Auroville Investment Management (HK) Limited (“Auroville” or the “Firm”) a privately- owned investment advisory firm incorporated in Hong Kong on November 15, 2016 with limited liability, and a wholly owned subsidiary of a Cayman incorporated Investment Manager, Auroville Investment Management Ltd (the “Investment Manager” or “Manager”). Auroville Investment Management (HK) Limited is controlled by its principal owner, Amarjyot Singh Anand (the “Principal Owner”). Auroville provides investment advisory services to private funds via a master feeder structure, whereby Auroville Investment Management US Feeder Fund (the “Domestic Feeder Fund”) and Auroville Investment Management Offshore Feeder Fund (the “Offshore Feeder Fund”) invest substantially all of its assets in Auroville Master Fund (the “Master Fund”). Hereinafter unless otherwise specified, the Domestic Feeder fund, the Offshore Feeder Fund and the Master fund are each referred to as a “Fund” or “Client” and collectively, as the “Funds” or “Clients”. The Investment Manager provides investment management services to its Clients pursuant to investment guidelines within the relevant organization documents, limited partnership agreement, investment management agreement, offering memorandum and/or subscription agreements, as the case may be (each an “Offering Document”, and collectively, the “Offering Documents”). Auroville does not tailor its services to the individual investors in the Funds, or provide investors with the right to specify, restrict, or influence the Funds’ investment objectives or any investments or trading decisions. In advising the Clients, Auroville implements a fundamental bottom-up data-driven approach to security selection and intends to invest globally, with a strong Asia thematic bias. Auroville’s investment objective in managing the Clients is to achieve absolute compound annual returns over time with diversified exposure across sectors, countries and investment themes to yield lower volatility and higher risk adjusted returns than the broad market indices. Auroville generally invests in a diversified portfolio of American depository receipts, equities, exchange traded funds, and derivatives. Auroville may utilize significant leverage in its investment program, and its portfolio includes both long and short positions. Investments may be made on exchanges, over-the-counter and in private transactions. Positions may be held in cash, as well as forward, futures, spot, index, options and swap markets. Auroville does not participate in wrap fee programs. As of December 31, 2018, Auroville’s regulatory assets under management were $7,258,941 all managed on a discretionary basis. please register to get more info

Auroville or its affiliates receive a management fee and performance-based compensation from Clients. Such compensation arrangement is set forth in the relevant Offering Documents with each Client. The management fees paid by the Funds are generally equal to an annual rate of 1.25% - 2.0%, depending on the particular share class of the Funds and the investment management agreements. The Firm or its affiliates may reduce, waive or calculate differently the management fee for certain investors or Clients, including members, employees and affiliates of the Firm. The management fee paid by the Clients is deducted and calculated monthly in arrears at the end of each calendar month as a percentage of the Net Asset Value (before deduction for any accrued Profit Allocation and the deduction of that month’s Management Fee). See item 6 below for a description of the performance-based fees. Fees are deducted and allocations are made from each Client’s account. Auroville’s fees are exclusive of brokerage commissions, transaction fees, custodial fees and other related costs and expenses which shall be incurred by Clients. Auroville expects that certain Funds will be responsible for investment-related expenses (including brokerage (see Item 12 below)), as well as for their organizational and offering expenses. please register to get more info

Auroville or the General Partner may be entitled to a performance-based fee or performance allocation with respect to each Client. Performance based fees are calculated based upon a percentage of the net capital appreciation of the relevant Client. The performance-based fees or allocations are charged in compliance with rule 205-3 of the Investment Advisers Act of 1940, as emended (the “Advisers Act”). Auroville of its affiliates receive performance-based compensation from Clients, generally equal to 7.5% - 20% of the net profits for each Client (as well as depending on the net asset value of each particular share class of each investor in the funds). Additional information regarding such compensation arrangements are set forth in the relevant Offering Documents with each Client. Auroville or its affiliates may reduce, waive or calculate differently the performance-based compensation for certain investors or Clients, including members, employees and affiliates of the Firm. The performance allocation is subject to a “high water mark.” The “high water mark” feature prevents Auroville from receiving a performance-based fee as to profits that simply restore previous losses and is intended to ensure that each performance allocation is based on the long-term performance of the Funds. The terms of the performance-based compensation may differ among the Clients. This may result in a conflict of interest with allocating opportunities among clients, as Auroville may have an incentive to favor clients that have a higher performance-based compensation. To avoid such a conflict of interest, Auroville has developed documented procedures for allocating opportunities among Clients in a fair and equitable manner. As management fees and performance-based compensation are based directly on Clients’ net asset values, Auroville may have a conflict of interest in valuing the assets held in Client accounts. Auroville follows documented valuation policies and procedures and consults with each Client’s third-party administrator, as applicable, in order to mitigate this risk. please register to get more info

Auroville provides investment advice to the Funds. please register to get more info

Investment Objective and Strategy
Auroville’s investment objective is to achieve attractive absolute compound annual returns over time with diversified exposure across sectors, countries and investment themes to yield lower volatility and higher risk adjusted returns than the broad market indices. Auroville may from time to time invest on an exceptional, opportunistic basis in Designated Investments. The Firm seeks to implement a fundamental bottom-up data-driven approach to security selection and intends to invest globally, with a strong Asia thematic bias. In implementing the investment strategy, the Firm may use investment techniques such as leverage and hedging.
Investment Philosophy
Auroville utilizes a fundamental bottom-up data-driven approach to security selection and intends to invest globally, with a strong Asia thematic bias. Auroville aims to adopt an investment approach driven by deep fundamental bottom- up research and security selection. The research process is augmented by a data-driven approach to underwriting where the Firm is assisted by a data science team. Idea generation and portfolio construction is augmented by a top-down analysis of country/sector. The Client’s investment philosophy entails the following: (a) The Client’s portfolio will generally be constructed one idea at a time from the tails of the risk-adjusted return distribution. (b) The Firm will generally place a greater focus on the numerator rather than the denominator in the net present value calculation. (c) Specialization in four sectors - Financial & Business Services, Technology Media & Telecom (TMT), Consumer, and Industrials. (d) Security selection will focus on asymmetric risk-reward with special attention paid to the bear market case (including from exogenous market events) in order to minimize permanent loss of capital. However, the Fund will seek to capitalize on volatility and drawdowns to maximize returns. (e) Long positions will generally have a quality bias, with a mix of compounders, value creators, industry leaders/disruptors and including businesses with a long runway for growth and stable to rising returns on incremental invested capital. (f) Short positions will generally be alpha generating and be a mix of frauds, fads and failures or situations where there is a short-term catalyst that the Firm thinks will play out. The Firm may from time to time invest on an exceptional, opportunistic basis in designated investments, which are typically equity securities in private companies up to 36 months prior to an anticipated initial public offering or liquidity event. Aggregate exposure to designated investments will be capped at 10% of the Fund’s NAV. Hedging The Client’s may employ hedging strategies, including the use of futures, ETFs, volatility instruments, options, and other derivatives, short selling, interest rate instruments and arbitrage positions, in order to mitigate various risks, such as market and interest rate risks related to specific securities, issuers, sectors or markets. Neither the Clients nor the Manager is obligated and will not attempt to hedge all market or other risks inherent in the Client’s position. Leverage The Manager may employ significant leverage, through borrowing including (but not limited to) by entering into margin lending agreements, and through the use of futures, forwards contracts, options and other derivative instruments, on a secured basis or an unsecured basis. Risk Management The Manager's risk management is imbedded in its investment philosophy and portfolio construction approach where capital preservation both on long and short side is a primary objective. Security selection will focus on asymmetric risk-reward with special attention paid to the bear case (including from exogenous market events) in order to minimize permanent loss of capital. Long positions will typically have a quality bias. In particular, the Manager will manage risk as follows:
• Conservative gross and net exposures: the Manager will not use excessive leverage to inflate gross exposures while keeping net exposures tight in order to limit the ‘market risk’ in the portfolio. Special attention will be paid to avoiding any beta mismatches between long and short exposures.
• Diverse exposure across country, industry and investment theme: the diversification will help mitigate market risk thereby dampening portfolio volatility while enhancing returns.
• Position management: every security is monitored on a case-by-case basis.
• Macro risk: there is a focus on correlations across securities in a country, sharp foreign exchange devaluations, liquidity shocks, and counterparty risk limit issues.
• Data Science: the Manager will attempt to track and assess both fundamental (e.g. causality vs. correlation) and technical measures of risk associated with the Client’s positions where possible. The Manager has broad investment discretion in seeking to achieve the Client’s investment objective. The Client is not subject to any formal policies in relation to diversification and may shift its capital allocation among the various strategies it deploys as opportunities change in the markets. The Client’s investment objective and strategy may be altered by the Manager from time to time, subject to the approval by the Board. In this regard, the Manager has flexibility in managing the Client’s investment activities, including but not limited to, changing the deployment of the principal investment strategies identified above, adopting other strategies or discontinuing the use of any strategy. If the Manager proposes to materially change the Client’s investment strategies as outlined above, the Manager will inform Shareholders within five (5) Business Days of the change being implemented and Shareholders will be permitted to redeem all or any portion of their Shares on the next Redemption Day in accordance with the Negative Consent Procedure that is described in greater detail in the Offering Documents. Certain Risk Factors Investing in securities involves risk of loss that Clients and investors in the Funds should be prepared to bear. The following explanation of certain risks is no exhaustive, but rather highlights some of the more significant risks involved in Auroville’s investment strategy. For a more complete list of expected risk factors, prospective Clients should review the Offering Documents. Legal and Regulatory Environment for Private Investment Funds and their Managers The legal, tax and regulatory environment worldwide for private investment funds (such as the Funds) and their managers is evolving. Changes in the regulation of private investment funds, their managers, and their trading and investing activities may have a material adverse effect on the ability of the Funds to pursue their investment programs and the value of investments held by the Funds. There has been an increase in scrutiny of the private investment fund industry by governmental agencies and self-regulatory organizations. New laws and regulations or actions taken by regulators that restrict the ability of the Funds to pursue their investment programs or employ brokers and other counterparties could have a material adverse effect on the Funds and the investors' investments therein. In addition, Auroville may, in its sole discretion, cause the Funds to be subject to certain laws and regulations if the Firm believes that an investment or business activity is in the Funds’ interest, even if such laws and regulations may have a detrimental effect on one or more investors. Dodd-Frank Act. The U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act”) was enacted in July 2010. The Dodd-Frank Act has resulted in extensive rulemaking and regulatory changes that affect private fund managers, the funds that they manage and the financial industry as a whole. Under the Dodd-Frank Act, the U.S. Commodity Futures Trading Commission and the SEC have mandated (and will mandate) new recordkeeping, reporting, central clearing and trading on electronic facilities requirements for investment advisers, which add costs to the legal, operational and compliance obligations of Auroville and the Clients and increase the amount of time that Auroville spends on non-investment- related activities. The Dodd-Frank Act affects a broad range of market participants with whom the Clients interact or may interact, including banks, non-bank financial institutions, rating agencies, mortgage brokers, credit unions, insurance companies, payday lenders and broker dealers, which may change the way in which the Firm conducts business with its counterparties. It may take years to understand the impact of the Dodd-Frank Act on the financial industry as a whole, and therefore, the continued uncertainty may make markets more volatile and may make it difficult for Auroville to execute the investment strategy of the Clients. Limited Operating History
The Fund, the Master Fund, the Manager and the Investment Adviser are all recently formed
and have a limited operating history and performance record. There can be no assurance
that the Fund or the Master Fund will achieve their objectives. The markets in which the
Master Fund operates have been severely disrupted over the past several years, therefore
results observed in earlier periods may have little relevance to the results observable in the
current environment.
Reliance on the Manager and key persons
Although the Directors have the ultimate authority and responsibility for the management
of the Master Fund, the decisions relating to the investment of the Master Fund's assets
has been delegated to the Manager. The Master Fund's expertise in trading is therefore
largely dependent on the continuation of an agreement with the Manager and the services
and skills of its officers and employees. The loss of the Manager's services (or that of one
of its key personnel) or any key persons could materially and negatively impact the value of
the Master Fund as it may lead to the loss of the use of any proprietary investment
methodology developed by the Manager or any key persons. Shareholders will have no
right or power to take part in the management of the Master Fund.
Market Risk
Any investment made in a specific group of securities is exposed to the universal risks of the
securities market. However, there can be no guarantee that losses equivalent to or greater
than the overall market will not be incurred as a result of investing in such securities.
Markets generally, or any particular market or segment of a market in which the Master
Fund has invested, could move against the Master Fund’s portfolio and the Master Fund
could suffer losses. The performance of the Master Fund’s portfolio depends to a great
extent on the accuracy of the assessments of the Manager on the future course of market
price movements. There can be no assurance that the Manager will be able to predict
accurately these price movements.
Liquidity
Under certain conditions liquidity of a particular market or security may be restricted, thus
affecting the performance of the Master Fund. Lack of liquidity or market depth can affect
the valuation of the Master Fund's assets as it looks to realize securities at quoted prices.
The Directors may, in their absolute discretion, classify certain of the Master Fund's
investments as illiquid on the basis that the Directors have determined that such
investments: (i) do not have a readily ascertainable market value; and/or (ii) may be valued
but are not freely transferable. Reduced liquidity may also make it difficult to purchase or
sell specific securities at a favorable or desirable price or in a sufficient quantity to meet the
investment objectives of the Master Fund. In addition, in the case of substantial
redemptions, the Master Fund may be forced to sell its more liquid positions at a
disadvantageous time, resulting in a greater percentage of the portfolio consisting of illiquid
securities and assets for the continuing Shareholders.
Exchange Rate Fluctuations
It may not be possible, or practicable to hedge successfully against currency risk exposure in
all circumstances. Further, exchange rate fluctuations and the costs of the currency hedging
arrangements utilized may prejudicially affect the Net Asset Value per Participating Share of
such Classes even where investment performance in respect of those Classes is positive.
In addition, while the Master Fund seeks to hedge its foreign currency exposure, it may not
always be practicable to do so. Moreover, hedging may not neutralize all currency risks.
Furthermore, the Master Fund may incur costs in connection with conversions between
various currencies. There can be no guarantee that instruments suitable for hedging
currency or market shifts will be available at the time the Master Fund wishes to use them or
will be able to be liquidated when the Master Fund wishes to do so. In addition, the
Master Fund may choose not to enter into hedging transactions with respect to some or all of its positions. Market and Issuer Volatility Markets are volatile and can decline significantly in response to adverse issuer-specific, political, regulatory, market or economic developments. While the Manager and the Investment Adviser may seek to take advantage of such volatility, such volatility may also adversely affect the Master Fund's performance. The Master Fund will purchase securities of specific issuers. The value of an individual security or particular type of security can be more volatile than the market as a whole and can perform differently from the value of the market as a whole. Price movements can occur as a result of multiple unpredictable factors such as market sentiment, as well as economic and political conditions. Volatility can cause historical or theoretical pricing relationships to be disrupted, causing otherwise comparatively low risk positions to incur losses. Lack of volatility can also result in losses for certain positions that profit from price changes. Repatriation Repatriation of investment income, capital and the proceeds from sales of securities by investors such as the Master Fund may require governmental registration and approval in some jurisdictions in which the Master Fund invests. The Master Fund could be adversely and materially affected by delays in or a refusal to grant required governmental registration or approval for any such proposed repatriation. Less Information and Regulation The Master Fund may invest in the instruments in various jurisdictions, including emerging market jurisdictions which may have corporate governance and financial reporting standards that are relatively less regulated, when compared to developed markets. Accordingly, the Master Fund may not be able to obtain as much as disclosure in terms of financial and corporate due diligence, as well as not being provided the same level of governance protections, as compared to the regimes of other developed markets. Leverage and Financing Risk The Master Fund may leverage its capital because the Manager believes that the use of leverage may enable the Master Fund to achieve a higher rate of return. Accordingly, the Master Fund may pledge its securities in order to borrow additional funds for investment purposes. The Master Fund may also leverage its investment return with options, short sales, swaps, forwards and other derivative instruments. The amount of borrowings which the Master Fund may have outstanding at any time may be substantial in relation to its capital. Leverage at Fund level is limited to not more than 250% of the Net Asset Value of the Fund from time to time (excluding leverage arising from the use of derivatives). While leverage presents opportunities for increasing the Master Fund's total return, it has the effect of potentially increasing losses as well. Accordingly, any event which adversely affects the value of an investment by the Master Fund would be magnified to the extent the Master Fund is leveraged. The cumulative effect of the use of leverage by the Master Fund in a market that moves adversely to the Master Fund's investments could result in a substantial loss to the Master Fund which would be greater than if the Master Fund were not leveraged. Limited Diversification Subject to the Manager's risk framework, in the normal course of making investments on behalf of the Master Fund, the Manager may select investments for the Master Fund that potentially could be concentrated, for example, in a limited number or type of financial
instruments or in any one asset class, issuer, industry, sector, strategy, emerging market
or geographic region. Market conditions may create opportunities within certain investment
strategies, which cause the Manager to increase the concentration of certain investment
strategies. Such concentration of risk may expose the Master Fund to losses
disproportionate to those incurred by the market in general if the areas in which the Master
Fund's investments are concentrated are disproportionately adversely affected by price
movements. Also, the use of a single Manager applying generally similar trading programs
could mean lack of diversification and, consequentially, higher risk.
Margin Risk
When financial instruments are traded on a leveraged basis, the financial instrument can be
purchased by depositing only a percentage of the instrument’s face value and borrowing the
remainder (margin). As a result, a relatively small adverse price movement in a financial
instrument’s value may result in immediate and substantial losses to the investor.
Hedging Transactions
The Master Fund may employ hedging strategies, including the use of options and other
derivatives, short selling, interest rate instruments and arbitrage positions, in order to
mitigate various risks, such as market and interest rate risks related to specific securities,
issuers, sectors or markets. Hedging against a decline in the value of a portfolio position
does not eliminate fluctuations in the value of portfolio positions or prevent losses if the
values of such positions decline, but establishes other positions designed to gain from
those same developments, thus, moderating the decline in the portfolio positions’ value.
Such hedge transactions also limit the opportunity for gain should the value of the portfolio
position increase.
Absolute Return Strategy
The Manager seeks initially to use an absolute return strategy whose performance is not
correlated with major market indices. Although the use of such strategy may mitigate losses
in generally declining markets, there is no assurance that losses will be avoided. Investment
strategies that have historically been uncorrelated or demonstrated low correlation to one
another or to major world market indices may become correlated at certain times, such as
during a liquidity crisis in global financial markets. During such periods, certain hedging
strategies may cease to function as anticipated, and there may be few or no buyers for
certain assets. The liquidation of assets by the Fund to pay redemptions, prevent losses or
for other purposes in such circumstances may be difficult or impossible.
Event Driven Investing
Event driven investing requires the Fund to make predictions about: (i) the likelihood that
an event will occur; and (ii) the impact such event will have on the value of a company's
securities. If the event fails to occur or it does not have the effect foreseen, losses can
result. Because of the inherently speculative nature of event driven investing, the results of
the Fund's operations may be expected to fluctuate from period to period. Accordingly,
investors should understand that the results of a particular period will not necessarily be
indicative of results that may be expected in future periods.
Futures and Commodities
The trading of commodities and commodity interests (e.g., futures contracts on
commodities, securities indices or currencies) is highly speculative and may entail risks that
are greater than the risks associated with investing in securities. Prices of commodity
interests are generally more volatile than prices of securities. Futures trading will have
effects on the Master Fund’s portfolio similar to the effects of leverage. The Master Fund
may participate in market price fluctuations of securities or commodity interests underlying
futures (or options on futures), while investing only a small percentage of the value of those
underlying securities or commodity interests. The Master Fund may open a futures position
by placing with a futures commission merchant an initial margin that is small relative to the value of the futures contract, making the transaction "leveraged". If the market moves against the Master Fund’s position or margin levels are increased, the Master Fund may be called upon to pay substantial additional funds on short notice to maintain its position. If the Master Fund were to fail to make such payments, its position could be liquidated at a loss, and the Master Fund would be liable for any resulting deficit in its account. Convertible Securities The Master Fund may invest in convertible securities, which are bonds, debentures, notes, preferred stocks, or other securities that may be converted into or exchanged for a specified amount of common stock of the same or different issuer within a particular period pursuant to a specified price or formula. The value of a convertible security is a function of the underlying stock price, the volatility of the stock, the stock dividend, stock borrow fee and credit spread of the underlying credit. Generally, the value of a convertible security will decrease when the underlying stock price decreases, or the volatility of the stock decreases, or the stock dividend payout increases, or the stock borrow fee increases, or the credit spread of the underlying credit widens. The Master Fund also assumes the risk of losing its investment in the option premium of the convertible security. The value of the convertible security is also subject to fluctuations due to interest rate changes. Adverse corporate events could also affect the issuer of such securities to repay principal and pay interest and therefore, increase the risk of default of such securities. Fixed Income Securities The Master Fund may invest in fixed income securities including, without limitation, bonds. The Master Fund will be subject to credit liquidity and interest rate risk. In particular, bonds below investment grade or unrated, are regarded as being predominantly speculative as to the issuer’s ability to make payments of principal and interest. Investment in such securities involves substantial risk. Such securities are especially subject to adverse changes in general economic conditions, to changes in the financial condition of their issuers and to price fluctuations in response to changes in interest rates. Issuers of high yield debt may be highly leveraged or have enterprise risk that renders unavailable to them more traditional methods of financing. Therefore, the risks associated with acquiring the securities of such issuers generally are greater than is the case with issuers of higher quality. For example, during an economic downturn or a sustained period of rising interest rates, issuers of high yield bonds may be more likely to experience financial stress, especially if such issuers are highly leveraged. During such periods, such issuers may not have sufficient revenues to meet their interest payment obligations. The issuer’s ability to service its debt obligations also may be adversely affected by specific issuer developments, or the issuer’s inability to meet specific projected business forecasts, or the unavailability of additional financing. The risk of loss due to default by the issuer is significantly greater for the holders of high yield instruments because such securities may be unsecured and may be subordinated to the other creditors of the issuer. There can be no assurance that such events will not occur after the Master Fund purchases particular securities, in which case the Master Fund may experience losses and incur costs. Adverse publicity and investor perceptions may also decrease the value and liquidity of securities with a low credit rating, especially in markets characterized by a low volume of trading. Derivative Instruments The Master Fund may utilize derivative instruments (including but not limited to swaps) which seek to modify or replicate the investment performance of particular securities, commodities, currencies, interest rates, indices or markets on a leveraged or unleveraged basis. The use of derivative instruments presents various risks, including but not limited to:
• Tracking – When used for hedging purposes, an imperfect or variable degree of correlation between price movements of the derivative instrument and the underlying investment sought to be hedged may prevent the Master Fund from achieving the intended hedging effect or expose the Master Fund to the risk of loss.
• Liquidity – Derivative instruments, especially when traded in large amounts,
may not be liquid in all circumstances, so that in volatile markets the Master Fund
may not be able to close out a position without incurring a loss. In addition, daily
limits on price fluctuations and speculative position limits on exchanges on which
the Master Fund may conduct its transactions in derivative instruments may
prevent prompt liquidation of positions, subjecting the Master Fund to the
potential of greater losses.
• Leverage – Trading in derivative instruments can result in large amounts of
leverage. Thus, the leverage offered by trading in derivative instruments will
magnify the gains and losses experienced by the Master Fund and could cause the
Net Asset Value of the Master Fund to be subject to wider fluctuations than would
be the case if the Master Fund did not use the leverage feature in derivative
instruments. Leverage increases the risk of loss.
Risks Related to Investments in Asia and Emerging Economies
Development of the Asian Economies
The economies of the various nations in Asia differ from the economies of most developed
countries in many aspects, including as to: (a) the political structure; (b) the degree of
government involvement; (c) the degree of development; (d) the level and control of capital
reinvestment; (e) the control of foreign exchange; and (f) the allocation of resources.
Certain economies in Asia have been transitioning from centrally planned economies to
more market-oriented economies. For example, for more than two decades, the government
of the PRC has implemented economic reform measures emphasizing utilization of market
forces in the development of the PRC economy. Although the Manager intends to monitor
various systemic and systematic risks, the Manager cannot ensure that changes in
economic, political and social conditions, laws, regulations and policies in the Asia region
will not have an adverse effect on the Fund, including its financial condition or results of
operation, or that such changes will not have an adverse "knock-on" effect on other target
markets within Asia.
Legal and Tax Systems
The legal and tax systems of certain countries in Asia are less predictable than most legal
and tax systems in countries with fully developed capital markets. Currently, the tax rules and
regulations prevailing in certain countries in Asia are, as a general matter, either new or
under varying stages of review and revision, and there is considerable uncertainty as to
whether new tax laws will be enacted and, if enacted, the scope and content of such laws.
Reliance on oral administrative guidance from regulators and procedural inefficiencies hinder
legal remedies in many areas, including bankruptcy and the enforcement of creditors’ rights.
Moreover, companies often experience delays when obtaining governmental licenses and
approvals. These factors contribute to the exogenous, systemic risks to which the Master
Fund may be exposed. In some countries, especially developing or emerging countries,
regulatory, political or diplomatic developments could lead to programs that would adversely
affect investments, such as confiscatory taxation or expropriation.
There can be no assurance that current taxes will not be increased or that additional
sources of revenue or income, or other activities, will not be subject to new taxes, charges
or similar fees in the future. Any such increase in taxes, charges or fees payable by the
Master Fund itself may reduce returns for the Shareholders. In addition, changes to tax
treaties (or their interpretation) between countries in which the Master Fund invests, and
countries through which the Master Fund conducts its investment program, may have
significant adverse effects on the Master Fund’s ability to efficiently realize income or capital
gains. Consequently, it is possible that the Master Fund may face unfavorable tax treatment
resulting in an increase in the taxes payable by the Master Fund on its Investments. Any
such increase in taxes could reduce the investment returns that might otherwise be
available to the Shareholders.
Less Company Information and Regulation Generally, there is less publicly available information about Asian companies. This may make it more difficult for the Manager to stay informed of corporate action that may affect the price of a particular security. Further, many countries lack uniform accounting, auditing and financial reporting standards, practices and requirements. These factors can make it difficult to analyze and compare the performance of certain Asian companies. Less Supervision of Stock Markets The stock markets in certain Asian countries are not as developed or efficient as the securities markets in other jurisdictions such as the U.S. or the United Kingdom. There is generally less government supervision and regulation of certain Asian exchanges, brokers and listed companies. Existing laws and regulations may be inconsistently applied. Greater Volatility of the Stock Exchanges The stock exchanges of certain Asian countries have smaller market capitalization and are more volatile than the securities markets in the U.S. and the United Kingdom. Certain of these stock exchanges have experienced substantial fluctuations in the prices and trading volumes of listed securities from time to time. Certain of the Asian governments have also been known to intervene in the securities market in a manner that may affect market price and liquidity of the Master Fund’s Investments. Problems with structural risks in the Stock Markets The stock exchanges in certain Asian countries have experienced certain problems, including market manipulation, insider trading and payment defaults. The recurrence of these or similar problems could have a material adverse effect on the market price and liquidity of the securities of certain Asian companies, which may, in turn, have an adverse impact on the Master Funds’ Investments. Local Intermediary Risks Certain of the Fund’s transactions may be undertaken through local brokers, banks or other organizations in Asia. The Fund will be subject to the risk of default, insolvency or fraud of such organizations. There can be no assurance that any money advanced to such organizations will be repaid or that the Fund would have any recourse in the event of default. The collection, transfer and deposit of bearer securities and cash expose the Fund to a variety of risks including theft, loss and destruction. The Fund will also be dependent upon the general soundness of the banking systems throughout Asia which, in some cases, remain relatively under-developed or unstable compared to developed markets such as the U.S. and the United Kingdom. Higher Commissions Commissions for trades on certain Asian exchanges, and related custody expenses, are generally higher than those applicable in the U.S. and United Kingdom markets. More complicated Investment Structures In certain cases, the structures used to make trades in certain Asian securities may be more complex and entail significant counterparty exposure. Risk of Natural Disasters and Epidemics Certain regions of Asia face relatively high systemic risks in connection with natural disasters that may have a severe impact on the value of the Investments. Certain regions of Asia are particularly susceptible to earthquakes, typhoons and tsunamis, for example, as has been th
recent experience in Sichuan Province in the PRC, as well as in Taiwan, Indonesia, Japan
and other Asian nations.
Certain regions in Asia also face relatively high systemic risks in connection with epidemics
such as Severe Acute Respiratory Syndrome ("SARS") or Avian flu. Past occurrences of
epidemics, depending on their scale of occurrence, have caused different degrees of damage
to the national and local economies throughout Asia. A recurrence of SARS or an outbreak of
any other epidemic in Asia, such as the H5N1 avian flu or the H1N1 "Swine flu" may adversely
affect the Fund’s financial condition and results of operation.
The Master Fund does not carry any insurance to cover damages caused by earthquakes,
typhoons or tsunamis, or to cover any resulting business interruption that may arise from
these events. In the event of a major earthquake, typhoon, tsunami or other natural disaster,
the Master Fund’s Investments could be severely disrupted and adversely affected.
Political and Economic Instability
The economies of many countries in which the Master Fund may invest are less stable than
the more developed economies, due to, among other things, volatile internal political
environments, less stable monetary systems and/or external political risks. The governments
of such countries may participate in their economies through ownership or regulation in
ways that can have a significant effect on securities prices. The economies of certain
countries depend heavily on international trade and can be adversely affected by the
enactment of trade barriers or changes in the economic conditions of their trading partners.
In some countries, especially developing or emerging countries, political or diplomatic
developments could lead to programs that would adversely affect investments, such as
confiscatory taxation or expropriation. Further, although the recent general trend in many of
the less developed economies of the countries in Asia has been towards more open markets
and the promotion of private business initiatives, no assurance can be given that the
governments of these countries will continue to pursue such policies or that such policies
may not be altered significantly. Political instability, economic distress, the difficulties of
adjustment to a market economy, social instability, organized crime or other factors beyond
the Manager’s control could have a material adverse effect on the performance of the Fund.
QFII and RQFII
Under prevailing regulations in the PRC (which excludes Hong Kong, Macau and Taiwan),
except for investors trading eligible Shanghai-listed A-Shares through the Northbound
Trading of the Shanghai-Hong Kong Stock Connect scheme ("Connect Scheme"), only
certain qualifying foreign institutions that have been approved as Qualified Foreign
Institutional Investors ("QFIIs") or Renminbi Qualified Foreign Institutional Investors
("RQFIIs") by the China Securities Regulatory Commission ("CSRC") can invest directly in
China A shares, PRC government bonds, convertible bonds, warrants, fixed-income
products in the interbank bond markets, managed funds or stock index futures and other
financial instruments permitted by the CSRC (collectively referred to as "Chinese
Securities"). As at the date of this PPM, the Fund is not a QFII or RQFII itself and therefore
may only invest indirectly in Chinese Securities via participating notes, equity-linked notes,
contracts for difference, low exercise price options and total return swaps that have
exposures to China A shares issued by QFIIs or RQFIIs, among other things ("Market
Access Products") and/or via the Connect Scheme. Investors should note that investments
in China A Shares through QFIIs, RQFIIs and the Connect Scheme are subject to
compliance with relevant regulatory restrictions in the PRC, as amended from time to time
(including in relation to investment restrictions, minimum investment holding periods and
restrictions with respect to the repatriation of capital and profits out of the PRC).
Accordingly, any risk or restriction in relation to the licenses of QFIIs and RQFIIs and the
Connect Scheme represents a risk or restriction for the Fund which will affect its ability to
invest in China A Shares. Further, the Manager will rely on the existing arrangements
entered into between QFIIs, RQFIIs and/ or the Connect Scheme with their respective local
custodians ("PRC Custodian") with respect to the custody of their (and therefore the
Fund’s) assets in Chinese Securities, and their brokers ("PRC Broker") in relation to the
execution of transactions in Chinese Securities in the PRC markets. The Fund may,
therefore, incur losses due to the acts or omissions of the PRC Brokers or the PRC
Custodians in the execution or settlement of any such transaction, or in the transfer of any
such funds or securities. QFIIs and RQFIIs are required by applicable regulations to disclose
to the Chinese regulatory authorities certain information (such as name, registration place,
portfolio) of the clients (such as the Fund or the Manager) which invest in Chinese A Shares
through QFIIs or RQFIIs (as applicable).
Changes in Chinese Securities Eligible for Trading Through the Northbound Trading Link
Broadly, Chinese Securities eligible for trading on the Northbound Trading Link include A-
Shares traded on the SSE that are: (a) constituent stocks of the SSE 180 Index, constituent
stocks of the SSE 380 Index, and A-Shares that have corresponding China H Shares trading
on the Stock Exchange of Hong Kong Limited ("SEHK"); (b) not traded on the SSE in
currencies other than RMB; and (c) not included in the risk alert board. The Fund’s ability
to trade in Chinese Securities may be adversely affected if the SEHK changes the types of
securities that are eligible for trading through the Northbound Trading Link. In addition, the
Fund will only be permitted to sell Chinese Securities and will be restricted from further
buying if: (i) the Chinese Securities subsequently cease to be constituent stocks of the
relevant indices; (ii) the Chinese Securities are subsequently specified on the risk alert
board; or (iii) the corresponding H share of the relevant Chinese Security subsequently
ceases to be traded on the SEHK, as the case may be.
PRC Tax Risk
Pursuant to Circular Caishui [2014] No.79 ("Circular 79"), QFIIs and RQFIIs without an
establishment or place of business in the PRC, or those with an establishment in the PRC but
whose income so derived in the PRC is not effectively connected with such establishment,
are temporarily exempt from PRC corporate income tax in respect of gains realized on or after
17 November 2014 from the trading of PRC equity investments such as China A shares.
Similarly, pursuant to Circular Caishui [2014] No.81 ("Circular 81"), effective 17 November
2014, capital gains realized by foreign investors from the trading of China A shares through
the Connect Scheme will be temporarily exempt from PRC corporate income tax, individual
income tax and business tax. Although no capital gains tax is currently levied in the PRC on
capital gains recognized by QFIIs, RQFIIs or the Connect Scheme based on their investment
in China A Shares or Market Access Products, investors should note that there remains
considerable uncertainty as to the application of PRC capital gains tax to the Fund’s
investments. There is no assurance that QFIIs, RQFIIs, the Connect Scheme and/or Market
Access Products will not be required to pay capital gains tax in the future and/or
retrospectively. Based on Circular 79 and Circular 81, the Fund does not currently intend to
provide for PRC capital gains tax on gains realized from its investment in China A Shares of
Market Access Products through QFIIs and RQFIIs, or on China A shares through the
Connect Scheme. However, the Fund may change its PRC tax provision policy on the above
in the future should there be a change in PRC tax rules, regulations or policy. Any change in
PRC tax provision policy may affect the Net Asset Value of the Fund thereby adversely
impacting the existing and/or future investors of the Fund. Dividends derived from Chinese
Securities are generally subject to a 10% PRC withholding tax (subject to any tax treaties
which are applicable to the investor). PRC stamp duty is also payable for transactions in
Chinese Securities under the Connect Scheme. The Chinese tax authorities may issue further
guidance or different policies relating to the taxation payable in respect of Chinese Securities
at any time and, as a result, the Fund’s positions in the Chinese Securities may be adversely
impacted by such changes in applicable taxation.
Inflation
Some of the countries in which the Master Fund intends to invest have experienced
extremely high rates of inflation for many years. Inflation and rapid fluctuations in inflation
rates have had and may continue to have negative effects on the economies and securities
markets of certain emerging countries. Therefore, the performance of the Master Fund
could be affected by rates of inflation in countries in which the Master Fund invests.
Restrictions on Investment and Repatriation
Some countries impose restrictions and controls regarding investment by foreigners.
Among other things, they may require prior governmental approvals, impose limits on the
amount or types of securities that may be held by foreigners or impose limits on the types
of companies in which foreigners may invest. These restrictions may at times limit or
preclude the Master Fund’s investment in certain countries and may increase the Master
Fund’s costs and expenses. In addition, certain countries impose restrictions and controls
on repatriation of investment income and capital. In this regard, there can be no assurance
that the Fund will be permitted to repatriate capital or profits, if any, over the life of its
activities. The Master Fund could be adversely affected by delays in, or a refusal to grant,
any required governmental approval for repatriation of capital, as well as by the application
to the Master Fund of any restrictions on investments. Investing in entities either in, or
which have a substantial portion of their operations in, Asia may require the Master Fund to
adopt special procedures, seek local government approvals or take other actions, each of
which may involve additional costs to the Master Fund.
Dislocated Assets
Other than Designated Investments made on behalf of Shareholders, the Master Fund does
not intend to invest in illiquid securities, instruments or other assets for which no market
or only a limited market may exist. The Board may designate a particular Investment or
certain Investments of the Master Fund to be Dislocated Assets. The Master Fund does not
expect that a material portion of its assets to be Dislocated Assets at any time, although
this may change in exceptional circumstances. Certain of the Fund’s investments that
become Dislocated Assets may be held through special purpose vehicles owned by the
Master Fund. Using a special purpose vehicle provides, among other things, limited liability
protection to the Master Fund. The Master Fund has full discretion to determine the
structure, capitalization, and sources of capital for each special purpose vehicle, as well as
the terms on which existing Shareholders may participate in Dislocated Assets, including,
whether new Shares of a different Series referable to such Dislocated Assets will be issued
or whether shares of the special purpose vehicles will be issued directly to Shareholders,
and the valuation and timing at which Dislocated Assets may be exited out of. The Manager
does not intend to charge any management fees or performance allocations in respect of
its management of Dislocated Assets.
In circumstances where no exchange, broker-dealer, bank, market maker or pricing service
will issue pricing information for a security or other investment held in the Master Fund
including Dislocated Assets, the Manager will use its reasonable efforts and all appropriate
means to value such investments at fair value. Since determining fair value in a dislocated
market depends on the facts and circumstances, the Master Fund will have broad discretion
in determining the fair value of any Dislocated Assets, including the discretion to write down
to zero the value of any such Dislocated Assets. Investors should be aware that an exposure
to Dislocated Assets could result in a loss of some or all invested capital. Valuations of
Dislocated Assets are necessarily based on estimates, which may cause inequities for
Shareholders, both redeeming or remaining invested in the Fund.
Notwithstanding anything to the contrary contained herein, the Fund may refuse to make a
redemption payment to a Shareholder if the Directors suspect or are advised that the payment
of any redemption proceeds to such Shareholder may result in a breach or violation of any
applicable laws or regulations (including, without limitation, any anti-money laundering or anti-
terrorism laws and regulations) by the Fund or any other person in any relevant jurisdiction, or
such refusal is necessary or appropriate to ensure compliance by the Fund, the Master Fund,
the Manager, its Directors, the Board or the Administrator with any such applicable law or
regulation in any relevant jurisdiction. In such circumstances, and until otherwise instructed
by the relevant authority, the Directors may deposit such redemption proceeds in a separate
bank account. If the Directors are given permission to pay out such
redemption proceeds to the relevant Shareholder, that Shareholder’s only right against the
Fund will be the right to receive the monies so deposited (without interest).
Designated Investments
The Manager may invest a substantial portion (up to the Designated Investment Cap in the
absence of Shareholder approval) of the Master Fund’s assets in Designated Investments,
being securities for which there is no public market or for which there is limited liquidity in
the public market. Designated Investments may be difficult to value and to sell or otherwise
liquidate, and the risk of investing in such securities is generally much greater than the risk
of investing in publicly traded securities. Companies whose securities are not publicly
traded are not subject to the same disclosure and reporting requirements that are generally
applicable to companies with publicly traded securities. The Master Fund will not be able to
promptly liquidate its Designated Investments if the need should arise or may be able to
liquidate Designated Investments only at substantial discounts from cost, and it may be
extremely difficult to value any Designated Investment accurately. In the event that the
Master Fund is dissolved, the Fund may be required to make in-kind distributions to the
Shareholders of securities for which no public market exists.
Portfolio Turnover
The Manager’s trading decisions may be made on the basis of short-term market
considerations. The portfolio turnover rate could be substantial, potentially involving
substantial brokerage commissions and fees. Increased portfolio turnover may not result in
higher returns but would result in higher costs.
Gains and Losses
The Fund intends to make investments that will create long-term value. However, investments
that the Fund makes may not appreciate in value and, in fact, may decline substantially in
value. Accordingly, no assurance can be given that the Fund’s investments will generate gains
or income or that any gains or income that may be generated will be sufficient to offset any
losses that may be sustained. Prospective investors should also note that the Management
Fee payable and Profit Allocation allocable by the Fund are based in part upon unrealized
gains and that such unrealized gains may never be realized by the Fund.
Short Selling
Short selling involves selling securities which are not owned and borrowing them for
delivery to the purchaser, with an obligation to replace the borrowed securities at a later
date. Short selling allows the investor to profit from declines in market prices to the extent
such decline exceeds the transaction costs and the costs of borrowing the securities and
can also involve borrowing and other costs which can reduce profits or create losses in
particular positions. The extent to which the Master Fund engages in short sales depends
upon the Manager's investment strategy and opportunities. A short sale creates the risk of a
theoretically unlimited loss, in that the price of the underlying security could theoretically
increase without limit, thus increasing the cost to the Master Fund of buying those
securities to cover the short position. There can be no assurance that the Master Fund will
be able to maintain the ability to borrow securities sold short. In such cases, the Master
Fund can be "bought in" (i.e., forced to repurchase securities in the open market to return to
the lender). There also can be no assurance that the securities necessary to cover a short
position will be available for purchase at or near prices quoted in the market. Purchasing
securities to close out the short position can itself cause the price of the securities to rise
further, thereby exacerbating the loss.
No Limitations on Strategies
Other than as specifically set forth above and in this PPM, there are no material limitations
on the investment strategies which the Manager may use when investing assets on behalf
of the Master Fund pursuant to the Manager’s investment approach.
The Manager will opportunistically implement whatever strategies or discretionary approaches the Manager believes from time to time may be best suited to prevailing market conditions. Over time, the strategies implemented on behalf of the Master Fund can be expected to expand, evolve and change, perhaps materially. The Manager will not be required to implement any particular strategy or strategies and may discontinue employing any particular strategy on behalf of the Master Fund, whether such strategies are specifically described in this PPM, and without notice to Shareholders. There can be no assurance that the various investment strategies which the Manager expects from time to time to employ for the Fund will be successful or that strategies that have been successful will continue to be profitable. Regulations With the exception of registration under the Cayman Islands Mutual Funds Law, the Master Fund and the Fund are not currently registered pursuant to any other applicable law, rule or regulation including the Company Act. Consequently, Shareholders will not benefit from certain of the protections afforded by such other laws or regulations. If the Directors of the Fund and/or the Master Fund determine that it is in the best interests of the Fund and/or the Master Fund (as applicable) to become registered pursuant to any other applicable law, rule or regulation (including the Company Act) then the Fund and/or the Master Fund (as applicable) shall take all necessary steps in order to achieve such registration. Legal, tax and regulatory changes in various jurisdictions could occur during the lifetime of the Master Fund, the Fund and/or the Manager which may adversely affect it. Should any of those laws change, the legal requirements to which the Master Fund, the Fund and/or the Manager may be subject could differ materially from the current requirements. Regulatory Approvals The Master Fund may be restricted in its investments in various countries as a foreign company and may require the approval of various regulatory bodies. There is no guarantee that the policies of relevant regulatory authorities towards investment by foreign companies will remain unchanged. Any adverse changes in such policies may have a significant impact on the Master Fund’s ability to invest, or to dispose of Investments, in countries in which such restrictions or policies exist. Custody Risk There are risks involved in dealing with custodians or brokers who settle fund trades. Securities and other assets deposited with custodians or brokers may not be clearly identified as being assets of the Master Fund, and hence the Master Fund may be exposed to a credit risk to such parties. In some jurisdictions, the Master Fund may only be an unsecured creditor of its broker in the event of bankruptcy or administration of such broker. There may be practical or time problems associated with enforcing the Master Fund’s rights to its assets in the event of the insolvency of any such party. Recent losses incurred by some hedge funds in connection with the financial crisis and the bankruptcy of several large financial institutions illustrate the risks in derivatives trading and custody/brokerage arrangements. Assets held as collateral by the brokers in relation to
facilities offered to the Master Fund and assets deposited as margin with the brokers may
therefore be available to the creditors of such persons in the event of their insolvency.
The banking and financial systems in certain countries in Asia might not be well developed
or well regulated. Delays in transfers by banks may result, as may liquidity crises and other
problems arising as a result of the under-capitalization of the banking sector as a whole. A
general banking crisis in any of the countries in which the Master Fund invests would have
a material adverse effect on the Master Fund.
Counterparty Risk
The Master Fund will transact most of its investments through financial institutions including
brokers, dealers and banks. All purchases and sales of securities carry counterparty risks (the
risk that the counter party might default) until the transactions are settled.
All financing transactions such as borrowing or lending of funds or securities will carry
counterparty risks until such borrowing or lending has terminated and the relevant
collateral is returned. Deposits of securities or cash with a custodian, bank or financial
institution will carry counterparty risk.
Upon default by a counterparty, the Master Fund may be forced to unwind certain
transactions and the Master Fund may encounter delays and difficulties with respect to
court procedures in seeking recovery of such assets.
These risks could differ materially where transactions are not exchange-traded transactions,
which normally are backed by clearing organization guarantees, daily mark-to-market and
settlement, and segregation and minimum capital requirements. Transactions entered
directly between two counterparties may not benefit from such protections and expose the
parties to the risk of counterparty default.
Institutional Risk
Institutions, such as brokerage firms, banks and broker-dealers, generally have custody of
the Master Fund’s portfolio assets and may hold such assets in "street name". An
unforeseen event such as bankruptcy or fraud at one of these institutions could impair the
operational capabilities or the capital position of the Master Fund.
Recourse to All Assets / Cross Class Liability
The Fund and the Master Fund are each separate legal entities. Accordingly, all of the assets
of the Fund and the Master Fund, including any Investments made by the Master Fund, are
available to satisfy all liabilities and obligations of the Fund and the Master Fund respectively,
regardless of the Class to which such assets or liabilities are attributable, and regardless of
the fact that Investments may be held through special purpose trading subsidiaries.
If the Fund or the Master Fund become subject to a liability, parties seeking to have the
liability satisfied may have recourse to the Fund’s or the Master Fund’s assets generally
and not be limited to any particular asset, such as the asset representing the investment
giving rise to the liability. This may result in the Manager disposing assets of the Master
Fund in order to satisfy liabilities arising from other assets.
In practice, cross class liability is only expected to arise where any Class becomes
insolvent and cannot meet all of its liabilities.
In this case, all of the assets of the Fund or the Master Fund attributable to another Class of
Participating Shares may be applied to cover the liabilities of the insolvent Class.
Lack of segregation and rehypothecation risk
The stability and liquidity of repurchase agreements, swap transactions, forward
transactions and other over-the-counter derivative transactions depend in large part on the
creditworthiness of the parties to the transactions. It is expected that the Manager will
monitor on an ongoing basis the creditworthiness of firms (including the prime brokers and
custodians) with which the Master Fund will enter into repurchase agreements, interest rate
swaps, caps, floors, collars or other over-the-counter derivatives. If there is a default by the
counterparty to such a transaction, th please register to get more info