CONFIDENTIAL Name of Recipient ________________
Rye Select Broad Market Portfolio Limited
A Cayman Islands Exempted Company
July 1, 2007
Amended and Restated Prospectus
Private Offering of Class A, Class B, and Class C Shares
Minimum Initial Subscription per Investor: Class A U.S.$500,000.00
Minimum Initial Subscription per Investor: Class B U.S. $500,000.00
Minimum Initial Subscription per Investor: Class C U.S. $500,000.00
Investment Manager: Tremont (Bermuda) Limited
Sub-Advisor: Tremont Partners, Inc.
Administrator: Tremont Partners, Inc.
Sub-Administrator: The Bank of New York
NONE OF THE SHARES ISSUED BY THE COMPANY ARE FOR SALE TO U.S. PERSONS EXCEPT TO CERTAIN TAX
EXEMPT, ERISA AND OTHER SELECTED INDIVIDUALS AND/OR ENTITIES AND THEN IN A LIMITED NUMBER
OF CASES. NO PERSON HAS BEEN AUTHORISED IN CONNECTION WITH THIS OFFERING TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS OTHER THAN AS CONTAINED IN THIS AMENDED AND
RESTATED PROSPECTUS. PLEASE DIRECT ANY INQUIRIES TO TREMONT PARTNERS, INC.
NEITHER THE COMPANY NOR ANY OF THE COMPANY SHARES DESCRIBED IN THIS AMENDED AND
RESTATED PROSPECTUS (THE “PROSPECTUS”) HAVE BEEN OR WILL BE REGISTERED OR QUALIFIED UNDER
THE SECURITIES LAWS OF THE UNITED STATES (“U.S.”) OR ANY OTHER JURISDICTION. THIS PROSPECTUS
SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY, NOR SHALL
THERE BE ANY SALE OF SHARES IN ANY JURISDICTION IN WHICH SUCH OFFER, SOLICITATION OR SALE IS
NOT AUTHORISED OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION
OR SALE. THE DIRECT OR INDIRECT OWNERSHIP OF SHARES BY “NON-QUALIFIED PERSONS” AS DEFINED IN
THIS PROSPECTUS IS PROHIBITED EXCEPT IN ACCORDANCE HEREWITH. NO PERSON HAS BEEN
AUTHORISED TO MAKE ANY REPRESENTATIONS CONCERNING THE COMPANY OR THE SHARES WHICH ARE
INCONSISTENT WITH THOSE CONTAINED IN THIS PROSPECTUS, AND ANY SUCH REPRESENTATIONS SHOULD
ACCORDINGLY BE TREATED AS UNAUTHORISED AND MAY NOT BE RELIED UPON BY THE RECIPIENT.
PROSPECTIVE INVESTORS SHOULD NOT CONSTRUE THE CONTENTS OF THIS PROSPECTUS AS LEGAL,
TAX OR FINANCIAL ADVICE. ALL PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN PROFESSIONAL
ADVISORS AS TO THE LEGAL, TAX, FINANCIAL OR OTHER MATTERS RELEVANT TO THE SUITABILITY OF AN
INVESTMENT IN THE SHARES FOR SUCH INVESTOR.
THE PURCHASE OF SHARES IS SPECULATIVE AND INVOLVES A HIGH DEGREE OF RISK. THERE IS NO
ASSURANCE THAT THE COMPANY WILL BE PROFITABLE OR THAT AN INVESTOR WILL NOT LOSE ITS ENTIRE
INVESTMENT IN THE COMPANY. SEE THE SECTION ENTITLED “RISK FACTORS” WITHIN THIS PROSPECTUS
FOR A DESCRIPTION OF CERTAIN RISKS INVOLVED IN THE PURCHASE OF SHARES.
THIS PROSPECTUS IS INTENDED SOLELY FOR THE USE OF THE PERSON TO WHOM IT HAS BEEN
DELIVERED BY THE COMPANY FOR THE PURPOSE OF EVALUATING A POSSIBLE INVESTMENT BY THE
RECIPIENT IN THE SHARES DESCRIBED HEREIN, AND IT IS NOT TO BE REPRODUCED OR DISTRIBUTED TO
ANY OTHER PERSONS (OTHER THAN PROFESSIONAL ADVISORS OF THE PROSPECTIVE INVESTOR RECEIVING
THIS DOCUMENT FROM THE COMPANY).
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF THE SHARES TO ANY MEMBER OF THE
PUBLIC IN THE CAYMAN ISLANDS AND THE SHARES MAY NOT BE OFFERED TO ANY MEMBER OF THE PUBLIC
IN THE CAYMAN ISLANDS UNLESS THE SHARES BECOME LISTED ON THE CAYMAN ISLANDS STOCK
EXCHANGE. CAYMAN ISLANDS EXEMPTED AND ORDINARY NON-RESIDENT COMPANIES MAY BE
PERMITTED TO ACQUIRE THE SHARES.
THE COMPANY HAS BEEN REGISTERED AS A MUTUAL FUND PURSUANT TO SECTION 4(3) OF THE
MUTUAL FUNDS LAW (REVISED) OF THE CAYMAN ISLANDS (THE “MUTUAL FUNDS LAW”) WITH THE MUTUAL
FUNDS DEPARTMENT OF THE MONETARY AUTHORITY OF THE CAYMAN ISLANDS (THE “MONETARY
AUTHORITY”). SUCH REGISTRATION DOES NOT IMPLY THAT THE MONETARY AUTHORITY OF THE CAYMAN
ISLANDS OR ANY OTHER REGULATORY AUTHORITY IN THE CAYMAN ISLANDS HAS PASSED UPON OR
APPROVED THIS PROSPECTUS OR THE OFFERING OF THE SHARES HEREUNDER NOR IS IT INTENDED THAT
THE COMPANY'S NET ASSET VALUE WILL BE CALCULATED IN U.S. DOLLARS. EACH SHAREHOLDER
WILL BEAR THE RISK OF ANY FOREIGN CURRENCY EXPOSURE RESULTING FROM DIFFERENCES, IF ANY, IN
THE VALUE OF THE U.S. DOLLAR RELATIVE TO THE CURRENCY OF THE COUNTRY IN WHICH SUCH
SHAREHOLDER RESIDES OR MAINTAINS ITS NET WORTH.
INVESTORS (AND EACH EMPLOYEE, REPRESENTATIVE OR OTHER AGENT OF INVESTORS)
MAY DISCLOSE TO ANY AND ALL PERSONS, WITHOUT LIMITATIONS OF ANY KIND, THE TAX TREATMENT
AND TAX STRUCTURE OF THE TRANSACTION AND ALL MATERIALS OF ANY KIND (INCLUDING OPINIONS OR
OTHER TAX ANALYSIS) THAT ARE PROVIDED TO INVESTORS RELATING TO SUCH TAX TREATMENT AND TAX
STRUCTURE. THIS AUTHORIZATION OF TAX DISCLOSURE IS RETROACTIVELY EFFECTIVE TO THE
COMMENCEMENT OF THE FIRST DISCUSSIONS BETWEEN SUCH INVESTOR AND THE COMPANY REGARDING
THE TRANSACTIONS CONTEMPLATED HEREIN.
DISCUSSIONS IN THIS PROSPECTUS BELOW AS THEY RELATE TO CERTAIN UNITED STATES
FEDERAL INCOME TAX CONSEQUENCES ARE NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE
USED, FOR THE PURPOSE OF AVOIDING UNITED STATES FEDERAL TAX PENALTIES. SUCH DISCUSSIONS
WERE WRITTEN TO SUPPORT THE PROMOTION OR MARKETING OF THE TRANSACTIONS OR MATTERS
ADDRESSED IN THIS PROSPECTUS, AND ANY TAXPAYER TO WHOM THE TRANSACTIONS OR MATTERS ARE
BEING PROMOTED, MARKETED OR RECOMMENDED SHOULD SEEK ADVICE BASED ON ITS PARTICULAR
CIRCUMSTANCES FROM AN INDEPENDENT TAX ADVISOR.
ALL REFERENCES HEREIN TO “U.S.$”, “DOLLARS” OR “$” ARE U.S. DOLLARS.
FOR AUSTRALIAN PROSPECTIVE SHAREHOLDERS ONLY:
NO OFFER FOR SUBSCRIPTION OR PURCHASE OF THE SHARES OFFERED HEREBY, NOR ANY
INVITATION TO SUBSCRIBE FOR OR BUY SUCH SHARES HAS BEEN MADE OR ISSUED IN AUSTRALIA,
OTHERWISE THAN BY MEANS OF AN EXCLUDED ISSUE, EXCLUDED OFFER OR EXCLUDED INVITATION
WITHIN THE MEANING OF SECTION 66(2) OR 66(3) OF THE CORPORATIONS LAW (REVISED). ACCORDINGLY,
THIS PROSPECTUS HAS NOT BEEN LODGED WITH THE AUSTRALIAN SECURITIES AND INVESTMENTS
COMMISSION. FURTHER, THE SHARES OFFERED HEREBY MAY NOT BE RESOLD IN AUSTRALIA WITHIN A
PERIOD OF SIX MONTHS AFTER THE DATE OF ISSUE OTHERWISE THAN BY MEANS OF AN EXCLUDED OFFER
OR EXCLUDED INVITATION AS DESCRIBED ABOVE.
FOR BELGIAN PROSPECTIVE SHAREHOLDERS ONLY:
THE SHARES MAY NOT BE OFFERED OR SOLD IN ANY MANNER THAT CONSTITUTES AN OFFER OR
SALE TO THE PUBLIC IN THE KINGDOM OF BELGIUM WITHIN THE LAWS AND REGULATIONS FROM TIME TO
TIME APPLICABLE TO PUBLIC OFFERS OR SALES OF SECURITIES.
FOR CANADIAN PROSPECTIVE SHAREHOLDERS ONLY:
THIS PROSPECTUS CONSTITUTES AN OFFERING IN CANADA OF THE SECURITIES DESCRIBED HEREIN
IN ONTARIO AND QUEBEC ONLY. THIS PROSPECTUS IS NOT, AND UNDER NO CIRCUMSTANCES IS TO BE
CONSTRUED AS, AN ADVERTISEMENT OR A PUBLIC OFFERING OF THE SECURITIES REFERRED TO HEREIN.
NO SECURITIES COMMISSION OR SIMILAR AUTHORITY IN CANADA HAS REVIEWED OR IN ANY WAY PASSED
UPON THIS DOCUMENT OR THE MERITS OF THE SECURITIES DESCRIBED HEREIN AND ANY
REPRESENTATION TO THE CONTRARY IS AN OFFENCE.
FOR FINNISH PROSPECTIVE SHAREHOLDERS ONLY:
THE SHARES OFFERED HEREBY MAY NOT BE PUBLICLY OFFERED, SOLD OR ADVERTISED IN
FINLAND AND THIS PROSPECTUS MAY ONLY BE CIRCULATED TO A LIMITED NUMBER OF PERSONS IN
FOR FRENCH PROSPECTIVE SHAREHOLDERS ONLY:
THE SHARES OFFERED HEREBY DO NOT COMPLY WITH THE CONDITIONS IMPOSED BY FRENCH
LAW FOR ISSUANCE, DISTRIBUTION, SALE, PUBLIC OFFERING, SOLICITATION AND ADVERTISING WITHIN
FRANCE. THE DISTRIBUTION OF THIS CONFIDENTIAL PROSPECTUS AND THE OFFERING OF SHARES IN THE
COMPANY IN FRANCE ARE THEREFORE RESTRICTED BY FRENCH LAW. PROSPECTIVE INVESTORS SHOULD
INFORM THEMSELVES AS TO THE RESTRICTIONS WITH RESPECT TO THE MANNER IN WHICH THEY MAY
DISPOSE OF THE SHARES IN FRANCE.
FOR HONG KONG PROSPECTIVE SHAREHOLDERS ONLY:
THIS PROSPECTUS RELATES TO A PRIVATE PLACEMENT AND DOES NOT CONSTITUTE AN OFFER TO
THE PUBLIC IN HONG KONG TO SUBSCRIBE FOR SHARES. NO STEPS HAVE BEEN TAKEN TO REGISTER THIS
CONFIDENTIAL OFFERING PROSPECTUS AS A PROSPECTUS IN HONG KONG.
THE OFFER OF THE SHARES IS PERSONAL TO THE PERSON TO WHOM THIS PROSPECTUS HAS BEEN
DELIVERED BY OR ON BEHALF OF THE COMPANY, AND A SUBSCRIPTION FOR SHARES WILL ONLY BE
ACCEPTED FROM SUCH PERSON (OR A COMPANY WHICH SUCH PERSON SHALL HAVE CERTIFIED TO BE ITS
CONTROLLED SUBSIDIARY) FOR SUCH MINIMUM AMOUNT OF SHARES AS DESCRIBED IN THIS
CONFIDENTIAL PROSPECTUS. IT IS A CONDITION OF THE OFFER THAT EACH PERSON WHO AGREES TO
SUBSCRIBE FOR SHARES PROVIDES A WRITTEN UNDERTAKING THAT IT (OR ITS PRINCIPAL) IS ACQUIRING
SUCH SHARES FOR INVESTMENT PURPOSES ONLY AND NOT WITH A VIEW TO DISTRIBUTE OR RESELL SUCH
SHARES AND THAT IT WILL NOT OFFER FOR SALE, RESELL OR OTHERWISE DISTRIBUTE OR AGREE TO
DISTRIBUTE SUCH SHARES WITHIN SIX MONTHS FROM THEIR DATE OF SALE TO SUCH PERSON.
FOR ISRAELI PROSPECTIVE SHAREHOLDERS ONLY:
ISRAELI RESIDENTS, OTHER THAN THOSE CONSIDERED “EXEMPTION HOLDERS” UNDER THE
GENERAL CURRENCY CONTROL PERMIT, (AS AMENEDED FROM TIME TO TIME), REQUIRE A SPECIAL PERMIT
FROM THE ISRAELI CONTROLLER OF FOREIGN CURRENCY IN ORDER TO PURCHASE THE SHARES.
FOR KUWAIT PROSPECTIVE SHAREHOLDERS ONLY:
THE SHARES ARE OFFERED TO A LIMITED NUMBER OF SOPHISTICATED INVESTORS WHOSE
MINIMUM INVESTMENT IN THE COMPANY SHOULD NOT BE LESS THAN THE EQUIVALENT OF KUWAITI
DINAR 50.000 (EQUIVALENT TO APPROXIMATELY U.S.$173,000 AT THE CURRENT EXCHANGE RATE). ANY
OFFER OF THE SHARES SHOULD BE MADE THROUGH A PRIVATE PLACEMENT CONDUCTED BY A KUWAITI
AGENT AUTHORISED TO CARRY OUT INVESTMENT BUSINESS IN THE STATE OF KUWAIT IN ACCORDANCE
WITH LAW NO. 31/1990 AND ITS AMENDMENTS RELATED TO THE TRADING OF SECURITIES AND THE
INCORPORATION OF INVESTMENT FUNDS IN KUWAIT.
FOR LUXEMBOURG PROSPECTIVE SHAREHOLDERS ONLY:
THE SHARES ARE OFFERED TO A LIMITED NUMBER OF SOPHISTICATED INVESTORS, IN ALL CASES
UNDER CIRCUMSTANCES DESIGNED TO PRECLUDE A DISTRIBUTION WHICH WOULD BE OTHER THAN A
PRIVATE PLACEMENT. THIS PROSPECTUS MAY NOT BE REPRODUCED OR USED FOR ANY OTHER PURPOSE,
NOR BE FURNISHED TO ANY OTHER PERSON OTHER THAN THOSE TO WHOM COPIES HAVE BEEN SENT.
FOR NETHERLANDS PROSPECTIVE SHAREHOLDERS ONLY:
IN THE NETHERLANDS, THE SHARES MAY NOT BE SOLICITED, ACQUIRED OR OFFERED IN OR FROM
WITHIN THE NETHERLANDS, AND THIS CONFIDENTIAL PROSPECTUS MAY NOT BE CIRCULATED IN THE
NETHERLANDS, TO ANY INDIVIDUAL OR LEGAL ENTITY AS PART OF THEIR INITIAL DISTRIBUTION OR ANY
TIME THEREAFTER, OTHER THAN TO INDIVIDUALS OR LEGAL ENTITIES WHO OR WHICH TRADE OR INVEST
IN SECURITIES IN THE CONDUCT OR A PROFESSION OR TRADE, INCLUDING BANKS, BROKERS, DEALERS,
AND (OTHER) INSTITUTIONAL INVESTORS INVESTING IN SECURITIES, AS DEFINED IN THE WET TOEZICHT
BELEGGINGSWEZEN, THE ACT ON THE SUPERVISION OF INVESTMENT INSTITUTIONS, OF JUNE 27, 1990, AND
IN THE REGELING VAN 9 OKTOBER TOT UITVOERING VAN ARTIKEL 14 VAN DE WET TOEZICHT
BELEGGINGSINSTELLIGEN, THE REGULATION DATED OKTOBER 9, 1990, IN RESPECT OF THE
IMPLEMENTATION OF ARTICLE 14 OF THE ACT ON SUPERVISION OF INVESTMENT INSTITUTIONS AND THE
RESPECTIVE ACCOMPANYING MEMORANDA THERETO OF THE MINISTER OF FINANCE OF THE
NETHERLANDS (AS AMENDED FROM TIME TO TIME). IN THE EVENT OF A SOLICITATION, ACQUISITION OR
OFFERING MADE TO OR BY PROFESSIONAL INVESTORS AND THEREFORE EXEMPT FROM THE GENERAL
PROHIBITION AS CONTAINED IN THE ACT, NO SUBSEQUENT OFFERING OF THE PARTICIPATION RIGHTS IN
A “SECONDARY OFFERING” BY SUCH PROFESSIONAL INVESTORS TO OTHERS THAN SUCH PROFESSIONAL
INVESTORS MAY BE MADE. ACTING IN VIOLATION OF THE PROHIBITIONS CONTAINED IN THE ACT OR IN
VIOLATION OF RESTRICTIONS OR CONDITIONS CONTAINED IN THE EXEMPTION MAY CONSTITUTE A
CRIMINAL OFFENSE FOR THE INVESTMENT INSTITUTION (OR ITS DIRECTORS) AND THE PERSON OR LEGAL
ENTITY WHO SOLICITS, ACQUIRES OR OFFERS PARTICIPATION RIGHT IN SUCH INVESTMENT INSTITUTION.
IN ADDITION, CONTRACTUAL TERMS CONFLICTING WITH THE PROHIBITION PROVISION OF THE ACT OR IN
VIOLATION OF RESTRICTIONS OR CONDITIONS CONTAINED IN AN EXEMPTION MAY BE DEEMED NULL
AND VOID OR VOIDABLE UNDER THE GENERAL RULES OF NETHERLANDS CIVIL LAW.
FOR UNITED KINGDOM PROSPECTIVE SHAREHOLDERS ONLY:
THERE ARE RESTRICTIONS ON THE OFFER AND SALE OF SECURITIES IN THE UNITED KINGDOM.
ALL APPLICABLE PROVISIONS OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (“FSA”) AND THE PUBLIC
OFFERS OF SECURITIES (EXEMPTIONS) REGULATIONS 2001 WITH RESPECT TO ANYTHING DONE BY ANY
PERSON IN RELATION TO SECURITIES IN, FROM OR OTHERWISE INVOLVING THE UNITED KINGDOM MUST
BE COMPLIED WITH.
THIS PROSPECTUS SHOULD NOT BE ISSUED OR PASSED ON IN THE UNITED KINGDOM TO ANY
PERSON UNLESS THAT PERSON IS OF A KIND DESCRIBED IN THE UNITED KINGDOM FINANCIAL SERVICES
ACT, 1986 (INVESTMENT ADVERTISEMENTS)(EXEMPTIONS) ORDER, 1988, OR FINANCIAL SERVICES AND
MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2001 OR IS A PERSON TO WHOM THE DOCUMENT MAY
OTHERWISE BE ISSUED OR PASSED ON. THE COMPANY IS AN UNREGULATED COLLECTIVE INVESTMENT
SCHEME, THE PROMOTION OF WHICH BY AUTHORISED PERSONS IN THE UNITED KINGDOM IS RESTRICTED
BY THE FSA. SHARES MAY NOT BE OFFERED OR SOLD IN THE UNITED KINGDOM BY AUTHORISED PERSONS
OTHER THAN TO OTHER PERSONS AUTHORISED TO CARRY OUT INVESTMENT BUSINESS UNDER THE FSA,
PERSONS WHOSE ORDINARY BUSINESS INVOLVES THE ACQUISITION AND DISPOSAL OF PROPERTY OF THE
SAME KIND AS THE PROPERTY, OR A SUBSTANTIAL PART OF THE PROPERTY, IN WHICH THE COMPANY
INVESTS AND PERSONS PERMITTED TO RECEIVE THIS DOCUMENT UNDER THE UNITED KINGDOM
FINANCIAL SERVICES (PROMOTION OF UNREGULATED COLLECTIVE INVESTMENT SCHEMES) REGULATIONS,
1991 OR SERVICES AND MARKETS ACT 2000 (PROMOTION OF COLLECTIVE INVESTMENT SCHEMES)
(EXEMPTIONS) ORDER 2001.
Rye Select Broad Market Portfolio Limited
The information set out below should be read in conjunction with, and is qualified in its entirety by,
the full text of this Prospectus (the “Prospectus”), the Company's Memorandum and Articles of Association
(the “Memorandum and Articles of Association”) and the documents and agreements referred to herein.
Company Rye Select Broad Market Portfolio Limited (the “Company”) is an
open-ended investment company organised as an exempted
company under the laws of the Cayman Islands on 23 August,
Offering of Shares The Company is offering its Class A, B, and Class C Shares (the
“Class A Shares,” the “Class B Shares,” and the “Class C Shares”
are collectively referred to as the “Shares”) pursuant to this
Prospectus. Furthermore, the Company’s Class D Shares are
offered pursuant to a separate offering supplement to the
Prospectus (the “Supplement”). The Class A, B, and C Shares are
U.S. Dollar denominated shares. The Class A Shares have been
issued only to those investors who are shareholders of record as of
December 31, 2002 (the “Existing Shareholders”). Any investors,
who are not Existing Shareholders, will be issued Class B or Class
C Shares. Class C Shares are the same in all material respects as the
Class B Shares, except that Class C Shares are charged an Investor
Servicing Fee (as defined herein). The Company’s Shares are
currently being offered based on the Net Asset Value per Share as
of the preceding Valuation Date - as of April 30, 2007 the Net
Asset Value of the Company was $872,191,564.
In addition to the Shares, the Company may authorize and issue
such further additional classes of shares. Such additional classes
may be subject to terms and conditions different from the terms
and conditions applicable to the Shares discussed herein (such as,
among other things, different fee structures (including no fee
assessments) and varying redemption rights. See “SHARES OF
THE COMPANY - The Company's Share Capital” and
“DETERMINATION OF NET ASSET VALUATION.”
Investment Objective and Strategy The Company’s objective is to seek to (i) achieve long term capital
appreciation and (ii) consistently generate positive returns
irrespective of stock market volatility or direction, while focusing
on preservation of capital. The Company attempts to accomplish
this investment objective by investing the majority of the assets
with one Manager who employs a “split strike conversion” strategy.
The remainder of the assets of the Company are invested with a
diverse group of non-U.S. investment funds, separate accounts, or
similar vehicles (the “Funds”) whose Managers (as defined herein)
employ a variety of investment strategies that have a low
correlation to the performance of traditional asset classes.
Currently, the majority of the assets are allocated to one Manager
(as defined herein). The Investment Manager (as defined herein)
will also select strategies whose performance historically has been
negatively correlated to equity/debt and other markets in attempt
to generate a consistent return pattern with minimum deviation.
There is no guarantee that the Company will be successful in
achieving its investment objective. See “INVESTMENT
OBJECTIVE AND STRATEGIES.”
Minimum Investment The minimum initial investment in the Company is
U.S.$500,000.00 for the Class A, B, and C Shares. The minimum
additional investment in the Company is U.S.$100,000.00 for the
Class A, B, and C Shares. The foregoing initial investments are
subject to the discretion of the Board to reduce such amounts,
provided that the Board will not reduce the minimum subscription
to below $50,000 or such other amount specified under Cayman
Islands law from time to time.
Investment Manager The Company has retained Tremont (Bermuda) Limited, a
corporation organised under the laws of Bermuda as an exempted
company, to serve as its investment manager (the “Investment
Manager”). The Investment Manager is responsible for allocating
the Company's assets among one or more Funds, monitoring their
performance and adherence to their stated objectives, managing the
Company’s investments and its day-to-day operations (other than
trading and investment decisions), subject to the overall control and
supervision of the Board. The Investment Manager performs its
services for the Company pursuant to the terms of a management
agreement, amended December 31, 2002 (the “Management
Agreement”). However, the Investment Manager has delegated
substantially all of its duties in this regard to its affiliate, Tremont
Partners, Inc., which serves as the sub-advisor to the Company.
Sub-Advisor The Investment Manager had retained its affiliate, Tremont
Partners, Inc., to serve as a sub-advisor to the Company (the “Sub-
Advisor”) at no additional cost to the Company and has delegated
substantially all of its duties in respect of the Company to the Sub-
Advisor. As such, the Sub-Advisor is responsible for selecting the
Company’s Managers, negotiating fee arrangements with the
Managers, allocating assets among Managers and monitoring the
The Sub-Advisor is registered as an investment adviser pursuant to
the Advisers Act. The Investment Manager pays the Sub-Advisor a
fee from its own assets pursuant to an investment sub-advisory
Approach The overall success of the Company depends on the ability of (i)
the Investment Manager to select appropriate Funds and to allocate
the Company's assets, and (ii) each Fund to perform successfully.
The past performance of the Investment Manager and/or any of
the Funds or any of their respective managers (collectively, the
“Managers”) is not necessarily indicative of the future profitability
of any strategies employed by them. No assurance can be given
that the strategy or strategies utilized by a given Manager of a Fund
will be successful under all or any market conditions. There can
be no guarantee of future performance and there is no
assurance that the Company will be able to achieve its
investment objective or be profitable.
Board of Directors The Board of Directors of the Company (the “Directors” or the
“Board”) consists of three (3) Directors. The Board has complete
authority over the operations and management of the Company.
The Board, however, has delegated the day-to-day management of
the Company to the Investment Manager. See “MANAGEMENT
- The Board of Directors.”
Subscriptions Shares may be purchased on the first day of each month and any
other day approved by the Board (each a “Subscription Date”)
valued at a price per Share equal to the Net Asset Value of the
relevant per Share Class as of the close of business on the last
Business Day of the preceding calendar month (each a “Valuation
Date”). The term “Business Day” refers to any day when banks in
the United States (“U.S.”) and Bermuda are open for business
other than a Saturday or a Sunday. Completed subscription
materials and cleared funds must be received by the Administrator
(as defined herein) prior to the Subscription Date on which
prospective investors wish to subscribe for Shares. See
“ELIGIBLE INVESTORS” and “SUBSCRIPTIONS.”
Redemptions A holder of Shares (each a “Shareholder”) may request a
redemption of Shares (see attached form “Redemption Request”),
on thirty-six (36) days' prior written notice to the Administrator, as
of the last Business Day of each month, or on another Valuation
Date (each a “Redemption Date”) at the Board's discretion, at a
redemption price per Share equal to the Net Asset Value of the
relevant per Share Class on the corresponding Valuation Date.
Except with the consent of the Board of Directors, redemption
requests are irrevocable. If a redemption would cause the value of
the Shares held by a Shareholder to fall below U.S.$100,000.00, or
such other minimum amount or amounts as determined by the
Board, then the Board has the right to require the compulsory
redemption of all Shares held by such Shareholder.
Settlement of redemptions will generally take place within thirty
(30) days after the Redemption Date, although the Company
reserves the right to retain up to ten percent (10%) of the
settlement proceeds until after the annual audit for the year in
which the redemption occurs is completed in order to confirm the
accuracy of the amount or to comply with applicable regulatory
requirements. The Board shall have the right to require the
compulsory redemption of all or portions of the Shares held by a
Shareholder upon ten (10) Business Days' prior written notice for
the reasons set out herein in the section entitled
“REDEMPTIONS,” at the price per Share equal to the then
prevailing Net Asset Value per relevant Share Class. In
circumstances where the Company is unable to liquidate securities
positions in an orderly manner in order to fund redemptions or
where the value of the assets and liabilities of the Company cannot
reasonably be determined, the Company may extend such thirty
(30) day period to effect settlements of redemptions or it may even
suspend redemptions. The Board may in its discretion settle
redemptions in kind for all redemptions submitted in respect of a
given Redemption Date. See “REDEMPTIONS.”
Eligible Investors The Class A, Class B, and Class C Shares may be purchased only by
“Eligible Investors” as described in this Prospectus. Persons
interested in purchasing Shares should inform themselves as to the
legal requirements within their own countries for the purchase of
Shares and any foreign exchange restrictions which they may
encounter. In the case of such U.S. investors, Shares may only be
sold to investors who (i) are accredited investors under Rule 501 of
Regulation D under the U.S. Securities Act of 1933, as amended
(the “Securities Act”), and (ii) meet any other eligibility standards as
legal counsel to the Company advises.
The Board reserves the right to reject subscriptions for Shares in its
absolute discretion for any reason or for no reason. See
Net Asset Value The Net Asset Value of the Company is equal to the Company's
assets, calculated at fair value, less its liabilities and any accrued but
unpaid expenses (including the Management Fee (as defined
herein)). The Net Asset Value per Share of a particular class is
determined by dividing such class’ Net Asset Value by the number
of Shares of that class then outstanding. The Net Asset Value will
be calculated on a monthly basis as of each Valuation Date or on
such other date when such computation is necessary or
appropriate. See “DETERMINATION OF NET ASSET
VALUATION.” The Company’s Net Asset Value will be based on
asset valuations supplied by the administrator of each Fund. As
such, a portion of the Company’s Net Asset Value may at any given
time include estimated valuations. See “DETERMINATION OF
NET ASSET VALUATION.” Such valuations will not be subject
to independent review or investigation by the Company, and the
Investment Manager and Administrator are entitled to rely on such
valuations without independent verification. See “RISK
Administrator The Company has appointed Tremont Partners, Inc., located in
New York (the “Administrator”), as administrator of the Company
under an Administration Agreement (the “Administration
Agreement”). The Administrator performs various administrative
services for the Company, including Share issue and redemption
services, calculation of the Net Asset Value of each respective Class
of Shares on a monthly basis, or at any other point in time when a
valuation is deemed necessary and appropriate, and act as registrar
and transfer agent. See “MANAGEMENT - The Administrator.”
However, the Administrator with effect from July 1, 2007 has
delegated substantially all of its duties in this regard to the
Company’s Bank, The Bank of New York, who will provide the
delegated duties through its Alternative Investment Services
division, (“BNY-AIS”) which will serve as the sub-administrator to
the Company. See “Sub-Administrator” below.
Sub-Administrator The Company has retained BNY-AIS to serve as a sub-
administrator to the Administrator (the “Sub-Administrator”) and
substantially all of its duties in respect of the Company have been
delegated to the Sub-Administrator. As such, the Sub-
Administrator is responsible for assisting the Administrator with
the day-to-day maintenance of the Company’s investor records,
attending to subscription, redemption and share transfer requests
and calculation of the Company’s Net Asset Value.
The Sub-Administrator, which is a part of a global financial services
group, specializes in providing administration and related services
to alternative investment entities including hedge funds.
Dividends The Company does not currently expect to pay dividends or other
distributions to Shareholders.
Fees and Expenses Management Fee. The Company pays the Investment Manager a
monthly management fee calculated at an annual rate (the
“Management Fee”). The Management Fee for Class A Shares is
calculated at an annual rate of one and a half percent (1.50%) of the
month-end Class A Net Asset Value of the Company, and the
Management Fee for Class B and Class C Shares is calculated at an
annual rate of one and three quarters percent (1.75%) of the month
end Class B and Class C Net Asset Value of the Company,
respectively. The Management Fee is paid to the Investment
Manager by the Company on or about the 15th Business Day of
the subsequent month.
Investor Servicing Fee. The Investment Manager on behalf of the
Company may enter into one or more agreements with one or
more unaffiliated third party placement agents (each a “Placement
Agent”) to place investors in the Class C Shares of the Company.
Any such Placement Agents who place investors in the Company
will be entitled to receive a fee from Class C Shareholders in an
amount up to 1.00% of the Net Asset Value of the Class C Shares
per annum (the “Investor Servicing Fee”). The Investor Servicing
Fee shall be payable monthly in arrears. The Investor Servicing Fee
will be prorated based upon a Class C Shareholder’s actual period
of ownership of its Class C Shares. The Investor Servicing Fee is
accrued monthly and is payable quarterly, in arrears, within a
reasonable time thereafter.
Administrative Fee. The Administrator receives a monthly
administration fee calculated at the annual rate of one-fifth of one
percent (0.20%) of the Company's average net assets per month
paid out of the respective Fund’s assets (the quot;Administration Feequot;).
The Administration Fee shall be calculated as of the last Business
Day of each calendar month and paid from the Company on or
about the 15th Business Day of the subsequent month. The
Administrator is also entitled to reimbursement of actual out-of-
pocket expenses incurred on behalf of the Company.
Managers. The Company bears all direct and indirect costs
associated with investment advisory services of the Managers. Such
costs may include both a fixed fee equal to a percentage of the
average Net Asset Value of a given fund and a performance fee
calculated as a percentage of the realized and unrealized annual
profit produced by the assets of the fund managed by a given
Manager. The Investment Manager will endeavor to negotiate with
Managers to obtain reduced fees for the Company, although there
can be no assurance that a fee less than that charged by a particular
Manager to other investors will be possible.
Other Fees. The Company bears all other costs of its investment
program (including brokerage, banking and custody charges,
interest, auditors, taxes and duties) as well as professional fees of its
Brokerage The Managers of the Funds selected by the Investment Manager
may allocate portfolio transactions through brokerage accounts on
the basis of best execution and also in consideration of such
brokers' provision or payment of the costs of research and other
investment-management-related services and equipment (i.e., “soft
dollar” payments). Research and other investment management-
related services and equipment obtained through soft dollar
commission arrangements may benefit the Managers of Funds.
Some soft dollar arrangements also may be outside of the
parameters of Section 28(e) of the United States Securities
Exchange Act of 1934, as amended (the “Exchange Act”), which
permits the use of soft dollars to acquire research and brokerage
services. The commission rates charged by the brokers in the
foregoing circumstances may be higher than those charged by other
brokers who may not offer such services. See
The Bank The bank for the Company is The Bank of New York (the
Risk Factors An investment in the Company entails certain risks. There is no
assurance that the Company will be profitable or that an investor
will not lose some or all of its investment in the Company. Past
results achieved by the Company, the Investment Manager, the
Managers of the Funds or their affiliates, are not necessarily
indicative of future results. Prospective investors should review
carefully the discussion under the caption “RISK FACTORS”
Valuations; Reporting The Administrator shall be responsible for computing as of each
Valuation Date, or at such other date as may be decided by the
Board, the Net Asset Value of the Company and the Net Asset
Value of the Class A, B, and C Shares. The Company sends
Shareholders monthly reports of the Net Asset Value of the
Company and the Net Asset Value of the Class of Shares. A report
containing the Company's annual audited financial statements will
be sent to Shareholders within six (6) months of the end of each
Fiscal Year (as defined herein) or as soon thereafter as possible.
The annual audited financial statements will be prepared in
accordance with U.S. Generally Accepted Accounting Principles.
Conflicts of Interest An investment in the Company is subject to certain conflicts of
interest. See “CONFLICTS OF INTEREST.”
Fiscal Year The Company's fiscal year-end is December 31st of each year.
Tax Status The Company should not be subject under current law to any
Cayman Islands or U.S. income taxation (other than U.S.
withholding taxes on dividends and certain interest income derived
from U.S. sources). Certain dividend income and certain capital
gains income realized by the Company may be subject to income or
withholding taxes in the source jurisdiction.
Transfers; Listing There is currently no public market for resale of Shares and none is
likely to exist in the future.
Functional Currency The Company's functional currency (i.e., the currency in which it
maintains its books and records and its financial statements) is the
Certain ERISA Considerations Investment in the Company generally will be open to employee
benefit plans and other funds subject to ERISA and/or Section
4975 of the Code. Except as described below under quot;RISK
FACTORS - Compliance with ERISA Transfer Restrictionsquot;, the
Investment Manager intends to use commercially reasonable efforts
to cause quot;benefit plan investorsquot; not to own a significant portion of
any class of equity interests in the Funds, so that the assets of the
Funds should not be considered quot;plan assetsquot; for purposes of
ERISA and Section 4975 of the Code, although there can be no
assurance that non quot;plan assetquot; status will be obtained or
maintained (See “RISK FACTORS – Compliance with ERISA
Transfer Restrictions”). Prospective purchasers and subsequent
transferees of Shares may be required to make certain
representations regarding compliance with ERISA and Section
4975 of the Code. See quot;CERTAIN ERISA
EACH PROSPECTIVE INVESTOR THAT IS SUBJECT
TO ERISA AND/OR SECTION 4975 OF THE CODE IS
ADVISED TO CONSULT WITH ITS OWN LEGAL, TAX
AND ERISA ADVISORS AS TO THE CONSEQUENCES
OF AN INVESTMENT IN THE COMPANY.
Privacy Notice Any and all nonpublic personal information received by the
Company and the Investment Manager with respect to the
Shareholders who are natural persons, including the information
provided to the Company by a Shareholder in the subscription
documents, will not be shared with nonaffiliated third parties which
are not service providers to the Company and/or the Investment
Manager without prior notice to such Shareholders. Such service
providers include but are not limited to the Administrator, the
auditors and the legal advisors of the Company. Additionally, the
Company and/or the Investment Manager may disclose such
nonpublic personal information as required by law, including
without limitation, the disclosure that may be required by the
Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism (USA
PATRIOT) Act of 2001 and the rules and regulations promulgated
Company's Registered Office
Rye Select Broad Market Portfolio Limited
c/o Trulaw Corporate Services Ltd.
P.O. Box 866
George Town, Grand Cayman KY1-1103
Telephone: (441) 949 7555
Facsimile: (441) 949 8492
Tremont (Bermuda) Limited
4 Park Road
Hamilton HM 11, Bermuda
Telephone: (441) 292-3781
Facsimile: (441) 296-0667
Tremont Partners, Inc.
555 Theodore Fremd Avenue
Rye, New York 10580
Telephone: (914) 925-1179
Facsimile: (914) 925-9337
Tremont Partners, Inc.
555 Theodore Fremd Avenue
Rye, New York 10580
Telephone: (914) 925-1179
Facsimile: (914) 925-9337
The Bank of New York
Alternative Investment Services
101 Barclay Street, 20th Floor West
New York, New York 10286
Telephone: (212) 815-4090
Facsimile: (212) 644-6669
The Bank of New York
One Wall Street
New York, NY 10286
Telephone: (212) 715-6540
Facsimile: (212) 644-6669
P.O. Box 493
Grand Cayman KY1-1106
Telephone: (345) 949-4800
Facsimile: (345) 949-7164
As to Cayman Islands Law:
Truman Bodden & Company
P.O. Box 866
Anderson Square Building
George Town, Grand Cayman KY1-1103
Telephone: (345) 949-7555
Facsimile: (345) 949-8462
As to United States Law:
Tannenbaum Helpern Syracuse & Hirschtritt LLP
900 Third Avenue
New York, NY 10022
Attn: Michael Tannenbaum, Esq.
Telephone: (212) 508-6700
Facsimile: (212) 371-1084
Table of Contents
THE COMPANY.......................................................................................................................................... 1
INVESTMENT OBJECTIVE AND STRATEGIES .................................................................................... 2
Investment Objective ........................................................................................................................ 2
Investment Strategy........................................................................................................................... 2
Fund of Funds Approach.................................................................................................................. 2
Selection of Funds............................................................................................................................. 3
Distributions and Reinvestment ........................................................................................................ 3
Use of Proceeds ................................................................................................................................ 3
Borrowing and Lending; Portfolio Lending ....................................................................................... 3
INVESTMENT OBJECTIVE AND STRATEGIES .................................................................................... 4
The Board of Directors ..................................................................................................................... 4
FEES AND EXPENSES ............................................................................................................................ 10
Fees of the Administrator................................................................................................................ 10
Fees of the Managers ...................................................................................................................... 10
Fees Relating to Brokerage .............................................................................................................. 10
Other Operating Expenses.............................................................................................................. 11
SHARES OF THE COMPANY.................................................................................................................. 12
The Fund's Share Capital................................................................................................................. 12
Temporary Suspension of Dealings ................................................................................................. 12
Voting and Other Rights ................................................................................................................. 13
Registration and Transfer of Shares................................................................................................. 13
REDEMPTIONS ........................................................................................................................................ 15
ELIGIBLE INVESTORS............................................................................................................................ 16
DETERMINATION OF NET ASSET VALUATION .............................................................................. 18
RISK FACTORS ......................................................................................................................................... 20
Limited Operating History; No Liquidity......................................................................................... 20
Business Dependent Upon Key Individuals..................................................................................... 20
Multi-Manager Concept................................................................................................................... 20
Access to Information from Funds ................................................................................................. 20
Investment Decisions of the Managers of Each Fund Are Independent of Each
Other ............................................................................................................................................. 21
Incentive Fees Payable Irrespective of Fund Performance............................................................... 21
Delays in Reporting......................................................................................................................... 21
Nature of Certain Investments ........................................................................................................ 21
Lack of Liquidity in Markets............................................................................................................ 21
Trading Risks 21
Risks of Certain Investments Made By Managers of Funds ............................................................. 22
Institutional Risk ............................................................................................................................. 26
Illiquidity of the Investment ............................................................................................................ 26
Effect of Substantial Redemptions .................................................................................................. 26
Changes in Applicable Law ............................................................................................................. 26
Reserve for Contingent Liabilities.................................................................................................... 26
Lack of Independent Experts Representing Investors...................................................................... 27
General Economic Conditions ........................................................................................................ 27
Suspensions of Trading ................................................................................................................... 27
Certain Investment Manager Activities ............................................................................................ 30
The Company ................................................................................................................................. 32
Shareholders of the Company ......................................................................................................... 33
ADDITIONAL AND GENERAL INFORMATION ................................................................................ 36
Cayman Islands Mutual Funds Law................................................................................................. 36
Further Issues of Shares .................................................................................................................. 38
Objects ........................................................................................................................................... 38
Repurchase of Shares ...................................................................................................................... 38
Alterations to the Company's Share Capital ..................................................................................... 39
Amendment of Memorandum and Articles of Association .............................................................. 39
Directors Interest in Contracts ........................................................................................................ 39
Directors Powers ............................................................................................................................ 39
Director’s Interests.......................................................................................................................... 40
Reports to the Shareholders ............................................................................................................ 40
Meetings of Shareholders ................................................................................................................ 40
I. PRIVACY NOTICE
Rye Select Broad Market Portfolio Limited
Rye Select Broad Market Portfolio Limited (the “Company”) is an open-ended investment company
organized as an exempted company under the laws of the Cayman Islands on 23 August 2001. The Company
amended and restated its articles on December 31, 2002 and approved the issuance of a new Class B Shares.
The Company is offering its Class A Shares (the “Class A Shares”) to Existing Shareholders and it’s Class B
and C Shares to new Shareholders (the “Class B Shares” and the “Class C Shares” pursuant to this
Prospectus. Furthermore, the Company’s Class D Shares are offered pursuant to a separate offering
supplement to the Prospectus (the “Supplement”).
The Company’s Shares are currently being offered based on the Net Asset Value per Share as of the
preceding Valuation Date. Any investors, who are not Existing Shareholders, will be issued Class B or Class
C Shares. Class C Shares are the same in all material respects as the Class B Shares, except that Class C Shares
are charged an Investor Servicing Fee (as defined herein). The Company’s Shares are currently being offered
based on the Net Asset Value per Share as of the preceding Valuation Date. As of April 30, 2007 the Net
Asset Value of the Company was $872,191,564. In addition to the Shares, the Company from time to time
may authorise and issue additional classes of shares in its sole discretion. Such additional classes may be
subject to terms and conditions different from the terms and conditions applicable to the Shares discussed
herein (such as, among other things, different fee structures (including no fee assessments) and varying
redemption rights to accommodate investors with special characteristics). The Company qualifies as a
“mutual fund” under the Mutual Funds Law (Revised) of the Cayman Islands and is so registered in the
Cayman Islands and is regulated in accordance with such law.
The proceeds of the sale and issue of each class of Shares will be deposited in an account for that
class of Shares or be segregated on the books of the Company. The assets, liabilities, income and
expenditures attributable to each such class of Shares will be applied to such account (or book entry) subject
as provided herein and to applicable law. The assets so held in respect of each class of Shares will be applied
solely in respect of that class of Shares except to the extent that expenses of the Company are allocated
among the classes of Shares at the discretion of the Board (as defined herein). The Net Asset Value of each
class of Shares will be calculated separately and, in terms of redemption, Shares of a particular class will be
redeemed at the Net Asset Value of that class at the relevant time. For limitations of such a corporate
structure as regards the liabilities of the Company, see “RISK FACTORS” herein.
Fees and expenses that are identifiable with respect to a particular class of Shares will be charged
against that class of Shares in computing its Net Asset Value. Other fees and expenses will be allocated pro
rata between the classes based on their respective Net Asset Values, as necessary.
The information in this Prospectus is qualified in its entirety by the agreements and documents
referred to herein and by the Memorandum and Articles of Association of the Company, which are available
from the Administrator upon request.
INVESTMENT OBJECTIVE AND STRATEGIES
The Company's objective is to seek to (i) achieve long term capital appreciation and (ii) consistently
generate positive returns irrespective of stock market volatility or direction, while focusing on preservation of
capital. The Company attempts to accomplish this investment objective by investing the majority of the
assets with one Manager who employs a “split strike conversion” strategy. The remainder of the assets of the
Company are invested with a diverse group of non-U.S. investment funds or similar vehicles (the “Funds”)
whose Managers (as defined herein) employ a variety of investment strategies. Such strategies may encompass
a wide variety of investment styles including but not limited to: statistical arbitrage; index arbitrage; pairs
trading; convertible arbitrage; basis and spread trading; multiple strategy; long/short equity strategies; and
merger arbitrage. These sophisticated investment strategies often require the use of derivative trading vehicles
such as stock options, index options, futures contracts (subject to all applicable regulatory requirements), and
options on futures. Should the Company invest with Funds that invest in futures, the Company and all
appropriate individuals will register with the appropriate regulatory authorities prior to investing with such
The Investment Manager has delegated overall responsibility for allocating the assets of the Company
to the Sub-Advisor who implements the investment strategy discussed herein and has the authority to select
the Funds in which the Company invests its assets.
Multi-Manager Investment Approach
The use of a multi-manager or “fund of funds” format, whereby investments are made through a
variety of Funds, the Managers for which utilize different and, if possible, non-correlated investment
strategies and trading techniques, is intended to afford the Company the ability to do the following:
· Provide investors with a diversified investment portfolio and enable them to obtain above-
average returns over an extended period of time;
· Invest with Managers of Funds that have different investment styles and philosophies;
· Lower risk by investing in Funds, the performance of which have low volatility and low
correlations to each other; and
· Invest with Managers of Funds that have a consistent past performance record.
The overall success of the Company depends on the ability of (i) the Sub-Advisor to select
appropriate Funds and to allocate the Company's assets, and (ii) each Fund to perform successfully. The past
performance of the Sub-Advisor, the Investment Manager and/or any of the Funds or any of their respective
managers (collectively, the “Managers”) is not necessarily indicative of the future profitability of any strategies
employed by them. No assurance can be given that the strategy or strategies utilized by a given Manager of a
Fund will be successful under all or any market conditions. There can be no guarantee of future
performance and there is no assurance that the Company will be able to achieve its investment
objective or be profitable.
To the extent to which the assets of the Company may be invested with a particular Fund, such assets
are subject to applicable legal and regulatory constraints. For example, the U.S. Investment Company Act of
1940, as amended (the “Company Act”) (and the regulations thereunder), imposes limits on the ability of the
Company to invest in “investment companies” (as defined in the Company Act).
The level of risk associated with the Company's investments varies depending on the particular
investment strategy utilized by the Managers of the Funds. Potential investors in the Company should
consider the risks associated with the Company's investment strategy prior to investing. The Sub-Advisor,
Investment Manager and their affiliates cannot assure the Company's success or profitability. The success of
the Company will depend upon a variety of factors, many of which are beyond their control. See “RISK
Selection of Funds
The Sub-Advisor will select Funds that satisfy one or more criteria including, but not limited to:
• the investment management experience of the Manager;
• the historical performance pattern of the Manager demonstrating consistent returns irrespective of
the market's volatility;
• the degree to which a specific Fund complements and balances the Company's portfolio with respect
to the strategies employed by other Funds;
• the quality and stability of the Fund's organization;
• and the ability of the Company to make withdrawals from or liquidate its investment in a Fund.
Certain of the criteria may be emphasized above others in the selection of a particular Fund.
Distributions and Reinvestment
The Company does not anticipate that any dividends or other distributions will be paid to holders of
Shares in the Company (each a quot;Shareholderquot;) out of the Company's current earnings and profits, but rather,
that such income will be reinvested. Potential investors should remain aware of this limitation when
determining whether or not an investment in the Company is suitable for their particular circumstances. The
Company reserves the right to change such policy.
Use of Proceeds
The net proceeds of the private offering contemplated herein (after payment of expenses) will be
invested in accordance with the policies set forth under “INVESTMENT OBJECTIVE AND
STRATEGIES”. The Company, without limitation, may hold cash or invest in cash equivalents for short-
term investments. Among the cash equivalents in which the Company may invest are: obligations of the U.S.
and foreign governments, their agencies or instrumentalities, commercial paper, repurchase agreements,
money market mutual funds, money market accounts and other similar bank accounts, certificates of deposit
and bankers' acceptances issued by banks and financial institutions. In the event that the Sub-Advisor and/or
the Investment Manager believes that there is not sufficiently good value in any securities suitable for
investment of the Company's capital, all such capital may be held in cash and cash equivalents.
Borrowing and Lending; Portfolio Lending
The Managers of Funds may engage in short sales, that is, the practice of selling securities, which are
borrowed from a third party. In such event, the Manager of any such Fund will be required to return, at the
lender's demand, securities equivalent to those borrowed for the short sale. Pending the return of such
securities, the Manager of such Fund will be required to deposit with the lender as collateral the proceeds of
the short sale plus additional cash or securities; the amount of the required deposit may be adjusted
periodically to reflect any change in the market price of the security which the Fund is required to return to
the lender. See “RISK FACTORS”.
The Board of Directors
The Board of Directors of the Company (the “Directors” or the “Board”) consists of three (3)
Directors, each of whom serves in accordance with the laws of the Cayman Islands and in accordance with
the Company's Memorandum and Articles of Association. The Directors are as follows:
Peter D. Anderson, CA, Mr. Anderson is a Partner with the Cayman Islands firm of Rawlinson &
Hunter, an international firm of chartered accountants with a global network of offices established over 70
years ago. The Cayman Islands firm has been offering a comprehensive range of professional services since it
was established in 1973.
Peter is a director of The R&H Trust Co. Ltd. and The Harbour Trust Co. Ltd, duly licensed Cayman
Islands trust companies owned and operated by Rawlinson & Hunter in the Cayman Islands. He is also a
director of a number of Cayman Islands regulated mutual funds and other client companies.
He is a Fellow of the Institute of Chartered Accountants in Ireland, and past president of the Cayman
Islands Society of Professional Accountants. Peter has extensive experience in the offshore financial industry
having worked in the Cayman Islands since 1982, including 12 years in his own practice and three years as a
Partner of Deloitte & Touche.
R. Darren Johnston is a Vice President and the Manager of the Rye Investment Management
division at Tremont Group Holdings, Inc.. In this capacity, Mr. Johnston is responsible for managing and
growing the firm’s select manager business globally and for providing a focal point for all of the related
Prior to his current position, Mr. Johnston served as Vice President and Chief Operating Officer of
the Tremont’s Canadian subsidiary where he was responsible for the execution of the business plan for the
Canadian marketplace. Mr. Johnston worked closely with various departments from the Rye, New York
headquarters to integrate the Canadian business with the firm’s global operations. He also contributed to
product development, fund administration and investor relations.
Mr. Johnston earned a Master of Business Administration degree from the Richard Ivey School of
Business at the University of Western Ontario in London, Ontario in 1999. He attended Queen’s University
in Kingston, Ontario for his undergraduate studies.
James Mitchell is a Vice President and currently responsible for overseeing TGHI’s European
operations from London. This includes Business Development and Sales as well as Investment Management.
Mr. Mitchell is also member of TGHI’s Investment Committee. Previously at TGHI, Mr. Mitchell was a
member of TGHI’s Investment Relationship Management team in New York where he was responsible for
many advisory and consulting clients. He played an integral role in portfolio construction, ongoing manager
monitoring, performance measurement and administration.
Prior to joining TGHI, Mr. Mitchell served as Vice President of Investments for Hennessee Group,
where he was responsible for overseeing the group's asset allocation and manager selection processes, as well
as acting as a relationship manager to many of the firm's larger high net worth and institutional clients.
Additionally, he was a Vice President with Citibank Alternative Investments where his responsibilities
included product development for many hedge fund and structured products. He was also involved with
portfolio risk management within Citibank's quantitative group. Mr. Mitchell started his career at Bankers
Trust where he served as a Relationship Manager for six years to many of the firm's global custody pension
Mr. Mitchell graduated with a Bachelor of Arts degree in Economics from Denison University in
No Director has:
(i) any unspent convictions in relation to indictable offences;
(ii) been bankrupt or the subject of an involuntary arrangement, or has had a receiver appointed to any
asset of such Director;
(iii) been a director of any company which, while he was a director with an executive function or within
twelve (12) months after he ceased to be a director with an executive function, had a receiver
appointed or went into compulsory liquidation, creditors voluntary liquidation, administration or
company voluntary arrangements, or made any composition or arrangements with its creditors
generally or with any class of its creditors;
(iv) been a partner of any partnership, which while he was a partner or within twelve (12) months after he
ceased to be a partner, went into compulsory liquidation, administration or partnership voluntary
arrangement, or had a receiver appointed to any partnership asset;
(v) had any public criticism by statutory or regulatory authorities (including recognised professional
(vi) been disqualified by a court from acting as a director or from acting in the management or conduct of
the affairs of any company.
Investment Manager; Sub-advisor
The Investment Manager is responsible for allocating assets among various Funds, monitoring their
performance and adherence to their stated objectives, managing the Company’s investments and its day-to-
day operations, subject to the overall control and supervision of the Board. The Investment Manager may
engage other persons or entities to perform similar functions, as it deems necessary from time to time.
Consequently, the Investment Manager has delegated, at no cost to the Company, substantially all of its
responsibility with respect to the Company, including, managing the assets of the Company, selecting
Managers, negotiating fee arrangements with Managers, allocating assets among Managers and monitoring
their performance and adherence to their stated investment objectives, to its affiliate, Tremont Partners, Inc.
(the “Sub-Advisor”) at no additional cost to the Company and has delegated substantially all of its duties in
respect of the Company to the Sub-Advisor. As such, the Sub-Advisor is responsible for selecting the
Company’s Managers, negotiating fee arrangements with the Managers, allocating assets among Managers and
monitoring the Fund’s investments. Both the Investment Manager and the Sub-Advisor are wholly-owned
subsidiaries of Tremont Group Holdings, Inc., which, in turn, is wholly-owned by Oppenheimer Acquisition
Corp., the parent corporation of OppenheimerFunds, Inc., one of America's largest and most respected asset
management companies. The Sub-Advisor is registered as an investment adviser pursuant to the United
States Investment Advisers Act of 1940, as amended (the “Advisers Act”).
Investment Management Agreement
The Investment Manager performs its services for the Company pursuant to the terms of a
management agreement between the Investment Manager and the Company (the “Management Agreement”).
The Management Agreement provides that the Investment Manager will be responsible for, among other
things, the supervision of the general administration and accounting services required by the Company in
connection with its business and operation. The Management Agreement provides that the Investment
Manager will not be liable to the Company for any act taken or omitted in good faith if negligence, reckless
misfeasance, fraud or any violation of law is not involved. The Company will indemnify the Investment
Manager in certain circumstances.
The Management Agreement dated September 1, 2001 was amended as of December 31, 2002 and
will continue in force and effect for an initial term ending on December 31, 2005, and thereafter, will be
automatically renewed for successive one year terms, provided, however, that either party may terminate the
Management Agreement by thirty (30) days’ prior written notice after the end of the initial term.
Tremont Partners, Inc. (the “Administrator”), a Connecticut corporation, has been appointed as the
Company's Administrator pursuant to an Administration Agreement (the “Administration Agreement”) under
which it provides administrative accounting, registrar and transfer agency services to the Company. However,
the Administrator with effect from July 1, 2007 has delegated substantially all of its duties in this regard to the
Company’s Bank, The Bank of New York, who will provide the delegated duties through its Alternative
Investment Services division,(“BNY-AIS”) which will serve as the sub-administrator to the Company. See
The Administrator receives, as negotiated from time to time, an administrator fee consistent with its
customary charges for providing accounting, shareholder record keeping and administrative services to the
Company and is also entitled to be reimbursed for actual out-of-pocket expenses incurred in the performance
of its duties.
Pursuant to the Administration Agreement entered into between the Company and the
Administrator, the Administrator is responsible for, among other things: (i) maintaining the register of
shareholders of the Company and generally performing all actions related to the issuance and transfer of
Shares of the Company and the safe-keeping of certificates therefor, if any, (ii) reviewing and, subject to
approval by the Board, accepting subscriptions for the Shares and accepting payment therefor, (iii) computing
and disseminating the Net Asset Value of the Company and the Net Asset Value per Share for each class of
Shares in accordance with its Memorandum and Articles of Association and as otherwise stated in this
Prospectus, (iv) performing all acts related to redemption of the Shares, (v) keeping the accounts of the
Company and such financial books and records as are required by law or otherwise for the proper conduct of
the financial affairs of the Company and preparing or procuring the preparation of unaudited monthly and
audited annual financial statements of the Company and furnishing such statements to Shareholders, (vi)
performing all other accounting and clerical services necessary in connection with the administration of the
Company and (vii) communicating with Shareholders.
The Administration Agreement may be terminated at any time by either party provided that at least
ninety (90) days’ written notice has been given to the other party.
The Administrator will not, in the absence of gross negligence, willful default or fraud on its part or
on the part of its directors, officers, employees or delegates, be liable to the Company or any Shareholder for
any act or omission, in the course of, or in connection with, the services rendered by it under the
Administration Agreement or for any loss or damage which the Company may sustain or suffer as the result
of, or in the course of, the discharge by the Administrator or its directors, officers, employees or delegates of
its duties under or pursuant to the Administration Agreement.
The Company will indemnify the Administrator and its directors, officers, employees and delegates
from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements or any kind or nature whatsoever (other than those resulting from the gross
negligence, willful default or fraud on the part of the Administrator or its directors, officers, employees or
delegates) which may be imposed on, incurred by, or asserted against the Administrator or its directors,
officers, employees or delegates in performing its obligations or duties hereunder.
See “FEES AND EXPENSES” herein for a description of the fees payable to the Administrator
pursuant to the Administration Agreement.
The Company has retained BNY-AIS to serve as a sub-administrator to the Company (the “Sub-
Administrator”) and substantially all of its duties in respect of the Company have been delegated to the Sub-
Administrator. As such, the Sub-Administrator is responsible for assisting the Administrator with the day-to-
day maintenance of the Company’s investor records, attending to subscription, redemption and share transfer
requests and calculation of the Company’s Net Asset Value.
The Sub-Administrator,: a division of The Bank of New York (BNY) (see section entitled “Bank”
below), specializes in providing administration and related services to alternative investment entities including
hedge funds. Its primary objective is to provide a quality accounting and administrative service tailored to
complex investment vehicles. At this time BNY-AIS works with over 90 hedge funds and money
management firms and services over 401 entities representing net assets of approximately $105.6 billion.
BNY-AIS has offices located in Hamilton, Bermuda; New York, New York; Dublin, Ireland and San
BNY-AIS will assist the Administrator in performing certain day-to-day tasks on behalf of the
Company, including: (i) maintaining the register of shareholders of the Company and generally performing all
actions related to the issuance and transfer of Shares of the Company and the safe-keeping of certificates
therefor, if any, (ii) reviewing and, subject to approval by the Board, accepting subscriptions for the Shares
and accepting payment therefor, (iii) computing and disseminating the Net Asset Value of the Company and
the Net Asset Value per Share for each class of Shares in accordance with its Memorandum and Articles of
Association and as otherwise stated in this Prospectus, (iv) performing all acts related to redemption of the
Shares, (v) keeping the accounts of the Company and such financial books and records as are required by law
or otherwise for the proper conduct of the financial affairs of the Company and preparing or procuring the
preparation of unaudited monthly and audited annual financial statements of the Company and furnishing
such statements to Shareholders, (vi) performing all other accounting and clerical services necessary in
connection with the administration of the Company and (vii) communicating with Shareholders.
Managers of Funds will utilize various brokers to execute, settle and clear securities transactions for
them. In selecting brokers to effect portfolio transactions, an investment manager may consider such factors
as price, the ability of the brokers to effect the transactions, the brokers' facilities, reliability and financial
responsibility, and any research or investment-management-related services and equipment provided by such
brokers. If a Manager obtains research or investment-management-related services from a broker, such
manager may pay commissions to such broker in an amount greater than the amount another broker might
Research or investment-management-related services and equipment provided by brokers through
which portfolio transactions are executed, settled and cleared may include research reports on particular
industries and companies, economic surveys and analyses, recommendations as to specific securities, on-line
quotations, news and research services, and other services (e.g., computer and telecommunications
equipment), providing lawful and appropriate assistance to the Managers in the performance of their
investment decision-making responsibilities on behalf of their Funds (collectively, “soft dollar items”).
Soft dollar items within the Section 28(e) safe harbor of the U.S. Securities Exchange Act of 1934, as
amended (the “Exchange Act”), whether provided directly or indirectly, as well as soft dollar items that fall
outside of the Section 28(e) safe harbor, may be utilized for the benefit of the Managers of Funds. Managers
of the Funds may expect to use soft dollars to acquire soft dollar items that they would otherwise be obligated
to provide to, or acquire at their own expense for, their investment vehicles.
Section 28(e) of the Exchange Act permits the use of soft dollar items in certain circumstances,
provided that the investment vehicle does not pay a rate of commissions in excess of what is competitively
available from comparable brokerage firms for comparable services, taking into account various factors,
including commission rates, financial responsibility and strength and ability of the broker to efficiently execute
transactions and refer investors. Non-research products acquired by Managers of Funds through the use of
soft dollars, and soft dollars that are not generated through agency transactions in securities, are outside of the
parameters of Section 28(e)'s safe harbor, as are transactions effected in futures, currencies or certain
derivatives. Certain soft dollar items received by the Managers of Funds based on transactions for their
investment vehicles may be outside of the safe harbor under Section 28(e). Shareholders should be aware that
the Managers of the Funds may or may not follow brokerage practices similar to those described above and as
a result, the Investment Manager will not be able to monitor whether or not certain soft dollar items received
by the Managers are outside the safe harbor of Section 28(e) of the Exchange Act.
The Bank of New York (“BNY”), headquartered in New York and with offices globally, serves as the
Company’s bank for purposes of receiving subscription funds, disbursing redemption payments and
processing cash transactions not directly related to the Company’s investment portfolio.
BNY, founded in 1784 by Alexander Hamilton, is the United States’ oldest bank and is the principal
subsidiary of The Bank of New York Company, Inc. (NYSE:BK), a financial holding company. With
approximately $13 trillion in total assets under custody as of December 31, 2006, BNY provides a complete
range of banking and other financial services to corporations and individuals worldwide through its basic
businesses, namely, Securities Processing and Global Payment Services, Corporate Banking, BNY Asset
Management and Private Client Services, Retail Banking, and Global Market Services.
Portfolio assets will be held in the custody of one or more financial institutions, including any brokers
or dealers or other institutions through which the Company effects transactions. Portfolio transactions are
executed by brokers and dealers selected on behalf of the Company on the basis of their ability to effect
prompt and efficient executions at competitive rates. Brokerage and custody services may be provided by the
Managers or their affiliated firms.
Independent Client Representative
The Company has the authority to appoint a person (the “Independent Client Representative”)
unaffiliated with the Sub-Advisor, the Investment Manager or any of their affiliates to act as the agent of the
Company to give or withhold any consent of the Company required under applicable law to a transaction in
which the Sub-Advisor and/or the Investment Manager causes the Company to purchase securities or other
instruments from, or sell securities or other instruments to, the Sub-Advisor’s and/or the Investment
Manager’s affiliates or to engage in brokerage transactions in which any of the Sub-Advisor’s or the
Investment Manager’s affiliates acts as a broker for another person on the side of the transaction opposite
that of the Company. The role of the Independent Client Representative is to determine whether or not a
proposed transaction falls within the investment purview of the Company notwithstanding the affiliated
nature of the transaction. This is designed to meet the requirements of Section 206 of the Investment
Advisers Act of 1940, as amended. If appointed, the Independent Client Representative may be paid by the
Company and will receive an indemnity from the Company for claims arising out of its activity in such
FEES AND EXPENSES
The Company pays the Investment Manager a monthly management fee calculated at an annual rate. The
Management Fee for Class A Shares is calculated at an annual rate of one and a half percent (1.50%) of the
month-end Class A Net Asset Value of the Company, and the Management Fee for Class B and Class C
Shares is calculated at an annual rate of one and three quarters percent (1.75%) of the month end Class B and
Class C Net Asset Value of the Company, respectively. The Management Fee is paid to the Investment
Manager from the Company on or about the 15th Business Day of the subsequent month.
Investor Servicing Fees
The Investment Manager on behalf of the Company may enter into one or more agreements with
one or more third party placement agents (each a “Placement Agent”) to place investors in the Class C Shares
of the Company. Any such Placement Agents who place investors in the Company will be entitled to receive
a fee from Class C Shareholders in an amount up to 1.00% of the Net Asset Value of the Class C Shares per
annum (the “Investor Servicing Fee”). The Investor Servicing Fee shall be payable monthly in arrears. The
Investor Servicing Fee will be prorated based upon a Class C Shareholder’s actual period of ownership of its
Class C Shares. The Investor Servicing Fee is accrued monthly and is payable quarterly, in arrears, within a
reasonable time thereafter.
The Administrator receives a monthly administration fee calculated at the annual rate equal to one-fifth of
one percent (0.20%) of the Company's average net assets per month paid out of the Company's assets (the
quot;Administration Feequot;). The Administration Fee will be calculated as of the last Business Day of each calendar
month and paid by the Company on or about the 15th Business Day of the subsequent month. The
Administrator is also entitled to reimbursement of actual out-of-pocket expenses incurred on behalf of the
Fees of the Managers
The Company bears all direct and indirect costs associated with investment advisory services of the
Managers. Such costs may include both a fixed fee equal to a percentage of the average net asset value of the
fund managed by a given Manager and a performance fee calculated as a percentage of the realized and
unrealized annual profit produced by the assets of the fund managed by a given Manager. The Investment
Manager will endeavor to negotiate with Managers to obtain reduced fees for the Company, although there
can be no assurance that a fee less than that charged by a particular Manager to other investors will be
Fees Relating to Brokerage
Decisions on purchase and sales of securities for the Company, the selection of brokers used in
securities transactions and the negotiation of commission rates are made by the Managers of Funds. In
selecting brokers to effect portfolio transactions for the Company, there is no guarantee that the Managers of
the Funds will allocate brokerage business on the basis of best available execution and in consideration of
such brokers' provision or payment of the costs of services.
Other Operating Expenses
All ongoing costs and expenses associated with the administration and operation of the Company
including brokerage commissions in relation to the affairs of the Company are borne by the Company and
treated in accordance with U.S. Generally Accepted Accounting Principles. Such ongoing expenses also
include, but are not limited to the following: (i) charges, fees and expenses associated with investing in
various Funds, (ii) fees and charges of custodians, (iii) interest and commitment fees on loans and debit
balances, (iv) income taxes, withholding taxes, transfer taxes and other governmental charges and duties, (v)
fees of the Company’s Administrator, legal advisers and independent auditors and accountants, (vi) Directors'
fees and expenses, (vii) the cost of maintaining the Company’s registered office in the Cayman Islands and
maintaining the Company in good standing and duly registered with the Cayman Islands Monetary Authority,
(viii) the cost of preparing and distributing any subscription materials and any reports and notices to
Shareholders, (ix) the costs incurred in connection with listing the Shares on any stock exchange, if such
listing is deemed desirable in the sole discretion of the Directors, (x) the cost of insurance premiums if any,
including, without limitation, the cost of director and officer liability insurance policies, and (xi) all similar
ongoing operational expenses. Each Director of the Company who is not an officer or employee of the
Investment Manager or related companies may receive fees for serving in such capacity. All Directors will
receive reimbursement for travel and other costs incurred in connection with their services.
SHARES OF THE COMPANY
The Company's Share Capital
The Company has an authorized capital of U.S. $50,000.00 consisting of the following:
(i) 1,000,000 Class A Shares, par value U.S. $0.01 per Share;
(ii) 1,000,000 Class B Shares, par value U.S. $0.01 per Share;
(iii) 1,000,000 Class C Shares par value U.S. $0.01 per Share;
(iv) 1,000,000 Class D Shares par value U.S. $0.01 per Share;
(v) 999,900 undesignated redeemable participating non-voting Shares par value U.S. $0.01 each; and
(vi) 100 non-participating voting Management Shares, par value U.S. $0.01 per share.
Each of the outstanding Shares participates ratably with all other outstanding Shares in the
Company's fees, expenses, assets and earnings with respect to such Class of Shares. Fractional shares are
permitted to three decimal points. Each Share has the redemption rights discussed herein. There are no
outstanding options or any special rights relating to any Shares, nor has it been agreed conditionally or
unconditionally to put Shares under option.
The Class A, Class B, and Class C Shares are redeemable participating non-voting Shares in the
Company. The Management Shares are non-redeemable, non-participating shares, which have the sole voting
rights in the Company.
Shares are issued on such terms and conditions as the Directors may determine. Each of the
outstanding Shares participates ratably with all other outstanding Shares of the same class in the Company's
fees, expenses, assets and earnings. Each Share has the redemption rights discussed herein. There are no
outstanding options or any special rights relating to any Shares, nor has it been agreed conditionally or
unconditionally to put Shares under option.
Each Share has equal voting rights and each Share in each class has equal dividend, distribution and
liquidation rights and is redeemable in accordance with the Net Asset Value of the Shares of that class.
Subject as provided herein, the Board may in its discretion issue additional classes of shares without
notice to or consent of the Shareholders provided such additional classes do not dilute the Shares or modify
the rights attaching thereto. Such additional classes of Shares may be subject to different terms and
conditions than as discussed herein and may be offered pursuant to separate memoranda.
Temporary Suspension of Dealings
The Board may temporarily declare a suspension of the sale, allotment, issue or redemption of the
Shares and the payment on redemption of Shares (in any of the classes) upon the occurrence of any of the
1. If the determination of the Net Asset Value for the whole or part of a period during which
any stock exchange or over-the-counter market on which any significant portion of the
investments of the Company are listed, traded or dealt in is closed (other than customary
weekend and holiday closing) or trading on such stock exchange or market is restricted; or
2. When circumstances exist as a result of which in the opinion of the Board of Directors it is
not reasonably practicable for the Company to dispose of its investments or as a result of
which any such disposal would be materially prejudicial to Shareholders; or
3. When a breakdown occurs in any of the means normally employed in ascertaining the value
of a significant portion of its investments or when for any other reason the value of a
significant portion of its investments or other assets of the Company cannot reasonably or
fairly be ascertained.
The Board may temporarily declare a suspension of the determination of the Company's Net Asset
Value (in any of the classes) during:
1. Any period when for any reason the prices of any investments which constitute a substantial
portion of the assets of the Company cannot be reasonably, promptly or accurately
2. Any period (other than customary holiday or weekend closings) when any recognised
exchange or market on which the Company's investments are normally dealt in or traded is
closed, or during which trading thereon is restricted or suspended.
Any suspension of redemptions and the calculation of the Net Asset Value will be notified
immediately to the Shareholders, and any stock exchange, if applicable, and, where possible, all reasonable
steps will be taken to bring any period of suspension to an end as soon as possible.
Voting and Other Rights
Subject to any rights or restrictions for the time being attached to any class or classes of Shares, on a
show of hands or on a poll every Shareholder present in person, or by proxy shall be entitled to vote in
accordance with the aggregate Net Asset Value (as at the most recent date of determination) of Shares held by
such Shareholder. General meetings of the Company's Shareholders may, but need not be, held annually to
approve the selection of auditors and to attend to such other business as may properly be placed before a
meeting. Shareholders will receive at least fourteen (14) days' notice of any Shareholders' meeting and will be
entitled to vote their Shares either personally or by proxy. If the proxy sent with the notice of meeting is not
completed and returned prior to the meeting and the Shareholder does not appear personally at such meeting,
such Shares will be voted in the discretion of the proxy designated in the Subscription Agreement executed by
Registration and Transfer of Shares
Shares will be issued in registered form; the Company does not issue bearer shares. The
Administrator maintains a current register of the names and addresses of the Company's Shareholders. Such
entry in the share register will be conclusive evidence of ownership of such Shares. Certificates representing
Shares will be issued only upon written request.
Transfers of Shares are permitted only with the prior consent of the Board, which consent may be
withheld in the absolute discretion of the Board (such as, in order to prevent adverse regulatory, pecuniary,
legal, taxation or material administrative disadvantage to the Company or its Shareholders as a whole) or
where the transfer would result in the transferee holding Shares with a Net Asset Value of less than U.S.
$100,000 for the Class A, B, and C Shareholders. Any transferee is required to furnish the same information,
which would be required in connection with a direct subscription in order for a transfer application to be
considered by the Board. Violation of applicable ownership and transfer restrictions may result in a
The Company is offering Shares on the first day of each calendar month and on any other day
approved by the Board (each a “Subscription Date”) at a price per Share equal to the then current Net Asset
Value per Share or other relevant class of Shares as of the preceding Valuation Date. See “SHARES OF
THE COMPANY - The Company's Share Capital.” The Net Asset Value per Share of each class is calculated
as of the close of the last Business Day of each month or such other date requiring the computation (each a
“Valuation Date”). The term “Business Day” refers to any day when banks in the United States and Bermuda
are open for business other than a Saturday or Sunday. Subscriptions received will be held in an account for
those purposes or segregated on the books of the Company until such date as the sale of the subject Shares is
effected. The minimum initial subscription for the Shares is U.S.$500,000. The minimum additional
investment for Shares is U.S.$100,000. The Board may, in its sole discretion, accept a lesser amount with
respect to such investments. Subscriptions are payable only in U.S. Dollars. The acceptance of subscriptions
is subject to confirmation of the prior receipt of cleared funds credited to the Company's subscription
account and the receipt of completed subscription documents in a form acceptable to the Administrator. The
Board reserves the right to reject subscriptions in its absolute discretion. A purchaser found acceptable to the
Company will be sold that number of Shares at the Net Asset Value per Share.
Subscriptions may be suspended under certain circumstances. (See “SHARES OF THE COMPANY
- Temporary Suspension of Dealings.”)
None of the Shares of the Company are under option or agreed, conditionally or unconditionally to
be under option.
Shareholders may request a redemption of Shares, on thirty-six (36) days' prior written notice to the
Administrator, as of the last Business Day of each month, or on another Valuation Date (each a “Redemption
Date”) at a redemption price per Share equal to the Net Asset Value per Share of the relevant class of Shares
on the corresponding Valuation Date. Except with the consent of the Board of Directors, redemption
requests are irrevocable. If a redemption would cause the value of the Shares held by a Shareholder to fall
below U.S.$100,000, or such other minimum amount or amounts as determined by the Board, then the Board
has the right to require the compulsory redemption of all Shares held by such Shareholder.
Settlement of redemptions will generally take place within thirty (30) days after the Redemption Date,
although the Company reserves the right to retain up to ten percent (10%) of the settlement proceeds until
after the annual audit for the year in which the redemption occurs is completed to confirm the accuracy of the
amount or to comply with applicable regulatory requirements. The Board shall have the right to require the
compulsory redemption of all Shares held by a Shareholder upon ten (10) Business Days' prior written notice
(in order to prevent adverse regulatory, pecuniary, legal, taxation or material administrative consequences of
the Company or its Shareholders as a whole), at the price per Share equal to the then prevailing Net Asset
Value per Share of the relevant class of Shares. In circumstances where the Company is unable to liquidate
securities positions in an orderly manner in order to fund redemptions or where the value of the assets and
liabilities of the Company cannot reasonably be determined, the Company may extend such thirty (30) day
limitation to effect settlements of redemptions or it may even suspend redemptions. The Board may in its
discretion settle redemptions in kind for all redemptions submitted in respect for a given Redemption Date.
Redemptions of the Class A, Class B, and Class C Shares will be made in U.S. Dollars and in
extraordinary circumstances, the Board may determine to pay redemption proceeds “in kind” or partially in
cash and partially “in kind.” Any such distribution “in kind” will not materially prejudice the interests of the
remaining shareholders. Cash settlements will be remitted by wire transfer to an account designated by the
Shareholder at the Shareholder's bank as specified by the Shareholder's written redemption notice. A
Shareholder has no rights with regard to Shares to be redeemed after the close of business on the date as of
which the Redemption Price is calculated, except to receive the Redemption Price therefor.
Net Asset Value determinations are based on the market value of the Company's assets as of the
Redemption Date, after deducting all accrued debts and liabilities of the Company, including any
contingencies for which reserves are determined to be required. Such deductions will include all fees earned
but not yet paid.
Redemptions may be suspended under certain circumstances. See “SHARES OF THE COMPANY
- Temporary Suspension and Dealings.”
Each prospective investor is required to certify that the Shares are not being acquired directly or
indirectly for the account or benefit of a Non-Qualified Person except as otherwise permitted herein. The
term “Non-Qualified Person” as used in this Prospectus means any member of the public in the Cayman
Islands (unless the Company is listed on the Cayman Islands Stock Exchange) or is either an Exempted or
Ordinary Non-resident Company under the laws of the Cayman Islands, or certain U.S. Persons as defined
below and other persons from time to time designated as such by the Company.
For the purposes of this Prospectus, “U.S. Person” means:
(a) any natural person who is resident in the United States;
(b) any partnership or corporation organised or incorporated under the laws of the
(c) any estate of which any executor or administrator is a U.S. Person;
(d) any trust of which any trustee is a U.S. Person;
(e) any agency or branch of a foreign entity located in the United States;
(f) any non-discretionary account or similar account (other than an estate or trust) held
by a dealer or other fiduciary for the benefit or account of a U.S. Person;
(g) any discretionary account or similar account (other than an estate or trust) held by a
dealer or other fiduciary organised, incorporated or (if an individual) resident in the United
(h) any partnership or corporation if (i) organised or incorporated under the laws of any
foreign jurisdiction and (ii) formed by a U.S. Person principally for the purpose of investing
in securities not registered under the Securities Act, unless it is organised or incorporated,
and owned, by accredited investors (as defined in Rule 501(a) under the Securities Act) who
are not natural persons, estates or trusts.
“U.S. Person” does not include:
(a) any discretionary account or similar account (other than an estate or trust) held for
the benefit or account of a non-U.S. Person by a dealer or other professional fiduciary
organised, incorporated or, if an individual, resident in the United States;
(b) any estate of which any professional fiduciary acting as executor or administrator is a
U.S. Person if (i) an executor or administrator of the estate who is not a U.S. Person has sole
or shared investment discretion with respect to the assets of the estate and (ii) the estate is
governed by foreign law;
(c) any trust of which any professional fiduciary acting as trustee is a U.S. Person if a
trustee who is not a U.S. Person has sole or shared investment discretion with respect to the
trust assets, and no beneficiary of the trust (and no settlor if the trust is revocable) is a U.S.
(d) an employee benefit plan established and administered in accordance with the law of
a country other than the United States and customary practices and documentation of such
(e) any agency or branch of a U.S. Person located outside the United States if (i) the
agency or branch operates for valid business reasons and (ii) the agency or branch is engaged
in the business of insurance or banking and is subject to substantive insurance or banking
regulation, respectively, in the jurisdiction where located; or
(f) the International Monetary Fund, the International Bank for Reconstruction and
Development, the Inter-American Development Bank, the Asian Development Bank, the
African Development Bank, the United Nations and their agencies, affiliates and pension
plans, and any other similar international organizations, their agencies, affiliates and pension
Any prospective investor acting in any fiduciary capacity may be required to certify the number of
beneficial owners for whom Shares are being purchased. Furthermore, it is the responsibility of each investor
to verify that the purchase and payment for the Shares is in compliance with all relevant laws of the investor's
jurisdiction or residence.
The Company reserves the right to offer Shares to Non-Qualified Persons, who will need to
qualify for other eligibility standards and who will receive other memoranda in addition to this Prospectus. In
this regard, a limited number of Shares (in the Company's discretion) may be offered and sold to certain U.S.
investors, including without limitation, pension and profit sharing and 401(k) plans upon meeting certain
eligibility standards such as being an “accredited investor” within the meaning of the Securities Act, and other
standards defined by the Company from time to time. Such prospective investors should consider the
provisions in this Prospectus under the heading “ERISA CONSIDERATIONS.”
DETERMINATION OF NET ASSET VALUATION
The Company's Net Asset Value is equal to the Company's assets, calculated at its fair value; less it
liabilities and any accrued but unpaid expenses (including, without limitation, the Management Fee described
below) and reasonable reserves. Each class will have its own Net Asset Value, determined in the manner
described below, and each class' Net Asset Value per Share will be determined by dividing the particular class'
Net Asset Value by the number of Shares then outstanding. Such valuation will be made in good faith by the
Administrator after consulting with the Investment Manager and the Directors.
The Administrator, under the overall supervision and direction of the Board, based upon information
supplied by the Funds’ administrators, determines the Net Asset Value of the Company and the Net Asset
Value per Share of each class. Such calculations are made as of each Valuation Date, Redemption Date or any
other point in time when such valuation is determined by the Directors to be necessary or appropriate. Such
valuations are made by the Administrator acting in good faith. Any Management Fees calculated in respect to
a particular class of Shares will be deducted against the Net Asset Value of such class.
The Administrator, in consultation with the Investment Manager and the Directors, and pursuant to
any policies established by the Board, shall value the assets and liabilities of the Company as follows:
1. The value of the assets of the Company will be based on valuations supplied by the
administrators of Funds in accordance with the practices and policies of each such Fund of
Funds. Such practices and policies may not be consistent.
2. All other assets and liabilities of the Company shall be assigned such value as the
Administrator, in consultation with the Investment Manager and the Directors, may
3. If the Administrator, in consultation with the Investment Manager and the Directors,
determines that any of the above valuation methodologies of any investments or other
property does not fairly represent market value, the Administrator, in consultation with the
Investment Manager and the Directors, shall value such securities or other property as it
shall reasonably determine and shall set forth the basis of such valuation in writing in the
records of the Company.
4. All values assigned to securities and other assets and liabilities by the Administrator, in
consultation with the Investment Manager and the Directors, shall be final and conclusive.
Valuations provided by the administrators of the Funds will not be subject to independent
review or investigation by the Company and the Company and the Investment Manager are
entitled to rely on such valuations without independent verification.
In determining the Company’s Net Asset Value based upon the above parameters, the following shall
be subtracted: (a) Management Fees that have accrued, as of the date of computation, but are not yet payable;
(b) the then current amount of any Management Fees that have been earned but unpaid in the prior years; (c)
an amount equal to the cumulative monthly amortization of expenses and costs; (d) an allowance for the cost
of the Company’s annual audit and legal fees; and (e) any contingency for which reserves are determined to be
appropriate. With regard to a redeeming shareholder, the Redemption Fee, if any, that is being imposed will
be subtracted from that shareholder's redemption proceeds and will be added to the Company’s Net Asset
Value at the next subsequent Valuation Date.
In computing the Net Asset Value in order to determine the Management Fee for a current period, (i)
the Management Fees earned but not yet paid (i.e., the amount referred to in clause (b) of the immediately
preceding paragraph) shall not be subtracted and (ii) such current Management Fee shall be computed with
regard to investment activity only and without reference to other expenses of the Company. The Company’s
auditors shall be entitled to rely on invoices from others (including, without limitation, the Investment
Manager) with regard to allocations of expenses.
Prospective investors should be aware that situations involving uncertainties as to the valuation of a
Fund could have an adverse effect on the Net Asset Value determination of the Company if the valuation
information reported by the Funds' administrators should be reported in an untimely manner or prove
incorrect. Absent bad faith or manifest error, the Administrator's determination of the Net Asset Values is
conclusive and binding on all Shareholders and prospective investors.
Prospective investors should give careful consideration to the following risk factors in evaluating the
merits and suitability of an investment in the Company as they relate specifically to the Shares or to the
Company, in general, as the context requires. The following does not purport to be a comprehensive
summary of all the risks associated with an investment in the Company. Rather, the following are only certain
particular risks to which the Company is subject that the Company wishes to encourage prospective investors
to discuss in detail with their professional advisors.
There is no active secondary market for investments in the Company and, accordingly, investments in
the Company may be disposed of only through the redemption procedures described elsewhere in this
Business Dependent Upon Key Individuals
All investment decisions with respect to the investment of the Company's assets will be made by the
Investment Manager, which relies on the services of its personnel. Moreover, the Company will be highly
dependent upon the expertise and abilities of the underlying Managers of the Funds who will have investment
discretion over the Company's assets. Shareholders will have no right or power to take part in the
management of the Company. As a result, the success of the Company for the foreseeable future will depend
largely upon the ability of the Investment Manager and the Managers of the Funds. There is no assurance
that the strategies employed by the Company will achieve attractive returns or will be successful. Additionally,
the death, incapacity or retirement of any key personnel may adversely affect investment results.
Prospective investors should carefully consider the effect on the Company of the Investment
Manager’s strategy of investing all or substantially all of the Company's assets with selected Funds. Two
aspects of this investment strategy that will affect the success of the Company are the risk of delegating
control of a majority of the Company's assets to persons other than the Investment Manager and the
increased cost. There is no way of predicting how the Managers of the Funds will make investments or
whether they will act in accordance with any disclosure documents or descriptive materials given by them to
the Company. This strategy significantly increases the fees and expenses payable by the Company since the
Managers of the Funds typically charge their own fees and expenses. The cost of investment advisory and
management services relating to investments by the Company, including investments made by the Funds, are
also paid by the Company.
Access to Information from Funds
The Company will receive periodic reports from the Managers of Funds at the same time as any
other investor with such Fund. The Investment Manager will request detailed information on a continuing
basis from each Fund regarding the Fund's investment strategies. However, the Investment Manager may not
always be provided with detailed information regarding all the investments made by the Funds because certain
of this information may be considered proprietary information by the Manager of the Fund. This lack of
access to information may make it more difficult for the Investment Manager to allocate the Company's assets
among the Funds and evaluate the Managers of the Funds. Moreover, although the Investment Manager will
receive detailed information from the Manager of each Fund regarding its historical performance and
investment strategy, in most cases there will be little or no means of independently verifying this information.
Accordingly, neither the Investment Manager nor the Company will undertake any due diligence activity with
regard to assessing the merits and risks associated with investing in a particular Fund. Moreover, the
investment strategies of the Managers of the Funds may include such investment techniques as short sales and
leverage (as further discussed herein) which practices can, in certain circumstances, maximize the adverse
impact to which the Company's assets may be subject.
Investment Decisions of the Managers of Each Fund Are Independent of Each Other
Investment decisions made by the Managers of each Fund are independent of each other. As a
result, at any particular time, one Manager may be purchasing shares of an issuer whose shares are being sold
by another Manager. Consequently, the Company could indirectly incur certain transaction costs without
accomplishing any net investment result. Overall, there can be no guarantee that each Manager will perform
and continue to perform accurately and in good faith, and the Investment Manager has no ability to
proactively determine whether or not the stated objective of such Manager is being pursued accurately and in
Incentive Fees Payable Irrespective of Fund Performance
Each Manager of a Fund may receive a performance-based fee or allocation to which it is entitled
irrespective of the performance of the other Funds and the Company generally. Accordingly, a Manager of a
Fund with positive performance may receive compensation from the Company even if the Company’s overall
investment return is negative.
Delays in Reporting
For the Company to provide an audited annual report to its Shareholders, it must receive information
on a timely basis from the administrators of the Funds. A Fund's administrator's delay in providing this
information could delay the Company’s preparation of the Company’s annual and other reports.
Nature of Certain Investments
There is no limitation on the size or operating experience of the companies in which the Managers of
the Funds may invest. Some small companies in which the Managers may invest through the various Funds
may lack management depth or the ability to generate internally or obtain externally the funds necessary for
growth. Companies with new products or services could sustain significant losses if projected markets do not
materialize. Further, such companies may have, or may develop, only a regional market for products or
services and may be adversely affected by purely local events. Such companies may be small factors in their
industries and may face intense competition from larger companies and entail a greater risk than investment in
Lack of Liquidity in Markets
The securities acquired by the Managers of the Funds lack a liquid trading market, which may result
in the inability of the Managers of the Funds to sell such assets and may impair the Company's ability to
realize the full value of its assets in the event of a voluntarily or involuntarily liquidation of such assets.
Liquidity relates to the ability of the Company to sell and invest in a timely manner.
The success of the Company's investment activities will depend on the Managers of the Funds ability
to identify and exploit price discrepancies in the capital markets. Identification and exploitation of the market
opportunities involve uncertainty. No assurance can be given that the Managers will be able to locate
investment opportunities or to correctly exploit price discrepancies in the capital markets.
For any given period of time, the investments of a Fund may be concentrated in a relatively small
number of positions, with the attendant risk that fluctuations in the value of a small number of positions will
significantly affect the value of the portfolio.
Risks of Certain Investments Made By Managers of Funds
The Company is engaged in a diversified investment strategy concentrating primarily on investing in
securities through Funds, some of which may not be marketable. The securities business is speculative, prices
are volatile, and market movements are difficult to predict. Supply and demand for securities change rapidly
and are affected by a variety of factors, including interest rates, merger activities and general economic trends.
Different Funds in which the Company's assets are invested may hold offsetting positions in the same or
similar investments, thus reducing the Company's potential for gain (as well as potential for loss) on such
In addition to these general investment risks, Managers of Funds may use investment techniques that
may subject a Manager's Fund as well as the Company to certain risks; some, but not all, of these techniques
and risks are summarized below.
Options. In seeking to enhance performance or hedge assets, Managers may engage from time to time
in various types of options transactions. An option gives the purchaser the right, but not the obligation, upon
exercise of the option, either (i) to buy or sell a specific amount of the underlying security at a specific price
(the “strike” price or “exercise” price), or (ii) in the case of a stock index option, to receive a specified cash
settlement. To purchase an option, the purchaser must pay a “premium,” which consists of a single,
nonrefundable payment. Unless the price of the securities interest underlying the option changes and it
becomes profitable to exercise or offset the option before it expires, the Fund may lose the entire amount of
the premium. The purchaser of an option runs the risk of losing the entire investment. Thus, a Fund may
incur significant losses in a relatively short period of time. The ability to trade in or exercise options also may
be restricted in the event that trading in the underlying securities interest becomes restricted. Options trading
may also be illiquid in the event that a Fund's assets are invested in contracts with extended expirations.
Managers may purchase and write put and call options on specific securities, on stock indexes or on other
financial instruments and, to close out its positions in options, may make a closing purchase transaction or
closing sale transaction.
Arbitrage and Speculative Securities Transactions. The Company may invest in Funds whose Managers
employ risk arbitrage. When the Managers determine that it is probable that a transaction (e.g., a merger) will
be consummated, the Manager may purchase securities at prices often only slightly below the anticipated
value to be paid or exchanged for such securities in the merger, exchange offer or cash tender offer (and
substantially above the price at which such securities traded immediately prior to the announcement of the
merger, exchange offer or cash tender offer). If the proposed merger, exchange offer or cash tender offer
appears likely not to be consummated or in fact is not consummated or is delayed, the market price of the
security to be tendered or exchanged will usually decline sharply, resulting in a loss to the Fund. In addition,
where a security to be issued in a merger or exchange offer has been sold short in the expectation that the
short position will be covered by delivery of such security when issued, failure of the merger or exchange
offer to be consummated may force the Fund to cover its short positions in the market at higher price than its
short sale, with a resulting loss.
In addition, Managers may determine that the offer price for a security that is the subject of a tender
offer is likely to be increased, either by the original bidder or by another party. In those circumstances,
Managers may purchase securities above the offer price, thereby exposing the Fund to an even greater degree
When the Managers determine that it is probable that a transaction will not be consummated, such
Managers may sell the securities of the target company short, at times significantly below the announced price
for the securities in the transaction. If the transaction (or another transaction, such as a defensive merger or a
friendly tender offer) is consummated at the announced price or a higher price, Managers may be forced to
cover the short positions in the market at a higher price than the short sale price, with a resulting loss.
The consummation of mergers, exchange offers and cash tender offers can be prevented or delayed
by a variety of factors. Offers for tender or exchange offers customarily reserve the right to cancel such offers
in a variety of circumstances, including an insufficient response from shareholders of the target company.
Even if the defensive activities of a target company or the actions of regulatory authorities fail to defeat an
acquisition, they may result in significant delays, during which a Fund's capital will be committed to the
transaction and interest charges may be incurred on funds borrowed to finance its arbitrage activities in
connection with the transaction.
Exchange offers or cash tender offers are often made for less than all of the outstanding securities of
an issuer, with the provision that, if a greater number is tendered, securities will be accepted on a pro rata
basis. Thus, after the completion of a tender offer, and at a time when the market price of the securities has
declined below its cost, a Fund may have the securities returned to it, and be forced to sell at a loss, a portion
of the securities it had previously tendered.
Managers may make certain speculative purchases of securities. Such purchases may include securities
of companies that are involved in, or that are believed to be involved in, corporate restructurings, that the
Managers believe are misvalued because of an extraordinary event, or that are expected to undergo a change
in value because of an expected occurrence. Managers may also make concentrated investments in securities
of companies that may be or may become targets for takeovers. If Managers purchase securities in
anticipation of an acquisition attempt or reorganization or with the intention to influence the management
and policies of the issuer of the securities, and an acquisition attempt or reorganization does not in fact occur
or the Managers are not able to so influence the issuer of the securities, the Managers may sell the securities at
a material loss.
In most forms of corporate reorganization, there exists the risk that the reorganization either will be
unsuccessful (for example, for failure to obtain requisite approvals), will be delayed (for example, until various
liabilities, actual or contingent, have been satisfied) or will result in a distribution of cash or a new security the
value of which will be less than the purchase price of the security in respect of which such distribution was
In certain transactions, the Managers may not be able to hedge against market fluctuations or, in
liquidation situations, may not accurately value the assets of the company being liquidated. This can result in
losses, even if the proposed transaction is consummated.
The Managers may invest in securities of issuers in weak financial condition, experiencing poor
operating results, having substantial capital needs or negative net worth, confronting significant legal or
regulatory problems, or that are involved in bankruptcy or reorganization proceedings. Investments of this
type may involve substantial financial and business risks that can result in substantial or at times even total
losses. Among the risks inherent in investments in troubled entities is the fact that it frequently may be
difficult to obtain information as to the true condition of such issuers. In the U.S., such investments also may
be adversely affected by state and Federal laws relating to, among other things, fraudulent transfers and other
voidable transfers or payments, lender liability and the U.S. Bankruptcy Court's power to disallow, reduce,
subordinate or disenfranchise particular claims. The market prices of such securities are also subject to abrupt
and erratic market movements and above-average price volatility, and the spread between the bid and asked
prices of such securities may be greater than those prevailing in other securities markets. It may take a number
of years for the market price of such securities to reflect their intrinsic value. In addition, because fewer
bidders for securities of financially troubled companies exist, such securities may become illiquid.
For any given period of time, the investments of the Funds may be concentrated in a relatively small
number of positions, with the attendant risk that fluctuations in the value of a small number of positions will
significantly affect the value of the portfolio.
Short Selling. Managers may engage in the short-selling of securities in certain circumstances.
Short-selling is the selling of securities the seller does not own. Short sales may only be maintained if the
securities can be borrowed. If the security cannot remain borrowed, the Fund could be required to cover the
short sale at a loss or at an inopportune time for such Fund. If securities are sold short, Managers would
fulfill their obligation to deliver such securities with borrowed securities. They would only profit from such a
practice if they could fulfill their obligation to the lender of the securities by repaying the lender with
securities, which they have purchased at a price lower than the price they received for the short sale. If the
price of a security that has been sold short increases, there is no limit to the loss that could be incurred in
covering a short sale.
Forward Trading. Managers may invest in forward contracts and options thereon. Such contracts and
options, unlike futures contracts, are not traded on exchanges and are not standardized; rather banks and
dealers act as principals in these markets, negotiating each transaction on an individual basis. Forward and
“cash” trading is substantially unregulated; there is no limitation on daily price movements and speculative
position limits are not applicable. The principals who deal in the forward markets are not required to
continue to make markets in the currencies or commodities they trade, and these markets can experience
periods of illiquidity, sometimes of significant duration. There have been periods during which certain
participants in these markets have refused to quote prices for certain currencies or commodities or have
quoted prices with an unusually wide spread between the price at which they were prepared to buy and that at
which they were prepared to sell.
Use of Swap Agreements. Managers may use swap agreements. The use of swaps is a highly specialized
activity that involves investment techniques and risks different from those associated with ordinary securities
transactions. Interest rate swaps, for example, do not typically involve the delivery of securities, other
underlying assets or principal. Accordingly, the market risk of loss with respect to an interest rate swap is
often limited to the amount of interest payments that the Fund is contractually obligated to make on a net
basis. If the other party to an interest rate swap defaults, the Fund's risk of credit loss may be the amount of
interest payments that the Fund is contractually entitled to receive on a net basis. However, where swap
agreements require one party's payments to be “up-front” and timed differently than the other party's
payments (such as is often the case with currency swaps), the entire principal value of the swap may be subject
to the risk that the other party to the swap will default on its contractual delivery obligations. If there is a
default by the counterparty, the Fund may have contractual remedies pursuant to the agreements related to
the transaction. The swap market has grown substantially in recent years, and has become relatively more
liquid, with a large number of banks and investment banking firms acting both as principals and as agents
utilizing standardized swap documentation. The investment performance of the Fund, however, may be
adversely affected by the use of swaps if the Fund's forecasts of market values, interest rates or currency
exchange rates are inaccurate.
Over-the-Counter Trading. Managers may use derivative instruments. Derivative instruments that may
be purchased or sold by the Funds are expected to regularly consist of instruments not traded on an
exchange. The risk of nonperformance by the obligor on such an instrument may be greater, and the ease
with which the Fund can dispose of or enter into closing transactions with respect to such an instrument may
be less, than in the case of an exchange-traded instrument. In addition, significant disparities may exist
between bid and asked prices for derivative instruments that are not traded on an exchange. Derivative
instruments not traded on exchanges are also not subject to the same type of government regulation as
exchange traded instruments, and many of the protections afforded to participants in a regulated environment
may not be available in connection with such transactions.
Certain Securities. Investing in the securities of companies (and governments) in certain countries (such
as emerging nations or countries with less well regulated securities markets than the U.S. or the UK or other
European Union countries, for that matter) involves certain considerations not usually associated with
investing in securities of United States companies or the United States Government. For instance, there are,
including among other things, political and economic considerations, such as greater risks of expropriation,
nationalization and general social, political and economic instability; the small size of the securities markets in
such countries and the low volume of trading, resulting in potential lack of liquidity and in price volatility;
fluctuations in the rate of exchange between currencies and costs associated with currency conversion; certain
government policies that may restrict investment opportunities; and in some cases less effective government
regulation than is the case with securities markets in the United States.
Leverage; Interest Rates. Managers may use leverage, including borrowing to buy securities on margin or
make other investments. The Managers may also leverage their assets by entering into reverse repurchase
agreements whereby they effectively borrow funds on a secured basis by “selling” their interests in
investments to a financial institution for cash and agreeing to “repurchase” such investments at a specified
future date for the sales price paid plus interest at a negotiated rate. In the event of a sudden, precipitous
drop in value of Fund assets, the Manager might not be able to liquidate assets quickly enough to meet its
margin or borrowing obligations. Also, because acquiring and maintaining positions on margin allows the
Fund to control positions worth significantly more than its investment in those positions, the amount that the
Fund stands to lose in the event of adverse price movements is high in relation to the amount of its
investment. In addition, since margin interest will be an expense of the Fund and margin interest rates tend
to fluctuate with interest rates generally, the Fund is at risk that interest rates generally, and hence margin
interest rates, will increase, thereby increasing the Fund's expenses.
Transaction Expenses. Managers may make frequent trades in securities. Frequent trades typically
result in correspondingly high transaction costs.
Hedging Transactions. Managers may utilize a variety of financial instruments such as derivatives,
options, interest rate swaps, caps and floors and forward contracts, both for investment purposes and for risk
management purposes. Hedging also involves special risks including the possible default by the other party to
the transaction, illiquidity and, to the extent the Managers' assessment of certain market movements is
incorrect, the risk that the use of hedging could result in losses greater than if hedging had not been used.
The Funds are subject to the risk of the failure or default of any counterparty to the Funds' transactions. If
there is a failure or default by the counterparty to such a transaction, the Funds will have contractual remedies
pursuant to the agreements related to the transaction (which may or may not be meaningful depending on the
financial position of the defaulting counterparty).
Illiquidity of Investments. Investments of the Company's assets will, in certain cases, be long-term in
nature and may require several years before they are suitable for sale. Realization of value from such
investments may be difficult in the short-term, or may have to be made at a substantial discount compared to
other freely tradeable investments. In placing funds with a particular Fund for investment, the Company may
be restricted in its ability to redeem its investment therein to meet redemption requests by Shareholders or to
pay expenses or fees.
The institutions, including brokerage firms and banks, with which the Company (directly or
indirectly) does business, or to which securities have been entrusted for custodial and prime brokerage
purposes, may encounter financial difficulties that impair the operational capabilities or the capital position of
Cash held by brokers or custodians for the account of the Funds will be subject to the protections
conferred by the rules of the U.S. Securities and Exchange Commission (the “SEC”). However, brokers may
make loans to the Funds, and such loans will be secured by assets of the Funds held by the brokers. As
continuing security for the payment and discharge of all liabilities of the Funds to the brokers, investments
held by the brokers are pledged as collateral and the brokers are authorised to borrow, lend or otherwise to
use for its own purposes any of the Funds' investments, subject to and to the extent permitted by the SEC's
rules. In the event of the insolvency of the brokers, the Fund might not be able to recover equivalent assets
Illiquidity of the Investment
The consent of the Company must be obtained prior to any transfer of Shares. In light of the
restrictions imposed on a transfer of Shares, and in light of the limitations imposed on a Shareholder's ability
to redeem all or part of his or its capital from the Company, an investment in the Company should be viewed
as illiquid and subject to risk.
Effect of Substantial Redemptions
Substantial redemptions by Shareholders within a short period of time could require the Investment
Manager to liquidate positions more rapidly than would otherwise be desirable, which could adversely affect
the value of the Company's assets. The resulting reduction in the Company's assets could make it more
difficult to generate a positive rate of return or to recoup losses due to a reduced equity base.
The Company is not registered as an investment company under the U.S. Investment Company Act
of 1940 as amended (or any similar state laws). Registered investment companies are subject to extensive
regulation. Shareholders, therefore, will not be accorded the protective measures provided by such legislation.
Changes in Applicable Law
The Company must comply with various legal requirements, including requirements imposed by the
securities laws, tax laws and pension laws in various jurisdictions. Should any of those laws change over the
scheduled term of the Company, the legal requirements to which the Company and the Shareholders may be
subject could differ materially from current requirements.
Reserve for Contingent Liabilities
Under certain circumstances, the Company may find it necessary to establish a reserve for contingent
liabilities or withhold a portion of the Shareholder's settlement proceeds at the time of redemption, in which
case, the reserved portion would remain at the risk of the Company's activities.
Lack of Independent Experts Representing Investors
The Investment Manager has consulted with counsel, accountants and other experts regarding the
Company and the preparation of these offering materials. Each prospective investor should consult his own
legal, tax and financial advisors regarding the desirability of an investment in the Company.
General Economic Conditions
The success of any investment activity is influenced by general economic conditions, for example,
inflation rates, industry conditions, interest rates, political events and trends, and tax laws. These and
innumerable other factors can substantially and adversely affect the business of the Company. In addition,
unexpected volatility or illiquidity in the markets in which the Company directly or indirectly holds positions
could impair the Company's ability to carry out its business and could cause it to incur losses.
Suspensions of Trading
Each securities exchange typically has the right to suspend or limit trading in all securities, which it
lists. Such a suspension would render it impossible for the Investment Manager or the Managers to liquidate
positions and, accordingly, could expose the Company to losses.
The Investment Manager intends to use commercially reasonable efforts to cause employee
benefit plans subject to ERISA and/or Section 4975 of the Code and other “benefit plan investors,” as
defined in the Plan Asset Regulation, in the aggregate hold less than 25% of each class of shares in the
Company and of any other class of shares in the Company. The Investment Manager shall use commercially
reasonable efforts to restrict transfers of any shares in the Company so that ownership of each class of shares
in the Company by benefit plan investors will remain below the 25% threshold contained in the Plan Asset
Regulation. In this event, although there can be no assurance that such will be the case, the assets of the
Company should not constitute “plan assets” for purposes of ERISA and Section 4975 of the Code.
Notwithstanding the foregoing, the Investment Manager may exceed 25% at any time in its sole discretion.
If the assets of the Company were to become “plan assets” subject to ERISA and Section 4975 of the
Code, certain investments made or to be made by the Company in the normal course of its operations might
result in non-exempt prohibited transactions and might have to be rescinded (see “ERISA
CONSIDERATIONS”). If at any time the Investment Manager determines that assets of the Fund may be
deemed to be “plan assets” subject to ERISA and Section 4975 of the Code, the Investment Manager may
take certain actions it may determine necessary or appropriate, including requiring one or more investors to
redeem or otherwise dispose of all or part of their Shares in the Company or terminating and liquidating the
Company. See quot; ERISA CONSIDERATIONS.quot;
Additional General Risks
Valuation Methods. Notwithstanding anything to the contrary herein, the Articles permit the Directors
to review and approve the use of non-standard valuation methods where special circumstances exist. In such
cases the Directors may permit the Investment Manager, in a reasonable manner, in good faith and subject to
generally acceptable accounting principles, to rely upon opinions and estimates of any persons who appear to
them to be competent to value any asset or liability of the Company of any type or designation by reason of
any appropriate professional qualification or experience of the relevant market or issuer. Prospective
investors should be aware that situations involving uncertainties as to the valuation of portfolio positions
could have an adverse effect on the Net Asset Value determination if judgments regarding appropriate
valuations should prove incorrect. Absent bad faith or manifest error, the Investment Manager’s
determination of Net Asset Value is conclusive and binding on all investors and prospective investors.
Allocation of Fees. The Directors shall, subject to the Companies Law, have the discretion to determine
the basis upon which any fees and expenses, asset or liability shall be allocated by or within the Company and
the Directors shall have power at any time and from time to time to vary such basis.
Currency Exposure. As the Net Asset Value of the Company will be calculated in U.S. Dollars for
Shares offered in respect of the Company, each holder of Shares and not the Company, will bear the risk of
any foreign currency exposure resulting from differences, if any, in the value of U.S. Dollars to the currency in
which a holder of Shares maintains their net worth.
Side Pockets. The Directors may determine to create a “side pocket” within the Company at their
absolute discretion and such “side pocket” shall be capable of being constituted as a separate division of
Shares of the Company, to which the Directors in consultation with the Investment Manager may determine
to allocate or attribute particular investments or assets, including but not limited to investments or assets
which are illiquid, difficult to value, subject to lock up or non-redemption provisions, subject to special
circumstances in the opinion of the Directors, or such assets and investments which it may be prudent,
necessary or desirable in the opinion of the Directors to segregate from other assets or investments of the
Company. The Directors may determine to apply and or impose particular investment restrictions with
respect to the side pocketed assets.
Side Letters. The Company, by unanimous consent of the Directors in consultation with the
Investment Manager, may from time to time seek to induce investment in the Company by offering
investment terms to certain prospective investors which are not available to existing investors in the
Company. In such cases the parties will enter into a written side arrangement varying the standard terms of
offer herein. Such variations may include, without limitation, variations to fees, minimum investment or
redemptions, with the effect that not all investors in the Company will invest on the same terms and some
investors may be expected to enjoy more favorable terms than others.The foregoing list of risk factors does not
purport to be a complete explanation of the risks involved in investing in the Company. Potential investors should read this entire
Prospectus before determining whether to invest in the Company and consult with their own financial and tax advisers. Potential
investors should also be aware that, if they decide to purchase Shares, they will have no role in the management of the Company
and will be required to rely on the expertise of the Investment Manager and the Administrator in dealing with the foregoing (and
other) risks on a day-to-day basis.
CONFLICTS OF INTEREST
The Company is subject to various conflicts of interest arising out of its relationship with the Investment
Manager and the Administrator. These conflicts include, but are not limited to, the following:
Certain Investment Manager Activities
The Investment Manager manages accounts and performs investment management for its own
account and for others, or may so do in the future, including for other investment funds similar in nature to
the Company and for managed accounts. Also, the Investment Manager and/or its affiliates and/or
employees may from time to time, have an interest, direct or indirect, in a security whose purchase or sale is
recommended or which is purchased, sold or otherwise traded for the Company. As a result, the Investment
Manager may sell or recommend the sale of a particular security for certain accounts including accounts in
which it has an interest and it or others may buy or recommend the purchase of such security for other
accounts, including accounts in which it has an interest and, accordingly, transactions in particular accounts
may not be consistent with transactions in other accounts or with the Investment Manager’s investment
recommendations. For example, the Investment Manager may recommend that the Company sell a security,
while not recommending such sale for other accounts in order to enable the Company to have sufficient
liquidity to honor Shareholders' redemption requests. Where there is a limited supply of investments, the
Investment Manager will ensure reasonable efforts to allocate or rotate investment opportunities on a fair and
equitable basis, but the Investment Manager cannot assure absolute equality among all accounts and clients.
From time to time the Company may buy (or sell) securities, which are being sold (or bought) for other
The Investment Manager and its affiliates may engage in other business ventures. In managing the
operations of more than one entity, conflicts of interest may arise with respect to allocating time, personnel
and other resources. The decision makers will devote such time to the affairs of the Company, as they, in
their sole discretion, deem necessary.
Investors should be aware that Managers of Funds selected by the Company may be subject to
similar conflicts of interest as described above.
The Directors and the service providers may have conflicts of interest in relation to their duties to the
Company. However, each shall, at all times, pay regard to its obligation to act in the best interests of the
Company and the Directors will ensure that all such potential conflicts of interest are resolved fairly and in the
interests of Shareholders. When allocating investment opportunities, the Investment Manager will ensure that
all such investments will be allocated in a fair and equitable manner.
The law firm of Tannenbaum Helpern Syracuse & Hirschtritt LLP, which serves as counsel to the
Company, has and will continue to serve as counsel to the Investment Manager and Administrator. Counsel
has attempted to be fair and reasonable and believes it has acted in a manner consistent with its professional
responsibilities. Should a future dispute arise between the Company, the Investment Manager and the
Administrator, the Board of Directors will cause the Company to retain separate counsel.
It should be noted that the Investment Manager, Sub-Advisor, Administrator and the Company are
members of the Tremont group of companies, as such may share not only common officers, employees,
agents and affiliates but may be direct or indirect subsidiaries of one another. It should also be noted that the
Sub-Advisor and the Administrator are the same entity and both are likely to become involved in the
investment process of the Company. The Investment Manager receives fees from the Company based upon
the Net Asset Value calculated by the Administrator. The Sub-Advisor receives fees from the Investment
Manager for its services hereunder. As such, a certain level of independence as it relates to matters adversely
affecting the Investment Manager, Sub-Advisor and the Administrator may be absent. The Investment
Manager and the Administrator may therefore have conflicts of interest in allocating management time,
services and functions among the Company and such other group funds for which they provide services.
However, at all times the Investment Manager and Administrator will endeavor to reach a fair and equitable
allocation of their management time, services, functions and investment opportunities between the Company
and any other such funds they provide services to.
By acquiring Shares in the Company, each investor will be deemed to have acknowledged the existence of actual or potential
conflicts of interest discussed above and to have waived any claim with respect to the existence of any such conflict of interest.
This summary of the principal tax consequences applicable to the Company and its Shareholders is
based upon advice received from the Company's Cayman Islands and U.S. legal and tax advisors. Such advice
is based upon factual representations made by the Investment Manager and the Administrator concerning the
proposed conduct of the activities to be carried out on behalf of the Company by them in the Cayman
Islands, in the U.S. and other parts of the world. The conclusions summarized herein could be adversely
affected if any of the material actual representations on which they are based should prove to be inaccurate.
Moreover, while this summary is considered to be a correct interpretation of existing laws in force on the date
of this Prospectus, no assurance can be given that courts or fiscal authorities responsible for the
administration of such laws will agree with such interpretation or that changes in such laws will not occur.
Cayman Islands Taxation. The Company is not subject to taxation in the Cayman Islands (although it
may be subjected to stamp duty on certain documents brought into or produced before a court in or executed
in the Cayman Islands). There are currently no Cayman Islands corporation taxes. The Company is required
is to pay the applicable Cayman Islands annual registration fee payable to the Cayman Islands government
under the Companies Law (Revised) which is currently approximately U.S.$574 and an annual registration fee
payable in respect of the registration of the Company under the Mutual Funds Law which is currently
There is at present, no direct taxation in the Cayman Islands and interest, dividends and gains payable
to the Company will be received free of all Cayman Island taxes. The Company is an exempted company
under Cayman Islands law and the Company has obtained a Tax Concessions Certificate from the Governor-
in-Cabinet of the Cayman Islands for an undertaking dated September 4, 2001 as to tax concessions pursuant
to Section 6(3) of the Tax Concessions Law (Revised) which provides that, for a period of 20 years, no law
hereafter enacted in the Cayman Islands imposing any tax to be levied on profits, income, gains or
appreciations shall apply to the Company or its operations and in addition, that no tax to be levied on profits,
income, gains or appreciations or which is in the nature of estate duty or inheritance tax shall be payable on or
in respect of the Shares, debentures or other obligations of the Company or by way of the withholding in
whole or in part of any relevant payment as defined in Section 6 (3) of the Tax Concessions Law (Revised).
U.S. Federal Income Taxation. The Company has been advised that it should not be subject to U.S.
Federal income taxes on any U.S. source income or gains from its trading (except in respect of any dividends
received in the course of such trading which would be subject to a thirty percent (30%) withholding tax),
provided that it does not engage in a trade or business within the U.S. to which such income or gains are
effectively connected. Pursuant to a safe harbor under the U.S. Internal Revenue Code of 1986, as amended
(the “Code”), a non-U.S. corporation which trades stock or securities for its own account should not be
treated as engaged in a trade or business within the U.S. provided that the non-U.S. corporation is not a dealer
in stock or securities. The Company intends to conduct its business in a manner so as to meet the
requirements of the safe harbor. If the activities of the Company were not covered by the foregoing safe
harbor, there would be a risk that the Company (but not any investor) would be required to file a U.S. Federal
income tax return for such year and pay tax at full U.S. corporate income tax rates as well as an additional
thirty percent (30%) branch profits tax.
The Company should not be subject to U.S. Federal income or withholding tax on U.S. source
interest income (other than in the case of certain contingent interest or interest received from a borrower ten
percent (10%) or more of the equity of which is owned by the Company, neither of which the Company
anticipates receiving), provided that the Company is not engaged in a trade or business within the U.S. to
which such interest income is effectively connected, and provided that the Company's interest-bearing
securities qualify as registered obligations and that the Company periodically supplies an Internal Revenue
Service Form W-8BEN or its equivalent.
Other Jurisdictions. In jurisdictions other than the U.S., foreign taxes may be withheld at the source on
dividend and interest income derived by the Company at rates ranging typically up to thirty (30%) percent.
Capital gains derived by the Company in such jurisdictions may often be exempt from foreign income or
withholding taxes at source, although the treatment of capital gains varies among jurisdictions.
Changes in Law. All laws, including laws relating to taxation in the Cayman Islands and the United
States (and in other jurisdictions as well), are subject to change without notice.
Shareholders of the Company
Shareholders who are not otherwise subject to Cayman Islands or United States taxes by reason of
their residence, domicile or other particular circumstances should not become subject to any such taxes by
reason of the ownership, transfer or redemption of the Shares.
Shareholders who are or may be subject to U.S. Federal income tax on their worldwide income
should be aware of certain tax consequences of investing directly or indirectly in Shares and should be certain
to consult with their own tax advisors in this regard.
Dividend and redemption payments made by the Company to Shareholders who are not U.S. Persons
should not be subject to U.S. Federal income tax, provided that Shares are not held in connection with a U.S.
trade or business of the Shareholder in the year of receipt. Individual holders of Shares who are neither
present or former U.S. citizens nor U.S. residents (as determined for U.S. estate and gift tax purposes) should
not be subject to U.S. estate and gift taxes with respect to their ownership of such Shares. A Shareholder's
change in status to a U.S. Person will result in adverse U.S. tax consequences, will constitute a violation of the
terms of this Prospectus and will result in a compulsory redemption of Shares.
The foregoing summary does not address tax considerations, which may be applicable to certain
Shareholders under the laws of jurisdictions other than the Cayman Islands or the U.S. The Company has no
present plans to apply for any certifications or registrations, or to take any other actions under the laws of any
jurisdictions, which would afford relief to local investors therein from the normal tax regime otherwise
applicable to an investment in the Shares. It is the responsibility of all persons interested in purchasing the
Shares to inform themselves as to any income or other tax consequences arising in the jurisdictions in which
they are resident or domiciled for tax purposes, as well as any foreign exchange or other fiscal or legal
restrictions, which are relevant to their particular circumstances in connection with the acquisition, holding or
disposition of the Shares. The value of the Company's investments may also be affected by repatriation and
exchange control regulations.
The United States Employee Retirement Income Security Act of 1974, as amended (quot;ERISAquot;) imposes
certain requirements on quot;employee benefit plansquot; (as defined in Section 3(3) of ERISA) subject to ERISA,
including entities such as collective investment funds and separate accounts whose underlying assets include
the assets of such plans (collectively, quot;ERISA Plansquot;) and on those persons who are fiduciaries with respect to
ERISA Plans. Investments by ERISA Plans are subject to ERISA's general fiduciary requirements, including
the requirement of investment prudence and diversification and the requirement that an ERISA Plan's
investments be made in accordance with the documents governing the plan. The prudence of a particular
investment must be determined by the responsible fiduciary of an ERISA Plan by taking into account the
ERISA Plan's particular circumstances, including the ERISA Plan's existing investment portfolio, and all of
the facts and circumstances of the investment including, but not limited to, the matters discussed above under
Section 406 of ERISA and Section 4975 of the Code prohibit certain transactions involving the assets
of an ERISA Plan (as well as those plans that are not subject to ERISA but which are subject to Section 4975
of the Code, such as individual retirement accounts (together with ERISA Plans, quot;Plansquot;)) and certain persons
(referred to as quot;parties in interestquot; for purposes of ERISA and quot;disqualified personsquot; for purposes of the
Code) having certain relationships to such Plans, unless a statutory or administrative exemption is applicable
to the transaction. A party in interest or disqualified person who engages in a nonexempt prohibited
transaction may be subject to excise taxes and other penalties and liabilities under ERISA and the Code, and
the transaction might have to be rescinded.
The U.S. Department of Labor has promulgated a regulation, 29 C.F.R. Section 2510.3-101 (the
quot;Plan Asset Regulationquot;), describing what constitutes the assets of a Plan with respect to the Plan's investment
in an entity for purposes of certain provisions of ERISA, including the fiduciary responsibility and prohibited
transaction provisions of Title I of ERISA and the related prohibited transaction provisions under Section
4975 of the Code. Under the Plan Asset Regulation, if a Plan invests in an quot;equity interestquot; of an entity that is
neither a quot;publicly offered securityquot; nor a security issued by an investment company registered under the
Investment Company Act, the Plan's assets include both the equity interest and an undivided interest in each
of the entity's underlying assets, unless it is established that the entity is an quot;operating companyquot;, which
includes for purposes of the Plan Asset Regulation a quot;venture capital operating companyquot;, or that equity
participation in the entity by quot;Benefit Plan Investorsquot; (as defined below) is not quot;significantquot;.
Under the Plan Asset Regulation, equity participation in an entity by Benefit Plan Investors (as
defined below) is quot;significantquot; on any date if, immediately after the most recent acquisition of any equity
interest in the entity, 25% or more of the value of any class of equity interests in the entity is held by Benefit
Plan Investors. The term quot;Benefit Plan Investorquot; is defined in the Plan Asset Regulation as: (a) any employee
benefit plan (as defined in Section 3(3) of ERISA), whether or not it is subject to the provisions of Title I of
ERISA; (b) any plan described in Section 4975(e)(1) of the Code; and (c) any entity whose underlying assets
include plan assets by reason of the investment in the entity by such employee benefit plan and/or plan. For
purposes of this determination, the value of equity interests held by a person (other than a Benefit Plan
Investor) that has discretionary authority or control with respect to the assets of the entity or that provides
investment advice for a fee (direct or indirect) with respect to such assets (or any affiliate of any such person)
Shares in the Company should be considered to be an “equity interest” in the Company for purposes
of the Plan Asset Regulation, and the Shares will not constitute “publicly offered securities” for purposes of
the Plan Asset Regulation. In addition, the Company will not be registered under the Investment Company
Act and is not expected to qualify as a “venture capital operating company.”
The Investment Manager intends to use commercially reasonable efforts to restrict transfers of any
equity interest in the Company so that ownership of each class of shares in the Company by Benefit Plan
Investors will remain below the 25% threshold contained in the Plan Asset Regulation. Although there can
be no assurance that such will be the case, the assets of the Company should not constitute “plan assets” for
purposes of ERISA and Section 4975 of the Code.
If the assets of the Company were deemed to constitute the assets of a Plan, the fiduciary making an
investment in the Company on behalf of an ERISA Plan could be deemed to have improperly delegated its
asset management responsibility, the assets of the Company could be subject to ERISA’s reporting and
disclosure requirements, and transactions involving the assets of the Company would be subject to the
fiduciary responsibility and prohibited transaction provisions of ERISA and the prohibited transaction rules
of Section 4975 of the Code. Accordingly, certain transactions that the Company may enter into, or may have
entered into, in the normal course of its operations might result in non-exempt prohibited transactions and
might have to be rescinded. A party in interest or disqualified person that engaged in a non-exempt
prohibited transaction may be subject to nondeductible excise taxes and other penalties and liabilities under
ERISA and the Code. In addition, such “plan asset” treatment would subject the calculation and payment of
the Investment Manager’s fees to applicable prohibited transaction and certain conflict of interest provisions
of ERISA and the Code. Consequently, if at any time the Investment Manager determines that assets of the
Company may be deemed to be “plan assets” subject to ERISA and Section 4975 of the Code, the
Investment Manager may take certain actions it may determine to be necessary or appropriate, including
requiring one or more investors to redeem otherwise dispose of all or part of their Shares in the Company or
termination and liquidating the Company.
Each Plan fiduciary who is responsible for making the investment decisions whether to invest in the
Company should determine whether, under the general fiduciary standards of investment prudence and
diversification and under the documents and instruments governing the Plan, an investment in the Shares is
appropriate for the Plan, taking into account the overall investment policy of the Plan and the composition of
the Plan's investment portfolio. Any Plan proposing to invest in the Company should consult with its counsel
to confirm that such investment will not result in a prohibited transaction and will satisfy the other
requirements of ERISA and the Code.
The sale of any Shares to a Benefit Plan Investor is in no respect a representation by the Company or
the Investment Manager and their affiliates or any other placement agent or arranger that such an investment
meets all relevant legal requirements with respect to investments by Plans generally or any particular Plan, or
that such an investment is appropriate for Plans generally or any particular Plan.
Regardless of whether the assets of the Company are deemed to be quot;plan assetsquot;, the acquisition of
Shares by a Plan could, depending upon the facts and circumstances of such acquisition, be a prohibited
transaction, for example, if any of the Company or the Investment Manager and their affiliates were a party in
interest or disqualified person with respect to the Plan. However, such a prohibited transaction may be
treated as exempt under ERISA and the Code if the Shares were acquired pursuant to and in accordance with
one or more quot;class exemptionsquot; issued by the U.S. Department of Labor, such as the QPAM Exemption,
Prohibited Transaction Class Exemption (quot;PTCEquot;) 90-1 (a class exemption for certain transactions involving
an insurance company pooled separate account), PTCE 91-38 (a class exemption for certain transactions
involving a bank collective investment fund), PTCE 95-60 (a class exemption for certain transactions
involving an insurance company general account), and PTCE 96-23 (a class exemption for certain transactions
determined by an in-house asset manager).
Any insurance company proposing to invest assets of its general account in the Company should also
consider the extent to which such investment would be subject to the requirements of ERISA in light of the
U.S. Supreme Court's decision in John Hancock Mutual Life Insurance Co. v. Harris Trust and Savings
Bank and under any subsequent legislation or other guidance that has or may become available relating to that
decision, including Section 401(c) of ERISA and the regulations thereunder published by the U.S.
Department of Labor in January, 2000.
The Investment Manager will require a fiduciary of an ERISA Plan that proposes to acquire Shares to
represent that it has been informed of and understands the Company’s investment objectives, policies,
strategies and limitations, fee structure and that the decision to acquire Shares was made in accordance with
its fiduciary responsibilities under ERISA and that neither the Company, the Investment Manager, or any of
their affiliates has provided investment advice with respect to such decision. The Investment Manager will
also require any investor that is, or is acting on behalf of, a Plan to represent and warrant that its acquisition
and holding of Shares will not result in a nonexempt prohibited transaction under ERISA and/or Section
4975 of the Code.
Governmental plans and certain church plans, while not subject to the fiduciary responsibility
provisions of ERISA or the provisions of Section 4975 of the Code, may nevertheless be subject to state or
other federal laws that are substantially similar to the foregoing provisions of ERISA and the Code. The
Investment Manager will require similar representations and warranties with respect to the purchase of Shares
by any such plan. Fiduciaries of such plans should consult with their counsel before purchasing any Shares.
The discussion of ERISA and Section 4975 of the Code contained in this Prospectus is, of necessity,
general and does not purport to be complete. Moreover, the provisions of ERISA and Section 4975 of the
Code are subject to extensive and continuing administrative and judicial interpretation and review. Therefore,
the matters discussed above may be affected by future regulations, rulings and court decisions, some of which
may have retroactive application and effect.
ANY POTENTIAL INVESTOR CONSIDERING AN INVESTMENT IN THE COMPANY
THAT IS, OR IS ACTING ON BEHALF OF, A PLAN (OR A GOVERNMENTAL PLAN
SUBJECT TO LAWS SIMILAR TO ERISA AND/OR SECTION 4975 OF THE CODE) IS
STRONGLY URGED TO CONSULT ITS OWN LEGAL, TAX AND ERISA ADVISORS
REGARDING THE CONSEQUENCES OF SUCH AN INVESTMENT AND THE ABILITY TO
MAKE THE REPRESENTATIONS DESCRIBED ABOVE.
ADDITIONAL AND GENERAL INFORMATION
Cayman Islands Mutual Funds Law
The Company was incorporated in the Cayman Islands on August 23, 2001, and will be registered in
the Cayman Islands as a mutual fund, registered number CR-112415. The Company falls within the definition
of a “mutual fund” in terms of the Mutual Funds Law and accordingly is regulated in terms of the Mutual
Funds Law. However, the Company is not required to be licensed or to employ a licensed mutual fund
administrator because the minimum interest purchasable by a prospective investor in the Company is equal to
or exceeds U.S.$50,000 or its equivalent in any other currency. Accordingly, the obligations of the Company
are (a) to register the Company with the Monetary Authority appointed in terms of the Mutual Funds Law (b)
to file with the Monetary Authority prescribed details of this Prospectus and any changes to it (c) to file
annually with the Monetary Authority accounts audited by an approved auditor and (d) to pay a prescribed
registration fee and thereafter the annual fee currently approximately U.S.$3,049 per annum.
As a regulated mutual fund the Company is subject to the supervision of the Monetary Authority and
to have its accounts audited and filed with the Monetary Authority. In addition the Monetary Authority may
ask the Board to give the Monetary Authority such information or such explanation in respect of the
Company as the Monetary Authority may reasonably require to enable him to carry out his duty under the
Mutual Funds Law.
The Board, if requested to do so, must give the Monetary Authority access to or provide at any
reasonable time all records relating to the Company and the Monetary Authority may copy or take an extract
of a record to which he is given access. Failure to comply with these requests by the Monetary Authority may
result in substantial fines being imposed on the Board and may result in the Monetary Authority applying to
the court to have the Company wound up.
The Monetary Authority is prohibited by the Mutual Funds Law from disclosing any information
relating to the affairs of a mutual fund other than disclosure required for the effective regulation of a mutual
fund or when required to by law or by the court.
The Monetary Authority may take certain actions if he is satisfied that a regulated mutual fund is or is
likely to become unable to meet is obligations as they fall due or is carrying on or is attempting to carry on
business or is winding up its business voluntarily in a manner that is prejudicial to its investors or creditors.
The powers of the Monetary Authority include inter alia the power to require the substitution of the Board, to
appoint a person to advise the Company on the proper conduct of its affairs or to appoint a person to assume
control of the affairs of the Company. There are other remedies available to the Monetary Authority
including the ability to apply to the court for approval of other actions.
Proceeds of Criminal Conduct Law (Revised) as amended (“PCCL”) and The Money Laundering
Regulations (Revised) (the quot;Regulationsquot;)
As part of the Company’s responsibility for the prevention of money laundering, the Company, its agents,
affiliates, subsidiaries or associates will require a detailed verification of each investor’s identity and the source
of the payment.
As a condition for subscription the Company and the Administrator require the completion and
submission to the Administrator of the “Anti Money Laundering” letter attached to the Subscription
Agreement. In the event of delay or failure by the investor to produce any information required for
verification purposes, the Administrator will refuse to accept the application and the subscription monies
If any person who is resident in the Cayman Islands has a suspicion that a payment to the Company
(by way of subscription or otherwise) contains the proceeds of criminal conduct that person is required to
report such suspicion pursuant to The Proceeds of Criminal Conduct Law (Revised).
By way of example, an individual may be required to produce a current (non-expired), legible copy of
a passport or identification card containing a photo and date of birth. In the case of corporate applicants, this
may require production of a certified copy of the certificates of incorporation (and any change of name),
memorandum and articles of association (or the equivalent), the names, occupations, dates of birth and
residential and business addresses of all directors.
In the event of delay or failure by the applicant to produce any information required for verification
purposes, the Administrator may refuse to accept the application and the subscription monies relating thereto
or may refuse to process a redemption request until proper information has been provided.
Many jurisdictions are in the process of changing or creating anti-money laundering, embargo and
trade sanctions, or similar laws, regulations, requirements (whether or not force of law) or regulatory policies
and many financial intermediaries are in the process of changing or creating responsive disclosure and
compliance policies (the “Requirements”) and the Company could be requested or required to obtain certain
assurances from the investors subscribing for any Shares, disclose information pertaining to them to
governmental, regulatory or other authorities or to financial intermediaries or engage in due diligence or take
other related actions in the future. It is the Company’s policy to comply with the Requirements to which it is
or may become subject and to interpret them broadly in favor of disclosure. Each investor will be required to
agree in the Subscription Agreement, and will be deemed to have agreed by owning any Shares, that it will
provide additional information or take such actions as may be necessary or advisable for the Company (in the
Investment Manager’s sole judgment) to comply with any Requirements, related legal process or appropriate
requests (whether formal or informal or otherwise). Each investor, by executing the Subscription Agreement,
consents, and by owning any Shares is deemed to have consented, to disclosure by the Company and its
agents to relevant third parties of information pertaining to it in respect of Requirements or information
requests related thereto. Failure to honor any such request may result in compulsory redemption by the
Company or the forced sale to another investor of such investor’s Shares. In addition, the Company and
other related entities will comply with the U.S. Bank Secrecy Act, the USA Patriot Act and any other anti-
money laundering, anti-terrorism and similar laws, rules and regulations and will disclose any information
required or requested by authorities in connection therewith.
Further Issues of Shares
The Shares shall be at the disposal of the Board and the Company may, by resolution of the Board, at
any time decide to offer further unissued Shares up to the amount of authorised share capital and, without
prejudice to any special rights previously conferred on the holders of existing Shares, to allot, issue, grant
options over or otherwise dispose of the Shares or any other classes of Shares with or without preferred,
deferred or other special rights or restrictions, whether with regard to dividend, voting or otherwise and to
such persons, at such times and on such other terms as the Board shall think proper, but not in a manner to
reduce the financial rights of Shareholders without their consent.
The objects of the Company, as provided for in Clause 3 of the Company's Memorandum of
Association, are unrestricted and the Company therefore has the full power and authority to carry out any
object not prohibited by the Companies Law (Revised) or any other law or public policy of the Cayman
Share Premium Account
The share premium received by way of subscriptions for Shares will be credited to the Company’s
share premium account and will be included in the Net Asset Value. The share premium account may be used
in any manner allowed under the Companies Law (Revised).
Repurchase of Shares
Under the Companies Law (Revised), subject to certain conditions, the Company is permitted to
repurchase or redeem its Shares out of profits of the Company or out of the proceeds from newly issued
Shares of equal value. Repurchased or redeemed Shares shall be treated as cancelled or maybe reissued by the
Company at that time. Redemptions of Shares will be made in accordance with the terms of this Prospectus.
Alterations to the Company's Share Capital
The Company may, by an ordinary resolution of the Shareholders, (i.e., a simple majority of those
Shareholders present and entitled to vote, who do vote in favor of the resolution) increase or, by a special
resolution (i.e., a resolution passed by a two-thirds (2/3) majority of those persons present and entitled to vote
who do vote in favor of the resolution) of the Shareholders subject to confirmation of the courts of the
Cayman Islands, reduce its authorised share capital.
Amendment of Memorandum and Articles of Association
The Memorandum and Articles of Association of the Company may only be altered or amended by
the passing of a special resolution of the Shareholders to that effect.
Directors Interest in Contracts
A Director or officer of the Company may be or become a director or other officer of, or otherwise
interested in, any company promoted by the Company or in which the Company may be interested as
shareholder or otherwise, and no such Director or officer shall be accountable to the Company for any
remuneration or other benefits received arising from the foregoing. Provided he first declares his interest to
the Company, a Director may hold any office or place of profit under the Company or under any company in
which the Company shall be a shareholder or otherwise interested, may contract with the Company, be
interested in any contract or arrangement entered into by or on behalf of the Company and retain any profit
arising from any such office or place of profit or realized by any such contract or arrangement. Provided
notice is given as described above, a Director or officer, notwithstanding his interest, may be counted in the
quorum present at any meeting and he may vote on any appointment or arrangement in which he is interested
other than his own appointment or the arrangement of the terms thereof.
The Directors shall each be entitled to such remuneration as may be voted to them by the Company
in General Meeting and this may be in addition to such remuneration as may be payable under any other
Article hereof. Such remuneration shall be deemed to accrue from day to day.
A general notice that a Director or officer is a member of any specified firm or company, and is to be
regarded as interested in all transactions with that firm or company, shall be a sufficient disclosure under the
terms of the Company's Memorandum and Articles of Association as regards such Director or officer and the
said transactions, and after such general notice it shall not be necessary for such Director or officer to give a
special notice relating to any particular transaction with that firm or company.
Save as provided in the Companies Law (Revised), as specifically set out in the Memorandum and
Articles of Association or as may be determined by the Shareholders from time to time by the passing of a
special resolution, the business of the Company shall be managed by the Board, who may pay all expenses
incurred in setting up and registering the Company and may exercise all the powers of the Company. In
particular, the Board may exercise all the powers of the Company to borrow money, and to mortgage or
charge the Company's undertaking, property and uncalled capital, or any part thereof, and to issue debentures,
debenture stock, bonds and other securities whether outright or as security for any debt, liability or obligation
of the Company or of any third party.
Neither the Directors, nor any connected person, the existence of which is known to or could with
reasonable diligence be ascertained by that Director, whether or not through another party, have any interest
in the Shares of the Company, nor have they been granted any options in respect of the Shares of the
None of the Directors has any interest, direct or indirect, in any transactions, which are unusual in
their nature or significant to the business of the Company during the current or immediately preceding
None of the Directors has a service contract, existing or proposed, with the Company.
No loan or guarantee has been granted or provided by the Company to any Director.
None of the Directors has a service contract, existing or proposed, with the Company.
There are no legal, arbitration or other proceedings pending or threatened against the Company, nor
have there been since its incorporation.
As of the date of this document the Company has no loan capital (including term loans) outstanding
or created but unissued, and no outstanding mortgages, charges, debentures or other borrowings, including
bank overdrafts and liabilities under acceptances or acceptance credits, hire purchase or finance lease
commitments, guarantees or other contingent liabilities.
Reports to the Shareholders
The Company will furnish annual reports to its Shareholders. The Administrator will be responsible
for computing as of each Valuation Date or at such other date as may be decided by the Directors or the
Officers of the Company, the Net Asset Value of the Company and the Net Asset Value of every class of
Shares. The Company will send to Shareholders monthly reports of the Net Asset Value of the Company and
the Net Asset Value of every class of Shares.
Meetings of Shareholders
Meetings of Shareholders will be held at such time and place as may be determined by the Board in
accordance with the Company's Memorandum and Articles of Association and otherwise in accordance with
Cayman Islands law.
Inquiries concerning the Company and the Shares, including information concerning subscription
and redemption procedures and current Net Asset Value, should be directed to the Administrator at the
address set forth in the DIRECTORY appearing elsewhere in this Prospectus.
The following contracts have been entered into by the Company (other than in the ordinary course of
business) and are, or may be, material.
Under the terms of the Investment Management Agreement effective September 1, 2001, between the
Company and the Investment Manager, the Investment Manager agrees to act as investment manager to the
Company. This agreement shall continue in force unless and until terminated by either party giving the other
party not less than 90 days’ written notice (or such shorter notice as the other party may agree to accept),
except that this agreement may be terminated forthwith by either party if the other party shall commit any
breach of its obligations under the agreement.
Documents Available For Inspection
Copies of the following documents will be available for inspection by prospective investors or their
representatives at the offices of the Administrator:
♦ Memorandum & Articles of Association and Certificate of Incorporation of the Company
♦ Certificate of Registration of the Company under the Mutual Funds Law (Revised)
♦ Investment Management Agreement
♦ Bank Agreement
♦ Administration and Registrar and Transfer Agency Agreement
♦ Mutual Funds Law (Revised) of the Cayman Islands
♦ The Companies Law (Revised) of the Cayman Islands
Tannenbaum Helpern Syracuse & Hirschtritt LLP, Truman Bodden & Company
The law firms of Tannenbaum Helpern Syracuse & Hirschtritt LLP and Truman Bodden &
Company have acted as legal counsel to the Company with regard to matters of US law and Cayman Islands
law in connection with its organization and may serve as US counsel and Cayman Islands counsel,
respectively, to other investment companies administered by the Administrator or managed by the Investment
Manager or persons connected to the Investment Manager. Truman Bodden & Company has passed upon
certain matters of Cayman Islands law in connection with this Offering. Tannenbaum Helpern Syracuse &
Hirschtritt LLP and Truman Bodden & Company do not represent the Shareholders or prospective investors
in the Company.
At the Investment Manager we recognize the importance of protecting the Shareholders’ privacy. As
such, the Company and the Investment Manager have policies in place to maintain the confidentiality and
security of our Shareholders’ information. The following is designed to help you understand what
information we collect from you and how we use information to serve your account.
Categories Of Information We May Collect
In the normal course of business, we may collect the following types of information:
Information you provide in the subscription documents and other forms (including name, address, social
security number, date of birth, income and other financial-related information)
Data about your transactions with us (such as the types of investments you have made and your account
How We Use Your Information That We Collect
Any and all nonpublic personal information received by the Investment Manager with respect to the
Shareholders who are natural persons, including the information provided to the Company by a Shareholder
in the subscription documents, will not be shared with nonaffiliated third parties which are not service
providers to the Company or the Investment Manager without notice to or prior consent from such
Shareholders. In the normal course of business, we may disclose the kinds of nonpublic personal information
listed above to nonaffiliated third party service providers involved in servicing and administering products and
services on our behalf. Such service providers include but are not limited to the Administrator, the
Accountant, the auditors and the legal advisors of the Company. Additionally, the Company and the
Investment Manager may disclose such nonpublic personal information as required by law (such as to
respond to a subpoena or to prevent fraud). Without limiting the foregoing, the Company and the
Investment Manager may disclose nonpublic personal information about you to governmental entities and
others in connection with meeting their obligations to prevent money laundering. In addition, if the
Company chooses to dispose of any Shareholder’s nonpublic personal information that the Company is not
legally bound to maintain, then the Company will do so in a manner that reasonably protects such
information from unauthorized access.
Confidentiality and Security
We restrict access to nonpublic personal information about our customers to those employees and
agents who need to know that information in order to provide products and services to you. We maintain
physical, electronic and procedural safeguards to protect your nonpublic personal information.