AXIOM LEGAL FINANCING FUND, SEGREGATED PORTFOLIO

Transcription

1 SUPPLEMENTAL OFFERING MEMORANDUM AXIOM LEGAL FINANCING FUND, SEGREGATED PORTFOLIO A segregated portfolio of JP SPC 1, a segregated portfolio company incorporated in the Cayman Islands on 31 October 2007 (CLASS A SHARES) (CLASS B SHARES) (CLASS C SHARES) AUGUST 2010 (a feeder fund offering) This document is supplemental to the Offering Memorandum for JP SPC 1 dated June 2009 and is in respect of a private offering of Participating Shares of a segregated portfolio of JP SPC 1 known as Axiom Legal Financing Fund, Segregated Portfolio. This document does not relate to any other segregated portfolio of JP SPC 1 and prospective investors who are interested in any other segregated portfolio should obtain a copy of the relevant Supplemental Offering Memorandum from the Administrator. Please read this Supplemental Offering Memorandum together with the Offering Memorandum for JP SPC 1 dated June 2009 before investing. They contain important information about JP SPC 1 and the segregated portfolio to which this Supplemental Offering Memorandum relates. If you are in any doubt about the contents of either document, you should consult your stockbroker, bank manager, accountant, legal adviser or other independent professional adviser. This Offering has not been underwritten or guaranteed by any institution or body. BTLG : 1 :

2 IMPORTANT INFORMATION This Supplemental Offering Memorandum ( Supplemental Offering Memorandum ) is issued in respect of non-voting participating shares ( Participating Shares ) of the segregated portfolio of JP SPC 1 (the SPC ) known as Axiom Legal Financing Fund, Segregated Portfolio (the Segregated Portfolio ). This Supplemental Offering Memorandum must be read in conjunction with the Offering Memorandum of the SPC dated June 2009 (the Offering Memorandum ) and the provisions of the Offering Memorandum are deemed to be incorporated into this Supplemental Offering Memorandum by reference. If there is any conflict between the provisions of this Supplemental Offering Memorandum and the Offering Memorandum, the provisions of this Supplemental Offering Memorandum shall prevail. The Directors of the SPC are the persons responsible for the information contained in this Supplemental Offering Memorandum. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in this Supplemental Offering Memorandum is in accordance with the facts and does not omit anything likely to affect the import of such information. The Directors accept responsibility accordingly. The distribution of this Supplemental Offering Memorandum and the offering of Participating Shares in certain jurisdictions may be restricted, and accordingly, persons into whose possession this Supplemental Offering Memorandum comes, are required by the SPC to inform themselves about, and to observe any such restrictions. This Supplemental Offering Memorandum does not constitute an offer for sale of shares in the SPC or the Segregated Portfolio. In particular, it does not constitute, and may not be used for the purposes of an offer or solicitation by any person in any jurisdiction (i) in which such offer or solicitation is not authorised, or (ii) in which the person making such offer or solicitation is not qualified to do so, or (iii) to any person to whom it is unlawful to make such offer or solicitation. In particular (i) the Participating Shares may not be offered by public invitation in the Cayman Islands; and (ii) the Participating Shares are not registered under the United States Securities Act of 1933 and may not be directly or indirectly offered or sold in the United States of America (including its territories, possessions and areas subject to its jurisdiction) or to or for the benefit of a United States Person as defined below. For this purpose, United States Person means a national or resident of the United States of America, a partnership organised or existing in any state, territory or possession of the United States of America, a corporation organised under the laws of the United States of America or of any state, territory or possession thereof, or any estate or trust other than an estate or trust for which income from sources outside the United States of America (which is not effe ctively connected with the conduct of a trade or business within the United States of America) is not included in its gross income for the purposes of computing United States federal income tax. This Supplemental Offering Memorandum has not been and will not be approved by any regulatory authority in any jurisdiction (including, without limitation, the Cayman Islands BTLG : 2 :

3 Monetary Authority who take no responsibility for the contents of this Supplemental Offering Memorandum). Participating Shares sold after the date of this Supplemental Offering Memorandum and the date of the Offering Memorandum will be sold on the basis of the information contained in this Supplemental Offering Memorandum and the Offering Memorandum. Any further information given or made by any dealer, salesman or other persons must be regarded by prospective investors as unauthorised. In particular, no person has been authorised to make any representations concerning the SPC, the Segregated Portfolio or the Participating Shares which are inconsistent with or in addition to those contained in this Supplemental Offering Memorandum or the Offering Memorandum and neither the SPC nor the Directors accept responsibility for any representations so made. This Supplemental Offering Memorandum is based on the law and practice in force in the Cayman Islands at the relevant time, and is subject to changes therein. Persons interested in acquiring Participating Shares should inform themselves as to: (i) (ii) (iii) the legal requirements within the countries of their nationality, residence, ordinary residence or domicile for such acquisition; any foreign exchange restrictions or exchange control requirements which they might encounter on acquisition or disposal of Participating Shares; and the income tax and other taxation consequences which might be relevant to the acquisition, holding or disposal of Participating Shares. Your attention is also drawn to the section headed Important Information in the Offering Memorandum and, in particular, to the restrictions on who may invest in the SPC and the Segregated Portfolio. BTLG : 3 :

4 DEFINITIONS AND DESCRIPTIONS Administrator Articles Auditors Base Currency Business Day Class A Participating Shares Class B Participating Shares Class C Participating Shares Deposit Bank/ Broker Directors Eligible Investor Fiscal Year Gross Negligence JP Fund Administration (Cayman) Ltd., Cayman Islands the Articles of Association of the SPC BDO, Cayman Islands in respect of the Segregated Portfolio, British Pounds (GBP) in respect of the Segregated Portfolio, (i) any day (other than a Saturday, Sunday or public holiday) on which banks are open for business in the Cayman Islands and Switzerland, and/or (ii) such other day or days classified as a business day according to such criteria as the Directors may adopt from time to time non-voting participating shares issued in respect of the Segregated Portfolio, denominated in British Pounds (GBP) and designated as Class A Participating Shares non-voting participating shares issued in respect of the Segregated Portfolio, denominated in US Dollars (USD) and designated as Class B Participating Shares non-voting participating shares issued in respect of the Segregated Portfolio, denominated in Euros (EUR) and designated as Class C Participating Shares in respect of the Segregated Portfolio, Deutsche Bank and any other brokers/deposit banks appointed from time to time the Directors of the SPC for the time being, or as the case may be, the Directors assembled as a board or as a committee thereof in respect of the Segregated Portfolio, as specified in the Offering Memorandum the SPC s fiscal year ending on 31 December in each year in respect of a person, a standard of conduct beyond negligence whereby a person acts with reckless disregard for the consequences of his action or inaction Initial Offering Period in respect of the Segregated Portfolio, from 1st June 2009 to 31 st August 2009 (both dates inclusive) or such other alternative dates as the Directors may specify from time to time BTLG : 4 :

5 Investment Manager Loan Manager Master Segregated Portfolio in respect of the Segregated Portfolio, The Synergy Solution Ltd. in respect of the Master Segregated Portfolio, Synergy (IOM) Ltd. Axiom Legal Financing Fund Master, Segregated Portfolio, a sub-fund or segregated portfolio of the Master SPC to which this Supplemental Offering Memorandum relates Master SPC Minimum Initial Subscription JP SPC 4, the umbrella fund of which the Master Segregated Portfolio is a sub-fund in respect of the Segregated Portfolio, GBP 25,000 for Class A Participating Shares, USD 40,000 for Class B Participating Shares and EUR 30,000 for Class C Participating Shares Minimum Additional Subscription in respect of the Segregated Portfolio, GBP 12,500 for Class A Participating Shares, USD 20,000 for Class B Participating Shares and EUR 15,000 for Class C Participating Shares Minimum Holding Net Asset Value Per Segregated Portfolio Net Asset Value Per Participating Share Participating Shares Redemption Date Redemption Price in respect of the Segregated Portfolio, GBP 25,000 for Class A Participating Shares, USD 40,000 for Class B Participating Shares and EUR 30,000 for Class C Participating Shares the net asset value of the Segregated Portfolio as determined in accordance with the Offering Memorandum the net asset value per Participating Share of the Segregated Portfolio as determined in accordance with the Offering Memorandum non-voting participating shares issued in respect of the Segregated Portfolio in three classes denominated in British Pounds (GBP), US Dollars (USD ) and Euros (EUR) or of the Master Segregated Portfolio denominated in British Pounds (GBP), as the reference indicates in respect of the Segregated Portfolio, the first Business Day of each month or such other date(s) as the Directors may determine, being the date(s) on which Participating Shares of a particular Segregated Portfolio may be redeemed in respect of the Segregated Portfolio, the price per share at which Participating Shares of a particular Segregated Portfolio are redeemed, determined in the manner described under Share Redemption of this Supplemental Offering Memorandum BTLG : 5 :

6 Segregated Portfolio Shareholder SPC Subscription Date Subscription Price Valuation Date Voting Shares Axiom Legal Financing Fund, Segregated Portfolio, a sub-fund or segregated portfolio of the SPC to which this Supplemental Offering Memorandum relates a person recorded as a holder of Participating Shares. JP SPC 1, the umbrella fund of which the Segregated Portfolio is a subfund in respect of the Segregated Portfolio, the first Business Day of each month or such other date(s) as the Directors may determine, being the date(s) on which investors may subscribe for Participating Shares of a particular Segregated Portfolio in respect of the Segregated Portfolio, the price per share at which Participating Shares of a particular Segregated Portfolio are issued, determined in the manner described under Offering and Share Subscription of this Supplemental Offering Memorandum in respect of the Segregated Portfolio, the last Business Day of each month or such other date(s) as the Directors may determine, being the date(s) on which the Net Asset Value per Participating Share is determined voting non-participating shares in the capital of the SPC BTLG : 6 :

7 INTRODUCTION This Supplemental Offering Memorandum describes the principal features of the Segregated Portfolio and the Master Segregated Portfolio, as the context requires, and must be read in conjunction with the Offering Memorandum. STRUCTURE The SPC was incorporated in the Cayman Islands on 31 October 2007 as a segregated portfolio company under Part XIV of the Companies Law ( as revised). As a segregated portfolio company, the SPC may create one or more segregated portfolios. The Segregated Portfolio is one such segregated portfolio created by the SPC. Under the Companies Law ( as revised), as a segregated portfolio, the assets and liabilities of the Segregated Portfolio will be legally separated from the assets and liabilities of every other segregated portfolio that the SPC has created or will create and from the general assets and liabilities of the SPC. General assets and liabilities of the SPC are those, which are not attributable to any particular segregated portfolio. The Directors are required to establish and maintain procedures to preserve this segregation and will do so by establishing a separate account or accounts for the Segregated Portfolio and every other segregated portfolio. The Companies Law ( as revised) provides that a creditor of a particular segregated portfolio may only have recourse to the assets of that segregated portfolio and not to the assets of any other segregated portfolio. If the assets of a segregated portfolio are insufficient to meet the liability owed to the creditor, the SPC s Articles provide that the creditor may not have recourse to the general assets of the SPC nor to the assets of any other segregated portfolio. Even though the assets and liabilities of the Segregated Portfolio are segregated from the assets and liabilities of the other segregated portfolio, the Segregated Portfolio is not a separate legal entity. The Segregated Portfolio acts as what is commonly referred to as a feeder fund. That is, Eligible Investors contribute capital to the Segregated Portfolio that the Segregated Portfolio in turn uses to purchase non-voting participating shares in the Master Segregated Portfolio. In this respect, the Segregated Portfolio may, in the future be a sister to an appropriate entity, that will be a United States feeder fund organised exclusively for United States Persons (the U.S. Feeder ). The U.S. Feeder is itself would be expected to be a limited liability company that pools its assets alongside those of the Segregated Portfolio such that, collectively, the two entities purchase one hundred percent of the issued and outstanding non-voting participating shares of the Master Segregated Portfolio. If such a structure is implemented, the Investment Manager will serve as investment manager to the Master Segregated Portfolio and may also act as the principal of the Managing Member of the US Feeder which includes the authority to manage the U.S. Feeder s Investments. BTLG : 7 :

8 INVESTMENT OBJECTIVE AND STRATEGY The investment objective of the Segregated Portfolio is to invest substantially all of its assets in the Master Segregated Portfolio. The Investment Manager believes that consolidating the capital of the Segregated Portfolio and other funds managed by the Investment Manager in the Master Segregated Portfolio, which may includine a U.S. Feeder in the future could provide numerous benefits to the Segregated Portfolio that could not be achieved by the Segregated Portfolio independently. The potential benefits include cost savings, administrative efficiencies, better credit lines, anonymity and preferred customer status as well as the ability to hedge Class B Participating Shares and Class C Participating Shares of the Segregated Portfolio against some of the foreign exchange risk associated with making investments based in British Pounds for investors who subscribe to the Segregated Portfolio in US Dollars or Euros. Consequently, the Segregated Portfolio intends to use the Master Segregated Portfolio and its affiliates, if any, as its principal trading vehicles. Notwithstanding the foregoing, the Investment Manager reserves the right, in its sole determination, to increase or decrease the portion of the Segregated Portfolio s assets invested in the Master Segregated Portfolio. Moreover, due to volatile market conditions and other factors, there can be no assurance as to the portion of the Segregated Portfolio s assets that will be committed to the Master Segregated Portfolio over time or from time to time. Any cash held by the Segregated Portfolio and not invested into the Master Segregated Portfolio will be used to settle the financial obligations of the Segregated Portfolio or, in the case of Share Class B or Share Class C of the Segregated Portfolio, cash may be used for margin to enable the limited hedging described below to take place. The investment objective of the Master Segregated Portfolio is to provide security of capital and to achieve capital growth uncorrelated to stock markets, commodities, property prices or interest rates, whilst targeting consistent minimum annual growth rates of: 11% (Class A) GBP 10% (Class B) USD 10% (Class C) EUR The annual, targeted performance figures above reflect anticipated gains to the Segregated Portfolio in cases where only 90% of the loans are returned with an interest payment for cases that succeed and that loans take an average of 12 months to be returned. In reality, the Investment Manager expects that many cases will be resolved more quickly and that the same money can be lent more than once a year; if the Investment Manager is successful in lending, receiving and re-lending the same money more than once each year, there is expected to be a significant enhancement in the performance of the Segregated Portfolio (please refer to the Valuation Methodology section below for important information concerning the performance assumptions being made at the outset). Returns will be lower for class B and class C shares because of the cost of providing the currency hedging. BTLG : 8 :

9 The targeted returns described in this Supplemental Offering Memorandum are targets only and there can be no assurance that the Master Segregated Portfolio will achieve its investment objectives or the targeted returns described herein. The Master Segregated Portfolio provides short term fixed interest loans to law firms in the United Kingdom (excluding Scotland) to pursue legal claims on a no -win, no-fee basis for the misselling of financial services products on behalf of claimants. To provide investors with the potential for a higher level of capital security, the funding facilities are fully insured against the non-return of the loans by the law firms. The Master Segregated Portfolio is dependent upon the credit risk of the underlying insurance policies for the return of the loans made on cases that do not succeed. However, the Investment Manager believes that this risk is significantly reduced by a second insurance policy that protects against failure of the law firm and failure of the loan insurer. The investment objective of the Master Segregated Portfolio is for the net asset value to increase steadily month by month in line with the target 12-month rates of return as listed above. All the costs of managing the Segregated Portfolio and the Master Segregated Portfolio are met from the loan capital provided to and repaid by the law firms. The gains to the Master Segregated Portfolio are achieved by charging each law firm a fixed interest amount on the loan. Two kinds of loan will be provided. The first is where the interest amount and the loan capital are paid by the court award against the loser of the case. If the case does not win, only the loan capital is returned from the insurance company. The second is a fixed term loan that has to be repaid regardless of the progress of the case. Both types are insured against non return. The first type of case that the Master Segregated Portfolio intends to offer loans is where breaches to the Consumer Credit Regulations in the United Kingdom are identified on a client s loan agreement which breach renders the agreement unenforceable by the lender against the client. It is planned to finance other types of case unrelated to consumer credit as the fund grows in size. Investment Criteria Loans are provided to suitably qualified law firms exclusively in the United Kingdom (excluding Scotland), for Permitted Uses. Permitted Uses include but are not limited to: Meeting the costs of disbursements or other costs approved by the Investment Manager related to cases involving credit card or loan agreements that breach the Consumer Credit Regulations in the United Kingdom. As the Investment Manager believes that the market for loans to law firms is an expanding market, other categories are under consideration and will be considered for inclusion by the Investment Manager as Permitted Uses if they are of a similar nature and the same standards of integrity and assurance of returns can be maintained. Permitted uses of the loans are determined by the Investment Manager using the criteria that: BTLG : 9 :

10 1. Cases must carry insurance underwriting; 2. It must be straightforward to determine the likely success of each case easily; 3. There is a high probability that cases can be completed in under a year. Capital Risk Management Security for the return of the Loan Use of the Master Segregated Portfolio is restricted to Permitted Uses and shall always include the provision of an insurance policy to cover any risks related to litigation with respect to such policies. Monies shall not be released to any law firm, or disbursements made on its behalf, until an insurance policy has been issued by an authorised insurer. At the conclusion of the litigation conducted by the respective law firm, the loan amount, including the insurance premiums plus the interest on the loan, are recovered from the losing side as provided under the Access to Justice Act of the United Kingdom. If the case is lost, a claim is made on the loan insurance. A further level of security is taken out by the Master Segregated Portfolio based on a loan protection policy which protects the Master Segregated Portfolio from the potential insolvency of the law firm or of the insurer of the litigation action. As every case accepted for funding is insured as outlined above and regularly monitored by the insurer, the amount lent out which includes the costs of operating and offering shares of the Segregated Portfolio and Master Segregated Portfolio is protected so that the capital of the Master Segregated Portfolio is not eroded. Use of the Money Loans to law firms are only available to meet permitted costs related to Permitted Uses. These Permitted Uses shall, for the time being, be restricted to different types of litigation funding. The permitted costs referred to above will be paid from a practice disbursement account held by the Loan Manager and are paid directly by the law firm and reimbursed by the Master Segregated Portfolio or paid directly by the Master Segregated Portfolio and charged to the respective law firm's account. Law Firm Security English, Welsh and Northern Irish solicitors practices are governed and regulated businesses; as a result, facilities provided to solicitors have a high level of security. All solicitors have to abide by the relevant law society rules and regulations and must be members of the respective solicitors indemnity fund that helps to ensure their solvency. In the unlikely event that a solicitor s practice does go bankrupt, the cases and the loan facility could simply be transferred BTLG : 10 :

11 to another solicitor approved by the Investment Manager who would then take over conduct of the case. Achievement of Capital Growth Capital Growth is expected to be accrued steadily in line with the targeted 12-month rates of return as described more fully above, although there can be no assurance that the targetted returns can be achieved. The operating costs of the Segregated Portfolio and Master Segregated Portfolio are primarily met by the law firms from the loan capital. The gains to the Segregated Portfolio and Master Segregated Portfolio are achieved by charging the law firm a fixed interest amount on each loan,. The interest amount and the loan capital are repaid by the law firm at the conclusion of a case when they recover their fees from the losing party. If the case does not win, only the loan capital is returned from the insurance company. In the case of fixed term loans, both interest and capital are repaid regardless of case progress or success and both are insured. The investor s capital is protected as loans are repaid by the court or an insurance company. Profits to the Master Segregated Portfolio accrue from the flat rate interest charged on each loan. Three Share Classes The Master Segregated Portfolio invests in law firms as more fully described above within the United Kingdom and so is based in British Pounds (GBP). Additional shares classes are available in US Dollars (Class B) and Euros (Class C). Hedging mechanisms are employed to reduce currency exposure for share classes B and C. Each share class will be partially hedged independently to mitigate the risk of loss of its base currency against the British Pound. It is not possible to establish a perfect hedge and no guarantee or warranty whatsoever is provided by the Directors of the SPC or the Investment Manager against the possibility of losses caused by adverse currency movements. To the extent that either the Master Segregated Portfolio s or the Segregated Portfolio s assets are not invested in such positions, and during periods in which the Investment Manager believes that economic, financial or political conditions make it advisable, or opportunities for capital appreciation are limited or for defensive purposes, the Segregated Portfolio may invest in shortterm and medium term debt securities or hold cash. In addition, the Segregated Portfolio may place all or part of its assets in temporary investments for cash management purposes pending investments of initial or subsequent subscription monies in accordance with the Segregated Portfolio s investment objective, or in order to meet its operational expenses. The Master Segregated Portfolio or the Segregated Portfolio may seek from time to time to hedge all or a portion of the market risks of the investments through the defensive use of derivative transactions, including, but not limited to, futures, options, swaps or any combination BTLG : 11 :

12 thereof. The underlying portfolio may be pledged as collateral to secure these derivative transactions and foreign exchange contracts. The Master Segregated Portfolio or the Segregated Portfolio may use leverage to meet redemptions or for currency hedging purposes only. The SPC may establish a credit facility for the Master Segregated Portfolio or the Segregated Portfolio. The maximum credit facility will depend on the liquidity of the investments of the Master Segregated Portfolio or the Segregated Portfolio. The Master Segregated Portfolio or the Segregated Portfolio will be able to borrow, repay and re-borrow amounts under the credit facility. Such credit facility may be utilised to enable the Master Segregated Portfolio or the Segregated Portfolio to establish the desired investment exposure or to cover the margin requirements for a currency hedge. The Investment Manager will decide periodically on the investments of the Master Segregated Portfolio or the Segregated Portfolio, review the investment process, evaluate proposed investments and monitor the performance of the Master Segregated Portfolio or the Segregated Portfolio. The Investment Manager is granted full discretion over the matters relating to the manner, the method and timing of investments and transactions. The evaluation and selection of investments will be made by using several criteria, including, but not limited to: (i) an assessment of the potential return expected from a contemplated investment, past performance, the strategy used, the particular geographic markets or economic sectors in which the investments will be made; (ii) an estimate of degree of risk and volatility likely to be experienced with the investment over time; (iii) the liquidity of the investment; and (iv) an estimate of the degree of correlation of the performance of the particular investment with other investments of the Master Segregated Portfolio or the Segregated Portfolio. NET ASSET VALUE PER PARTICIPATING SHARE The Net Asset Value per Participating Share will be calculated in accordance with the criteria as specified under Net Asset Per Participating Share in the Offering Memorandum. DIVIDEND POLICY It is not the intention of the Directors to declare dividends in respect of the Segregated Portfolio and all earnings of the Segregated Portfolio are intended to be reinvested. However, the Directors reserve the right to declare dividends in respect of the Segregated Portfolio. BTLG : 12 :

13 OFFERING AND SHARE SUBSCRIPTION For administrative convenience, Participating Shares are issuable in various series which will generally be convertible into other series. However, the Segregated Portfolio currently does not intend to issue Participating Shares in different series. No part of the initial offer has been underwritten or guaranteed. Participating Shares in the Segregated Portfolio issued at the close of the Initial Offering Period are available for issue during the Initial Offering Period at a Subscription Price of GBP 100 per Class A Participating Share, USD 100 for Class B Participating Shares and EUR 100 for Class C Participating Shares. The Initial Offering Period will commence at 9am (Cayman Islands time) on 1 st June 2009 and will close at 5pm (Cayman Islands time) 31 st August The Directors may extend or shorten the Initial Offering Period at their discretion. Following the close of the Initial Offering Period, Participating Shares will be available for subscription at the Subscription Price on each Subscription Date at a price equal to the Net Asset Value per Participating Share as at the Valuation Date immediately preceding the Subscription Date on which the application is effective. There are no subscription charges payable in respect of any amount subscribed for. Participating Shares may be issued for non-cash consideration at the discretion of the Directors. Such consideration will be valued by reference to the valuation principles applied in the calculation of Net Asset Value of the SPC and the Net Asset Value per Participating Share (but subject to the deduction of such sum (if any) as the Directors consider represents an appropriate provision for any fiscal, transfer, registration or other charges, fees or duties associated with the non-cash consideration received by the SPC) or, if the Directors consider appropriate, by such other method as may, in the opinion of the Directors, be fair and reasonable, having regard to the interests of the applicant and the existing Shareholders at the relevant time. Applicants for Participating Shares during the Initial Offering Period should complete a subscription agreement in the form prescribed by the SPC and send it to the Administrator by mail (with a copy by or facsimile) so as to be received by the Administrator no later than 5pm (Cayman Islands time) on the last day of the Initial Offering Period. In the case of subscriptions in cash, cleared funds in respect of the subscription monies must be received by the Administrator by the same time. If the subscription agreement and/or subscription monies is/are not received by these times, the application will be held over until the first Subscription Date following the close of the Initial Offering Period and Participating Shares will then be issued at the Subscription Price on that Subscription Date. Thereafter, applicants for Participating Shares, and Shareholders wishing to apply for additional Participating Shares, must send their completed subscription agreement by mail (with a copy by or facsimile) so as to be received by the Administrator by no later than 5pm (Cayman Islands time) 5 Business Days before each Subscription Date, or by such other day as the Directors may in any particular case determine, before the relevant Subscription Date and so that, in the case of subscriptions in cash, cleared funds are received by the Administrator no later than BTLG : 13 :

14 5pm (Cayman Islands time) on the same day, failing either of which the application will be held over to the following Subscription Date and Participating Shares will then be issued at the Subscription Price applicable on that Subscription Date. Fractions of Participating Shares will, if necessary, be issued to four decimal places. If an applicant or Shareholder requests a whole number of Participating Shares, subscription monies in excess of the amount needed to purchase the Participating Shares will be repaid (without interest) to the applicant or the Shareholder at their risk and cost. The SPC reserves the right to reject any application in whole or part in its absolute discretion, without any obligation to disclose their reasons for doing so, in which event the amount paid on application or the balance thereof (as the case may be) will be returned (without interest) as soon as practicable in the same currency at the risk and cost of the applicant or Shareholder. The Administrator will issue a written confirmation to successful applicants or Shareholders confirming acceptance of their application, normally within 5 Business Days of the relevant Subscription Date. Once completed applications have been received and accepted by the Administrator, they are irrevocable. In the case of subscriptions in cash, applications for Participating Shares will not be dealt with and Participating Shares will not be issued until receipt of notification that an applicant s or Shareholder s funds have been cleared in the full amount of the subscription. Subject thereto, Participating Shares will be deemed to be issued on the relevant Subscription Date. The Directors reserve the right from time to time to resolve to close the Segregated Portfolio or to new subscriptions, either for a specified period or until they otherwise determine and either in respect of all investors or new investors only. During any such period, Participating Shares will not be available for subscription. The Minimum Initial Subscription per investor for Class A Participating Shares is GBP 25,000, the Minimum Initial Subscription per investor for Class B Participating Shares is USD 40,000 and the Minimum Initial Subscription per investor for Class C Participating Shares is EUR 30,000. The Directors may, in their absolute discretion, waive such minimum initial investment requirement, either generally or in any particular case. The Minimum Additional Subscription per investor for Class A Participating Shares is GBP 12,500, the Minimum Additional Subscription per investor for Class B Participating Shares is USD 20,000 and the Minimum Additional Subscription per investor for Class C Participating Shares is EUR 15,000. The Directors may, in their absolute discretion, waive such minimum subsequent investment requirement, either generally or in any particular case. The Investment Manager and its directors, employees and connected persons are not subject to these minimum investment levels. The subscription agreement requires each prospective applicant for Participating Shares to represent and warrant to the SPC that, among other things, he, she or it is able to acquire and hold Participating Shares without violating applicable laws. BTLG : 14 :

15 Investment in Participating Shares is strictly limited to Eligible Investors as defined in the Offering Memorandum. Prospective applicants must represent and warrant in the subscription application form that they are Eligible Investors and that they have the knowledge, expertise and experience in financial investment and business matters to evaluate the risks of investing in the Segregated Portfolio, are aware that the Participating Shares are an investment involving risk, that they are aware of the risks inherent in investing in assets in which the Segregated Portfolio will invest and the method by which these assets may be held and/or traded, that they are not dependent upon current cash returns with respect to the investment in the Segregated Portfolio and that they can bear the loss of their entire investment in the Segregated Portfolio. Whilst it is entirely the responsibility of the individual investor to be satisfied that he, she or it is an Eligible Investor and neither the SPC nor the Directors accept any responsibility in that regard, subscriptions will not be accepted from any natural person, firm or company whom the Directors know or reasonably suspect is not an Eligible Investor. All the Participating Shares will only be issued in bookstock form, meaning that a Shareholder s entitlement will be evidenced by an entry in the SPC s register of Shareholders for the Segregated Portfolio, as maintained by the Administrator, and not by a share certificate. The Directors may declare a suspension of the issue of Participating Shares in certain circumstances as described under Net Asset Value Per Participating Share in the Offering Memorandum. No Participating Shares will be issued during any such period of suspension. Measures aimed at the prevention of money laundering require an applicant for Participating Shares as described under General and Statutory Information in the Offering Memorandum. BTLG : 15 :

16 SHARE REDEMPTION Subject to any restrictions in that regard, Participating Shares are redeemable at the option of the Shareholder. Any Shareholder may redeem all or part of their Participating Shares at the Net Asset Value per Participating Share on a Redemption Date. Shareholders should complete a redemption request in the form prescribed by the SPC and send it to the Administrator by mail (with a copy by or facsimile) so as to be received by the Administrator no later than 5pm (Cayman Islands time) 30 Business Days before the Redemption Date, or by such other day as the Directors may in any particular case determine, before the relevant Redemption Date, failing which the redemption request will be held over until the next following Redemption Date and Participating Shares will be redeemed at the Redemption Price applicable on that Redemption Date. Redemption requests may be sent by or facsimile, but redemption proceeds will not be remitted unless the Administrator has received the original of the redemption request by the relevant Redemption Date and the Shareholder has duly received confirmation from the Administrator that such redemption request is in good order within 5 Business Days of the Administrator s receipt of same; failing which confirmation, any redemption request sent by e- mail or facsimile will be rendered void. The minimum request for redemption for Class A Participating Shares will be GBP 12,500 per investor, the minimum request for redemption for Class B Participating Shares will be USD 20,000 per investor and the minimum request for redemption for Class C Participating Shares will be EUR 15,000 per investor. A request for a partial redemption of Participating Shares may be refused, or the holding redeemed in its entirety, if, as a result of such partial redemption, the Net Asset Value of the Participating Shares retained by the Shareholder would be less than the Minimum Holding. A redemption request, once given, is irrevocable. The Redemption Price will be equal to the Net Asset Value per Participating Share as at the Valuation Date immediately preceding the relevant Redemption Date. No redemption fee will be payable on Participating Shares. Payment of redemption proceeds will normally be made within 30 Business Days of the relevant Redemption Date. Payment of redemption proceeds for Class A Participating Shares will be made in British Pounds (GBP), payment of redemption proceeds for Class B Participating Shares will be made in US Dollars (USD) and payment of redemption procee ds for Class C Participating Shares will be in Euros (EUR) by direct transfer in accordance with instructions given by the redeeming Shareholder to the Administrator and at the Shareholder s risk and cost. Redemption may, at the discretion of the Directors, be effected in specie by the appropriation of assets of the Segregated Portfolio of the relevant value (which shall conclusively be determined BTLG : 16 :

17 by the Directors in good faith) in satisfaction of the Redemption Price. Any such appropriation shall not materially prejudice the interests of the remaining Shareholders as a whole. The Directors may declare a suspension of the redemption of Participating Shares in certain circumstances as described under Share Redemption in the Offering Memorandum. No Participating Shares will be redeemed during any such period of suspension. The Directors have the right to require the compulsory redemption of all Participating Shares held by or for the benefit of a Shareholder in certain circumstances as described under Share Redemption in the Offering Memorandum. Shareholders should note that the Directors may refuse to accept a redemption request if it is not accompanied by such additional information as they may reasonably require. This power may, without limitation to the generality of the foregoing, be exercised where proper information has not been provided for the prevention of money laundering verification purposes as described under General and Statutory Information in the Offering Memorandum. BTLG : 17 :

18 INVESTMENT MANAGER The Segregated Portfolio has appointed The Synergy Solution Ltd. as Investment Manager of the Segregated Portfolio and the Master Segregated Portfolio pursuant to an Investment Management Agreement effective as of 25th May 2009 (the Investment Management Agreement ). The Investment Manager was formed in May 2007 by its directors, David Kennedy and Tim Schools, to act as a broker for legal financing. They will be responsible for screening the law firms requiring loans and for vetting each case with the insurance underwriters before instructing the Loan Manager to make payments. Tim Schools qualified as a solicitor in the UK in 1998 and specialises in the field of litigation. He successfully exploited the opportunities presented with the introduction of the Access to Justice Bill in 2000, which introduced the concept of lawyers acting on a no win - no fee basis, by opening up his own law firm specialising in personal injury claims. In conjunction with this, Tim also opened up a claims management company and employed a combined total of over 400 staff dealing with in excess of 3000 cases per month. Tim subsequently sold his law firm in 2004 and has since been looking to develop further opportunities in the financial misselling sector and other related fields. Tim has vast experience in developing funding and insurance models for law firms and exploiting emerging market conditions. Tim Schools has formed a law firm that may receive loans from the Master Segregated Portfolio, for further information please refer to the "Conflicts of Interest Specific to the Segregated Portfolio" section below. David Kennedy has 24 years experience working in financial services and is regulated by the Financial Services Authority of the United Kingdom to give financial advice. He has worked with fund managers and international life companies and conducted consultancy work with Luxembourg and Isle of Man institutions. He was instrumental in attracting funding of 100 million for a class action in the UK from a major European Bank in This experience has been beneficial in forming The Synergy Solution Ltd with Tim Schools. The responsibilities of the Investment Manager will include making and carrying out all investment decisions on behalf of the Segregated Portfolio and the Master Segregated Portfolio. The particular skills that the Investment Manager brings are its general expertise and experience in the financial services sector in the UK and litigation arising therefrom. Under the terms of the Investment Management Agreement, the services of the Investment Manager may generally only be terminated by either party on 90 days written notice. The Investment Management Agreement may also be terminated immediately in certain circumstances as detailed in the Investment Management Agreement. For example, the Investment Management Agreement will be deemed to be terminated immediately in the event of the SPC or the Master SPC, as the case may be, exercising its right to compulsorily redeem all Participating Shares in the Segregated Portfolio or the Master Segregated Portfolio or the where BTLG : 18 :

19 the Investment Manager has failed to reach certain targets set by the SPC or the Master SPC, as applicable. The Investment Manager will not be responsible for any loss or damage which the Segregated Portfolio or the Master Segregated Portfolio may sustain or suffer as a result of or in the course of the discharge by the Investment Manager of its duties to the Segregated Portfolio or the Master Segregated Portfolio other than loss or damage arising from the actual fraud, gross negligence or wilful default of the Investment Manager. The Segregated Portfolio and the Master Segregated Portfolio will indemnify the Investment Manager out of the Segregated Portfolio s or the Master Segregated Portfolio s (as appropriate) assets against claims against the Investment Manager in respect of any loss or damage suffered by the Investment Manager, other than by reason of the actual fraud, gross negligence or wilful default of the Investment Manager. The Investment Manager is permitted to delegate some or all of its responsibilities under the Investment Management Agreement to a sub-investment manager but will be responsible for any acts or omissions of such sub-investment manager. The Investment Manager is required to exercise due care and diligence in making any such appointment and to supervise the person or entity appointed. In the event that the Investment Manager shall cease to operate or be wound up, the Directors will take such steps in relation to the Segregated Portfolio or the Master Segregated Portfolio as they consider shall be in the best interests of the Shareholders. In accordance with applicable law, the Investment Manager may effect transactions or arrange for the effecting of transactions through brokers with whom it has arrangements whereby the broker agrees to use a proportion of the commission earned on such transactions to discharge the broker's own costs or the costs of third parties in providing certain services to the Investment Manager. The benefits provided under such arrangements will assist the Investment Manager in the provision of investment management services to the Master Segregated Portfolio, the Segregated Portfolio and to other third parties. Specifically, the Investment Manager may agree that a broker shall be paid a commission in excess of the amount another broker would have charged for effecting such transaction so long as, in the good faith judgement of the Investment Manager, the amount of the commission is reasonable in relation to the value of the brokerage and other services provided or paid for by such broker. Such services, which may take the form of research, analysis and advisory services and which, depending on the precise nature of the services, may also take the form of market price services, electronic trade confirmation systems or third party electronic dealing or quotation systems, may be used by the Investment Manager in connection with transactions in which the Master Segregated Portfolio or the Segregated Portfolio will not participate. Please refer to the Investment Management Agreement itself for its full details of its terms and conditions. BTLG : 19 :

20 ADMINISTRATOR The Master Segregated Portfolio and the Segregated Portfolio have appointed JP Fund Administration (Cayman) Limited, Cayman Islands as Administrator of the Master Segregated Portfolio and the Segregated Portfolio pursuant to an Administration Agreement between, inter alios, the Master SPC on behalf of the Master Segregated Portfolio, the SPC on behalf of the Segregated Portfolio and the Administrator effective as of 25 th May 2009 (the Administration Agreement ). The Administrator is an exempted company limited by shares and was incorporated in the Cayman Islands the 13 th August The Administrator is the holder of a full mutual fund administrators licence to carry on business as an administrator in respect of an unlimited number of mutual funds granted by the Cayman Islands Monetary Authority on 4 th November Subject to the approval of the Cayman Islands Monetary Authority, the Master SPC and the SPC are entitled to appoint a different administrator in respect of the Master Segregated Portfolio or the Segregated Portfolio, respectively, at its discretion. The Administrator is responsible for the Master Segregated Portfolio s and the Segregated Portfolio s fund administration, including accounting, financial reporting, net asset value calculations and the processing of subscriptions and redemptions. Under the terms of the Administration Agreement, the services of the Administrator may generally only be terminated by either party on 90 days written notice. The Administration Agreement may also be terminated immediately in certain circumstances as detailed in the Administration Agreement. The Administrator will not be liable for any damage, loss, claims, proceedings, demands, liabilities, costs or expenses whatsoever suffered or incurred by the Master Segregated Portfolio or the Segregated Portfolio or any person at any time from any cause whatsoever unless arising directly as a result of the Administrator s actual fraud, Gross Negligence (as defined in the Administration Agreement) or wilful default, or that of any of its directors, officers, employees, delegates or agents, as the case may be. The Master Segregated Portfolio and the Segregated Portfolio will indemnify the Administrator, for itself and as trustee for each of its directors, officers, employees and agents, its directors, officers or agents from and against any all liabilities, obligations, losses, damages, penalties, actions, proceedings, claims, judgments, demands, costs, expenses or disbursements of any kind whatsoever which they or any of them may incur or be subject to in consequence of the Administration Agreement or as a result of the performance of the Administration Agreement or as a direct result of the performance of its duties under the Administration Agreement except to the extent that the same are a result of the fraud, Gross Negligence (as defined in the Administration Agreement) or wilful default of the party seeking the indemnity thereunder. The Administrator shall be entitled to appoint such sub-registrars, issue, transfer and redemption agents, nominees, agents and delegates as it sees fit to perform in whole or in part any of its duties under the Administration Agreement (including in such appointment powers of sub - delegation). The fees and other remuneration of any such sub-registrars, issue, transfer and BTLG : 20 :

21 redemption agents, nominees or delegates shall (unless specifically agreed otherwise) be paid by the Administrator out of its own fees received pursuant to the Administration Agreement. Notwithstanding any other provisions of the Administration Agreement, save where an agent or delegate is an Associate of the Administrator (as defined in the Administration Agreement), the Administrator shall not be liable for any loss occasioned by any agent or delegate appointed pursuant to the Administration Agreement provided that the Administrator has exercised reasonable skill and care in the selection of that agent or delegate. Please refer to the Administration Agreement itself for its full details of its terms and conditions. VALUATION METHODOLOGY Given the level of insurance and to avoid high, associated costs to the Master Segregated Portfolio, none of the Directors, the Investment Manager nor the Administrator will consult any rating agencies or engage in any other form of assessment of risks associated with a Project other than reliance on the experience and expertise of the Investment Manager in making such investment decisions. For the purpose of analysis, the Administrator has stated that fair value of any asset is the amount for which an asset could be exchanged between knowledgeable, willing parties in an arm s length transaction. The methodology adopted to arrive at fair value of the portfolio is the income approach which is based on expected cash flows discounted for the time value of money and adjusted for any additional risk factors. The Master Segregated Portfolio will initially be valued with the assumption that each loan will be repaid in a standard term ( Assumed Average Term ) with an interest rate based on prevailing conditions ( Assumed Return ). It is expected that a proportion of the loans will relate to cases that fail and these cases will not create a profit ( Assumed Failure Rate ). The Net Asset Value shall be based on the capital sum plus the remaining proportion of the interest due on each loan granted (Assumed Return) after deduction of the Assumed Failure Rate and then discounted over the Assumed Average Term, less all operating costs, including but not limited to the deferred premiums on the capital insurance. At the discretion of the Investment Manager, the Loan Manager and the Administrator, the Assumed Term, Assumed Profit and Assumed Failure Rate will be reviewed and amended from time to time to reflect the overall success rate of cases over time. Initially, the Assumed Term shall be 12 months, the initial Assumed Profit shall be 15% and the initial Assumed Failure Rate shall be 5%. The portfolio held by the Master Segregated Portfolio will be valued to reflect the time until repayment is received and subject to the considerations explained above; it will be calculated BTLG : 21 :

22 and applied on a monthly basis. similar fashion. Any assets held directly by the Portfolio will be valued in a Valuations of the loan portfolio will be based on information provided by the Investment Manager and the Loan Manager. It should be noted that the Administrator will not perform a detailed review of any contractual investment documentation. The Administrator assumes no responsibility or liability for and makes no representations with respect to the accuracy or completeness of any such information supplied by the Investment Manager or the Loan Manager or on behalf of the Investment Manager or Loan Manager. The Administrator notes that valuation is not a precise science and that there is a range of possible valuations for each investment and no single figure can be described as correct. However, in accordance with the requirements of the Segregated Portfolio and Master Segregated Portfolio, the Administrator will express a single point estimate for each investment, which represents the mid-point of the valuation range as at the Valuation Date (for more information concerning problems which may arise as a result of this Valuation Methodology refer to the Illiquidity of the Assets of the Master Segregated Portfolio under Risk Factors Specific to the Segregated Portfolio section below). LOAN MANAGER The Investment Manager has appointed Synergy (IOM) Ltd. as Loan Manager for the Master Segregated Portfolio (the Loan Manager ). The Loan Manager is acompany incorporated in the Isle of Man that is associated with the Investment Manager, it is owned by the same principals as the Investment Manager and has an independent, corporate Director as described below. The duties of the Loan Manager include the proper management, handling, oversight and transmission of money held by the Master Segregated Portfolio as well as the distribution, return of loans and the payment of interest to the Master Segregated Portfolio. Specifically, the Loan Manager receives and distributes cash held by the Master Segregated Portfolio to suitably qualified law firms which are approved and appointed by the Investment Manager from time to time. In addition, the Loan Manager oversees and handles repayment of loan monies as cases conclude then returns the money generated for the Master Segregated Portfolio to the Deposit Bank in all cases before subsequent re-investment. Both the selection of cases and the selection of law firms are at the sole discretion of the Investment Manager. In recognition of the Loan Manager s role being one that includes the handling and holding of cash, it is administered by Turnstone (Europe) Limited, a licensed Corporate and Trust Service Provider regulated by the Isle of Man Financial Supervision Commission (IOM FSC). Turnstone (Europe) Limited also act as sole Director of the Loan Manager. Turnstone was formed in 2005 and provides a range of bespoke corporate and trustee services. It is part of the Turnstone Group, a global fiduciary service provider with an international presence, BTLG : 22 :

23 which offers comprehensive private wealth, corporate and fund services to institutional and private clients. The Director of the Loan Manager is Peacock Management Limited ( Peacock ), which is owned by Turnstone. The Directors of Peacock have been assessed and approved by the IOM FSC as fit and proper persons as required by Isle of Man regulation. DEPOSIT BANK/ BROKER No Custodian or Prime Broker has been appointed by the Master Segregated Portfolio or the Segregated Portfolio. The Master Segregated Portfolio and the Segregated Portfolio have each appointed Deutsche Bank as a Deposit Bank of the Master Segregated Portfolio and the Segregated Portfolio. Founded in 1870, Deutsche Bank is headquartered in Frankfurt am Main, Germany. With a market capitalisation of billion Euros, Deutsche Bank offers retail banking services in Germany. Its investment bank and asset management business comprises 1,700 branches located in more than 70 countries. Deutsche Bank provides a full range of financial services to institutional and private clients. The Deposit Bank's operating divisions include Corporate and Investment Banking, Private Clients and Asset Management. It generated a total revenue of 31 billion Euros in 2007, has approximately 80,250 employees and is a reputed provider of credit ratings. Deutsche Bank is subject to supervision by a number of global, regulatory authorities. The Master Segregated Portfolio and the Segregated Portfolio have each appointed Saxo Bank as an executing broker (the Broker ) of the Master Segregated Portfolio and the Segregated Portfolio. The Broker, a pioneer of low-cost, online trading systems, is a leading Internet bank, involved in trading and investment in Forex (more than any other online provider), Contract For Difference (CFDs) stock derivatives, stocks from 22 major stock exchanges and Futures and Managed funds. The Broker will facilitate trades electronically as determined by the Investment Manager. The Master Segregated Portfolio and the Segregated Portfolio may appoint other deposit banks and executing brokers at the discretion of the Directors or Investment Manager and without any prior approval by either the Deposit Bank or the Broker. Under a Power of Attorney executed by the Directors of the SPC on behalf of the Segregated Portfolio, certain individuals of JP Fund Services S.A., an affiliate of JP Fund Foundation Ltd. (which company has been issued all of the voting shares of the SPC and which is the promoter of the SPC) have been given the power to open bank accounts with the Deposit Bank and securities trading accounts with the Broker. BTLG : 23 :

24 Neither the Deposit Bank nor the Broker will be liable for any consequential loss suffered by the Master Segregated Portfolio or the Segregated Portfolio. Neither the Deposit Bank nor the Broker will have any liability in relation to any external asset manager appointed by the Master Segregated Portfolio or the Segregated Portfolio and, in particular, neither the Deposit Bank nor the Broker shall be under any obligation whatsoever to investigate or monitor any act performed by the Master Segregated Portfolio, the Segregated Portfolio or the Investment Manager. The Master Segregated Portfolio and the Segregated Portfolio each agrees to indemnify and save harmless both the Deposit Bank and the Broker from and against any and all loss, damage, liability, claims and expenses whatsoever by reason of the Deposit Bank and the Broker acting as the Master Segregated Portfolio or the Segregated Portfolio s deposit bank and broker. No liability whatsoever shall accrue to the Deposit Bank or the Broker in respect of any act performed by the Investment Manager or any person appointed by the Investment Manager. In particular, neither the Deposit Bank nor the Broker shall be under any obligation whatsoever to investigate or monitor in any way any act performed by the Master SPC, the SPC, the Master Segregated Portfolio, the Segregated Portfolio or the Investment Manager. The foregoing shall apply in particular to compliance with any investment requirements or restrictions prescribed by law or laid down by agreement, regardless of whether or not the Deposit Bank or the Broker has been notified of the same. RISK FACTORS SPECIFIC TO THE SEGREGATED PORTFOLIO THE SEGREGATED PORTFOLIO S INVESTMENT PROGRAM IS SPECULATIVE AND ENTAILS SUBSTANTIAL RISKS. MARKET RISKS ARE INHERENT IN ALL SECURITIES TO VARYING DEGREES. NO ASSURANCE CAN BE GIVEN THAT THE SEGREGATED PORTFOLIO S INVESTMENT OBJECTIVE WILL BE REALISED. Segregated Portfolio Structure The SPC is established as a segregated portfolio company. As a matter of Cayman Islands law, the assets held on behalf of one segregated portfolio will not be available to meet the liabilities of another. However, the SPC 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 recognise such segregation. Value of the portfolio The valuation of the Company may fluctuate due to a number of factors, many of which are beyond the Company s control, including but not limited to: Changes in claims values due to market-wide corrections Variations in success rate of the projects in which the Segregated Portfolio is invested Changes in interest rates and/or the liquidity available from the banking sector BTLG : 24 :

25 Dependence on Management There can be no assurance that the Segregated Portfolio or the Master Segregated Portfolio will achieve its investment objective. The achievement of the investment objective of the Segregated Portfolio or the Master Segregated Portfolio in respect of the Participating Shares depends, in part, on the quality, skill, and expertise of the individuals employed by the Investment Manager. The loss of key personnel from the Investment Manager could adversely affect the Segregated Portfolio or the Master Segregated Portfolio. Dependence on the Loan Manager The engagement of the Loan Manager enables the Master Segregated Portfolio to benefit from lower cost and more efficient payments administration as well as increased security. While the Loan Manager is subject to the Investment Manager s instructions., the Loan Manager through its administrator will have sole signatory powers for the monies related to the Master Segregated Portfolio in the processing of the transactions as described in the Loan Manager section above. Any mismanagement of such monies resulting from the Loan Manager s failiure to meet its obligations in managing accounts and handling of monies, whether deliberate or accidental, may adversely affect the Segregated Portfolio. While the Loan Manager is administered by a fiduciary services company regulated in the Isle of Man and its activities will be subject to supervision by the Investment Manager, there can be no assurance that such regulation or supervision will prevent mismanagement of monies. Changes to Laws governing Permitted Uses Any changes to the laws and regulations and rules relating to claims being made against financial institutions, for bank charge or PPI abuse and governing how solictors operate their practices and handle such cases including, without limitation, relevant law society rules and regulations, the Consumer Credit Act of 1974 of the United Kingdom, the United Kingdom Credit Regulations and the procedures governing the resolution of complaints thereunder and the Access to Justice Bill may have an adverse effect on the capital value and/or the income of the Company s portfolio of claims. Discount Rates and Valuation Methodology The Valuation Methodology includes discount rates based on an assumption concerning the failure rate of cases as well as further discount rate based on the ongoing return for successful cases with a further assumption concerning how long each case will take to be completed (for more information see Valuation Methodology above). Net Asset Value calculations will be affected by the assumptions made and this may have a positive or negative effect on the value of Subscriptions and Redemptions. Initially these assumptions shall be based entirely on the experience of the Investment Manager and stated in good faith. BTLG : 25 :

26 Currency Risk to Class B Participting Shares and Class C Participating Shares Class B Participating Shares and Class C Participating Shares will be partially hedged independently to mitigate the risk of loss of its base currency against the British Pound. It is not possible to establish a perfect hedge and no guarantee or warranty whatsoever is provided by the Directors of the SPC or the Investment Manager against the possibility of losses caused by adverse currency movements. Illiquidity of the Assets of the Segregated Portfolio The illiquid nature of the assets held by the Segregated Portfolio may create delays in redemption payments being made to investors. If Redemption requests relating to a large proportion of assets under management are made for any reason, it may be difficult for sufficient cash to be made available to enable Redemption payments within the terms stated in the Share Redemption section of this document. The Investment Manager will make all reasonable efforts to ensure liquidity to investors and will be assisted by the Redemption notice period of 30 business days (as stated above in the Share Redemption section) but in some cases it may not be possible to provide liquidity for Redemptions in Participating Shares within the normal terms. The foregoing is not a comprehensive list of investment risk factors in respect of the Participating Shares, and potential investors are urged to refer to the list of investment risk factors under Risk Factors in the Offering Memorandum and also to consult with their professional advisors as to the legal, tax and business risks involved in this program. BTLG : 26 :

27 FEES AND EXPENSES Management Fee The operating costs of the Investment Manager as well as distribution costs relating to the issuance of Participating Shares are deducted from each loan made to the law firms. The loan amount is repaid by the court award or, if the case fails, by the insurance underwriter to include these fees and costs. Therefore, the Investment Manager will not be entitled to receive any management fee from the Segregated Portfolio or the Master Segregated Portfolio. Performance Fee The Investment Manager will be entitled to receive from the Segregated Portfolio a performance fee ( Performance Fee ) in respect of each Participating Share. The Performance Fee will be calculated and, except as noted below, payable monthly, at each calendar month end in arrears (the Calculation Period ) at the rate of 25% of the increase in the Starting Net Asset Value per Participating Share during the Calculation Period above the High Watermark per Participating Share (as defined below) in respect of the Calculation Period but only to the extent that such increase exceeds the shareholder s Hurdle Rate for the Calculation Period. Hurdle Rate means a return of 10% per year. The Hurdle Rate percentage will be adjusted appropriately for any year that is not a full year. If a shareholder has an increase in the Net Asset Value per Participating Share above the High Watermark per Participating Share (as defined below) in respect of the Calculation Period but that increase falls short of the Hurdle Rate, the Investment Manager will not be entitled to a Performance Fee for the Calculation Period. The IM has agreed to waive any Performance Fees that may be payable to it as calculated above from the inception of the Segregated Portfolio until the end of March, The amount of any Performace Fee attributable to any Participating Shares being redeemed will be calculated as of the Redemption Date for such shares and will be payable to the Investment Manager following such redemption. The High Watermark per Participating Share in respect of each Calculation Period will be the highest Net Asset Value per Participating Share achieved at the end of any Calculation Period since the inception of the Segregated Portfolio. The Investment Manager, at its absolute discretion, reserves the right to waive or reduce the Performance Fee either generally or in any particular case. Subscription Charge There are no subscription charges payable in respect of any amount subscribed for. BTLG : 27 :

28 Redemption Charge No redemption fee will be payable on Participating Shares Directors Fees Directors fees and expenses will be borne by the Segregated Portfolio. Administration, Deposit Bank and Brokerage Fees The Segregated Portfolio will pay the Administrator, the Deposit Bank and Broker customary fees in exchange for their services. Other Fees and Expenses The Segregated Portfolio is obliged to pay all its regular and recurring legal expenses, annual audit costs and the ongoing expenses of administration. The expenses of administration may include postage, telephone and facsimile expenses; reasonable travel expenses related to the administration and affairs of the Segregated Portfolio; the cost of on-going filing requirements; the cost of preparing, printing, publishing and distributing, in such languages as are necessary, memoranda, such reports and documents as may be desirable or required under applicable laws and regulations; the out-of-pocket expenses related to accounting and bookkeeping; and all other ongoing out-of-pocket administration expenses related to the Segregated Portfolio together with all other reasonable out-of-pocket expenses of the Investment Manager, the Administrator, the Deposit Bank, the Broker and any other service provider. The costs, charges and expenses that may be attributable to the SPC will be borne by the SPC and allocated across the segregated portfolios, including the Segregated Portfolio, in such manner as the SPC shall determine. CONFLICTS OF INTEREST SPECIFIC TO THE SEGREGATED PORTFOLIO Mr. Tim Schools (a princip al of the Investment Manager) has formed a law firm to be named ATM that is expected to become a suitably qualified law firm eligible to receive loans from the Master Segregated Portfolio as described in this Supplemental Offering Memorandum. ATM will be dealt with by the Investment Manger as any other law firm would be with respect to loans from the Master Segregated Portfolio. In addition, the verification process for claims applicable to all law firms, including ATM, is independently arranged through the Investment Manager's appointed auditing process and loans will only be advanced to law firms that meet these criteria. Other potential conflicts of interest also exist in the structure and operation of the SPC. Please refer to the section headed Conflicts of Interest in the Offering Memorandum. BTLG : 28 :