SCHRODER OFFSHORE CASH FUND

Transcription

1 SCHRODER OFFSHORE CASH FUND An open-ended unit trust constituted by a Trust Deed dated 15 April 1997, made between Schroder Investment Management (Guernsey) Limited and Barings (Guernsey) Limited as amended by a Supplemental Trust Deed dated 2 August 2001 made between Schroder Investment Management (Guernsey) Limited, Barings (Guernsey) Limited and RBSI Trustee Services (Guernsey) Limited and authorised by the Guernsey Financial Services Commission under The Protection of Investors (Bailiwick of Guernsey) Law, 1987, as a Class A Scheme SUPPLEMENT TO EXPLANATORY MEMORANDUM FOR UK INVESTORS If you are in any doubt about the contents of this Explanatory Memorandum, which constitutes the scheme particulars of Schroder Offshore Cash Fund, you should consult your independent adviser authorised pursuant to the Financial Services and Markets Act The Directors of Schroder Investment Management (Guernsey) Limited, whose names appear on page 14 of the accompanying Explanatory Memorandum, are the persons responsible for the information contained in this Supplement and accept responsibility accordingly. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of the information. 1

2 SCHRODER OFFSHORE CASH FUND ( the Fund ) SUPPLEMENT TO EXPLANATORY MEMORANDUM FOR UK INVESTORS This Supplement to Explanatory Memorandum forms part of the Explanatory Memorandum and has been prepared for United Kingdom investors. Definitions set out on page 6 of the Explanatory Memorandum apply in this Supplement unless the context otherwise requires. The Fund is an open-ended unit trust constituted by a Trust Deed dated 15 April 1997 made between Schroder Investment Management (Guernsey) Limited and the Original Trustee, as amended by a Supplemental Trust Deed dated 2 August 2001 made between Schroder Investment Management (Guernsey) Limited, the Original Trustee and RBSI Trustee Services (Guernsey) Limited. The Fund is authorised by the Guernsey Financial Services Commission under The Protection of Investors (Bailiwick of Guernsey) Law 1987, as a Class A Scheme. Units in the Fund were initially listed on the Channel Islands Stock Exchange on 19 February These units represent the original class of units, as referred to herein as A Units. A second class of units, called the B Units, were launched on the 28 th January The B Units are not listed on any stock exchange. The A Units and the B Units together comprise the Units in the Fund ( Units ). A copy of this Supplement and the Explanatory Memorandum have been delivered, as required by the appropriate legislation and regulations, to the Financial Services Authority in the United Kingdom. Potential investors are referred to the Risk Warnings and other information as set out on page 3 of this Supplement. UK Representative. The UK representative of the Fund is Schroder Investment Management Limited of 31 Gresham Street, London EC2V 7QA. Under a Facilities Agreement dated 4 August 1997, Schroder Investment Management Limited was appointed by Schroder Investment Management (Guernsey) Limited to provide facilities in the United Kingdom as required under the Financial Services Authority Handbook, Collective Investment Schemes Sourcebook, The Agreement is entered into for an indefinite period and may be terminated by the giving of three months notice by either party. Redemption of Units In addition to the procedure for redemptions set out in Redemption of Units on page 20 of the Explanatory Memorandum, application for redemptions may be made to Schroder Investment Management Limited at its office at 31 Gresham Street, London EC2V 7QA and payment of the redemption proceeds may be obtained therefrom. Particulars of the procedure to be followed in connection with the subscription for and redemption of units are set out in the Explanatory Memorandum. Complaints about the Fund may also be made to Schroder Investment Management Limited at the above address. 2

3 Information available to UK Holders Copies of the contracts mentioned in paragraph 14 of the Explanatory Memorandum ( Material Agreements ) including the Trust Deed, as amended, establishing the Fund and the current Explanatory Memorandum, may be obtained free of charge during normal office hours from Schroder Investment Management Limited at 31 Gresham Street, London EC2V 7QA. The preceding day's Offer Price and Redemption Price will be published in the FT Managed Funds Service section of the Financial Times under the heading Schroder Investment Management (Guernsey) Limited and/or such other newspapers as the Directors may from time to time determine. For reasons beyond the control of the Manager, these may not necessarily be the current prices. The most recently published prices of Units are also available from the registered office of the Fund at Trafalgar Court, Les Banques, St. Peter Port, Guernsey, Channel Islands and from Schroder Investment Management Limited at 31 Gresham Street, London EC2V 7QA and may be obtained either orally or in writing. Holders of Units will be sent copies of the most recent audited accounts and unaudited half-yearly reports of the Fund and, annually, a valuation showing the number and value of Units held. Taxation Taxation information for UK investors is set out on page 16 of the Explanatory Memorandum. Risk Warnings Investors should be aware that the investments of the Fund are subject to normal market fluctuations and other risks inherent in investing in securities. There can be no assurance that any appreciation in value of investments will occur. The value of investments and the income derived therefrom may fall as well as rise and investors may not recoup the original amount invested in the Fund. There is no assurance that the investment objectives of the Fund will actually be achieved. Investors are reminded that in certain circumstances their right to redeem Units may be suspended. The Fund does not qualify under the UK Financial Services Compensation Scheme. Any applicant in the United Kingdom applying for Units in response to this invitation will not have the right to cancel his agreement as afforded to him by the cancellation rules contained in Chapter 6 of the United Kingdom Financial Services Authority s Conduct of Business Sourcebook. The Fund does not carry out investment business in the United Kingdom and is not regulated by The Financial Services and Markets Act 2000 of the United Kingdom. The Explanatory Memorandum has been approved by Schroder Investment Management Limited, which is authorised and regulated in the conduct of investment business under the Financial Services and Markets Act 2000 by the United Kingdom Financial Services Authority. 3

4 SCHRODER OFFSHORE CASH FUND EXPLANATORY MEMORANDUM Valid as at: 7 August 2006 T:\G-FNDSEC\lm\1400\2006\Offshore Cash Expl Mem Final.DOC

5 Important Schroder Offshore Cash Fund ( the Fund ) is an open-ended unit trust constituted by a Trust Deed dated 15 April 1997 made between Schroder Investment Management (Guernsey) Limited and the Original Trustee, as amended by a Supplemental Trust Deed dated 2 August 2001 made between Schroder Investment Management (Guernsey) Limited, the Original Trustee and RBSI Trustee Services (Guernsey) Limited. The Fund was authorised as a Class A Scheme on 16 April 1997 by the Guernsey Financial Services Commission under the Protection of Investors (Bailiwick of Guernsey) Law, In giving this authorisation the Commission does not vouch for the financial soundness of the Fund or for the correctness of any of the statements made or opinions expressed with regard to it. Copies of this Explanatory Memorandum have been delivered to the Guernsey Financial Services Commission. This document is based on the law and practice currently in force in the Island of Guernsey and is subject to changes therein. This Explanatory Memorandum constitutes the scheme particulars of the Fund. The Fund is a recognised scheme under Section 270 of the United Kingdom Financial Services and Markets Act 2000 ( the Act ). This Explanatory Memorandum has been approved by Schroder Investment Management Limited for the purposes of Section 21 of the Act. In giving such approval Schroder Investment Management Limited gives no advice or recommendation as to the merits of investing in the Fund and expresses no opinion as to the suitability of such investment for any person. Schroder Investment Management Limited is regulated by the Financial Services Authority in the conduct of investment business. All or most of the protections provided by the United Kingdom regulatory system do not apply and compensation under the Financial Services Compensation Scheme established under the Act will not be available. Guernsey is a designated territory under Section 270 of the Act and investors are therefore offered the protection provided for under the compensation scheme operated by the Guernsey regulatory authorities. Units in the Fund were initially listed on the Channel Islands Stock Exchange on 19 February These units represent the original class of units, as referred to herein as A Units. A second class of units, called the B Units, were launched on the 28 January The B Units are not listed on any stock exchange. The A Units and the B Units together comprise the Units in the Fund ( Units ). The distribution of this Explanatory Memorandum and the offering of Units in certain jurisdictions may be restricted, and accordingly persons into whose possession this document comes are required by the Trustee and the Manager to inform themselves about and to observe any such restrictions. This Explanatory Memorandum does not constitute, and may not be used for the purpose of, an offer or solicitation by any person in any jurisdiction (i) in which such offer or solicitation is not authorised or (ii) in which such person is not qualified to make such offer or solicitation or (iii) to any person to whom it is unlawful to make such offer or solicitation. None of the Units have been or will be registered under the United States Securities Act of 1933, as amended, and, none of the Units may be offered or sold, directly or indirectly, in the United States of America, its territories or possessions or any areas subject to its jurisdiction (the United States ) or to any citizen or resident thereof, any corporation, partnership or other entity created or organised in or under the laws of the United States or any political subdivision thereof, any agency or branch of a foreign entity located in the United States or any estate or trust that is subject to United States federal income taxation regardless of the source of its income. In addition, the Fund has not been registered under the United States Investment Company Act of 1940, as amended. Accordingly, the Units are being offered and sold under circumstances to preclude the Fund from having to register under the Investment Company Act. Units are offered on the basis of the information and representations contained in this Explanatory Memorandum and no other information and representations relating thereto are authorised. This Explanatory Memorandum will be issued as a continuing explanatory memorandum. Factual references should nonetheless be read as made at the date of this Explanatory Memorandum. If you are in any doubt about the contents of this Explanatory Memorandum, you should consult your solicitor, accountant or other financial adviser. Schroder Investment Management Limited is acting for the Manager in relation to this Explanatory Memorandum and matters relating thereto and it or any of its associates may have an interest or position in Units in the Fund. It will not be acting for or offering advice to, any other person (unless other arrangements apply between Schroder 2

6 Investment Management Limited and such person) in relation to investment in the Fund and will not be responsible for providing protections afforded to its customers in relation thereto. Investors should be aware that, whilst the price of a Unit will normally rise as income accrues in respect of underlying investments, such price may fall in certain circumstances such as a substantial change in interest rates. Investors should note that the price of Units can go down as well as up. Persons interested in acquiring Units should inform themselves as to: (a) (b) (c) the legal requirements for such acquisition within the countries of their nationality, residence, ordinary residence or domicile; any foreign exchange restriction or exchange control requirements which they might encounter on acquisition or disposal of Units; and the income tax and other taxation consequences which might be relevant to the acquisition, holding, redemption, sale or transfer of Units under the relevant laws of the jurisdiction to which they are subject. The Directors of the Manager, whose names appear under Management and Administration below, are responsible for the information contained in this document. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information. The Directors accept responsibility accordingly. Notices or other documents required or authorised to be served on the Fund in Guernsey may be served at the registered office of the Manager, Trafalgar Court, Les Banques, St. Peter Port, Guernsey, Channel Islands, GY1 3QL and in the United Kingdom may be served at the offices of Schroder Investment Management Limited, 31 Gresham Street, London, EC2V 7QA. 3

7 Contents DEFINITIONS... 6 SUMMARY... 8 INVESTMENT POLICY DIVIDEND POLICY INVESTMENT RESTRICTIONS MANAGEMENT AND ADMINISTRATION TAXATION GENERAL INFORMATION MANAGER SCHRODER INVESTMENT MANAGEMENT (GUERNSEY) LIMITED Trafalgar Court, Les Banques, St. Peter Port, Guernsey, Channel Islands, GY1 3QL.* Telephone: Facsimile: INVESTMENT ADVISER SCHRODER INVESTMENT MANAGEMENT LIMITED 31 Gresham Street, London, EC2V 7QA.* ADMINISTRATOR AND REGISTRAR NORTHERN TRUST INTERNATIONAL FUND ADMINISTRATION SERVICES (GUERNSEY) LIMITED Trafalgar Court, Les Banques, St. Peter Port, Guernsey, Channel Islands, GY1 3QL.* BANKERS, TRUSTEE AND CUSTODIAN RBSI TRUSTEE SERVICES (GUERNSEY) LIMITED Royal Bank Place, 1 Glategny Esplanade, St Peter Port, Guernsey, Channel Islands, GY1 4BQ. * AUDITORS ERNST & YOUNG LLP, Chartered Accountants 14 New Street, St. Peter Port, Guernsey, Channel Islands GYI 4AF. LEGAL ADVISERS TO THE MANAGER (on matters of Guernsey Law) OGIER & Le MASURIER, Coutts House, Le Truchot, St Peter Port, Guernsey, Channel Islands, GY1 1WD. 4

8 UK REPRESENTATIVE SCHRODER INVESTMENT MANAGEMENT LIMITED 31 Gresham Street, London EC2V 7QA.* * Also the registered office of such institution. 5

9 Definitions The following definitions apply in this Explanatory Memorandum, which constitutes the scheme particulars of the Fund, unless the context otherwise requires. Expressions not defined in this Explanatory Memorandum have the meanings ascribed to them in the Trust Deed of the Fund. A Units are those Units listed on the Channel Islands Stock Exchange. The term A Units is used to distinguish between the original unit class of the Fund and B Units. A management charge will be levied against the value of A Units. The holders of A Units will not be invoiced separately.. Administrator Approved Bank Northern Trust International Fund Administration Services (Guernsey) Limited. means a person who is licensed under The Banking Supervision (Bailiwick of Guernsey) Law, 1994 or under The Banking Business (Jersey) Law, 1991 or is authorised to carry on a banking or deposit-taking business under the law of any member state of the European Union or under the law of any other country or territory which may be listed in notices issued from time to time by the Guernsey Financial Services Commission. B Units are those units which were launched on 28 January The B Units will be invoiced separately by the Manager in respect of any management fee due. The B Units will only be offered to investors who are clients of the Manager or its affiliates and have a discretionary management agreement covering the charging structure relevant to the Holders' investments in such units. B Units will bear their pro-rata share of the fees payable to the Administrator, Trustee and any other additional costs. Business Day CIS Rules Custodian Directors Extraordinary Resolution Government and other Public Securities a day which is a business day in the Bailiwick of Guernsey and in England. the Collective Investment Scheme (Class A) Rules 2002 made under the Protection of Investors (Bailiwick of Guernsey) Law, RBSI Trustee Services (Guernsey) Limited. the directors of the Manager. means a resolution proposed and passed as an extraordinary or special resolution at a meeting of Holders duly convened and held in accordance with the CIS Rules and carried, whether on a show of hands or on a poll, by a majority consisting of 75% (or any other proportion specified under applicable law) of the total number of votes cast for and against such resolution at a general meeting of Holders or (as the case may be) class meeting, of which notice specifying the intention to propose the resolution as an extraordinary or special resolution has been duly given; means, subject to the CIS Rules, loan stock, bonds and other instruments creating or acknowledging indebtedness issued or guaranteed (i) by or on behalf of the government of the United Kingdom, of Northern Ireland, of any member state of the European Union, or by the government of Australia, Canada, Japan, New Zealand, Switzerland or the United States of America; or (ii) a local authority in 6

10 the United Kingdom or any other member State of the European Union; or (iii) an international organisation the members of which include the United Kingdom or another member State of the European Union. Holder Investment Adviser or SIM Manager a person for the time being entered in the register of Unit holders or the first named holder in the case of joint holders. Schroder Investment Management Limited. Schroder Investment Management (Guernsey) Limited. Minimum Investment has the meaning ascribed to it on page 8. Original Trustee Barings (Guernsey) Limited. Registrar SIM Trustee transferable securities Units United States Person Valuation Day Northern Trust International Fund Administration Services (Guernsey) Limited. Schroder Investment Management Limited. RBSI Trustee Services (Guernsey) Limited. has the meaning set out in the CIS Rules and includes, inter alia, shares, stocks, debentures, bonds, certificates of deposit, partnership interests and warrants but does not include an investment the title to which cannot be transferred or can be transferred only with the consent of a third party. means both the A Units and the B Units. includes any citizen or resident of the United States of America, its territories and possessions including the State and District of Columbia and all areas subject to its jurisdiction (including the Commonwealth of Puerto Rico), any corporation, trust, partnership or other entity created or organised in or under the laws of the United States of America, any state thereof or any estate or trust the income of which is subject to United States federal income tax, regardless of source. The expression also includes any person falling within the definition of the term US Person under the Regulation S promulgated under the United States Securities Act of a day which is a Business Day. Valuation Point a.m. on each Valuation Day and such other times as the Manager may in its discretion determine. 7

11 Summary The Fund Schroder Offshore Cash Fund is an open-ended unit trust authorised by the Guernsey Financial Services Commission as a Class A Scheme under the Protection of Investors (Bailiwick of Guernsey) Law, The Fund is a recognised scheme under Section 270 of the Financial Services and Markets Act 2000 and has been rated Aaa and MR1+ by Moody's Investors Service Limited. All Units will be denominated in Sterling, however, the Fund has the ability to issue separate classes of units denominated in different currencies with the approval of the Trustee. The Fund currently has two Unit classes. A Units and B Units. The only differences between the A Units and the B Units are that: A management charge will be levied on the value of the A Units whereas the Manager of the B Units will invoice Holders separately for the management fee in respect of B Units;. All other costs and expenses will be shared on a pro rata basis; the A Units are listed on the Channel Islands Stock Exchange while the B Units are not listed; the B Units are only offered to a restricted class of persons and have higher minimum investment requirements. Except where expressly provided otherwise the administration and management of the Units and the rights and obligations attached to the Units are identical and as provided for by this Information Memorandum. Minimum Investment The minimum investment in the purchase of A Units is 10,000 or the equivalent thereof in any other currency in which Units may be denominated. The minimum subsequent investment is 5,000 or the equivalent as appropriate. The minimum investment in the purchase of B Units is 1,000,000 or the equivalent thereof in any other currency in which Units may be denominated. The minimum subsequent investment is 20,000 or the equivalent as appropriate. The Manager reserves the right to reduce or waive the minimum investment levels of both Units. How to Buy Units The simplest way to buy Units of either class is to complete an Application Form appended to this Explanatory Memorandum and send it to the Manager in Guernsey. If you are investing 15,000 or more, we would advise you to pay by telegraphic transfer, and details of how to do this are given with the Application Form. Unless previously agreed with the Manager in writing, your investment can only be made on receipt of cleared funds. You may also pay for your investment in US Dollars or any other major currency. The Manager will arrange any necessary foreign exchange conversion, at your expense, once it has received cleared funds. Applications received by the Manager or its agents will, if accepted and provided they are accompanied by cleared funds, be dealt with on a forward price basis and be treated as applications for the issue of Units on the next Valuation Day following their receipt or if received on a Valuation Day prior to a.m. (Guernsey time) will be treated as applications for the issue of Units at the offer price determined as at the Valuation Point on that day. Valuation days are each Business Day. The Manager will send you a contract note on or before the second Business Day next following the relevant Valuation Day with details of your investment and your account number. The account number should be quoted when making any additional investments or in other correspondence with the Manager. 8

12 Verification Requirements It is a term of the issue of Units that, in order to ensure compliance with the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999 (as amended) and the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Regulations, 2002 ( the Law and Regulations ), the Manager or the Administrator may require verification of the identity of the person by whom or on whose behalf an application form is lodged with payment (which requirements are referred to below as the verification of identity requirements ). The person(s) (the applicant ) who, by lodging an application form as described above, applies for the allocation to him of Units shall thereby be deemed to agree to provide the Manager or the Administrator with such information and other evidence as it may require in order to satisfy the verification of identity requirements and to permit the Manager or the Administrator to make such enquiries of third parties as they may consider necessary to meet the requirements of the Law and Regulations. If the Manager or the Administrator determines that the verification of identity requirements apply to an application and that such requirements have not been satisfied (which the Manager or the Administrator shall in its absolute discretion determine), the Manager or the Administrator may treat the application as defective or may confirm the allotment of units to the applicant but such shares will not be issued to him or registered in his name until the verification of identity requirements have been satisfied (which the Manager or the Administrator shall in its absolute discretion determine). If the application is not treated as defective and the verification of identity requirements are not satisfied within such period, being not less that fourteen days after a request for evidence of identity is despatched to the applicant, as the Manager or the Administrator may in its absolute discretion allow, the Manager or the Administrator will be entitled to make arrangements (at its absolute discretion as to manner, timing and terms) to sell or redeem the Units (and for that purpose the Manager or the Administrator will be deemed to be expressly authorised to act as agent of the applicant). Any proceeds of sale (net of expenses) of such Units which shall be issued to and registered in the name of the purchaser(s), or an amount equivalent to the original payment, whichever is the lower, will be held by the Manager or the Administrator on trust for the applicant, subject to the requirements of the Law and Regulations. Neither the Manager nor the Administrator, its employees or agents will be liable to any person for any loss suffered as a result of the exercise of any such discretion or as a result of the sale of any Units. Return of an application form with the appropriate payment will constitute a warranty from the applicant that the Law and Regulations will not be breached by acceptance of such payment. If the verification of identity requirements apply, failure to provide the necessary evidence of identity may result in such acceptance being treated as invalid. The verification of identity requirements will not usually apply: (a) (b) if the applicant is a regulated financial services business (as defined by the Law and Regulations) in Guernsey; or if the applicant is a financial services business from a country or territory whose authorised financial services businesses may be treated as though they were local (as determined by the Law and the Regulations and the Guidance Notes on the Prevention of Money Laundering and Countering the Financing of Terrorism issued thereunder) and who appears from time to time on a supervisor/regulator s list of financial services businesses authorised in that country or territory. Pricing of Units The Fund has adopted a single pricing regime for both classes of Units. On each Valuation Day the Fund will be valued at the Valuation Point to determine the price at which Units in each class may be issued and redeemed. There will be no preliminary charge payable. Further details of the procedure for the issue and redemption of Units are contained on pages 18 to 21. The Manager has not adopted a policy in relation to large deals. Issuing of Certificates Certificates are only issued at your specific request. Some investors prefer not to hold certificates because, if lost, an indemnity satisfactory to the Manager and the Registrar must be provided by the investor before a new certificate can be issued. It is often easier just to keep contract notes. 9

13 How to sell Units You may realise all of your investment, or part of it, subject to the Minimum Investment requirements, by issuing instructions by telex, facsimile or in writing by normal course of post to the Manager. Any redemption order received by post, telex or fax before a.m. (Guernsey time) on a Valuation Day will, if accepted, be dealt with on a forward price basis at the price calculated on that day. If you wish to redeem using the telex or fax facility, please provide the following details: Your name and Holder account number. The number of Units you wish to redeem. How you wish to be paid. Uncertificated Registered Units If you have uncertificated Units, the proceeds of redemption can be credited direct to your bank account in accordance with the details entered on the Application Form. If you wish to have the proceeds of a redemption paid to you by cheque, it will be sent to your registered address or, in the case of joint holdings, to the address of the first named Holder, unless an original signed confirmation of alternative arrangements has been received by the Manager from the Holder(s). Certificated Registered Units If you have certificated Units you must return the duly endorsed certificates before redemption proceeds can be paid to you. Unitholder Reports An annual valuation showing the number and value of your Units and the audited annual report and accounts of the Fund will be sent to you at your registered address. The date on which the Fund s annual accounting period ends in each year is 31 December. Audited annual reports for the fiscal year ending 31 December will normally be published and despatched to Holders and the Channel Islands Stock Exchange within 4 months after the end of the annual accounting period. The Fund has an interim accounting period ending on 30 June in each year. Unaudited interim reports and accounts for the six months ending 30 June will normally be published and despatched to Holders and the Channel Islands Stock Exchange within 2 months after the end of the half-yearly accounting period. Publication of Prices The price of Units will be published in the FT Managed Funds Service section of the Financial Times under the heading Schroder Investment Management (Guernsey) Limited. The prices shown will reflect the prices calculated on the latest Valuation Day. For reasons beyond the control of the Manager, published prices may not be the current prices. The most recent published prices and most recent yields are available from the Manager at its registered office and may be obtained either orally or in writing. Please remember that the price of Units may fall as well as rise. Reminder Please do not forget to let the Manager know (in writing) of any changes in your circumstances, e.g. change of bank account details, change of address, change of financial adviser. 10

14 Investment Policy The Fund's principal investment objective is to achieve a money market linked return with minimum risk to capital. The Fund is designed to offer investors a high degree of protection and access to wholesale money markets whilst providing a high degree of liquidity. The Fund is a money market fund for the purposes of the CIS Rules, which specify that the property of the Fund must consist of money market fund assets. These include certain Government and other Public Securities, cash and near cash; certain deposits which are repayable within 12 months; bills of exchange repayable within 12 months and which are accepted by an Approved Bank; and certain debentures, debenture stock, loan stock, bonds, and certificates of deposit which are repayable within 12 months, not subordinated and are issued by an Approved Bank, admitted to official listing on the Channel Islands Stock Exchange or in a member state of the European Union, or which are traded on or under the rules of an eligible securities market. The Fund will normally make investments from which income will be received by the Fund without any deduction of withholding tax. The Fund may engage in efficient portfolio management (certain derivatives transactions or forward transactions in currency) in accordance with the provisions of the CIS Rules. The CIS Rules stipulate that scheme property may only be used for efficient portfolio management where the transaction is economically appropriate; where the exposure is fully covered by cash or other scheme property sufficient to meet any obligation to pay or deliver that could arise; and where the transaction is entered into either to reduce risk, to reduce cost and/or to generate additional capital or income for the Fund with no (or an acceptably low level of) risk. The CIS Rules also permit the Fund to engage in certain stocklending activities for the purposes of efficient portfolio management, that is when it reasonably appears to be economically appropriate to do so with a view to generating additional income of the Fund with no, or an acceptable degree of, risk. Stocklending involves a lender transferring securities to a borrower otherwise than by sale, with the borrower transferring those securities (or securities of the same type and amount) back to the lender at a later date. In accordance with good market practice, a separate transaction by way of transfer of assets is also involved for the purpose of providing collateral to the lender to cover him against the risk that the future transfer back of the securities may not be satisfactorily completed. Moody's Investors Service Limited has given the Fund a credit rating of Aaa and a market risk weighting of MR1+. In order to maintain a market risk rating of MR1+ the maximum weighted average maturity of instruments held within the Fund will be sixty days. The B Units have an identical investment objective and policy to the A Units. Dividend Policy Although dividends are permitted by the Trust Deed (the annual income allocation date being 2 January) it is intended that no dividends will be paid and that the whole of the net income attributable to the Fund will be accumulated within the Fund as and when earned and will be reflected in the price of the Units. As such, although permitted by the Trust Deed, the Trustee does not operate an equalisation procedure. Listing Units in the Fund were initially listed on the Channel Islands Stock Exchange on 19 February These units represent the original class of units, as referred to herein as A Units. A second class of units, called the B Units, were launched on the 28 January The B Units are not listed on any stock exchange. 11

15 Investment Restrictions The main limits on investments are as follows: (a) (b) (c) (d) No more than 5% in value of the Fund shall consist of instruments, other than Government and other Public Securities, issued by any one issuer. In respect of amounts exceeding 1,000,000, no more than 10% in value of the Fund shall be deposited with any one person; provided that up to 20% in value of the Fund may be deposited with one person if that person is an Approved Bank not in the same group as the Trustee or the Manager and provided further that the amount of the deposit does not exceed 10% of such Approved Bank s issued capital and reserves as shown in its most recently published annual accounts. Provided that no more than 35% in value of the Fund shall consist of Government and other Public Securities issued by any one issuer, there is no limit on the amount which may be invested in Government and other Public Securities or Government and other Public Securities issued by any one issuer or of any one issue. The Fund may invest more than 35% in value of the Fund in Government and other Public Securities issued by any one issuer, provided that: (i) (ii) the Fund may only invest up to 30% of its value in Government and other Public Securities of any one issue; and the Fund must include Government and other Public Securities of at least six different issues issued by that or another issuer. More than 35% of the Fund may be, but as at the date hereof is not, invested in Government and other Public Securities issued by of the government of the United Kingdom or the governments of Australia, Austria, Belgium, Canada, Finland, France, Germany, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Portugal, Spain, Switzerland or the United States of America. (e) (f) (g) (h) (i) No more than 80% in value of the Fund shall be invested in transferable securities. At least 35% in value of the Fund shall consist of instruments or deposits which are redeemable or repayable within two weeks or which are capable of being transferred without the consent of a third party (any issuer being regarded as a third party for these purposes). The maximum period for deposits is six months with a maximum penalty of seven days' interest calculated at ordinary commercial rates. No more than 5% of the value of the Fund may be directed to initial outlay (as that term is defined in the CIS Rules) in respect of off-exchange transactions with any one counterparty. The Fund may not:- (i) (ii) (iii) (iv) make loans or give guarantees; invest in commodities, land or buildings; invest in other collective investment schemes; borrow for investment purposes. It is not intended that the Fund will have an interest in any immoveable property (e.g. its office) or tangible moveable property (e.g. office equipment). 12

16 ELIGIBLE MARKETS The Fund may now invest in securities markets and derivatives markets which are Eligible Markets as defined in the CIS Rules. Eligible markets generally include any market established in a member state of the European Union or the European Economic Area ( member state ) on which transferable securities admitted to official listing in the member state are dealt in or traded. In the case of all other markets, in order to qualify as an eligible market, the Manager, after consultation with the Trustee, must be satisfied that the relevant market a) is regulated; b) operates regularly; c) is recognised; and d) is open to the public. For the purposes of paragraph 11(d) of Schedule 2 of the CIS Rules the Manager, after consultation with the Trustee, has decided that the following securities exchanges are eligible markets in the context of the investment policy of the Fund. COUNTRY USA: i) NASDAQ (the electronic inter-dealer quotation system of America operated by the National Association of Securities Dealers Inc); ii) any exchange registered with the Securities and Exchange Commission as a national stock exchange including the New York Stock Exchange, the American Stock Exchange, and the stock exchanges of Boston, Cincinnati, Midwest, Pacific and Philadelphia; iii) the market in transferable securities issued by or on behalf of the Government of the United States of America conducted through those persons for the time being recognised and supervised by the Federal Reserve Bank of New York and known as primary dealers; and iv) the Over-the-Counter Market regulated by the National Association of Securities Dealers Inc. 13

17 Management and Administration Manager The Manager of the Fund is Schroder Investment Management (Guernsey) Limited which is a company limited by shares incorporated in Guernsey on 15 March, Its ultimate holding company is Schroders plc which is incorporated in England and Wales. The Manager has authorised and issued and fully paid up share capital of 100,000. The Manager was licensed to carry on controlled investment business in the Bailiwick of Guernsey on 25 May 1990 pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, Pursuant to the Trust Deed dated 15 April 1997, the Manager is responsible for the management and administration of the Fund. It has delegated certain functions to Northern Trust International Fund Administration Services (Guernsey) Limited including valuing the assets and liabilities of the Fund and maintaining the accounts of the Fund. Schroder Investment Management Limited has been appointed to provide discretionary fund management services to the Fund. The directors of the Manager and their significant activities not connected with the business of the Manager are as follows:- Richard John Corbin (British) is a Fellow of the Chartered Association of Certified Accountants and is currently the the Director of Finance Administration and Compliance of Schroders (C.I.) Limited, a Channel Islands subsidiary of Schroders plc which conducts banking and investment management business. He joined Schroders (C.I.) Limited as Compliance Officer in June, 1999, having previously worked in accounting, fund administration and global custody with the Bank of Bermuda (Guernsey) Limited for 18 years, of the which the latter 9 years were in a management capacity. Christopher Martin Walter Hill (British) is an Associate of the Chartered Institute of Bankers. Mr Hill has recently retired as Managing Director of Guernsey International Fund Managers Limited. In addition, he is a director of a number of Guernsey-based management companies and funds. He has more than 20 years experience in the field of offshore banking and fund administration. Mark Julian Smith (British) is an Executive Director of Schroder Investment Management Limited and an Executive Vice President of Schroder Investment Management North America Inc. He graduated from Cambridge University and joined the investment division of J. Henry Schroder Wagg in In 1986 he was transferred to Schroder Capital Management International Inc. (now Schroder Investment Management North America Inc.) in New York, with responsibility for US equity research. He returned to London in All the Directors act in a non-executive capacity. The address of all the Directors, for the purposes of the Fund, is that of the Manager. The material provisions of certain agreements entered into by the Manager in connection with the Fund which may be relevant to holders are summarised under the heading Material Agreements. Administrator and Registrar The Administrator and Registrar is Northern Trust International Fund Administration Services (Guernsey) Limited which is a company limited by shares incorporated in Guernsey on 29 May, Its ultimate holding company is a wholly owned subsidiary of Northern Trust GSF Holdings Limited which is in turn wholly owned by Northern Trust Corporation. Northern Trust Corporation and its subsidiaries comprise the Northern Trust Group, one of the world s leading providers of global custody and administration services to institutional and personal investors. Trustee The Trustee of the Fund is RBSI Trustee Services (Guernsey) Limited, a company which was incorporated with limited liability in Guernsey on 27 October 2000 and whose principal activity is the provision of trustee and custodian services to collective investment schemes. As at the date of this document the Trustee s issued and paid up share capital is 1 million divided into 1 million shares of 1 each. The Trustee is licensed to carry on 14

18 controlled investment business in the Bailiwick of Guernsey pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, RBSI Trustee Services (Guernsey) Limited is a wholly owned subsidiary of RBSI Securities Services (Holdings) Limited which in turn is owned 30 percent by Bank of New York International Financing Corporation and 70 percent by The Royal Bank of Scotland International (Holdings) Limited. The Royal Bank of Scotland International (Holdings) Limited is ultimately owned by Royal Bank of Scotland Group plc, a company registered in Scotland. The Trustee is responsible for the keeping of the register but has delegated this function to the Registrar. The Trustee is responsible for the custody of the assets of the Fund under the terms of the Trust Deed. It will also provide, subject to the Investment Restrictions, banking and related services to the Fund on normal banking terms and will be entitled to retain all benefits arising therefrom. The material provisions of certain agreements entered into by the Trustee in connection with the Fund which may be relevant to holders are summarised under the heading Material Agreements. Investment Adviser The Manager, with the consent of the Trustee, has entered into an Investment Advisory Agreement with Schroder Investment Management Limited ( SIM ) under which SIM has full discretionary powers over the investment of the property of the Scheme subject to compliance with all applicable investment restrictions and the overall responsibility and right of veto of the Manager. SIM is a subsidiary of Schroders plc, the holding company of an international asset management group whose origins date back to The shares of Schroders plc are listed on the London Stock Exchange. Schroders has been involved in asset management since 1922 and provides investment services, research and marketing functions from offices in countries located throughout the world. Worldwide funds under investment management and advisory contracts world-wide at 30 June 2004 were valued at 100 billion. SIM is authorised and regulated by the Financial Services Authority in the conduct of investment business. Certain material provisions of the Investment Advisory Agreement which may be relevant to holders are summarised under the heading Material Agreements. Taxation Set out below is a summary based on the Manager's understanding of certain income tax and other provisions and practices in force that may be relevant to investors. Prospective purchasers who are in any doubt as to the tax and exchange control consequences of acquiring, holding or disposing of Units should consult their professional advisers. Tax levels or reliefs are liable to change. The Fund (a) In Guernsey The Income Tax Authority in Guernsey has confirmed that the Fund is eligible for exemption from income tax in Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance This exemption must be applied for annually and, if granted, currently entails payment of an annual fee of 600 by the Fund to the States of Guernsey. The following information is also noted with regards to taxation in Guernsey: (i) European Union Directive on the Taxation of Savings Income 15

19 On 3 June 2003, the European Union ( EU ) Council of Economic and Finance Ministers adopted a directive on the taxation of savings income in the form of interest payments (the EU Savings Tax Directive ). Each EU Member State, from 1 July 2005, is required to provide to the tax authorities of another EU Member State details of payments of interest (or other similar income) paid by a person within its jurisdiction to or for the benefit of an individual resident in that other EU Member State; however, Austria, Belgium and Luxembourg will instead apply a withholding tax system for a transitional period in relation to such payments. Guernsey is not subject to the EU Savings Tax Directive. However, the Advisory and Finance Committee of the States of Guernsey (whose functions in this respect have been assumed by the States of Guernsey Policy Council) announced that, in keeping with Guernsey's policy of constructive international engagement, Guernsey would introduce a withholding tax system in respect of payments of interest, or other similar income, made to an individual beneficial owner resident in an EU Member State by a paying agent situate in Guernsey (the terms "beneficial owner" and "paying agent" are defined in the EU Savings Tax Directive). The withholding tax system will apply for a transitional period prior to the implementation of a system of automatic communication to EU Member States of information regarding such payments. During this transitional period, such an individual beneficial owner resident in an EU Member State will be entitled to request a paying agent not to withhold tax from such payments but instead to apply a system by which the details of such payments are communicated to the tax authorities of the EU Member State in which the beneficial owner is resident. However, under the current proposals in respect of the implementation of such a withholding tax system in Guernsey the issuer is not be obliged to levy withholding tax in respect of interest payments made by it to a paying agent. Accordingly, the Fund will not offer this option. In keeping with other European jurisdictions, it has been determined that automatic disclosure of investor information in accordance with the Directive provision will be made in accordance with the Guernsey law. Investors who wish to elect for a withholding tax option should NOT invest in this Fund because the Administrator will apply a system by which the details of such interest payments will ultimately be communicated to the tax authorities of the EU Member State in which the individual investor is resident. (ii) European Union Code of Conduct on Business Taxation On 3 June 2003, the European Union Council of Economic and Finance Ministers reached political agreement on the adoption of a Code of Conduct on Business Taxation (the Code ). Guernsey is not a member of the European Union, however, the Advisory and Finance Committee of the States of Guernsey has announced that, in keeping with Guernsey s policy of constructive international engagement, it intends to propose legislation to replace the Guernsey exempt company regime by the end of 2008 with a general zero rate of corporate tax. (b) In the United Kingdom It is the intention of the Manager to conduct the affairs of the Fund so as to ensure that it will not become resident in the United Kingdom. Accordingly, and provided that the Fund does not carry on a trade in the United Kingdom through a branch or agency situated therein, the Fund will not be subject to United Kingdom corporation tax or income tax. Investors (a) In the United Kingdom Chapter V Part XVII of The Income and Corporation Taxes Act, 1988, of the United Kingdom contains provisions whereby persons resident or ordinarily resident in the United Kingdom for tax purposes and branches or agencies of non-resident companies carrying on business in the United Kingdom will be subject to income tax (or corporation tax on income, depending on their particular circumstances) on gains realised on disposals of interests in offshore funds which do not distribute all of their income to shareholders from year to year. For these purposes investors should note that no dividends will be paid and that the whole of the net income attributable to the assets of the Fund will be accumulated within the Fund and reflected in the price of the Units. Any gain on disposal will be taxable as income. For corporate investors Units will be treated as loan relationships under Chapter 11 Finance Act 1996, resulting in movements in their value being taxable as income on an accruals basis. 16