Anwar et al v. Fairfield Greenwich Limited et al

Filing 363

DECLARATION of Michael Thorne, Esq. in Support re: (66 in 1:09-cv-02222-VM, 360 in 1:09-cv-00118-VM-THK, 54 in 1:09-cv-02410-VM, 76 in 1:09-cv-02269-VM, 10 in 1:09-cv-08500-VM, 62 in 1:09-cv-04031-VM, 107 in 1:09-cv-02588-VM, 80 in 1:09-cv-05650-VM, 87 in 1:09-cv-00134-VM, 103 in 1:09-cv-02366-VM, 74 in 1:09-cv-00301-VM) MOTION to Dismiss., (75 in 1:09-cv-00301-VM, 55 in 1:09-cv-02410-VM, 67 in 1:09-cv-02222-VM, 11 in 1:09-cv-08500-VM, 81 in 1:09-cv-05650-VM, 104 in 1:09-cv-02366-VM, 77 in 1:09-cv-02269-VM, 63 in 1:09-cv-04031-VM, 361 in 1:09-cv-00118-VM-THK, 88 in 1:09-cv-00134-VM, 108 in 1:09-cv-02588-VM) MOTION to Dismiss., (79 in 1:09-cv-05650-VM, 86 in 1:09-cv-00134-VM, 359 in 1:09-cv-00118-VM-THK, 61 in 1:09-cv-04031-VM, 73 in 1:09-cv-00301-VM, 102 in 1:09-cv-02366-VM, 9 in 1:09-cv-08500-VM, 65 in 1:09-cv-02222-VM, 53 in 1:09-cv-02410-VM, 75 in 1:09-cv-02269-VM, 106 in 1:09-cv-02588-VM) MOTION to Dismiss.. Document filed by Fairfield Greenwich Limited, Fairfield Greenwich (Bermuda) Ltd., Fairfield Greenwich Advisors LLC, Yanko Dellaw Schiava, Philip Toub, Lourdes Barreneche, Vianney D'hendecourt, Harold Greisman, Jacqueline Harary, David Horn, Richard Landsberger, David Lipton, Julia Luongo, Mark Mckeefry, Charles Murphy, Santiago Reyes, Andrew Smith, Fairfield Risk Services Ltd., Fairfield Greenwich Limited, Lourdes Barenche, Daniel Lipton, Jacqueline Hararay, Corina Noel Piedrahita, Fairfield Heathcliff Capital LLC, Maria Teresa Pulido Mendoza, Fairfield Greenwich (Bermuda) LTD. (Attachments: #1 Exhibit 1-Part 1 of 2, #2 Exhibit 1-Part 2 of 2 - Exhibit 4, #3 Exhibit 5-6, #4 Exhibit 7, #5 Exhibit 8-9, #6 Exhibit 10, #7 Exhibit 11-12, #8 Exhibit 13-14, #9 Exhibit 15)Filed In Associated Cases: 1:09-cv-00118-VM-THK et al.(Cunha, Mark)

Exhibit 1A

Private Placement Memorandum

FAWIELD SENTRY LIMITED

A British VirginIslands International Business Company

Securities Oflered: Redeemable, Voting Shares Minimum Investment per Subscriber: U.S. $100,000 Purchase Price per Share: Net Asset Valueper Share Investment Manager Fairfield Greenwich (Bermuda)Ltd. Administrator Cifcofind Services (Europe) B. V. Placement Agent Fai$eld GreenwichLimited

SHARES OF THE FUND MAY BE OFFERED TO PERSONS WHO ARE NEITHER CITIENS NOR RESIDENTS OF THE UNITED STATES AND TO A W I T E D NUMBER OF UNITED STATES INYESTORS CONSISTING OF PENSION AND PROFIT SHARUVG TRUSTS, CHARITIESAND OTHER TAXEXEMPT ENTITEX

THE SHARES OFFERED HEREBY ARE SPECULAUVE AND INVOLVE A HIGH DEGREE OF RISK. THEY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES LAWS OF ANY JURISDICTION AND ARE BEING OFFERED AND SOLD IN REWANCE ON EXEMP7X2NS FROM THE REGISlR4TlON REQUIREMEN73 OF SUCH LAWS. THE SHARES ARE SUBJECT TO RESTRICTIONS ON TUANSFERQBILITY AND R E S m AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMIiTED UNDER THE FUND'S ARTICLES OF ASSOCIATlON. THE SHARES HA VE NOT BEEN APPROVED OR DISAPPROVED BY ANY REGULATORY AUTHORITY, hrOR HAS ANY SUCH AUTHORITY PASSED UPON OR ENDORSED TNE MERITS OF THIS OFFERING OR THE ACCURACY OR ADEQUACY OF THIS MEMORANDUM. The date of this Private Placement Memorandum i as ofAugust 14,2006. s
Fairfieid Greenwich (Bermuda) Ltd

COMMODITY POOL OPERATOR NO-ACTION RELIEF

THE INVESTMENT MANAGER HAS FILED A CLAIM OF EXEMPTION FROM REGISTRATION AS A COMMODITY POOL OPERATOR ("CPO") THE T H E D STATES COMMODITY FUTURES TRADING COMMISSION ("CFTC") I CONNECTION N WITH PRIVATE INVESTMENT FUNDS WHOSE PARTICIPANTS ARE ACCRIEDITED INVESTORS, AS DEFINED IN REGULATION D UNDER THE SECURITIES ACT OF 1933, CERTAIN FAMILY TRUSTS AND CERTAIN PERSONS AFFILIATED WITH THE INVESTMENT MANAGER AT ALL TIMES, THE FUND WILlL UTrr,TZE FUTURES SUCH THAT EITHER (1) NO MORE THAN 5% OF ITS ASSETS ARE USED TO ESTABLISH COMMODITY INTEREST POSITIONS OR (2) THE NOTIONAL VALUE OF ITS COMMODITY INTEREST POSITIONS DOES NOT EXCEED 100%OF THE FUND'S LIQUIDATION VALUE.

UNLIKE A REGISTERED CPO, THE INVESTMENT MANAGER IS NOT REQWIRED TO DELIVER A DISCLOSURE DOCtTMENT AND A CERTIFIED ANNUAL REPORT TO PARTICIPANTS IN THE FUND. THE CFTC HAS NOT REVIEWED OR APPROVED THTS OFFEIUNG OR ANY DISCLOSURE DOCUMENT FOR THE FUND.

CERTAIN GENERAL INJl'ORMATION The Shares offered hereby (the "Shares") will be issued only on the basis of the information in this Private Placement Memorandum and any attachments hereto (the "Memorandum"). No other information about Fairfield Sentry Limited (the "Fund") has been authorized. Any investment in the Fund on the basis of information that is not contained, or which is inconsistent with,the information herein shall be solely at your risk. The delivery of this Memorandum does not imply that any information herein is correct at any time after the date hereof. You should inform yourself of the legal requirements and tax consequences within the countries of your residence or domicile for the purchase, hoIding or sale of the Shares, and any foreign exchange restrictions. Shares that are bought by persons not entitled to hold them in accordance with the provisions herein may be compulsorily redeemed. No Shares may be transferred without the prior written consent of the Directors. The distribution of this Memorandum may be restricted by law in certain countries. You must inform yourself of and observe any such restrictions. You should review the Country-Specific Notices contained herein for any applicable notices for your countries of residence or domicile. T i hs Memorandum does not constitute an offer or solicitation to any person in any jurisdiction in which the offer or solicitation is not authorized, or to any person to whom it is unlawll to make the offer or . solicitation. No person is authorized to give any information with respect to the Fund unless authorized by the Directors. This Memorandum supersedes any written or verbal information relating to the Fund. You should not construe this Memorandum as legal or investment advice. You shouId consult your own attorneys, accountants and other advisers regarding this investment. This Memorandum describes certain documents relating to this investment, including various executed and unexecuted documents and certain statutes, dings and regulations. Such summaries do not purport to be complete and are qualified in their entirety by reference to the Mi text of those documents, statutes, rulings and regulations. You and your investment representatives are invited to ask questions of and to obtain additional information from the Administrator (Citco Fund Services (Europe) B.V.) or Investment Manager (Fairfield Greenwich (Bermuda) Ltd.) concerning the Fund, including additional information to verify the completeness or accuracy of the information in this Memorandum.
All references herein to $ are to United States dollars.

The Fund is incorporated as an International Business Company under the International Business Companies Act of the British Virgin Islands. The Fund constitutes a "professional fund" as defined in the Mutual Funds Act, 1996 (as amended) of the British Virgin Islands (the "BVI Act") and as such is required to be and is recognized as a "professional fund" under the provisions of the BVI Act. Such recognition does not entail supervision of the investment performance or portfolio of the Fund by the Financial Services C o d s s i o n of the British Virgin Islands (the "BVI"),which accepts no responsibility for the financial soundness of the Fund or the correctness of any statements or opinions expressed herein. There is no financial obligation or compensation scheme imposed on or by the Financial Services Commission of the BVI in favor of or available to the investors in the Fund. As an entity regulated under the BVI Act, the Fund will be subject to the supervision of the Services Commission in the BVI,which is authorized by the BVI Act to direct the Fund to furnish information or provide access to any records, books or other documents which it deems necessary to ascertain compliance with the BVI Act or any regulations made under the BVI Act. The BVI Act provides that the Fund's certificate of recognition may be cancelled if, among other things, the Fund has breached the BVI Act or any regulations or codes of conduct, or conditions of its certificate, has been convicted of an offense, is carrying on business in a manna detrimental to its investors or to the public interest, or is declared bankrupt or is being wound up or dissolved. Because the Fund is a professional h d under the BVI Act, whose shares are Iisted on the Irish Stock Exchange, the Shares may be held only by persons who are "professional investors" within the meaning of the BVI Act and the Irish Stock Exchange, and on the basis that the initial investment in the Fund by each of its shareholders is not less than $100,000. A professional investor is any person whose ordinary business involves, whether for his own account or for the account of others, the acquisition or disposal of property of the same kind as the property, or a substantial part of the property, of the Fund (in this case, investment instruments), or who has signed a declaration that he, whether individually or jointly with his spouse, has a net worth in excess of $1,000,000, or, if an institution, $5,000,000 or its equivalent in any other currency, and that he consents to being treated as a professional investor. In addition, in order to comply with rules of the Irish Stock Exchange, an investor will have to represent that he has knowledge and expertise in financial matters sufficient to evaluate the risks involved in an investment in the Fund, that he is aware of such risks and can bear the loss of the entire investment. This Memorandum may not be reproduced or used for any other purpose other than making an investment in the Fund. Any distribution of this Memorandum in whole or in part, or the divulgence of any of its contents, is unauthorized. By accepting delivery of this Memorandum, you agree to return it to the Fund if you do not invest.

TABLE OF CONTENTS
Page

CERTAIN GENERAL INFORMATION..................................................................................................

AI

...

FUND DIRECTORY ................................................................................................................................... vi

MANAGEMENT OF T I E FUND AND OTHER RELATIONSHIPS ....................................................... 6

INVESTMENTPOLICIES .......................................................................................................................... 9 OFFERING OF THE SHARES.................................................................................................................. 11 FEES,COMPENSATION AND EXPENSES............................................................................................ 14 BANK, CUSTODIAN AND BROKERAGE ................... ..... ................................................................ 16 . ADMINISTRATOR, REGISTRAR AND TRANSFER AGENT .......................................................... 17
RISK FACTORS ........................................................................................................................................
POTENTIAL CONFLICTS OF INTEREST..............................................................................................
I7

22

DESCRIPTION OF SHARES .................................................................................................................... 23

DIVIDEND POLICY.................................................................................................................................. 23
TRANSFERS, REDEMPTIONS AND TERMINATION.......................................................................... ANTI-MONEY LAUNDERING POLICIES .................'............................................................................
TAX CONSIDERATIONS AND EXCHANGE CONTROL AND ERISA

23 25

ANTI-MONEY LAUNDERTNG REGULATIONS................................................................................... 25

.............................................. 27
.....

LEGAL MATTERS .................................................................................................................................. 32 .... MISCELLA?SEOUS ..................................................:................................................................................ 'I 32 COUNTRY-SPECIFIC NOTICES ............................................................................................................. APPENDIX A APPENDlX B INVESTMENT MANAGERS FORM ADV PART I1 SUBSCRIPTION DOCUMENTS 36

. ,

FUND DIRECTORY

THE FUND

FaFairfield Sentry Limited C/O Codan T m t Company (B.V.I.) Ltd. P.O. Box 3 140 Romasco Place, Wickhams Cay Road Town, Tortola British Virgin Islands Fairfield Greenwich (Bermuda) Ltd. 12 Church Street Suite 606 Hamilton, Bermuda Telephone: [phone] Facsimile: 44 1-292-5413 Fairfield Greenwich Limited c/o Offices of Charles Adams, Ritchie & Duckworth Second Floor, Zephyr House, Mary Street P.O. Box 709 George Town, Grand Cayman Cayman Islands Citco Fund Services (Europe)B.V. Telestone 8 -Teleport Naritaweg 165 1043 BW Amsterdam The Netherlands Telephone: [phone] Facsimile: (3 1-20) 572-2610 Law Offices of Andrew E. Goldstein 488 Madison Avenue, 16' Floor New York, New York 10022 USA Conyers Dill & Pearman Romasco Place, Wickhams Cay 1 P.O. Box 3140 Road Town, Tortola British Virgin Islands PricewaterhouseCoopers Marten Meesweg 25 3068 AV Rotterdam Amsterdam The Netherlands

INVESTMENT MANAGER

PLACEMENT AGENT

ADMINISTRATOR REGISTRAR AND TRANSFER AGENT

US.COUNSEL

BRITISH VlRGlN ISLANDS COUNSEL

AUDITORS

CUSTODIAN BANK

Citco Bank Nederland, N V D b i Branch . . uln Custom House Plaza, Block 6 International Financial Swices Centre P.O. Box 6639 Dublin 1 Ireland Citco Global Custody N.V. Telestone 8 - Teleport Naritaweg 165 1043 BV Amsterdam The Netherlands Telephone: [phone] Telecopier: (3 1-20) 572-2625

DEPOSITORY

SUMMARY Thefollowing Summav is intended to highlight certain basic information which is set forth more fully elsewhere in this Private Placement Memorandum and in the Memorandum of Associ~tionand Articles ofAssociation of the Fund. 23is should be read in conjunction with such detailed infmotion.

THE OFFERING
Issuer
Fairfield Sentry Limited (the "Fund") is organized as an international business company under the laws of the Territory of the British Virgin Islands ("BVI"). The registered office of the Fund is located in the BVI. The Fund's redeemable, voting shares (the "Shares") were offered on November 30,1990 at an initial offering price of US. $200 per Share and thereafter have been offered at a price equal to the Net Asset Value (as hereinafter defmed) as of the opening of business on the date of issuance. Shares may be offered only to experienced and sophisticated investors who are neither citizens nor resident. of the United States ("Won-U.S. Persons") and to a limited number of United States investors that are tax-exempt entities ("US. Tax Exempt Investors"). See "OFFERING OF THE SHARES".

Securities Offered

0fferees

Minimum Subscription

The minimum initial subscription per investor is U.S.$100,000. Following his initial investment, a shareholder may make additional investments in amounts of not less than U.S. $50,000.
The Fund will not accept a subscription tendered at a time when the number of its outstanding Shares is 10,000,000. It is preferable that subscriptions be made by wire transfer. However, subscriptions may be made by mail if necessary. Subscriptions received during any monthly period prior to the third to the last business day of the month will ordinariIy be accepted, subject to the sole discretion of the Investment Manager (as defined below), as of tbe first business day of the following monthly period, i-e., subscriptions received between December 28 and January 28, assuming the 29"-31" are business days, will be accepted as of February 1. Subscriptions will become irrevocabIe to the subscriber on the third to the last business day of the month in which such subscription is received by the Fund.

Maximum Capitalization
SubscriptionProcedures

Sokitation of Subscriptions

The Fund may use the assistance of affiliated or unaffiliated placement agents and money managers, including FGL (as defmed below), to place the Shares. Such placement agents and intermediaries may charge their clients a placement fee of up to 5% of the total amount of the subscription for Shares sold with their assistance, andfor share in the fees earned fiom the Fund, which they may rebate to their clients. Placement fees charged directly by FGL will not exceed 3%. In certain instances, the Fund may deduct the amount of the placement fee fiom the subscription amount to pay to the placement agent and such amounts will not constitute part of the assets of the Fund. The Fund seeks to obtain capital appreciation of its assets principally h u g h the utilization of a nontraditional options trading strategy described as "split strike conversion", to which the Fund allocates the predominant portion of its assets. See "INVESTMENT POLICIES". Fairfield Greenwich (Bermuda) Ltd. ("FGBL" or the "Investment Manager"), a corporation organized under the laws of Bermuda, serves as the Fund's investment manager. It is the wholly-owned subsidiary of Fairfield Greenwich Limited which previously served as the investment manager of the Fund and currently serves as the Fund's Placement Agent. Jeffrey H.Tucker, Walter M. Noel, Jr. and Andres Piedrahita are the m i principals of an FGL. Mr. Noel is also a Director of the Fund (see "MANAGEMENT OF THE FUND AND OTHER RELATIONSHIPS"). Effective April 20,2006, FGBL registered as an investment adviser with the United States Securities and Exchange Commission pursuant to the Investment Advisers Act of 1940, as amended. The Tnvesttnent Manager has claimed an exemption under Commodity Futures Trading Commission ("CFTC") Rule 4.13(a)(3) from registration with the CFTC as a commodity pool operator and, accordingly, is not subject to certain regulatory requirements with respect to the Fund that would otherwise be applicable absent such an exaption. Faitfield Greenwich Limited, an exempted company incorporated under the laws of the Cayman Islands "FGI? or the "Placement Agent"), is the Fund's Placement Agent. FGL oversees the marketing of the Shares and is an affiliate of the Investment Manager. FGBL and FGL are member companies of the which was established in Fairfield Greenwich Group ("FGG"), 1983 and had, as of May 1, 2006, more than $9.0 billion employed in alternative asset management funds. Throughout its history, FGG has internally managed its own alternative asset funds and selectively identified external managers for affiliations where it serves as a managerial and distributionpartner. Walter M. Noel, Jr., Jan R. Naess and Peter P. Schmid are the Directors of the Fund. Mr. Noel is also a Director of FGL, an affiliate of the Investment Manager.

Business Objective

Investment Manager

Placement Agent

Directors

Citco

Citco Fund Services (Europe) B.V., an affiliate of The Citco Group Ltd., acts as administrator, registrar and transfer agent for the Fund. The Fund's escrow account is maintained at Citco Bank Nederland, N.V. Dublin Branch. Pursuant to a custodial services agreement, Citco Bank Nederland N.V., Dublin Branch and Citco Global Custody N.V. have agreed to provide custodial services to the Fund.

Dividend Policy

It is anticipated that the Fund will not declare any dividends; rather, income will be reinvested and will be reflected in the Net Asset Value of the Shares.

SALE AND REDEMPTION OF SIbWES
Redemption at the Option of a

Shareholder

A shareholder of the Fund, on fifteen (15) calendar days' notice, may cause his Shares to be redeemed as of the last business day (being any day not a Saturday or a Sunday, that is not a public holiday or a day on which banks are generally authorized or obliged by law or regulation to close in the Netherlands, the Republic of Ireland, Canada or the United States of America) of any month. There is no minimum period of time that Shares must be held in order for a shareholder to redeem his Shares.

Compulsory Redemption

The Fund reserves the right to call all or a part of a sharehoIder's Shares for redemption at any time. This right will only be exercised as to Shares where the continued holding of which would result in regulatory, pecuniary, legal, taxation, or material administrative disadvantage for the Fund or the sharehofders as a whole.
Subscriptions received during any monthly period prior to the third to the last business day of the month will ordinarily be accepted, subject to the sole discretion of the Investment Manager, as of the first business day of the following monthly period, i.e., subscriptions received between December 28 and January 28 will be accepted as of February 1. Subscriptions will become irrevocable to the subscriber on the third to the last business day of the month in which such subscription is received by the Fund.

Exchange Listing

The Fund w s admitted to the Ofl'icial List of the Irish Stock a Exchange in Dublin, Ireland on January 12, 1995 and has been issued SEDOL number 0330934. It is unlikely that a public trading market will develop for the Fund's shares and none has developed to date. Shareholder redemption rights are not affected by this listing.

COMPENSATION AND EXPENSES
Expenses
The Fund will bear, for each year, all continuing offering costs; all ordinary legal and auditing fees; all registrar, transfer agent and administration fees; all insurance expenses; a11 expenses in maintaining the Fund's office and all other expenses incurred in the operation of the Fund, if any, including any legal and auditing fees that relate to extraordinary circumstances, such as tax examinations or litigation involving the Fund, as well as all fees and all ordinary and necessary expenses related to the Fund's investment and trading activities.

FGL will pay the Investment Manager a fixed fee for providing
certain managerial services to the Fund, as more fully described in the Investment Manager's Form ADV Part 11, which is attached to this Memorandum as Appendix B.

Management Fee

FGL will receive a monthly management fee in an amount equal to one-twelfth of one percent (0.0833%) (approximately 1% per annum) of the Net Asset Value of the Fund before Performance Fees (as hereinafter defined) as calculated at the opening of the first day of the month, which will include subscriptions for Shares accepted by the Fund as of the first day of such month. This fee is payable monthly in arrears. FGL may pay a portion of the Management Fee to an affiliate of FGL and the Investment Manager in consideration of the affiliate providing certain administrative services and back-office support to the Fund. FGL will receive, for each calendar quarter, a perfonnance fee (the "Performance Fee") with respect to each Share outstanding during such calendar quarter in an aggregate amount equal to 20% of the net realized and net unrealized appreciation in the Net Asset Value of each Share in such calendar quarter ("Net Profits"), if any; subject to reduction in connection with certain offsets with respect to each Share, provided, however, that if a Share has a loss chargeable to it during any calendar quarter or quarters ("Unrecouped Loss") and during any succeeding calendar quarters there are Net Profits allocable to the Share, there will be no Performance Fee payable with respect to such Share until the amount of the Unrecouped Loss allocated to such Share has been recouped. If Shares are redeemed during a caIendar quarter, the Unrecouped Loss relating to such Shares will be reduced in the same proportion as the reduction in the Net Asset Value of such Shares caused by such redemption. Shares which are either purchased or redeemed during a calendar quarter shaIl be subject to the payment of a Performance Fee only for the portion of the calendar quarter during which such Shares were outstanding. The Performance Fee will only be paid on "new appreciation" in the Fund's Net Asset Value allocabIe to the Shares.

Performance Fee

In certain circumstances, the Performance Fee may be reduced
for particular calendar quarters and the amount of the reduction repaid i subsequent calendar quarters (see "FEES, n COMPENSATION AND EXPENSES -Performance Feew).

FGL and the Fund may enter into an agreement pursuant to which FGL may elect to defer payment of all or a portion of its Management Fees andlor Performance Fees.

The Fund was incorporated in the Territory of the British Virgin Islands ("BVI") as an international business company on October 30, 1990. The registered office of the Fund is located in Road Town, Tortola, British Virgin Islands. Shareholders wiH have the right to redeem part or all of their Shares as of the last business day of any month (See "TRANSFERS, REDEMPTIONS AND TERMINATION").

MANAGEMENT OF THE FUND AND OTHER RELATIONSHIPS
The Fund The Fund's Board of Directors has overall management responsibility for the Fund, including establishing investment, dividend and distribution policy, and having the authority to select and replace the Fund's administrator, registrar and transfer agent, custodian, any officers of the Fund and other persons or entities with management or administrative responsibilities to the Fund. None of the Fund's Directors own an equity interest in the Fund. The Directors of the Fund are as follows: Walter Noel has over thirty years of experience in the investment business. From 1959 to 1972, he was associated with the Management Services Division of Arthw D. Little Inc., an industrial and management consulting fm. From 1972 to 1974, Mr. Noel was President of Bahag Banking Ltd., in Lausanne, Switzerland. In 1974, Mr. Noel became Vice President of the Intcmational Private Banking Department of Citibank, N.A., where he remained until 1977 when he became .Senior Vice President of the International Private Banking Department of Chemical Bank. Mr. Noel remained at Chemical Bank until 1983, where he shared primary responsibility for deveIoping its international private banking business. He founded The Fairfield Greenwich Group, an affdiate of the Fund's investment manager, Fairfield Greenwich (Bermuda) Ltd., in 1983. Since founding The Fairfield Greenwich Group, Mr. Noel has been a director or general partner for a variety of its funds.
Jan R. Naess received a Bachelor of Arts degree in 1981 and a Masters degree in Economics in 1983 from the University of Oslo. From 1983 to 1987, he was tmployed in the Economic Research Department of R.S.Platou a.s. in Oslo, a leading shipbrokering firm. In 1987, Mr. Naess joined with RS. Platou as. to form R.S. Platou Asset Management as., which was instrumental in the sale and purchase of 15 bulk carriers fmm 1987 to 1989. In 1989, Mr. Naess liquidated his interest in R.S. Platou Asset Management as. and formed PAN Shipping Ltd., a shipowningloy>eratingand project development fund, which merged with Northern Navigation International Limited ("NNI") in 1991. Mr. Naess is a Vice President of NNI, a Liberian corporation, which is in the business of investing in and managing shipping assets.
Peter P. Schmid received a Swiss Federal Certificate of Capacity in 1968. Mr. Schmid was employed by Credit Suisse from 1968 to 1986. From 1975 to 1977, he was employed in Credit Suisse's International Portfolio Management Department in Zurich. After a brief posting in Credit Suisse's New York office, Mr. Schmid was in charge of the bank's representative ofiice in Rio de Janeiro from 1977 to 1984. From 1984 to 1986, Mr. Schmid was Vice President in charge of Credit Suisse's Latin American Private Banking Desk in Geneva. Mr. Schmid has been an independent investment adviser since April 1986. He

is President of Peter Schmid (Fortfolio Management), P. Schmid & AssociCs, S.A. and Armor SA. Mr. Schmid is a Director of Inter Asset Management Inc.

The Investment Manager
The Fund's investment manager is Fairfield Greenwich (Bermuda) Ltd., a corporation organized under the laws of Bermuda ("FGBL" or the "Investment Manager"), which was incorporated on June 13,2003. It is responsible for the management of the Fund's investment activities, the selection of the Fund's investments, monitoring its investments and maintaining the relationship between the Fund and its custodian, administrator, registrar and transfer agent. The Investment Manager is the wholly-owned subsidiary of Fairfield Greenwich Limited, an exempted company organized under the laws of the Cayman Islands ("FGL"), which previously served as the investment manager of the Fund and currently serves as the Fund's Placement Agent.

FGBL and FGL are member companies of the Fairfield Greenwich Group ("FGG"), which was established in 1983 and had, as of May 1, 2006, more than $9.0 billion employed in alternative asset
management funds. Throughout its history, FGG has internally managed its own alternative asset funds and selectively identified external managers for affiliations where it serves as a managerial and distribution partner. The Investment Manager and its affiliates currently serve as investment or administrative manager to more than twenty funds, and have exclusive distribution arrangements with several others. FGG maintains its principal office in New York, with a significant presence in London and Bermuda. Marketing and client support offices exist in other locations in the United States, Europe, and Latin America. FGG's London entity is licensed and subject to the supervision of the United Kingdom Financial Services Authority (the "FSA"). An affiliate of FGG is registered as a broker-dealer in the United States. Effective April 20,2006, the Investment Manager registered as an investment adviser with the Securities and Exchange Commission under the Investment Advisers Act of 1940, as mended. In addition, the Investment Manager has claimed an exemption under Commodity Futures Trading Commission ("CFTC") Rule 4.13(a)(3) from registration with the CFTC as a commodity pool operator and, accordingly, is not subject to certain regulatory requirements w t respect to the Fund that would ih otherwise be applicable absent such an exemption.
Pursuant to the investment Management Agreement between the Fund and the Investment Manager, the Investment Manager and the Placement Agent is not liable for any error of judgment or for any loss incurred by the Fund, except a loss resulting fiom willful malfeasance, bad faith or gross negligence in the performance of its duties under such agreement. The Investment Management Agreement further provides that the Investment Manager, the Placement Agent, their directors, officers, employees, agents and counsel will be indemnified and held harmless by the Fund against any and all claims, liability and expenses for any loss suffered by the Fund arising out of any act or omission of such indemnified party, except to the extent an act or omission constitutes willll misconduct or reckless disregard of the duties of such indemnified party. The Investment Management Agreement may be terminated by either party thereto on ten days' written notice prior to the end of any calendar quarter.

The Placement A ~ e n t
Fairfield Greenwich Limited ("FGL" or the Tlacement Agent"), the Fund's placement agent, oversees the marketing of the Shares.

The Fund may use the assistance of afiliated or unaffiliated placement agents and money managers, including FGL, to place the Shares. Such placement agents and intermediaries may charge their clients a placement fee of up to 5% of the total amount of the subscription for Shares sold wt their assistance, ih andlor share in the fees earned from the Fund, which they may rebate to their clients. Placement fees charged directly by FGL will not exceed 3%. In certain instances, the Fund may deduct the amount of the placement fee fiom the subscription amount to pay to the placement agent and such amounts will not constitute part of the assets of the Fund. Following is biographical infomation on the founders, principal officers and certain other key employees of FGG:

Walter M. Noel, Jr. His background is summarized above under "MANAGEMENTOF THE FUND AND OTHER RELATIONSHIPS - The Fundn. Andres Piedrahita founded Littlestone Associates in 1991, which merged with FGG in 1997. Mr. Piedrahita directs FGG's European and Latin American activities. Mr. Piedrahita has over fifteen years of experience in the investment business. Prior to the merger, Mr. Piedrahita was the Director and President of Littlestone Associates, Inc. (1991-1997). He w s previously a Vice President at Shearson Lehman a Hutton, specializing in money management consulting for non-U.S. institutions and individuals (19871990). Before joining Shearson, Mr. Piedrahita was a financial consultant with Prudential Bache Securities Inc. in New York (1981-1987). He received his Bachelor of Arts degree fiom Boston University's School of Communications. Jeffrey Tucker has over thirty years of experience in investment related businesses. Mr. Tucker was an attorney with the Securities and Exchange Commission fiom 1970 to 1978. From 1975 to 1978, he was an Assistant Regional Administrator of the SEC's New York regional office, with supervisory responsibility for approximately half of its enforcement program. Mr. Tucker entered private practice in 1978 as a partner in the law firm Tucker, Globeman & Feinsand, where he remained until 1987. He specialized in securities and transactional matters, with a principal focus on limited partnership offkrings. Mr. Tucker entered the securities industry in 1987 as a general partner of Fred Kolber & Co. ("Kolber"), a registered broker-dealer. At Kolber, Mr. Tucker was responsible for the development and administration of the f m ' s private investment funds. FGG began its association with Kolber at that time as a marketing agent, and the firms subsequently merged activities. Throughout FGG's development, Mr. Tucker has been responsible for directing its business and operational development and has been a director or general partner for a variety of its investment funds. Mr. Tucker received his Bachelor of Arts degree from Syracuse University and his JD fiom Brooklyn Law School.
FGL and certain of its principals have beneficial interests in the Fund. The backgrounds of the Directors and key officers of the Investment Manager are set forth below:

.
"

..

.

Andres Piedrahita is a Director and the President of the Investment Manager. His background is set forth above under "MANAGEMENT OF THE F W D AND OTHER RELATIONSHIPS-The Investment Manager".
Brian Francoeur is a Director of the Investment Manager. Mr. Francoeur joined Citco Fund Services (Bermuda) Limited in 2001 and currently serves as its Managing Director. From 1999 until joining Citco, he was the Chief Financial Officer of CCS Group Limited, a computer cabling and network company based in Hamilton, Bermuda, and fiom 1997 to 1999 was a Senior Portfolio Manager with Olympia Capital (Bermuda) Limited, a fund administration company in Bermuda. Mr. Francoeur qualified as a chartered accountant in 1994 and was employed by Ernst & Young in Bermuda fiom 1995 to 1997.

Amit Vijayvergiya is Managing Director of the Investment Manager and focuses on manager selection and risk management for the Fund. He has been employed by the Investment Manager since 2003. Mr. Vijayvergiya has over 12 years of experience in asset management, risk management and operations research. Prior to joining the Investment Manager, fiom 2000 to 2.003, Mr. Vijayvergiya managed MAV Hedge Advisors, a family office investing in traditional and alternative investment managers. From 1998 to 2000, he was the General Manager of LOM Asset Management ("LOM AM''), where he oversaw the management of $160 million in assets. At LOM AM, Mr. Vijayvergiya structured and managed several multi-manager funds and served on the f m ' s management and investment committees. He began his business career in 1994 with a position in operations research at Canadian National Railways. Mr. Vijayvergiya received a Masters in Business Administration from. Schulich School of Business at York University, a Bachelors of Science in Statistics from the University of Manitoba and a Bachelors of Arts in Economics fiom the University of Western Ontario. Mr. Vijajwergiya holds the Chartered Financial Analyst designation and the Financial Risk Manager certification. INVESTMENT POLICIES
The Fund seeks to obtain capital appreciation of its assets principally through the utilization of a nontraditional options trading strategy described as "split strike conversion", to which the Fund allocates the predominant portion of its assets. Set forth below is a description of the "split strike conversion" strategies ("SSC Investments"). The establishment of a typical position entails (i) the purchase of a group or basket of equity securities that are intended to highly correlate to the S&P 100 Index, (ii) the purchase of out-of-the-money S&P 100 Index put options with a notional value that approximately equals the market value of the basket of equity securities, and (iii) the sale of out-of-the-money S&P 100 Index call options with a notional value that approximately equals the market value of the basket of equity securities. An index call option is out-ofthe-money when its strike price is greater than the current price of the index; an index put option is outof-the-money when the strike price is lower than the current price of the index. The basket typically consists of between 35 to 50 stocks in the S&P 100 Index.

The primary purpose of the long put options is to Iimit the market r s of the stock basket at the strike ik price of the long puts. The primary puxpose of the short call options is to largely finance the cost of the put hedge and to increase the stand-still rate of return.
This position in its entirety could be characterized as a bull spread which, presuming the stock basket highly correlates to the S&P 100 Index, is intended to work as follows: (i) it sets a floor value below which further declines in the value of the stock basket is offset by gains in the put options, (ii) it sets a ceiling value beyond which further gains in the stock basket are offset by increasing liability of the short calls, and (iii) defines a range of potential market gain or loss, depending on how tightly the options collar is struck. The degree of bullishness of the strategy can be expressed at implementation by the selection of the strike prices in the S&P 100 Index put and call options. The farther away the strike prices are from the price of the S&P 100 Index, the more bullish the strategy. The Split Strike Conversion strategy is implemented by Bernard L. Madoff Investment Securities LLC ("BLM7'), a broker-dealer registered with the Securities and Exchange Commission, through accounts maintained by the Fund at that firm. The accounts are subject to certain guidelines which, among other things, impose limitations on the minimum number of stocks in the basket, the minimum market

capitalization of the equities in the basket, the minimum correlation of the basket against the S&P 100 Index, and the permissible range of option strike prices. Subject to the guidelines, BLM is authorized to determine the price and timing of stock and option transactions in the account. The services of BLM and its personnel are essential to the continued operation of the Fund, and its profitability, if any. The options transactions executed for the benefit of the Fund may be effected in the over-the-counter market or on a registered options exchange.

Other Investments
The Investment Manager, in its sole and exclusive discretion, may allocate a portion of the Fund's assets (never to exceed, in the aggregate, 5% of the Fund's Net Asset Value, measured at the time of investment) to alternative investment opportunities other than its "split strike conversion" investments (the "Non-SSC Investments"). It is anticipated that the Non-SSC Investments will be allocated to new investment vehicles managed by experienced management teams establishing themselves in new investment businesses ("Emerging Managers"), with no single allocation exceeding $50 million, measured at the time of investment. These arrangements may include "lock-up" provisions of varying durations of these assets in such investments, subject to earty release for breach of risk control or performance guidelines, or for cause. FGBL and the Fund generally share in fees received by Emerging Managers fkom investors other than the Fund. The Fund will pay fees with respect to the Emerging Managers at a rate that will not exceed the Fund's rate of fees (in certain cases, this may be accomplished by FGBL subsidizing, fiom its own moneys, the fees charged on these assets by Noa-SSC Investment manag&-Non-SSC Investments may also include strategic allocations to experienced managers in established funds. In certain circumstances, the Performance Fee may be reduced for particular calendar quarters for certain Non-SSC Investment Losses. See 'TOTENTJAL CONFLICTS OF INTEREST" and "FEES, COMPENSATION AND EXPENSES -Performance Fee". In order to ensure that the Fund will not be subject to United States federal income taxation on trading gains from the disposition of certain investments, it is expected that the Fund will not invest in any "United States real property interest" (including, for example, certain interests in any U.S.Corporation that is a "United States real property holding corporationtt),as such terms are defined under the US. Internal Revenue Code of 1986 (the "Code") and the Treasury Regulations promulgated thereunder. (See "TAX CONSIDERATlONS AND EXCHANGE CONTROL.") The Fund may invest some of its assets in short-term U.S.government obligations, certificates of deposit, short-term high grade commercial paper and other money market instruments, including repurchase agreements with respect to such obligations, money market mutual funds and short term bond funds. In order to ensure that substantially all of the interest earned by the Fund will not be subject to United States federal withholding taxes, any investment in an obligation of a U.S. person or entity (other than in certificates of deposits in banks) primarily will be in an instrument (i) which is issued and purchased at a discount from its face amount, which is not otherwise interest bearing, and which has a tern of no more than I83 days from the date of issuance or (ii) which is in registered form and which is issued after July 18,1984. (See "TAX CONSIDERATlONS AND EXCHANGE CONTROL.")
Investment Restrictions The Fund will observe the investment restrictions set forth in the Fund's Articles of Association which are summarized here:

a) no more than. 10% of the Net Asset Vdue of the Fund will be invested in the securities of any one issuer (other than any government or governmental agency); b) the Fund may not hold more than 10% of the issued securities of any one class of securities in any issuer (other than any government or governmental agency); c) no more than 10% of the gross assets of the Fund may be exposed to the creditworthiness or solvency of a single counterparty (other than any government or governmental agency), in each case calculated at the time of investment;
d) no more than 10% of the Net Asset Value of the Fund may be invested in securities of countries where immediate repatriation rights are not available;

e) the Fund will not invest in the securities of any issuer if the d i i t o r s and officers of the Fund and the Investment Manager collectively own in excess of 5% of such securities;

the Fund will not take or seek to take legal or management control of the issuer of underlying investments;

g) the Fund will adhere to the general principle of diversification in respect of all of its assets;
h) the Fund will not invest directly in real prop*;

i) the Fund will not make any Ioans (except to the extent that the acquisition of any investment in securities or commodity interests described herein may constitute a loan) to any one issuer (other than any government or governmental agency) except with the consent of the custodian of the Fund's assets; and
j) no more that 10% of the Nt Asset Value of the Fund will be invested in physical commodities. e
The investment restriction set out in (c) above will not apply to transactions with any counterparty which advances fl and appropriate collateral to the Fund in respect of such transactions. d
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OFFFXING OF THE SHARES
The Fund is offering up to 10,000,000 Shares. The initial offering price was U.S. $200 per Share on November 30, 1990. The Shares are currently offered at a price equal to the Net Asset Value per Share (as hereinafter defined) as of the opening of business on the date of issuance. Shares may be offered only to experienced and sophisticated investors who are neither citizens nor residents of the United States ("Non-U.S. Investors7')and to a limited number of United States investors that are tax-exempt entities ("W.S. Tax-Exempt Investors"). The minimum initial purchase by each subscriber is US. $100,000. The Fund may reject any subscription, in whole or in part, in its discretion. All subscriptions, once made, are irrevocable to the subscriber. AII proceeds from the sale of Shares will be received by the Fund in trust and will be deposited by the Fund into a segregated interest bearing account in the Fund's name at the Fund's bank, Citco Bank Nederland N.V. Dublin Branch. There are no underwriting arrangements with respect to the offering of Shares. The Fund may use the assistance of affiliated or unaffiliated placement agents and money

managers, including FGL, to place the Shares. Such placement agents and intermediaries may charge their clients a placement fee of up to 5% of the total amount of the subscription for Shares sold with their assistance, andor share in the fees earned ffom the Fund, which they may rebate to their clients. Placement fees charged directly by FGL will not exceed 3%. In certain instances, the Fund may deduct the amount of the placement fee fiom the subscription amount to pay to the unaffiliated placement agent and such amounts will not constitute part of the assets of the Fund. The Fund will offer its Shares on a continuous basis at a price equal to its Net Asset Value as of the opening of business on the date of issuance of such Shares. Subscriptions received during any month prior to the thii to the last business day of the month will be accepte:d, subject to the sole discretion of the Investment Manager, as of the first business day of the following month. Thus, for example, subscriptions received between January 1 and January 28 shall be accepted as of F e b m q 1, assuming the 29th-31st are business days. The Fund reserves the right, in its discretion, to accept any subscription prior to such first day. Subscriptions shall become irrevocable to the subscriber on the third to the last business day of the month in which such subscription is received by the Fund. The Fund was admitted to the Official List of the Irish Stock Exchange, Dublin, Ireland on January 12, 1995 and has been issued SEDOL number 0330934. It is unlikely that a trading market in the Fund's Shares will develop and none has developed to date. The listing does not affect shareholder redemption rights. Net Asset Value Defmed The Net Asset Value of the Shares is the value of the Fund's assets as calculated in accordance with the International Financial Reporting Standards and the Memorandum and Articles of Association of the Fund. Notwithstanding the foregoing:
in the case of extraordinary circumstances which warrant a different valuation of (i) any securities, such as an inability to liquidate existing positions, such securities will be valued at such prices as the Directors shall determine; and

the amount of any distribution or dividend made shall be a liability of the Fund (ii) from the day when the distribution or dividend is declared until it is paid. A 1 decisions on the valuation of assets and liabilities and determination of Net Asset Value shall be made 1 by the Fund's Board of Directors. Net Asset Value per Share is defined as tbe Net Asset Value divided by the number of Shares then outstanding. The Net Asset Value of the Fund will be calculated on a monthly basis by the Fund's administrator, Citco Fund Services (Europe) B.V., which will promptly notify the Irish Stock Exchange of the results of each such Net Asset Value calculation. Pursuant to the Fund's Articles of Association, the Fund may suspend the calculation of its Net Asset Value for the whole or any part of any period: (a) during which any stock exchange or over-the-counter market on which any significant portion of the investments of the Fund are listed, quoted, traded or dealt

in is closed (other than customary weekend and holiday closing) or trading on any such stock exchange or over-the-counter market is restricted; or

when circumstances exist as a result of which in the opinion of the Directors it is
not reasonably practicable for the Fund to dispose of investments or as a result of which any such disposal would be materially prejudicial to the shareholders; or when a breakdown occurs in any of the means nonnaIly employed in ascertaining the vaIue of investments or when for any other reason the value of any of the investments or other assets of the Fund cannot reasonably or fairly be ascertained; or during which the Fund is unable to repatriate funds required for the purpose of making payments due on redemption of Shares or during which any transfer of funds involved in the realization or acquisition of investments or payments due on redemptions of Shares cannot in the opinion of the Directors be effected at normal rates of exchange. Any such suspension shall take effect at such time as the Directors shall declare but not later than the close of business on the business day next following the declaration, and thereafter there shall be no deterinination of the Net Asset Value per Share of the Fund until the Directors shall declare the suspension at an end, except that such suspension shall terminate in any event on the first business day on which (a) the condition giving rise to the suspension &a11 have ceased to exist; and (b) no other condition under which suspension is authorized under the Fund's Articles of Association shall exist. Each declaration by the Directors pursuant to this paragraph shall be consistent with such official rules and regulations (if any) relating to the subject matter thereof as shall have been promulgated by any authority having jurisdiction over the Fund and as shall be in effect at the time. To the extent not inconsistent with. such official rules and regulations, the determination of the Directors shall be conclusive. Whenever the Directors shall declare a suspension of the determination of the Net Asset Value per Share, then as soon as may be practicable after any such declaration, the Directors shall give notice to all shareholders stating that such declaration has been made. At the end of any period of suspension as aforementioned the Directors shall give notice to all shareholders stating that the period of suspension has ended.

Who Should Purchase/Subscri~tion Procedure
This offering is limited to non-US. persons arid to a limited number of United States investors that are tax-exempt entities all of whom have the ability to speculate in high risk securities and for whom such a purchase is suitable in light of such person's financial condition. The Fund will require as a condition to the acceptance of a subscription that the subscriber represent and warrant that he has a net worth in excess of U.S. %1,000,000. Prospective subscribers should inform themselves as to the legal requirements within their own countries for the purchase of Shares and any foreign exchange or tax considerations relevant to such purchase. As part of the Fund's responsibility for the prevention of money laundering, the Fund will require detailed verification of a prospective investor's identity to be included with its subscription application. An individual will be required to produce a certified copy of a passport or identification card. Corporate applicants will be required to produce a certified copy of the certificate of incorporation (and any change of name), memorandum and articles of association (or other documents evidencing the existence of the

legal entity), the register of directors or an excerpt from the bade register held at the relevant chamber of commerce and the signatory card verifying the authority of officers to sign on behalf of the corporate entity. Trusts and other entities which subscribe to the Fund must demonstrate organizational documents which verify the existence of the entity and which verifjr the authority of one or more signatories to sign subscriptions on behalf of the entity.

T e Fund reserves the right to request such further information as is necessary to verify the identity of an h
applicant. In the event of delay or failure by the applicant to produce any information required for verification purposes, the Fund may refuse to accept the application and the subscription moneys relating theredo.

In order to subscri'be for Shares, subscribers must complete and sign the Subscription Agreement included
in the Subscription Documents which accompany this Private Placement Memorandum (the "Memorandum7'), and mail them to Fairfield Sentry Limited, c/o Citco Fund Services (Europe) B.V., Telestone 8-Teleport, Naritaweg 165, 1043BW Amsterdam, The Netherlands; fax number (31-20) 5722610. Subscription funds should be wire transferred to the Fund's escrow account at: Intermediary Bank Field 56 HSBC Bank,New York BIC: MRMDUS33 Fed Wire: 02I001088 Account with Institution Field 57 Account Name: Citco Bank Nederland N.V. Dublin Branch Account Number: 000306487 BIC: CITCIE2D Beneficaty Customer - Field 59 Beneficiary Account Name: Fairfield Sentry Limited Beneficiary International Bank Account Number (IBAN): IE23CITC00000035810501 Reference SMFT Field 70: Name and Full Address of Subscriber:

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FEES, COMPENSATION AND EXPENSES

The Fund will bear, for each year, all continuing offering costs; all ordinary legal and auditing fees; all registrar, transfer agent and administration fees; all insurance expenses; all expenses in maintaining the Fund's ofice and a11 other expenses incurred in the operation of the Fund, if any, including any legal and auditing fees that relate to extraordinary circumstances, such as tax examinations or titigation involving the Fund, as well as all fees and all ordinary and necessary expenses related to the Fund's investment and trading activities.

FGL will pay the Investment Manager a fixed fee for providing certain managerial services to the Fund, as more fully descnied in the Investment Manager's Form ADV Part 11, which is attached to this Memorandum as Appendix 3.

Mans~ement Fee

FGL will receive for each month a management fee (the "Management Fee") in an amount equal to onetwelfth of one percent (0.0833%) (approximately 1% per m u m ) of the Net Asset Value of the Fund
before Performance Fees (as hereinafter defined) as calculated at the open of the &st day of the month (which would include any subscriptions for Shares accepted by the Fund as of the first day of such month). The Management Fee is payable monthly in anears. FGL may pay a portion of the Management Fee to an affiliate of FGL and the Investment Manager in consideration of the affiliate providing certain administrative services and back-office support to the Fund. Performance Fee

FGL will receive, for each calendar quarter, a perfomance fee (the "Performance Fee") in an amount
equal to 20% of the net realized and net unrealized appreciation in the Net Asset Value of each Share in such calendar quarter ("Net Profits"), if any; provided, however, that if a Share has a loss chargeable to it during any calendar quarter or quarters ("Unrecouped Loss") and during any succeeding calendar quarters there are Nt Profits allocable to the Share, there will be no Performance Fee payable with respect to such e Share until the amount of the Unrecouped Loss allocated to such Share has been recouped. If Shares are redeemed during a calendar quarter, the Unrecouped Loss relating to such Shares will be reduced in the same proportion as the reduction in the Net Asset Value of such Shares caused by such redemption. No Share will be subject to the payment of a Performance Fee until such Share has recouped its loss carryover, i.e., until the Net Asset Value of such Shares is at least as high as the previous highest Net Asset Value per Share. IN OTHER WORDS, PERFORMANCE FEES WILL ONLY BE PAID ON "NEW APPRECIATION" I THE NET ASSET VALUE OF THE SHARES. Shares which were either N purchased or redeemed during a calendar quarter will be subject to the payment of a Performance Fee only for the portion of the calendar quarter during which such shares were outstanding. FGL will reduce any Performance Fees otherwise payable to it by offsetting it against an amount equal to the "Shared Cash Flow Amount" as defined in "POTENTIAL CONFLICTS OF INTEREST", below) attributable to NonSSC Investments. Notwithstanding the foregoing, in the event that, as at the end of any calendar year, the aggregate amount of original investments in Non-SSC Investment vehicles exceeds the aggregate net asset value of the Fund's interests in Non-SSC Investment vehicles (before deduction of the Fund's share of fees payable by the Non-SSC Investment vehicles) (such excess being the "Non-SSC Investment Loss") FGL will reduce its Performance Fee payable at subsequent quarter-end by an amount equal to the Non-SSC Investment Loss. The portion of the Performance Fee that is reduced to cover the Non-SSC Investment Loss will be carried forward. In the event that the Non-SSC Investment Loss is, in part or in whole, subsequently recouped by Non-SSC Investment vehicles, the Fund will pay FGL such portion of the Performance Fee that was previously reduced to cover Non-SSC Investment Losses in addition to Performance Fees otherwise payable for any quarter. Pursuant to its agreement with the Fund, FGL may elect to defer payment of all or a portion of its Performance Fee. Salaries and Other Personnel Expenses
Mr. Noel will not be compensated for serving as a Director of the Fund, but he and representatives of the Investment Manager will be reimbursed by the Fund for any out-of-pocket expenses they may incur in attending meetings of the Board of Directors or of shareholders. The Directors not affiliated with the Investment Manager, of which there are at the present time two, will each be paid a fee of $25,000 per

mum by the Fund together with his out-of-pocket expenses in attending meetings of

the Board of

Directors or of shareholders.

BANK, CUSTODIAN AND BROKERAGE

Bank and Custodian
Pursuant to a custodian agreement (the "Custody Agreement"), Citco Bank Nederland N.V., Dublin Branch ("Citco Bank") and Citco Global Custody N.V. ("Citco Depository") have agreed to provide custodial services to the Fund. Citco Bank shall, to the extent it deems necessary, appoint and Citco Depository shall make use of sub-custodians with respect to certain securities of the Fund. Citco Bank will not be Iiable for any act or omission or for the solvency of such subcustodians, provided Citco Bank exercised due care in selecting the subcustodians. Citco Depository will not be liable for any act or omission or for the solvency of such sub-custodians. Citco Bank will exercise reasonable skill, care and diligence in the selection of a suitable sub-custodian and shall be responsible to the Fund for the duration of the sub-custody arrangement for satisfying itself as to the ongoing suitability of the sub-custodian to provide custodial services to the Fund. Citco Bank will maintain an appropriate level of supervision over the sub-custodian(s) and make appropriate enquiries, periodically, to confirm that the obligations of the sub-custodian(s) continue to be competently discharged. As a result of the Investment Manager's selection of Bernard L. Madoff Investment Securities, LLC ("BLM") as execution agent of the split sfrike conversion strategy, substantially all of the Fund's assets will be held in segregated accounts at BLM, a U.S. registered broker-dealer and qualified custodian. Accordingly, BLM will be a sub-custodian of the Fund. The underlying assets of the Non-SSC Investments are held pursuant to custodial arrangements with other qualified entities.

Brokerage
It is expected that the Investment Manager and the Non-SSC Investment managers will generally allocate brokerage business on the basis of best available execution and in consideration of such brokers' provision of brokerage and research services. The Investment Manager and the Non-SSC Investment managers may also utilize brokers with which the Non-SSC Investment managers are affiliated.

In selecting brokers or dealers to execute transactions, the Investment Manager and the Non-SSC Investment managers typically will not solicit competitive bids and will not have an obligation to seek the lowest available commission cost. It generally will not be the practice of the Investment Manager or the Non-SSC Investment managers to negotiate Lbexecution only" commission rates, and thus the Fund may be deemed to be paying for research and other services provided by the broker which are included in the commission rate. Research furnished by brokers may include, but is not limited to, written information and analyses concerning specific securities, companies or sectors; market, financial and economic studies and forecasts; financial publications; statistic and pricing services, as well as discussions with research personnel, along with hardware, software, data bases and other technical and telecommunication services and equipment utilized in the investment management process. Research services obtained by the use of commissions arising from such transactions may be used by the Investment Manager or the Non-SSC Investment managers in their other investment activities. The Investment Manager and the Non-SSC Investment managers may also be paying for services other than research that are included in the commission rate. These other services may include, without limitation, office space, facilities and equipment; administrative and accounting support; supplies and

stationery; telephone limes, usage and equipment and other items which might otherwise be treated as an expense of the Investment Manager or the Non-SSC Investment managers. To the extent the Investment Manager or the Non-SSC Investment managers utilize commissions to obtain items which would otherwise be an expense of the Investment Manager or the Non-SSC Investment rnmagm, such use of commissions in effect constitutes additional compensation to the Investment Manager or the Non-SSC Investment managers, as the case may be. Certain of the foregoing cormmission arrangements are outside the parameters of Section 28(e) of the Securities Exchange Act of 1934, as amended which permits the use of commissions or "soft doIlars" to obtain "research and execution" services. Finally, since commission rates are generally negotiable, selecting brokers on the basis of considerations which are not limited to applicable commission rates may result in higher transaction costs than would otherwise be obtainable.

ADMINISTRATOR, REGISTRAR AND TRANSFER AGENT
Pursuant to an administration agreement, dated February 20,2003, between Citco Fund Services (Europe) B.V. ('Titco") and the Fund (the "Admistration Agreementy'), Citco serves as the administrator for the Fund, under the overall direction of the Fund's Board of Directors. As administrator, Citco has the responsibility for furnishing the day-to-day administrative services which the Fund may require, such as: accounting services; maintaining the Fund's books and records; preparation of reports and accounts; calculation of Net Asset Value and fees; communications with shareholders andlor governmental bodies; paying the Fund's expenses; providing suitable facilities and procedures for handing dividends and distributions (if any) and the orderly liquidation and dissolution of the Fund, if required. In consideration of its services, Citco receives a monthly fee based on the Net Asset Value of the Fund as of the last business day of each month at a commercially reasonable rate. To the extent that Citco relies on information supplied by the Fund, my investee h d of the Fund or any brokers engaged by the Fund, in comectian with making any of the aforementioned cafcdations, Citco's liability for the accuracy of such calculations is limited to the accuracy of its computations. Citco shall not be liable for the accuracy of the underlying data provided to it. Pursuant to the Administration Agreement, the Fund has agreed to indemnify Citco, its subsidiaries, affiliates, directors and other officers, shareholders, servants, employees, agents and permitted delegates under the Administration Agreement, against any and all liabilities, obligations, losses, judgments and expenses of any kind or nature whatsoever (collectively, the "Claims" and, individually, a Tlaim") which may be imposed on, incurred by or asserted against any of them arising (other than by reason of negligence, bad faith, thud or dishonesty on the part of Citco or such other indemnified party) out of the provision of services under the Administration Agreement. Similarly, Citco will indemnify the Fund from and against any Claim which arises directly out of the negligence, bad faith, fraud or dishonesty of its obligations on the part of Citco in connection with its provision of' services under the Administration Agreement. The Administration Agreement may be terminated by either party on 90 days' prior written notice; provided, however, that the Administration Agreement may be terminated forthwith by notice in writing by either party if the other party (a) commits a material breach of the Administration Agreement and fails to cure such breach w i t h i 30 days after notice from the non.-defaultingparty; or (b) enters into involuntary liquidation or if a receiver is appointed over any of its assets.

RISK FACTORS
The purchase of Shares in the Fund involves substantial risks that are incident to the Fund's allocation of assets to SSC and Non-SSC Investments.

1. T a i g Risks. Substantial risks are involved in the trading of equity securities rdn and options. Market movements can be volatile and are difficult to predict. U.S. Government activities, particularly those of the Federal Reserve Board, can have a profound effect on interest rates which, in tum, substantially affect securities and options prices, as