Reconstruction and wind up

NSF Securities Limited
20 November 2007

NSF Securities Limited (the 'Company')

Recommended proposals for the reconstruction and winding-up of the Company

20 November 2007



The Board has today announced Proposals for the reconstruction of the Company.
The Proposals will, if approved, become effective on 11 December 2007, being the
planned winding-up date of the Company.



Terms used and not defined in this announcement shall, unless the context
otherwise requires, bear the meaning given to them in the Circular issued by the
Company dated 19 November 2007.



Introduction



The Articles require the Directors to put a resolution to Shareholders on 11
December 2007 to consider the winding-up or reconstruction of the Company. The
Directors, with their advisers, have reviewed the courses of action available,
which include a simple liquidation of the Company, but have concluded that it is
in the interests of Shareholders as a whole to propose a scheme of
reconstruction. This will comprise a members' voluntary liquidation of the
Company pursuant to section 78 of the Companies (Guernsey) Laws 1994 to 1996, as
amended, together with the opportunity for ZDP Shareholders:



•           to roll over their interests in ZDP Shares into Accumulation Units
in Diversified Absolute Return Fund to a value of their Final Capital
Entitlement per ZDP Share less an initial charge of one per cent. (to be
contributed towards the cost of the Proposals). The ability of the Company to
pay the Final Capital Entitlement of 168.48 pence per ZDP Share in full is
subject to the Group's net assets at the Effective Date exceeding £42 million.
As at 15 November 2007 the Group's net assets were approximately £87 million
(unaudited). In the event of the Group's net assets being less than £42 million
on the Effective Date, the amount payable to ZDP Shareholders as their Final
Capital Entitlement will be reduced pro rata to the shortfall. Diversified
Absolute Return is an authorised open ended unit trust with an investment
objective to achieve a positive absolute return in different market conditions
from a portfolio of securities;



•           to receive their Final Capital Entitlement (subject as above), being
168.48 pence per ZDP Share in cash, providing an Election is made to receive
cash; or



•           to elect for a combination of Accumulation Units and cash.



Pursuant to the Proposals, ZDP Shareholders (other than Overseas Shareholders)
who wish to receive cash must positively elect to receive cash. Overseas
Shareholders will, however, be deemed to have elected to receive cash.
Accumulation Units in Diversified Absolute Return are not available to Overseas
Shareholders.



Notwithstanding the above, the Diversified Absolute Return Option is not
available in respect of fewer than 600 ZDP Shares. Accordingly, any Election or
deemed Election for the Diversified Absolute Return Option in respect of fewer
than 600 ZDP Shares will be invalid and will, in any event, be deemed to be an
Election for the Cash Option.



Benefits of the Proposals



The Directors believe that the Proposals will have the following benefits:



•           a choice of options for ZDP Shareholders, that would not be the case
if the Company were simply to be wound up;



•           for those ZDP Shareholders who wish to realise some or all of their
investment, the opportunity to receive cash equal to the Final Capital
Entitlement in respect of each ZDP Share;



•           enable the ZDP Shareholders (other than Overseas Shareholders) to
retain an exposure to an actively managed fund which seeks to provide capital
growth similar to that provided by zero dividend preference shares without such
shareholders incurring an immediate liability to capital gains tax, as a result
of them being able to elect for the Diversified Absolute Return Option; and



•           the standard initial charge for investing in Diversified Absolute
Return will be discounted from five per cent. to one per cent. in respect of
Accumulation Units to be issued pursuant to the Proposals.



The Diversified Absolute Return Option



Diversified Absolute Return is an authorised unit trust with an investment
objective to achieve a positive absolute return in different market conditions
from a portfolio of securities. In order to achieve its investment objective,
Diversified Absolute Return's investment policy is to invest in zero dividend
preference shares, fixed-interest securities, units in collective investment
schemes, investment trusts, money market investments, deposits and any other
permitted asset type deemed appropriate to meet the investment objective. Units
of Diversified Absolute Return are currently 'qualifying investments' for ISAs
and PEPs.



Diversified Absolute Return was launched in May 1991 and New Star became its
investment manager on 1 September 2003. On 31 October 2007, the net assets of
Diversified Absolute Return were approximately £105 million (unaudited).



Portfolio

Diversified Absolute Return's assets are predominantly invested in zero dividend
preference shares with the remainder of its assets invested in other products
and strategies chosen to deliver positive absolute returns. At 31 October 2007,
the assets of Diversified Absolute Return were invested as shown in the table
below:



Investment type                                  Percentage of assets



Zero dividend preference shares                        49.4

Defined return funds or similar products               18.6

Private equity                                          8.7

Absolute return managers                                7.6

Property funds                                          4.9

Energy and resources                                    4.5

Structured products                                     4.0

Special situations                                      2.3

Cash                                                    0.0

Total                                                 100.0



Performance

Between 1 September 2003, when New Star Investment Funds was appointed as its
investment manager, and 31 October 2007, the compound annual return on
Diversified Absolute Return was 12.2 per cent. which compares to 11.5 per cent.
for Datastream's index of zero dividend preference shares.



The percentage return of Diversified Absolute Return in each of the five years
ended 30 September 2007 is shown in the table below:



Year ended 30 September                     2003    2004   2005   2006   2007

New Star Diversified Absolute Return Fund   37.0    19.0   20.9   6.9    2.5

Source: Lipper (mid-mid basis). Past performance is not necessarily a guide to
future performance.



Manager

Diversified Absolute Return is currently managed by Paul Craig at New Star. Mr.
Craig joined New Star from Exeter Asset Management in September 2003, and is a
director of New Star Asset Management Limited. He has 19 years of investment
experience, including 10 years gained at Exeter Asset Management. He is
responsible for the management of four unit trusts investing in closed-end funds
with combined assets of approximately £492 million at 31 October 2007. At 31
October 2007, Mr. Craig was rated 'A' by Citywire.



The annual management charge is 1.2 per cent. and other estimated expenses
amount to 0.22 per cent. per annum.



The Accumulation Units are not listed on any stock exchange and thus may not be
traded as such but can be purchased or redeemed through New Star Investment
Funds.



The Cash Option



Those ZDP Shareholders who have elected (or who are deemed to have elected) for
the Cash Option will receive cash in an amount equal to such number of ZDP
Shares in respect of which an Election for the Cash Option has been or is deemed
to have been made multiplied by the Final Capital Entitlement of such ZDP
Shares.



Details of the Scheme



Apportionment of net assets on Liquidation

On the Resolution being passed at the Second General Meeting to wind-up the
Company, New Star Financial Opportunities will be required to repay immediately
the 2001 Loan Note and the 2005 Loan Note to the Company and New Star Financial
Opportunities will be required to discharge immediately its obligations under
the 2001 Undertaking and the 2005 Undertaking to contribute such amount to the
Company as will, together with the amounts repaid under the 2001 Loan Note and
the 2005 Loan Note, result in the Company having sufficient cash to distribute
168.48 pence in respect of each ZDP Share.



Calculation of value for the purposes of the Proposals

Accumulation Units will be issued at their net asset value as at noon on the
Calculation Date, calculated in accordance with the FSA Regulations by reference
to the valuation of Diversified Absolute Return at that time to the nearest two
decimal places. The number of Accumulation Units to be issued to each relevant
ZDP Shareholder will be such number as has a value, at the relevant net asset
value, equal to the aggregate Final Capital Entitlement of the ZDP Shares in
respect of which such ZDP Shareholder elected to receive Accumulation Units less
an initial charge of one per cent. (such one per cent. charge being remitted in
whole by the Unit Trust Manager to New Star Financial Opportunities to reduce
the cost to New Star Financial Opportunities of providing the rollover
opportunity).



Conditions

The Scheme is conditional upon the passing of the requisite resolutions at the
Meetings and satisfaction of certain other Conditions. If the Accumulation Units
are for any reason not issued by 14 December 2007, elections for the Diversified
Absolute Return Option will be deemed to be elections for the Cash Option.



Costs and Commissions

The total costs of the Proposals are expected to amount to approximately
£160,000 (including amounts in respect of VAT). These costs will be borne by New
Star Financial Opportunities, being the Ordinary Shareholder.



An initial charge of one per cent. will be payable in connection with the issue
of Accumulation Units under the Scheme to meet the costs incurred by New Star
Financial Opportunities in providing the rollover opportunity.



Tax Consequences For ZDP Shareholders

ZDP Shareholders should note that: (i) implementation of the Proposals should
not constitute a disposal by ZDP Shareholders of their ZDP Shares for the
purposes of UK taxation of chargeable gains to the extent that Accumulation
Units are received; and (ii) all ZDP Shareholders who elect or are deemed to
elect for the Cash Option should note that they will thereby make a disposal for
the purposes of UK taxation of capital gains and such ZDP Shareholders within
the scope of UK taxation of capital gains in respect of their holdings of ZDP
Shares therefore may realise a chargeable gain or allowable loss, depending on
their applicable circumstances.



ZDP Shareholders should be aware that the Accumulation Units do not represent
any form of 'roll-up investment' for UK income taxation purposes.



Dealings in Shares and Reclassified Shares



As part of the reconstruction of the Company, it is necessary to reorganise the
Company's share capital. Accordingly, subject to the passing of the Resolutions
set out in the notices convening the Class Meeting and the First General
Meeting, the ZDP Shares will be reclassified with different rights, depending on
the elections made by ZDP Shareholders (or deemed to have been so made) under
the Proposals, following the passing of the Resolutions at the Class Meeting and
the First General Meeting, which is expected to be at approximately 10.40 a.m.
on 11 December 2007.



The Register in respect of the ZDP Shares will close from 5.00 p.m. on 7
December 2007 and the last date for dealings on the London Stock Exchange and
the CISX on a normal rolling settlement basis will be 4 December 2007. As from 4
December 2007, dealings should be for cash settlement only and will be
registered in the normal way if the transfer, accompanied by the documents of
title, is received by Capita Registrars by 5.00 p.m. on 7 December 2007.
Transfers received after that time will be retained by Capita Registrars and
registered prior to the opening of the Register in respect of Reclassified
Shares. The Register in respect of the Reclassified Shares is expected to open
at approximately 10.40 a.m. on 11 December 2007.



However, investors who purchase ZDP Shares on or after 10 December 2007 should
be aware that they will receive unlisted Reclassified Shares reflecting the
Options which the transferring Shareholder has elected for (or has been deemed
to elect for) pursuant to the Scheme. No application has been made nor will be
made for the Reclassified Shares to be admitted to the Official List of the UK
Listing Authority or the Official List of the CISX or to trading on the London
Stock Exchange or the CISX.



Suspension of trading in, and cancellation of listing of, ZDP Shares



Trading in the ZDP Shares on the London Stock Exchange and on the CISX will be
suspended at 7.30 a.m. on 11 December 2007. Subject to the passing of the
resolution to wind up the Company to be proposed at the Second General Meeting
of the Company on 11 December 2007, the Company will be placed in liquidation
and consequently cancellation of the listing of the ZDP Shares will occur at
8.00 a.m. on 12 December 2007. The Company has applied to the FSA and the CISX
to cancel the listing of the ZDP Shares with effect from 8.00 a.m. on 12
December 2007.



Deemed Elections



ZDP Shareholders (other than Overseas Shareholders) who do not return a Form of
Election or (as appropriate) send a TTE Instruction to CREST will be deemed to
have elected for the Diversified Absolute Return Option in respect of their
entire holdings

of ZDP Shares.



Overseas Shareholders will not receive a Form of Election and will be deemed to
have elected for the Cash Option in respect of their entire holdings of ZDP
Shares.



The Diversified Absolute Return Option is not available in respect of fewer than
600 ZDP Shares. Accordingly, any Election or deemed Election for the Diversified
Absolute Return Option in respect of fewer than 600 ZDP Shares will be invalid
and will, in any event, be deemed to be an Election for the Cash Option.


Expected Timetable                                                      2007


Date from which it is advised that dealings in ZDP Shares               4 December

should only be made on the basis of cash settlement and

immediate delivery of documents of title


Latest time for receipt of Forms of Election                            1.00 p.m. on 7 December


Latest time for receipt of TTE Instructions from                        1.00 p.m. on 7 December

Shareholders holding ZDP Shares in uncertificated form


Record Date for the purposes of Elections and                           5.00 p.m. on 7 December

Company's Register closes


Latest time for receipt of Forms of Proxy for the Class                 11.00 a.m. on 8 December

Meeting


Latest time for receipt of Forms of Proxy for the First                 10.30 a.m. on 9 December

General Meeting


Latest time for receipt of Forms of Proxy for the Second                10.40 a.m. on 9 December

General Meeting


Class Meeting                                                           11.00 a.m. on 10 December


Listing of ZDP Shares suspended                                         7.30 a.m. on 11 December


First General Meeting                                                   10.30 a.m. on 11 December


ZDP Shares reclassified as Reclassified Shares and                      11 December*

Company's Register re-opens


Second General Meeting                                                  10.40 a.m. on 11 December


Effective Date for implementation of Proposals                          11 December


Entitlement of ZDP Shareholders (other than those                       12.00 noon on 11 December

who have elected, or are deemed to have elected, for

the Cash Option) to Accumulation Units determined


Accumulation Units issued by Diversified Absolute Return                11 December


Cheques despatched to ZDP Shareholders who have                         on or as soon as practicable after
                                                                        11 December
elected for the Cash Option and CREST payments made

Cancellation of listing of ZDP Shares                                   8.00 a.m. on 12 December


Contract notes for Accumulation Units despatched                        on or as soon as practicable after
                                                                        12 December





* The reclassification of ZDP Shares in respect of which no Election for the
Cash Option (or deemed such Election) has been made will occur immediately
following the passing of the Resolutions proposed at the Class Meeting and the
First General Meeting, this being expected to be at approximately 10.40 a.m. on
11 December 2007, and are a technical requirement of the Scheme. Shares will be
reclassified according to the Elections made (or deemed to have been made) by
ZDP Shareholders.



Definitions



The following definitions apply throughout this announcement unless the context
requires otherwise:


'Articles' or 'Articles of       the articles of association of the Company, as amended from time to time

Association'


'Calculation Date'               the date on which the creation price for the Accumulation Units will be
                                 determined pursuant to the Transfer Agreement for the purposes of
                                 calculating the number of Accumulation Units to be issued to ZDP
                                 Shareholders electing for the Diversified Absolute Return Option, and
                                 which is expected to be 11 December 2007


'Cash Option'                    the option for ZDP Shareholders to realise their ZDP Shares for cash in
                                 accordance with the Scheme


'Class Meeting'                  the class meeting of ZDP Shareholders convened for 10 December 2007 at
                                 11.00 a.m. and any adjournment thereof


'Diversified Absolute Return     the right of election by ZDP Shareholders to roll over their ZDP
Option'
                                 Shares into Accumulation Units


'Effective Date'                 the date on which the special resolution for the winding-up of the Company
                                 to be proposed at the Second General Meeting is passed, when the Scheme
                                 shall become effective (which is expected to be 11 December 2007)


'Election'                       an election for the Diversified Absolute Return Option and/or the Cash
                                 Option (as the context may require) in respect of ZDP Shares including,
                                 where appropriate, a deemed election under the Scheme


'Final Capital Entitlement'      168.48 pence or, if the assets of the Group available for distribution to
                                 ZDP Shareholders on a winding-up of the Company are insufficient to enable
                                 the Company to pay 168.48 pence in respect of each ZDP Share on
                                 liquidating, such lower sum per ZDP Share as is available to be paid to
                                 ZDP Shareholders upon the liquidation of the Company


'First General Meeting'          the extraordinary general meeting of the company convened for 11 December
                                 2007 at 10.30 a.m. and any adjournment thereof


'Group'                          the Company and New Star Financial Opportunities


'Meetings'                       The Class Meeting, the First General Meeting and the Second General
                                 Meeting
'New Star' or 'Manager'          New Star Asset Management Limited, authorised and regulated by the FSA


'New Star Financial              New Star Financial Opportunities Fund Limited
Opportunities'

'Proposals'                      the proposals for the liquidation and reconstruction of the Company and
                                 the Resolutions to be approved at the Meetings, including the approval of
                                 the Scheme, the changes to the Articles and all ancillary matters


'Record Date'                    5.00 p.m. on 7 December 2007, being the record date for ZDP Shareholders
                                 to participate in the Scheme


'Reclassified Shares'            ZDP Shares as reclassified into A Shares and B Shares for the purpose of
                                 the Scheme upon the passing of the Resolution set out in the notice
                                 convening the relevant First General Meeting


'Register'                       the register of members of the Company


'Resolutions'                    the resolutions to be proposed at the Meetings


'Second General Meeting'         the general meeting of the Company convened for 11 December 2007 at 10.40
                                 a.m. or as soon thereafter as the First General Meeting has concluded


'ZDP Shares'                     the zero dividend preference shares of 25p each in the capital of the
                                 Company


'ZDP Shareholders'               holders of Zero Dividend Preference Shares





Copies of the Circular have been submitted to the UK Listing Authority and will
shortly be available for inspection at the UK Listing Authority's Document
Viewing Facility which is situated at:



Financial Services Authority

25 The North Colonnade

Canary Wharf

London

E14 5HS

Tel. no. 020 7066 1000



Enquiries:



Ravi Anand/Robert Peel

New Star Asset Management Limited

020 7225 9292/6171



David Benda/Katie Standley

Winterflood Investment Trusts

020 3100 0291/0293




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