Drexel Morgan Capital Advisers, Inc.

DUE DILIGENCE QUESTIONNAIRE

Firm Name:
Date Prepared:

Please complete the following questionnaire as part of our due diligence process. The purpose of this
questionnaire is to ascertain the investment capabilities of the Firm. The questions are arranged in sections,
each with multiple parts. We encourage you to use additional pages and to add attachments to help provide
clear and concise answers.

Please submit a copy of the following information with the completed questionnaire:

 The Firm’s most recent disclosure document (Form ADV or equivalent provided to any state, province or
regulatory agency)

 Evidence of the Firm’s fidelity bond and professional liability insurance coverage

 The Firm's latest financial statements and capitalization of the Firm as of the latest audited financial
statement

 Audited and unaudited Financial Statement of the Fund for the last five years, as provided to the

investors

 Offering Memorandum

 Articles of Association/Memorandum of Association or Partnership Agreement

 Subscription Documents

 Investment Management Agreement between the Fund and the Advisor

 Fund Registration/Formation Documents

 Administrators Agreement/Custodian Agreement

 Minutes and resolutions of the Board of Directors and /or Shareholders for the last three years

 Existing Side Letters, “Most Favored Nations” Agreements, and similar agreements with other investors

 Details of current outstanding loans to or from the Fund and related loan agreements

 The Firm’s compliance policies and procedures (i.e., your compliance manual)

 Copies of internal guidelines/policies regarding:

 trade allocations

 insider trading prohibitions

 account churning prohibitions.

 Valuation policy

 Code of Ethics

 Proxy voting policy

  Marketing literature

In the event of amendments to the aforementioned documents, please ensure that we will receive those directly
from you within reasonable time.
1 INVESTMENT MANAGER INFORMATION
CONTACT INFORMATION
Company name:
Address:
Telephone:
Fax:
E-mail:
Name of contacts:
Title of contacts:
Telephone of contacts:
E-mail of contacts:
Internet/website:

COMPANY
Please give a brief history of the
company and, if applicable,
group structure:
What type of legal entity is your
company?
Provide a chart of the legal
structure of the company and
list all branch or affiliate offices:
Date and place of incorporation
and registered number:
Domicile:
Subsidiaries, branch offices or
other locations, if any:
What functions are performed at
these subsidiaries, branches
and locations?
Which regulatory authority is the
company registered with?
 Name(s) of
regulatory bodies:
 Date of
registration:
 Registration
number:
 Scope of
registered
activities:
 List individuals
also registered
with the same
authority in
relation to the
company’s
registration:
Specify reliance on any
regulatory exemptions:
Please specify the date of the
most recent regulatory
inspection if any.
Provide a discussion of any
relevant regulatory agency staff
examination or enforcement
action regarding the Firm or its
affiliates during the past five
years. Your response is to
include a discussion of the
results, including
recommendations, of any such
examinations to the extent such
information may be disclosed.
Please provide copies of any
deficiency letter issued and any
response thereto and all such
reports and any responses
generated in the audit.

List any affiliations,

directorships and memberships
of the company and/or its
principals:
Specify nature of services
provided by the company
(discretionary investment
management or advisory):

OWNERSHIP
Describe the company’s and
group ownership structure,
name of its owners, their
percentage ownership, and their
role within the company:
Detail any changes in the last 3
years:
Are there any plans for further
ownership changes?

CORPORATE GOVERNANCE
Who are the Directors? Please
provide details of relationship to
the firm.
Are there independent
Directors? Please provide
details.
How often does the
Board/Governing body meet?

ORGANIZATION
How many full-time employees
are there?
Please provide a short
background of principals
(education, career background,
etc.):
 Please, attach
information if
necessary.
Who are the key principals?
Please give details and
descriptions of other
commitments or interests of the
principals:
How many investment
professionals (portfolio
managers, analysts, etc) are in
the company and what due
diligence was carried out prior to
their appointment?
What are the average years of
professional experience in the
company, both years as a
professional as well as years in
the company?
Please enclose an organization
chart depicting the names of
senior managers in charge of
the following areas and
headcount:
 Trading:
 Reporting,
performance
analysis:
 Strategy,
research and
development:
 IT/Programming:
 Administration:
 Risk
Management:
 COO/Operations:
 Legal:
 Compliance:
 Marketing and
business
development:
 Others (please
specify):
What has been the turnover rate
among the company’s
personnel? Please list
joiners/leavers of key staff over
last (two) years.
How does the company attract
new people?
Explain the compensation
scheme for key staff (particularly
the bonus structure and the
manager’s share of the
performance fee):
How are incentive fees allocated
once received? (e.g. investment
vs. marketing personnel)
Please discuss possible
retirement of key individuals
with succession plans:
Where do the primary trading,
research and portfolio
management activities take
place?
Where are the accounts
maintained?
Are outside representatives or
consultants used for any
activities? If so, give details:
Please provide details of the
appointed legal counsel and
auditors?
Have the auditors ever issued
qualified financial statements?
Do you have a relationship (e.g.
seeding arrangement) with
another investment manager?
Do you share office space with
another investment manager? If
so, please give details.
Does this create conflicts and, if
so, how are those conflicts
managed?
Is the firm a member of AIMA or
any other relevant trade
association?

MANAGER REFERENCES
Please provide at least two
references for the company and
for each of the principals
involved in the management of
the fund.
 Name:
 Profession:
 Company:
 Title:
 Telephone:
 Fax:
 E-mail:
 Current and past
relationship with the
company or its
principal:

MANAGER TRACK RECORD

Number of
portfolios/accounts/products
managed by the company:
Please specify total assets
under management to the
nearest million (US$)$), as of
the most recent quarter end for
each of the following categories:
1. Separate accounts
2. Mutual Funds
3. Other Pooled Vehicles
Number of funds
managed/advised by the
company:
 Names and sizes
of these funds:
Total assets managed/advised
by the company.
Include the categories of
assets/mandates by strategy,
country and client group.
Provide the assets under
management in each such
category/mandate to the nearest
million (US$), as of the most
recent quarter end.

Show the growth of assets

under management (total and
breakdown by style) over the
last 5 years:
What is the percentage of
assets under management
represented by your largest
client, and by your 5 largest
clients? Provide a list of the 5
main clients (incl. size of assts,
duration of client relationship):
Oldest continuously active
account:
Largest current account:
Length of track record:
Has the track record been
audited? If yes, by whom?
What is the level of trading
activity of the portfolio? Please
provide information in terms of
coverage of assets/instruments
measured and whether numbers
are for notional or nominal
values. If relevant please
indicate average holding periods
for long and short positions.
Average annual commission
costs as a percentage of total
assets:
 Brokerage to
equity ratio:
 Administrator fee
to equity ratio:
 Custodian fee to
equity ratio:
 Auditors’ fee to
equity ratio:

RISK MANAGEMENT
Discuss position concentration
(e.g. industries, countries) and
stop-loss limits and their
management:
How often are these limits
applied? When were their
peaks observed?
How do you adjust your risk
capital allocation when there is
a significant increase in equity
due to trading profits?
Do you use an external risk
monitor? If so, who and why
that particular one?
Does the company maintain a
written risk management policy?
If so, please provide. If not,
please describe the risk
management policy:
How do you measure minimum
liquidity of positions?
What risk system/software is
used in your middle office?

OPERATIONAL RISK
How does the company define
operational risk?
Does the company have an
operational risk management
framework? Does the
framework consider how the
company identifies, assesses,
monitors and controls
operational risks? What sort of
offsite arrangements are
maintained in the case of a
disaster (e.g. terrorist attack,
natural disaster)?
Are the employees responsible
for the operational risk
framework adequately
independent from the business
and appropriately trained? (For
example, does the company
have a risk or internal audit
function that is responsible for
the framework?)
Does the board of directors
approve and regularly review
the operational risk
management framework?
Who is responsible for
implementing the operational
risk framework? Are there clear
lines of responsibility across
senior management?
How does the company ensure
that employees understand their
responsibilities for implementing
the operational risk framework?
What ongoing assurance does
the firm provide to clients over
the effectiveness of its
operational risk framework? If a
SAS70 has been completed,
please list the key weaknesses
identified in the last 5 years.

OPERATIONAL RISK FOR OUTSOURCED FUNCTIONS

What due diligence process
does the company perform prior
to the appointment of an
outsourced service provider?
Please specify if this process
differs for different service
providers, e.g. custodian,
administrator and prime broker.
Are service level agreements in
place between the company and
its outsourced service
providers? If so, how does the
company monitor services
against the prescribed
standards?
Does the company perform
periodic reviews of the
outsourced service providers?
What ongoing assurance does
the firm perform over the
effectiveness of the controls at
outsourced service providers?

2 INVESTMENT RESEARCH
What outside sources are used?
What proportion of research is
generated internally?
Describe the typical flow of an
investment idea from inception
to a trading position:
Describe your back testing of
investment ideas:
Have you published or
commissioned any
research/academic papers?
Please give details.

3 EXECUTION & TRADING

Describe members of the trade
execution group, their functions
and experience:
Who is authorized to place
orders on behalf of the fund?
Is there clear separation of
functions between front and
back office?
How are executed trades
allocated to accounts? Please
explain in detail, particularly with
respect to split fills:
Are any positions allocated as of
the end of the trading day or
immediately after execution,
rather than prior to or at the time
of order entry?
Does the manager undertake
any cross trades or netting and
if so, what procedures are
utilized?
What is the company’s policy
with respect to trading and
system errors? Please explain
in detail:
Have there been any major
“trade breaks”? If so, please
describe.
Are trades reconciled to broker
confirmations? How often?
Are cash positions reconciled?
How often?
What is the company’s policy
with respect to personal account
dealing by:
 Staff?
 Principals?
 The company itself?
Is there a restricted list?
Does the company make use of
“soft dollars”?
Does the company or advisor
have any relationship which
may affect its trading flexibility,
e.g. associated broker/dealer?

4 Compliance
Who is responsible for
compliance in the company?
Does a dedicated compliance
team exist? Does the company
maintain a written compliance
manual? If yes, please provide
a copy.
When was the manual last
updated?
Provide a summary of the Firm’s
policy and procedures for
selecting broker-dealers and
allocating brokerage among
broker-dealers. Include a
discussion of the Firm’s
considerations in determining
the commission rate(s) at which
brokerage transactions are
executed and the extent to
which commission rates may
vary.
Does the Firm have written
policies governing the use of
client brokerage to obtain
research and other services
("soft dollar arrangements")? If
not, please describe the
unwritten policies in place. If
yes, please provide a copy of
the written policies.
Provide a summary of the Firm’s
policies and procedures
regarding aggregated or “block”
trades and the allocation of
securities purchased for multiple
clients. In particular, describe
how partially filled brokerage
orders are equitably allocated
among your clients.
Provide a summary of the Firm’s
policies and procedures which
seek to ensure that investment
opportunities of a limited nature
(including, but not limited to,
participation in IPOs) are
equitably allocated among your
clients. Provide a summary of
the Firm’s policies and
procedures regarding the
correction of trade errors.
Does the Firm have written
policies governing trading
practices, principal and cross
trades, and trade errors? If not,
please briefly describe the
unwritten policies in place. If
yes, please provide us with a
copy of the written policies.
Please describe any current or
potential conflict of interest or
any relationships which may
affect trading, trading flexibility,
e.g. associated broker/dealer.
Are there any potential conflicts
the investor should be aware
of?
Are key people invested in the
funds? If yes, under which
terms and conditions?
Does the firm and/or fund have
distribution agreements with
managers and or distributors?
What are the company’s
employees’ own account
dealing procedures?
Does the company have regular
compliance monitoring
programs? If so, please give
brief details:
Has the company or its
principals ever been the subject
of any action or warnings from a
regulatory body?
Has any application to a
regulatory body on behalf of the
company ever been withdrawn?
If so, please give details:
Do any of the company’s
principals have other business
involvement?
If yes, describe and quantify
how much of their professional
time is dedicated to each:
Has an employee of the
company ever been refused
authorization or had it
withdrawn? If so, please
provide details:

5 LEGAL
Are there or have there in the
last 10 years, been any criminal,
civil, regulatory or administrative
proceedings against (i) the
Investment Manager or any of
its principals or (ii) the
Investment Product or any of its
directors any similar such
matters including reparations,
arbitrations and negotiated
settlements? If so, please
provide details:

6 ANTI-MONEY LAUNDERING POLICY

Confirm that the company has
established Anti-money
Laundering (AML) procedures:
Please advise which
jurisdiction’s regulations you
comply with:
1 Please advise who your AML
officer is:
Elaborate on the procedure to
ensure compliance with AML
policies including details of any
training provided to employees:
Please provide a summary of
your AML procedures.
If this function is delegated to an
outside contractor (i.e.,
administrator):
 Include the name of
the company:
 Detail the duration
of the relationship:
 How do you ensure
that their AML
procedures are in
compliance with
industry practice?

7 INSURANCE
Do you currently hold insurance
for the following:

 Directors’ &
Officers’ Liability?
a) For the funds
b) For the
management
companies
 Professional
Indemnity or
Errors and
Omissions?
 Crime (Employee
fidelity/third party
fraud)?
 Key Person
Insurance?
Please provide coverage limits
for each.

8 BUSINESS CONTINUITY
Does the company have a
formal business continuity
management plan? Please
describe the basic provisions:
What contingency plans do you
have in terms of:
 Computer system
fault?
 Incapacitated
investment
decision makers?
 Technical failure
at prime broker’s
location?
 Presence of in-
house computer
technician?
 Back-up systems?
 Viral outbreaks?
9 FUND INFORMATION (IF YOU MANAGE SEVERAL FUNDS, PLEASE
COMPLETE ONE FORM PER FUND).
FUND DETAILS
Contact details:
 Name:
 Address:
 Telephone:
 Fax:
Currency of participation
interests:
List share classes and
denominations of each share
class
Date of inception:
Is the fund regulated? If so,
please provide details
(including where and by who)
and explain any requirements
for regulation:
Describe the fund’s ownership
structure?
Is the fund listed on any
exchange(s)?
 E-mail:
 Internet:
 Fund structure:
 Legal entity:
 Domicile

FEES
Management fee:
Administration fee:
Incentive fee (or performance
allocation, preferential
dividend, etc.):
Hurdle rate/high water mark:
Sales fee:
Redemption fee:
Any other fees:
What costs, if any, are
recharged to the fund?
Are your fees calculated and
charged in terms of
equalization structure by:
 Issuing a different series of
shares every time
shareholders subscribe?
 The Equalization Share
method?
 The Equalization and
Depreciation Deposit
method?
 The Equalization-
Adjustment method?
 Others? (Please describe):
Do you ever share fees with a
third party?
Have any investors been
granted rebates?
Disclose any soft dollar/soft
commission agreement(s):
Ratio of expenses (other than
the company’s management
and incentive fee) to NAV:
Highlight unamortized launch
costs, if any, separately

INVESTMENT/REDEMPTION AND LOCK UP TERMS – BY SHARE CLASS IF DIFFERENT

Minimum initial investment:
Minimum investment
subscription?
Minimum subsequent
investment:
Subscription frequency (when):
Redemption frequency (when):
Redemption notice period:
Does the fund have any lock-up
period or any other liquidity
constraints (e.g. suspension of
redemptions and gates)?
Is there a “gate” and how is
that computed (on an
aggregate basis or investor by
investor basis) and how is the
amount in excess of the gate
treated?
Under what conditions would
these restrictive provisions be
invoked?
What is the maximum period
that a shareholder would be
prevented from having their
redemption notice accepted
and redeemed?
After a shareholder has given
the fund administrator the
minimum required notice for
redemption, please state the
maximum number of days it
will take to receive the
redemption proceeds, including
all possible restrictions (e.g.
gate provisions etc).
Has the manager undertaken
any analysis of costs attached
to liquidating the fund over
certain time frames; for
example, 1 day, 3 days, 5 days,
1 month etc? If so, please
enclose.
Does the fund allow for
transfer of shares or limited
partnership interests between
nominees?
Are there any independent
fund directors, please provide
details:
How often does the board
meet?
Please provide roles and
responsibilities of the
Directors.

FUND DIRECTORS
Please list the number of
directors, their names, the
degree of relationship with
investment manager and
service providers, directors’
fees paid and the duration of
the company’s professional
relationship with each director:
Is there D&O insurance?
Are there provisions in the fund
documentation relating to
indemnification of directors?

ADMINISTRATION/OPERATIONS
Is the administration of the
fund performed in-house? If
performed in-house:
 Explain why this role is
performed in-house.
 What are the tasks of
the administration?
 Does any independent
party review these
calculations?
 What systems are used
for administration?
Are the computer systems
developed in-house or does the
company use standard
products?
If services are delegated to
outside contractors:
 Which tasks are
fulfilled by external
service providers
(include names of
companies)?
 Detail the duration of
the relationship.
 Which services does
your administrator
provide (e.g. direct
reporting to
investors)?
Please outline the process for
valuations, reconciliations, and
confirmation of assets.
Have you experienced any
material discrepancy between
your administrator and your
own internal estimate of NAV
calculation? If so, please
describe.

SERVICE PROVIDERS
Do all the Funds run by the
company have the same service
providers? If not, why?
FUND ADMINISTRATOR – LIST OF SERVICES PERFORMED (COMPLETE THIS SECTION FOR ALL ADMINISTRATORS USED)
Details:
 Name:
 Address:
 Telephone:
 Fax:
 E-mail:
 Name of contact:
 Telephone of contact:
 E-mail of contact:
Duration of the company’s
professional relationship with
the administrator.
Are there provisions in the fund
documentation relating to
indemnification of the
administrator?
Please provide contact names,
telephone and email for the
following functions:
 Financial Reporting
 Valuations / Fund
Accounting
Have ongoing due diligence
visits been conducted? If so, by
whom and of what frequency?

FUND PRICING
Where assets are valued in-
house, please provide a
summary of the controls in
place to ensure accuracy.
Who is responsible for
obtaining valuations and how
are any difficult-to-price assets
or instruments priced?
What is the percentage of
funds not held in exchange
traded instruments?
Does the fund hold investments
in which the underlying market
has limited liquidity?
Does the fund take positions in
any non-traditional instruments
such as pre-insurance,
underwriting and bridging?
Are at least three independent
prices available for non-
exchange traded investments?
Please list the sources and
methodology of valuation for
instruments that have limited
liquidity or are non-exchange
traded?
Are any investments (as
examples: trade finance,
private placements, private
equity, highly structured credit
instruments, insurance,
mezzanine loans, warrants or
options) priced using a yield-to-
maturity, quantitative model, or
other non market traded pricing
practice?
If yes, please explain the pricing
methodology.
Please describe how the fund
directors ensure that the fund
administrator obtains and
verifies independent third party
valuations for these
investments?
What is the procedure to price
any investments where the
purchase or sale of the
investment would create a
notable or material market
impact?

PRIME BROKER – LIST OF SERVICES PERFORMED (COMPLETE THIS SECTION FOR ALL PRIME BROKERS USED)
Details:
 Name:
 Address:
 Telephone:
 Fax:
 E-mail:
Duration of your professional
relationship:
Are the assets held in the name
of the fund? If not, please
explain:
Are all or any of the assets
segregated from the prime
broker’s assets?
Do you use multiple prime
brokers? If so, please give
details:
How is cash held at the prime
broker?
Are long and short accounts
held with the prime broker
netted off?
Does the prime broker have
insurance? If so, please detail
scope:
Can the assets of the fund be
pledged or in any other manner
used to support or benefit
another entity’s liabilities?
Does the company or any
affiliate ever take “custody” of
client assets?
Which other services offered by
the prime broker do you or
have you utilized?
Are there provisions in the fund
documentation relating to
indemnification of prime
broker?
Have ongoing due diligence
visits been conducted? If so, by
whom and of what frequency?

CUSTODIAN
Details:
 Name:
 Address:
 Telephone:
 Fax:
 E-mail:
Duration of the company’s
professional relationship with
the custodian:
How are sub-custodians
treated? Are you provided with
notice when the custodian
transfers assets to a sub-
custodian?
How is the risk of loss treated?
Are there provisions in the fund
documentation relating to
indemnification of the
custodian or sub-custodian?
Have ongoing due diligence
visits been conducted? If so, by
whom and of what frequency?

AUDITOR
Details:
 Name:
 Address:
 Telephone:
 Fax:
 E-mail:
Duration of the company’s
professional relationship with
the auditor:
Confirm that the auditor is in
good standing in its
domicile/jurisdiction.
Have the auditors ever issued
qualified financial statements
for the fund?
Have ongoing due diligence
visits been conducted? If so, by
whom and of what frequency?

LEGAL ADVISER(S)
Details:
 Name:
 Address:
 Telephone:
 Fax:
 E-mail:
Duration of the company’s
professional relationship with
the legal advisers:

GENERAL
Has the administrator, prime
broker, custodian, lawyer or
auditor or any service provider
been changed within the past 5
years? If so, why and please
give name of previous provider?
Please provide details of the
fees paid to your service
providers, on an annual basis
(including administrator).
Do either the prime broker(s)
or administrator hold a credit
rating and are they insured?
Please provide details:

FUND PROMOTERS
What external promoters or
distributors, if any, have been
appointed by the company for
the fund?
What is the regulatory status
of the external promoter
and/or third party distributor?
Duration of the company’s
professional relationship with
any promoter:

10 DATA OVERVIEW
FUND ASSETS
Please list the fund’s assets
under management (leveraged
and unleveraged):
What percentage of assets is
represented by the largest
investor?
Please list the size of assets by
investment vehicle:
List the total assets under
management and their
respective changes over the
last 2 years:
Please provide net in/out flows
over the last 2 years.
Please provide your highest
historical inflow and outflow in
a given quarter:
What is the percentage of
“benefit plan investors?”

CAPACITY MANAGEMENT
What is the maximum capacity
of your fund?
What is the projected time
frame to reach capacity?
Will new money be accepted
after capacity is reached?
How will front/back-office
operations be affected in the
event of significant increase in
assets under management, and
what measures will be taken?

WITHDRAWALS
What were the 5 largest
withdrawals in your fund since
inception?
 Date:% of NAV:
 Reasons:

MANAGEMENT TEAM’S CO-INVESTMENT

What is the total amount
invested by the
principals/management in the
fund and other investment
vehicles managed pari passu
with the fund?
How is such co-investment
structured and what are the
key terms?
Has the management reduced
its personal investment?
 Date:
 Amount:
 Reasons:
Disclose conditions of
subscription/redemptions of
team and owners’ assets:
List the Fund affiliated
transactions for the past three
years:

INVESTOR BASE
Please provide details of
investor type.

FUND PERFORMANCE
Historical performance since
inception:
 Monthly NAVs since
inception (in table
format):
 Monthly RoR since
inception:
 Standard deviation
(annualized):
 Three largest drawdowns
and recovery periods:
 Percentage of
positive/negative months:
Provide the Fund turnover
rate:
Please explain any major
factors affecting performance
and drawdowns (i.e. a manager
change, a change in strategy,
etc):
Is the fund performance
audited? If Yes, by whom?

DRAWDOWNS
List the 5 maximum
drawdowns, in percent of
equity for the fund, the
recovery period and explain
when and why they have
happened:
Over the past 3 years, how
many drawdowns greater than
5% have occurred? When did
they occur and what was the
length of recovery?

OTHER / PREFERENTIAL TERMS

Is the fund’s reporting
AIMR/GIPS compliant?
Are there any side letter
agreements that can negatively
impact the fund? If so please
give details.
Are there any special terms
given to certain investors in
relation to fees or redemption?
Please list the following special
terms:
 Best redemption terms
 Lowest fee granted
 Size of additional capacity

11 INVESTMENT STRATEGY
Characterize your investment
style in terms of:
 Strategy;
 Hedging;
 Market exposure;
 Portfolio concentration in
terms of amount of
instruments and exposure
bias (min/max/avg.
number of instruments,
 min/max/avg. long or
short bias);
 Geographical market
focus:
 Liquidity;
 Correlation.
List the instrument types you
use by percentage:
List the top 10 investments of
the Fund by percentage as of
the end of the last quarter:
Do you carry out IPO or PIPE
trading on behalf of the fund?
Describe your strategy (in as
much detail as possible):
What is your
investment/trading
philosophy?
Do you believe that there are
persistent structural
inefficiencies in the area you
invest in? Please explain. How
do you think these market
inefficiencies will change over
time?
What makes your strategy
unique?
What makes your strategy
different from your peers?
Describe your strategy for
today’s market:
What are the
strengths/weaknesses of your
investment strategy?
Why do you feel you will
generate absolute returns?
In which markets do you
believe your strategy performs
best/worst? (Give examples of
time periods):
 Volatility:
 Trends:
 Range trading
What is your average holding
period for:
 All investments?
 Profitable investments?
 Losing investments?
Does the strategy have a long
or short bias?
 What is the maximum net
long or short exposure the
fund has had?
 What is the normalized
net exposure?
 Is there a strategy in place
to limit the asymmetric
risk involved in shorting,
such as purchasing calls?
What investment criteria must
new positions meet?
How do you invest new capital
into the market?
How do you close out positions
to meet capital redemptions?
In what circumstances would
you suspend redemptions and
for how long?
What would be the maximum
period of time when normal
terms would be suspended?
Have the strategy or trading
processes changed over time
due to capital flows?
Have you encountered position
limit problems? If yes, please
explain:
What is the percentage of
assets in non-exchange traded
instruments? Do you utilize
side pocket accounting for
such instruments? How long do
you expect it would take to
liquidate these assets under
normal circumstances?
Describe your cash
management policy:
Do you outsource this function?
If so, please give name of
provider and method used.

PORTFOLIO CONSTRUCTION
Who is responsible for
managing the portfolio and
how are decisions made
(unanimous, majority,
individual)?
Describe how capital is
allocated to a particular
strategy.
To what extent is the portfolio
construction dependent on
computer models?
Is there an investment
committee that approves
portfolio allocations? If
applicable, please describe its
set up and authority:
How often are portfolios
rebalanced?

12 RISK
LEVERAGE
Discuss your leverage exposure
policy and its management
over different market cycles:
 What has been the
maximum/ minimum
leverage used?
 What has been the
normalized leverage used?
What are your portfolio
financing constraints/limits?
Discuss sensitivity (cost) to
LIBOR levels:

HEDGING
How is the portfolio hedged?
How do you determine size and
limits for each position/basket?
How often do you re-hedge?
Who bears the burden of loss in
the event of a counterparty
failure?

LIQUIDITY
Discuss the nature of illiquid
holdings in the fund and
explain how they are valued:
How quickly could you normally
liquidate 40% of the portfolio?
Under what conditions would
that not be possible?
How are liquidity provisions
monitored and controlled?
How do you manage the
liquidity risk in your portfolio?
State the policy implemented
in terms of liquidity
management. Have you
defined guidelines in terms of
acceptable liquidity matching?
Please describe the credit
facilities you have for the fund
including the foreign exchange
(FX) hedging, if any, and the
process to monitor them.
DIVERSIFICATION
Discuss the depth of
diversification:
How do you calculate the
correlation between each
investment in the portfolio?
What are the main sources of
marginal risk in your strategy?
How has performance been
distributed across positions and
time?
How do you ensure there is no
style drift?

EXTERNAL CONTROLS
Are any third parties involved
in verifying adherence to risk
limits, e.g. the fund’s
administrator?

13 INVESTOR SERVICE / REPORTING

Can the prospectus/offering
memorandum be transmitted
to us electronically?
Are all prices provided by
independent service providers?
Please give details:
Does the investment manager
ever provide any instrument
prices/NAV calculations?
Who calculates the NAV and
what is the frequency of
calculation?
Do you make any adjustments
to the NAV valuation received
from your source? If yes, please
explain what kind in terms of:
 Liquidity:
 Time zone:
 Size:
 Holding period:
 Other:
 Percentage of adjustments
to total NAV:
 What instruments are
subject to adjustments:
Can fund performance (NAV,
RoR) be transmitted to us
electronically on a regular
basis, and how quickly after
period end?
What is your client reporting
policy? Address topics such as
level of transparency and
frequency and timeliness:
List all reports and
correspondence usually sent to
clients. Please detail the
content of your reporting
(performance, risk, allocation,
liquidity, etc.)
Can you provide copies of
historical reports?
 Please provide examples.
What is the normal method of
communication with your
clients:
Are investors informed when
minor/major changes are made
to the trading, money
management, or risk control
methods?
What databases, publications
or other available sources does
the manager regularly report
performance figures to?
If none, explain why?
Can investors receive
customised reports?
What portfolio data can you
provide in terms of:
 Position?
 Concentration?
 Exposure?
 Performance attributes?
 Hedge?
Can all trades be reported on a
daily basis to the client?
Are audited reports available
to the investor? Please provide
a sample.

14 TAXATION
What type of tax reporting is
provided to the clients and
how often are reports
provided?
Has the Fund paid tax to any
authority before? If so, what is
it and how much?
Has the Fund been advised by
any advisor (e.g. auditor, legal
counsel) on a specific tax
 matter? If so, what is the
conclusion?

Certification
By my signature below, I certify that the responses to the questions in this Due Diligence Questionnaire are true,
complete and correct as of the date below. I further certify that the evidence of insurance and any other
document provided by my Firm in response to this Questionnaire is genuine and complete as of the date below.
Finally, I agree to report promptly in writing to the Drexel Morgan Capital Advisers, Inc. CCO any change to the
foregoing.

Signature:

Name:

Position:

Date: