GrowthProspectus.doc
Upcoming SlideShare
Loading in...5
×
 

GrowthProspectus.doc

on

  • 690 views

 

Statistics

Views

Total Views
690
Views on SlideShare
690
Embed Views
0

Actions

Likes
1
Downloads
2
Comments
0

0 Embeds 0

No embeds

Accessibility

Upload Details

Uploaded via as Microsoft Word

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    GrowthProspectus.doc GrowthProspectus.doc Document Transcript

    • TABLE OF CONTENTS DEFINITIONS 3 Key Information 4 Directors, Investment Manager and Advisers 5 Introduction 6 Political and Economic Background 6 Countries in the Caribbean 8 The Caribbean Stock Markets 9 Investment Policy 11 Past Investment Performance 11 Risk Factors 11 Directors, Management and Administration 12 Fees and Expenses 13 Dividend Policy 13 Taxation and Exchange Control 14 Dealing in the Fund’s Shares 15 Ways to Invest 17 General Information 17 Potential investors should note that investing in equity and debt securities may involve a high degree of risk and investment in the shares offered herein is therefore only suitable for investors who understand the risks inherent in participating in financial markets involved. Your particular attention is drawn to the section headed ”Risk Factors” in Section (1).
    • PROSPECTUS & INFORMATION CIRCULAR Fortress Caribbean Growth Fund Prospectus and information circular for the issue of an unlimited number of class ‘A’ redeemable mutual fund shares at a price equal to the net asset value per share. The holders from time to time of such shares shall collectively and exclusively constitute the fund shareholders. A copy of this document has been registered with the Registrar of Companies in Barbados in accordance with the provisions of the Companies Act Cap 308 of the laws of Barbados and has also been filed with the Securities Exchange of Barbados and it is an authorized mutual fund licensed under the Mutual Funds Act, 1998-45. The Registrar of Companies and The Securities Exchange of Barbados take no responsibility as to the validity or the veracity of the contents of this prospectus and have neither approved nor disapproved the issue of any of the securities herein mentioned. It is not the intention of the offeror to file a copy of this document or to register any of the securities herein mentioned with any regulatory authority or agency in any territory outside of Barbados. No person receiving a copy of this document in any territory may treat this document as constituting an invitation to him or her to purchase or subscribe for any shares nor should he in any event purchase or subscribe for any shares unless in the relevant territory such an invitation could lawfully be made to him or her without the offeror compliance with any registration or other legal requirements. Any person wishing to subscribe for shares should satisfy himself that, in doing so, he or she complies with the laws of any relevant territory, and that he or she obtains any requisite governmental or other consents and observes any other applicable formalities. 2
    • DEFINITIONS In this document, where the context permits, the expressions set out below bear the following meanings: “THE COMPANY Fortress Mutual Fund Limited “THE FUND” Fortress Caribbean Growth Fund./ The net subscription proceeds of the subscriptions made by Fund Shareholders. “FUND SHARES” “Class ‘A’ redeemable mutual Fund shares” of the company “FUND SHAREHOLDERS” Holders of the “Class ‘A’ redeemable mutual fund shares” of the company “THE DIRECTORS” The Directors of the Company “THE MANAGER” Fortress Fund Managers Limited “PERPETUAL” Perpetual Unit Trust Management Limited “SEB” The Securities Exchange of Barbados “TSE” Trinidad & Tobago Stock Exchange “JSE” Jamaica Stock Exchange “BDS$” The currency of Barbados “TT$” The currency of the Republic of Trinidad & Tobago “JAM$” The currency of Jamaica “US$” The currency of the United States of America “GDP” Gross Domestic Product “NASDAQ” National Association of Securities Dealers Inc.-Stock Market “IFC” International Finance Corporation - Lessons of Experience Report - Series 2. “SHARES” Class ‘A’ redeemable mutual fund shares of the company 3
    • KEY INFORMATION The following information summarises various matters which are described more fully in the rest of this document. FORTRESS MUTUAL FUND LIMITED Fortress Mutual Fund Limited is a Barbados based mutual fund company which provides an avenue for portfolio investment in domestic, regional and international markets. The objective of the Fund is to achieve long-term capital appreciation. The fund is authorised to invest in equity and debt securities of both quoted and unquoted securities. MANAGER The Manager of the Fund is Fortress Fund Managers Limited, a Barbados based investment management company. DEALINGS & SETTLEMENT The shares of the Fund are not listed on any stock exchange. Settlements will take place through Fortress Fund Managers Limited. Settlement is made in Barbados currency. CALCULATION AND PUBLICATION OF NET ASSET VALUE The net asset value per share of the Fund is calculated weekly at the close of business on Fridays and is published in both Barbados newspapers, and on the internet @fortressfund.com and the Lipper Overseas Fund Table. MINIMUM INVESTMENT AMOUNT The minimum initial investment is Bds$100. The minimum monthly investment is Bds$50.00 CHARGES There is an initial charge of 2% of any amount being invested into the fund. Annual Management fee charges are 1.75% per annum of the net assets of the fund. Custodian and administrative charges do not exceed 0.175% per annum of the net asset value of the fund. 4
    • DIRECTORS, INVESTMENT MANAGER & ADVISERS BANKER INDEPENDENT AUDITORS PricewaterhouseCoopers Barclays Bank Plc. Chartered Accountants Broad Street The Financial Services Centre Bridgetown Bishop’s Court Hill Barbados St. Michael Barbados DIRECTORS ATTORNEY-AT-LAW Mr. Geoffrey Cave - Chairman Mr. David Bynoe Sir Henry Forde, QC Sen. Sir Fred Gollop Juris Chambers Mr. Roger Cave - Investment Manager Attorneys-at-law Mr. Ken Emery Fidelity House Wildey Business Park St. Michael SECRETARY Barbados Corporate Services Limited The Financial Services Centre CUSTODIAN & ADMINISTRATOR Bishop’s Court Hill St.Michael Barclays Bank Trustee Branch Barbados Broad Street Bridgetown REGISTERED OFFICE Barbados 1st Floor Carlisle House Hincks Street FUND MANAGERS Bridgetown Barbados Fortress Fund Managers Limited 1st Floor Carlisle House Hincks Street Bridgetown, Barbados Tel no: 246-431-2198 Fax no: 246-431-0514 Internet: fortressfund.com E-mail: caverc@caribsurf.com 5
    • INTRODUCTION Fortress Mutual Fund Ltd. is a mutual fund investment company incorporated in Barbados and licensed under the Mutual Funds Act. The Company has established one fund; The Fortress Caribbean Growth Fund which provides a practical route for individuals to invest in domestic, regional and international portfolio investment in the Caribbean. The objective of the Fund is to achieve long term capital appreciation through investment in a diversified portfolio of shares listed on the main Caribbean Stock Exchanges, new issues and unlisted securities of Caribbean companies. The Manager of the Fund is Fortress Fund Managers Limited, a Barbados-based investment management company of which the shareholders are Cave Shepherd & Co Limited, Perpetual Plc, Barbados Shipping & Trading Co Ltd (BS&T), The Nation Corporation, and Roger Cave. POLITICAL & ECONOMIC BACKGROUND Barbados is an independent sovereign state, having gained independence from Great Britain in 1966. Barbados remains a member of the Commonwealth and has the second oldest surviving parliament in the British Commonwealth. The constitution of Barbados is based on the Westminster parliamentary model, which is a UK style representative system. Queen Elizabeth II is head of State and is represented by a Governor-General. The Governor-General appoints the person who commands the support of the majority of elected members of parliament to be Prime Minister. The 21-member Senate is appointed by the Governor-General (12 members on the advice of the Prime Minister, two on the advice of the leader of the opposition and seven by the governor-general in his own discretion.) The House of Assembly consists of 28 members who are directly elected to represent single-member constituencies for terms of five years. Judicial appointments are made by the Governor General on the recommendation of the Prime Minister after consultation with the leader of the opposition. Final appeals rest with the Judicial Committee of the Privy Council in the United Kingdom. Barbados is a member of a number of regional and international organisations. These include Caricom, the United Nations and its agencies, the International Monetary Fund (IMF) and the World Bank. With the exception of Haiti and Cuba, almost all of the other Caribbean countries can be considered relatively stable democracies with varying forms of parliamentary governments that hold free and fair elections. The Caribbean consists of a number of small island economies which are in the early stages of development in terms of their capital markets and portfolio foreign investments but are well advanced in terms of business, banking, legal and political structures. Most of the Caribbean economies over the years have been characterised by closed, government dominated, commodity based economies, which have relied in part on financial aid and support for export prices from the major developed countries. 6
    • Over the last decade Caribbean countries have begun to transform their economies through diversification away from the basic commodities of sugar and bananas to tourism, light manufacturing, offshore financial services and informatics. Over the last two to three years, Caribbean governments have committed themselves to a process of change towards more open and market driven economies. The most significant changes have taken place in Jamaica, Guyana, Trinidad and more recently in the OECS where exchange controls have been relaxed, currencies floated, and trade liberalisation policies enacted with reduced duties, quotas and the downsizing of governments through major privatisation of government controlled organisations. The result is that the refocused economies, and emphasis on the private sector has put the Caribbean countries in a position to take advantage of renewed world-wide growth. The Caribbean islands have a wide range of real economic growth rates, which can vary significantly from island to island in any given year and typically will lag the cycles of the US and other economies. Many of the islands have recorded renewed growth rates during the last 3 years due to increasing tourist arrivals, freer trade and world-wide economic growth. Inflation rates also vary significantly across the region from being relatively stable, 2% to 7% in the Eastern Caribbean to double digit figures in the Dominican Republic and Cuba. The Caribbean can be considered as a classical ’Emerging Capital Market’ with five stock exchanges. With the exception of Jamaica, the activity on the exchanges has been very limited, and is typical of immature stock markets in developing countries. Both the supply and demand have been inhibited by factors such as fear of loss of family control, lack of tradition and understanding of equity investment and over-reliance on bank overdraft financing. This low level of market activity results in relatively inefficient markets, which are characterised by comparatively low P/ E ratios and buy and hold strategies by most investors who trade on a yield basis. It is these characteristics, which provide the investment opportunity now as these markets begin to develop and become more efficient. The ability to invest across the region offers attractive opportunities for equity risk management through portfolio diversification of investments in the various countries. The countries in which Fortress Caribbean Growth Fund invests are listed on the table that follows. The main focus is on Barbados, Jamaica and Trinidad where established stock markets currently exist. The Fund is also actively seeking investment opportunities across the region and will continue to increase the diversification of the portfolio as other Caribbean capital markets develop. 7
    • THE COUNTRIES OF THE CARIBBEAN COUNTRY Size(sq km) Population(000’s) Currency ExRateUS$(Dec 31st 2000) Barbados 432 264 Barbados $ BDS$2 Jamaica 11,424 2,486 Jamaican $ J$45.30 Trinidad & Tobago 5,128 1,257 Trinidad $ TT$6.24 OECS COUNTRIES Antigua & Barbuda 442 64 East Caribb $ EC$2.70 Dominica 750 73 East Caribb $ EC$2.70 Grenada 345 97 East Caribb $ EC$2.70 Montserrat 102 10 East Caribb $ EC$2.70 St Kitts & Nevis 269 42 East Caribb $ EC$2.70 St Lucia 616 151 East Caribb $ EC$2.70 St.Vincent and the Grenadines 388 107 East Caribb $ EC$2.70 OTHER COMMONWEALTH Anguilla 96 10 East Caribb $ EC$2.70 The Bahamas 13,942 270 Bahamian $ B$1 Belize 22,960 205 Belize $ Bz$1.98 British Virgin Islands 150 17 United States $ US$1 Cayman Islands 259 31 Cayman Isl $ CI$1.207 Guyana 214,790 760 Guyana $ G$1.81 Turks & Caicos 417 14 United States $ US$1 DUTCH WEST INDIES Aruba 200 70 Aruba Florin G1.77 8
    • Curacao 102 11 Netherland Guilder G1.77 St. Maarten 86 55 French Franc FF7.38 FRENCH WEST INDIES Guadeloupe 345 410 French Franc FF7.38 Martinique 1,100 360 French Franc FF7.38 U.S. TERRITORIES Puerto Rico 9,104 3,685 United States $ US$1 US Virgin Islands 352 103 United States $ US$1 OTHER COUNTRIES Cuba 110,860 10,896 Cuban Peso 1CPeso Dominican Republic 48,422 7,769 Dom Rep Peso RD$16.10 Haiti 27,560 6,539 Gourdes G23.50 Suriname 163,265 404 Suriname Guilder G987.6 TOTAL 633,906 36,160 THE CARIBBEAN STOCK MARKETS 1999 1998 1997 1996 1995 NO. OF QUOTED COMPANIES Jamaica 44 44 49 50 51 Trinidad 28 28 28 27 27 Barbados 22 20 18 18 16 94 92 95 95 96 ANNUAL TURNOVER (US$M) Jamaica 54 56 129 125 290 Trinidad 117 198 135 103 137 Barbados 12 34 23 6 3 182 288 287 234 430 MARKET CAPITALISATION(US$M) 9
    • Jamaica 2,511 2,128 1,920 1,888 1,275 Trinidad 4,367 3,966 3,116 1,401 1,135 Barbados 2,007 2,412 1,141 770 494 8,885 8,506 6,177 4,059 2,904 MARKET INDEX (LOCAL CURRENCY) Jamaica 21,893 20,593 19,847 16,616 14,267 % Change 6% 4% 19% 16% -14% Trinidad 417 436 352 167 150 % Change -4% 24% 110% 12% 69% Barbados 2,561 2,794 1,893 1,258 1,298 % Change -8% 48% 51% -3% -7% AVERAGE TRADING VALUES - DEC 31ST Jamaica Average P/E Ratio 7.23 10.58 6.91 5.32 7.68 Average Yield 4.64 4.16 2.01 2.39 1.85 Average Price/Book 1.16 0.18 0.63 1.04 1.14 Trinidad Average P/E Ratio 12.64 14.67 17.37 9.52 10.40 Average Yield 4.47 3.27 3.46 5.02 5.15 Average Price/Book 1.92 2.29 2.35 1.40 1.76 Barbados Average P/E Ratio 13.09 15.76 10.90 13.63 9.42 Average Yield 3.50 1.76 4.52 5.54 5.26 Average Price/Book 0.98 1.83 1.27 0.77 0.78 EXCHANGE RATE TO 1 US$ Jamaica (JA$/US$) 41.42 37.15 35.58 37.02 35.14 % Change -11% -4% 4% -5% -67% Trinidad (TT$/US$) 6.30 6.30 6.30 6.28 5.95 % Change -0% 0% 0% -6% -1% Barbados (BDS$/US$) 2.00 2.00 2.00 2.00 2.00 % Change 0% 0% 0% 0% 0% (Source - Caribbean Stock Exchanges- Data at December 31st) 10
    • The Caribbean capital markets consist of five small country exchanges in Jamaica, Trinidad, Barbados, the Dominican Republic, the Bahamas and a call exchange in Guyana. The stock exchange in the Dominican Republic has very few listed equities and the trading is primarily in debt securities. Private sector debt markets and commercial paper have begun to develop in Jamaica and Trinidad and the remainder is characterised by the issuance of government paper and bonds by island governments primarily to state pension schemes and institutional investors with little secondary market activity. The statistics on the three main stock exchanges show a combined market of just under 100 listed companies with an annual trading value of approximately US$300m per annum. The majority of this activity is concentrated in Jamaica and Trinidad, with Barbados being a thin market with few listed companies or market participants. Barbados, Trinidad and Jamaica have all benefited from having increased institutional activity from local and regional mutual funds and from some foreign direct portfolio investment. Despite the variance in the economies and the variance in performance returns from the various exchanges, there has been very little cross border trading activity between the three exchanges although some appropriate mechanism exists. As recent as 1997, the Trinidad exchange increased by 110% and was the fifth best performer of the stock markets in the world and yet few Jamaicans or Barbadians participated in these gains. There is little diversification by Caribbean investors who are simply riding the ups and downs of their particular island economies. During 1995, the Inter-American Development Bank (IADB) commenced funding for a project to harmonise the Caribbean Stock Exchanges. It was implemented by consultants from NASDAQ and the objective is to link the five main stock exchanges in the Caribbean with electronic trading and a central depository system for settlement. The countries involved are Jamaica, Trinidad, Barbados, Bahamas and the Dominican Republic. So far Jamaica and Barbados have commenced electronic trading, with settlements taking place through Central Securities Depository providing for settlement on a delivery vs. payment basis. Trinidad is expected to implement a similar system in 2001 and the countries in the Organization of East Caribbean States (OECS) are expected to launch an electronic over-the-counter stock exchange in the same year. The Caribbean countries are likely to soon follow recent trends of merging their Stock Exchanges now happening around the world, thereby creating more active, dynamic and efficient stock exchanges. The Directors believe that the expansion of the regional economies, the need for fresh capital investment particularly in the services and tourism sectors and the several incentives that are being provided by Governments, will increase the listings in the local markets. The creation of a final withholding tax of 12.5% for dividend income for Barbadians and the taxation of dividends at zero percent for Caricom territories who have signed the Caricom Treaty is likely to further the demand for equities. The reduction of the corporation tax rate in Trinidad to 35% and the planned inclusion of the Trinidad and Jamaican Stock Exchanges in the IFC Emerging Markets index should all combine to increase the demand for Caribbean equities. 11
    • INVESTMENT POLICY The objective of the Fund is to achieve long-term capital appreciation of its assets through investment in shares of both quoted and unquoted Caribbean companies. The Fund will also pursue the concept of local investors swapping shares held in public companies for the more diversified portfolio of the Fund. The companies in which the Fund will invest are expected to have at least one of the following characteristics; (a) The company’s product(s) must be well established in the local and or regional markets. (b) The price of the company’s shares are attractively priced as measured by their Price to Earnings & Price to Book Value Ratios compared with Industry Averages. (c) The company is recording high rates of growth in revenues and profits. (d) The company is in a solid position of sustainable export earnings. (e) The company’s shares are depressed following a period of unusual or temporarily poor results. The length of the investment period will depend on the growth in the Fund’s assets and the growth in the activity in the regional markets. In the absence of availability of suitable equity investments, the Fund will invest either in short term debt securities and commercial paper of regional companies and governments or in International Funds or both depending on the availability of foreign exchange. The stock markets of the Caribbean lack liquidity, therefore the Fund Manager will invest a larger than normal percentage (maximum 25%) of the Fund’s assets into investments that can be liquidated at any time. The objective of the Fund is growth and long-term capital appreciation, therefore, investments may be made from time to time in international equity funds which will allow for easy liquidation at any time to meet any foreign currency redemptions. Since most of the Caribbean companies are quite small by international standards, the Fund could easily become a significant shareholder. It will not however acquire more than 10 % of the voting shares of any one company, and it will not invest more than 10% of the fund’s assets in any one security. The Fund will not invest in the shares or fixed income securities of Cave Shepherd & Co Limited. The Fund will act strictly as a portfolio investor and will not take legal and or management control or seek directorships in any of the companies in which it invests. The Fund has had an excellent track record with a 93% return after the first four years. (from inception December 9, 1996 to November 30th, 2000) RISK FACTORS Emerging markets tend to have a greater level of risk and volatility associated with them than more established markets. The small sizes of the Caribbean stock markets will tend to make them volatile and relatively not very liquid. Currency fluctuations, exchange controls, tax and or other regulations currently applicable or which may be introduced in the future may affect the value and marketability of the Fund’s investments and income derived therefrom. The passing of the mutual funds Act in Barbados in 1998 has strengthened the supervision and regulation of the local securities industry but it is still at a less developed stage than in the USA, Canada, UK, Europe and other developed stock markets. While some of the Caribbean countries have implemented Central Securities Depositories for the recording of securities and trading, this has not occurred in all of the islands which increases the risk of settlement of transactions in these markets. 12
    • DIRECTORS, MANAGEMENT AND ADMINISTRATION MANAGER Fortress Fund Managers Limited (“ the Manager) has been appointed to manage the fund The Manager is a privately incorporated Barbados company that is owned and controlled by the shareholders and directors of the company, the representatives of the Manager’s shareholders serve as Directors of the fund. MANAGER SHAREHOLDERS & FUND DIRECTORS The shareholders of the Manager and their representatives who serve as Directors of the Fund are as follows Shareholders Fund Director Cave Shepherd & Co Ltd Mr. Geoffrey Cave Barbados Shipping & Trading Co Ltd Mr. David Bynoe The Nation Corporation Senator Sir Fred Gollop Mr. Roger Cave Mr. Roger Cave Perpetual PLC - - Mr. Ken Emery CAVE SHEPHERD & COMPANY LIMITED – is a family controlled, public company listed on the SEB. Its principal business is that of retail, being the leading department store in Barbados. Mr. Geoffrey Cave is the chairman and managing director of Cave Shepherd & Co. Limited. He also sits on the boards of several of the island’s leading companies. BARBADOS SHIPPING & TRADING CO LTD. (BS&T) – is the largest public company in Barbados and is listed on the Barbados Stock Exchange. BS&T employs over 2,000 people and is involved in a range of business activities ranging from retail and distribution to manufacturing, tourism and financial services. BS&T through its Chairman, Mr. David Bynoe, will bring to the Fund tremendous knowledge of local and regional investment opportunities. THE NATION CORPORATION– is the largest news and media company in Barbados. Its principal subsidiary, the Nation Publishing Co. Limited publishes the leading daily newspaper. Another subsidiary, Starcom Network Inc., operates three radio stations, including the Voice of Barbados. The Corporation’s chairman, Senator Sir Fred Gollop, is an Attorney-at-Law with extensive experience in the public and private sectors. His knowledge of the media business will be extremely helpful in guiding the marketing and promotion policies of the Fund. PERPETUAL plc – is a public investment management company based in the U.K. Perpetual offers a wide range of national and international unit trusts and has an outstanding long term investment performance record both in the U.K. and internationally. MR. KEN EMERY is an independent consultant and advisor specializing in the development of mutual funds and related investment products. Mr. Emery retired as Technical Director of the Save & Prosper Securities Ltd. In the U.K. where he worked for 26 years. He was actively involved in the creation of several new investment products during his distinguished career along with setting up several funds in many countries around the world. Mr. Emery worked extensively on setting up of the Fortress Caribbean Growth Fund as a consultant and he subsequently joined the Board of Directors, of the Manager and the Fund. ROGER CAVE C.A., C.F.A Investment Manager is a Chartered Financial Analyst (CFA) and Chartered Accountant (CA) with four years of professional accounting experience with Coopers & Lybrand in Canada and Price Waterhouse in Barbados. Roger completed a two year contract with the Commonwealth Development Corporation as an Executive in their East Caribbean office before joining Cave Shepherd in 1994. Roger is one of the lead promoters and founding shareholders of the Management Company and the Fund in 1996. 13
    • MANAGEMENT CONTRACT The current Manager’s contract has been in existence since the Fund’s inception, and continues automatically thereafter unless determined by six months’ written notice by the Company or twelve months’ written notice by the Manager. The Manager will receive a weekly management fee in arrears from the Fund as described below. ADMINSTRATION & CUSTODIAN Barclays Bank Plc (Barclays) is the administrator and custodian of the Fund. Barclays is responsible for the recording and holding of all securities of the Fund. Barclays is also responsible for the settlement of all transactions. REGISTRAR Fortress Fund Managers Limited is the registrar of the Fund and all transactions are settled and reported to the Administrator on a weekly basis. FEES AND EXPENSES THE MANAGER INITIAL CHARGE There is an initial charge of 2% of all amounts invested into the Fund by investors. ANNUAL CHARGE The Manager is paid a fee that is calculated on the net asset value of the Fund (“NAV”). This fee is equivalent to 1.75 % per annum of the NAV of the Fund. The fee is calculated on the closing prices of the Fund’s assets on the dealing day at the end of each week. The fee is paid to the Manager within one week of calculation. CUSTODIAN & ADMINISTRATOR Custodian and administrative fees payable to Barclays Bank Plc amount to a maximum fee of 0.175 % of NAV and will reduce on a sliding scale to 0.020 % on assets in excess of BDS $ 200 million. These charges are calculated on the same basis as the management fees and are paid within one week of calculation. BROKERAGE The buying and selling of securities in Barbados are handled by Cave Shepherd Investments Limited (CSI), which holds a seat on the SEB. CSI trades for the account of Fortress Fund Managers Limited and only charges the Fund out of pocket expenses for trades on the SEB. There are no actual brokerage costs. Trades on the Jamaica and Trinidad stock exchanges and in the other territories are handled by other brokers and the fund incurs market brokerage costs. The settlement of all trades are done by the Administrator. OTHER EXPENSES The Fund bears the cost of other expenses of the Fund including administration, audit, legal, printing and stationery costs. The organisation and set up costs are being amortised over a period of five years and the total percentage of other costs does not exceed one tenth of one percent of the assets of the Fund in any one year. DIVIDEND POLICY The principal aim of the Fund is to provide shareholders with long term capital appreciation. The Fund is not expected to pay any dividends and all income and capital gains are automatically reinvested in new investments for the Fund. 14
    • TAXATION & EXCHANGE CONTROL TAXATION OF THE FUND CORPORATION TAX The Fund is licensed as an authorized mutual fund under the Mutual funds Act, 1998-45 of Barbados. In calculating the assessable income of the Fund for tax purposes, the act provides for a deduction of up to a 100% of the income that is designated to be income of the Fund shareholders. All of the profits of the Fund are designated to the Fund’s Class ‘A’ shareholders and consequently the Fund will not be subject to corporation tax. CAPITAL GAINS TAX There is no capital gains tax in Barbados and therefore all capital gains earned by the Fund will not be subject to tax. DIVIDENDS Dividends received by the Fund from other resident companies registered in Barbados are not subject to the final 12.5% withholding tax on dividends. For countries in the Caribbean Community (Caricom) which have signed the Caricom Double Taxation Agreement, investment income originating from those countries is taxed at zero percent. The countries which have so far signed this agreement include Antigua, Barbados, Belize, Dominica, Grenada, Guyana, Jamaica St. Kitts & Nevis, St. Lucia, St. Vincent and the Grenadines and Trinidad & Tobago. PROPERTY TRANSFER TAX & STAMP DUTY In accordance with section 48 of the Mutual Funds Act, 1998-45, the Fund is exempt from all provisions of the Stamp Duty Act and the Property Transfer Tax Act with respect to transactions concerning the ownership or transfer of shares in mutual funds. TAXATION OF SHAREHOLDERS Any dividends paid by the Fund to individual resident shareholders in Barbados will be subject to a final withholding tax of 12.5%. Companies resident in Barbados are not subject to tax on dividends received from the Fund. However the Fund’s policy is to reinvest all income into new investments of the fund. There is no capital gains tax in Barbados and therefore individuals resident in Barbados will not be subject to capital gains tax on profits realized from investing in the Fund. PERSONAL INCOME TAX In accordance with the provisions of the Income Tax Act, individuals resident in Barbados may claim an annual deduction in respect of investments made in authorized mutual funds licensed under the Mutual Funds Act,1998-45. The maximum annual amount which may be deducted from income is BDS $10,000.00. Disposal of any such investments within five years will give rise to recapture of the tax relief given. In accordance with section 9 (1) of the Income tax act, individuals resident in Barbados, where employers do not offer them shares in lieu of bonus, may claim a reduction of the lower of 75% of their annual bonus or $7,500, if such a bonus is invested in a mutual fund within four months from the date in which the annual bonus payment was made. EXCHANGE CONTROL Barbados has a regime of exchange control regulations administered by the Central Bank. These regulations require that residents convert foreign currency receipts to Barbados dollars and purchase their foreign currency requirements for goods and services from the commercial banks who have delegated authority to sell foreign exchange on behalf of the Central Bank. Since 1975, Barbados has maintained a fixed exchange rate of BD$2.00:US$1.00. 15
    • Capital transactions by non-residents involving the purchase of shares in Barbados corporations or the acquisition of real property and the payment of dividends or interest or the repayment of foreign currency debt are subject to the prior approval of the Central Bank. Similar requirements exist for residents of Barbados to invest abroad or borrow in foreign currency. In order to facilitate the trading of shares of the Company, the Central Bank has agreed to grant the company permission regarding the purchase and redemption of its shares. Consistent with the exchange control regulations for cross border trading, the company has been advised that foreign shareholders of the Fortress Caribbean Growth Fund will be able to purchase and redeem up to BDS$ 2m per transaction in shares of the Fund. DEALING IN THE FUND’S SHARES DESCRIPTION OF THE SHARES The company is structured as an open-end Mutual Fund and is authorized to issue an unlimited number of Class ‘A’ Redeemable Mutual Fund Shares with the authority to issue fractional shares. Each fund share is entitled to an equal share in the distribution of net income and net capital gains of the fund and participates equally in all other respects. Fund shareholders shall not be entitled to vote at meetings of shareholders of the Company save and except as permitted under the Companies Act, CAP 308, for the following; (1) Disposal of the Assets of the Company. (2) Any change or abrogation of the rights of the shares or Any variation affecting the rights of the shares (3) Any proposed amalgamation of the company with another company or any amalgamation of the Fund with another Mutual Fund. Upon a liquidation or winding-up of the Company the Fund Shareholders shall be entitled to the net proceeds, after satisfying the cost of realization of the assets of the Fund but shall not be entitled to share in any surplus property of the Company. The Common shareholders of the Company shall not be entitled to participate or share in the distribution of any property of the fund. PRICE OF SHARES The price per share is determined by calculating “the net asset value” of a share on valuation days. There is a 2% initial fee on all purchases to cover the cost of initial administrative expenses. “The net asset value” of a share is calculated at the close of business on Friday of each week (unless such is a bank holiday, in which case the valuation day shall be the close of business on the proceeding day) by dividing the value of net assets of the Fund (i.e., the value of the Fund’s assets less its liabilities) by the total number of shares. CALCULATION OF NET ASSET VALUE In determining the net asset value of the Fund, securities owned are valued at their market value. Under normal trading conditions this will be determined by the closing price of the shares. In the event that there is limited or no trading in a particular security then, at the discretion of the directors a price within the limits of the bid and offer prices for that day will be used. In the event of unusual market conditions or in the event that a particular security value has become impaired, as evidenced by no bids being quoted and offers below the previous trade price, the manager, in consultation with the Custodian/Trustee and on the advice of an independent broker will make a reasonable estimate of a fair price. 16
    • PURCHASE OF SHARES The purchase price for a share is equal to the net asset value which is calculated at the close of business on the valuation day next following the receipt of an application for the purchase of shares. There is a front-end charge of 2% on the purchase of shares in the fund. The minimum investment is $100. The minimum for additional investments is $100. Investors may purchase shares of the Fund by completing an application form, which may be obtained from any of the following persons: (a) Fortress Mutual Fund Ltd – 1st Floor Carlisle House, Hincks Street, Bridgetown (b) Any member of the Securities Exchange of Barbados (c) Any Barclays Bank branch The Fund Manager may in his discretion reject any application to purchase shares, such decision must however be made within three days after receipt of the application. If an application is rejected, all money received with the application will be returned immediately. If an application is received and approved and the necessary funds received before 3 p.m. on a valuation day, then the purchase order will be processed that day using the net asset value for shares as of that valuation day. Orders received after 3:00 p.m. or on a day which is not a valuation day, will be processed using the net asset value as determined on the next valuation day. An investor who has satisfied the minimum investment requirement of $ 100 may continue to invest through a periodic investment plan. This plan allows for deductions of a specific amount from the investor’s bank account on a monthly basis and for investments in the Fund to be made until a predetermined objective is attained or until further notice. The minimum periodic investment is $50. REDEMPTION OF FUND SHARES A Fund shareholder may cash in any or all of the shares of the Fund owned by such Fund shareholder in accordance with the redemption policy of the Fund at any time by delivering a written request for redemption on the appropriate form to the Fund Managers. Fund shares will be redeemed at their net asset value as determined at the valuation date next following the day on which the Fund receives the redemption order. If a redemption request is received before 3:00 p.m. on a valuation day, the redemption will be processed on that valuation day. Redemption requests received after 3:00 p.m. or on a day, which is not a valuation day, will be processed at the next valuation date. Provided the investor has delivered all the documentation required, payment will be mailed to such investor within three (3) business days of the redemption date. The investor may be asked to provide such reasonable documentation as the Fund manager may require in order to complete the redemption request. In the event of unusual circumstances and the Fund receives redemption requests, within any 30 consecutive days, represents more then 20% of the Fund’s assets, the directors of the company reserve the right to suspend redemptions and to hold a special meeting of the fund shareholders to determine the future of the Fund, including the liquidation of the Fund’s assets. 17
    • WAYS TO INVEST There Are Four Easy Ways To Invest In The Fund. (1) Open A Monthly Savings Investment Plan You decide how much you can afford to invest each month (minimum Bds. $50) and complete our direct debit form and return it to us. We will debit your bank on the 10th day of each month and purchase an equivalent amount of “Fund Shares” based on the value of the Fund at the immediate proceeding valuation date. (2) Regular Lump Sum Amount You can invest whenever you have the available funds to do so (minimum $100). (3) Shares Exchange Plan If you are already a shareholder in one or more companies you may transfer your shares to the company in exchange for an equivalent value of “Fund Shares” based on the current market value of the shares transferred net of any brokerage costs. Prices and shares are subject to market conditions. (4) Third Party Dividend Reinvestment Plan If you own shares in a publicly traded company and you do not wish to sell those shares but you would like to reinvest any dividends received, you can simply mandate your dividends (minimum BDS$100) to the company who will credit you with a number of “Fund shares” purchased by the proceeds of such mandated dividends. GENERAL INFORMATION • Save as disclosed there is no minimum subscription. • The extracts included in this prospectus from referenced sources were not prepared for specific inclusion in this prospectus. • Fractional shares of the company may be issued. • No share certificates in the usual format and style will be issued by the company, but the company shall issue to each Fund shareholder a statement showing the number of Fund Shares held by each such person. • Barbados Shipping & Trading Co Ltd, Cave Shepherd & Co Ltd, Perpetual PLC, The Nation Corporation, Barclays Bank Plc; Corporate Services Limited , PricewaterhouseCoopers, Fortress Fund Managers Limited, Sir Henry Forde QC, have all given and have not withdrawn their written consent to the inclusion of their names in the prospectus in the form and context in which it is included. • Save as disclosed there is no closing date for applications made pursuant to this prospectus, the purchase price for a share shall be equal to the net asset value which is calculated at the close of business on the valuation day next following the receipt of an application for the purchase of shares. • The company, upon the advice of the Manager, may from time to time, close the subscription list for new shares of the company. 18