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Harvest Stargate Fund Version ENF1


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Harvest Stargate Fund Version ENF1

  1. 1. Investment Manager: Harvest Financial Services Ltd, Regulated by the Cyprus Securities and Exchange Commission, License Number 021/03 –Member of the Investor Protection Fund (TAE), Harvest Stargate Fund Ltd: Registered and Regulated by the Central Bank of Cyprus As an international Collective Investment Scheme Law No 47 (1) of 1999 (ICIS). NOVEMBER 2011 (V1EN) CONTACT: Telephone + 357 22 552800 [email_address] This document is for informational purposes only. This document does not constitute an offer, an invitation to offer, or a recommendation to enter into any transaction, nor does it constitute investment advice. This material does not constitute a solicitation to buy or sell securities in any jurisdiction in which such a solicitation is not authorized or to any person to whom it is unlawful to make such a solicitation,
  2. 2. Executive Summary Fund Structure Indicative Summary Terms Final Maturity <ul><li>Open Ended investments Unlimited holding period. </li></ul>Currency <ul><li>EUR or currency equivalent on the subscription date. </li></ul>Principal Protection Provider <ul><li>Some underline assets bear the principal protection of the issuer of the underline assets. The fund therefore offers soft capital protection only on selected underline assets that bare issuers guarantees. </li></ul>Form <ul><li>Shares – ICIS UNITS </li></ul>Notional <ul><li>[●] MM, minimum 5MM </li></ul>Issue Price <ul><li>NAV </li></ul>Redemption Amount <ul><li>The shares will be redeemed on the NAV: </li></ul><ul><li>The Shares may be redeemed prior to that on a monthly basis after year 2 . </li></ul><ul><li>Share Price (t) – Early Redemption Premium, whereby the Early Redemption Premium is initially 4%, and then decreasing by 1% on each anniversary of the Issue Date, until reaching 0% </li></ul>Additional Investments <ul><li>Investors will be able to subscribe additional amounts in the fund on a monthly basis, with rounds of 10,000 EURO </li></ul>Initial Allocation into the Underlying Fund <ul><li>The Initial Allocation of the Issuer to the Underlying Fund will be equal to 100%; thereafter the Trading Administrator will adjust the allocation between the assets of the Issuer in accordance with the Rebalancing Rules </li></ul>Investment Manager <ul><li>Harvest Financial Services Ltd - </li></ul>Transaction Fees <ul><li>Investment Manager Fees: 2.0% annual management fees on NAV and an incentive – performance fee of 20% of annual returns in excess of 10% </li></ul>
  3. 3. Risk Statements LIMITED OFFER Investment Horizon: The fund has a minimum holding period of 2 years with unlimited duration. Investors must maintain capital for this period. Non-Reliance on Historic Returns: Past performance does not guarantee future performance; investment in the fund should be based upon a complete assessment of their terms. Limitations of Simulated Returns: Certain presentations and back-testing or other statistical analysis materials that may have been provided in connection with explanations of the mechanics and/or potential returns of the Notes use pro forma analysis and hypothetical circumstances to estimate how the Reference Portfolio may have performed prior to its actual existence. Harvest provides no assurance or guarantee that the Notes will operate or would have operated in the past in a manner consistent with those materials. As such, any historical returns projected in such material, or any hypothetical simulations based on this analysis, provided in relation to the fund may not reflect the performance of, and are no guarantee or assurance in respect of the performance or returns of, the fund. Non-Linear Returns: Absent the occurrence of a Knock Out, the return on the Notes will be based on the performance of the Reference Portfolio over time. As such it is not possible to predict the return on the fund simply by reference to the initial and final values of the Reference Portfolio. The application of the Fund’s Mechanics may result in an opportunity cost when the return on the fund is compared to either a direct investment in the Reference Portfolio or as the underline assets principal protected investment where the exposure to the Reference Portfolio is achieved through a conventional call option issued by the product providers. Clean Up Event: If there is a significant reduction in either the value of the Reference Portfolio or, shortly after issuance of the fund, a rapid decline in interest rates, a Clean Up Event may occur. Under both such circumstances, the return on the fund will cease to offer any potential capital gain as a function of the future performance of the Underlying Fund and will effectively become that of the remaining asset classes. Credit Risk: The value of the fund may decline dramatically based on market conditions. Investors understand that there are risks involved and capital may decline due to market conditions and valuations. Past performance is not guaranteed for future returns. Disclosure of Investor Identity: It may be required for purposes of the Investment Manager’s compliance procedures to disclose to the name of the initial investor in the fund.
  4. 4. Table of Contents Benefits of the Harvest Stargate Fund Ltd, Summary: A Multi-Asset Fund offering several key Advantages. <ul><li>The Benefit of Investing in International Collective Investment Funds (ICIS): </li></ul><ul><li>Given the recent volatility in stock markets worldwide, we wish to give investors an update on the benefits of holding ICIS, as part of a balanced and diversified portfolio. </li></ul><ul><li>The Harvest Stargate Fund Ltd offers individual investors access to a unique multi-asset, multi manager investment methodology usually only used by sophisticated institutional investors. The fund’s objective is to deliver returns in excess of those offered by traditional investment funds, by the careful and active allocation of the portfolio across three key asset classes, combined with the active selection of the best performing underline fund managers. The fund provides diversification-the foundation of a successful portfolio. The fund invests in three strategies each managed by a leading specialist manager. </li></ul><ul><li>Investing in just one asset class carries with it a higher degree of risk and the Harvest Stargate Fund Ltd adopts an active asset allocation policy that ensures the fund invests across a spread of asset classes that offer the best risk adjusted return. In addition, Harvest Stargate Fund Ltd and its advisors, Harvest Financial Services Ltd, aim to select the best performing funds for each asset class which are then analyzed on an ongoing basis. </li></ul>
  5. 5. Introduction The Manager Harvest Financial Services Ltd, is a leading investment management company, based in Nicosia Cyprus. Harvest Financial Services Ltd was established in March 2000 by Harvest Advisors Ltd, as a spin-off from Harvest Financial Group. Harvest Financial Services Ltd, is regulated by the Cyprus Securities & Exchange Commission with license number 021/03. Harvest Financial Services Ltd provides a wide range of mutual funds, hedge funds and portfolio management advisory services. Its investment team has over 14 years experience in: Tailored portfolio construction- the construction and management of diversified, high quality fund portfolios, tailored to the needs of private and institutional clients. Distribution of Hedge Funds- the distribution of a wide range of fund of hedge fund products for both the institutional and retail markets. Structured Products – the structuring and management of products linked to hedge funds. Traditional Investment portfolio Management – The construction and management of traditional, predominantly long / short portfolios.
  7. 7. Competitive Fund Management Integrated Fund Management Harvest Financial Services Ltd Manager’s Style
  8. 8. THE IMPORTANCE OF ASSET CLASSES CONSISTENT RETURNS The Fund The most popular traditional asset classes are cash, bonds, equities, real estate, futures, forex and energy hedge funds. Harvest Stargate Fund Ltd, combines these asset classes, with the exception of cash, in order to create the next generation of multi asset Global Macro investments. The different asset classes will perform their best at different stages of a normal investment cycle. When building a portfolio, it is therefore essential that it should not only be spread between different asset classes, but should also make an allocation to the asset class that is likely to provide the best return in the following year. Whilst equities may be rising, bonds or property could be falling, and when equities fall, hedge funds could perform well. The Stargate Fund is an aggressive market neutral fund with a return objective of 10-15% annually with a standard deviation of approximately 3%-5%. It allocates capital among managers who have stated investment objective of returns in excess of 15% per annum. It is expected that the fund will have higher than average volatility but through diversification of strategies can mitigate drawdown's during bear market environments. In positive market periods, the fund should produce returns above market benchmarks.
  9. 9. INVESTMENT FOCUS GEOGRAPHIC AREA Scientists recently discovered a massive offshore reserve of an estimated 122 trillion cubic feet of natural gas called the Levant Basin Province . While it is one of the world's richest natural gas reserves, the Levant Basin Province is located between countries with endless amounts of mutual hatred. It straddles the sea borders of Israel, Lebanon, Palestine, the Republic of Cyprus. The largest section discovered so far, the Leviathan gas field , is believed to possibly contain, alongside natural gas, 4.2 billion barrels of oil. Leviathan straddles the Israeli-Lebanese maritime border.
  10. 10. Example of the investment Strategy: Zero Coupon +Direct Investment 1/3 Strategy <ul><li>The standard way to create capital protected notes for a variety of underlying asset types </li></ul><ul><li>The initial investment strategy of the Harvest Stargate Fund Ltd is allocated (1/3 of its assets) into or through structured funds and High Yield Treasuries and Bonds: </li></ul><ul><ul><li>Buying a zero coupon bond that will mature at 100 at the maturity of the transaction [cost of zero coupon bond = 75]. Buying the Underlying Fund (or an option on the Fund if such can be created) using [100% - price of zero coupon = 25] </li></ul></ul>T = 0 Maturity e.g.5- 7 years € 100 invested € 75 Price of Zero Coupon Bond € 25 Underlying Fund RISKLESS: Zero coupon Bond will mature at €100, to repay Principal in full Zero accrues to €100 Investment pays off based on interim performance of Underlying Fund RISKY: Payoff dependent on Underlying Fund Zero Coupon Bond Matures At €100 Payoff e.g. at €50 Redemption Of €100+50 <ul><li>This structure is the oldest and simplest principal protection strategy </li></ul><ul><ul><li>TOTAL RETURN OF UNDERLYING FUND: 50/25 = 200.0% </li></ul></ul><ul><ul><li>TOTAL RETURN OF INVESTMENT: 150/100 = 150.0% </li></ul></ul>
  11. 11. Fund Structure 1/3 of the fund’s assets are investment into protected asset classes with 100% Initial Participation SPV Put Option at Guaranteed Amount Investment € 100 Fund Units Investor Hellenic Bank PLC Administrator Zero Coupon Bond (Riskless) Underlying Fund (Issuer) ISSUER at Maturity Part 1: Dynamic Rebalancing € 100 initially € 0 initially Part 2: Put Option HFS as the fund manager Determines the proportion of Assets invested in the Underlying Fund or the 0-Coupon Bond <ul><li>Part Portfolio Capital protection is composed of 2 parts : </li></ul><ul><ul><li>A dynamic rebalancing between an investment into the Underlying Fund and a zero coupon bond. </li></ul></ul><ul><ul><ul><li>Objective: to ensure that funds are invested in the Underlying Fund for the maximum time possible </li></ul></ul></ul><ul><ul><ul><li>Through the fund structure it is possible to capture 100% of the performance of the Underlying Fund </li></ul></ul></ul><ul><ul><li>An unconditional put at 100% at maturity </li></ul></ul><ul><ul><ul><li>To ensure full repayment of 1/3 capital, in case the dynamic rebalancing is insufficient </li></ul></ul></ul>
  12. 12. Successful Investment Strategy <ul><li>The Harvest Stargate Fund Ltd, offers individual investors access to unique multi-asset, multi manager investment strategy usually only used by sophisticated institutional investors and hedge fund managers. The principal questions faced by any private investor today are: how to allocate their investable funds between the various asset classes available; how would this asset allocation should be regularly reviewed, and; how they can be certain that they’re in the best possible funds run by the best possible fund managers. The Harvest Stargate fund’s objective is to deliver returns in excess of those offered by traditional investment funds, by the careful and active allocation of the portfolio across the five key asset classes-bonds, equities, property, capital protected funds and commodities-combined with the active selection of the best performing underlying fund managers. </li></ul><ul><li>Primary Fund strategy focused on undervalued equities in Europe and US either directly or through selected highly rated mutual funds. Investments in the CY and GR markets will take an opportunistic approach based on fundamental catalysts that will yield capital gains for the fund. </li></ul><ul><li>Secondary strategy overlaying portfolio focused on different products. The addition of capital protected notes as the strategy yields stability and earns possible coupons for the fund. </li></ul><ul><li>Tertiary strategy overlaying portfolio focused on currency management and occasional non-equity opportunities such as bonds, forex, commodities and real estate funds and property assets.1/3 of the Funds assets are allocated into this dynamic strategy which offers stability and growth. </li></ul>Global Macro/Real Estate Capital Protected Equity Long/Short
  13. 13. Experienced and Accessible Investment Manager <ul><li>Founded in Cyprus in 1998 (EPEY since 2003) </li></ul><ul><ul><li>Harvest Financial Services Limited (“HFS”) is a Cyprus based fund management group, providing discretionary portfolio management services to high net worth individuals, institutions and mutual funds both in Cyprus and abroad ( ) </li></ul></ul><ul><li>Head Office in Nicosia </li></ul><ul><ul><li>Key management and staff nearby and available to investors to answers questions regarding investment strategy, performance, Harvest Stargate Fund Ltd mechanics and administration. </li></ul></ul><ul><li>Regulated by the Cyprus Securities and Exchange Commission License Number 021/03 </li></ul><ul><li>Affiliated with some of the World’s most prestigious Product and investment service Providers </li></ul>
  14. 14. The Fund’s Asset Allocation Process Financial Instrument’s Futures/Options Equities ENERGY EAST MED RUSSIA Real Estate Energy Focus 60% Hedge Funds GLOBAL ENERGY DIVERSIFICATION Fund’s Underline Strategies
  15. 15. Primary Strategy: FOCUS ON NATURAL GAS COMPANIES <ul><li>Primary Strategy: FOCUS ON ENERGY-NATURAL GAS AND OIL (60% ASSET ALLOCATION) </li></ul><ul><li>The First and core strategy seeks to buy undervalued equities either on an individual or sector basis and hold them for capital appreciation and income for the medium term. The Fund will engage models prior in investing in speculative investments and simulate possible return vs. risk prior of entering in such transactions. </li></ul><ul><li>The strategy also seeks to identify major changes of direction in key markets through independent analysis of relevant macro-economic factors, trend developments and investor sentiment. Harvest seeks to vary overall market exposure accordingly, either through further allocations/reductions to existing holdings or investment/divestments in market heavy weights. The strategy does not aim at a particular geographical exposure but rather is driven by a sector approach. Historically, Europe and US have provided the main holdings for the strategy, but Israel and Russia are currently in focus. </li></ul>EAST MED INVESTMENT OPPORTUNITIES – Global gas use over next 30 years (bcm): 􀂙 2000 - 2,527 􀂙 2010 - 3,377 􀂙 2020 - 4,254 􀂙 2030 - 5,047 Tamar and Leviathan: the two biggest deep-water Gas discoveries of the past 10 years
  16. 16. MED ENERGY Primary Strategy: Equities Long / Short / Hedged <ul><li>GLOBAL MACRO PRIMARY STRATEGY 60% Weight of Portfolio (FOCUS ON MED ENERGY) </li></ul><ul><li>Delek Energy, Delek Drilling and Avner, Nobel Energy, Lukoil, initiating coverage on the fund diversification policy. Triple digit upside potential of an oil discovery . Symbols: (DELKG.TA), (AVNRP.TA), (DEDRP.TA), (DLEN.TA), (NBL. NYSE), ( LUKOIL. DR) (CUSIP 677862104), MICEX (Moscow), Gazprom (OGZPY), TOTAL OIL (TOT.NYSE) </li></ul><ul><li>The value of the Levithan, Tamar, and the Cyprus Aphrodite Reserves (12) can be derived from two sources: The value of the natural gas reserves and the value of the oil potential. The current share prices do not reflect value of oil potential. Ratio share price partially reflects an oil discovery, highest upside potential from an oil discovery. Levithan oil results likely in early 2012. US-based Noble Energy has discovered gas in Block 12 of Cyprus’ Exclusive Economic Zone (EEZ) and the reserve is thought to be 30-40% higher than estimates. Tamar was discovered in 2009 and holds an estimated 8.7 tcf (246 bcm) of natural gas. It is expected to come on-stream in 2013 and investment is estimated at $4 bln. Peak production for the first phase is targeted at 1.0-1.2 bln cfd. Leviathan was discovered in December 2010 with reserves estimated at 16 tcf (453 bcm). It is estimated its production life would be 2017-48 with gas sold from two LNG trains, each with a capacity of 7.5 mln tons/year. The first would come on-stream in 2017, the second in 2020. Total development costs would amount to $14 bln. It forecasts that 75% of the LNG would be shipped to Europe and the remaining 25% to Asia. </li></ul>
  17. 17. INDUSTRY GROWTH LNG World LNG Production May Double by 2016 LNG hub in Cyprus seems most likely: Cyprus seems to be gaining popularity as a potential hub for a future LNG facility that would help pump natural gas upstream from the Israeli and adjacent Cypriot offshore fields and use the island to transport the product to customers. Two reports have cited the current geopolitical climate in the Middle East and North Africa as reinforcing the case for Israeli gas, while looking at Cyprus as an alternative solution to lengthy and politically sensitive pipelines in other countries. Recent natural gas discoveries halfway between Cyprus and Israel at the Tamar and Leviathan fields estimates gas reserves at 25 trln cubic feet (705 bln cu.m.), enough to meet domestic demand for several decades, and enough to transform Israel into an energy exporter, the Middle East Economic Survey.
  18. 18. INDUSTRY FOCUS – REGIONAL EFFECTS <ul><li>Shekel appreciation and “Dutch disease” to be mitigated through a SWF </li></ul><ul><li>With Israel’s current account surplus likely to get even bigger in the future, concerns have been raised about “Dutch disease”, i.e. a large appreciation of the shekel damaging the competitiveness of Israel’s non-energy exports. While further shekel appreciation appears very likely, we think the extent of appreciation can be reduced through the establishment and careful management of a SWF that would help to sterilize a large part of the natural gas-related FX inflows. </li></ul><ul><li>The real game-changer could be oil </li></ul><ul><li>Geological tests suggest a possibility that, in addition to natural gas, Israel might also find sizeable quantities of offshore oil. While the ‘probability of success’ is currently considered to be low, our calculations suggest that, in the event of success, oil could potentially deliver a boost to GDP growth, the budget and the external balance that might potentially be even bigger than the impact from natural gas. This would also imply a larger appreciation potential for the shekel and an even greater requirement to manage the resulting macroeconomic challenges through a carefully managed sovereign wealth fund. </li></ul><ul><li>More meaningful results of geological tests on oil are expected in late 2011. </li></ul>
  19. 19. Important Legal Note <ul><li>The material provided herein is for informational purposes only. It does not constitute an offer to sell or a solicitation of an offer to buy any securities relating to any of the products referenced herein, notwithstanding that any such securities may be currently being offered to others. Any such offering will be made only in accordance with the terms and conditions set forth in the Offering Memorandum pertaining to such fund. Alternative investments such as hedge funds and ICIS are subject to less regulation than other types of pooled investment vehicles, may be illiquid and can involve a significant use of leverage, making them substantially riskier than the other investments, including any products which may be shown as comparison herein. Prior to investing, investors are strongly urged to review carefully the Offering Memorandum (including the risk considerations described therein), and all related fund documents, to ask such additional questions of the Investment Manager as they deem appropriate, and to discuss any prospective investment in the Fund with their legal and tax advisers in order to make an independent determination of the suitability and consequences of an investment. </li></ul><ul><li>This presentation does not constitute an offer or solicitation to any person in any jurisdiction in which such offer or solicitation is not authorized or to any person to whom it would be unlawful to make such offer or solicitation. It is the responsibility of any person or persons in possession of this material to inform themselves of and to observe all applicable laws and regulations of any relevant jurisdiction. Prospective investors should inform themselves and take appropriate advice as to any applicable legal requirements and any applicable taxation and exchange control regulations in the countries of their citizenship, residence or domicile which might be relevant to the subscription, purchase, holding, exchange, redemption or disposal of any investments. </li></ul><ul><li>Investment in ICIS Funds are suitable only for sophisticated investors for whom an investment in such fund does not constitute a complete investment program and who fully understand, and are willing to assume and understand, the risks involved. While the given material is subject to change and, although based upon information which we consider reliable, it is not guaranteed as to accuracy or completeness. No person has been authorized to give any information or to make any representation, warranty, statement or assurance not contained in the Offering Memorandum and, if given or made, such other information or representation, warranty, statement or assurance may not be relied upon. </li></ul><ul><li>Past performance is not a guide to future performance and the value of investments and the income derived from those investments can go down as well as up. Future returns are not guaranteed and a loss of principal may occur. Harvest Financial Services Ltd makes no warranty or representation that the security and or recommendation/the fund made are appropriate for all recipients and investors. </li></ul><ul><li>Opinions expressed are current opinions as of the date appearing in this material only. No part of this material may be i) copied, photocopied or duplicated in any form, by any means; or ii) redistributed without Harvest Financial Services Ltd prior written consent. </li></ul>
  20. 20. Geographic Map <ul><li>Source: Delek Energy </li></ul>
  21. 21. IMPORTANT INFORMATION “ The Central Bank of Cyprus shall not be liable by virtue of its recognition of the ICIS or by reason of its exercise of the functions conferred on it by the International Collective Investment Schemes Law. Recognition of the ICIS does not constitute a warranty by the Bank as to the creditworthiness or financial standing of the various parties to the ICIS”. Supervision of ICIS In accordance with section 3 of the Law, the Central Bank of Cyprus is the regulatory and supervisory authority in the Republic of Cyprus for ICIS, their managers and trustees. An ICIS must sell, redeem or repurchase its units at the request of unit holders, in accordance with its constitutional documentation. Units may not be issued as partly paid and may not be sold unless the equivalent of the net issue price is paid. Basic Rules for the calculation of sale, redemption or repurchase price can be found in “Regulations on the valuation of the property of an ICIS” . Taxation Any gains or profits generated by an ICIS of any type, including a unit trust or an investment limited partnership, are subject to an effective tax rate of 0,425%, while no further tax is imposed on any dividends or other distributions made by an ICIS to its unit holders. The income of managers and trustees, if not permanent residents of the Republic, which is generated from services they offer to ICIS is exempt from income tax.
  22. 22. Professionals <ul><li>Fund Regulator: Central Bank of Cyprus, </li></ul><ul><li>Investment Manager Regulator: Cyprus Securities & Exchange Commission. </li></ul><ul><li>Investment Manager – Harvest Financial Services Ltd </li></ul><ul><li>Internal Auditor: KPMG Advisory Services Ltd </li></ul><ul><li>Administrator – Hellenic Bank Public Ltd </li></ul><ul><li>Custodian - Hellenic Bank Public Ltd </li></ul><ul><li>Auditors – PKP Professional Services Ltd </li></ul><ul><li>Legal Advisor – Drakos & Efthymiou </li></ul><ul><li>National Bank of Greece Cyprus Ltd </li></ul><ul><li>Hellenic Bank Public Ltd </li></ul><ul><li>Wall Street Global LLC </li></ul><ul><li>Interactive Brokers LLP </li></ul><ul><li>Deutsche Bank Securities Israel Ltd </li></ul>Professionals