Man AHL Diversified Futures Ltd A company incorporated with limited liability under the Companies Act 1981 of Bermuda

Transcription

1 Man AHL Diversified Futures Ltd A company incorporated with limited liability under the Companies Act 1981 of Bermuda Second Addendum to the Prospectus issued by Man AHL Diversified Futures Ltd (the Company ) dated 4 September 2012 (the Prospectus ) containing particulars of the change in Investment Manager This Second addendum ( Addendum ) is dated 22 July 2014 and is to be read in conjunction with the Prospectus, as amended by the First Addendum dated 7 November All capitalised and undefined terms in this Addendum shall have the meaning prescribed in the Prospectus. Page numbers as referred to below are to page numbers in the Prospectus. Except as amended in this Addendum, all provisions of the Prospectus shall remain in full force and effect. This Addendum will be effective from 22 July The Directors and the Investment Manager accept full responsibility for the accuracy of the information contained in this addendum and confirm, having made all reasonable enquiries, that to the best of their knowledge and belief there are no other facts the omission of which would make any statement misleading. The Prospectus is hereby amended as follows: A. Change in Investment Manager Page 2 (The offering) The ninth paragraph of page 2 (commencing Investment Manger ) shall be deleted and replaced by: Investment Manger AHL Partners LLP Page 5 (Investment Manager) The last paragraph of the second column of page 5 (commencing The Investment Manager ) and the first paragraph of the first column of page 6 (commencing Man is a world leader ) shall be deleted and replaced by: Following the novation of the Investment Management Agreement to AHL Partners LLP on 22 July 2014, the Investment Manager for the Company is AHL Partners LLP. The responsibility of the investment selection, portfolio construction and portfolio management of the Company s portfolio rests with AHL. AHL operates as an investment division of the Man Group and operates through various legal vehicles including the Investment Manager (i.e. AHL Partners LLP). The Investment Manager is authorised and regulated by the FCA in the conduct of its regulated activities in the United Kingdom. A member of the Man Group, the Investment Manager provides access for private and institutional investors worldwide to alternative investment strategies through a range of innovative products and solutions designed to deliver long-term investment performance. Man Investments Limited, also a member of the Man Group, was the investment manager of the Company from inception until 22 July 2014.

2 The second paragraph of the first column of page 6 (commencing AHL ) shall be deleted and replaced by: AHL AHL operates as an investment division of Man Group and operates through various legal vehicles including the Investment Manager. AHL is one of the world s leading quantitative managed futures managers. It provides investors with highly liquid and efficient trading strategies which offer low correlation to more traditional investment disciplines. The business was established in 1987 as a division of Man Investments Limited and has developed a long and successful track record, offering strong returns with a low correlation to other asset classes. As at 31 March 2014, the Investment Manager managed 9 billion in assets. AHL employs sophisticated computerised processes to identify inefficiencies in markets around the world. A stable and robust trading and implementation infrastructure is then employed to capitalise on these trading opportunities. AHL is able to draw on the substantial business and corporate infrastructure, information technology, administration, logistics, compliance and legal functions, and client servicing offered by Man through a worldwide network of offices and staff. Page 22 (Brokerage fees) The final paragraph of the first column of page 22 (commencing Neither the Investment Manager ) shall be deleted and replaced by: Use of Dealing Commission The Investment Manager utilises various brokers and dealers to execute securities transactions. Portfolio transactions for the Company are allocated to brokers and dealers on the basis of best execution (in accordance with the rules of the FCA) based on a number of factors, including commissions/price, the ability of brokers and dealers to effect the transactions, the brokers and dealers facilities, reliability and financial responsibility. The Investment Manager need not solicit competitive bids and does not have an obligation to seek the lowest available commission cost. All such transactions will be undertaken in compliance with the rules of the FCA on inducements and the use of dealing commission. Accordingly, dealing commissions will be used only for the provision of execution or research services. In addition, although soft dollars will be used for brokerage and research products and services with the Safe Harbor provided by Section 28 (e) of the US Securities Exchange Act of 1934, as amended, soft dollars may be generated in transactions and pursuant to arrangements not falling within the Section 28 (e) Safe Harbor. Soft dollars generated through transactions other than agency transactions in securities and riskless principal transactions in securities (e.g. transactions in rights, options, warrants or certificates to the extent that they relate to shares and principal transactions involving securities that are not riskless principal transactions) do not fall within the Safe Harbor created by Section 28 (e) and may be used to obtain brokerage and research products and services.

3 Brokers sometimes suggest a level of business they would like to receive in return for the various products and services they provide. Actual brokerage business received by any broker may be less than the suggested allocation, but can (and often does) exceed the suggested level, because total brokerage is allocated on the basis of all of the considerations described above. A broker is not excluded from receiving business because it has not been identified as providing research services or products. Research products and services received from the Company s brokers may be used by the Investment Manager in servicing all of its accounts, and not all such research products and services need to be used in connection with the Company. Nonetheless the Investment Manager believes that such investment information provides the Company with benefits by supplementing the research otherwise available to the Company. In entering into transactions with brokers or dealers connected to the Investment Manager on behalf of the Company, directors of the Company or any of their connected persons, the Investment Manager will ensure that: (a) such transactions are on arm s length terms; (b) it uses due care in the selection of such brokers or dealers and ensure that they are suitably qualified in the circumstances; (c) transaction execution must be consistent with applicable best execution standards; (d) the fee or commission paid to any such broker or dealer in respect of a transaction must not be greater than that which is payable at the prevailing market rate for a transaction of that size and nature; (e) it monitors such transactions to ensure compliance with its obligations; and (f) the nature of such transactions and the total commissions and other quantifiable benefits received by such broker or dealer shall be disclosed in the annual report of the Company. Dealing commissions will be used for the provision of execution or research services in accordance with any applicable regulatory requirements. In particular, soft dollars will only be retained if the goods or services 1 are of demonstrable benefit to Shareholders, transaction execution is consistent with best execution standards and brokerage rates are not in excess of customary institutional full-service brokerage rates. Periodic disclosure will be made in the Company s annual report in the form of a statement describing the Investment Manager s soft dollar practices, including a description of the goods and services received by the Investment Manager. 1 Goods and services may include: research and advisory services; economic and political analysis; portfolio analysis, including valuation and performance measurement; market analysis, data and quotation services; computer hardware and software incidental to the above goods and services; clearing and custodian services and investment-related publications. Such goods and services may not include travel, accommodation, entertainment, general administrative goods or services, general office equipment or premises, membership fees, employee salaries, or direct money payments.

4 Neither the Investment Manager nor any of its connected persons will retain cash or other rebates from brokers or dealers in consideration of directing transactions for the Manager to such brokers or dealers. Page 23 (Names and addresses) The third paragraph of the second column of page 23 (commencing Investment Manager ) shall be deleted and replaced by: Investment Manager AHL Partners LLP 2 Swan Lane Riverbank House London EC4R 3AD United Kingdom Page 26 (Appendix 1) The second paragraph of the first column of page 26 (commencing Investment Manager ) shall be deleted and replaced by: Investment Manager means AHL Partners LLP of Riverbank House, 2 Swan Lane, London EC4R 3AD, United Kingdom, a limited liability partnership established in England and authorised and regulated by the FCA in the conduct of its regulated activities in the United Kingdom. Page 30 (Appendix 2) The first paragraph headed (a) of the first column of page 30 (commencing the Investment Management Agreement ) shall be deleted and replaced by: (a) the Investment Management Agreement between the Company, Man Investments AG (formerly Adam, Harding & Lueck AG which merged with Man Investments AG) and the Investment Manager, dated 25 March 2011, as amended and restated on 4 September 2012 and subsequently novated to the Investment Manager on 22 July 2014, pursuant to which the Investment Manager has agreed to provide investment management advice, trading advice and risk management services to the Company and pursuant to which Man Investments AG has been appointed as Marketing Adviser; The second paragraph headed (g) of the second column of page 30 (commencing the Hong Kong representative agreement ) shall be deleted and replaced by: (g) the Hong Kong representative agreement between the Company, the Investment Manager and the Hong Kong Representative, dated 25 March 2011, as amended and restated on 22 July 2014, pursuant to which the Hong Kong Representative has been appointed as the Hong Kong Representative of the Company and the Investment Manager. B. Administrative updates (i) Change in the name and address of the Registrar, the Principal Paying Agent and the Company Secretary (including the address of the registered office of the Company).

5 All references in the Prospectus to Citi Hedge Fund Services, Ltd., shall be deleted and replaced by Citi Fund Services (Bermuda), Ltd.. Pages 23 and 24 (Names and addresses) The first paragraph of the second column of page 23 (commencing Registered office of the Company ) shall be deleted and replaced by: Registered office of the Company Citi Fund Services (Bermuda), Ltd 5 Reid Street Hamilton HM 11 Bermuda The second paragraph of the second column of page 23 (commencing Company Secretary ) shall be deleted and replaced by: Company Secretary Christine Perinchief c/o Citi Fund Services (Bermuda), Ltd. 5 Reid Street Hamilton HM 11 Bermuda The last paragraph of the second column of page 23 (commencing Registrar ) shall be deleted and replaced by: Registrar Citi Fund Services (Bermuda), Ltd. 5 Reid Street Hamilton HM 11 Bermuda Tel: Fax: Contact: The Company Secretary The third paragraph of the second column of page 24 (commencing Principal Paying Agent ) shall be deleted and replaced by: Principal Paying Agent Citi Fund Services (Bermuda), Ltd. 5 Reid Street Hamilton HM 11 Bermuda Tel: Fax: (ii) Reduction on the minimum investment amount from 20,000 to 10,000. Page 2 (The offering) The sixth paragraph of page 2 (commencing Minimum initial investment ) shall be deleted and replaced by:

6 Minimum initial investment 10,000 Page 17 (Procedure for applications) The last sentence in the first paragraph of the first column of page 17 (commencing For all new applications ) as amended by the First Addendum dated 7 November 2013 shall be deleted and replaced by: Please note that the minimum level of initial investment by each investor in Hong Kong in the Company is 10,000. The third paragraph of the second column of page 17 (commencing When applying for Shares ) as amended by the First Addendum dated 7 November 2013 shall be deleted and replaced by: When applying for Shares, Applicants should apply for a minimum initial investment of 10,000. (iii) Update on information regarding Board of Directors of the Company to reflect the resignation of Ronan Daly and John Walley. All references to Ronan Daly and John Walley shall be deleted. (iv) All references to Financial Services Authority or FSA shall be deleted and replaced by Financial Conduct Authority or FCA respectively. (v) Change of the website reference through which certain reporting and statements were available. All references to shall be deleted and replaced by (this website is not authorised and reviewed by the SFC). (vi) Other miscellaneous updates Page 23 (Names and addresses) The second paragraph of the first column of page 23 (commencing Dawn Griffiths (British) ) shall be deleted and replaced by: Dawn Griffiths (British) Conyers Dill & Pearman Limited Clarendon House 2 Church Street Hamilton HM 11 Bermuda Ms Griffiths is a director of Conyers Dill & Pearman Limited, barristers and attorneys, Bermuda.

7 Man AHL Diversified Futures Ltd A company incorporated with limited liability under the Companies Act 1981 of Bermuda Addendum to the Prospectus issued by Man AHL Diversified Futures Ltd (the Company ) dated 4 September 2012 (the Prospectus ) containing particulars of an offering of participating shares This addendum ( Addendum ) is dated 7 November 2013 and is to be read in conjunction with the Prospectus. All capitalised and undefined terms in this Addendum shall have the meaning prescribed in the Prospectus. Page numbers as referred to below are to page numbers in the Prospectus. Except as amended in this Addendum, all provisions of the Prospectus shall remain in full force and effect. This Addendum will be effective from 7 November The Directors and the Investment Manager accept responsibility for the information contained in this addendum. The Prospectus is hereby amended as follows: Page 16 (Procedure for applications) The first paragraph of the first column of page 17 (commencing For all new applications for subscriptions ) shall be deleted and replaced by: For all new applications for subscriptions, Applicants must promptly mail the relevant original Application Form (and Anti-money Laundering Documents required in Appendix 4) duly completed and signed by or on behalf of the Applicant to Citibank (Hong Kong) or the Shareholder Services Provider who have been appointed to process applications. Shareholders will not be entitled to payment of any redemption proceeds (pursuant to a request for redemption) until the original Application Form (and Anti-money Laundering Documents) has been received by Citibank (Hong Kong) or the Shareholder Services Provider. Once completed applications have been received by the Company, they are irrevocable. The Directors may, in their absolute discretion, reject or scale down any application for Shares without giving any reason. In such event the subscription monies or any balance thereof, as appropriate, less any bank charges, will be returned to the source from which it was received. Please note that the minimum level of initial investment by each investor in Hong Kong in the Company is 20,000 (or such lesser amount as the Directors in their discretion may determine, but in any event the minimum level of initial investment by each investor in Hong Kong in the Company must not be less than 10,000). The third paragraph of the second column of page 17 (commencing When applying for Shares ) shall be deleted and replaced by: When applying for Shares, Applicants should apply for a minimum initial investment of 20,000 (or such lesser amount as the Directors in their discretion may determine, but in any event the minimum level of initial investment by each investor in Hong Kong in the Company must not be less than 10,000).

8 Page 23 (Names and addresses) The second paragraph of page 24 (commencing Transfer Agency ) shall be deleted and replaced by: Transfer Agency Citibank N.A., Hong Kong Branch 9/F, Two Harbourfront 22 Tak Fung Street Hunghom, Kowloon Hong Kong, Tel: Fax: (Dealing Forms only)

9 Man AHL Diversified Futures Ltd A company incorporated with limited liability in Bermuda under the Companies Act 1981 of Bermuda Prospectus 4 September 2012

10 MANADF-PROS-ENGCHI

11 Man AHL Diversified Futures Ltd A company incorporated with limited liability in Bermuda under the Companies Act 1981 of Bermuda The prices of futures, options and other investments in which the Company may invest may fall in value as rapidly as they may rise and it may not be possible to liquidate the Company s position in the relevant markets before a loss is sustained. No assurance can be given that the investment objective of the Company will be achieved or that substantial losses will not be suffered.

12 Preliminary If you are in any doubt about the contents of this Prospectus you should consult your stockbroker, bank manager, lawyer, accountant or other professional adviser. Investors may contact Man Investments (Hong Kong) Ltd (the Hong Kong Representative ) for any queries or complaints in relation to this investment product. To contact the Hong Kong Representative, investors may either: write to the Hong Kong Representative (Man Investments (Hong Kong) Ltd, Suite 1301, Chater House, 8 Connaught Road Central, Hong Kong) the Hong Kong Representative (ComplaintsAsia@ man.com) call the Hong Kong Representative Complaints line: The Hong Kong Representative will respond to the enquiry or complaint in writing within reasonable time. This Prospectus contains particulars of Man AHL Diversified Futures Ltd (the Company ), an open-ended investment company, and the offering of Participating Shares (the Shares ) the proceeds of which are to be invested in accordance with the objectives set out in this Prospectus. The distribution of this Prospectus is not authorised unless it is accompanied by a copy of the latest audited financial statements of the Company, which together with this Prospectus forms the Prospectus for the issue of Shares in the Company. This Prospectus does not constitute an offer or solicitation to anyone in any jurisdiction in which such offer is not authorised or to any person to whom it is unlawful to make such offer or solicitation. The Shares are offered on the basis of the information and representations contained in this Prospectus and any further information given or representations made by any person may not be relied upon as having been authorised by the Company or its Directors. Neither the delivery of this Prospectus nor the allotment or issue of Shares shall under any circumstances create any implication that there has been no change in the affairs of the Company since the date of this Prospectus. No listing or other dealing facility is at present being sought for the Shares although the Directors may consider seeking a listing in the future. The Company has been incorporated in Bermuda as an open-ended investment company with limited liability. The Company is open-ended in that it can issue and redeem its Shares at prices based upon the Net Asset Value per Share. The Company has been classified as a Bermuda standard fund. As such, the Company is subject to supervision and regulation as provided for in the Bermuda Investment Funds Act However, the Company should be viewed as an investment suitable only for those investors who can fully evaluate and bear the risks involved. The Company is regulated in Bermuda by the Bermuda Monetary Authority whose address is BMA House, 43 Victoria Street, Hamilton HM 12, Bermuda with telephone number The Investment Manager is authorised and regulated in the United Kingdom by the Financial Services Authority whose address is 25 The North Colonnade, Canary Wharf, London E14 5HS, United Kingdom with telephone number +44 (0) Permission under the Exchange Control Act 1972 (and regulations made thereunder) has been obtained from the Bermuda Monetary Authority for the issue of the Shares as defined and described herein. Authorisation by the Bermuda Monetary Authority does not constitute a guarantee by the Bermuda Monetary Authority as to the performance of the Company or its creditworthiness. Furthermore, in authorising the Company, the Bermuda Monetary Authority shall not be liable for the performance of the Company or in the default of its operators or service providers, nor for the correctness of any opinions or statements expressed in this Prospectus. A copy of this Prospectus has been delivered to the Registrar of Companies in Bermuda for filing pursuant to the Act. It must be distinctly understood that, in accepting this Prospectus for filing, the Registrar of Companies in Bermuda accepts no responsibility for the financial soundness of any proposals or for the correctness of any of the statements made or opinions expressed with regard to them. Man AHL Diversified Futures Ltd

13 The Company has been authorised by the Securities and Futures Commission ( SFC ) in Hong Kong under the Code on Unit Trusts and Mutual Funds as a Futures Fund and not as a Hedge Fund. In granting such authorisation the Securities and Futures Commission takes no responsibility for the financial soundness of the Company or for the accuracy of any of the statements made or opinions expressed in this Prospectus. SFC authorisation is not a recommendation or endorsement of a scheme nor does it guarantee the commercial merits of a scheme or its performance. It does not mean the scheme is suitable for all investors nor is it an endorsement of its suitability for any particular investor or class of investors. The Investment Manager and the Directors of the Company, whose names appear in this Prospectus, accept full responsibility for the accuracy of the information contained in this Prospectus and confirm, having made all reasonable enquiries that to the best of their knowledge and belief there are no other facts the omission of which would make any statement misleading. Investments in the Company are not deposits or obligations of, or guaranteed or endorsed in any way by Citibank Europe plc, Citi Hedge Fund Services, Ltd., or any of their respective affiliates. None of Citibank Europe plc, Citi Hedge Fund Services Ltd., nor any of their respective affiliates, branches or subsidiaries, directly or indirectly, guarantees, assumes or otherwise insures the obligations or performance of the Company or any other investment that the Company makes. Any losses of the Company are solely borne by the investors and not by Citibank Europe plc, Citi Hedge Fund Services, Ltd. or any of their respective affiliates or subsidiaries. As described in this Prospectus Citibank Europe plc and Citi Hedge Fund Services, Ltd. may provide services to the Company pursuant to the Citi Fund Services Agreement. Neither Citibank Europe plc nor Citi Hedge Fund Services, Ltd. is under that agreement acting as an investment manager, as an investment, legal or tax adviser, or as a custodian to the Company. In providing their services Citibank Europe plc and Citi Hedge Fund Services, Ltd. are only providing such services to the Company pursuant to the Citi Fund Services Agreement and not to any other person. Neither Citibank Europe plc nor Citi Hedge Fund Services Ltd. is responsible for the content of this Prospectus. Such responsibility is with the Investment Manager and the Directors of the Company and accordingly each investor agrees that neither Citibank Europe plc nor Citi Hedge Fund Services, Ltd. will have any liability arising from any inaccuracies in this Prospectus. United States No Shares shall be issued in the US or to any US Person other than pursuant to the provisions of the Prospectus in this regard. The Shares have not been, nor will they be, registered or qualified under the US Securities Act of 1933, as amended (the "Securities Act") or any applicable securities laws of any state or other political sub divisions of the US. Except with respect to Permitted US Persons, the Shares may not be offered, sold, transferred or delivered directly or indirectly in the US or to any US Person. Any sales or transfers of Shares in violation of the foregoing shall be prohibited and treated by the Company as void. All applicants and transferees of Shares must complete an Application Form which confirms, among other things, that a purchase or a transfer of Shares would not result in a sale or transfer to an entity which is a US Person precluded from the purchase of Shares hereunder. In reliance on Section 3(c) (7) of the US Investment Company Act of 1940, as amended (the "US Company Act"), the Company is not registered as an investment company because any Shares sold within the US will be sold on a private placement basis to persons who are "qualified purchasers" (as defined in Section 2(a) (51) of the US Company Act and the regulations thereunder). The Company does not intend to permit investments by "benefit plan investors" (as defined under Section 3(42) of the US Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and any regulations promulgated thereunder) to equal or exceed twenty five percent (25%) of the aggregate Net Asset Value of any Class of Shares. Except in relation to those prohibited recipients as described in Appendix 3, copies of this Prospectus and of the Application Form may be obtained from the Company, the offices of Man and its authorised intermediaries, the Shareholder Services Provider, Citibank (Hong Kong) and the Hong Kong Representative. Capitalised terms used herein, unless otherwise defined, shall have the meanings ascribed to them in Appendix 1 entitled Definitions. The date of this Prospectus is 4 September The attention of potential investors is drawn to the 'Risk factors' section. Man AHL Diversified Futures Ltd

14 Table of contents Man AHL Diversified Futures Ltd Preliminary Table of contents 1 The offering 2 Investment objective 3 The AHL Diversified Programme 3 AHL Risk management 4 Investment and borrowing restrictions 4 Investment Manager 5 Brokerage and Custodian 6 On-exchange contracts Off-exchange contracts Custodian Risk factors 6 Investment in Shares Overall investment approach Soverign risk European sovereign crisis Fees and transaction costs Exchange rate risks Counterparty risk Taxation and legal No guarantee or principal or capital protection Special purpose vehicle Conflicts of interest Directors Man Group entities and affiliates Services Manager conflicts European Savings Directive Management and administration 13 Introducing Broker Custodian Services Manager General shareholder and registrar services Valuation services Paying Agency Services The Citi Fund Services Agreement Company Secretary The Shares 15 Purchase price Share valuation Reporting Procedure for applications Money laundering Subscription Account Restriction on applications Transfer of Shares Procedure for redemption Fee for early redemption of Tranche B Shares Compulsory redemption of Shares Total redemption/winding up Suspension of dealings Dividends Charges and fees 20 Investment management and incentive fees Custodian fees Hong Kong Representative fees Services Manager fees Company Secretary fees Other fees and expenses Brokerage fees Names and addresses 23 Directors Appendix 1 25 Definitions Appendix 2 28 General information Appendix 3 33 Selling restrictions Appendix 4 40 Anti-money laundering documentation requirements Man AHL Diversified Futures Ltd 1

15 The offering General The Shares of the Company are divided into two tranches: Tranche A and Tranche B. The Company is offering only Participating Tranche A Shares to investors at the Subscription Price (as defined in Appendix 1) from (and including) 4 September The Directors have resolved that all Shares issued by the Company prior to 4 September 2012 shall be converted to Tranche B Shares on 4 September Shareholders wishing to purchase additional Shares from 4 September 2012 onwards must subscribe for Participating Tranche A Shares (unless the Directors may decide otherwise from time to time). The Company Man AHL Diversified Futures Ltd Shares Shares may be redeemed on any Dealing Day at the Net Asset Value per Share (an early redemption fee may be applicable to Tranche B Shares, see section headed Fee for early redemption of Shares ). Shares will be denominated in. Investment objective The Company seeks to achieve substantial medium-term capital growth while aiming to restrict the associated risk Dividends It is not anticipated that any dividends will be paid. Investors returns will be determined by the trading profits, if any, to the redemption date. Minimum initial investment 20,000 Minimum Redemption 200 Shares Minimum Holding 300 Shares or 10,000, whichever is lesser (based on last published NAV) or such lesser amount as the Directors in their discretion may determine. Investment Manager Man Investments Limited Services Manager Man Investments AG Registrar Citi Hedge Fund Services, Ltd. Shareholder Services Provider Citibank Europe plc Principal Paying Agent Citi Hedge Fund Services, Ltd. Custodian HSBC Institutional Trust Services (Asia) Limited Introducing Broker and Marketing Adviser Man Investments AG Valuations Service Provider Citibank Europe plc Hong Kong Representative Man Investments (Hong Kong) Limited Identification numbers of the Shares ISIN code Valoren number Tranche A BMG5777T Tranche B BMG0122Q The Net Asset Value per Share may go down as well as up. The attention of potential investors is drawn to the Risk factors section of this Prospectus. This is a summary concerning the Shares and is indicative only. The detailed terms and conditions of this offering follow with substantial qualifications and restrictions that apply to this summary. Accordingly, the above terms must be read in conjunction with the terms, qualifications, conditions and restrictions that follow. Capitalised terms used in this summary have the meanings ascribed to them in Appendix 1. 2 Man AHL Diversified Futures Ltd

16 Investment objective The Company seeks to achieve substantial medium-term capital growth while aiming to restrict the associated risk. The underlying investment programme, the AHL Diversified Programme, seeks to capitalise primarily on upward and downward price trends in a diversified range of global stock index, bond, currency, short-term interest rate and commodity futures markets. No more than 5% of the Net Asset Value will be applied towards margin requirements with respect to off-exchange Futures Contracts (that is, contracts which are not traded on Recognised Exchanges). The Company primarily invests in futures and options. The Company will invest extensively in financial derivative instruments ( FDI(s) ) to achieve its investment objective, including warrants, options, futures, convertible securities, interest rates and equity swaps. It may use long or short investment strategies. Monies and any other assets of the Company which are not immediately required for investment purposes will be held by the Custodian. On the instructions of the Investment Manager the Custodian may deposit such monies with banks or credit institutions and may also invest part or all of such monies in short-term money related instruments including, but not limited to, fixed deposits, certificates of deposit, commercial paper, treasury bills and bonds issued or guaranteed by the government of any country of the OECD. The Company may also enter into arrangements by which cash not required by the Company for trading purposes will be managed by the Investment Manager. Such arrangements may include the entry by the Company into repurchase agreements or reverse repurchase transactions and other cash management arrangements, including holding cash in bank accounts, secured or unsecured deposits or investing such cash in corporate or government bonds, or such other instruments as deemed appropriate by the Investment Manager. A repurchase transaction involves the sale of securities by a seller to a buyer for a purchase price, and an agreement for the seller to repurchase such securities on a mutually agreed future date for the same purchase price, plus interest at a negotiated rate. From the perspective of the buyer, the transaction is referred to as a reverse repurchase transaction, and involves buying securities against payment of a cash price, with the buyer agreeing to resell the securities at a future date, and the original seller agreeing to repurchase such securities at the same price, plus interest at a negotiated rate. Such transactions are economically equivalent to a cash loan collateralised by the securities. Collateral obtained under a repo contract must be in the form of one of the following: (a) government or public securities; (b) corporate bonds; (c) shares/equities listed on a recognised stock exchange; and (d) such other collateral as the Investment Manager deems appropriate. The counterparty to a repo contract must have a credit rating that is satisfactory to the Investment Manager, acting reasonably. The counterparties must also be approved by the Directors. The AHL Cash & Collateral Committee is responsible for recommending counterparties to the Directors and counterparties currently must have an investment grade credit rating and be based in a jurisdiction which is recognised to be a major financial centre and subject to a very high standard of regulation or be an offshore jurisdiction of such a jurisdiction. On an on-going basis Man Group Risk/AHL Research and Trading is responsible for monitoring the Company s credit risk in respect of the counterparties with whom the Funds have placed cash by tracking each counterparty s credit rating, credit default swap spread and share price movement. The maximum level of the Company s assets available for repo contracts and other cash management arrangements will not exceed the cash not required by the Company for trading purposes. All incremental gross income will accrue to the Company. The Company may be geared to a significant extent, and is accordingly exposed to abnormal levels of risk associated with gearing. The AHL Diversified Programme AHL manages the AHL Diversified Programme which employs sophisticated computerised processes primarily to identify trends and other opportunities in markets around the world. A trading and implementation infrastructure is then employed to capitalise on these trading opportunities. This process is quantitative and primarily directional in nature, and is underpinned by risk control, ongoing research, diversification and the constant quest for efficiency. Man AHL Diversified Futures Ltd 3

17 A product of continuing research and development carried out by AHL since 1987, the AHL Diversified Programme utilises and is committed to extending the range and versatility of the original investment techniques, strategies and markets. As such, subject to the restrictions set out in this Prospectus, AHL may increase the number and diversity of markets and instruments traded directly or indirectly by the AHL Diversified Programme and deploy new strategies or trading systems where appropriate. A cornerstone of the investment philosophy is that financial markets experience persistent trends and inefficiencies. Trends are a manifestation of serial correlation in financial markets the phenomenon whereby past price movements influence future price behaviour. Although they vary in their intensity, duration and frequency, price trends are universally recurrent across all sectors and markets. Trends are an attractive focus for active trading styles applied across a diverse range of global markets. As well as emphasising sector and market diversification, the AHL Diversified Programme has been constructed to achieve diversification by combining various systems. The systems are driven by powerful computerised processes or trading algorithms, most of which work by sampling prices in real time and measuring price momentum and breakouts. With access to around 200 traded instruments, AHL provides investors with one of the most diverse trading programmes in the industry. Instruments traded encompass currencies, bonds, rates, energies, metals and agriculturals. The trading algorithms aim mainly to capture price trends and close out positions when there is a high probability of a different trend developing. The AHL Diversified Programme may include algorithmic systems based on certain forms of quantitative fundamental data that can be captured efficiently, such as interest rate data. Another important aspect of diversification is the fact that the various systems generate signals across different time frames, ranging from two to three days to several months, which helps to reduce the risk of the AHL Diversified Programme. In line with the principle of diversification, the approach to portfolio construction and asset allocation is premised on the importance of deploying investment capital across the full range of sectors and markets. Particular attention is paid to correlation of markets and sectors, expected returns, market access costs and market liquidity. Portfolios are regularly reviewed and, when necessary, adjusted to reflect changes in these factors. The Investment Manager also has a process for adjusting its market risk exposure in real time to reflect changes in the volatility of individual markets. The portfolio structure and constituents are regularly reviewed by the investment management team and allocations may change to access other sectors and markets. The leverage range of the AHL Diversified Programme is typically around % of the Company s NAV. Leverage is calculated by summing the absolute values of all FDIs contracts notional exposures in and dividing by the Company s NAV expressed in percentage terms. Leverage is allowed to fluctuate both above and below these average levels to some extent, as leverage is a function of positions held, so strong trends and other opportunities in a market tend to result in larger positions and therefore higher leverage. Leverage is closely monitored. Additionally, AHL benefits from being part of Man. Man offers expertise in client servicing through a worldwide network of offices and staff, product structuring, marketing and compliance together with back-office support functions including information technology, administration and logistics. AHL Risk management Risk management is an essential component of AHL's investment management process. AHL has put in place a risk management framework which is designed to identify, monitor and mitigate the portfolio, operational and outsourcing risks relevant to its operations. AHL's risk management framework is part of, and is supported by, the overarching risk management framework of Man. Key principles of AHL's risk management framework include the segregation of functions and duties where material conflicts of interest may arise and having an appropriate degree of independent and senior management oversight of business activities. As part of this independent oversight, AHL's activities are subject to regular review by Man internal audit function. Risk management consists primarily of monitoring risk measures and ensuring the systems remain within prescribed limits. The major risk monitoring measures and focus areas include value-at-risk, stress testing, implied volatility, leverage, margin-to-equity ratios and net exposures to sectors and different currencies. Investment and borrowing restrictions The Company will at all times adhere to the principle of diversification of risk in its derivatives trading. 4 Man AHL Diversified Futures Ltd

18 The following investment and borrowing restrictions shall apply. 1. The Company may only enter into futures and options contracts dealt with on a futures, commodities or options exchange or any over-the-counter derivative approved by the Custodian. 2. No more than 5% of the Company s Net Asset Value will be invested in short-term securities issued by the same body. This limit may be increased to 30% for securities issued by or funds maintained with or guaranteed by: (a) a European Union ( EU ) credit institution; (b) a bank authorised in a member state of the European Free Trade Association ( EFTA ); or (c) a bank authorised by a signatory state, other than an EU member state, or a member state of EFTA, to the Basle Capital Convergence Agreement of July However, the Company may invest up to 100% of its assets in different transferable securities issued or guaranteed by any member state of the EU, the United States, Canada, Australia, Japan, New Zealand and Switzerland, provided that the Company invests in at least six different issues and not more than 30% is invested in the same issue. 3. No more than 5% of the Company s Net Asset Value may be invested in the debt securities of companies, other than banks, with shareholder funds of less than 1 billion or equivalent in foreign currency. 4. The assets of the Company must include liquid assets which have a total minimum value, at all times except in extraordinary circumstances, at least equal to three times the amount of the sum of margins deposited and all premiums paid, in respect of transactions which have not been closed out. (The Investment Manager shall notify the Custodian immediately if such extraordinary circumstances occur.) At least 30% of the Net Asset Value must be held on deposit or invested in liquid short-term debt instruments and may not be used for margin requirements. Not more than 35% of the Net Asset Value may be committed as margin for Futures Contracts and/or premium paid for options purchased (including put and/or call options). 6. Premiums paid to acquire options outstanding with identical characteristics may not exceed 5% of the Net Asset Value. 7. The Company will not hold open positions in Futures Contracts concerning a single commodity or single financial instrument for which the combined margin requirement represents 20% or more of its Net Asset Value. 8. The Company may not invest in commodity contracts other than commodity futures contracts and EFP metals. The Company will not undertake borrowings save for borrowings to fund (a) redemption payments for redeeming Shareholders; or (b) for the short-term funding of new investments in each case pending redemption by the Company of the proceeds of sale or redemption of other investments which may be secured on the assets of the Company. The aggregate borrowing capacity of the Company shall be limited to a maximum of 10% of its Net Asset Value at any time and from time to time. Additionally the Broker (or one of its affiliated companies) may lend monies to the Company in foreign currencies to finance non- margins (both initial and variation). By matching a non- obligation with a short-term borrowing in the relevant currency, foreign exchange risks may be mitigated. Any such borrowing will not be taken into account in such 10% limit referred to above on the basis that such borrowing is made on a back-to-back basis only. The Investment Manager has designed and implemented a statistically derived measure of risk through its computerbased trading systems. This proprietary risk control mechanism (which is continually monitored and updated) operates to control the application of leverage to the Company s investments, such leverage being variable depending on the nature of the investments and the markets traded and prevailing market conditions. No more than 35% of the Net Asset Value may be held by the Broker and used for initial margin purposes except in extraordinary circumstances. (The Investment Manager shall notify the Custodian and the Securities and Futures Commission immediately if such circumstances occur.) The Company will not take legal or management control over any of the entities in which it invests. 5. The Company will not hold open contract positions in any Futures Contract month or option series for which the combined margin requirement represents 5% or more of its Net Asset Value. Investment Manager The Investment Manager for the Company is Man Investments Limited (Man). The responsibility of the Man AHL Diversified Futures Ltd 5

19 investment selection, portfolio construction and portfolio management of the Company's portfolio rests with AHL, a division of Man. Man is a world leader in alternative investments, offering a comprehensive range of transparent, dynamic and thematic trading strategies across the liquidity spectrum to a highly diversified client base. The business currently has around 59.0 billion of assets under management (as at 31 March 2012). Man can trace its origins back more than 225 years and is a member of the FTSE 250 Index (UK: EMG). AHL AHL is Man s industry-leading quantitative managed futures manager. It provides investors with highly liquid and efficient trading strategies which offer low correlation to more traditional investment disciplines. Founded in 1987, AHL has established itself as one of the world s leaders in systematic trading, with a long and enviable track record supported by its strong commitment to innovation through on-going research and development. Marketing Adviser Man Investments AG has been appointed as the Marketing Adviser. Man Investments AG, a member of the Man Group, has principal responsibility for advising the Company in relation to product structuring and for the set-up, optimisation, co-ordination and maintenance of an efficient global distribution network. Man Investments AG has also been appointed as the Introducing Broker and Services Manager. The Marketing Adviser may liaise with the relevant service providers in respect of the Shares and arrange for the provision of liquidity to the Company and the implementation of any leverage facility. Brokerage and Custodian The nature of futures brokerage arrangements differs substantively from securities brokerage in that significant exposure to the futures markets can be effected with minimal capital commitments. Additionally, transactions in the off-exchange markets may be incurred without the commitment of significant capital. These arrangements are described in detail below. On-exchange contracts On-exchange futures contracts are entered into on a margin basis whereby the Company is required to deposit only a percentage of the relevant contract value with the Brokers. The Brokers in turn post margin to the relevant exchange. Pursuant to the FSA (or equivalent) client money rules each Broker is obliged to request segregation of its client and own assets held by the relevant exchange, although not all exchanges offer segregation and this is taken into consideration in determining the Broker selection for each exchange. Therefore margins paid by the Company to a Broker together with open trading positions and all realised profits and losses derived from trading may be held in a segregated customer account with that Broker (the brokerage account ) and the Company s assets will be designated as those of the Company by the Broker. The assets held in the brokerage account will be subject to a lien in favour of the Broker in respect of liabilities of the Company due to the Broker since such monies constitute the Broker s collateral in the event of trading losses. Off-exchange contracts For off-exchange traded contracts, the Brokers make available to the Company dealing facilities with various counterparties. The Brokers satisfy the margin requirements (if any) required by the counterparty for these contracts. The Brokers in turn request margin from the Company, including any additional margin required to cover any unrealised losses on the contract. Any excess funds held by the Brokers over the amounts needed to cover margin requirements are withdrawn from the Brokerage Accounts on a daily basis and returned to the Company. Custodian Monies held by the Custodian shall be subject to the Broker s right to call for such monies in the event of trading losses being incurred, or when additional margin is required by the Broker for on-exchange contracts. The Brokers will accept trading instructions for the Brokerage Accounts directly from the Investment Manager on the basis of a formal trading authorisation received from the Company. Risk factors Investment in the Company is subject to certain risk factors. Investors should carefully consider the risks associated with acquiring and holding the Shares. As at the date of this prospectus, the following risk factors set out the risks associated with acquiring and holding the Shares. As the Company's investment styles evolve, new risks may emerge over time and an investment in the Company may become subject to risk factors not described in this section. Investment in Shares (a) Each investor must decide the amount to invest in Shares of the Company taking into consideration the risk factors described in this section and the terms and conditions described in this Prospectus and the 6 Man AHL Diversified Futures Ltd

20 Application Form. It should be borne in mind that the risk involved in this type of company is greater than that normally associated with other types of investment as the underlying investments of the Company can be subject to sudden, unexpected and substantial price movements. Investors should note that because leverage is utilised and the value of the Shares can therefore be volatile, the value of the Shares may decline as well as appreciate and there can be no guarantee and no assurance that the Company will be able to achieve its overall investment objective. The Net Asset Value per Share may go down as well as up. Accordingly, an investment should be made only by those persons who could sustain a loss in their investment. (b) Shareholders return on the Shares will be determined by reference to any cumulative net gains or losses from the diversified investment activities of the Company. The difference at any one time between the price paid for a Share and the price at which a Share may be redeemed (i.e. the Net Asset Value per Share less any applicable redemption fee (for Tranche B investors) means that an investment in Shares may not be suitable for all investors and should be viewed as at least, a mediumterm investment. (c) Market conditions are continually changing and the fact that the investment strategy happened to be successful in the past may largely be irrelevant to its prospects for future profitability. Past results are not necessarily indicative of future performance. No assurance can be given that profits will be achieved or that substantial losses will not be incurred. (d) Any redemption of Shares will have the effect of decreasing the assets of Shares of the Company, thereby increasing the costs attributable to those Shares which remain outstanding. (e) In the event all of the Shares are redeemed by the Company the investors may not receive all of their original investment. (f) Where an Applicant for Shares fails to pay the subscription monies by the due date, the Directors may, in accordance with the Company s Articles, cancel the allotment of the Shares. Redemption, transfer or conversion instructions may be refused or treated as though they have been withdrawn if payment for the Shares has not been made. An Applicant may be required to indemnify the Company against any losses, costs or expenses incurred directly or indirectly as a result of the Applicant s failure to pay for Shares applied for in a timely fashion. In computing any losses covered under this paragraph (f), account shall be taken, where appropriate, of any movement in the price of the Shares concerned between the allotment date and cancellation date of the Shares, and of the costs incurred by the Company in taking proceedings against the Applicant. The Company may also, at its discretion, redeem or sell part of an investor s existing shareholding to satisfy any loss incurred. In addition, investors should note if the Company decides not to or cannot take proceedings against the Applicant in relation to any losses, costs or expenses incurred directly or indirectly as a result of the Applicant s failure to pay for Shares applied for in a timely fashion then the Company shall bear such losses, costs or expenses. Overall Investment approach (a) The Company primarily invests in futures and options. The Company will invest extensively in financial derivative instruments ( FDIs ), including warrants, options, futures, convertible securities, interest rates and equity swaps, which can be highly volatile and expose investors to a high risk of loss due to the leveraged effect embedded in it.. Futures and options investments are subject to key risk factors including leverage, counterparty and liquidity risks and substantial losses may be suffered. Risks associated with the use of FDIs include leverage, counterparty and liquidity risks. The Company may utilise over-the-counter (OTC) FDIs which may increase these risks. (b) Investors should carefully consider the investment objective of the Company as set out in the section entitled 'Investment objective' in this Prospectus. There can be no guarantee that the Company or the Investment Manager will realise the investment objective. (c) There can be no assurance that information on the Investment Manager set out in this Prospectus will be in any respect indicative of how it will perform (either in terms of profitability or non-correlation with other investments) in the future. (d) Shareholders' returns on the Shares (by way of any redemption payments (or their equivalent) will be determined by reference to any cumulative net gains or losses (if any), arising from the diversified investment activities conducted on behalf of the Company. The return on the Shares may vary significantly over the life of the Shares, and may decrease as well as increase, depending upon trading profits and investment gains. The Company makes no representation as to any return that a Shareholder will achieve on the Shares and there can be no assurance that information on the Investment Man AHL Diversified Futures Ltd 7

21 Manager or the AHL Diversified Programme set out in this Prospectus will be in any respect indicative of how they will perform (either in terms of profitability or low correlation with other investments) in the future. (e) The Investment Manager manages the risk for the Company by seeking to ensure that the underlying risk is within predetermined levels as defined by the Investment Manager's trading strategy. Nevertheless, investors should note that in the event of an exceptional decline in the value of the Funds to a level insufficient to sustain its normal trading strategies, the Company may have to cease trading activities. (f) Shareholders will need to submit a written notice of redemption one Business Day prior to the Dealing Day on which the redemption is to be made. There is currently no secondary market for the Shares. Shareholders will therefore not know in advance of giving the notice of redemption the price at which the Share will be redeemed. In the period after which the notice of redemption has been given and before the relevant Dealing Day, the Net Asset Value and therefore the Redemption Price which will be payable to the Shareholder may change substantially due to market movements. Shareholders are not entitled to withdraw a request for redemption unless the Directors otherwise determine or unless a suspension of dealings and/or calculations has been declared as per the terms of this Prospectus. (g) Funds not immediately required for margin requirements are usually held in a bank account but the Investment Manager has total discretion to allocate such Funds to other managers subject to the sum so allocated not being more than 10% of Net Asset Value. Funds so invested will have a higher risk profile than a standard bank account and losses incurred could have a detrimental effect on the performance of the Company though the objective would be to enhance the overall potential performance profile of the Company. (h) The complex trading systems/programmes operated by or on behalf of the Investment Manager and the speed and volume of transactions invariably results in occasional trades being executed which, with the benefit of hindsight, were not required by the trading systems/programmes. Shareholders will receive the benefit or bear the loss resulting from any unintentional trades conducted in this manner for the Shares. (i) Investments by the Company on the advice of the Investment Manager may be concentrated and a significant proportion of its assets may be in the securities of a single issuer or agency. To the extent it does concentrate in any of these ways, the overall impact of adverse developments in the business of such issuer or such agency or in relation to the currency in which such securities are denominated could be considerably greater than if it did not concentrate its investments to such an extent. (j) In order to implement the AHL Diversified Programme the Company may borrow and may utilise FDIs together with other forms of leverage. While leverage presents opportunities for increasing total return, it has the effect of potentially increasing losses as well. If income and appreciation on investments made with borrowed funds are less than the cost of the leverage, the value of the Company's net assets and the Net Asset Value per Share will decrease. Accordingly, any event which adversely affects the value of an investment by the Company would be magnified to the extent leverage is employed. The cumulative effect of the use of leverage in a market that moves adversely to a leveraged investment could result in a substantial loss which would be greater than if leverage were not used. (k) Generally, most leveraged transactions involve the posting of collateral. Increases in the amount of margin or similar payments could result in the need for trading activity at times and prices which could be disadvantageous to the Company and could result in substantial losses. Some investment approaches and the AHL Diversified Programme may require the use of considerable leverage. There is no assurance that any leverage facility will be renewed. In particular, third parties may not be available to act as leverage facility providers and the Man Group itself may face regulatory, commercial or other constraints, resulting in it not offering or renewing a leverage facility. Additionally, any leverage facility may be subject to early termination in accordance with its terms and may be terminated by counterparty. A loss of, a termination of, or a reduction in, a leverage facility may have the effect of causing the Company to reduce its investment exposure with a corresponding reduction in investment return expectations. The renewal of a the leverage facility might be subject to a change in terms of that leverage facility including but not limited to a change in applicable interest margins. (l) In order to implement the AHL Diversified Programme, the Company may make extensive use of various derivative instruments, including warrants, options, futures, convertible securities, interest rate and equity swaps. Many derivatives are valued on the basis of dealers' equivalents. However, the price at which 8 Man AHL Diversified Futures Ltd

22 dealers value a particular derivative and the price which the same dealers would actually be willing to pay for such derivative may be materially different. Such differences can result in an overstatement of the Net Asset Value, and may have a materially adverse effect on performance in situations where positions are required to be liquidated in order to raise funds. (m) Some of the investment strategies utilised by the Company may include short selling which involves agreeing to sell securities at a future date although, at the time of such agreement, the securities to be sold may or may not be owned by the seller. The seller may, at times, have to borrow securities of the same type for delivery to the purchaser, with an obligation on the seller (the Company) to replace any such borrowed securities at a later date. Short selling allows the investor to profit from declines in market prices to the extent such decline exceeds the transaction costs and any costs of borrowing the securities. However, if the borrowed securities must be replaced by purchases at market prices in order to close out the short position, any appreciation in the price of the borrowed securities would result in a loss. Purchasing securities to close out the short position can itself cause the price of the securities to rise further, thereby exacerbating the loss. In addition, in some markets there are rules prohibiting short sales at prices below the last sale price, which may prevent the Company from executing short sales at the most desirable time. (n) The Company may make investments in markets that are volatile and which may become illiquid. Accordingly, although certain investments may give greater liquidity than an equity investment it may be impossible (in the event of trading halts or daily price fluctuation limits on the markets traded or otherwise) or expensive for the Company to liquidate positions against which the market is moving. Alternatively, it may not be possible in certain circumstances for a position to be initiated or liquidated promptly (in the event of insufficient trading activity in the relevant market or otherwise). These risks may be accentuated where the Company is required to liquidate positions to meet margin requests, margin calls or other funding requirements. (o) The Company is exposed to risks of investments in commodities markets which may be more volatile and may be of higher risk than investments on other markets. As such the net asset value of the Company may be very volatile and could go down substantially within a short period of time. (p) The Company may invest in futures and options with interest rates as an underlying asset. If the Company has long positions in futures and options with interest rates as an underlying asset, an increase in interest rates may result in a decrease in the market-to-market value of such instrument, an d hence, the Company may incur significant loss, and vice versa. The factors influencing interest rates include, amongst other things, monetary policy, fiscal policy and inflation. (q) A significant portion of the Company s asset will be managed in currency(ies) other than that in which the Company is denominated, and the Company, will therefore be affected by the fluctuation of the exchange rate(s). (r) The Company may employ certain strategies which depend upon the reliability and accuracy of the Investment Manager s analytical models. To the extent such models or the assumptions underlying them do not prove to be correct, the investments of the Company may not perform as anticipated which could result in losses. (s) The Company may enter into arrangements by which cash not required by the Company for trading purposes will be managed by the Investment Manager. Such arrangements may include the entry by the Company into repurchase or reverse repurchase transactions and other cash management arrangements, including holding cash in bank accounts or secured or unsecured deposits or investing such cash in corporate or government bonds, or such other instruments as deemed appropriate by the Investment Manager. (t) A repurchase transaction involves the sale of securities by a seller to a buyer for a purchase price, and an agreement for the seller to repurchase such securities on a mutually agreed future date for the same purchase price, plus interest at a negotiated rate. From the perspective of the buyer, the transaction is referred to as a reverse repurchase transaction, and involves buying securities against payment of a cash price, with the buyer agreeing to resell the securities at a future date, and the original seller agreeing to repurchase such securities at the same price, plus interest at a negotiated rate. Such transactions are economically equivalent to a cash loan collateralised by the securities. (u) The use of repurchase and reverse repurchase agreements by the Company involves certain risks. For example, if the seller of securities to the Company under a reverse repurchase transaction defaults on its obligation to repurchase the underlying securities, as a Man AHL Diversified Futures Ltd 9

23 result of its bankruptcy or otherwise, the Company will seek to dispose of such securities, which action could involve costs or delays. The Company may suffer a loss to the extent that the proceeds from the disposal of the underlying securities are less than the repurchase price due from the defaulting seller. Sovereign risk The AHL Diversified Programme may invest in debt securities issued or guaranteed by governments and/or supranational institutions (or in related financial derivative instruments) and thus may be exposed to credit risk of such governments and/or supranational institutions. If such governments and/or supranational institutions default on their debt securities, e.g. when they are not able to meet their obligations as to the payment of principal and/or interest, or become insolvent, Company could lose money. There may not be any bankruptcy proceedings by which the Company could enforce its rights against a defaulted government or a supranational institution in whole or in part. European sovereign crisis In light of the current fiscal conditions and concerns on the sovereign risk of certain European countries, investments in European securities might face higher volatility, liquidity and foreign exchange risk. The performance of these investments could deteriorate significantly should there be any adverse credit events (e.g. further downgrade of the sovereign credit rating) of any European country. Should the current fiscal conditions on certain European countries continue to deteriorate, there is a possibility that a European government may default. Funds investing in securities issued or guaranteed by governments and/ or supranational institutions in a European country may thereby be exposed to additional credit risks relating to sovereign debts as described in the risk factor headed Sovereign Risk above. Fees and transaction costs The performance of the Company will be affected by charges related to the investments of the Company. The Company may be engaged in a high level of trading resulting in commensurably higher transaction costs. Typically, high portfolio turnover will result in correspondingly high transaction costs and the exact amount of brokerage and related transaction costs that will be incurred will depend upon a number of factors including the nature and frequency of the market opportunities presented, the size of transactions and the transaction rates in effect from time to time. The Company is obliged to support significant costs as disclosed in the sections entitled Charges and fees in this Prospectus including management and incentive fees and transaction brokerage charges, and these costs will affect the Net Asset Value of the Share and therefore the ability of the Company to generate positive performance. Such fees and transaction costs are to a substantial degree, payable to the Man Group. Investors should note there will be no equalisation methods used for the purpose of determining the incentive fee payable to the Investment Manager. Therefore there is a risk an investor redeeming Shares may still incur an incentive fee in respect of the Shares, even though a loss in investment capital has been suffered by the redeeming investor. For further information on fees and transaction costs, please refer to the section entitled 'Charges and fees'. Exchange rate risks Investments in the Company must be made in. Shareholders dealing in a different local currency should be aware that exchange rate fluctuations could cause the value of the investment to diminish or increase. Additionally, the Company may have to finance non- margins. Counterparty risk (a) The Company is subject to the possibility of insolvency of any counterparty with which it trades financial derivative instrument contracts off exchange. In the event of the insolvency of any counterparty or of any Broker through which the Investment Manager trades for the account of the Company, the Company may only rank as an unsecured creditor in respect of sums due to the Company on the margin account or otherwise and any losses (which could be substantial) will be borne by the Company. The insolvency of any counterparty may also result in a delay in the recovery of such margins due to the Company on the margin account or otherwise. (b) On-exchange contracts will be entered into between the Company and Broker as either principal or agent. Accordingly, the Company is exposed to the risk that the Broker, where acting as Principal may, in an insolvency or similar event, be unable to meet its contractual obligations to the Company. (c) To the extent that margin monies of the Company held by a Broker are placed with a market counterparty of the Broker, such margin monies may be pooled with 10 Man AHL Diversified Futures Ltd

24 margin monies of other customers of both the Broker and/or the market counterparty that are held with such market counterparty and may be exposed to loss. (d) The Company may also enter into currency, interest rate, total return or other swaps which may be surrogates for other instruments such as currency forwards and interest rate options. The value of such instruments generally depends upon price movements in the underlying assets as well as counterparty risk. Taxation and Legal (a) This Prospectus does not take into consideration any tax consequences of investing in the Company. Potential investors in the Company should understand the taxation regime in their own jurisdictions as well as the implications of such regime on an investment in the Shares and should, where appropriate, take independent taxation advice. (b) Applicable laws, regulations or taxation arrangements may change and adversely affect the Company and/ or Shareholders. Furthermore the interpretation of such laws, regulations or taxation arrangements may differ from jurisdiction to jurisdiction and/or be construed differently by a court of law from the legal advice obtained by the Company. (c) The United States Hiring Incentives to Restore Employment Act (the HIRE Act ) was signed into US law in March 2010 creating a new withholding regime referred to as the Foreign Account Tax Compliance Act ( FATCA ). In order for the Company to avoid a US withholding under FATCA (i.e. a tax of thirty percent (30%) on certain payments (including payments of gross proceeds) made with respect to certain actual and deemed US investments), the Company will be required to enter into an agreement with the US Internal Revenue Service (the Service ) by 30 June 2013 agreeing to identify certain direct and indirect US investors. Investors in the Company will be required to provide information which identifies any direct and indirect US ownership as well as information that may certify other FATCA compliance or non-us status. The Company will be required to provide information on its direct and indirect US investors to the Service. A non-us investor that is a "foreign financial institution" within the meaning of Section 1471(d)(4) of the US Internal Revenue Code of 1986, as amended ( IRC ) will generally be required to enter into an agreement with the Service by 30 June 2013 identifying certain direct and indirect US investors. A non-us investor who fails to provide such information to the Company or enter into such an agreement with the Service, as applicable, may be subject to the thirty percent (30%) withholding tax with respect to its share of any such payments attributable to actual and deemed US investments of the Company and the Directors may take any action in relation to an investor's Shares or redemption proceeds to ensure that such withholding is economically borne by the relevant investor whose failure to provide the necessary information gave rise to the withholding. Shareholders should consult their own tax advisors and (where applicable) financial intermediary regarding the possible implications of these rules on their investments in the Company. (d) Prospective investors should note that they may be exposed to the unknown risks of changes in laws, regulations or taxation which may affect the Company or their investment. (e) The Company intends to conduct its affairs such that it should not be deemed to be engaged in a trade or business in any jurisdiction other than Bermuda and should not therefore, be liable to taxes of any jurisdiction other than Bermuda. If any of the activities were deemed to constitute a trade or business in a jurisdiction other than Bermuda, then that jurisdiction's taxes may apply. Any such taxes would adversely affect the investment performance of the Shares. No guarantee or principal or capital protection Any investment in Shares is not guaranteed or subject to principal or capital protection and investors could lose some or all of their investment. Potential investors in Shares should carefully consider the information contained in this Prospectus before making any investment in Shares. Special purpose vehicle The Company is an unregulated special purpose vehicle which does not have its own infrastructure and is reliant on service providers to fulfil its obligations to Shareholders. Where a service provider is unable to fulfil its obligations to the Company, for example where a service provider becomes insolvent, the Company in turn may encounter difficulties in performing its obligations to Shareholders. Conflicts of interest Each of the Directors, the Investment Manager, the Brokers, the other members of the Man Group from time to time and their respective officers, employees and affiliates (the 'Interested Parties') is involved in other financial, investment or professional activities which may on occasion give rise to conflicts of interest with the Company. In particular, the Investment Manager provides and may in the future provide investment management, investment advice or other services in relation to a number of funds or managed Man AHL Diversified Futures Ltd 11

25 accounts which may have similar investment policies to that of the Company. Interested Parties may exercise investment discretion with respect to a portion of the assets of the Company. The Interested Parties will have regard to their obligations under their agreements with the Company and to their obligations to act in the best interests of the Company, so far as is practicable having regard to their obligations to other clients, when potential conflicts of interest arise. If a conflict does arise, the Directors will endeavour to ensure that such conflict is resolved fairly having regard to various issues, such as the frequency of trading, the importance of timely execution of trades and applicable laws and regulations. Having regard to these obligations, the Company may buy investments from or sell investments to the Investment Manager or its affiliates according to normal market standards and applicable law. In particular, the Investment Manager will use its reasonable efforts to ensure that the Company have the opportunity to participate in potential investments identified by the Investment Manager which fall within the Company's investment objective and policies on the best terms reasonably obtainable at the relevant time having regard to the interests of the Company. Directors The Directors may have conflicts of interests, principally arising from their role within various service providers to the Company and from their role as directors of other investment vehicles. The Directors will have regard to their obligations to act in the best interests of the Company in managing these conflicts. Man Group entities and affiliates Each of the Investment Manager and the other members or affiliates of the Man Group and their respective officers, employees and affiliates may undertake financial, investment or professional activities which give rise to conflicts of interest with the Company ( Man Conflicts ). Where there is a material risk of damage to the Company arising from any Man Conflict, the conflict shall be managed by the Man Group entities and affiliates in accordance with the conflict of interests policy that has been adopted by the relevant Man Group entity or affiliate in order to prevent the conflict from adversely affecting the interests of the Company so far as it is practicable having regard to their obligations to other clients. Where it cannot be managed it will be disclosed to the Company. In many cases, approval by the Company with the Man Group entities will be the primary mechanism of managing potential Man Conflicts. Examples of potential Man Conflicts include the following: Competitor products: the Investment Manager and/or its affiliates provide and may in the future provide investment advice or other services in relation to separate competitor investment products or managed accounts. These competitor vehicles may have investment policies similar to those of the Company and the Investment Manager may be compensated in a different manner in respect of those vehicles. The Investment Manager will follow procedures designed to ensure an appropriate allocation of available investment opportunities for the Company and competitor vehicles. There may be potential conflicts of interest between the activities of the Company and the activities of others using the same Investment Manager. In order to deal with these conflicts of interest, investment opportunities will be allocated in a non-discretionary manner designed to treat each user equally and fairly. The Investment Manager or its affiliates may invest in the same investments as the Company or may take the same, different or opposite positions to that of the Company (as principal or agent) in respect of any instrument or any market. Proprietary investment activities: any of the Man Group entities may buy, hold and redeem Shares in the Company in the normal course of their business and may on occasions hold a significant percentage of the Company s issued Shares of one or more Class. They may also enter into transactions as principal with the Company. Allocations: there will be occasions when a member of the Man Group has an interest in fees and expenses charged by or in relation to the AHL Diversified Programme. In this context, the term interest means, without limitation, a business relationship, financial relationship or other commercial dynamic which results in a business, commercial, financial or other material interest being generated in relation to the subject matter. Service provision: Man Investments AG, in its roles as Marketing Adviser providing structuring services, as the Introducing Broker, or as the Services Manager, may propose that the Company enters into agreements with Man Investments AG, affiliated entities or third parties with which Man Investments AG or its affiliates have a broader commercial relationship for the provision of various services, including the leverage facility, valuation and brokerage services in respect of which affiliates of the Man Group may receive fees, spreads and other compensation in respect of the Company. The final decision as to which service provider is chosen is made by the Directors. The Investment Manager has policies and processes designed to prevent market abuse. 12 Man AHL Diversified Futures Ltd

26 Services Manager conflicts The Services Manager and other members of the Man Group have selected and appointed the Shareholder Services Provider, the Registrar, the Principal Paying Agent, and the Valuations Service Provider to also provide similar services to a number of other funds, investment companies and other clients of the Services Manager or other members of the Man Group. The fees payable by the Services Manager or other members of the Man Group to the relevant service providers in respect of the services provided to the Company may not directly correlate to the fees paid to the Services Manager by the Company. Further, the Services Manager or another member of the Man Group may, pursuant to their appointment as a services manager to another fund, investment company or other client, in relation to processing claims by that other client, act as a claims manager for that other client in connection with claims against the relevant service providers appointed by the Company. Neither the Services Manager nor any other member of the Man Group shall be restricted from acting in a manner that is, or may be, contrary to the interests of the Company in processing claims. The Services Manager or other member of the Man Group shall also not be required to inform the Company of the actions that it has taken when acting as services manager for another fund, investment company or client. European Savings Directive The European Union Savings Directive 2003/48/EC (the Directive ) came into force with effect from 1 July The Directive requires a paying agent (as defined in the Directive), established in an EU member state, associated/ dependent territories, or certain third countries to either report or withhold tax from payments of savings income to an individual beneficial owner residing in another EU member state or covered territory. Savings income is defined in the Directive and can include coupon and dividend payments, distribution and redemption payments in respect of investments in bonds/shares and certain investment funds. Investors should seek independent advice on the impact of the Directive on their investment. It is the investment objective of the Company to generate capital gains rather than interest. Management and administration After deduction of the preliminary expenses of the Company (as set out in the Charges and fees section to this Prospectus) the unutilised balance of the proceeds of the Share issue will be invested in the AHL Diversified Programme. Introducing Broker The Company may appoint a number of Brokers to provide clearing services in relation to its trading activities. Man Investments AG, a member of the Man Group, has been appointed as the Introducing Broker to the Company and is responsible for recommending appropriate Brokers to the Company as well as actively managing these relationships, ensuring appropriate service levels as well as an adequate diversification of Brokers. Custodian The Company has appointed HSBC Institutional Trust Services (Asia) Limited, a company incorporated with limited liability in Hong Kong in 1974, to act as Custodian of the Company s assets pursuant to the custodian agreement. The Custodian provides safe custody for the cash and registrable assets of the Company held by it (other than monies and trading assets with the Broker) and collects any income arising on such assets on the Company s behalf. The Custodian is an indirect wholly owned subsidiary of HSBC Holdings plc, a public company incorporated in England and Wales. The HSBC Group is one of the world s largest banking and financial services organisations with well-established business in Europe, the Asia-Pacific region, the Americas, the Middle East and Africa. The Custodian was incorporated in Hong Kong in 1974 and is registered as a trust company under the Trustee Ordinance in Hong Kong, and approved by the Mandatory Provident Funds Authority to provide trustee services. Services Manager Man Investments AG has been appointed by the Company as the Services Manager. In performing that role, Man Investments AG will be responsible to the Company for selecting and appointing (as principal) service providers to provide general shareholder services (which will include maintenance of the Company's register) and certain accounting and valuation services to the Company, as well as monitoring the providers of those services. The Company will not itself select or appoint these service providers. The Company has agreed to both indemnify and exempt from liability each of the Services Manager, members of its group, its delegates (which, for the avoidance of doubt, shall not include the service providers appointed by the Services Manager which are referred to below) and its associates from losses, liabilities, damages or costs in connection with the Services Manager's appointment and provision of its services, the appointment of service providers or the performance or non-performance of the relevant service provider's duties and/or any untrue Man AHL Diversified Futures Ltd 13

27 statement of material fact contained in the Prospectus that is not due to fraud, gross negligence or wilful default of the Services Manager, members of its group, its delegates or its associates. The Services Management Agreement also includes provisions pursuant to which the Company has agreed to both indemnify and exempt from liability Citibank Europe plc, members of its group, its delegates and its associates from losses, liabilities, damages or costs in connection with the appointment of the service provider or the performance or non-performance of its duties and/or any untrue statement of material fact contained in the Prospectus that is not due to a breach of the Citi Fund Services Agreement between the Services Manager, Citibank Europe plc and Citi Hedge Fund Services, Ltd. by, or the negligence, wilful default, bad faith or fraud of, Citibank Europe plc, members of its group, its delegates or its associates. Citibank Europe plc and the members of its group, delegates and associates are able to enforce the indemnity and exclusion of liability directly against the Company through third party rights granted to them pursuant to the terms of the Services Management Agreement. The Services Management Agreement may be terminated by any party giving not less than 3 months notice in writing to the other parties. General shareholder and registrar services In accordance with the Services Management Agreement, the Services Manager (as principal) has selected and appointed Citibank Europe plc as Shareholder Services Provider and Citi Hedge Fund Services, Ltd. as the Registrar pursuant to the Citi Fund Services Agreement. The Shareholder Services Provider and the Registrar will perform certain general shareholder services including maintaining the register of investors of the Company and processing certain Anti-money Laundering Documents. The Shareholder Services Provider and the Registrar may delegate their duties with the prior written consent of the Services Manager, not to be unreasonably withheld. The Shareholder Services Provider has delegated certain of its duties to Citibank (Hong Kong). Valuation services In accordance with the Services Management Agreement, the Services Manager (as principal) has selected and appointed Citibank Europe plc pursuant to the Citi Fund Services Agreement as Valuations Service Provider to the Company. The Valuations Service Provider will perform certain valuation and accounting services for the Company. The Valuations Service Provider may delegate some of its duties with the prior written consent of the Services Manager, not to be unreasonably withheld. The Valuations Service Provider is not responsible and will have no liability in connection with any trading decisions of the Company. The Valuations Service Provider will not provide any investment advisory or investment management services to the Company. The Valuations Service Provider will not be responsible for and will have no liability in connection with monitoring any investment restrictions or compliance with the investment restrictions. In determining the Net Asset Value per Share, the Valuations Service Provider will follow the valuation policies and procedures adopted by the Company. The manner in which the services of the Valuations Service Provider will be performed by the Valuations Service Provider will be determined in accordance with the Bye-laws and the Prospectus and the liability of the Valuations Service Provider will be determined in accordance with the Citi Fund Services Agreement. For the purpose of calculating the Net Asset Value per Share, the Valuations Service Provider shall in certain circumstances, and shall be entitled to, rely on, and will not be responsible for and will have no liability in connection with the accuracy of, financial data furnished to it by various third parties which may include the Custodian and/or the Investment Manager. Paying agency services In accordance with the Services Management Agreement, the Services Manager (as principal) has selected and appointed Citi Hedge Fund Services, Ltd. pursuant to the Citi Fund Services Agreement as Principal Paying Agent to the Company. The Principal Paying Agent will perform certain paying agency services for the Company. The Principal Paying Agent may delegate some of its duties with the prior written consent of the Services Manager, not to be unreasonably withheld. The Citi Fund Services Agreement Citibank Europe plc is a licensed bank, authorised and regulated by the Central Bank of Ireland. Citibank Europe plc was incorporated in Ireland on 9 June 1988 under registered number Citibank Europe plc and Citi Hedge Fund Services, Ltd. are members of the Citigroup group of companies, having as their ultimate parent Citigroup Inc., a US publicly quoted company. Although Citibank Europe plc and Citi Hedge Fund Services, Ltd. are appointed by the Services Manager as principal, not agent for the Company, the Company is able to enforce certain of the obligations in the Citi Fund Services Agreement through third party rights granted to it pursuant to the terms of that agreement. Any enforcement by the Company is subject to a specific conduct of claims process set out in the Citi Fund Services Agreement. Under this process the Services Manager or a member of its group 14 Man AHL Diversified Futures Ltd

28 will, unless certain defined exceptions apply, represent the Company if it is bringing a claim against Citibank Europe plc, Citi Hedge Fund Services, Ltd. or their delegates or if Citibank Europe plc, Citi Hedge Fund Services, Ltd. or one of their delegates is bringing a claim against the Company. Company Secretary The Company has appointed an employee of Citi Hedge Fund Services, Ltd. to act as Company Secretary (together, the Company Secretary ). Pursuant to the Company Secretarial Services Agreement, the Company Secretary is responsible for, amongst other things, the following matters: (a) preparing and filing the annual return of the Company with the Registrar of Companies; (b) maintaining the Company's minute book and records; (c) updating the Company's registers of directors and members; (d) making all necessary filings with the Registrar of Companies and the BMA; (e) organising payment to the BMA of the Company s annual registration fees; and (f) arranging the Company's board meetings and providing agendas and minutes of each of the Company's meetings. In each case, the Company Secretary provides services under the general supervision of the Directors. The terms of the Company Secretarial Services Agreement contains certain indemnification and exclusion of liability provisions in favour of Citi Hedge Fund Services, Ltd., its officers, servants, agents and delegates. However, the Company Secretary is not entitled to indemnification or exclusion of liability in the event that Citi Hedge Fund Services, Ltd. or its officers, servants, agents or delegates acted with negligence, wilful default, fraud or dishonesty in performing its obligations or duties under the Company Secretarial Services Agreement. The Shares Purchase price The price at which Shares may be purchased will be by reference to the Subscription Price, as defined in Appendix 1. Share valuation The Net Asset Value per Share will be equal to the value of the assets of the Company less its liabilities divided by the number of Shares outstanding at each Valuation Point. The value of the assets and the liabilities of the Company will be determined by computing as at each Valuation Point in accordance with the Bye-laws as follows: (a) all calculations based on the value of investments quoted, listed, traded or dealt in or on any futures exchange shall be made by reference to the settlement price (or, in the absence of any trades, at the mean between the latest offer and bid prices quoted thereon) on the principal exchange for such investments as at the close of business on the day for which such calculation is to be made; all calculations based on the value of investments traded or dealt in on any overthe-counter market which is the principal exchange therefore shall be made by reference to the mean between the latest offer and bid prices quoted thereon PROVIDED ALWAYS that: (i) if the Directors at their discretion consider that the prices ruling on an exchange other than the principal exchange provide in all the circumstances a fairer criterion of value in relation to any such investment, they may adopt such prices; and (ii) the Directors may, at their absolute discretion, permit some other method of valuation to be used if they consider that such valuation better reflects the fair value; (b) forward foreign exchange contracts will be valued by reference to the price at the Valuation Point at which a new forward contract of the same size and maturity could be undertaken; (c) if no price quotations are available as above provided, the value thereof shall be determined from time to time in such manner as the Directors shall determine; and (d) any value (whether of a security or cash) otherwise than in shall be translated into at the rate (whether official or otherwise) that the Directors shall in their absolute discretion deem appropriate to the circumstances having regard inter alia to any premium or discount that they consider may be relevant and to costs of exchange. Reporting The Net Asset Value per Share as at each Valuation Point will be published in the Hong Kong Economic Times, the South China Morning Post, and on Bloomberg, Morningstar, Reuters and SIX Financial Information and at the Director s discretion in other financial publications. In addition it will be available from the Registrar, and the Hong Kong Representative and can be accessed via Man s Hong Kong country website (this website is not authorised and reviewed by the SFC and it may contain non-sfc authorised funds). The following documents, among others, will be published on (select Hong Kong): Monthly performance report of the Company (in English and Chinese language); Man AHL Diversified Futures Ltd 15

29 Audited financial statements prior to the annual general meeting in each year within four months of the financial year end (in English language only); Unaudited semi-annual financial report within two months of the relevant accounting period (in English language only); and Copies of Shareholder notification letters (in English and Chinese language) (the original notification letters will be mailed to Shareholders). Shareholders will be notified in writing when new audited financial statements or new semi-annual financial report are available in electronic form on the Hong Kong country website of Man. Procedure for applications The Shares of the Company are divided into two tranches: Tranche A and Tranche B. The Company is offering only Participating Tranche A Shares to investors at the Subscription Price (as defined in Appendix 1) from (and including) 4 September The Directors have resolved that all Shares issued by the Company prior to 4 September 2012 shall be converted to Participating Tranche B Shares on 4 September Shareholders wishing to purchase additional Shares from 4 September 2012 onwards must subscribe for Participating Tranche A Shares (unless the Directors may decide otherwise from time to time). Shareholders as at the date of this Prospectus should note their rights have not been changed. Completed and signed application forms can be sent to Citibank (Hong Kong) or the Shareholder Services Provider at the contact address referred to in the 'Names and addresses' section of this Prospectus. The information required in the Application Form is necessary for consideration of the application. Failure to provide the information may result in rejection of the application. The data Applicants provide (the 'Data') to the Company may be disclosed to the Registrar, the Shareholder Services Provider and/or any other service provider and their affiliates, Citibank (Hong Kong), entities within Man Group (which includes but is not limited to the Hong Kong Representative) and/or the Applicant's account executive so far as is necessary for the Data Purposes as defined below (the 'Data Recipients'). The Data may only be used by the Company or the Data Recipients for consideration of the application, for the administration of an Applicant's investment; for informing Applicants about their investment and (if agreed by Applicants on the Application Form and then only such Data as is necessary for this purpose) may be used for direct marketing of services any Data Recipient thinks may be of interest to each Applicant (all the 'Data Purposes'). Applicants have the right to revoke their consent to the use of the Data for direct marketing purposes by notice in writing to the Shareholder Services Provider, Citibank (Hong Kong) or the Hong Kong Representative. Applicants further agree that any Data Recipient may contact them by post, telephone, fax, or other available method for the Data Purposes. Applicants have the right to require corrections to, and receive a copy of, the Data and a reasonable fee may be charged to Applicants for any such copy. Applicants also have the right to ascertain the Company's policies and practices in relation to the Data and to be informed of the kind of Data held by the Company. The person to whom requests for correction of Data or copies of Data or for information regarding policies and practices and kinds of data held are to be addressed as follow: The Data Protection Officer Man Investments (Hong Kong) Ltd, Suite 1301, Chater House, 8 Connaught Road Central, Hong Kong By providing an address on an Application Form (the 'Authorised Address'), an Applicant will agree that the Data Recipients and/or any other service provider and their affiliates may contact the Applicant by (which is a non-secure medium) at the Authorised Address in connection with any of the following: (a) requesting further documentation or information from the Applicant relating to the investment products in which the Applicant has an investment (the 'Investments'); and (b) providing the Applicant with trading advisory reports, performance reports, contract notes and ancillary or generic information relating to Investments. The Applicant will be required to acknowledge that all electronic correspondence between the Applicant, the Company, Man Group and/or any other Data Recipient shall be governed by the relevant standard terms and conditions, a copy of which is available upon request. Applications should be made by fax or by original to Citibank (Hong Kong) or the Shareholder Services Provider not later than 17:00 (Hong Kong time), one Business Day prior to the Dealing Day on which the subscription is to take place. Any applications received after this deadline will not (unless the Directors agree otherwise) be accepted for subscription on that Dealing Day and will automatically be moved to the next following Dealing Day. 16 Man AHL Diversified Futures Ltd

30 For all new applications for subscriptions, Applicants must promptly mail the relevant original Application Form (and Anti-money Laundering Documents required in Appendix 4) duly completed and signed by or on behalf of the Applicant to Citibank (Hong Kong) or the Shareholder Services Provider who have been appointed to process applications. Shareholders will not be entitled to payment of any redemption proceeds (pursuant to a request for redemption) until the original Application Form (and Antimoney Laundering Documents) has been received by Citibank (Hong Kong) or the Shareholder Services Provider. Once completed applications have been received by the Company, they are irrevocable. The Directors may, in their absolute discretion, reject or scale down any application for Shares without giving any reason. In such event the subscription monies or any balance thereof, as appropriate, less any bank charges, will be returned to the source from which it was received. Citibank (Hong Kong) or the Shareholder Services Provider will not require an original executed version of any subsequent Application Form in respect of any application for additional Shares and, in such circumstances, will regard a faxed Application Form as authentic and conclusive, provided that the Applicant has agreed to indemnify Citibank (Hong Kong) or the Shareholder Services Provider in connection with such faxed subsequent Application Form and has provided their relevant bank account information in relation to the account which the redemption proceeds should be credited to as part of its original executed and delivered initial Application Form (as described in the previous paragraph). The Applicant will also always be under the obligation to promptly mail the duly completed and signed Anti-money Laundering Documents to Citibank (Hong Kong) or the Shareholder Services Provider. Shares will be allotted on the Dealing Day after acceptance of the application. The Company will issue fractions of Shares. Subscription monies should be sent by SWIFT MT103 transfer using the bank instruction letter provided with the Application Form (see the end of this Prospectus for the Application Form). Subscription monies are due immediately but in any case cleared funds net of bank charges must be received in the Subscription Account within three (3) Business Days of the relevant Dealing Day in respect of which the application is made. If timely settlement is not made the relevant allotment of Shares may be cancelled and an Applicant may be required to compensate the Company (see paragraph (f) of Investment in Shares section of the Risk Factors section of the Prospectus). The Company may also, at its discretion, redeem or sell part of an investors existing shareholding to satisfy any loss incurred. Subscription monies denominated in a certain currency cannot be transferred on any public holiday relating to such currency e.g. cannot be transferred on a US federal public holiday and in such circumstances the subscription monies will be transferred on the next Business Day. When applying for Shares, Applicants should apply for a minimum initial investment of 20,000 (or such lesser amount as the Directors in their discretion may determine). A Shareholder may increase its holding of Shares in increments of not less than 10,000 (or such other amount or number of Shares as the Directors may determine from time to time). A sales fee of up to 5% may be charged on new applications by the relevant distributor. Unless otherwise indicated in the Application Form, all the amounts received in the Subscription Account shall be applied to the AHL Diversified Programme and the Company shall have absolutely no obligation to repay any amount as a sales commission to the relevant distributor. Once applications have been received by Citibank (Hong Kong) or the Shareholder Services Provider they may not be withdrawn without the consent of the Directors, acting in their sole discretion. By signing the Application Form, an Applicant will certify, represent, warrant and agree that he/she/it is not a US person for the purposes of US Federal income tax or that the Shares applied for are not being acquired directly or indirectly by or on behalf of, or for the account of a US person. An Applicant will further certify, represent, warrant and agree that the Applicant will notify Citibank (Hong Kong), the Shareholder Services Provider or the Company (as the case may be) in the event that either the Applicant becomes a US person or holds the Shares on behalf of, or for the account or benefit of, a US person. A false statement or misrepresentation of tax status by a US person could lead to penalties under US law. If an Applicant's tax status changes and it becomes a US citizen or a resident, it must notify the relevant party as mentioned above within 30 days. Money laundering The Registrar, the Shareholder Services Provider and Citibank (Hong Kong) and any of their delegates are responsible to regulators for compliance by the Company with money laundering regulations and for that reason, existing Shareholders, potential subscribers for and Man AHL Diversified Futures Ltd 17

31 transferees of Shares may be asked for Anti-money Laundering Documents. Until satisfactory Anti-money Laundering Documents are provided by potential investors or transferees, as determined by the Directors, the Directors reserve the right to withhold issuance and approval of transfers of Shares. In case of delay or failure to provide satisfactory Anti-money Laundering documents, the Company may take such action as they see fit including the right to redeem issued Shares compulsorily. Contract notes will be issued to successful Shareholders confirming allocation. No money should be paid to any intermediary in Hong Kong who is not licensed or registered to carry on Type 1 regulated activity under Part V of the Securities and Futures Ordinance. In accordance with Bermudian law, Shares are only issued in the names of companies, partnerships or individuals. In the case of an Applicant acting in a special capacity (for example as trustee), contract notes (or Share certificates, if issued) may, at the request of the Applicant, record the capacity in which the Applicant is acting. Shares purchased for those under 18 years of age must be registered in the name of the parent or guardian, but may be designated with the minor s initials for the purposes of identification. The Company will take no cognisance of any trust applicable to its Shares. Subscription Account The Company has opened an interest bearing Subscription Account. Any monies credited to the Subscription Account shall be held on trust for the benefit of the relevant Applicant pending the allocation of the Shares. Any interest accruing on the Subscription Account shall belong to the Company absolutely. Restriction on applications There are no restrictions on the eligibility of any person to subscribe for Shares provided that such person is not a Non-qualified Person. Applicants subscribing for Shares in the Company are advised that the Shares are issued subject to the provisions of the Bye-laws. Transfer of Shares Shareholders are entitled to transfer Shares to anyone other than a Non-qualified Person by completion of the Man Transfer request form (available from the Shareholder Services Provider or Citibank (Hong Kong) (or such other entity contracted to provide such form)) and signed by or on behalf of the transferor and the transferee subject to the restrictions mentioned above. A transfer must be accompanied by a completed original Transfer request form signed for and on behalf of the transferor and the transferee as well as the Anti-money Laundering Documents. Shareholders wishing to transfer Shares must sign the transfer instrument in the exact name or names in which the Shares are registered, indicating any special capacity in which they are signing and supplying all other requested details. The Directors may at their discretion decline to register any transfer. A Shareholder is not entitled to transfer Shares if as a result of such transfer either he or the person to whom the Shares are to be transferred would hold Shares with a value of less than the Minimum Holding unless the whole of the Shareholder s holding is transferred. Procedure for redemption Shares are redeemable, and written notices to redeem Shares should be received by Citibank (Hong Kong) or the Shareholder Services Provider at the contact address referred to in the 'Names and addresses' section of this Prospectus not later than 17:00 pm (Hong Kong time) one Business Day prior to the Dealing Day on which the redemption is to take place, except in the event that the calculation of the Net Asset Value per Share has been suspended (see below for details of where notice should be given). Any applications received after this deadline will not (unless the Directors agree otherwise) be accepted for redemption on that Dealing Day and shall automatically be moved to the next following Dealing Day. The written redemption notices must contain the exact name of the investor, the amount of Shares to be redeemed and an original signature(s) as per the Application Form, Redemptions must be for a number of Shares at least equal to the Minimum Redemption of 200 Shares and must not (unless all of the relevant Shareholder s Shares are being redeemed) result in the Shareholder holding a number of Shares less than the Minimum Holding. If the redemption notice was sent by fax, the Company is under no obligation to pay any redemption proceeds until the original of that redemption notice has been received by Citibank (Hong Kong) or the Shareholder Services Provider. In relation to any redemption notice sent by fax, Citibank (Hong Kong) or the Shareholder Services Provider will not require an original executed version of the redemption notice to be sent as described in the previous paragraph, provided that the redeeming Shareholder has agreed to indemnify Citibank (Hong Kong) or the Shareholder Services Provider in connection with such faxed redemption notices 18 Man AHL Diversified Futures Ltd

32 and has provided their relevant bank account information in relation to the account which the redemption proceeds should be credited to as part of its original executed and delivered initial Application Form. The redemption price will be calculated by reference to the Net Asset Value as at the Valuation Point immediately preceding the Dealing Day. Shareholders are not entitled to withdraw a request for redemption unless the Directors otherwise determine or unless redemptions or the payment of redemption proceeds have been suspended or the determination of the Net Asset Value per Share has been suspended (see Suspension of valuations in section 5 of Appendix 2 to the Prospectus). The Directors are not bound to redeem part only of a holding of Shares if as a result of such redemption a Shareholder would hold less than the Minimum Holding. Upon receipt of a Shareholder's redemption notice, payment of redemption proceeds to Shareholders will be made without interest in by bank transfer at the expense and risk of the Shareholder in accordance with the bank instructions provided by that Shareholder within five (5) Business Days after the Dealing Day or as soon as practicable thereafter. Any bank wire charges incurred by the Company associated with the payment of redemption proceeds to investors will be borne by the Company rather than by the redeeming investor. The redeeming investor's bank wire charges incurred by their own bank will be borne by the redeeming investor. The Company is under no obligation to pay any redemption proceeds until the original Application Form (and Anti-money Laundering Documents) has been received. The Directors may, in their sole discretion, waive the Minimum Redemption and Minimum Holding requirements. Fee for early redemption of Tranche B Shares All costs of marketing the Shares and certain amounts payable to intermediaries are borne by the Marketing Adviser. No such costs are borne by the Company. In case the Tranche B Shares are redeemed before they have been in issue for the periods shown below after their initial issuance, the current Net Asset Value per Share redeemed will be paid by the Company to the Shareholder after deduction of a fee for early redemption, which will, in turn be paid to the Marketing Adviser primarily to compensate it for the costs of marketing the Shares, as follows: Tranche B Shares redeemed on a Dealing Day before they have been in issue for: Fee for early redemption: 2 years 4.0 % of redemption price per Share 4 years 2.5 % of redemption price per Share 6 years 1.0 % of redemption price per Share There will be no redemption fee applied on Tranche B Shares which are redeemed after they have been in issue for six years after their initial issuance. For the avoidance of doubt, the Directors have determined that in general no redemption fees will be applied for redemptions of Tranche A Shares. There may be circumstances in which the Company will be able to procure a purchase of a redeeming Shareholder s Shares and, although no actual redemption will be effected, where a purchase is procured in these circumstances a redeeming Shareholder will receive an amount equal to those proceeds that would have been paid to the Shareholder had an actual redemption taken place (that is, less the redemption fee, where applicable). In these circumstances the redemption fee will operate as an administrative charge to be paid to the Marketing Adviser. In certain circumstances, the Directors have the discretion to waive all or any of the fee for early redemption and in particular cases or generally. Compulsory redemption of Shares The Bye-laws empower the Company to require the redemption (or transfer) of any Shares, if in the opinion of the Directors, such Shares are acquired or held by a Nonqualified Person. In the event that a Shareholder (or the ultimate beneficial holder of the Shares held by a Shareholder) fails to disclose its identity to the reasonable satisfaction of the Directors, the Directors are empowered to redeem compulsorily all of the Shares held by such Shareholder (or such number thereof as are being held on behalf of that ultimate beneficial holder). Total redemption/winding up All of the Shares may be redeemed by the Company if: (a) the holders of not less than 75% in value of the issued Shares of the Company carrying voting rights at general meetings of the Company approve of the redemption at a general meeting of which not more than 12 and not less than four weeks notice has been given; or (b) at any time, the aggregate of the Net Asset Value per Share of all Shares in issue on each of three successive Valuation Points is less than 3,000,000 and provided that notice of not less than four and not more than 12 weeks has been given to the holders of the Shares within four weeks after the third relevant Valuation Point; or Man AHL Diversified Futures Ltd 19

33 (c) the Custodian has served notice of its intention to retire under the terms of the custodian agreement (and has not revoked such notice) and no new custodian has been formally approved and appointed within six months of the date of service of such notice. On a winding up of the Company the assets available for distribution (after satisfaction of creditors) shall be distributed to the holders of the Manager Shares and the Shares pari passu to the extent of their nominal value up to the nominal amount paid thereon and thereafter all surplus assets shall be distributed to the holders of the Shares in proportion to the number of Shares held. Suspension of dealings The Directors may declare a suspension of the determination of the Net Asset Value per Share in certain circumstances as described in section 5 of Appendix 2. No Shares will be redeemed during such period of suspension, but whilst such suspension subsists, a redemption notice may be withdrawn. However, if a redemption notice is not withdrawn, it will be acted upon on the first Dealing Day following the end of the suspension. Dividends It is not the intention of the Directors to make any distribution of net income by way of dividends. Net income will, therefore, effectively be represented in the value of the Shares. Charges and fees Investment management and incentive fees The Investment Manager will be entitled to a management fee of 3% per annum of the Net Asset Value of the Company (the Management Fee ) accrued daily and calculated on the aggregate Net Asset Value at the immediately preceding Valuation Point. The Management Fee is payable monthly in arrears by the Company. In addition to the management fee, an incentive fee (the Incentive Fee) will also be payable by the Company to the Investment Manager. The Incentive Fee is payable annually in arrears on the last Dealing Day in each financial year of the Company, and accrued daily at each Valuation Point, and is calculated at the rate of 20% of any net appreciation (after deduction of the Management Fees in respect of the period for which the calculation is being made but prior to deduction of the Incentive Fee) in the Net Asset Value per Share as at the Valuation Point applicable to such Dealing Day above any previous highest Net Asset Value per Share on any preceding Dealing Day in respect of which an Incentive Fee shall have previously been paid (the Benchmark NAV ), multiplied by the number of Shares in issue as at the Valuation Point applicable to such Dealing Day. A hypothetical example of the calculation of the incentive fee is set out below. Benchmark Net Asset Value per Share (high watermark)* Net Asset Value per Share at year end (prior to deduction of incentive fees (if any))* Will an incentive fee be applied?* Net appreciation on which incentive fee is applied* Incentive fee per Share (20% of the net appreciation)* Net Asset Value per Share at year end (including incentive fees (if any))* Year Yes Year No N/A N/A 10.5 Year Yes Year No N/A N/A 12.0 *This is a hypothetical example and is not indicative of future performance. 20 Man AHL Diversified Futures Ltd

34 Investors should note there will be no equalisation methods used for the purpose of determining the Incentive Fee payable by the Company to the Investment Manager. The use of equalisation methods ensures the Incentive Fee payable by the investor is directly referable to the specific performance of such individual investor s holding of Shares. If an investor redeems Shares part way through a financial year, the Incentive Fee accrued in respect of the Shares redeemed, over the period from the end of the previous financial year in respect of which an Incentive Fee was previously paid to the date of redemption, shall be crystallised. The amount of the crystallisation (i.e. the Incentive Fee associated with the redeemed Shares) in respect of each Share redeemed will be 20% of the net appreciation (as described above) in the Net Asset Value per Share as at the Valuation Point applicable to the Dealing Day on which the Shares are redeemed above the Benchmark NAV. The aggregate crystallisation associated with the redeemed Shares during a financial year shall be paid by the Company to the Investment Manager at the end of the financial year in which the relevant Shares are redeemed. The crystallisation of Incentive Fees and the payment of such crystallisation will neither affect the price of Shares remaining in issue nor the holdings of existing investors. If an investor subscribes part way through a financial year and the Net Asset Value per Share on the Valuation Point applicable to the date of the subscription is above the Benchmark NAV the Company will increase the overall Incentive Fee accrual by an amount equal to the current Incentive Fee accrual per Share for the period from the last Dealing Day in respect of which an Incentive Fee was previously paid to the date of the subscription, multiplied by the number of Shares issued to the subscribing investor. The increase in the Incentive Fee accrual due to new subscriptions may result in a dilution of the Net Asset Value per Share for the remaining investors. The amount of any dilution will depend on the current Incentive Fee accrual per Share applicable on the date of the subscription and the size of the Shares issued in respect of the subscription relative to the total number of outstanding Shares of the Company. If an investor subscribes part way through a financial year and the Net Asset Value per Share applicable at the date of the subscription is below the Benchmark NAV there would be no Incentive Fee accrual for these Shares until the Net Asset Value per Share increases above the Benchmark NAV. This means that the Company would not pay any Incentive Fee for these new Shares for the positive performance between the Net Asset Value per Share on the date of the subscription and the Benchmark NAV. Full details of the calculation of the Management Fee and the Incentive Fee are contained in the Investment Management Agreement referred to in section 11 of Appendix 2. Fees payable to the Investment Manager will be paid directly to Man Investments AG which has been appointed as Marketing Adviser for receipt of such fees in accordance with the Investment Management Agreement. Custodian fees The Custodian shall be paid by the Company a fee accruing at each Valuation Day and payable monthly at a rate of up to 0.10% per annum of the Net Asset Value subject to a minimum annual fee of 15,000. In addition, the Custodian is entitled to be reimbursed for all out-of-pocket expenses properly incurred by it in the performance of its duties. The Company will be responsible for the fees and expenses of any sub-custodians appointed by the Custodian. Hong Kong Representative fees The Hong Kong Representative shall be paid by the Company a fee accruing at each Valuation Day and calculated monthly at a rate of up to 5,000 per annum. Services Manager fees In consideration for the services provided by the Services Manager pursuant to the Services Management Agreement, the Company will pay the Services Manager in respect of shareholder services an annual fixed fee of 1,000 plus an annual variable fee accruing at each Valuation Day and payable quarterly as per a sliding scale based on the number of investors as follows: Up to 100 investors 10, to 200 investors 13, to 400 investors 16, to 600 investors 19,000 When there are more than 600 investors, the annual variable fee shall be increased by increments of 3,000 for every additional 200 investors. The Services Manager will also be paid by the Company an annual fee of 0.05% of the Net Asset Value. In addition, a fee of 27 shall be paid in arrears by the Company in respect of outward payments to Shareholders. In respect of valuation services, the Company will pay the Services Manager a fee of 0.23% per annum of the Net Asset Value accrued daily and paid monthly in arrears. The valuation fees payable will be subject to a minimum of 25,000 per annum. The Services Manager will pay a portion of the fees it receives from the Company to the Shareholder Services Provider and Registrar and the Valuations Service Provider. The Services Manager is solely responsible for the payment Man AHL Diversified Futures Ltd 21

35 of fees to the Shareholder Services Provider and Registrar and the Valuations Service Provider and the Company will have no responsibility or liability for such fees. Company Secretary fees In consideration for the secretarial services provided by the Company Secretary to the Company, the Company will pay an annual retainer fee at the Company Secretary's customary rates for such services. The Company Secretary will be reimbursed for all disbursements and reasonable expenses incurred in the performance of its duties, and such disbursements will be invoiced separately and payable annually. Other fees and expenses The Company bears, directly or indirectly, the Bermuda annual company registration fees of the Company, the cost of printing and distributing periodic and annual reports and statements, and all other operating expenses. The Directors reserve the right to charge all or any of the fees and expenses to the Company and to effect payment accordingly. Directors will receive an amount of up to 5,000 per annum per Director plus other fees and be reimbursed for out-of-pocket expenses, including those in relation to attendance at meetings. The preliminary expenses of establishing the Company have been fully amortised. Brokerage fees The Company shall bear all costs of trading transactions and interest on borrowing. Brokerage fees will be charged at market rates by the Broker and comprise execution fees charged by executing brokers, exchange fees and the fee charged by the Brokers. The Introducing Broker will charge a fee to the Company of 1% per annum of the Net Asset Value. Neither the Investment Manager nor their connected persons of the Company has entered into any cash or soft dollar commission agreements with the Brokers. 22 Man AHL Diversified Futures Ltd

36 Names and addresses Directors Michael Collins (President) (British) Argonaut Limited Argonaut House 5 Park Road Hamilton HM 09 Bermuda Mr Collins is the managing director of Argonaut Limited, Bermuda. Shirelle Jones is an alternate director to Mr Collins. Dawn Griffiths (British) Conyers Dill & Pearman Limited Clarendon House 2 Church Street Hamilton HM 11 Bermuda Ms Griffiths is a director of Conyers Dill & Pearman Limited, barristers and attorneys, Bermuda. John Collis is an alternative director to Ms Griffiths. Ronan Daly (British) Centaur Fund Services Dawson Street Dublin 2 Ireland Mr Daly is the chairman of Centaur Fund Services Limited. John Walley (Irish) 62 The Avenue Carrickmines Wood Foxrock Dublin 18 Ireland Mr Walley is a financial services consultant specialising in the offshore funds administration business. David Smith (British) Equus Asset Management Partners L.P. 27 Queen Street Hamilton HM 11 Bermuda Mr Smith is a partner of Equus Asset Management Partners L.P. Registered office of the Company Hemisphere House 9 Church Street Hamilton HM 11 Bermuda Company Secretary Christine Perinchief c/o Citi Hedge Fund Services, Ltd. Hemisphere House 9 Church Street Hamilton HM 11 Bermuda Investment Manager Man Investments Limited 2 Swan Lane Riverbank House London EC4R 3AD United Kingdom Introducing Broker, Marketing Adviser Man Investments AG Huobstrasse Pfäffikon SZ Switzerland Custodian HSBC Institutional Trust Services (Asia) Limited HSBC Main Building 1 Queen s Road Central Hong Kong Services Manager Man Investments AG Huobstrasse Pfäffikon SZ Switzerland Registrar Citi Hedge Fund Services, Ltd. Hemisphere House 9 Church Street Hamilton HM 11 Bermuda Tel: Fax: Contact: The Company Secretary Man AHL Diversified Futures Ltd 23

37 Shareholder Services Provider Citibank Europe plc 1 North Wall Quay Dublin 1 Ireland Tel: Fax: Fax: (Application Forms only) Transfer Agency Citibank N.A., Hong Kong Branch 10/F, Two Harbourfront 22 Tak Fung Street Hunghom, Kowloon Hong Kong, Tel: Fax: (Dealing Forms only) Principal Paying Agent Citi Hedge Fund Services, Ltd. Hemisphere House 9 Church Street Hamilton HM 11 Bermuda Tel: Fax: Hong Kong Representative Man Investments (Hong Kong) Limited Suite 1301 Chater House 8 Connaught Road Central Hong Kong Tel: InvestorServicesAsia@man.com Valuations Service Provider Citibank Europe plc 1 North Wall Quay Dublin 1 Ireland Auditors Ernst & Young Ltd. 3 Bermudiana Road Hamilton HM 11 Bermuda Legal adviser as to matters of Bermudian law Conyers Dill & Pearman Limited Clarendon House 2 Church Street Hamilton HM 11 Bermuda 24 Man AHL Diversified Futures Ltd

38 Appendix 1 Definitions Act means the Companies Act 1981 of Bermuda, as the same may be amended from time to time. AHL means an investment division of the Investment Manager. AHL Diversified Programme means the programme described in the section entitled The AHL Diversified Programme. Anti-money Laundering Documents means the documentation required to be provided by an Applicant as part of their application for Shares as set out in Appendix 4 to the Prospectus. Applicant means any person, in whose name an application to subscribe for Shares is made by submitting a duly completed and signed Application Form and Applicants shall be construed accordingly. Application Form means the application form to be completed and executed by an investor upon applying for Shares and Application Forms shall be construed accordingly. Auditors means Ernst & Young Ltd, chartered accountants of 3 Bermudiana Road, Hamilton HM 11, Bermuda. Broker means any party or parties appointed from time to time as clearing and/or prime broker of the Company and Brokers shall be construed accordingly. Business Day means a day on which financial markets are generally open for business in Dublin, London, Hong Kong, and New York and Business Days shall be construed accordingly. Bye-laws means the bye-laws of the Company, as amended from time to time. Citibank (Hong Kong) means Citibank N.A., Hong Kong Branch. Company means Man AHL Diversified Futures Ltd, a company incorporated with limited liability in Bermuda under the Companies Act 1981 of Bermuda. 'Company Secretary means Citi Hedge Fund Services, Ltd. or such other person as may be appointed by the Company from time to time as its company secretary. Company Secretarial Services Agreement means the company secretarial services agreement entered into by and between the Company and Citi Hedge Fund Services, Ltd. Custodian means HSBC Institutional Trust Services (Asia) Limited. Dealing Day means the first Business Day following a Valuation Day or such other days as the Directors shall from time to time determine. Directors means the directors (or any alternate director) of the Company or any duly authorised committee thereof and Director shall be construed accordingly. FSA means the Financial Services Authority, a company limited by guarantee established and authorised to carry out its regulatory functions under the FSMA (and any successor regulatory organisation). FSMA means the Financial Services and Markets Act 2000 of the United Kingdom, as the same may be amended from time to time. Fund means all consideration received by the Company for the allotment or issue of Participating Shares together with all investments in which such consideration is invested or reinvested and all income earnings, profits and proceeds thereof and Funds shall be construed accordingly Futures Contracts means contracts (including contracts which are not traded on-exchange and which are not readily realisable investments) on and for physical commodities, currencies, mortgage-backed securities, money market instruments, obligations of and guaranteed by the governments of sovereign nations, and any other financial instruments, securities, stock, financial, and economic indices, and items which are now, or may hereafter be, the subject of futures contract trading, futures contracts, options on futures contracts and physical commodities, cash and forward contracts, foreign exchange commitments, deferred delivery contracts, leverage contracts, and other commodity related contracts, agreements and transactions (including contingent liability transactions), and Futures Contract shall be construed accordingly. Hong Kong Representative means Man Investments (Hong Kong) Limited, a limited liability company incorporated in Hong Kong and a member of the Man Group, or such other party as is appointed Hong Kong Representative of the Company and the Investment Manager from time to time. Introducing Broker means Man Investments AG, a limited liability company incorporated in Switzerland. Man AHL Diversified Futures Ltd 25

39 Investment Management Agreement means the agreement between the Company, the Investment Manager and Man Investments AG, as described in section 11 of Appendix 2 to this Prospectus. Investment Manager means Man Investments Limited (formerly Man Investment Products Limited), a limited liability company incorporated in England and regulated in the conduct of its regulated activities in the United Kingdom by the FSA. Man Group means: (i) Man Group plc; (ii) any company or other entity which directly or indirectly controls, is controlled by or is under common control with Man Group plc (including any holding company or subsidiary, each within the meaning of section 1159 of the Companies Act 2006); and (iii) any limited partnership or limited liability partnership whose general partner or managing member is an entity in (ii) above, but excluding any investment fund in relation to which Man Group plc or an entity or partnership in (ii) or (iii) above provides investment management, advisory, marketing or related services. Manager Shares means the shares of a par value of 1 in the capital of the Company having the rights and being subject to the restrictions described in sections 1 and 2 of appendix 2 and Manager Share shall be construed accordingly. Marketing Adviser means Man Investments AG, acting in its capacity as marketing adviser pursuant to the investment management agreement. Minimum Holding means the minimum number of Shares or amount which a Shareholder must maintain, being 300 Shares or 10,000, whichever is lesser (based on last published NAV) or such lesser amount as the Directors in their discretion may determine. Minimum Redemption means the minimum number of Shares which a Shareholder may redeem pursuant to any single redemption application being 200 Shares. Net Asset Value or NAV means the amount calculated by the Valuations Service Provider on each Valuation Point, which amount is equal to the value of the net assets of the Company for the benefit of the Shareholders (as such value is more particularly described in the section headed Share valuation ). Net Asset Value per Share means the Net Asset Value divided by the numbers of Shares outstanding at each Valuation Point. Non-qualified Person means (i) any person who by acquiring and/or holding Shares, would be in breach of the law or requirements of any country or governmental authority; or (ii) any person or persons in circumstances (whether directly or indirectly affecting such person or persons and whether taken alone or in conjunction with any other persons, connected or not, or any other circumstances appearing to the Directors to be relevant) which, in the opinion of the Directors, might result in the Company incurring any liability to taxation or suffering any other pecuniary or commercial disadvantage that the Company might not otherwise have incurred or suffered; or (iii) any person under the age of 18 years; or (iv) any United States person other than a corporate entity situated in the US applying on behalf of its own client(s) who are non-us Person(s). OECD means the Organisation for Economic Co-operation and Development. Participating Share or Share means each of the 75,000,000 redeemable participating shares of 0.01 offered pursuant to this Prospectus (comprising both Tranche A Shares and Tranche B Shares) and Participating Shares or Shares shall be construed accordingly. Principal Paying Agent means Citi Hedge Fund Services, Ltd. Prospectus means this prospectus dated 4 September 2012 relating to the offering of Shares by the Company including the appendices to this Prospectus accompanied by a copy of the latest audited financial statements of the Company. Recognised Exchange means an investment exchange recognised under the Financial Services and Markets Act 2000 (UK) or designated by the Securities and Investments Board and, when the context so admits, includes a recognised clearing house through which transactions effected under the rules of a Recognised Exchange may be cleared and Recognised Exchanges shall be construed accordingly. Registrar means Citi Hedge Fund Services, Ltd. Service means United States Internal Revenue Service 26 Man AHL Diversified Futures Ltd

40 Services Management Agreement means the services management agreement entered into by and between the Company and the Services Manager, as amended and restated from time to time. Services Manager means Man Investments AG. SFC means the Securities and Futures Commission in Hong Kong referred to in section 3(1) of the Securities and Futures Ordinance. Shareholder Services Provider means Citibank Europe plc. Shareholders means the holders of a Participating Share and Shareholder shall be construed accordingly. Subscription Account means the subscription account opened by the Company with Citibank N.A., Hong Kong Branch (the details of which are set out in the Application Form). United States person or US person has the meaning given to it in section 7701 (a) (30) of the Internal Revenue Code of 1986 as amended and United States persons or US persons shall be construed accordingly. means dollars in the currency of the United States of America. Valuation Day means any Business Day and/or such other day or days in addition thereto or in substitution thereof as may from time to time be determined by the Directors, either in any particular case or generally, but so that there shall be at least one Valuation Day in each month. Valuation Point means the time of close of business in the market or markets relevant for the valuation of the assets and liabilities of the Company on the Valuation Day and Valuation Points shall be construed accordingly. Valuations Service Provider means Citibank Europe plc. Subscription Price means the price at which Shares can be purchased, which shall be ascertained by: (a) determining the Net Asset Value of the Company calculated as at the last Valuation Point prior to the Dealing Day the relevant Shares are issued; (b) dividing the amount calculated under (a) above by the number of Shares in issue or deemed to be in issue as at the relevant Valuation Point; and (c) deducting therefrom such amount as may be necessary to round the resulting amount down to the nearest cent. United States or US means the United States of America and its territories and possessions including any state thereof and the District of Columbia. Man AHL Diversified Futures Ltd 27

41 Appendix 2 General information 1. Incorporation The Company was incorporated on 11 September 1997 in Bermuda with limited liability under the Companies Act 1981 of Bermuda. The memorandum of association and the Byelaws of the Company comprise its constitution. On incorporation the authorised share capital of the Company was 12,000 divided into 12,000 Manager Shares of a par value of 1 each. Shortly after incorporation the authorised share capital was increased from 12,000 to 762,000 by the creation of an additional 75,000,000 shares of 0.01 par value designated as Participating Shares. The Manager Shares are owned by Master Multi-Product Holdings Ltd, a Bermuda exempted company, which is itself owned by Codan Trust Company Limited in its capacity as trustee of the Master Multi-Product Purpose Trust, a special purpose trust formed under the laws of Bermuda pursuant to a Deed of Trust made by Codan Trust Company Limited dated 14 December The Shares are available for issue at the discretion of the Directors. 2. Manager Share rights The holders of Manager Shares shall: (a) not be entitled to vote; (b) not be entitled to any dividends whatsoever in respect of such Manager Shares; (c) in the event of a winding up or dissolution of the Company, whether voluntary or involuntary or for the purpose of reorganisation or otherwise or upon distribution of capital, be entitled pari passu with the holders of Shares, to an amount equal to the nominal amount paid up on such Manager Shares out of the assets of the Company but shall not be entitled to any other or further amount; and (d) not be subject to redemptions or repurchase of such Manager Shares, whether at the option of the Company or the holder. 3. The Shares The holders of the Shares shall: (a) be entitled to one vote per Share; (b) be entitled to such dividends as the Directors may from time to time declare; (c) in the event of a winding up or dissolution of the Company, whether voluntary or involuntary or for the purposes of reorganisation or otherwise or upon any distribution of capital, be entitled, subject to the provisions of the Bye-laws, to share pro rata in the remaining assets of the Company; and (d) be entitled, and subject, to redemption or repurchase of such Shares as provided in these Bye-laws. 4. Redemption price On each Dealing Day, the redemption price per Share will be the Net Asset Value per Share as at the last Valuation Point rounded down to the nearest whole cent. Any certificate as to the Net Asset Value per Share and/ or redemption price per Share given in good faith by or on behalf of the Directors is binding on all parties. The payment of redemption proceeds will be made usually within five Business Days or as soon as practicable thereafter following the calculation of the Net Asset Value as at the relevant Valuation Point (but in any event within one calendar month of receipt by Citibank (Hong Kong) (or such other entity contracted to receive applications) of the relevant redemption notice) in accordance with the provisions set out under the section headed Procedure for redemption. 5. Suspension of valuations The Directors may suspend the determination of the Net Asset Value for the whole or any part of a period during which: any exchange or market on which any significant portion of the investments of the Company are listed, quoted, traded or dealt in is closed (other than customary weekend and holiday closing) or trading on any such exchange or market is restricted; circumstances exist as a result of which in the opinion of the Directors it is not reasonably practicable for the Company to dispose of investments of the Company, or as a result of which any such disposal would be materially prejudicial to Shareholders; a breakdown occurs in any of the means normally employed in ascertaining the value of investments or when for any other reason the value of any of the investments or other assets of the Company cannot reasonably or fairly be ascertained; the Company is unable to repatriate funds required for the purpose of making payments due on redemption of the Shares; or any transfer of funds involved in the realisation or acquisition 28 Man AHL Diversified Futures Ltd

42 of investments or payments due on redemptions of the Shares cannot, in the opinion of the Directors, be effected at normal rates of exchange. 6. Directors (a) The remuneration of the Directors will be determined by the Company in a general meeting. The Directors may also be paid, inter alia, for travelling, hotel and other expenses properly incurred by them in attending meetings of the Directors or in connection with the business of the Company. Any Director who devotes special attention to the business of the Company may be paid such extra remuneration as the Directors may determine. (b) A Director may hold any other office or place of profit under the Company (other than the office of auditor) in conjunction with his office of Director, or may act in a professional capacity for the Company on such terms as the Directors may determine. No Director shall be disqualified by his office from contracting with the Company in any capacity, nor shall any such contract or arrangement entered into by the Company in which any Director is in any way interested be liable to be avoided, nor shall any Director so contracting or being so interested be liable to account to the Company for any profit realised by any such contract or arrangement by reason of such Director holding that office if he shall declare the nature of his interest. However, with certain limited exceptions, in the case of obligations incurred on behalf of the Company, and of proposals concerning other companies in which he has a beneficial interest of at least one percent, a Director shall not vote and shall not be counted in the quorum in respect of any contract or arrangement in which he is so interested, and if he shall vote, his vote shall not be counted, unless he has declared the nature of his interest at the first opportunity at a meeting of the Directors or in writing to the Directors and no other Director objects to the interested Director voting on such arrangement. (c) A Director, notwithstanding his interest, may be counted in the quorum present at any meeting at which he or any other Director is appointed to hold any such office or place of profit under the Company or at which the terms of any such appointment are arranged, and he may vote on any such appointment or arrangement other than his own appointment or the arrangement of terms thereof. (d) There is no provision in the Bye-laws requiring a Director to retire by reason of any age limit and there is no share qualification for Directors. 7. Restrictions on Shareholders The Directors have power to impose such restrictions as they may think necessary for the purpose of ensuring that no Shares are acquired or held by a Non-qualified Person. If it comes to the notice of the Directors that any Shares are so held by any such Non-qualified Person the Directors may give notice to such person requiring the redemption or transfer of such Shares in accordance with the provisions of the Bye-laws. A person who becomes aware that he is holding or owning Shares in breach of any such restriction is required either to deliver to the Company a written request for redemption of his Shares in accordance with the Bye-laws, or to transfer the same to a person who would not thereby be a Non-qualified Person. 8. Indemnities The Bye-laws of the Company contain indemnities in favour of the Directors, secretary and other officers and servants for the time being of the Company. In addition, certain of the material contracts referred to in section 11 below contain provisions under which the Company indemnifies the other parties thereto. 9. Commission Save as disclosed in this Prospectus, no commission, discounts, brokerage or other special terms have been granted by the Company in connection with the issue or sale of any Shares. 10. Interests The Investment Manager is indirectly wholly owned by the Man Group. The Man Group or affiliated companies will receive, directly or indirectly, fees in respect of valuation services provided, advisory and management and registrar fees from the Company and will, from time to time, make loans bearing commercial rates of interest to the Company. No Director has any interest in the Shares. Ms Griffiths, Mr Collins, Mr Daly and Mr Walley also serve as directors of Master Multi-Product Holdings Ltd which is the owner of the Manager Shares of the Company. Ms Perinchief is an employee of Citi Hedge Fund Services, Ltd., which is acting as Registrar and Paying Agent for the Company and receives fees for its services. There are no existing or proposed service contracts between any of the Directors and the Company but the Directors may receive remuneration as provided in the Bye-laws. 11. Material contracts The following contracts (not being contracts in the ordinary course of business) have been entered into by the Company and are, or may be, material: Man AHL Diversified Futures Ltd 29

43 (a) the Investment Management Agreement between the Company, Man Investments AG (formerly Adam, Harding & Lueck AG which merged with Man Investments AG) and the Investment Manager, dated 25 March 2011, as amended and restated in the amended and restated Investment Management Agreement dated 4 September 2012 pursuant to which the Investment Manager has agreed to provide trading advice to the Company and pursuant to which Man Investments AG has been appointed as Marketing Adviser; (b) the introducing broker agreement between the Introducing Broker and the Company, dated 4 September 2012 pursuant to which Man Investments AG has been appointed as Introducing Broker of the Company; (c) the early redemption agreement between the Company and the Marketing Adviser, dated 11 March 1998 as amended and restated in the amended and restated early redemption agreement dated 4 September 2012, pursuant to which the Company has agreed to pay, in consideration of certain marketing related expenses incurred by the Marketing Adviser on behalf of the Company, to the Marketing Adviser a fee for early redemption of Shares. The amount of this fee is set out under the section headed Fee for early redemption of Shares ; (d) the Services Management Agreement between the Company and the Services Manager dated 4 September 2012, pursuant to which the Services Manager will select and appoint (as principal) service providers to provide general shareholder services (which will include maintenance of the Company's register) and certain accounting and valuation services to the Company, as well as monitoring the providers of those services; (e) the Company Secretarial Services Agreement between the Company and Citi Hedge Fund Services, Ltd. dated 4 September 2012, pursuant to which the Company Secretary has agreed to provide certain corporate administrative services to the Company; (f) the custodian agreement between the Company, the Investment Manager and HSBC International Trustee Limited (the original custodian to the Company), dated 13 March 1998 (which was subsequently novated to the Custodian pursuant to a novation agreement between them and the Custodian dated 20 June 2008), as amended and restated in the amended and restated Custodian agreement dated 4 September 2012 pursuant to which the Custodian has been appointed as Custodian for the assets of the Company; and (g) the Hong Kong representative agreement between the Company and the Hong Kong Representative, dated 25 March 2011 pursuant to which the Hong Kong Representative has been appointed as the Hong Kong Representative of the Company. 12. Consents The Auditors have given and have not, before delivery of a copy of this Prospectus for filing with the Registrar of Companies in Hong Kong and in Bermuda, withdrawn their written consent to the inclusion of their name and their report in the form and context in which they appear. 13. Meetings The financial year end of the Company is 30 September in each year. Audited financial statements and unaudited semi-annual financial reports will be published on the Hong Kong website of Man at (select Hong Kong) (this website is not authorised and reviewed by the SFC and it may contain non-sfc authorised funds). Audited financial statements will be made available prior to the annual general meeting in each year within four months of the financial year end and unaudited semi-annual financial report will be made available within two months of the relevant accounting period. Audited financial statements and unaudited semi-annual financial reports will only be available in English. Copies will be provided by the Hong Kong Representative upon request Annual general meetings will usually be held in Bermuda (normally during February or March of each calendar year or such other date as the Directors may determine). Notices convening each annual general meeting will be sent to Shareholders not later than 21 days before the date fixed for the meeting. 14. Litigation The Company is not engaged in any litigation or arbitration proceedings and is not aware of any litigation or claim pending or threatened by or against it. 15. Change in financial position There has been no significant change in the financial position of the Company since the date of the latest audited financial statements of the Company to the date of this Prospectus. The Directors confirm that as of the date of issue of this Prospectus, there are no events which have occurred subsequent to the date of the last audited financial statements and prior to the date of issue of this document 30 Man AHL Diversified Futures Ltd

44 that either provide material additional information relating to conditions that existed at the date of such financial statements or which cause significant changes to assets or liabilities relating to the Company or which will or may have a significant effect on the future operations of the Company other than those events which occur in the normal course of business of a fund (including the subscriptions and redemptions of Shares and changes in the market value of the assets of the Company). 16. Taxation Investors should appreciate that as a result of changing law or practice, or unfulfilled expectations as to how the Shares, the Company or investors will be regarded by revenue authorities in different jurisdictions, taxation consequences for investors may vary. Investors should consult their professional advisers on the possible tax consequences of their subscribing for, purchasing, holding, selling or redeeming Shares under the laws of their countries of citizenship, residence, ordinary residence or domicile. The following comments are based on advice received by the Directors regarding current law and practice in Bermuda and Hong Kong and are intended to assist investors. Bermuda At the date of this Prospectus, there is no Bermuda income, corporation, or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by the Company or its Shareholders, other than Shareholders ordinarily resident in Bermuda. The Company has obtained from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act, 1966, as amended, an undertaking that, in the event of there being enacted in Bermuda any legislation imposing tax computed on profits or income, or computed on any capital assets, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not until 28 March 2016 be applicable to the Company or to any of its operations or to the shares, debentures or other obligations of the Company, except in so far as such tax applies to persons ordinarily resident in Bermuda and holding such shares, debentures or other obligations of the Company or any land leased or let to the Company. As an exempted company, the Company is liable to pay the Bermuda Government a fixed registration fee currently at rates between 1,995 and 31, 120 per annum, calculated by reference to the authorised share capital of the Company. In addition there is an annual fee payable to the Bermuda Monetary Authority under the provisions of the Investment Funds Act Hong Kong Under current Hong Kong law and practice: (a) profits of the Company arising from the sale or disposal of securities, interest received by or accrued to the Company and profits arising under foreign exchange and Futures Contracts are exempt from profits tax; (b) profits tax will not be payable by any investors in respect of the sale, redemption or other disposal of Shares (unless such transactions form part of a trade, profession or business carried on in Hong Kong); and (c) no tax will be payable by investors in Hong Kong in respect of dividends or other income distribution of the Company (if any). Identity of Beneficial Ownership and Withholding on Certain Payments In order to avoid a US withholding tax of thirty percent (30%) on certain payments (including payments of gross proceeds) made with respect to certain actual and deemed US investments, the Company will be required to enter into an agreement with the Service by 30 June 2013 identifying certain direct and indirect US investors. A non-us investor in the Company will generally be required to provide to the Company information which identifies its direct and indirect US ownership. Any such information provided to the Company will be shared with the Service. A non-us investor that is a "foreign financial institution" within the meaning of Section 1471(d)(4) of the US Internal Revenue Code of 1986, as amended ( IRC ) will generally be required to enter into an agreement with the Service by 30 June 2013 identifying certain direct and indirect US investors. A non-us investor who fails to provide such information to the Company or enter into such an agreement with the Service, as applicable, would be subject to the thirty percent (30%) withholding tax with respect to its share of any such payments attributable to actual and deemed US investments of the Company and the Directors may take any action in relation to an investor's Shares or redemption proceeds to ensure that such withholding is economically borne by the relevant investor whose failure to provide the necessary information gave rise to the withholding. Shareholders should consult their own tax advisors and (where applicable) financial intermediary regarding the possible implications of these rules on their investments in the Company. Shareholders should consult their own tax advisors regarding the possible implications of these rules on their investments in the Company. 17. Exchange control The Company has been classified as non-resident of Bermuda for exchange control purposes by the Bermuda Monetary Authority, whose permission for the issue of Shares of the Company has been obtained. The transfer Man AHL Diversified Futures Ltd 31

45 of Shares between persons regarded as resident outside Bermuda for exchange control purposes and the issue and redemption of Shares to or by such persons may be effected without specific consent under the Exchange Control Act 1972 of Bermuda and regulations made thereunder. Issues and transfers involving any person regarded as resident in Bermuda for exchange control purposes require specific prior authorisation under the Act. The Company, by virtue of being non-resident in Bermuda for exchange control purposes, is free to acquire, hold and sell any foreign currency and investments without restriction. 18. Inspection of documents Copies of the following documents are available for inspection at any time during normal business hours on any day (excluding Saturdays, Sundays and public holidays) free of charge at the offices of the Company in Bermuda and at the offices of the Hong Kong Representative (from whom copies may be purchased): (a) the Companies Act 1981 (as amended) of Bermuda; (b) the memorandum of association and Bye-laws of the Company; (c) the material contracts referred to in section 11 above; (d) latest financial statements and audited report thereon; and (e) the written consent of the Auditors referred to above. 32 Man AHL Diversified Futures Ltd

46 Appendix 3 Selling restrictions The distribution of this Prospectus and the offering of the Shares may be restricted in certain jurisdictions. The information below is for general guidance only. It is the responsibility of any person or persons in possession of this Prospectus and wishing to make an application for Shares to inform themselves of and to observe all applicable laws and regulations of any relevant jurisdiction. Argentina This Prospectus and any supplement(s) is highly confidential and has been prepared by the Company solely for use in connection with the private placement of Shares. This Prospectus and any supplement(s) is personal to you and does not constitute an offer to any other person or to the public generally to purchase the Shares under applicable Argentinean laws. Neither the Argentine Securities Commission nor any other regulatory authority in Argentina has either verified the accuracy of this Prospectus or any supplement(s) or approved or disapproved the registration of any Shares. Distribution of this Prospectus and any supplement(s) to any person other than to those, if any, retained to advise you in respect thereto, is unauthorised and any disclosure of any of its contents, without the prior written consent of the Company, is prohibited. By accepting delivery of this Prospectus you agree to the foregoing and to make no further copies of this Prospectus, any supplement(s) or any other documents referred to herein. Australia The Company is a foreign body corporate not registered in Australia. It does not hold an Australian financial services licence. This document is not a prospectus or product disclosure statement under Australian law. It is not required to, and does not include all the information that such documents are required to contain. It has not been lodged with or been the subject of notification to the Australian Securities and Investments Commission. Investors do not have any cooling off rights in relation to their investment under Australian law. Australian persons who may invest in the Shares are persons to whom an offer of securities may be made without a prospectus under Australian law ('Eligible Investor'). This includes a person who: (a) is a 'professional investor' (such as an Australian financial services licensee, a trustee of superannuation funds with net assets of at least AUD 10 million, other bodies regulated by the Australian Prudential Regulation Authority, a listed entity or its related body corporate, or a person who has or controls gross assets of at least AUD 10 million (including any assets held by an associate or under a trust that the person manages)); (b) invests more than AUD 500,000 in the Shares (not including any amount lent by the Company or an associate); (c) provides a copy of a certificate given within the preceding two years by a qualified accountant which states that the person has net assets of at least AUD 2.5 million or had gross annual income of AUD 250,000 for each of the last two financial years; or (d) invests through an Australian financial services licensee where the licensee is satisfied on reasonable grounds that the investor has sufficient previous experience to assess the offer and the investor signs an acknowledgement that they have not received a prospectus in accordance with the Corporations Act 2001 (Cth). The provision of this document to any person does not constitute an offer of the Shares to that person or an invitation to that person to apply for Shares. Any such offer or invitation will only be extended to a person if that person has first satisfied the Company that the person is an Eligible Investor. It is a term of issue of the Shares that the investor may not transfer or offer to transfer their Shares to any person located or resident in Australia unless the transferee is an Eligible Investor. This document is not intended to be read by any person in Australia who is not an Eligible Investor. This document does not constitute or contain investment advice. Prospective investors should seek their own professional advice in assessing whether or not to invest. Austria The Shares may only be offered in the Republic of Austria in compliance with the provisions of the Austrian Capital Markets Act, the Austrian Investment Funds Act and any other laws applicable in the Republic of Austria governing the offer and sale of the Shares in the Republic of Austria. The Shares are not registered or otherwise authorised for public offer under either the Austrian Capital Market Act or the Austrian Investment Funds Act or any other relevant securities legislation in Austria. The recipients of this document and other marketing material or information of any kind in respect to the Shares have been individually Man AHL Diversified Futures Ltd 33

47 selected and are targeted exclusively on the basis of a private placement. Accordingly, the Shares may not be, and are not being, offered or advertised publicly or offered similarly under either the Austrian Capital Markets Act or the Austrian Investment Funds Act or any other relevant securities legislation in Austria. This offer may not be made to any other persons than the recipients to whom this document is personally addressed. Brazil Shares have not been and will not be issued nor placed, distributed, offered or negotiated in the Brazilian capital markets. Neither the Company nor the issuance of any Shares has been or will be registered with the Brazilian Securities and Exchange Commission (Comissão de Valores Mobiliários, the CVM). Therefore, each of the Managers has represented and agreed that it has not offered or sold, and will not offer or sell, the Shares in Brazil, except in compliance with the applicable circumstances which do not constitute a public offering, placement, distribution or negotiation of securities in the Brazilian capital markets regulated by Brazilian legislation or pursuant to an available exemption therefrom. Canada The Shares may not be offered or sold, and this Prospectus may not be delivered, in Canada or to a resident of Canada unless and until this Prospectus is accompanied by an appropriate Canadian wrapper. In addition, the Shares may only be offered or sold to qualified investors in Canada, in accordance with the requirements of the securities regulations of the investor's place of residence or domicile. Cyprus This document does not constitute, and may not be used for the purposes of, an offer or an invitation to subscribe for or otherwise acquire any shares by any person in Cyprus (i) in any circumstances which require the publication, approval or filing of a prospectus pursuant to the Law on Public Offer and Prospectus of 2005 (as amended) or the Companies Law, Cap.113 (as amended), or (ii) to any person to whom it is unlawful to make such an offer or invitation or (iii) by any person who is not qualified to make such an offer or invitation. Denmark This Prospectus has not been filed with or approved by the Danish Financial Supervisory Authority or any other Regulatory Authority in the Kingdom of Denmark. The Shares in the Company have not been offered or sold and may not be offered, sold or delivered directly or indirectly in Denmark, unless in compliance with Chapter 4 of the Danish Act on Investment Associations, Special-Purpose Associations and Other Collective Investment Funds and Executive Orders issued pursuant thereto as amended from time to time. Dubai International Financial Centre This Prospectus relates to a fund which is not subject to any form of regulation or approval by the Dubai Financial Services Authority ('DFSA'). This Prospectus is intended for distribution only to persons of a type specified in the DFSA's Rules (i.e. 'Qualified Investors') and must not, therefore, be delivered to, or relied on by, any other type of person. The DFSA has no responsibility for reviewing or verifying any Prospectus or other documents in connection with this fund. Accordingly, the DFSA has not approved this Prospectus or any other associated documents nor taken any steps to verify the information set out in this Prospectus, and has no responsibility for it. The Shares to which this Prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the Shares offered should conduct their own due diligence on the Shares. If you do not understand the contents of this Prospectus you should consult an authorised financial adviser. Finland The Shares are offered in Finland solely to investors who automatically qualify as professional investors, as defined in the Finnish Investment Funds Act (48/1999, as amended). This Prospectus and any supplement(s) have neither been filed with nor approved by the Finnish Financial Supervision Authority and do not constitute a prospectus under the Prospectus Directive (2003/71/EC), the Finnish Securities Market Act (495/1989, as amended) or the Finnish Investment Funds Act (48/1999, as amended). France This Prospectus is for information purposes only and does not constitute an offer, an invitation or a solicitation for any investment or subscription for the Shares of the Company in France. Any person who is in possession of this Prospectus is hereby notified that no action has or will be taken that would allow an offering of the Shares in France and neither the Prospectus nor any offering material relating to the Shares have been submitted to the Autorité des Marchés Financiers for prior review or approval. Accordingly, the Shares may not be offered, sold, transferred or delivered and neither this Prospectus nor any offering material relating to the Shares may be distributed or made available (in whole or in part) in France, directly or indirectly, except as permitted by French law and regulation. 34 Man AHL Diversified Futures Ltd

48 Germany No class of Share which is the object of this Prospectus and any relevant supplement is registered for public distribution with the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdienstleistungsaufsicht - 'BaFin') according to the German Investment Act (Investmentgesetz) or listed on a German exchange. No sales prospectus pursuant to the German Securities Prospectus Act (Wertpapierprospektgesetz) or German Sales Prospectus Act (Verkaufsprospektgesetz) has been filed with the BaFin. Consequently, Shares must not be distributed within the Federal Republic of Germany by way of a public offer, public advertisement or in any similar manner and this Prospectus, each supplement and any other document relating to the Shares, as well as information or statements contained therein, may not be supplied to the public in the Federal Republic of Germany or used in connection with any offer for subscription of the Shares to the public in the Federal Republic of Germany or any other means of public marketing. Any resale of the Shares in Germany may only be made in accordance with the German Securities Prospectus Act and any other applicable laws governing the sale and offering of shares in Germany. No view on taxation is expressed. Prospective investors in Germany are urged to consult their own tax advisers as to the tax consequences that may arise from an investment in the Shares. Guernsey The Shares are not being offered to the public in Guernsey and the Shares will not be offered to the public unless all the relevant legal and regulatory requirements of Guernsey law have been complied with. This Prospectus may not be generally distributed in Guernsey. Indonesia This Prospectus will not be distributed or passed on in the Republic of Indonesia or to Indonesian citizens, nationals, corporations or residents and the Company will not be offered or sold in the Republic of Indonesia or to Indonesian citizens, nationals, corporations or residents, in each case, in a manner which constitutes a public offering of the Company under the laws and regulations of the Republic of Indonesia. Isle of Man The Company is an unregulated collective investment scheme for the purposes of Isle of Man law. Accordingly, the promotion in the Isle of Man of the Shares is restricted by Section 1 of the Financial Supervision Act 1988 and the Shares may only be promoted in the Isle of Man to holders of banking or investment business licences issued pursuant to the Banking Act 1998, or Section 3 of the Investment Business Act 1991 ('IBA'), or to persons whose ordinary business involves the acquisition or disposal of property of the same kind as the property or a substantial part of the property to which the Company relates. Promotion of the Shares may also be made by persons who are 'permitted persons' for the purposes of the IBA to those persons to whom unregulated collective investment schemes can be marketed pursuant to the Financial Supervision (Promotion of Unregulated Schemes) (Exemption) Regulations The Company is not subject to approval in the Isle of Man and investors are not protected by any statutory compensation arrangements in the event of the Company's failure. The Isle of Man Financial Supervision Commission does not vouch for the financial soundness of the Company or the correctness of any statements made or opinions expressed with regard to it in this Prospectus. Israel This Prospectus has not been approved for public offering by the Israeli Securities Authority. The Shares are being offered to a limited number of investors (35 investors or less) and/or special types of investors ('Investors') such as: mutual trust funds, managing companies of mutual trust funds, provident funds, managing companies of provident funds, insurers, banking corporations and subsidiary corporations, except for mutual service companies (purchasing securities for themselves and for clients who are Investors), portfolio managers (purchasing securities for themselves and for clients who are Investors), investment counsellors (purchasing securities for themselves), members of the Tel-Aviv Stock Exchange (purchasing securities for themselves and for clients who are Investors), underwriters (purchasing securities for themselves), venture capital funds, corporate entities wholly owned by Investors the main business of which is the capital market, and corporate entities whose net wealth exceeds NIS 250 million, except for those incorporated for the purpose of purchasing securities in a specific offer; and in all cases under circumstances that will fall within the private placement exemption or other exemptions of the Securities Law, or Joint Investment Trusts Law This Prospectus may not be reproduced or used for any other purpose, nor be furnished to any person other than those to whom copies have been sent. Nothing in this Prospectus should be considered as counselling or investment marketing advice, as defined in The Regulation of Investment Counselling, Investment Marketing and Portfolio Management Law, Any offeree who purchases a Bond is purchasing such a Bond for its own benefit and account and not with the aim or intention of distributing or offering such a Bond to other parties. Man AHL Diversified Futures Ltd 35

49 Investors are encouraged to seek competent investment counselling from a locally licensed investment counsellor prior to making the investment. Italy No offering of Shares or distribution of any offering materials relating to Shares will be made in the Republic of Italy unless the requirements of Italian law concerning the offering of collective investment schemes have been complied with, including (i) the requirements of Article 42 and Article 98-ter4 and seq. of Legislative Decree No. 58 of 24 February 1998 and CONSOB Regulation No of 14 May 1999; and (ii) all other Italian securities tax and exchange controls and any other applicable laws and regulations, all as amended from time to time. Japan The Shares have not been and will not be registered for a public offering in Japan under the Financial Instruments and Exchange Law of Japan. The Company does not intend to offer the Shares directly or indirectly to a resident of Japan. As used in this paragraph 'resident of Japan' means any person resident in Japan, including any corporation or other entity organised under the laws of Japan. Jersey No steps have been taken to obtain a consent under the Control of Borrowing (Jersey) Order 1958, as amended and the Shares may not be offered or sold in Jersey in circumstances which would constitute an offer to the public for the purposes of Article 8 of such law. Luxembourg The Shares are not for public offering in or from the Grand Duchy of Luxembourg. The recipients of this Prospectus and any other marketing material in respect of the Shares in Luxembourg are less than 100 and have been individually selected and identified prior to the offer being made and are targeted exclusively on the basis of a private placement. Accordingly, the Shares may not be and are not being offered or advertised publicly or offered similarly in or from the Grand Duchy of Luxembourg. The Shares may not be offered to any persons other than the recipients to whom this Prospectus is directed, and may not be reproduced or used for any other purpose nor provided to any persons other than the recipient. As a result, the Luxembourg regulatory authorities have neither reviewed nor approved this Prospectus and any other marketing material. Macao The Company has been registered by the Monetary Authority of Macao ('AMCM') in Macao Special Administrative Region ('Macao SAR') and authorised for advertising and marketing as a 'Foreign Investment Fund' in Macao SAR in accordance with Article No. 62 of Decree Law no.83/99/m of 22 November Malaysia This Prospectus will not be distributed or passed on in Malaysia or to Malaysian citizens, nationals, corporations or residents and the Company will not be offered or sold in Malaysia or to Malaysian citizens, nationals, corporations or residents, in each case, in a manner which constitutes a public offering of the Company under the laws and regulations of Malaysia. Mexico Shares have not been and will not be registered with the National Register of Securities maintained by the Mexican National Banking and Securities Commission and may not be offered or sold publicly in Mexico. The Shares may, however, be privately offered under any of the private placement exceptions permitted under the Securities Market Law. New Zealand The Shares may not be offered or sold directly or indirectly, and no offering material or advertisement relating to the Shares (including this Prospectus) may be distributed directly or indirectly, in either case, in New Zealand or to, or for the benefit of, any person resident in New Zealand. Norway The Shares are not offered or available to persons in Norway. Nothing in this Prospectus and offering materials is directed to or intended for persons in Norway. The Netherlands The Shares in the Company will not be offered or sold, directly or indirectly, in the Netherlands, other than: (a) with a minimum denomination of 50,000 or the equivalent in another currency per class of Shares per investor; (b) for a minimum consideration of 50,000 or the equivalent in another currency per class of Shares per investor; (c) to fewer than 100 individuals or legal entities other than qualified investors; or (d) solely to qualified investors, all within the meaning of article 1:12 of the Netherlands Financial Supervision Act (Wet op het financieel toezicht) and article 4 of the Netherlands Financial Supervision Act Exemption Regulation (Vrijstellingsregeling Wft). 36 Man AHL Diversified Futures Ltd

50 If the Shares will be offered or sold in reliance on the exemption referred to in (i) or (ii) above, the following additional requirements apply: (1) the first drawdown amount per investor must be at least 50,000 or the equivalent in another currency (exclusive of any costs), payable as a lump sum; (2) any subsequent drawdown may be in an amount less than 50,000 or the equivalent in another currency; (3) the amount invested by each investor may never be less than 50,000 or the equivalent in another currency (exclusive of a decrease of the value of the amount invested), all in accordance with the interpretation of the Netherlands Authority for the Financial Markets (Stichting Autoriteit Financiële Markten) dated 11 June 2008 on the denomination and package exceptions/exemptions (Coupure en pakket uitzonderingen/vrijstellingen aanbieden effecten aan het publiek en aanbieden deelnemingsrechten in beleggingsinstellingen). In respect of the offer of Shares under this Prospectus, the Company is not required to obtain a license as a collective investment scheme pursuant to the Netherlands Financial Supervision Act (Wet op het financieel toezicht) and is not subject to market conduct supervision of the Netherlands Authority for the Financial Markets and prudential supervision of the Dutch Central Bank (De Nederlandsche Bank N.V.). The Philippines THE SHARES BEING OFFERED OR SOLD HEREIN HAVE NOT BEEN REGISTERED WITH THE PHILIPPINE SECURITIES AND EXCHANGE COMMISSION UNDER THE SECURITIES REGULATION CODE. ANY FUTURE OFFER OR SALE THEREOF IS SUBJECT TO REGISTRATION REQUIREMENTS UNDER THE CODE UNLESS SUCH OFFER OR SALE QUALIFIES AS AN EXEMPT TRANSACTION. No action has been or will be taken to permit an offering of the Shares or the distribution of this Prospectus in the Philippines, except under circumstances that will result in compliance with the provisions on exempt transactions under the Securities Regulation Code and applicable rules (including but not limited to the requirement on the delivery to the offeree of a written disclosure stating the provision of section 10.1 of the Code under which exemption from registration is claimed and stating whether a confirmation of exemption has been obtained from the Philippine Securities and Exchange Commission). Accordingly, this Prospectus may not be used for the purpose of sale or solicitation in the Philippines, except under those circumstances. Republic of Korea This Prospectus will not be distributed or passed on in the Republic of Korea ('ROK') or to ROK citizens, nationals, corporations or residents and the Company will not be offered or sold in ROK or to ROK citizens, nationals, corporations or residents, in each case, in a manner which constitutes a public offering of the Company under the laws and regulations of ROK. Saudi Arabia This Prospectus is provided for informational and illustration purposes only. It does not constitute a solicitation, recommendation or offer to buy or sell any securities. Prospective investors in the Shares must obtain and carefully read the Prospectus prior to making an investment in the Shares. The information contained herein, including any expression of opinion, has been obtained from or is based upon sources believed to be reliable, and is believed to be fair and not misleading. However, the Man Group does not guarantee its accuracy or completeness. Moreover, the Capital Market Authority does not make any representation as to the accuracy or completeness of this Prospectus, and expressly disclaims any liability whatsoever for any loss arising from, or incurred in reliance upon, any part of this Prospectus. Prospective purchasers of the Shares should conduct their own due diligence on the accuracy of the information relating to the Shares. If you do not understand the contents of this Prospectus you should consult an authorized financial adviser. This Prospectus may not be distributed in the Kingdom of Saudi Arabia except to such persons as are permitted under the Offers of Securities Regulations and/or the Investment Fund Regulations issued by the Capital Market Authority (the 'Regulations'). Investors are informed that the Regulations place restrictions on secondary market activity with respect to the Shares. Singapore The offer or invitation of the shares (the 'Shares') of Man AHL Diversified Futures Ltd (the 'Company), which is the subject of this Prospectus, does not relate to a collective investment scheme which is authorised under section 286 of the Securities and Futures Act, Chapter 289 of Singapore (the 'SFA') or recognised under section 287 of the SFA. The Company is not authorised or recognised by the Monetary Authority of Singapore (the 'MAS') and Shares Man AHL Diversified Futures Ltd 37

51 are not allowed to be offered to the retail public. Each of this Prospectus and any other document or material issued in connection with the offer or sale is not a prospectus as defined in the SFA. Accordingly, statutory liability under the SFA in relation to the content of prospectuses would not apply. You should consider carefully whether the investment is suitable for you. This Prospectus has not been registered as a prospectus with the MAS. Accordingly, this Prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of Shares may not be circulated or distributed, nor may Shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 304 of the SFA, (ii) to a relevant person pursuant to Section 305(1), or any person pursuant to Section 305(2), and in accordance with the conditions specified in Section 305 of the SFA, or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. Where Shares are subscribed or purchased under Section 305 by a relevant person which is: (a) a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor, securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the Shares pursuant to an offer made under Section 305 except: (1) to an institutional investor or to a relevant person defined in Section 305(5) of the SFA, or to any person pursuant to an offer referred to in Section 275(1A) or Section 305A(3)(i)(B) of the SFA; (2) where no consideration is or will be given for the transfer; or (3) where the transfer is by operation of law; or (4) as specified in Section 305A(5) of the SFA Notwithstanding the above, upon the Company being removed from the MAS List of Restricted Schemes, this Prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of Shares may not be circulated or distributed, nor may Shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 304 of the SFA, or (ii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA. MAS List of Restricted Schemes may be accessed at home/cisnethome.action. South Africa The Company is not regulated under the Collective Investment Schemes Control Act 45 of 2002 (as amended) and this Prospectus and any supplement(s) are not intended to be and do not constitute a solicitation for investments from members of the public. A potential investor will be able to invest in the Company only upon conclusion of the relevant investment agreement and will be required to warrant it has the requisite exchange control approvals in place for such investment. This document does not constitute an offer for the sale of or subscription for, or the solicitation of an offer to buy and subscribe for, shares to the public as defined in the South African Companies Act, No. 61 of 1973 (as amended). This document does not, nor is it intended to, constitute a prospectus prepared and registered under such Companies Act. It is only distributed in South Africa to banks, mutual banks or insurers, registered as such under the applicable South African legislation or to a wholly owned subsidiary of such bank, mutual bank or insurer acting as either an agent for an authorised portfolio manager for a pension fund registered in terms of the Pension Funds Act, 1956 or as a manager for a collective investment scheme registered in terms of the Collective Investment Schemes Control Act, 2002, and to addressees acting as principals who are willing to subscribe for shares to a value of at least R This Prospectus and any supplement(s) do not constitute an express or implied recommendation, guidance or proposal that an investment in the Company is appropriate to the particular investment objectives, financial situation or particular needs of the addressee. Neither the Company nor the Investment Manager is a registered financial services provider in South Africa. 38 Man AHL Diversified Futures Ltd

52 South African investors will need to procure their own exchange control approvals for such investment. Sweden The Company is not authorised under the Swedish Investment Funds Act. The Shares in the Company are being offered to a limited number of investors and therefore this Prospectus and any supplement(s) have not been, and will not be, registered with the Swedish Financial Supervisory Authority under the Swedish Financial Instruments Trading Act (1991:980). Further, no single investor may invest an amount less than EUR 50,000. Accordingly, this Prospectus and any supplement(s) may not be made available, nor may the Shares in the Company otherwise be marketed and offered for sale in Sweden, other than in circumstances which are deemed not to be an offer to the public in Sweden under the Financial Instruments Trading Act. Switzerland The Company has not been approved by the Swiss Federal Banking Commission Financial Market Supervisory Authority FINMA as a foreign collective investment scheme pursuant to Article 120 of the Swiss Collective Investment Scheme Act of June 23, 2006 (the 'CISA'). Accordingly, Shares may not be publicly offered in or from Switzerland and neither this Prospectus nor any other offering materials relating to the Shares may be made available through a public offering in or from Switzerland. Shares may only be offered and this Prospectus may only be distributed in or from Switzerland to 'Qualified Investors' (as defined in the CISA and its implementing ordinance). Taiwan The Shares have not been and will not be registered with the Financial Supervisory Commission of Taiwan (R.O.C.) pursuant to applicable securities laws and regulations and the Shares may not be offered or sold within Taiwan (R.O.C.) through a public offering or in circumstances which constitute an offer within the meaning of the Securities and Exchange Law or Securities Investment Trust and Consulting Law of Taiwan (R.O.C.) that requires a registration or the approval of the Financial Supervisory Commission of Taiwan (R.O.C.). United Kingdom This Prospectus and any supplement(s) are not available for general distribution in, from or into the United Kingdom because the Company is an unregulated collective investment scheme whose promotion is restricted by Sections 238 and 240 of the Financial Services and Markets Act When distributed in, from or into the United Kingdom this Prospectus and any supplement(s) are only intended for investment professionals having professional experience of investing in unregulated schemes, high net worth companies, partnerships, associations or trusts and investment personnel of any of the foregoing persons having professional experience of investing in unregulated schemes (each within the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005) and the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001), persons outside the European Economic Area receiving it electronically, persons outside the United Kingdom receiving it non-electronically and any other persons to whom it may be communicated lawfully. No other person should act or rely on it. Other persons distributing this Prospectus and any supplement(s) in, from or into the United Kingdom must satisfy themselves that it is lawful to do so. Thailand This document will not be distributed or passed on in the Thailand or to Thailand citizens, nationals, corporations or residents and the Company will not be offered or sold in the Thailand or to Thailand citizens, nationals, corporations or residents, in each case, in a manner which constitutes a public offering of the Company under the laws and regulations of Thailand. United States The Shares have not been and will not be registered under the US Securities Act of 1933, as amended (the 'Securities Act') and may not at any time be directly or indirectly offered or sold in the United States or to or for the benefit of any US person (as defined herein) unless the Shares are registered under the Securities Act, or an exemption from the registration requirement of the Securities Act is available. Uruguay This offering of Shares constitutes a private placement. The Shares will not be offered or sold to the public in Uruguay, except in circumstances which do not constitute a public offering under Uruguayan laws and regulations. The Shares have not been and will not be listed on any Uruguayan Stock Exchange. There is no requirement for the Company or the Shares to be registered with the Central Bank of Uruguay and so no such registration has been or will be effected. The Company does not qualify as an investment fund created under Uruguayan law 16,774 of 27 September 1996, as amended. The attention of potential investors is drawn to the section entitled 'Risk factors' and also to the 'Antimoney laundering documentation requirements' in Appendix 4 to this Prospectus. Man AHL Diversified Futures Ltd 39

53 Appendix 4 Anti-money laundering documentation requirements (a) If the Applicant is a sole proprietor or an individual please provide a certified copy (within 6 months) of current valid passport or current valid identity card or current valid driver s license. The document must contain a photograph, date of birth and signature. Please also provide two original or two certified copies (within 3 months) of differing current utility bills, or an original or certified copy of one utility bill and an original or certified copy of a recent bank statement from a reputable Financial Institution. (b) If the Applicant is a corporation or a limited liability company, Please supply: (i) (ii) an original or certified copy of the certificate of incorporation or its equivalent in the jurisdiction of domicile; an original or certified copy of the memorandum and articles of association or its equivalent in the jurisdiction of domicile; residence; list of all directors names, occupations, residential and business addresses, and dates of birth. Additional information and/or documentation may be required at the Shareholder Services Provider's discretion to verify the source of the subscription monies and/or the beneficial owner(s) of the investment. The Shareholder Services Provider reserves the right to request such information and/or documentation as is necessary to verify the identity of an Applicant,any benefical owner(s) of the investment or the source of the subscription monies. In the event of delay or failure by the Applicant to produce any information required for verification purposes, the Shareholder Services Provider may refuse to accept the application and subscription monies. It is further acknowledged that the Shareholder Services Provider, in the performance of its delegated duties, shall be held harmless by the Applicant against any loss arising as a result of a failure to process the subscription if such information as has been requested by the Shareholder Services Provider has not been provided by the Applicant. (iii) (iv) (v) (vi) a list of all directors names, occupations, residential addresses, business addresses and dates of birth; a properly authorized mandate of the directors to make the investment (i.e. a certified copy of board minutes); documentation (as outlined in section (a) above) confirming the identity of at least two directors and all persons authorized to operate the account from time to time; and a list of names and addresses of any shareholders holding 10% or more of the company s issued share capital. If the shareholder is individual, please supply documentation (as outlined in section (a) above) confirming the identity of such shareholder; if the shareholder is a company, the following is required: original or certified copy of the certificate of incorporation or its equivalent in the jurisdiction of domicile; original or certified copy of the Memorandum and Articles of Association or its equivalent in the jurisdiction of 40 Man AHL Diversified Futures Ltd

54 Man AHL Diversified Futures Ltd Report and Financial Statements For the year ended 30 September 2013

55 Man AHL Diversified Futures Ltd Table of Contents Page Corporate information 3 Report of the custodian 5 Statement of financial position 6 Statement of changes in equity 7 Statement of comprehensive income 8 Statement of cash flows 9 Notes to the financial statements 10 Independent auditors report 29 2

56 Man AHL Diversified Futures Ltd Corporate information Directors Investment Manager Michael B Collins Man Investments Limited Argonaut Limited Riverbank House Argonaut House 2 Swan Lane 5 Park Road London EC4R 3AD Hamilton HM 09 United Kingdom Bermuda Introducing Broker and Marketing Adviser Shirelle Jones is an alternate director to Man Investments AG Mr Collins Huobstrasse Pfäffikon SZ Dawn C Griffiths Switzerland Conyers Dill & Pearman Limited Clarendon House Services Manager 2 Church Street Man Investments AG Hamilton HM 11 Huobstrasse 3 Bermuda 8808 Pfäffikon SZ Switzerland John Collis (resigned 31 March 2013) was an alternate director to Ms Griffiths Valuation Service Provider Citibank Europe plc David Smith 1 North Wall Quay Equus Asset Management Partners Dublin 27 Queen Street Ireland Hamilton HM11 Bermuda Legal advisor as to matters of Bermudian law Conyers Dill & Pearman Limited Company Secretary and Registered Office Clarendon House of the Company 2 Church Street Christine Perinchief Hamilton HM 11 To 31 December 2012 Bermuda Citi Hedge Fund Services, Ltd. Hemisphere House Custodian 9 Church Street HSBC Institutional Trust Services (Asia) Limited Hamilton HM 11 HSBC Main Building Bermuda 1 Queen s Road Central Hong Kong From 1 January 2013 Citi Fund Services (Bermuda), Ltd. Principal Paying Agent 5 Reid Street To 31 December 2012 Hamilton HM 11 Citi Hedge Fund Services, Ltd. Bermuda Hemisphere House 9 Church Street Hong Kong Representative Hamilton HM 11 Man Investments (Hong Kong) Limited Suite 1301 Chater House From 1 January Connaught Road Central Citi Fund Services (Bermuda), Ltd. Hong Kong 5 Reid Street Hamilton HM 11 Bermuda Effective as of 1 January 2013 the Company s registered office provider, Registrar and Principal Paying Agent formally changed its name from Citi Hedge Fund Services, Ltd. to Citi Fund Services (Bermuda), Ltd ( Citi Bermuda ). As of the same date Citi Fund Services (Bermuda), Ltd changed its registered office address, and thus the registered office address for all companies for which it provides registered office, to 5 Reid Street, Hamilton HM 11, Bermuda. 3

57 Man AHL Diversified Futures Ltd Corporate information (continued) Auditors Registrar Ernst & Young Ltd. To 31 December Bermudiana Road Citi Hedge Fund Services, Ltd. Hamilton HM 11 Hemisphere House Bermuda 9 Church Street Hamilton HM 11 Shareholder Services Provider Bermuda Citibank Europe plc 1 North Wall Quay From 1 January 2013 Dublin 1 Citi Fund Services (Bermuda), Ltd. Ireland 5 Reid Street Hamilton HM 11 Bermuda 4

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59 Man AHL Diversified Futures Ltd Statement of financial position As at 30 September 2013 Notes Current assets Cash at bank 3 366,128, ,000,077 Cash with brokers 3 105,780,701 97,458,097 Due from brokers 4,282,697 - Financial assets at fair value through profit or loss (Cost: $19,108,697; 2012: Nil) 4 90,941,617 33,630,387 Subscription receivable 197, ,683 Prepayments and other assets 47, ,054 Total current assets 567,379, ,987,298 Current liabilities Financial liabilities at fair value through profit or loss (Cost: $(11,017,025); 2012: Nil) 4 (101,036,213) (27,560,439) Redemption payable (3,021,396) (2,833,408) Due to brokers (2,206,559) (5,625,656) Accounts payable and accrued expenses 7,8 (2,111,972) (3,546,500) Total current liabilities (108,376,140) (39,566,003) Net Assets Attributable to Holders of Redeemable Participating Shares 459,002, ,421,295 Which are represented by: Equity 15,260,148 (2012: 20,994,600) Redeemable Participating Shares with a Net Asset Value per Redeemable Participating Share of (2012: 34.50) 9 459,002, ,421,295 Management Shares Issued, uncalled ordinary Management Share capital (12,000 Management Shares of 1.00 each) Approved and authorised for issue on behalf of the Board on 23 January Dawn Griffiths Director Michael Collins Director The accompanying notes form an integral part of the financial statements. 6

60 Man AHL Diversified Futures Ltd Statement of changes in equity For the year ended 30 September Net Assets Attributable to Holders of Redeemable Participating Shares at beginning of year 724,421,295 1,060,996,444 Net loss for the year attributable to Redeemable Participating Shareholders (72,226,756) (107,261,676) Issue of 1,268,529 (2012: 12,028,466 ) Redeemable Participating Shares 42,500, ,771,911 Redemption of 7,002,981 (2012: 18,437,341) Redeemable Participating Shares (235,691,570) (650,085,384) Net Assets Attributable to Holders of Redeemable Participating Shares at end of year 459,002, ,421,295 The accompanying notes form an integral part of the financial statements. 7

61 Man AHL Diversified Futures Ltd Statement of comprehensive income For the year ended 30 September 2013 Notes Income Interest income 2 1,856,398 4,826,316 Net loss on financial assets and liabilities at fair value through profit or loss 6 (47,894,195) (75,371,504) Net gain on foreign exchange 6 442, ,497 (45,594,981) (69,601,692) Expenses Management and incentive fees 7,8 (17,923,348) (25,967,028) Introducing broker fees 7,8 (5,974,449) (8,652,448) Director fees 7,8 (14,157) (10,139) Custody fees 7 (117,380) (40,569) Auditor fees (27,000) (13,636) Legal and Other Professional fees 8 (149,747) (140,396) Bank charges (129,953) (129,811) Other connected person expenses 7,8 (1,734,435) (2,040,711) Other expenses 7 (504,777) (478,135) Interest expense 2 (56,529) (187,111) (26,631,775) (37,659,984) Net loss for the year attributable to Redeemable Participating Shareholders (72,226,756) (107,261,676) The accompanying notes form an integral part of the financial statements. 8

62 Man AHL Diversified Futures Ltd Statement of cash flows For the year ended 30 September Cash flows from operating activities Net loss for the year attributable to Redeemable Participating Shareholders (72,226,756) (107,261,676) Adjustments to reconcile net loss for the year to net cash used in operating activities: Financial assets and liabilities at fair value through profit or loss 16,164,544 15,405,984 Due from brokers (4,282,697) - Due to brokers (3,419,097) (14,488,435) Prepayment and other assets 649,085 (697,054) Accounts payable and accrued expenses (1,434,528) (14,049,848) Net cash used in operating activities (64,549,449) (121,091,029) Cash flows from financing activities Proceeds on issue of Redeemable Participating Shares 42,503, ,570,228 Payments on redemption of Redeemable Participating Shares (235,503,582) (647,251,976) Net cash used in financing activities (192,999,779) (226,681,748) Net change in cash and cash equivalents (257,549,228) (347,772,777) Cash and cash equivalents at beginning of year 729,458,174 1,077,230,951 Cash and cash equivalents at end of year 471,908, ,458,174 Cash and cash equivalents consist of: Cash at bank 366,128, ,000,077 Cash with brokers 105,780,701 97,458, ,908, ,458,174 Supplemental disclosure of cash flow information: Interest paid (80,624) (187,111) Interest received 12,451,699 4,129,262 The accompanying notes form an integral part of the financial statements. 9

63 Man AHL Diversified Futures Ltd Notes to the financial statements For the year ended 30 September General Man AHL Diversified Futures Ltd (the Company ) was incorporated under the laws of Bermuda on 11 September 1997 and carries on business as an open-ended investment company, trading a diversified portfolio of international interbank currency and financial futures. The Company commenced trading on 12 May Summary of Significant Accounting Policies a) Accounting convention The financial statements are prepared in accordance with International Financial Reporting Standards ( IFRS ) issued by the International Accounting Standards Board ( IASB ) and where relevant, in accordance with the provisions of the Hong Kong Securities & Futures Commission Code on Unit Trusts and Mutual Funds pursuant to the Securities and Futures Ordinance (Cap 571) April 2003 (as amended effective 25 June 2010). The financial statements have been prepared on historical cost basis except for financial assets and liabilities held at fair value through profit or loss that have been accounted for based on fair value. b) Changes in Accounting Policy and Disclosure The following new standards and amendments to standards are relevant but not yet effective for the Company s operations: IAS 27 Separate Financial Statements (as revised in 2011) As a consequence of the new IFRS 10 and IFRS 12, what remains in IAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and associates in separate financial statements. As the Company has no subsidiaries, this amendment has no impact on the Company s financial position or performance and becomes effective for annual periods beginning on or after 1 January IFRS 9 Financial Instruments: Classification and Measurement IFRS 9 as issued reflects the first phase of the IASB s work on the replacement of IAS 39 and applies to classification and measurement of financial assets and financial liabilities as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. The adoption of the first phase of IFRS 9 is not expected to have an effect on the classification and measurement of the Company s financial assets and liabilities. The Company will quantify the effect in conjunction with the other phases, when issued, to present a comprehensive picture. IFRS 10 Consolidated Financial Statements IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial statements. It also replaces SIC-12 Consolidation - Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities including special purpose entities. The changes introduced by IFRS 10 will require management to exercise significant judgement to determine which entities are controlled, and therefore required to be consolidated by a parent, compared with the requirements that were in IAS 27. This standard becomes effective for annual periods beginning on or after 1 January This amendment is not expected to have an impact on the Company s financial position or performance. IFRS 13 Fair Value measurement IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. This standard becomes effective for annual periods beginning on or after 1 January At the date of authorisation of the financial statements there were a number of Standards and Interpretations which were in issue but not yet effective. The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the financial statements of the Company. The accounting policies have been consistently applied by the Company in the current and prior year. 10

64 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Summary of Significant Accounting Policies (continued) c) Use of Accounting Judgements and Estimates The preparation of financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect the amounts reported and disclosures made in these financial statements and accompanying notes, including certain valuation assumptions. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities in the future. d) Going Concern The Company s management has made an assessment of the Company s ability to continue as a going concern and is satisfied that the Company has resources to continue in business for the foreseeable future. Furthermore, the management is not aware of any material uncertainties that may cast significant doubt upon the Company s ability to continue as a going concern, therefore, the financial statements continue to be prepared on a going concern basis. e) Revenue Recognition Interest on financial assets held at fair value through profit or loss for the year are credited to net gain loss on financial assets and liabilities at fair value through profit or loss in the statement of comprehensive income on an accrual basis. f) Financial Assets and Liabilities at Fair Value through Profit or Loss Valuation of investments This category has two sub-categories: (i) financial assets and liabilities held for trading; and (ii) those designated by management at fair value through profit or loss at initial recognition. Financial assets or liabilities held for trading are acquired or incurred principally for the purpose of selling or repurchasing in the short term. Derivatives are also categorised as held for trading by definition. After initial measurement, the Company measures financial instruments, which are classified as at fair value through profit or loss, at their fair values. IAS 39 indicates that for listed assets and liabilities the best evidence of fair value is usually the last bid price for securities held and offer price for securities sold short. Financial instruments are designated at fair value through profit and loss because they are managed on a fair value basis. Regular-way purchases and sales of investments are recognised on the trade date, which is the date on which the Company commits to purchase or sell the asset. Investments are initially recognised at fair value. Investments are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership. The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading securities) is based on quoted market prices at the statement of financial position date. The quoted market price used for financial assets held by the Company is the current bid price, whilst the ask price is used for financial liabilities. When the Company holds derivatives with offsetting market risks, it uses midmarket prices as a basis for establishing fair values for the offsetting risk positions and applies the bid or asking price to the net open position, as appropriate. The Company may from time to time invest in financial instruments that are not traded in an active market (for example over-the-counter derivatives and private placements of both equities and fixed income securities). The fair value of these financial instruments is determined based on observable inputs such as current interest and currency rates. g) Securities Sold Short The Company may engage in securities sold short. A short sale is a transaction in which the Company sells a security it does not own. The proceeds received for short sales are recorded as liabilities and the Company records an unrealised gain or loss to the extent of the difference between the proceeds received and the value of the open short position. The Company records a realised gain or loss when the short position is closed. By entering into short sales, the Company bears the market risk of an unfavourable change in the price of the security sold short in excess of the proceeds received. Short sales expose the Company to potentially unlimited liability. 11

65 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Summary of significant accounting policies (continued) h) Derivatives The Company may trade derivative financial instruments, including futures and forwards whose values are based upon an underlying asset, index, currency or interest rate. The unrealised gains or losses, rather than contract or notional amounts, represent the approximate future cash flows from trading. Derivative financial instruments are recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured at their fair value. Fair values are obtained from quoted market prices in active markets, including recent market transactions, and valuation techniques, including discounted cash flow models and options pricing models, as appropriate. Models are calibrated by back testing to actual transactions to ensure outputs are reliable. Models use observable data to the extent practicable. However, areas such as credit risk (both own and counterparty); volatilities and correlations require the Board of Directors to make estimates. Changes in assumptions about these factors could affect the reported fair value of derivative financial instruments at the valuation date. All derivative financial instruments are carried in assets when amounts are receivable by the Company and in liabilities when amounts are payable by the Company. Changes in the fair values of derivatives are included in the statement of comprehensive income. During the year, when the contract is open, changes in the value of the contracts are recognised as unrealised appreciation or depreciation to reflect the fair value of the contract at the last day of the valuation period. When the contract is closed, the Company records a realised gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Company s basis in the contract. The Company may engage in futures contracts, forward contracts and swap contracts. Futures contracts Futures contracts are recorded on the trade date and are valued at the applicable closing bid or offer prices on the last business day of the period. The difference between the original contract amount and the fair value of the open futures position is reflected as unrealised appreciation or depreciation in the statement of financial position and as a net change in unrealised appreciation or depreciation in the statement of comprehensive income. Realised gains or losses are recognised on the closing or trade date of the contract and are included in revenue under net realised gain/(loss) on futures contracts in the statement of comprehensive income. Forward contracts Forward contracts are recorded on the trade date and are valued at the applicable foreign exchange rates on the last business day of the period. The difference between the fair value of the original contract amount and the fair value of the open forward contract position is reflected as unrealised appreciation or depreciation on open forward contracts in the statement of financial position and as a net change in unrealised appreciation or depreciation on open forward contracts in the statement of comprehensive income. Realised gains or losses are recognised on the maturity or trade date of the contract and are included in net realised gain/(loss) on forward contracts in the statement of comprehensive income. Swap contracts Swaps are contractual agreements between two parties to exchange streams of payments over time based on specified notional amounts. The Company s main swap contracts consist of interest rate swaps and credit default swaps as detailed below. Interest Rate Swaps Interest rate swaps relate to contracts taken out by the Company with major brokers in which the Company either receives or pays a floating rate of interest in return for paying or receiving, respectively, a fixed rate of interest. The payment flows are usually netted against each other, with the difference being paid by one party to the other. Changes in the value of the interest rate swap agreements and amounts received or paid in connection with these contracts, are recognised as net gains/(losses) on investments at fair value through profit or loss in the statement of comprehensive income. Credit Default Swaps The Company may enter into credit default swaps for speculative purposes or to manage its exposure to certain sectors of the market or to reduce credit risk. The Company may enter into credit default swap agreements to provide a measure of protection against the default of an issuer (as buyer of protection) and/or gain credit exposure to an issuer to which it is not otherwise exposed (as seller of protection). Credit default swaps are agreements in which one party pays fixed periodic payments to a counterparty in consideration for a guarantee from the counterparty to make a specific payment should a negative credit event take place (e.g. default, bankruptcy or debt restructuring). The Company may either buy or sell (write) credit default swaps. If a credit event occurs, as a buyer, the Company will either receive from the seller an amount equal to the notional amount of the swap and deliver the referenced security or underlying securities comprising of an index or receive a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising of an index. As a seller (writer), the Company will either pay the buyer an amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising of an index or pay a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising of an index. 12

66 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Summary of significant accounting policies (continued) h) Derivatives (continued) The periodic payments received or made by the Company are included in net realised gain/(loss) on investments at fair value through profit or loss in the statement of comprehensive income. Swaps are marked-to-market daily and changes in value are recorded as unrealised appreciation/(depreciation). When the swap is terminated, the Company will record a realised gain/(loss) equal to the difference between the proceeds from (or cost of) the closing transaction and the Company s basis in the contract, if any. Swap transactions involve, to varying degrees, elements of credit and market risk in excess of the amounts recognised in the statement of financial position. Such risks involve the possibility that there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as to the meaning of the contractual terms in the agreements, and that there may be unfavourable changes in interest rates and/or market values associated with these transactions. i) Realised and Unrealised Gains and Losses All realised and unrealised gains and losses on securities and derivatives are recognised as net gain/(loss) on financial assets and liabilities at fair value through profit or loss in the statement of comprehensive income. The cost of securities sold is accounted for on a First In First Out ( FIFO ) basis. The unrealised gain or loss on open derivative contracts is calculated as the difference between the contracted rate and the rate to close out the contract. Realised gains or losses include net gains on contracts which have been settled or offset by other contracts. j) Functional and Presentational Currency The primary objective of the Company is to generate returns in United States dollars, its capital-raising currency. The liquidity of the Company is managed on a day-to-day basis in United States dollars in order to handle the issue and redemption of the Company s Redeemable Participating Shares. The Company performance is also evaluated in United States dollars. Therefore, as United States dollars is considered as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions, the Company s functional currency is United States dollars. The Directors have also chosen United States dollars as the presentational currency. k) Foreign Currency Transactions during the year denominated in foreign currencies have been translated at the rates of exchange ruling at the dates of transactions. For foreign currency transactions and foreign currency investments held at the year end, the resulting gains or losses are included in the net gain/(loss) on financial assets and liabilities at fair value through profit or loss in the statement of comprehensive income. Assets and liabilities denominated in foreign currencies are translated at the rates of exchange in effect at the date of the statement of financial position. l) Interest Income and Expense Interest income and expense are recognised in the statement of comprehensive income on an accruals basis, in line with the contractual terms. m) Other Expenses All expenses are recognised in the statement of comprehensive income on an accruals basis. n) Reclassification of Prior Year Comparative Figures Certain prior year comparatives have been reclassified to conform to the current year s presentation. o) Redeemable Participating Shares Redeemable Participating Shares are redeemable at the Redeemable Participating Shareholder s option. The Redeemable Participating Shares are carried at the redemption amount that is payable at the statement of financial position date if the Redeemable Participating Shareholders exercise their right to redeem their participating shares. p) Distributions It is not the intention of the Directors to make any distribution of net income by way of dividends. Net income will, therefore, effectively be represented in the value of the Redeemable Participating Shares. 13

67 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Cash and Cash Equivalents and Due from/(to) Brokers At year end amounts disclosed as Cash at bank and Cash with broker were held at Citibank N.A., ABN Amro, Barclays Bank, Mizuho Bank, Royal Bank of Scotland, National Bank of Abu Dhabi, Commerzbank AG and BNP Paribas (the Banks ), and Deutsche Bank, J.P. Morgan, Royal Bank of Scotland, Credit Suisse, and Merrill Lynch (the Brokers ). Cash at bank in the statement of financial position comprises cash on hand, term deposits, demand deposits, short-term deposits in banks and short-term highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value, with original maturities of three months or less. Cash with broker include amounts transferred as collateral against open futures and forward contracts and other derivatives. Amounts receivable from short sales and collateral may be restricted in whole or in part until the related securities are purchased. To the extent that securities are purchased on margin, the margin debt may be secured on the related securities. The maturities of the term deposits held by the Company are listed below: Counterparty Maturity date Commerzbank AG 01 October 2013 National Bank of Abu Dhabi 01 October 2013 Barclays Bank 04 October 2013 National Bank of Abu Dhabi 23 October 2013 Mizuho Bank 23 October Financial Assets and Liabilities at Fair Value through Profit or Loss The following tables summarise financial assets and liabilities at fair value through profit or loss as at 30 September. The table also discloses the % of Net Assets for each derivative position and the notional amount at year end, with the exception of forward currency contracts, which are disclosed by the payable and receivable legs entered into by the Company. Notional 2013 Fair Value % of Net Assets Notional 2012 Fair Value % of Net Assets Financial assets at fair value through profit or loss Derivatives Commodity futures 156,837,385 6,295, ,132,615 5,109, Foreign exchange futures - 205, ,675, , Forward currency contracts 2,760,258,974 16,713, ,564,041,470 8,803, Interest rate futures 2,453,949,712 6,146, ,057,722,917 12,061, Index futures 536,367,420 2,047, ,311, , Commodity forwards 29,531, , ,652,626 6,681, Credit default swap 281,127,000 19,097, Interest rate swap 3,925,679,071 40,028, Total derivatives 10,143,751,165 90,941, ,522,536,395 33,630, Total financial assets at fair value through profit or loss 10,143,751,165 90,941, ,522,536,395 33,630,

68 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Financial Assets and Liabilities at Fair Value through Profit or Loss (continued) Notional 2013 Fair Value % of Net Assets Notional 2012 Fair Value % of Net Assets Financial liabilities at fair value through profit or loss Derivatives Commodity futures (220,680,732) (4,180,047) (0.91) (185,078,309) (7,302,453) (1.00) Foreign exchange futures (16,466,215) (7,880) - (25,569,358) (219,502) (0.03) Forward currency contracts (2,768,003,199) (24,458,178) (5.32) (1,561,254,754) (6,016,610) (0.83) Interest rate futures (550,105,165) (3,110,889) (0.68) (752,891,678) (4,616,128) (0.64) Index futures (17,199,993) (4,593,242) (1.00) (7,961,950) (5,911,118) (0.82) Commodity forwards (29,656,346) (530,952) (0.12) (150,465,918) (3,494,628) (0.48) Credit default swap (851,646,999) (11,914,479) (2.60) Interest rate swap (4,013,733,028) (52,240,546) (11.38) Total derivatives (8,467,491,677) (101,036,213) (22.01) (2,683,221,967) (27,560,439) (3.80) Total financial liabilities at fair value through profit or loss (8,467,491,677) (101,036,213) (22.01) (2,683,221,967) (27,560,439) (3.80) The Company invests in a range of derivative securities, as detailed above. The derivatives are cleared through the following brokers, who are situated in the following countries,; Deutsche Bank, England, J.P. Morgan Chase Bank, Scotland, The Royal Bank of Scotland plc, Scotland, Credit Suisse, Australia and Merrill Lynch, London. The Company s Swap notional amounts should be reviewed on a net basis. The Company s Foreign exchange futures held at 30 September consisted only of short positions which have been split by Market Value gain or loss in the above table. The following table details the movements in notional values of the portfolio since the end of the preceding accounting period. Financial assets at fair value through profit or loss Opening Net Additions/Realisations Closing Commodity futures 269,132,615 (112,295,230) 156,837,385 Foreign exchange futures 28,675,630 (28,675,630) - Forward currency contracts 1,564,041,470 1,196,217,504 2,760,258,974 Interest rate futures 7,057,722,917 (4,603,773,205) 2,453,949,712 Index futures 449,311,137 87,056, ,367,420 Commodity forwards 153,652,626 (124,121,023) 29,531,603 Credit default swap - 281,127, ,127,000 Interest rate swap - 3,925,679,071 3,925,679,071 Total 9,522,536, ,214,770 10,143,751,165 Financial liabilities at fair value through profit or loss Opening Net Additions/Realisations Closing Commodity futures (185,078,309) (35,602,423) (220,680,732) Foreign exchange futures (25,569,358) 9,103,143 (16,466,215) Forward currency contracts (1,561,254,754) (1,206,748,445) (2,768,003,199) Interest rate futures (752,891,678) 202,786,513 (550,105,165) Index futures (7,961,950) (9,238,043) (17,199,993) Commodity forwards (150,465,918) 120,809,572 (29,656,346) Credit default swap - (851,646,999) (851,646,999) Interest rate swap - (4,013,733,028) (4,013,733,028) Total (2,683,221,967) (5,784,269,710) (8,467,491,677) 15

69 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Financial Assets and Liabilities at Fair Value through Profit or Loss (continued) Derivative financial instruments The Company trades derivative financial instruments, including futures, swaps and currencies whose values are based upon an underlying asset, index, currency or interest rate. The net unrealised gains or losses, rather than contract or notional amounts, represent the Company s approximate future cash flows from trading activities. Forward contracts As part of its portfolio management techniques, the Company may use forward contracts to economically hedge its non-functional currency liability to Redeemable Participating Shareholders (although formal hedge accounting is not used). The Company may also use forward contracts for speculative trading purposes. Forward contracts entered into by the Company represent a firm commitment to buy or sell an underlying asset, or currency at a specified value and point in time based upon an agreed or contracted quantity. The realised/unrealised gain or loss is equal to the difference between the value of the contract at the commencement and the value of the contract at settlement date/year end date and are included in the statement of comprehensive income. Futures contracts The Company may use exchange-traded futures for speculative trading purposes or to maintain the appropriate exposure to stock markets in accordance with the Investment Manager s recommended overall asset allocation. Futures are contracts for delayed delivery of commodities, securities or money market instruments in which the seller agrees to make delivery at a specified future date of a specified commodity or instrument, at a specified price or yield. Gains and losses on futures are recorded by the Company based upon market fluctuations and are recorded as net gain/(loss) on financial assets and liabilities at fair value through profit or loss in the statement of comprehensive income. Swap contracts At 30 September 2013, the Company was exposed, via its investments in swap contracts, to the underlying positions representing financial instruments for which notional amounts are summarised on pages 14 and 15. Fair value of financial instruments The Company classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in determining the measurements in line with IFRS 7. The fair value hierarchy has the following levels: Level 1 - Quoted market price in an active market for an identical instrument. Level 2 - Valuation techniques based on observable inputs. This category includes instruments valued using: quoted market prices in active markets for similar instruments; quoted prices for similar instruments in markets that are considered less than active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data. Level 3 - Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique includes inputs not based on observable data and the unobservable inputs could have a significant impact on the instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable adjustments or assumptions are required to reflect differences between the instruments. At the reporting date any listed equities, debt securities and publicly traded derivatives are included within Level 1 of the hierarchy where their fair values are based on quoted market prices or binding dealer price quotations, without any deduction for transaction costs. For all other financial instruments, fair value is determined using valuation techniques. Valuation techniques include net present value techniques, comparison to similar instruments for which market observable prices exist, options pricing models and other relevant valuation models. The Company uses widely recognised valuation models for determining fair values of over-the-counter derivatives. For these financial instruments, inputs into models are market observable and are, therefore, included within Level 2. The Company has no level 3 financial instruments. 16

70 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Financial Assets and Liabilities at Fair Value through Profit or Loss (continued) Fair value of financial instruments (continued) The following tables analyse the fair value hierarchy of the Company s financial assets and liabilities measured at fair value at 30 September 2013 and 30 September 2012: As at 30 September 2013 Financial assets at fair value through profit or loss Level 1 Level 2 Level 3 Total Fair Value Derivatives Commodity futures 6,295, ,295,922 Foreign exchange futures 205, ,277 Forward currency contracts - 16,713,953-16,713,953 Interest rate futures 6,146, ,146,005 Index futures 2,047, ,047,733 Commodity forwards - 406, ,209 Credit default swap - 19,097,884-19,097,884 Interest rate swap - 40,028,634-40,028,634 Total derivatives 14,694,937 76,246,680-90,941,617 Total financial assets at fair value through profit or loss 14,694,937 76,246,680-90,941,617 Financial liabilities at fair value through profit or loss Level 1 Level 2 Level 3 Total Fair Value Derivatives Commodity futures (4,180,047) - - (4,180,047) Foreign exchange futures (7,880) - - (7,880) Forward currency contracts - (24,458,178) - (24,458,178) Interest rate futures (3,110,889) - - (3,110,889) Index futures (4,593,242) - - (4,593,242) Commodity forwards - (530,952) - (530,952) Credit default swap - (11,914,479) - (11,914,479) Interest rate swap - (52,240,546) - (52,240,546) Total derivatives (11,892,058) (89,144,155) - (101,036,213) Total financial liabilities at fair value through profit or loss (11,892,058) (89,144,155) - (101,036,213) 17

71 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Financial Assets and Liabilities at Fair Value through Profit or Loss (continued) As at 30 September 2012 Financial assets at fair value through profit or loss Level 1 Level 2 Level 3 Total Fair Value Derivatives Commodity futures 5,109, ,109,560 Foreign exchange futures 173, ,014 Forward currency contracts - 8,803,325-8,803,325 Interest rate futures 12,061, ,061,821 Index futures 801, ,332 Commodity forwards - 6,681,335-6,681,335 Total derivatives 18,145,727 15,484,660-33,630,387 Total financial assets at fair value through profit or loss 18,145,727 15,484,660-33,630,387 Financial liabilities at fair value through profit or loss Level 1 Level 2 Level 3 Total Fair Value Derivatives Commodity futures (7,302,453) - - (7,302,453) Foreign exchange futures (219,502) - - (219,502) Forward currency contracts - (6,016,610) - (6,016,610) Interest rate futures (4,616,128) - - (4,616,128) Index futures (5,911,118) - - (5,911,118) Commodity forwards - (3,494,628) - (3,494,628) Total derivatives (18,049,201) (9,511,238) - (27,560,439) Total financial liabilities at fair value through profit or loss (18,049,201) (9,511,238) - (27,560,439) 18

72 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Financial Risk Management The Company s investment activities expose it to the various types of risk which are associated with the financial instruments and markets in which it invests. The most important types of financial risks to which the Company is exposed are market risk, credit risk and liquidity risk. Market risk includes security price risk interest rate risk and foreign currency risk. The Investment Manager manages these risks on an aggregate basis along with the risks associated with its investing activities as part of its overall risk management policies. The nature and extent of the financial instruments outstanding at the dates of the statement of the financial position and the risk management policies employed by the Company are discussed below. Overall risk management The Company seeks to generate returns through investing in the AHL Programme. The Investment Manager distinguishes between two primary risk levels, which are risks at the Company level, and risks at the underlying investment level. Accordingly, the Investment Manager has implemented procedures to manage risks associated with both the Company and its underlying investments. At the Company level Risk management at the Company level can be segregated into pre and post-investment risk management. Pre-investment risk management involves determining asset allocation and portfolio construction. Thereafter, risk management involves conducting risk and return analysis, monitoring the relevant Company specific portfolio restrictions and investment guidelines and managing currency, interest rate, credit and liquidity risks at the Company level and making relevant adjustments to asset allocation and portfolio construction. Risk considerations or the need to bring the portfolio back in line with product guidelines may trigger a rebalancing of the portfolio, which is typically done on a weekly basis by the Investment Manager's portfolio management team. AHL In the case of the AHL Programme, the trading activity is managed by AHL. AHL identifies opportunities to profit from price movements in more than 300 diverse international markets through specialised investment techniques, advanced technology and daily risk control. The AHL Programme seeks to identify and take advantage of upward and downward price trends. Trading takes place around-the-clock and realtime price information is used to respond to price movements across a diverse range of global markets. Investment rules are executed within a systematic framework. AHL employs a number of risk measures including proprietary measurement methods similar to the industry standard Value-at-Risk ("VaR") and conducts daily stress testing based on historical data. Depending upon the risks identified, AHL may alter the exposure to different markets it trades in. Substantially, all derivative contracts are transacted on a margin basis. The Investment Manager manages the risk associated with these transactions by maintaining margin deposits in compliance with individual exchange regulations and internal guidelines. The Investment Manager also takes an active role in managing and controlling the Company s market and counterparty risks, monitoring trading activities and margin levels daily and, as necessary, deposits additional collateral or reduces positions. Market risk Market risk is the risk that fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates and security prices. There are many risk measures used by the Investment Manager, however one generally understood measure is annualised volatility. Annualised volatility is a measure of risk that is calculated as the standard deviation of the returns on the NAV per Redeemable Participating Share from inception up the reporting date. As it is based on the NAV per Redeemable Participating Share, annualised volatility incorporates all performance characteristics of the Company including the impact of interest rate movements and currency exchange differences from inception. Although the direct investments of the Company may change, the investment strategies employed by its underlying investments will not significantly change, meaning that the risk and return characteristics that the Company is exposed to are broadly consistent. Annualised volatility has limitations as it assumes a normal distribution of periodic returns, which may not be fully representative of hedge fund behaviour. The annualised volatility will also be a more accurate measure where more data points exist. Annualised volatility is based upon historical data. There is no guarantee of trading performance and past performance is no indication of future performance or results. As at 30 September 2013, the annualised volatility for the Company was 11.28% (2012: 10.17%) calculated on a weekly basis. 19

73 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Financial Risk Management (continued) Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The Company is directly exposed to interest rate risk through its investment strategy, which is deliberately designed to generate returns through trading strategies focussed on exploiting price differentials in rates. The sensitivity of these exposures is modelled through the overall volatility analysis provided in the market risk section. The Company is significantly exposed to interest rate risk on cash at bank and brokers, Interest Rate Futures and Interest Rate Swaps held at 30 September The following table details the Company's exposure to interest rate risk by the earlier of contractual maturities or re-pricing: As at 30 September 2013 Less than one month One month to one year Over one year Not exposed to interest rate Current Assets: Cash at bank 366,128, ,128,245 Cash with brokers 105,780, ,780,701 Due from brokers 4,282, ,282,697 Financial assets at fair value through profit or loss - 7,001,573 39,173,066 44,766,978 90,941,617 Subscription receivable , ,882 Prepayment and other assets ,969 47,969 Total Total current assets 476,191,643 7,001,573 39,173,066 45,012, ,379,111 Current Liabilities: Due to brokers (2,206,559) (2,206,559) Financial liabilities at fair value through profit or loss - (6,184,864) (49,166,571) (45,684,778) (101,036,213) Redemption payable (3,021,396) (3,021,396) Accounts payable and accrued expenses (2,111,972) (2,111,972) Total current liabilities (excluding Net Assets Attributable to Holders of Redeemable Participating Shares) (2,206,559) (6,184,864) (49,166,571) (50,818,146) (108,376,140) Total interest rate sensitivity gap 473,985, ,709 (9,993,505) (5,805,317) 459,002,971 Cumulative interest rate sensitivity gap 473,985, ,801, ,808, ,002, ,002,971 20

74 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Financial Risk Management (continued) Interest rate risk (continued) As at 30 September 2012 Less than one month One month to one year Over one year Not exposed to interest rate Current Assets: Cash at bank 416,221, ,779, ,000,077 Cash with brokers 97,458, ,458,097 Financial assets at fair value through profit or loss - 5,823,477 6,238,344 21,568,566 33,630,387 Subscription receivable , ,683 Prepayment and other assets , ,054 Total Total current assets 513,679, ,602,477 6,238,344 22,467, ,987,298 Current Liabilities: Due to brokers (5,625,656) (5,625,656) Financial liabilities at fair value through profit or loss - (4,446,741) (169,387) (22,944,311) (27,560,439) Redemption payable (2,833,408) (2,833,408) Accounts payable and accrued expenses (3,546,500) (3,546,500) Total current liabilities (excluding Net Assets Attributable to Holders of Redeemable Participating Shares) (5,625,656) (4,446,741) (169,387) (29,324,219) (39,566,003) Total interest rate sensitivity gap 508,053, ,155,736 6,068,957 (6,856,916) 724,421,295 Cumulative interest rate sensitivity gap 508,053, ,209, ,278, ,421, ,421,295 Liabilities not exposed to interest rate risk comprise accounts payable and accrued expenses. These amounts normally require contractual settlement within one quarter and, in all cases, within one year. The following tables details the effect on net assets should interest rates have increase/decreased by 50 basis points (bps) with all other variables remaining constant: As at 30 September 2013 Less than one month One month to one year Over one year Not exposed to interest rate Net assets 50 bps increase 476,355, ,793 (10,043,473) (5,805,317) 461,327,012 Net assets 50 bps decrease 471,615, ,625 (9,943,537) (5,805,317) 456,678,930 Total As at 30 September 2012 Less than one month One month to one year Over one year Not exposed to interest rate Net assets 50 bps increase 510,593, ,241,515 6,099,302 (6,856,916) 728,077,687 Net assets 50 bps decrease 505,513, ,069,957 6,038,612 (6,856,916) 720,764,903 Total 21

75 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Financial Risk Management (continued) Currency risk Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. The Company is exposed to currency risk though its investments in non- denominated investments. The Investment Manager has an active procedure to monitor foreign exchange exposures and manages this risk though offsetting non denominated balances and entering into offsetting forward foreign exchange contracts. Monetary assets and liabilities denominated in foreign currencies are summarised below: As at 30 September 2013 Amounts are expressed in their equivalents EUR CAD JPY HKD KRW Other Total Current Assets: Cash at bank 359,305,069 6,823, ,128,245 Cash with brokers 67,263,953 17,534,009 2,440,290 3,265,640 1,876,241 4,770,945 8,629, ,780,701 Due from brokers 3,406, , ,282,697 Financial assets at fair value through profit or loss 20,093,067 16,057,115 2,395, ,536 6,501,005 2,949,369 42,058,050 90,941,617 Subscription receivable 197, ,882 Prepayments and other assets 47, ,969 Total current assets 450,314,237 41,290,700 4,835,765 4,153,176 8,377,246 7,720,314 50,687, ,379,111 Current Liabilities: Due to brokers (2,172,533) (34,026) (2,206,559) Financial liabilities at fair value through profit or loss (22,873,841) (12,789,517) (2,261,862) (1,721,027) (8,729,721) (1,633,141) (51,027,104) (101,036,213) Redemption payable (3,021,396) (3,021,396) Accounts payable and accrued expenses (2,111,972) (2,111,972) Total current liabilities (30,179,742) (12,823,543) (2,261,862) (1,721,027) (8,729,721) (1,633,141) (51,027,104) (108,376,140) Net assets 420,134,495 28,467,157 2,573,903 2,432,149 (352,475) 6,087,173 (339,431) 459,002,971 22

76 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Financial Risk Management (continued) Currency risk (continued) Monetary assets and liabilities denominated in foreign currencies are summarised below. The amounts stated represent the Company s pre-hedged exposure and do not take account of the significantly reduced sensitivity to foreign currency risk that results from currency hedging techniques used As at 30 September 2012 Amounts are expressed in their equivalents EUR CAD JPY HKD KRW Other Total Current Assets: Cash at bank 632,000, ,000,077 Cash with brokers 78,763,000 15,964,715 (500,051) (2,844,601) (1,774,240) 6,733,854 1,115,420 97,458,097 Financial assets at fair value through profit or loss 10,144,488 5,128, ,902 1,738, ,377 2,253,884 13,430,350 33,630,387 Subscription receivable 201, ,683 Prepayments and other assets 697, ,054 Total current assets 721,806,300 21,093, ,851 (1,105,894) (1,449,863) 8,987,738 14,545, ,987,298 Current Liabilities: Due to brokers (5,625,656) (5,625,656) Financial liabilities at fair value through profit or loss (14,911,613) (6,912,510) (711,881) (936,904) (1,064) (86,356) (4,000,111) (27,560,439) Redemption payable (2,833,408) (2,833,408) Accounts payable and accrued expenses (3,546,500) (3,546,500) Total current liabilities (26,917,177) (6,912,510) (711,881) (936,904) (1,064) (86,356) (4,000,111) (39,566,003) Net assets 694,889,123 14,180,884 (602,030) (2,042,798) (1,450,927) 8,901,382 10,545, ,421,295 Other price risk Price risk is the risk that the price of a financial instrument will fluctuate due to changes in market conditions influencing, directly or indirectly, the value of the instrument. The Company is exposed to price risk from its investments. Due to the nature of the trading strategies followed by these investments, no direct relationship between any market factors and the expected prices of the investments can be reliably established. Price risk is managed through the overall risk management processes described above. Credit/Counterparty risk Credit risk is the risk that an issuer or counterparty will be unable to meet a commitment that it has entered into with the Company. The Company's maximum exposure to credit risk (not taking into account the value of any collateral or other security held) in the event that the counterparties fail to perform their obligations as of 30 September 2013 in relation to each class of recognised financial assets, other than derivatives, is the carrying amount of those assets in the statement of financial position. With respect to derivative financial instruments, credit risk arises from the potential failure of counterparties to meet their obligations under the contract or arrangement. Credit risk is mitigated for the AHL Programme through the diversity of counterparties and regular monitoring of concentration risk. With regards to the credit default swaps, the maximum exposure as a result of a potential future credit event is disclosed as the notional amount in Note 4. 23

77 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Financial Risk Management (continued) Credit/Counterparty risk (continued) The significant exposures are to the Banks and the Brokers. The table below analyses the Company s exposure of cash at bank and cash at brokers by rating agency category at 30 September Counterparty Moody s Rating % Credit Suisse A1 39,100, Mizuho Bank A1 20,000, ABN Amro A Barclays Bank A2 96,602, BNP Paribas A2 93,040, Deutsche Bank A2 12,121, Citibank NA A3 33,387, Royal Bank of Scotland A3 29,456, National Bank of Abu Dhabi Aa3 78,009, J.P Morgan Aa3 23,575, Commerzbank AG Baa1 45,088, Merrill Lynch Baa2 1,526, ,908, The Investment Manager performs due diligence on all counterparties before they become a service provider or counterparty to the Company, and credit quality checks are part of this process. The credit quality of the Company's Banks, Brokers and any lenders is regularly monitored and factored into allocation decisions. Liquidity risk Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. Redeemable participating shareholder redemption requests are the main liquidity risk for the Company. The Company s Redeemable Participating Shares are redeemable at the redeemable participating shareholder s option on each Dealing Day with one day written notice. The Company is therefore potentially exposed to periodic redemptions by its redeemable participating shareholders. The exposure to liquidity risk through redeemable participating shareholder redemption requests is managed by specifically setting the redemption notice period to accommodate the expected liquidity of the underlying investments as agreed by the Investment Manager. The Company s investments include listed securities/exchange-traded futures contracts which are considered readily realisable as they are all listed on major recognised exchanges. The Company s financial instruments also include investments in derivative contracts traded over-the-counter, which are not quoted in an active public market and which generally may be illiquid. As a result, the Company may not be able to liquidate quickly some of its investments in these instruments at an amount close to their fair value in order to meet its liquidity requirements. 6. Net Gain/(Loss) on Financial Assets and Liabilities at Fair Value through Profit or Loss Realised and unrealised gain/(loss) on investments Net realised loss on investments (23,637,978) (59,965,520) Net realised currency gain/(loss) on cash 829,751 (1,032,252) Total net realised loss (22,808,227) (60,997,772) Movement in net unrealised loss on investments (24,256,217) (15,405,984) Movement in net unrealised currency (loss)/gain (386,935) 1,975,749 Total net movement in unrealised loss (24,643,152) (13,430,235) Net loss on financial assets and liabilities at fair value through profit or loss (47,451,379) (74,428,007) Total realised and unrealised loss on investments (47,894,195) (75,371,504) Total realised and unrealised currency (loss)/gain 442, ,497 24

78 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Fees, commissions and other expenses Management and incentive fees The Investment Manager will be entitled to a management fee of 3% per annum of the Net Asset Value of the Company (the Management Fee ) accrued daily from 4 September 2012 and weekly prior to 4 September 2012, and calculated on the aggregate Net Asset Value at the immediately preceding Valuation Point. The Management fee is payable monthly in arrears by the Company. Incentive fees are calculated and accrued daily at each Valuation Point and payable annually in arrears at the rate of 20% of any net appreciation (after deduction of the management fee but prior to deduction of the incentive fee) in the Net Asset Value (NAV) per Redeemable Participating Share on the last Valuation Point in the relevant financial year of the Company above any previous highest NAV per Redeemable Participating Share on any preceding Dealing Day on which an incentive fee had previously been paid, multiplied by the number of Redeemable Participating Shares outstanding on the Valuation Point in respect of which the incentive fee is calculated. Where an investor redeems Redeemable Participating Shares part way through a financial year, the incentive fee accrued in respect of those Redeemable Participating Shares is crystallised and paid at the end of the year. There were no incentive fees accrued during the financial year. Management and incentive fees payable in respect of the AHL Programme are paid to Man Investments AG in consideration for marketing advisory and investment management services. Service Manager and Administration fees Man Valuation Services Limited ( MVSL ) ceased to be the valuation agent for the Company from 29 March 2011 and was appointed as the Administrative Agent (up to 3 September 2012) for which they continued to receive an administration fee and remunerate Citco Fund Services (Hong Kong) Limited who provided valuation agent services for the period from 29 March 2011 to 3 September Citibank Europe plc (the Valuation Agent ) was appointed as valuation agent on 4 September Man Investments AG was appointed as Service Manager (the Service Manager ) on 4 September 2012 and provides a service manager function to the Company for which it receives a fee of 0.23 basis points of the Net Asset Value, as determined on each Valuation Day (approximately equivalent to 0.23% per annum of the Net Asset Value of the Redeemable Participating Shares). The Service Manager will pay fees to Citibank Europe plc (the Valuation Agent ) for Valuation services ("Valuation Fees"), Registrar services, Shareholder services and other related administration costs. Company Secretary fees The Company secretary fees are charged by Citi Fund Services (Bermuda), Ltd., at an annual fixed fee of 3,000 payable quarterly in arrears. Introducing Broker fees Introducing Broker fees of 5,974,449 (2012: 8,652,448) were paid to Man Investments AG (the introducing broker ). Institutional charges of 1,453,793 (2012: 303,617) which cover exchange and other third party costs, which are payable to brokers, have been netted against realised gains/losses and unrealised gains/losses on investments. Introducing Broker fees, excluding institutional charges, are calculated at a rate of 1% per annum of the NAV as determined on each Valuation Point, were paid to the Introducing Broker. Hong Kong representative fees The Hong Kong representative is paid a fee, calculated monthly at an amount of up to 5,000 per annum. 25

79 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Fees, commissions and other expenses (continued) Custodian fees The Custodian shall be paid by the Company a fee accruing at each Valuation Point and paid monthly at a rate of up to 0.02% per annum of the NAV subject to a minimum annual fee of 15,000. In addition, the Custodian is entitled to be reimbursed for all out-of pocket expenses properly incurred by it in the performance of its duties. Taxation There is currently no taxation imposed on income or capital gains by the Government of the Bermuda Islands. Under current Bermuda law, the Company is not obligated to pay any taxes in Bermuda on either income or capital gains. The Company has received an undertaking from the Minister of Finance in Bermuda pursuant to the provisions of the Exempted Undertakings Tax Protection Act 1966 which exempts the Company from any such Bermuda taxes, at least until 28 March Related Party Transactions Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions. Master Multi-Product Holdings Ltd, a Bermuda incorporated company with directors in common with the Company, is a related party through its 100% holding of the Management Shares in the Company. Master Multi-Product Holdings Ltd is itself owned by Codan Trust Company Limited in its capacity as trustee of the Master Multi-Product Purpose Trust, a special purpose trust formed under the laws of Bermuda. The immediate controlling party of the Company is therefore Master Multi-Product Holdings Ltd. Man Investments Limited is a related party as it is the Investment Manager of the Company. Man Investments Limited is a subsidiary of Man Group plc and therefore all subsidiaries of Man Group plc are also related parties. During the year, the Company has transacted with the following subsidiaries of Man Group plc: Man Investments AG Man Investments Limited Man Investments (Hong Kong) Limited Conyers Dill & Pearman is a related party as Dawn C Griffiths is a director of the Company and a partner of the law firm. The following transactions, which were entered into in the ordinary course of business and on normal commercial terms took place between the Company and its related parties. Fees payable For the year ended 30 September 2013 Related party Type of fee Total Fees at 30 September 2013 Conyers Dill & Pearman Limited Legal fees 5,664 - Directors Directors fees 14,157 - Man Investments AG Introducing Broker fees 5,974, ,925 Man Investments AG Management fees 17,923,348 1,217,776 Man Investments (Hong Kong) Limited Hong Kong representative fees 6,250 1,250 Man Investments AG Service Manager and Administration fees 1,728, ,584 For the year ended 30 September 2012 Related party Type of fee Total Fees Fees payable at 30 September 2012 Conyers Dill & Pearman Limited Legal fees 140, ,836 Directors Directors fees 10,139 3,365 Man Investments AG Crystallised incentive fee 8,583 8,582 Man Investments AG Introducing Broker fees 8,652,448 - Man Investments AG Management fees 25,958,445 1,934,384 Man Investments AG Service Manager and Administration fees 148,302 - Man Investments (Hong Kong) Limited Hong Kong representative fees 5,000 3,154 Man Fund Management (Guernsey) Limited Service Coordination fees 1,887,409-26

80 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Share Capital Management Shares of the Company The Company has an authorised share capital of 762,000 comprising 12,000 Management Shares of par value 1, and 75,000,000 Redeemable Participating Shares of par value The 75,000,000 Redeemable Participating Shares of par value 0.01 carry 100% of the voting rights. The Management Shares do not carry voting rights for as long as there are shares of any other class in issue. The Management Shares are owned 100% by Master Multi-Product Holdings Ltd, a Bermuda incorporated company, which is itself owned by Codan Trust Company Limited in its capacity as trustee of the Master Multi-Product Purpose Trust, a special purpose trust formed under the laws of Bermuda pursuant to a Deed of Trust made by Codan Trust Company Limited dated 14 December The holders of Management Shares are not entitled to any dividend whatsoever in respect of their Management shares. In the event of a winding up or dissolution of the Company, the holders of Management Shares are entitled to an amount equal to the par value thereof, if paid up, and the surplus assets of the Company. However, the holders of the Management Shares have agreed irrevocably to waive their entitlement to any amounts which exceed the par value of their ordinary shares and have authorised the Company to credit any such amounts to the Shares Account for the benefit of the Redeemable Participating Shareholders. The Management Shares have been issued but not called. No amount is recognised until the Management Shares are called. Redeemable Participating Shares The Redeemable Participating Shares of the Company are divided into two tranches: Tranche A and Tranche B. The Company is offering only Participating Tranche A Shares to investors at the Subscription Price from (and including) 4 September The Directors have resolved that all Redeemable Participating Shares issued by the Company prior to 4 September 2012 shall be converted to Tranche B Shares on 4 September Redeemable Participating Shareholders wishing to purchase additional Redeemable Participating Shares from 4 September 2012 onwards must subscribe for Participating Tranche A Shares (unless the Directors may decide otherwise from time to time). Redeemable Participating Shares are redeemable, and written notices to redeem Redeemable Participating Shares should be received by Citibank (Hong Kong) or the Shareholder Services Provider at the contact address referred to in the 'Names and addresses' section of this Prospectus not later than 17:00 pm (Hong Kong time) one Business Day prior to the Dealing Day on which the redemption is to take place, except in the event that the calculation of the Net Asset Value per Redeemable Participating Share has been suspended. Capital Management As a result of the ability of investors to redeem Redeemable Participating Shares, the capital of the Company can vary depending on the demand for redemptions from and subscriptions to the Company. The Company is not subject to externally imposed capital requirements and has no restrictions on the issue and redemption of Redeemable Participating Shares other than those described in the financial statements. The Company s objectives for managing capital are: To invest the capital in investments meeting the description, risk exposure and expected return indicated in the Prospectus; To achieve consistent returns while safeguarding capital by participating in derivative and other advanced capital markets; To maintain sufficient liquidity to meet the expenses of the Company, and to meet redemption requests as they arise; and To maintain sufficient size to make the operation of the Company cost-efficient. Refer to Note 5, 'Financial risk management,' for the policies and processes applied by the Company in managing its capital. Redemption fees In case Tranche B Redeemable Participating Shares are redeemed before they have been in issue for the periods shown below, the current Net Asset Value per Redeemable Participating Share redeemed will be paid by the Company to the Shareholder after deduction of a fee for early redemption, which will, in turn be paid to the Introducing Broker primarily to compensate it for the costs of marketing the Redeemable Participating Shares, as follows: 27

81 Man AHL Diversified Futures Ltd Notes to the financial statements (continued) For the year ended 30 September Share Capital (continued) Tranche B Redeemable Participating Shares redeemed on a Dealing Day before they have been in issue for: Fee for early redemption: 2 years 4.0 % of redemption price per Redeemable Participating Share 4 years 2.5 % of redemption price per Redeemable Participating Share 6 years 1.0 % of redemption price per Redeemable Participating Share There will be no redemption fee applied on Tranche B Redeemable Participating Shares which are redeemed after they have been in issue for six years. No redemption fees will be applied for redemptions of Tranche A Redeemable Participating Shares. Performance table Total NAV NAV per redeemable participating share Highest redeemable participating share Lowest redeemable participating share at year end issue price during the redemption price year during the year ,002, ,421, ,060,996, ,279,584, ,553,254, ,291,193, ,269, ,458, ,272, ,168, ,686, ,310, ,496, ,606, ,879, Events during the year There were no significant events during the year. 11. Subsequent events Subsequent to the year end subscriptions of 4,600,605 and redemptions of 52,046,958 were applied to the Company, up to 9 January There were no other significant events since the year end. 12. Contingent Liabilities and Commitments There were no contingent liabilities or commitments as at 30 September 2013 (2012: none). 13. Soft Commission Arrangements There were no soft commission arrangements in place during the year. 28

82 Ernst & Young Ltd. #3 Bermudiana Road Hamilton HM 11, Bermuda P.O. Box HM 463 Hamilton, HM BX, Bermuda Tel: Fax: INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS AND SHAREHOLDERS MAN AHL DIVERSIFIED FUTURES LTD We have audited the accompanying financial statements of Man AHL Diversified Futures Ltd (the Company ) which comprise the statement of financial position as at 30 September 2013 and the statement of changes in equity, the statement of comprehensive income and the statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, the relevant disclosure provisions of the Memorandum and Articles of Association of the Company and the relevant disclosure requirements set out in Appendix E to the Hong Kong Code on Unit Trusts and Mutual Funds of the Securities and Futures Commission of Hong Kong (the Code ), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our report is made solely to you, as a body, and for no other purpose. We do not assume responsibility towards or accept liability to any other person for the contents of this report. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement, and whether the financial statements are in accordance with the relevant disclosure provisions of the Memorandum and Articles of Association of the Company and the disclosure requirements of the Code. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. A member firm of Ernst & Young Global Limited

83 Opinion In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Man AHL Diversified Futures Ltd as at 30 September 2013 and its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards. Report on Other Legal and Regulatory Requirements We report that the financial statements have been properly prepared in accordance with the relevant disclosure provisions of the Memorandum and Articles of Association of the Company and the disclosure requirements of Appendix E of the Code. 23 January 2014

84 Man AHL Diversified Futures Ltd Unaudited interim financial statements For the period ended 31 March 2014

85 Man AHL Diversified Futures Ltd Table of Contents Page Corporate information 3 Statement of financial position (unaudited) 4 Statement of changes in equity (unaudited) 5 Statement of comprehensive income (unaudited) 6 Statement of cash flows (unaudited) 7 Notes to the financial statements (unaudited) 8 2

86 Man AHL Diversified Futures Ltd Corporate information Directors Investment Manager Michael B Collins Man Investments Limited Argonaut Limited Riverbank House Argonaut House 2 Swan Lane 5 Park Road London EC4R 3AD Hamilton HM 09 United Kingdom Bermuda Introducing Broker and Marketing Adviser Shirelle Jones is an alternate director to Man Investments AG Mr Collins. Huobstrasse Pfäffikon SZ Dawn C Griffiths Switzerland Conyers Dill & Pearman Limited Clarendon House Services Manager 2 Church Street Man Investments AG Hamilton HM 11 Huobstrasse 3 Bermuda 8808 Pfäffikon SZ Switzerland David Smith Equus Asset Management Partners Valuation Service Provider 27 Queen Street Citibank Europe plc Hamilton HM11 1 North Wall Quay Bermuda Dublin Ireland Company Secretary and Registered Office of the Company Legal advisor as to matters of Bermudian law Christine Perinchief Conyers Dill & Pearman Limited Citi Fund Services (Bermuda), Ltd. Clarendon House 5 Reid Street 2 Church Street Hamilton HM 11 Hamilton HM 11 Bermuda Bermuda Principal Paying Agent Custodian Citi Fund Services (Bermuda), Ltd. HSBC Institutional Trust Services (Asia) Limited 5 Reid Street HSBC Main Building Hamilton HM 11 1 Queen s Road Central Bermuda Hong Kong Hong Kong Representative Registrar Man Investments (Hong Kong) Limited Citi Fund Services (Bermuda), Ltd. Suite 1301 Chater House 5 Reid Street 8 Connaught Road Central Hamilton HM 11 Hong Kong Bermuda Auditors Shareholder Services Provider Ernst & Young Ltd. Citibank Europe plc 3 Bermudiana Road 1 North Wall Quay Hamilton HM 11 Dublin 1 Bermuda Ireland 3

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