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Carter Rock Limited www.carterrock.

com

Fund Prospectus Statistical Arbitrage March 2012
Carter Rock Ltd

This prospectus does not constitute an offer of investment in a jurisdiction where such an offer is unlawful or to persons to whom such an offer is restricted by law. CRL is not an education provider and therefore expects investors to conduct their own research into the subject to ensure a reasonable level of understanding is achieved before considering whether to participate. Investors should carefully examine this document in its entirety. In countries which require the translation of this prospectus into the official language of that country. the fund management company. This prospectus is not required to be authorized. This prospectus is intended to provide investors with an overview of the objectives and investment principles of the fund (which may vary from time to time) and to assist investors when deciding on whether to participate. 2 .Disclaimer Carter Rock Limited. The information related to investors of CRL is confidential and subject to disclosure only in the cases provided for in legislation and the client agreement pertaining to this fund. registered or vetted by the Government of New Zealand. the English version shall prevail in the case of any incongruity. shall henceforth be known as CRL. and seek further professional advice for a more detailed understanding on all aspects of this opportunity so as to be fully aware and understanding of the inherent risks associated with this fund including loss. This prospectus may be distributed outside of New Zealand only with the express permission of CRL. Investors located in a foreign country are advised to take into consideration that the measures adopted for the protection of investors in one country do not always extend to transactions of a fund registered in another country.

........................................................................................................................................................ 6 Operational Risks ................................................................................................................................................................................................................. 7 Rights of CRL Fund Investors ................................................ 5 CRL Aggressive Fund ....... 5 CRL Investment Objectives: .............................................................................................................................................................................................................................................................Table of Content Definitions ................................................................................................................................................................................................................................... 7 Limitations of CRL Fund Investors .................................................................................................................................................................................................................................................................... 6 Market Risks .................................. 6 Credit Risks ............................................................................................................ 7 Redemption of investment ....................................................................................................................................... 5 Risks Associated with CRL Funds........................................................................................ 4 General Provisions ............................... 8 3 . 6 CRL has absolute discretion as to trades ................... 8 Miscellaneous ................................................................... 8 About the Company ................................................................................................................................................................................................... 5 CRL Conservative Fund................ 7 Fees and other obligations................................................................................................................................................................................................................

with exposure exclusively to uncertainties where a gain is expected. A hedged portfolio is truly market neutral if it exhibits near-zero correlation with general economic/market risks Excess return of an invested portfolio with respect to general market returns. A legal document between Carter Rock Limited and an investor Hedging Market/Beta Neutral Alpha Client Agreement 4 .Definitions For the purposes of this document the following definitions shall assist with interpretation unless otherwise provided for: AUM Assets Under Management Fund Manager(s) Person(s) responsible for general trading of assets NAV Net Asset Value associated with invested asset High Watermark Performance minimum achieved to initiate incentive fee Incentive Fee fee payable to CRL for the general fund growth a request to be submitted by investor ahead of next available Redemption Date Redemption Request Redemption Date dates where fund redemptions are freely available Hedging is the act of taking a combination of financial products to minimum unwanted risk.

with an investment outlook of not less than 1 year. The base currency of CRL funds shall be the New Zealand Dollar. 5. CRL aims to minimize short term fund value volatility (risk) by exploiting a basket of low correlation market inefficiencies. Expected Volatility of Return: ±10% CRL expects the Conservative Fund to suit risk-averse investors with an investment outlook of not less than 1 year. 4. CRL aims to generate alpha from financial product structure inefficiencies. CRL Aggressive Fund       Expected Annual Return: 35%. CRL funds are non-public open-ended risk capital funds. There may be periods where a significant portion. CRL funds shall not guarantee to investors the yield (rate of return) of the managed portfolios or the preservation of initial investments. Fund manager(s) utilize strategies considered most profitable with respect to market conditions. CRL aims to generate Alpha from relative value inefficiencies between traded asset combinations. 5 . Investors of the Fund must qualify as “Eligible Persons” as provided for in Section 5 of the Securities Act 1978 (NZ). Minimum initial investment is currently set at $100. and are aware of all possible risks associated thereto. 2. Minimal or zero leverage shall be utilized in this fund All positions are hedged to achieve general market neutrality. Some positions are not Beta hedged to achieve the highest expected returns over time.General Provisions 1. CRL aims to minimize short term fund value volatility (risk) by exploiting a basket of low correlation market inefficiencies. no more than 40%. of the fund may be positioned in cash. CRL Investment Objectives: CRL Conservative Fund        Expected Annual Return: 20%. Expected Volatility of Return: ±26% CRL expects the aggressive fund to suit investors desiring high expected returns with moderate short term volatility. The trading strategies are opportunistic. Leveraged derivative instruments are utilized in this fund. 3.000 NZD.

Exchange rate risk is generally not hedged as the cost of hedging may negatively affect the funds expected returns. Market Risks  Accelerated Inflation Risk: inflation adjusted value of an investment may not overcome actual rate of inflation. Interest Rate Risk: Change in interest rates may affect the relative valuation and volatility of certain financial products unfavorably for the fund (e.g.) may negatively affect CRL funds’ regular activities. Risks Associated with CRL Funds Despite CRL’s active hedging and expected returns favourable for the funds. Investment in the funds cannot be considered as deposits since preservation and increase of capital are not guaranteed. Market Liquidity Risk: Products with a significant decrease in liquidity may experience high price volatility. with some periods greater than others. Depository Risk: Possible threat of loss or destruction of assets kept by the regional depositary institution through negligence or an intentional illegal act. Upon investing in the Fund.   Credit Risks  Issuer Risk: Inability of an issuer of a credit instrument to perform its debt obligations. index options). the investor must take into consideration all dimensions of risk related to investments which may affect rate of return. There may be periods where a significant portion. treasury futures. no more than 40%. Exchange Policy Risk: Possible changes in exchange policies (e. The trading strategies are opportunistic. uptick-rule. etc. Currency Exchange Risk: CRL funds trade mostly US and Asian financial products which are not priced in NZD.g. Fund manager(s) utilize strategies considered most profitable with respect to market conditions. of the fund may be positioned in cash.    Operational Risks  Regional Legislation Risk: Possible changes in regional legislation related to general investments may negatively affect CRL funds’ regular activities. everything need not realize in the manner and extent specified in the Prospectus. Values of funds fluctuate in time. and are likely to incur increased transaction costs. short-selling ban. 6 .

Redemption Request details are explained in the Carter Rock Client Agreement document.  7 . Exchange Traded Notes. Investors do not participate in the management of the funds. Settlement Risk: Inability of the counterparty of an agreed transaction to transfer in the course of settlement the required amount of money or securities. and derivative instruments. The assets of the fund may be invested in instruments globally without limitation.  Limitations of CRL Fund Investors  It is recommended that an investor seek independent professional advice on all matters relating to this opportunity including associated risks. including but not limited to listed companies.  Redemption of investment  To redeem an Investment Amount. CRL has absolute discretion as to trades  CRL funds may trade in all types of financial instruments. an investor shall submit to CRL a Redemption Request. CRL funds may invest in instruments related to all sectors of the economy. CRL funds may trade options and futures of all classes. details are explained in the Carter Rock Client Agreement document.    Rights of CRL Fund Investors  Investors have the right to demand that CRL redeem their Investment Amount pursuant to the provisions of the Carter Rock Client Agreement document. Performance reporting standards are detailed in the Carter Rock Client Agreement document. Redemptions are available with terms and conditions and may incur fees. Exchange Traded Funds. taxation and other obligations. unless otherwise requested by CRL management. Investors have the right to obtain individual performance reports individual to them. Fund manager(s) may trade options and futures for the purpose of both hedging as well as Alpha generation.

a New Zealand registered corporation. risk management.Fees and other obligations  Expenses related to the preservation and operation of the funds is detailed in the Carter Rock Client Agreement document. Quantitative analyst. financial reporting. Before investing a client must meet the requirements as detailed in Section 5 of the Securities Act 1978 (NZ) and accept all terms and conditions stipulated by CRLs Client Agreement. Economic advisor. Members of the CRL management: 1) CEO: 2) CFO: 3) COO: Alex Smith Josh Carter Rocko Chen Client relationship management. asset management. general administration.  Miscellaneous  This document shall not be relied upon and is provided for informational purposes only. CRL may manage assets of the Conservative/Aggressive Funds separately from its own assets and/or from assets from other investment funds managed by CRL. 8 . CRL shall be paid an Incentive Fee based on positive performance of the funds. details are explained in the Carter Rock Client Agreement document. CRL shall obtain significant statistical information around interest assets and counterparties before taking positions on behalf of the funds.   About the Company  The funds are managed by Carter Rock Limited.