Microsoft word - off doc draft _final_ 24.9.07.doc
Hythe Strategic Opportunities Fund PLC
(an open-ended investment company established under the laws of the Isle of Man)
OFFERING DOCUMENT 24th September 2007 Hythe Strategic Opportunities Fund PLC is not subject to approval in the Isle of Man and investors are not protected by any statutory compensation arrangements in the event of the Fund's failure. The Isle of Man Financial Supervision Commission does not vouch for the financial soundness of the Fund or for the correctness of any statements made or opinions expressed with regard to it. Administrator's Approval The Administrator has approved this Offering Document being the offering document for the purposes of the Financial Supervision (Experienced Investor Fund)(Exemption) Order 1999 as containing sufficient information to enable an informed investment decision to be made. CONTENTS
Summary of Directors, Officers and Advisers . 5
VALUATIONS, DEALINGS AND DISTRIBUTIONS. 23
INTRODUCTION Important Notice to All Readers
The Fund is an Experienced Investor Fund as defined in the Financial Supervision
(Experienced Investor Fund)(Exemption) Order 1999.
The Directors are the persons responsible for all the information contained in this Offering
Document. To the best of the knowledge and belief of such Directors (who have taken all
reasonable care to ensure that such is the case) such information is in accordance with the
facts and does not omit anything which is likely to affect the import of such information. The
Directors accept responsibility accordingly.
No person has been authorised to give any information or to make any representations, other
than those contained in this Offering Document, in connection with the participating
redeemable preference shares in the capital of the Fund and, if given or made, such
information or representations must not be relied on as having been authorised by the Fund.
Neither the delivery of this Offering Document nor the issue of Shares shall, under any
circumstances, create any implication that there has been no change in the circumstances
affecting the Fund since the date hereof.
No action has been taken to permit the distribution of this Offering Document in any
jurisdiction where action would be required for such purpose. This Offering Document does
not constitute an offer to or solicitation by anyone in any jurisdiction in which such an offer
or solicitation is not authorised, or to any person to whom it is unlawful to make such an
offer or solicitation. In particular: (i) none of the Shares has been or will be registered under
the United States Securities Act of 1933, as amended (the “1933 Act”), and none of the
Shares may be offered or sold, directly or indirectly, in the United States of America, its
territories or possessions and all areas subject to its jurisdiction (“United States”) or to or for
the benefit of any national or resident thereof (including any corporation, partnership or other
entity created or organised in or under the laws of the United States or any political
subdivision thereof) and any estate or trust which is subject to United States federal income
taxation regardless of the source of its income, and (ii) this Offering Document may be
issued in the United Kingdom of Great Britain and Northern Ireland (the “United Kingdom”)
and the Fund may be promoted in the United Kingdom only in accordance with section 21 of
the Financial Services and Markets Act 2000 (an Act of Parliament) and the Financial
Services and Markets Act 2000 (Financial Promotion) Order 2001.
Investors should inform themselves as to: (i) the legal requirements within their own
countries for purchase and holding of the Shares, (ii) any foreign exchange restrictions to
which they might be subject, and (iii) the income and other taxation consequences which
might apply in their own countries relevant to the purchase, holding or disposal of the
Copies of this Offering Document, application forms and information regarding purchases or
redemptions of Shares may be obtained from Blue Sea International Limited, 31-37 North
Risk Factors Investment in the Fund carries substantial risk. There can be no assurance that the Fund’s investment objective will be achieved and investment results may vary substantially over time. Investment in the Fund is not intended to be a complete investment programme for any investor. Prospective investors should carefully consider whether an investment in the Fund is suitable for them in light of their circumstances and financial resources (see further under “Risk Factors”). Investment in the Fund is only appropriate for those whose business and investment experience is such that they are capable, in conjunction with their professional advisers, of evaluating the merits of their prospective investment, can afford the loss of the whole of their investment and have no need for their investment to be liquid. Prospective investors should accordingly consult a suitably qualified professional adviser before committing to an investment in the Fund. Summary of Directors, Officers and Advisers
Registered Office:
Administrator: Investment Manager: Custodian: Legal Adviser as to Isle of Auditors: Definitions The following definitions apply throughout this Offering Document unless the context
the base currency of the Fund shall be Sterling
any day on which banks are normally open for business in
arrangements with respect to investments enabling those
holding units or shares in such a scheme to participate in
or receive profits or income (if any) from the acquisition,
disposal, holding or management of such investments
for subscriptions and for the redemption of Shares shall
generally be the first Business Day of each calendar month
or such other day as the Directors may determine from
the members of the board of directors of the Fund for the
time being and any duly constituted committee thereof and
any alternates or successors to such members as may be
an Exit Charge levied on a redemption of Shares as set out
a person who in relation to any experienced investor fund
is sufficiently experienced to understand the risks
associated with an investment in that fund
a charge levied on all subscriptions as set out on page 30
the period during which Shares are offered for a fixed price
the Companies Acts 1931 to 2004, the Financial
Supervision Act 1988 and the Investment Business Act
1991 of the Isle of Man and any regulations made
the net asset value of the Fund determined in accordance
the Net Asset Value divided by the number of Shares in
participating redeemable preference shares of £0.01 each
in the Fund issued at par to the Administrator for the
purpose of providing funds for the redemption of the
the price per Share at which Shares are redeemed
calculated in the manner described on page 26
participating redeemable preference shares of £0.01 in the
the price per Share at which Shares are issued calculated in
participating redeemable preference Shares of £0.01 each
available for issue as Shares or as Nominal Shares
generally, the last Business Day of each calendar month, or
such other day as the Directors may determine from time
THE PARTIES
The Directors The Directors are responsible for the overall management and control of the Fund. The
Directors will review the operations of the Fund at regular meetings and it is the current
intention of the Directors to meet at least quarterly. For this purpose, the Directors receive
periodic reports from the Investment Manager detailing the Fund’s performance and
providing an analysis of its investment portfolio. The Investment Manager will provide such
other information as may from time to time be reasonably required by the Directors for the
Mr Desai graduated in Economics from the University of East Anglia and is a Fellow of the
Association of Chartered Certified Accountants and a Member of the Securities and Investment
Institute. Mr Desai is a founding member and director of Cavendish Trust Company Limited in
the Isle of Man, licensed as a corporate service provider by the Isle of Man Financial
Supervision Commission. Mr Desai is a director of the Administrator and is involved with the
structuring, management and administration of collective investment schemes.
Jayne Evett is a director of the Administrator. Ms Evett has had many years’ experience in
the investment field. Prior to her employment by the Administrator, Ms Evett was employed
for 5 years by Caledonian Trust (IOM) Limited as manager of the fund services department
and for 11 years by MeesPierson (Isle of Man) Limited as a manager in the fund services
department and as an investment adviser in the investment management department where
her clients were high net worth individuals. Ms Evett currently assists promoters and
sponsors to set up offshore fund companies and manages the fund services operation for the
Meenaz Mehta has over 15 year’s experience in capital markets trading and management.
He has been Managing Director and Chief Investment Officer of the Investment Manager,
Hythe Securities Limited, for over 9 years. He is one of the pioneers of the investment
strategy that will be employed by the Fund. He has global investment experience and a track
record of advisory asset management stemming from before 2000. His investment
experience and approach are not just defined by the great equity boom of the last few years,
but also by the experience of actively trading and managing the risks that materialised in the
Russian Min-Fin and Ruble crisis, the Asian Financial Crisis, the collapse of Long Term
Capital Management, September 11 and the grinding recession that followed. Having
successfully navigated these events and market fractures, he is well placed to manage the
risks of the uncertain economic and geo-political times to come and has devised strategic
approaches for such scenarios. He has been advising on portfolios with cross-asset exposure
for a number of years and has developed a medium term strategy that optimises exposure to,
and diversification across, a full range of global asset classes. He frequently appears on
CNBC Europe and Sky News as a commentator on investment strategy and market events,
The Administrator
The Fund has entered into an exclusive agreement (the “Administration Agreement”) with
Blue Sea International Limited to provide services to the Fund as administrator, registrar and
The Administrator was incorporated in the Isle of Man on 22nd July 2004 and is owned by
Pritesh Desai, a Director of the Administrator and the Fund, and Anthony Preece, a
marketing executive. The Administrator is the holder of a category 3(b) investment business
licence issued on 12th October 2004 under section 3 of the Investment Business Act 1991 of
the Isle of Man and as such is authorised to act as Administrator of the Fund.
The Administrators’s registered office is 31-37 North Quay, Douglas, Isle of Man. Its
principal activity is the provision of a range of mutual fund administration services.
The Administrator shall administer the Fund’s day-to-day activities in coordination with the
Directors, which includes the responsibility for accounting, administration, reporting, and
calculation and publication of the Net Asset Value per Share, based on information provided
by the Investment Manager and/or brokers, and monitoring of all payments and receipt of
money. The Administrator receives all applications for subscriptions and notifications for
It should be noted that in relying on information furnished by other persons in performing
services for the Fund, the Administrator will not be responsible or liable for the accuracy of
the underlying data. The Administrator in no way acts as guarantor or offeror of the
investment described herein and is not responsible for the actions of the sales agents,
advisors, consultants and brokers that the Directors may select.
The Fund and the Administrator have entered into the Administration Agreement in respect
of the functions set out above. The Administrator will be entitled to be compensated by the
Fund as set out below in the section headed “Charges and Expenses”.
Under the Administration Agreement, it is anticipated that the Administrator will not, in the
absence of gross negligence or wilful misfeasance or any act or omission not performed in
good faith on its part or on the part of any of its agents or employees, be liable for any loss or
damage sustained or suffered by the Fund as the result of or in the course of the discharge by
the Administrator of its duties. The Fund intends to indemnify the Administrator and any of
its controlling persons, shareholders, directors, officers, agents and employees from and
against any and all claims, liabilities, losses, damages and expenses whatsoever arising from,
or incurred in connection with, the Administrator performing its obligations or duties under
its agreements, other than any such claims, liabilities, losses, damages and expenses resulting
from the Administrator’s gross negligence or wilful misfeasance, or any act of omission not
performed in good faith by the Administrator or its agents or employees.
The Administration Agreement may be terminated by the Fund or the Administrator for
cause at any time and otherwise upon 90 days’ prior written notice
In calculating the value of any security the Administrator may rely upon such automatic
pricing services as it shall determine or it may use information provided by particular pricing
services, brokers, market makers or other intermediaries. In such circumstances, the
Administrator shall not, in the absence of negligence or wilful default on its part, be liable
for any loss suffered by the Fund or any Shareholder by reason of any error in the calculation
of the value of any security resulting from any inaccuracy in the information provided by any
such pricing service, broker, market maker or other intermediary.
The Investment Manager Hythe Securities Limited has been appointed by the Fund to provide discretionary
investment management services to the Fund in relation to the investment and reinvestment
of the Fund’s assets within the investment policy laid down from time to time by the
Directors in pursuit of the investment objective, process and methodology set out in this
The Investment Manager was incorporated in England and Wales on 7th August 1985 as a
company with limited liability under company number 01936728 and its registered office is
at Hythe House, 337 City Road, London EC1V 1LJ. The Investment Manager is owned by
Hythe Investment Limited, formed in 1985 and based in London. The Investment Manager
is an authorised person under the Financial Services and Markets Act 2000 of the United
Kingdom and is regulated by the Financial Services Authority in the conduct of its regulated
The Investment Manager was appointed pursuant to an agreement between the Fund and the
Investment Manager (the “Investment Management Agreement”). Pursuant to the
Investment Management Agreement, the Investment Manager will manage the investment
and reinvestment of the assets of the Fund in pursuit of the investment objective, process and
methodology set out in this Offering Document. The Investment Manager has also been
appointed by the Fund to act as Distributor to solicit subscriptions for Shares with power to
Custodian The Fund has appointed Hythe Securities Limited as Custodian of the Fund in addition to
being the Investment Manager. The Custodian is an Eligible Custodian for the purposes of
the Financial Supervision Commission Clients Investments Regulatory Code, by virtue of
being a person not resident in the Isle of Man whom the Administrator reasonably believes to
be a person whose business includes the provision of investment custodial services and who,
in providing those services is subject to regulation and supervision by a regulatory body or
agency of government in the country in which that person carries on that business.
Pursuant to an agreement between the Fund and the Custodian (the “Custodian Agreement”),
the Custodian will be responsible for all assets of the Fund other than assets deposited as
margin with brokers. Such assets will be held by the Custodian in a separate client account
and will be separately designated in the books of the Custodian. Assets deposited as margin
need not be segregated and may become available to the creditors of brokers. The Custodian
is not responsible for the selection or performance of the underlying investments of the Fund
nor is it responsible in a fiduciary capacity for the administration of the Fund.
The Fund’s assets will be held on its behalf either directly by or in the name of the Custodian
or its associate company, Hythe Nominees Limited, or sub custodian(s), nominee(s), agent(s)
or delegate(s) (together the “Sub-Custodians”) of the Custodian. The Custodian will be
responsible for implementing banking and financial transactions for the account of the Fund.
Sub-custodians may be appointed by the Custodian, provided that the Custodian shall
exercise reasonable skill, care and diligence in the selection of a suitable Sub-Custodian and
shall be responsible to the Fund for the duration of any sub-custody agreement for satisfying
itself as to the ongoing suitability of the Sub-Custodians to provide custodial services to the
Fund. The Custodian will also maintain an appropriate level of supervision over the Sub-
Custodians and will make appropriate inquiries periodically to confirm that the obligations
of the Sub-Custodians continue to be competently discharged. Any Sub-Custodian appointed
will be paid normal commercial rates. The Custodian shall not be liable in the event of the
loss of any assets held by a Sub-Custodian provided that such Sub-Custodian exercised
reasonable care and acted without gross negligence or wilful misconduct.
Auditors
The Auditors of the Fund are Moore Stephens Chartered Accountants of 26-28 Athol Street,
Constitution of the Fund
The name of the Fund is Hythe Strategic Opportunities Fund PLC.
The Fund was incorporated in the Isle of Man on 18th September 2007 as a public
company limited by shares. The registered number of the Fund is 120812C and its
registered office is at 34 North Quay, Douglas, Isle of Man, IM1 4LB.
The Fund is considered to be an Experienced Investor Fund under the terms of the
Financial Supervision (Experienced Investor Fund)(Exemption) Order 1999 of the Isle
The authorised capital of the Fund is £10,100 divided into 100 ordinary shares of
£1.00 par value each (the “Management Shares”) and 1,000,000 Unclassified Shares
of £0.01 par value each. All of the Management Shares have been issued fully paid
The Fund may by resolution of members amend its Memorandum and Articles of
Association to create additional classes of shares. Subject to the provisions of the
Articles of Association of the Fund and the Companies Acts 1931 to 2004, the Fund
may, by resolution of members amend its Memorandum of Association to increase or
If at any time the authorised capital of the Fund is to be divided into different classes
of or series of shares from those then existing, the rights attached to any class or
series (unless otherwise provided by the terms of the issue of the shares of that class
or series) may, whether or not the Fund is being wound up, be varied with the
consent in writing of the holders of not less than three-fourths of the issued shares of
that class or series and of the holders of not less than three-fourths of the issued
shares of any other class or series of shares which may be affected by such variation.
The financial year end of the Fund is such date as the Directors determine from time
to time and, in default of such determination, shall be 30th June in each year.
Characteristics of Shares
Holders of shares in the capital of the Fund have the rights as set out in the Articles,
and, in particular, the voting rights and the right to participate in the profits as set out
therein, both of which are summarised below.
On a show of hands every holder of a Management Share who is present in person
shall have one vote, and on a poll every holder of Management Shares present in
person or by proxy shall be entitled to one vote for every share of which he is the
holder. Management Shares do not entitle their holders to any distribution rights.
Shares entitle their holders to participate in the profits of the Fund as set out in the
Articles, may be redeemed as described on page 26 below and, on a winding up, have
the rights set out on page 36. Shares do not carry the right to vote at general
meetings save where a special resolution is proposed to wind up the Fund or to
amend the investment policy of the Fund or to issue shares other than as Management
Shares, Shares or Nominal Shares, in which last event the consent of a separate class
meeting of holders of Shares is also required.
Unclassified Shares are available for issue as Shares or as Nominal Shares.
Nominal Shares will only be issued at par to the Administrator for the purpose of
providing funds for the redemption of the nominal amount of Shares. Nominal
Shares may be redeemed at par. For the rights of the holder on a winding up see page
36. Nominal Shares may be converted into Shares, but carry no rights other than
A holding of shares in the capital of the Fund will be evidenced by entries on the
register of Shareholders, and every Shareholder shall be entitled to receive a
statement setting out the details of his holding; share certificates will only be issued
upon written request. The register of Shareholders is maintained by the
Administrator and may be inspected there.
Investment Objectives The Fund was incorporated as an open-ended investment company in the Isle of Man to
provide investors with absolute returns and capital growth through the diversification of
assets across a number of lowly inter-correlated investment themes that combine to result in
Investment Process and Methodology The Investment Manager will place strong emphasis on its ability to generate ideas through
combining internal research with quantitative screening for the best investment
opportunities. The quantitative screening process uses a proprietary technology platform
integrated with third party financial models for pricing financial instruments and ascertaining
fair values. The Investment Manager will use fundamental analysis for determining a source
of relative value, including analysis of companies and sectors, macro-economic data,
prospectuses, market flows and technical dynamics, psychology and motivation of investors.
In addition to internal idea generation, the Investment Manager will also use a more
traditional approach giving attention to brokers’ and analysts’ recommendations and
The Fund intends to achieve its investment objective by investing across a range of
investment programmes, a summary of which is set out below (with indicative weightings in
Bottom up long-short equity programme (55%)
Using primarily fundamental screening techniques, the Investment Manager will aim to
identify equities that are significantly over and under-valued, relative to their fair value.
From this output, the Investment Manager will aim to structure long-short positions to best
capitalise on these disparate valuations. Equities and contracts for differences will be used
Yield enhancement programme (10%)
For assets in the Fund that are deemed core or medium to long term, derivatives such as
options will be used in order to enhance the yield on the long term holdings. The most
commonly used strategy within this programme will be covered call options.
Foreign exchange, commodity and index technical trading programme (10%)
Using mainly technical and quantitative decision support tools, momentum based
transactions in the above instruments will be undertaken in order to best capitalise on the
volatility in these instruments. Futures contracts and exchange traded futures will be used in
Thematic in principle, positions will be taken based on the medium term global economic
and political environment. The Investment Manager would strive to take into account the
geo-political risks in the current investment environment as well as more traditional
economic benchmarks. Again, the main products used to execute this strategy will be
exchange traded futures and futures contracts.
It is anticipated that the Investment Manager would set aside some liquidity for investment
into special situations such as mergers and acquisitions activity, commodity and currency
shocks and sharp commercial events that may present investment opportunties. This
programme will make use of all available liquid financial instruments.
To benefit from a global multi-strategy approach, capital will be allocated on an opportunistic
basis across different strategies and geographic regions where the Investment Manager has
strong ties while ensuring that sufficient theme diversification is maintained. The Investment
Manager intends to use leverage prudently as part of the investment decision process
The above is an indication of the intended investment strategy. The relative weightings
between the various programmes and the exposure to individual markets and asset classes
will vary from time to time according to market conditions.
Investment Restrictions Subject as set out above, there are no restrictions on the investments which may be made by the
Use of Leverage
The Fund may employ leverage up to a gross maximum market exposure of 2 times the Net
Asset Value. This is a predetermined limit set by the Directors and is calculated with a view
to allowing sufficient liquidity within the portfolio in order to achieve the necessary
exposure to the market whilst avoiding additional calls for cash if margin requirements are to
change suddenly. Market exposure is calculated by summing the contractual value of all of
the open futures, short option positions and long underlying securities. It should be noted
that, whilst the Directors will aim to limit leverage as set out above, market conditions may
from time to time result in the above limit being breached. The Fund, acting on the advice
of the Investment Manager, will use its best endeavours to correct any such breach within a
Borrowing Powers
Pursuant to the Articles, the Directors may exercise all of the powers of the Fund to borrow
and to give security therefor. At present it is envisaged that borrowings will only be incurred
to meet redemptions which would otherwise result in the Fund having prematurely to realise
investments or to meet timing differences arising on the settlement of investments within the
Fund and that such borrowings will be limited to an amount equal to 25% of the Net Asset
Currency Hedging Policy
It is not anticipated that the Fund will adopt a currency hedging policy for the purposes of
mitigating the Fund’s exposure to foreign exchange risk. However, the Investment Manager
may use hedging (“portfolio hedging”) for the purposes of portfolio enhancement.
Risk Factors The nature of the Fund’s investments involves certain risks and the Fund employs
investment techniques (such as leverage, short selling and the use of derivatives) which may
carry additional risks. An investment in Shares therefore carries certain substantial risk and
is suitable only for those persons who can assume the risk of losing their entire investment.
The following risk factors do not purport to be a complete explanation of all of the risks
involved in subscribing for Shares. Prospective investors should read this Offering
Document in its entirety before determining whether to subscribe for Shares.
The Fund is recently incorporated and has no operating history upon which potential
investors may base an evaluation of its likely performance. There can be no guarantee that
the stated investment objectives of the Fund will be achieved. The Net Asset Value per
Share can fall as well as rise. An investment in Shares should be considered high risk;
therefore a holding of Shares should not be considered a complete investment programme.
Changes in economic conditions, including, for example, interest rates, inflation rates,
employment conditions, competition, technological developments, political and diplomatic
events and trends, and tax laws can affect substantially and adversely the business and
prospects of the Fund. None of these conditions is within the control of the Directors and no
assurances can be given that they will anticipate these developments and respond effectively.
Securities in which the Fund may invest may have limited marketability and, therefore, may
be subject to wide fluctuations in market value. In addition, certain securities may lack a
significant operating history and be dependent on products or services without an established
A major strength of the Fund is that it will hold and invest in securities, which may not be
denominated in the currency of the Fund. Investors should understand that in a fund which is
spread across several markets, sectors and currencies, that there is exposure to change, which
would not exist in a fund restricted to a single economy, sector and/or currency.
Potential Illiquidity of Exchange-traded Instruments. It may not always be possible for
the Fund to execute a buy or sell order on exchanges at the desired price or to liquidate an
open position due to market conditions, including the operation of price fluctuation limits. If
trading on an exchange is suspended or restricted, the Fund may not be able to execute trades
or close out positions on terms that the Investment Manager believes are desirable.
Most futures exchanges limit fluctuations in futures contract prices during a single day by
regulations referred to as “price limits”. Once the price of a futures contract has increased or
decreased to the limit point, it may be impossible to exit a position at an advantageous price.
Futures prices have occasionally moved the limit down for several consecutive days with
little or no trading. Similar occurrences could prevent the Fund from promptly liquidating
unfavourable positions and subject the Fund to substantial losses. Also, the exchange
regulator or exchanges may suspend or limit trading. While price limits reduce liquidity, they
do not reduce ultimate losses. Futures contracts which expire into cash settlement such as
stock indices, interest rate futures and currencies do not operate a daily price limit system,
but instigate a system of circuit breakers where the market will be closed for a few minutes.
Exchange-Traded Futures Contracts and Options on Futures Contracts - The Fund will
use exchange-traded futures contracts and options on futures contracts. Use by the Fund of
such instruments will present the same types of volatility and leverage risks associated with
transactions in derivative instruments generally (see below). In addition, such transactions
present a number of risks which might not be associated with the purchase and sale of other
Futures contracts are highly leveraged instruments and the low margin deposits normally
required in futures transactions allow for an extremely high degree of leverage in comparison
with investments in other assets. Because of the leverage associated with trading futures, a
relatively small movement in the market price of traded instruments may result in a
disproportionately large profit or loss and may result in a loss of a substantial amount or
Due to the nature of futures, cash to meet margin money will be held by a broker with whom
the Fund has an open position. In the event of the insolvency or bankruptcy of the broker,
there can be no guarantee that such money will be returned to the Fund. On execution of an
option the Fund may pay a premium to or receive a premium from the Clearing House. In
the event of the insolvency or bankruptcy of the Clearing House, the option premium may be
lost in addition to any unrealised gains where the contract is in the money. Trading in
derivative instruments is not always subject to governmental regulation or control. In
addition the Fund is exposed to the risk of counterparties defaulting on contractual
obligations and substantial losses may occur on such default, if as a result of such losses the
solvency of the Clearing House is affected. However, all Clearing Houses operate large, but
not unlimited, insurance policies against such defaults.
The Fund may invest in financial futures and related options to the extent such trading does
not require registration with the United States Commodity Futures Commission (“CFTC”).
In the future, the Fund may engage in such activities provided all necessary registrations
have been obtained. Such registration would not include review or approval by the CFTC of
any Offering Document or the trading strategies of the Fund. Certain transactions and
strategies particularly trading on U.S. contract markets, will not be available to the Fund
unless and until certain registrations are obtained. The Fund and the Investment Manager
may not pursue or obtain any such registration. Inability to trade futures on U.S. contract
markets may decrease the Fund’s total return.
Prior to exercise or expiration, a futures or option position can be terminated only by
entering into an offsetting transaction. This requires a liquid market on the exchange on
which the original position was established. While the Fund will enter into futures and
option positions only if, in its judgement, there appears to be a liquid market for such
instruments, there can be no assurance that such a market will exist for any particular
contract at any point in time. In that event, it might not be possible to establish or liquidate a
The liquidity of a market in futures contracts and options on futures contracts is also subject
to the risk of trading halts, suspensions, exchange or clearing house equipment failures,
government intervention, insolvency of a brokerage firm, clearing house or exchange or
other disruptions of normal trading activity. Default or insolvency of a broker may result in
positions being liquidated or closed out.
To the extent that the Fund trades in derivatives contracts and any broker with whom the
Fund maintains accounts fails to segregate the Fund’s assets, the Fund may be subject to a
risk of loss in the event of the bankruptcy of the broker.
OTC Derivative Instrument Transactions - The Fund may invest in futures and options
and other investments which are not traded on organised exchanges and as such are not
standardised. Such transactions are known as over-the-counter or (“OTC”) transactions and
may include forward contracts or options. Whilst some OTC markets are highly liquid,
transactions in OTC derivatives may involve greater risk than investing in exchange traded
derivatives because there is no exchange market on which to close out an open position. It
may be impossible to liquidate an existing position, to assess the value of the position arising
from an off-exchange transaction or to assess the exposure to risk. Bid and offer prices need
not be quoted and, even where they are, they will be established by dealers in these
instruments and consequently it may be difficult to establish what is a fair price. In respect
of such trading, the Fund is subject to the risk of counter-party failure or the inability or
refusal by a counter-party to perform with respect to such contracts. Market illiquidity or
disruption could result in major losses to the Fund.
The instruments, indices and rates underlying derivative transactions expected to be entered
into by the Fund may be extremely volatile in the sense that they are subject to sudden
fluctuations of varying magnitude, and may be influenced by, among other things,
government trade, fiscal, monetary and exchange control programmes and policies: national
and international political and economic events; and changes in interest rates. The volatility
of such instruments, indices or rates, which may render it difficult or impossible to predict or
anticipate fluctuations in the value of instruments traded by the Fund could result in losses.
Short Selling. To the extent that the Fund invests directly in equity securities, the
establishment and maintenance of a short position in equities can involve greater risks than
would be the case with a long position. These include the possibility of unlimited loss due to
potentially unlimited price appreciation in the securities concerned, problems associated with
the cost or availability of stock to borrow for the purposes of short selling and possible
difficulties in purchasing stock to cover short positions in certain market conditions.
Short Option Strategies. The establishment and maintenance of a short position in options
can involve greater risks than would be the case with a long position. These include the
possibility of unlimited loss due to potentially unlimited price appreciation in the options
concerned. It must be stressed that the use of short option strategies by the Fund may
involve risks that other options investors would prefer to lay-off or avoid taking and that
short option strategies are not suitable for all investors.
Leverage, Interest Rates and Margin. The Fund may leverage its investment return with
such instruments as futures, options and other derivative contracts traded on recognised
exchanges. The interest rates imputed in the prices of such instruments may affect the
operating results of the Fund in a similar way to other forms of borrowing. It must be
stressed that at all times the Fund will seek to operate within the pre-determined maximum
exposure limit. The Investment Manager will closely supervise margin/equity ratios in case a
larger than normal move in the market unexpectedly increases margin levels.
The Fund's use of leverage results in certain additional risks. For example, should the
securities pledged to brokers to secure the Fund's margin accounts decline in value, the Fund
could be subject to a "margin call" and need to deposit additional funds with the broker or
suffer mandatory liquidation of the pledged securities to compensate for the decline in value.
In the event of a sudden drop in the value of the Fund's assets, the Fund might not be able to
liquidate assets quickly enough to pay off its margin debt. In addition, leverage can increase
the loss to investors. In the futures markets, margin deposits are typically low. Low margin
deposits mean that a relatively small price movement in a futures contract may result in
immediate and substantial losses. For example, if at the time of purchase 10 per cent. of the
price of a futures contract is deposited as margin, a 10 per cent. decrease in the price of the
futures contract would, if the contract is then closed out, result in a total loss of the margin
deposit before any deduction for the brokerage commission.
Possible Effects of Speculative Position Limits. Most futures exchanges have established
limits referred to as “speculative position limits” on the maximum net long or net short
speculative positions that any person may hold or control in any particular futures or options
contracts traded on futures exchanges. All accounts owned or managed by the Investment
Manager will be combined for speculative position limit purposes. The Investment Manager
could be required to liquidate positions held for the Fund in order to comply with such
limits. Any such liquidation could result in substantial costs to the Fund.
INVESTMENTS IN OFFSHORE INVESTMENT FUNDS
Since the Fund may invest in other funds, the Fund’s assets so invested will be valued based
upon the net asset value of the Fund’s interest in such funds. Accordingly, the Fund may
experience a delay in receiving net asset value calculations for such assets if the dealing day
of such funds is similar to that of the Fund, or such valuations may be based on net asset
values calculated on a dealing day which occurs at a different time of the month than that of
the Fund. Therefore, the calculation of the Fund’s Net Asset Value may be delayed while the
net asset value of the Fund’s investment in other funds is calculated and reported to the
Fund. The Fund may have to bear the cost of any charges, including initial charges, imposed
The Fund may invest in a variety of currencies and, thus, will not be currency neutral.
Investors should understand that assets of the Fund may from time to time fluctuate in value
against their chosen currency. In addition, where investors subscribe in a currency other than
the currency of the Share Class, the Administrator will convert subscription monies into the
Base Currency prior to investment and redemption proceeds will be paid in the Base
Currency. Investors shall bear the cost of conversion and the associated currency risk.
Currently there is no public market for the Shares, and it is likely that no active secondary
market will develop. Shares are not being registered to permit a public offering under the
securities laws of any jurisdiction. The Administrator must first approve transfers of Shares,
but its approval may not be unreasonably withheld. The Shareholders may be able to dispose
of their Shares only by means of redemptions on the relevant Dealing Day at the Redemption
Price. The risk of any decline in the Net Asset Value during the period from the date of
notice of redemption until the redemption date will be borne by the Shareholder(s)
requesting redemption. The Directors have the power to suspend and compel redemptions
subject to the limitations outlined under the heading “Compulsory Redemptions”.
SUSPENSION OF REDEMPTION AND ILLIQUIDITY OF SHARES
As noted below, the right of Shareholders to redeem their Shares may be suspended upon the
occurrence of certain events determined by the Directors to be an emergency. The
suspension of a Shareholder’s right of redemption in response to such an event would result
in the Shares being an illiquid investment until such suspension can be, and effectively is,
lifted. Furthermore, since the repurchase price upon redemption can be paid in kind, an
investment in the Fund can, as a result, be considered illiquid.
PASSIVE INVESTMENT
Shareholders have no opportunity to participate in the Fund’s daily management or to select
or evaluate any of the Fund’s investments or strategies. The likelihood that Shareholders will
realise gain depends on the skill and expertise of the Investment Manager.
Investments may be valued at the stated net asset value per share, in the case of collective
investment schemes, and in the case of all other securities at the last traded price, acquisition
price, a bid quotation from a broker or a price determined to represent fair value by a
competent professional which may include the Administrator. There is no guarantee that the
prices resulting from the valuation process will reflect the actual sales prices of the
securities, even when such sales occur very shortly after the Valuation Day. If sales of
investments result in fewer proceeds than estimated, the remaining Shareholders of the Fund
will have the Net Asset Value of their Shares adjusted to reflect the reality of sale.
The Fund does not intend to pay dividends or distribute interest income, but intends to
reinvest all of the Fund’s interest income and gains. Accordingly, an investment in the Fund
may not be suitable for investors seeking current returns for financial or tax planning
There can be no assurance that the Directors will remain as directors of the Fund. In
addition, since the Investment Management Agreement and the Administration Agreement
may be terminated with prior written notice to the Fund as specified in the respective
agreement, there can be no assurance that the Investment Manager or the Administrator will
remain employed by the Fund for the term of their respective agreements, or thereafter.
The Fund will be empowered to utilise borrowing to meet cash requirements for
redemptions. The Fund will also invest in derivative instruments which involve an element
of leverage or gearing and carry a high degree of risk.
The Directors and the service providers may have conflicts of interest in relation to their
duties to the Fund. However, each shall, at all times, pay regard to its obligation to act in the
best interest of the Fund and the Directors will ensure that all such potential conflicts of
interest are resolved fairly and in the interests of Shareholders.
The Fund may acquire securities from or dispose of securities to any Interested Party or any
investment fund or account advised or managed by any such person. An Interested Party
may provide professional services to the Fund (provided that no Interested Party will act as
auditor to the Fund) or hold Shares and buy, hold and deal in any investments for their own
accounts notwithstanding that similar investments may be held by the Fund. An Interested
Party may contract or enter into any financial or other transaction with any Shareholder or
with any entity any of whose securities are held by or for the account of the Fund, or be
interested in any such contract or transaction. Furthermore, any Interested Party may receive
commissions to which it or he is contractually entitled in relation to any sale or purchase of
any investments of the Fund effected by it for the account of the Fund, provided that in each
case the terms are no less beneficial to the Fund than a transaction involving a disinterested
party and any commission is in line with market practice.
Return to Investors It is not intended to distribute to holders of Shares any income by way of dividend. All the
Fund's income, including all dividends, interest and investment gains will be accumulated.
Eligible Investors
Shares in the Fund may only be issued to Experienced Investors, defined in the Financial Supervision (Experienced Investor Fund)(Exemption) Order 1999 as being "a person who, in relation to any experienced investor fund, is sufficiently experienced to understand the risks associated with an investment in that fund" and who has signed a declaration to that effect found in the attached Application Form.
Each investor must represent and warrant to the Fund that, amongst other things, he is able to
acquire or hold Shares without violating applicable laws, including the 1933 Act. The Fund
will not knowingly offer or sell Shares to any investor to whom such offer or sale would be
Shares may not, directly or indirectly, be offered, sold, transferred, assigned or delivered to, or
held by, any United States Person (“U.S. Person”) as defined below, at any time or any person
in the United States or any person in circumstances which might result in the Fund incurring
any liability to taxation or suffering any other pecuniary disadvantages which the Fund might
not otherwise incur or suffer, or would result in the Fund being required to register under the
United States Investment Company Act of 1940 or the Investment Manager or any affiliate
being required to register under the United States Commodity Exchange Act, as amended, and
Shares may not be offered, sold, transferred, assigned, delivered to or held by, any person
whose holding may be in breach of the law or requirement of any country or governmental
authority including, without limitation, exchange control regulations.
The Fund reserves, and intends to exercise, the right at its sole discretion compulsorily to
redeem any shares offered, sold, transferred assigned, delivered or held in contravention of
these prohibitions or in circumstances where Shareholdings would have adverse legal, fiscal or
pecuniary consequences on the Fund or its remaining Shareholders.
A person who applies for Shares and a transferee of Shares (other than an existing Shareholder)
will be required to represent that he is not a U.S. Person.
An applicant for Shares or transferee may also be required to produce evidence of his identity
satisfactory to the Administrator and the Fund.
No application shall be accepted, and no such subscription or transfer shall be effected
unless and until such person has signed a statement acknowledging that the new participant
or transferee is an Experienced Investor.
Definition of “U.S. Person”
For the purposes of this Offering Document, but subject to applicable law and to such changes
as may be notified by the Fund to applicants for shares and transferees, “US Person”, as
defined by Rule 902 of Regulation S under the 1933 Act, generally includes the following: (a)
any natural person who is a resident of the United States; (b) any partnership or corporation
organised or incorporated under the laws of the United States; (c) any estate of which any
executor or administrator is a US Person as defined in sub-paragraphs (a) and (b) herein; (d)
any trust of which any trustee is a US Person as defined in sub-paragraphs (a) and (b) herein;
(e) any agency or branch of a foreign entity located in the United States; (f) any non-
discretionary account or similar account (other than an estate or trust) held by a dealer or
fiduciary for the benefit or account of a US Person; (g) any discretionary account or similar
account (other than an estate or trust) held by a dealer or other fiduciary organised,
incorporated, or, if an individual, resident in the United States; (h) any partnership or
corporation if (i) organised or incorporated under the laws of any foreign jurisdiction and (ii)
formed by a US Person principally for the purpose of investing in securities not registered
under the 1933 Act unless it is organised or incorporated and owned, by accredited investors
(as defined in Rule 301 (a) under the 1933 Act) who are not natural persons, estates or trusts; or
(iii) any entity organised principally for passive investment such as a commodity pool,
investment Fund or other similar entity (other than a pension plan for the employees, officers or
principals of an entity organised and with its principal place of business outside the United
States) (1) in which US Persons hold units of participation representing in the aggregate 10
percent or more of the beneficial interest in the entity; or (2) which has as a principal purpose
the facilitating of investment by a US Person in a commodity pool with respect to which the
operator is exempt from certain requirements under the United States Commodity Exchange
Act regulations by virtue of its participants being non-US Persons. “US Person” does not
include: (a) a discretionary account or similar account (other than an estate or trust) held for the
benefit or account of a non-US Person by a dealer or other professional fiduciary organised,
incorporated or, if an individual, resident in the United States; (b) any estate of which any
professional fiduciary acting as executor or administrator is a US Person if (i) an executor or
administrator of the estate who is not a US Person has sole or shared investment discretion
with respect to the assets of the estate and (ii) the estate is governed by foreign law; (c) any
trust of which any professional fiduciary acting as trustee is a US person if a trustee who is not
a US Person has sole or shared investment discretion with respect to the trust assets, and no
beneficiary of the trust (and no settlor if the trust is revocable) is a US Person; (d) an employee
benefit plan established and administered in accordance with the law of a country other than
the United States and customary practices and documentation of such country; or (e) any
agency or branch of a US Person located outside the United States if (i) the agency or branch
operates for valid business reasons and (ii) the agency or branch is engaged in the business of
insurance or banking and is subject to substantive insurance or banking regulation, respectively
The above definition is provided for guidance only. It is not a statement of the present legal definition of U.S. Person and has not been verified by a United States attorney. Investors should seek independent legal advice if they are unsure of their status. VALUATIONS, DEALINGS AND DISTRIBUTIONS Valuation of Shares
The Articles provide that the value of the net assets in the Fund shall be determined by the
Directors on each Valuation Day (except when determination of such value has been
suspended under the provisions of the Articles) and shall be the value as at such Valuation
Day of all the assets of the Fund less all the liabilities of the Fund calculated in accordance
The assets of the Fund shall be deemed to comprise:
all cash on hand and on deposit, including any interest accrued thereon;
all bills and demand notes and accounts receivable;
all investments owned or contracted for by the Fund;
all stock and cash dividends and cash distributions to be received by the Fund and not
yet received by it, when the Net Asset Value is being determined as at the record date
(or the ex-dividend date if different from the record date) or a date subsequent
all interest accrued on any interest-bearing investments owned by the Fund (except
interest accrued on investments in default and interest which is included in the
all other property of every kind and nature including prepaid expenses as defined
The value of the assets of the Fund shall be determined as follows.
The value of any cash on hand or on deposit, bills, demand and promissory notes and
accounts receivable, prepaid expenses, cash dividends and interest declared or
accrued as aforesaid and not yet received shall be deemed to be the full amount
thereof unless the Directors shall have determined that any such deposit, bill, demand
or promissory note or account receivable or other amount is not worth the full
amount thereof, in which event the value thereof shall be deemed to be such value as
the Directors with the approval of the Auditors shall deem to be the reasonable value
Certificates of deposit, treasury bills, bank acceptances, trade bills and any other
monetary instruments not otherwise provided for hereunder shall each be valued (on
the basis of notification to the Directors by a person approved by the Directors and the
Auditors, whose business includes dealing in or effecting transactions in such
investments) according to the normal dealing practice therein.
Save as otherwise herein provided all investments shall be valued:
in the case of an investment which is an investment of any description other
than units or shares in a collective investment scheme, at the bid dealing price
in the case of investments which are units or shares in a collective investment
scheme, at the most recent net asset value per unit or share for units or shares
of the kind in question following the most recent valuation of the relevant
if there is no price for the investment in question under (i) or (ii) above, at a
reasonable estimate of the amount which would be paid to a seller by way of
consideration for an immediate transfer or assignment to him at arm's length
plus any fiscal charges or other charges payable.
In the case of any investment for which no price quotations are available as above
provided, the value thereof shall be the fair value thereof as shall be determined from
to time to time in such manner as the Directors or any manager appointed by the
Directors shall from time to time determine.
In the case of any investment realised or contracted to be realised at a known value
the net proceeds of such realisation shall be taken into account in lieu of any other
method of determining the value of the asset concerned subject to such allowance as
the Directors consider appropriate if such net proceeds are receivable at some future
If, in valuing any asset of the Fund, the Directors at any time consider that any of the
above mentioned bases of valuation are inapplicable or give rise to an unfair value
they shall be entitled to substitute what in their opinion is a fair value therefor.
The liabilities of the Fund shall be deemed to comprise:
all administrative expenses payable and/or accrued, including an appropriate
provision for monthly and annual management or other fees;
all contractual obligations for the payment of money or property, including the amount
of any unpaid dividends declared upon the shares of the Fund;
all provisions authorised or approved by the Directors for taxes or contingencies; and
all other liabilities of the Fund of whatsoever kind and nature except liabilities
represented by share capital share premium account and reserves of the Fund.
Shares for which application has been made shall be deemed to be in issue on the
Business Day next following the day as at which the Issue Price therefor shall be
determined and after such time the Issue Price thereof payable to the Fund if not
received shall be deemed to be an asset of the Fund and any liabilities in connection
with the issue thereof shall be deemed to be liabilities of the Fund;
Shares to be redeemed under the Articles shall be deemed to be in issue only until the
time as at which the Redemption Price is determined and from such time until paid
the price thereof shall be deemed to be a liability of the Fund;
For the purpose of calculating the Net Asset Value the value of the assets and
liabilities of the Fund denominated in a currency other than the Base Currency shall
be converted into the Base Currency at such rates of exchange and at such times as
the Directors shall consider appropriate and equitable.
The value of the assets of the Fund may be specially valued at the discretion of the Directors
if the Administrator receives an application for subscription or redemption the value
of which the Directors at their absolute discretion determine is such that a special
where the Directors in their absolute discretion determine it is in the best interests of
Issue and Redemption of Shares
Shares may only be issued to investors who have satisfied the Administrator that they
are Experienced Investors. Pursuant to the Articles, Shares are available for issue at
Shares may be purchased on any Dealing Day at the relevant subscription price
representing the aggregate of the Net Asset Value per Share on the Valuation Day
immediately preceding the relevant Dealing Day, adjusted for fiscal and other
charges, if any, in accordance with the Articles and any adjustment for rounding or
handling charges (the “Subscription Price”). Any Initial Charge shall be deducted
from the amount of any subscription before calculating the number of Shares to be
The minimum initial subscription will be £10,000 and thereafter additional
subscriptions of not less than £10,000 may be made.
Contract notes will normally be sent to investors by the Fund within 5 Business Days
of the determination of Net Asset Value. If a written request is made for a share
certificate, certificates representing Shares will normally be posted to an investor
within two months of the relevant written request at the investor's own risk.
The Fund is permitted to invest in other funds. In some cases, such funds may deal
infrequently in their units and may release their unit prices only after those funds
have, in turn, received valuations of their underlying investments. This means that
the Fund, when calculating the Net Asset Value in order to determine the
Subscription Price and thus the number of Shares to be issued to an investor, must
either base those valuations on historic prices or continue to hold the investor's
subscription monies in the subscription account until current prices become
The Directors wish to ensure that Shares track as closely as possible the value of the
underlying funds and that applicants’ monies are invested as promptly as possible, so
that the investors will receive the benefit (if any) of the performance of the
underlying funds as quickly as possible. Accordingly, the Directors have rejected the
option of using historic prices. However, the Directors are reluctant to leave
applicants subscription monies in the subscription account while the current prices
become available; this may have the effect of the Fund missing the opportunity to
invest in underlying funds. Therefore, notwithstanding that the applicant will not be a
member of the Fund, the Fund will use that applicant’s subscription monies for
investment during the period between the Dealing Day and the date when the current
prices of the underlying funds become available and Shares are actually issued.
In these circumstances, the applicant is deemed to have made an irrevocable loan of
the subscription monies to the Fund for these purposes. As soon as current prices
become available the Fund will redeem the loan and apply the proceeds in the
purchase or subscription of the appropriate number of Shares to which his original
subscription monies entitle him, based on the current prices available. The applicant
will not receive any interest on the loan, but will be treated as participating in the
profits of the Fund from the relevant Dealing Day. In the event that the Fund is
wound up before the investor is issued with Shares, the investor's claim against the
Fund under the loan shall rank pari passu with the claims of other unsecured
creditors. However, if the Fund is so wound up, the sole entitlement of such investors
will be to repayment of their subscription monies.
Purchasers of Shares may be required to pay stamp duty and other charges in
accordance with the laws and practices of the country of purchase.
If a share certificate is mutilated, defaced, destroyed or lost it may be replaced on
application to the Administrator on payment of such costs as may be incurred in
connection therewith and on such terms as to evidence and indemnity as the Fund
and the Administrator may require. Mutilated or defaced share certificates must be
surrendered before new ones will be issued.
Shares may be redeemed by the Fund, at the option of the holder of such Shares, on a
Dealing Day at a price representing the Net Asset Value per Share on the Valuation
Day immediately preceding the relevant Dealing Day, less the Exit Charge (if any)
and adjusted for fiscal and other charges, if any, in the Isle of Man in accordance with
the Articles (the “Redemption Price”).
The minimum value of any redemption is £10,000. If the redemption results in the
total holding falling below the Minimum Holding, or the currency equivalent, the
Notice of redemption (which, once given may only be withdrawn in exceptional
circumstances at the discretion of and with the written approval of the Directors) in
writing or by facsimile must be given to, and received by, the Administrator at 31-37
North Quay, Douglas, Isle of Man, IM1 4LB not less than one month prior to the
Dealing Day on which the investor wishes to redeem his shares; any share
certificate(s) issued in respect of the Shares to be redeemed should be received by the
Administrator at 31-37 North Quay, Douglas, Isle of Man, IM1 4LB by 5 pm
(London time) on the Business Day preceding the relevant Dealing Day; the
Directors are not bound to make any payment to any holders in respect of a
redemption of Shares unless and until any relevant share certificate(s) has/have been
received by the Administrator. Where a holding is not represented by a certificate the
Directors will require an original instruction signed by the person or persons
authorised by the holder and payment will only be made to an account in the name of
the holder and not to any third party unless the Directors in their absolute discretion
are satisfied that such third party payment is justified and has been suitably
authorised. The holder must supply appropriate signature lists, suitably certified as
originals where copies have been provided.
Payment on the redemption of Shares will generally be dispatched by the Fund within
ten Business Days after the determination of Net Asset Value and will be made by
telegraphic transfer at the expense of the investor to the bank nominated by the
investor in the redemption request. The Exit Charge shall be deducted from the value
of the redemption proceeds before payment is made to Shareholders.
The redemption price paid by the Fund for any Shares, depending on the Net Asset
Value per Share applicable on the relevant Dealing Day, may be higher or lower than
the price paid at the time of purchase of such Shares.
The Fund shall not be bound to redeem as at any Dealing Day more than one-fifth of
the number of Shares then in issue. If the Fund shall receive requests for the
redemption as at any Dealing Day of a greater number of Participating Shares, it may
scale down the number to be redeemed in response to each request to such extent as
may be necessary to ensure that the foregoing limit is not exceeded and shall carry
forward for redemption as at the next following Dealing Day the balance of each
request and so on to each succeeding Dealing Day until each request has been
complied with in full, provided that requests for redemption which have been carried
forward from an earlier Dealing Day shall subject always to the foregoing limits be
complied with in priority to later requests.
In certain circumstances, including, but not limited to, the inability of the Fund
reasonably to determine Net Asset Value by reason of the suspension of trading on
any established market where interests of the Fund or the funds are traded, or default
or delay in payments due to the Fund from banks or other persons, the Fund may in
turn suspend subscriptions and redemptions of Shares as of the applicable Dealing
Day or delay payment to persons requesting redemption of Shares.
In such cases, the Fund shall as soon as practicable thereafter effect such
subscriptions or cause such Shares to be redeemed or such redemption payment to be
made. Potential investors and Shareholders will be notified immediately of any
period of suspension and the Directors will take all reasonable steps to bring such a
period of suspension to an end as quickly as possible.
The Directors have the right to require the compulsory redemption of all Shares held
by or for the benefit of a Shareholder if the Directors determine that the Shares are
held by or for the benefit of any Shareholder who fails to comply with the conditions
required to be an eligible investor (as set out on page 21) or if the Net Asset Value of
the Shares held by the Shareholder is less than the Minimum Holding.
If either: (i) the Net Asset Value per Share is less than £75 for any consecutive three-
month period occurring after the first anniversary of the Fund’s incorporation; or (ii)
the Net Asset Value is less than £5,000,000 for any consecutive three-month period
occurring after the first anniversary of the Fund’s incorporation; or (iii) if the
Directors consider it advisable or prudent in the interests of Shareholders as a result
of any enactment, legislation or otherwise, the Fund may, in any such case, at its
option, cause all Shares then outstanding to be redeemed.
Procedure for Application Applications, which must be for a minimum of £10,000 inclusive of the Initial Charge (if
any) and must be made on and in accordance with the accompanying Application Form.
Subsequent investments must also be for a minimum of £10,000.
Applications should be sent to the Administrator at 31-37 North Quay, Douglas, Isle of Man,
IM1 4LB. All applications, whenever made, should be accompanied by a copy of the
telegraphic transfer form providing for payment before the relevant Dealing Day to the bank
account set out in the application form.
After the Initial Offer of Shares, the number of Shares issued in respect of any application
will depend on the relevant Subscription Price.
Any Initial Charge shall be deducted from the amount of any subscription before calculating
A right is reserved to accept in part only or to reject or scale down applications for Shares,
and to make any acceptance in whole or in part subject to the prior provision of information
sufficient to satisfy the Directors that the receipt of such application and/or any subsequent
issue of Shares is not made in consequence of or will not constitute a breach of the Laws or
any applicable legislation in the country of origin of the applicant.
If any application is not accepted in full, application monies will be returned in part or in full
(as the case may require) to the applicant by mail at the applicant's risk, or by telegraphic
transfer to the remitting account at the applicant’s expense.
A receipt will be issued by the Administrator on receipt of any payment on application.
Interest will not be paid on subscription monies received prior to the Dealing Day.
All cheques and other documents sent or returned to applicants will be sent by mail at the
Where payment in respect of a purchase or redemption of Shares is tendered or requested in
a freely transferable currency, the necessary foreign exchange transaction will be arranged
for the account of, and at the expense of, the applicant at the time the application is received
Shares will only be issued on receipt of cleared funds.
Initial Offer
During the Initial Offer period commencing at 9.00 a.m. on Tuesday 25th September 2007
and ending at 5.00 p.m. on Friday 26th October 2007 (both dates inclusive) Shares will be
available at a price of £100 each, inclusive of premium and any Initial Charge.
CHARGES AND EXPENSES The Fund bears all expenses incurred in connection with its establishment and the initial
placement of Shares including all out of pocket expenses incurred on its behalf such as legal
and accounting fees, and other incidental costs. These costs are not expected to exceed
£50,000 and will be paid in the first instance by the Investment Manager and recovered from
the Fund over a period of 36 months from the close of the initial offer period. Current
applicable accounting practice requires the establishment costs to be written off in the first
accounting period. However, amortisation will be used for the purposes of determining the
Net Asset Value and a reconciliation note made in the financial statements.
Initial and Exit Charge
An Initial Charge of up to 5% of the initial subscription and every subsequent subscription
will be levied. The Fund reserves the right to pay the full amount of the Initial Charge to
introducers by way of commission. Redemptions within one year of subscription will be
subject to an Exit Charge of 3% of the value of the redemption proceeds.
Fees of Service Providers
The Administrator shall be paid a fee of 0.25% per annum of the Net Asset Value up
to £30 million, 0.20% per annum on that part of the Net Asset Value between £30
million and £60 million and 0.15% per annum on that part of the Net Asset Value
which exceeds £60 million, subject to a minimum annual fee of £20,000 which shall
accrue and be payable monthly in arrears on the last Business Day of each month.
Additionally, the Administrator shall be reimbursed all out of pocket expenses.
The Investment Manager shall be paid a fee not exceeding 2% of the Net Asset Value
which shall accrue daily and be paid monthly in arrears on the last Business Day of
The Investment Manager will also be paid a fee of 20% of the increase in Net Asset
Value in excess of 5% per annum (the “Performance Fee”) calculated as follows:-
The Performance Fee is calculated so that each Share is effectively charged a fee
which equates precisely with that Share’s performance. This method of calculation
ensures that (i) any Performance Fee paid to the Investment Manager is charged only
to those Shares which have appreciated in value; (ii) all Shareholders have the same
amount of capital per Share at risk in the Fund; and (iii) Shareholders have the same
The Performance Fee is payable quarterly in arrears in respect of each performance
period. The performance period will be calculated as at the quarters ended 31st
January, 30th April, 31st July and 31st October (the “Performance Period”). The
Performance Fee will be paid to the Manager as soon as practicable after the end of
The Performance Fee will be equal to 20 per cent. of the increase in the Net Asset
Value per Share of each Class (after adding back any distributions made) outstanding
in respect of each Performance Period over and above a 5% benchmark per annum
(equivalent to 1.25% per quarter) and subject to a high water mark. The use of a high
water mark (as described below) ensures that investors will not be charged a
Performance Fee until any previous losses are recovered.
The Performance Fee will be accrued weekly and taken into account in the
calculation of the Net Asset Value per Share on each Valuation Day. In the event
that a Shareholder redeems Shares prior to the end of a Performance Period, any
accrued but unpaid Performance Fee in respect of such Shares will be deducted from
the redemption proceeds and paid to the Manager promptly thereafter. The
Performance Fee in respect of each Performance Period will be calculated by
reference to the Net Asset Value per Share before the deduction of any accrued
Performance Fees but after the deduction of accrued management fees and other
Adjustment Due to Deficit and Premium Subscriptions
Where an investor subscribes for Shares at a time when the Net Asset Value per
Share is less than the high water mark then an adjustment is required to reduce
inequalities that may otherwise result to the respective subscriber or to the Manager.
the highest Net Asset Value per Share on the last day of any Performance
Where Shares are subscribed at a time when the Net Asset Value per Share is less
than the high water mark, such new Shareholders will in effect, be required to pay an
equivalent Performance Fee with respect to any subsequent appreciation in the Net
Asset Value per Share of those Shares until the high water mark has been reached.
This will be achieved by the Fund having the power to redeem a portion of that
Shareholder’s holding for a consideration equivalent to the Performance Fee at the
end of each Performance Period which amount shall be paid directly to the Manager
and not to the respective Shareholder. After the high water mark has been achieved,
the Performance Fee will be calculated and levied in the same manner as for all other
Shares. No Performance Fee will be accrued for existing Shareholders until the high
Where Shares (“Premium Shares”) are purchased at a time when the Net Asset Value
per Share is greater than the high water mark (a “Premium Subscription”), the
prospective investor is required to pay an additional sum equal to the accrual then in
place per Share in respect of the Performance Fee (an “Equalisation Credit”). The
Equalisation Credit is designed to ensure that all Shareholders have the same amount
The Equalisation Credit will be at risk in the Fund and will therefore appreciate or
depreciate based on the performance of the Fund subsequent to the subscription. In
the event of a decline in the Net Asset Value per Share, the Equalisation Credit due
to the Shareholder will reduce in line with the Performance Fee accrual for other
Shares namely by an amount equal to 20 per cent. of the amount of the loss on a per
Share basis until the Equalisation Credit is exhausted. Subsequent appreciation in
the value of the Premium Shares will result in a recapture of any Equalisation Credit
lost due to such reductions, but only to the extent of the previously lost Equalisation
Credit up to the amount paid at subscription.
At the end of the Performance Period, an amount equal to the lower of the
Equalisation Credit paid at the time of the Premium Subscription (less any
Equalisation Credit previously applied) or 20 per cent. of the excess of the Net Asset
Value per Share over the high water mark and the 5 per cent. benchmark is applied in
the subscription for additional Shares for the Shareholder.
If a Shareholder redeems Shares between high water marks the redemption proceeds
will be increased or decreased to reflect the relevant Performance Fee calculation.
Performance Fees paid on previous unrealised gains that subsequently become
realised losses are non-refundable. Any decrease in the Net Asset Value subsequent
to the most recent month in which Performance Fees were earned will be carried
forward until future increases exceed the amount of loss carried forward. The
amount of the decrease in the value carried forward will be reduced in an amount
The Performance Fee will be paid to the Investment Manager as soon as practicable
Risks associated with Performance Fees: Under the fee arrangement described
above, the Investment Manager will be compensated for unrealised gains which may
never be reassessed. The fee arrangement may also create an incentive for the
Investment Manager to cause the Fund to make investments that are riskier or more
speculative than would be the case in the absence of a performance fee arrangement.
The Custodian shall be paid a fee not exceeding 0.1% per annum of the Net Asset
Value which shall only apply once the Net Asset Value has reached £5,000,000 and
which shall accrue daily and be payable monthly in arrears on the last Business Day
of each month. However, should the Net Asset Value subsequently fall below
£5,000,000, the fee will continue to be paid. Additionally, the Custodian shall
recover all counter-party charges and be reimbursed all out of pocket expenses.
Mr Desai and Ms Evett shall each be paid £2,500 per annum. Mr Mehta will waive
Registered Office and Company Secretarial Fee
The Administrator shall be paid a fee of £2,000 per annum for the provision of a
company secretary and registered office to the Fund.
Other Costs and Expenses
The following additional costs shall be borne by the Fund:-
expenses of and incidental to the convening and holding of meetings of
Shareholders, Directors and committees of Directors, of the Fund including without
limitation the expenses of and incidental to producing, printing and posting or
otherwise despatching notices of meetings and any documents enclosed therewith or
designed to be read in conjunction therewith;
expenses of and incidental to producing, printing and posting or otherwise
despatching yearly accounts of the Fund and any report of the Directors and/or
expenses of and incidental to printing and posting or otherwise despatching
advice or contract notes, share certificates and dividend warrants of the Fund;
the cost of maintaining the Fund's share register, minute books and other
documentation required by law to be maintained by the Fund;
stamp and other duties, taxes, governmental charges, brokerage, transfer fees,
registration fees and other charges payable in respect of or in conjunction with the
acquisition, holding or realisation of any investment by the Fund;
corporate and other fees payable by the Fund to any Government or other
authority or to any agency of such Government or authority whether in the Isle of
audit fees of the Fund and legal expenses in connection with the Fund's
corporate existence, corporate and financial structure and relations with its
Shareholders and third parties and all other professional and other charges in respect
the cost of directors and officers liability insurance; and
other costs incurred by the Fund in connection with its operation as a
Where appropriate the above fees will bear value added tax.
Taxation, Exchange Control and Duty The following is intended only as a summary of current law and practice in the Isle of Man
and the United Kingdom, is subject to change and does not constitute legal, tax or exchange
control advice. Prospective investors should consult their own professional advisers on the
implications in the relevant jurisdiction(s) of buying, holding, disposing of or redeeming
Shares, including the provisions of the laws of the jurisdiction in which they reside or are
Isle of Man
With effect from 6th April 2006, the Isle of Man Government introduced a zero rate tax
regime for Isle of Man companies. The Fund will, therefore, be liable for tax at 0% on its
income. However, if the Fund has Isle of Man resident Shareholders, it will be required to
account for a charge, known as the Distributable Profits Charge (“DPC”), in respect of such
Shareholders. A person shall be treated as an Isle of Man resident Shareholder only where
ultimate beneficial ownership of the Shares is vested in an individual or company which is
resident in the Isle of Man. The DPC is payable by the Fund on the amount of distributable
profits attributable to Manx resident Shareholders, currently at the rate of 18%. All potential
investors will be required to make a declaration in the application form as to the residence of
the ultimate beneficial owner of the Shares.
The Isle of Man does not levy taxes on capital inheritances, capital gains, gifts or sales. No
Isle of Man tax will be withheld in respect of the payment of redemption proceeds.
It is intended that the Fund will be so organised as to be fiscally resident in the Isle of Man.
The Fund may invest in various jurisdictions and, in consequence, certain of its income and
gains may be liable to taxation in those jurisdictions. However, the Fund will aim to
minimise taxation on its income and gains to the extent to which the Directors and
There are no current exchange control restrictions applicable in the Isle of Man.
Isle of Man capital duty is payable at the rate of 1.5% of the Fund's authorised share capital
from time to time, subject to an aggregate maximum duty payable of £5,000.
EU Savings Tax Directive
The EU Savings Tax Directive (Council Directive 2003/48/EC) (the “Directive”) came into
force on 1st July 2005. The Isle of Man has entered into Agreements with the EU Member
States. These Agreements effectively require the Island to comply with the requirements of
the Directive, subject to certain other jurisdictions also complying. Once the provisions of
the Directive are implemented by the Island, then certain distributions and redemption
proceeds paid by collective investment schemes established in the Isle of Man to
Shareholders who are individuals resident in the EU may be subject to withholding tax.
However, the Isle of Man Government has determined that only one category of collective
investment scheme, namely Authorised Schemes, will fall within the Directive and that all
other types of collective investment scheme, including the experienced investor fund do not
fall within the Directive. Accordingly, as the Fund is an experienced investor fund, there will
be no requirement to deduct withholding tax from any such distributions or redemption
proceeds paid to Shareholders by the Fund.
WINDING UP Share rights on a winding up
On a winding up of the Fund, the liquidator of the Fund shall, so far as is possible, apply the
assets available for distribution in the following manner:
firstly, in payment pari passu to holders of Shares of the nominal amount paid up
thereon, which payment may be made from the available assets of the Fund;
(ii) secondly, in repayment pari passu to holders of Nominal Shares of the nominal
amount paid up thereon, which payment may be made from the remaining assets of
thirdly, in repayment pari passu to holders of Management Shares of the nominal
amount paid up thereon, which payment may be made from the remaining assets of
fourthly, any surplus assets then remaining shall be distributed among the holders of
the Shares in accordance with regulation 7 of the Articles.
VII MISCELLANEOUS Reporting to Investors The annual general meeting of all Shareholders of the Fund will be held in the Isle of Man
for the purpose, inter alia, of considering the annual audited financial statements of the Fund.
The year end of the Fund will be 30th June in each year. Notices convening the annual
general meeting, together with the annual report and accounts of the Fund will be sent,
within six months of the financial year end (and at least twenty-one days before the date
fixed for the meeting), to Shareholders at their registered address.
The annual financial statements shall be prepared in accordance with international or United
Kingdom accounting standards. Shareholders should note that the Net Asset Value in the
financial statements will, therefore, be calculated on a different basis from the Net Asset
Value used for the purposes of determining the price at which Shares are issued and
Shareholders will also be sent, within two months of 31st March, 30th June, 30th September
and 31st December in each year commencing in 2008, copies of the quarterly investment
Other general meetings and class meetings of the Fund may be convened from time to time
by the Directors on the giving of twenty-one days' notice to all Shareholders.
Shareholders will receive one month’s written notice of the following:-
(i) any change in the investment policy, limits and restrictions of the Fund;
(ii) any change in the Administrator, Manager, Investment Manager or Custodian;
(iii) any increase in the costs and expenses incurred by the Fund; and
(iv) any other amendment to the Fund considered by the Directors to be material.
It is envisaged that prices of Shares may in the future be published in the Financial Times The Material Contracts
The following contracts, not being contracts entered into in the normal course of business,
have been entered into by the Fund prior to the date of this Offering Documnent and are, or
An Administration Agreement between the Fund and the Administrator made the
24th day of September 2007 whereby the Fund appointed the Administrator to
provide certain company secretarial, registrar and transfer agency, accounting and
other administrative services to the Fund. The Administration Agreement shall
continue in force until terminated by either party on 60 days’ notice in writing to the
other party and may be terminated forthwith if (a) a secured party takes possession or a
receiver, manager or other similar officer is appointed, of the whole or any part of the
undertaking, assets and revenues of the Administrator, (b) the Administrator admits in
writing its insolvency or inability to pay its debts as they fall due, (c) an administrator
or liquidator of the Administrator or the whole or any part of the undertaking, assets
and revenues of the Administrator is appointed (or application for any such
appointment is made), (d) the Administrator takes any action for a readjustment or
deferment of any of its obligations or makes a general assignment, or an arrangement,
or composition, with, or for the benefit of, its creditors or declares a moratorium in
respect of any of its indebtedness, (e) an order is made or an effective resolution is
passed for the winding up of the Administrator or (f) any event occurs which has an
analogous effect of any of the foregoing; whereupon the Fund shall appoint a successor
as Administrator acceptable to it to take effect immediately upon such termination. The
Administration Agreement provides that in the absence of fraud, wilful default or
negligence, the Administrator will not be liable for any loss incurred by the Fund as a
result of any act or omission of the Administrator in the performance of its services
and duties under the Administration Agreement and the Fund agrees to indemnify the
Administrator against any loss suffered by the Administrator in the performance of
its obligations and duties under the Administration Agreement, save where such loss
arises as a result of a breach of the terms of the Administration Agreement,
negligence, wilful default or fraud on the part of the Administrator.
An Investment Management Agreement between the Fund and the Investment
Manager dated the 24th day of September 2007 whereby the Fund appointed the
Investment Manager, subject to the control and review of the Directors, to manage
the investments of the Fund. The Investment Management Agreement shall continue
in force until terminated by either party on 90 days’ notice in writing to the other
party. It may be terminated forthwith by either party on immediate written notice if
the other party commits any material breach of its obligations and fails to remedy
such breach within 30 days of receipt of written notice requiring the same, or if the
other party is dissolved or otherwise enters into insolvency proceedings. The Fund
may terminate the Investment Management Agreement forthwith if the Investment
Manager ceases to be an authorised person for the purposes of the Financial Services
and Markets Act 2000 (or any successor legislation). The Investment Manager will
not be liable for any loss suffered by the Fund in connection with the performance by
the Investment Manager of its obligations under the Investment Management
Agreement in the absence of fraud, wilful default or negligence on the part of the
Investment Manager in the performance or non-performance of its obligations and
duties under the Investment Management Agreement. The Fund agrees to indemnify
the Investment Manager against all liabilities incurred by it in the performance of its
obligations and duties under the Investment Management Agreement other than
liabilities arising out of the fraud, wilful default or negligence on the part of the
Investment Manager in the performance or non-performance of its obligations and
A Custodian Agreement between the Fund and the Custodian dated the 24th day of
September 2007 whereby the Fund has appointed the Custodian as custodian of the
assets of the Fund. The Custodian Agreement shall continue in force until terminated
by either party on 60 days’ notice in writing to the other party and may be terminated
immediately upon one party giving the other (“the Defaulting Party”) notice of
immediate termination in the event of (a) the Defaulting Party being insolvent or
going into liquidation (other than voluntary liquidation for the purpose of
reconstructing or amalgamation forthwith to be carried into effect) or a Receiver
being appointed of any of its assets; or (b) the Defaulting Party committing a serious
breach of this Agreement or being guilty of serious misconduct or negligence in the
performance of its duties hereunder; or (c) the Custodian being prohibited by statute
or by any rules, regulations, orders or directives made or issues by any person, body
or organisation, which pursuant to any relevant legislation has or is recognised as
having supervisory authority in respect of the Custodian, from being the Custodian of
the assets; or (d) if all the Shares of the Fund are redeemed. The Custodian
Agreement provides that in the absence of fraud, wilful default or negligence, the
Custodian will not be liable for any loss incurred by the Fund as a result of any act or
omission of the Custodian in the performance of its services and duties under the
Custodian Agreement and the Fund agrees to indemnify the Custodian against any
loss suffered by the Custodian in the performance of its obligations and duties under
the Custodian Agreement, save where such loss arises as a result of a breach of the
terms of the Custodian Agreement, negligence, wilful default or fraud on the part of
Documents Available for Inspection
Copies of this Offering Document, the Fund’s Memorandum and Articles of Association, the
Material Contracts, any amending documents and (in due course) copies of the most recent
annual and interim reports (when compiled), may be inspected at and copies may be obtained
Miscellaneous
Save as disclosed herein, no commission or other payment will be made by the Fund
in respect of application for Shares. The Fund may make such payments of
commission or otherwise as it thinks fit in respect of each such application.
Save as disclosed herein, no Director of the Fund has any interest, direct or indirect,
in any assets which have been acquired or disposed of by or leased to the Fund or are
proposed to be acquired, disposed of by or leased to the Fund or in any transaction
which is subsisting at the date of this Offering Document and which is unusual in its
nature or conditions or significant in relation to the business of the Fund.
The Fund does not have any subsidiaries.
Save as disclosed herein no share or loan capital of the Fund is under option or
agreed to be put under option conditionally or unconditionally and, save as disclosed
herein, no commission, discounts, brokerages or other special terms have been
granted by the Fund prior to the date of this Offering Document in connection with
the issue or sale of any share or loan capital of the Fund.
Save as disclosed herein, no share or loan capital of the Fund has been issued or
agreed to be issued prior to the date of this Offering Document or is proposed to be
issued, fully or partly paid, either for cash or for a consideration other than cash.
The Fund has not purchased or agreed to purchase or acquire any real property.
Save as disclosed herein, no amount or benefit has been paid or given (or is intended
Save for the entering into the Material Contracts and opening a bank account, the
There are no legal, arbitration or other proceedings pending or threatened against the
Fund, nor have there been since the incorporation of the Fund.
As of the date of this Offering Document the Fund has no loan capital (including
term loans) outstanding or created but unissued, and no outstanding mortgages,
charges, debentures or other borrowings, including bank and overdraft and liabilities
under acceptance or acceptance credits, hire purchase or finance lease commitments,
guarantees or other contingent liabilities.
Neither the Directors, nor any connected person, the existence of which is known to
or could with reasonable diligence be ascertained by the Director, whether or not
through another party, have any interest in the Shares of the Fund nor have they been
granted any options in respect of the Shares of the Fund.
No loan or guarantee has been granted or provided by the Fund to any Director.
None of the Directors have a service contract, existing or proposed, with the Fund.
The Directors may vote on any transaction in which they have a material interest if
they first disclose the nature of their interest to the Fund.
The Directors may fix the emoluments of Directors with respect to services to be
The Directors may exercise all the powers of the Fund to borrow money and to
mortgage or charge its undertakings property and uncalled capital or any part thereof,
to issue debentures, debenture stock and offer securities whenever money is
borrowed as security for any debt, liability or obligation of the Fund.
The Articles of Association contain no provision requiring Directors to retire on
Shares are freely transferable and may not be subject to any transfer restrictions or
compulsory redemption save where the holdings of such Shares may result in
regulatory, pecuniary, legal taxation or material administrative disadvantage for the
Fund or its shareholders as a whole, or whether such transfer would result in the
value of a Shareholder’s Shares falling below the value of the Minimum Holding.
Author's personal copy Mathematical and Computer Modelling 52 (2010) 1023–1029Contents lists available at ScienceDirectjournal homepage: www.elsevier.com/locate/mcmA network model for the short-term prediction of the evolution ofcocaine consumption in SpainFrancisco-José Santonja a,∗, Iván-C. Lombana b, María Rubio b, Emilio Sánchez c,Javier Villanueva da Departamento de Estad
The ‘Morning-After Pill’, Rape Victims and Ethical and Religious Directives for Catholic Health Care Services Anthony McCarthy “ A female who has been raped should be able to defend herself against a potential conception from the sexual assault. If after appropriate testing, there is no evidence that conception treated with medications that would preven