Information  X 
Enter a valid email address
  Print      Mail a friend       More announcements

Tuesday 02 September, 2008

SGAM A.I. Starway Fd

Creation of Additional Incuba

RNS Number : 5818C
SGAM A.I. Starway Fund Ltd
02 September 2008
 
Stock Exchange Announcement
 
For immediate release                                                                                  September 2, 2008
 
 
SGAM AI Starway Fund Ltd. (The “Fund”)
 
Re: Creation of additional Incubator Fund
 
 
 
 
SGAM AI Starway - Grant Capital Segregated Portfolio (the “Grant Incubator Fund”), a segregated portfolio of SGAM AI Starway SPC (the “Segregated Portfolio Company”) was formed on September 1, 2008, under the laws of the Cayman Islands. The Grant Incubator Fund will commence operations on September 2, 2008. The Grant Incubator Fund’s registered and principal office is located at the same address as the Fund. Grant Capital Partners LLC (“Grant Capital” or the “Investment Manager”) serves as the investment managerof LiquidMacro Master Fund, Ltd. (the “Grant Master Fund”), in which the Grant Incubator Fund will invest all or substantially all of its assets.
The Grant Master Fund was incorporated with limited liability under the laws of the Cayman Islands on July 9, 2008 under registration number 231847. The Grant Master Fund will commence operations on September 1, 2008. The Grant Master Fund’s registered and principal office is:
 
Citadel Solution LLC
131 South Dearborn Street
Chicago, Illinois, 60603
USA
 
Investment Objective and Strategy
The Grant Incubator Fund, indirectly through its investment in the Grant Master Fund, will seek to achieve its investment objective by engaging in highly speculative trading in a variety of financial and real assets. Through the Grant Master Fund, the Grant Incubator Fund is expected to trade and invest by taking long and short positions in currencies, government bonds, commodities, interest rates, stocks and credit indices. The Grant Incubator Fund, in this capacity, is expected to use financial futures, forwards, swaps, options, and other derivative instruments to meet its investment objective. The Grant Master Fund has a worldwide scope and can buy and sell instruments or assets on a variety of exchanges around the world as well as on the inter-bank and over the counter markets. The Grant Incubator Fund, through its investment in the Grant Master Fund, may invest in either rated or unrated securities or listed or unlisted securities.
The Grant Incubator Fund and Grant Master Fund will adhere to the same investment restrictions as detailed in the listing particulars of the Fund, dated July 31, 2006 (the “Listing Particulars”). The principal investment objectives and policies of the Grant Incubator Fund and Grant Master Fund will be adhered to for three years from the date of the commencement of operations of the Grant Incubator Fund. 
Balance Sheet and Off Balance Sheet Leverage
The Grant Incubator Fund, indirectly through its investment in the Grant Master Fund, uses highly leveraged trading strategies to meet its principle objective of capital appreciation. Balance sheet leverage involves borrowing money against the value of the Grant Incubator Fund’s holdings so that the total assets held in the Grant Incubator Fund’s portfolio can be many times the total value of net assets in the Grant Incubator Fund. Such use of leverage potentially allows the Grant Incubator Fund to profit from small movements in the value of the underlying assets. Due to the speculative nature of the Grant Incubator Fund’s strategy, however, substantial losses can occur if the price movements run contrary to the Investment Manager’s expectations. The Grant Incubator Fund is expected to use strategies involving both long and short positions in financial and real assets, and, therefore, price movements in either direction could cause substantial profits or losses depending upon the positions held by the Grant Incubator Fund. In addition, though there are not explicit leveraging limits, there is a maximum 1-day limit for Value-at-Risk (at a 95% confidence level) of 4% of the Grant Master Fund's net asset value. 
Similarly, the Grant Incubator Fund may employ off balance sheet instruments as a part of its investment strategy. Financial and commodity instruments such as forward interest contracts, option and swap contracts may require the Grant Incubator Fund to post either a small fraction of their value in margin or no margin. This approach may mean the balance sheet of the Grant Incubator Fund may not reflect the amount of leveraged utilized. Accordingly, small price movements in either direction could result in substantial profits or losses for the Grant Incubator Fund. 
The Grant Incubator Fund may also employ options as part of its strategy. An option involves the right of the purchaser and the obligation of the seller to buy or sell an underlying instrument for a fixed price at or before some point in the future. The value of an option can vary substantially depending upon the value of the underlying instrument. The seller of the option may also incur substantial risks relating to delivering or taking delivery of a physical commodity. The Grant Incubator Fund expects to both purchase and sell options, and, therefore, relatively small price movements in the underlying instruments may result in substantial profits and losses.
Risk Management
An investment in the Grant Incubator Fund is subject to significant levels of risk. Nonetheless, the Investment Manager, through an Investment Committee, has adopted guidelines to monitor market risk with the goal of keeping the risks associated with the Grant Master Fund’s strategy within appropriate levels in order to achieve targeted returns. These guidelines are both quantitative and qualitative in nature and apply to both individual portfolio managers and to the aggregate risk level of the Fund.
One of the quantitative methods employed to measure risk for the Grant Incubator Funds is known as “Value at Risk” (VAR). This method involves analyzing the Grant Incubator Fund’s portfolio using a covariance matrix multiplied by the current market volatilities. This approach may help the Investment Manager to estimate the Grant Incubator Fund’s potential losses based upon a historical simulation methodology.
Grant Capital Partners LLC
Grant Capital Partners LLC, the Investment Manager, is a Delaware limited liability company and is responsible for managing the Grant Master Fund’s portfolio. As of August 2008, the Investment Manager had no assets under discretionary management. The Investment Manager is not registered in any capacity with a governmental regulatory authority. The Investment Manager also serves as general partner to LiquidMacro Fund, LP, a California limited partnership (the “Onshore Feeder”) and as investment manager to LiquidMacro Fund, Ltd., a Cayman Island exempted company (the “Offshore Feeder” and, collectively with the Onshore Feeder, the “Feeder Funds”). 
The Investment Manager relies on certain exemptions from registration as an investment adviser with the U.S. Securities and Exchange Commission. The Investment Manager will also claim an exemption from registration as a commodity pool operator and a commodity trading advisor with the U.S. Commodity Futures Trading Commission.
The Investment Committee
The Investment Manager has established an investment committee (the “Investment Committee”), which includes the portfolio managers assigned to manage the assets of the Grant Master Fund as well as the Chief Risk Officer. The main responsibility of the Investment Committee is to allocate capital and levels of risk to portfolio managers. The Investment Committee will meet regularly and make such allocations based upon a number of fluid and static factors, including but not limited to, market conditions, recent trading performance, correlations between portfolio managers and strategies and assets under management. As provided in the documents governing the Investment Committee, Geoffrey Grant will hold veto power over a number of investment decisions including, setting and adjusting fund risk limits, setting and adjusting the Grant Master Fund’s permitted leverage ratio, adding or removing portfolio managers, modifying the approved markets or instruments list and approving any allocations made to third parties or affiliates.
The Investment Committee meets regularly to monitor and adjust these risk levels as appropriate. In addition to his veto power over certain key decisions, Geoffrey Grant also has the authority to employ a forced “Time Out” for individual portfolio managers or for the Grant Master Fund as a whole. Currently, Geoff Grant, Perry Parker, Stephen Duneier, Eric Peters and Kit Munday are the portfolio managers for the Grant Master Fund. Stephen Lisenby serves as the Chief Risk Officer.
 
The Principals of the Grant Master Fund
Geoff Grant (Chief Executive Officer and Chief Investment Officer) has over 27 years of experience in the financial markets, beginning as a foreign exchange options trader at Morgan Stanley, where he ultimately served as head of Asian currency derivatives from 1987 to 1989. In 1989, Mr. Grant took a position with Goldman Sachs where he was elected partner in 1996. Mr. Grant directed numerous operations while at Goldman Sachs including European Government Bond Trading, Global Foreign Exchange Trading and Global Propriety Trading. He retired from Goldman Sachs at the end of 2004 and founded Peloton Partners, a London-based hedge fund. He holds a BS in Applied Mathematics and Operations Research from Columbia University.
Perry Parker (Portfolio Manager) has over 20 years experience as an entrepreneur and securities professional. Most recently, Mr. Parker was a portfolio manager of the Peloton Multi-Strategy Fund. From 1996 until 2005, Mr. Parker held a number of positions with Deutsche Bank in both London and New York starting as Head of Global Vanilla Options (London). In 2001, he was promoted to Head of North American Foreign Exchange (New York), and he was named Managing Director, Global Head of Non-Franchise Trading in 2002. Mr. Parker started his formal career with Goldman Sachs in 1987 as an Options Market Maker and floor broker on the Chicago Mercantile Exchange. He has owned and operated the Sanford Land and Cattle Company, a cattle grazing business based in Mississippi, since 1993. He was an organizer and investor in The First National Bank of South Mississippi, which is currently listed on the NASDAQ. Mr. Parker received his MBA (Finance) from the University of Chicago and completed his undergraduate work at the University of Southern Mississippi where he was awarded a BS, Finance, cum laude.
Stephen Duneier (Portfolio Manager) has over 20 years experience in the financial markets. Most recently, he was Portfolio Manager of the Peloton Multi-Strategy Fund. From late 2003 through 2006, Mr. Duneier was Partner, Portfolio Manager for London Diversified Fund Management, where he managed a macro-driven portfolio utilizing option strategies primarily in the foreign exchange market. Mr. Duneier served as Managing Director, Emerging Markets Division for AIG International in their London offices from 2001 until the fall of 2003. In London, Mr. Duneier developed the “TIP” business model, which has subsequently been used by many firms in the foreign exchange business. While at AIG International, he and his team of traders, based in London, New York and Singapore, managed a portfolio of emerging market derivative strategies. During his career, Mr. Duneier has held positions with several major financial institutions: VP of Emerging Markets Derivatives, AIG Trading; Head of FX Options Trading, Bank of America; Chief Dealer, Republic Bank of New York; Currency Option Trader, Credit Suisse. Mr. Duneier received his MBA (Economics and Finance) from New York University, Stern School of Business, with Stern Scholar distinction.
Eric Peters (Portfolio Manager) has nearly 20 years experience in the financial markets as a proprietary trader and entrepreneur. Mr. Peters began his career with Lehman Brothers as a Money Market Trader, and later served as Director, Money Market Proprietary Trading, and finally, as Director, Foreign Exchange Proprietary Trading. As Director, Fixed Income Proprietary Trading, for Credit Suisse First Boston in London, Eric employed a global macro approach to directional and cross market opportunities. Mr. Peters founded Stockback, a financial services company backed by venture capital investors, RRE Ventures and T.H. Lee Putnam Ventures, and he sold the company to a competitor in 2004. Mr. Peters serves as an advisor to Solon Mack Capital, which holds a portfolio of alternative investments, real estate interests and private partnerships. Mr. Peters received his BA in Business Economics from Brown University in Providence, Rhode Island.
Kit Munday (Portfolio Manager) has over 15 years experience in the investments business, specializing in interest rate and credit markets. In his most recent position as Portfolio Manager with Peloton Capital Management L.P., Mr. Munday’s trading responsibilities included proprietary credit trading, single names, structured products, directional and relative value trading. From 1992 through mid-2005, Mr. Munday worked for Nomura International Plc/Nomura Securities Inc. in a variety of capacities. Starting in their London offices as a fixed income trader, he ran a proprietary trading block of European Government bonds, Futures, Swaps and Options. Promoted to Assistant Vice President, Fixed Income Trading in 1996, Mr. Munday relocated to New York where he was responsible for European products distributed to U.S. accounts. Transferring to Nomura’s Tokyo office, he assumed additional responsibilities for overnight pricing of London products including Swaps, FRNs, emerging market and credit arbitrage structures. With a 2002 promotion to Vice President, Fixed Income, Mr. Munday moved back to the London office where he established and managed a relative value trading book using a trading strategy that combined bottom-up financial analysis with top-down mathematical modeling. Mr. Munday received his MBA (Finance) from Columbia Business School in New York. He also graduated from The University of Edinburgh in Scotland with a MA (Honors) in Clinical Psychology.
 
Stephen Lisenby (Chief Operating Officer and Chief Risk Officer) began his career as a physical oil trader in 1981. He spent over four years in Singapore where he became a boutique dealer in the early stages of the global energy swaps and options market. During the period from 1992-2002, Mr. Lisenby worked for Goldman Sachs as Vice President of Energy Risk Management in North America and Europe. In 1999, Mr. Lisenby relocated to London to compliment the European marketing desk for both natural gas and petroleum. Mr. Lisenby’s operational experiences include scheduling pipelines, chartering ships, managing marine tank farms, and processing crude oil in California and Singapore. Mr. Lisenby has served as both consultant and Vice President, Energy Services for Sapient Corporation with the mandate to develop technology solutions and business opportunities for trading companies including hedge funds. Mr. Lisenby received a BS, Business Administration from the University of Arizona in Tucson. His emphasis of study was marketing and quantitative analysis.
Grant Investment Management Agreement
 
General. The Grant Master Fund pays the Management Fee and makes the Incentive Allocation to the Investment Manager under the terms of an investment management agreement with the Grant Master Fund (the “Grant Investment Management Agreement”).
If the Grant Investment Management Agreement is terminated as of a date that is not the last day of a calendar year, the Incentive Allocation then due will be calculated on the basis of the Grant Master Fund’s performance over the period from the last Incentive Allocation computation (or the inception of the Grant Master Fund, as the case may be) through the termination date, and will be payable within ten days of such date.
The Grant Investment Management Agreement provides that it shall continue until terminated. Either the Investment Manager or the Grant Master Fund may terminate the Grant Investment Management Agreement effective at the close of business on the last business day of any month by giving the Grant Master Fund, or the Investment Manager, as the case may be, at least ninety days (90) days’ prior written notice of such termination. The Grant Investment Management Agreement also provides that upon reasonable notice by the Investment Manager the Grant Master Fund will replace the Administrator.  The Grant Investment Management Agreement is governed by the laws of the State of California, United States of America.
The Grant Investment Management Agreement provides that the Investment Manager assumes no responsibility thereunder other than to render the services called for by the Grant Investment Management Agreement in good faith. Subject to the Grant Incubation Agreement (as defined below), under the terms of the Grant Investment Management Agreement, the Investment Manager and certain other persons not only are not liable to the Grant Master Fund or the Investors for errors in judgment or other acts or omissions not amounting to breach of fiduciary duty (provided that the person acts in good faith), but they are indemnified in such circumstances by the Grant Master Fund. The Grant Investment Management Agreement also provides that the Grant Master Fund will advance funds to those persons for legal expenses in cases in which the indemnity may apply. Therefore, purchasers of the Shares may have more limited rights of action than they would have absent the limitations in the Grant Investment Management Agreement. Additionally, the Investment Manager will not be liable to the Grant Master Fund for any failure to make any recommendation or effect any transaction for the Grant Master Fund on the basis of information known to the Investment Manager if the utilization of such information could, in the Investment Manager’s opinion, constitute a violation of any applicable law, rule or regulation, or the breach of any fiduciary duty or confidential relationship between the Investment Manager and any other person.
The Grant Investment Management Agreement recognizes that the Investment Manager or its affiliates are or may become associated with other investment entities and engage in investment management for others. Except to the extent necessary to perform their obligations under the Grant Investment Management Agreement, the Investment Manager or its affiliates will not be limited or restricted from engaging in or devoting time and attention to the management of any other business, whether of a similar or dissimilar nature, or to render services of any kind to any other corporation, firm, individual, or association. As a result, the Investment Manager or its affiliates or other clients may hold substantial positions in investments that are also owned by the Grant Master Fund. Although the availability at acceptable prices of investments may from time to time be limited, it is the policy of the Investment Manager and its affiliates, subject to similar investment objectives and risk tolerance, to allocate purchases and sales of such securities in a manner deemed fair and equitable to all clients, including the Grant Master Fund.
The initial term of the Grant Investment Management Agreement shall be effective as of September 1, 2008 (the “Effective Date”). Except as otherwise provided above, the Investment Management Agreement shall continue in full force and effect until or unless terminated by LiquidMacro Fund, Ltd. or the Grant Master Fund, or by the Investment Manager , effective at the close of business on the last business day of any month by giving the other parties to the Grant Investment Management Agreement at least ninety days (90) days’ prior written notice of such termination.
Grant Incubation Agreement
General. The Project Agreement dated as of August 13, 2008 between SGAM AI Edge Inc. (the “Sponsor”), SGAM AI Starway (US) Master Fund Ltd., SGAM AI Starway Master Fund Ltd., Grant Capital Partners, LLC,and the LiquidMacro Master Fund Ltd. (the “Grant Incubation Agreement”) provides, in addition to Operating Revenues and the Buy-Out Entitlement, both as described in the Listing Particulars, other rights or benefits — including, among other things, certain consent rights, non-competition covenants, marketing rights, “most favored nation” status and investment capacity rights.
The Sponsor has committed to the Investment Manager that, barring a Commitment Termination Event (for example, peak-to-trough drawdowns, position concentration events and other risk limits, sub-standard performance, “key man events,” reputational damage or material breach of the Grant Incubation Agreement), the Grant Incubator Fund will maintain investments in the Grant Master Fund until the September 30, 2011. In certain circumstances, the Investment Manager can exercise its Buy-Out Entitlement prior to this date.
If the Sponsor terminates the Grant Incubation Agreement without cause, the Sponsor will give up substantial future economic rights under the Grant Incubation Agreement. On the other hand, if the Sponsor terminates the Grant Incubation Agreement for cause, pursuant to the Grant Incubation Agreement, the Sponsor shall continue to be entitled to certain substantial economic rights.
Standard of Liability and Indemnity. The Grant Incubator Fund, the Sponsor and their affiliates will generally be indemnified by the Investment Manager for any loss suffered by them due to material misstatements or omissions contained in materials furnished by Investment Manager for use in marketing. The Investment Manager and its affiliates will generally be indemnified by the Sponsor for any loss suffered by the Investment Manager due to material misstatements or omissions contained in materials furnished by the Sponsor for use in marketing the Investment Manager. Notwithstanding the foregoing, no person will be indemnified with respect to any matter resulting from its gross negligence, bad faith, or fraud, a material violation of applicable securities laws, conduct that is the subject of criminal proceedings where such person knew such conduct was unlawful or a material breach of the Grant Incubation Agreement.
The Administrators
Euro-VL (Ireland) Limited (“Euro-VL”) serves as the Administrator of Grant Incubator Fund pursuant to an Administration Agreement dated October 2005, as amended from time to time, between Euro-VL and the Segregated Portfolio Company (on behalf of each of the Incubator Funds). Euro-VL will continue to act under the same terms and conditions and fees as disclosed in the Listing Particulars.
Citadel Solutions (“Citadel”) serves as the Administrator (and provides two independent directors) of Grant Master Fund. Citadel provides administrative services for a number of corporations, trusts and partnerships throughout the world. 
Citadel is responsible for all matters pertaining to the administration of the Grant Master Fund, including: (i) processing and reviewing subscription agreements, communicating with Shareholders and maintaining a register of Shareholders; (ii) recording subscriptions payments and assisting in the establishment of bank accounts; (iii) reviewing all money wires and maintaining the principal records and books of accounting of Grant Master Fund; (iv) arranging for and coordinating the audit of the financial statements of Grant Master Fund by independent auditors; (v) disbursing distributions with respect to the Shares, legal fees and accounting fees on behalf of Grant Master Fund; (vi) furnishing the offering price of the Shares; (vii) Prepare minutes of one annual general meeting and two directors meetings (if required) for the Grant Master Fund; and (viii) calculating and distributing the net asset value of Grant Master Fund. 
Grant Master Fund has entered into Administrative Services Agreement with Citadel dated as of September 1, 2008; which provide that Grant Master Fund will indemnify and hold harmless the Administrator, its affiliates and any of their respective officers, directors, members, shareholders, employees, and agents, or any of their successors or assigns (each, an “Administrator Indemnified Party”), from and against any and all losses, judgments, liabilities, expenses (including, without limitation, attorney’s fees) and amounts paid in settlement of any claims arising out of, or in connection with, any action taken or omitted by any of the foregoing Administrator Indemnified Parties, unless such action or omission is found to have resulted from the bad faith, fraud, gross negligence or willful misconduct by such Administrator Indemnified Party in connection with the performance of its duties and obligations under the Services Agreement.
The Administrative Services Agreements may be terminated without penalty by either of the parties thereto upon not less than 120 days’ prior written notice.
 
Citadel is entitled to receive out of the assets of the Grant Master Fund an annual fee of max 16 bps per year of the Net Asset Value of the Grant Master Fund.
The Custodian to the Grant Incubator Fund
Société Générale S.A.(the “Custodian”), an affiliate of the Sponsor, is the appointed custodian of the Incubator Fund under Custodian Agreements dated as of October 1, 2005, as amended from time to time. The main activities of the Custodian are the provision of custodial services to collective investment schemes. The Custodian is a French public limited company founded in 1864 and which is one of France’s leading commercial and investment banking institutions with operations throughout the world. The Custodian is actively engaged in asset management, private banking and corporate and investment financial services throughout the world. As of the end of December 2007, the Custodian has over €29.1 billion in shareholders’ equity. As of the end of December 2007, the Custodian had approximately €2,582 billion in assets under custody.
The Custodian is responsible for the safe-keeping of all of the assets of the entities that make up the Fund’s structure. The Custodian may, however, appoint any person or persons to be the sub-custodian of the assets of these entities but the liability of the Custodian shall not be affected by the fact that it has entrusted to a third party some or all of the assets in its safekeeping. The Custodian may appoint sub-custodians to provide custody for the assets of the entities that make up the Fund’s structure (including the Grant Incubator Fund); provided, that the Custodian shall exercise reasonable skill, care and diligence in the selection of a suitable sub-custodian and shall be responsible to the entities that make up the Fund’s structure (including the Grant Incubator Fund) for the duration of the sub-custody agreement for satisfying itself as to the ongoing suitability of the sub-custodian to provide custodial services to the entities that make up the Fund’s structure (including the Grant Incubator Fund). The Custodian must maintain an appropriate level of supervision over the sub-custodian and make appropriate inquiries to periodically confirm that the obligations of the sub-custodian continue to be competently discharged. 
The Custodian Agreements provide that as the entities that make up the Fund’s structure (including the Grant Incubator Fund) may invest in markets where custodial and/or settlement systems are not fully developed, the assets of the entities that make up the Fund’s structure (including the Grant Incubator Fund) which are traded in such markets and which have been entrusted to sub-custodians, in circumstances where the use of such sub-custodians is necessary, may be exposed to risk in circumstances whereby the Custodian will have no liability. 
The Custodian must exercise all reasonable care and diligence in the discharge of its duties and shall be liable to the entities that make up the Fund’s structure (including the Grant Incubator Fund) in respect of any loss suffered by them arising from negligence, fraud, bad faith, wilful default or recklessness in the performance of its duties under the Custodian Agreements. The entities that make up the Fund’s structure (including the Grant Incubator Fund) undertake to hold harmless and indemnify the Custodian against all actions, proceedings and claims and against all costs, demands and expenses arising therefrom which may be brought against, suffered or incurred by the Custodian by reason of the performance of the Custodian’s duties under the terms of the Custodian Agreements save where any such actions, proceedings, claims, costs, demands or expenses arise as a result of the Custodian’s negligence, wilful default, fraud, bad faith or recklessness to perform its obligations or its improper performance of them.
The Custodian Agreements continue in effect until terminated. The Custodian Agreements may be terminated by any of the parties to the Custodian Agreements on giving 90 days’ notice to the other parties thereto. In the event of breach of the Custodian Agreements or certain regulatory events occur, the Custodian Agreements may be terminated on shorter notice.
The Custodian’s remuneration is determined based on the net asset value of the SGAM AI Starway Master Fund Ltd., as per the disclosure contained in the Listing Particulars.
The Custodian is regulated in France by the AMF.
The Prime Brokers to the Grant Master Fund
The Grant Master Fund has appointed each of Goldman, Sachs & Co. and Credit Suisse (collectively, the “Prime Brokers”) as a prime broker and custodian to the Grant Master Fund pursuant to a Separate Custom Account Agreement, dated as of the September 1, 2008 (together the “Prime Brokerage Agreements”). 
Grant Master Fund may utilize prime brokers other than the Prime Brokers (such brokers, together with the Prime Brokers, the “Brokers”). Brokers and banks that the Grant Master Fund uses and that have custody of the Grant Master Fund’s cash (including subscription proceeds) and Financial Instruments will meet the definition of “Qualified Custodian” under Rule 206(4)-2 of the U.S. Investment Advisers Act of 1940, as amended (the “Advisers Act”). A “Qualified Custodian” is generally a bank or savings association that has deposits insured by the U.S. Federal Deposit Insurance Corporation, a U.S. SEC-registered broker-dealer, a U.S. CFTC-registered futures commission merchant or a foreign financial institution that holds segregated customer assets. Financial Instruments and cash (including subscription proceeds) held by such Brokers and banks will be maintained in an account in the name of the Grant Master Fund. 
No Prime Brokers will have discretion in relation to the investment of the assets of the Grant Master Fund and will not participate in the management of the Grant Master Fund or otherwise be involved in the decision-making process. The Prime Brokerage Agreements have been entered into on arms’ length and market terms.
In addition to using the Prime Brokers, the Investment Manager is authorized to determine different Brokers to be used for each Financial Instrument transaction for the Grant Master Fund. In selecting Brokers to execute transactions, the Investment Manager need not solicit competitive bids and does not have an obligation to seek the lowest available commission cost. It is not the Investment Manager’s practice to negotiate “execution only” commission rates; thus, the Company may be deemed to be paying for other products and services provided by the Broker which are included in the commission rate. Brokers will be selected generally on the basis of best execution, which will be determined by taking into account, among other things, commission rates (and other transactional charges), the Broker’s financial strength, stability and responsibility, reputation, reliability, responsiveness to the Investment Manager and accuracy of recommendations on particular Financial Instruments, ability to execute trades, block trading and block positioning capabilities, nature and frequency of sales coverage, net price, depth of available services, bond capability and option operations, willingness to execute related or unrelated difficult transactions in the future, order of call, back office, processing and special execution capabilities and efficiency of execution and error resolution.
Neither Grant Master Fund nor the Investment Manager intends to enter into “soft dollar” arrangements that would fall outside of the safe harbor rules set forth in Section 28(e) of the U.S. Securities Exchange Act of 1934.
The Prime Brokers are primarily regulated in the conduct of its brokerage business by the U.S. Securities Exchange Commission and the New York Stock Exchange. Goldman Sachs has a credit rating of A-1 by Standard & Poor’s and P-1 by Moody’s for their short-term debt, a credit rating of AA- by Standard & Poor’s for their long term debt and a credit rating of Aa3 by Moody’s for their long-term debt. Credit Suisse has a credit rating of A-1 by Standard & Poor’s for its short-term debt, a credit rating of A+ by Standard & Poor’s for its long-term debt and a credit rating of Aa2 by Moody’s for its long term debt. Each Prime Broker has sufficient financial resources in excess of U.S. 200 million. In its capacity as prime broker, each Prime Broker will execute purchase and sale orders as directed by Grant Master Fund and clear and settle such orders and orders executed by other brokers (on the basis of payment against delivery). In addition, each Prime Broker may enter into off-exchange contracts with the Grant Master Fund as principal. The Prime Brokers will also provide the Investment Manager with short selling facilities.
As custodian, the Prime Brokers, collectively, will be responsible for the safekeeping of the investments and other assets of the Grant Master Fund delivered to it in accordance with general brokerage laws of the U.S. applicable to the Prime Brokers (the “Grant Master Fund’s Property”). The Prime Brokers will identify, record and hold the Grant Master Fund’s Property in such a manner that the identity and location thereof can be identified at any time and so that the Grant Master Fund’s Property shall be readily identifiable as property belonging to, and held for the benefit of, the Grant Master Fund and as separate from any of the Prime Broker’s own property.
The Prime Brokers may hold the Grant Master Fund’s Property with a sub-custodian, depository or clearing agent, including a person connected with the Prime Brokers (each a “sub-custodian”) in a single account that is identified as belonging to customers of the Prime Broker. Each Prime Broker will identify in its own books and records that part of the Company’s Property held by a sub-custodian as being held for the Company. Consistent with general brokerage laws of the U.S. applicable to the Prime Brokers, certain assets of the Company are not required to be segregated and in the event of the Prime Broker’s insolvency, may not be recoverable in full.
Each Prime Broker will exercise reasonable skill, care and diligence in the selection of any such sub-custodian and will be responsible to the Grant Master Fund for the duration of the sub-custody agreement for satisfying itself as to the ongoing suitability of such sub-custodian to provide custodian services to the Grant Master Fund, will maintain an appropriate level of supervision over such sub-custodian and will make appropriate inquiries periodically to confirm that the obligations of such sub-custodian continue to be competently discharged.

The Grant Master Fund’s obligations to the Prime Brokers will be secured by way of a security interest in and first priority lien over the Grant Master Fund’s Property. Assets held as collateral by the Prime Brokers will be deemed pledged to the Prime Brokers and may be re-hypothecated or otherwise used by the Prime Brokers for its own purposes to the extent permitted under general brokerage laws applicable to the Prime Brokers. The Grant Master Fund will have a right against the Prime Brokers for the return of equivalent assets. Cash held or received for the Grant Master Fund by the Prime Brokers may be used by the Prime Brokers in the course of its business. However, U.S. federal regulations require the Prime Brokers to maintain a “Special Reserve Bank Account for the Exclusive Benefit of Customers” into which the Prime Brokers must deposit a sufficient amount of cash and/or U.S. Government securities to cover the net amount of unencumbered cash held on behalf of clients after deducting customer debits owed to the Prime Brokers. The Prime Brokers may not commingle their own cash with the assets held in the Special Reserve Bank Account. Under the Securities Investor Protection Act (“SIPA”), cash for investment is considered “customer property” and would be subject to the SIPA customer protection scheme in the event of the Prime Broker’s insolvency.
No Prime Broker will be liable for any loss, expense, damage, demand, charge, claim, penalty, fine and excise tax or any kind or nature (including legal expenses and reasonable attorneys’ fee) (together “Losses”) to the Grant Master Fund resulting from any act or omission in relation to the services provided under the terms of the Prime Brokerage Agreements unless such Losses result directly from gross negligence, bad faith, or wilful misfeasance of the applicable Prime Broker. No Prime Broker will be liable for Losses to the Grant Master Fund caused by the insolvency, acts or omissions of any sub-custodian or other third party by whom or in whose control any of the Grant Incubator Fund’s investments or cash may be held (subject to the obligations of the Prime Broker regarding the selection and ongoing suitability of such sub-custodian or third party as set out above). The Prime Brokers accept the same level of responsibility for nominee companies controlled by it as for their own acts. The Grant Master Fund has agreed to indemnify the Prime Brokers against any loss suffered by, and any claims made against, them to the extent set forth in the Prime Brokerage Agreements.
Depending on the transaction, the Prime Brokers may be paid a transaction-based fee or commission charged at normal commercial rates negotiated in the ordinary course of business.
The allocation of the assets between the Prime Brokers will be determined by the nature and type of transaction.
The Prime Brokerage Agreements may be terminated by either party at any time. The Prime Brokers may decline to act as a prime broker at any time. 
The Prime Brokers are service providers to the Company and are not responsible for the preparation of this document or the activities of the Grant Incubator Fund and therefore accept no responsibility for any information contained in this document.
Fees & Expenses
Management Fee
Grant Master Fund will pay the Investment Manager a monthly asset-based fee (the “Management Fee”) equal to 0.167% (2% per annum) of the Net Asset Value of each Series of Shares, in advance, calculated as of the beginning of each fiscal quarter. The Management Fee will be borne solely by the Shares and not any other Class of shares. Grant Master Fund will rebate a pro rata portion of the Management Fee with respect to Shares redeemed intra-quarter and will waive a pro rata portion of the Management Fee for intra-quarter subscriptions.
“Net Asset Value of a Series” is defined under “Net Asset Value and Valuation of the Company’s Assets” below. All calculations with respect to the Management Fee shall be based on unaudited financial statements prepared in accordance with GAAP with such adjustments as necessary or advisable in the discretion of the Directors, and all Financial Instruments held by the Company shall be valued in accordance with the valuation principles set forth under “Net Asset Value and Valuation of the Company’s Assets” below.
The Management Fee may be waived or reduced by the Directors of the Grant Master Fund in their sole discretion with respect to certain Classes and/or Series (including, but not limited to, those held by the Investment Manager and/or its principal and employees).
 
Performance Fee
At the end of each calendar year (and, with respect to an intra-year redemption, on the Redemption Date) Grant Master Fund will pay the Investment Manager, solely out of the assets of the relevant Series, a performance-based fee equal to 20% of the New Net Profit of the Shares, if any, attributable to each Series (the “Performance Fee”). The Performance Fee is calculated separately for each Series, is net of all expenses, and is subject to a “high water mark” so that no Performance Fee will be paid on the recoupment of any net losses.
New Net Profit” means the increase, if any, in the Net Asset Value of a Series of the Shares from the beginning to the end of the relevant period after subtraction of the Management Fee and the other fees and expenses described in this Memorandum and adjustment for any intra-period redemptions (i.e., a net gain (both realized and unrealized)) allocable to that Series. To the extent that losses are attributable to a particular Series, all such losses must be recouped before a subsequent Performance Fee will be made with respect to such Series. New Net Profit will not be reduced by the Performance Fee or distributions paid during the calendar year. New Net Profit will be determined on the basis of realized and unrealized profits and losses
The Performance Fee may be waived or reduced by the Directors of Grant Master Fund in their sole discretion with respect to certain Classes and/or Series (including, but not limited to, those held by the Investment Manager and/or its principal and employees).
Organizational Expenses
Grant Master Fund will bear the organizational, start-up and initial offering costs and expenses attributable to the Grant Master Fund which are not expected to exceed U.S.$75,000 comprised of legal filing and administrative fees related to the launch of the Grant Master Fund (the “Organizational Expenses”). These Organizational Expenses will be amortized over a 60-month period. While the amortization of the Organizational Expenses is not in accordance with U.S. generally accepted accounting principles (“GAAP”), the Directors believe that amortizing the Organizational Expenses is more equitable than requiring the initial investors to bear these costs.
Ongoing Expenses
Grant Master Fund will bear all of its ongoing operating expenses including, but not limited to, (i) investment related expenses, including, but not limited to, brokerage commissions and other charges for transactions in Financial Instruments, interest expense, custody expense, data services, quotation services, commitment fees and due diligence expenses, (ii) legal, bookkeeping, accounting, auditing, record keeping, administration, corporate secretarial, and clerical expenses, (iii) printing, duplication, telephone and mailing expenses, (iv) the cost of maintaining the Grant Master Fund’s corporate existence and expenses (including the fees for continuing regulatory approval under Cayman Islands law), filing fees, government fees, (v) expenses related to investor communication and support, (vi) expenses of the continuing offering of Shares, and (vii) extraordinary expenses (including indemnification) as incurred. All fund expenses incurred directly or indirectly by the Investment Manager in the exercise of its duties to the Grant Master Fund, including, but not limited to, investment related expenses, will be paid or reimbursed by the Grant Master Fund.
Control Agreements
SGAM AI Starway FoF Ltd. and the Segregated Portfolio Company on behalf of the Grant Incubator Fund have entered into an agreement, dated as of September 1, 2008, in which the Grant Incubator Fund agrees not to do the following, without the prior consent of SGAM AI Starway FoF Ltd.: (i) change its investment objectives, policies and restrictions as set out in the Fund’s Listing Particulars and (ii) change the Portfolio Manager, Administrator, Custodian or any other service provider to the Grant Incubator Fund. The Directors of SGAM AI Starway FoF Ltd. will further ensure that the Grant Incubator Fund (i) shall continue to be validly organized and shall operate in conformity with the Memorandum and Articles of Association of the Segregated Portfolio Company at all times, (ii) shall adhere to the principles on the resolutions of conflicts of interest outlined in the section entitled “Potential Conflicts of Interest” in the Fund’s Listing Particulars, and (iii) that shares attributable to the Grant Incubator Fund conform with the constitutional documents of the Grant Incubator Fund and with all relevant legal and regulatory requirements and be issued without third party rights or obligations.

The Grant Incubator Fund and Grant Master Fund have entered into an agreement, dated as of September 1, 2008, in which the Grant Master Fund agrees not to do the following, without the prior consent of the Grant Incubator Fund: (i) change its investment objectives, policies and restrictions as set out in the Fund’s Listing Particulars and (ii) change the Portfolio Manager, Administrator, Custodian or any other service provider to the Grant Master Fund. The Directors of Grant Incubator Fund will further ensure that the Grant Master Fund (i) shall continue to be validly organized and shall operate in conformity with the Memorandum and Articles of Association of the Segregated Portfolio Company at all times, (ii) shall adhere to the principles on the resolutions of conflicts of interest outlined in the section entitled “Potential Conflicts of Interest” in the Fund’s Listing Particulars, and (iii) that shares attributable to the Grant Master Fund conform with the constitutional documents of the Grant Master Fund and with all relevant legal and regulatory requirements and be issued without third party rights or obligations.

Grant Incubator Fund
The share capital of the Segregated Portfolio Company (incorporated on August 23, 2005 and its registration number in the Cayman Islands is 153890) is $50,000 divided into 5,000,000 shares of $0.01 par value each. All shares are issued in registered form. All shares are voting shares. Every shareholder in the Segregated Portfolio Company shall have one vote for each share held. Shares in the Grant Incubator Fund will be entitled to participate in the profits and losses of the Grant Incubator Fund. The shares will also share equally in the net assets attributable to the Grant Incubator Fund on liquidation and in dividends and other distributions as declared. Shares in the Segregated Portfolio Company have no other special rights, including conversion rights.
 
The share capital of the Grant Master Fund is $50,000 divided into 5,000,000 redeemable participating Shares, designated as Class C Shares, of a nominal or par value of U.S. $0.01 each which may be issued in one or more Classes or Series as the Directors may by resolutions determine. The Directors are authorized to allot and issue shares at any time and upon such terms and conditions as the Directors, by resolution, may determine. 
All shares are issued in registered form. Class C Shares do not have the right to receive notice of, attend, speak or vote at general meetings of the Grant Master Fund. The Class C Shares are redeemable at the option of the holder in accordance with the terms set out in this Memorandum and the Articles of Association of the Grant Master Fund.
Management shares carry one vote per share but do not carry any right to dividends. In a liquidation, the management shares rank only for a return of the nominal amount paid up on those shares before any payment to the holders of participating shares and any other shares ranking pari passu with the Participating Shares in a liquidation.
Certain matters must be passed as “special resolutions” as explicitly stated in the Companies Law (Revised) of the Cayman Islands in which case the requisite majority is two-thirds of the votes validly cast at a meeting, or a unanimous written resolution. General meetings of the Shareholders will be held at the discretion of the Directors or when called by holders of Shares in accordance with the Articles of Association of the Company. Holders of Shares will receive at least seven calendar days’ written notice of any Shareholders meeting and will be entitled to vote their Shares either in person or by proxy. No business shall be transacted at a general meeting unless a quorum is present. At a general meeting, unless otherwise provided in the Articles of Association, including if a meeting is adjourned, persons who are present in person or by proxy representing at least a majority of the Company’s outstanding Shares entitled to vote will constitute a quorum.
The Grant Incubator Fund will hold Class C Shares and all of the Management Shares.
It is not the current intention of the Grant Incubator Fund or the Grant Master Fund to declare dividends. Any dividend, if declared, will be paid in compliance with the requirements of the Irish Stock Exchange.
Shares of the Segregated Portfolio Company (including the Grant Incubator Fund) and the Grant Master Fund can be redeemed at the discretion of the Directors. 
The Grant Incubator Fund and the Grant Master Fund will suspend redemptions and the determination of its net asset value in the same situations as disclosed in the Fund’s Listing Particulars. The frequency of calculation, the valuation principles and method of determination of the Grant Incubator Fund’s net asset values and the Grant Master Fund’s net asset values are the same as those of the Grant Incubator Fund.
The risk factors associated with the Grant Incubator Fund and Grant Master Fund include in all material respects the risks of investing in the shares of the Grant Incubator Fund. Additionally, the Grant Incubator Fund and Grant Master Fund are subject to the following risk factors:
General
Risk of Loss. A Shareholder could lose all or substantially all of an investment in the Grant Incubator Fund. The Shares are only suitable for persons who are willing, and have the financial resources, to accept this risk.
No Operating History. The Grant Incubator Fund is recently formed and has no operating history. There is no assurance that the Grant Incubator Fund will achieve its investment objective. The Investment Manager is also recently formed and has no operating history. The returns of the “hedge fund” sector have generally been significantly lower in the last several years than they were previously — a situation which may continue.
Exchange Rate Risk. The Shares are denominated in U.S. dollars. Consequently, Shareholders whose functional currency is not the U.S. dollar will be subject to significant exchange-rate risk on their investment in the Grant Incubator Fund. On the other hand, the Grant Master Fund will focus on non-U.S. markets in its trading so that many of the assets traded by the Grant Incubator Fund will be denominated in currencies other than U.S. dollars, exposing U.S. dollar-based investors to exchange-rate risk. The U.S. dollar has declined substantially against many other major currencies in recent years. 
Financing Arrangements; Availability of Credit. Leverage is an integral part of the Grant Incubator Fund’s investment strategies. The use of leverage not only increases risk, but also results in significant investment exposure. There can be no assurance that the Grant Incubator Fund will be able to maintain adequate financing arrangements or to avoid having to close out positions at losses which if held would have been profitable due to an increase in margin requirements.
As a general matter, the banks and dealers that provide financing to the Grant Incubator Fund can apply essentially discretionary margin, haircut, financing as well as security and collateral valuation policies. Changes by banks and dealers in such policies, or the imposition of other credit limitations or restrictions, whether due to market circumstances or government, regulatory or judicial action, may result in large margin calls, loss of financing, forced liquidations of positions at disadvantageous prices, termination of swap and repurchase agreements and cross-defaults to agreements with other dealers. Any such adverse effects may be exacerbated in the event that such limitations or restrictions are imposed suddenly and/or by multiple market participants. The imposition of any such limitations or restrictions could compel the Grant Incubator Fund to liquidate all or part of its portfolio at disadvantageous prices, perhaps leading to a complete loss of the Grant Incubator Fund’s equity. 
Market Participant Risk. The institutions, including brokerage firms and banks, with which the Grant Incubator Fund trades or invests, may encounter financial difficulties that impair the operational capabilities or the capital position of the Grant Incubator Fund.
In addition to the risk of a counterparty or broker defaulting, there is also the risk that the Grant Incubator Fund’s counterparties or brokers will be required to restrict the amount of credit previously granted to the Grant Incubator Fund due to their own financial difficulties, resulting in forced liquidation of substantial portions of the Grant Incubator Fund’s portfolio.
Competition; Potential Saturation. The Grant Incubator Fund competes with numerous other private investment funds as well as other investors, many of which have resources substantially greater than the Grant Incubator Fund’s.
The amount of capital committed to “alternative investment strategies” has increased dramatically during recent years. At the same time, market conditions have become significantly more adverse to many of such strategies than they were in previous years. The profit potential of the Grant Incubator Fund may be materially reduced as a result of the “saturation” of the alternative investment field.
The returns of the “hedge fund” sector have generally been significantly lower in the last several years than they were previously — a situation that may continue.
Competition for Qualified Personnel. The competition for qualified and experienced traders is intense, and there can be no assurance that the Investment Manager will be able to attract or retain key personnel.
Segregated Company Portfolio Status. The Portfolio Company is established as a segregated portfolio company under Cayman Islands law. As a matter of Cayman Islands law only, the assets of a segregated portfolio (i.e., those attributable to a specific class or classes of Shares) are not available to meet the liabilities of another. However, the Portfolio Company is a single legal entity which may operate or have assets held on its behalf or be subject to claims in other jurisdictions which may not necessarily recognize such segregation and, in such circumstances, there is a risk that the assets of a segregated portfolio may be applied to meet liabilities in respect of another segregated portfolio where the assets in such segregated portfolio have been exhausted.
Cross Liability.  Where more than one class and/or series of Shares is issued in respect of a particular segregated portfolio of the Portfolio Company, Shareholders of such classes or series of Shares may be compelled to bear the liabilities incurred in respect of the other classes or series of such segregated portfolio, which such Shareholders do not themselves own, if there are insufficient assets in respect of the other classes or series to satisfy those liabilities. Accordingly, there is a risk that liabilities of one class or series within a particular segregated portfolio may not be limited to that particular class or series and may be required to be paid out of one or more other classes or series of that particular segregated portfolio. 
Strategy Risk
The Grant Incubator Fund’s strategies, implemented indirectly through its investment in the Grant Master Fund, are subject to a number of risks particular to such strategies.
General Investment and Market Risks. There can be no guarantee of the success of the Investment Manager’s investment strategy and the Grant Master Fund’s activities may be significantly and adversely affected by general economic and market conditions, such as interest rates, availability of credit, inflation rates, economic uncertainty, changes in laws, and national and international political circumstances. These factors may affect the level and volatility of securities prices and the liquidity of the Grant Master Fund’s investments. Unexpected volatility or illiquidity could impair the Grant Incubator Fund’s profitability or result in losses.
Moreover, many of the Grant Master Fund’s investments may have limited liquidity. In addition, the Grant Master Fund may invest in a limited number of securities and instruments, and as a consequence, the aggregate returns realized by the Investors may be substantially adversely affected by the unfavorable performance of a small number of such investments. If the Investment Manager elects to concentrate the Grant Master Fund’s investments in a particular area or region, the Grant Master Fund’s portfolio will then become more susceptible to fluctuations in value resulting from adverse economic conditions affecting that particular area or region.
Specialized, Speculative Investment Program. The specialized investment program of the Grant Master Fund involves investing in a wide variety of financial instruments. Many of the Grant Master Fund’s investments have limited liquidity. The Grant Master Fund is designed to serve as part of an overall investment program for sophisticated investors willing and able to assume the capital risks inherent investing in an investment vehicle that follows the Grant Master Fund’s investment strategy.
Highly Volatile Markets. The prices of financial instruments in which the Grant Master Fund may invest can be highly volatile. Price movements of forward and other derivative contracts in which the Grant Master Fund's assets may be invested are influenced by, among other things, interest rates, changing supply and demand relationships, trade, fiscal, monetary and exchange control programs and policies of governments, and national and international political and economic events and policies. The Grant Master Fund also is subject to the risk of the failure of any of the exchanges on which its positions trade or of its clearinghouse.
Loans of Portfolio Securities. The Grant Master Fund may lend its portfolio securities. By doing so, the Grant Master Fund attempts to increase income through the receipt of interest on the loan. In the event of the bankruptcy of the other party to a securities loan, the Grant Master Fund could experience delays in recovering the loaned securities. To the extent that the value of the securities the Grant Master Fund lent has increased, the Grant Master Fund could experience a loss if such securities are not recovered.
Concentration of Investments. The Investment Management Agreement imposes no limits on the concentration of the Grant Master Fund’s investments in particular securities, industries, or sectors and at times the Grant Master Fund may hold a relatively small number of securities positions, each representing a relatively large portion of the Grant Master Fund’s capital. Losses incurred in those positions could have a material adverse effect on the Grant Incubator Fund’s overall financial condition. The Grant Master Fund’s investment portfolio (because of size, investment strategy and other considerations) may be confined to the securities of relatively few countries, regions, issuers or industries. Further, the Grant Master Fund is not required to maintain any minimum level of capital. As a result of losses or redemptions, the Grant Master Fund may not have sufficient funds to diversify its investments. When investments are concentrated in several relatively large security positions or industries relative to Grant Master Fund capital, a loss in any one position or a downturn in a sector in which the Grant Master Fund is invested could materially reduce the Grant Master Fund’s performance.
Availability and Accuracy of Information. The Investment Manager will select investments for the Grant Master Fund on the basis of information and data derived from firsthand research by the Investment Manager and, for public companies, filed by the issuers of such securities with the SEC. Although the Investment Manager intends to evaluate all such information and data and to seek independent corroboration when the Investment Manager considers it appropriate and when it is reasonably available, the Investment Manager will not in many cases be in a position to confirm the completeness, genuineness or accuracy of such information and data.
Limited Liquidity of Certain Grant Master Fund Investments.  The Grant Master Fund will from time to time invest its assets in securities that are illiquid because they are thinly traded, or otherwise. The Grant Master Fund may not be able to liquidate those investments if the need should arise, and its ability to realize gains, or to avoid losses in periods of rapid market activity, may therefore be affected. In addition, the value assigned to such securities for purposes of determining Investors’ partnership percentages and determining net profits and net losses may differ substantially from the value the Grant Master Fund is ultimately able to realize.
Risks Associated with the Grant Master Fund’s Investment Techniques. The Grant Master Fund will trade and invest in all types of securities, including common and preferred stocks, options, futures, forwards, warrants, bonds, notes, bills, rights and derivatives. The Investment Management Agreement imposes no limits on the types of securities or other instruments in which the Grant Master Fund may take positions, the type of positions it may take, or the concentration of its investments.
Availability of and Ability to Acquire Suitable Investments. While the Investment Manager believes that many attractive investments of the type in which the Grant Master Fund may invest are currently available and can be identified, there can be no assurance that such investments will be available when the Grant Master Fund commences investment operations, or that available investments will meet the Grant Master Fund’s investment criteria. Furthermore, the Grant Master Fund may be unable to find a sufficient number of attractive investment opportunities to meet its investment objective.
Relative Value Strategies. The success of the Grant Master Fund’s relative value strategies depends on market values converging towards the theoretical values determined by the Investment Manager’s valuation models. In the event that the perceived mispricings underlying the Grant Master Fund’s positions were to fail to converge toward, or were to diverge further from, relationships expected by the Investment Manager, the Grant Master Fund may incur a loss. In the event of market disruptions, significant losses can be incurred which may force the Grant Master Fund to close out one or more positions. Such disruptions have in the past resulted in substantial losses for funds employing relative value strategies. Furthermore, the valuation models used to determine whether a position is mispriced may become outdated and inaccurate as market conditions change. The Grant Master Fund’s relative value investment strategy may result in high portfolio turnover and, consequently, high transaction costs.
The Grant Master Fund’s relative value strategy will be designed to be relatively non-correlated with respect to the movements in fixed-income securities markets in general. However, depending upon the investment strategies employed and market conditions, the Grant Master Fund may be adversely affected by unforeseen events involving such matters as political crises, changes in currency exchange rates or interest rates, forced redemptions of securities or general lack of market liquidity.
Mispriced Securities. The identification of investment opportunities that are mispriced by the market is a difficult task, and there is no assurance that such opportunities will be successfully recognized or acquired. While investments in mispriced securities offer opportunities for above-average capital appreciation, these investments involve a high degree of financial risk and can result in substantial losses. Returns generated from the Grant Master Fund’s investments may not adequately compensate for the business and financial risks assumed.
The Grant Master Fund may make certain speculative investments in securities which the Investment Manager believes to be mispriced by the market. However, there are no assurances that the securities purchased are in fact mispriced by the market. In addition, the Grant Master Fund may be required to hold such securities for a substantial period of time before realizing their anticipated value. During this period, a portion of the Grant Master Fund’s capital would be committed to the securities purchased, thus possibly preventing the Grant Master Fund from investing in other opportunities. In addition, the Grant Master Fund may finance such purchases with borrowed funds and thus will have to pay interest on such funds during such waiting period.
“Widening” Risk. For reasons not necessarily attributable to any of the risks set forth herein (for example, supply/demand imbalances or other market forces), the prices of the securities in which the Grant Master Fund invests may decline substantially. In particular, purchasing assets at what may appear to be “undervalued” levels is not a guarantee that these assets will not be trading at even more “undervalued” levels at a time of valuation or at the time of sale. It may not be possible to predict, or to hedge against, such “spread widening” risk. In addition, overall credit spreads in the market could widen quickly and significantly if investors become more risk averse. This in turn could cause the prices of the investments in which the Grant Master Fund invests to decline substantially.
Certain Risks of Debt Securities. Debt securities are subject to credit and interest rate risks. “Credit risk” refers to the likelihood that an issuer will default in the payment of principal and/or interest on an instrument. Financial strength and solvency of an issuer are the primary factors influencing credit risk. In addition, lack or inadequacy of collateral or credit enhancement for a debt instrument may affect its credit risk. Credit risk may change over the life of an investment and securities which are rated by rating agencies are often reviewed and may be subject to downgrade. “Interest rate risk” refers to the risks associated with market changes in interest rates. Interest rate changes may affect the value of a debt instrument indirectly (especially in the case of fixed rate securities) and directly (especially in the case of instruments whose rates are adjustable). In general, rising interest rates will negatively impact the price of a fixed rate debt instrument and falling interest rates will have a positive effect on price. Adjustable rate instruments also react to interest rate changes in a similar manner although generally to a less degree (depending, however, on the characteristics of the reset terms, including the index chosen, frequency of reset and reset caps or floors, among other factors). Interest rate sensitivity is generally more pronounced and less predictable in instruments with uncertain payment or prepayment schedules.
High-Yield Bank and Bond Debt. High-yield investments are generally not exchange traded and, as a result, these instruments trade in a smaller secondary market than exchange-traded bonds. In addition, the Grant Master Fund may invest in bonds and bank debt of issuers that do not have publicly traded equity securities, making it more difficult to hedge the risks associated with such investments. High-yield investments that are below investment grade or unrated face ongoing uncertainties and exposure to adverse business, financial or economic conditions. The market values of certain of these non-investment grade and unrated debt investments tend to reflect individual corporate developments to a greater extent than do higher-rated investments, which react primarily to fluctuations in the general level of interest rates, and tend to be more sensitive to economic conditions than are higher-rated investments. Companies that issue such investments are often highly leveraged and may not have available to them more traditional methods of financing. It is possible that a major economic recession could disrupt severely the market for such investments and may have an adverse impact on the value of such investments. In addition, it is possible that any such economic downturn could adversely affect the ability of the issuers of such investments to repay principal and pay interest thereon and increase the incidence of default of such investments.
Contingent Liabilities. The Grant Master Fund may from time to time incur contingent liabilities in connection with an investment. For example, the Grant Master Fund may purchase from a lender a revolving credit facility that has not yet been fully drawn. If the borrower subsequently draws down on the facility, the Grant Master Fund might be obligated to fund a portion of the amounts due.
Hedging Transactions. The Investment Manager will not attempt to hedge against all risks. Furthermore, if the Investment Manager does not anticipate the occurrence of a particular risk, it may not establish a hedge to protect against it. In addition, certain risks may not be able to be hedged on a cost-effective basis (such as credit risk and liquidity risk described elsewhere in this Memorandum). For a variety of reasons, the Investment Manager may not seek to hedge certain (or any) portfolio holdings, or may not seek to establish a perfect correlation between such hedging instruments and the portfolio holdings being hedged. Such imperfect correlation may prevent the Grant Master Fund from achieving the intended hedge or expose the Grant Master Fund to risk of loss.
The success of the hedging strategy of the Grant Master Fund will be subject to the Investment Manager’s ability to correctly assess the degree of correlation between the performance of the instruments used in the hedging strategy and the performance of the investments in the portfolio being hedged. Since the characteristics of many securities change as markets change or time passes, the success of the hedging strategy will also be subject to the Investment Manager’s ability to continually recalculate, readjust and execute hedges in an efficient and timely manner. While the Grant Master Fund may enter into hedging transactions to seek to reduce risk, such transactions may result in a poorer overall performance for the Grant Master Fund than if they had not engaged in any such hedging transactions. 
Non-U.S. Investments. The Grant Master Fund may invest all or any portion of its assets in the debt, loans or other securities of issuers located outside the United States. In addition to business uncertainties, such investments may be affected by political, social and economic uncertainty affecting a country or region. Many financial markets are not as developed or as efficient as those in the United States, and as a result, liquidity may be reduced and price volatility may be higher. The legal and regulatory environment may also be different, particularly as to bankruptcy and reorganization. Financial accounting standards and practices may differ, and there may be less publicly available information in respect of such companies.
The Grant Master Fund may be subject to additional risks which include, among other things, trade balances and imbalances and related economic policies, unfavorable currency exchange rate fluctuations, imposition of exchange control regulation by the United States or non-U.S. governments, limitations on the removal of funds or other assets, policies of governments with respect to possible nationalization of their industries, political difficulties, including expropriation of assets, confiscatory taxation and economic or political instability in nations other than the United States, possible adverse political and economic developments, possible seizure or nationalization of non-U.S. deposits and possible adoption of governmental restrictions which might adversely affect the payment of principal and interest to investors located outside the country of the issuer, whether from currency blockage or otherwise.
Furthermore, some of the securities may be subject to brokerage taxes levied by governments, which has the effect of increasing the cost of such investment and reducing the realized gain or increasing the realized loss on such securities at the time of sale. Income received by the Grant Master Fund from sources within some countries may be reduced by withholding and other taxes imposed by such countries. Any such taxes paid by the Grant Master Fund will reduce its net income or return from such investments. Additional costs could be incurred in connection with the Grant Master Fund’s international investment activities. Brokerage commissions in countries other than the United States generally are higher than in the United States. Expenses also may be incurred on currency exchanges when the Investment Manager changes investments from one country to another. Increased custodian costs as well as administrative difficulties (such as the applicability of non-U.S. laws to non-U.S. custodians in various circumstances, including bankruptcy, ability to recover lost assets, expropriation, nationalization and record access) may be associated with the maintenance of assets in non-U.S. jurisdictions. 
There may be less publicly available information about certain non-U.S. companies than would be the case for comparable companies in the United States and certain non-U.S. companies may not be subject to accounting, auditing and financial reporting standards and requirements comparable to or as uniform as those of United States companies. Securities markets outside the United States, while growing in volume, have for the most part substantially less volume than U.S. markets, and many securities traded on these non-U.S. markets are less liquid and their prices more volatile than securities of comparable United States companies. In addition, settlement of trades in some non-U.S. markets is much slower and more subject to failure than in U.S. markets. There also may be less extensive regulation of the securities markets in particular countries than in the United States. These risks may be greater for companies in emerging markets. 
While the Investment Manager will take these factors into consideration in making investment decisions for the Grant Master Fund, no assurance can be given that the Investment Manager will be able to fully avoid these risks.
Currency Risks. The Grant Master Fund may seek to buy and sell foreign currencies on as favorable a basis as practicable. Some price spread on currency exchange (to cover service charges) may be incurred, particularly when the Grant Master Fund changes investments from one country to another or when proceeds of the sale of interests in U.S. dollars are used for the purchase of securities in foreign countries. Also, some countries may adopt policies which would prevent the Grant Master Fund from transferring cash out of the country, or withhold portions of interest and dividends at the source. There is the possibility of cessation of trading on national exchanges, expropriation, nationalization or confiscatory taxation, withholding and other foreign taxes on income or other amounts, foreign exchange controls (which may include suspension of the ability to transfer currency from a given country), default in foreign government securities, political or social instability, or diplomatic developments that could affect investments in securities of issuers in foreign nations.
The Grant Master Fund may be affected either unfavorably or favorably by fluctuations in the relative rates of exchange between the currencies of different nations, by exchange control regulations and by indigenous economic and political developments. Some countries in which the Grant Master Fund may invest also may have fixed or managed currencies that are not free-floating against the U.S. dollar. Further, certain currencies may not be internationally traded. Certain of these currencies have experienced a steady devaluation relative to the U.S. dollar. Any devaluations in the currencies in which the Grant Master Fund’s portfolio securities are denominated may have a detrimental impact on the Grant Master Fund. 
Low Credit Quality Securities. The Grant Master Fund may invest in the securities of companies that are financially leveraged or troubled or potentially troubled (e.g., securities of stressed and distressed companies) and may be or have recently been involved in restructuring, bankruptcy reorganization or liquidation means that these securities are likely to be particularly risky investments although they also may offer the potential for correspondingly high returns. As a result, the Grant Master Fund may lose all or substantially all of its investment in any particular instance. In addition, there is no minimum credit standard which is a prerequisite to the Grant Master Fund’s investment in any security and many of the debt securities and preferred stock in which the Grant Master Fund may invest will be less than investment grade and may be considered to be “junk bonds.” Securities in which the Grant Master Fund may invest may rank junior to other outstanding securities and obligations of the issuer, all or a significant portion of whose debt securities may be secured by substantially all of the issuer’s assets. Moreover, the Grant Master Fund may invest in securities which are not protected by financial covenants or limitations on additional indebtedness.
Interest Rates. The market value of debt securities that are interest rate sensitive is inversely related to changes in interest rates. That is, an interest rate decline produces an increase in a security’s market value and an interest rate increase produces a decrease in value. The longer the remaining maturity of a security, the greater the effect of interest rate changes. Changes in the ability of an issuer to make payments of interest and principal and in the market’s perception of its creditworthiness also affect the market value of that issuer’s debt securities.
Non-Investment Grade Securities. The Grant Master Fund may invest in securities that are rated in the non-investment grade categories by the various credit rating agencies or are not rated. Such securities are subject to greater risk of loss of principal and interest than higher-rated securities and are generally considered to be predominantly speculative with respect to the issuer’s capacity to pay interest and repay principal. They are also generally considered to be subject to greater risk than securities with higher ratings in the case of deterioration of general economic conditions and the yields and prices of such securities may be more volatile than those for higher-rated securities. The market for non-investment grade and non-rated securities is thinner, often less liquid, and less active than that for higher-rated securities, which can adversely affect the prices at which these securities can be sold and may even make it impractical to sell such securities. The limited liquidity of the market may also adversely affect the ability of the relevant calculating party to arrive at a fair value for certain non-investment grade and non-rated securities at certain times and could make it difficult for the Grant Master Fund to sell or dispose of certain securities.
Rating Agencies. Ratings assigned by Moody’s and/or S&P and/or Fitch to securities acquired by the Grant Master Fund reflect only the views of those agencies. Explanations of the significance of ratings should be obtained from Moody’s, S&P and Fitch. No assurance can be given that ratings assigned will not be withdrawn or revised downward if, in the view of Moody’s, S&P or Fitch, circumstances so warrant.
Leverage. The Grant Master Fund intends to leverage its capital because the Investment Manager believes that the use of leverage may enable the Grant Master Fund to achieve a higher rate of return. Accordingly, the Grant Master Fund would pledge its securities to the lender in order to borrow additional funds for investment purposes. The Grant Master Fund may also leverage its investment return with options, short sales, swaps, forwards and other derivative instruments. The amount of borrowings which the Grant Master Fund may have outstanding at any time may be substantial in relation to its capital.
While leverage presents opportunities for increasing the Grant 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 Grant Master Fund would be magnified to the extent the Grant Master Fund is leveraged. The cumulative effect of the use of leverage by the Grant Master Fund in a market that moves adversely to the Grant Master Fund’s investments could result in a substantial loss to the Grant Master Fund which would be greater than if the Grant Master Fund were not leveraged.
In the forward market, margin deposits are typically low relative to the value of the forward contracts purchased or sold. Such low margin deposits are indicative of the fact that any forward contract trading is typically accompanied by a high degree of leverage. Low margin deposits mean that a relatively small price movement in a contract may result in immediate and substantial losses to the investor.
In general, the anticipated use of short-term margin borrowings results in certain additional risks to the Grant Master Fund. For example, should the securities pledged to brokers to secure the Grant Master Fund’s margin accounts decline in value, the Grant Master Fund could be subject to a “margin call,” pursuant to which the Grant Master Fund must either deposit additional funds or securities with the broker, or suffer mandatory liquidation of the pledged securities to compensate for the decline in value. In the event of a sudden drop in the value of the Grant Master Fund’s assets, the Grant Master Fund might not be able to liquidate assets quickly enough to satisfy its margin requirements.
The Grant Master Fund may borrow by entering into reverse repurchase agreements. Under a reverse repurchase agreement, the Grant Master Fund sells securities and agrees to repurchase them at a mutually agreed date and price. Reverse repurchase agreements may involve the risk that the market value of the securities retained in lieu of sale by the Grant Master Fund may decline below the price of the securities the Grant Master Fund has sold but is obligated to repurchase. In the event the buyer of securities under a reverse repurchase agreement files for bankruptcy or becomes insolvent, such buyer or its trustee or receiver may receive an extension of time to determine whether to enforce the Grant Master Fund’s obligation to repurchase the securities and the Grant Master Fund’s use of the proceeds of the reverse repurchase agreement may effectively be restricted pending such decision. To the extent that, in the meantime, the value of the securities that the Grant Master Fund has purchased has decreased, the Grant Master Fund could experience a loss.
Derivative Instruments.  The Grant Master Fund may buy and sell derivative securities in “over-the-counter” or “interdealer” markets. The participants in such markets are typically not subject to credit evaluation and regulatory oversight as are members of “exchange-based” markets. This exposes the Grant Master Fund to the risk that a counterparty will not settle a transaction in accordance with its terms because the counterparty has a credit or liquidity problem. Delays in settlement may also result from disputes over the terms of the contract (whether or not bona fide) because such markets may lack the established rules and procedures for settlement of disputes among market participants available in “exchange-based” markets. These problems may cause the Grant Master Fund to suffer loss due to adverse market movements while replacement transactions are executed or otherwise. Such “counterparty risk” is accentuated for contracts with longer maturities where events may intervene to prevent settlement, or where the Grant Master Fund has concentrated its transactions with a single or small group of counterparties. 
In addition, derivative instruments may be difficult to value accurately. Any misvaluation could adversely affect the Investors.
Options and Warrants. The Grant Master Fund may buy and sell put and call options or warrants on securities and securities indices. Although successful trading in options contracts and warrants requires many of the same skills required for successful securities trading, the risks involved are somewhat different. For example, if the Grant Master Fund were to write a covered call option, the Grant Master Fund would give up the opportunity, while the option is in effect, to realize gain from any price increase (above the option exercise price) in the underlying security. In addition, the Grant Master Fund’s ability to sell the underlying security is limited while the option is in effect unless the Grant Master Fund effects a closing purchase transaction. The purchase of an option or warrant runs the risk of losing the entire investment, thereby causing significant losses to the account in a relatively short period of time.
The trading of options is highly speculative and may entail more risk than those present when investing in other securities. Prices of options are generally more volatile than prices of other securities. Purchasing options would allow the Grant Master Fund to speculate on market fluctuations of securities and securities exchange indices while investing only a small percentage of the value of the securities underlying the option. A change in the market price of the underlying securities or underlying market index will cause a much greater percentage change in the price of the option contract. In addition, the Grant Master Fund will lose the premium the Grant Master Fund paid to purchase an option if the Grant Master Fund do not sell or exercise the option. If the Grant Master Fund sells options and must deliver the underlying securities at the exercise price, the Grant Master Fund has a theoretically unlimited risk of loss if the price of the underlying securities increases. If the Grant Master Fund must buy the underlying securities, the Grant Master Fund risks the loss of the difference between the market price of the underlying securities and the exercise price. Any gain or loss derived from the sale or exercise of an option will be reduced or increased, respectively, by the amount of the premium paid. The expenses of option investing include commissions payable on the purchase and on the exercise or sale of an option.
The Grant Master Fund may buy or sell stock or index options not traded on a securities exchange. Options not traded on an exchange are not issued by the Options Clearing Corporation. The risk of nonperformance by the obligor on such an option may be greater and the ease with which the Grant Master Fund can dispose of such an option may be less than in the case of an exchange-traded option issued by the Options Clearing Corporation.
Swap Agreements. The Grant Master Fund may enter into one or more swap agreements. Swap agreements are two-party contracts entered into primarily by institutional investors for periods ranging from a few weeks to more than a year. In a standard swap transaction, two parties agree to exchange the returns earned on specific assets, such as the return on, or increase in value of, a particular dollar amount invested at a particular interest rate, in a particular foreign currency, or in a “basket” of securities representing a particular index. A swap contract may not be assigned without the consent of the counterparty, and may result in losses in the event of a default or bankruptcy of the counterparty. Swap agreements are traded in the over-the-counter market and may be considered to be illiquid.
Total return swaps are a relatively recent development in the financial markets. Consequently, there are certain legal, tax and market uncertainties that present risks in entering into swaps. There is currently little or no case law or litigation characterizing total return swaps, interpreting their provisions, or characterizing their tax treatment. In addition, additional regulations and laws may apply to total return swaps that have not heretofore been applied. There can be no assurance that future decisions construing similar provisions to those in any total return swap agreement or other related documents or additional regulations and laws will not have a material adverse effect on the Grant Master Fund.
The swap counterparties with which the Grant Master Fund does business may encounter financial difficulties, fail, or otherwise become unable to meet their obligations. Any such development would impair the operational capabilities of the Grant Master Fund or cause damaging losses, or even complete loss, of its capital.
Credit Default Swaps. The Grant Master Fund may enter into credit default swap agreements. The “buyer” in a credit default contract is obligated to pay the “seller” a periodic, stream of payments over the term of the contract provided no event of default has occurred. In the event of default, the seller must pay the buyer the “par value” (full notional value) of the reference obligation in exchange for the reference obligation. The Grant Master Fund may be either the buyer or seller in the transaction. If the Grant Master Fund is a buyer and no event of default occurs, the Grant Master Fund loses the periodic payments made and recovers nothing. However, if an event of default occurs, the buyer receives full notional value for a reference obligation that may have little or no value. As a seller, the Grant Master Fund receives a fixed rate of income throughout the term of the contract, provided there is no default event. If an event of default occurs, the seller may pay the notional value of the reference obligation. The value of the reference obligation received by the seller, coupled with the periodic payments previously received may be less than the full notional value it pays to the buyer, resulting in a loss of value to the Grant Master Fund. Credit default swaps may involve greater risks than if the Grant Master Fund had invested in the reference obligation directly. In addition to general market risks, credit default swaps are subject to illiquidity risk, counterparty risk and credit risks.
Fixed-Income Securities. The Grant Master Fund may invest a portion of its capital in bonds or other fixed income securities, including, without limitation, bonds, notes and debentures issued by corporations; debt securities issued or guaranteed by the U.S. Government or one of its agencies or instrumentalities or by foreign governments; commercial paper; and “higher yielding” (and, therefore, higher risk) debt securities of the former categories. These securities may pay fixed, variable or floating rates of interest, and may include zero coupon obligations. Fixed income securities are subject to the risk of the issuer’s inability to meet principal and interest payments on its obligations (i.e., credit risk) and are subject to price volatility due to such factors as interest rate sensitivity, market perception of the creditworthiness of the issuer and general market liquidity (i.e., market risk). It is likely that a major economic recession could disrupt severely the market for such securities and may have an adverse impact on the value of such securities. In addition, it is likely that any such economic downturn could adversely affect the ability of the issuers of such securities to repay principal and pay interest thereon and increase the incidence of default for such securities.
Counterparty Risk. Some of the markets in which the Grant Master Fund may effect transactions are “over-the-counter” or “interdealer” markets. The participants in such markets are typically not subject to the credit evaluation and regulatory oversight to which members of “exchange–based” markets are subject. This exposes the Grant Master Fund to the risk that a counterparty will not settle a transaction in accordance with its terms and conditions because of a dispute over the terms of the contract (whether or not bona fide) or because of a credit or liquidity problem, thus causing the Grant Master Fund to suffer a loss. Such “counterparty risk” is accentuated for contracts with longer maturities where events may intervene to prevent settlement, or where the Grant Master Fund has concentrated its transactions with a single or small group of counterparties. The Grant Master Fund is not restricted from concentrating any or all of its transactions with one counterparty. The ability of the Grant Master Fund to transact business with any one or number of counterparties and the absence of a regulated market to facilitate settlement may increase the potential for losses by the Grant Master Fund.
Futures and Commodities. The Grant Master Fund may enter into futures contracts that relate to securities in which it may directly invest and indices comprised of such securities and may purchase and write call and put options on such contracts. The Grant Master Fund may also purchase futures and options if cheaper than the underlying stocks or bonds. The Grant Master Fund may also enter into futures on commodities related to the types of companies in which it invests, such as gold, silver and copper futures, and options thereon. 
Substantially all futures contracts are closed out before settlement date or called for cash settlement. A futures contract is closed out by buying or selling an identical offsetting futures contract. Upon entering into a futures contract, the Grant Master Fund is required to deposit an initial margin with the custodian for the benefit of the futures broker. The initial margin serves as a “good faith” deposit that the Grant Master Fund will honor its futures commitments. Subsequent payments (called “variation margin”) to and from the broker are made on a daily basis as the price of the underlying investment fluctuates.
The Grant Master Fund’s transactions, if any, in options, futures, options on futures and equity swaps involve additional risk of loss. Loss can result from a lack of correlation between changes in the value of derivative instruments and the portfolio assets (if any) being hedged, the potential liquidity of the markets for derivative instruments, or the risks arising from margin requirements and related leverage factors associated with such transactions. The use of these management techniques also involves the risk of loss if the Investment Manager is incorrect in its expectation of fluctuations in securities prices, interest rates or currency prices.
Whether the Grant Master Fund realizes a gain or loss from commodities futures activities depends generally upon movements in the underlying commodity. Such prices can be highly volatile based on a number of factors, including, without limitation, the effect of a widening of interest rate differentials between the cost of money and the cost of the underlying commodity, direct government intervention into the market, the impact of large-scale distress sales of the underlying commodity in times of crisis and the inherent uncertainties associated with the exploration, development and production of the underlying commodity.
The Grant Master Fund may also buy and sell put and call options on futures contracts. These options give the Grant Master Fund the right (but not the obligation), for a specified price, to sell or purchase, as the case may be, the underlying futures contracts at any time during the option period. The Grant Master Fund may terminate its position in an option contract by selling or purchasing, as the case may be, an offsetting option in the same series. There is no guarantee that such a closing transaction can be effected. The Grant Master Fund’s ability to establish and close out positions on such options is dependent upon a liquid market. Loss from investing in options on futures is potentially unlimited.
Short Sales. The Grant Master Fund may engage in short sales. Short selling involves selling securities that may or may not be owned and borrowing the same securities 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. Because the borrowed securities must be replaced by purchases at market prices in order to close out the short position, any appreciation in the price of the borrowed securities can result in a loss. It may be impossible for the Grant Master Fund to borrow securities at the most desirable time to make a short sale, particularly in illiquid securities markets. In addition, rules that prohibit short sales of securities at prices below the last sale price may prevent the Grant Master Fund from executing short sales of securities at the most desirable time. If the prices of securities sold short increase, the Grant Master Fund may be required to provide additional funds or collateral to maintain the short positions. This could require the Grant Master Fund to liquidate other investments to provide additional margin, and those liquidations might not be at favorable prices. In other situations, the lender of securities can request return of the borrowed securities and the Grant Master Fund may not be able to borrow those securities from other lenders. This would cause a “buy-in” of the short positions, which may be disadvantageous to the Grant Master Fund. A short sale involves the risk of a theoretically unlimited increase in the market price of the particular investment sold short, which could result in the inability of the Grant Master Fund to cover the short position, and of theoretically unlimited potential for loss to the Grant Master Fund’s account.
Forward Trading. Forward trading involves contracting for the purchase or sale of a specific quantity of, among other things, a financial instrument at the current price thereof, with delivery and settlement at a specified future date. Forward contracts and options thereon are not traded on exchanges and are not standardized. Rather, banks and dealers act as principals in these markets, negotiating each transaction on an individual basis. Forward and “cash” trading is substantially unregulated. There is no limitation on daily price movements and speculative position limits are not applicable. The principals who deal in the forward markets are not required to continue to make markets in the currencies or commodities they trade and these markets can experience periods of illiquidity, sometimes of significant duration. There have been periods during which certain participants in these markets have refused to quote prices for certain currencies or commodities or have quoted prices with an unusually wide spread between the price at which they were prepared to buy and that at which they were prepared to sell. Disruptions can occur in any market traded by the Grant Master Fund due to unusually high trading volume, political intervention or other factors. The imposition of controls by governmental authorities might also limit such forward trading to less than that which the Investment Manager would otherwise recommend, to the possible detriment of the Grant Master Fund. Market illiquidity or disruption could result in major losses to the Grant Master Fund.
Smaller Company Risk. The Grant Master Fund may invest in the securities of small or medium-size companies or in the securities of pooled investment vehicles that hold such securities. These securities may be more susceptible to market downturns, and the prices of which may be more volatile than those of larger companies. Smaller companies generally have narrower markets and more limited managerial and financial resources than larger, established companies.
Equity Securities. The purchaser of an equity security typically receives an ownership interest in the company as well as certain voting rights. The owner of an equity security may participate in a company’s success through the receipt of dividends, which are distributions of earnings by the company to its owners. Equity security owners may also participate in a company’s success or lack of success through increases or decreases in the value of the company’s shares as traded in the public trading market for such shares. Equity securities generally take the form of common stock or preferred stock. Preferred stockholders typically receive greater dividends but may receive less appreciation than common stockholders and may have lesser or greater voting rights as well. Equity securities may also include convertible securities, warrants or rights. Convertible securities typically are debt securities or preferred stocks which are convertible into common stock after certain time periods or under certain circumstances. Warrants or rights give the holder the right to purchase a common stock at a given time for a specified price.
Preferred Stock. The Grant Master Fund may invest in preferred stock which may have characteristics of both debt and equity securities. Dividend payments to preferred stockholders may be suspended or cancelled if the issuer experiences liquidity difficulties and the principal paid for preferred stock is generally subordinate to the debt obligations of the issuer. Consequently, investments in preferred stock carry significant risk of loss of principal.
Unusual Securities Creations.   The Investment Manager may cause the Grant Master Fund to invest in unusual securities created for particular purposes that are not of a type typically traded in the securities markets. Examples of such securities include, but are not limited to, publicly traded limited liability companies, contingent payment rights, and securities whose value is contingent upon the occurrence of a series of events. There may be no liquid market for such securities. The market prices, if any, of such investments tend to be more volatile and it may be impossible to sell such investments when desired or to realize their fair value in the event of a sale. Moreover, securities in which the Grant Master Fund may invest include those that are not listed on a stock exchange or traded in an over-the-counter market. As a result of the absence of a public trading market for these securities, they may be less liquid than publicly traded securities. There may be substantial delays in attempting to sell non-publicly traded securities. Although these securities may be resold in privately negotiated transactions, the prices realized from these sales could be less than those originally paid. Further, companies whose securities are not publicly traded are not subject to the disclosure and other investor protection requirements which would be applicable if their securities were publicly traded.
High Brokerage and Other Transactional Expenses. The Grant Master Fund’s activities may at times involve a high level of trading (including significant short-term trades) resulting in very high portfolio turnover that may generate substantial transaction costs. These costs will be borne by the Grant Master Fund regardless of its profitability. The expenses of the Grant Master Fund may be greater than the total fees charged in other comparable investment vehicles.
High Portfolio Turnover and Recognition of Gains.  The Grant Master Fund’s investment strategy may result in a short holding period before investments are rolled over into new investments or sold. This will cause the recognition of any investment gains on a more frequent basis than other investment strategies. Many of those gains will not likely qualify for the holding period needed for capital gains tax treatment. Therefore, taxable investors in this Grant Master Fund may have a greater need to pay regular taxes (out of their own resources or by requesting redemptions) than compared to other investment strategies that hold investments longer.
Changing Conditions Could Cause the Grant Master Fund to Suffer Losses. There are innumerable external factors that could impact the Grant Master Fund including changes in economic conditions (such as interest rates and inflation rates), industry conditions, governmental regulation, competition, technological developments, political and diplomatic events and trends, the outbreak of war or terrorist acts, changes in tax laws and other factors. We cannot control any of these conditions.
Miscellaneous
Different Business Terms. The Grant Incubator Fund may permit certain investors to invest on materially different business terms than others — including different management and/or incentive compensation and different redemption provisions. Certain investors may also be permitted to invest in Shares which trade at a higher degree of leverage than other Shares, creating a cross-collateralization risk for the lower leveraged Shares.
Limited Ability to Redeem Shares. A Shareholder’s ability to redeem Shares is limited to each calendar quarter-end following the Initial Restricted Period and the Available Redemption Amount thereafter. Furthermore, redemption notices must be given at least 30 days before the effective date of redemption. Consequently, the Net Asset Value of the Shares being redeemed could vary materially from their Net Asset Value at the time by which irrevocable redemption requests must be submitted. 
Effect of Substantial Redemptions. Substantial redemptions over a short time period, particularly redemptions by SGAM AI Starway FoF Ltd., the Grant Incubator Fund’s single largest investor, could necessitate the liquidation of a significant portion of the Fund’s trading positions on materially disadvantageous terms. 
Conflicts of Interest. The Sponsor and the Investment Manager both manage other private investment funds. As a result, they may have incentives to favor certain accounts over the Grant Incubator Fund or Grant Master Fund, and, in addition, favor certain Shareholders over others. 
The principals of the Sponsor and the Investment Manager are subject to material conflicts of interest in their operation of the Grant Incubator Fund. No objective or independent party is in a position to confirm that the principals are equitably resolving these conflicts of interest, and investors will have no means of knowing whether these conflicts are being equitably resolved.
See “Conflicts of Interest.”
Limited Government Regulation. The Grant Incubator Fund is not registered as an investment company under the U.S. Investment Company Act of 1940, as amended, or as a “UCIT” under comparable European Union regulations. Accordingly, the provisions of such regulations, which among other things generally require investment companies to have a majority of disinterested directors, require securities held in custody at all times to be maintained in segregated accounts and regulate the relationship between the investment company and its asset manager, are not applicable to an investment in the Grant Incubator Fund. The Grant Incubator Fund is not subject to comparable regulation in any non-U.S. jurisdiction. Therefore, investors in the Grant Incubator Fund do not have the benefits of the protections afforded by, nor is the Grant Incubator Fund subject to the restrictions contained in, such registration and regulation.
Lack of Transparency. In an effort to protect the confidentiality of its positions, the Grant Incubator Fund will not generally disclose all of its positions to Shareholders on an ongoing basis, although the Sponsor and/or the Investment Manager, may permit such disclosure on a select basis to certain Shareholders, if they determine that there are sufficient confidentiality agreements and procedures in place.
Proposed Accounting Changes. In the wake of the Enron bankruptcy, a number of accounting initiatives have been undertaken, both in the U.S. and internationally, in an effort to ensure that issuers’ financial statements more accurately reflect their true financial condition. Certain of these initiatives could have materially adverse consequences for the Grant Incubator Fund. There can be no assurance as to what effect possible accounting changes may have on the Grant Incubator Fund’s prospects.
 
Possibility of Additional Government or Market Regulation. Market disruptions and the dramatic increase in the capital allocated to alternative investment strategies during recent years have led to increased governmental as well as self-regulatory scrutiny of the “hedge fund” industry in general. It is impossible to predict what, if any, changes in regulation applicable to the Grant Incubator Fund, the Sponsor, the Investment Manager, the markets in which they trade and invest or the counterparties with which they do business may be instituted in the future. Any such regulation could have a material adverse impact on the profit potential of the Grant Incubator Fund, as well as require increased transparency as to the identity of the Shareholders.
Other than disclosed in this announcement, the service providers to the Grant Incubator Fund and Grant Master Fund are the same as those for the Fund and each of the service providers may be contacted at the same address.  The Memorandum and Articles of Association and the material contracts relating to the Grant Incubator Fund, the Grant Master Fund and the Segregated Portfolio Company, together with the Companies Law may be inspected at the registered offices of the Grant Incubator Fund and Grant Master Fund and, for a period of 14 days from the date of this announcement, at the offices of J&E Davy.
Each year investors and the Irish Stock Exchange will be sent audited financial statements of the Grant Incubator Fund and Grant Master Fund within 6 months of the end of the fiscal year. The Grant Incubator Fund and Grant Master Fund will send unaudited interim reports for the first 6 months of each fiscal year to each investor and the Irish Stock Exchange within 4 months of the end of the period to which it relates. The annual audited financial statements for the Grant Incubator Fund, Grant Master Fund and Segregated Portfolio Company will be sent to Shareholders and prospective investors on request.
 
The financial statements for December 31, 2008, will be the first audited financial statements for the Grant Incubator Fund and Grant Master Fund and there have been no pending or threatened legal or arbitration proceedings against the Grant Incubator Fund and Grant Master Fund since their incorporation. Since the date of incorporation, neither the Grant Incubator Fund nor the Grant Master Fund has commenced trading, no accounts have been prepared and no dividends have been paid as at the date of this announcement. 
 
As of the date of this announcement, the Grant Incubator Fund and the Grant Master Fund have no loan capital (including term loans) outstanding or created but unissued, and no outstanding mortgages, charges or other borrowings or indebtedness in the nature of borrowing, including bank overdrafts and liabilities under acceptance or acceptance credits, hire purchase or finance lease commitments, guarantees, term loans either secured or unsecured, guaranteed or other contingent liabilities.
The Taxation section as set out on page 67 the Fund’s Listing Particulars equally applies to shareholders in the Fund and shareholders in the Grant Incubator Fund and Grant Master Fund.
Enquires:
SG AM AI Edge Inc.
Lior Segev
+1 212 205 4088
 
 
 
J&E Davy
Aoife Colgan
+353 1 614 8933
 
 
 
This announcement has been issued through the Companies Announcement Service of
The Irish Stock Exchange.
 
 
 
 

This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
ISEZGGGLKZDGRZM

a d v e r t i s e m e n t