Embed Size (px)
Citation preview
The Close ManHedge FundExposure to hedge fundsfor the UK investor, withcapital protection throughits investment in a capitalguaranteed bond issued byThe Royal Bank of Scotland
01
The Challenge
May 2004
Hedge funds have provided investors with opportunities
for growth which traditional funds have difficulty in
matching. They can take advantage of both rises and
falls in asset prices and are able to enhance returns
using gearing. The investment techniques they adopt
allow them to profit from a far wider range of
opportunities than those available to traditional asset
managers. By employing a multi-strategy approach,
positive returns are achievable throughout the full
economic cycle.
Unfortunately it has been difficult for UK private
investors to access talented hedge fund managers.
Usually they have extremely high entry minimums,
capacity is quickly taken up, gains are taxed as income,
they are rarely denominated in sterling and have
infrequent exit points.
In a world where stock marketreturns are becoming increasinglyvolatile, market trends short livedand often sector specific, manyinvestors now seek products whichenable them to diversify broadmarket risk.
The Opportunity
I would like to invest in hedge funds, they seem to offerattractive risk-adjusted returns (i.e. good returns with lower volatility).
• How do I choose from the thousands available?• I am worried about the risk of investing with just one manager.• The entry levels are too high.• The tax treatment and currency denomination does not suit me.
I would be interested in a fund which has capital protection, isdenominated in sterling, gives access to a diversified portfolio of strategiesand talented managers, aims to provide consistent returns and growthwhich is Capital Gains Tax assessable.
04
The Solution
May 2004
*Investment in The Royal Bank of Scotland capital guaranteed bond and the capital protection thereon will be net of any
initial commission. The capital guaranteed bond is a firm and binding obligation of The Royal Bank of Scotland plc to
the Fund to repay the Guaranteed Capital Amount at maturity. The use of the word “guaranteed” does not mean that
shareholders themselves have the direct benefit of any guarantee from The Royal Bank of Scotland plc. Full details of the
terms and conditions of the capital guaranteed bond are set out in the Prospectus.
The Close Man Hedge Fund (“the Fund”)is designed to give investors capitalprotection plus exposure to a diversifiedhedge fund portfolio managed by ManGlobal Strategies, an investment divisionof Man Investments Limited, part of one ofthe world’s largest independent hedge fundmanagement groups. Capital protection isprovided through the Fund’s investment ina capital guaranteed bond issued by TheRoyal Bank of Scotland*. Shares in theFund can be redeemed quarterly at NetAsset Value and gains are capital gains taxassessable for UK private investors.
06 May 2004
The Fund• is a closed-ended investment company incorporated
in Guernsey and will be listed on the Channel IslandsStock Exchange (CISX). Shares have an investmentterm of approximately 8.5 years.
• provides exposure to a managed portfolio of carefullyselected hedge funds.
• will use appropriately weighted exposures to anumber of hedge fund style categories to includeinitially arbitrage, equity hedge, long/short equities,managed futures and a multi-style portfolio.
• will allocate to a range of fund managers within thevarious style categories, providing further diversificationwithin the overall portfolio.
ObjectivesHow will my money grow?The Fund aims for impressive medium term capital gainswith controlled risk through investment in a portfolio ofhedge funds. Its objective is to produce annualisedabsolute returns of 13%-15% net of all fees with targetannualised volatility of 10%-12% over the medium term†.
Is my money secure?The capital guaranteed bond issued by The Royal Bankof Scotland is designed to ensure the return to the Fundat maturity of its initial capital investment*.
Do markets have to rise for me to make a profit?By gaining exposure to a diverse range of alternativeinvestment strategies, many of which have a lowcorrelation with each other as well as major capitalmarkets, the Fund aims to produce stable returns evenwhen global markets are falling.
How will this Fund have the potential to enhance myexisting portfolio?It is intended that the Fund will gain exposure to similarhedge fund strategies as Man Multi-Strategy GuaranteedLtd which has demonstrated an ability to performindependently of traditional stock and bond investmentssince its inception in July 2000**. This lack ofcorrelation means that any returns achieved by the Fundhave the ability to provide valuable diversification benefitsand enhance the risk-return characteristics of atraditional investment portfolio.
Investment ExpertiseResponsibility for the content and management of the
hedge fund portfolio rests with Man Global Strategies, an
investment division of Man Investments Limited. The
investment professionals on Man Global Strategies’
investment committee have refined their multi-strategy
asset allocation skills since 1996, when the first Man
multi-manager structured product was developed. The
five style categories to which the Fund will initially
allocate are as follows:
Arbitrage Style
The arbitrage style category includes Investment Strategies
that typically exploit pricing anomalies between related
securities within and between markets. By establishing long
positions in undervalued assets and short positions in
overvalued assets, these strategies aim to capture profit
opportunities that arise from the changing price relationship
between the assets concerned. Strategies tend to be relative
value or event driven in nature, and include convertible
bond, fixed income, merger and multi-strategy arbitrage
approaches. They are designed to produce positive returns
independent of the overall direction of broad market prices
with relatively low volatility in all market environments.
Equity Hedge Style
The equity hedge style includes Investment Strategies
that are relative value and market neutral (either dollar
or beta) high-hedge in nature. It aims to profit from
identifying equities deemed to be under or over-valued
in relation to other stocks or groups of stocks, often
within a sector. Investment decisions are commonly
executed within a systematic framework. Stock selection
tends to be based on either price based analysis, which
is usual in the case of statistical arbitrage models, or
various measures of fundamental value. Sometimes
multi-factor models combining both technical and
fundamental measures are employed. The performance
of strategies is typically expected to show relatively low
correlation and beta to the markets traded. Equity hedge
strategies are often characterised by a relatively high
trading frequency. Strategies within this category aim to
achieve consistent returns with relatively low volatility in
all market environments.
How Does It Work?
07May 2004
Long/Short Equities Style
The long/short equities style includes Investment
Strategies that trade long and short without any necessary
restriction on the degree of net long or short exposure
they adopt. Some strategies may have a variable or
consistent net long or short bias. They aim to profit from
identifying stocks deemed to be under or over-valued on
an outright basis – an approach commonly known as
“stock picking”. Investment decisions are usually made
within a discretionary framework based on fundamental
quantitative and qualitative valuation techniques.
Long/short equities strategies are often characterised by a
relatively low trading frequency. The performance of these
strategies is typically expected to show higher correlation
and beta to the markets traded than equity hedge
strategies. Volatility also tends to be higher than for equity
hedge strategies. The strategies aim to be return-
enhancing, delivering most of the upside of stock markets
with less of the downside.
Managed Futures Style
The managed futures style includes Investment Strategies
which trade derivative instruments such as futures
contracts, options, forward contracts, swap contracts and
leverage contracts across a range of markets including
stock index, fixed income, foreign exchange and
commodities. They invest on both the long and short side
of the market and usually apply technical analysis and
systematic investment processes, although they may also
apply fundamental analysis and make discretionary
investments. The trading systems employed are generally
sophisticated computer-driven systems to identify and
follow trends, although certain managers may use non-
trend approaches such as trend-reversal, contrarian
(counter-trend) and mean reversion approaches. Other
advisers engage in active and fast systematic trading
approaches designed to capture short-term profit
opportunities in highly liquid futures markets.
Multi-Style Portfolio
The multi-style portfolio category caters for any
investment in a diversified portfolio of underlying
Investment Strategies. The multi-style portfolio managers
must employ a clear investment process and
methodology to harness the competitive advantages
offered by each underlying Investment Strategy. The
objective is to produce consistently attractive absolute
returns with low (usually bond-like) volatility. An
allocation to a multi-style portfolio within a broader
portfolio helps to ensure an inherent level of strategic
diversification and lends stability to the broader portfolio.
Source: Man Investments
†There is no guarantee of trading performance and past or projected performance is not necessarily a guide to future
results. The return and volatility targets quoted are based on performance projections of the investment approaches and
investment strategies that have been used historically by Man Investments Limited to construct portfolios with similar
anticipated investment exposures. Based upon these projections, Man Investments Limited believes that the target risk
and return figures are realistic and achievable.
*Investment in The Royal Bank of Scotland capital guaranteed bond and the capital protection thereon will be net of any
initial commission. Full details of the terms and conditions of the capital guaranteed bond are set out in the Prospectus.
**Source: Man Investments.
08
Where Will It Invest?
May 2004
Source: Man database, CSFB/Tremont and Standard & Poor’s Micropal. There is no
guarantee of trading performance and past performance is not necessarily a guide to
future results. World stocks: MSCI World Stock Index (total return). World bonds:
Citigroup World Government Bond Index (total return). 1Please note that the
performance record shown for Man Multi-Strategy Guaranteed Limited is based on
USD denominated returns and that The Close Man Hedge Fund is denominated in
sterling. Man Multi-Strategy Guaranteed Limited has exposure to similar hedge fund
strategies as it is intended that the Fund will have. The hedge fund strategies to
which the Fund will be exposed may produce different returns from Man Multi-
Strategy Guaranteed Limited due to a number of differing factors such as: fees and
operating expenses, taxes, foreign exchange, cash flows, asset size and investment
structure.
5
Source: Man database.
The figures cited are based on initial target allocations which are subject to change
based on Man Global Strategies’ investment committee’s current decisions at the
time of implementation and may differ from actual allocations due to gearing
overlays and other factors.
1 Managed futures
2 Arbitrage
3 Multi-style
4 Equity hedge
5 Long/short equities
Total
% ofportfolio
36.0%
20.0%
19.3%
16.7%
8.0%
100%
Initial Strategy Allocation for the standard Man Multi-Strategy Guaranteedstructure as at 1 May 2004
Man Multi-Strategy Guaranteed Limited vs CSFB Hedge Fund Index, world stocks and bonds
15 July 2000 to 31 March 2004
It is intended that the Fund will gain exposure to similar hedge fund strategiesas Man Multi-Strategy Guaranteed Ltd which was launched in July 2000.
4
3
2
1
20022001
1800
1600
1400
1200
1000900
2003 2004
Index value USD
(Log scale)
Man Multi-Strategy Guaranteed Limited1
CSFB Hedge Fund Index
World Stocks
World Bonds
09May 2004
UK Stocks 40%
World Stocks 20%
UK Bonds 20%
World Bonds 10%
Cash 10%
Portfolio enhancement through an allocation to Man Multi-Strategy Guaranteed Limited
15 July 2000 to 31 March 2004
The inclusion of a 20% allocation to the Fund in a traditional client portfolio ofstocks and bonds (see footnote below) could have an impressive impact onboth overall return and volatility. An illustration of such an allocation isdetailed below.
How Can This Enhance My Portfolio?
Traditional Portfolio
Enhanced Portfolio
Traditional Portfolio 80%
Man Multi-StrategyGtd Ltd1 20%
% (
annu
alis
ed)
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
-0.3
9.2
ReturnVolatility
Source: Man database, Bloomberg and Standard & Poor’s Micropal. There is no guarantee of trading performance and past performance is not necessarily a guide to future results.
Traditional portfolio: 40% UK stocks: FTSE All Share Index (Total Return) (GBP), 20% World Stocks: MSCI World Stock Index (Total Return) (USD), 20% UK bonds: Citigroup 7-10
Year UK Government Bond Index (Total Return) (GBP), 10% World bonds: Citigroup World Government Bond Index (Total Return) (USD), 10% Cash: UK 3 month LIBOR Index (GBP)
Enhanced Portfolio: 80% Traditional Portfolio, 20% Man Multi-Strategy Guaranteed Limited1.
1Please note that Man Multi-Strategy Guaranteed Limited is denominated in US dollars and The Close Man Hedge Fund is denominated in sterling. Man Multi-Strategy
Guaranteed Limited has exposure to similar hedge fund strategies as it is intended that the Fund will have. The hedge fund strategies to which the Fund will be exposed may
produce different returns from Man Multi-Strategy Guaranteed Limited due to a number of differing factors such as: fees and operating expenses, taxes, foreign exchange, cash
flows, asset size and investment structure.
By allocating 20% of a portfolio to Man Multi-Strategy Guaranteed Limited at launch, annualised returns have been
enhanced by 2.8% and annualised volatility reduced by 2.5%.
% (
annu
alis
ed)
10.0%
8.0%
6.0%
4.0%
2.0%
0.0%
-2.0%
-4.0%
2.5
6.7
ReturnVolatility
10
Summary
What are the Key Benefits?
• Track record. Man Investments isa global leader with more than 20years of experience in hedgefunds. It is intended that the Fundwill gain exposure to similar hedgefund strategies as the Man Multi-Strategy Guaranteed Ltd whichwas launched in July 2000*.
• Capital Guaranteed Bond.The capital guaranteed bondissued by The Royal Bank ofScotland is designed to ensurethe return to the Fund of its initialcapital investment**.
• Returns. The Fund targetsannualised absolute returns of13%-15% net of all fees withtarget annualised volatility of10%-12% over the mediumterm†. To put this into context theFTSE 100 Index has deliveredannualised total returns of 8.5%with associated volatility of 15.1%over the last 15 years, whilst UKGilts have delivered 9.6%annualised total return with 5.8%annualised volatility over thesame period††.
• Liquidity. The Fund offers quarterlyredemptions at Net Asset Value.
• Currency. The Fund isdenominated in sterling which,unlike many other hedge funds,means the principal investment isprotected from currency risk.
• Flexibility. As a closed-endedinvestment company incorporatedin Guernsey, the Fund is eligiblefor inclusion in SIPPs, SSASs, PEPTransfers and ISAs. It will be capitalgains assessable with the benefit oftaper relief for UK private investors.
• Low entry minimum. Theminimum investment is £10,000.In the past it has been difficult forprivate investors to access theexpertise of leading hedge fundmanagers because of high entryminimums, and because capacityis quickly taken up.
• Launch Details. Shares will beavailable for subscription as partof the offer for subscription untilNoon 18 June 2004.
*Source: Man Investments.
May 2004
11May 2004
**Investment in The Royal Bank of Scotland capital
guaranteed bond and the capital protection thereon will
be net of any initial commission. Full details of the terms
and conditions of the capital guaranteed bond are set
out in the Prospectus.
†There is no guarantee of trading performance and
past or projected performance is not necessarily a
guide to future results. The return and volatility targets
quoted are based on performance projections of the
investment approaches and investment strategies that
have been used historically by Man Investments
Limited to construct portfolios with similar anticipated
investment exposures. Based upon these projections,
Man Investments Limited believes that the target risk
and return figures are realistic and achievable.
††Source Lipper Limited. Performance data to 31 March
2004. Total return in sterling. UK Gilts: Merrill Lynch UK
Gilts Index.
Summary
12
Your Questions
What are the charges?
Information on fees and expenses are described on
page 25 of this document.
How can I subscribe for shares?
Please complete and sign the application form
attached to this brochure, which must be accompanied
by a cheque for the full amount made payable to:
“BPCIL re The Close Man Hedge Fund Limited” and
crossed “A/C Payee”.
Completed application forms and cheques must be
received at: Anson Registrars Limited, New Issues
Department, PO Box 426, Anson House, Havilland
Street, St Peter Port, Guernsey, Channel Islands GY1
3WX by Noon 18 June 2004.
Notes on how to complete the application form and
information for applicants sending subscription monies
by electronic transfer (CHAPS) can be found on page 28.
What notification will I receive?
Share certificates will be despatched by 2 July 2004.
Stock accounts for those investors who elect to receive
their shares in uncertificated form through the CREST
system are expected to be credited on 28 June 2004.
How will I be able to find the current value of
my investments?
Closing market prices of shares can be obtained from
your stockbroker.
How will I be able to redeem my shares?
You will be able to apply to redeem your shares at Net
Asset Value on a quarterly basis by submitting a
redemption form which can be obtained from Anson Fund
Managers Limited and must be received by Anson Fund
Managers Limited, PO Box 405, Anson House, Havilland
Street, St Peter Port, Guernsey, Channel Islands GY1
3GF as follows;
Receipt of Redemption Redemption Date
Form (9.30am) on
2nd business day
prior to the 15th
calendar day of 1st business day of
December January
March April
June July
September October
Payment of the proceeds of an early redemption will be
paid approximately 30 business days after the relevant
redemption date. The minimum redemption
requirement is 9,700 shares and shares must be
redeemed in multiples of 50 shares. Further details are
set out in Part III of the Prospectus.
It is also the intention to encourage a secondary market
whereby shareholders can sell their shares via a
stockbroker at market prices on any business day.
Please note the value of shares may differ from the
prices quoted by market makers.
When should I expect to receive report and accounts?
Annual reports for the 12 months to 30 September will
be sent to Shareholders in April commencing in 2005.
Interim reports for the 6 months to 31 March will be
sent to Shareholders in July commencing in 2005.
May 2004
13
Key Information
The following information is derived from, and should
be read in conjunction with, the full text of the
Prospectus. The attention of potential investors is
drawn to the section headed “Risk Factors” set out in
this section.
The Company
• The Close Man Hedge Fund Limited is a Guernsey
incorporated, closed-ended investment company.
The Company has an unlimited life but the Shares
have an investment term of approximately 8.5 years
and all Shares still in issue on the Maturity Date will
be subject to compulsory redemption.
• The Company will be managed by the board of
Directors and will not have an external manager.
Administrative and secretarial support will be provided
by Anson Fund Managers Limited in Guernsey.
Investment Objective and Policy
• The investment objective of the Company is to
provide Shareholders over the medium term with
target annualised absolute returns of 13 to 15 per
cent. and target annualised volatility of 10 to 12 per
cent. through an economic exposure to a diverse
range of quantitative and qualitative hedge fund
Investment Strategies selected by Man Global
Strategies, an investment division of Man Investments
Limited, whilst providing capital protection for
Shareholders. There is no guarantee of trading
performance and past or projected performance is
not necessarily a guide to the future. The return and
volatility targets quoted are based on performance
projections of the investment approaches and
investment strategies that have been used historically
by Man Investments Limited to construct portfolios
with similar anticipated investment exposures. Based
upon these projections, Man Investments Limited
believes that the target risk and return figures are
realistic and achievable.
• The Company will invest solely in Capital Guaranteed
Bonds issued by The Royal Bank of Scotland, the
returns on which are designed to enable the Company
to meet its investment objective. Under the terms of
the Bonds, The Royal Bank of Scotland will be
required to repay to the Company at the Maturity Date
the full amount invested by the Company in the Bonds
(“Guaranteed Capital Amount”) together with a return
linked to the performance of Man MS Sterling Ltd. The
investment objective and policy of Man MS Sterling
Ltd has been devised by the Investment Manager on
the basis of various analytical models with the aim of
enabling the Company to achieve its target returns
and volatilities over the medium term. Further details
on Man MS Sterling Ltd are set out below.
• The Royal Bank of Scotland will invest a significant
proportion of the proceeds it receives from the issue
of the Bonds in a Notional Zero Coupon Note. The
Royal Bank of Scotland will also enter into a Swap
Agreement with the Swap Counterparty pursuant to
which The Royal Bank of Scotland will pay the
balance of the proceeds of the Bonds to the Swap
Counterparty in return for which the Swap
Counterparty will agree to pay to The Royal Bank of
Scotland the net asset value per share it receives in
respect of its shares in Man MS Sterling Ltd as at the
termination date of the Swap or part thereof prior
to the termination date, if requested by The Royal
Bank of Scotland following a request from the
Company for a partial repurchase of Bonds. The
Swap Counterparty will use the proceeds received
from The Royal Bank of Scotland to invest in the
shares of Man MS Sterling Ltd. Man MS Sterling Ltd
will utilise these proceeds, together with amounts
raised under the Credit Facility with the objective of
achieving its target investment exposure.
• The repayment obligation of The Royal Bank of
Scotland under the terms of the Bonds means that,
at the Maturity Date, in the absence of any default by
The information set out on the following pages is taken from the Prospectus issued by The Close Man Hedge Funddated 7 May 2004 (the “Prospectus”). Terms set out in this section have the same meaning as defined in theProspectus.
May 2004
14
Key Information
The Royal Bank of Scotland, the Company should be
able to repay to Shareholders the Initial Investment in
respect of their Shares. Please refer to sub-section
headed “Exceptional Expenses” in the “Risk Factors”
section for information on exceptional circumstances
in which Shareholders’ returns on their Initial
Investment may be prejudiced.
• The Bonds will not be rated for credit purposes.
However, for information purposes only, long term
unsecured and unguaranteed debt obligations of The
Royal Bank of Scotland are currently rated AA by
S&P, Aa1 by Moody’s and AA+ by Fitch.
Rights attaching to Shares
• The Shares will be capable of being redeemed on a
quarterly basis prior to the Maturity Date at the
request of Shareholders. The Shares will be
redeemable at their Net Asset Value per Share
calculated as at the Valuation Point immediately prior
to the relevant Redemption Date. The method of
calculation of the Net Asset Value per Share is set out
in detail in Part III of the Prospectus. Redemption
proceeds of the Shares will be paid approximately 30
Business Days after the relevant Redemption Date. In
order for the Company to meet requests from
Shareholders for quarterly redemptions, the Company
will request The Royal Bank of Scotland to
repurchase Bonds at the Prevailing Bond NAV. Such
repurchases from the Company will not benefit from
the capital protection provided by The Royal Bank of
Scotland under the Bonds, which will only apply at
the Maturity Date.
• No dividends will be paid on the Shares.
Investment Manager of Man MS Sterling Ltd
• The investment manager of Man MS Sterling Ltd is
Man Investments Limited (“Investment Manager”),
which is authorised and regulated by the FSA in the
United Kingdom. Responsibility for the content,
construction and management of Man MS Sterling
Ltd’s portfolio rests with Man Global Strategies, an
investment division of Man Investments Limited. The
investment professionals who comprise the Man
Global Strategies’ investment committee have an
average of 16 years of relevant investment experience.
• Man Investments is part of Man Group plc, an
international financial services business that is listed
on the London Stock Exchange and is a constituent
of the FTSE 100 index of major companies.
Established in 1983, Man Investments has launched
around 400 products. It is also one of the world’s
largest independent hedge fund management groups.
• Man Investments is an independent and global leader
in alternative investments, providing innovative
products and tailor-made solutions for private and
institutional clients. Through its core managers, Man
Investments has succeeded in developing specialised
strengths in different alternative asset classes, namely
hedge funds, private equity, leveraged finance and
convertible bonds.
Investment Objective and Policy of Man MS Sterling Ltd
• Man MS Sterling Ltd is a mutual fund company
incorporated with limited liability in Bermuda. The
investment objective of Man MS Sterling Ltd is to
achieve consistent risk adjusted capital gains during
both rising and falling market periods over the
medium term. It is the Investment Manager’s aim that
the investment returns of Man MS Sterling Ltd are
sufficient to enable the Company to achieve its stated
target returns at the target volatilities over the
medium term. The Investment Manager will seek to
enable Man MS Sterling Ltd to achieve its investment
objective by allocating its assets to a diversified and
flexible portfolio of Investment Strategies.
• The Investment Strategies may initially be classified
into five broad style categories: arbitrage, equity
hedge, long/short equities, managed futures and
multi-style portfolio. For each of the investment style
categories, the Investment Manager will select one
or more Trading Advisers which it believes has the
ability or have the collective ability to deliver the
target risk-return profile it has defined for each style
category. The list of style categories described above
are not exhaustive. The Investment Manager may,
in the future, allocate assets to new investment
May 2004
15
Key Information
approaches and style categories that constitute or fall
into style categories other than those above. The
composition and description of these categories may
also change over time.
• The Investment Manager considers that this
investment approach improves the stability of potential
returns by avoiding over-concentration in any asset
class, sector or strategy, thereby smoothing out the
effect of possible above or below-average performance
by individual Investment Strategies in certain market
conditions. In the opinion of the Investment Manager,
the stable performance Man MS Sterling Ltd is seeking
to achieve makes it feasible and advantageous to
provide a high investment exposure, thereby creating
the potential for enhanced returns whilst maintaining a
favourable risk profile. Dynamic portfolio management
through changes in capital allocations to the style
categories and/or the constituent Investment
Strategies, are designed, in the opinion of the
Investment Manager, to help to maintain a favourable
balance of profit potential and volatility control in
accordance with the target levels set. In addition, in
the opinion of the Investment Manager, the type of
diversified portfolio construction envisaged has
historically demonstrated an ability to deliver robust
performance during periods of market correction and
has been capable historically of complementing
traditional stock and bond assets within an investment
portfolio. The Investment Manager believes that the
investment objective of Man MS Sterling Ltd and, by
extension, the target risk and return figures of the
Company, are achievable and, if so achieved, would
compare very favourably with traditional investments.
Risk Management Process
• A significant aspect of the management of the
portfolio of Man MS Sterling Ltd is the management
of risk. Man Global Strategies, an investment division
of Man Investments Limited responsible for
constructing and managing the portfolio of Man MS
Sterling Ltd, has been responsible for constructing
and managing hedge style and multi-strategy
portfolios for a number of products developed by the
Investment Manager. Through this experience, and as
a result of historic and ongoing research undertaken
by the Investment Manager into portfolio
management techniques, a number of strategies for
actively managing portfolio risk have been developed.
Investment Allocation
• In creating a portfolio, the Investment Manager will
typically carefully select and combine Managers with
complementary performance characteristics in order
to create style portfolios (termed “Style Funds”).
These Style Funds are then blended to create multi-
strategy portfolios capable of delivering risk within a
particular range and achieving favourable returns
within that risk tolerance level.
• While hedge fund style risk and return characteristics
are not static and do shift in various ways with the
market cycle, the Investment Manager’s experience
and research indicates that over the medium-term
different hedge fund styles deliver returns within a
particular range for associated levels of risk. By
having a comprehensive understanding of the risk
and return drivers for each style, the Investment
Manager aims to harness the performance profiles of
different styles within multi-strategy portfolios.
• The Investment Manager aims to manage the
portfolios under its management in order to achieve
target returns within a specified target risk level. The
emphasis is therefore on effective management of
risk rather than seeking to avoid risk altogether. This
can involve both withdrawing from investments in
underlying strategies where the risk exceeds the
expected return and from investments where the
Trading Advisers are too risk-averse and are unlikely
to contribute sufficient returns to the overall portfolio.
Risk management therefore involves defining clearly
what risk is acceptable and even desirable and
striving to ensure Trading Advisers are correctly
targeting appropriate levels of risk.
• The Investment Manager seeks to avoid risk where it is
appropriate to do so and emphasises risk mitigation
throughout all stages of the portfolio construction
process. It has a team of specialists devoted exclusively
May 2004
16
Key Information
to risk management both at the Trading Advisers’ level
and at the portfolio level. The risk control process it has
developed for the Trading Advisers to which it directly or
indirectly allocates capital facilitates comprehensive risk
management of its portfolios.
Leverage
• Man MS Sterling Ltd will utilise the Credit Facility in
order to achieve its target investment exposure. The
amount required to be borrowed will vary over time,
but the intention is that once Man MS Sterling Ltd
has achieved its full target investment exposure it will
gradually reduce (as a percentage of the NAV of Man
MS Sterling Ltd) the Credit Facility as trading profits
accrue. If Man MS Sterling Ltd performs in line with
its target, after reaching full target investment
exposure, the loan requirement (as a percentage of
NAV of Man MS Sterling Ltd) will start to decrease as
profits (and therefore trading capital) are generated
by the underlying investments.
• The Investment Manager has developed a number of
advanced proprietary modelling techniques to enable
it to manage dynamically the amount of leverage
utilised within a portfolio given the target return and
volatility of that portfolio, the ‘worst loss’ risk in
relation to that portfolio (see below) and the targeted
investment exposure.
• Such advanced modelling techniques play a critical
role in enabling the Investment Manager to determine
the expected cash requirement for its products over
their life and consequently the appropriate amount of
leverage to employ. The Investment Manager’s
modelling techniques allow it to look at the possible
performances of each underlying strategy given a
number of possible scenarios and to use the results
from this modelling in constructing investment
portfolios. The Investment Manager is then in a
position to make assessments of risk and performance
expectations on what it considers a more systematic
basis than simply observed historical performance.
Returns and volatility
• Since the returns from underlying hedge fund
strategies are not normally distributed, significant
negative returns can occasionally occur. The risk of
such negative returns is a major concern for hedge
fund investors, including lenders into hedge fund
structured products. As a result of this, the Investment
Manager has carried out extensive research into the
properties of hedge fund return distributions.
• For each underlying Trading Adviser, the Investment
Manager will use sophisticated modelling techniques
to derive a clear assumption of the ‘worst loss’ risk for
that underlying Trading Adviser, being the maximum
loss that the Trading Adviser might experience in any
one trading period. At the level of Man MS Sterling
Ltd, the Investment Manager will combine the ‘worst
loss’ information for a Trading Adviser to derive an
overall ‘worst loss’ figure. Using this information, the
Investment Manager will then be able to determine
what level of trading capital is required for the Man
MS Sterling Ltd portfolio to be resilient in the face of a
deep loss. This information will then be used to
calculate gearing levels (leverage) and to implement
the associated risk controls necessary to ensure that
Man MS Sterling Ltd has a high probability of
withstanding market shocks at any point during its life
and preserving the trading capital necessary to be
able to meet its risk and return objectives.
• Using this proprietary ‘worst loss’ approach, the
Investment Manager will be able to calculate a precise
point at which to reduce the leverage of Man MS
Sterling Ltd and thereby reduce its investment exposure.
• This approach typically allows the Investment Manager
to maintain the maximum level of gearing for longer,
giving a product the maximum chance to recover in
the event of negative performance. The Investment
Manager is able to maintain this relative gearing
advantage due to its familiarity with the underlying
funds, its sophisticated modelling techniques and the
rigorous risk management of these underlying funds.
Distributor
• Close Fund Management (Investments) Limited has
been appointed by the Company as distributor and is
responsible for pro-actively promoting the Company
May 2004
17
Key Information
with the aim of marketing its Shares in the UK. Close
is authorised and regulated by the FSA in the United
Kingdom. Along with its fellow subsidiary, Close Fund
Management Limited, it comprises the specialist
investment management business of Close Brothers
Group plc (“Close Brothers”). Established over 120
years ago and now amongst the 250 largest UK
companies listed on the London Stock Exchange,
Close Brothers is a substantial UK merchant bank
with a market capitalisation of approximately £1.15
billion as at 31 March 2004. Close Brothers’ activities
include corporate finance, banking, market making
(through its subsidiary, Winterflood Securities Limited)
and asset management.
Issue Arrangements
• In aggregate, up to 250 million Shares are being
made available pursuant to the Offer for Subscription.
• The Issue Price is 100p per Share. The minimum
subscription under the Offer for Subscription is
£10,000 and applications under the Offer for
Subscription must be made in multiples of £1,000.
• Where an Initial Commission is payable to an IFA, the
number of Shares an investor will receive (at the
Issue Price) will reflect the deduction of such
commission from the amount subscribed.
• The Shares issued under the Offer for Subscription
are eligible for transfer via CREST. The Shares will be
eligible for inclusion in the stocks and shares
component of a UK ISA and will be qualifying
investments for existing UK PEPs provided that the
UK PEP or UK ISA manager has acquired such
Shares under the Offer for Subscription or by
purchase in the market. In addition, the Shares will
be eligible for inclusion in UK self-invested personal
pension schemes (SIPPS) and UK small self-
administered schemes (SSAS).
Risk Factors
Investment in the Company is subject to certain risk
factors. Investors should carefully consider the risks
associated with acquiring and holding the Shares.
The risk factors are set out as follows:
• Suitability for Investment
Each investor should decide whether to invest in the
Company after careful consideration with his or her
advisers as to the suitability of such investment in
light of the risk factors and other information set out
in this Prospectus. It should be borne in mind that
the risks involved in this type of investment are
greater than those normally associated with other
types of investments, as the investments in which it is
proposed that Man MS Sterling Ltd will, directly or
indirectly, invest through some of the investment style
categories can be subject to sudden, unexpected and
substantial price movements and various other risks.
Consequently, substantial losses as well as gains in
NAV per Share could occur within a short period of
time. The use of leverage by Man MS Sterling Ltd
may have the effect of further significantly magnifying
the impact of such price movements on the NAV of
Man MS Sterling Ltd. Neither the Company nor any of
its advisers make any recommendation as to the
suitability of the Shares for investment by any person.
• Target Annual Returns and Volatilities
The annualised return and volatility targets set out in
the investment objective of the Company have been
calculated based on various analytical models produced
by the Investment Manager. To the extent that such
models (or the assumptions underlying them) prove not
to be correct, the Company may not be able to achieve
its targeted returns at the target volatility.
• Use of Leverage and Credit Facilities
It is expected that Man MS Sterling Ltd will employ a
very high level of leverage in order substantially to
increase its investment exposure with a view to
achieving the Company’s target returns at the target
volatilities and may utilise swaps and other off balance
sheet derivative transactions and other forms of
leverage. Leverage can be created by means of direct
lending and swaps or other derivative instruments. In
the event of Man MS Sterling Ltd’s assets declining
and producing negative returns, the leverage used by
Man MS Sterling Ltd may very significantly magnify
May 2004
18
Key Information
the adverse Net Asset Value impact on both Man MS
Sterling Ltd and, as a consequence, on the Net Asset
Value per Share. In addition to the Credit Facility
provided to Man MS Sterling Ltd, Leverage is employed
in respect of certain of the Investment Strategies. The
underlying vehicles through which Man MS Sterling Ltd
directly or indirectly invests may also make use of
leverage, thereby compounding the overall leverage of
Man MS Sterling Ltd.
While leverage presents opportunities for increasing
total return, it can also have the effect of increasing
losses as well. If income and appreciation on
investments made with borrowed funds are less than
the cost of the leverage, the NAV of Man MS Sterling
Ltd and, as a consequence, the Net Asset Value per
Share will decrease. The effect of the use of leverage is
to increase investment exposure, the result is that in a
market that moves adversely the possible resulting loss
to investors’ capital would be greater than if leverage
was not used. In the event of underperformance by a
particular portfolio which is the subject of such
leverage, the leverage may be reduced at the discretion
of the relevant Trading Adviser in order to reduce Man
MS Sterling Ltd’s exposure to that portfolio.
Generally, most leveraged transactions may involve the
posting of collateral. Increases in the amount of margin
or similar payments could result in the need for trading
activity at times and at prices which could be
disadvantageous to Man MS Sterling Ltd or the
underlying vehicles through which it directly or
indirectly invests and could result in substantial losses.
Some of the Investment Strategies may require the
use of considerable leverage. There can be no
assurance that the leverage facilities will always be
available and a loss of, or reduction in, the leverage
facilities is likely to have the effect of causing Man
MS Sterling Ltd to reduce or lose its overall
investment exposure. Terms upon which leverage
facilities are available may be subject to change.
There is no assurance that any Credit Facility of Man
MS Sterling Ltd will be renewed and loss of, or a
reduction in, a Credit Facility may result in (i) Man MS
Sterling Ltd being required to liquidate some or all of its
investments at prevailing prices which may be
unfavourable; (ii) a reduction in Man MS Sterling Ltd’s
overall investment exposure; and/or (iii) a corresponding
reduction in investment return and volatility
expectations. The renewal of a Credit Facility (or
equivalent derivative instrument arrangement) may be
subject to a change in its terms and/or applicable
interest margins. The entity providing the Credit Facility
will rank in priority to any investor in the event of Man
MS Sterling Ltd’s liquidation and in such an eventuality
the value of Man MS Sterling Ltd’s assets may only be
sufficient to repay the amount borrowed by Man MS
Sterling Ltd under the Credit Facility. This would result
in no Performance Return being payable to the
Company under the Bonds. A breach of the terms of
any Credit Facility constituting an event of default would
entitle the relevant entity providing the Credit Facility to
require repayment, which may also require Man MS
Sterling Ltd to liquidate some or all of its investments at
prevailing prices which may be unfavourable.
• Past Performance
Investors should be aware that past performance is
not necessarily indicative of likely future performance
and that the Net Asset Value per Share may go down
as well as up. There is no assurance that the
information on the Investment Manager, the Trading
Advisers or the investment objectives and approach
of the Company or Man MS Sterling Ltd as set out
herein will be in any respect indicative of how they
will perform (either in terms of profitability, volatility or
low correlation with other investments) in the future.
• Bond Risk
Investors should be aware that the repayment by the
Company at the Maturity Date of the Initial Investment
in respect of their Shares will only be protected if The
Royal Bank of Scotland satisfies its obligation under
the Bonds to repay to the Company the Guaranteed
Capital Amount at that time. In the event of an
insolvency, The Royal Bank of Scotland may be unable
May 2004
19
Key Information
to meet its obligations to the Company to repay the
Guaranteed Capital Amount. The use of the word
“guaranteed” does not mean that Shareholders
themselves have the benefit of any direct guarantee
from The Royal Bank of Scotland. The repayment to the
Company of the Guaranteed Capital Amount applies
only at the Maturity Date. Prior to this date, The Royal
Bank of Scotland is obliged to repurchase the Bonds at
the Prevailing Bond NAV. Neither the Company nor the
Bonds have been structured with the aim of providing
certainty that Shareholders can be repaid their Initial
Investment prior to the Maturity Date.
In addition to any possible default by The Royal Bank
of Scotland at the Maturity Date, any default by The
Royal Bank of Scotland under the Bonds at any other
time may further prejudice the ability of the Company
to meet requests from Shareholders for redemption of
their Shares prior to the Maturity Date. If The Royal
Bank of Scotland should be wound-up or otherwise
suffer an insolvency related event, the Directors will
be obliged to convene an extraordinary general
meeting for the purposes of considering an ordinary
resolution as to whether all the Shares should be
compulsorily redeemed.
• Uncertain Performance Return
The Performance Return, if any, will be determined by
reference to any cumulative net gains or losses (if any)
arising from the diversified investment activities of Man
MS Sterling Ltd. The return may vary significantly over
the approximate 8.5 year investment term, and may
decrease as well as increase, depending upon trading
profits and investment gains of Man MS Sterling Ltd.
While the investment objective of Man MS Sterling Ltd
is designed to achieve a Performance Return in line
with the stated investment objective of the Company,
there can be no certainty that this objective will be
achieved. There can be no assurance that information
on the Investment Manager, the Trading Advisers or
the Investment Strategies set out in this document
will be in any respect a guarantee of how they will
perform (either in terms of profitability or low
correlation with other investments) in the future.
There can be no assurance that Man MS Sterling Ltd
will generate positive returns. If the performance of
Man MS Sterling Ltd is poor and, specifically, if there
is a discontinuance of trading by Man MS Sterling Ltd
(see below), Shareholders may receive only their Initial
Investment as at the Maturity Date, or less if they
redeem their Shares prior to the Maturity Date.
Neither Shareholders nor the Directors will have any
influence over the Investment Manager’s management
of Man MS Sterling Ltd.
• Discontinuance of Investment by Man MS Sterling Ltd
All investments by Man MS Sterling Ltd may be
discontinued and all its assets liquidated if (i) its Net
Asset Value falls below £4 million, or (ii) its directors,
acting reasonably, determine that there is no realistic
prospect of Man MS Sterling Ltd achieving the expected
level of performance and, when aggregated with the
present value of the Notional Zero Coupon Note, there
are sufficient assets in Man MS Sterling Ltd at that time
for the Company to receive at least the Guaranteed
Capital Amount upon an early repurchase of the Bonds.
In such circumstances the Swap Agreement will be
terminated and The Royal Bank of Scotland will place
the proceeds (if any) on deposit.
If either of the above occurs or if Man MS Sterling Ltd
discontinues trading for any other reason (including
liquidation), prior to the Maturity Date, the Directors
will be obliged to convene an extraordinary general
meeting for the purpose of considering an ordinary
resolution as to whether all Shares should be
compulsorily redeemed before the Maturity Date. In
the event that Shareholders resolve that the Company
should compulsorily redeem all the Shares, the
Company will request The Royal Bank of Scotland to
repurchase all of the Bonds and the repurchase
proceeds will be distributed amongst Shareholders by
the Company pro rata to their Shareholdings.
Accordingly, other than in the circumstances
described in (ii) above, the Company may not be able
to repay Shareholders the Initial Investment in
respect of their Shares in such circumstances.
May 2004
20
Key Information
If Shareholders resolve to continue their investment in
the Company until the Maturity Date, the Bonds will be
redeemed at the Maturity Date and The Royal Bank of
Scotland will be obliged to repay the Guaranteed
Capital Amount in full. However, any future costs and
expenses of the Company will be borne by the
Company itself, and no longer by Man MS Sterling Ltd.
To the extent that the proceeds of the Swap Agreement
placed on deposit and any interest accruing on such
deposit are insufficient to cover any continuing costs
and expenses of the Company, such costs will be met
by the Company out of the Guaranteed Capital Amount
received by the Company under the Bonds which will
result in the Company being unable to repay
Shareholders the full Initial Investment in respect of
their Shares at the Maturity Date.
• Exceptional Expenses
To the extent that the Company incurs exceptional
expenses which are not contemplated under the
Expenses and Information Agreement and where Man
MS Sterling Ltd does not have sufficient assets to
meet such additional costs, such costs would have to
be paid by the Company out of the proceeds it
receives from The Royal Bank of Scotland pursuant
to the Bonds. To the extent that the Performance
Return is insufficient to cover such exceptional costs,
Shareholders may not receive back their full Initial
Investment at the Maturity Date.
• Fees and Transaction Costs
Man MS Sterling Ltd is obliged to support very
significant costs, including the costs of the Company.
In order for there to be a positive Performance Return
upon redemption of the Shares as at the Maturity Date
or a Redemption Date (as the case may be), the return
generated by Man MS Sterling Ltd to that date will
have to exceed the significant aggregate fees and
expenses paid or payable by Man MS Sterling Ltd
during such period, including the fees and expenses of
the Company, Man MS Sterling Ltd and the Swap
Counterparty. The performance of Man MS Sterling Ltd
will be affected by charges related to the investments
of Man MS Sterling Ltd and the underlying vehicles
through which it directly or indirectly invests. To the
extent that Man MS Sterling Ltd is invested in the
multi-style portfolio style category there may be
multiple layers of fees and transaction costs borne by
Man MS Sterling Ltd. Man MS Sterling Ltd and the
underlying vehicles through which it directly or
indirectly invests, may be engaged in a high level of
trading resulting in commensurately high brokerage
and transaction costs. Typically, high portfolio turnover
will result in correspondingly high brokerage and
transaction costs. The exact amount of brokerage and
related transaction costs that will be incurred will
depend upon a number of factors including the nature
and frequency of the market opportunities presented,
the size of transactions and the transaction rates in
effect from time to time. As a result of investment
diversification within Man MS Sterling Ltd, Man MS
Sterling Ltd may be required to pay incentive fees in
respect of some of the underlying Investment
Strategies, even if Man MS Sterling Ltd itself has not
realised any gains during the same period.
• Reliance on Investment Manager
The Investment Manager manages the risk for Man
MS Sterling Ltd by seeking to ensure that the
underlying risk is within predetermined levels.
Nevertheless, Shareholders should note that in the
event of an exceptional decline in the value of the
assets of Man MS Sterling Ltd to a level insufficient to
sustain its normal diversified investment approaches,
Man MS Sterling Ltd may have to cease trading
activities in some or all of the Investment Strategies.
Although the Investment Manager will endeavour to
manage Man MS Sterling Ltd to the best of its
abilities, there can be no assurance that the
Investment Manager’s management of Man MS
Sterling Ltd will result in the Company receiving a
Performance Return. Identification and exploitation of
Investment Strategies to be pursued by the
Investment Manager or the Trading Advisers involves
a high degree of uncertainty. No assurance can be
given that the Investment Manager will be able to
May 2004
21
Key Information
locate suitable investment opportunities in which to
deploy all of the allocated assets.
• Trading Advisers
Investors should be aware that the performance of
Man MS Sterling Ltd will depend to a considerable
extent on the performance of the Investment Strategies
and individual Trading Advisers comprising its portfolio.
The Company, Man MS Sterling Ltd, the Investment
Manager and The Royal Bank of Scotland cannot
protect against the risk of fraud, misrepresentation or
other misconduct on the part of any Trading Adviser.
The complex trading systems/programmes operated by
certain Trading Advisers and the speed and volume of
transactions invariably results in occasional trades
being executed which, with the benefit of hindsight,
were not required by the trading systems/programmes.
Man MS Sterling Ltd will receive the benefit or bear the
loss resulting from any unintentional trades conducted
in this manner.
• Swap Counterparty Risk
The obligation of The Royal Bank of Scotland to pay
to the Company the Performance Return is limited to
the extent to which the Swap Counterparty satisfies its
obligations under the Swap Agreement. Shareholders
will have no recourse or rights against the assets of
The Royal Bank of Scotland, the Swap Counterparty or
Man MS Sterling Ltd in respect of the Swap Agreement.
If the Swap Counterparty defaults in its obligations
under the Swap Agreement the Swap Agreement is
terminated and shareholders may not receive the
Performance Return attributable to their Shares. The
Swap Counterparty is not an affiliate of The Royal
Bank of Scotland and The Royal Bank of Scotland
does not control or otherwise direct the operations of
the Swap Counterparty and makes no representation
or assurance that the Swap Counterparty will perform
its obligations under the Swap Agreement.
• Termination of Swap Agreement
The Swap Agreement may be terminated prior to the
Maturity Date, inter alia, in the following circumstances:
(i) by The Royal Bank of Scotland if the Swap
Counterparty fails to make a payment under the Swap
Agreement (subject to the applicable grace period set
out in the Swap Agreement) or makes a representation
which is incorrect or misleading in any material respect
or fails to comply with its related obligations;
(ii)by the Swap Counterparty if The Royal Bank of
Scotland fails to make the payment it is required to pay
(reflecting a portion of the proceeds of the issue of the
Bonds) under the Swap Agreement (subject to the
applicable grace period set out in the Swap
Agreement); and
(iii)by either The Royal Bank of Scotland or the Swap
Counterparty if either party is dissolved, becomes
insolvent or is unable to pay its debts as they
become due.
The Swap Agreement is scheduled to terminate if the
shares in Man MS Sterling Ltd held by the Swap
Counterparty are redeemed in full.
In the event that the Swap Agreement is terminated
(other than as a result of the scheduled termination)
prior to the Maturity Date, the Directors will be
obliged to convene an extraordinary general meeting
for the purposes of considering an ordinary resolution
to effect the compulsory redemption of all Shares
before the Maturity Date.
In the event that Shareholders resolve that the
Company should compulsorily redeem all Shares, the
Company will require The Royal Bank of Scotland to
repurchase all the Bonds and the repurchase
proceeds will be distributed amongst Shareholders by
the Company pro rata to their shareholdings. In such
event, The Royal Bank of Scotland will pay to the
Company the net present value of the Notional Zero
Coupon Note and such amounts (if any) as have
been received from the Swap Counterparty (after
deduction of amounts relating to certain fees payable
by the Swap Counterparty to The Royal Bank of
Scotland) but will not be obliged to repay the
May 2004
22
Key Information
Guaranteed Capital Amount. After The Royal Bank of
Scotland has received from the Swap Counterparty
such amounts as relate to the fees payable to it by
the Swap Counterparty to The Royal Bank of
Scotland, it will, to the extent that the Swap
Counterparty has not paid in full all other amounts
then due and payable to The Royal Bank of Scotland,
seek to assign all its rights to, and interests in, the
Swap Agreement to the Company. After assignment if
the Company is unable to successfully recover the
Performance Return from the Swap Counterparty or if
the Performance Return is insufficient to cover any
shortfall below the Guaranteed Capital Amount,
Shareholders may not receive the Initial Investment
in respect of their Shares.
If Shareholders resolve to continue their investment in
the Company until the Maturity Date, the Bonds will
be redeemed as at the Maturity Date in an amount
equal to the Guaranteed Capital Amount plus an
amount in cash equal to the amount actually received
under the Swap Agreement (if any) (other than such
amounts as relate to the payment by the Swap
Counterparty to The Royal Bank of Scotland of certain
fees). In addition, after The Royal Bank of Scotland
has received from the Swap Counterparty such
amounts as relate to the fees payable by the Swap
Company. However, any future costs and expenses of
the Company may be required to be borne by the
Company itself (and not by Man MS Sterling Ltd)
and may result in Shareholders not receiving the
Initial Investment in respect of their Shares at the
Maturity Date.
• Interest Rate Risk
Shareholders should be aware that any change in
interest rates may adversely affect the Net Asset Value
of their Shares. The returns generated by Man MS
Sterling Ltd and the underlying vehicles through which
it directly or indirectly invests may be adversely
affected by changes in interest rates. In particular, any
increase in the interest rate payable under the Credit
Facility or other forms of leverage could negatively
affect the Net Asset Value of Man MS Sterling Ltd’s
assets and, in turn, the Performance Return.
In addition, The Royal Bank of Scotland will invest
a proportion of the proceeds of the Bonds in a
Notional Zero Coupon Note in order to achieve the
Guaranteed Capital Amount at the Maturity Date.
Prior to the Maturity Date, the present value of the
Notional Zero Coupon Note may be affected by
changes in prevailing interest rates. Any Shareholder
seeking to redeem his or her Shares prior to the
Maturity Date would not have the benefit of the
capital protection afforded to the Company by the
obligation of The Royal Bank of Scotland to pay to the
Company the Guaranteed Capital Amount as at the
Maturity Date, and the Net Asset Value of his or her
Shares would reflect the Prevailing Bond NAV (please
refer to Part III of the Prospectus for details on how
the Net Asset Value per Share is calculated on an
early redemption).
• Guaranteed Capital Amount not payable in full prior
to Maturity Date
As The Royal Bank of Scotland is not obliged to repay
to the Company the Guaranteed Capital Amount in
full in respect of a repurchase of the Bonds prior to
the Maturity Date, Shareholders who redeem their
Shares prior to the Maturity Date could potentially
receive less than their Initial Investment.
• Temporary Suspension of Redemption
The Directors have the ability to temporarily suspend
the right of Shareholders to request the Company to
redeem their Shares during periods in which (i) the
redemption of shares in Man MS Sterling Ltd is
suspended, (ii) the right to request repurchase of
Bonds by The Royal Bank of Scotland is suspended,
(iii) the Director are unable to repatriate funds
required for the purposes of making payments due
on redemption, and/or (iv) the Directors, acting
reasonably, consider that as a result of exceptional
market conditions it would be in the interests of
Shareholders as a whole to do so.
May 2004
23
Key Information
• Redemption
To redeem their Shares, Shareholders will need to
submit a redemption form and the relevant share
certificate to be received by no later than 9:30 am on
the second Business Day prior to the 15th calendar
day of the month immediately preceding the
Redemption Date on which any redemption is
intended to be made. Shareholders will, therefore, not
know in advance of submitting the redemption form
the price at which the Shares comprising that
redemption form will be redeemed. In the period after
the redemption form has been submitted, and before
the relevant Redemption Date, the Net Asset Value
per Share (i.e. the redemption price which will be
payable to the Shareholder) may change substantially
due to market movements. Shareholders are not
entitled to withdraw a request for redemption.
• Short Selling
Some of the Investment Strategies accessed by Man
MS Sterling Ltd may include short selling. Short selling
allows the investor to profit from declines in market
prices to the extent such declines exceed the
transaction costs and any costs of borrowing the
securities. However, if the borrowed securities must be
replaced by purchases at market prices in order to
close out a short position, any appreciation in the price
of the borrowed securities would result in a loss.
Purchasing securities to close out a short position can
itself cause the price of the securities to rise further,
thereby exacerbating the loss. In addition, in some
markets there are rules prohibiting short sales at prices
below the last sale price, which may prevent the short
sales from being executed at the most desirable time.
• Volatility and Illiquidity
Man MS Sterling Ltd may make investments in
markets that are volatile and which may become
illiquid. Accordingly, although certain investments
may give greater liquidity than an equity investment,
it may be impossible (in the event of trading halts or
daily price fluctuation limits on the markets traded or
otherwise) or expensive for Man MS Sterling Ltd to
liquidate positions against which the market is
moving. Alternatively, it may not be possible in certain
circumstances for a position to be initiated or
liquidated promptly (in the event of insufficient
trading activity in the relevant market or otherwise).
These risks may be accentuated where Man MS
Sterling Ltd is required to liquidate positions to meet
margin requirements, margin calls or other funding
requirements. The Trading Advisers face similar risks
in relation to their investments.
• No Operating History
Man MS Sterling Ltd has no operating history.
Although the Investment Manager and the Trading
Advisers have operating histories, some of those
histories may be relatively short and the Investment
Strategies applied may not have previously been
used by a fund of the same type as Man MS
Sterling Ltd.
• No Recourse to Man MS Sterling Ltd’s Assets
Shareholders and the Company will not have, and the
Shares will not represent, any direct or indirect
ownership interest in the assets of Man MS Sterling
Ltd. Shareholders will have no recourse to assets in
Man MS Sterling Ltd. Shareholders will receive an
economic exposure to the performance of the assets
of Man MS Sterling Ltd under the terms of the Bonds.
• Broker Default Risk
Where appropriate, investment trades will normally be
entered into between Man MS Sterling Ltd and a
broker as principal (and not as agent). Accordingly,
Man MS Sterling Ltd is exposed to the risk that the
broker may, in an insolvency or similar event, be
unable to meet its contractual obligations to Man
MS Sterling Ltd. The underlying vehicles through
which Man MS Sterling Ltd directly or indirectly invest
may bear similar or greater risks with regard to the
brokers utilised.
• Counterparty Risk
Man MS Sterling Ltd and the underlying vehicles
May 2004
24
Key Information
through which Man MS Sterling Ltd directly or
indirectly invests will have a counterparty risk with
regard to the over-the-counter instruments which they
hold. In the event of the insolvency of any
counterparty, or of any broker through which the
Investment Manager or a Trading Adviser trades for
the account of Man MS Sterling Ltd, Man MS Sterling
Ltd or the underlying vehicles (as applicable) may
only rank as an unsecured creditor in respect of
sums due on the margin account(s) or otherwise and
any losses will be borne by Man MS Sterling Ltd or
those underlying vehicles (as applicable). Man MS
Sterling Ltd and the Trading Advisers may also enter
into currency, interest rate, total return or other swaps
which may be surrogates for other instruments such
as currency forwards and interest rate options. The
value of such instruments generally depends upon
price movements in the underlying assets as well as
counterparty risk.
• Foreign Currency Risk
Investment in the Company must be made in
pounds sterling. Shareholders dealing in a different
currency should be aware that exchange rate
fluctuations could cause the value of their investment
to diminish or increase. Man MS Sterling Ltd may have
to finance non-sterling margins. However, Man MS
Sterling Ltd may seek to mitigate foreign exchange
risks involved in this financing by borrowing a
matching non-sterling amount in the relevant currency
from a broker (or one of its affiliated companies). The
underlying vehicles through which Man MS Sterling Ltd
directly or indirectly invests may bear similar or greater
risks with regard to their investments. The majority of
Man MS Sterling Ltd’s portfolio may be invested in
assets not denominated in sterling and, therefore, their
sterling value could be significantly affected by
movements in foreign exchange rates. The Investment
Manager will seek to mitigate this risk through the
appropriate use of currency hedging techniques.
• Other Risks associated with Man MS Sterling Ltd
Investments by Man MS Sterling Ltd, either directly or
indirectly, on the advice of the Investment Manager or
any one or more of the Trading Advisers, may be
concentrated and a significant proportion of its assets
may, directly or indirectly, be in the securities of a
single issuer or agency. To the extent it does
concentrate in any of these ways, the overall impact of
adverse developments in the business of such issuer
or such agency or in relation to the currency in which
such securities are denominated could be considerably
greater than if it did not concentrate its investments to
such an extent. Man MS Sterling Ltd and the
underlying vehicles through which it directly or
indirectly invests may employ certain strategies
which depend upon the reliability and accuracy of
the Investment Manager’s, or any Trading Adviser’s,
analytical models. To the extent such models (or the
assumptions underlying them) do not prove to be
correct, Man MS Sterling Ltd’s investments may not
perform as anticipated, which could result in
substantial losses incurred by Man MS Sterling Ltd.
There may be potential conflicts of interest between
the activities of Man MS Sterling Ltd and the activities
of others using the Investment Manager or the same
Trading Advisers. The Investment Manager, the Trading
Advisers and/or their affiliates may invest in the same
investments as Man MS Sterling Ltd or may take the
same, different or opposite positions to those they take
on behalf of Man MS Sterling Ltd (as principal or
agent) in respect of any instrument or any market.
• Regulatory Change
Future regulatory changes in applicable jurisdictions
could limit the ability of Man MS Sterling Ltd to carry
out its business as described herein and/or could
have material adverse effect on the Net Asset Value
per Share.
• Change in Taxation
Any change in the Company’s tax status, or in taxation
legislation in either Guernsey, the United Kingdom or
Bermuda, or in any taxation legislation affecting the
taxation of the Bonds or the Swap or the VAT
treatment accorded to the provision of services to the
May 2004
25
Key Information
Company could affect the amount paid to the
Company under the Bonds, the Company’s ability to
achieve its investment objective, the amount paid to
Shareholders on a redemption of their Shares and/or
alter the post-tax returns to Shareholders. Statements
in this document concerning the taxation of UK
Shareholders are based upon current UK tax law and
practice which is subject to change that could
adversely affect the ability of the Company to meet its
investment objective.
It is not currently anticipated that there will be any
withholding tax affecting payments made under the
Swap Agreement or the Bonds. If, however, there is a
change in tax legislation at any time, the Guaranteed
Capital Amount and the Performance Return payable
by The Royal Bank of Scotland to the Company
under the Bonds will be reduced by the amount of
such withholding.
Fees and Expenses
• Initial Launch Costs
The Initial Launch Costs are costs which arise from or
are incidental to the establishment of the Company,
the Offer for Subscription and Admission. These
include the Listing Sponsor’s fee, legal and
accounting fees, the Administrator’s set-up fee, the
Receiving Agent’s fee, the Escrow Agent’s fee, fees of
the Channel Islands Stock Exchange, promotion costs
and printing, advertising and distribution costs. The
Initial Launch Costs are not expected to exceed the
higher of £400,000 and 0.8 per cent. of the Net
Issue Proceeds. The Initial Launch Costs will be met
by Man MS Sterling Ltd pursuant to the Expenses
and Information Agreement and will be amortised
over the first three years.
• Ongoing Costs
The Ongoing Costs are costs which are incidental to
the management and administration of the Company
and which will be incurred over the period until the
Maturity Date, including the fees of the Administrator
and Secretary, Registrar, Transfer Agent, Paying
Agent and Receiving Agent, Auditors, Directors and
Channel Islands Stock Exchange and other
operational expenses as set out in more detail in
Part I of the Prospectus. Ongoing Costs are not
expected to exceed, on average, £150,000 in each
financial year and will be met by Man MS Sterling
Ltd. In the unlikely event that the Ongoing Costs are
materially higher than anticipated, and Man MS
Sterling Ltd has insufficient assets to meet such
excess costs Close Fund Management (Investments)
Limited and Man Investments Limited have agreed to
meet certain of these specified costs up to an agreed
limit in certain circumstances as described in Part I
of the Prospectus.
In addition, Man MS Sterling Ltd will be charged
management fees at a rate of up to one-quarter of
1.0 per cent. per month (i.e. up to 3.0 per cent. per
annum) of the allocation to each Investment Strategy.
A monthly incentive fee of up to 20 per cent. will also
be charged based on the increase attributable to
each Investment Strategy and arising from the net
new profits designated to each Investment Strategy.
In some cases, incentive fees may only be payable if
the increase in such net new profits exceeds a target
or hurdle rate of return. Incentive fees may also be
charged prior to the deduction of certain fees and
expenses. All or a portion of these fees may be
received by a member of the Man Group or its
affiliates.
In implementing the Investment Strategies, Trading
Advisers may invest in other investment structures.
Man MS Sterling Ltd will participate in proportion to
such investments in all fees and expenses charged in
relation to those investment structures.
Man MS Sterling Ltd will also bear (i) a risk transfer
and management fee of 1 per cent. per annum of the
Aggregate Bond NAV (ii) a liquidity and finance
administration fee of three-eighths of 1 per cent.
(0.375 per cent.) per annum of the Aggregate Bond
NAV and (iii) ongoing swap costs of 0.2 per cent. per
annum of the Guaranteed Capital Amount.
May 2004
26
Key Information
• Initial Commission for IFAs
An Initial Commission of up to 3 per cent. of the
amount subscribed by an investor for Shares
pursuant to the Offer for Subscription may be payable
to his or her IFA (if any).
Taxation
• United Kingdom
Shareholders (other than those holding Shares as
dealing stock, who are subject to separate rules) who
are resident or ordinarily resident in the United
Kingdom for taxation purposes, or who carry on
business in the United Kingdom through a branch or
agency with which their investment in the Company is
connected, may be liable to United Kingdom tax on
capital gains realised on the disposal or redemption of
their Shares. Shareholders may benefit from taper
relief which will reduce the amount of chargeable gain
according to how long, measured in years, the Shares
have been held. Holders of Shares who are bodies
corporate resident in the United Kingdom for taxation
purposes will benefit from indexation allowance which,
in general terms, increases the capital gains tax base
cost of an asset in accordance with the rise in the
retail prices index.
• Generally, no United Kingdom stamp duty or SDRT
is payable on a transfer of, or agreement to
transfer, Shares.
• Since the Company does not anticipate paying
dividends on Shares, the question of whether there
will be any liability to UK income tax on dividends
should not arise.
If any potential investor is in any doubt about the
taxation consequences of acquiring, holding or
disposing of Shares, he should seek advice from his
own independent professional adviser.
May 2004
27
Important Information
This brochure has been issued to assist prospective
investors to evaluate whether to subscribe for shares in
the Company during the period of the offer for
subscription. It should not be considered to amount to
investment advice, and prospective investors should seek
their own advice as to the merits of an investment in the
Company from an appropriately qualified and authorised
professional or financial adviser. This brochure is, in any
event, intended to apply for the duration of the period of
the offer for subscription, and, without prejudice to the
scope of any other statements or disclaimers concerning
this brochure, it should not be relied upon for any
purpose connected with the purchase or sale of Shares in
the Company at any time after the close of the period of
the offer for subscription.
Prospective investors in the Company are advised that the
offer for subscription and the issue of Shares is governed
exclusively by the terms of the Prospectus. You must read
the Prospectus in full and be sure you understand its
terms before investing. If a copy of the Prospectus was
not provided to you with this brochure, you are strongly
recommended to ask for one. In any event, any investor
who submits an application for Shares will be taken to
have read and understood the Prospectus.
This brochure has been prepared by Close Fund
Management (Investments) Limited based upon
information which it has obtained from the Prospectus or
from parties who have assisted in the preparation of the
Prospectus. Close has not been able to, or is it in a
position to, verify all such information and cannot accept
responsibility to investors in the Company for its accuracy,
completeness, sufficiency or reasonableness. It is the duty
of prospective investors to inform themselves, or to seek
independent professional or financial advice, in order to be
certain of the terms of the offer for subscription and the
content of the Prospectus. This brochure should not be
deemed by any prospective investor to amount to an
explanation of the terms of the offer for subscription to the
exclusion of the Prospectus. In the event of any
inconsistency between this brochure and the Prospectus
on any matter, the Prospectus shall be definitive.
Close Fund Management (Investments) Limited, to the
maximum extent permitted in law, excludes liability to
any investor in the Company for the consequences to
that investor or any person whom he represents or who
claims through him of the effect of misrepresentation in
the Prospectus.
May 2004
1. Application
Fill in (in figures) in Box 1 the amount of money beingsubscribed for Shares. The amount being subscribedmust be for a minimum of £10,000 and thereafter inmultiples of £1,000. Financial intermediaries who areinvesting on behalf of clients should make separateapplications or, if making a single application for morethan one client, provide details of all clients in respect ofwhom application is made in order to benefit mostfavourably from the scaling back process should this berequired or to benefit most favourably from anycommission arrangements.
2. Initial Commission Payable
Fill in (in figures) in Box 2 the rate of Initial Commissionthe IFA identified in section 9 of the Application Form isentitled to receive from the Company out of the amountbeing subscribed in Box 1. The amount of InitialCommission payable may not exceed 3% of the amountbeing subscribed and if the amount of commission showndoes exceed 3% thereof it will be reduced to 3%. If yourIFA has waived their right to an Initial Commission or youare not subscribing through an IFA or do not want theirInitial Commission to be deducted from the amount youare subscribing write NONE in Box 2.
3A. Holder Details
Fill in (in block capitals) the full name and address ofeach holder. In the case of joint holders only the firstnamed may bear a designation reference. A maximum offour joint holders is permitted. All holders named mustsign the Application Form at section 4.
3B. CREST
If you wish your Shares to be deposited in a CRESTAccount in the name of the holders given in section 3A,enter in section 3B the details of that CREST Account.Where it is requested that Shares be deposited into aCREST Account please note that payment for such Sharesmust be made prior to the day such Shares might beallotted and issued. It is not possible for an applicant torequest that Shares be deposited in their CREST Accounton an against payment basis. Any Application Formreceived containing such a request will be rejected.
4. Signature
All holders named in section 3A must sign section 4and insert the date. The Application Form may be signedby another person on behalf of each holder if that personis duly authorised to do so under a power of attorney. Thepower of attorney (or a copy duly certified by a solicitor ora bank) must be enclosed for inspection (which originalswill be returned by post at the addressee’s risk).
A corporation should sign under the hand of a dulyauthorised official whose representative capacity shouldbe stated and a copy of a notice issued by the corporationauthorising such person to sign should accompany theApplication Form.
5. Cheque / Banker’s Draft, Payment Details
Payment may be made by a cheque or banker’s draftaccompanying your application or by interbankelectronic transfer (CHAPS). If payment is by cheque orbanker’s draft such payment must accompany yourApplication Form and be for the exact amount shown insection 1 of your Application Form. Your cheque orbanker’s draft must be made payable to “BPCIL re TheClose Man Hedge Fund Limited” and crossed “A/CPayee”. If you use a banker’s draft or a building societycheque you should ensure that the bank or buildingsociety issuing the payment enters the name, addressand account number of the person whose account isbeing debited on the reverse of the banker’s draft orcheque and adds its stamp. Your cheque or banker’sdraft must be drawn in sterling on an account at a bankbranch in the United Kingdom, the Channel Islands orthe Isle of Man and must bear a United Kingdom banksort code number in the top right hand corner. Where anapplication is accompanied by a cheque or banker’sdraft drawn by someone other than the holder(s), anymonies returned will be sent by the Escrow Agent to theaccount on which the cheque or payment was drawn.For applicants sending subscription monies byelectronic bank transfer (CHAPS), payment must bemade for value on 22 June 2004 to Barclays PrivateClients International Limited, Guernsey InternationalBanking Centre Branch; Sort Code 20-35-32; foraccount “BPCIL re The Close Man Hedge FundLimited”; account number 40010529. Details of thebank being instructed to make such electronic transfermust be entered in the boxes provided at section 5 of theApplication Form. Your payment must relate solely tothis application. No receipt will be issued.
6. Reliable Introducer Declaration
Applications with a value greater than £10,000 will besubject to Guernsey’s verification of identity requirements.This will involve you providing the verification of identitydocuments listed in section 7 of the Application FormUNLESS you can have the declaration provided at section6 of the Application Form given and signed by a firmacceptable to Anson Registrars.
In order to ensure your application is processed timelyand efficiently all applicants are strongly advised to havethe declaration provided in section 6 of the ApplicationForm completed and signed by a suitable firm.
7. Identity Information
Applicants need only consider section 7 of the ApplicationForm if the declaration in section 6 cannot be completed.
Notwithstanding that the declaration in section 6 has beencompleted and signed Anson Registrars reserves the rightto request of you the identity documents listed in section 7and/or to seek verification of identity of each holder andpayor (if necessary) from you or their bankers or fromanother reputable institution, agency or professionaladviser in the applicable country of residence. Ifsatisfactory evidence of identity has not been obtainedwithin a reasonable time your application might be rejectedor revoked. Where certified copies of documents arerequested in section 7, such copy documents should becertified by a senior signatory of a firm which is either agovernmental approved bank, stockbroker or investmentfirm, financial services firm or an established law firm oraccountancy firm which is itself subject to regulation in theconduct of its business in its own country of operation andthe name of the firm should be clearly identified on eachdocument certified.
8. Contact Details
To ensure the efficient and timely processing of yourApplication Form, please provide contact details of a personAnson Registrars may contact with all enquiries concerningyour application. Ordinarily this contact person should bethe person signing in section 4 on behalf of the first namedholder. If no details are provided here but an IFA is identifiedin section 9, Anson Registrars will contact the IFA. If nodetails are entered here and no IFA is named in section 9and Anson Registrars requires further information, any delayin obtaining that additional information may result in yourapplication being rejected or revoked.
9. Commission Payment Details
This section should be completed by your IFA (if any).
Notes On How To Complete The Application FormApplications should be returned so as to be received no later than Noon on 18 June 2004.
HELP DESK: If you have a query concerning completion of this Application Form please call Anson Registrars Limited’s Help
Desk on 01481 722260 / 711301 or from outside the UK +44 1481 722260 / 711301.
INSTRUCTIONS FOR DELIVERY OF COMPLETED APPLICATION FORMS Completed Application Forms should be returned, by
post or by hand, to Anson Registrars, New Issues Department, PO Box 426, Anson House, Havilland Street, St Peter Port, Guernsey,
Channel Islands GY1 3WX, so as to be received no later than Noon on 18 June 2004, together in each case with payment in full
in respect of the application. If you post your Application Form, you are recommended to use first class post and to allow at least
two days for delivery. Application Forms received after this date may be returned.
28 May 2004
May 2004
Application FormPlease send this completed form by post or by hand to Anson Registrars
Limited, New Issues Department, P.O. Box 426, Anson House,
Havilland Street, St Peter Port, Guernsey, Channel Islands GY1 3WX,
so as to be received no later than Noon on 18 June 2004.
Important before completing this form, you should read the accompanying notes.
FOR OFFICIAL USE ONLYLog No.
/
To: The Close Man Hedge Fund Limited and Anson Registrars Limited
1 APPLICATION
I/We the person(s) detailed in section 3A below offer to subscribe the amount shown in Box 1 forShares subject to the Terms and Conditions set out in Part VI of the Prospectus dated 7 May 2004and subject to the Memorandum and Articles of Association of the Company.
2 COMMISSION ARRANGEMENT
I/We consent to there being deducted from the amount of our subscription in Box 1 the amount of InitialCommission shown in Box 2 and authorise the Company to procure that such be paid to the IFAidentified in section 9 of this form upon allotment of Shares to me/us. I/We acknowledge that the numberof Shares to be allotted to me/us shall be the result of dividing the amount in Box 1 less the amount ofcommission payable (if any) at the rate set out in Box 2 by £1 rounded down to the nearest whole Share.
3A DETAILS OF HOLDER(S) IN WHOSE NAME(S) SHARES WILL BE ISSUED (BLOCK CAPITALS)
1: Mr, Mrs, Miss or Title Forenames (in full):
Surname / Company name:
Address (in full):
Post Code:
Designation (if any):
2: Mr, Mrs, Miss or Title Forenames (in full):
Surname / Company name:
Address (in full):
Post Code:
3: Mr, Mrs, Miss or Title Forenames (in full):
Surname / Company name:
Address (in full):
Post Code:
4: Mr, Mrs, Miss or Title Forenames (in full):
Surname / Company name:
Address (in full):
Post Code:
3B CREST DETAILS(Only complete this section if Shares allotted are to be deposited in a CREST Account which must be in the same name as the holder(s) given in section 3A.)
CREST Participant ID
CREST Member Account ID
Box 1. (minimum of £10,000 and in multiples of £1,000)
£
Box 2. (maximum 3% or NONE)
£
Tear
alo
ng d
otte
d lin
e
Application Form Continued
May 2004
4 SIGNATURE(S) ALL HOLDERS MUST SIGN
First holder signature: Second holder signature:
Third holder signature: Fourth holder signature:
Dated: 2004
5 CHEQUES / BANKER’S DRAFT DETAILS
Pin or staple to this form your cheque or banker’s draft for the exact amount shown in section 1 made payable to “BPCIL re The Close Man Hedge Fund Limited” andcrossed “A/C Payee”. Cheques and banker’s payments must be drawn in sterling on an account at a bank branch in the United Kingdom, the Channel Islands or the Isle ofMan and must bear a United Kingdom bank sort code number in the top right hand corner.
For applicants sending subscription monies by electronic bank transfer (CHAPS) pay to Barclays Private Clients International Limited, Guernsey International Banking CentreBranch; Sort Code 20-35-32; for account “BPCIL re The Close Man Hedge Fund Limited”; account number 40010529; and enter below the sort code of the bank and branchbeing instructed to make such payment for value on 22 June 2004 together with the name and number of the account to be debited and the branch contact details.
Sort Code: Account name:
Account number: Contact name at branch and telephone no.:
6 RELIABLE INTRODUCER DECLARATION
Completion and signing of this declaration by a suitable person or institution may avoid presentation being requested of the identity documents detailed in section 7 of this form.
The declaration below may only be signed by a person or institution (such as a governmental approved bank, stockbroker or investment firm, financial services firm or anestablished law firm or accountancy firm) (the ‘firm’) which is itself subject in its own country to operation of ‘know your customer’ and anti-money laundering regulations noless stringent than those which prevail in Guernsey. Acceptable countries include Austria, Belgium, Canada, Denmark, Finland, France, Germany, Gibraltar, Greece, HongKong, Iceland, Ireland, Isle of Man, Italy, Japan, Jersey, Luxembourg, Netherlands, New Zealand, Norway, Portugal, Singapore, South Africa, Spain, Sweden, Switzerland,the United Kingdom and the United States of America.
DECLARATION: To the Company and Anson Registrars
With reference to the holder(s) detailed in section 3A, all persons signing at section 4 and the payor identified in section 7 if not also a holder (collectively “the subjects”)WE HEREBY DECLARE:
1. we operate in one of the above mentioned countries and our firm is subject to money laundering regulations under the laws of that country which, to the best of ourknowledge, are no less stringent than those which prevail in Guernsey;
2. we are regulated in the conduct of our business and in the prevention of money laundering by the regulatory authority identified below;3. each of the subjects are known to us in a business capacity and we hold valid identity documentation on each of them and we undertake to immediately provide to you
copies thereof on demand;4. we confirm the accuracy of the names and residential/business address(es) of the holder(s) given at section 3A and if a CREST Account is cited at section 3B that the
owner thereof is named in section 3A;5. having regard to all local money laundering regulations we are, after enquiry, satisfied as to the source and legitimacy of the monies being used to subscribe for the Shares
mentioned; and6. where the payor and holder(s) are different persons we are satisfied as to the relationship between them and reason for the payor being different to the holder(s).
The above information is given in strict confidence for your own use only and without any guarantee, responsibility or liability on the part of this firm or its officials.
Signed: Name: Position:
having authority to bind the firm.
Name of regulatory authority: Firm’s licence number:
Website address or telephone number of regulatory authority:
STAMP of firm giving full name and business address.
Telephone number:
Tear
alo
ng d
otte
d lin
e
7 IDENTITY INFORMATION
Only complete this section if the declaration in section 6 cannot be signed.In accordance with internationally recognised standards for the prevention of money laundering theundermentioned documents and information must be provided.
A. For each holder being an individual enclose:
(1) a certified clear photocopy of one of the following identification documents which bear both aphotograph and the signature of the person: current passport – Government or Armed Forcesidentity card – driving licence; and
(2) certified copies of at least two of the following documents which purport to confirm that theaddress given in section 3A is that person’s residential address: a recent gas, electricity, wateror telephone (not mobile) bill – a recent bank statement – a council rates bill – or similardocument issued by a recognised authority; and
(3) if none of the above documents show their date and place of birth, enclose a note of suchinformation; and
(4) details of the name and address of their personal bankers from which Anson Registrars mayrequest a reference, if necessary.
B. For each holder being a company (a “holder company”) enclose:
(1) a certified copy of the certificate of incorporation of the holder company; and
(2) the name and address of the holder company’s principal bankers from which Anson Registrarsmay request a reference, if necessary; and
(3) a statement as to the nature of the holder company’s business, signed by a director; and
(4) a list of the names and residential addresses of each director of the holder company; and
(5) for each director provide documents and information similar to that mentioned in A above; and
(6) a copy of the authorised signatory list for the holder company; and
(7) a list of the names and residential/registered address of each ultimate beneficial ownerinterested in more than 5% of the issued share capital of the holder company and, where aperson is named, also complete C below and, if another company is named (hereinafter a“beneficiary company”), also complete D below. If the beneficial owner(s) named do notdirectly own the holder company but do so indirectly via nominee(s) or intermediary entities,provide details of the relationship between the beneficial owner(s) and the holder company.
C. For each person named in B(7) as a beneficial owner of a holder company enclose foreach such person documents and information similar to that mentioned in A(1) to (4)
D. For each beneficiary company named in B(7) as a beneficial owner of a holdercompany enclose:
(1) a certified copy of the certificate of incorporation of that beneficiary company;
(2) a statement as to the nature of that beneficiary company’s business signed by a director;
(3) the name and address of that beneficiary company’s principal bankers from which AnsonRegistrars may request a reference, if necessary; and
(4) enclose a list of the names and residential/registered address of each beneficial owner owningmore than 5% of the issued share capital of that beneficiary company.
E. If the payor is not a holder and is not a bank providing its own cheque or banker’s paymenton the reverse of which is shown details of the account being debited with such payment(see note 5 on how to complete this form) enclose:
(1) if the payor is a person, for that person the documents mentioned in A(1) to (4); or
(2) if the payor is a company, for that company the documents mentioned in B(1) to (7); and
(3) an explanation of the relationship between the payor and the holder(s).
Anson Registrars reserves the right to ask for additional documents and information.
Application Form Continued
May 2004Tear
alo
ng d
otte
d lin
e
Holders Payor
1 2 3 4
Tick here for documents provided
Application Form Continued
May 2004
8 CONTACT DETAILS
To ensure the efficient and timely processing of this application please enter below the contact details of a person Anson Registrars may contact with all enquiries concerningthis application. Ordinarily this contact person should be the person signing in section 4 on behalf of the first named holder. If no details are provided here but an IFA isidentified in section 9, Anson Registrars will contact the IFA. If no details are entered here and no IFA is named in section 9 and Anson Registrars requires further information,any delay in obtaining that additional information may result in your application being rejected or revoked.
Contact name: E-mail address:
Contact address:
Postcode:
Telephone No.: Fax No.:
9 COMMISSION PAYMENT DETAILS
Payment of commission at the rate set out in Box 2 above (if any) shall be made to the IFA whose details, and stamp, are set out below.
Stamp of IFA showing name and postal address: Regulatory Authority:
License No.:
Telephone No.:
Fax No.:
IFA contact name:
E-mail address:
Bank name and address:
Bank Sort Code:
Account name:
Account number:
A.Please pay any Initial Commission by cheque made payable to ………..............……………………………..........……. and sent by post at our risk to the above address /by interbank credit transfer to the bank detailed above for credit to the account name and number as shown.
Signed: Date:
Authorised Signatory for the IFA firm.
Tear
alo
ng d
otte
d lin
e
38 38
Distributor
Close Fund Management (Investments) Limited
10 Crown Place, London EC2A 4FT
Registrar, Transfer Agent and Paying Agent
Anson Registrars Limited
PO Box 426, Anson House, Havilland Street
St Peter Port, Guernsey GY1 3WX
Administrator and Secretary
Anson Fund Managers Limited
PO Box 405, Anson House, Havilland Street
St Peter Port, Guernsey GY1 3GF
Manager of the hedge fund portfolio
Man Investments Limited
Sugar Quay, Lower Thames Street, London EC3R 6DU
Important Information
This brochure describes The Close Man Hedge Fund
Limited (the “Company”) and the issue of shares in the
Company (the “Shares”) at 100 pence per Share
pursuant to the offer for subscription. Applications for
shares will only be considered on the terms of the
prospectus issued by the Company (“the Prospectus”).
This brochure contains information in summary. The
detailed terms and conditions of the issue of shares are
subject to substantial qualifications and restrictions all of
which are set out in the Prospectus and which apply to
this material. This material must therefore be read in
conjunction with the risk warnings, terms, qualifications,
conditions and restrictions described in the Prospectus.
This material is issued by Close Fund Management
(Investments) Limited which is authorised and regulated
by the Financial Services Authority. Close Fund
Management (Investments) Limited does not offer
investment advice. Close Fund Management
(Investments) Limited and/or any of its associates may
have an investment in the Company. There is no
guarantee of trading performance and past or projected
performance is not necessarily a guide to the future.
The return and volatility targets quoted are based on
performance projections of the investment approaches
and investment strategies that have been used
historically by Man Investments Limited to construct
portfolios with similar anticipated investment exposures.
Based upon these projections, Man Investments Limited
believes that the target risk and return figures are
realistic and achievable. Potential investors should note
that alternative investments can involve significant risks.
Tax assumptions may be subject to statutory change.
Shareholders will not have recourse to the Investors
Compensation Scheme in the United Kingdom. The
provision of this material does not constitute an offer to
purchase shares directly or indirectly in the United States
of America or to or for the benefit of any US person as
such term is defined under the Securities Act of 1933.
The capital guaranteed bond is a firm and binding
obligation of The Royal Bank of Scotland plc to the
Company to repay the guaranteed capital amount at
maturity. The use of the word ‘guaranteed’ does not
mean that shareholders themselves have the direct
benefit of any guarantee from The Royal Bank of
Scotland plc. Repayment of the guaranteed capital
amount to the Company is subject to The Royal Bank of
Scotland plc not defaulting under the bond. Partial
redemption of the bond by the Company in order to meet
redemption requests from shareholders will not benefit
from capital protection under the bond. The Royal Bank
of Scotland plc has consented to the inclusion of its
name in this material in the form and context in which it
appears, but otherwise has not accepted responsibility
for, or approved any statements herein. The Royal Bank
of Scotland plc makes no representation, expressed or
implied, as to the investment returns or performance of
the shares or the nature of the operations of the
Company. Information contained in this material is
correct at the time of publication.
Man Investments Limited, as investment manager of
Man MS Sterling Ltd, has provided the Company with
the information on Man MS Sterling Ltd which is
contained in the Prospectus. Man Investments Limited
confirms that the information set out in the Prospectus
relating to Man MS Sterling Ltd is correct as at the date
of the Prospectus and has been accurately incorporated
into the Prospectus by the Company, and takes
responsibility accordingly.
Close Fund Management
Close Fund Management is the specialist investment
management arm of the Close Brothers Group.
History & Tradition
Close Brothers Group plc is a substantial British
merchant banking group and is among the 250 largest
UK companies listed on the London Stock Exchange.
Founded in the City of London over 125 years ago,
Close Brothers has built an enviable reputation for high
quality service, integrity and an uncompromising level
of professionalism.
Now one of the most respected City institutions, it
employs over 1,800 people and has a market
capitalisation of approximately £1.15 billion***.
Close Fund Management provides products to help
investors deal with the profound changes occurring
within the savings and investment arena. With the
economic and political environment encouraging
individuals to plan their own financial futures, investors
need a greater understanding of the risk and the
potential returns of investment.
Accordingly Close Fund Management has launched a
range of protected unit trusts to help the investor gain
exposure to equity markets and quantify the risks that
they are taking.
Close Fund Management is the market leader in this
sector, managing the widest range of protected unit
trusts on behalf of private clients, pension schemes and
institutions alike.
Close Fund Management’s aim is to produce funds that
are designed for “Turning savings into investments”TM
Man Investments
Man Investments is the asset management division of
Man Group plc.
History & Tradition
Man Group plc is an international financial services
business listed on the London Stock Exchange and is a
constituent of the FTSE 100 Share Index with a market
capitalisation of £5.3 billion**. Man Group can trace its
origins back to 1783 and now employs 2,500 people in
15 countries worldwide*.
Man Investments is a global leader in alternative
investments, providing innovative products and
tailor-made solutions to private and institutional clients
with assets under management in excess of US $38
billion (£21 billion)*.
Man Investments has 20 years of experience in the
design and management of hedge fund products having
launched around 400 such vehicles worldwide.
Source: Man Investments.
*as at 25 March 2004
** as at 29 March 2004
*** as at 31 March 2004
Close Fund Management (Investments) Limited
10 Crown Place, London EC2A 4FT
T 0800 269 824
F +44 (0)20 7426 4024
www.closefm.com
Subsidiary of Close Brothers Group plcAuthorised and regulated by the Financial Services Authority
Close Fund Management is a market leader in the
protected fund sector and manages the following range
of funds, unit trusts and investment trusts.
• The Close UK Escalator 100 Fund
• The Close UK Escalator 95 Fund
• The Close European Escalator Fund
• The Close World Escalator Fund
• The Close Capital Account
• The Close Beacon Investment Fund
• The Close FTSE techMARK Fund
• The Close Reserve Equity Fund
• The Close FTSE 100 Trust plc
• The Close FTSE 100 Income & Growth Fund plc
• The Close UK Index Growth Fund
• The Close US Index Growth Fund
• The Accelerated Return Fund
• The Japanese Accelerated Performance Fund
For further information on any of our funds call the
Close Fund Management helpline free on
0800 269 824Please remember that the price of units can fall as well as rise.A charge is included in the cost of your investment which is likely to affect its valueparticularly in the short term.
