LFG Enhanced Liquidity Fund

Transcription

1 The Directors of Mosaic ICAV (the ICAV ) whose names appear in the Directory of the Prospectus accept responsibility for the information contained in this Supplement. 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 Supplement and the Prospectus is in accordance with the facts and does not omit any material information likely to affect the import of such information. LFG Enhanced Liquidity Fund (A sub-fund of Mosaic ICAV, an Irish collective asset management vehicle constituted as an umbrella fund with segregated liability between sub-funds and authorised by the Central Bank of Ireland pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 (as amended)) SUPPLEMENT NO. 1 MANAGER DMS INVESTMENT MANAGEMENT SERVICES (EUROPE) LIMITED DATED 7 November 2016 This Supplement forms part of, and should be read in the conte xt of and together with, the Prospectus dated 7 November 2016 (the Prospectus ) in relation to the ICAV and contains information relating to the LFG Enhanced Liquidity Fund which is a sub-fund of the ICAV. Save as disclosed in this Supplement, there has been no significant change and no significant new matter has arisen since publication of the Prospectus

2 TABLE OF CONTENTS Definitions...3 The Fund...4 Investment Objective And Policies...6 Us Person Investor Limitations Risk Considerations Dividend Policy Fees And Expenses Subscription And Redemption Of Shares Switching Between Share Classes

3 DEFINITIONS Any words or terms not defined in this Supplement have the same meaning given to them in the Prospectus. The Fund is established pursuant to the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 (as amended) ( UCITS Regulations ) and this Supplement will be construed accordingly and will comply with the applicable Central Bank UCITS Regulations. Base Currency means USD; Business Day means: (i) (ii) a day on which banks in Switzerland and Dublin are open for business; or such other day or days as may be determined from time to time by the Directors; Dealing Day, being the day upon which redemptions and subscriptions occur, means (i) (ii) each Business Day; and / or any other day which the Directors have determined, subject to advance notice to all Shareholders in the Fund and provided there is at least one Dealing Day per fortnight; Emerging Markets means those defined in the MSCI market classification For the avoidance of doubt, markets which: (i) are not classified in such classification as MSCI developed markets; or (ii) markets which are not located in OECD member states, will be classified as Emerging Markets for the purposes of t he Fund; Form K-1 is a tax document used to report the incomes, losses and dividends of a partnership or an entity which has elected to be treated as a partnership for U.S. tax purposes. The document is prepared for each investor and is included with the investor s personal tax return. Fund means the LFG Enhanced Liquidity Fund; IRS Form W-9 is an Internal Revenue Service (IRS) form, also known as a Request for Taxpayer Identification Number and Certification form, which is used to confirm a person s taxpayer identification number (TIN). This confirmation can be requested for either an individual defined as a U.S. citizen or a person defined as a resident alien; LIBOR means the rate fixed by the British Bankers Association for three month depos its in the designated currency of the relevant class of the Fund (as appropriate) expressed as an annual percentage; Redemption Cut-Off Time means am (Dublin time) on the Business Day immediately preceding the relevant Dealing Day or such point as the Manager may determine in exceptional circumstances; Subscription Cut-Off Time means 5.00pm (Dublin time) on the third Business Day immediately preceding the relevant Dealing Day or such point as the Manager may determine in exceptional circumstances; Valuation Day means each the Business Day preceding each Dealing Day, unless otherwise determined by the Manager; and Valuation Point means 2.00 pm (Dublin time) on each Valuation Day or such other time as the Manager may determine in respect of the Fund from time to time and notify to Shareholders

4 THE FUND The LFG Enhanced Liquidity Fund is a sub-fund of Mosaic ICAV, an Irish collective assetmanagement vehicle constituted as an umbrella fund with segregated liability between sub-funds. The ICAV offers twelve classes of Shares in the Fund as set out below. The ICAV may also create additional classes of Shares in the Fund in the future with prior notification to, and clearance in advance by, the Central Bank. Share classes Investor Prerequisites Class Currency Currency hedged at Share Class level Dividends Minimum Initial Subscription Minimum Additional Subscription Withholding tax on certain U.S. source income A USD USD No (1) USD 1,000 USD 1,000 A EUR A CHF Only U.S. Taxable Investors (as defined below) may invest in these share EUR CHF Yes Yes EUR 1,000 CHF 1,000 EUR 1,000 CHF 1,000 I USD classes USD USD No (1) 1,000,000 Investors must provide IRS USD 10,000 I EUR Form W-9 EUR Yes No EUR before 1,000,000 EUR 10,000 investing I CHF CHF CHF Yes 1,000,000 CHF 10,000 None Z USD Z EUR Z CHF Only entities managed or advised by the Investment Adviser may invest in these share classes USD EUR CHF No (1) Yes Yes None None None None None None 30% or applicable tax treaty rate if eligible The ICAV has elected to be taxed as a foreign partnership for U.S. tax purposes by election filed with the IRS, and investors in these share classes will receive a Form K-1 and may report their respective share of partnership income and gains. As used above, the term U.S. Taxable Investors refers to persons subject to U.S. tax as defined in the Internal Revenue Code of 1986, as amended, which generally includes U.S. citizens, U.S. green card holders (permanent residents), U.S. residents, and U.S. corporations. Please consult with your qualified tax adviser to determine which Share Class is appropriate for your investment. (1) The Base Currency of the Fund is USD, The investment currency of the Fund is not limited to the USD. The Fund may use currency derivatives transactions to manage its currency exposure as outlined herein. Where a Class is denominated in a currency other than the Base Currency, the currency exposure of that Class to the Base Currency of the Fund will be hedged to the relevant Class Currency

5 Although hedging strategies may not necessarily be used in relation to each Class within the Fund (e.g., classes with a Class Currency that is the same as the Base Currency), the financial instruments used to implement such strategies will be assets/liabilities of the Fund as a whole. However, such transactions will be clearly attributable to the relevant Class and the gains/losses on and the costs of the relevant financial instruments will accrue solely to the relevant Class. The Manager will limit hedging to the extent of the hedged class shares currency exposure, and the Manager will monitor such hedging so that it does not exceed 105% of the NAV of each relevant Class of Shares and will adjust such hedging appropriately in the event that it does exceed this limit. The Manager will also review such hedging with a view to ensuring that positions materially in excess of 100% of the Net Asset Value of the relevant Class are not carried over from month to month. The currency exposure of the Fund arising from the assets held by the Fund and also the currency hedging transactions entered into by the Fund (other than with respect to a Class of Shares) will not be allocated to separate Classes and will be allocated pro rata to all Classes of the Fund. Where currency hedging transactions are entered into in respect of a Class, the currency exposure arising from such transactions will be for the benefit of that Class only and may not be combined with or offset against the currency exposure arising from transactions entered into in respect of other Classes whether such exposure is attributable to transactions entered into at the Class or Fund level. The periodic reports of the Fund will indicate how hedging transactions have been utilised

6 INVESTMENT OBJECTIVE AND POLICIES The investment objective of the Fund is to provide capital appreciation. There is no assurance that such objective will be achieved. The Fund will seek to achieve its investment objective by investing globally primarily in variable and fixed income securities (as outlined below) (between 51% and 100% of the Fund s Net Asset Value will be invested in fixed income securities in normal market circumstances subject to suitable investments being available) issued by commercial, governmental or supranational entities which may be fixed and/or floating rate and denominated in any currency from issuers domiciled in any country worldwide, and which are listed or traded on Recognised Markets. The Manager employs a global diversified strategy approach. Debt markets are subject to constant evolution depending on various factors like economic circumstances, business contexts and political situations. They offer a broad diversity of investments with a large number of countries, currencies, sectors, issuers and securities. In these complex markets, participants diverge in their evaluation of the fair value of financial assets. This dispersion, commonly called market inefficiencies may vary depending on economic conditions and the information availability. To consistently generate riskadjusted performance and to achieve the Fund's investment objective, the Manager exploits the economic situation and market inefficiencies following a three step investment process: (1) The 'Top-down' analysis which is based on country specific and regional economic conditions, geo-political situations, government fiscal policies and relevant central banks' monetary policies. (2) The 'Bottom-up' analysis identifies appropriate companies for investment using a combined two-step process; (a) Credit-analysis analysing to identify issuers with strong balance sheets that can generate sufficient cashflows to repay debts and as a result have a greater potential of not incurring liquidity difficulties with the possibility of improving their credit ratings; and (b) fundamental research relating to the profitability and growth prospects of the individual issuers. (3) The combination of both the Top-down and Bottom-up analysis detailed above will enable the construction of the portfolio. The Fund may also be exposed to the financial derivative instruments ( FDI ) outlined in the Financial Derivatives Instruments section below, whether for investment or for hedging purposes. Variable and fixed income securities are exposed to interest rate risk whose severity is measured by the duration of the debt instruments contained in the portfolio. Duration is a measure of price sensitivity of a debt security, or a portfolio of debt securities, to relative changes in interest rates. For instance, a positive duration of three years means that a security s or portfolio s price would be expected to decrease by approximately three percent with a one percent increase in interest rates (assuming a parallel shift in yield curve). The Manager will regularly conduct studies on matters which influence interest rates (such as central bank policies, inflation or volatility) to evaluate the future evolution of interest rates. If the Manager comes to the conclusion that interest rates will fall, the Manager will seek to increase the overall duration of the portfolio as a higher duration will imply a higher Fund appreciation where interest rates decrease. If the Manager comes to the conclusion that interest rates will increase, the Manager will seek to decrease the overall duration of the portfolio as a lower duration will imply a lower Fund depreciation where interest rates increase. The duration of the portfolio is expected to range between zero and three years. The Manager will manage the duration of the portfolio: (1) by selecting the investments according to their maturities; or (2) with the use of interest rate FDIs such as interest rate swaps or bond futures if the Manager wants to adjust the duration temporarily or if the use of FDI is less expensive than adjusting the direct investments of the Fund. The duration of these FDI will be aggregated to the direct investments of the Fund and the duration of the portfolio will be modified accordingly. The types of variable and fixed income securities in which the Fund can invest include securities issued or guaranteed by governments worldwide, their sub-divisions, agencies or instrumentalities, corporate debt securities (ie bonds) and corporate commercial paper, inflation indexed bonds issued both by governments and corporations, debt securities, such as bonds, of international agencies or supranational entities, debt securities whose interest is, in the opinion of bond counsel for the issuer at

7 the time of the issuance, exempt from US federal income tax (municipal bonds), freely transferable hybrid securities (such as convertible bonds and notes that combine debt and equity characteristics), freely transferable structured notes, mortgage backed securities and asset backed (including securitised, and freely transferable, collateralized bond obligations and collateralized loan obligations) securities which are transferable securities that are collateralised by receivables or other assets. The variable and fixed income securities may have fixed, variable or floating rates of interest. The types of hybrid securities that may be used include, but are not limited to, convertible bonds (which embed options and therefore leverage which is not expected to be material), contingent convertibles (a security which has the potential to convert to equity dependent/contingent upon a specified event, such as the capital ratio of the contingent convertible issuer falling below a certain threshold), warrants, and hybrid preferred debt securities (which involve a combination of bond and equity characteristics and, like bonds, pay a stream of payments to holders but the failure to pay this stream does not result in a default event). Structured notes are debt securities which embed a derivative and/or leverage. As a result, the bond s coupon, average life, and/or redemption values can become exposed to the forward movement in various indices, equity prices, foreign exchange rates, etc. The collateralized bond obligations, collateralized loan obligations, mortgage back ed securities and asset backed securities in which the Fund may invest will not embed leverage and will be sufficiently diversified. The Fund will not invest more than 30% of its Net Asset Value in the securities specified above which are below-investment grade or unrated. The Fund will not invest more than 20% of its Net Asset Value in the securities specified above which are listed or traded in, or in respect of which the issuers are domiciled in, Emerging Markets. Up to 20% in aggregate of the Fund's Net Asset Value may be exposed to mortgage backed securities and asset backed securities. The Fund s market exposure in respect of the each of the asset categories in which it may invest may vary in time and will typically range between 0% to 150% for long positions and 0% to 50% for short positions of the Net Asset Value of the Fund, depending on the Manager s analysis of the prevailing market conditions and considered in light of the investment objective of the Fund. These ranges are not limits and the actual exposures may from time to time fall outside these estimated ranges. Due to the nature of some fixed-income securities such as, but not limited to, convertible bonds or contingent convertibles, the Fund may on an exceptional basis hold equities following conversions of such fixed income securities and/or following corporate actions of issuers of such fixed income securities. The Fund will adopt as an objective the disposal of such equity investments taking into account the interests of Shareholders, market conditions and such other factors as the Manager may in its discretion consider relevant. The Fund may invest up to 10% of net assets in eligible collective investment schemes, including money market funds. Although it is intended that it will be the normal policy of the Fund to invest its assets as detailed above, in exceptional market conditions or where the Manager is of the opinion that there are insufficient investment opportunities in such assets, the Fund may also retain up to 100% of its net assets in cash and/or cash equivalents namely cash deposits, time deposits, treasury bills and commercial paper. Investors should note that while the Fund may invest substantially in cash and/or cash equivalents, including deposits, the value of the principal invested in the Fund may fluctuate. The percentage of the Fund's net assets held in cash and/or cash equivalents relative to the Fund's investments in fixed income securities and the other debt securities listed above at any one point in time will be determined by the Manager based on the investment outlook for fixed income securities and the other debt securities in which the Fund may invest as set out above. The situation where 100% of the Fund's net assets are invested in cash and/or cash equivalents may only arise where no suitable investment opportunities in fixed income securities and the other debt securities set out above are identified or where there is severe market volatility

8 Financial Derivative Instruments The Fund may employ the investment techniques and instruments listed below, for investment and hedging purposes, where provided for in the Fund's Risk Management Process. The Fund may only utilise FDIs listed in the Risk Management Process once cleared by the Central Bank. Where Derivative Specific Use hedging: risk being hedged EPM? How FDI will help achieve investment objectives? Bond Futures, Bond Forwards, Bond Swaps and Bond Options Independent profit opportunities and to hedge certain risks of investment positions Market Risk Credit risk Yes Manages Fund's exposure to bond fluctuations (take a directional view on bond price moves) which helps the Fund achieve its objective. Interest Rate Futures, Interest Rate Forwards, Interest Rate Options and Interest Rate Swaps Independent profit opportunities and to hedge certain risks of investment positions Market Risk Interest Rate Risk Yes Manage the Fund's exposure to interest rate fluctuations (take a directional view on interest rate moves) which helps the Fund achieve its objective. Currency Forward Contracts, Currency Options and Currency Swaps Independent profit opportunities and to hedge certain risks of investment positions Market Risk Currency Risk Yes Investment purposes and Hedge foreign currency exposure and prevent NAV fluctuations caused by currency movements) which helps the Fund achieve its objective. Credit Default Swap (CDS) including CDS Indices, CDS options, CDS Index Options and Independent profit opportunities and to hedge certain risks of investment positions Market Risk Credit Risk Yes Allows a view to be taken on the credit market (hedge credit risk or take a directional view on the credit market) which Credit Total Return Swaps helps the Fund achieve its objective. CDS index options manages the Fund's exposure to bond fluctuations, the credit market, hedge credit risk or take a directional view on credit markets which helps the Fund achieve its objective. Credit Total Return Swaps on bonds or bond indices manage the Fund's exposure to market fluctuations and protect

9 portfolio value. Inflation Swaps Independent profit opportunities and to hedge certain risks of investment positions Market Risk Interest Rate Risk Yes Manage the Fund's exposure to inflation linked bonds fluctuations (take a directional view on inflation rate moves) which helps the Fund achieve its objective. Volatility Indices, Futures eg VIX Future on the S&P 500 Independent profit opportunities and to hedge certain risks of investment positions Market Risk Yes Manages the Fund's exposure to market volatility and fluctuations, and protects portfolio value which helps the Fund achieve its objective. Equity Futures, Forwards, Options, Equity Index Futures, Forwards, Options Total Return Swaps Single equity derivatives are used to manage the Fund s exposure to convertible bonds whose risk profile more closely resembles the underlying equity. Derivatives on equity indices are used for independent profit opportunities. Market Risk Credit Risk Equity Risk Yes Manage the Fund's exposure to convertible bonds whose risk profile more closely resembles the underlying equity which helps the Fund achieve its objective. Derivatives on equity indices may provide independent profit opportunities. Options are contracts that give the buyer the right, but not the obligation, to sell to / buy from the seller of the contract, a specific quantity of a particular asset at a specified price. Forwards and futures are contracts that provide for a contractual obligation to purchase or sell a specified quantity of a particular asset at a specified price. Swap agreements are derivative products in which two parties agree to exchange payment streams that may be calculated in relation to a rate, index, instrument, or certain securities and a particular notional amount and which may embed an agreed fee or rate of return for the counterparty. A credit default swap is a swap agreement designed to transfer the credit exposure of fixed income products between parties. The buyer of the credit default swap makes payments to the swap s seller up until the maturity date of a contract. In return, the seller agrees that, in the event that the debt issuer defaults or experiences another credit event, the seller will pay the buyer the security s premium as well as all interest payments that would have been paid between that time and the security s maturity date. A credit default swap option is also known as a credit default swaption. It is an option on a credit default swap (CDS). A CDS option gives its holder the right, but not the obligation, to buy (call) or sell (put) protection on a specified reference entity for a specified future time period for a certain spread. The option is knocked out if the reference entity defaults during the life of the option. This knock -out feature marks the fundamental difference between a CDS option and a standard option. A credit default index swap option (CD index swap option, or CD index swaption, or CDS index option) is an option to buy or sell the underlying CDS at a specified date. A payer swaption gives the holder of the option the right to buy protection (pay premium) and a receiver swaption gives the holder of the option the right to sell protection (receive premium). Unlike a CD index swap, which is a natural

10 extension of a CDS on a single-entity to a CDS on a portfolio of entities, a CD index swaption is significantly different from a CDS option, an option on a single-entity CDS. In the case of an option on a single-entity, if the reference entity defaults before the option's expiry, the option will be knocked out and become worthless. For an option on a CDS, when a reference entity defaults before the option's expiry, the loss will be paid by the protection seller to the protection buyer when the option is exercised. Even if there is only one entity in the portfolio, a CD index swaption is still different from a single-entity CDS option: if the entity defaults before expiry, the option's seller will pay to the protection buyer the lost amount at expiry. A total return swap is a swap agreement where the underlying asset, referred to as the reference asset, is usually an equity index, or bonds. The reference asset is owned by the party receiving a set rate payment under the swap agreement. Total return swaps therefore allow the other party to gain exposure to a reference asset without actually having to own it. The Fund s exposure to total return swaps is as set out below (in each case as a percentage of Net Asset Value): Expected Maximum Total Return Swaps 10% 100% The Fund will not utilise repo contracts or securities lending. The Manager may use currency forward contracts, currency options and currency swaps to hedge currency exposure arising from the Fund s investment in assets denominated in currencies other than the Base Currency of the Fund, but is not required to do so. The Fund's global exposure will be calculated using the commitment approach as described in detail in the risk management process document of the ICAV and leverage will not exceed 100% of its net assets at any time. Simple leverage is calculated as being global exposure divided by the Fund s Net Asset Value. The Manager will measure global exposure and leverage daily. The Fund will be subject to the borrowing restrictions pursuant to the UCITS Regulations, as set out in the section entitled Borrowing Policy in the Prospectus. Investment Restrictions Please refer to the Investment Restrictions at Appendix D of the Prospectus for more information with regard to investment restrictions of the Fund. Profile of a Typical Investor Investment in the Fund is suitable for investors seeking a return through capital appreciation. The Manager expects that the Fund will have an SRRI of approximately 2. This is primarily due to the makeup of the investments in the Fund, which tend to have a moderate volatility for the purposes of SRRI calculations, when compared to other investment categories. The SRRI disclosed is correct as at the date of this Supplement but is subject to change. Investors should refer to the Key Investor Information Document for the Fund, which is available online at for the most recent SRRI

11 US PERSON INVESTOR LIMITATIONS US Persons, as defined in Regulation S (see Appendix A of the Prospectus) are permitted to invest in this Fund subject to the following limitations: Each US Person investor shall be an accredited investor as defined in Regulation D promulgated by the SEC There shall be no public offering of interests in the Fund within the US There shall be no more than 99 U.S. Person investors (as defined in Appendix A of the Prospectus) permitted at any time (across all Share Classes) in the Fund at any time

12 RISK CONSIDERATIONS There can be no assurance that the Fund s investments will be successful or that the investment objectives of the Fund will be achieved. Investors should be aware of the risks of the Fund including, but not limited to, the risks described in the Risk Considerations section of the Prospectus and below. An investment in the Fund is suitable only for persons who are in a position to take such risks. Limited Operating History; No Reliance on Past Performance The Fund has no operating history upon which prospective investors can evaluate its likely performance. The past investment performance of the Manager should not be construed as an indication of the future results of the Manager and its affiliates or the Fund. The results of other investment funds formed and accounts managed by the Manager, currently or in the past, which have or have had investment policies that are different from or similar to the investment policies of the Fund, are not indicative of the results that the Fund may achieve. The Fund will make investments in different portfolios of securities. Accordingly, the Fund s results may differ from and are independent of the results previously obtained by the Manager and those investment funds and accounts. Further, the Fund and its method of operation may differ in several respects from other investment vehicles or accounts managed by the Manager; e.g., there are different investment and return objectives and investment allocation strategies and, in certain cases, investment techniques. Performance Fee Where Performance Fees are payable by the Fund, these will be based on net realised and net unrealised gains and losses as at the end of each Calculation Period. As a result, Performance Fees may be paid on unrealised gains which may subsequently never be realised. Performance Fees are calculated on a Share-by-Share basis in order to maintain a single Net Asset Value per Share within each Class. As described in detail in the section of this Supplement entitled Fees and Expenses Performance Fees, in respect of each Calculation Period, a performance fee equal to 15% of such aggregate amount of excess performance over the amount of Benchmark Return is charged to such Class as a whole. This means that, where a performance fee is payable in respect of a Class, the Net Asset Value per Share of all Shares in that Class is reduc ed equally to reflect the payment of the per Share average of the aggregate performance fee for the Class as a whole and not the individual performance of those Shares during the relevant Calculation Period. Accordingly, it is possible that the Net Asset Value of Shares in a Class held by a Shareholder may reflect the payment of a Performance Fee even though the Net Asset Value of such Shares experienced no appreciation or even depreciated during the relevant period. Since the Net Asset Value per Share of all Shares within each Class is reduced to reflect the payment of the performance fee attributable to such Class, it is also possible that the Net Asset Value of Shares held by a Shareholder may bear a disproportionate amount of the performance fee in relation to the actual outperformance that such Shares experienced during the relevant period. However, the Performance Fee attributable to a Share that is redeemed at any time before the end of the relevant Calculation Period shall be based on the difference between the closing NAV of such Share (before accrual of the Performance Fee) as of the end of the Dealing Day on which such Share is redeemed and the level of the Benchmark in respect of such Share. Accordingly, when a Share is redeemed at any time before the end of the relevant Calculation Period: (i) the performance fee attributable to such Share could be different from the performance fee that would be payable if such Share was not redeemed until the end of the Calculation Period; and (ii) the holder redeeming such Share would not get the benefit of, or suffer the disadvantage of, the allocation of the performance fee across the Class as a whole

13 DIVIDEND POLICY The Directors do not currently intend to declare any dividends in respect of each Class of Shares. Accordingly, net investment income on the Fund s investments attributable to the Class of Share is expected to be retained by the Fund, which will result in an increase in the Net Asset Value per Share of each Class of Share. The Directors nevertheless retain the right to declare dividends in respect of such net investment income on the Fund s investments attributable to a Class of Shares in their sole discretion. In the event that the Directors determine to declare dividends in respect of a Class of Shares in the Fund, Shareholders will be notified in advance of any such change in the dividend policy (including the date by which dividends will be paid and the method by which dividends will be paid) and full details will be disclosed in an updated Supplement

14 FEES AND EXPENSES Investors should refer to the section Fees and Expenses in the Prospectus for details of certain fees and expenses payable in respect of the ICAV and the Fund. The following additional fees and expenses apply in respect of the Fund. Management Fees In respect of its provisions of management services to the Fund, the Manager will receive a management fee (the " Management Fee") on a sliding scale at a maximum rate of 0.05% of the Net Asset Value of the Fund or the relevant Class, subject to a minimum annual fee of 75,000. In addition, in respect of its provision of investment management services to the Fund, the Manager will receive an investment management fee (the Investment Management Fee ) on a sliding scale at a maximum rate of 0.03% of the Net Asset Value of the Fund or the relevant Class, subject to a minimum fee of 25,000. The Management Fee and the Investment Management Fee will accrue on a daily basis and be paid monthly in arrears together with the reasonable vouched out of pocket expenses incurred by the Manager in the performance of its duties. Investment Advisory Fees The Investment Adviser will receive an investment advisory fee (the "Investment Advisory Fee") in respect of each Class as set out in the table below for investment advisory services to the Fund. The Investment Advisory Fee is accrued daily and paid monthly, in arrears. Share classes Investment Advisory Fee per annum A USD 1.00% A EUR 1.00% A CHF 1.00% I USD 0.65% I EUR 0.65% I CHF 0.65% Z USD Z EUR Z CHF None None None For the purposes of calculating the Investment Advisory Fee for any Business Day, the NAV of the Fund attributable to a class is determined by or under the direction of the Directors, based on the Fund's NAV as of the close of the prior Business Day adjusted to reflect any applicable redemptions and subscriptions. Notwithstanding the foregoing, the Investment Adviser may, in its sole discretion, during any period, elect to waive a portion of its fees with respect to the Fund or any Class without notice to Shareholders. In addition, the Fund may issue Shares of a separate Class that may calculate the Investment Advisory Fee differently or charge a lower Investment Advisory Fee. The Investment Adviser may, from time to time and at its sole discretion, rebate any or all of its fees to some or all Shareholders

15 Performance Fees The Investment Adviser will receive a performance fee (the "Performance Fee") calculated as set out below. The Performance Fee payable will be equal to 15% of the aggregate outperformance in value of each Class of Shares (other than the Class Z USD, Class Z EUR and Class Z CHF Shares) over the amount of the Benchmark Return (as defined below) for that Class of Shares multiplied by the average number of Shares of that Class in issue during the Calculation Period. The manner in which the outperformance in value of relevant Class of Shares and the Benchmark Return are calculated for these purposes is described in more detail below. No Performance Fee shall be payable in respect of the Class Z USD, Class Z EUR and Class Z CHF Shares. Performance Fees are accrued at each Valuation Point and payable quarterly in arrears, calculated by the Administrator and verified by the Depositary as at the last Business Day in the three month periods ending on 31 March, 30 June, 30 September and 31 December in each year (each a Calculation Date ). Where a Shareholder requests the Fund to redeem their Shares prior to the end of a Calculation Period, any accrued but unpaid Performance Fee in respect of such Shares will be deducted from the redemption proceeds. For the purposes of calculating the Performance Fee, a calculation period shall generally commence on the Business Day following the immediately preceding Calculation Date and end on the Calculation Date as at which the Performance Fee is to be calculated ( Calculation Period ). For the purposes of calculating the Performance Fee during the first Calculation Period of a Class of Shares, the ini tial offer price of the relevant Class of Shares will be taken as the starting point for the calculation of the Performance Fee for the first Calculation Period and the first Calculation Period will be the period commencing on the Business Day immediately following the close of the Initial Offer Period and ending on the next Calculation Date. The outperformance in value in respect of Shares in a Class shall be calculated as at each Calculation Date based off the Closing NAV of those Shares for that Calculation Period. For the purposes of such calculation, the Closing NAV shall be the Net Asset Value per Share at the Calculation Date as at which the calculation is being made before accrual of the Performance Fee. The initial Closing NAV was the initial offer price for the respective Share Class. The Benchmark Return shall be the aggregate notional return which would have accrued in that Calculation Period had a sum equal in value to the Net Asset Value per Share at the preceding Calculation Date been invested at the commencement of the Calculation Period at an annual rate of the benchmark value + 1.5% where the benchmark value is composed of the 3 month LIBOR in the respective currency of the relevant Class of Shares (the Benchmark ). The Performance Fee will only be payable in circumstances where the Closing Net Asset Value of the relevant Class of Shares exceeds the High Water Mark per Share (as defined below). Any underperformance against the Benchmark in previous periods will be clawed back before the Performance Fee becomes due in subsequent periods. The High Water Mark per Share is the greater of the higher of the last Net Asset Value per Share as at which a Performance Fee was payable in respect of that Share or, in the case of Shares in respect of which no Performance Fee has previously been payable, the Net Asset Value per Share at which those Shares were issued (the High Water Mark per Share ). If the Investment Advisory Agreement is terminated during a Calculation Period the Performance Fee in respect of the then current Calculation Period will be calculated and paid as though the date of termination were the end of the relevant Calculation Period

16 The calculation of the Performance Fee will be verified by the Depositary. Share classes Performance Fee A USD 15% above USD 3 Month LIBOR + 1.5% A EUR 15% above EUR 3 Month LIBOR + 1.5% A CHF 15% above CHF 3 Month LIBOR + 1.5% I USD 15% above USD 3 Month LIBOR + 1.5% I EUR 15% above EUR 3 Month LIBOR + 1.5% I CHF 15% above CHF 3 Month LIBOR + 1.5% Equalisation Policy Where Shares are acquired at a price based on the Net Asset Value per Share, when Shares are subscribed for, certain adjustments will be made to reduce inequities that could otherwise result to the Shareholder or to the Fund. This is done so that: (i) the Performance Fee paid to the Investment Adviser is charged only to those Shares which have appreciated in value since their acquisition, (ii) all Shareholders of a Class will have the same amount per Share at risk, and (iii) all Shares in the same Class have the same Net Asset Value per Share. a. Where Shares are subscribed for at a time when the Net Asset Value per Share is less than the High Water Mark per Share of the relevant Class, the Shareholder will be required to pay a Performance Fee with respect to any subsequent appreciation in the value of those Shares. With respect to any appreciation in the value of those Shares from the Net Asset Value per Share at the date of subscription up to the High Water Mark per Share, the Performance Fee will be charged at the end of each Calculation Period by redeeming such number of the Shareholder s Shares of the relevant Class as have an aggregate Net Asset Value (after accrual for any Performance Fee) equal to a percentage of any such appreciation of the relevant class of Shares (a "Performance Fee Redemption"). The aggregate Net Asset Value of the Shares so redeemed will be paid to the Investment Adviser as a Performance Fee. Performance Fee Redemptions are employed to ensure that the Fund maintains a uniform Net Asset Value per Share of each relevant Class. As regards the Shareholder s remaining Shares of the relevant Class, any appreciation in the Net Asset Value per Share of those Shares above the High Water Mark per Share of that Class will be charged a Performance Fee in the normal manner described above. b. If Shares are subscribed for at a time when the Net Asset Value per Share is greater than the High Water Mark per Share of the relevant Class, the Shareholder will be required to pay an amount in excess of the then current Net Asset Value per Share of that Class equal to a percentage of the difference between the then current Net Asset Value per Share of that Class (before accrual for the Performance Fee) and the High Water Mark per Share of the relevant Class of Shares (an "Equalisation Credit"). At the date of subscription, the Equalisation Credit will equal the Performance Fee per Share accrued with respect to the other Shares of the same Class in the Fund (the "Maximum Equalisation Credit"). The Equalisation Credit is payable to account for the fact that the Net Asset Value per Share of that Class has been reduced to reflect an accrued Performance Fee to be borne by existing Shareholders of the same Class and serves as a credit against Performance Fees that might otherwise be payable by the Fund but that should not, in equity, be charged against the Shareholder making the subscription because, as to such Shares, no favourable performance has yet occurred. The Equalisation Credit ensures that all holders of Shares of the same Class have the same amount of capital at risk per Share. The additional amount invested as the Equalisation Credit will be at risk in the Fund and will therefore appreciate or depreciate based on the performance of the relevant Class of Shares subsequent to the issue of the relevant Shares but will never exceed the Maximum Equalisation Credit. In the event of a decline as

17 at any Valuation Point in the Net Asset Value per Share of those Shares, the Equalisation Credit will also be reduced by an amount equal to a percentage of the difference between the Net Asset Value per Share of the relevant Class of Shares (before accrual for the Performance Fee) at the date of issue and as at that Valuation Point. Any subsequent appreciation in the Net Asset Value per Share of the relevant Class will result in the recapture of any reduction in the Equalisation Credit but only to the extent of the previously reduced Equalisation Credit up to the Maximum Equalisation Credit. At the end of each Calculation Period, if the Net Asset Value per Share (before accrual for the Performance Fee) exceeds the High Water Mark per Share of the relevant Class, that portion of the Equalisation Credit equal to a percentage of the relevant Class of Shares of the excess, multiplied by the number of Shares of that Class subscribed for by the Shareholder, will be applied to subscribe for additional Shares of that Class for the Shareholder. Additional Shares of that Class will continue to be so subscribed for at the end of each Performance Period until the Equalisation Credit, as it may have appreciated or depreciated in the Fund after the original subscription for Shares of that Class was made, has been fully applied. If the Shareholder redeems his Shares of that Class before the Equalisation Credit has been fully applied, the Shareholder will receive additional redemption proceeds equal to the Equalisation Credit then remaining multiplied by a fraction, the numerator of which is the number of Shares of that Class being redeemed and the denominator of which is the number of Shares of that Class held by the Shareholder immediately prior to such redemption in respect of which an Equalisation Credit was paid on subscription Administration and Depositary fees The Fund will be subject to an administration fee in relation to administration services provided by the Administrator to the Fund and to a custody and depositary fee in relation to the services provided by the Depositary to the Fund. Fund accounting fees payable to the Administrator will not exceed 0.10% of the Net Asset Value of the Fund per annum, subject to a minimum monthly fee applicable to the Fund not to exceed 8,000. The fees of the Administrator will accrue at each Valuation Point and will be billed quarterly in advance and are due and payable in advance on the first day of each calendar quarter. Custody fees, payable in respect of safekeeping of assets (which may include certain sub-custody fees) will not exceed 0.025% per annum of the value of the assets of the Fund held in the Depositary s custodial network. The Depositary will also receive depositary fees in respect of its cash flow monitoring, ownership verification, record keeping and oversight duties, which will not exceed 0.025% of the Net Asset Value of the Fund per annum, subject to a minimum monthly fee applicable to the Fund of 2,600. Other fees and expenses, may be payable to the Administrator and/or Depositary, including fees in respect of transfer agency, transaction processing and settlement fees and tax reclaim services. These fees are on normal commercial rates and are primarily charged on a pertransaction basis. These fees in respect of the Depositary will accrue at each Valuation Point and shall be payable in arrears on the last Business Day of each month, and in respect of the Administrator, will accrue at each Valuation Point and shall be payable in advance quarterly on the first Business Day of each quarter. The ICAV will reimburse the Administrator for reasonable out-of-pocket expenses incurred out of the assets of the Fund and will also reimburse the Depositary out of the assets of the Fund for reasonable out-of-pocket expenses incurred by the Depositary and for fees (which will not exceed normal commercial rates) and reasonable out of pocket expenses of any sub-custodian appointed by the Depositary and will be liable for transaction charges (which will not exceed normal commercial rates). The expenses of the Depositary shall accrue at each Valuation Point and shall be payable monthly in arrears, and the expenses of the Administrator shall accrue at each Valuation Point and shall be payable quarterly in arrears. Sales Charge There will be no sales charge applicable to the Fund

18 Redemption Charge There will be a maximum redemption charge of 3% applicable to each Class of Shares of the Fund. Expenses The Fund pays all of its own operating expenses and bears its pro rata share of the operating expenses of the ICAV which may be incurred by the Fund, the ICAV, the Manager, the Investment Adviser or their respective affiliates, including, but not limited to, the following expenses: (i) external legal, accounting, auditing, and other professional expenses; (ii) administration fees and expenses; (iii) certain insurance expenses; (iv) research expenses (including research-related travel), (v) custodial and sub-custodial fees and expenses, (vi) transfer agent and registrar fees; (vii) the cost of valuation services; (viii) company secretarial fees, (ix) the cost of preparing, printing, publishing, translating and distributing (in such languages as may be necessary) prospectuses, supplements, annual reports, financial statements, notices and other documents or information to current and prospective Shareholders (including the costs of developing and enhancing computer software and electronic transmission techniques to distribute such documents or information), (x) the expense of publishing price and yield information in relevant media, (xi) the costs and expenses of obtaining and/or maintaining bank services; (xii) the costs and expenses of obtaining and/or maintaining authorisations or registrations with the regulatory authorities in any jurisdiction, including any levy applied by the Central Bank; (xiii) the cost of listing and maintaining a listing on any stock exchange, (xiv) marketing and promotional expenses; (xv) Directors fees, (xvi) the cost of convening and holding Directors and Shareholders and other meetings; (xvii) all expenses arising in respect of the termination or liquidation of the ICAV or the Fund; (xviii) organizational expenses; (xix) the Management Fee; (xx) litigation or other extraordinary expenses; (xxii) investment expenses such as commissions and brokerage fees (including fees related to negotiation of commissions and brokerage fees); (xxi) interest on margin accounts and other indebtedness; (xxii) taxes, including without limitation, withholding, net income, franchise, valued added, stamp and transfer taxes, along with any interest and penalties thereon or other additions to such taxes and (xxiii) other expenses related to the purchase, sale, monitoring or transmittal of the Fund s or ICAV s assets as will be determined by the Board of Directors in its sole discretion. Organizational expenses of the Fund, including expenses incurred in the formation of the Fund and the offering of Shares, are borne by the Fund and are being amortized over a period of 36 months from the date the Fund commenced operations. Switching Charge An exchange fee not to exceed 1% of the redemption proceeds of the Class of Shares which is being exchanged with another Class of Shares of the Fund may be payable on each exchange. If the exchange fee is charged, then the redemption proceeds of the Class of Shares whic h is being exchanged will be reduced by the amount of the exchange fee and the net amount applied in subscribing for Shares of the other Class. The Directors or their delegates may waive the payment of the exchange fee at their discretion. Where charged, the exchange fee will be retained by the ICAV. Anti-Dilution Levy The actual cost of purchasing investments may be higher or lower than the value used in calculating the Net Asset Value. These costs may include dealing charges, commission and transaction charges and the dealing spread may have a materially disadvantageous effect on a Shareholder s interest in the Fund. To prevent this effect, known as dilution, the Fund may charge an anti-dilution levy in the circumstances set out in the following paragraph. On any Dealing Day where there are net subscriptions or net redemptions, the Directors may determine (based on such reasonable factors as they see fit, including without limitation, the prevailing market conditions and the level of subscriptions or redemptions requested by Shareholders or potential Shareholders in relation to the size of the Fund) to add an anti-dilution levy to the subscription price on that Dealing Day or deduct an anti-dilution levy from the redemption payments, in each case not to exceed 5% of Net Asset Value of the Shares being issued or