Carter Rock Funds Prospectus 1.2

7/31/2019 Carter Rock Funds Prospectus 1.2

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Carter Rock Limited

www.carterrock.com

Fund Prospectus

Statistical Arbitrage

March 2012

Carter Rock Ltd


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Disclaimer

Carter Rock Limited, the fund management company, shall henceforth be known as CRL.

This prospectus is intended to provide investors with an overview of the objectives and investment

principles of the fund (which may vary from time to time) and to assist investors when deciding onwhether to participate.

Investors should carefully examine this document in its entirety, and seek further professional advice for

a more detailed understanding on all aspects of this opportunity so as to be fully aware and

understanding of the inherent risks associated with this fund including loss.

CRL is not an education provider and therefore expects investors to conduct their own research into the

subject to ensure a reasonable level of understanding is achieved before considering whether to

participate.

This prospectus may be distributed outside of New Zealand only with the express permission of CRL.Investors located in a foreign country are advised to take into consideration that the measures adopted

for the protection of investors in one country do not always extend to transactions of a fund registered

in another country. In countries which require the translation of this prospectus into the official

language of that country, the English version shall prevail in the case of any incongruity.

This prospectus does not constitute an offer of investment in a jurisdiction where such an offer is

unlawful or to persons to whom such an offer is restricted by law.

This prospectus is not required to be authorized, registered or vetted by the Government of New

Zealand.

The information related to investors of CRL is confidential and subject to disclosure only in the cases

provided for in legislation and the client agreement pertaining to this fund.


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Table of Content

Definitions ..................................................................................................................................................... 4

General Provisions ........................................................................................................................................ 5

CRL Investment Objectives: .......................................................................................................................... 5CRL Conservative Fund .............................................................................................................................. 5

CRL Aggressive Fund ................................................................................................................................. 5

Risks Associated with CRL Funds ................................................................................................................... 6

Market Risks .............................................................................................................................................. 6

Operational Risks ...................................................................................................................................... 6

Credit Risks ................................................................................................................................................ 6

CRL has absolute discretion as to trades ...................................................................................................... 7

Rights of CRL Fund Investors ......................................................................................................................... 7

Limitations of CRL Fund Investors ................................................................................................................. 7

Redemption of investment ........................................................................................................................... 7

Fees and other obligations ............................................................................................................................ 8

Miscellaneous ............................................................................................................................................... 8

About the Company ...................................................................................................................................... 8


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Definitions

For the purposes of this document the following definitions shall assist with interpretation unless

otherwise provided for:

AUM Assets Under Management

Fund Manager(s) Person(s) responsible for general trading of assets

NAV Net Asset Value associated with invested asset

High Watermark Performance minimum achieved to initiate incentive fee

Incentive Fee fee payable to CRL for the general fund growth

Redemption Request

a request to be submitted by investor ahead of next available Redemption

Date

Redemption Date dates where fund redemptions are freely available

Hedging

Hedging is the act of taking a combination of financial products to

minimum unwanted risk, with exposure exclusively to uncertainties where

a gain is expected.

Market/Beta Neutral

A hedged portfolio is truly market neutral if it exhibits near-zero

correlation with general economic/market risks

Alpha

Excess return of an invested portfolio with respect to general market

returns.

Client Agreement A legal document between Carter Rock Limited and an investor


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General Provisions

1. CRL funds are non-public open-ended risk capital funds.2. CRL funds shall not guarantee to investors the yield (rate of return) of the managed portfolios or the

preservation of initial investments.

3. The base currency of CRL funds shall be the New Zealand Dollar.4. Investors of the Fund must qualify as Eligible Persons as provided for in Section 5 of the Securities Act

1978 (NZ), and are aware of all possible risks associated thereto.

5. Minimum initial investment is currently set at $100,000 NZD.CRL Investment Objectives:

CRL Conservative Fund

Expected Annual Return: 20%, Expected Volatility of Return: 10% CRL expects the Conservative Fund to suit risk-averse investors with an investment outlook of not less

than 1 year.

Minimal or zero leverage shall be utilized in this fund All positions are hedged to achieve general market neutrality. CRL aims to generate Alpha from relative value inefficiencies between traded asset combinations. CRL aims to minimize short term fund value volatility (risk) by exploiting a basket of low correlation

market inefficiencies.

The trading strategies are opportunistic. Fund manager(s) utilize strategies considered most profitablewith respect to market conditions. There may be periods where a significant portion, no more than 40%,

of the fund may be positioned in cash.

CRL Aggressive Fund

Expected Annual Return: 35%, Expected Volatility of Return: 26% CRL expects the aggressive fund to suit investors desiring high expected returns with moderate short

term volatility, with an investment outlook of not less than 1 year.

Leveraged derivative instruments are utilized in this fund. Some positions are not Beta hedged to achieve the highest expected returns over time. CRL aims to generate alpha from financial product structure inefficiencies. CRL aims to minimize short term fund value volatility (risk) by exploiting a basket of low correlation

market inefficiencies.


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The trading strategies are opportunistic. Fund manager(s) utilize strategies considered most profitablewith respect to market conditions. There may be periods where a significant portion, no more than 40%,

of the fund may be positioned in cash.

Risks Associated with CRL Funds

Despite CRLs active hedging and expected returns favourable for the funds, everything need not realize

in the manner and extent specified in the Prospectus.

Upon investing in the Fund, the investor must take into consideration all dimensions of risk related to

investments which may affect rate of return. Values of funds fluctuate in time, with some periods

greater than others. Investment in the funds cannot be considered as deposits since preservation and

increase of capital are not guaranteed.

Market Risks

Accelerated Inflation Risk: inflation adjusted value of an investment may not overcome actual rate ofinflation.

Interest Rate Risk: Change in interest rates may affect the relative valuation and volatility of certainfinancial products unfavorably for the fund (e.g. treasury futures, index options).

Market Liquidity Risk: Products with a significant decrease in liquidity may experience high pricevolatility, and are likely to incur increased transaction costs.

Currency Exchange Risk: CRL funds trade mostly US and Asian financial products which are not priced inNZD. Exchange rate risk is generally not hedged as the cost of hedging may negatively affect the funds

expected returns.

Operational Risks

Regional Legislation Risk: Possible changes in regional legislation related to general investments maynegatively affect CRL funds regular activities.

Exchange Policy Risk: Possible changes in exchange policies (e.g. short-selling ban, uptick-rule, etc.) maynegatively affect CRL funds regular activities.

Depository Risk: Possible threat of loss or destruction of assets kept by the regional depositaryinstitution through negligence or an intentional illegal act.

Credit Risks

Issuer Risk: Inability of an issuer of a credit instrument to perform its debt obligations.


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Settlement Risk: Inability of the counterparty of an agreed transaction to transfer in the course ofsettlement the required amount of money or securities.

CRL has absolute discretion as to trades

CRL funds may trade in all types of financial instruments, including but not limited to listed companies,Exchange Traded Funds, Exchange Traded Notes, and derivative instruments.

CRL funds may invest in instruments related to all sectors of the economy. The assets of the fund may be invested in instruments globally without limitation. CRL funds may trade options and futures of all classes. Fund manager(s) may trade options and futures

for the purpose of both hedging as well as Alpha generation.

Rights of CRL Fund Investors

Investors have the right to demand that CRL redeem their Investment Amount pursuant to theprovisions of the Carter Rock Client Agreement document.

Investors have the right to obtain individual performance reports individual to them. Performancereporting standards are detailed in the Carter Rock Client Agreement document.

Limitations of CRL Fund Investors

It is recommended that an investor seek independent professional advice on all matters relating to thisopportunity including associated risks, taxation and other obligations.

Investors do not participate in the management of the funds, unless otherwise requested by CRLmanagement.

Redemption of investment

To redeem an Investment Amount, an investor shall submit to CRL a Redemption Request. RedemptionRequest details are explained in the Carter Rock Client Agreement document.

Redemptions are available with terms and conditions and may incur fees; details are explained in theCarter Rock Client Agreement document.


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Fees and other obligations

Expenses related to the preservation and operation of the funds is detailed in the Carter Rock ClientAgreement document.

CRL shall be paid an Incentive Fee based on positive performance of the funds; details are explained inthe Carter Rock Client Agreement document.

Miscellaneous

This document shall not be relied upon and is provided for informational purposes only. Before investinga client must meet the requirements as detailed in Section 5 of the Securities Act 1978 (NZ) and accept

all terms and conditions stipulated by CRLs Client Agreement.

CRL shall obtain significant statistical information around interest assets and counterparties beforetaking positions on behalf of the funds.

CRL may manage assets of the Conservative/Aggressive Funds separately from its own assets and/orfrom assets from other investment funds managed by CRL.

About the Company

The funds are managed by Carter Rock Limited, a New Zealand registered corporation.Members of the CRL management:

1) CEO: Alex Smith Client relationship management, general administration.2) CFO: Josh Carter Economic advisor, financial reporting, risk management.3) COO: Rocko Chen Quantitative analyst, asset management.

Carter Rock Funds Prospectus 1.2

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