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Rye Select Broad Select Market Ltd

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  • 1. Rye Select Broad Market Portfolio Limited September 30, 2008 FOR FINANCIAL PROFESSIONAL USE ONLY AND MAY NOT BE USED WITH THE GENERAL PUBLIC 1
  • 2. Disclaimer THIS IS A CONFIDENTIAL DISCUSSION. THIS DOCUMENT IS AN OUTLINE AND IS INCOMPLETE IF NOT ACCOMPANIED BY A VERBAL PRESENTATION. THE INFORMATION CONTAINED HEREIN IS NOT INTENDED FOR DISTRIBUTION TO, OR USE BY, ANY PERSON OR ENTITY IN ANY JURISDICTION OR COUNTRY WHERE SUCH DISTRIBUTION OR USE WOULD BE CONTRARY TO ANY LAW OR REGULATION OR WHICH WOULD SUBJECT RYE SELECT BROAD MARKET PORTFOLIO LIMITED OR TREMONT GROUP HOLDINGS, INC. OR THEIR AFFILIATES TO ANY REGISTRATION REQUIREMENT WITHIN SUCH JURISDICTION OR COUNTRY. NONE OF THE INFORMATION CONTAINED HEREIN CONSTITUTES AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO ACQUIRE, OR ANY RECOMMENDATION CONCERNING, INTERESTS IN RYE SELECT BROAD MARKET PORTFOLIO LIMITED OR ANY OTHER SECURITY OR INVESTMENT PRODUCT. INTERESTS IN RYE SELECT BROAD MARKET PORTFOLIO LIMITED ARE MADE ONLY TO QUALIFIED INVESTORS BY THE FUND’S INFORMATION MEMORANDUM, WHICH SHOULD BE READ IN ITS ENTIRETY. THIS MATERIAL IS BEING FURNISHED ONLY TO PROSPECTIVE QUALIFIED INVESTORS AND/OR THEIR ADVISORS ON A PRIVATE AND CONFIDENTIAL BASIS TO PROVIDE CERTAIN SUMMARY INFORMATION REGARDING RYE SELECT BROAD MARKET PORTFOLIO LIMITED. NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, SUCH PROSPECTIVE INVESTOR (AND EACH EMPLOYEE, REPRESENTATIVE, OR OTHER AGENT OF SUCH PROSPECTIVE INVESTOR) MAY DISCLOSE TO ANY AND ALL PERSONS, WITHOUT LIMITATION OF ANY KIND, THE U.S. FEDERAL INCOME TAX TREATMENT AND TAX STRUCTURE OF (I) RYE SELECT BROAD MARKET PORTFOLIO LIMITED, AND (II) ANY TRANSACTIONS DESCRIBED HEREIN, AND ALL MATERIALS OF ANY KIND (INCLUDING OPINIONS AND OTHER TAX ANALYSES) THAT ARE PROVIDED TO SUCH PROSPECTIVE INVESTOR RELATING TO SUCH TAX TREATMENT OR TAX STRUCTURE, EXCEPT WHERE CONFIDENTIALITY IS REASONABLY NECESSARY TO COMPLY WITH SECURITIES LAWS. NONE OF THE CONTENTS OF THIS MATERIAL MAY BE REPRODUCED, STORED IN A DATA RETRIEVAL SYSTEM OR TRANSMITTED IN ANY FORM OR BY ANY MEANS – ELECTRONIC, MECHANICAL, PHOTOCOPY REPRODUCTION, VIA RECORDING OR OTHERWISE – EITHER IN WHOLE OR IN PART, WITHOUT THE EXPRESS WRITTEN AUTHORIZATION OF RYE SELECT BROAD MARKET PORTFOLIO LIMITED OR RYE INVESTMENT MANAGEMENT®. CERTAIN INFORMATION PRESENTED HEREIN HAS BEEN OBTAINED OR DERIVED FROM SOURCES BELIEVED BY RYE INVESTMENT MANAGEMENT® TO BE RELIABLE, BUT NEITHER THE FUND NOR ANY OF ITS AFFILIATES MAKES ANY REPRESENTATION AS TO THE ACCURACY OR COMPLETENESS OF SUCH INFORMATION. INVESTING IN HEDGE FUNDS MAY BE CONSIDERED SPECULATIVE AND MAY INVOLVE A SIGNIFICANT DEGREE OF RISK. THEY ARE ONLY APPROPRIATE FOR CONSIDERATION BY QUALIFIED PERSONS WHO, AT A MINIMUM, ARE ACCREDITED INVESTORS AND, IN THE CASE OF RYE SELECT BROAD MARKET PORTFOLIO LIMITED, QUALIFIED PURCHASERS, AS WELL (AS BOTH TERMS ARE DEFINED IN THE SECURITIES ACT OF 1933, AS AMENDED, AND THE INVESTMENT COMPANY ACT OF 1940, AS AMENDED, RESPECTIVELY), AND WHO CAN EVALUATE THE RISKS ASSOCIATE WITH AN INVESTMENT IN HEDGE FUNDS AND CAN BEAR THE FINANCIAL RISKS INVOLVED. PLEASE REFER TO “RISKS RELATING TO HEDGE FUND INVESTING” ON PAGE 3 FOR MORE INFORMATION. THE STANDARD & POOR’S 500 DRI INDEX (quot;S&P 500 DRIquot;) IS A WIDELY RECOGNIZED, UNMANAGED INDEX OF MARKET ACTIVITY BASED UPON THE AGGREGATE PERFORMANCE OF A SELECTED PORTFOLIO OF PUBLICLY TRADED COMMON STOCKS INCLUDING MONTHLY ADJUSTMENTS TO REFLECT THE REINVESTMENT OF DIVIDENDS AND OTHER DISTRIBUTIONS. THE S&P 500 REFLECTS THE TOTAL RETURN OF SECURITIES COMPRISING THE INDEX, INCLUDING CHANGES IN MARKET PRICES AS WELL AS ACCRUED INVESTMENT INCOME, WHICH IS PRESUMED TO BE REINVESTED. THESE RESULTS ARE SHOWN TO GIVE A PERSPECTIVE OF THE HISTORICAL PERFORMANCE OF THE U.S. EQUITY MARKET. T-BILL IS A U.S. GOVERNMENT DEBT SECURITY WITH A MATURITY THAT IS LESS THAN ONE YEAR. 2
  • 3. Risks of Hedge Fund Investing Investors should be aware that an investment in a hedge fund, including a fund of hedge funds (“fund”), may be speculative, illiquid and involve a substantial element of risk. Such an investment is suitable only for consideration by qualified subscribers who, at a minimum, are Accredited Investors (as defined by SEC) and only for a limited portion of the risk segment of such subscriber's portfolio. Prospective investors should consider the following risk factors in evaluating the merits and suitability of an investment in a fund. However, please be aware that this list of risk factors is not exhaustive. Speculative. No Guaranteed Return of Capital. An investment in a fund is generally considered speculative and involve a substantial degree of risk. No assurance can be given that a fund will achieve its overall investment objective of seeking substantial capital appreciation. Investors are at risk of losing all or a substantial amount of their investments in a fund. Limited Operating History. A fund could have limited operating history and the underlying managers may have limited or no operating histories. Limited Access to Information on Investments. The investment manager may only have limited information with regard to the actual underlying investments made by the managers and may have little or no means of verifying information provided by managers. Limited Rights. Investors in a fund may have limited rights with respect to their investment interest, including limited voting rights and limited participation in management of the Alternative Investments. Illiquid Investment. Interests in a fund generally are subject to substantial restrictions on transfer and have limited liquidity. Use of Non-Traditional Investment Techniques. Various risks are associated with the securities and other investments in which managers may invest and the specialized investment techniques which they may use. Potential for Lack of Diversification. Although a fund sometimes intends to invest with several managers, managers may, inadvertently, hold the same investments thereby making a fund's investments more concentrated than anticipated. Use of Leverage. Investment managers may use leverage, including borrowing to buy securities on margin. A fund will indirectly bear this financial risk to the extent it invests with managers which may choose to employ leverage. Fees and Expenses. Investors in the Fund will bear fees, expenses and performance-based allocations at the Fund level and also at the manager level. The fees and performance-based allocations payable by the Fund and its investors are higher than the fees typically charged by registered mutual funds. Conflicts of Interest. Investors in a fund will rely on the experience and judgment of the investment manager and sponsor, who may be subject to certain conflicts of interests. Country of Citizenship or Domicile. Investors in a fund are urged to seek appropriate advice regarding any applicable legal requirements and any applicable taxation and exchange control regulations in the county of their citizenship, residence or domicile, which may be relevant to the subscription, purchase, holding, exchange, redemption or disposal of any fund. Lack of Management Control by Investors. Investors cannot take part in the management or control of a fund’s business. The investment manager will have wide latitude in making investment decisions. Certain Tax Risks. An investment in a fund may involve certain tax risks. In addition, potential delays in manager reporting may require limited partners to seek extensions of the deadline to file their tax returns. Tax Structure. Certain funds may have complex tax structures and may not distribute annual tax information prior to April 15 of each year, thereby requiring investors in funds to obtain extensions for filing tax returns each year. Regulatory Oversight. Many funds are not, nor, generally, are their underlying portfolio funds, registered as investment companies under the U.S. Investment Company Act of 1940, as amended. The foregoing does not purport to be a complete enumeration or explanation of the risks involved in an investment in a fund including the Rye Select Broad Market Portfolio Limited. Prospective investors are urged to read the entire offering memorandum of any fund in which such investor may seek to invest. 3
  • 4. Contents Rye Investment Management® 5 Rye Select Funds 6 Rye Select Broad Market Portfolio Limited Key Terms 8 Investment Strategy 9 Administration 11 Value-Added Services 12 Performance 13 Contacts 22 4
  • 5. Rye Investment Management® A division of Tremont Group Holdings, Inc. Origins within the firm dating back to 1994 Provides exclusive access to select hedge fund managers Dedicated product, marketing and investor services Shared legal, compliance, administration, sales and technology resources Develops, manages and promotes the Rye Select Funds Confidential. The material presented herein is informational only and none of such information constitutes an offer to sell, or a solicitation of an offer to acquire, or any recommendation involving interests in any of the Rye Select Funds. Such an offer, if made, is made only to qualified investors by the relevant fund’s information memorandum, which should be read in its entirety. Please read disclaimer on Page 2 and Risks of Hedge Fund Investing on Page 3. 5
  • 6. Rye Select Funds Select group of the industry’s most experienced and proven investment talent Generally unavailable hedge fund managers Offered to Accredited Investors and Qualified Purchasers 4 investment strategies 13 funds (onshore and offshore) Over 650 investor accounts Over $5 billion in assets Confidential. The material presented herein is informational only and none of such information constitutes an offer to sell, or a solicitation of an offer to acquire, or any recommendation involving interests in any of the Rye Select Funds. Such an offer, if made, is made only to qualified investors by the relevant fund’s information memorandum, which should be read in its entirety. Please read disclaimer on Page 2 and Risks of Hedge Fund Investing on Page 3. 6
  • 7. Product Offerings Activist Nelson Peltz Rye Select Activist Segregated Portfolio* (Event Driven) Over 30 year record of value creation “Operational Activism” with public companies Broad Market Over 14 years of consistent positive returns Rye Select Broad Market Portfolio Limited* (Equity Market Neutral) A hedged option trading strategy Rye Select Broad Market XL Portfolio Limited* Defined risk and return parameters Rye Select Broad Market Insurance Portfolio, LDC* Equities Renaissance Technologies LLC Rye Select Equities Segregated Portfolio* (Long/Short Equity) Long-biased U.S. equities fund Strict adherence to mathematical & statistical methods Futures Renaissance Technologies LLC Rye Select Futures Segregated Portfolio* (Global Macro) Leveraged, slow-trading, global futures & forwards fund Strict adherence to mathematical & statistical methods * U.S. funds available Confidential. The material presented herein is informational only and none of such information constitutes an offer to sell, or a solicitation of an offer to acquire, or any recommendation involving interests in any of the Rye Select Funds. Such an offer, if made, is made only to qualified investors by the relevant fund’s information memorandum, which should be read in its entirety. Please read disclaimer on Page 2 and Risks of Hedge Fund Investing on Page 3. 7
  • 8. Rye Select Broad Market Portfolio Limited Investment Objective Long term capital appreciation Positive returns irrespective of stock market volatility or direction Key Terms Inception September 1, 2001 Minimum Subscription $500,000 Management Fee 1.75% (Class B) Administration Fee 0.20% Subscriptions Monthly Redemptions (Notice Period) Monthly (36 Days) Administration The Bank of New York Mellon Auditor KPMG Legal Counsel Walkers Assets (09/30/08) U.S. $1,207,103,222 Confidential. The material presented herein is informational only and none of such information constitutes an offer to sell, or a solicitation of an offer to acquire, or any recommendation involving interests in any of the Rye Select Funds. Such an offer, if made, is made only to qualified investors by the relevant fund’s information memorandum, which should be read in its entirety. Please read disclaimer on Page 2 and Risks of Hedge Fund Investing on Page 3. 8
  • 9. Investment Strategy “ Split Strike Conversion” a hedged, market timing strategy with defined risk and return parameters designed to profit from short periods of growth in U.S. equities the ‘position’ generally consists of: the purchase of a basket of U.S. large cap stocks the purchase of equity index put options (value approx. equal to stocks) the sale of equity index call options (value approx. equal to stocks) Confidential. The material presented herein is informational only and none of such information constitutes an offer to sell, or a solicitation of an offer to acquire, or any recommendation involving interests in any of the Rye Select Funds. Such an offer, if made, is made only to qualified investors by the relevant fund’s information memorandum, which should be read in its entirety. Please read disclaimer on Page 2 and Risks of Hedge Fund Investing on Page 3. 9
  • 10. Investment Strategy (cont.) Return Expectations The purchase of a basket of large cap U.S. equities establishes the position Buying index put options establishes a floor that limits the value of a decline in the basket of equities (see above) as it is offset Profitability by gains on the long puts Writing out-of-the-money index call options establishes a ceiling in which further gains on the basket of equities (see below) are offset by liabilities to these short calls Market exposure has historically been between 1% - 2% 590 600 610 Index Level Confidential. The material presented herein is informational only and none of such information constitutes an offer to sell, or a solicitation of an offer to acquire, or any recommendation involving interests in any of the Rye Select Funds. Such an offer, if made, is made only to qualified investors by the relevant fund’s information memorandum, which should be read in its entirety. Please read disclaimer on Page 2 and Risks of Hedge Fund Investing on Page 3. 10
  • 11. Administration The Bank of New York Mellon (“BNY”) Founded in 1784 by Alexander Hamilton Oldest bank in the United States Principal subsidiary of The Bank of New York Mellon Corporation (NYSE:BK) Established leader in global fund administration with over $23.1 trillion in assets under custody and administration Alternative Investment Services A division of BNY Offices in Hamilton, Bermuda; New York, New York; Somerset, New Jersey; Dublin, Ireland; Orlando, Florida and San Francisco, California Specialize in providing administration and related services to alternative investment entities Servicing more than 2,000 funds with more than $550 billion in assets 11
  • 12. Value-Added Services Rye Investment Management® maintains a private website at www.ryeselectfunds.com. News Letters Fact Sheets Presentations Weekly Performance Estimates Monthly Performance Estimates Monthly Performance Reports Monthly Account Statements Audited Financial Statements Confidential. The material presented herein is informational only and none of such information constitutes an offer to sell, or a solicitation of an offer to acquire, or any recommendation involving interests in any of the Rye Select Funds. Such an offer, if made, is made only to qualified investors by the relevant fund’s information memorandum, which should be read in its entirety. Please read disclaimer on Page 2 and Risks of Hedge Fund Investing on Page 3. 12
  • 13. Performance – Historical Monthly Returns Class A (closed to new investors December 31, 2002) Class B Past performance is not an indication of future results. Confidential. The material presented herein is informational only and none of such information constitutes an offer to sell, or a solicitation of an offer to acquire, or any recommendation involving interests in any of the Rye Select Funds. Such an offer, if made, is made only to qualified investors by the relevant fund’s information memorandum, which should be read in its entirety. Please read disclaimer on Page 2 and Risks of Hedge Fund Investing on Page 3. 13
  • 14. Performance Statistical Analysis (Class B) Rye Select Broad Market Portfolio Limited S&P 500 DRI Annualized Return 7.96% 7.00% Volatility 1.96% 10.54% Sharpe Ratio (U.S. T-bills) 2.68 0.4 Maximum Drawdown -0.53% -23.20% Recovery Period 1 Month ongoing Positive Months 85% 63% Average Down Month -0.14% -2.72% Alpha (S&P 500 DRI) 0.63% 0.00% Beta (S&P 500 DRI) 0.04 1.00 Correlation (S&P 500 DRI) 0.20 1.00 Past performance is not an indication of future results. Confidential. The material presented herein is informational only and none of such information constitutes an offer to sell, or a solicitation of an offer to acquire, or any recommendation involving interests in any of the Rye Select Funds. Such an offer, if made, is made only to qualified investors by the relevant fund’s information memorandum, which should be read in its entirety. Please read disclaimer on Page 2 and Risks of Hedge Fund Investing on Page 3. 14
  • 15. Performance Distribution of Monthly Returns (Class B) 35% 30% 25% 20% 15% 10% 5% 0% Past performance is not an indication of future results. Confidential. The material presented herein is informational only and none of such information constitutes an offer to sell, or a solicitation of an offer to acquire, or any recommendation involving interests in any of the Rye Select Funds. Such an offer, if made, is made only to qualified investors by the relevant fund’s information memorandum, which should be read in its entirety. Please read disclaimer on Page 2 and Risks of Hedge Fund Investing on Page 3. 15
  • 16. Performance Growth of $1,000,000 (Class B) $2,000,000 $1,750,000 $1,553,503 $1,500,000 $1,475,764 $1,250,000 $1,172,059 $1,000,000 $750,000 $500,000 Jan-03 Jan-04 Jan-05 Jan-06 Jan-07 Jan-08 RSBMPL S&P 500 DRI 90 Day T-Bill Past performance is not an indication of future results. Confidential. The material presented herein is informational only and none of such information constitutes an offer to sell, or a solicitation of an offer to acquire, or any recommendation involving interests in any of the Rye Select Funds. Such an offer, if made, is made only to qualified investors by the relevant fund’s information memorandum, which should be read in its entirety. Please read disclaimer on Page 2 and Risks of Hedge Fund Investing on Page 3. 16
  • 17. Performance Risk vs. Reward (Class B) 9% 1.96%, 7.96% 8% 10.54%, 7.00% 7% Average Annualized Return 6% 5% 4% 3% 0.44%, 2.80% 2% 1% 0% 0% 2% 4% 6% 8% 10% 12% Annualized Standard Deviation S&P 500 DRI Rye Select Broad Market Portfolio Limited 90 Day T-Bill Past performance is not an indication of future results. Confidential. The material presented herein is informational only and none of such information constitutes an offer to sell, or a solicitation of an offer to acquire, or any recommendation involving interests in any of the Rye Select Funds. Such an offer, if made, is made only to qualified investors by the relevant fund’s information memorandum, which should be read in its entirety. Please read disclaimer on Page 2 and Risks of Hedge Fund Investing on Page 3. 17
  • 18. Performance Equity Market Correlation (Class B) 10% Rye Select Broad Market Portfolio Limited 8% 6% 4% 2% (Class B) 0% -10% -5% -2% 0% 5% 10% -4% -6% -8% -10% S&P 500 Past performance is not an indication of future results. Confidential. The material presented herein is informational only and none of such information constitutes an offer to sell, or a solicitation of an offer to acquire, or any recommendation involving interests in any of the Rye Select Funds. Such an offer, if made, is made only to qualified investors by the relevant fund’s information memorandum, which should be read in its entirety. Please read disclaimer on Page 2 and Risks of Hedge Fund Investing on Page 3. 18
  • 19. Performance Performance in Hostile Markets (Negative S&P 500 Months Ranked from Worst) Class B 10% 8% 6% 4% RSBMPL Monthly Return 2% S&P 500 0% -2% -4% -6% -8% -10% Past performance is not an indication of future results. Confidential. The material presented herein is informational only and none of such information constitutes an offer to sell, or a solicitation of an offer to acquire, or any recommendation involving interests in any of the Rye Select Funds. Such an offer, if made, is made only to qualified investors by the relevant fund’s information memorandum, which should be read in its entirety. Please read disclaimer on Page 2 and Risks of Hedge Fund Investing on Page 3. 19
  • 20. Performance Rolling 1-Year Alpha (Class B) 12% 10% 8% 6% 4% 2% 0% Past performance is not an indication of future results. Confidential. The material presented herein is informational only and none of such information constitutes an offer to sell, or a solicitation of an offer to acquire, or any recommendation involving interests in any of the Rye Select Funds. Such an offer, if made, is made only to qualified investors by the relevant fund’s information memorandum, which should be read in its entirety. Please read disclaimer on Page 2 and Risks of Hedge Fund Investing on Page 3. 20
  • 21. Performance Rolling 1-Year Beta (Class B) 1.0 0.8 0.6 0.4 0.2 0.0 -0.2 -0.4 -0.6 -0.8 -1.0 Past performance is not an indication of future results. Confidential. The material presented herein is informational only and none of such information constitutes an offer to sell, or a solicitation of an offer to acquire, or any recommendation involving interests in any of the Rye Select Funds. Such an offer, if made, is made only to qualified investors by the relevant fund’s information memorandum, which should be read in its entirety. Please read disclaimer on Page 2 and Risks of Hedge Fund Investing on Page 3. 21
  • 22. Definitions • Alpha – A measure of performance on a risk-adjusted basis. Alpha takes the volatility (price risk) of a mutual fund and compares its risk-adjusted performance to a benchmark index. The excess return of the fund relative to the return of the benchmark index is a fund's alpha. • Beta – A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. • Sharpe Ratio – A ratio developed by Nobel laureate William F. Sharpe to measure risk-adjusted performance. The Sharpe ratio is calculated by subtracting the risk-free rate - such as that of the 10-year U.S. Treasury bond - from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio returns. • Correlation – In the world of finance, a statistical measure of how two securities move in relation to each other. Correlations are used in advanced portfolio management. • Volatility – A statistical measure of the dispersion of returns for a given security or market index. Volatility can either be measured by using the standard deviation or variance between returns from that same security or market index. Commonly, the higher the volatility, the riskier the security. • S&P 500 DRI Index – The S&P 500 is one of the most commonly used benchmarks for the overall U.S. stock market. The benchmark is an index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500 is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe. Companies included in the index are selected by the S&P Index Committee, a team of analysts and economists at Standard & Poor's. The S&P 500 is a market value weighted index - each stock's weight in the index is proportionate to its market value. 22
  • 23. Contact Information Rye Investment Management® Corporate Center at Rye 555 Theodore Fremd Avenue Rye, NY 10580 Phone: 914-925-1725 Fax: 914-925-4090 Email: sales@ryeinvestmentmanagement.com Website: www.ryeselectfunds.com 23