THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to the action you should take, you are recommended to seek immediately your own personal financial advice from yourindependent financial adviser, stockbroker, bank manager, solicitor, accountant, fund manager or other appropriately qualified adviser authorised underthe Financial Services and Markets Act 2000, as amended (the “FSMA”) if you are in the United Kingdom or, if not, from another appropriately authorisedindependent adviser.

A copy of this Prospectus, which comprises a prospectus relating to Queen’s Walk Investment Limited (the “Company”) prepared in accordance with the ListingRules and the Prospectus Rules made under Section 73A of the FSMA, has been delivered to the Financial Services Authority (“FSA”) in accordance with Rule 3.2of the Prospectus Rules.

The Company has been declared to be an Authorised Closed-ended investment scheme by the Guernsey Financial Services Commission under Section 8 ofThe Protection of Investors (Bailiwick of Guernsey) Law, 1987, as amended. Neither the States of Guernsey Policy Council nor the Guernsey Financial ServicesCommission take any responsibility for the soundness of the Company or for the correctness of any statements made or opinions expressed with regard to it.

Applications will be made to the UK Listing Authority for 13,322,328 New Ordinary Shares and up to 49,958,731 Preference Shares to be admitted to the Official Listof the UK Listing Authority and to the London Stock Exchange plc (“London Stock Exchange”) for 13,322,328 New Ordinary Shares and up to 49,958,731Preference Shares to be admitted to trading on the London Stock Exchange’s main market for listed securities. The application for admission to the Official List inrespect of the New Ordinary Shares is an application for a premium listing and the application in respect of the Preference Shares is an application for a standardlisting. It is expected that admission of the New Ordinary Shares to the Official List will become effective and that dealings in the New Ordinary Shares on the LondonStock Exchange’s main market will commence at 8.00 a.m. (London time) on 16 September 2010. It is expected that admission of the Preference Shares to the OfficialList will become effective and that dealings in the Preference Shares on the London Stock Exchange’s main market will commence at 8.00 a.m. (London time) on17 September 2010. The issue of the New Ordinary Shares and the Preference Shares and their admission to trading on the London Stock Exchange’s main marketand to the Official List is conditional upon the Ordinary Shareholders voting in favour of the Required Resolutions at the Extraordinary General Meeting.

If you sell or have sold or otherwise transferred your Existing Ordinary Shares please send this Prospectus, together with the Application Form (having completedbox 8 on the Application Form) as soon as possible to the purchaser or transferee or to the bank, stockbroker or other agent through whom or by whom the sale ortransfer was effected, for delivery to the purchaser or transferee. The distribution of this Prospectus and any accompanying documents in jurisdictions other than theUnited Kingdom, including the United States, Australia, Canada, Japan and South Africa, may be restricted by law. Persons into whose possession these documents,the Open Offer Entitlements, the New Ordinary Shares or the Preference Shares come must inform themselves about and observe all restrictions applicable to them.Any failure to comply with these restrictions may constitute a violation of the securities laws of such jurisdictions. This Prospectus and the Application Form maynot be distributed, forwarded, transmitted or otherwise made available, and their contents may not be disclosed, to any US Person or in, into or from theUnited States or any other Excluded Territory. US Persons and persons within the United States or any other Excluded Territory who obtain a copy of thisProspectus or the Application Form are required to disregard it.

Each of the Directors, whose names appear on page 44 of this Prospectus, and the Company itself accept responsibility for the information contained in thisProspectus. The Directors and the Company declare that, having taken all reasonable care to ensure that such is the case, the information contained in thisProspectus is, to the best of their and its knowledge, in accordance with the facts and contains no omission likely to affect its import.

Investment in the Company involves significant risks and special considerations. Prospective investors should read this entire document and, in particular,the section entitled “Risk Factors” on pages 9 to 34 of this Prospectus. The definitions used in this Prospectus are set out on pages 144 to 151.

Queen’s Walk Investment Limited(an authorised closed-ended investment scheme limited by shares and incorporated

under the laws of Guernsey with registered number 43634)

Prospectus

Placing and Open Offer of 13,322,328 New Ordinary Shares at €2.00 per New Ordinary Share

Bonus Issue of up to 49,958,731 Preference Shares

Investment Manager

Cheyne Capital Management (UK) LLP

Sponsor, Financial Adviser and Bookrunner

Liberum Capital Limited

The Open Offer Entitlements, the New Ordinary Shares and the Preference Shares have not been and will not be registered under the US Securities Act of 1933,as amended (the “US Securities Act”), or under any securities laws of any state or other jurisdiction of the United States or under the securities laws of Australia,Canada, Japan or South Africa. The Open Offer Entitlements, the New Ordinary Shares and the Preference Shares may not be offered, sold, resold, taken up,exercised, renounced, transferred delivered or distributed, directly or indirectly, into or within the United States or to, or for the account or benefit of, US Persons(as defined in Regulation S under the US Securities Act, “US Persons”). The Open Offer Entitlements, the New Ordinary Shares and the Preference Shares arebeing offered and sold only outside the United States to non-US Persons in “offshore transactions” in accordance with and in reliance on the exemption from theregistration requirements of the US Securities Act provided by Regulation S thereunder. There will be no public offer of the Open Offer Entitlements, the NewOrdinary Shares or the Preference Shares in the United States.

The Company has not been and will not be registered under the US Investment Company Act of 1940, as amended (the “US Investment Company Act”) and, assuch, investors will not be entitled to the benefits of the US Investment Company Act. No offer, purchase, sale, exercise or transfer of the Open Offer Entitlements,the New Ordinary Shares or the Preference Shares may be made except under circumstances which will not result in the Company being required to register as aninvestment company under the US Investment Company Act.

This Prospectus does not constitute or form part of an offer to sell or issue, or a solicitation of an offer to purchase or subscribe for, the Open OfferEntitlements, the New Ordinary Shares or the Preference Shares to, or for the account or benefit of, US Persons or persons within the United States or anyother Excluded Territory. US Persons and persons within the United States or any other Excluded Territory may not take up the Open Offer Entitlements, subscribefor or purchase the New Ordinary Shares or receive the Preference Shares offered hereby.

All Overseas Shareholders and any person (including, without limitation, a custodian, nominee or trustee) who has a contractual or legal obligation to forward thisProspectus or any accompanying documents, if and when received, to a jurisdiction outside the United Kingdom should read the section titled “OverseasShareholders” in Part IV or Part VI (as appropriate) of this Prospectus.

Liberum Capital Limited (“Liberum Capital”), which is authorised and regulated in the United Kingdom by the Financial Services Authority, is acting as financialadviser, bookrunner, sponsor and broker for the Company in connection with the Placing and Open Offer (and financial adviser for the Company in connectionwith the Bonus Issue) and for no one else and will not regard any other person (whether or not a recipient of this document) as a client in relation to the Placingand Open Offer and the Bonus Issue and will not be responsible to anyone other than the Company for providing the protections afforded to its clients, nor forproviding any advice in connection with the Placing and Open Offer, the Bonus Issue, the contents of this document or any other matter referred to herein. Nothingin this paragraph shall serve to exclude or limit any responsibilities which Liberum may have under FSMA or the regulatory regime established thereunder.Liberum takes no responsibility for any part of the contents of this document pursuant to sections 79(3) or 90 of FSMA and does not accept any responsibility for,or authorise, any part of the contents of this document under rule 5.5 of the Prospectus Rules of the FSA.

17 August 2010

AIII 5.1.2

AI 5.1.1, 5.1.2,5.1.3

AIII 1.1AIII 1.2AI 1.1, 1.2

LR13.3.1(6)

AIII 6.1LR13.1.9(h)

CONTENTS

Page

SUMMARY 3

RISK FACTORS 9

IMPORTANT INFORMATION 35

EXPECTED TIMETABLE OF PRINCIPAL EVENTS 41

INDICATIVE STATISTICS 43

CORPORATE INFORMATION 44

PART I THE COMPANY’S BUSINESS 46

PART II THE ABS MARKET 65

PART III MANAGEMENT OF THE COMPANY 68

PART IV TERMS AND CONDITIONS OF THE OPEN OFFER 79

PART V TERMS AND CONDITIONS OF THE PREFERENCE SHARES 103

PART VI BONUS ISSUE ARRANGEMENTS 105

PART VII TAX CONSIDERATIONS 111

PART VIII FINANCIAL INFORMATION 115

PART IX ADDITIONAL INFORMATION 117

DEFINITIONS AND GLOSSARY 144

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SUMMARY

THIS SUMMARY SHOULD BE READ AS AN INTRODUCTION TO THE FULL TEXT OFTHIS PROSPECTUS AND ANY DECISION TO INVEST IN THE NEW ORDINARY SHARESSHOULD BE BASED ON CONSIDERATION OF THE FULL TEXT OF THIS PROSPECTUSAS A WHOLE.

Where a claim relating to the information contained in this Prospectus is brought before a court, aplaintiff investor may, under the national legislation of an EEA state, have to bear the costs oftranslating this Prospectus before the legal proceedings are initiated. Civil liability attaches to theCompany and its Directors, who are responsible for this summary, including any translation of thissummary, but only if the summary is misleading, inaccurate or inconsistent when read together withthe other parts of this Prospectus.

The Company

• The Company is a non-cellular closed-ended investment company limited by shares incorporatedin Guernsey in 2005.

The Placing and Open Offer

• Conditional on the Required Resolutions being approved by Ordinary Shareholders at the EGMand Open Offer Admission occurring, 13,322,328 New Ordinary Shares are being issued pursuantto the Placing and Open Offer.

• Qualifying Open Offer Shareholders are being given the opportunity to apply to subscribe forNew Ordinary Shares in the proportion to their existing holdings at the Offer Price (payable infull on application) on the following basis: 1 New Ordinary Share at €2.00 per New OrdinaryShare for every 2 Existing Ordinary Shares registered in the name of Qualifying Open OfferShareholders at the Open Offer Record Date and so in proportion for any other number ofExisting Ordinary Shares then registered.

• Valid applications by Qualifying Open Offer Shareholders will be satisfied in full up to theamount of their individual Open Offer Entitlement.

• The Placees have agreed to subscribe for all the New Ordinary Shares at the Offer Price subjectto Open Offer Admission and the passing of the Required Resolutions at the ExtraordinaryGeneral Meeting, subject to clawback in respect of valid applications by Qualifying Open OfferShareholders at the Offer Price under the Open Offer.

• Not all holders of Existing Ordinary Shares will be Qualifying Open Offer Shareholders.Shareholders of the Company who are located or resident in, or who are citizens of, or who havea registered address in an Excluded Territory or are US Persons (regardless of the number ofExisting Ordinary Shares that they hold) will not qualify to participate in the Open Offer.

The Bonus Issue

• The Preference Shares, which will be denominated in Sterling, will be issued free of subscriptioncost to Qualifying Bonus Issue Shareholders.

• The Bonus Issue is conditional on the Required Resolutions being passed and Bonus IssueAdmission becoming effective by not later than 8.00 a.m. on 17 September 2010.

• Qualifying Bonus Issue Shareholders will, subject to the conditions of the Bonus Issue, be issuedPreference Shares on the basis of 1.25 Preference Shares for every 1 Ordinary Share held as atthe Bonus Issue Record Date.

• Due to restrictions under the securities laws of the Excluded Territories, Restricted Shareholderswill not qualify to participate in the Bonus Issue and will not be eligible to receive certificatedPreference Shares or have their securities account in CREST credited with entitlements toPreference Shares.

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The Preference Shares

• Subject to applicable law and regulation, the Preference Shares confer the right to a preferentialcumulative Preference Dividend (which is an amount in Sterling equal to 8 per cent. per annumof the Preference Share Notional Value) payable quarterly on each Payment Date.

• On a return of capital on liquidation or otherwise of the Company (other than by way of arepurchase or redemption of Shares in accordance with the provisions of the Articles and theCompanies Law) the assets of the Company available for distribution among the Shareholdersshall be applied first to the Preference Shareholders in proportion to their holdings for an amountequal to the Repayment Amount in respect of each Preference Share.

Proposed change to the Company’s investment policy and the fund raising

• Having managed the Investment Portfolio through the credit crisis of 2008 and 2009, theCompany, on the advice of the Investment Manager, believes that there is an opportunity for it tobenefit from investment in the European real estate debt market.

• Accordingly, the Company is proposing, subject to the consent of Ordinary Shareholders at theExtraordinary General meeting, to:

• change its investment policy with the result that the Company’s primary focus for newinvestments will be Real Estate Debt Investments; and

• undertake a Placing and Open Offer of New Ordinary Shares to raise gross proceeds of€26,644,656 million to invest in accordance with the proposed investment policy.

• The Company also proposes, subject to the approval of the Required Resolutions, to make aBonus Issue to Ordinary Shareholders of fixed income Preference Shares.

• The Placing and Open Offer and the Bonus Issue are conditional on the approval of thefollowing resolutions at the Extraordinary General Meeting:

• the special resolution to amend the Articles to accommodate the Preference Sharerights, approve the Placing and Open Offer and the Bonus Issue and approve eachmodification, variation or abrogation of the rights of Ordinary Shares;

• the ordinary resolution to amend the Company’s investment policy; and

• the ordinary resolution to approve the Offer Price of the New Ordinary Shares being€2.00 which is a discount of more than 10 per cent. to the middle market price of theOrdinary Shares on 13 August 2010,

such resolutions being the “Required Resolutions”.

• The Board believes that the proposed change to the investment policy of the Company, the Placingand Open Offer and the Bonus Issue will result in a number of benefits for the Company. TheDirectors, on the advice of the Investment Manager, believe that Real Estate Debt Investmentsoffer attractive returns relative to the risk of such investments. Further, the Company is mindfulof the need to balance its best interests to raise capital against the interests of OrdinaryShareholders. The Board believes that the structure of the Placing and Open Offer balancesappropriately the interests of Existing Ordinary Shareholders with new investors in that it offersExisting Ordinary Shareholders the opportunity to not suffer, or limit the, dilution that will occurupon the issue of New Ordinary Shares.

Investment objective

• The Board believes that it is now in the best interests of Ordinary Shareholders as a whole for theCompany’s investment policy to be amended.

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The Company’s proposed investment policy will permit the Company to invest primarily in Real EstateDebt Investments. As at the date of this Prospectus, the Investment Portfolio includes a number ofResidual Income Positions and as a result, in order to avoid inadvertent breaches of the proposedinvestment policy, the proposed investment policy will, if adopted, require at least 70 per cent. of theNAV of the Company to be invested in Real Estate Debt Investments and Residual Income Positions.However, if the proposed investment policy is adopted at the EGM, the Company does not currentlyintend to actively increase existing Residual Income Positions or invest in other Residual IncomePositions with the current intention that eventually Real Estate Debt Investments will form a majorityof the Investment Portfolio.

Background to the further business proposed at the EGM

• In addition to the Required Resolutions proposed at the EGM to implement the change to theCompany’s investment policy and the fund raising, the Company is:

• proposing to amend the Management Fee payable to the Investment Manager, conditionalupon and with effect from Bonus Issue Admission;

• proposing to amend the name of the Company from Queen’s Walk Investment Limited toReal Estate Credit Investments Limited;

• taking the opportunity to make a number of amendments to its Memorandum and Articlesto reflect current legal and regulatory requirements and market practice;

• proposing a resolution which would allow the Company, at the discretion of the Directors,to buy back Preference Shares, if issued, subject to certain limitations; and

• proposing a resolution which would disapply the pre-emption rights contained in theRevised Articles in respect of 2,664,466 Ordinary Shares, such disapplication to have effectuntil the Company’s annual general meeting in 2011 (unless previously renewed, varied orrevoked by the Company in general meeting).

• In the event that any one of the Required Resolutions is not passed by the required majorityof Shareholders attending and voting at the EGM (whether in person or by proxy), thePlacing and Open Offer and the Bonus Issue will not take place.

Investment Portfolio and performance

• As at 31 March 2010 (the latest practicable date prior to the publication of this Prospectus), theCompany’s Investment Portfolio was valued at €92.5 million and the Company had a Net AssetValue per Ordinary Share of €3.73 (source: audited accounts for the year ended 31 March 2010).

• The Company’s Investment Portfolio generated interest income of €16.1 million for the 12 monthperiod ended 31 March 2010 compared to interest income of €21.7 million for the 12 monthperiod ended 31 March 2009 (source: audited accounts for the years ended 31 March 2010 and31 March 2009, respectively). Since 31 March 2010, the Company’s Investment Portfolio hasgenerated interest income of €4.1 million for the period to 30 June 2010 (source: managementaccounts, unaudited).

• The Company generated total gross cash flows of €20.9 million in the quarter ended 31 March2010, of which €6.3 million came from the Investment Portfolio, €5.4 million was received fromthe sale of a AAA bond portfolio and a further €9.2 million was received from the sale of theMagellan 2 portfolio (source: audited accounts for the year ended 31 March 2010). The cashbalance as at 31 March 2010 was €15.7m. Since 31 March 2010, the Company has recorded totalgross cash flows for the period to 30 June 2010 (the latest practicable date prior to the publicationof this Prospectus) of €17.2 million of which €6.7 million came from the Investment Portfolioand a further €10.5 million was received from the sale of the Gate 06-1 and Gate 05-2 SMEportfolios and one ABS Bond (source: management accounts, unaudited).

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Financing strategy

• As at the date of this Prospectus, the Company and the Group has no structural indebtedness orexternal borrowings of any type.

• The Company does not currently intend to incur indebtedness prior to completion of theinvestment of the net cash proceeds of the Placing and Open Offer.

Dividend policy

• If the Required Resolutions are approved, following completion of the Bonus Issue of PreferenceShares, the Company currently intends that available income is first used to pay any PreferenceDividend that is due and payable and then, if the Directors in their sole discretion so resolve, topay dividends to Ordinary Shareholders. It is expected that the dividend payable to OrdinaryShareholders, following payment of any Preference Dividend, will be substantially reduced ascompared to the dividends that have been previously paid in respect of the Ordinary Shares.However, the Directors do currently intend that the Company continues to pay a dividend toOrdinary Shareholders when it is able and appropriate to do so.

• The Company further intends, subject to the performance of the Investment Portfolio, that theamount of dividends paid, if any, to Ordinary Shareholders following the change to the dividendpolicy should be adjusted from time to time in line with any increase or decrease in interestincome from the Investment Portfolio, subject to applicable law and regulation.

• There is no assurance that the Company will declare or pay dividends on Ordinary Shares or thePreference Dividend and, if dividends are paid, there is no assurance with respect to the amountand timing of such dividend.

The Investment Manager

• The Company’s investments are managed by Cheyne Capital Management (UK) LLP, aLondon-based investment management company.

• Under the current terms of the Investment Management Agreement, the Investment Manager isentitled to receive from the Company an annual Management Fee of 1.75 per cent. of the NetAsset Value of the Company other than to the extent that such value is comprised of anyinvestment where the underlying asset portfolio is managed by the Investment Manager.

• The Investment Management Agreement Side Letter will, conditional upon the approval ofOrdinary Shareholders at the EGM and Bonus Issue Admission occurring, amend the calculationof the Management Fee set out above so that the Management Fee payable will be equal to1.75 per cent. per annum of the Adjusted NAV of the Company other than to the extent that suchvalue is comprised of any investment where the underlying asset portfolio is managed by theInvestment Manager. The Adjusted NAV will be equal to the prevailing NAV calculated inaccordance with the Company’s accounting policies increased by an amount equal to the numberof Preference Shares in issue (excluding Preference Shares held in treasury) multiplied by thePreference Share Notional Value.

• The calculation of the Incentive Fee payable to the Investment Manager from time to time willnot be amended pursuant to the Investment Management Agreement Side Letter.

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Principal Risk Factors

• Investment in the New Ordinary Shares and the Preference Shares is subject to manyrisks including:

Risks relating to the Company and its investment strategy

• the Company will be reliant on the skill and judgement of the staff of the InvestmentManager in valuing and determining an appropriate purchase price for its investments anddetermining the value of certain investments thereafter, in particular ResidualIncome Positions;

• the Company’s operating history and the Investment Manager’s track record are notindicative of the Company’s or the Investment Manager’s future performance;

• the ability of the Company to effectively implement its investment policy and achieve itsdesired investment returns may be limited by its ability to source appropriate investmentsin which to invest;

Risks relating to ABS, Real Estate Debt Investments and Residual Income Positions

• on liquidation of the Company’s assets on any given day, the reported NAV may not matchthe cash value received on such assets;

• investments in the Investment Portfolio may be exposed to losses resulting from the defaultand foreclosure of secured loans;

• many of the Company’s investments in Residual Income Positions are illiquid, other assetsin the Investment Portfolio may be illiquid in the future and such illiquidity may adverselyaffect the Company’s ability to raise cash or vary its Investment Portfolio in atimely fashion;

• the Company’s income will be derived from payments from its investments and defaults oninvestments will harm the Company’s performance;

• the Company is subject to concentration risk in its Investments Portfolio, in particular inrelation to the real estate sector;

Risks relating to Real Estate Debt Investments

• the Company will be exposed through its investment in Real Estate Debt Investments tovarious risks associated with RMBS and residential mortgage loans;

• the Company will be exposed through its investment in Real Estate Debt Investments tovarious risks associated with CMBS and commercial mortgage loans;

Risks relating to the Investment Manager

• there can be no assurance that the Directors of the Company will be able to find areplacement manager if the Investment Manager resigns;

• the departure or resignation of some or all of the Investment Management Team couldprevent the Company from achieving its investment objective;

Risks relating to the Shares

• the price of the Company’s Shares may fluctuate significantly;

• the Company may issue additional securities that dilute existing holders of Shares or thathave rights or privileges that are more favourable than the rights and privileges of holdersof Shares and, if the Revised Articles are adopted at the EGM, the Company intends to seekrenewal of the dis-application of pre-emption rights on an ongoing basis;

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Risks relating to Ordinary Shares

• approval of the Required Resolutions by Ordinary Shareholders may result in the issue ofPreference Shares that will entitle their holders to a preferential cumulative dividend to bepaid in preference to any distribution to Ordinary Shareholders and to a preferred right torepayment of the Repayment Amount;

• the value of the Company’s Investment Portfolio attributable to the Ordinary Shares willdepend on the assets in the Company’s portfolio being sufficient to meet the RepaymentAmount of the Preference Shares;

• Ordinary Shareholders may not receive distributions;

Risks relating to Preference Shares

• the existence of a liquid market in the Preference Shares cannot be guaranteed;

• the Company’s ability to pay dividends and the Repayment Amount to holders ofPreference Shares is not guaranteed;

Risks relating to the Placing and Open Offer and the Bonus Issue

• Ordinary Shareholders will experience dilution in their ownership of, and voting interest in,the Company to the extent to which they do not subscribe in full for their Open OfferEntitlement; and

• Shareholders outside the United Kingdom may not be able to acquire New Ordinary Sharesand may not be able to participate in the Bonus Issue.

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RISK FACTORS

An investment in the Shares carries a number of risks including the risk that the entireimnvestment may be lost. In addition to all other information set out in this Prospectus, thefollowing specific factors should be considered when deciding whether to make an investment inthe Shares. The risks set out below are those which are considered to be the material risks relatingto an investment in the New Ordinary Shares and participation in the Bonus Issue known to theDirectors as at the date of this Prospectus. No assurance can be given that Shareholders willrealise profit on, or recover the value of, their investment in the Shares. It should be rememeberedthat the price of securities and the income from them can go down as well as up.

The Shares are only suitable for potential investors who understand the potential risk of capitalloss and that there may be limited liquidity in the underlying investments of the Company, forwhom an investment in the Shares would be of a long-term nature and constitutes part of adiversified investment portfolio and who understand and are willing to assume the risks involvedin investing in the Shares. Additional risks and uncertainties of which the Company is presentlyunaware or that the Company currently believes are immaterial may also adversely impact itsbusiness, financial condition, results of operations or the value of the Shares.

Potential investors in the Shares should review this Prospectus carefully and in its entirety andconsult with their professional advisers prior to making an application to subscribe for Shares.Defined terms used in the risk factors below have the meanings set out under the section headed“Definitions and Glossary” on pages 144 to 151 of this Prospectus.

Risks relating to the Company and its investment strategy

The Company will be reliant on the skill and judgement of the staff of the Investment Managerin valuing and determining an appropriate purchase price for its investments and determining the valueof certain investments thereafter, in particular Residual Income Positions. Any determinations of valuethat differ materially from the value the Company realises on maturity of the investments or upon theirdisposal will likely have a negative impact on the Company and its share price

The Company’s Residual Income Positions are and may continue to be illiquid and there will be noreadily available market for sale of those investments or by reference to which they can be valued. Thevaluation of Residual Income Positions is highly subjective. There is no commonly agreed-uponmethodology to value Residual Income Positions and, in light of the subjective nature of the assessmentof Residual Income Positions, it is generally not possible to obtain “bid” or “offer” prices from marketmakers for the assets or “fairness” or similar opinions in respect of such pricing.

Accordingly, the Company will be dependent on the Investment Manager’s assessment of an appropriateon-going valuation of all Residual Income Positions and certain other investments. The valuationdetermined by the Investment Manager in respect of a Residual Income Position will be based on thereturns (internal rate of return or discount rates for such asset as well as the expected cash flow returns)that the Investment Manager expects the investment to generate, utilising a financial pricing model thatreflects numerous variables including, among other things, the Investment Manager’s assessment of thenature of the investment and the relevant collateral, security position, risk profile, historical defaultrates, and the originator and servicer of the position. Each of these factors involves subjectivejudgements and forward-looking determinations by the Investment Manager. In the event that theInvestment Manager misvalues an investment (for whatever reason), the actual returns on the investmentmay be less than anticipated at the time of valuation. Further, in light of the illiquidity of the investment,it may be difficult for the Company to dispose of the investment at a price similar to the valuation.

Since the Investment Manager’s valuations will be based on assumptions and estimates, not all of whichcan be confirmed, whether readily or at all, the Investment Manager’s, and therefore the Company’s,determinations of fair value of Residual Income Positions may differ materially from the values thatmight have been used if a ready market for those investments existed. Even if “offer” or “bid” priceswere available for the Company’s investments, such quotations may not reflect the value that theCompany would actually be able to realise.

AIII 2AI 4

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The ABS bonds (being the assets in the Company Portfolio that are not Residual Income Positions) andReal Estate Debt Investments are currently valued using available market prices. Should there be anincrease in illiquidity in the applicable market, this may have an impact upon the valuation of the bondsand consequentially adversely affect the Company’s NAV and/or Share price. Where any such illiquiditymeans that there is no available market price or that, in the view of the Investment Manager and theCompany, an available market price is not reflective of the true value of an asset, the InvestmentManager may choose to adopt an alternative valuation methodology in respect of ABS bonds and RealEstate Debt Investments held. Alternative valuation methodologies may include the use of a financialmodel to calculate an appropriate valuation. If this were to occur, the risks relating to the valuation ofResidual Income Positions set out above would also apply to the valuation of ABS bonds and RealEstate Debt Investments.

The Net Asset Value and the value of the Shares could be adversely affected if the Investment Manager’sdeterminations regarding the fair value of the Company’s investments are materially higher than thevalues that the Company ultimately realises to maturity of the investments or upon their disposal.Moreover, the Management Fee payable to the Investment Manager is based on the determinations madeby the Investment Manager of the value of the Company’s investments. The NAV could be adverselyaffected if the values of investments that the Company records are materially higher than the values thatare ultimately realised upon the disposal or realisation of investments and changes in values attributedto investments from period to period may result in volatility in the NAV and results of operations thatthe Company reports from time to time. The Company makes no assurance and gives no guarantee thatthe investment values that the Company records from time to time will ultimately be realised.

In relation to the valuation of the Company’s illiquid investments, the Company’s Auditors have notedan “emphasis of matter” in the auditors report and financial statements for the Company. The Auditorshave noted that: (i) the fair value estimates included in the financial statements are subject toconsiderable uncertainty; (ii) different assumptions will impact the measurement of the investmentswhich may have an effect on the financial statements; and (iii) it is not possible to quantify thepotential effects of the resolution of this uncertainty. There is a material risk that on sale of theCompany’s assets, the Company may not be able to achieve the book value ascribed to such investmentin the Company’s financial statements. If the book value is not achieved on a number of investments,or a single significant investment, the ability of the Company to return value to Shareholders may bediminished significantly.

The Company’s operating history and the Investment Manager’s track record are not indicative of theCompany’s or the Investment Manager’s future performance

The Company’s operating history and the track record of the Investment Manager are not indicative ofthe Company’s or the Investment Manager’s future performance. No guarantee is made in relation to theperformance of the Company, the Ordinary Shares or the Preference Shares. Past performance may notbe an accurate predictor of future performance or returns, nor is there any guarantee that future marketconditions will allow for similar performance. An investment in the Company is subject to the risk thatthe Company will not achieve its investment objectives or the expected return from the investments andthat the value of the Shares could decline substantially.

The ability of the Company to effectively implement its investment policy and achieve its desiredinvestment returns may be limited by its ability to source appropriate investments in which to invest

The ability of the Company to implement its investment policy effectively and achieve its desiredinvestment returns may be limited by its ability to source appropriate investments in which to invest thenet proceeds of the Placing and Open Offer and reinvest capital returned on its existing investments. TheCompany has not yet identified the investments that it will make using the net proceeds of the Placingand the Open Offer. There can be no assurance that suitable investment opportunities will materialise,prove attractive or be sufficient in quantity or size to permit the Company to invest any cash raised inthe Placing Open Offer in a timely matter, or at all.

Until such time as the Investment Manager is able to identify, invest in and monitor a suitable numberof investments and implement the various aspects of the Company’s investment strategy, its funds maynot be fully invested. Also, the majority of the Company’s investments amortise or are repaid over time,

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such that their weighted average lives generally range from six months to 15 years, giving rise tore-investment risk. There can be no assurance that, upon receiving the full or partial repayment of agiven investment, the Company will be able to make a further investment with an expected rate ofreturn equal to that of the investment repaid. If the expected rate of return of the new investment is lessthan that of the investment repaid, this may reduce the value of the Shares and net income and,consequently, could have an adverse impact on the Company’s ability to pay dividends (including thePreference Dividends).

Achieving growth is largely a function of the Investment Manager’s ability to provide competent,attentive and efficient services under the Investment Management Agreement and the Company’s abilityto reinvest capital and obtain additional capital on acceptable terms. In order for the Company to grow,the Investment Manager may be required to hire, train, supervise and manage new employees. However,the Company can offer no assurance that any of those employees will contribute to the work that theInvestment Manager carries out on the Company’s behalf. Any failure to manage the Company’s futuregrowth or to effectively implement the Company’s investment strategy could have a material adverseeffect on the Company’s business, financial condition and results of operations.

The Company may face increased competition in sourcing and making investments

The Company may become subject to increased competition in sourcing and making investments. Inparticular, competition in respect of Real Estate Debt Investments (which will be the Company’s primaryinvestment focus in the event that Shareholders approve the change to the investment policy) mayincrease. Some of the Company’s competitors may have greater financial, technical and marketingresources and the Company may not be able to compete successfully for investments. In addition,potential competitors of the Company may have higher risk tolerances or different risk assessments oraccess to different sources of funding, which could allow them to consider a wider variety of investmentsand establish more relationships than the Company. Furthermore, competition for investments may leadto the price of such investments increasing which may further limit the Company’s ability to generate itsdesired returns. The Company may loose investment opportunities in the future if it does not matchinvestment prices, structures and terms offered by competitors. Alternatively, the Company mayexperience decreased rates of return and increased risks of loss if it matches investment prices, structuresand terms offered by competitors. The Company can offer no assurance that competitive pressures willnot have a material adverse effect on its profitability, Net Asset Value and/or Share price.

Economic recessions and downturns and adverse market conditions may impair the profitability ofthe Company and the value of its investments, the income available for distribution to investors andmay prevent the Company from increasing its investment base

The Company and its portfolio of investments are materially affected by conditions in the globalfinancial markets and economic conditions throughout the world, including rising interest rates,unemployment, inflation, business and consumer confidence, availability of credit, currency exchangerates and controls, changes in laws, trade flows, terrorism and political uncertainty. These factors areoutside the Company’s control and may affect the level and volatility of prices, the amount ofdistributions received from its investments and the liquidity and the value of investments. The Companymay be unable to or may choose not to manage its exposure to these conditions and any efforts tomanage its exposure may or may not be effective.

Market conditions over the last three years have significantly deteriorated as compared to prior periods.Global financial markets have experienced considerable declines in the valuations of securities, an acutecontraction in the availability of credit and the failure of a number of leading financial institutions,leading to a significantly diminished availability of credit and an increase in the cost of financing. TheCompany expects that the lack of credit and declines in valuations of equity and debt securities, shouldthey persist, may place additional negative pressure on the Company’s operating results movingforward. In addition, the global financial crisis brought about an increase in unemployment and asignificant decline in the value of real estate, factors that the Company is exposed to. If conditionsfurther deteriorate, the Company’s business may continue to be negatively affected. The Company isunable to predict when the economic and market conditions may become more favourable. Even if suchconditions do improve broadly and significantly over the long-term, adverse conditions in particularsectors may cause the Company’s performance to suffer further or limit the Company’s opportunities to

AI 9.2.3

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realise value from its investments (in particular, if the investments were made prior to the deteriorationof the credit markets) or result in decreased revenues, financial losses, credit rating downgrades,difficulty in obtaining access to financing and increased funding costs.

In addition, while difficult market conditions may increase opportunities to make certain distressed assetinvestments, such conditions also increase the risk of default with respect to debt investments. Suchdefaults would adversely affect the profitability, Net Asset Value and/or Share price of the Company.

Furthermore, during periods of adverse economic conditions, the Company may have difficultyaccessing financial markets, which could make it more difficult or impossible for the Company toobtain funding for additional investments and harm its profitability, Net Asset Value and/or Share price.

Deteriorating conditions in the global financial markets, and actions by governments to address them,have created a great deal of uncertainty for the real estate and finance industries, which may adverselyaffect the Company’s investments, access to financing, competitive landscape and overall performance

Since the onset of the current financial crisis in the second half of 2007, the US and global economiesand capital markets worldwide have been adversely affected by exceptional market turbulence, a lackof liquidity, rising mortgage default rates and substantial asset declines and write-downs. Thesedeteriorating conditions have led to the failures of multiple global financial institutions and otherbusinesses and, in turn, to a series of initiatives and market interventions by governments in the US, theUK and Europe (where a substantial portion of the Company’s investments are or were held) seeking toresolve the financial crisis and minimise its repercussions to the wider economy.

In the US, where the crisis is thought to have originated, the federal government enacted in October 2008the Emergency Economic Stabilization Act of 2008, authorising the US Department of Treasury topurchase up to US$700 billion of mortgage-backed and other securities through the Troubled AssetRelief Program, or TARP, for the purpose of stabilising the financial markets. On 23 March 2009, theUS Department of Treasury announced that it would implement an initiative under the TARP to promotepurchases by private investors of legacy, or so-called “toxic”, real estate loans held directly on the booksof banks and securities backed by loan portfolios.

Elsewhere, governments have responded to the financial crisis by making capital infusions, and in somecase taking controlling stakes, in financial institutions, such as Bradford & Bingley and the Royal Bankof Scotland in the UK, LandsBanki in Iceland and Fortis in the Netherlands and Belgium, andguaranteeing bank deposits and debts. In addition, both in the US and outside the US, the financial crisishas led to substantial consolidation in the financial services industry, at times through combinationsbrokered or fostered by governments.

The scale and extent of these government interventions and initiatives are unprecedented in recenttimes, and it remains unclear what impact they will have on global financial markets, the European, USand world economies and, ultimately, the asset management sector, of which the Company is a part.These initiatives are subject to change, may be implemented in unanticipated ways and, given thediscretion they afford, their effects are difficult to predict. It is not known whether the Company, itsunderlying investments or its competitors will be able to avail themselves of these initiatives, directly,indirectly, or at all. There can be no assurance that conditions in the global financial markets, or actionsby governments to alleviate these conditions, will not worsen and/or further adversely affect the valueof the Company’s investments, access to financing and overall performance.

Investors and Shareholders should note that regulatory proposals surrounding the ABS market are stillbeing worked on in one or more jurisdictions providing an uncertain backdrop for investors who arewilling to engage in that market.

Changes in laws or regulations may adversely affect the Company’s business and results ofoperations

The Company is subject to laws and regulations enacted by national, regional and local governments.In particular, the Company is required to comply with certain on-going notification requirements thatare applicable to a Guernsey authorised closed-ended collective investment scheme, including theAuthorised Closed-end Investment Scheme Rules 2008 and other laws and regulations supervised by

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the GFSC. Additional laws may apply to the vehicles in which the Company makes investments. Thoselaws and regulations and their interpretation and application may also change from time to time andthose changes could have a material adverse effect on the Company’s business, investments and resultsof operations.

The Company may experience fluctuations in its quarterly operating results

The Company may experience fluctuations in its operating results from quarter to quarter due to anumber of factors, including changes in the values of investments, which in turn could be due to changesin the amount of distributions, dividends or interest paid in respect of investments, changes in operatingexpenses, variations in and the timing of the recognition of realised and unrealised gains or losses, thedegree to which the Company encounters competition and general economic and market conditions.Such variability may lead to volatility in the trading price of the Shares and cause the Company’s resultsfor a particular period not to be indicative of the Company’s performance in a future period.

Defaults on investments or underlying assets may have a negative impact on the value of theInvestment Portfolio and cash flows received

While the Company’s valuations take into account expected levels of default rates and the expected lossgiven a default (“severity rate”), the Company’s investments and the assets that collateralise them maybe subject to higher losses through a combination of higher default or severity rates.

Default and severity rates are influenced by changes in interest rates and a variety of economic,geographic and other factors beyond the Company’s control and consequently cannot be predicted withcertainty. The level and timing of defaults made by borrowers in respect of the loans that collateralisecertain of the Company’s investments may have an adverse impact on the income earned by theCompany from those investments.

To the extent that actual defaults on any assets in an underlying asset portfolio exceed the level ofdefaults factored into the purchase price of the relevant investment by the Investment Manager, thevalue of the anticipated return from the investment will be reduced. The more deeply subordinated thetranche of securities in which the Company invests, such as Residual Income Positions, the greater therisk of loss. While the Investment Manager takes into account estimated levels of default and severityrates when determining the prices it pays for investments and the values at which those investments arecarried in its books, defaults and severity in excess of expectations will have a negative impact on thevalue of the Company’s investments, will reduce the cash flows that the Company receives from itsinvestments and could adversely impact the Company’s ability to pay dividends (including thePreference Dividend), the Net Asset Value and/or the Share Price.

The Company may be exposed to counterparty risk

The Company may enter into financing transactions (including, transactions in over the countermarkets) and hold investments (including synthetic securities) which would expose the Company to thecredit risk of its counterparties and their ability to satisfy the terms of such contracts. Credit risk is therisk that an issuer or counterparty to a transaction entered into by the Company will be unable orunwilling to meet a commitment that it has entered into with the Company. In the event of a bankruptcyor insolvency of such a counterparty, the Company could experience delays in liquidating its positionand significant losses, including the loss of that part of the Company’s portfolio financed through sucha transaction, declines in the value of its investment during the period in which the Company seeks toenforce its rights, inability to realise any gains on its investment during such period and fees andexpenses incurred in enforcing its rights.

The Company is subject to the risk that sponsors of ABS in which it invests, including sovereigngovernments and government entities, banks and non-bank financial companies, may default on theirobligations under such instruments and that certain events may occur which have an immediate andsignificant adverse effect on the value of such investments. There can be no assurance that a sponsor ofa transaction in which the Company invests will not default or that an event which has an immediateand significant adverse effect on the value of such instruments will not occur, and that the Companywill not sustain a loss on the investment as a result.

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In addition, with respect to synthetic or pass-through securities, the Company will not usually have acontractual relationship with the underlying issuer of the underlying obligation. Therefore the Companywill generally have no right to enforce directly compliance by the actual issuer with the terms of theunderlying obligation nor any rights of set-off against the actual issuer, nor have any voting rights withrespect to the underlying obligation. The Company will not directly benefit from the collateralsupporting the underlying obligation and will not have the benefit of the remedies that would normallybe available to a holder of such underlying obligation. In the event of the insolvency of the counterpartyto such synthetic or pass-through security, the Company will be treated as a general creditor of suchcounterparty, and will not have any claim with respect to the underlying obligation.

The Company is subject to market risk

The Company’s exposure to market risk is comprised mainly of movements in the market value of itsinvestments, and to the extent that the Company incurs indebtedness in the future, changes in interestrates that either increase its cost of borrowing or, in the event the Company makes any fixed interestinvestments in future, may decrease its income.

The value of an ABS (including a Real Estate Debt Investment) will fluctuate as a result of changes inmarket prices, whether caused by factors specific to an individual investment, its issuer or factorsaffecting all instruments traded in the market over which the Company will have no control. As themajority of the Company’s financial instruments are carried at fair value with fair value changesrecognised in the consolidated income statement, all changes in market conditions will directly affectthe value of the Investment Portfolio. Further the fair value of the Company’s investments will fluctuateas a result of change in the discount rate applied to the net present value of the Residual IncomePositions in the Investment Portfolio.

The Company is subject to interest rate risk

Interest rate risk is the risk that the fair value and future cash flows of a financial instrument willfluctuate because of changes in market interest rates. Interest rate risk will apply to the various types ofasset in the Investment Portfolio in different ways.

Residual Income Positions are exposed to interest rate risk as changes in interest rates may have aneffect on the prepayments and defaults of the underlying loans of the securitisations. The direct interestrate risk on a Residual Income Position is minimal as they are the equity positions in securitisationtransactions. Due to the nature of the securitisations, the liabilities are matched to the underlyingcollateral and in the significant majority of instances, the margin on the liabilities are fixed. The cashflows from the Residual Income Positions are not directly affected by changes in market interest ratesbecause the investments have no notional fixed rate element. However, the underlying loans in asecuritisation vehicle may be subject to interest rate exposure. Changes in interest rates can affectthe Company’s net interest income, which is the difference between the interest income earned oninterest-earning investments and the interest expense incurred on interest-bearing liabilities.

In calculating the price to be paid for a bond, for example for most MBS that the Company will investin, the Investment Manager will, among other considerations, use an estimate of the changes in LIBORover the life of the investment to establish possible cash flows. If the actual LIBOR is lower from timeto time than the estimate made prior to investment, the yield on the bond will fall and not match theexpectations that the Investment Manager had on acquisition. Bonds will also be exposed interest raterisk through changes in interest rates potentially having an affect on prepayments and defaults of theunderlying loans of the securitisations.

The due diligence process that the Investment Manager undertakes in connection with theCompany’s investments may not reveal all facts that may be relevant in connection with an investment

Before the Company makes any investment, the Investment Manager conducts due diligence that itdeems reasonable and appropriate based on the facts and circumstances applicable to each investment.The objective of the due diligence process is to identify attractive investment opportunities based on thefacts and circumstances surrounding an investment. When conducting due diligence and making anassessment regarding an investment, the Investment Manager will be required to rely on resourcesavailable to it, including information provided by the originator of the investment. Accordingly, there

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can be no assurance that the due diligence investigation that the Investment Manager carries out withrespect to any investment opportunity will reveal or highlight all relevant facts that may be necessary orhelpful in evaluating such investment opportunity. Moreover, there can be no assurance that such aninvestigation will result in an investment being successful.

There may be circumstances in which the Company is required to dispose of an asset from theInvestment Portfolio to comply with its investment policy

The current investment policy of the Company requires that at least 70 per cent. of the Company’s NAVwill consist of Primary Target Investments and the proposed investment policy of the Company requiresthat at least 70 per cent. of the Company’s NAV will consist of Residual Income Positions and RealEstate Debt Investments. There may be circumstances in which the Company is required to dispose ofan asset in order to comply with the investment policy and the price achieved on such a sale may not beas favourable as the price that would be achieved on the sale of an asset in the ordinary course ofbusiness. If this were the case, there may be an adverse impact on the Company’s NAV and/or the Shareprice and/or ability to pay dividends.

The Company may be subject to liability following the disposal of investments

While the Company intends to hold the majority of its investments to maturity, the Company maydispose of investments in some circumstances and may be required to give representations andwarranties about those investments and to pay damages to the extent that any such representations orwarranties turn out to be inaccurate. The Company may become involved in disputes or litigationconcerning such representations and warranties and may be required to make payments to third partiesas a result of such disputes or litigation. If the Company does not have cash available to conduct suchlitigation or make such payments it may be required to borrow funds. Any such payments andborrowings to finance those payments could have an adverse impact on the Company’s ability to paydividends. In addition, if the Company is unable to borrow funds to make such payments, it may beforced to sell investments to obtain funds. There can be no assurance that any such sales could beaffected on satisfactory terms.

The value, price and/or income from investments may be affected by currency movements or macrofluctuations and hedging transactions to reduce such exposure may limit gains or result in losses

The Company’s accounts will be denominated in Euro while investments are likely to be made andrealised in Euro, Sterling, US Dollars and other currencies. Changes in rates of exchange may have anadverse effect on the value, price or income of the investments. A change in foreign currency exchangerates may adversely impact returns on the Company’s non-Euro-denominated investments. TheCompany’s principal non-Euro currency exposure is expected to be the pound Sterling, but this maychange from time to time.

The Company may use derivative transactions to reduce its exposure to interest rate and currencyfluctuations. As at the date of this Prospectus, the Company uses Euro:Sterling hedge options to hedgeits currency exposures. Further, the Company has in the past hedged against a fall in house prices andentered into a macro-hedge against the SME market in Europe. A hedge position or other derivativetransaction may not be effective in eliminating all of the risks inherent in any particular position andthere can be no guarantee that suitable instruments for hedging will be available at times when theCompany wishes to use them. Further, the Company is under no obligation to enter into hedgingarrangements in respect of currency, interest rate or other macro fluctuations that may affect theInvestment Portfolio or one or more classes of Shares and Shareholders and investors should have noexpectation that any such hedges will be entered into by the Company from time to time.

The Company may realise losses on a hedge position that could adversely impact the Company’s abilityto pay dividends and may result in poorer overall performance than if such hedging transactions had notbeen executed. The Company will also be exposed to the credit risk of the relevant counterparty withrespect to relevant payments under derivative instruments. Failure by a counterparty to make paymentsdue under a derivative instrument will reduce the Company’s income and, consequently, could have anadverse impact on the Company’s ability to pay dividends or have an adverse impact on the NAV and/orShare price. The Company’s counterparty risk has increased as credit and liquidity have becomeconstrained in global financial markets.

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Preference Shares may introduce the risk of currency fluctuations

The Preference Shares are denominated in Sterling and the Preference Dividend and the RepaymentAmount are due payable by the Company in Sterling. The Company conducts its business in Euro andhence the Company will be exposed to currency fluctuations between Sterling and Euro that may affectits ability to pay the Preference Dividend or the Repayment Amount. The Company may not choose toor may not be able to secure foreign exchange hedging on economic terms to cover all of theseexposures. Furthermore, any foreign exchange hedging that the Company does engage in cannot berelied upon to mitigate either fully or partly exchange rate risk. Exchange rate fluctuations betweenSterling and Euro could have a detrimental impact on the Company’s financial position.

The Company may become subject to currency fluctuations on translating revenues and costs fromnon Euro currencies into Euro

The Company is subject to and may in the future become increasingly subject to currency fluctuationson translating revenues and costs from non-Euro currencies into Euros which, given the anticipatedgrowth of this business, could have a material adverse effect on the Company’s business, prospects,financial results and/or financial condition.

Movements in the exchange rate may be influenced by factors such as trade imbalances, levels ofshort-term interest rates, differences in relative values of similar assets in different currencies, long-termopportunities for investment and capital appreciation and political developments.

Borrowings could adversely affect the Company’s Net Asset Value and the level of the Company’sdividends

While the Company will not have any leverage at the time of Open Offer Admission, it may in the futureborrow to fund the acquisition of additional investments and, where appropriate, may utilise leverage inorder to enhance returns to Shareholders, subject to the leverage restrictions set out in its investmentpolicy from time to time. These borrowings may be secured against some or all of the Company’s assets.

The application of leverage to an investment magnifies the adverse impact caused by defaults in theunderlying investment portfolio. Also, since the Company’s investments may be subordinated to moresenior claims on the underlying assets, any borrowings by the Company would be incremental to theleverage already inherent in those investments. Therefore, in the event of a default in the assetsunderlying investments in the Company’s portfolio, the level of losses suffered by the Company wouldbe proportionately higher as a function of the aggregate leverage implicit in each of the Company’sinvestments and a relatively small increase in the rate of defaults could have a materially detrimentaleffect on returns to Shareholders.

The Company’s earnings will be generated from the difference between income received and interestexpense plus certain gains arising from the sale of assets. The Company’s return on investments andcash available for distribution to Shareholders would be reduced to the extent that its interest expenseincreases relative to income, such as in the event of a general rise in interest rates, or in the event oflosses arising from the sale of assets. Interest rates are highly sensitive to factors beyond the Company’scontrol, including, among other things, governmental monetary and tax policies and domestic andinternational economic and political conditions.

The structure and specific provisions of any financing arrangements could give rise to additional risks

To the extent that the Company enters into any financing arrangements in the future, such arrangementsmay contain provisions that expose it to further risk of loss. Such provisions could be financial covenantsthat could, among other things, require the Company to maintain certain financial ratios. If the Companywere to breach the financial covenants contained in any loan, repurchase agreement or other financingagreement, the Company might be required to repay such borrowings immediately in whole or in part,together with any attendant costs and the Company might be forced to sell some of its assets to fund suchcosts. The Company might also be required to reduce or suspend payment of its dividends.

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Changes in the debt financing markets may negatively impact the ability of the Company to obtainfinancing and may increase the cost of such financing if it is obtained

Since the onset of the current financial crisis in the second half of 2007, the markets for debt financinghave contracted significantly. Large commercial banks, which have traditionally provided suchfinancing, are currently demanding higher rates, more restrictive covenants (e.g. lower interest coverageratios and lower debt coverage ratios) and generally more onerous terms in order to provide suchfinancing, and in some cases are not providing financing at all for acquisitions which would have beenmore readily financed in recent past years.

In the event that the Company, in the long-term, is unable to obtain committed debt financing forpotential acquisitions or can only obtain debt at high costs, this may prevent the Company fromcompleting otherwise profitable investments or may lower the profit that the Company would otherwisehave achieved from such transactions, either of which could lead to a decrease in the Company’sprofitability, Net Asset Value and/or Share price.

Risks relating to ABS, Real Estate Debt Investments and Residual Income Positions

On liquidation of the Company’s assets on any given day, the reported NAV may not match the cashvalue received on such assets

Where the Company is required or deems it necessary to liquidate some or all of its assets on any givenday, the cash value received on such assets may not match the reported NAV or portion of the reportedNAV (in the case that not all of the Company’s assets are liquidated) attributable to such assets.Liquidation of the Company’s assets will be subject to a number of factors, including the availability ofpurchasers of the Company’s assets, liquidity and market conditions and, as such, the actual cash valueof some or all of the Company’s assets may differ from the latest reported NAV (or portion of thereported NAV (in the case that not all of the Company’s assets are liquidated)).

Many of the Company’s investments in Residual Income Positions will be illiquid, other assets in theInvestment Portfolio may be illiquid in the future and such illiquidity may adversely affect theCompany’s ability to raise cash or vary its Investment Portfolio in a timely fashion

The market for Residual Income Positions is illiquid. Accordingly, a substantial proportion of theInvestment Portfolio is currently invested in illiquid assets. In addition, investments that the Companymay purchase in privately negotiated (also called “over the counter” or “OTC”) transactions may not beregistered under relevant securities laws or otherwise may not be freely tradable, resulting in restrictionson their transfer, sale, pledge or other disposition except in a transaction that is exempt from theregistration requirements of, or is otherwise in accordance with, those laws. As a result of this illiquidity,the Company’s ability to raise cash or vary its Investment Portfolio in a timely fashion and to receive afair price in response to changes in economic and other conditions may be limited.

Furthermore, where the Company acquires investments for which there is not a readily available market,the Company’s ability to deal in any such investment or obtain reliable information about the value ofsuch investment or risks to which such investment is exposed may be limited.

The Company’s investments will include subordinated securities, which can be particularlysusceptible to losses

The Company may invest in and/or have economic exposure to limited recourse securities that aresubordinated in right of payment and ranked junior to other securities that are secured by or representownership in the same pool of assets. Generally, in relation to such investments, holders of the issuer’smore senior securities will be entitled to payments in priority to the Company. Some of the Company’sinvestments may also have structural features that divert payments of interest and/or principal to moresenior classes of securities secured by or representing ownership in the same pool of assets when thedelinquency or loss experience of the pool exceeds certain levels. This may lead to interruptions in theincome stream that the Company anticipates receiving from its Investment Portfolio, which may lead tothe Company having less income to distribute to Preference Shareholders and Ordinary Shareholders.

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Although holders of ABS generally have the benefit of first ranking security (or other priority rights) overany collateral, control of the timing and manner of the disposal of such collateral upon a default typicallywill devolve to the servicer and special servicer appointed in the transaction. There can be no assurancethat the proceeds of any such sale of collateral will be adequate to repay in full the Company’s investments.

The Company’s income will be derived from payments from its investments and default oninvestments will harm the Company’s performance

The Company will invest in mezzanine or subordinated tranches of ABS. In the case of ABS, the issuerof the securities relies upon the receipt of payments from underlying obligors in order to make theinterest payments. A wide range of factors could adversely affect the ability of the issuers of thesecurities (or underlying borrowers in the case of Real Estate Debt Investments) to make interest orother payments. These factors include adverse changes in the financial condition of the issuers of thesecurities, the underlying obligors, or the industries or regions in which they operate; the issuer’s orobligor’s exposure to counterparty risks; systemic risk in the financial system and settlement; changesin law and taxation; a downturn in general economic conditions; higher interest rates; unemployment;changes in governmental regulations or other policies and natural disasters, terrorism, social unrest andcivil disturbances.

The ability of a commercial borrower to repay a mortgage loan may be affected by many factors, suchas the success of tenant businesses, property management decisions, changes in laws that increaseoperating expense or limit rents that may be charged, the occurrence of any uninsured casualty at theproperty, declines in regional or local real estate values or occupancy rates, increases in interest rates,real estate tax rates and other operating expenses, increases in unemployment, increases in leverage asa percentage of property values and increases in the percentage of income that borrowers must use toservice their mortgages.

Investments in the Investment Portfolio may be exposed to losses resulting from default andforeclosure of secured loans

To the extent that actual defaults in the underlying loans of a particular investment held in the portfolioexceed the level of defaults factored into the purchase price of that investment, the value of theanticipated return from the investment may be reduced which may have a material adverse effect of theNet Asset Value and the Share price. The more deeply subordinated the tranche of securities in whichthe Company invests or is exposed to, such as Residual Income Positions, the greater the risk of loss.While the Investment Manager on behalf of the Company estimates levels of default when determiningthe prices it pays for investments and the values at which those investments are carried in its books, anydefaults in excess of expectations may have a negative impact on the value of such investments.

Certain loans held by investments in the Investment Portfolio will be secured. While secured loans willgenerally be over-collateralised, the Company may be exposed to losses resulting from default andforeclosure. Therefore, the value of the underlying collateral, the creditworthiness of the borrower andthe priority of the lien may each be of importance. The Company cannot guarantee the adequacy of theprotection of the Company’s interests, including the validity or enforceability of the loan and themaintenance of the anticipated priority and perfection of the applicable security interests. Furthermore,the Company cannot assure that claims may not be asserted that might interfere with enforcement of therights of the investment held within the Investment Portfolio. In the event of a foreclosure, theinvestment within the Investment Portfolio may assume direct ownership of the underlying asset. Theliquidation proceeds upon sale of such asset may not satisfy the entire outstanding balance of principaland interest on the relevant loan, resulting in a loss to the investment within the Company portfolio. Anycosts or delays involved in the effectuation of a foreclosure of the loan or a liquidation of the underlyingproperty will further reduce the proceeds and thus increase the loss.

The Company is subject to concentration risk in its Investment Portfolio, in particular in relation tothe real estate sector

While the Company will invest in accordance with its prevailing investment policy and will also regularlymonitor the concentration of its portfolio and its exposure to any given servicer of underlying assets,concentration in any one industry, region or country or with respect to any given servicer may arise fromtime to time. For example, at any given time, certain geographic areas or sectors may provide more

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attractive investment opportunities than others and, as a result, the Company’s investment portfolio maybe concentrated in those countries or regions or specific sectors in those countries or regions or withrespect to particular servicers. In particular, the Company is and will be exposed to a concentration riskto the real estate sector. The risk that payments on the Company’s investments could be adversely affectedby defaults on debt obligations or the general deterioration of underlying portfolios of assets is likely tobe increased to the extent that the Investment Portfolio is concentrated in such a way as a result ofdownturns relating generally to such industry, region, country or servicer. To the extent there is adownturn in any such industries, markets or other jurisdictions, or in any other area where the Company’sportfolio may have concentration, this could reduce the amount of payments the Company receives on itsinvestments and, consequently, could have an adverse impact on the Company’s ability to pay dividendsto holders of Preference Shares and Ordinary Shares and the value of the Investment Portfolio.

The Company’s investments are subject to prepayments, increasing re-investment risk

The Company’s valuations of the Investment Portfolio take into account expected levels of prepaymentof the loans that collateralise the securitisation transactions in which the Company has purchased thepositions. The Investment Manager reviews the prepayment assumptions each quarter and will update asrequired. These assumptions are considered by review of the underlying loan performance information.

The Company’s investments and the assets that collateralise them may prepay more quickly than expectedand have an impact on the value of the Investment Portfolio. Prepayment rates are influenced by changesin interest rates and a variety of economic, geographic and other factors beyond the Company’s controland consequently cannot be predicted with certainty. In addition, for a securitisation originator there isoften a strong incentive to refinance well-performing portfolios once the senior tranches amortise, andan originator will typically have the right to redeem outstanding bonds once 90 per cent. of the originalprincipal amount outstanding has been repaid in a “clean-up call”. The yield to maturity of theinvestments will depend on, inter alia, the amount and timing of payments of principal on the mortgageloans and the price paid for the investments. Such yield may be adversely affected by a higher or lowerthan anticipated rate of prepayments on the mortgages. Prepayments on the mortgage loans may resultfrom refinancings, voluntary sales of properties by borrowers, as a result of enforcement proceedingsunder the relevant mortgage loans. The rate of prepayment of the mortgage loans cannot be predicted andis influenced by a wide variety of economic, social and other factors, including prevailing mortgagemarket interest rates, the availability of alternative financing, local and regional economic conditions and,with respect to residential mortgage loans, homeowner mobility. Therefore, no assurance can be given asto the level of prepayments that the relevant investment will experience.

Early prepayments may also give rise to increased re-investment risk with respect to certain investments,as the Company may realise excess cash earlier than expected. If the Company is unable to reinvest suchcash in a new investment with an expected rate of return at least equal to that of the investment repaid,this may reduce the Company’s net income and, consequently, could have an adverse impact on theCompany’s ability to pay dividends.

The Company may invest in assets with no or limited performance or operating history

The Company may invest in assets with no or limited investment history or performance record upon whichthe Investment Manager and the Company will be able to evaluate their likely performance. The Company’sinvestments in entities with no or limited operating history are subject to all of the risks and uncertaintiesassociated with a new business, including the risk that such entities will not achieve target returns.Consequently, the Company’s profitability, Net Asset Value and Share price could be adversely affected.

The Company will be exposed to underlying borrower fraud through the debt securities held in itsInvestment Portfolio

Investing in debt securities involves the possibility of the Company’s investments being subject topotential losses arising from material misrepresentation or omission on the part of borrowers whoseloans are held within the relevant investments. Such inaccuracy or incompleteness may adversely affectthe valuation of the collateral underlying the debt securities that are held within the Company portfolioor may adversely affect the ability of the relevant investment to perfect or effectuate a lien on thecollateral securing the loan. The vehicles in which the Company invests will rely upon the accuracy andcompleteness of representations made by the underlying borrowers to the extent reasonable, but cannot

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guarantee such accuracy or completeness. In addition, the quality of the Company’s investments inCMBS and RMBS are subject to the accuracy of representations made by the underlying borrowers.Accordingly, the Company is subject to the risk that the systems used by the originators of CMBS andRMBS to control for such accuracy are defective.

The performance of many of the Company’s investments may depend to a significant extent upon theperformance of the servicers of the underlying asset portfolio

The Company will not control the portfolios of assets underlying the ABS in which it invests and willrely on the servicers of the ABS to administer and review the portfolios. Particularly in the case ofResidual Income Positions, the actions of the servicer, including its ability to identify and report onissues affecting the portfolio on a timely basis, may affect the Company’s return on its investments, insome cases significantly. In addition, concentration of a significant number of the Company’sinvestments with one servicer could affect the Company adversely in the event that the servicer fails tofulfil its function effectively or at all. In the event of fraud by any entity in which the Company investsor by other parties involved with the entity, such as servicers or cash managers, the Company may suffera partial or total loss of the amounts invested in that entity.

Changes in the tax treatment of investments and special purpose vehicles and unanticipated incomeand/or withholding taxes may affect anticipated cash flows

The Company uses SPVs to acquire some investments. The Company’s income will be derived frompayments of interest and principal repayment on these securities. The Company intends that each suchSPV will be structured so that it is substantially exempt from or neutral to income taxes in itsjurisdiction of incorporation and that each SPV should conduct its affairs so as not to be subject to, orto be subject to minimal, income tax in the jurisdictions in which it operates. Further, the Companyintends that the securities held by such SPVs generally will not be subject to withholding taxes ondistributions made by, or on realisations of, the assets. In some cases, certain procedural formalities mayneed to be completed before payments in respect of such assets can be made free of withholding tax.The completion of such formalities may depend on the agreement of taxation authorities, the timing ofwhich cannot be guaranteed.

Tax laws, however, may change or be subject to differing interpretations, possibly with retroactive effect,so that the tax consequences of a particular investment or structure may change after the investment hasbeen made or the structure has been established with the result that investments held by SPVs may besubject to withholding tax or SPVs may need to be unwound or restructured, in each case resulting in theCompany’s returns being reduced. The Company and the SPVs will be subject to such risk both in thejurisdiction of their respective incorporation and in each jurisdiction of their respective operations.

Moreover, the underlying issuers of ABS could become subject to net income tax in jurisdictions inwhich they operate. The imposition of any such net income tax would reduce the cash received by theCompany, and could therefore materially impair the Company’s ability to pay dividends on the Shares.

Accounting guidelines governing the consolidation of special purpose entities are subject to varyinginterpretations regarding the requirement to consolidate such special purpose entities where a companyholds residual income positions in those entities, but does not have control over them as determinedfollowing the guidance contained in Standing Interpretations Committee Interpretation 12“Consolidation — Special Purchase Entities”. On the basis of its adopted accounting policy onconsolidation, the Company does not expect to consolidate special purpose entities in which it holdsresidual income positions where control is not otherwise indicated. If a change in the interpretation ofsuch guidelines were to require the Company to consolidate the assets and liabilities of such specialpurpose entities, the financial statements of the Company would appear materially different as a resultof such consolidation. However, such a change should not have any substantive effect on the financialposition or the results of the Company itself.

Investments will be subject to differing laws regarding creditors’ rights and enforceability of security

The Company’s investments and the collateral underlying those investments may be subject to variouslaws for the protection of creditors in the jurisdictions of incorporation of the issuers or borrowers and,if different, the jurisdictions from which they conduct business and in which they hold assets (such as

AIII 4.11

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the jurisdiction of the underlying obligors in respect of the securitised assets), which may adverselyaffect an issuer’s or borrower’s ability to make payment in full or on a timely basis. These insolvencyconsiderations will differ depending on the country in which an obligor or its assets are located and maydiffer depending on the legal status of the obligor. Additionally, the Company, as a creditor, mayexperience less favourable treatment under different insolvency regimes than apply in the UK or theUnited States, including where it seeks to enforce any security it may hold as a creditor.

Risks relating to Real Estate Debt Investments

The value of the security of the MBS may decline which may result in losses for the Company if thatsecurity is required to be enforced

The security for an MBS, that is either an RMBS or a CMBS, will likely consist of, inter alia, thesecuritisation vehicle’s interest in the underlying mortgage loans. The value of the security may beaffected by, among other things, a decline in property values. No assurance can be given that values ofthe properties have remained or will remain at the level at which they were at on the dates of originationof the related securities.

If the residential or commercial property market in the United Kingdom or Europe should experiencean overall decline in property values, such a decline could in certain circumstances result in the valueof the security created by the mortgage loans being significantly reduced and, ultimately, may result inlosses to the Company if that security is required to be enforced.

The Company will be exposed through its investment in Real Estate Debt Investments to various risksassociated with mortgage loans that underlie RMBS

The RMBS the Company invests in are subject to all of the risks of the underlying mortgage loans.Residential mortgage loans are secured by single-family residential property and are subject to risks ofdelinquency and foreclosure, and and risks of loss. The ability of a borrower to repay a loan secured bya residential property is dependent, amongst other factors, upon the income or assets of the borrower.A number of factors, including a general economic downturn, higher unemployment, depreciation ofhousing prices, acts of God, terrorism, social unrest and civil disturbances, may impair borrowers’abilities to repay their loans. Loss of earnings, illness, divorce and other similar factors may lead to anincrease in delinquencies and bankruptcy filings by mortgage borrowers, which may lead to a reductionin payments by such borrowers on their mortgage loans and thereby impact the amount of interest paidon and ultimate repayment of the investments.

The underlying mortgage loans may include interest only and part and part loans. There is no scheduledamortisation of the interest only loans or that part of a loan which is interest only. Consequently, uponthe maturity of an interest only loan or a part and part loan, the relevant borrower will be required to makea “bullet” payment that will represent the entirety of the principal amount then outstanding. The abilityof such a Borrower to repay an interest only loan or a part and part loan at maturity frequently dependson such Borrower’s ability to refinance the property or obtain funds from another source, such as pensionpolicies, personal equity plans or endowment policies. The ability of the borrower to refinance theProperty will be affected by a number of factors, including the value of the property, the borrower’s equityin the property, the financial condition of the borrower, tax laws and general economic conditions at thetime. Because of the greater risk regarding refinancing, a significant downturn in the property markets,or the economy in general, could lead to a greater increase in defaults or repayment of principal ofinterest only loans, and to a lesser extent, of part and part loans, than on repayment Loans. This higherrisk associated with the higher defaults or repayment of interest only and part and part loans increasesthe risk of a failure to pay interest or loss of principal in the Company’s RMBS investments.

The underlying mortgage loans may include loans secured by non-owner occupied properties. Theborrower’s ability to service payment obligations in respect of a loan secured on such a property is likelyto depend on the borrower’s ability to lease the properties on appropriate terms. This dependency onleasing income increases the likelihood, during difficult market conditions, that the rate ofdelinquencies and losses on loans secured by such non-owner occupied properties will be higher than

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for loans secured on the primary residence of a borrower. This higher risk associated with greaterdefaults or losses of loans secured by non-owner occupied properties increases the risk of a failure topay interest or loss of principal in the Company’s RMBS investments.

The underlying mortgage loans may contain mortgage loans to borrowers who (a) may have an adversecredit history; (b) are self-employed or self-certifying; and/or (c) are otherwise considered by bank andbuilding society lenders to be non-conforming borrowers (collectively “Non-Conforming Borrowers”).Mortgage loans made to Non-Conforming Borrowers are generally likely to experience higher rates ofdelinquency, write-offs, enforcement and bankruptcy than have historically been experienced bymortgage loans made to standard borrowers and therefore carry a higher degree of risk. This higher riskassociated with greater defaults or losses of loans secured by non-owner occupied properties increasesthe risk of a failure to pay interest or loss of principal in the Company’s RMBS investments.

Should any of the risks referred to above occur in relation to investments held by the Company, theremay be a material adverse effect on the Company’s profitability, Net Asset Value and/or Share price.

The Company will be exposed through its investment in Real Estate Debt Investments to various risksassociated with CMBS and commercial mortgage loans

The Investment Portfolio will include exposure to CMBS and commercial mortgage loans. CMBS are,generally, securities backed by obligations (including certificates of participation in obligations) that areprincipally secured by mortgages on real property or interests therein having a multifamily orcommercial use, such as regional shopping malls, other retail space, office buildings, industrial orwarehouse properties, hotels and nursing homes. The value of the commercial mortgage loans and theunderlying commercial mortgage-backed securities held in the Investment Portfolio will be influencedby the rate of delinquencies and defaults experienced on the relevant commercial mortgage loans andby the severity of loss incurred as a result of such defaults. Factors influencing delinquencies, defaultsand loss severity include (a) economic and real estate market conditions by industry sectors (forexample, multifamily or retail office); (b) the terms and structure of the mortgage loans; (c) the amountof leverage and (d) any specific limits to legal and financial recourse upon a default under the terms ofthe mortgage loan. Special risks are presented by loans to hospitals, nursing homes, hospitalityproperties and certain other property types.

Commercial property values and net operating income are subject to volatility, which may result in netoperating income becoming insufficient to cover debt service on the related mortgage loan. Furthermore,the net operating income from and value of any commercial property is subject to various risks, includingchanges in general or local economic conditions and/or specific industry segments; the solvency of therelated tenants; declines in real estate values; declines in rental or occupancy rates; increases in interestrates, real estate tax rates and other operating expenses; changes in governmental rules, regulations andfiscal policies; acts of God; terrorist threats and attacks and social unrest and civil disturbances.

Commercial mortgage loans are generally viewed as exposing a lender to a greater risk of loss throughdelinquency and foreclosure than lending on the security of single family residences. The ability of aborrower to repay a loan secured by income-producing property typically is dependent primarily uponthe successful operation and operating income of such property (namely, the ability of tenants to makelease payments, the ability of a property to attract and retain tenants, and the ability of the owner tomaintain the property, minimise operating expenses, and comply with applicable zoning and other laws)rather than upon the existence of independent income or assets of the borrower. Most commercialmortgage loans provide recourse only to specific assets, such as the property and not against theborrower’s other assets or personal guarantees.

Commercial mortgage loans that will be acquired by the investments held by the Company generally donot fully amortise, which can necessitate a sale of the property or refinancing of the remaining“balloon” amount at or prior to maturity of the mortgage loan. Accordingly, investors in commercialmortgage loans and commercial mortgage-backed securities bear the risk that the borrower will beunable to refinance or otherwise repay the mortgage at maturity, thereby increasing the likelihood of adefault on the borrower’s obligation. In certain circumstances, the creditors may also become liableupon taking title to an asset for environmental or structural damage existing at the property.

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Should any of the risks referred to above occur in relation to investments held by the Company, theremay be a material adverse effect on the Company’s profitability, Net Asset Value and/or Share priceand/or dividend policy.

The Company may be exposed through its investment in Real Estate Debt Investments to various risksassociated with the foreclosure of commercial mortgage loans

The servicer or special servicer of a MBS held by the Company may find it necessary or desirable toforeclose on mortgage loans held by it. The foreclosure process is often lengthy and expensive.Borrowers may resist mortgage foreclosure actions by asserting numerous claims, counterclaims anddefences against the portfolio investment, including, without limitation, lender liability claims anddefences, even when such assertions may have no basis in fact, in an effort to prolong foreclosureactions and force lenders into a modification of the loans or a favourable buy-out of the borrowers’positions. Foreclosure actions can take several years or more to litigate. At any time prior to or duringthe foreclosure proceedings the borrower may file for bankruptcy, which would have the effect ofstaying the foreclosure actions and further delaying the foreclosure process. In the event of thebankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to besecured only to the extent of the value of the underlying collateral at the time of bankruptcy (asdetermined by the bankruptcy court), and the lien securing the mortgage loan will be subject to theavoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien isunenforceable. Foreclosure litigation tends to create a negative public image of the mortgaged propertyand may result in disrupting the ongoing leasing, management and operation of the property. Inaddition, the portfolio investment (and therefore, indirectly, the Company) will bear a risk of loss ofprincipal to the extent of any deficiency between the value of the collateral and the principal andaccrued interest of the mortgage loan.

The ability to foreclose on an investment held by the Company (directly or indirectly) may be affectedby changes to the legal or statutory foreclosure procedures applicable in each of the jusrisdicitons inwhich the Company’s investments are held.

Risks relating to the Investment Manager

The Company’s performance is heavily reliant on the Investment Manager and its investmentprofessionals

The Company and the Group do not currently have any employees or own any facilities, and eachdepends on the Investment Manager for the day-to-day management and operation of the Company’sbusiness. The Company’s ability to achieve its investment objectives depends on its ability to grow itsinvestment base, which depends, in turn, on the Investment Manager’s ability to identify, invest in andmonitor a suitable number of investments and implement the various aspects of its investment strategy.Achieving growth on a cost-effective basis is largely a function of the Investment Manager’s structuringof the investments process, its ability to provide competent, attentive and efficient services under theInvestment Management Agreement and the Company’s ability to reinvest its capital and to obtainadditional capital on acceptable terms. The Investment Manager’s investment professionals havesubstantial responsibilities under the Investment Management Agreement. Any failure to manage thefuture growth of the Company or to effectively implement the Company’s investment strategy couldhave a material adverse effect on the Company’s profitability, Net Asset Value and/or Share price.

The Company further believes that its success and the success of certain of the investments in which theCompany invests will depend upon the experience of the Investment Manager and its continuedinvolvement in the Company’s business, in particular the success of the Investment Manager’sinvestment process described in this Prospectus. The Investment Manager has the right to resign itsappointment and terminate the Investment Management Agreement in accordance with the noticeprovisions described in the section headed “Termination of the Investment Management Agreement” inPart III of this Prospectus. If the Investment Manager were to cease to provide services under theInvestment Management Agreement or to cease to provide investment management, operational andfinancial advisory services to the Company for any reason, the Company is subject to the risk that nosuitable replacement will be found and would likely experience difficulty in making new investments,

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the Company’s business and prospects would be materially harmed and the value of the Company’sexisting investments, the Shares and the Company’s results of operations and financial condition wouldbe likely to suffer materially.

There can be no assurance that the Directors of the Company will be able to find a replacementmanager if the Investment Manager resigns

Under the terms of the Investment Management Agreement, the Investment Manager may terminate itsappointment at any time by giving not less than three months’ notice (provided that such terminationshall not take affect until the earlier of (i) the date on which the Company has appointed a replacementinvestment manager and (ii) the date falling six months after the date on which the Investment Managergave such notice. The Directors would, in these circumstances, have to find a replacement manager tothe Company and there can be no assurance that such a replacement will be found.

The Investment Manager is authorised and regulated by the FSA. If the Investment Manager failsto comply with legal and regulatory requirements, the Company and its Share price may beadversely affected

The provision of investment management services is regulated in the United Kingdom, and theInvestment Manager is authorised and subject to regulation and supervision by the FSA (which has theauthority to review and investigate the conduct of the Investment Manager and its employees). Changesto statutes, regulations or regulatory policies (including changes in interpretation or implementationthereof), or any failure by the Investment Manager or its employees to comply with such laws,regulations or policies could adversely impact the Investment Manager, and thereby could adverselyaffect the Company and its Share price. Although the Investment Manager has implemented systemsand controls requiring employees to comply with these laws, regulations and policies, there can be noassurance that all employees will abide by these and, if any were to fail to do so, that such failure wouldnot have an adverse effect on the Company.

The departure or reassignment of some or all of the Investment Management Team could prevent theCompany from achieving its investment objective

The Company depends on the diligence, skill and business contacts of the Investment Manager’sinvestment professionals and the information and deal flow they generate during the normal course oftheir activities. The Company’s future success depends on the continued service of these individuals,who are not obligated to remain employed with the Investment Manager. The Investment Manager hasexperienced departures of key investment professionals in the past and may do so in the future, and theCompany cannot predict the impact that any such departures will have on the Company’s ability toachieve its investment objectives. The departure of any of the members of the Investment Committee,the Investment Management Team or a significant number of its other investment professionals for anyreason, or the failure to appoint qualified or effective successors in the event of such departures, couldhave a material adverse effect on the Company’s ability to achieve its investment objective. TheInvestment Management Agreement does not require the Investment Manager to maintain theemployment of any of its investment professionals. In addition, a transfer of control over the InvestmentManager’s business could result in the departure or reassignment of some or all of the InvestmentManager’s investment professionals that are involved in the Company’s business.

The Investment Manager’s compensation structure may encourage the Investment Manager to investin high risk investments

In addition to its Management Fee, the Investment Manager is entitled under the Investment ManagementAgreement to receive an Incentive Fee based upon the Company’s consolidated net income (each fee asdescribed in the section headed “Investment Manager’s Fees and Expenses” in Part III of this Prospectus).In evaluating investments and other management strategies, the opportunity to earn an Incentive Feebased on net income may lead the Investment Manager to place undue emphasis on the maximisation ofnet income at the expense of other criteria, such as preservation of capital, in order to achieve a higherIncentive Fee. Investments with higher yield potential are generally riskier or more speculative.

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The compensation of the Investment Manager’s personnel contains significant performance relatedelements, and poor performance by the Company or other of the Investment Manager’s funds maymake it difficult for the Investment Manager to retain staff

In common with most investment managers, the compensation of the Investment Manager’s personnelcontains significant performance related elements which are funded by management and performancerelated fees payable to the Investment Manager by its funds in respect of strong performance. Poorperformance by any of the Investment Manager’s funds, including the Company, may reduce the amountavailable to pay performance related compensation to the Investment Manager’s personnel, which mayresult in those persons obtaining other employment. In that case, poor performance of the funds may befurther compounded by Investment Manager staff departures. In addition, as the performance relatedcompensation of the Investment Manager’s personnel will depend on the performance of more than onefund and not just the Company, poor performance of one fund could adversely impact another, betterperforming, fund if it led to the departure of Investment Manager personnel.

The Investment Manager has broad discretion to manage the investments of the Company and willthus exercise substantial influence over the business of the Company

The Investment Manager has, subject to compliance with the investment policy of the Company, substantialdiscretion in the management of the Company’s investments, including the timing and the terms of the exitfrom investments. While the Board will review the Investment Manager’s compliance with the investmentpolicy and may direct the Investment Manager to take certain actions in connection with the Company’sinvestments, the Board is not expected to review or approve all individual investment decisions.

The Investment Manager’s investment strategies, used to achieve the Company’s investmentobjectives and policy, may not be successful under all or any market conditions

No assurance can be given that the strategies used, or to be used, by the Investment Manager to achievethe Company’s investment objectives and policy will be successful under all or any market conditions.The strategies currently employed by the Investment Manager may be modified and altered from timeto time, so it is possible that the strategies used by the Investment Manager to achieve the Company’sinvestment objective and policy in the future may be different from those presently expected to be used.

The Investment Manager’s other client relationships may give rise to conflicts of interest

In addition to the Company, the Investment Manager and the Investment Management Team willmanage other investment vehicles, which may lead to conflicts of interest. For example, certaininvestments appropriate for the Company may also be appropriate for one or more other investmentvehicles managed by the Investment Manager and/or the Investment Management Team. Therefore,there may be situations where the Investment Manager or the Investment Management Team may decideto allocate a particular investment to another investment vehicle rather than to the Company. Where theCompany and one or more other investment vehicles are managed by the Investment Manager and theInvestment Manager becomes aware of an investment opportunity that is applicable to both or all ofthem, the allocation of that investment between the relevant funds (including the Company) will be doneon a pro rata basis, subject to adjustment in certain circumstances as described under the heading inPart III of this Prospectus. Also, the compensation structures of other investment vehicles managed bythe Investment Manager differ from that provided under the Investment Management Agreement withthe Company, and such differences could incentivise the Investment Manager to allocate certainopportunities to these other investment vehicles.

Additionally, the fact that the Investment Manager and its officers and employees manage other vehiclesand engage in other business activities may reduce the time the Investment Management Team spendsmanaging the Company’s investments. This could adversely affect the Company’s ability to achieve itsinvestment objectives, which could have a material adverse effect on the Company’s profitability, NetAsset Value and/or Share price. The Investment Management Team’s decision to spend time on otheractivities besides the management of the Company’s investments could be influenced by a variety offactors, including the compensation structures of other investment vehicles as compared to that of theCompany and the performance of the various vehicles.

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The Investment Manager may receive a Management Fee and/or an Incentive Fee in respect ofperiods when the Company is unable to pay a dividend

The Company’s ability to pay dividends may be restricted as a matter of applicable law or regulation,including to the extent that dividends are not covered by income received in the relevant period fromunderlying investments. Accordingly, there may be periods in respect of which the Investment Manageris paid an Incentive Fee but the Preference Dividend or a dividend on the Ordinary Shares cannot bepaid, for example, where, as a result of losses or expenses, there are no profits available for distributionin the period.

The liability of the Investment Manager and the Investment Manager’s Associates is limited under theCompany’s arrangements with them, and the Company has agreed to indemnify the InvestmentManager and the Investment Manager’s Associates against claims that they may face in connection withsuch arrangements, which may lead them to assume greater risks when making investment-relateddecisions than they otherwise would if investments were being made solely for their own account

Under the Investment Management Agreement, the Investment Manager has not assumed anyresponsibility other than to render the services described in the Investment Management Agreement ingood faith and will not be responsible for any action that the Company takes in following or declining tofollow its advice or recommendations. The Investment Management Agreement limits the liability of theInvestment Manager and its Associates (including its directors, officers and employees) to the Companyto circumstances in which the Investment Manager or its Associates have been negligent, in wilful defaultof their obligations or fraudulent. Accordingly, the rights of the Company to recover against theInvestment Manager as a result of its default may be limited and any such recovery by the Companyagainst the Investment Manager may be significantly lower than the loss that the Company has suffered.

The Company has agreed to indemnify the Investment Manager and the Investment Manager’sAssociates to the fullest extent permitted by law from and against any losses, damages, claims, costs,charges, liabilities, demands or expenses incurred by an indemnified person in respect of acts oromissions in connection with the Investment Manager’s duties under the Investment ManagementAgreement except in the case of negligence, wilful default or fraud on the part of such party. Theseprotections may result in the Investment Manager and its Associates tolerating greater risks whenmaking investment-related decisions than otherwise would be the case, including when determiningwhether to use leverage in connection with investments. The indemnification arrangements to whichsuch persons are a party may also give rise to legal claims for indemnification that are adverse to theCompany and/or Shareholders.

The Investment Management Agreement is subject to a long notice period

The Investment Manager’s appointment pursuant to the Investment Management Agreement is intendedto be long term. The Company may terminate the Investment Management Agreement by giving theInvestment Manager not less than 24 months’ prior notice in writing. The Company will not of its owninitiative be able to terminate the Investment Management Agreement at shorter notice than describedabove unless the Investment Manager has committed certain “cause” events, as described in more detailin the section headed “Termination of the Investment Management Agreement” in Part III of thisProspectus or it makes a payment in lieu of the Management Fees and the Incentive Fees that theInvestment Manager would have earned. Negative investment performance would not of itself constitutean event allowing the Investment Management Agreement to be terminated on short notice.

The Investment Manager has also been appointed as the Investing Fund’s discretionary investmentmanager and decisions taken by the Investment Manager in that capacity may not be in the bestinterests of the Company

The Investing Fund, which holds 15,773,804 Ordinary Shares representing 59.2 per cent. of the ExistingOrdinary Shares in the Company, is also managed by the Investment Manager. The investment policiesand objectives of such fund may differ from those of the Company and investment managementdecisions taken by the Investment Manager in relation to the Investing Fund may not always be in thebest interests of the Company. The Investing Fund, through the votes it is able to exercise at generalmeetings of the Company, is capable of exercising a significant degree of influence over the outcomeof certain matters to be considered by the Company’s Shareholders.

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The AIFM Directive, if implemented, may impair the ability of the Investment Manager to managethe investments of the Company which may materially adversely affect the Company’s ability toimplement its investment strategy and achieve its investment objective

On 30 April 2009 the European Commission published a draft AIFM Directive which is currently dueto be implemented in 2012. In its current form, the draft AIFM Directive seeks to regulate alternativeinvestment fund managers (in this paragraph, “AIFM”) based in the EU and prohibits such managersfrom managing any alternative investment fund (in this paragraph, “AIF”) or marketing shares in suchfunds to EU investors unless authorisation is granted to the AIFM. Under the draft, in order to obtainsuch authorisation, and be able to manage the AIF, an AIFM would need to comply with variousobligations in relation to the AIF which may create significant additional compliance costs that may bepassed to investors in the AIF. Furthermore, as currently drafted, the marketing of shares or units in anAIF to EU investors would not be permitted if the AIFM were not authorised and, in the case of an AIF(such as the Company) domiciled outside the EU, the AIF’s host country were not to meet certainconditions (although the current draft of the AIFM Directive envisages that the restrictions on marketingthe shares or units of an AIF domiciled in a non-EU state would not come into force until three yearsafter implementation of the AIFM Directive, during which period it is likely, although not guaranteed,that EU AIFM will be able to market the shares of third country AIF under existing domestic privateplacement rules).

From the Company’s perspective, if implemented as currently drafted, the AIFM Directive wouldrequire the Investment Manager to seek the authorisation to manage the Company. If the InvestmentManager were to fail to, or be unable to, obtain such authorisation, it may be unable to continue tomanage the Company or its ability to manage the Company may be impaired.

The AIFM Directive may change considerably before it is adopted and the Board will continue to monitorthe position and react appropriately which may include putting proposals to Shareholders to redomicilethe Company. However, any regulatory changes arising from implementation of the AIFM Directive (orotherwise) that impair the ability of the Investment Manager to manage the investments of the Company,or limit the Company’s ability to market future issuances of its Shares, may materially adversely affectthe Company’s ability to carry out its investment strategy and achieve its investment objective.

Risks relating to the Shares

The price of the Company’s Shares may fluctuate significantly

The market price of the Shares may fluctuate significantly and Shareholders may not be able to reselltheir Shares at or above the price at which they purchased them. Factors that may cause the price of theShares to vary may include the following:

• changes in the Company’s financial performance and prospects or in the financial performanceand prospects of companies engaged in businesses that are similar to the Company’s business;

• changes in the underlying values of the investments that the Company makes, particularly whenthe Company announces its quarterly results;

• the termination of the Investment Management Agreement or the departure of some or all of theInvestment Manager’s investment professionals;

• changes in laws or regulations, or new interpretations or applications of laws and regulations, thatare applicable to the Company’s business;

• sales of Shares by Shareholders;

• general economic trends and other external factors, including those resulting from war, incidentsof terrorism or responses to such events;

• changes to the Company’s dividend policy;

• poor performance of the Investment Manager’s affiliated products and the potential negativepublicity associated therewith; and

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• speculation in the press or investment community regarding the Company’s business or investmentsor factors or events that may directly or indirectly affect the Company’s business or investments.

Securities markets in general have experienced extreme volatility that has often been unrelated to theoperating performance of particular companies. Any broad market fluctuations may adversely affect thetrading price of the Shares. Furthermore, investors should be aware that a liquid secondary market inthe Shares cannot be assured.

The Company may issue additional securities that dilute existing holders of Shares or that have rightsand privileges that are more favourable than the rights and privileges of holders of the Shares and,if the Revised Articles are adopted at the EGM, the Company intends to seek renewal of thedisapplication of pre-emption rights on an ongoing basis

Subject to the Companies Law and all other legal and regulatory requirements, the Company may issueadditional Ordinary Shares and, subject to the Revised Articles being approved by Shareholders at theEGM, additional Preference Shares. Any additional issuances by the Company, or the possibility of suchissue, may cause the market price of the relevant Shares to decline. Subject to all legal requirements,future issuances may consist of Shares or of securities having preferential rights and preferences.

The Companies Law and the Articles in force as at the date of this Prospectus contain no pre-emptionrights. However, as required by the Listing Rules, the Revised Articles do contain pre-emption rights.The pre-emption rights contained in the Revised Articles will not apply to the Preference Shares. If theRevised Articles are approved by Shareholders at the EGM, a further resolution will be proposed at theEGM to dis-apply the pre-emption rights contained in the Revised Articles in respect of 2,664,466Ordinary Shares until the end of the Company’s annual general meeting in 2011. The Directors intendto seek renewal of the authority to allot Ordinary Shares on a non-pre-emptive basis at each subsequentannual general meeting. Therefore, it may not be possible for existing Shareholders to participate infuture issues of Shares, which may dilute the existing Shareholders’ interests in the Company.

Borrowings and increases in operating and other expenses could limit the Company’s ability to paydividends to holders of Preference Shares and/or Ordinary Shares

The Company’s ability to pay dividends to holders of Preference Shares and/or Ordinary Shares will beadversely impacted by any increase in costs associated with its borrowings and operating expenses.There is no guarantee that holders of Preference Shares and/or Ordinary Shares will receive dividendsin the future. The payment of dividends in respect of the Ordinary Shares in the past should not be takenas implying that dividends will be paid in respect thereof in the future.

The Group’s operating and other expenses could increase without a corresponding increase indistributions from investments. Factors which could increase operating and other expenses may includethe following:

• increases in the rate of inflation and currency fluctuation;

• increases in the costs of services provided by third party providers;

• increases in taxes and other statutory charges;

• changes in laws, regulations or government or local authority policies (including those relating tohealth and safety and environmental compliance) which increase the costs of compliance withsuch laws, regulations or policies;

• unforeseen increases in the costs of maintaining the portfolio of investments; and

• unforeseen capital expenditure which may arise.

Such increases could have a material adverse effect on the Company’s financial position, capitalresources and ability to make any distributions to holders of Preference Shares and/or Ordinary Shares.

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Any borrowings undertaken by the Group in the future could also give rise to increased costs. As aresult, the Company’s cash available for distribution to holders of the Preference Shares or OrdinaryShares may be reduced to the extent that changes in economic conditions, increases in interest ratesand/or levels of amortisation imposed by its lenders cause the Group’s cost of borrowing to increaserelative to the income that can be derived from its portfolio of investments.

The Company’s future potential ability to pay dividends to holders of Preference Shares and OrdinaryShares depends on the availability of net cash income within the Group and the ability of the Companyto receive net cash income or intra-Group loan payments from SPVs or subsidiaries in the Group

The Company currently holds some of its investments indirectly through Trebuchet Finance Limited(a SPV) and may in the future hold assets through related SPVs or subsidiaries. It therefore does notdirectly receive net cash income generated from all the investments owned by the Group and is reliant onthe payment of net cash income or intra-Group loan payments from the related SPVs and/or subsidiaries.

The ability of the related SPV and/or subsidiary to make upstream cash payments or loans to otherGroup members is generally subject to applicable laws, the SPV’s and/or subsidiary’s organisationaldocuments, the terms of financing arrangements, accounting treatment or other factors. Applicable lawsrequire the related SPVs and/or subsidiaries to, among other things, comply with restrictions on theamounts distributed by way of dividend and capital and reserve maintenance principles, or require themto obtain shareholder approval. Applicable laws may also restrict the making of any distribution, loanor other payment or the timing thereof.

There is no assurance that the Group will be able to comply with any laws or requirements regulatingupstream cash distributions, loans, or payments directly or indirectly to the Company. If the Group isunable to comply with these laws or requirements, net cash income may be reduced, which wouldmaterially adversely affect the Company’s ability to pay dividends to holders of Preference Shares andOrdinary Shares, and which in turn could affect the trading price of the Preference Shares and theOrdinary Shares.

Restrictions on the payment of dividends may negatively affect the value of an investment in the Company

Investors should note that payment of any further dividend and any future dividend increases in respectof the Ordinary Shares will be proposed or, as the case may be, decided by the Board after taking intoaccount many factors, including the Company’s and the Group’s ability to buy and sell investments,operating results, financial condition, current and anticipated cash needs, the successful management ofthe Group’s existing investments, the distributions by investments, interest costs, legal and regulatoryrestrictions and such other factors as the Directors may deem relevant from time to time. The Company’sability to pay dividends to holders of Preference Shares and Ordinary Shares may be restricted as amatter of applicable law or regulation or other factors, including to the extent that the Board is unableto certify that the Company will satisfy the solvency test contained in the Companies Law immediatelyafter payment of the dividend. There is no guarantee that the Company’s existing or, if adopted,proposed dividend policy (see the section headed “Dividends and Dividend Policy” in Part I of thisProspectus for further details on the existing and proposed dividend policies) will be maintained, thatany dividends will be paid at all or that dividend growth will be achieved. Any failure to pay dividendsor achieve dividend growth could have a material adverse effect on the market price of the OrdinaryShares and the Preference Shares and the value of an investment in the Company.

The Company may require the sale or transfer, or procure the disposal of interests in, Shares held bycertain Shareholders

The Articles contain provisions which in certain circumstances entitle or require the Directors to servea transfer notice upon a Shareholder obliging that Shareholder to transfer his Shares to an eligibletransferee. Such circumstances arise if, in summary, the Directors have reason to believe that thetransferee is a person to whom a transfer of Shares would or could be in breach of the laws orrequirements of any jurisdiction or governmental authority or in circumstances (whether directly orindirectly affecting such person, and whether taken alone or in conjunction with other persons,connected or not, or any other circumstances appearing to the Directors to be relevant) which mightresult in the Company incurring a liability to taxation or suffering a pecuniary, fiscal, administrative orregulatory disadvantage.

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If the transfer notice is not complied with to the satisfaction of the Directors, the Company is entitled tosell or transfer (and/or procure the disposal of interests in) the Shares held by the relevant Shareholderon behalf of the holder. The net proceeds of sale will belong to the Company which will become indebtedto the former Shareholder for an amount equal to the net proceeds. There is no assurance as to the pricewhich may be achieved for the Shares in any such sale and the provisions of the Articles summarised inthis paragraph may operate to the detriment of certain Shareholders. A fuller description of the provisionsof the Articles summarised in this paragraph is set out in paragraph 4 of Part IX of this Prospectus.

The Company is not, and does not intend to become, registered in the United States as an investmentcompany under the US Investment Company Act and related rules

The Company has not, does not intend to, and may be unable to, become registered in the United Statesas an investment company under the US Investment Company Act. The US Investment Company Actprovides certain protections to US investors and imposes certain restrictions on companies that areregistered as investment companies. As the Company is not so registered, and does not intend to register,none of these protections or restrictions is or will be applicable to the Company. In addition, to avoidbeing required to register as an investment company under the US Investment Company Act and toavoid violating that Act, the Company has implemented restrictions on the ownership and transfer of theShares which may materially affect certain Shareholders’ ability to transfer the Shares.

Risks relating to Ordinary Shares

Approval of the Required Resolutions by Ordinary Shareholders may result in the issue of PreferenceShares that will entitle their holders to a preferential cumulative dividend to be paid in preference to anydistribution to Ordinary Shareholders and to a preferential right to repayment of the Repayment Amount

The Preference Shares have the right to receive the Preference Dividend and a preferential right to therepayment of the Repayment Amount on their designated redemption date. Therefore, any payment ofdividend to holders of Ordinary Shares is subject to the entitlement of holders of Preference Shares tothe Preference Dividend being satisfied and holders of Preference Shares benefit from a preferentialright to the reimbursement of the Repayment Amount. The Company’s ability to pay dividends toholders of Ordinary Shares will be adversely impacted by the issue of the Preference Shares. There isno guarantee that dividends will be paid on the Ordinary Shares.

The value of the Company’s Investment Portfolio attributable to the Ordinary Shares will depend onthe assets in the Company’s portfolio being sufficient to meet the Repayment Amount of thePreference Shares

If the Required Resolutions are approved, the Company’s capital structure will be such that theunderlying value of assets in the Company’s portfolio of investments attributable to the Ordinary Shareswill be leveraged by the performance of the assets in the Company’s portfolio relative to the RepaymentAmount attributable to the Preference Shares, which rank in priority to Ordinary Shares in respect ofrepayment of the Repayment Amount per Preference Share. Accordingly, a positive Net Asset Value forthe Ordinary Shareholders will be dependent upon the assets in the Investment Portfolio being sufficientto meet those prior entitlements, in addition to any entitlement for the repayment of capital inconnection with any debt financing which may be in place from time to time. Potential OrdinaryShareholders should understand they may receive an amount less than the price paid for their OrdinaryShares, or even no payment at all.

Ordinary Shareholders may not receive distributions

There is no assurance Ordinary Shareholders will receive distributions. The Ordinary Shareholders,subject to the Board exercising its discretion to pay a dividend and all other applicable legal and regulatoryrequirements and restrictions, may receive the income of the Company after payment of the PreferenceDividend payable from time to time, fees, expenses and taxes. Any distributions in respect of the OrdinaryShares are subject to a number of considerations and restrictions that will include the following:

• the Company passing the solvency test contained in the Companies Law;

• prevailing market conditions;

LR13.3.1(9)(c)

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• any other legal or regulatory constraints;

• the Directors exercising their sole discretion to purchase Shares; and

• the Company electing to use income to make further investments rather than pay all or some ofthe excess income to Ordinary Shareholders as a dividend.

Investors are reminded that if the Required Resolutions are adopted and the Board changes the dividendpolicy as set out in Part I of this Prospectus (noting that the change in dividend policy is not subject tothe approval of Shareholders and will be amended if the Directors, in their sole and absolute discretion,choose to do so) achieving income on the Ordinary Shares will no longer be a primary objective and,therefore, the Directors do not expect revenue profits or revenue reserves to be significant and suchrevenue profits or revenue reserves may be used for reinvestment in assets in the Investment Portfolio.

Any change in the tax treatment of dividends paid to, income received by or capital returned to theCompany may reduce the dividends or other distributions paid to the holders of the Ordinary Shares.Any change in the tax treatment of distributions made to, or dividends paid to, the holders of OrdinaryShares may have adverse taxation consequences for such holders.

The existence of a liquid market in the Ordinary Shares cannot be guaranteed

Neither the admission of the Existing Ordinary Shares to the Official List and to trading on the LondonStock Exchange’s market for listed securities, nor the proposed Open Offer Admission of the New OrdinaryShares should be taken as implying that there is or will be a liquid market for the Ordinary Shares.

The Ordinary Shares currently, have in the past, and could in the future, trade at a discount to NetAsset Value

The Ordinary Shares have periodically traded at a discount to Net Asset Value and any class of Sharesissued from time to time could do so in the future for a variety of reasons, including due to marketconditions or the extent investors undervalue the Investment Manager’s investment managementactivities. The Company is not obligated to make cash distributions to the Shareholders and it mayreinvest the cash it receives. Therefore, in order to realise upon their investment, investors may need tosell their Ordinary Shares for cash. Accordingly, in the event that a holder of Ordinary Shares requiresimmediate liquidity, or otherwise seeks to realise the value of its investment in the Company, through asale of Ordinary Shares, the amount received by the Shareholder upon such sale may be less than theunderlying Net Asset Value of the Ordinary Shares sold. Further, there is no guarantee that a liquidmarket in the Ordinary Shares will exist at the time of any such sale which would likely further reducethe amount received by the Shareholders.

Risks relating to Preference Shares

The existence of a liquid market in the Preference Shares cannot be guaranteed and the PreferenceShares could trade at a discount to the Preference Share Notional Value

There can be no guarantee that a liquid market in the Preference Shares will develop or that thePreference Shares will trade at prices close to their underlying redemption capital entitlement. ThePreference Shares could trade at a discount to the Preference Share Notional Value. Accordingly,Preference Shareholders may be unable to realise their investment at their underlying redemption capitalentitlement or at all.

The Bonus Issue is the initial offering of the Preference Shares and no public market for the PreferenceShares currently exists. The Company has applied for Bonus Issue Admission and it is expected thatBonus Issue Admission will become effective and that dealings in the Preference Shares will commenceon 17 September 2010. Any delay in the commencement of trading in the Preference Shares on theLondon Stock Exchange would decrease the liquidity of the market for the Preference Shares, makingtrading in the Preference Shares more difficult for Shareholders.

In addition it is not possible to predict the extent to which an active market for the Preference Shareswill develop or be sustained after the Preference Shares are listed on the London Stock Exchange. Theremay be a limited number of holders of Preference Shares. Limited numbers and/or holders of Preference

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Shares may mean that there is limited liquidity in such Preference Shares which may affect (i) aninvestor’s ability to realise some or all of his investment and/or (ii) the price at which such investor caneffect such realisation and/or (iii) the price at which Preference Shares trade in the secondary market.

The Company cannot predict the effects on the price of the Preference Shares if a liquid and active tradingmarket for those Preference Shares does not develop. In addition, if such a market does not develop,relatively small sales may have a significant negative impact on the price of the Preference Shares, andsales of a significant number of those Preference Shares may be difficult to execute at a stable price.

The Company’s ability to pay dividends to holders of Preference Shares is not guaranteed

The ability of the Company to pay the Preference Dividend to holders of Preference Shares is notguaranteed and is dependent upon the Board being able to certify that the Company will satisfy thesolvency test contained in the Companies Law immediately after payment of the Preference Dividend.If the Company fails to pay all or any part of a Preference Dividend, the Company will pay a furthersum to each of the Preference Shareholders on the amount of any Preference Dividend not paid within14 days of the relevant Payment Date at the rate of 8 per cent. per annum calculated on a daily basisfrom (but excluding) the Payment Date to (but excluding) the date payment of such amount of thePreference Dividend is made, such further sum to be payable on the date of such payment.

The application for admission to the Official List of the UK Listing Authority in respect of thePreference Shares is an application for a standard listing and not a premium listing

As the Preference Shares will not be “equity shares” for the purposes of the Listing Rules, thePreference Shares are not eligible for a listing on the premium segment of the Official List of the UKListing Authority. Provided that Bonus Issue Admission occurs, a number of Listing Rules that areapplicable to the Ordinary Shares will not apply in respect of the Preference Shares including, withoutlimitation, certain rules relating to significant transactions, related party transactions, the Companydealing in the Preference Shares and the contents of circulars sent to Preference Shareholders. Inaddition, the pre-emption rights contained in the Revised Articles will not, if the Revised Articles areapproved at the EGM, apply to Preference Shares.

The Investing Fund may seek to dispose of its holding of Preference Shares on or shortly followingBonus Issue Admission.

The Investing Fund may seek to dispose of all or part of its holding of Preference Shares on or shortlyfollowing Bonus Issue Admission. The Investing Fund has agreed that, subject to Liberum Capitalprocuring purchasers for at least 25 per cent. of the Preference Shares issued to the Investing Fundpursuant to the Bonus Issue, where it does seek to dispose of all or part of its holding of PreferenceShares, it will effect such disposal through Liberum Capital. Whilst the Investing Fund has given anundertaking to trade the balance of its holding of Preference Shares through Liberum Capital in anorderly fashion for a period of six months from Bonus Issue Admission, there can be no guarantee thatsuch an orderly marketing arrangement will be successful or that the aim of preventing significantvolatility or reduction in the price of the Preference Shares, which could occur on release of a largevolume of Preference Shares for sale in the market, will be achieved.

Risks relating to the Placing and Open Offer and Bonus Issue

The Company’s Share price may fluctuate due to the Placing and Open Offer and the Bonus Issue

The Company’s Share price is generally subject to fluctuation and, in addition, the market price of theNew Ordinary Shares and/or the Existing Ordinary Shares could be subject to significant fluctuationsdue to a change in sentiment in the market specifically regarding the Placing and Open Offer, an issueof Ordinary Shares at a discount to the prevailing NAV per Ordinary Share and the Bonus Issue. Suchrisks will depend in part on the market’s response to the Placing and Open Offer and the Bonus Issue.

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Ordinary Shareholders will experience dilution in their ownership of, and voting interest in, theCompany to the extent that they do not subscribe in full for their Open Offer Entitlement

If a Qualifying Open Offer Shareholder does not subscribe in full for his entitlement under the OpenOffer, his proportionate ownership and voting interests in the Company will be reduced and thepercentage that his Shares will represent of the total share capital of the Company will be reducedaccordingly. Ordinary Shareholders in the Excluded Territories or who are US Persons will not be ableto participate in the Placing and Open Offer.

In addition, the Bonus Issue Record Date is after the date on which the New Ordinary Shares will beissued. As each Ordinary Shareholder’s entitlement to Preference Shares will be based on the OrdinaryShares held following the Placing and Open Offer, a Qualifying Open Offer Shareholder who does notsubscribe for the maximum number of New Ordinary Shares available or sells Ordinary Shares prior tothe Bonus Issue Record Date will receive fewer Preference Shares pursuant to the Bonus Issue.

Shareholders outside the United Kingdom may not be able to acquire New Ordinary Shares and maynot be able to participate in the Bonus Issue

Securities laws of certain jurisdictions (such as the Excluded Territories which include the UnitedStates) may restrict the Company’s ability to allow participation by Shareholders in the Placing andOpen Offer and the Bonus Issue. In particular, holders of Ordinary Shares who are US Persons or arelocated in the United States will not be able to participate in the Open Offer and the Bonus Issue. TheOpen Offer Entitlements, the New Ordinary Shares and the Preference Shares have not been and willnot be registered under the US Securities Act and the Company has not been and will not be registeredunder the US Investment Company Act. Securities laws of certain other jurisdictions may restrict theCompany’s ability to allow participation by Shareholders in such jurisdictions in any future issue ofshares carried out by the Company.

Risks relating to Taxation

An adverse change in the Company’s tax status or applicable tax legislation could harm theCompany’s financial condition or prospects

Any change in the Company’s tax status or in taxation legislation or practice in Guernsey or any othertax jurisdiction affecting the Company could affect the value of the investments held by the Companyor affect the Company’s ability to achieve its investment objective or alter the post-tax returns toShareholders. Any such change could adversely affect the net amount of any dividends payable toPreference Shareholders and/or Ordinary Shareholders.

In addition, if the Company were treated as having a permanent establishment, or as otherwise beingengaged in a trade or business, in any country in which it invests, income attributable to or effectivelyconnected with such permanent establishment or trade or business may be subject to tax on a net basis.

Statements in this Prospectus concerning the taxation of Shareholders are based upon current tax lawand published practice in the jurisdictions covered, which law and practice is, in principle, subject tochange that could be adverse to Shareholders. The advice that the Directors have received in relation tothe new definition of an “offshore fund” for the purposes of the new UK offshore fund rules introducedby the Finance Act 2009 with effect from 1 December 2009 is based in part upon certain generaldiscussions and correspondence between the Company’s advisers and HMRC in relation to theinterpretation of the new definition.

As a result, the Directors may apply for “Reporting Fund” status in respect of the Preference Shares inorder to retain the most advantageous UK tax treatment for UK resident Preference Shareholders.

Changes in the Company’s non-UK tax residence status would adversely affect the Company

In order to maintain its non-UK tax resident status, the Company is required to be controlled andmanaged outside the United Kingdom. In order to maintain its non-UK tax resident status, each memberof the Group and the Company is required to be controlled and managed outside the United Kingdom.The composition of each Group company’s board, the place of residence of the board’s individualmembers and the location(s) in which the board makes decisions will all be important in determining

AI 9.2.3

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and maintaining the non-UK tax resident status of that company. Although each company is establishedoutside the UK and a majority of the board of directors of each member of the Group live outside theUnited Kingdom, continued attention must be given to ensure that major decisions are not made in theUnited Kingdom or the relevant company may lose its non-UK tax resident status. As such,management errors could potentially lead to a company being considered a UK tax resident, whichwould negatively affect its financial and operating results.

There is a risk that amounts paid or received under intra-group arrangements in the past and/or thefuture could be deemed for tax purposes to be lower or higher, as the case may be, or fail to bedisregarded for the purposes of calculating tax which may increase the Group’s taxable income ordecrease the amount of relief available to the Group with a consequential negative effect on its financialand operating results.

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IMPORTANT INFORMATION

The attention of existing and potential investors is drawn to the “Risk Factors” set out on pages 9to 34 of this Prospectus.

Investment in the Company will involve certain risks and special considerations. Existing andpotential investors should be able and willing to withstand the loss of their entire investment. Theinvestments of the Company are subject to normal market fluctuations and the risks inherent inall investments and there can be no assurance that an investment will retain its value or thatappreciation will occur. The price of the Ordinary Shares and Preference Shares and the incomefrom Preference Shares and Ordinary Shares can go down as well as up and Shareholders maynot realise the value of their initial investment.

General

This Prospectus has been produced for the purpose of the Placing and Open Offer and the Bonus Issueand seeking admission to listing on the Official List of the UK Listing Authority and admission totrading of the New Ordinary Shares and the Preference Shares on the London Stock Exchange’s mainmarket for listed securities. In making an investment decision regarding the New Ordinary Sharesoffered pursuant to the Placing and Open Offer (and the resulting Preference Shares issued pursuant tothe Bonus Issue), investors must rely on their own examination of the Company, including the meritsand risks involved in an investment in the New Ordinary Shares (and the resulting receipt of thePreference Shares). The Placing and Open Offer and the Bonus Issue are being made solely on the basisof this Prospectus.

The New Ordinary Shares and the Preference Shares are only suitable for existing and potentialinvestors who understand the potential risk of capital loss and that there may be limited liquidity in theunderlying investments of the Company, for whom an investment in the New Ordinary Shares andPreference Shares would be of a long-term nature and constitutes part of a diversified investmentportfolio and who understand and are willing to assume the risks involved in investing in the Company.

In connection with the Placing and Open Offer and/or the Bonus Issue, Liberum Capital and any of itsAffiliates acting as an investor for its or their own account(s) may receive New Ordinary Shares and/orPreference Shares and, in that capacity, may retain, purchase, offer to sell or otherwise deal for its ortheir own account(s) in the New Ordinary Shares and/or the Preference Shares, any other securities ofthe Company or other related investments in connection with the Placing and Open Offer or the BonusIssue or otherwise. Accordingly, references in this Prospectus to the New Ordinary Shares and thePreference Shares being offered, received, acquired or otherwise dealt with should read as including anyoffer to sell, or receipt, acquisition or dealing by Liberum Capital and any of its Affiliates acting as aninvestor for its or their own account(s). Liberum Capital does not intend to disclose the extent of anysuch investment or transaction otherwise than in accordance with any legal or regulatory obligation todo so.

No broker, dealer or other person has been authorised by the Company, its Directors, the InvestmentManager or Liberum Capital to issue any advertisement or to give any information or to make anyrepresentations in connection with the Placing and Open Offer or the Bonus Issue, other than thosecontained in this Prospectus and, if issued, given or made, such advertisement, information orrepresentations must not be relied upon as having been authorised by the Company, its Directors, theInvestment Manager or Liberum Capital.

Existing and potential investors should not treat the contents of this Prospectus as advice relating tolegal, taxation, investment or any other matters. Existing and potential investors should informthemselves as to: (a) the legal requirements within their own countries for the purchase, receipt, holding,transfer, redemption or other disposal of New Ordinary Shares and/or Preference Shares and/or ExistingOrdinary Shares, (b) any foreign exchange restrictions applicable to the purchase, receipt, holding,transfer, redemption or other disposal of New Ordinary Shares and/or Preference Shares and/or ExistingOrdinary Shares that they might encounter, and (c) the income and other tax consequences that mayapply in their own countries as a result of the purchase, receipt, holding, transfer, redemption or other

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disposal of New Ordinary Shares and/or Preference Shares and/or Existing Ordinary Shares. Existingand potential investors must rely upon their own representatives, including their own legal advisers andaccountants, as to legal, tax, investment or any other related matters concerning the Company and aninvestment therein.

Statements made in this Prospectus are based on the law and practice currently in force in Guernsey,England and Wales and the United States and are subject to changes therein. Prospective investorsshould assume that the information appearing in this Prospectus is accurate only as of the date on thefront cover of this Prospectus, regardless of the time of delivery of the Prospectus or of any offer or saleof the New Ordinary Shares and/or Preference Shares. The business, financial condition and prospectsof the Company could have changed since that date. The Company expressly disclaims any duty toupdate this Prospectus save where required by the Authorised Closed-ended Investment Scheme Rules2008, the Prospectus Rules, Listing Rules or Disclosure and Transparency Rules of the FSA.

This Prospectus should be read in its entirety before making any investment in the Company. Allprospective Shareholders are entitled to the benefit of, are bound by and are deemed to have notice of,the provisions of the Memorandum and Articles of Incorporation of the Company.

Restrictions on Sales

This Prospectus does not constitute, and may not be used for the purposes of, an offer or an invitation tosubscribe for any New Ordinary Shares and/or Preference Shares by any person in any jurisdiction: (i) inwhich such offer or invitation is not authorised; or (ii) in which the person making such offer or invitationis not qualified to do so; or (iii) to any person to whom it is unlawful to make such offer or invitation.

The distribution of this Prospectus and the offering of the New Ordinary Shares and Preference Sharesin certain jurisdictions may be restricted. Accordingly, persons outside the United Kingdom into whosepossession this Prospectus comes are required by the Company and Liberum Capital to informthemselves about and to observe any restrictions as to the offer or sale of New Offer Shares andPreference Shares and the distribution of this Prospectus under the laws and regulations of any territoryin connection with any applications for New Ordinary Shares and/or Preference Shares in the Company,including obtaining any requisite governmental or other consent and observing any other formalityprescribed in such territory. No action has been taken or will be taken in any jurisdiction by theCompany, Liberum Capital, the Investment Manager or the Administrator that would permit a publicoffering of the New Ordinary Shares or Preference Shares in any jurisdiction where action for thatpurpose is required, nor has any such action been taken with respect to the possession or distribution ofthis Prospectus other than in any jurisdiction where action for that purpose is required.

This Prospectus does not constitute or form part of an offer or invitation to sell or issue, or a solicitationof an offer to purchase or subscribe for, the Open Offer Entitlements, the New Ordinary Shares or thePreference Shares to any person to whom or in any jurisdiction in which such an offer, invitation orsolicitation is unlawful, including the Excluded Territories. US Persons and persons within the UnitedStates or any other Excluded Territory may not take up the Open Offer Entitlements or subscribe for orpurchase the New Ordinary Shares or receive the Preference Shares offered hereby.

US Persons and persons within the United States or any other Excluded Territory who obtain a copy ofthis Prospectus or the Application Form are required to disregard it. No offer, purchase, sale, exerciseor transfer of Open Offer Entitlements, New Ordinary Shares or Preference Shares may be made exceptunder circumstances which will not result in the Company being required to register as an investmentcompany under the US Investment Company Act or potentially being in violation of the US InvestmentCompany Act or the rules and regulations promulgated thereunder.

The Shares are subject to the restrictions on transfer described herein.

In addition, until the expiration of 40 days after the later of the commencement of the Placing and theOpen Offer, an offer, sale or transfer of the Shares within the United States by any dealer may violatethe registration requirements of the US Securities Act.

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For the attention of Shareholders and investors in the European Economic Area

In relation to each member state of the European Economic Area that has implemented the ProspectusDirective (each, a “Relevant Member State”), with effect from and including the date on which theProspectus Directive is implemented in that Relevant Member State (the “Relevant ImplementationDate”), an offer of New Ordinary Shares and/or Preference Shares described in this Prospectus may notbe made to the public in that Relevant Member State prior to the publication of a prospectus in relationto the New Ordinary Shares and/or Preference Shares that has been approved by the competent authorityin that Relevant Member State or, where appropriate, approved in another Relevant Member State andnotified to the competent authority in that Relevant Member State, all in accordance with the ProspectusDirective, except that, with effect from and including the Relevant Implementation Date, an offer ofsecurities may be offered to the public in that Relevant Member State at any time:

• to any legal entity that is authorised or regulated to operate in the financial markets or, if not soauthorized or regulated, whose corporate purpose is solely to invest in securities; or

• to any legal entity that has two or more of (1) an average of at least 250 employees during the lastfinancial year; (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnoverof more than €50,000,000, as shown in its last annual or consolidated accounts; or

• in any other circumstances that do not require the publication of a prospectus pursuant to Article 3of the Prospectus Directive.

For purposes of this provision, the expression an “offer to the public” in any Relevant Member Statemeans the communication in any form and by any means of sufficient information on the terms of theoffer and the securities to be offered so as to enable an investor to decide to purchase or subscribe thesecurities, as the expression may be varied in that Relevant Member State by any measure implementingthe Prospectus Directive in that Relevant Member State, and the expression “Prospectus Directive”means Directive 2003/71/EC of the European Parliament and of the Council of 4 November 2003 andincludes any relevant implementing measure in each Relevant Member State.

This Prospectus may not be used for, or in connection with, and does not constitute, any offer of anyNew Ordinary Shares or Preference Shares or an invitation to purchase or subscribe for New OrdinaryShares or Preference Shares in any Relevant Member State or jurisdiction in which such offer orinvitation will be lawful.

For the attention of US Persons and persons within the United States

The Open Offer Entitlements, the New Ordinary Shares and the Preference Shares have not been andwill not be registered under the US Securities Act, or under any securities laws of any state or otherjurisdiction of the United States. The Open Offer Entitlements, the New Ordinary Shares and thePreference Shares may not be offered, sold, resold, taken up, exercised, renounced, transferred, deliveredor distributed, directly or indirectly, into or within the United States or to, or for the account or benefitof, US Persons. The Open Offer Entitlements, the New Ordinary Shares and the Preference Shares arebeing offered and sold only outside the United States to non-US Persons in “offshore transactions” inaccordance with and in reliance on the exemption from the registration requirements of theUS Securities Act provided by Regulation S thereunder. There will be no public offer of the Open OfferEntitlements, the New Ordinary Shares or the Preference Shares in the United States. US Persons andpersons within the United States or any other Excluded Territory may not take up the Open OfferEntitlements, subscribe for or purchase the New Ordinary Shares, or receive the Preference Sharesoffered hereby.

The Company has not been and will not be registered under the US Investment Company Act and, assuch, investors will not be entitled to the benefits of the US Investment Company Act.

The Open Offer Entitlements, the New Ordinary Shares and the Preference Shares have not beenapproved or disapproved by the US Securities and Exchange Commission, any state securitiescommission in the United States or any other regulatory authority in the United States, nor have any of

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the foregoing authorities passed upon or endorsed the merits of the Placing, the Open Offer or the BonusIssue or the accuracy or adequacy of this Prospectus. Any representation to the contrary is a criminaloffence in the United States.

For the attention of Shareholders and investors in Portugal

This Prospectus is private and confidential and is for the use solely of the person to whom suchmaterials are addressed. No action has been taken, or is intended to be taken, that would cause thisdistribution to be qualified under Portuguese Securities Code as a public offer of securities.

Accordingly, neither this Prospectus nor any other information related to it shall be made available tothe public, advertised in any public manner in Portugal or to Portuguese residents or used for solicitationpurposes to undetermined investors in Portugal. This Prospectus is being made available for informationpurposes and on a personal and confidential basis exclusively to Portuguese “qualified investors”,within the meaning of the Portuguese Securities Code, and to less than 100 determined Portuguese“non-qualified” investors.

For the attention of Shareholders and investors in Switzerland

The New Ordinary Shares and Preference Shares may not be publicly offered, distributed orre-distributed on a professional basis in or from Switzerland and neither this Prospectus nor any othersolicitation for investments in the New Ordinary Shares or Preference Shares may be communicated ordistributed in Switzerland in any way that could constitute a public offering within the meaning ofArticles 652a of the Swiss Code of Obligations. This Prospectus may not be copied, reproduced,distributed or passed on to others without the Company’s prior written consent. This Prospectus is nota prospectus within the meaning of Article 652a of the Swiss Code of Obligations or a listing prospectusaccording to Article 32 et seq. of the Listing Rules of the SWX Swiss Exchange and may not complywith the information standards required thereunder. The Company will not apply for a listing of theShares on any Swiss stock exchange and this Prospectus may not comply with the information requiredunder the relevant listing rules.

In addition, it cannot be excluded that the Company qualifies as a foreign collective investment schemepursuant to Article 119 of the Swiss Federal Act on Collective Investment Schemes (“CISA”). The NewOrdinary Shares and the Preference Shares will not be licensed for public distribution in and fromSwitzerland. Therefore, the New Ordinary Shares and the Preference Shares may only be offered andsold to so-called “qualified investors” in accordance with the private placement exemptions set forth bythe law (in particular, Article 10 para. 3 CISA and Article 6 of the implementing ordinance to the CISA).The Company has not been licensed and is not subject to the supervision of the Swiss Federal BankingCommission (“SFBC”). Therefore, investors in the New Ordinary Shares and the Preference Shares donot benefit from the specific investor protection provided by CISA and the supervision of the SFBC.

For the attention of investors in Israel

The Placing and Open Offer and the Bonus Issue is intended solely for investors listed in the FirstSupplement of the Israeli Securities Law, 1968 to whom an offer of securities may be made without thepublication of a prospectus in accordance with the Israeli Securities Law, 1968. A prospectus has notbeen prepared or filed, and will not be prepared or filed with the Israeli Securities Authority inconnection with this offering. Subject to any applicable law, the New Ordinary Shares and PreferenceShares offered in this offering may not be offered or sold in the State of Israel to more than thirty-fiveofferees, in the aggregate, who are not listed in the First Supplement of the Israeli Securities Law, 1968.

Forward-Looking Statements

This Prospectus includes statements that are, or may be deemed to be, “forward-looking statements”. Insome cases, these forward-looking statements may be identified by the use of forward-lookingterminology, including the terms “believes”, “estimates”, “anticipates”, “expects”, “intends”, “may”,“will” or “should” or, in each case, their negative or other variations or comparable terminology. Theseforward-looking statements include all matters that are not historical facts. They appear in a number ofplaces throughout this Prospectus and include statements regarding the intentions, beliefs or currentexpectations of the Company concerning, amongst other things, the investment objectives and

38

investment policy, financing strategies, investment performance, results of operations, financialcondition, prospects, and dividend policy of the Company and the markets in which it, and its portfolioof investments invest and, where applicable, issue securities. By their nature, forward-lookingstatements involve risks and uncertainties because they relate to events and depend on circumstancesthat may or may not occur in the future. Forward-looking statements are not guarantees of futureperformance. The Company’s actual investment performance, results of operations, financial condition,dividend policy and the development of its financing strategies may differ materially from theimpression created by the forward looking statements contained in this Prospectus. In addition, even ifthe investment performance, results of operations and financial condition of the Company, and thedevelopment of its financing strategies, are consistent with the forward-looking statements contained inthis Prospectus, those results or developments may not be indicative of results or developments insubsequent periods. Important factors that could cause these differences include, but are not limited to:

• the risk factors in the section titled “Risk Factors” in this Prospectus;

• changes in economic conditions generally and the Company’s ability to achieve its investmentobjectives and returns on equity for investors;

• changes in the Company’s business strategy and the audited financial history of the Company notbeing indicative of its future performance;

• the Company’s ability to invest the cash on its balance sheet and the proceeds of the Open Offerin suitable investments on a timely basis;

• changes in interest rates and/or credit spreads, as well as the success of the Company’s investmentstrategy in relation to such changes and the management of the uninvested proceeds of theOpen Offer;

• significant changes in the market value of the Investment Portfolio from time to time;

• impairments in the value of the Company’s investments;

• the availability and cost of capital for future investments;

• competition within the industries in which the Company seeks to invest;

• the departure of key members employed by the Investment Manager;

• approval of the Required Resolutions;

• the termination of, or failure of the Investment Manager to perform its obligations under theInvestment Management Agreement with the Company;

• changes in laws or regulations, including tax laws, or new interpretations or applications of lawsand regulations, that are applicable to the Company’s business or companies in which theCompany makes investments; and

• general economic trends and other external factors, including those resulting from war, incidentsof terrorism or responses to such events.

Given these uncertainties, existing and prospective investors are cautioned not to place any unduereliance on such forward-looking statements. These forward-looking statements speak only as at thedate of this Prospectus.

Although the Company and the Investment Manager undertake no obligation to revise or update anyforward-looking statements contained herein (save where required by the Prospectus Rules, ListingRules or Disclosure and Transparency Rules of the FSA), whether as a result of new information, futureevents, conditions or circumstances, any change in the Company’s or the Investment Manager’sexpectations with regard thereto or otherwise, holders of Ordinary Shares and Preference Shares areadvised to consult any communications made directly to them by the Company and/or any additionaldisclosures through announcements that the Company may make through a RIS.

39

No Incorporation of Website

The contents of the Company’s and the Investment Manager’s website do not form part ofthis Prospectus.

Presentation of Information

In this Prospectus:

All references to the “Company” are to Queen’s Walk Investment Limited (together, where relevant,with its subsidiaries and subsidiary undertakings).

All references to the “Investment Manager” or “Cheyne Capital” are to Cheyne Capital Management(UK) LLP.

All references to historical financial data are in accordance with International Financial ReportingStandards (“IFRS”).

All references to “Euro” or “€” are to the lawful single currency of member states of the EuropeanCommunities that adopt or have adopted the Euro as their currency in accordance with the legislationof the European Union relating to European Monetary Union.

All references to “GBP”, “Sterling” or “pound Sterling” are to the lawful currency of the United Kingdom.

All references to “$”, “US$” or “US Dollars” are to the lawful currency of the United States.

Service of Process and Enforcement of Civil Liabilities

The Company is incorporated under Guernsey law. Service of process upon Directors and officers ofthe Company, all of whom reside outside the United States, may be difficult to effect within the UnitedStates. Furthermore, since most directly owned assets of the Company are outside the United States, anyjudgment obtained in the United States against the Company may not be enforceable in practice withinthe United States. There is doubt as to the enforceability outside the United States, in original actionsor in actions for enforcement of judgments of US courts, of civil liabilities predicated upon US federalsecurities laws. In addition, awards of punitive damages in actions brought in the United States orelsewhere may be unenforceable in Guernsey or the United Kingdom.

References to Defined Terms and Incorporation of Terms

Certain terms used in this Prospectus, including capitalised terms and certain technical and other termsare explained in the section entitled “Definitions and Glossary”.

40

EXPECTED TIMETABLE OF PRINCIPAL EVENTS

2010

Open Offer Record Date close of business on13 August

Publication of Prospectus and Circular and despatch of Application Forms 17 August

Existing Ordinary Shares marked “ex” by the London Stock Exchange (expected to be)17 August

Open Offer Entitlements credited to the stock accounts of Qualifying 18 AugustCREST Open Offer Shareholders

Recommended latest time and date for requesting withdrawal of Open Offer 4.30 p.m. onEntitlements from CREST (i.e. if Open Offer Entitlements are in CREST 3 Septemberand the Qualifying CREST Open Offer Shareholder wishes to convert them into certificated form)

Recommended latest time for depositing an Application Form with the 3.00 p.m. onCREST Courier and Sorting Service (i.e. where a Qualifying Open Offer 6 September Shareholder wishes to hold the Open Offer Entitlement set out in an Application Form as Open Offer Entitlements in CREST)

Latest time and date for splitting Application Forms (to satisfy bona fide 3.00 p.m. onmarket claims only) 7 September

Latest time and date for acceptance, payment in full and submission of 11.00 a.m. onApplication Forms (in respect of Qualifying Certificated Open Offer 9 SeptemberShareholders) and USE Instructions (in respect of Qualifying CRESTOpen Offer Shareholders) to the Receiving Agent

Open Offer Entitlements held in CREST expected to be disabled 11.00 a.m. on 9 September

Latest time and date for receipt of the Form of Proxy for the Extraordinary 11.00 a.m. on General Meeting (or receipt of the appropriate CREST message, in the case 13 Septemberof CREST members)

Extraordinary General Meeting1 11.00 a.m. on15 September

Announcement of results of the Open Offer 15 September

Admission of the New Ordinary Shares issued pursuant to the Placing and 16 SeptemberOpen Offer to the Official List and commencement of dealings on the London Stock Exchange

New Ordinary Shares in uncertificated form expected to be credited to 8.00 a.m. onaccounts in CREST 16 September

Bonus Issue Record Date for the calculation of the maximum number of 5.00 p.m. on Preference Shares to be issued to Qualifying Bonus Issue Shareholders 16 Septemberpursuant to the Bonus Issue

Ordinary Shares marked “ex” by the London Stock Exchange (expected to be)17 September

AIII 4.7

AIII 5.1.9

AIII 5.1.3AIII5.2.3(g)

41

1 The quorum for the Extraordinary General Meeting is two Shareholders of the Company present in person or by proxy. In the eventthat the Extraordinary General Meeting is not quorate, the Board will reconvene the Extraordinary General Meeting on22 September 2010.

2010

Admission of the Preference Shares issued pursuant to the Bonus Issue 17 Septemberto the Official List and commencement of dealings on the London Stock Exchange

Preference Shares in uncertificated form expected to be credited to accounts 17 Septemberin CREST

Announcement of the number of Preference Shares to be issued pursuant 17 Septemberto the Bonus Issue

Despatch of definitive share certificates for the New Ordinary Shares by 23 Septemberin certificated form

Despatch of definitive share certificates for the Preference Shares in by 23 Septembercertificated form

General Notes:

(a) The actions specified in the expected timetable of principal events above are subject to certainrestrictions relating to certain Shareholders and the Excluded Territories, details of which are setout in Parts IV and VI (as applicable) of this Prospectus.

(b) The times and dates set out in the expected timetable of principal events above and mentionedthroughout this Prospectus may be adjusted by the Company, in which event details of the newtimes and dates will be notified to the UK Listing Authority, and an announcement will be madeon an RIS.

(c) References to times in this Prospectus are to London times unless otherwise stated.

(d) If you have any queries on the procedure for acceptance and payment, you should contact theReceiving Agent. The Receiving Agent cannot provide advice on the merits of the proposals orgive any financial, legal or tax advice.

If you have any queries on the procedure for acceptance and payment in relation to the ApplicationForm, you should contact the Receiving Agent on 0871 664 0321, if you are calling from inside the UK,or +4420 8639 3399, if calling from outside the UK, between 9.00 a.m. and 5.00 p.m. Monday to Friday(excluding public holidays). Calls to the 0871 664 0321 number are charged at 10 pence per minutefrom a BT landline. Other network providers’ costs may vary. Calls to the helpline from outside the UKwill be charged at applicable international rates. Different charges may apply to calls made from mobiletelephones and calls may be recorded and monitored randomly for security and training purposes.

LR13.3.1(9)(a)

42

INDICATIVE STATISTICS

Offer Price per New Ordinary Share €2.00

NAV per New Ordinary Share as at 31 March 2010 €3.73

Expected NAV per New Ordinary Share following Placing and Open Offer(1) €3.11

Initial Adjusted NAV per New Ordinary Share following Bonus Issue(2) €1.59

Maximum total number of Ordinary Shares in issue post Open Offer Admission 39,966,985

Estimated net proceeds receivable by the Company pursuant to the Placing and €24,880,656Open Offer(3)

Maximum total number of Preference Shares in issue post Bonus Issue Admission 49,958,731

Preference Share Notional Value £1.00

ISIN for Ordinary Shares GB00B0HW5366

ISIN for Preference Shares GG00B4ZRT175

(1) The expected NAV per New Ordinary Share following the Placing and Open Offer will take into account the expected netproceeds receivable by the Company and the Enlarged Issued Ordinary Share Capital following the Placing and Open Offer.

(2) The Adjusted NAV will be equal to the Expected NAV per New Ordinary Share following the Placing and Open Offer decreasedby an amount equal to the Aggregate Preference Share Notional Value.

(3) The estimated net proceeds receivable by the Company are stated after deduction of the estimated commissions, fees andexpenses of the Placing and Open Offer and Bonus Issue payable by the Company, which are expected to be approximately€1,764,000.

AIII 4.1

AIII 4.4AIII 5.3.1

43

CORPORATE INFORMATION

Directors Tom Chandos (Chairman)Talmai MorganChristopher SpencerGraham HarrisonJohn Hawkins

Registered Office of the Company Dorey CourtAdmiral ParkSt. Peter PortGuernsey GY1 3BGTelephone Number: +44 1481 727111

Administrator and Kleinwort Benson (Channel Islands)Secretary of the Company Fund Services Limited

Dorey CourtAdmiral ParkSt. Peter PortGuernsey GY1 3BG

Investment Manager Cheyne Capital Management (UK) LLPStornoway House13 Cleveland RowLondon SW1A 1DHTelephone Number: +44 20 7031 7450

Sponsor, Financial Adviser Liberum Capital Limitedand Bookrunner Ropemaker Place

Level 1225 Ropemaker StreetLondon EC2Y 9LY

Legal Adviser to the Company as to Herbert Smith LLPEnglish and US Law Exchange House

Primrose StreetLondon EC2A 2HS

Legal Advisers to the Company as to Carey OlsenGuernsey Law Carey House

Les BanquesSt. Peter PortGuernsey GY1 4BZ

Legal Adviser to the Sponsor, Berwin Leighton Paisner LLPFinancial Adviser and Bookrunner Adelaide House

London BridgeLondon EC4R 9HA

Auditors and reporting accountants Deloitte LLP – Guernsey BranchRegency CourtGlategny EsplanadeSt Peter PortGuernsey GY1 3HW

Registrar Capita Registrars (Guernsey) LimitedLongue Hougue HouseSt. SampsonGuernsey GY2 4JN

AIII 5.4.2

AIII 5.4.1

AXV 4.1

AIII 10.1AI 14.1

44

UK Transfer Agent Capita RegistrarsThe Registry34 Beckenham RoadBeckenhamKent BR3 4TU

Receiving Agent Capita RegistrarsCorporate ActionsThe Registry34 Beckenham RoadBeckenhamKent BR3 4TU

Custodian State Street Custodial Services(Ireland) Limited78 Sir John Rogerson’s QuayDublin 2Ireland

AXV 5.1

45

PART I

THE COMPANY’S BUSINESS

Introduction

The Company is a non-cellular closed-ended investment company limited by shares incorporated inGuernsey in 2005 and has been declared an authorised closed-ended investment scheme by the GuernseyFinancial Services Commission. The Company’s investments are managed by Cheyne CapitalManagement (UK) LLP (“Cheyne Capital” or the “Investment Manager”), a London-based investmentmanagement company authorised and regulated by the Financial Services Authority. Further informationrelating to the management of the Company and Cheyne Capital is set out in Part III of this Prospectus.

The Placing and Open Offer and the Bonus Issue are conditional on the Required Resolutions beingpassed at the Extraordinary General Meeting. A separate Circular is being sent to OrdinaryShareholders with this Prospectus setting out details of the Extraordinary General Meeting and theresolutions to be proposed (including the Required Resolutions).

Details of the Placing and Open Offer and the Bonus Issue

Placing and Open Offer

Conditional on the Required Resolutions being approved by Ordinary Shareholders at the EGM andOpen Offer Admission occurring, up to 13,322,328 New Ordinary Shares are being issued pursuant tothe Placing and Open Offer.

Qualifying Open Offer Shareholders are being given the opportunity to apply to subscribe for NewOrdinary Shares in proportion to their existing holdings at the Offer Price (payable in full onapplication) on the following basis:

1 New Ordinary Share at €2.00 per New Ordinary Share for every 2 Existing Ordinary Shares

registered in the name of Qualifying Open Offer Shareholders at the Open Offer Record Date and so inproportion for any other number of Existing Ordinary Shares then registered. Fractions representing NewOrdinary Shares which would otherwise have arisen will not be allotted to Qualifying Open OfferShareholders, but will be aggregated and subscribed for under the Placing for the benefit of the Company.The New Ordinary Shares will rank equally with Existing Ordinary Shares following their issue.

Valid applications by Qualifying Open Offer Shareholders will be satisfied in full up to the amount oftheir individual Open Offer Entitlement. Qualifying Open Offer Shareholders should be aware thatthe Open Offer is not a rights issue. As such, Qualifying Certificated Open Offer Shareholdersshould note that their Application Form is not a negotiable document and cannot be traded.Qualifying CREST Open Offer Shareholders should note that, although their Open OfferEntitlement will be credited to their CREST accounts, the Open Offer Entitlements will not betradable or listed.

The Placees have agreed to subscribe for all the New Ordinary Shares at the Offer Price subject to OpenOffer Admission and the passing of the Required Resolutions at the Extraordinary General Meeting,subject to clawback in order to satisfy all valid applications by Qualifying Open Offer Shareholdersunder the Open Offer.

Not all holders of Existing Ordinary Shares will be Qualifying Open Offer Shareholders. Shareholdersof the Company who are located or resident in, or who are citizens of, or who have a registered addressin an Excluded Territory or are US Persons (regardless of the number of Existing Ordinary Shares thatthey hold) will not qualify to participate in the Open Offer. The attention of Overseas Shareholders isdrawn to paragraph 6 of Part IV of this Prospectus.

Full terms and conditions of the Open Offer are set out in Part IV of this Prospectus and (for QualifyingCertificated Open Offer Shareholders only) the Application Form.

AIII5.2.3(b)AIII 6.3

AIII 5.2.1

AIII 4.6

LR13.3.1(3)

46

On the assumption that 13,322,328 New Ordinary Shares are issued pursuant to the Placing and OpenOffer, the initial gross proceeds of the Placing and Open Offer will be €26,644,656, the expensespayable by the Company will be approximately €1,764,000 (based on the Prevailing Exchange Ratesas at 16 August 2010) and the net proceeds of the Placing and Open Offer will be approximately€24,880,656.

Bonus Issue

The Preference Shares, which will be denominated in Sterling, will be issued free of subscription costto Qualifying Bonus Issue Shareholders.

The Bonus Issue is conditional on the Required Resolutions being passed and Bonus Issue Admissionbecoming effective by not later than 8.00 a.m. on 17 September 2010.

Qualifying Bonus Issue Shareholders will, subject to the conditions detailed in Part VI of thisProspectus, be issued Preference Shares on the basis of 1.25 Preference Shares for every 1 OrdinaryShare held as at the Bonus Issue Record Date.

Subject to applicable law and regulation, the Preference Shares confer the right to a preferentialcumulative Preference Dividend (which is an amount in Sterling equal to 8 per cent. per annum of thePreference Share Notional Value) payable quarterly on each Payment Date.

Due to restrictions under the securities laws of the Excluded Territories, Restricted Shareholders willnot qualify to participate in the Bonus Issue and will not be eligible to receive certificated PreferenceShares or have their securities account in CREST credited with entitlements to Preference Shares.

The Investing Fund may seek to dispose of all or part of its holding of Preference Shares immediatelyfollowing the Bonus Issue. For further information, please refer to the paragraph 10 of Part IX of thisProspectus headed “Orderly marketing arrangements”.

Further details of the rights attaching to Preference Shares are set out in Part V of this Prospectus. Fullterms and conditions of the Bonus Issue are set out in Part VI of this Prospectus.

Background to the proposed change to the Company’s investment policy and the fund raising

Since its inception in 2005 the Company has invested primarily in a diversified portfolio ofsubordinated tranches of asset-backed securitisations. These subordinated tranches of ABS will, in mostcases, be below investment grade or unrated and will, in many cases, represent the residual incometypically retained by the originator of a securitisation transaction as the “equity” or “first loss” position(“Residual Income Positions”).

During the course of 2007, the asset-backed securities market experienced rapid and significantdeterioration as part of the global credit crisis. As a result, the Company’s assets with exposure tounderlying real estate in the United Kingdom and the United States suffered heavy losses, althoughlosses incurred by the Company were mitigated by the Investment Manager’s active management of theInvestment Portfolio throughout the course of 2007.

During the calendar year 2007, the Company sold approximately 75 per cent. and 40 per cent. (bynumber of investments) of its Residual Income Positions exposed to the mortgage market in the UnitedStates and the United Kingdom, respectively, and replaced the Company’s repo financing facility withterm facilities that had no mark-to-market test. Since December 2005, the Company has returned inexcess of €70 million to Ordinary Shareholders through buybacks and tenders of Ordinary Shares andhas paid €2.45 per Ordinary Share in aggregate dividends. The Company focused on improvingfinancial stability through 2008 and 2009 and has now fully repaid its €45 million debt facility, whilecontinuing to pay a dividend on Ordinary Shares. The Company currently intends to continue to selldown and/or amortise its portfolio of Residual Income Positions.

Having managed the Investment Portfolio through the downturn, the Company, on the advice of theInvestment Manager, believes that there is an opportunity for it to benefit from investment in theEuropean real estate debt market. Subject to approval of the Required Resolutions, the Company intendsto focus future investments on real estate debt including residential mortgage backed securities(“RMBS”) and commercial mortgage backed securities (“CMBS”).

47

Accordingly, the Company is proposing, subject to the consent of Ordinary Shareholders at theExtraordinary General Meeting, to:

• undertake a Placing and Open Offer of New Ordinary Shares to raise gross proceeds of€26,644,656 million to invest in accordance with the proposed investment policy; and

• change its investment policy with the result that the Company’s primary focus for new investmentswill be Real Estate Debt Investments (as more fully detailed on pages 55 to 56 of this Prospectus).

The Company also proposes, subject to Ordinary Shareholder consent, to make a bonus issue toOrdinary Shareholders of fixed income Preference Shares pro rata to their holdings of Ordinary Sharesat the close of the first day of trading of the New Ordinary Shares on a 1.25:1 basis (the “Bonus Issue”).Subject to applicable law and regulation, the Preference Shares will confer the right to a preferentialcumulative Preference Dividend equal to 8 per cent. per annum of the Preference Share Notional Valueof £1.00, payable quarterly on each Payment Date.

The Company currently intends that in the event Preference Shares are issued pursuant to the BonusIssue, the Company’s dividend policy will be amended so that available income is first used to pay anyPreference Dividend that is due and payable and then, if the Directors in their sole discretion so resolve,to pay dividends to Ordinary Shareholders. It is expected that any future dividends payable to OrdinaryShareholders, following payment of any Preference Dividend, will be substantially reduced as comparedto the dividends that have been previously paid in respect of the Ordinary Shares. However, theDirectors do currently intend that the Company continues to pay a dividend to Ordinary Shareholderswhen it is able and appropriate to do so. Further details are set out under the heading “Dividend Policy”in this Part I.

The Placing and Open Offer and the Bonus Issue are conditional on the approval of the followingresolutions at the Extraordinary General Meeting:

• the special resolution to amend the Articles to accommodate the Preference Share rights,approve the Placing and Open Offer and the Bonus Issue and approve each modification,variation or abrogation of the rights of Ordinary Shares (resolution 2 in the Notice of theExtraordinary General Meeting);

• the ordinary resolution to amend the Company’s investment policy as described below(resolution 6 in the Notice of the Extraordinary General Meeting); and

• the ordinary resolution to approve the Offer Price of the New Ordinary Shares being €2.00which is a discount of more than 10 per cent. to the middle market price of the OrdinaryShares on 13 August 2010 (resolution 7 in the Notice of Extraordinary General Meeting),

such resolutions being the “Required Resolutions”.

In the event that any one of the Required Resolutions is not passed by the required majority ofShareholders attending and voting at the EGM (whether in person or by proxy), the Placing andOpen Offer and the Bonus Issue will not take place.

Shareholders should note that the Placing and Open Offer and the Bonus Issue are not conditional onthe resolutions proposed at the EGM making certain amendments to the Articles (other than theinsertion of the rights of the Preference Shares), approving the amendment to the Management Feepayable to the Investment Manager, granting authority to the Directors to buy back Preference Sharesor disapplying the pre-emption rights, which are referred to below, being approved.

Background to the further business to be proposed at the EGM

In addition to the Required Resolutions proposed at the EGM to implement the change to theCompany’s investment policy and the fund raising, the Company is:

• proposing to amend the Management Fee payable to the Investment Manager, conditional upon andwith effect from Bonus Issue Admission occurring (further details of which are set out below);

48

• proposing to amend the name of the Company from Queen’s Walk Investment Limited to RealEstate Credit Investments Limited;

• taking the opportunity to make a number of amendments to its Memorandum and Articles toreflect current legal and regulatory requirements and market practice. These changes include theaddition of pre-emption rights in respect of offers of Ordinary Shares and equity shares (whichwill not include the Preference Shares) of any other class then in issue which are required in orderfor the Company to maintain its premium listing status on the Official List of the UK ListingAuthority. The Required Resolution that allows for the insertion of the Preference Share rightsinto the Articles is proposed as a separate resolution from the resolution making general updatesto the Memorandum and Articles and adding pre-emption rights;

• proposing a resolution which would allow the Company, at the discretion of the Directors, to buyback Preference Shares, if issued, subject to certain limitations; and

• proposing a resolution which would disapply the pre-emption rights contained in the RevisedArticles in respect of 2,664,466 Ordinary Shares, such disapplication to have effect until theCompany’s annual general meeting in 2011 (unless previously renewed, varied or revoked by theCompany in general meeting).

Details of the amendments to the Investment Management Agreement

The Company, Trebuchet and the Investment Manager have entered into the Investment ManagementAgreement Side Letter pursuant to which, and conditional upon approval by Ordinary Shareholders atthe EGM and on Bonus Issue Admission occurring, the following amendments will be made to theInvestment Management Agreement:

• adjustments to the Management Fee payable to the Investment Manager;

• agreement that at least 70 per cent. of the Company’s Net Asset Value will comprise ResidualIncome Positions and Real Estate Debt Investments as opposed to Primary Target Investments inaccordance with the proposed investment policy; and

• amendments to the Investment Manager’s conflicts policy that applies to its management of theInvestment Portfolio, as further described in Part III of this Prospectus under the heading “Conflicts”.

The Management Fee currently payable to the Investment Manager is an annual fee equal to 1.75 per cent.of the Net Asset Value. If Preference Shares are issued, the obligation on the Company to pay thePreference Share Notional Value on a winding up of the Company or the redemption of the PreferenceShares in accordance with their terms will be classified as a liability for the purposes of calculating theNAV. The Directors believe that the Bonus Issue of itself should not lead to a reduction of the ManagementFee that would be payable to the Investment Manager and, as such, have proposed the followingamendment. If approved by the Ordinary Shareholders, the Management Fee payable will, with effect fromBonus Issue Admission, be equal to 1.75 per cent. per annum of the Adjusted NAV. No Management Feewill be payable to the Investment Manager in respect of investments in asset portfolios already managedby the Investment Manager. The Adjusted NAV will be equal to the prevailing NAV calculated inaccordance with the Company’s accounting policies increased by an amount equal to the AggregatePreference Share Notional Value.

The Incentive Fee calculation will not be amended pursuant to the Investment Management AgreementSide Letter.

Benefits of the Proposals

The Board believes that the proposed change to the investment policy of the Company, the Placing andOpen Offer and the Bonus Issue will result in a number of benefits for the Company.

Given the volatile market conditions since 2007, the Company has taken steps to improve its financialstability and the Directors, on the advice of the Investment Manager, now believe that there is anopportunity for the Company to invest in Real Estate Debt Investments. The Company intends to utilisethe net proceeds of the Placing and Open Offer primarily in RMBS and CMBS investments with

49

underlying assets in the United Kingdom and Western Europe. The Directors, on the advice of theInvestment Manager, believe that this asset class offers attractive returns relative to the risk of suchinvestments. In addition, the Directors believe, on the advice of the Investment Manager, that the RealEstate Debt Investments, and in particular the MBS, offer better liquidity and price transparency than theResidual Income Positions. This is consistent with the Company’s actions in its financial year ended31 March 2010 in which it focused on growing its Real Estate Debt Investments portfolio and sellingResidual Income Positions. Assuming that: immediately following Open Offer Admission (i) the netproceeds of the Placing and Open Offer are approximately €24.9 million; (ii) such net proceeds areimmediately invested in Real Estate Debt Investments; and (iii) the valuation of the Residual IncomePositions is unchanged from the announced NAV on 31 March 2010 and the valuation of the Real EstateDebt Investments is unchanged from 30 June 2010, Real Estate Debt Investments would account forapproximately 42.5 per cent. of the Investment Portfolio by NAV as compared to approximately 14.4 percent. of the Investment Portfolio by NAV as at 31 March 2010 (source: Annual Report, managementaccounts, unaudited). This calculation is for illustrative purposes only. In particular, Shareholders andinvestors should be aware that the Company will not be able to invest all of the net proceeds of the Placingand Open Offer immediately following Open Offer Admission.

The Company is mindful of the need to balance its best interests to raise capital against the interests ofOrdinary Shareholders. The Board believes that the structure of the Placing and Open Offer balancesappropriately the interests of Existing Ordinary Shareholders with new investors in that it offersExisting Ordinary Shareholders the opportunity not to suffer, or to limit, the dilution which will occurupon the issue of New Ordinary Shares.

The Board believes that the issue of New Ordinary Shares pursuant to the Placing and Open Offer at anOffer Price of €2.00 per New Ordinary Share and the Bonus Issue of Preference Shares with aPreference Dividend equal to 8 per cent. per annum of the Preference Share Notional Value representsan attractive investment opportunity to both Existing Ordinary Shareholders and new investors. Inparticular, the Board believes that there is the potential for capital appreciation in the InvestmentPortfolio as the Company’s financial position is stabilised and the Investment Portfolio is restructured,that the right to the Preference Dividend will appeal to certain investors and that there will be renewedappeal to investors as a result of the Company’s revised capital structure.

The Directors further believe that the Placing and Open Offer will allow the Company to broaden itsShareholder base which should improve liquidity in the market for its Ordinary Shares. The InvestingFund, which holds 15,773,804 Ordinary Shares representing 59.2 per cent. of the Existing OrdinaryShares in the Company, has agreed in writing not to take up its Open Offer Entitlement. Assuming that13,322,328 New Ordinary Shares are issued pursuant to the Placing and Open Offer, the Investing Fundwill hold 39.47 per cent. of the Ordinary Shares in issue immediately following Open Offer Admission.

Shareholder approvals required to implement the proposals

As noted above, the Placing and Open Offer and the Bonus Issue are conditional on the RequiredResolutions being approved by Ordinary Shareholders at the EGM.

The Companies Law requires that any amendment to the Memorandum and Articles be approved by aspecial resolution of Shareholders (that is 75 per cent. of the Shareholders present and voting, whetherin person or by proxy). The Companies Law further requires that Shareholder consent must be obtainedfor a Company to buy back shares.

In addition, the Listing Rules impose an obligation to receive Shareholder consent prior to the Companyundertaking certain actions, including:

• a material change to the Company’s investment policy, which requires approval by way of anordinary resolution of Shareholders; and

• a related party transaction, which must be conditional on Shareholder approval by way of anordinary resolution. Since Cheyne Capital is a related party of the Company for the purposes ofthe Listing Rules, Shareholder approval of the Investment Management Agreement Side Letter isrequired before it can become unconditional.

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The Investing Fund currently holds 15,773,804 Ordinary Shares representing 59.2 per cent. of theExisting Ordinary Shares in the Company. Cheyne Capital has taken all reasonable steps to ensure thatthe Investing Fund will not vote on the resolution approving the amendments to the InvestmentManagement Agreement to be proposed at the EGM.

The Listing Rules also require (in summary) that, in the absence of shareholders approving the terms ofan offer, if the Company makes an open offer or offer for subscription of Ordinary Shares, the price ofsuch offer must not be at a discount of more than 10 per cent. to the middle market price of the OrdinaryShares at the time of announcing the terms of the offer. As the Offer Price is at a discount of more than10 per cent. to the middle market price of the Ordinary Shares on 13 August 2010, a further Shareholderresolution is required at the EGM.

Use of Proceeds of the Placing and Open Offer

The Company intends to use the net proceeds of the Placing and Open Offer primarily to invest inEuropean Real Estate Debt Investments with particular focus on: (i) RMBS; and (ii) CMBS inaccordance with the proposed investment policy of the Company as set out below under the heading“Investment Policy” in this Part I. The Directors believe, having been so advised by the InvestmentManager, that the primary advantage of raising capital pursuant to the Placing and Open Offer will bethe opportunity for further investment in the European real estate debt markets, where the InvestmentManager believes there is currently significant price dislocation. To the extent that suitable RMBS andCMBS investments are not available (which the Directors do not expect to be the case), the net proceedsof the Placing and Open Offer may also be invested in other assets that fall within the proposedinvestment policy to the extent that the Investment Manager identifies investment opportunities that itbelieves offer attractive returns to the Company.

Pending investment of the net proceeds of the Placing and Open Offer in RMBS and CMBS and otherinvestments in accordance with the Company’s investment policy, the Company may invest the netproceeds in short-term money market funds. The Company does not intend to apply leverage to thesetemporary investments.

Company total assets immediately following Open Offer Admission and Bonus Issue Admission

Assuming all 13,322,328 New Ordinary Shares are subscribed for pursuant to the Placing and OpenOffer, total assets of the Company will have increased by €24,880,656 immediately following OpenOffer Admission. It is expected that the Placing and Open Offer will have a positive impact on theCompany’s earnings.

Assuming that 49,958,731 Preference Shares are issued pursuant to the Bonus Issue, total assets of theCompany will not be changed immediately following the Bonus Issue. It is expected that the BonusIssue will have a negative impact on the Company’s earnings, because of the Preferred Dividend.

Company Overview

The Company’s current investment objective is to preserve capital and provide stable returns toOrdinary Shareholders in the form of quarterly dividends.

If the Required Resolutions are approved by Ordinary Shareholders at the Extraordinary GeneralMeeting, the Company’s investment objective will be to provide Ordinary Shareholders with a leveredexposure to a diversified and amortising portfolio of Residual Income Positions and a growing portfolioof Real Estate Debt Investments and to provide Preference Shareholders with stable returns in the formof quarterly dividends.

As at 13 August 2010 (the latest practicable date prior to the publication of this Prospectus), theCompany had cash deposits of €6,401,659, and had no debt outstanding.

The Company has been established with an unlimited life. AI 5.1.3

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The Company currently holds some of its investments indirectly through Trebuchet Finance Limited(a SPV) and may in the future hold assets through SPVs or subsidiaries. The Company’s interest in theinvestments held by Trebuchet is through unsecured participation notes issued by Trebuchet. Trebuchetis also a party to the Investment Management Agreement pursuant to which the Investment Managermanages the assets held by Trebuchet in accordance with the Company’s investment policy. Furtherinformation regarding Trebuchet is set out in paragraph 11.6 of Part IX.

Investment Policy

The Board believes that it is now in the best interests of Ordinary Shareholders as a whole for theCompany’s investment policy to be amended. Pursuant to the prevailing investment policy, the Companyhad sought to invest primarily in a diversified portfolio of subordinated tranches of ABS. Thesesubordinated tranches of ABS are, in most cases, Residual Income Positions.

The Company’s proposed investment policy will permit the Company to invest primarily in Real EstateDebt Investments (as such term is defined below). As at the date of this Prospectus, the InvestmentPortfolio includes a number of Residual Income Positions and, as a result, in order to avoid inadvertentbreaches of the proposed investment policy, the proposed investment policy will, if adopted, require atleast 70 per cent. of the NAV of the Company to be invested in Real Estate Debt Investments andResidual Income Positions. However, if the proposed investment policy is adopted at the EGM, theCompany does not currently intend actively to increase existing Residual Income Positions or invest inother Residual Income Positions with the current intention that eventually Real Estate Debt Investmentswill form a majority of the Investment Portfolio.

Both the current investment policy of the Company and the proposed investment policy of the Companyare set out below.

The amendment to the Company’s investment policy is subject to Shareholder approval, by ordinaryresolution, at the Extraordinary General Meeting

Current Investment Policy

In order to achieve its investment objective, the Group invests primarily in a diversified portfolio ofsubordinated tranches of ABS where the Investment Manager considers that the coupon or cash flowson the subordinated tranche are attractive relative to the underlying credit. These subordinated tranchesof ABS will, in most cases, be below investment grade or unrated and will, in many cases, represent theresidual income typically retained by the originator of a securitisation transaction as the “equity” or“first loss” position.

The Residual Income Position in a securitisation represents the cash flows, if any, that remain at thebottom of the payment waterfall after all other debt and transaction costs in respect of a securitisation,including payments on the more senior tranches of ABS, have been met. These positions are typicallyretained by the originator of the assets underlying the securitisation. The value of residual incomepositions is significantly influenced by the particular characteristics of the residual income position.Valuation takes considerable time, expertise, and a detailed knowledge of the underlying assets. Valuealso depends on the view taken of the underlying collateral and on the view taken by an investor on itsrequired return, which are both subjective judgements. Unlike a more conventional debt instrument andthe more senior tranches of ABS, the pay-out profile of a residual income position will not generallyinclude a contractually established schedule of fixed payments divided between interest and principal.Instead, the pay-outs will generally vary over time, and the periodic cash flows associated with aresidual income position may include a significant element of principal repayment as well as interestpayments. The Group intends to reinvest the principal repayment portion of such cash flows in newinvestments when it has the ability to do so. Residual income positions also expose the holder to the riskthat any default or loss on the assets in the securitised portfolio may reduce the cash flows available tobe paid to the holder as interest or a return of principal.

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Where appropriate, the Group may utilise leverage for the purpose of financing its portfolio andenhancing returns to Shareholders. The Group intends to reduce exposure to interest rate and currencyfluctuations through the use of currency and interest rate hedging arrangements for the purposes ofefficient portfolio management.

The Group seeks to create a geographically diverse portfolio of investments primarily backed by a broadrange of financial assets. It will regularly monitor the extent to which the investment portfolio isconcentrated in any particular country or region, asset class, industry or sector, or originator or servicer,along with any relevant risks associated with such country, region, asset class, industry, originator orservicer and the Investment Manager will rebalance the investment portfolio as and when it deems itappropriate to do so. The Group’s investment policy contemplates investment primarily in subordinatedtranches of ABS where the underlying portfolios of assets contain a number of exposures that aresufficiently diverse or, in the Investment Manager’s terminology, “granular” to ensure that the Group isnot unduly exposed to any single obligor. The Investment Manager believes, and the Directors agree,that such granularity further enhances stability in the performance of such investments. The Group’sprimary target investments (the “Primary Target Investments”) will be interests in and/or exposuresto ABS that have subordinated claims to cash flows generated by portfolios of consumer or commercialfinancial assets including, without limitation, residential mortgages, credit card receivables, auto loans,student loans, commercial real estate loans and leases and may include ABS backed by pools of smalland medium-enterprise loans that the Investment Manager determines are sufficiently granular but willnot include certain collateralised debt obligations (or “CDOs”) that are backed by other corporate loansor by corporate bonds. Primary Target Investments typically will have the following key characteristics.Investments will be backed by assets located primarily in the UK, continental Europe and/or the UnitedStates, investments will have prospective returns at or above the level targeted by the InvestmentManager at the time of purchase. Such target returns will be adjusted by the Investment Manager fromtime to time to reflect changing market conditions. The prospective returns on investments targeted bythe Investment Manager will typically be 10 per cent. per annum or higher, the portfolio will have avaried duration profile with the duration of individual investments generally ranging from six monthsto 10 years, investments will represent non-investment grade risk and may constitute residual incomepositions, (i) acquired in the secondary market; (ii) structured by a third party to the InvestmentManager’s specification in a primary market transaction; or (iii) arising out of transactions where theInvestment Manager works directly with asset originators and investments will be held to maturity (orearlier redemption/repayment by the issuer/borrower) rather than traded prior to maturity.

While the Group will have the flexibility to invest in assets that do not have all of the characteristicslisted above, such as, inter alia, direct real estate investments and mezzanine loans, the Group hasadopted a policy, which is set out in the Investment Management Agreement which requires that at least70 per cent. of its Net Asset Value will comprise Primary Target Investments, measured at the time ofand after giving effect to each proposed new or additional investment or at the time of any disposal byreference to the latest then available Net Asset Value. If upon such a measurement the InvestmentManager determines that less than 70 per cent. of the portfolio comprises Primary Target Investments,the Investment Manager has agreed with the Group to take such action, including the sale of assets, aswould be necessary to correct this imbalance prior to acquiring any further assets which do not qualifyas Primary Target Investments. The Investment Manager will monitor adherence to this investmentpolicy. The structure of the Group’s investments and, in particular, residual income positions, may takemany different forms including, without limitation, securities, subordinated bonds, subordinated loans,mortgage early redemption certificates, preference shares, deferred purchase price, or the right toreceive certain cash reserves.

The Board of Directors has adopted general guidelines for investments and borrowings to the effect thatexcept in the case of cash deposits awaiting investment, no more than 20 per cent. of the Gross Assetsof the Group will be lent to or invested in any one Group or group at the time the investment or loan ismade, no more than 20 percent of the Group’s Gross Assets will be invested directly in real estate assets,no more than 10 per cent. of the Gross Assets of the Group will be invested in other listed investmentcompanies (including listed investment trusts), except where the investment companies themselves havestated investment policies to invest no more than 15 per cent. of their Gross Assets in other listedinvestment companies (including listed investment trusts), no more than 15 per cent. of the Gross Assets

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of the Group will be invested in other listed investment companies (including listed investment trusts),regardless of their investment policies and the Group will not take legal control, or seek to take legalcontrol, or be actively involved in the management of, any companies or businesses in which it invests,except for (i) any SPVs it may establish and (ii) pursuant to the exercise of rights as a consequence ofthe Group taking steps to preserve or enforce its security in relation to a particular investment. TheGroup will not, to a significant extent, be a dealer in investments and neither the Group nor any memberof its Group will conduct a trading activity which is significant in the context of the Group as a whole.

The Group will not co-invest with the Investment Manager, any of its Affiliates or other funds managedby the Investment Manager (other than Group Affiliates) unless (i) the co-investment is otherwise inaccordance with the Group’s investment guidelines and (ii) the terms of such co-investment are at leastas favourable to the Group as to the Investment Manager or such Affiliate or other managed fund (asapplicable) making such co investment. Shareholders will be informed in the annual report and accountsof the Group of the actions taken by the Investment Manager in the event of any breach of the aboveinvestment restrictions which the Directors consider to have been material during the year in question.In accordance with the requirements of the Financial Services Authority the Group will alter itsinvestment policy only with the approval of its Shareholders by ordinary resolution and distributableincome is expected to be derived from investment and neither the Group nor any of its consolidatedSPVs will conduct any trading activity which is significant in the context of the Group as a whole.

At any given time, certain geographic areas, asset types or industry sectors may provide more attractiveinvestment opportunities than others and, as a result, the Group’s investment portfolio may beconcentrated in those geographic areas, asset types or industry sectors. Other than as described above,there are no restrictions regarding the concentration of the Group’s investment portfolio. However, theInvestment Manager will regularly monitor concentration in the Group’s investment portfolio, togetherwith any relevant risks associated with the geographic areas, asset types and industry sectors inquestion, and will take steps to adjust the balance of the investment portfolio when it deems itappropriate to do so. The Group expects that the UK, continental Europe, and the United States will bethe largest regional exposures, and as noted above, the Group’s Primary Target Investments will bebacked by collateral located primarily in the UK, continental Europe, and the United States.

Within the limits of its investment policy, the Group may utilise leverage for the sole purpose offinancing its portfolio and enhancing returns to Shareholders. The Group has adopted a policy, whichis set out in the Investment Management Agreement, which requires that (except for temporarywarehouse finance arrangements or temporary borrowings to finance short-term cash requirements)leverage as a percentage of that part of the Group’s total portfolio that comprises Primary TargetInvestments (measured on a gross asset basis) will not exceed 30 per cent. (of which no single PrimaryTarget Investment (measured on a gross asset basis) may be more than 50 per cent. funded withleverage) and leverage as a percentage of that part of the Group’s total portfolio that comprises assetsthat are not Primary Target Investments (measured on a gross asset basis) will not exceed 95 per cent.The magnification of the adverse impact of defaults in investments and their underlying assets andincreased interest expense on borrowings could adversely affect the Group’s Net Asset Value and thelevel of its dividends. Breach of financing arrangements such as cross-default provisions and financialcovenants could give rise to additional loss. Borrowings could adversely affect the Group’s Net AssetValue and the level of the Group’s dividends. The Group may borrow to fund the acquisition ofadditional investments and, where appropriate, may utilise leverage in order to enhance returns toShareholders. These borrowings may be secured against some or all of the Group’s assets. Theapplication of leverage to an investment magnifies the adverse impact caused by defaults in theunderlying investment portfolio. Also, since the Group’s investments are typically subordinated to moresenior claims on the underlying assets, any borrowings by the Group would be incremental to theleverage already inherent in those investments. Therefore, in the event of a default in the assetsunderlying investments in the Group’s portfolio, the level of losses suffered by the Group would beproportionately higher as a function of the aggregate leverage implicit in each of the Group’sinvestments and a relatively small increase in the rate of defaults could have a materially detrimentaleffect on returns to Shareholders. The Group’s earnings will be generated from the difference betweenincome received and interest expense plus certain gains or losses arising from the sale of assets.

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Proposed Investment Policy

Asset Allocation

In order to achieve its investment objective, the Company will invest primarily in debt secured bycommercial or residential properties in Western Europe and the United Kingdom (“Real Estate DebtInvestments”). The Real Estate Debt Investments may take different forms but will likely be:(i) securitised tranches of secured real estate related debt securities, for example, RMBS and CMBS,together MBS; and (ii) secured real estate loans, debentures or any other form of debt instrument.

The Company will generally invest, either directly, through SPVs or subsidiaries, in new Real EstateDebt Investments on a buy-to-hold basis based on an analysis of the credit worthiness of the underlyingassets in the applicable investment. Therefore, the total return from any given investment will be drivenby actual performance of the underlying real estate loans rather than by market prices. However, theCompany will actively manage the Investment Portfolio, and may from time to time dispose of aninvestment prior to its maturity if the Company so decides for reasons including, but not limited to, theprice offered being sufficiently attractive, the credit view of the underlying assets changing or superioralternative investments being available.

The Company’s investments in Real Estate Debt Investments will have some or all of the followingkey characteristics:

• investments will be backed, directly or indirectly, by real-estate primarily located in WesternEurope and the UK;

• investments will have a varied weighted average life profile, with the weighted average life of theindividual investments generally ranging from six months to 15 years;

• investments in securities will be rated by one of Fitch, Moody’s, Standard and Poor’s or anotherrecognised rating agency; and/or

• investments in loans must be secured by one or more commercial or residential properties andloans may not exceed 85 per cent. LTV at the time of the investment.

For the purposes of the paragraph above, “Western Europe” shall mean Andorra; Austria; Belgium;Denmark; Finland; France; Germany; Gibraltar; Guernsey; Iceland; Ireland, Isle of Man; Italy; Jersey;Liechtenstein; Luxembourg; Monaco; the Netherlands; Norway; Portugal; San Marino; Spain; Sweden;and Switzerland.

As at 17 August 2010 the Investment Portfolio also includes Residual Income Positions. The Companydoes not currently intend actively to increase existing Residual Income Positions within the InvestmentPortfolio or to invest in other Residual Income Positions.

While the Company will have the flexibility to invest in assets that do not have some or all of thecharacteristics listed above, such as, inter alia, direct real estate investments, it has adopted a policywhich requires that at least 70 per cent. of its Net Asset Value will comprise Real Estate DebtInvestments and Residual Income Positions, measured at the time of, and after giving effect to, eachproposed new or additional investment or at the time of any disposal by reference to the latest thenavailable Net Asset Value. If upon such a measurement the Investment Manager determines that lessthan 70 per cent. of the Investment Portfolio comprises Real Estate Debt Investments and ResidualIncome Positions, the Investment Manager has agreed with the Company to take such action, includingthe sale of assets, as would be necessary to correct this imbalance prior to acquiring any further assetswhich do not qualify as Real Estate Debt Investments or Residual Income Positions.

The Company will not take make investments via derivatives unless the Company has fullycollateralised the derivative position or cannot be exposed to margin calls. However, the Companyintends to (but shall not be obliged to) reduce exposure to interest rate and currency fluctuations throughthe use of currency and interest rate hedging arrangements for the purposes of efficient portfoliomanagement. From time to time, the Company may also enter into derivative transactions to hedge thevalue of the Investment Portfolio.

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Risk Diversification

At any given time, certain geographic areas, asset types or industry sectors may provide more attractiveinvestment opportunities than others and, as a result, the Company’s Investment Portfolio may beconcentrated in those geographic areas, asset types or industry sectors. Other than as described above,there are no restrictions regarding the concentration of the Company’s Investment Portfolio. However, theCompany will seek to create a diversified portfolio of investments. It will regularly monitor the extent towhich the Investment Portfolio is concentrated in any particular country, region or servicer and theInvestment Manager will re-balance the Investment Portfolio as and when it deems it necessary to do so.

The Board of Directors has adopted general guidelines for investments and borrowings to the effect that,except in the case of cash deposits awaiting investment, no more than 20 per cent. of the Gross Assets ofthe Group will be lent to or invested in any one group at the time the investment or loan is made, no morethan 20 per cent. of the Gross Assets of the Group will be invested in direct real estate investments, nomore than 10 per cent. of the Gross Assets of the Group will be invested in other listed investmentcompanies (including listed investment trusts), except where the investment companies themselves havestated investment policies to invest no more than 15 per cent. of their Gross Assets in other listedinvestment companies (including listed investment trusts), no more than 15 per cent. of the Gross Assetsof the Group will be invested in other listed investment companies (including listed investment trusts),regardless of their investment policies and the Group will not take legal control, or seek to take legalcontrol, or be actively involved in the management of, any companies or businesses in which it invests,except for (i) any SPVs it may establish and (ii) pursuant to the exercise of rights as a consequence of theGroup taking steps to preserve or enforce its security in relation to a particular investment. The Companywill not, to a significant extent, be a dealer in investments and neither the Company nor any member ofits Group will conduct a trading activity which is significant in the context of the Group as a whole.

Leverage

The proposed issue of Preference Shares will represent a form of structural leverage. Holders of PreferenceShares will be entitled to receive a preferred income return and, on a winding up of the Company, to receivea preferred return of capital ahead of the holders of Ordinary Shares. To this extent, the rights of OrdinaryShareholders to income and capital are geared by the presence of the Preference Shares. Assuming theRevised Articles are adopted by the Ordinary Shareholders at the EGM, any further issue of PreferenceShares by the Company would require approval of the Ordinary Shareholders by special resolution.

Other than a working capital facility limited to a maximum quantum equivalent to 10 per cent. of theNet Asset Value, the Company shall not, without the prior approval of the Ordinary Shareholders byordinary resolution passed at a separate general meeting of the Ordinary Shareholders, agree to enterinto any credit facility pursuant to which leverage is utilised by the Company.

Hedging

The Company’s policy will be to hedge currency risk on a case by case basis and also, where theInvestment Manager considers it appropriate, on a portfolio basis. The Company may bear a level ofcurrency risk that could otherwise be hedged where it considers that bearing such risks is advisable.Shareholders should not expect that all currency risks that arise from time to time will be hedged. As atthe date of this Prospectus, the Company uses Euro:Sterling options to hedge its currency exposure.

The Company may, but shall not be obliged to, enter into hedging arrangements in respect of interestrate fluctuations and certain macro risks that may affect the value of the Investment Portfolio. In manycases it is not possible to hedge against an adverse change in relation to variables that may affect thevalue of the Residual Income Positions or other parts of the Investment Portfolio. Notwithstanding theabove, in 2007 the Company purchased a hedge against a fall in UK house prices by purchasing a putoption on the Halifax House Price Index. In 2009, the Company entered into a macro-hedge against theSME market in Europe by purchasing a put option on the MDAX index.

Save where the Company enters into swap arrangements to gain exposure to an underlying cash assetor assets, or to comply with asset transfer restrictions or similar legal restrictions which prevent theCompany from owning a target investment directly, derivative transactions will only be used for thepurpose of efficient portfolio management. The Company will not enter into derivative transactions forspeculative purposes.

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A substantial portion of the Company’s underlying investments will be denominated in Euro andSterling. The Company may not hedge this exposure.

Cautionary Note Regarding Historical Company Performance

The Company’s historical results and Share price history may not be indicative of the future results. Inparticular, the future results of the Investment Portfolio may differ significantly from its historical results.

Investment Portfolio and Performance (Unaudited analysis)

Overview and historical performance

The original investment strategy of the Company was set out in the prospectus dated 8 December 2005issued by the Company and stated that the Company’s focus was on investments backed bysubordinated, unrated tranches of securitisations located primarily in the UK, continental Europe andthe United States. Since the market downturn in 2007, the Company has looked to exit from its UK andUS Residual Income Positions, re-direct the geographic focus of the Investment Portfolio and returncash to Shareholders.

During the course of 2007, the real estate market experienced rapid and significant falls due to sharpdeclines in residential housing markets, liquidity and investor sentiment. As a result, the UK andUS components of the Company’s Investment Portfolio suffered heavy losses, although the losseswere mitigated by the Investment Manager’s active management of the Investment Portfoliothroughout the course of 2007. During the calendar year 2007, the Company sold approximately75 per cent. and 40 per cent. (by number of investments) of its US and UK Residual IncomePositions respectively. Through 2008 and 2009, the Company focused on improving financialstability, and has repaid in full its €45 million of debt since November 2008, while continuing topay a dividend on Ordinary Shares.

As at 31 March 2010 (the latest practicable date prior to the publication of this Prospectus), the Company’sInvestment Portfolio was valued at €92.5 million (including an interest accrual of €0.9 million) and theCompany had a Net Asset Value per Ordinary Share of €3.73 (source: audited accounts for the year ended31 March 2010). This compares with 31 March 2009, where the Company’s Investment Portfolio wasvalued at €109.6 million (including an interest accrual of €1.3 million) and the Company had a NAVper Ordinary Share of €3.96 (source: audited accounts for the year ended 31 March 2009). Over thefinancial year ending 31 March 2010, the Company has paid dividends of €0.32 per Ordinary Share.

The Ordinary Share price as at close of business on 31 Mar 2008, 31 March 2009 and 31 March 2010 was€4.15, €1.175 and €2.415, respectively. The Ordinary Share price as at close of business on16 August 2010, being the last practicable date prior to the publication of the Prospectus, was €2.42(source: Bloomberg).

Since 13 December 2005 the Company has paid in aggregate €2.45 per Ordinary Share in dividends andreturned in excess of €70 million to Shareholders through buybacks and tenders of Ordinary Shares.

The Company’s Investment Portfolio generated interest income of €16.1 million for the 12 month periodended 31 March 2010 compared to interest income of €21.7 million for the 12 month period ended31 March 2009 (source: audited accounts for the years ended 31 March 2010 and 31 March 2009,respectively). Since 31 March 2010, the Company’s Investment Portfolio has generated interest incomeof €4.1 million for the period to 30 June 2010 (the latest practicable date prior to the publication of thisProspectus) (source: management accounts, unaudited).

The Company generated total cash flows of €20.9 million in the quarter ended 31 March 2010, of which€6.3 million came from the Investment Portfolio, €5.4 million was received from the sale of a AAAbond portfolio and a further €9.2 million was received from the sale of the Magellan 2 portfolio (source:audited accounts for the year ended 31 March 2010). The cash balance as at 31 March 2010 was €15.7m.Since 31 March 2010, the Company has recorded total cash flows for the period to 30 June 2010 (thelatest practicable date prior to the publication of this Prospectus) of €17.2 million of which €6.7 millioncame from the Investment Portfolio and a further €10.5m was received from the sale of the sale of theGate 06-1 and Gate 05-2 SME portfolios and one ABS bond (source: management accounts, unaudited).

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As at 31 March 2010, the Investment Portfolio consisted of 19 Residual Income Positions and24 ABS bonds (the ABS bonds being rated tranches of ABS that are not Residual Income Positions).As at 30 June 2010, the Investment Portfolio consisted of 17 Residual Income Positions and 46 ABSbonds. A breakdown of the Company’s Investment Portfolio as at 30 June 2010 by jurisdiction (byreference to the underlying asset jurisdiction, except for SME Residual Income Position investmentswhere the jurisdiction of the originator is used) and asset type (by reference to underlying assetcollateral) is set out below. Percentages for each asset class are in relation to the value of theResidual Income Positions as at 31 March 2010 and the value of the ABS bonds as at 30 June 2010(sources: audited accounts for the year ended 31 March 2010 and Management accounts,unaudited, respectively) excluding cash and hedges.

Jurisdiction as at 30 June 2010* Asset Type as at 30 June 2010*

* Charts are based on the following information:

(i) Residual Income Positions and ABS bonds in the Investment Portfolio as at 30 June 2010 (source: management accounts,unaudited);

(ii) fair value of the Residual Income Positions as at 31 March 2010 (source: audited accounts for the year ended 31 March 2010);

(iii) fair value of the ABS bonds as at 30 June 2010 (source: management accounts, unaudited); and

(iv) excludes cash and hedges.

In the above chart, “Prime” indicates that the underlying pool of loans comprises mortgages made toborrowers with good credit records and whose incomes were verified at the time of the origination.

Owing to the valuation process for Residual Income Positions, the latest available portfolio analysis forthese investments is as at 31 March 2010. In respect of the ABS bond portfolio, the latest availableportfolio analysis is at 30 June 2010.

Of the 17 Residual Income Positions held in the Investment Portfolio as at 30 June 2010, 3 have zerovalue. These investments include two CDO Residual Income Positions held in Cheyne CLO InvestmentsI Limited and a US sub-prime Residual Income Position held in the RASC Series 2006-KS2 Trust.Details of the remaining 14 Residual Income Positions held in the Investment Portfolio as at 30 June2010 are set out below.

Since 30 June 2010, there has been no material change to the Investment Portfolio.

Investment Portfolio – Residual Income Positions – European mortgages (as at 31 March 2010)

The Company’s European mortgage Residual Income Positions generated cash flows in the quarter ended31 March 2010 of €1.8 million while cash flows in the year ended 31 March 2010 totalled €9.7 million(source: audited accounts for the year ended 31 March 2010). Further, the Company’s Europeanmortgage Residual Income Positions have generated total cash flows of €2.9 million in the quarter ended30 June 2010 (source: management accounts, unaudited).

Near Prime Residual Income

Positions1.7%

Sub Prime Residual Income

Positions5.5%

Prime Residual Income

Positions44.2%

SME Residual Income

Positions19.9%

ABS Bonds28.7%

Germany16.8%

France3.0%

Switzerland0.1%

Italy9.4%

Portugal34.0%

Holland11.6%

UK25.0%

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The Company believes that a lower Euribor rate has had a positive effect on the Portuguese mortgageportfolio, with fewer mortgage borrowers falling into arrears than in previous quarters. These lower arrearslevels translated into lower defaults in the portfolio for the quarter. The Company’s exposure to thePortuguese market has fallen to 34.0 per cent. of the value of the Investment Portfolio as at 30 June 2010(as shown and calculated in the pie chart above) from 36.0 per cent. as at 31 March 2010 following the saleof the Magellan 2 mortgage portfolio on 26 February 2010 (source: management accounts, unaudited).

The Company has closely followed developments regarding fiscal deficits in Southern Europe and thewidening credit spreads. The Company believes that the wider government bond spreads should haveno direct impact on its mortgage portfolios because the majority of mortgage loans are indexed to shortterm Euribor rates and that the key risk to asset value remains an increase in unemployment andconsequent mortgage defaults as a result of government austerity measures.

The Company wrote down the Sestante Italian mortgage portfolio in the quarter ended 31 March 2010as a result of an anticipated delay in expected cash flows which comprises a single bullet payment at theend of the transaction. The Company believes that mortgage holders are finding it harder to refinance,the result being that the Investment Portfolio’s mortgage refinancing rate fell, and that lower mortgagerefinancing rates are likely to persist for a prolonged period which, as a consequence, has delayed theexpected repayment date by approximately two years.

As at 30 June 2010, the Company’s European mortgage Residual Income Position Portfolio consistedof the following: Lusitano Mortgages No. 1 plc, Lusitano Mortgages No. 2 plc, Lusitano MortgagesNo. 3 plc, Magellan Mortgages No. 1 plc and Sestante Finance S.R.L.

Investment Portfolio – Residual Income Positions – small and medium enterprise (“SME”)investments (as at 31 March 2010)

The Company’s SME Residual Income Position portfolio generated cash flows in the quarter ended31 March 2010 totalled €1.7 million while cash flows in the year ended 31 March 2010 totalled€7.4 million (source: audited accounts for the year ended 31 March 2010). Further, the Company’sSME Residual Income Positions have generated total cash flows of €1.8 million in the quarter ended30 June 2010 (source: management accounts, unaudited).

However, default rates remain volatile. The average default rate for the SME portfolio fell to 0.66 per cent.in the quarter ended 31 March 2010, from 1.84 per cent. in the previous quarter (source: managementaccounts, unaudited). The Company investment in Gate 05-2 recorded the greatest fall in default rates, to1.48 per cent. from 5.71 per cent. in the prior quarter. The Company recorded write-downs against the Gate05-2 and Gate 06-1 SME portfolios after observing an unusually low recovery rate for four defaultedloans. The Company continues to analyse these loans and has taken the precautionary measure of loweringthe recovery rate across both these portfolios.

On 27 May 2010, the Company sold the Gate 06-1 SME portfolio at a level that was accretive to theprevailing NAV. On 9 June 2010, the Company sold the Gate 05-2 SME portfolio at a level that wasaccretive to NAV.

As at 30 June 2010, the Company’s SME Residual Income Position Portfolio consisted of the following:Eirles Three 236B (SMART 06-1) and Amstel Corporate Loan Offering BV 2006-1 F.

Investment Portfolio – Residual Income Positions – UK mortgages (as at 31 March 2010)

The Company’s UK mortgage Residual Income Positions generated cash flows of £1.6 million in the quarterended 31 March 2010 while cash flows in the year ended 31 March 2010 totalled £3.9 million (Source: auditedaccounts for the year ended 31 March 2010). Further, the Company’s UK mortgage Residual Income Positionshave generated total cash flows of £0.9 million in the quarter ended 30 June 2010 (source: managementaccounts, unaudited).

The Company has recently increased the valuation of its RMAC assets, however, the Company remainsconservative in its forecasts of defaults for the element of the Investment Portfolio consisting of UKmortgage Residual Income Positions. The Company continues to work with mortgage originators toidentify loans that do not satisfy representations and warranties provided at the time of the securitisation.

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As at 30 June 2010, the Company’s UK mortgage Residual Income Position Portfolio consisted of thefollowing: Alba 2005-1 plc, Alba 2006-1 plc, Eurosail 2006-1 plc, Newgate 2006-1 plc, RMAC 2004-NSP4 plc, RMAC 2005-NS3 plc and RMAC 2005-NS4 plc.

Investment Portfolio – ABS bonds (as at 30 June 2010)

Over 95 per cent. of the ABS bond portfolio consists of MBS.

The element of the Investment Portfolio consisting of ABS bond investments recorded cash flows of€0.2 million in the quarter ended 31 March 2010 while cash flows in the year ended 31 March 2010totalled €1.7 million (source: audited accounts for the year ended 31 March 2010). Further, the ABSbond investments generated total cash flows of €0.2 million in the quarter ended 30 June 2010(source: management accounts, unaudited).

Appetite for high quality AAA-rated ABS bonds increased substantially in the early weeks of 2010. Totake advantage of the price rally, on 22 January 2010, the Company sold for €3.4 million nominal valueits holding in AAA RMBS bonds. The average sale price was 92.4 cents versus an average purchaseprice of 74.2 cents, giving an annualised return on those investments of 28.2 per cent.

During the quarter ended 31 March 2010, the Company invested €6.5 million in purchasing ABSbonds which accounted for 15.3 per cent. by Net Asset Value of the Investment Portfolio at the end ofthat quarter. Between 31 March 2010 and 30 June 2010 the Company invested a further €11.6 millionpurchasing ABS bonds (source management accounts, unaudited). As at 30 June 2010, the ABS Bondportfolio consisted of 46 bonds at a cost of €25.8 million and a nominal value of €45.9 million(source: management accounts, unaudited). The following tables detail the ABS bonds held by theCompany as at 30 June 2010.

Percentage of ABS Bond Portfolio by Cost Price (as at 30 June 2010)Rating by Vintage1 2004 2005 2006 2007 Total

AAA 4.5% 5.2% 6.6% 7.8% 24.1%AA 0.4% 2.4% 14.0% 1.8% 18.6%A 4.6% 4.8% 11.7% 6.4% 27.6%BBB 0.0% 6.3% 5.7% 4.5% 16.4%BB and Below 0.0% 1.4% 9.5% 2.5% 13.4%

Total 9.5% 20.1% 47.4% 23.0% 100.0%

1. Vintage reflects the issue date of the bond. Rating at time of purchase.

(Source: management accounts, unaudited)

Percentage of ABS Bond Portfolio by Cost Price (as at 30 June 2010)UK UK UK Non- Euro

Rating1 Prime Buy To Conforming Prime UK Euro by Type RMBS Let RMBS RMBS RMBS CMBS CMBS SME Total

AAA 0.0% 0.0% 12.9% 0.0% 6.4% 4.8% 0.0% 24.1%AA 0.0% 10.1% 1.8% 0.4% 0.0% 6.3% 0.0% 18.6%A 0.9% 1.0% 9.7% 0.0% 8.4% 7.6% 0.0% 27.6%BBB 3.1% 0.0% 1.0% 0.0% 5.3% 4.3% 2.8% 16.4%BB and Below 0.0% 0.0% 1.7% 0.0% 2.3% 9.4% 0.0% 13.4%

Total 4.0% 11.1% 27.1% 0.4% 22.4% 32.3% 2.8% 100.0%

1. Rating at time of purchase

(Source: management accounts, unaudited)

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Top 10 holdings in the Investment Portfolio as at 30 June 2010Investment Investment Type Subtype

Investments individually accounting for 8 per cent. or more of Investment Portfolio (based on the NAVas at 31 March 2010)

Magellan Mortgages No. 1 plc RMBS PrimeAmstel Corporate Loan Offering BV 2006-1 F SME SMEEirles Three 236B SME SMESestante Finance S.R.L. RMBS Prime

Investments individually accounting for between 5 per cent. and 7 per cent. of Investment Portfolio(based on the NAV as at 31 March 2010)

RMAC 2004 NSP4 plc RMBS Sub-primeLusitano Mortgages No. 1 plc RMBS PrimeLusitano Mortgages No. 3 plc RMBS Prime

Investments individually accounting for less than 5 per cent. of Investment Portfolio (based on NAV asat 31 March 2010)

Lusitano Mortgages No. 2 plc RMBS PrimeRMAC 2005 NS4 plc RMBS Sub-primeRMAC 2005 NS3 plc RMBS Sub-prime

Investment Portfolio Valuation as at 31 March 2010

In accordance with the Company’s valuation procedures, the fair value of the Company’s investmentsis calculated on the basis of observable market data, market discount rates and the InvestmentManager’s expectations regarding future trends. Given the re-structurings at many investment banks,there is a lack of reliable independent broker marks for the Residual Income Portfolio. Therefore, theCompany elected to use a model-based approach to value its Residual Income Positions. An externalvaluation agent has reviewed the underlying pricing assumptions for the valuation of the ResidualIncome Positions as at 31 March 2010. The Company currently applies a discount margin of between15 per cent. and 20 per cent. depending on the class of assets being valued. These discount rates areapplied to the loss-adjusted cash flows. The Company received broker marks for all of its ABS bonds.

The valuation of Residual Income Positions held in the Investment Portfolio are the valuations for suchinvestments as at 31 March 2010. Updated valuations for these Residual Income Positions as at30 June 2010 are not available currently and will not be announced publicly until September, inaccordance with the Company’s standard policy for the valuation of such investments.

Financing Strategy

As at the date of this Prospectus, the Company and the Group has no structural indebtedness or externalborrowings of any type.

The Company does not currently intend to incur indebtedness prior to completion of the investment ofthe net cash proceeds of the Placing and Open Offer.

The Company will not use unfunded derivatives to obtain leverage on investments.

Dividends and Dividend Policy

Existing dividend policy for Ordinary Shares

The Company currently intends to pay out a majority of its net income (but excluding any realised orunrealised surpluses from the sale, realisation or revaluation of investments held directly by theCompany) to Ordinary Shareholders in the form of quarterly dividends, subject to having distributableprofits available for this purpose and any Financial Services Authority or other legal limitations.

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Since the initial public offering of Ordinary Shares in December 2005, the Company has sought toprovide investors with a steady dividend and has paid or declared dividends equal to €2.45 per OrdinaryShare. In the 2010 fiscal year, the Company paid or declared dividends of €0.32 per Ordinary Share or€8.5 million in aggregate. The dividend policy has been supported by the high level of cash cover fromthe Investment Portfolio. In the 2010 fiscal year, the gross cash flows from the Investment Portfolio andthe hedging portfolio entered into by the Company totalled €26.3 million. In the 2009 and 2008 fiscalyears, the Company paid or declared dividends of €0.39 and €0.60 per Ordinary Share, respectively,or €12.8 and €21.9 million in aggregate, respectively.

At its discretion the Company may pay a dividend to Ordinary Shareholders. The expected level ofdividend payouts may be materially less than the current payout on the Ordinary Shares.

Revised dividend policy for Ordinary Shares

If the Required Resolutions are approved, following completion of the Bonus Issue of PreferenceShares, the Company currently intends that available income is first used to pay any PreferenceDividend that is due and payable and then, if the Directors in their sole discretion so resolve, to paydividends to Ordinary Shareholders. It is expected that any future dividends payable to OrdinaryShareholders, following payment of any Preference Dividend, will be substantially reduced as comparedto the dividends that have been previously paid in respect of the Ordinary Shares. However, theDirectors do currently intend that the Company continues to pay a dividend to Ordinary Shareholderswhen it is able and appropriate to do so. The Company further intends, subject to the performance ofthe Investment Portfolio, that the amount of dividends paid, if any, to Ordinary Shareholders followingthe change to the dividend policy should be adjusted from time to time in line with any increase ordecrease in interest income from the Investment Portfolio, subject to applicable law and regulation.Assuming 49,958,731 Preference Shares are issued pursuant to the Bonus Issue, the maximumaggregate Preference Dividend that will be payable pursuant to the terms of the Preference Shares inany financial year will be approximately £3,996,698.48 million or €4,862,383.37, (based on exchangerates as at 16 August 2010) (source: Bloomberg).

Subject to the payment of the Preference Dividend to the holders of the Preference Shares and theapplicable requirements and restrictions contained in the Companies Law, the Company may considermaking interim dividend payments to Ordinary Shareholders, having regard to the net incomeremaining after the payment of the Preference Dividends, potential reinvestment of cash or other usesof income at a level the Directors deem appropriate, in their sole discretion, from time to time. There isno fixed date on which it is expected that dividends will be paid to Ordinary Shareholders and OrdinaryShareholders should not expect to receive regular interim dividends.

There is no assurance that the Company will declare or pay dividends on Ordinary Shares or PreferenceShares and, if dividends are paid, there is no assurance with respect to the amount and timing of anysuch dividend.

Purchase of Own Shares

The Company has authority to make market purchases of fully paid Ordinary Shares, for example,where the Directors believe such purchases will enhance Shareholder total returns by returning capitalsurpluses that may not be returned pursuant to applicable law and regulation in the form of dividendsor where the Investment Manager has been unable to source sufficient appropriate investments, eitherat all or in a timely manner.

The Company has authority to make market purchases of up to 14.99 per cent. of the issued OrdinaryShares and renewal of this authority will be sought from Shareholders at the 2010 annual generalmeeting of the Company, and each subsequent annual general meeting, or earlier in a general meetingif the Directors so resolve. The Company will also seek authority from Shareholders at theExtraordinary General Meeting to make market purchases of up to 14.99 per cent. of the PreferenceShares in issue immediately following Bonus Issue Admission. The Company will seek renewal of thisauthority at the 2011 annual general meeting of the Company, and each subsequent annual generalmeeting, or earlier in a general meeting if the Directors so resolve.

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Purchases of any Shares will be made within guidelines established from time to time by the Board. Thetiming of any purchases will be decided by the Board in light of prevailing market conditions.

Purchases of Ordinary Shares will only be made through the market for cash at prices below theirprevailing Net Asset Value per Share. Such purchases of Shares will only be made in accordance withthe terms of the authority granted to the Company by Shareholders and the rules of the UK ListingAuthority in force from time to time or any successor laws, rules or regulations. The rules of the UKListing Authority currently provide that the maximum price to be paid shall be limited to an amountwhich must not exceed the higher of (a) 105 per cent. of the average of the market values of the OrdinaryShares for the 5 Business Days before the purchase is made, and (b) the higher of the price of the lastindependent trade and the highest current independent bid price.

Purchases of Preference Shares (which for the avoidance of doubt includes tender offers and purchasesof Preference Shares through the market) will only be made through the market for cash.

If the Revised Articles are adopted pursuant to the applicable resolution, the Company will have theability to hold Shares that have been purchased by it in treasury. Assuming that the Revised Articles areapproved by Shareholders at the EGM, Shares which are purchased may be cancelled or held in treasuryprovided that the number of Ordinary Shares or Preference Shares held as treasury shares may not atany time exceed 10 per cent. of the total number of issued Ordinary Shares or Preference Shares (asapplicable) at that time and any repurchased Shares in excess of such amount will be cancelled.

In the last 12 months, the Company purchased no Ordinary Shares.

Financial Information

The Company’s audited accounts are made up for the period to 31 March in each year. An unauditedinterim report in respect of the first six months of each subsequent accounting period, i.e. to30 September, is also published. In addition, the Company releases interim management statements asrequired by the Disclosure and Transparency Rules. The Company’s first full accounting period was inrespect of the period ending 31 March 2007. The Company prepared, and will continue to prepare, itsannual report and accounts in accordance with International Financial Reporting Standards.

The Net Asset Value of the Company is calculated and published quarterly, including as at the relevantdates of the announcement of its interim and annual results, and will be published in its annual reportand accounts sent to Shareholders.

In accordance with the Company’s valuation procedures, the fair value of the Company’s investments iscalculated on the basis of observable market data, market discount rates and the Investment Manager’sexpectations regarding future trends. MBS are valued using market prices. The Company takes theaverage of two marks to determine the value of the bonds. For each Residual Income Position, theInvestment Manager has a developed a cash flow model that takes into account the key variables thatwill affect the valuation of these assets, including but not limited to, default rates, recovery rates, arrearsrates, and pre-payment rates. On each valuation date (which are quarterly or when there is a materialchange to the underlying pricing assumptions), the Investment Manager reviews information, includingbut not limited to, loan by loan information on the status of each loan, market conditions related to theinvestment, the financial and operational condition of the related parties in the securitisation andgeneral macro conditions. An external valuation agent also reviews the underlying pricing assumptionsof the model each time there is an adjustment to the assumptions.

Where applicable, currency conversions used to calculate the Net Asset Value will be based on therelevant exchange rate published by Bloomberg as at the close of business on the date of the relevantNet Asset Value.

The calculation of the Net Asset Value will only be suspended in circumstances where the underlyingdata necessary to value the investments of the Company cannot be readily, or without due expenditure,obtained. Details of any suspension in making such calculations will be announced through an RIS.

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Capital Structure

Introduction

As at 31 March 2010 (the latest practicable date prior to the publication of this Prospectus) the issuedshare capital of the Company consisted of 26,644,657 Ordinary Shares with an aggregate Net AssetValue of €99,329,841 (source: audited accounts for the year ended 31 March 2010).

On the assumption that the Required Resolutions are approved and that the Placing and Open Offer issubscribed for in full, immediately following Open Offer Admission the issued share capital of theCompany will consist of 39,966,985 Ordinary Shares. This should not be taken as an indication of theactual number of New Ordinary Shares that will be issued pursuant to the Placing and Open Offer.Applications will be made to the UK Listing Authority for the New Ordinary Shares to be admitted tothe Official List and to the London Stock Exchange for such New Ordinary Shares to be admitted totrading on the main market for listed securities. The application for admission to the Official List inrespect of the New Ordinary Shares is an application for a premium listing.

On the assumption that the Required Resolutions are approved and that the Placing and Open Offer issubscribed for in full, immediately following Bonus Issue Admission, the issued share capital of theCompany will consist of 39,966,985 Ordinary Shares and 49,958,731 Preference Shares. Applicationswill be made to the UK Listing Authority for the Preference Shares to be admitted to the Official Listand to the London Stock Exchange to be admitted to trading on the main market for listed securities.The application for admission to the Official List in respect of the Preference Shares is an applicationfor a standard listing.

Ordinary Shares

The Company’s Ordinary Shares are quoted in, and have their Net Asset Value reported in, Euros.

On a winding-up, Ordinary Shareholders will be entitled to the net assets of the Company: (i) after anycreditors have been paid; and (ii) subject to the Required Resolutions being passed, the RepaymentAmount of the Preference Shares having been met. Distribution of revenue reserves (if any) on awinding-up is likely to be made by way of distribution immediately prior to the commencement of thewinding-up.

Ordinary Shares carry the right to vote at general meetings of the Company. In addition, each class ofOrdinary Shares in issue from time to time carries the right to vote as a class on certain proposals whichwould be likely to materially affect their position, including any proposed change in the Company’sinvestment policy.

Ordinary Shares have no par value. All distributions payable to the Ordinary Shareholders (includingon redemption of such Ordinary Shares) will be paid in Euros.

Preference Shares

Details of the rights attached to Preference Shares are set out in Part V of this Prospectus.

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PART II

THE MBS MARKET

The information sourced from third parties in this Part II has been accurately reproduced and as far asthe Company is aware and is able to ascertain from information published by the stated sources, no factshave been omitted which would render the information inaccurate or misleading.

Background Information Relating to Mortgage Backed Securities (“MBS”)

MBS

MBS are a form of asset backed security (“ABS”) securities that are typically secured by a discrete poolof financial assets, typically residential or commercial mortgage loans. The cash flow from the assets isused to service interest and repay principal on the securities. In a basic securitisation structure, an entity(the “originator”), which is often a financial institution, originates or otherwise acquires a portfolio offinancial assets, such as mortgage loans, either directly or through an Affiliate. It sells the assets to abankruptcy remote SPV incorporated specifically for the purpose of acquiring the assets and issuingsecurities that are secured or “backed” by those assets. The pool of assets is managed by a servicer,which may be the same entity as the originator. The servicer performs a variety of roles, including,among other things, collecting payments on the underlying financial assets (for example, residentialmortgage loans) and structuring work-outs of non-performing assets (for example, defaulted ordelinquent residential mortgage loans). The MBS structure is intended, amongst other things, to transfercredit risk on the assets from the originator to the MBS investors while at the same time insulating theMBS investors from the corporate credit risk of the originator.

The SPV services payments of interest and repayments of principal on the MBS primarily from the cashflows generated by the financial assets contained in the underlying portfolio but may also have recourseto other sources of funds which are incorporated into the securitisation structure in order to ensure fulland timely payment. These features, typically referred to as liquidity enhancement or creditenhancement, depending on the particular aspects of the portfolio they are intended to address, includeliquidity facilities, cash reserves, letters of credit, over collateralisation (that is, the degree by which theprincipal amount of a given financial asset portfolio exceeds the principal amount of the liabilitiessecured by that portfolio), subordinated loans and guarantees. MBS transactions typically includeinterest rate hedges to protect the transaction from increases in interest rates.

Common Types of MBS – CMBS and RMBS

While there are a number of types of MBS, CMBS and RMBS continue to represent the bulk ofoutstanding issuance in the European ABS markets.

CMBS are securities secured by or evidencing ownership interests in a single mortgage loan secured byone or more commercial properties or a pool of mortgage loans secured by commercial properties.These securities may be senior, junior, investment grade or non-investment grade. The yield on CMBSwill depend, in part, on the timely payment of interest and repayment of principal due on the underlyingmortgage loans, and defaults by the borrowers on such loans may ultimately result in deficiencies anddefaults on the CMBS. In the event of a default, the trustee for the benefit of the holders of the CMBSwill typically have recourse only to the underlying pool of mortgage loans and, if a loan is in default, tothe mortgaged property securing such mortgage loan. After the trustee or other parties appointed underthe securities has exercised all of the rights of a lender under a defaulted mortgage loan and the relatedmortgaged property has been liquidated, typically no further remedy will be available.

The credit quality of CMBS depends primarily on the credit quality of the underlying mortgage loans.Among the factors likely to determine the credit quality of a mortgage loan are: (i) the principal amountof the mortgage loan relative to the value of the related mortgaged property and in particular at thematurity of the mortgage loan; (ii) the creditworthiness of tenants occupying the mortgaged properties(upon which the borrower generally relies for funds to repay the mortgage loans); (iii) the purpose of

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the mortgage loan (for example, refinancing or new purchase); (iv) the mortgage loan terms (forexample, amortisation, balloon payment amounts, reserves, prepayment terms, duration); and (v) thegeographic location of the mortgaged property securing the mortgage loan.

RMBS are securities secured by or evidencing ownership interests in pools of mortgage loans securedby residential properties. Similar to CMBS, the yield on RMBS will depend, in part, on the timelypayment of interest and principal due on the underlying mortgage loans by the borrowers. Defaults bysuch borrowers may ultimately result in deficiencies and defaults on the RMBS.

The credit quality of the underlying residual mortgage loans is a function of factors such as: (i) theprincipal amount of the mortgage loans relative to the value of the related mortgaged properties; (ii) thecreditworthiness of the borrowers; (iii) the purpose of the mortgage loans (for example, refinancing,new purchase or investment); (iv) the mortgage loan terms (for example, prepayment and amortisation);and (v) the geographic location of the properties securing the mortgage loans.

Typical MBS Capital Structure

The capital structure of a typical securitisation involves the issue by the SPV of multiple tranches ofdebt securities. The various tranches have different rankings as to entitlement to payment of interest andprincipal both before and after any enforcement of the security underlying the debt obligations. Eachjunior tranche provides credit enhancement to the tranches which rank senior to it, since the holders ofthe senior tranches are generally entitled to payment before payments are made to the holders of thejunior tranches. For example, in a securitisation that issues debt securities in the form of “A” notes, “B”notes and “C” notes in declining order of seniority, the “B” notes and “C” notes provide creditenhancement to the “A” notes, and the “C” notes provide credit enhancement to the “B” notes. In theevent of a default on any of the financial assets backing the transaction, any shortfall is absorbed firstby any additional credit enhancement in the transaction (such as overcollateralisation or a cash reserve,subordinated loan, residual certificate or any other residual income position in the structure) and thenby the most junior tranche of the debt securities issued (in the example above, the “C” notes) to theextent of the credit enhancement provided by that tranche, and then by the next most senior tranche ortranches until the shortfall has been absorbed in its entirety. Generally, the most subordinated trancheof securities is therefore the most sensitive to delinquencies and credit losses in relation to theunderlying assets, and the most senior tranche is the least sensitive to them. Residual income which isavailable at the bottom of the payment waterfall of a typical MBS structure after the other debt andtransaction costs have been met has, historically, often been retained by the originator. Should a defaultor decrease in expected payments under a particular securitisation structure occur, the deficiency willfirst affect the residual income position (which is also often referred to as the “equity” or “first loss”position) which will be the first to have its payments decreased by the deficiency.

ABS through the credit crisis

The European asset backed securities market was on a stable, expanding path prior to the events of 2007.ABS issuance volumes grew every year from 2000 up to and including 2006 (source: ESF SecuritisationData Report 2010 Q1) as the number and size of issuers multiplied to take advantage of securitisation asa source of funding and risk transfer. Buyers consisted of a range of players such as asset backedcommercial paper (“ABCP”) issuers, SIVs and money managers for safer class A tranches, CDOs andhedge funds who invested in riskier junior bonds at higher yields. The Company believes that the buyingcommunity invested mainly due to improved return profiles compared to similarly rated products andcontributed to the sector’s continued growth and compression of risk spreads.

Credit concerns in the MBS market started to appear first in the US towards the end of 2006, whenmortgage borrowers with prior credit problems on highly leveraged products encountered refinancingproblems. Due to bad credit histories and high loan balances relative to property values, borrowers wereunable to repay their mortgages and were forced to default. The Directors understand that this affectedthe performance of ABS securitisations that owned the rights to receive these mortgage cash flows andcast doubt on the credibility of ABS credit ratings. As money market funds grew more concerned aboutthe safeness of MBS investments, they halted purchases of bonds and notes issued by ABCP issuers and

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SIV bonds and notes. Due to the short term liability profile of a majority of ABS funding vehicles, suchas ABCP conduit vehicles and SIVs, they were quickly drawn into a funding crisis and became forcedsellers of MBS paper to repay their liabilities.

The UK was drawn into similar problems around September 2007. European ABS investors, nervousabout the funding crisis seen in the US, refused to provide refinancing to Northern Rock, aUK mortgage lender heavily reliant on short term financing from the wholesale money market forfunding of its mortgage loans. Northern Rock’s inability to find investors for its securitisationprogramme and wholesale funding programmes led to a well publicised bank run and an eventualgovernment led rescue via nationalisation by the end of the year. By the beginning of 2008, negativedynamics in the securitisation funding markets had started a negative feedback loop on most realeconomies around the world. Mortgage borrowers’ lack of refinancing options drove up paymentdelinquencies and had a negative effect on house prices. This caused banks to increase provisions fortheir lending book and a continued underperformance of MBS transactions. Rating agencies started todowngrade MBS paper based on worse than expected performance, which, coupled with pro-cyclicalaccounting treatments, increased banks’ capital charges for ABS holdings. At the same time, investorsbecame increasingly worried as they saw MBS prices plummet as more and more forced sellersemerged, causing demand to dry up almost entirely. The increased strain on banks’ balance sheettriggered an interbank funding crisis throughout 2008 culminating in Lehman Brothers becomingbankrupt in September 2008.

Central banks, governments and financial regulators have sought to act in concert to contain the damagedone to the real economy through a variety of measures including monetary, fiscal, regulatory andaccounting responses. The intent is to ensure that a repetition of the funding crisis is avoided in future,while most authorities remain focussed on keeping securitisation alive as a funding option for banks inthe future. Regulatory proposals surrounding the ABS market are still being worked on providing anuncertain backdrop for investors who are willing to engage in the market.

MBS market prices have recovered over the course of 2009 and 2010 helped by banks taking speculativelong positions with a view of turning products over to end buyers eventually. However, risk spreads stillremain highly elevated relative to markets prior to the funding crisis. End buyers appear to remainscarce as a combination of factors serves to depress demand, including regulatory uncertainty and aperceived complexity and unpredictability of the product.

Market Opportunities

The Directors, on the advice of the Investment Manager, believe that the continued supply demandimbalance in MBS markets has moved debt prices past their fair value and that sellers tend to be highlygeared asset managers, assets repossessed from repo facilities and bank portfolios. The InvestmentManager believes, and the Directors agree, that these selling pressures are likely to remain in place asbonds face rating downgrades and banks are looking to deleverage balance sheets for some time to come.On the other hand, a number of traditional buyers of European real estate debt, including SIVs and otherhighly geared funds, no longer exist as they were forced into closure during the tumultuous events ofprior years. Shaken by the markets high volatility, banks’ proprietary trading desks have curtailed theirability to hold bonds, while bank treasuries may soon no longer be able to use MBS as eligible liquidassets. It is the opinion of the Investment Manager that new entrants to the market are deterred by a lackof understanding of the fundamental credit and structural features of the asset class. The asset backedinvestor base turned out to be more homogenous and shallower than many had expected as most investorsrelied on the same operating model of short-term leverage, short-term capital and high volume, therebycreating an illusion of liquidity. The Investment Manager sees an attractive proposition in participatingin the current MBS market dynamic. As a survivor of the funding crisis, it can draw on a wealth ofexperience to benefit selectively from indiscriminate selling offering attractive returns.

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PART III

MANAGEMENT OF THE COMPANY

Management of the Company

The Board of Directors is responsible for the determination of the Company’s investment objective andpolicy as specified in this Prospectus and has overall responsibility for its activities. The Directors, allof whom are non-executive, are as follows:

Tom Chandos (Chairman) (UK resident). Viscount Chandos, age 56, is chairman of the real estateinvestment company Invista European Real Estate Trust SICAV and sits on the board of a number ofother publicly traded and private companies. He has a background in investment banking and venturecapital. He is a Trustee of the Esmee Fairbairn Foundation and a member of its investment committee.He is a Labour member of the House of Lords.

Talmai Morgan (Guernsey resident). Mr Morgan qualified as a barrister in the United Kingdom in1976. He moved to Guernsey in 1988 where he worked for Barings as general counsel and then for theBank of Bermuda as managing director of Bermuda Trust (Guernsey) Limited. From January 1999 toJune 2004, Mr. Morgan was director of Fiduciary Services and Enforcement at the Guernsey FinancialServices Commission (Guernsey’s financial regulatory agency) where he was responsible for the designand subsequent implementation of Guernsey’s law relating to the regulation of fiduciaries,administration businesses and company directors. Mr. Morgan was also involved in working groups ofthe Financial Action Task Force and the Offshore Group of Banking Supervisors. From July 2004 toMay 2005, Mr. Morgan served as chief executive of Guernsey Finance, which is the official body forthe promotion of the Guernsey finance industry. Mr. Morgan is now the chairman or a non-executivedirector of a number of investment-companies including companies listed on the LSE. He holds anM.A. in economics and law from the University of Cambridge.

Christopher Spencer (Guernsey resident). Mr Spencer qualified as a chartered accountant in Londonin 1975. Following two years in Bermuda he moved to Guernsey. Mr. Spencer, who specialised in auditand fiduciary work, was Managing Partner/Director of Pannell Kerr Forster (Guernsey) Limited from1990 until his retirement in May 2000. Mr. Spencer sits on the AIC Offshore Committee and is a pastPresident of the Guernsey Society of Chartered and Certified Accountants, and a past Chairman of theGuernsey Branch of the Institute of Directors. Mr. Spencer sits on the Board of Directors of J.P.MorganPrivate Equity Limited, IRP Property Investments Limited, Tamar European Industrial Fund Limited,Dexion Trading Limited, Henderson Far East Income Limited, Ruffer Investment Company Limited andLow Carbon Accelerator Limited, each of which is listed on the London Stock Exchange. Mr. Spenceralso sits on the Board of Directors of Thames River Hillside Apex Fund SPC, Thames River LongstoreLimited, and Nevsky Fund limited, each of which is listed on the Irish Stock Exchange.

Graham Harrison (Guernsey resident). Mr Harrison is co-founder and managing director of AssetRisk Consultants Limited (ARC), an investment consulting practice based in Guernsey. After obtaininga Masters in Economics from the London School of Economics, he began his career working instructured finance for Midland Montagu in London and then as a project economist for the CaribbeanDevelopment Bank in Barbados. In 1993, he moved back to Guernsey to help developinvestment-related business for the Bachmann Group and in 2002 he led a management buy-out whichsaw ARC become an independent business wholly owned by management. A Chartered Fellow of theChartered Institute for Securities and Investment, he is also currently a non-executive director of anumber of investment and asset management companies.

John Hawkins (Guernsey resident). Mr Hawkins retired from the Bank of Bermuda, after 25 years withthe Group, as Executive Vice President and a Member of the Executive Committee with responsibilityfor private clients and investments. He spent many years in Asia, based in Hong Kong, and hadresponsibility for the Asia Pacific region and for the overall development of the Bank’s presence there.During his time in Hong Kong Mr Hawkins represented the Bank of Bermuda on a number of industryand government related committees. He had previously been based both in London and Bermuda. His

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responsibilities have been of an international nature and following the amalgamation of the Bank ofBermuda with HSBC Group in February 2004, he was appointed to the board of a subsidiary companyof the HSBC Group (resigned 21 May 2008). He also sits on the board of a number of public and privatecompanies including funds and hedge funds. Mr Hawkins is a Fellow of the Institute of CharteredAccountants in England and Wales.

All Directors are independent of the Investment Manager.

The Chairman receives an annual fee of €120,000 and each of Mr Morgan, Mr Spencer, Mr Harrisonand Mr Hawkins will receive an annual fee of €30,000, in each case payable quarterly in equalinstalments in arrear.

In addition to these fees, the Company will reimburse all reasonable travel, and other incidentalexpenses incurred by the Directors in the performance of their duties.

During the year, Talmai Morgan and Graham Harrison each received €12,500 in their capacity asdirectors of Trebuchet Finance Limited.

Corporate Governance

The Company will comply with any corporate governance obligations that apply to Guernseyincorporated companies from time to time. Currently there are no such obligations. In early 2010, theGFSC undertook a public consultation in respect of a proposed code of corporate governance that mayapply to Guernsey companies such as the Company. It is expected that the proposed Guernsey code willcome into effect later in 2010.

The Company is a member of the Association of Investment Companies.

As from 1 April 2010, the Listing Rules now require that the Company include a statement in its annualreport and accounts of how it has applied the main principles set out in section 1 of The UK Code onCorporate Governance (the “Code”), in a manner that would enable Shareholders to evaluate how theprinciples have been applied. Further, such report and accounts will also need to include a statement asto whether the Company has: (i) complied throughout the accounting period with all relevant provisionsset out in section 1 of the Code; or (ii) not complied throughout the accounting period with all relevantprovisions set out in section 1 of the Code and if so, setting out those provisions it has not compliedwith; in the case of provisions whose requirements are of a continuing nature, the period within which,if any, it did not comply with some or all of those provisions; and the Company’s reasons for non-compliance. As at the date of this document the Company complies with the Code.

For the purposes of assessing compliance with the Code, the Board considers all of the Directors asindependent of the Investment Manager and free from any business or other relationship that couldmaterially interfere with the exercise of their independent judgement.

In accordance with the Code, the Board has established an audit committee and a nominationcommittee, in each case with formally delegated duties and responsibilities within written terms ofreference. The Board has not established a remuneration committee as the Company does not andcurrently intends not to have any executive directors or employees.

The audit committee is chaired by Mr Spencer, and its other members will are Mr Morgan, Mr Harrisonand Mr Hawkins. Only independent Directors serve on the committee and members of the committee haveno links with the Company’s external auditors and are independent of the Investment Manager. The auditcommittee will meet not less than twice a year and will meet the external auditors at least once a year.

The audit committee is responsible for overseeing the Group’s relationship with the external auditors,including making recommendations to the Board on the appointment of the external auditors and theirremuneration. The committee is required to consider the nature, scope and results of the auditors’ workand reviews, and develop and implement policy on the supply of any non-audit services that are to beprovided by the external auditors. It receives and reviews reports from the Investment Manager and theGroup’s external auditors relating to the Group’s annual report and accounts. The committee focusesparticularly on compliance with legal requirements, accounting standards and the Listing Rules and

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ensuring that an effective system of internal financial and non-financial controls is maintained. Theultimate responsibility for reviewing and approving the annual report and accounts will remain with theBoard. The Group does not have an internal audit function but due to internal control processes put inplace by the Administrator, Sub-Administrator, Custodian and Investment Manager, the Board hasdecided to place reliance on their systems and internal control procedures.

The nomination committee is chaired by Mr Chandos, and its other members will be Mr Morgan,Mr Harrison, Mr Hawkins and Mr Spencer. The members of the committee are and will be independentDirectors. The terms of reference state that the committee will meet not less than once a year, will haveresponsibility for considering the size, structure and composition of the Board, and retirements andappointments of additional and replacement Directors and will make appropriate recommendations tothe Board.

While no formal committee has been appointed to consider the continuation of engagement of therelevant service providers, the whole Board reviews their performance.

The holders of the position of the chairman of the committees referred to above is reviewed on an annualbasis. The membership of these committees and their terms of reference will be kept under review.

The performance of the chairman of the Board will be assessed by another of the independent Directorsthrough discussions with the other Directors (other than the Chairman).

In addition, the Company complies with the Model Code published in the Listing Rules as requiredby the Listing Rules. The Model Code will apply to the Directors and relevant employees of theInvestment Manager.

Management of Company Assets

As discussed more fully under the heading “The Investment Manager’s Fees and Expenses” below andin paragraph 7 of Part IX, the Company has entered into the Investment Management Agreement withthe Investment Manager and Trebuchet under which the Investment Manager is responsible for themanagement of the Company’s assets, subject to the overall supervision of the Directors.

The Investment Manager

Cheyne Capital is a limited liability partnership registered in England and Wales on 8 August 2006 andis authorised and regulated in the conduct of investment business in the United Kingdom by the FSA.

Cheyne Capital Management Limited is the corporate member and predecessor in interest of theInvestment Manager and commenced business in 2000. The Cheyne Capital group, which includes theInvestment Manager, is a diversified alternative investment management firm specialising in credit-based investments across the risk spectrum, including high-grade, asset-backed, convertible bonds andsub- investment grade strategies. As of 30 June 2010, Cheyne Capital managed net assets ofapproximately US$4.5 billion with approximately 150 staff and members in offices in London,Bermuda, New York and Switzerland. The Cheyne Capital group was founded by Jonathan Lourie(Chief Executive Officer) and Stuart Fiertz (President and Director of Research) in 1999 following tenyears previously working together at Morgan Stanley in London. Chris Goekjian joined Cheyne Capitalin April 2009 as Chief Investment Officer.

As at the date of this Prospectus, the Investment Management Team manages a number of funds andinvestment vehicles within Cheyne Capital.

The Investment Management Team

The Investment Management Team currently consists of two portfolio managers, two businessmanagers and four credit analysts, with over 30 years of combined market experience in the assetbacked securities market.

The Investment Management Team covers the entire ABS capital structure, permitting informedassessment of relative value and access to transactions and allowing the Investment Manager to considerfor debt at all levels of the ABS capital structure. Its members have extensive experience in the

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structuring, execution and management of term securitisation transactions involving many types ofassets, including portfolios comprised of traditional asset classes such as commercial and residentialmortgages, and consumer finance assets such as credit card receivables and other loans. This experienceincludes asset portfolios across multiple jurisdictions, focused primarily on Europe and the UnitedKingdom. The team has particular expertise in commercial and residential mortgage-backed securitiesand loans.

The Investment Manager’s Resources

The Company does not maintain an office or employ personnel. Instead it relies on the facilities andresources of the Investment Manager to conduct its day to day operations. The Company will haveaccess to all of Cheyne Capital’s infrastructure (operational and risk management systems) andresources as well as a team of professionals responsible for the day-to-day operations of the Company.The Company also believes that the reputation of the Investment Manager and its close workingrelationships with several market participants will afford it broad access to investment opportunities.

The key principals of Cheyne Capital’s real estate debt team that will be involved with the day-to-dayprovision of investment management services to the Company are currently Messrs Shamez Alibhai,Ravi Stickney, Richard Lang, Daniel Schuldes, Nicolas Vocos and Yasmin Jiang. Their biographies, togetherwith the biographies of other key members of the Investment Management Team, are set out below.

Shamez Alibhai joined Cheyne in 2006 and is a partner and Portfolio Manager. He coversABS strategies including managing a €500 million portfolio of mezzanine and first loss securitiesranging from residential mortgages to SME loans in the UK and Europe. Prior to that, he worked atCredit Suisse, responsible for the mortgage loan trading platform, structured and executed mortgage,consumer NPL and SME transactions, where he traded approximately €1bn of residential mortgageloans. Prior to that, he was a Senior Structurer at Barclays where he developed risk transfer transactionsto sell deeply subordinated risk to investors. Mr Alibhai has Master’s Degrees from Yale University andMcGill University.

Ravi Stickney joined Cheyne in 2008 and is a partner and Portfolio Manager. He is responsible formanaging a portfolio of €500 million in direct commercial real estate mezzanine loans and CMBSspread across the UK and Europe. Previously he was on ING Bank’s proprietary investments desk, withsole responsibility for managing a €400 million long/short portfolio of predominantly subordinateinterests in Europeane commercial real estate loans and CMBS. Prior to that, he was at LehmanBrothers, structuring and executing UK and European CMBS/RMBS and commercial real estate Bloans and mezzanine loans. He acted as sole operating advisor to the restructuring and eventual sale ofthe first distressed UK CMBS deal. He continues to play an active role in the direction of variousdistressed European real estate loans. He began his career on the UK commercial real estate desk atErnst & Young. Mr Stickney serves on the Executive Committee of the Commercial MortgageSecurities Association in Europe.

Richard Lang joined Cheyne in 2007 and is a partner. He previously worked at Barclays Capital, andprior to that was at Deutsche Bank where he was responsible for the controlling of the EuropeanSecuritised Products Group and Commercial Mortgage Backed Securities businesses. Before that heworked in control roles within the fixed income areas of RBS and Paine Webber. Mr Lang qualified asa chartered accountant in 1999 after obtaining a BA (Hons) in History, and is a member of the ICAEWand CFA UK, having obtained the IMC in 2008.

Daniel Schuldes joined Cheyne in 2008 from Credit Suisse where he was Associate in the AssetFinance Capital Markets. Mr Schuldes earned a Masters in Phil Economics from Cambridge Universityafter completing his BSc in Mathematics at London School of Economics.

Nicolas Vocos joined Cheyne in 2009 from Deutsche Bank London, where he modelled, arranged andexecuted asset backed and corporate structured credit products. Mr Vocos earned a BSc in Economicsfrom the University of Cordoba in Argentina and two Masters of Finance degrees from Torcuato Di TellaUniversity in Argentina and London Business School.

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Yasmin Jiang joined Cheyne in 2010 from Manford Read Estate where she was an Associate workingin financial modelling, acquisition due diligence and asset management. Ms Jiang earned a Bsc inProperty Management & Valuation from the University of Glamorgan, is currently completing a PHDin Real Estate Investments at the University of Glamorgan and is a member of the RICS, Faculty ofValuation.

The Investment Manager’s Investment Process

The following describes the Investment Manager’s current investment process. This process hasdeveloped since the initial public offering of Ordinary Shares in 2005 to reflect the change in the relevantmarkets in which the Company invests and the investment strategy followed by the Investment Manager.

Asset sourcing

The Investment Manager sources investment opportunities through a variety of channels, including theInvestment Manager’s network of direct relationships with several major commercial and investmentbanks, in their capacity both as principals and intermediaries and as issuers.

The Directors believe that the Investment Manager has a competitive advantage in its ability to sourceinvestments through these channels. The Investment Manager’s network of relationships with severalcommercial and investment banks provides it with a broad exposure to financial institutions wishing tosell positions that they already hold.

Members of the Investment Management Team have been involved in European ABS since 2000 andwere one of the earliest market participants to re-enter the Euro ABS market in late 2008. As a result,the Investment Manager has strong relationships with key players including banks, loan servicers andspecial servicers who provide access to information flows. The Investment Management Team aremembers of S&P’s Global Investor Council, which allows a better insight into rating agency activities.

Deal underwriting: asset, loan and bond level analysis

The Investment Manager performs credit focussed analysis of the underlying real estate assets eachpotential investment considered, paired with proprietary cash flow models for each bond. TheInvestment Manager reviews the underlying properties, the loan documentation and the cash flowstructure of the investments.

At the property level, an assessment of the “stressed case” value of the underlying real estate collateralin a particular investment is performed. For commercial properties this analysis will consider stressedyields, vacancies, defaults and repossession values. For residential properties, this will focus onexpected falls in house prices. At the loan level, an understanding of the key terms and covenants issought via a thorough review of the offering prospectus and related documents. In relation to MBS, anunderstanding of the key terms of the securitisation structure is reviewed, including triggers that switchcash flows and, where appropriate, decision tree modelling of outcomes in default and enforcement. Allinvestments are also supported by cash flow models produced by the Investment Manager. The potentialinvestment is reviewed by an analyst and a credit memo is prepared which will include the underwritingassumptions related to an investment. This is then reviewed by an investment committee of the portfoliomanagers, and the risk and pricing is agreed. The Investment Manager uses its knowledge of all theparticipants and its relationships with them to get the best price and information to source trades.

Ongoing monitoring

The Investment Manager will also review the Investment Portfolio on a daily basis, and will if necessaryre-balance the portfolio in the event there is a breach of the Company’s investment policy or as and whenit deems necessary to do so. On a daily basis the Investment Portfolio is also reviewed and monitoredby the risk management team at the Investment Manager. The risk management team at Cheyne Capitalmonitors compliance with the investment policy of the Company, ensures the Investment Portfolio doesnot violate Investment Manager’s internal risk guidelines, and reviews the pricing models utilised inconnection with the Investment Portfolio from time to time. Any violations of the Company’sinvestment policy and the Investment Manager’s internal risk guidelines will be reported to theInvestment Manager’s CIO office.

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The Investment Manager undertakes periodic performance monitoring of all the assets, focusing onunderlying asset and loan performance on an ongoing basis, with no reliance on rating agencies. In themajority of cases, the terms of Company’s investment in Residual Income Positions have allowed theInvestment Manager access to the pool tapes of the particular securitisation (which include details ofthe mortgages underlying the securitisation together with payment records) together with in-depthmodelling tools. The Investment Manager has used its access to such materials, together with its residualinvestor experience, to analyse the mortgage market.

The Investment Manager uses an independent loan-by-loan analysis platform that is kept up to date within-house mortgage specific technology. It maintains full control of data input and storage, which isnecessary to understand and adjust for the idiosyncrasies in the UK mortgage market. It can run itsanalysis on any sub-groups of mortgages through a proprietary loan-level mortgage tool. Data iscollected for distressed sale situations most likely to be found in securitisations, but ignored byaggregate indices.

As noted above, with respect to the Real Estate Debt Investments, the Investment Manager will, as partof the underwriting process, create a credit memo that includes the underwriting assumptions related toan investment. Over the life of an investment, the key underwriting assumptions are monitored and inthe event of a material change, the Investment Manager may elect to reduce or alternatively increase theCompany’s exposure to the investment. In addition, the Investment Manager monitors the market priceof each investment and may from time to time elect to reduce or alternatively increase the exposure toan investment position.

In the event of a significant deterioration in the performance of an investment’s underlying portfolio,the Investment Manager will increase its surveillance and monitoring of the relevant underlyingportfolio and its originator/servicer. Depending on the reasons for, and magnitude of, theunderperformance, as well as the transaction structure, the Investment Manager may do some or all ofthe following to the extent available to it:

• if applicable, engage a third party surveillance specialist in order to obtain detailed informationregarding the nature and extent of such underperformance. In some cases, such an engagement willin and of itself improve asset performance by identifying procedural weaknesses of the servicer;

• if applicable, engage with the special servicer to assist the servicer with asset workouts,particularly in circumstances where the relevant servicer may lack expertise in working outdistressed loans or disposing of foreclosed property;

• if applicable, in cases where the Investment Manager forms the view that the performance of theservicer cannot be improved by any of the foregoing measures, in cooperation with other investorsand stakeholders, take steps to have the originator, SPV trustee or similar parties replace theservicer. There is no guarantee that such steps will be successful;

• if applicable, exercise a call option, if any, and sell collateral assets; and/or

• sell the investment.

Valuation

The Company values each asset in the Investment Portfolio on a fair value basis. In accordance with theCompany’s valuation procedures, the fair value of the Company’s investments is calculated on the basisof observable market data, market discount rates and the Investment Manager’s expectations regardingfuture trends.

Given the re-structurings at many investment banks, there is a lack of reliable independent broker marksfor the Residual Income Positions. The Company has elected to value its Residual Income Positionsusing cash flow models, in the absence of a market bid. The Company has cash flow models for eachof the Company’s Residual Income Positions. Pricing assumptions, including market discount rates,prepayment rates, default rates and credit losses are revised periodically to take into account changes inactual performance and macro conditions. The present value of each of the Residual Income Positionsis calculated using a discount rate applied to the expected cash flow. For each of the Company’s Residual

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Income Positions, except for the two CDO assets, the Company employs an external validation agent toevaluate the Company’s investments and establish a range of valuations based on the degree of liquidity,credit rating, the security type and consistency amongst pricing sources.

ABS bonds are valued using market prices. Currently, the Company takes the average of at least twomarks to determine the value of the bonds.

Exit: loan repayment or opportunistic secondary sale

The Investment Manager will monitor its holdings and the market and consider all appropriate exitstrategies for the assets contained in the Investment Portfolio. The Investment Manager constantlymonitors the market to sell at a premium as spreads compress.

Investment Manager’s Fees and Expenses

Management Fee

Under the current terms of the Investment Management Agreement (the “Investment ManagementAgreement”) between the Company, the Investment Manager and Trebuchet, the Investment Manageris entitled to receive from the Company an annual management fee of 1.75 per cent. of the Net AssetValue of the Company (the “Management Fee”), other than to the extent that such value is comprisedof any investment where the underlying asset portfolio is managed by the Investment Manager (as is thecase with Cheyne High Grade ABS CDO Ltd and Cheyne CLO Investments I Limited), calculated andpayable monthly in arrear.

The Investment Management Agreement Side Letter will, conditional upon the approval of OrdinaryShareholders at the EGM and Bonus Issue Admission occurring, amend the calculation of theManagement Fee set out above so that the Management Fee payable will, with effect from Bonus IssueAdmission, be equal to 1.75 per cent. per annum of the Adjusted NAV of the Company other than to theextent that such value is comprised of any investment where the underlying asset portfolio is managedby the Investment Manager. The Adjusted NAV will be equal to the prevailing NAV calculated inaccordance with the Company’s accounting policies increased by an amount equal to the number ofPreference Shares in issue (excluding Preference Shares held in treasury) multiplied by the PreferenceShare Notional Value.

Incentive Compensation

Under the terms of the Investment Management Agreement, the Investment Manager is entitled toreceive an incentive compensation fee (the “Incentive Fee”) in respect of each incentive period that willbe paid quarterly in arrear. An incentive period will comprise each successive quarter.

The Incentive Fee for each incentive period will be an amount equivalent to 25 per cent., of the amountby which A exceeds (B x C) where:

A = The Company’s consolidated net income taking into account any realised or unrealised losses (butonly to the extent they have not been deducted in a prior incentive period) and excluding any gainsfrom the revaluation of investments, as shown in the Company’s latest consolidated managementaccounts for the relevant quarter, before payment of any Incentive Fee;

B = An amount equal to a simple interest rate equal to two per cent., per quarter, subject to the resetmechanic described below (the “Hurdle Rate”); and

C = The weighted average number of Shares outstanding during the relevant quarter multiplied by theweighted average offer price of such Shares.

For the purposes of calculating the Incentive Fee, the Hurdle Rate was reset on each of 1 April 2009 and1 April 2010, and will be reset on each 1 April thereafter, to equal the greater of (i) a simple interest rateequal to two per cent., per quarter, or (ii) one quarter of the sum of the then-prevailing yield per annumon ten-year German Bunds and 300 basis points. While the Company will not pay a Management Feein respect of that portion of its Investment Portfolio that is comprised of investments where the

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Investment Manager receives fees for its management of the underlying asset portfolio, the income fromsuch investments will be included in the consolidated net income of the Company for the purpose ofcalculating the Incentive Fee.

Where there is a difference between the Company’s consolidated net income for the relevant incentiveperiod as shown in the Company’s quarterly management accounts compared to the Company’s auditedannual accounts, the consolidated net income for the relevant incentive period as reflected in the auditedaccounts shall prevail. Any excess Incentive Fee paid or any additional Incentive Fee due in respect ofany incentive period attributable to any such difference will be repaid by or paid to the InvestmentManager, as the case may be.

Expenses

The Company will also pay or reimburse the Investment Manager in respect of all expenses and costsreasonably incurred by it in performance of its duties under the Investment Management Agreement.These expenses include, but are not limited to, issuance and transaction costs incidental to theacquisition, disposition and financing of investments, legal and auditing fees and expenses, thecompensation and expenses of the Directors, the costs associated with the establishment and maintenanceof any credit facilities and other indebtedness of the Company (including commitment fees, legal fees,closing costs, etc.), all fees and expenses incurred in relation to the incorporation and initial organisationof the Company and the SPVs, expenses associated with other securities offerings of the Company, costsof legal, accounting, due diligence, tax, auditing, administrative and other similar services rendered forthe Company by the Investment Manager or by the Investment Manager’s employees (provided that, inthe latter case, such costs are no greater than those which would be payable to outside professionals orconsultants engaged to perform such services pursuant to agreements negotiated on an arm’s lengthbasis), the costs of printing and mailing circulars and reports to the Company’s Shareholders, costsincurred by employees of the Investment Manager for travel on the Company’s behalf, costs associatedwith any computer software or hardware that is used by the Company, costs to obtain liability insuranceto indemnify the Directors and officers of the Company and the Investment Manager and thecompensation and expenses of the Company’s transfer agent, custodian, registrar and administrator.Subject thereto, the Investment Manager will be responsible for its own overhead expenses in connectionwith the performance of its duties under the Investment Management Agreement, includingcompensation of its employees and rent for office space occupied by it. Also, to the extent that theInvestment Manager incurs expenses related to activities involving other investment vehicles managed bythe Investment Manager in addition to the Company, the Investment Manager will assign only anappropriate and equitable portion of those expenses to the Company.

Termination of the Investment Management Agreement

The Company may terminate the Investment Management Agreement at any time by giving theInvestment Manager not less than 24 months’ prior notice in writing. In lieu of providing 24 months’notice, the Company may pay a termination fee equal to the Management Fees and the Incentive Feesthat the Investment Manager would have earned if the Investment Management Agreement had not beenterminated prior to the end of the 24 month notice period (calculated based on the fees earned by theInvestment Manager during the 12 month period preceding termination).

The Company may terminate the Investment Management Agreement for cause by giving theInvestment Manager not less than 60 days’ prior notice in writing, if the Investment Manager commitsany material breach with respect to its obligations under the Investment Management Agreement andfails (in the case of a breach capable of rectification) to make good such breach within 30 days of receiptof written notice from the Company requiring it to do so. Such termination may not take effect until theCompany has appointed a replacement investment manager.

The Company may terminate the Investment Management Agreement by giving notice to theInvestment Manager, effective immediately, if the Investment Manager is dissolved or unable to pay itsdebts or commits any act of bankruptcy or if a receiver is appointed over all or a substantial portion ofits assets or ceases to hold any licence, permission, authorisation or consent necessary for theperformance of its duties under the Investment Management Agreement.

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The Investment Manager may resign its appointment at any time by giving the Company not less thanthree months’ prior notice in writing, provided that such termination shall not take effect until the earlierof (i) the date on which the Company has appointed a replacement investment manager; and (ii) the datefalling six months after the date on which the Investment Manager gave such notice. The InvestmentManager may resign its appointment by giving the Company not less than 60 days’ prior notice inwriting if the Company commits any material breach with respect of its obligations under thisAgreement and fails to make good any breach within 30 days of receipt of written notice from theInvestment Manager requiring it to do so.

The Investment Manager may resign its appointment by giving notice in writing to the Company,effective immediately, if the Company is dissolved or is unable to pay its debts or commits any act ofbankruptcy or if a receiver is appointed over all or a substantial portion of its assets.

Investment Manager Options

On 8 December 2005, the Company paid a fee to the Investment Manager in recognition of the workperformed by it in connection with the initial capital raising by the Company in December 2005 in theform of a grant to the order of the Investment Manager of options (the “Investment ManagerOptions”) representing the right to acquire 2,250,000 Ordinary Shares, being 10 per cent. of the numberof Ordinary Shares offered to investors in the 2005 capital raising (excluding the Exchange Shares andthe Ordinary Shares issued to the Directors), at an exercise price per share of €10 per Ordinary Share.The Investment Manager Options are fully vested and immediately exercisable and will remainexercisable until 13 December 2015.

As at 16 August 2010 (the latest practicable date prior to the publication of this Prospectus), noInvestment Manager Options have been exercised.

The Board resolved on 12 August 2010 that no further Investment Manager Options would be issued bythe Company.

Conflicts

The Investment Manager and its officers and employees will provide services to the Company and anyaffiliated SPV on a non-exclusive basis. They may also be involved in other financial, investment orprofessional activities. The Investment Management Agreement generally does not limit or restrict theInvestment Manager’s ability to engage in any business or manage any other vehicle that investsgenerally in ABS. The current terms of the Investment Management Agreement prohibits the InvestmentManager and any entity controlled by or under common control with the Investment Manager fromraising or sponsoring any new investment fund, company or investment vehicle (private or public)whose investment policies, guidelines or plan targets as its primary investment category investments inPrimary Target Investments, it being understood that no such fund, company or investment vehicle shallbe prohibited from investing in Primary Target Investments. As of the date of this Prospectus, theInvestment Manager does not sponsor any vehicle which targets as its primary target investmentcategory investments in Primary Target Investments.

The terms of the existing Investment Management Agreement further provide that the InvestmentManager will initially consider any Primary Target Investment opportunities for the Company. If theInvestment Manager determines, in its sole discretion, that an investment is suitable in its entirety forthe Company taking into account any factors that the Investment Manager deems appropriate (forexample, size, underlying collateral type and location, servicer, price and/or available financing), theInvestment Manager will seek to acquire the investment for the Company. If the Investment Managerdetermines, in its sole discretion, that an investment (in whole or in part) is not suitable for the Company(taking into account any of the aforementioned factors), the Investment Manager will seek to acquirefor the Company that part, if any, of the investment which is suitable for the Company, and theInvestment Manager may seek to allocate all or the part of such opportunity that is not deemed suitablefor the Company to other funds managed by it in its discretion.

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In the event that Ordinary Shareholders approve the Investment Management Agreement Side Letter,the conflicts provisions in the Investment Management Agreement summarised in the two paragraphsabove shall cease to have effect. In their place, the Investment Management Agreement Side Letter willprovide that the Investment Manager will allocate Real Estate Debt Investments, Residual IncomePositions and other investment opportunities that fall within the Company’s investment policy betweenthe Company and its other clients on the following basis. When it is determined that it would beappropriate for the Company and one or more other investment vehicles managed by the InvestmentManager (including investment vehicles managed by the Investment Management Team) to participatein the same investment opportunity, the Investment Manager will seek to allocate participation levels inthe opportunity on a pro rata basis (based on the latest available asset value approved by the relevantadministrator or commitment amount, as applicable, of the relevant investment vehicles). The pro rataallocation will be subject to an adjustment, applied by Investment Manager in its reasonable discretionthat takes into account, amongst other things, any restrictions on making such an investment arisingfrom each relevant vehicle’s investment policy or eligibility criteria, their relative amounts of capitalavailable for new investments, their risk and return profile, the relative exposure to market trends andthe size, liquidity, financiability and the anticipated term of the proposed investment. The InvestmentManager shall make such adjustments in a manner that it considers is fair and reasonable to all clientsand does not give material unfair preference to any single client or group of clients.

The Company may buy or borrow investments from or sell or lend (including by way of repurchaseagreements) investments to other entities managed or controlled by the Investment Manager, and mayborrow funds from or lend funds to other entities managed or controlled by the Investment Manager,but any such transactions will be entered into only on an arm’s length basis in accordance with Part 3of the Authorised Closed-ended Investment Scheme Rules 2008 and subject, where required under theListing Rules, to independent Shareholder approval and/or delivery of a fairness opinion.

The Investment Manager may on occasion represent both the buyer and the seller of the security in aspecific transaction. In such a case, the Investment Manager will obtain an independent valuation for thesecurity to be traded to facilitate fair pricing of the transaction. The Investment Manager will execute thepurchase transaction on behalf of the client at the seller’s price and will charge no fee for this transaction.

The Company and/or any affiliated SPV may enter into transactions with the Investment Manager andits officers and employees, provided that such transactions are conducted and entered into on an arm’slength basis in accordance with the Authorised Closed-ended Investment Scheme Rules 2008 andapproved by the independent members of the Board, and where required under the Listing Rules, aresubject to independent Shareholder approval and/or delivery of a fairness opinion.

The Investment Manager may work with third parties in seeking to source securitisation transactionswhere the Real Estate Debt Investment or other applicable investment in the new SPV established forthe purpose of the transaction is suitable for the Company. The Investment Manager may receive feesfrom the originating bank or financial institution, any arranging banks or other parties advising on suchsecuritisation transactions or from the relevant SPV itself in each case in respect of structuring advicein relation to the relevant SPV without having to account to the Company for such fees. Except wherethe Investment Manager is manager of the relevant asset or issuer, the Company and/or Trebuchet (orany similar funding or asset holding vehicle) may acquire such assets without Shareholder approval (butsubject to the prior approval of the independent members of the Board of Directors having beenobtained). Where the Investment Manager is manager of the relevant asset or issuer, the acquisition ofsuch assets will be the subject of independent Shareholder approval and/or delivery of a fairness opinionwhere required by the Listing Rules.

As noted under the heading “Investment Manager’s Fees and Expenses—Management Fee” above, noManagement Fee will be payable in respect of the Company’s investment in any SPV where theunderlying asset portfolio is managed by the Investment Manager. Income from such investments,however, will be included in the consolidated net income of the Company for the purpose of calculatingthe Incentive Fee payable to the Investment Manager by the Company.

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The Administrator

The Company has entered into an administration agreement with Kleinwort Benson (Channel Islands)Fund Services Limited (the “Administrator”) (the “Administration Agreement”), under which theAdministrator provides administrative and company secretarial services for the Company. A summaryof the Administration Agreement is set out in paragraph 7 of Part IX of this Prospectus. TheAdministrator is a subsidiary of Kleinwort Benson Channel Islands Limited, whose ultimate parentcompany is RHJ International SA, and provides investment advice to investment companies and unittrusts domiciled principally in Guernsey, Ireland, Luxembourg, Bermuda, the Cayman Islands and theUnited Kingdom.

The Administrator has entered into a sub-administration agreement with the Company and State StreetFund Services (Ireland) Limited (the “Sub-Administrator”) (the “Sub-Administration Agreement”)pursuant to which it has delegated the provision of fund administration and fund accounting services tothe Sub-Administrator. A summary of the Sub-Administration Agreement is set out in paragraph 7 ofPart IX of this Prospectus. In return for the provision of these services, the Sub-Administrator is entitledto receive an annual fee, which is payable by the Administrator from the fees paid to the Administratorunder the Administration Agreement, such fee to be agreed in writing from time to time between theAdministrator, the Company and the Sub-Administrator.

The Sub-Administrator was incorporated as a private limited company in Ireland on 23 March 1992 andis ultimately owned by State Street Corporation. The authorised share capital of the Sub-Administratoris £5,000,000 with an issued and paid up share capital of £350,000. State Street Corporation is a leadingworld-wide specialist in providing sophisticated global investors with investment servicing andinvestment management. State Street Corporation is headquartered in Boston, Massachusetts, USA andtrades on the New York Stock Exchange under the system “STT”.

The Sub-Administrator, as part of its duties, produces a set of management accounts on a monthly basisfor the Board of Directors. The management accounts will include the Company’s Net Asset Valuecalculated in accordance with the Company’s accounting policies.

The Custodian

The Company has entered into a custody agreement with State Street Custodial Services (Ireland)Limited (the “Custodian”) (the “Custody Agreement”) pursuant to which the Custodian will providecustodial services to the Company in return for a fee agreed in writing from time to time between theCustodian and the Company. A summary of the Custodian Agreement is set out in paragraph 7 of PartIX of this Prospectus. The Custodian is authorised and regulated by the Irish Financial ServicesRegulatory Authority. The assets of the Company will be held by the Custodian or by one or morenominees, agents or sub-custodians or may be deposited with or held in any securities depository,settlement system, clearing house, dematerialised book entry system or similar system and/or in arecognised system or clearing agency. The Custodian’s telephone number is +353 1776 3674.

The Custodian has the same ownership structure as the Sub-Administrator, as described above.

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PART IV

TERMS AND CONDITIONS OF THE OPEN OFFER

The New Ordinary Shares are only suitable for existing and potential investors who understandthe potential risk of capital loss associated with an investment in the Company and that there maybe limited liquidity in the underlying investments of the Company and the New Ordinary Shares,for whom an investment in the New Ordinary Shares is part of a diversified investmentprogramme and who fully understand and are willing to assume the risks involved in such aninvestment programme.

1. Introduction

Conditional on the Required Resolutions being approved by Ordinary Shareholders at the EGM andOpen Offer Admission occurring, 13,322,328 New Ordinary Shares are being issued pursuant to thePlacing and Open Offer.

Upon completion of the Placing and Open Offer, the New Ordinary Shares will representapproximately 50 per cent. of the existing issued share capital of the Company and 33 per cent. of theEnlarged Issued Ordinary Share Capital on an undiluted basis, assuming that no Investment ManagerOptions are exercised.

This Prospectus (and, for Qualifying Certificated Open Offer Shareholders only, the Application Form)contains the formal terms and conditions of the Open Offer. Your attention is drawn to paragraph 4 ofthis Part IV which gives details of the procedure for application and payment for the New OrdinaryShares. The attention of Overseas Shareholders is drawn to paragraph 6 of this Part IV below.

Qualifying Open Offer Shareholders who apply for New Ordinary Shares will receive dividends on anyNew Ordinary Shares issued to them in the same manner as they receive their dividend on their ExistingOrdinary Shares in accordance with the Company’s dividend policy from time to time.

The Placees have agreed to subscribe for all the New Ordinary Shares at the Offer Price subject to OpenOffer Admission and the passing of the Required Resolutions at the Extraordinary General Meeting,subject to clawback in respect of valid applications by Qualifying Certificated Open Offer Shareholdersand Qualifying CREST Open Offer Shareholders at the Offer Price under the Open Offer.

The Open Offer is being made to Qualifying Open Offer Shareholders, being holders of ExistingOrdinary Shares as set out on the Register on the Open Offer Record Date. The Open Offer is anopportunity for Qualifying Open Offer Shareholders to apply for, in aggregate, 13,322,328 NewOrdinary Shares on a pro rata basis by reference to their holding of Existing Ordinary Shares as at theOpen Offer Record Date at the Offer Price in accordance with the terms of the Open Offer. Each suchapplicant will be entitled to apply for New Ordinary Shares in the proportions detailed below.

Any Ordinary Shareholder who has sold or transferred all or part of their registered holding(s) ofExisting Ordinary Shares prior to the close of business on 13 August 2010 is advised to consult theirstockbroker, bank or other agent through or to whom the sale or transfer was effected as soon as possiblesince the invitation to apply for New Ordinary Shares under the Open Offer may be a benefit which maybe claimed from them by the purchasers or transferees under the rules of the London Stock Exchange.

2. The Open Offer

Subject to the terms and conditions set out below (and, in the case of Qualifying Certificated Open OfferShareholders, in the Application Form), Qualifying Open Offer Shareholders are being given theopportunity to apply to subscribe for New Ordinary Shares in the proportion to their existing holdingsat the Offer Price (payable in full on application) on the following basis:

1 New Ordinary Share at €2.00 per New Ordinary Share for every 2 Existing Ordinary Shares

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registered in the name of Qualifying Open Offer Shareholders at the Open Offer Record Date and so inproportion for any other number of Existing Ordinary Shares then registered.

Entitlements of Qualifying Open Offer Shareholders will be rounded down to the nearest whole numberof New Ordinary Shares. Fractions representing New Ordinary Shares which would otherwise havearisen will not be allotted to Qualifying Open Offer Shareholders, but will be aggregated and subscribedfor under the Placing for the benefit of the Company.

Valid applications by Qualifying Open Offer Shareholders will be satisfied in full up to the amount oftheir individual Open Offer Entitlements. No application in excess of a Qualifying Open OfferShareholder’s pro rata entitlement will be met under the Open Offer and any Qualifying Open OfferShareholder so applying will be deemed to have applied for the maximum entitlement as specified onthe Application Form in the case of a Qualifying Certificated Open Offer Shareholder or standing to thecredit of the CREST stock account in the case of a Qualifying CREST Open Offer Shareholder or asotherwise notified to him (and any monies received in excess of the amount due will be returned to theQualifying Open Offer Shareholder, without interest, at the risk of the Qualifying Open OfferShareholder). Qualifying Open Offer Shareholders may apply for less than their maximum entitlementshould they wish to do so. Any New Ordinary Shares comprising Open Offer Entitlements not appliedfor by Qualifying Open Offer Shareholders will be placed with the Placees.

If you are a Qualifying Certificated Open Offer Shareholder, the Application Form shows the numberof Existing Ordinary Shares registered in your name on the Open Offer Record Date (in Box 4) and alsoshow the maximum number of New Ordinary Shares for which you are entitled to apply pursuant toyour Open Offer Entitlement (in Box 5 of the Application Form).

Qualifying CREST Open Offer Shareholders will have Open Offer Entitlements credited to their stockaccounts in CREST and should refer to paragraph 4.2 of this Part IV and also to the CREST Manualfor further information on the relevant CREST procedures.

Qualifying Open Offer Shareholders will have a basic pro rata entitlement to apply for Open OfferShares which, in the case of Qualifying Certificated Open Offer Shareholders is equal to the number ofOpen Offer Entitlements shown in Box 5 on each of the Application Form, or, in the case of QualifyingCREST Open Offer Shareholders, is equal to the number of Open Offer Entitlements that will becredited to their stock account in CREST on 18 August 2010.

Following the issue of the New Ordinary Shares to be allotted pursuant to the Placing and Open Offer,Qualifying Open Offer Shareholders who do not take up any of their Open Offer Entitlements will suffera dilution of approximately 2.50 per cent. to their interests in the Company on an undiluted basis,assuming that no Investment Manager Options are exercised, and will suffer a dilution of approximately2.37 per cent. to their interests in the Company on a fully diluted basis.

Not all holders of Existing Ordinary Shares will be Qualifying Open Offer Shareholders. Shareholdersof the Company who are located or resident in, or who are citizens of, or who have a registered addressin an Excluded Territory or are US Persons (regardless of the number of Existing Ordinary Shares thatthey hold) will not qualify to participate in the Open Offer. The attention of Overseas Shareholders isdrawn to paragraph 6 of this Part IV.

Qualifying Open Offer Shareholders should be aware that the Open Offer is not a rights issue. Assuch, Qualifying Certificated Open Offer Shareholders should note that their Application Formis not a negotiable document and cannot be traded. Qualifying CREST Open Offer Shareholdersshould note that, although their Open Offer Entitlement will be credited to their CRESTaccounts, the Open Offer Entitlements will not be tradable or listed and applications in respect ofthe Open Offer may only be made by the Qualifying CREST Open Offer Shareholders originallyentitled or by a person entitled by virtue of a bona fide market claim. New Ordinary Shares whichare not taken up under the Open Offer will not be sold in the market for the benefit of those whodo not apply under the Open Offer and Qualifying Open Offer Shareholders who do not apply totake up Open Offer Shares will have no rights under the Open Offer. Any New Ordinary Shareswhich are not applied for in respect of the Open Offer will be issued to the Placees, with theproceeds retained for the benefit of the Company.

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The Existing Ordinary Shares are already admitted to CREST. No further application for admission toCREST is accordingly required for the New Ordinary Shares. All such New Ordinary Shares, whenissued and fully paid, may be held and transferred by means of CREST.

Application will be made for the Open Offer Entitlements to be admitted to CREST. The conditions forsuch admission having already been met, the Open Offer Entitlements are expected to be admitted toCREST with effect from 8.00 a.m. on 16 September 2010.

The results of the Open Offer are expected to be announced on or around 15 September 2010 througha RIS announcement.

The New Ordinary Shares will be issued credited as fully paid and will rank pari passu in all respectswith the Existing Ordinary Shares. The New Ordinary Shares are not being made available in whole orin part to the public except under the terms of the Open Offer.

3. Conditions and further terms of the Placing and Open Offer

The Placing and Open Offer is conditional on, amongst other things, the passing of the RequiredResolutions at the Extraordinary General Meeting, Admission of the New Ordinary Shares becomingeffective by not later than 8.00 a.m. on 16 September 2010 (or such later time and date as the Companyand Liberum Capital may agree) and the Placing and Open Offer Agreement not being terminated priorto such time.

Accordingly, if any condition is not satisfied, the Placing and Open Offer will not proceed and anyapplications made by Qualifying Open Offer Shareholders will be rejected. In such circumstances,application monies will be returned (at the applicant’s sole risk), without payment of interest, as soonas practicable thereafter.

No temporary documents of title will be issued. Definitive certificates in respect of New OrdinaryShares subscribed for under the Open Offer are expected to be posted to each Qualifying CertificatedOpen Offer Shareholder by 23 September 2010. Pending receipt of the certificates, transfers of NewOrdinary Shares will be certified against the Register. In respect of Qualifying CREST Open OfferShareholders, the New Ordinary Shares are expected to be credited to stock accounts maintained inCREST on 16 September 2010.

Applications will be made for the New Ordinary Shares to be admitted to the Official List and to tradingon the London Stock Exchange’s main market for listed securities. The application for admission to theOfficial List in respect of the New Ordinary Shares is an application for a premium listing. Admissionis expected to occur on 16 September 2010, when dealings in the New Ordinary Shares on the LondonStock Exchange are expected to begin.

If for any reason it becomes necessary to adjust the expected timetable as set out in this Prospectus, theCompany will notify the UK Listing Authority and make an appropriate announcement on a RIS givingdetails of the revised dates.

4. Procedure for application and payment

The action to be taken by you in respect of the Open Offer depends on whether, at the relevant time, youhave an Application Form in respect of your Open Offer Entitlements or you have Open OfferEntitlements credited to your CREST stock account in respect of such entitlement.

Qualifying Certificated Open Offer Shareholders will be allotted their New Ordinary Shares incertificated form. Qualifying CREST Open Offer Shareholders will be allotted their New OrdinaryShares in CREST. It will be possible for Qualifying Certificated Open Offer Shareholders to depositOpen Offer Entitlements into CREST and for Qualifying CREST Open Offer Shareholders to withdrawOpen Offer Entitlements from CREST but only to satisfy a bona fide market claim. Further informationon deposit and withdrawal from CREST is set out in paragraph 4.2(f) of this Part IV.

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CREST sponsored members should refer to their CREST sponsor, as only their CREST sponsor will beable to take the necessary action specified below to apply under the Open Offer in respect of the OpenOffer Entitlements of such members held in CREST. CREST members who wish to apply under theOpen Offer in respect of their Open Offer Entitlements in CREST should refer to the CREST Manualfor further information on the CREST procedures referred to below.

Qualifying Open Offer Shareholders who do not want to apply for the New Ordinary Shares under theOpen Offer should take no action and should not complete or return the Application Form or take anyaction in CREST.

If you are a Qualifying Open Offer Shareholder and have any queries about the Open Offer or on theprocedure for acceptance and payment you should call the Shareholder helpline on 0871 664 0321 fromwithin the UK or on + 44 20 8639 3399 if calling from outside the UK. Calls to the 0871 664 0321number cost 10 pence per minute from a BT landline. Other network providers’ costs may vary. Linesare open 9.00 a.m. to 5.00 p.m. (London time) Monday to Friday (except UK public holidays). Calls tothe helpline from outside the UK will be charged at the applicable international rate. Different chargesmay apply to calls from mobile telephones and calls may be recorded and randomly monitored forsecurity and training purposes. The helpline cannot provide advice on the merits of the Open Offer norgive any financial, legal or tax advice.

If you are a Qualifying CREST Open Offer Shareholder and you have any questions regarding theCREST procedures, please telephone the CREST Service Desk on 0871 384 2903 (+44 121 415 0250if you are calling from outside the United Kingdom). The CREST Service Desk is available from9.00 a.m. to 5.00 p.m. Monday to Friday (excluding public holidays). Please note that calls may bemonitored or recorded.

For legal reasons, the Shareholder helpline or CREST Service Desk will only be able to provide youwith information contained in this Prospectus (other than information relating to the Company’sRegister and CREST processes respectively) and as such will be unable to give advice on the merits ofthe Open Offer or to provide financial advice. Shareholder helpline staff can explain the optionsavailable to you, which forms you need to fill in and how to fill them in correctly.

4.1 If you have an Application Form showing your Open Offer Entitlements in respect of yourentitlement under the Open Offer

(a) General

Subject to what is provided in paragraph 6 of this Part IV “Terms and Conditions of theOpen Offer” in relation to Overseas Shareholders, Qualifying Certificated Open OfferShareholders will receive an Application Form for the New Ordinary Shares. TheApplication Form shows the number of Existing Ordinary Shares registered in their nameon the Open Offer Record Date in Box 4 of the Application Form. It also shows the numberof New Ordinary Shares for which they are entitled to apply under the Open Offer, asshown by the total number of New Ordinary Shares comprising their Open OfferEntitlement set out in Box 5 of the Application Form. Entitlements to New Ordinary Sharesare rounded down to the nearest whole number and fractional Open Offer Entitlements havetherefore also been rounded down. Fractional Open Offer Entitlements will be aggregatedand the resulting New Ordinary Shares will not be allotted to Qualifying Open OfferShareholders, but will be subscribed for under the Placing for the benefit of the Company.Qualifying Certificated Open Offer Shareholders may apply for less than their maximumentitlement should they wish to do so. Qualifying Certificated Open Offer Shareholdersmay also hold such Application Form by virtue of a bona fide market claim (see paragraph4.1(b) below).

Each Qualifying Certificated Open Offer Shareholder who wishes to take up Open OfferEntitlements will be required, prior to receiving any New Ordinary Shares, to make therepresentations, warranties, agreements and acknowledgements set out in paragraph 6 ofthis Part IV and as included in the Application Form. Certificates representing New

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Ordinary Shares will not be delivered to any person unless and until the Company and theReceiving Agent have received a duly signed Application Form including suchrepresentations, warranties, agreements and acknowledgements.

The instructions and other terms set out in the Application Form constitute part of the termsof the Open Offer to Qualifying Certificated Open Offer Shareholders.

(b) Bona fide market claims

Applications to acquire New Ordinary Shares may only be made on the Application Formand may only be made by the Qualifying Certificated Open Offer Shareholder named in itor by a person entitled by virtue of a bona fide market claim in relation to a purchase ofExisting Ordinary Shares through the market prior to 8.00 a.m. on 17 August 2010, the dateupon which the Existing Ordinary Shares are expected to be marked “ex” for the purposeof the entitlement to participate in the Open Offer by the London Stock Exchange.Application Forms may not be assigned, transferred or split, except to satisfy bona fidemarket claims up to 3.00 p.m. on 7 September 2010. The Application Form is not anegotiable document and cannot be traded. A Shareholder who has sold or otherwisetransferred all or part of his holding of Existing Ordinary Shares prior to the date uponwhich the Existing Ordinary Shares were marked “ex” for the purpose of the entitlement toparticipate in the Open Offer, should consult his broker or other professional adviser assoon as possible, as the invitation to acquire New Ordinary Shares under the Open Offermay be a benefit which may be claimed by the transferee.

Shareholders who have sold all of their registered holdings prior to 5.00 p.m. on13 August 2010 should complete Box 8 on the Application Form and immediately send theform to the stockbroker, bank or other agent through whom the sale or transfer was effectedfor transmission to the purchaser or transferee, or directly to the purchaser or transferee, ifknown. Subject to certain exceptions, the Application Form should not, however, beforwarded to or transmitted in or into any Excluded Territory. If the market claim is to besettled outside CREST, the beneficiary of the claim should follow the procedures set out inthe accompanying Application Form. If the market claim is to be settled in CREST, thebeneficiary of the claim should follow the procedures set out in paragraph 4.2(b) below.

Qualifying Certificated Open Offer Shareholders who have sold or otherwise transferredpart only of their Existing Ordinary Shares shown on Box 4 of their Application Formsprior to 3.00 p.m. on 7 September 2010 should complete Box 8 of the Application Formsand immediately deliver the Application Form, together with a letter stating the number ofApplication Forms required, the total number of Existing Ordinary Shares to be includedin each Application Form (the aggregate of which must equal the number shown in Box 4of the Application Form) and the total number of Open Offer Entitlements to be includedin each Application Form (the aggregate of which must equal the number shown in Box 5of the corresponding Application Form), to the stockbroker, bank or other agent throughwhom the sale or transfer was effected or return it by post to Capita Registrars, CorporateActions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU so as to bereceived by 11.00 a.m on 9 September 2010. Capita Registrars will then create newApplication Forms, mark the Application Forms “Declaration of sale or transfer dulymade’’ and send them by post to the person submitting the original Application Form.

(c) Application procedures

Qualifying Certificated Open Offer Shareholders wishing to apply to acquire NewOrdinary Shares (whether in respect of all or part of their Open Offer Entitlement) shouldcomplete the Application Form in accordance with the instructions printed on it.

Completed Application Forms should be posted in the accompanying pre-paid envelope (inthe UK only) or returned by post or by hand (during normal office hours only) to the CapitaRegistrars, Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, KentBR3 4TU (who will act as Receiving Agent in relation to the Open Offer) so as to be

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received by no later than 11.00 a.m. on 9 September 2010, after which time, subject to thelimited exceptions set out below, Application Forms will not be valid. Applicationsdelivered by hand will not be checked upon delivery and no receipt will be provided.Qualifying Certificated Open Offer Shareholders should note that applications, once made,will, subject to the very limited withdrawal rights set out in this Prospectus, be irrevocableand receipt thereof will not be acknowledged. If an Application Form is being sent by first-class post in the UK, Qualifying Certificated Open Offer Shareholders are recommendedto allow at least four working days for delivery.

Completed Application Forms should be returned with a cheque or banker’s draft drawn inEuros on a bank or building society in the UK which is either a member of the Cheque andCredit Clearing Company Limited or the CHAPS Clearing Company Limited or a memberof either of the committees of the Scottish or Belfast Clearing Houses or which hasarranged for its cheques and banker’s drafts to be cleared through facilities provided by anyof those companies or committees. Such cheques or banker’s drafts must bear theappropriate sort code in the top right-hand corner and must be for the full amount payableon application.

Cheques should be drawn on a personal account in respect of which the QualifyingCertificated Open Offer Shareholder has sole or joint title to the funds and should be madepayable to “Capita Registrars Limited re: Queen’s Walk Investment Limited Open Offer”and crossed “A/C Payee Only”. Third-party cheques (other than building society chequesor banker’s drafts where the building society or bank has confirmed that the relevantQualifying Certificated Open Offer Shareholder has title to the underlying funds byinserting the applicant name on the back of the banker’s draft or the building society chequeand adding their stamp) will not be accepted. Payments via CHAPS, BACS or electronictransfer will also not be accepted. All documents and cheques sent through the post to andfrom the Qualifying Certificated Open Shareholder will be sent at their own risk and anycheques not received by Capita Registrars will need to be re-issued and re-sent by theQualifying Certificated Open Offer Shareholder.

Cheques and banker’s drafts will be presented for payment on receipt and it is a term of theOpen Offer that cheques and banker’s drafts will be honoured on first presentation. TheCompany may elect to treat as valid or invalid any applications made by QualifyingCertificated Open Offer Shareholders in respect of which cheques are not so honoured. Shouldsuch cheques or banker’s drafts not be so honoured, the Company may undertake any action torecover the value of the application and any costs associated with such recovery (including theforfeiture and sale of any New Ordinary Shares allotted pursuant to such an application). Ifcheques or banker’s drafts are presented for payment before the conditions of the Placing andOpen Offer are fulfilled, the application monies will be kept in a separate bank account untilall the conditions are met. No interest will be paid on such payments. If the Placing and OpenOffer does not become unconditional, no New Ordinary Shares will be issued and all monieswill be returned (at the applicant’s sole risk), without payment of interest, to applicants as soonas practicable following the lapse of the Placing and Open Offer.

The Company may in its sole discretion, but shall not be obliged to, treat an ApplicationForm as valid and binding on the person by whom or on whose behalf it is lodged, even ifnot completed in accordance with the relevant instructions or not accompanied by a validpower of attorney where required, or if it otherwise does not strictly comply with the termsand conditions of the Open Offer. The Company further reserves the right (but shall not beobliged) to accept either:

(i) Application Forms received after 11.00 a.m. on 9 September 2010; or

(ii) applications in respect of which remittances are received before 11.00 a.m. on9 September 2010 from authorised persons (as defined in FSMA) specifying theNew Ordinary Shares applied for and undertaking to lodge an Application Form indue course but, in any event, within two Business Days.

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Multiple applications will not be accepted. All documents and remittances sent by post byor to an applicant (or as the applicant may direct) will be sent at the applicant’s own risk.

If New Ordinary Shares have already been allotted to a Qualifying Certificated Open OfferShareholder and such Qualifying Certificated Open Offer Shareholder’s cheque or banker’sdraft is not honoured upon first presentation or such Qualifying Certificated Open OfferShareholder’s application is subsequently otherwise deemed to be invalid, the Companyshall be authorised (in its absolute discretion as to manner, timing and terms) to makearrangements for the sale of such New Ordinary Shares on behalf of such QualifyingCertificated Open Offer Shareholder and to hold the proceeds of sale (net of the Company’sreasonable estimate of any loss that it has suffered as a result of the acceptance beingtreated as invalid (including VAT) including any stamp duty or SDRT payable on thetransfer of such New Ordinary Shares) and of all amounts payable by such QualifyingCertificated Open Offer Shareholders pursuant to the provisions herein in respect of thesubscription of such New Ordinary Shares, on behalf of such Qualifying Certificated OpenOffer Shareholders. None of Capita Registrars, or the Company, nor any other person, shallbe responsible for, or have any liability for, any loss, expense or damage suffered by suchQualifying Certificated Open Offer Shareholder as a result.

(d) Effect of application

By completing and delivering an Application Form, amongst other things, the applicant:

(i) represents and warrants to the Company that he has the right, power and authority,and has taken all action necessary, to make the application under the Open Offer andto execute, deliver and exercise his rights, and perform his obligations under anycontracts resulting therefrom and that he is not a person otherwise prevented by legalor regulatory restrictions from applying for New Ordinary Shares or acting on behalfof any such person on a non-discretionary basis;

(ii) agrees with the Company that all applications under the Open Offer and contractsresulting therefrom shall be governed by, and construed in accordance with, the lawsof England;

(iii) confirms to the Company that in making the application he is not relying on anyinformation or representation in relation to the Company other than that contained inthis Prospectus, and the applicant accordingly agrees that no person responsible solelyor jointly for this Prospectus or any part thereof, or involved in the preparation thereof,shall have any liability for any such information or representation not so contained andfurther agrees that, having had the opportunity to read this Prospectus, he will bedeemed to have had notice of all the information in relation to the Company containedin this Prospectus (including information incorporated by reference);

(iv) confirms to the Company that no person has been authorised to give any informationor to make any representation concerning the Company or its subsidiaries or the NewOrdinary Shares (other than as contained in this Prospectus) and, if given or made,any such other information or representation should not be relied upon as havingbeen authorised by the Company;

(v) represents and warrants to the Company that he is the Qualifying Certificated OpenOffer Shareholder originally entitled to the Open Offer Entitlements or that he hasreceived such Open Offer Entitlements by virtue of a bona fide market claim;

(vi) represents and warrants to the Company that if he has received some or all of hisOpen Offer Entitlements from a person other than the Company, he is entitled toapply under the Open Offer in relation to such Open Offer Entitlements by virtue ofa bona fide market claim;

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(vii) requests that the New Ordinary Shares, to which he will become entitled, be issuedto him on the terms set out in this Prospectus and the Application Form, subject tothe terms of the Revised Articles;

(viii) represents and warrants to the Company that he is not, nor is he applying on behalfof any person, a citizen or resident, or which is a corporation, partnership or otherentity created or organised in or under any laws, of any Excluded Territory or anyjurisdiction in which the application for New Ordinary Shares is prevented by lawand he is not applying with a view to re-offering, re-selling, transferring or deliveringany of the New Ordinary Shares which are the subject of his application in anyExcluded Territory or to, or for the benefit of, a person who is a citizen or resident,or which is a corporation, partnership or other entity created or organised in or underany laws, of any Excluded Territory or any jurisdiction in which the application forNew Ordinary Shares is prevented by law, nor acting on behalf of any such person ona non-discretionary basis nor is he a person otherwise prevented by legal orregulatory restrictions from applying for New Ordinary Shares under the Open Offernor acting on behalf of any such person on a non-discretionary basis (except whereproof satisfactory to the Company, in its sole and absolute discretion, has beenprovided to the Company that he is able to accept the invitation by the Company freeof any requirement which the Company, in its sole and absolute discretion, regardsas unduly burdensome);

(ix) represents and warrants to the Company that (1) it is not a US Person, is not locatedwithin the United States and is not acquiring the Open Offer Entitlements or the NewOrdinary Shares for the account or benefit of a US Person; (2) it is acquiring theOpen Offer Entitlements or the New Ordinary Shares in an offshore transactionmeeting the requirements of Regulation S; (3) it is acquiring the Open OfferEntitlements or the New Ordinary Shares for its own account or for one or moreinvestment accounts for which it is acting as a fiduciary or agent, in each case forinvestment only, and not with a view to or for sale or other transfer in connection withany distribution of the New Ordinary Shares in any manner that would violate theUS Securities Act, the US Investment Company Act or any other applicable securitieslaws; (4) it understands and acknowledges that the Open Offer Entitlements and theNew Ordinary Shares have not been and will not be registered under theUS Securities Act or with any securities regulatory authority of any state or otherjurisdiction of the United States and may not be offered, sold, resold, taken up,exercised, renounced, transferred, delivered or distributed, directly or indirectly, intoor within the United States or to, or for the account or benefit of, US Persons; and(5) it understands and acknowledges that the Company has not registered and will notregister as an investment company under the US Investment Company Act;

(x) represents and warrants to the Company that no portion of the assets used topurchase, and no portion of the assets used to hold, the New Ordinary Shares or anybeneficial interest therein constitutes or will constitute the assets of (1) an “employeebenefit plan” as defined in Section 3(3) of ERISA that is subject to Title I of ERISA;(2) a “plan” as defined in Section 4975 of the US Tax Code, including an individualretirement account or other arrangement that is subject to Section 4975 of the US TaxCode; or (3) an entity which is deemed to hold the assets of any of the foregoingtypes of plans, accounts or arrangements that is subject to Title I of ERISA orSection 4975 of the US Tax Code. In addition, if an investor is a governmental,church, non-US or other employee benefit plan that is subject to any federal, state,local or non-US law that is substantially similar to the provisions of Title I of ERISAor Section 4975 of the US Tax Code, its purchase, holding, and disposition of theShares must not constitute or result in a non-exempt violation of any suchsubstantially similar law;

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(xi) understands and acknowledges that the Company reserves the right to make inquiriesof any holder of the New Ordinary Shares or interests therein at any time as to suchperson’s status under the federal US securities laws and to require any such personthat has not satisfied the Company that the holding by such person will not violateor require registration under the US securities laws to transfer such New OrdinaryShares or interests in accordance with the Articles;

(xii) represents and warrants to the Company that (1) it has received (outside the UnitedStates), carefully read and understands the Prospectus, and (2) it has not, directly orindirectly, distributed, forwarded, transferred or otherwise transmitted the Prospectus (orany part thereof) or any other presentation or offering materials concerning the Sharesto or within the United States or to any US Person, nor will it do any of the foregoing;

(xiii) represents and warrants to the Company that (1) at the time the New Ordinary Sharesare acquired, it is not an affiliate of the Company or a person acting on behalf of suchan affiliate, and (ii) it is not acquiring the New Ordinary Shares for the account orbenefit of an affiliate of the Company or of a person acting on behalf of such an affiliate;

(xiv) understands and acknowledges that if any New Ordinary Shares are issued incertificated form, then such certificates evidencing ownership will contain a legendsubstantially to the following effect unless otherwise determined by the Company inaccordance with applicable law:

QUEEN’S WALK INVESTMENT LIMITED (THE “COMPANY”) HAS NOTBEEN AND WILL NOT BE REGISTERED UNDER THE US INVESTMENTCOMPANY ACT OF 1940, AS AMENDED (THE “US INVESTMENT COMPANYACT”). IN ADDITION, THE SECURITIES OF THE COMPANY REPRESENTEDBY THIS CERTIFICATE HAVE NOT BEEN AND WILL NOT BE REGISTEREDUNDER THE US SECURITIES ACT OF 1933, AS AMENDED (THE “USSECURITIES ACT”), OR WITH ANY SECURITIES REGULATORYAUTHORITY OF ANY STATE OR OTHER JURISDICTION OF THE UNITEDSTATES. ACCORDINGLY, THIS SECURITY MAY NOT BE OFFERED, SOLD,RESOLD, TRANSFERRED, DELIVERED OR DISTRIBUTED, DIRECTLY ORINDIRECTLY, INTO OR WITHIN THE UNITED STATES OR TO, OR FOR THEACCOUNT OR BENEFIT OF, US PERSONS (AS DEFINED IN REGULATION SUNDER THE US SECURITIES ACT);

(xv) represents and warrants to the Company that if in the future it decides to offer, sell,transfer, assign or otherwise dispose of the New Ordinary Shares, it will do so only(1) in an offshore transaction complying with the provisions of Regulation S underthe US Securities Act to a person outside the United States and not known by thetransferor to be a US Person, by pre-arrangement or otherwise, or (2) to the Companyor a subsidiary thereof. It understands and acknowledges that any sale, transfer,assignment, pledge or other disposal made other than in compliance with the abovestated restrictions will be subject to the compulsory transfer provisions as providedin the Articles;

(xvi) represents and warrants to the Company that, if it is acquiring any Shares as afiduciary or agent for one or more accounts, it has sole investment discretion withrespect to each such account and full power and authority to make such foregoingrepresentations, warranties, acknowledgements and agreements on behalf of eachsuch account; and

(xvii) understands and acknowledges that the Company, Liberum Capital, their directors,officers, agents, employees, advisers and others will rely upon the truth and accuracy ofthe foregoing representations, warranties, acknowledgments and agreements. If any ofthe representations, warranties, acknowledgments or agreements made by it are nolonger accurate or have not been complied with, it will immediately notify the Company.

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All enquiries in connection with the procedure for application and completion of theApplication Forms should be addressed to the Receiving Agent at Capita Registrars,Corporate Actions, The Registry, 34 Beckenham Road, Beckenham, Kent BR3 4TU or bytelephone on 0871 664 0321 from within the UK or on + 44 20 8639 3399 if calling fromoutside the UK. Calls to the 0871 664 0321 number cost 10 pence per minute from aBT landline. Other network providers’ costs may vary. Lines are open 9.00 a.m. to5.00 p.m. (London time) Monday to Friday (except UK public holidays). Calls to thehelpline from outside the UK will be charged at the applicable international rate. Differentcharges may apply to calls from mobile telephones and calls may be recorded and randomlymonitored for security and training purposes. The helpline cannot provide advice on themerits of the Open Offer nor give any financial, legal or tax advice.

Qualifying Certificated Open Offer Shareholders who do not want to apply for the NewOrdinary Shares under the Open Offer should take no action and should not complete orreturn the Application Form.

4.2 If you have Open Offer Entitlements credited to your stock account in CREST in respect ofyour entitlement under the Open Offer

(a) General

Subject to what is provided in paragraph 6 of this Part IV in relation to certain OverseasShareholders, each Qualifying CREST Open Offer Shareholder will receive a credit to hisstock account in CREST of his Open Offer Entitlements equal to the maximum number ofNew Ordinary Shares for which he is entitled to apply to acquire under the Open Offer.Entitlements to New Ordinary Shares will be rounded down to the nearest whole number.Fractional Open Offer Entitlements will be aggregated and the resulting New OrdinaryShares will be sold to the Placees for the benefit of the Company. Qualifying CREST OpenOffer Shareholders may apply for less than their maximum entitlement should they wish todo so.

The CREST stock account to be credited will be an account under the participant ID andmember account ID that apply to the Existing Ordinary Shares held on the Open OfferRecord Date by the Qualifying CREST Open Offer Shareholder in respect of which theOpen Offer Entitlements have been allocated.

If for any reason the Open Offer Entitlements cannot be admitted to CREST by, or the stockaccounts of Qualifying CREST Open Offer Shareholders cannot be credited by, 4.30 p.m.on 18 August 2010, or such later time and/or date as the Company may decide, a form ofapplication will be sent to each Qualifying CREST Open Offer Shareholder in substitutionfor the Open Offer Entitlements which should have been credited to his stock account inCREST. In these circumstances the expected timetable as set out in this Prospectus will beadjusted as appropriate.

A Qualifying CREST Open Offer Shareholder who wishes to apply to acquire some or allof their entitlements to New Ordinary Shares should refer to the CREST Manual for furtherinformation on the CREST procedures referred to below. Should a Qualifying CRESTOpen Offer Shareholder need advice with regard to these procedures, please contact CapitaRegistrars on 0871 664 0321 from within the UK or on + 44 20 8639 3399 if calling fromoutside the UK. Calls to the 0871 664 0321 number cost 10 pence per minute from aBT landline. Other network providers’ costs may vary. Lines open 9.00 a.m. to 5.00 p.m.(London time) Monday to Friday (except UK public holidays). Calls to the helpline fromoutside the UK will be charged at the applicable international rate. Different charges mayapply to calls from mobile telephones and calls may be recorded and randomly monitoredfor security and training purposes. The helpline cannot provide advice on the merits of theOpen Offer nor give any financial, legal or tax advice. If you are a CREST sponsoredmember you should consult your CREST sponsor if you wish to apply for New OrdinaryShares as only your CREST sponsor will be able to take the necessary action to make thisapplication in CREST.

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(b) Bona fide market claims

The Open Offer Entitlements will constitute a separate security for the purposes of CREST.Although Open Offer Entitlements will be admitted to CREST and be enabled forsettlement, applications in respect of Open Offer Entitlements may only be made by theQualifying CREST Open Offer Shareholders originally entitled or by a person entitled byvirtue of a bona fide market claim transaction. Transactions identified by the CRESTClaims Processing Unit as “cum” the Open Offer Entitlement will generate an appropriatemarket claim transaction and the relevant Open Offer Entitlement(s) will thereafter betransferred accordingly.

(c) USE instructions

A Qualifying CREST Open Offer Shareholder who is a CREST member and who wants toapply for New Ordinary Shares in respect of all or some of their Open Offer Entitlementsin CREST must send (or, if they are CREST sponsored members, procure that their CRESTsponsor sends) an Unmatched Stock Event (“USE”) Instruction to Euroclear which, on itssettlement, will have the following effect:

(i) the crediting of a stock account of Capita Registrars under the participant ID andmember account ID specified below, with a number of Open Offer Entitlementscorresponding to the number of New Ordinary Shares applied for; and

(ii) the creation of a CREST payment, in accordance with the CREST paymentarrangements in favour of the payment bank of Capita Registrars in respect of theamount specified in the USE Instruction which must be the full amount payable onapplication for the number of New Ordinary Shares referred to in (i) above.

(d) Content of USE Instruction in respect of Open Offer Entitlements for New Ordinary Shares

The USE Instruction must be properly authenticated in accordance with Euroclear’sspecifications and must contain, in addition to the other information that is required forsettlement in CREST, the following details:

(i) the number of New Ordinary Shares for which application is being made (and hencethe number of the Open Offer Entitlement(s) being delivered to Capita Registrars);

(ii) the ISIN of the Open Offer Entitlement for New Ordinary Shares. Thisis GG00B4THTL39;

(iii) the CREST participant ID of the accepting CREST member;

(iv) the CREST member account ID of the accepting CREST member from which theOpen Offer Entitlements are to be debited;

(v) the participant ID of the Receiving Agent in its capacity as a CREST receiving agent.This is 9RA01;

(vi) the member account ID of the Receiving Agent in its capacity as a CREST receivingagent. This is 27149QUE;

(vii) the amount payable by means of a CREST payment on settlement of the USEInstruction. This must be the full amount payable on application for the number ofNew Ordinary Shares referred to in (i) above;

(viii) the intended settlement date. This must be on or before 11.00 a.m. on 9 September; and

(ix) the Corporate Action Number for the Open Offer. This will be available by viewingthe relevant corporate action details in CREST.

In order for an application under the Open Offer to be valid, the USE Instruction mustcomply with the requirements as to authentication and contents set out above and mustsettle on or before 11.00 a.m. on 9 September.

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In order to assist prompt settlement of the USE Instruction, CREST members (or theirsponsors, where applicable) may consider adding the following non-mandatory fields to theUSE Instruction:

(i) a contact name and telephone number (in the free format shared note field); and

(ii) a priority of at least 80.

In the event that the Placing and Open Offer does not become unconditional by 8.00 a.m.on 16 September 2010 or such later time and date as the Company and Liberum Capitalmay agree (and notified to Shareholders), the Placing and Open Offer will lapse, the OpenOffer Entitlements admitted to CREST will be disabled and Capita Registrars will refundthe amount paid by a Qualifying CREST Open Offer Shareholder by way of a CRESTpayment, without interest, as soon as practicable thereafter. The interest earned on suchmonies will be retained for the benefit of the Company.

(e) Deposit of Open Offer Entitlements into, and withdrawal from, CREST

A Qualifying Certificated Open Offer Shareholder’s entitlement under the Open Offer asshown by the number of Open Offer Entitlements in his Application Form may beconverted into Open Offer Entitlements that are deposited into CREST (either into theaccount of the Qualifying Certificated Open Offer Shareholder named in the ApplicationForm or into the name of a person entitled by virtue of a bona fide market claim). Similarly,Open Offer Entitlements held in CREST may be withdrawn from CREST so that theentitlement under the Open Offer is reflected in an Application Form. Normal CRESTprocedures (including timings) apply in relation to any such deposit or withdrawal, subject(in the case of a deposit into CREST) as set out in the Application Form.

If you are the registered holder(s) of the Existing Ordinary Shares set out in Box 4 of theApplication Form, Box 11 which is entitled “CREST Deposit Form” should be completedand then the Application Form deposited with the CREST Courier and Sorting Service. Inaddition, the normal CREST stock deposit procedures will need to be carried out, exceptthat (a) it will not be necessary to complete and lodge a separate CREST transfer form (asprescribed under the Stock Transfer Act 1963) with the CREST Courier and SortingService and (b) only the total number of Open Offer Entitlements shown in Box 5 of theApplication Form may be deposited into CREST.

If you are entitled to the Open Offer Entitlements shown in Box 5 of the Application byvirtue of a bona fide market claim, the declaration in Box 8 of the Application Form musthave been completed or (in the case of an Application Form which may have been split)marked “Declaration of sale duly made”, and then the CREST Deposit Form in Box 11must be completed and deposited with the CREST Courier and Sorting Service inaccordance with the instructions above. A holder of more than one Application Form whowishes to deposit the Open Offer Entitlements shown on those Application Forms intoCREST must complete Box 11 of each Application Form.

A holder of an Application Form who is proposing to deposit the entitlement set out in suchform into CREST is recommended to ensure that the deposit procedures are implementedin sufficient time to enable the person holding or acquiring the Open Offer Entitlementsfollowing their deposit into CREST to take all necessary steps in connection with taking upthe entitlement prior to 11.00 a.m. on 9 September 2010.

In particular, having regard to normal processing times in CREST and on the part of theReceiving Agent, the recommended latest time for depositing an Application Form with theCREST Courier and Sorting Service, where the person entitled wishes to convert theentitlement under the Open Offer set out in such Application Form into Open OfferEntitlements in CREST, is 3.00 p.m. on 6 September 2010 and the recommended latesttime for receipt by Euroclear of a dematerialised instruction requesting withdrawal of OpenOffer Entitlements from CREST is 4.30 p.m. on 3 September 2010 in either case so as to

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enable the person acquiring or (as appropriate) holding the Open Offer Entitlementsfollowing the conversion or withdrawal (whether as shown in an Application Form or heldin CREST) to take all necessary steps in connection with applying in respect of the OpenOffer Entitlements, as the case may be, prior to 11.00 a.m. on 9 September 2010.

Delivery of an Application Form with the CREST deposit form duly completed whether inrespect of a deposit into the account of the Qualifying Certificated Open Offer Shareholdernamed in the Application Form or into the name of another person, shall constitute arepresentation and warranty (in addition to and not limiting any other representation orwarranty) to the Company and the Receiving Agent by the relevant CREST member(s) thatit/they is/are not in breach of any of the representations, warranties, acknowledgements andconfirmations on page 2 of the Application Form or the provisions of the notes under theparagraph headed “Instructions for depositing entitlements under the Open Offer intoCREST” on page 3 of the Application Form, and a declaration to the Company and theReceiving Agent from the relevant CREST member(s) that, subject to certain exceptions,in the Company’s sole and absolute discretion, it/they is/are not in or citizen(s) orresident(s) of any Excluded Territory or any jurisdiction in which the application for NewOrdinary Shares is prevented by law, and, where such deposit is made by a beneficiary ofa market claim, a representation and warranty that the relevant CREST member(s) is/areentitled to apply under the Open Offer by virtue of a bona fide market claim.

(f) Validity of application

A USE Instruction complying with the requirements as to authentication and contents setout above which settles by no later than 11.00 a.m. on 9 September 2010 will constitute avalid application under the Open Offer.

(g) CREST procedures and timings

Qualifying CREST Open Offer Shareholders and (where applicable) their CREST sponsorsshould note that Euroclear does not make available special procedures in CREST for anyparticular corporate action. Normal system timings and limitations will therefore apply inrelation to the input of a USE Instruction and its settlement in connection with the OpenOffer. It is the responsibility of the CREST member concerned to take (or, if the CRESTmember is a CREST sponsored member, to procure that his CREST sponsor takes) suchaction as shall be necessary to ensure that a valid application is made as stated above by11.00 a.m. on 9 September 2010. In this connection CREST members and (whereapplicable) their CREST sponsors are referred in particular to those sections of the CRESTManual concerning practical limitations of the CREST system and timings.

(h) Incorrect or incomplete applications

If a USE Instruction includes a CREST payment for an incorrect sum, the Company,through the Receiving Agent, reserves the right:

(i) to reject the application in full and refund the payment to the CREST member inquestion (without interest);

(ii) in the case that an insufficient sum is paid, to treat the application as a validapplication for such lesser whole number of New Ordinary Shares as would be ableto be applied for with that payment at the Offer Price, refunding any unutilised sumto the CREST member in question (without interest); and

(iii) in the case that an excess sum is paid, to treat the application as a valid applicationfor all the New Ordinary Shares referred to in the USE Instruction, refunding anyunutilised sum to the CREST member in question (without interest).

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(i) Effect of valid application

A Qualifying CREST Open Offer Shareholder who makes or is treated as making a validapplication in accordance with the above procedures thereby:

(i) represents and warrants that he has the right, power and authority, and has taken allaction necessary, to make the application under the Open Offer and to execute,deliver and exercise his rights, and perform his obligations, under any contractsresulting therefrom and that he is not a person otherwise prevented by legal orregulatory restrictions from applying for New Ordinary Shares or acting on behalf ofany such person on a non-discretionary basis;

(ii) agrees to pay the amount payable on application in accordance with the aboveprocedures by means of a CREST payment in accordance with the CREST paymentarrangements (it being acknowledged that the payment to Capita Registrars’ paymentbank in accordance with the CREST payment arrangements shall, to the extent of thepayment, discharge in full the obligation of the CREST member to pay to theCompany the amount payable on application);

(iii) agrees that all applications under the Open Offer and contracts resulting therefromshall be governed by, and construed in accordance with, the laws of England;

(iv) confirms that in making the application he is not relying on any information orrepresentation in relation to the Company other than that contained in thisProspectus, and the applicant accordingly agrees that no person responsible solely orjointly for this Prospectus or any part thereof, or involved in the preparation thereof,shall have any liability for any such information or representation not so containedand further agrees that, having had the opportunity to read this Prospectus, he will bedeemed to have had notice of all the information in relation to the Companycontained in this Prospectus (including information incorporated by reference);

(v) confirms that no person has been authorised to give any information or to make anyrepresentation concerning the Company or its subsidiaries or the New OrdinaryShares (other than as contained in this Prospectus) and, if given or made, any suchother information or representation should not be relied upon as having beenauthorised by the Company;

(vi) represents and warrants that he is the Qualifying CREST Open Offer Shareholderoriginally entitled to the Open Offer Entitlements or that he has received such OpenOffer Entitlements by virtue of a bona fide market claim;

(vii) represents and warrants that if he has received some or all of his Open OfferEntitlements from a person other than the Company, he is entitled to apply under theOpen Offer in relation to such Open Offer Entitlements by virtue of a bona fidemarket claim;

(viii) requests that the New Ordinary Shares to which he will become entitled be issued tohim on the terms set out in this Prospectus, subject to the Revised Articles;

(ix) represents and warrants to the Company that he is not, nor is he applying on behalfof any person, a citizen or resident, or which is a corporation, partnership or otherentity created or organised in or under any laws, of any Excluded Territory or anyjurisdiction in which the application for New Ordinary Shares is prevented by lawand he is not applying with a view to re-offering, re-selling, transferring or deliveringany of the New Ordinary Shares which are the subject of his application in anyExcluded Territory or to, or for the benefit of, a person who is a citizen or resident,or which is a corporation, partnership or other entity created or organised in or underany laws, of any Excluded Territory or any jurisdiction in which the application forNew Ordinary Shares is prevented by law, nor acting on behalf of any such person ona non-discretionary basis nor is he a person otherwise prevented by legal or

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regulatory restrictions from applying for New Ordinary Shares under the Open Offernor acting on behalf of any such person on a non-discretionary basis (except whereproof satisfactory to the Company, in its sole and absolute discretion, has beenprovided to the Company that he is able to accept the invitation by the Company freeof any requirement which the Company, in its sole and absolute discretion, regardsas unduly burdensome);

(x) represents and warrants to the Company that (1) it is not a US Person, is not locatedwithin the United States and is not acquiring the Open Offer Entitlements or the NewOrdinary Shares for the account or benefit of a US Person; (2) it is acquiring theOpen Offer Entitlements or the New Ordinary Shares in an offshore transactionmeeting the requirements of Regulation S; (3) it is acquiring the Open OfferEntitlements or the New Ordinary Shares for its own account or for one or moreinvestment accounts for which it is acting as a fiduciary or agent, in each case forinvestment only, and not with a view to or for sale or other transfer in connection withany distribution of the Shares in any manner that would violate the US Securities Act,the US Investment Company Act or any other applicable securities laws; (4) itunderstands and acknowledges that the Open Offer Entitlements and the NewOrdinary Shares have not been and will not be registered under the US Securities Actor with any securities regulatory authority of any state or other jurisdiction of theUnited States and may not be offered, sold, resold, taken up, exercised, renounced,transferred, delivered or distributed, directly or indirectly, into or within the UnitedStates or to, or for the account or benefit of, US Persons; and (5) it understands andacknowledges that the Company has not registered and will not register as aninvestment company under the US Investment Company Act;

(xi) represents and warrants to the Company that no portion of the assets used topurchase, and no portion of the assets used to hold, the New Ordinary Shares or anybeneficial interest therein constitutes or will constitute the assets of (1) an “employeebenefit plan” as defined in Section 3(3) of ERISA that is subject to Title I of ERISA;(2) a “plan” as defined in Section 4975 of the US Tax Code, including an individualretirement account or other arrangement that is subject to Section 4975 of the US TaxCode; or (3) an entity which is deemed to hold the assets of any of the foregoingtypes of plans, accounts or arrangements that is subject to Title I of ERISA or Section4975 of the US Tax Code. In addition, if an investor is a governmental, church, non-US or other employee benefit plan that is subject to any federal, state, local or non-US law that is substantially similar to the provisions of Title I of ERISA or Section4975 of the US Tax Code, its purchase, holding, and disposition of the Shares mustnot constitute or result in a non-exempt violation of any such substantially similar law;

(xii) understands and acknowledges that the Company reserves the right to make inquiriesof any holder of the New Ordinary Shares or interests therein at any time as to suchperson’s status under the federal US securities laws and to require any such personthat has not satisfied the Company that the holding by such person will not violateor require registration under the US securities laws to transfer such Placing Shares orinterests in accordance with the Articles;

(xiii) represents and warrants to the Company that (1) it has received (outside the UnitedStates), carefully read and understands the Prospectus, and (2) it has not, directly orindirectly, distributed, forwarded, transferred or otherwise transmitted the Prospectus(or any part thereof) or any other presentation or offering materials concerning theShares to or within the United States or to any US Person, nor will it do any ofthe foregoing;

(xiv) represents and warrants to the Company that (1) at the time the New Ordinary Sharesare acquired, it is not an affiliate of the Company or a person acting on behalf of suchan affiliate, and (2) it is not acquiring the New Ordinary Shares for the account orbenefit of an affiliate of the Company or of a person acting on behalf of such an affiliate;

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(xv) represents and warrants to the Company that if in the future it decides to offer, sell,transfer, assign or otherwise dispose of the New Ordinary Shares, it will do so only(1) in an offshore transaction complying with the provisions of Regulation S underthe US Securities Act to a person outside the United States and not known by thetransferor to be a US Person, by pre-arrangement or otherwise, or (2) to the Companyor a subsidiary thereof. It understands and acknowledges that any sale, transfer,assignment, pledge or other disposal made other than in compliance with the abovestated restrictions will be subject to the compulsory transfer provisions as providedin the Articles

(xvi) represents and warrants to the Company that, if it is acquiring any Shares as afiduciary or agent for one or more accounts, it has sole investment discretion withrespect to each such account and full power and authority to make such foregoingrepresentations, warranties, acknowledgements and agreements on behalf of eachsuch account; and

(xvii) understands and acknowledges that the Company, Liberum Capital, their directors,officers, agents, employees, advisers and others will rely upon the truth and accuracyof the foregoing representations, warranties, acknowledgments and agreements. Ifany of the representations, warranties, acknowledgments or agreements made by itare no longer accurate or have not been complied with, it will immediately notifythe Company.

(j) Company’s discretion as to the rejection and validity of applications

The Company may in its sole discretion:

(i) treat as valid (and binding on the CREST member concerned) an application whichdoes not comply in all respects with the requirements as to validity set out or referredto in this Part IV “Terms and Conditions of the Open Offer”;

(ii) accept an alternative properly authenticated dematerialised instruction from aCREST member or (where applicable) a CREST sponsor as constituting a validapplication in substitution for or in addition to a USE Instruction and subject to suchfurther terms and conditions as the Company may determine;

(iii) treat a properly authenticated dematerialised instruction (in this sub-paragraph the“first instruction”) as not constituting a valid application if, at the time at which theReceiving Agent receives a properly authenticated dematerialised instruction givingdetails of the first instruction or thereafter, either the Company, the Receiving Agentor the Registrar has received actual notice from Euroclear of any of the mattersspecified in Regulation 35(5)(a) of the CREST Regulations in relation to the firstinstruction. These matters include notice that any information contained in the firstinstruction was incorrect or notice of lack of authority to send the first instruction; and

(iv) accept an alternative instruction or notification from a CREST member or CRESTsponsored member or (where applicable) a CREST sponsor, or extend the time forsettlement of a USE Instruction or any alternative instruction or notification, in theevent that, for reasons or due to circumstances outside the control of any CRESTmember or CREST sponsored member or (where applicable) CREST sponsor, theCREST member or CREST sponsored member is unable validly to apply for NewOrdinary Shares by means of the above procedures. In normal circumstances, thisdiscretion is only likely to be exercised in the event of any interruption, failure orbreakdown of CREST (or any part of CREST) or on the part of the facilities and/orsystems operated by Capita Registrars in connection with CREST.

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(k) Lapse of the Open Offer

In the event that the Placing and Open Offer does not become unconditional by 8.00 a.m.on 16 September 2010 or such later time and date as the Company and Liberum Capitalmay agree, the Placing and Open Offer will lapse, the Open Offer Entitlements admitted toCREST will be disabled and Capita Registrars will refund the amount paid by a QualifyingCREST Open Offer Shareholder by way of a CREST payment, without interest, as soon aspracticable thereafter. The interest earned on such monies, if any, will be retained for thebenefit of the Company.

5. Money laundering regulations UK Money Laundering Regulations

5.1 Pursuant to the UK Money Laundering Regulations 2007 and the Criminal Justice (Proceeds ofCrime) (Bailiwick of Guernsey) Law, 1999 (as amended) and regulations made thereunder, CapitaRegistrars may be required to check the identity of persons who subscribe for New OrdinaryShares. Capita Registrars may therefore undertake electronic searches for the purposes ofverifying the identity of the person by whom or on whose behalf an Application Form is lodgedwith payment. To do so Capita Registrars may verify the details against the applicant’s identity,but also may request further proof of identity. Capita Registrars reserves the right to withhold anyentitlement (including any refund cheque) until verification of the applicant’s identity iscompleted to its satisfaction. If an Application Form is submitted by a UK regulated broker orintermediary acting as agent and which is itself subject to the UK Money Laundering Regulations2007, any verification of identity requirements are the responsibility of such broker orintermediary and not of the Receiving Agent. In such case, the lodging agent’s stamp should beinserted on the Application Form.

5.2 The person (the “acceptor”) who, by lodging the Application Form with payment and inaccordance with the other terms as described above, accepts the Open Offer in respect of suchnumber of New Ordinary Shares as is referred to in it (the “relevant New Ordinary Shares”)will be deemed to agree to provide the Receiving Agent with such information and other evidenceas the Receiving Agent may require to satisfy the verification of identity requirements.

5.3 If the verification of identity requirements apply, failure to provide the necessary evidence ofidentity within a reasonable time may result in delays in the despatch of share certificates or increditing CREST accounts. If following a request for verification of identity the Receiving Agenthas not received evidence satisfactory to it, the Company may treat the relevant application asinvalid, in which event the monies payable on acceptance of the Open Offer will be returned (atthe acceptor’s risk) without interest to the account of the bank or building society on which therelevant cheque or banker’s draft was drawn.

5.4 The verification of identity requirements will not usually apply if:

5.4.1 the acceptor is an organisation required to comply with the Third Money LaunderingDirective (the Council Directive on the prevention of the use of the financial system for thepurpose of money laundering and terrorist activity – no. 2005/60/EC);

5.4.2 the acceptor (not being an acceptor who delivers his acceptance in person) makes paymentby way of a cheque drawn on an account in the name of such acceptor; or

5.4.3 the aggregate subscription price for the relevant New Ordinary Shares is less than €15,000.

5.5 In other cases, the verification of identity requirements may apply. Satisfaction of theserequirements may be facilitated in the following ways:

5.5.1 if payment is made by bank or building society cheque (not being a cheque drawn on anaccount of the acceptor) or banker’s draft, by the building society or bank endorsing on thecheque or draft the acceptor’s full name and the number of an account held in the acceptor’sname at such bank or building society, such endorsement being validated by a stamp andan authorised signature; and

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5.5.2 if an Application Form is lodged with payment by an agent which is an organisation of thekind referred to in paragraph 5.5.1 above or which is subject to anti-money launderingregulations in a country which is a member of the Financial Action Task Force (thenon-European Union members of which are Argentina, Australia, Brazil, Canada, China,Gibraltar, the Gulf-Co-operation Council, Hong Kong, Iceland, Japan, Korea, Mexico,New Zealand, Norway, Russian Federation, Singapore, South Africa, Switzerland, Turkeyand the United States), the agent should provide written confirmation that it has that statuswith the Application Form and written assurance that it has obtained and recorded evidenceof the identity of the person for whom it acts and that it will on demand make such evidenceavailable to the Receiving Agents and/or any relevant regulatory or investigatory authority.

5.6 In order to confirm the acceptability of any written assurance referred to in paragraph 5.5.2above, or in any other case, the acceptor should contact the Receiving Agents.

5.7 If the Application Form is in respect of New Ordinary Shares with an aggregate subscription priceof €15,000 or more and is/are lodged by hand by the acceptor in person, or if the ApplicationForm in respect of New Ordinary Shares is lodged by hand by the acceptor and the accompanyingpayment is not the acceptor’s own cheque, he should ensure that he has with him evidence ofidentity bearing his photograph (for example, his original passport) and separate evidence of hisaddress (such as an original utility bill).

Open Offer Entitlements in CREST

5.8 If you hold your Open Offer Entitlements in CREST and apply for New Ordinary Shares inrespect of all or some of your Open Offer Entitlement as agent for one or more persons and youare not a UK or EU regulated person or institution (e.g. a UK financial institution), then,irrespective of the value of the application, Capita Registrars is obliged to take reasonablemeasures to establish the identity of the person or persons on whose behalf you are making theapplication. You must therefore contact Capita Registrars before sending any USE or otherinstruction so that appropriate measures may be taken.

5.9 Submission of a USE Instruction which on its settlement constitutes a valid application asdescribed above constitutes a warranty and undertaking by the applicant to provide promptly toCapita Registrars such information as may be specified by Capita Registrars as being required forthe purposes of the UK money laundering regulations. Pending the provision of evidencesatisfactory to Capita Registrars as to identity, Capita Registrars may in its absolute discretiontake, or omit to take, such action as it may determine to prevent or delay issue of the NewOrdinary Shares concerned. If satisfactory evidence of identity has not been provided within areasonable time, then the application for the New Ordinary Shares represented by the USEInstruction will not be valid, without prejudice to the right of the Company to undertakeproceedings to recover monies in respect of the loss suffered by it as a result of failure to providesatisfactory evidence.

6. Overseas Shareholders

The comments set out in this paragraph 6 are intended as a general guide only and any OverseasShareholders who are in any doubt as to their position should consult their professional adviserswithout delay.

6.1 General

The distribution of this Prospectus and the making of the Open Offer to persons who haveregistered addresses in, or who are resident or ordinarily resident in, or citizens of, or which arecorporations, partnerships or other entities created or organised under the laws of countries otherthan the United Kingdom or to persons who are nominees of or custodians, trustees or guardiansfor residents in or citizens of, countries other than the United Kingdom may be affected by thelaws or regulatory requirements of the relevant jurisdictions. Those persons should consult theirprofessional advisers as to whether they require any governmental or other consent or need toobserve any applicable legal requirement or other formalities to enable them to apply for NewOrdinary Shares under the Open Offer.

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No action has been or will be taken by the Company to permit a public offering or distribution ofthis Prospectus (or any other offering or publicity materials or Application Form relating to theNew Ordinary Shares) in any jurisdiction where action for that purpose may be required, otherthan in the United Kingdom.

Receipt of this Prospectus and/or Application Form and/or credits of Open Offer Entitlements toa stock account in CREST will not constitute an invitation or offer of securities for subscription,sale or purchase in those jurisdictions in which it would be illegal to make such an invitation oroffer and, in those circumstances, this Prospectus and/or the Application Form and/or credits ofOpen Offer Entitlements to a stock amount in CREST must be treated as sent for information onlyand should not be copied or redistributed.

The Application Form will not be sent to, and Open Offer Entitlements will not be credited tostock accounts in CREST of, persons with registered addresses in any Excluded Territory or theiragent or intermediary, except where the Company is satisfied, in its sole and absolute discretion,that such action would not result in the contravention of any registration or other legalrequirement in any jurisdiction.

No person receiving a copy of this Prospectus and/or the Application Form and/or a credit ofOpen Offer Entitlements to a stock account in CREST in any territory other than the UnitedKingdom may treat the same as constituting an invitation or offer to him or her, nor should he orshe in any event use any such Application Form(s) and/or credit of Open Offer Entitlements to astock account in CREST unless, in the relevant territory, such an invitation or offer could lawfullybe made to him or her and such Application Form and/or credit of Open Offer Entitlements to astock account in CREST could lawfully be used, and any transaction resulting from such usecould be effected, without contravention of any registration or other legal or regulatoryrequirements. In circumstances where an invitation or offer would contravene any registration orother legal or regulatory requirements, this Prospectus and/or the Application Form and/or creditsof Open Offer Entitlements to a stock account in CREST must be treated as sent for informationonly and should not be copied or redistributed.

It is the responsibility of any person (including, without limitation, custodians, agents, nomineesand trustees) outside the United Kingdom wishing to apply for New Ordinary Shares under theOpen Offer to satisfy himself or herself as to the full observance of the applicable laws of anyrelevant territory in connection therewith, including obtaining any governmental or other consentsthat may be required, observing any other formalities required to be observed in such territory andpaying any issue, transfer or other taxes due in such territory.

None of the Company nor any of their respective representatives makes any representation to anyofferee or purchaser of the New Ordinary Shares regarding the legality of such an investment inthe New Ordinary Shares by such offeree or purchaser under the laws applicable to such offereeor purchaser.

Persons (including, without limitation, custodians, agents, nominees and trustees) receiving acopy of this Prospectus and/or the Application Form and/or a credit of Open Offer Entitlementsto a stock account in CREST, in connection with the Open Offer or otherwise, should notdistribute or send any of those documents nor transfer Open Offer Entitlements in or into anyjurisdiction where to do so would or might contravene local securities laws or regulations. If acopy of this Prospectus and/or the Application Form and/or a credit of Open Offer Entitlementsto a stock account in CREST is received by any person in any such territory, or by his or hercustodian, agent, nominee or trustee, he or she must not seek to apply for New Ordinary Sharesunless the Company, in its sole and absolute discretion, is satisfied that such action would notviolate applicable legal or regulatory requirements. Any person (including, without limitation,custodians, agents, nominees and trustees) who does forward a copy of this Prospectus and/or theApplication Form and/or transfers Open Offer Entitlements into any such territory, whetherpursuant to a contractual or legal obligation or otherwise, should draw the attention of therecipient to the contents of this Part IV and specifically the contents of this section 6.

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Any person (including, without limitation, custodians, agents, nominees and trustees) outside theUnited Kingdom wishing to apply for New Ordinary Shares must satisfy himself or herself as tothe full observance of the applicable laws of any relevant territory, including obtaining anyrequisite governmental or other consents, observing any other requisite formalities and payingany issue, transfer or other taxes due in such territories.

The Company reserves the right to treat as invalid any application or purported application forNew Ordinary Shares that appears to the Company or its agents to have been executed, effectedor dispatched from an Excluded Territory or in a manner that may involve a breach of the laws orregulations of any jurisdiction or if the Company or its agents believe that the same may violateapplicable legal or regulatory requirements or if it provides an address for delivery of thecertificates of New Ordinary Shares or in the case of a credit of Open Offer Entitlements to astock account in CREST, to a CREST member whose registered address would be in an ExcludedTerritory, or any other jurisdiction outside the United Kingdom in which it would be unlawful todeliver such share certificates or make such a credit.

Notwithstanding any other provision of this Prospectus or the Application Form, the Companyreserves the right to permit any person to apply for New Ordinary Shares if the Company, in itssole and absolute discretion, is satisfied that the transaction in question is exempt from, or notsubject to, the legislation or regulations giving rise to the restrictions in question.

Overseas Shareholders who wish, and are permitted, to apply for New Ordinary Shares shouldnote that payment must be made in Euro denominated cheques or bankers’ drafts.

6.2 Excluded Territories

Due to restrictions under the securities laws of the Excluded Territories, and subject to certainlimited exceptions, Restricted Shareholders will not qualify to participate in the Open Offer andwill not be sent the Application Form nor will their stock accounts in CREST be credited withOpen Offer Entitlements.

The New Ordinary Shares have not been and will not be registered under the relevant laws of anyExcluded Territory or any state, province or territory thereof and may not be offered, sold, resold,delivered or distributed, directly or indirectly, in or into any Excluded Territory or to, or for theaccount or benefit of, any person with a registered address in, or who is resident or ordinarilyresident in, or a citizen of, any Excluded Territory except pursuant to an applicable exemption.

No offer of New Ordinary Shares is being made by virtue of this Prospectus or the ApplicationForm into any Excluded Territory or to any Restricted Shareholders.

6.3 Restrictions relating to US Persons and persons within the United States or any otherExcluded Territory

The Open Offer Entitlements and the New Ordinary Shares have not been and will not beregistered under the US Securities Act, or under any securities laws of any state or otherjurisdiction of the United States. The Open Offer Entitlements and the New Ordinary Shares maynot be offered, sold, resold, taken up, exercised, renounced, transferred, delivered or distributed,directly or indirectly, into or within the United States or to, or for the account or benefit of,US Persons. The Open Offer Entitlements and the New Ordinary Shares are being offered andsold only outside the United States to non-US Persons in “offshore transactions” in accordancewith and in reliance on the exemption from the registration requirements of the US Securities Actprovided by Regulation S thereunder. There will be no public offer of the Open Offer Entitlementsor the New Ordinary Shares in the United States.

The Company has not been and will not be registered under the US Investment Company Act and,as such, investors will not be entitled to the benefits of the US Investment Company Act.

This Prospectus does not constitute or form part of an offer to sell or issue, or a solicitation of anoffer to purchase or subscribe for, Open Offer Entitlements or New Ordinary Shares to any personto whom or in any jurisdiction in which such an offer, invitation or solicitation is unlawful,including the Excluded Territories. US Persons and persons within the United States or any other

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Excluded Territory may not take up Open Offer Entitlements or subscribe for or purchase NewOrdinary Shares. US Persons and persons within the United States or any other ExcludedTerritory who obtain a copy of this Prospectus and/or an Application Form and/or credits of OpenOffer Entitlements to a stock account in CREST are required to disregard it.

6.4 Other overseas territories

Application Forms will be sent to Qualifying Certificated Open Offer Shareholders, and OpenOffer Entitlements will be credited to the stock account in CREST of Qualifying CREST OpenOffer Shareholders in jurisdictions other than the Excluded Territories. Qualifying CertificatedOpen Offer Shareholders and Qualifying CREST Open Offer Shareholders in jurisdictions otherthan the Excluded Territories may, subject to the laws of their relevant jurisdiction, take up NewOrdinary Shares under the Open Offer in accordance with the instructions set out in thisProspectus and the Application Form.

Qualifying Certificated Open Offer Shareholders or Qualifying CREST Open Offer Shareholderswho have registered addresses in, or who are resident or ordinarily resident in, or citizens of,countries other than the United Kingdom should consult appropriate professional advisers as towhether they require any governmental or other consents or need to observe any furtherformalities to enable them to participate in the Open Offer.

6.5 Representations and warranties relating to Overseas Shareholders

(a) Qualifying Certificated Open Offer Shareholders

Any person completing and returning an Application Form or requesting registration of theNew Ordinary Shares comprised therein (i) makes all the representations and warranties setout in paragraph 4.1(d) of this Part IV and (ii) represents and warrants to the Companyand/or Capita Registrars that, except where proof has been provided to the Company andthe Company, in its sole and absolute discretion, is satisfied that such person’s use of theApplication Form will not result in the contravention of any applicable legal requirementsin any jurisdiction: (A) such person is not requesting registration of the relevant NewOrdinary Shares from within any Excluded Territory; (B) such person is not in any territoryin which it is unlawful to make or accept an offer to acquire New Ordinary Shares in respectof the Open Offer or to use the Application Form in any manner in which such person hasused or will use it; (C) such person is not acting on a non-discretionary basis for a personlocated within any Excluded Territory or any territory referred to in (B) above at the timethe instruction to accept was given; and (D) such person is not acquiring New OrdinaryShares with a view to the offer, sale, resale, transfer, delivery or distribution, directly orindirectly, of any such New Ordinary Shares into any of the above territories. The Companyand/or the Receiving Agent may treat as invalid any acceptance or purported acceptance ofthe allotment of New Ordinary Shares comprised in an Application Form if it: (i) appearsto the Company or its agents to have been executed, effected or dispatched from anExcluded Territory or in a manner that may involve a breach of the laws or regulations ofany jurisdiction or if the Company or its agents believe that the same may violate applicablelegal or regulatory requirements; or (ii) provides an address in an Excluded Territory fordelivery of the share certificates of New Ordinary Shares (or any other jurisdiction outsidethe United Kingdom in which it would be unlawful to deliver such share certificates); or(iii) purports to exclude the warranty required by this sub-paragraph (a).

(b) Qualifying CREST Open Offer Shareholders

A CREST member or CREST sponsored member who makes a valid acceptance inaccordance with the procedures set out in this Part IV (i) makes all the representations andwarranties set out in paragraph 4.2(i) of Part IV of this Prospectus and (ii) represents andwarrants to the Company that, except where proof has been provided to the Company andthe Company, in its sole and absolute discretion, is satisfied that such person’s acceptancewill not result in the contravention of any applicable legal requirement in any jurisdiction:(A) he or she is not within any Excluded Territory; (B) he or she is not in any territory inwhich it is unlawful to make or accept an offer to acquire New Ordinary Shares; (C) he or

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she is not, subject to certain exceptions, acting on a non-discretionary basis for a personlocated within any Excluded Territory or any territory referred to in (B) above at the timethe instruction to accept was given; and (D) he or she is not acquiring any New OrdinaryShares with a view to the offer, sale, resale, transfer, delivery or distribution, directly orindirectly, of any such New Ordinary Shares into any of the above territories.

6.6 Waiver

The provisions of this paragraph 6 and of any other terms of the Open Offer relating to OverseasShareholders may be waived, varied or modified as regards specific Shareholders or on a generalbasis by the Company in their absolute discretion (but subject to the terms of the Placing andOpen Offer Agreement). Subject to this, the provisions of this paragraph 6 supersede any termsof the Open Offer inconsistent herewith. References in this paragraph 6 to Shareholders shallinclude references to the person or persons executing an Application Form and, in the event ofmore than one person executing an Application Form the provisions of this paragraph 6 shallapply to them jointly and to each of them.

7. Withdrawal rights

Qualifying Open Offer Shareholders wishing to exercise or direct the exercise of statutory withdrawalrights pursuant to section 87Q(4) of FSMA after the issue by the Company of a Supplement to theProspectus must do so by lodging a written notice of withdrawal within two Business Days commencingon the Business Day after the date on which the Supplement to the Prospectus is published. Thewithdrawal notice must include the full name and address of the person wishing to exercise statutorywithdrawal rights and, if such person is a CREST member, the participant ID and the member accountID of such CREST member. The notice of withdrawal must be deposited by post or by hand (duringnormal business hours only) with Capita Registrars, Corporate Actions, The Registry, 34 BeckenhamRoad, Beckenham, Kent BR3 4TU (please call the Receiving Agent on 0871 664 0321 from within theUK or on + 44 20 8639 3399 if calling from outside the UK) or emailed to Capita Registrars at thefollowing address: withdraw@capitaregistrars.com (Subject: Queen’s Walk Investment Limited). Callsto the 0871 664 0321 number cost 10 pence per minute from a BT landline. Other network providers’costs may vary. Lines are open 9.00 a.m. to 5.00 p.m. (London time) Monday to Friday (except UKpublic holidays). Calls to the helpline from outside the UK will be charged at the applicableinternational rate. Different charges may apply to calls from mobile telephones and calls may berecorded and randomly monitored for security and training purposes. The helpline cannot provideadvice on the merits of the Proposals nor give any financial, legal or tax advice.

The Company will not permit the exercise of withdrawal rights after payment by the relevant person forthe New Ordinary Shares in full and the allotment of such New Ordinary Shares to such personbecoming unconditional save to the extent required by statute. In such event, such persons are advisedto seek independent legal advice.

8. Admission, settlement and dealings

The result of the Open Offer is expected to be announced on 15 September 2010 through a RIS and onthe Company’s website. Applications will be made to the UK Listing Authority for the New OrdinaryShares to be admitted to the Official List and to trading on the London Stock Exchange’s main marketfor listed securities. It is expected that Open Offer Admission will become effective and that the listingof the New Ordinary Shares will commence at 8.00 a.m. on 16 September 2010.

The Existing Ordinary Shares are already admitted to CREST. No further application for admission toCREST is accordingly required for the New Ordinary Shares. All such shares, when issued and fullypaid, may be held and transferred by means of CREST.

Open Offer Entitlements held in CREST are expected to be disabled in all respects after 11.00 a.m. on9 September 2010 (the latest date for applications under the Open Offer). If the conditions to the OpenOffer described above are satisfied, New Ordinary Shares will be issued to those persons who submitteda valid application for New Ordinary Shares by utilising the CREST application procedures and whoseapplications have been accepted by the Company. On 16 September 2010, the Registrar will instruct

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Euroclear to credit the appropriate stock accounts of such persons with such persons’ entitlements toNew Ordinary Shares with effect from Open Offer Admission (expected to be 16 September 2010). Thestock accounts to be credited will be accounts under the same CREST participant IDs and CRESTmember account IDs in respect of which the USE Instruction was given.

Notwithstanding any other provision of this Prospectus, the Company reserves the right to sendQualifying CREST Open Offer Shareholders a form of application instead of crediting the relevantstock account with Open Offer Entitlements, and to allot and/or issue any New Ordinary Shares incertificated form. In normal circumstances, this right is only likely to be exercised in the event of anyinterruption, failure or breakdown of CREST (or of any part of CREST) or on the part of the facilitiesand/or systems operated by Capita Registrars in connection with CREST.

For Qualifying Certificated Open Offer Shareholders who have applied by using the Application Form,certificates in respect of the New Ordinary Shares validly applied for are expected to be dispatched bypost by 23 September 2010. No temporary documents of title will be issued in respect of shares held incertificated form and, pending the issue of definitive certificates, transfers will be certified against theshare register of the Company. All documents or remittances sent by or to applicants, or as they maydirect, will be sent through the post at their own risk. For more information as to the procedure forapplication, Qualifying Certificated Open Offer Shareholders are referred to paragraph 4.1 above andtheir Application Form.

9. Times and dates

The Company shall, in agreement with Liberum Capital and after consultation with its financial andlegal advisers, be entitled to amend or extend the latest date for acceptance under the Open Offer andall related dates set out in this Prospectus (subject to the long-stop date being Admission taking placeno later than 1 October 2010 as set out in the Placing and Open Offer Agreement) and in suchcircumstances shall notify the UK Listing Authority, and make an announcement on a RIS butQualifying Open Offer Shareholders may not receive any further written communication in addition tosuch announcement.

If a Supplement to the Prospectus is issued by the Company two or fewer Business Days prior to thelatest time and date for acceptance and payment in full under the Open Offer specified in thisProspectus, the latest date for acceptance under the Open Offer shall be extended to the date that is threeBusiness Days after the date of issue of the Supplement to the Prospectus (and the dates and times ofprincipal events due to take place following such date shall be extended accordingly).

10. Governing law and jurisdiction

The terms and conditions of the Placing and Open Offer and any non-contractual obligations arising outof or in relation to the Placing and Open Offer as set out in this Prospectus, the Application Form andany non-contractual obligation related thereto shall be governed by, and construed in accordance with,English law. The courts of England and Wales are to have exclusive jurisdiction to settle any disputewhich may arise out of or in connection with the Placing and Open Offer, this Prospectus and theApplication Form (including any dispute relating to any non-contractual obligations arising out of or inconnection with them). By taking up their Open Offer Entitlement in accordance with the instructions setout in this Prospectus and, where applicable, the Application Form, Qualifying Certificated Open OfferShareholders and Qualifying CREST Open Offer Shareholders irrevocably submit to the jurisdiction ofthe courts of England and Wales and waive any objection to proceedings in any such court on the groundof venue or on the ground that proceedings have been brought in an inconvenient forum.

11. Taxation

Certain statements regarding Guernsey and United Kingdom taxation in respect of the New OrdinaryShares and Preference Shares are set out in Part VII of this Prospectus. Shareholders who are in anydoubt as to their tax position in relation to taking up their entitlements under the Open Offer, Placingand/or Bonus Issue or who are subject to tax in any jurisdiction other than Guernsey or theUnited Kingdom should immediately consult a suitable professional tax adviser.

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12. Further information

Your attention is drawn to the further information set out in this Prospectus and also, in the case ofQualifying Certificated Open Offer Shareholders and other Shareholders to whom the Company hassent an Application Form, to the terms, conditions and other information printed on the accompanyingApplication Form.

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PART V

TERMS AND CONDITIONS OF THE PREFERENCE SHARES

The following summary of the rights attaching to the Preference Shares will be included in the RevisedArticles, subject to the approval by Ordinary Shareholders at the EGM of the relevant Required Resolution.

Rights as to income

The holders of Preference Shares shall be entitled to be paid a fixed cumulative preferential dividend atthe rate of eight pence per Preference Share per annum (the “Preference Dividend”).

The Preference Dividend shall be payable in priority to any payment to the holders of any other Sharesof the Company.

The Preference Dividend shall accrue from day to day and shall be payable quarterly in arrear in equalamounts on 31 March, 30 June, 30 September and 31 December (or where the relevant payment date isnot a Business Day, the first Business Day after such date) in each year (each a “Payment Date”) inrespect of the calendar quarter ending on those days. Notwithstanding any other Payment Date which mayarise before such date, the first dividend payment shall be made on 31 December 2010 in respect of theperiod commencing on and including the date of Bonus Issue Admission and ending on and including thatdate. Payments of dividends thereafter shall be made as and when the next Payment Date arises.

The Company shall pay a further sum to each of the Preference Shareholders on the amount of anyPreference Dividend not paid within 14 days of the relevant Payment Date at the rate of 8 per cent. perannum calculated on a daily basis from (but excluding) the Payment Date to (but excluding) the datepayment of such amount of the Preference Dividend is made, such further sum to be payable on the dateof such payment.

Where the Company is unable to pay any part of the Preference Dividend for any legal or regulatoryreason with the result that it is unable to pay in full on any Payment Date any Preference Dividend orfurther sum payable to the Preference Shareholders, the following provisions shall apply:

(a) on that Payment Date the Company shall pay to such holders on account of the PreferenceDividend and any further sum payable to the Preference Shareholders the maximum sum (if any)which can then, consistently with applicable law and regulation, be paid by the Company; and

(b) on every succeeding Payment Date the Company shall pay to such holders on account of thebalance of the Preference Dividend for the time being remaining outstanding and any further sumin respect thereof (so far as not already paid), and until such amounts are paid in full, themaximum sum (if any) which on each such succeeding Payment Date respectively can,consistently with applicable law and regulation, be paid by the Company, such sum to be appliedfirst in the payment of any such further sum payable pursuant to the preceding paragraph.

Rights as to capital

On a return of capital on liquidation or otherwise (other than by way of repurchase or redemption ofShares in accordance with the Articles and the Companies Law) the assets of the Company available fordistribution among the Shareholders shall be applied first in repaying to the Preference Shareholdersthe sum of £1.00 per Preference Share (the “Preference Share Notional Value”) together with a sumequal to any arrears and accruals of the Preference Dividend and any further sum payable in respect ofthe Preference Dividend in each case calculated down to the date of the return of capital and to bepayable whether or not such dividend or further sum has been declared or earned (the “RepaymentAmount”). Secondly, the balance of such assets shall belong to and be distributed among the OrdinaryShareholders in proportion to the number of Ordinary Shares held by them.

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Rights as to redemption

The Preference Shares shall be issued as redeemable shares within the meaning of the Companies Law.The Preference Shares shall be redeemed by the Company in the following circumstances, inaccordance with the terms of, and subject to the conditions set out in, applicable law and regulationincluding the Companies Law and the Revised Articles:

(a) at any time, by way of the purchase of any such Preference Shares by the Company through thefacilities of the London Stock Exchange; or

(b) upon a change of control of the Company (defined as the acquisition by a single person or personsacting in concert of more than 50 per cent. of the voting rights attached to the Ordinary Shares),but only if a majority of Preference Shareholders attending and voting at a special class meetingof Preference Shareholders (which shall be convened within 60 days of the change of control) soresolve by way of an ordinary resolution, at a price equal to the Repayment Amount; or

(c) if more than 75 per cent. of the Preference Shares have been redeemed before the expiration ofthe seven year period referred to under paragraph (d) below, by way of a mandatory redemptionprogramme launched by the Company at its sole discretion, at a price equal to the higher of (i) theRepayment Amount, or (ii) the average mid-market closing price over the five Business Daysprior to the announcement of the launch of such programme; or

(d) if not redeemed earlier pursuant to paragraphs (a), (b) or (c) above, on a date that is seven yearsafter their issue at the Repayment Amount.

Redeemed Preference Shares shall be cancelled or held in treasury (subject to all applicable legal andregulatory restrictions).

Rights as to voting

Subject to the paragraph below, the Preference Shares shall not entitle the holders thereof to vote uponany resolution at any general meeting of the Company but the Preference Shareholders shall be entitledto receive notice of and to attend and speak at any general meeting of the Company.

If at any time:

(a) the payment of the Preference Dividend on any of the Preference Shares or any part thereof ismore than 12 months in arrear; or

(b) the redemption of any of the Preference Shares is more than one month overdue;

then in relation to any general meeting held at any time whilst either of the events specified in paragraphs(a) or (b) above remain applicable (or any adjournment thereof) Preference Shareholders shall be entitledto attend and vote at general meetings of the Company in the same way as Ordinary Shareholders.

Other rights

Further details of the rights attaching to the Preference Shares can be found in the paragraph 4 ofPart IX of this Prospectus.

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PART VI

BONUS ISSUE ARRANGEMENTS

Persons to whom Preference Shares are issued pursuant to the Bonus Issue and any potentialinvestors in Preference Shares should make themselves aware of the potential risk of capital lossassociated with an investment in the Company and that there may be limited liquidity in theunderlying investments of the Company, for whom an investment in the Preference Shares is partof a diversified investment programme and who fully understand and are willing to assume therisks involved in such an investment programme.

1. Introduction

The Preference Shares will be issued free of subscription cost to Qualifying Bonus Issue Shareholders.

Qualifying Bonus Issue Shareholders will, subject to the conditions detailed below, be issued PreferenceShares on the basis of 1.25 Preference Shares for every 1 Ordinary Share held as at the Bonus IssueRecord Date. Preference Shares issued pursuant to the Bonus Issue will be rounded down to the nearestwhole number. Any fractions arising on the issue of the Preference Shares will be disregarded.

The application for admission to the Official List in respect of the Preference Shares is an applicationfor a standard listing. The Bonus Issue is conditional on the Required Resolutions being passed andBonus Issue Admission becoming effective by not later than 8.00 a.m. on 17 September 2010.

In the event that there are any significant changes affecting any of the matters described in this Prospectusor where any significant new matters have arisen after the publication of this Prospectus and prior toBonus Issue Admission, the Company will publish a Supplement to the Prospectus. The Supplement tothe Prospectus will give details of the significant change(s) or the significant new matter(s).

The issue, offer and sale of the Preference Shares to persons with a registered address in, or who arecitizens, residents or nationals of, a jurisdiction other than the United Kingdom may be affected by thelaws of the relevant jurisdiction. Those persons should consult their professional advisers as to whetherthey require any governmental or other consent or need to observe any other formalities to enable themto receive Preference Shares. It is the responsibility of all persons outside the United Kingdom receivingthis Prospectus or Preference Shares or wishing to transfer Preference Shares to satisfy themselves asto full observance of the laws of the relevant jurisdiction, including obtaining all necessarygovernmental or other consents which may be required, observing all other requisite formalities needingto be observed and paying any issue, transfer or other taxes due in such territory.

The attention of Overseas Shareholders and any person (including, without limitation, a custodian,nominee or trustee) who has a contractual or other legal obligation to forward this Prospectus or anyaccompanying document, if and when received, to a jurisdiction other than the United Kingdom isdrawn to the section titled “Overseas Shareholders” in paragraph 5 of this Part VI. In particular, subjectto the provisions set out in “Overseas Shareholders” in paragraph 5 of this Part VI, this Prospectus andany accompanying document will not be made available to Restricted Shareholders and they will notreceive Preference Shares.

The Investing Fund may seek to dispose of all or part of its holding of Preference Shares on or shortlyfollowing Bonus Issue Admission. Please refer to paragraph 10 of Part IX for further details.

2. CREST

The Preference Shares will be issued in registered form.

The Preference Shares will be eligible for settlement through CREST with effect from Bonus IssueAdmission. Preference Shares allocated will be transferred to placees through the CREST system unlessotherwise stated. Member firms will be requested to give their CREST settlement details to the Company.

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The Company will arrange for Euroclear to be instructed to credit the appropriate Euroclear accountsof the subscribers concerned or their nominees with their respective entitlements to Preference Shares.The names of subscribers or their nominees that invest through their Euroclear accounts will be entereddirectly on to the Register.

3. Dealings

The Company will apply for admission of the Preference Shares to the Official List and for trading ofthe Preference Shares on the London Stock Exchange’s main market for listed securities under thesymbol QWIP.

It is expected that the basis of allocation under the Bonus Issue will be announced on 17 September 2010through a RIS. It is expected that issue of the Preference Shares will take place on 17 September 2010and that dealings in such Preference Shares will commence on 17 September 2010. Dealings inPreference Shares in advance of the crediting of the relevant stock account shall be at the risk of theperson concerned.

The ISIN number and SEDOL code for the Preference Shares are GG00B4ZRT175 andB4ZRT17 respectively.

4. Transfer of Preference Shares

The transfer of Preference Shares outside the CREST system should be arranged directly throughthe Registrar.

If a Shareholder or transferee requests Preference Shares to be issued in certificated form and is holdingsuch Shares outside CREST, a Share certificate will be despatched either to them or their nominatedagent (at their own risk) within 21 days of completion of the registration process or transfer, as the casemay be, of the Share. Shareholders holding definitive certificates may elect at a later date to hold theirShares through CREST or in uncertificated form provided they surrender their definitive certificates.

The Company has not been and will not be registered under the US Investment Company Act. Inaddition, the Preference Shares have not been and will not be registered under the US Securities Act orunder any securities laws of any state or other jurisdiction of the United States. The Preference Sharesmay not be offered, sold, resold, taken up, exercised, renounced, transferred, delivered or distributed,directly or indirectly, into or within the United States or to, or for the account or benefit of, US Persons.

5. Overseas Shareholders

The comments set out in this Part VI are intended as a general guide only and any Qualifying BonusIssue Shareholder who is in doubt as to his position should consult his own independent professionaladviser without delay.

5.1 General

Set out below are restrictions applicable to Shareholders who have registered addresses outsidethe United Kingdom, who are citizens, residents or nationals of countries other than the UnitedKingdom, or who are persons (including, without limitation, custodians, nominees and trustees)who have a contractual or other legal obligation to forward this Prospectus or any accompanyingdocument to a jurisdiction outside the United Kingdom or who hold Ordinary Shares for theaccount or benefit of any such person.

No action has been taken or will be taken by the Company or Liberum Capital to permit a publicoffering or distribution of this Prospectus or any accompanying documents (including theApplication Form) in any jurisdiction where action for that purpose may be required other than inthe United Kingdom.

Certificated Preference Shares have not been and will not be sent to, and entitlements toPreference Shares have not been and will not be credited to CREST accounts of, RestrictedShareholders, or to their agents or intermediaries.

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US Persons and persons within the United States who are Shareholders will not be eligible toparticipate in the Bonus Issue. The Preference Shares may not be accepted, acquired ortransferred, and may not be subscribed or purchased by, or for the account or benefit of,US Persons or persons within the United States.

Receipt of this Prospectus and/or certificated Preference Shares or the crediting of PreferenceShares to a securities account in CREST will not constitute or form part of an offer in or into anExcluded Territory or to, or for the account or benefit of, any US Person. In those circumstances,this Prospectus and/or a certificated Preference Share or the crediting of entitlements to PreferenceShares must be treated as sent for information only and should not be copied or redistributed. Noperson who receives a copy of this Prospectus and/or a certificated Preference Share or a credit ofentitlements to Preference Shares to a securities account in CREST in any territory other than theUnited Kingdom may treat the same as constituting an invitation or offer to him, nor should he inany event trade in certificated Preference Share or deal with Preference Shares in CREST unless,in the relevant territory, such an invitation or offer could lawfully be made to him and thePreference Shares could lawfully be traded or dealt with without contravention of any unfulfilledregistration or other legal or regulatory requirements.

Accordingly, persons (including, without limitation, custodians, nominees and trustees) receivinga copy of this Prospectus and/or a certificated Preference Share or whose securities accounts inCREST are credited with entitlements to Preference Shares, in connection with the Bonus Issueor otherwise, should not distribute or send the same in or into, or transfer Preference Shares in orinto any Excluded Territory or to, or for the account or benefit of, any US Person.

If a certificated Preference Share or credit of an entitlement to a Preference Share in CREST isreceived by any person in any Excluded Territory or any US Person (or by their custodian,nominee or trustee), he must not seek to use Preference Shares, or transfer any Preference Shares(nor may his custodian, nominee or trustee do so on his behalf).

Subject to the restrictions set out herein, any person (including, without limitation, nominees,agents and trustees) outside the United Kingdom wishing to receive Preference Shares inconnection with the Bonus Issue (or to do so on behalf of someone else) must satisfy himself asto full observance of the applicable laws of any relevant territory including obtaining any requisitegovernmental or other consents, observing any other requisite formalities and paying any issue,transfer or other taxes due in such territories.

The Company reserves the right, in its sole and absolute discretion, to treat as invalid anyacceptance or purported acceptance of the Preference Shares that appears to the Company:

(i) to have been executed, effected or dispatched from any Excluded Territory or by aUS Person, unless the Company is satisfied that such action would not result in thecontravention of any registration or other legal requirement in any jurisdiction;

(ii) to provide an address for delivery of certificates in relation to the Preference Shares in anyExcluded Territory or any other jurisdiction in which it would be unlawful to deliver suchcertificates, unless the Company is satisfied that such action would not result in thecontravention of any registration or other legal requirement in any jurisdiction;

(iii) to involve a potential breach or violation of the securities laws of any jurisdiction;

(iv) that may be inconsistent with the procedures, terms and conditions set out in thisProspectus; or

(v) that purports to exclude or modify any of the representations, warranties, agreements andacknowledgments described under the heading “Overseas Shareholders” in this Part VI.

Notwithstanding any other provision of this Prospectus, the Company reserves the right to permitany Qualifying Bonus Issue Shareholder to take up his rights if the Company in its sole andabsolute discretion is satisfied that the transaction in question is exempt from or not subject to thelegislation or regulations giving rise to the restrictions in question. If the Company is so satisfied,

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the Company will arrange for the relevant Qualifying Bonus Issue Shareholder to be sentcertificated Preference Shares or arrange for entitlements to Preference Shares to be credited tothe relevant securities accounts in CREST.

The provisions of this Part VI will apply generally to Restricted Shareholders who do not or areunable to receive Preference Shares allotted to them. Accordingly, any allotment to a RestrictedShareholder who does not validly accept the Preference Shares in accordance with this Part VIwill be deemed to have been declined and will lapse.

5.2 Excluded Territories

Due to restrictions under the securities laws of the Excluded Territories, Restricted Shareholders willnot qualify to participate in the Bonus Issue and will not be eligible to receive certificated PreferenceShares or have their securities account in CREST credited with entitlements to Preference Shares.

The Preference Shares issued pursuant to the Bonus Issue have not been and will not be registeredunder the relevant laws of any Excluded Territory or any state, province or territory thereof andmay not be offered, sold, resold, delivered or distributed, directly or indirectly, in or into anyExcluded Territory or to, or for the account or benefit of, any Restricted Shareholders.

No offer of Preference Shares is being made by virtue of this Prospectus into any ExcludedTerritory or any Restricted Shareholder.

5.3 Restrictions relating to persons within the United States and US Persons

The Preference Shares have not been and will not be registered under the US Securities Act, orunder any securities laws of any state or other jurisdiction of the United States. The PreferenceShares may not be offered, sold, resold, taken up, exercised, renounced, transferred, delivered ordistributed, directly or indirectly, into or within the United States or to, or for the account orbenefit of, US Persons. There will be no public offer of the Preference Shares in the United States.US Persons and persons within the United States will not be eligible to receive the PreferenceShares described herein.

The Company has not been and will not be registered under the US Investment Company Act and,as such, investors will not be entitled to the benefits of the US Investment Company Act.

This Prospectus does not constitute or form part of an offer or invitation to sell or issue, or asolicitation of an offer to purchase or subscribe for, Preference Shares to any person to whom orin any jurisdiction in which such an offer, invitation or solicitation is unlawful, including theExcluded Territories. US Persons and persons within the United States or any other ExcludedTerritory who obtain a copy of this Prospectus are required to disregard it.

Pursuant to the Articles in effect on the date of this Prospectus, the Directors may refuse toregister a transfer of Shares or require the sale or transfer of Shares if they have reason to believethat the transferee is a person to whom a transfer of Shares would or could be in breach of thelaws or requirements of any jurisdiction or governmental authority or in circumstances (whetherdirectly or indirectly affecting such person, and whether taken alone or in conjunction with otherpersons, connected or not, or any other circumstances appearing to the Directors to be relevant)which might result in the Company incurring a liability to taxation or suffering a pecuniary, fiscal,administrative or regulatory disadvantage. The Directors will not however exercise this discretionif to do so would prevent dealings in Shares from taking place on an open and proper basis on theLondon Stock Exchange.

5.4 Representations given by Qualifying Bonus Issue Shareholders

Each person to whom the Preference Shares are distributed, offered or sold will be deemed, andeach subsequent investor in the Preference Shares will be deemed by its purchase of thePreference Shares, to have represented and agreed as follows (terms used in this paragraph havethe same meaning as in Regulation S):

(i) it is not a US Person, is not located within the United States and is not acquiring thePreference Shares for the account or benefit of a US Person;

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(ii) it is acquiring the Preference Shares in an offshore transaction meeting the requirements ofRegulation S under the US Securities Act;

(iii) it is acquiring the Preference Shares for its own account or for one or more investmentaccounts for which it is acting as a fiduciary or agent, in each case for investment only, andnot with a view to or for sale or other transfer in connection with any distribution of thePreference Shares in any manner that would violate the US Securities Act, theUS Investment Company Act or any other applicable securities laws;

(iv) it understands and acknowledges that the Preference Shares have not been and will not beregistered under the US Securities Act or with any securities regulatory authority of anystate or other jurisdiction of the United States and may not be offered, sold, resold, takenup, exercised, renounced, transferred, delivered or distributed, directly or indirectly, into orwithin the United States or to, or for the account or benefit of, US Persons;

(v) it understands and acknowledges that the Company has not registered and will not registeras an investment company under the US Investment Company Act;

(vi) no portion of the assets used to purchase, and no portion of the assets used to hold thePreference Shares or any beneficial interest therein constitutes or will constitute the assetsof (1) an “employee benefit plan” as defined in Section 3(3) of ERISA that is subject toTitle I of ERISA; (2) a “plan” as defined in Section 4975 of the US Tax Code, includingan individual retirement account or other arrangement that is subject to Section 4975 of theUS Tax Code; or (3) an entity which is deemed to hold the assets of any of the foregoingtypes of plans, accounts or arrangements that is subject to Title I of ERISA or Section 4975of the US Tax Code. In addition, if an investor is a governmental, church, non-US or otheremployee benefit plan that is subject to any federal, state, local or non-US law that issubstantially similar to the provisions of Title I of ERISA or Section 4975 of the US TaxCode, its purchase, holding, and disposition of the Shares must not constitute or result in anon-exempt violation of any such substantially similar law;

(vii) it understands and acknowledges that the Company reserves the right to make inquiries ofany holder of the Preference Shares or interests therein at any time as to such person’s statusunder the federal US securities laws and to require any such person that has not satisfiedthe Company that the holding by such person will not violate or require registration underthe US securities laws to transfer such Preference Shares or interests in accordance withthe Articles;

(viii) it represents and warrants to the Company that (1) it has received (outside the UnitedStates), carefully read and understands the Prospectus, and (2) it has not, directly orindirectly, distributed, forwarded, transferred or otherwise transmitted the Prospectus (orany part thereof) or any other presentation or offering materials concerning the PreferenceShares to or within the United States or to any US Person, nor will it do any ofthe foregoing;

(ix) it represents and warrants to the Company that (1) at the time the Preference Shares areacquired, it is not an affiliate of the Company or a person acting on behalf of such anaffiliate, and (ii) it is not acquiring the Preference Shares for the account or benefit of anaffiliate of the Company or of a person acting on behalf of such an affiliate;

(x) it understands and acknowledges that if any Preference Shares are issued in certificatedform, then such certificates evidencing ownership will contain a legend substantially to thefollowing effect unless otherwise determined by the Company in accordance withapplicable law:

QUEEN’S WALK INVESTMENT LIMITED (THE “COMPANY”) HAS NOT BEENAND WILL NOT BE REGISTERED UNDER THE US INVESTMENT COMPANY ACTOF 1940, AS AMENDED (THE “US INVESTMENT COMPANY ACT”). IN ADDITION,THE SECURITIES OF THE COMPANY REPRESENTED BY THIS CERTIFICATE

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HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE US SECURITIESACT OF 1933, AS AMENDED (THE “US SECURITIES ACT”), OR WITH ANYSECURITIES REGULATORY AUTHORITY OF ANY STATE OR OTHERJURISDICTION OF THE UNITED STATES. ACCORDINGLY, THIS SECURITY MAYNOT BE OFFERED, SOLD, RESOLD, TRANSFERRED, DELIVERED ORDISTRIBUTED, DIRECTLY OR INDIRECTLY, INTO OR WITHIN THE UNITEDSTATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, US PERSONS (ASDEFINED IN REGULATION S UNDER THE US SECURITIES ACT);

(xi) if in the future it decides to offer, sell, transfer, assign or otherwise dispose of thePreference Shares, it will do so only (1) in an offshore transaction complying with theprovisions of Regulation S under the US Securities Act to a person outside theUnited States and not known by the transferor to be a US Person, by pre-arrangement orotherwise, or (2) to the Company or a subsidiary thereof. It understands and acknowledgesthat any sale, transfer, assignment, pledge or other disposal made other than in compliancewith the above stated restrictions will be subject to the compulsory transfer provisions asprovided in the Articles;

(xii) it is not acquiring any Preference Shares from within any Excluded Territory and itsacceptance of such Preference Shares will not result in the contravention of any applicablelegal requirement in any jurisdiction;

(xiii) it does not have a registered address in, and is not a citizen, resident or national of, anyjurisdiction in which it is unlawful to make or accept an offer of the Preference Shares andit is not acting on a non discretionary basis for any such person;

(xiv) the Company, Liberum Capital, their directors, officers, affiliates, agents, employees,advisers and others will rely upon the truth and accuracy of the foregoing representations,warranties, acknowledgements and agreements. If any of the representations, warranties,acknowledgements or agreements made by it are no longer accurate or have not beencomplied with, it will immediately notify the Company, and if it is acquiring any PreferenceShares as a fiduciary or agent for one or more accounts, it has sole investment discretionwith respect to each such account and it has full power and authority to make suchforegoing representations and agreements on behalf of each such account.

5.5 Waiver

The provisions of this section “Overseas Shareholders” and of any other terms of the Bonus Issuerelating to Overseas Shareholders may be waived, varied or modified as regards specificShareholders or on a general basis by the Company and Liberum Capital in their absolutediscretion (but subject to the terms of the Placing and Open Offer Agreement). Subject to this, theprovisions of this section “Overseas Shareholders” supersede any terms of the Bonus Issueinconsistent herewith.

6. Money laundering

Pursuant to anti-money laundering laws and regulations with which the Company must comply in theUK and/or Guernsey, the Company and its agents, the Registrar, the Investment Manager and/orLiberum Capital may require evidence in connection with the issue of Preference Shares to QualifyingBonus Issue Shareholders, including further identification of Qualifying Bonus Issue Shareholders,before any Preference Shares are issued. The Company, the Investment Manager, the Registrar and/orLiberum Capital reserve the right to request such information as is necessary to verify the identity ofan investor and (if any) the underlying beneficial owner of Preference Shares issued by the Company.In the event of delay or failure by the Qualifying Bonus Issue Shareholder to produce any informationrequired for verification purposes, the Directors, in consultation with Liberum Capital and theInvestment Manager, may refuse to issue Preference Shares to such Qualifying Bonus IssueShareholder, or refuse the transfer of Preference Shares issued by the Company held by any suchQualifying Bonus Issue Shareholder.

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PART VII

TAX CONSIDERATIONS

1. General

The comments below are of a general and non-exhaustive nature based on the Directors’ understandingof the current revenue law and published practice in Guernsey and the UK, which is subject to changepossibly with retrospective effect. The following summary does not therefore constitute legal or taxadvice and applies only to persons holding Shares as an investment.

An investment in the Company involves a number of complex tax considerations. Changes in taxlegislation in any of the countries in which the Company will have investments or in Guernsey (or inany other country in which a subsidiary of the Company through which investments are made, islocated), or changes in tax treaties negotiated by those countries, could adversely affect the returns fromthe Company to investors.

Prospective investors should consult their professional advisers on the potential tax consequencesof subscribing for, purchasing, holding, converting or selling Shares under the laws of theircountry and/or state of citizenship, domicile or residence.

2. Guernsey Taxation

The Company

The Company has applied and has been granted exempt status for Guernsey tax purposes. In return forthe payment of a fee, currently £600, an authorised closed-ended investment scheme, such as theCompany, is able to apply annually for exempt status for Guernsey tax purposes.

If exempt status is granted, the Company will not be considered resident in Guernsey for Guernseyincome tax purposes. A company that has exempt status for Guernsey tax purposes is exempt from taxin Guernsey on both bank deposit interest and any income that does not have its source in Guernsey. Itis not anticipated that any income other than bank interest will arise in Guernsey and therefore theCompany is not expected to incur any additional liability to Guernsey tax.

In response to the review carried out by the European Union Code of Conduct Group, the State ofGuernsey abolished exempt status for the majority of companies with effect from January 2008 and hasintroduced a zero rate of tax for companies carrying on all but a few specified types of activity. However,because investment funds including closed-ended investment companies, such as the Company, were notone of the regimes in Guernsey that were classified by the European Union Code of Conduct Group asbeing harmful, investment funds including closed-ended investment companies continue to be able toapply for exempt status for Guernsey tax purposes after 31 December 2007. Therefore, the Company willbe entitled, and intends to continue applying, for tax exempt status in Guernsey.

In keeping with its ongoing commitment to meeting international standards, the State of Guernsey iscurrently undertaking a review of its tax regime with the expectation of implementing any requiredrevisions to the regime in the period between 2012 and 2015. At this point in time, the key features ofany revised regime have yet to be determined. It is currently not anticipated that there will be any changeto the current exemption for investment funds and as such the Company is expected to be able to remaintax exempt.

Guernsey currently does not levy taxes upon capital inheritances, capital gains, gifts, sales or turnover,nor are there any estate duties, save for an ad valorem fee for the grant of probate or letters ofadministration. No stamp duty is chargeable in Guernsey on the issue, transfer, or redemption of shares.

Shareholders

Shareholders will receive dividends without deduction of Guernsey income tax. Any Shareholders whoare resident for tax purposes in Guernsey, Alderney or Herm will incur Guernsey income tax on anydividends paid on Ordinary Shares owned by them but will suffer no deduction of tax by the Company

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from any such dividends payable by the Company where the Company is granted exempt status. TheCompany is required to provide details of distributions made to Shareholders resident in the Islands ofGuernsey, Alderney and Herm to the Administrator of Income Tax in Guernsey.

Guernsey has introduced measures that are the same as the EU Savings Tax Directive. However, payingagents located in Guernsey are not required to operate the measures on payments made by closed endedinvestment companies.

3. United Kingdom Taxation

The Company

It is intended that the Company will be managed and controlled in such a way that it should not beresident in the United Kingdom for United Kingdom tax purposes. Accordingly, and provided that theCompany does not carry on a trade in the United Kingdom (whether or not through a branch, agency orpermanent establishment situated there), the Company will not be subject to United Kingdom incometax or corporation tax other than on certain types of United Kingdom sourced income.

Shareholders

UK Offshore Fund Rules – Ordinary Shares

The Directors have been advised that the Ordinary Shares should not constitute an offshore fund for thepurposes of United Kingdom taxation and that the legislation introduced by Finance Act 2009 witheffect from 1 December 2009, contained in Part 8 of the Taxation (International and Other Provisions)Act 2010 (“TIOPA 2010”) (the “offshore fund rules”), should not apply. Accordingly, OrdinaryShareholders (other than those holding Ordinary Shares as dealing stock, who are subject to separaterules) who are resident or ordinarily resident in the United Kingdom, or who carry on business in theUnited Kingdom through a branch, agency or permanent establishment with which their investment inthe Company is connected, may, depending on their circumstances, be liable to United Kingdom tax onchargeable gains realised on the disposal of their Ordinary Shares (which will include a redemption andon final liquidation of the Company).

UK Offshore Fund Rules – Preference Shares

The Directors have been advised, based upon general discussion with HM Revenue & Customs, that thePreference Shares are likely to be considered by HM Revenue & Customs as an offshore fund for thepurposes of the offshore fund rules. If HM Revenue & Customs were to take such a view, then unlessthe Company applies for, and is granted, “Reporting Fund” status in respect of the Preference Shareclass pursuant to regulations made under section 354 of TIOPA 2010, any profit on disposal (includinga redemption) of Preference Shares by Preference Shareholders who are resident or ordinarily residentin the United Kingdom, or who carry on business in the United Kingdom through a branch, agency orpermanent establishment with which their investment in the Company is connected, would be taxed asan “offshore income gain” for UK tax purposes, and would be subject to prevailing UK income tax orcorporation tax rates, as appropriate.

The Directors may seek approval of the Preference Share class as a “Reporting Fund” for UK taxpurposes. If such approval were to be granted by HM Revenue & Customs, a disposal (including aredemption) of Preference Shares by a United Kingdom resident or ordinarily resident Shareholder ora Shareholder who carries on a trade in the United Kingdom through a branch, agency or permanentestablishment with which their investment in the Company is connected may give rise to a chargeablegain or an allowable loss for the purposes of UK taxation on chargeable gains, depending on theShareholder’s circumstances and subject to any available exemption or relief. United Kingdom residentPreference Shareholders will, if the Preference Share class is approved as a Reporting Fund, be chargedto income tax or corporation tax (as appropriate) on all “reportable income” attributable to thePreference Shares, regardless of whether such income is actually distributed by way of a cash dividend,in accordance with applicable United Kingdom regulations.

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Open Offer and Bonus Issue

The Open Offer and Bonus Issue will be treated, for the purposes of UK taxation of chargeable gains, asa reorganisation of share capital, with the result that the New Ordinary Shares acquired under the OpenOffer and the Preference Shares acquired under the Bonus Issue will be deemed, on acquisition, to be partof a single asset comprised of the New Ordinary Shares, the Preference Shares and the Existing OrdinaryShares from which the Open Offer Entitlement and entitlement to Preference Shares were derived. The taxbase cost of that single asset will be the aggregate of the original tax base cost of the Existing OrdinaryShares and the consideration given for the New Ordinary Shares and Preference Shares.

For the purposes of calculating chargeable gains or allowable losses on any future disposals of NewOrdinary Shares, Preference Shares and Existing Ordinary Shares the aggregate tax base cost of thatsingle asset requires to be apportioned between the holdings of New Ordinary Shares, Preference Sharesand Existing Ordinary Shares by reference to the respective market values of the Shares on the first dayon which those market values are quoted on the London Stock Exchange.

Tax on Chargeable Gains

Capital gains tax at the rate of 18 per cent. (for basic rate taxpayers) and 28 per cent. (for higher andadditional rate taxpayers) would apply to any gain realised on a disposal (including a redemption) ofOrdinary Shares or Preference Shares (if the Preference Share class is either (i) not considered byHM Revenue & Customs to constitute an offshore fund, or (ii) approved as a Reporting Fund) by anindividual Shareholder who is resident or ordinarily resident in the United Kingdom for taxationpurposes. Shareholders who are bodies corporate resident in the United Kingdom for taxation purposeswill, upon disposal of Ordinary Shares or Preference Shares (if the Preference Share class is either(i) not considered by HM Revenue & Customs to constitute an offshore fund, or (ii) approved as aReporting Fund), benefit from indexation allowance which, in general terms, increases the chargeablegains tax base cost of an asset in accordance with the rise in the retail prices index.

Dividends

Individual Ordinary Shareholders and individual Preference Shareholders (provided that the PreferenceShare class does not constitute an offshore fund for UK tax purposes) resident in the United Kingdomfor tax purposes will be liable to UK income tax in respect of dividend or other income distributions ofthe Company. An individual Ordinary Shareholder or Preference Shareholder (provided the PreferenceShares do not constitute an offshore fund) resident in the UK for tax purposes and in receipt of adividend from the Company will, provided they own less than 10 per cent. of the Company, be entitledto claim a non-repayable dividend tax credit equal to one-ninth of the dividend received.

The effect of the dividend tax credit would be to extinguish any further income tax liability for eligiblebasic rate taxpayers (who currently pay tax at the dividend ordinary rate of 10 per cent.). The effect forcurrent eligible higher rate taxpayers (who pay tax at the current dividend upper rate of 32.5 per cent.)would be to reduce their effective tax rate to 25 per cent. of the cash dividend received.

The effect of the dividend tax credit for current eligible additional rate taxpayers (United Kingdomresident individuals with income in excess of £150,000), who pay tax at the current dividend additionalrate of 42.5 per cent. would be to reduce their effective tax rate to 36.11 per cent.

Shareholders who are bodies corporate resident in the United Kingdom for tax purposes may be able torely on legislation introduced by Finance Act 2009 with effect from 1 July 2009, which exempts certainclasses of dividends from the charge to corporation tax.

Preference Shareholders resident in the United Kingdom for tax purposes may, if the Preference Sharesclass is considered by HM Revenue & Customs to be an offshore fund, be taxed as receiving an amountof interest upon receipt of dividends or other income distributions from the Company, unless less than60 per cent. of the underlying assets of the Preference Share class (by market value) constituteinvestments falling within section 494 of the Corporation Tax Act 2009. In such case the UK taxtreatment described above for individual and corporate Preference Shareholders resident in the UK fortax purposes would not apply.

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Stamp duty and Stamp Duty Reserve Tax (“SDRT”)

No UK stamp duty or SDRT will arise on the issue of Shares

Generally, no United Kingdom stamp duty or SDRT is payable on a transfer of or agreement to transferShares provided nothing is done in relation to such transfer, or agreement to transfer, in theUnited Kingdom and the Shares are not registered in a register kept in the United Kingdom by or onbehalf of the Company.

ISAs

Investors are recommended to consult their professional tax and or investment advisers in relation to theeligibility of the Shares for a stocks and shares ISA.

Ordinary Shares allotted under the Placing are not eligible for direct transfer into an ISA. OrdinaryShares acquired pursuant to the Open Offer or in the secondary market and Preference Shares aquiredpursuant to the Bonus Issue may be eligible for inclusion in a stocks and shares ISA, although theaccount manager should be asked to confirm ISA eligibility in all cases. The annual ISA investmentallowance is £10,200 for the tax year 2010-2011. Up to half of that allowance can be invested as cashwith one provider. The remainder of the £10,200 can be invested in a stocks and shares ISA with eitherthe same or another provider.

Other United Kingdom Tax Considerations

United Kingdom resident companies having an interest in the Company, such that 25 per cent. or moreof the Company’s profits for an accounting period could be apportioned to them, may be liable toUnited Kingdom corporation tax in respect of their share of the Company’s undistributed profits, if any,in accordance with the provisions of Chapter IV of Part XVII of the Taxes Act relating to controlledforeign companies. These provisions only apply if the Company is controlled by United Kingdomresidents. Investors should be aware that the controlled foreign companies regime is the subject of anongoing consultation. Although the scope of any reform cannot be accurately predicted, it is nowexpected that final legislation to introduce changes to the regime will be introduced by Finance Bill 2012.

Individuals ordinarily resident in the United Kingdom should note that Chapter 2 of Part 13 of theIncome Tax Act 2007, which contains provisions for preventing avoidance of income tax by transactionsresulting in the transfer of assets to a person (including a company) abroad, which result in incomebecoming payable to a person abroad, may render them liable to taxation in respect of any undistributedincome and profits of the Company.

The attention of Shareholders resident or ordinarily resident in the United Kingdom is drawn to theprovisions of section 13 of the Taxation of Chargeable Gains Act 1992 under which, in certaincircumstances, a portion of capital gains made by the Company can be attributed to a Shareholder whois resident or ordinarily resident in the United Kingdom and, if an individual, domiciled in theUnited Kingdom, and who holds, alone or together with associated persons, more than 10 per cent. ofthe Shares.

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PART VIII

FINANCIAL INFORMATION

1. Statutory accounts for the financial years ended 31 March 2008, 31 March 2009 and31 March 2010

1.1 Statutory accounts for the Company and the Group prepared in accordance with InternationalFinancial Reporting Standards for the financial years ended 31 March 2008, 31 March 2009 and31 March 2010, in respect of which the Company’s auditors, Deloitte LLP, CharteredAccountants, of Regency Court, Glategny Esplanade, Guernsey GY1 3HW, made unqualifiedreports, have been delivered to the Guernsey Financial Services Commission.

1.2 In relation to the valuation of the Company’s illiquid investments, the Company’s Auditors have notedan “emphasis of matter” in the auditors report and financial statements of the Company for thefinancial year ended 31 March 2010. The auditors have noted that: (i) the fair value estimatesincluded in the financial statements are subject to considerable uncertainty; (ii) different assumptionswill impact the measurement of investments which may have an effect on the financial statements;and (iii) it is not possible to quantity the potential effects of the resolution of this uncertainty.

2. Published annual reports and accounts for the financial years ended 31 March 2008,31 March 2009 and 31 March 2010

2.1 Historical financial information

The consolidated published annual reports and audited accounts of the Group for the financialyears ended 31 March 2008, 31 March 2009 and 31 March 2010 (which have been incorporatedin this Prospectus by reference) included, on the pages specified in the table below, thefollowing information:

Year ended Year ended Year ended31 March 2008 31 March 2009 31 March 2010

Consolidated Statement of Comprehensive Income 24 23 23Consolidated Statement of Changes in Equity 25 24 24Consolidated Statement of Financial Position 26 25 25Consolidated Statement of Cash Flows 27 26 26Notes to the Consolidated Financial Statements 28 to 55 27 to 55 27 to 58Significant Accounting Policies 29 to 32 27 to 31 27 to 31Independent Auditor’s Report 22 to 23 21 to 22 21 to 22

2.2 Selected financial information

The key audited figures that summarise the financial condition of the Group in respect of thefinancial years ended 31 March 2008, 31 March 2009 and 31 March 2010, which have beenextracted without material adjustment from the historical financial information referred to inparagraph 2.1 of this Part VIII (unless otherwise indicated in the notes below the following table),are set out in the following table:

As at As at As at31 March 2008 31 March 2009 31 March 2010

€ € €

Interest Income 39,057,501 21,669,409 16,125,956Gains and Losses on Fair Value Through Profit and Loss Financial Instruments (50,246,378) (74,873,145) (9,608,632)Operating Expenses (7,406,746) (4,462,662) (3,700,373)Finance Costs (3,500,463) (2,197,946) (545,909)Net Profit/(Loss) (22,096,086) (59,864,344) 2,271,042

Total Assets 243,291,581 138,026,937 111,336,170

Total Liabilities 46,147,162 32,441, 846 12,006,329

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2.3 Operating and financial review

The published annual reports and audited accounts of the Company for the financial period from1 April 2009 to 31 March 2010 (which have been incorporated in this Prospectus by reference)included, on the pages specified in the table below, descriptions of the Company’s financialcondition (in both capital and revenue terms), changes in its financial condition and details of theCompany’s portfolio of investments for each of those periods.

Annual report and accounts for the financial period 1 April 2009 to 31 March 2010Page No(s)

Chairman’s statement 3 to 4Investment Manager’s Report 5 to 9

2.4 Availability of annual report and audited accounts for inspection

Copies of the published annual reports and audited accounts of the Company for the financial periodsince its incorporation on 28 April 2005 to 30 June 2006 and for the financial years ended 30 June2007 and 30 June 2008 are available for inspection at the addresses set out in paragraph 13 ofPart IX of this Prospectus.

2.5 Related party transactions

The Company has entered into the following related party transactions (as defined in InternationalAccounting Standard 24) in the period since 1 April 2007 to the date of this Prospectus:

2.5.1 The Company and Trebuchet are parties to the Investment Management Agreementpursuant to which the Company and Trebuchet has appointed the Investment Manager tomanage their respective assets on a day to day basis in accordance with their respectiveinvestment objectives and policies, subject to the overall supervision and direction of theirrespective boards of directors. The Group pays the Investment Manager the ManagementFee and the Incentive Fee.

2.5.2 As at 31 March 2008, the Group held investments with a total value of €4,479,375 in thefollowing entities which are managed by the Investment Manager: Cheyne ABSInvestments I plc, Cheyne High Grade ABS CDO Limited and Cheyne CLO Investments ILimited. The investment in Cheyne ABS Investments I plc was disposed of by the Companyon 17 July 2008 and the investments in Cheyne High Grade ABS CDO Limited and CheyneCLO Investments I Limited had their value written down to zero by the Company on30 June 2008 and 31 March 2009, respectively.

2.5.3 Options were granted by the Group on 8 December 2005 to Cheyne Global ServicesLimited in recognition of work performed by the Investment Manager in raising capital forthe Group. These represent the right to acquire 2,250,000 Ordinary Shares at an exerciseprice per Ordinary Share equal to €10 per Ordinary Share. The Investment ManagerOptions are fully vested and immediately exercisable and will remain exercisable until13 December 2015. As at 31 March 2010, the Investment Manager Options were out of themoney as the Share price on 31 March 2010 was below the exercise price of €10 perOrdinary Share.

2.5.4 The Investing Fund, a company that is also controlled by the Investment Manager, has acontrolling interest in the Company.

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PART IX

ADDITIONAL INFORMATION

1. The Company

The Company was incorporated and registered in Guernsey on 6 September 2005 under the provisionsof the Companies Law, as a non-cellular company limited by shares with the name Queen’s WalkInvestment Limited and with registered number 43634. The Company is domiciled in Guernsey andoperates under the Companies Law and the ordinances and regulations made thereunder. The Companyis regulated by the Guernsey Financial Services Commission. The Company’s registered office is atDorey Court Admiral Park St. Peter Port Guernsey GY1 3BG and its telephone number at its registeredoffice is +44 (0) 1481 727 111.

The Company has been declared by the GFSC to be an Authorised Closed-ended investment schemeauthorised under Section 8 of The Protection of Investors (Bailiwick of Guernsey) Law, 1987, asamended and, as such, the Company is authorised and regulated by the Guernsey Financial ServicesCommission. Neither the States of Guernsey Policy Council nor the Guernsey Financial ServicesCommission take any responsibility for the financial soundness of the Company or for the correctnessof any statements made or opinions expressed with regard to it.

As a company admitted to the Official List, the Company is not a regulated fund but is subject to theListing Rules of the FSA applicable to closed-end investment companies.

2. Significant change statement

There has been no significant change in the financial or trading position of the Company or its Groupsince 31 March 2010 (being the end of the last financial year of the Company for which auditedfinancial information has been published).

There has been no material adverse change in the prospects of the Company or the Group since31 March 2010, being the date to which audited financial statements have last been published.

3. Share Capital

The Company was incorporated with power to issue an unlimited number of shares of no par value.

Upon incorporation of the Company, two Ordinary Shares of no par value were issued. On 13 December2005 the Company issued 22,500,000 Ordinary Shares pursuant to its initial public offering at an offerprice of €10 per share. In addition, the Company simultaneously issued 17,900,754 Ordinary Shares tothe Investing Fund (along with transferring the two Ordinary Shares issued on incorporation) inexchange for the Initial ABS Portfolio and 120,000 Ordinary Shares were also issued to the Directorsof the Company at that time.

The share capital of the Company currently consists of Ordinary Shares of no par value. The fully paidissued share capital of the Company as at 16 August 2010 (the latest practicable date prior to thepublication of this Prospectus) was as follows:

No. of Shares Nominal Value

Ordinary Shares 26,644,657 Nil

The Company does not hold any Ordinary Shares in treasury as at the date of this Prospectus. AI 21.1.7

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Since 1 April 2007, there have been the following changes to the Company’s share capital:

Date of Purchase of Number of Ordinary Price Paid per Ordinary Shares Shares Purchased Ordinary Share Issue Share Capital

18/07/2007 20,000 5.925 40,600,75619/07/2007 8,125 5.920 40,592,63120/07/2007 30,000 5.863 40,562,63123/07/2007 31,000 5.690 40,531,63124/07/2007 15,000 5.625 40,516,63125/07/2007 31,000 5.455 40,485,63126/07/2007 33,000 5.352 40,452,63127/07/2007 34,000 5.100 40,418,63130/07/2007 10,000 4.850 40,408,63131/07/2007 36,415 4.866 40,372,21601/08/2007 34,197 4.880 40,338,01902/08/2007 35,740 4.919 40,302,27903/08/2007 34,751 4.985 40,267,52806/08/2007 30,000 5.092 40,237,52807/08/2007 40,000 5.130 40,197,52808/08/2007 40,262 5.150 40,157,26609/08/2007 25,164 5.146 40,132,10210/08/2007 40,100 5.063 40,092,00213/08/2007 42,000 5.100 40,050,00214/08/2007 41,000 4.910 40,009,00215/08/2007 34,700 4.790 39,974,30216/08/2007 33,600 4.790 39,940,70217/08/2007 33,400 4.790 39,907,30220/08/2007 33,300 4.750 39,874,00221/08/2007 33,100 4.800 39,840,90222/08/2007 33,600 4.800 39,807,30223/08/2007 32,100 4.800 39,775,20224/08/2007 31,800 4.800 39,743,40228/08/2007 30,000 4.800 39,713,40229/08/2007 29,000 4.800 39,684,40230/08/2007 28,000 4.750 39,656,40231/08/2007 27,000 4.750 39,629,40202/10/2007 17,000 5.262 39,612,40203/10/2007 10,000 5.250 39,602,40210/10/2007 10,000 5.550 39,592,40211/10/2007 17,200 5.515 39,575,20212/10/2007 14,000 5.500 39,561,20215/10/2007 14,000 5.457 35,042,70216/10/2007 2,357 5.420 35,040,34517/10/2007 11,000 5.478 35,029,34518/10/2007 11,500 5.448 35,017,84519/10/2007 11,528 5.425 35,006,31722/10/2007 3,946 5.400 35,002,37123/10/2007 4,953 5.450 34,997,41824/10/2007 5,000 5.450 34,992,41825/10/2007 10,351 5.550 34,982,06726/10/2007 9,508 5.550 34,972,55929/10/2007 8,461 5.500 34,964,09830/10/2007 8,643 5.440 34,955,45531/10/2007 8,724 5.400 34,946,73101/11/2007 5,500 5.255 34,941,23102/11/2007 6,000 5.200 34,935,231

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Date of Purchase of Number of Ordinary Price Paid per Ordinary Shares Shares Purchased Ordinary Share Issue Share Capital

05/11/2007 6,600 4.991 34,928,63109/11/2007 6,600 4.705 34,922,03112/11/2007 2,912 4.400 34,919,11913/11/2007 2,500 4.380 34,916,61914/11/2007 7,200 4.369 34,909,41915/11/2007 7,100 4.400 34,902,31916/11/2007 5,700 4.270 34,896,61919/11/2007 6,186 4.270 34,890,43320/11/2007 5,214 4.750 34,885,21921/11/2007 2,500 5.500 34,882,71922/11/2007 25,000 5.675 34,857,71923/11/2007 8,000 5.600 34,849,71926/11/2007 50,000 5.675 32,021,94804/12/2007 30,000 5.500 31,991,94821/12/2007 25,000 5.550 31,966,94809/01/2008 25,000 5.550 31,941,94816/01/2008 30,000 5.525 31,911,94823/01/2008 25,000 5.475 31,886,94825/01/2008 30,000 5.440 31,856,94828/01/2008 35,000 5.325 31,821,94830/01/2008 30,000 5.315 31,791,94831/01/2008 30,000 5.290 31,761,94805/02/2008 30,000 5.225 31,731,94806/02/2008 30,000 5.190 31,701,94808/02/2008 30,000 5.140 31,671,94811/02/2008 40,000 5.100 31,631,94812/02/2008 30,000 5.100 31,601,94813/02/2008 50,000 4.950 31,551,94814/02/2008 45,000 4.900 31,506,94815/02/2008 50,000 4.900 31,456,94818/02/2008 40,000 4.850 31,416,94819/02/2008 40,000 4.850 31,376,94820/02/2008 40,000 4.850 31,336,94821/02/2008 40,000 4.850 31,296,94822/02/2008 40,000 4.850 31,256,94825/02/2008 40,000 4.750 31,216,94826/02/2008 49,000 4.4887 31,167,94827/02/2008 40,000 4.3700 31,127,94828/02/2008 40,000 4.2500 31,087,94829/02/2008 40,000 4.2500 31,047,94803/03/2008 40,000 4.2450 31,007,94804/03/2008 40,000 4.2000 30,967,94805/03/2008 40,000 4.1500 30,927,94806/03/2008 40,000 4.1600 30,887,94807/03/2008 26,000 4.1000 30,861,94810/03/2008 40,000 4.0000 30,821,94811/03/2008 35,900 3.9000 30,786,04812/03/2008 35,000 4.0000 30,751,04813/03/2008 20,000 3.9400 30,731,04814/03/2008 25,000 3.9000 30,706,04817/03/2008 22,750 4.4000 30,683,29818/03/2008 4,000 4.6000 30,679,29819/03/2008 15,000 4.7100 30,664,29825/03/2008 8,000 4.7500 30,656,298

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Date of Purchase of Number of Ordinary Price Paid per Ordinary Shares Shares Purchased Ordinary Share Issue Share Capital

26/03/2008 15,000 4.7333 30,641,29811/04/2008 5,000 4.7500 30,636,29816/04/2008 25,000 4.8700 30,611,29817/04/2008 25,000 4.7500 30,586,29821/04/2008 25,000 4.7500 30,561,29824/04/2008 5,000 4.6500 30,556,29828/04/2008 9,000 4.6500 30,547,29802/05/2008 140,000 4.7500 30,407,29806/05/2008 16,950 4.7000 30,390,34809/05/2008 2,450 4.6075 30,387,89821/05/2008 50,000 4.6075 30,337,89822/05/2008 50,000 4.7500 30,287,89827/05/2008 50,000 4.7500 30,237,89803/06/2008 10,000 4.5000 30,227,89804/06/2008 10,000 4.5000 30,217,89816/06/2008 10,000 4.4000 30,207,89817/06/2008 10,000 4.4000 30,197,89818/06/2008 10,000 4.4000 30,187,89801/07/2008 10,000 4.3500 30,177,89802/07/2008 15,000 4.5500 27,162,91704/07/2008 10,000 4.5000 27,152,91707/07/2008 10,000 4.4750 27,142,91709/07/2008 10,000 4.4750 27,132,91710/07/2008 10,000 4.4700 27,122,91718/08/2008 15,000 4.4700 27,107,91719/08/2008 10,000 4.4500 27,097,91720/08/2008 15,000 3.7500 27,082,91721/08/2008 15,000 3.6000 27,067,91722/08/2008 15,000 3.6200 27,052,91726/08/2008 20,000 3.6100 27,032,91727/08/2008 20,000 3.6000 27,012,91729/08/2008 20,000 3.6200 26,992,91701/09/2008 13,500 3.7907 26,979,41702/09/2008 20,000 3.8100 26,959,41703/09/2008 15,000 3.8000 26,944,41704/09/2008 10,000 3.8000 26,934,41705/09/2008 7,260 3.8000 26,927,15708/09/2008 15,000 3.8000 26,912,15709/09/2008 15,000 3.8000 26,897,15710/09/2008 12,500 3.7800 26,884,65711/09/2008 5,000 3.4000 26,879,65712/09/2008 10,000 3.4800 26,869,65715/09/2008 10,000 3.3500 26,859,65716/09/2008 5,000 3.2500 26,854,65718/09/2008 50,000 0.3800 26,804,65725/09/2008 75,000 0.4500 26,729,65729/09/2008 30,000 0.6350 26,699,65730/09/2008 46,000 0.6450 26,653,65701/10/2008 5,000 0.6475 26,648,65722/12/2008 4,000 0.6900 26,644,657

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Assuming that the Required Resolutions are approved at the Extraordinary General Meeting and thePlacing and Open Offer is fully subscribed the issued share capital of the Company (all of which willbe fully paid up) immediately following the Placing and Open Offer and Bonus Issue will be as follows:

No. of Shares Nominal Value

Ordinary Shares 39,966,985 NilPreference Shares 49,958,731 Nil

For further information on the rights attaching to the Shares, please refer to paragraph 4 of thisPart IX below.

As at the date of this Prospectus no securities convertible or exchangeable into Shares or warrants havebeen issued by the Company or agreed to be issued.

In recognition of the work performed by the Investment Manager in raising capital for the Group, theGroup granted to Cheyne Global Services Limited on 8 December 2005 options representing the right toacquire 2,250,000 Ordinary Shares at an exercise price per share equal to €10. As at the 16 August 2010(the latest practicable date prior to the publication of this Prospectus), Investment Manager Optionsrepresenting the right to acquire 2,250,000 Ordinary Shares at an exercise price per share equal to €10remain outstanding. The Investment Manager Options are fully vested and immediately exercisable andwill remain exercisable until 13 December 2015.

Save as disclosed in this Prospectus, no commissions, discounts, brokerages or other special terms havebeen granted by the Company in connection with the issue or sale of any such capital and no borrowingor contingent liabilities have been incurred.

The Shares will be issued in registered form and will be capable of being held in certificated oruncertificated form, provided however, that the Company may specify in any prospectus, or otherwise,published in connection with any increase in the Company’s share capital, that US Persons participatingin such capital increase (if applicable) be issued shares in certificated form. Temporary documents oftitle will not be issued.

It is expected that, subject to the passing of the Required Resolutions at the EGM, the New OrdinaryShares will be allotted pursuant to a resolution of the Board to be passed on or around 15 September 2010conditional upon Open Offer Admission and that the Preference Shares will be allotted pursuant to aresolution of the Board to be passed on or around 17 September 2010 conditional upon BonusIssue Admission.

There are no provisions of Guernsey law which confer rights of pre-emption in respect of the allotmentof any class of Shares. However, in order to comply with the requirements of the Listing Rules, theRevised Articles contain pre-emption rights that will apply in respect of equity securities (as such termis defined in the Revised Articles, which, for the avoidance of doubt, does not include PreferenceShares). A further resolution is being proposed at the EGM to dis-apply the pre-emption rightscontained in the Revised Articles in respect of 2,664,466 Ordinary Shares until the Company’s annualgeneral meeting to be held in 2011. The Directors intend to request authority to allot Shares on anon-pre-emptive basis is reviewed at each subsequent annual general meeting of the Company.

4. Memorandum and Articles of Incorporation

The Company’s principal objects, which are contained in its Memorandum of Incorporation, includethe carrying on of the business of an investment company. The objects of the Company are set out infull in clause 3 of the Memorandum, which is available for inspection at the address specified inparagraph 12 below.

If the Revised Memorandum is adopted at the EGM then the Company’s objects will be unlimited aspermitted by the Companies Law.

The following is a summary of the Articles which also contain information on the proposedamendments to the Articles that will be made upon Shareholders validly resolving in favour of theRequired Resolutions at the Extraordinary General Meeting. Prospective investors should read in full

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the Articles and the terms of the Revised Articles and not just rely on the summary provided below.Copies of the Articles and of the Revised Articles are available for inspection at the place specified inparagraph 13 of this Part IX.

Variation of Class Rights and Alteration of Capital

Subject to the provisions of Guernsey law, all or any of the special rights for the time being attached toany class of shares for the time being issued may (unless otherwise provided by the terms of issue ofthe shares of that class or the Articles) from time to time (and notwithstanding that the Company mayor may be about to be in liquidation) be varied or abrogated in such manner (if any) as may be providedby such rights or, in the absence of any such provision, either with the consent in writing of the holdersof not less than three-quarters of the capital committed or agreed to be committed in respect of theissued shares of the class or with the sanction of an extraordinary resolution passed at a separate generalmeeting of the holders of shares of the class duly convened and held as provided in the Articles, but sothat the quorum at such meeting (other than an adjourned meeting) shall be two persons holding orrepresenting by proxy at least one third of the capital committed or agreed to be committed in respectof the issued shares of the class in question.

The rights conferred upon the holders of the shares of any class issued with preferred or other rightsshall not (unless otherwise expressly provided by the terms of issue of the shares of that class) bedeemed to be varied by the creation or issue of further shares ranking pari passu therewith.

Issue of Shares

As at the date of the Prospectus and subject to the provisions of the Articles, the unissued OrdinaryShares shall be at the disposal of the Board which may allot, grant options over (including, withoutlimitation, by way of granting phantom stock, stock appreciation rights or other similar rights) orotherwise dispose of them to such persons on such terms and conditions and at such times as the Boarddetermines but so that the amount payable on application on each share shall be fixed by the Board.Shares do not carry any rights of pre-emption under the existing Articles.

If the Revised Articles are approved by Ordinary Shareholders, the following pre-emption rightswill apply:

The Company shall not allot equity securities to a person on any terms unless:

(a) it has made an offer to each person who holds ordinary shares in the Company to allot to him, onthe same or more favourable terms, a proportion of those securities that is as nearly as practicableequal to the proportion in number held by him of the ordinary share capital of the Company; and

(b) the period during which any such offer may be accepted has expired or the Company has receivednotice of the acceptance or refusal of every offer so made.

(the “Restriction”)

For this purpose “equity securities” means:

(a) ordinary shares in the Company (ordinary shares, for this purpose only, being shares other thanshares that as respects dividends and capital carry a right to participate only up to a specifiedamount in a distribution); or

(b) rights to subscribe for, or to convert securities into, ordinary shares in the Company.

References to the allotment of equity securities include:

(a) the grant of a right to subscribe for, or to convert any securities into, ordinary shares in theCompany; and

(b) the sale of ordinary shares in the Company that immediately before the sale are held by theCompany as treasury shares.

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Equity securities that the Company has offered to allot to a holder of ordinary shares may be allotted tohim, or anyone in whose favour he has renounced his right to their allotment, without contravening theRestriction and if the Restriction applies in relation to the grant of such right, it will not apply in relationto the allotment of shares in pursuance of that right.

Shares held by the Company as treasury shares shall be disregarded for the purposes of the Restriction,so that the Company is not treated as a person who holds ordinary shares; and the treasury shares arenot treated as forming part of the share capital of the Company.

Any offer required to be made by the Company pursuant to the provisions set out above should be madeby a notice and such offer must state a period during which such offer may be accepted and such offershall not be withdrawn before the end of that period. Such period must be a period of at least 14 daysbeginning on the date on which such offer is deemed to be delivered or received (as the case may be)pursuant to the Revised Articles.

The Restriction shall not apply in relation to the allotment of bonus shares, nor to a particular allotmentof equity securities if these are, or are to be, wholly or partly paid otherwise than in cash.

The Company may by Special Resolution resolve that the Restriction shall be excluded or that suchArticle shall apply with such modifications as may be specified in the resolution:

(a) generally in relation to the allotment by the Company of equity securities;

(b) in relation to allotments of a particular description; or

(c) in relation to a specified allotment of equity securities;

and any such resolution must:

(d) state the maximum number of equity securities in respect of which the Restriction is excluded ormodified; and

(e) specify the date on which such exclusion or modifications will expire, which must be not morethan five years from the date on which the resolution is passed.

Any resolution passed pursuant to the paragraph above may:

(a) be renewed or further renewed by Special Resolution of the Company for a further period notexceeding five years; and

(b) be revoked or varied at any time by Special Resolution of the Company.

Notwithstanding that any such resolution referred to in the paragraphs above has expired, the Directorsmay allot equity securities in pursuance of an offer or agreement previously made by the Company ifthe resolution enabled the Company to make an offer or agreement that would or might require equitysecurities to be allotted after it expired.

In respect of the pre-emption rights, in relation to an offer to allot equity securities a reference (howeverexpressed) to the holder of equity securities of any description is to whoever was the holder of equitysecurities of that description at the close of business on a date to be specified in the offer and thespecified date must fall within the period of 28 days immediately before the date of the offer.

Classes of Shares

As at the date of the Prospectus, the rights attaching to the Shares are as follows:

(a) Voting Rights

Subject to any special rights or restrictions which may be attached to any class of share on a showof hands, every holder of shares who (being an individual) is present in person or by a proxy shallhave one vote and, on a poll, every holder present in person or by a proxy shall have one vote forevery share held.

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If the Revised Articles and the relevant Required Resolution inserting the rights of PreferenceShares are approved by Ordinary Shareholders, Preference Shareholders will only have the rightto vote at general meetings of the Company in the circumstances summarised under the heading“Rights as to Voting” in Part V of this Prospectus.

(b) Dividends

Subject to the Companies Law, and as hereinafter set out, the Directors of the Company may fromtime to time declare dividends on Ordinary Shares based on the net income of the Company to bepaid to Ordinary Shareholders according to their respective rights and interests in the net incomeavailable for distribution, but no dividend will be declared in excess of the amount recommendedby the Directors.

The Directors have the right to recommend the payment of dividends in respect of the Companyat their discretion, provided that dividends will be payable only to the extent that they are justifiedby the position of the Company and any surplus derived from the sale or realisation of aninvestment held directly by the Company shall not be available for dividends. In the event that theRevised Articles are approved by Ordinary Shareholders, the article summarised in the precedingsentence shall be replaced with an article which states that no dividend shall be paid otherwisethan in accordance with the Companies Law.

All unclaimed dividends may be invested or otherwise made use of by the Directors for thebenefit of the Company until claimed. No dividend shall bear interest against the Company. Anydividend unclaimed after a period of 12 years from the date of declaration thereof will be forfeitedand will revert to the Company and the payment by the Directors of any unclaimed dividend orother sum payable on or in respect of an Ordinary Share into a separate account will not constitutethe Company a trustee in respect thereof.

If the Revised Articles and the relevant Required Resolution inserting the rights of PreferenceShares are approved by Ordinary Shareholders, Preference Shareholders will have the right toincome as summarised under the heading “Right to Income” in Part V of this Prospectus. Afterpayment of the Preference Dividend and any further sum payable to the Preference Shareholdersany additional sums shall be available for distribution to the Ordinary Shareholders. All dividendsdeclared in respect of the Ordinary Shares shall be distributed among the Ordinary Shareholdersin proportion to the amount paid up on the Ordinary Shares held by them.

(c) Redemption

The Ordinary Shares do not carry a right to redemption by Ordinary Shareholders.

If the Revised Articles and the relevant Required Resolution inserting the rights of PreferenceShares are approved by Ordinary Shareholders, the Preference Shares will have the right ofredemption summarised under the heading “Rights to Redemption” in Part V of this Prospectus.

Transfer and Compulsory Transfer of Shares

As at the date of this Prospectus, subject to any restrictions on transfers described below:

(a) Any Shareholder may transfer all or any of his uncertificated shares by means of a relevant systemauthorised by the Board in such manner provided for, and subject as provided, in any regulationsissued for this purpose under the Laws or such as may otherwise from time to time be adopted bythe Board on behalf of the Company and the rules of any relevant system and accordingly noprovision of the Articles shall apply in respect of an uncertificated share to the extent that itrequires or contemplates the effecting of a transfer by an instrument in writing or the productionof a certificate for the shares to be transferred.

(b) Any Shareholder may transfer all or any of his certificated shares by an instrument of transfer inany usual form, or in any other form which the Board may approve, signed by or on behalf of thetransferor and, unless the share is fully paid, by or on behalf of the transferee.

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(c) The Directors shall not be bound to register more than four persons as joint holders of any Share.In addition, the Articles allow the Directors to refuse to consent to a transfer by a Shareholder(a “Defaulting Shareholder”) who, having been requested to do so by the Directors, fails toprovide certain information regarding the interests of other persons in the Shares held by theDefaulting Shareholder.

The Articles entitle the Directors to require the transfer of Shares by a Defaulting Shareholder.

The Directors may refuse to register a transfer of Shares or require the sale or transfer of Shares if theyhave reason to believe that the transferee is a person to whom a transfer of Shares would or could be inbreach of the laws or requirements of any jurisdiction or governmental authority or in circumstances(whether directly or indirectly affecting such person, and whether taken alone or in conjunction withother persons, connected or not, or any other circumstances appearing to the Directors to be relevant)which might result in the Company incurring a liability to taxation or suffering a pecuniary, fiscal,administrative or regulatory disadvantage. The Directors will not however exercise this discretion if todo so would prevent dealings in Shares from taking place on an open and proper basis on the LondonStock Exchange.

Directors

(a) Unless otherwise determined by the Board, the number of Directors shall be not less than two normore than ten.

(b) The Directors shall not be required to hold any qualification shares. At the first annual generalmeeting and at each annual general meeting thereafter: (1) any Director who was elected or lastre-elected a Director at or before the annual general meeting held in the third calendar year beforethe current year shall retire by rotation; and (2) such further Directors (if any) shall retire byrotation as would bring the number retiring by rotation up to one-third of the number of Directorsin office at the date of the notice of the meeting (or, if their number is not a multiple of three, thenumber nearest to but not greater than one-third).

(c) The Directors (other than alternate Directors) shall be entitled to receive by way of fees for theirservices as Directors such sum as the Board may from time to time determine provided that theamount paid to any Director by way of fees shall not exceed €160,000 in any financial year, orsuch higher amount as may be determined from time to time by ordinary resolution of theCompany. Any fees payable pursuant to the Articles shall be distinct from and shall not include anysalary, remuneration for any executive office or other amounts payable to a Director pursuant toany other provisions of the Articles and shall accrue from day to day. The Directors shall be entitledto be repaid all reasonable travelling, hotel and other expenses properly incurred by them in orabout the performance of their duties as Directors, including expenses incurred in attendingmeetings of the Board or any committee of the Board or general meetings or separate meetings ofthe holders of any class of shares or of debentures of the Company. If by arrangement with theBoard, any Director shall perform or render any special duties or services outside his ordinaryduties as a Director, he may be paid such reasonable additional remuneration as the Board maydetermine.

(d) A Director who to his knowledge is in any way directly or indirectly interested in a contract orarrangement or proposed contract or arrangement with the Company shall disclose the nature of hisinterest at a meeting of the Board. If the Revised Articles are approved by Ordinary Shareholders,the article summarised in the preceding sentence shall be replaced with an article which states thata Director who to his knowledge is in any way directly or indirectly interested in a contract orarrangement or a proposed contract or arrangement with the Company shall immediately afterbecoming aware of the fact that he is so interested disclose the nature and monetary value or, if thatvalue is not quantifiable, the extent of his interest at a meeting of the Board.

(e) A Director may not vote (or be counted in the quorum) in respect of any resolution of theDirectors or committee of the Directors concerning a contract, arrangement, transaction orproposal to which the Company is or is to be a party and in which he has an interest which(together with any interest of any person connected with him) is, to his knowledge, a material

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interest (otherwise than by virtue of his interest in shares or debentures or other securities of orotherwise in or through the Company). This is subject to certain exceptions including (i) wherethe contract, arrangements, transaction or proposal concerns general employee privileges orbenefits or insurance policies for the benefit of Directors or (ii) in circumstances where a Directoracts in a personal capacity in the giving of a guarantee, security or indemnity for the benefit ofthe Company or any of its subsidiaries.

(f) Any Director may act by himself or his firm in a professional capacity for the Company, otherthan as auditor, and he or his firm shall be entitled to remuneration for professional services as ifhe were not a Director.

(g) Any Director may continue to be or become a director, managing director, manager or otherofficer, employee or member of any company promoted by the Company, in which the Companymay be interested or with which the Company has entered into any transaction, arrangement oragreement, and any such Director shall not be accountable to the Company for any remunerationor other benefits received by him as a director, managing director, manager or other officer ormember of any such company.

(h) The Directors shall not be subject to a mandatory retirement age.

Borrowing Powers

The Directors may exercise all the powers of the Company to borrow money and hypothecate,mortgage, charge or pledge the assets, property and undertaking of the Company or any part thereof andto issue debentures and other securities whether outright or as collateral security for any debt, liabilityor obligation of the Company or of any third party. The Articles do not include any limitations on theCompany’s power to borrow.

Disclosures of Beneficial Interests in Shares

(a) The Directors may serve notice on any Shareholder requiring that Shareholder to disclose to theCompany the identity of any person (other than the Shareholder) who has an interest in the Sharesheld by the Shareholder and the nature of such interest. Any such notice shall require anyinformation in response to such notice to be given within such reasonable time as the Directorsmay determine.

(b) If any Shareholder is in default in supplying to the Company the information required by theCompany within the prescribed period (which is 28 days after service of the notice or 14 days ifthe shares concerned represent 0.25 per cent., or more in nominal value of the issued shares ofthe relevant class), the Directors in their absolute discretion may serve a direction notice on theShareholder. The direction notice may direct that in respect of the shares in respect of which thedefault has occurred (the “Default Shares”) and any other shares held by such Shareholder, suchShareholder shall not be entitled to vote in general meetings or class meetings. Where the DefaultShares represent at least 0.25 per cent., of the Shares for the time being in issue, the directionnotice may additionally direct that dividends on such Default Shares will be retained by theCompany (without interest), and that no transfer of Default Shares (other than a transfer approvedunder the Articles) shall be registered until the default is rectified.

Winding Up

The Company may be voluntarily wound up at any time by special resolution. On a winding up, thesurplus assets remaining after payment of all creditors, including the repayment of bank borrowings,shall be divided pari passu amongst Shareholders pro rata, according to the rights attached tothe Shares.

Untraceable Shareholders

The Company shall be entitled to sell at the best price reasonably obtainable the shares of a Shareholderor any shares to which a person is entitled by transmission on death or bankruptcy if and provided that:

(a) for a period of 12 years no cheque or warrant sent by the Company through the post in a pre-paidletter addressed to the Shareholder or to the person so entitled to the share at his address in theRegister of Members or otherwise the last known address given by the Shareholder or the person

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entitled by transmission to which cheques and warrants are to be sent has been cashed and nocommunication has been received by the Company from the Shareholder or the person so entitledprovided that in any such period of 12 years the Company has paid at least three dividendswhether interim or final;

(b) the Company has at the expiration of the said period of 12 years by advertisement in a newspapercirculating in the area in which the address referred to in sub-paragraph (i) above is located givennotice of its intention to sell such shares;

(c) the Company has not during the period of three months after the date of the advertisement andprior to the exercise of the power of sale received any communication from the Shareholder orperson so entitled; and

(d) if any part of the share capital of the Company is quoted on any stock exchange the Company hasgiven notice in writing to the quotations department of such stock exchange of its intention to sellsuch shares.

5. Directors

No Director has:

(i) any convictions in relation to fraudulent offences for at least the previous five years;

(ii) been bankrupt or been a director of any company or has been a member of the administrative,management or supervisory body of a company or a senior manager of a company, at the time ofany receivership or compulsory or creditors’ voluntary liquidation for at least the previous fiveyears; or

(iii) been subject to any official public incrimination of him and/or sanctions by any statutory orregulatory authority (including designated professional bodies) nor has he been disqualified by acourt from acting as a director of a company or from acting as a member of the administrative,management or supervisory bodies of an issuer or from acting in the management or conduct ofthe affairs of any issuer, for at least the previous five years.

Each of the Directors were appointed on 6 September 2005.

There are no outstanding loans granted by the Company to Directors, nor are there any guaranteesprovided by the Company for the benefit of any Director.

No Director has any conflicts of interests between any duties the Director owes to the Company and anyprivate interests and/or other duties. There are no lock-up provisions regarding the disposal by any ofthe Directors of any Shares currently in force.

No Director has had any interest, direct or indirect, in any transaction which is or was unusual in itsnature or conditions or significant to the business of the Company and which was affected by theCompany since its incorporation.

Over the five years preceding the date of this Prospectus, the Directors hold or have held the followingdirectorships (apart from their directorships of the Company) or memberships of administrative,management or supervisory bodies and/or partnerships:

Name Current directorships/partnerships Previous directorships/partnerships

Charities InvestmentManagement LimitedCine UK LimitedGFH Strategy LimitedGNE Group LimitedSteamroller Restaurants LimitedThe Television CorporationLimited

Curzon Artificial Eye LimitedEaster Holdings LimitedInvista European Real Estate TrustSICAFMoonpig.com LimitedNew Ink Media LimitedNorthbridge Management Limited

Tom Chandos

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Name Current directorships/partnerships Previous directorships/partnerships

The 21st Century LearningInitiativeTusker Direct LimitedUdex Holdings Limited

Bourse Trust Company LimitedBrix Global Investment LimitedClose European AcceleratedFund LimitedEuropean Investments(Guersney) Limited European Investment Holdings(Guernsey) Mayven International LimitedMayven UK PLCPeak Asia Properties LimitedPsource Asian Recovery LimitedProdesse Investment Limited

Northbridge UK LimitedNorthbridge Ventures LimitedQueen’s Walk Investment Limited(Guernsey)RSMB Television ResearchLimitedSand Aire LimitedScopetime LimitedSplash Media LimitedThe Social Market FoundationZone Limited

AnaCap Atlantic Co-InvestmentGP LimitedAnaCap Derby Co-Investment GPLimitedAnaCap FP Debt OpportunitiesGP LimitedAnaCap FP GP LimitedAnaCap FP GP II LimitedAltius Associates GP LimitedAltius Select Europe (GP) LimitedBH Global LimitedBH Macro LimitedEuroDekania LimitedGlebe Central Cross LimitedGlebe London LimitedGoldman Sachs DynamicOpportunities LimitedMont Hubert LimitedNB Distressed Debt InvestmentFund LimitedNB Private Equity PartnersLimited NB PEP Holdings LimitedNB PEP Investments LimitedNB PEP Investments LP LimitedQueen’s Walk Investment Limited Sherborne Investors (Guernsey) ALimited Signet Global Fixed IncomeStrategies Limited Star Asia Finance, LimitedTCR1 LimitedTCR2 LimitedThe Emotional Assets Fund 1LimitedThird Point Offshore IndependentVoting Company LimitedTherium Holdings LimitedTrebuchet Finance Limited

Talmai Morgan

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Name Current directorships/partnerships Previous directorships/partnershipsAdvanta HoldingsThames River Scimitar FundLimitedGuernsey Post LimitedSDH Insurance Company (PCC)LtdGartmore Alternative StrategiesPCC LimitedStates of Guernsey TransportBoardMichelangelo Insurance Co.LimitedGartmore Capital Strategy FundLimitedUnited Service TechnologiesLimitedThames River Topaz Fund LimitedThames River Garret Fund LimitedGartmore SICAVDrummonds Insurance PCC LtdSt Johns Ambulance and RescueGuernsey Gambling ControlCommissionCowry Global Financials FundLimited Advance Focus Fund LimitedThames River Tybourne FundLimtiedHenderson Far East Income(Malta) LimitedThames River EDOPSolve Alternatives PCC LtdThames River Kingsway PlusFund LimitedThames River Argentum FundLimitedThames River ZeCo FundLimitedThames River Origin FundLimitedThames River 2X CurrencyAlpha Fund LimitedRutley East African PropertyLimited

Advance Focus Fund LimitedAshcourt Sterling Bond FundLimitedFundFact LtdHamilton Capital LimitedLiontrust Absolute Return FundLimited

Alpha Bank Jersey LimitedAlpha Asset Finance CI LtdJ.P. Morgan Private Equity LimitedCarib Golf LimitedDexion Trading LimitedGenerali International LimitedGenerali Worldwide InsuranceCompany Ltd.Generali Portfolio Management(CI) LimitedBSI Generali UK LimitedGrenfell PAI Guernsey LimitedHenderson Far East Income LimitedIRP Property Investments LimitedIRP Holdings LimitedKAAN LimitedKenmore European IndustrialFund LtdKEIF Luxembourg SARLKEIF Luxembourg Scandi SARLLow Carbon Accelerator LimitedOpportunity Investment Co. LimitedRIL Insurance LimitedRuffer Investment CompanyLimitedRutley Russia Property FundLimitedSafedataco.com LimitedSitex Insurance PCC LimitedSpencer Holdings LimitedTacus Fund LimitedThames River Hillside Apex FundSPCHillside Apex Fund LimitedThames River Hillside Apex FundII LimitedThames River Kingsway FundLimitedKingsway Fund LimitedThames River Legion Fund LimitedNevsky Fund LimitedThames River Longstone LimitedThames River Property Growth &Income Fund Ltd

Arcograph LtdArcograph (Jersey) LimitedAsset Risk Consultants LtdAsset Risk Consultants (Jersey) LtdBH Global LimitedClose Enhanced CommoditiesFund II Limited

Christopher Spencer

Graham Harrison

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Name Current directorships/partnerships Previous directorships/partnershipsLiontrust International (Cayman)LimitedIntegrated Research LimitedSyndicate Asset Management(CI) LimitedThe Professional Investor FundPCC Limited Footballs For Fun Limited

Cedar Partners (Asia) LimitedCedar Partners (Cayman)LimitedClassics Fund LimitedCPCL (Holdings) LimitedGlobal MENA Financial AssetsLimitedFinancial Assets MENA W.L.L.Financial Assets Bahrain W.L.L.GSC Credit LimitedHSBC Global Cash FundsLimited (amalgamated withHSBC Corporate Money FundsLimited)HSBC Investment Management(International) Limited

De Putron Fund Management(Guernsey) LtdErmitage Opportunities FundErmitage Thematic Fund SICAVHAL LimitedHamilton Group Holdings LimitedIPT Holdings LimitedISIS Property Trust LimitedLiontrust Alternative Funds PCCLimitedLiontrust Credit FundLiontrust Credit Master FundLiontrust Guernsey Fund LtdLiontrust Global InvestmentServices LimitedLiontrust International (Guernsey)LtdLiontrust International Funds(Luxembourg) SICAVMarguerite LimitedQPM LimitedQueens Walk Investment LimitedSegregated Account ServicesLimitedThe Stuff Your RucksackFoundationTrebuchet Finance LimitedZenith International Bond FundsLimitedZenith International GrowthLimitedZenith International Multi-Manager Funds LimitedZenith International ReservesFunds

Advance Developing MarketsFund LimitedAustralian Property Management(Bermuda) LimitedConsolidated CustodiansInternational LimitedDexion Equity Alternative LimitedGlobal Property Management(Bermuda) LimitedHSBC Corporate Money FundsLimitedHSBC Fund of Funds LimitedHSBC Managed PortfoliosLimitedHSBC Specialist Funds LimitedHSBC Investment Solutions PLC*

John Hawkins

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Name Current directorships/partnerships Previous directorships/partnerships

6. Directors’ and Other Interests

The interests of Directors in the Ordinary Shares of the Company as at the date of this Prospectus areas follows:

Name Shares

Tom Chandos 19,0002

Talmai Morgan 1,0003

Christopher Spencer 1,0004

Graham Harrison 1,0005

John Hawkins 1,000

Except as set out above, none of the Directors, nor any persons connected with the Directors, have aninterest in Shares or options of the Company.

The Directors will be Qualifying Open Offer Shareholders in respect of the above holdings ofOrdinary Shares.

The total emoluments receivable by the Directors and paid by the Company in respect of the accountingyear of the Company ended 31 March 2010 was €240,000. The Chairman was paid annualremuneration of €120,000 and the other Directors were paid annual remuneration of €30,000 each forthe financial year ended 31 March 2010. Save for Tom Chandos, all of the Directors will be paid anadditional payment of €5,000 each in relation to the Placing and Open Offer and Bonus Issue.

2 These Shares are held by Smith F Williamson Nominees Limited for Botts & Company Retirement Benefit Scheme on behalfof Mr Chandos.

3 These Shares are held by Forest Nominees Limited for Mr Morgan.

4 These shares are held by Schroder Nominees (Guernsey) Limited for Mr Spencer.

5 These Shares are held by Forest Nominees for Asset Risk Consultants Limited Retirement and Annuity Trust Scheme on behalfof Mr Harrison.

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Momentum All Weather AbsolutePerformance Ltd M W Nippon Fund LimitedNew Star Absolute Return FundPCC LimitedNew Star UK Gemini HedgeFund LimitedNew Star Leveraged EuropeanHedge Fund LimitedNew Star Leveraged ManagedHedge Fund LimitedSR Investments (L) LimitedSR Japan Inc

Low Carbon Accelerator LimitedMorant Wright Japan IncomeTrust LimitedM W Japan Fund LimitedPrana LimitedP D Star Fund LimitedQueen’s Walk Investment LimitedRaffles Asia Investment CompanyLimitedSR Global General Partner LimitedSR General Partner (Cayman)LimitedSR Global (Delaware) LLCSR Phoenicia (Delaware) LLCSR Vista (Delaware) LLCSR Global (Mauritius) LimitedSR Global Fund Inc.SR Services LimitedSR Phoenicia IncSR Phoenicia (Mauritius) LimitedSR Vista IncSR Vista (Mauritius) LimitedSRH General Partner LimitedSRH Eclipse Inc.The Greater China Fund, Inc.The Prospect Japan Fund Limited

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Each of the Directors has signed a letter of appointment with the Company setting out the terms of theirappointment. There are no service contracts in existence between the Company and any of the Directors,nor are any proposed. No amount has been set aside or accrued by the Company to provide pension,retirements or other similar benefits.

Save as disclosed below, as at the date of this Prospectus, the Directors are not aware of any personswho can, or immediately following the Placing and Open Offer and Bonus Issue could, directly orindirectly, jointly or severally, own the Company or exercise control over the Company.

Percentage of Issued Number of Share Capital Post

Name Ordinary Shares Placing and Open Offer6

Concert Party 16,433,584 41.12%

The Directors are not aware of any arrangements, the operations of which may at a subsequent dateresult in a change of control of the Company.

As at 16 August 2010 (the latest practicable date prior to the publication of this Prospectus), save inrespect of those Shareholders noted below, insofar as is known to the Company, the following personsare, directly or indirectly, interested in 5 per cent. or more of the issued share capital of the Company:

Percentage ofNo. of Ordinary Shares

Ordinary Shareholder Ordinary Shares in issue

Cheyne ABS Opportunities Fund LP 15,773,804 59.2

None of the Company’s Ordinary Shareholders has voting rights attached to the Ordinary Shares theyhold which are different to the voting rights attached to the other Ordinary Shares in the Company.

7. Material Contracts

The following contracts (not being contracts entered into in the ordinary course of business) arecontracts which have been entered into by the Company in the two years immediately preceding the dateof this Prospectus, and which are or may be material or are contracts entered into by the Company whichcontain any provisions under which the Company has any obligation or entitlement which is or may bematerial to the Company at the date of this Prospectus:

7.1 Investment Management Agreement

The Company is party to the Investment Management Agreement, as amended, with theInvestment Manager and Trebuchet, dated 8 December 2005, pursuant to which the Company hasappointed the Investment Manager to manage the assets of the Company and Trebuchet on a day-to-day basis in accordance with, inter alia, the investment objective and policy of the Company,subject to the overall supervision and direction of their respective boards of directors.

The Investment Management Agreement provides that if the Investment Manager acts asinvestment manager of, or investment adviser to, a subsidiary or SPV, the Investment Managerwill be required to procure, to the extent that it is able to do so, that the investments of the relevantsubsidiary or SPV are made such that the Company’s Investment Portfolio shall, overall, be inaccordance with the investment restrictions applicable to the Company.

The Investment Manager, its associates and their directors, members, managers, officers, agents,delegates and employees shall not be liable for any error of judgement or any loss suffered by theCompany or any subsidiary or any SPV incorporated as a funding or asset holding vehicle for theCompany, or the Shareholders, directors, partners of the Company or any subsidiary or any SPVin connection with the services provided under the Investment Management Agreement unlesssuch loss was caused by negligence, wilful default or fraud on the part of the Investment Manager,its associates or their directors, members, managers, officers, agents, delegates or employees. TheInvestment Management Agreement provides that the Investment Manager will not be liable forany default of any custodian, counterparty or other entity which holds money, investments or other

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6 Assumes no exercise of the Investment Manager Options and such Shareholders do not subscribe for additional Shares in thePlacing and Open Offer.

documents of title on behalf of the Company or with or through whom transactions are conductedfor the Company. Nothing in the Investment Management Agreement excludes any liability of theInvestment Manager under the FSMA or the rules of the Financial Services Authority.

The Investment Manager or any holding company of the Investment Manager or any subsidiaryof such holding company or of the Investment Manager (each an “Interested Party”) may receivecommissions which it may negotiate in relation to any sale or purchase of investments effected byit for the account of the Company or any SPV and the Interested Party shall be entitled to retainfor its own benefit any profit or benefit derived therefrom provided that the amount of suchcommission is not in excess of rates commonly receivable by securities dealers in transactions ofthe kind contemplated.

The Company has agreed to indemnify the Investment Manager, its Associates and their directors,members, managers, officers, agents, delegates and employees with respect to all expenses,losses, damages, liabilities, demands, costs, charges and claims arising from acts or omissions ofsuch party except in the case of negligence, wilful default or fraud on the part of such party.

The Investment Manager has agreed to indemnify the Company, to the extent lawful, against allexpenses, losses, damages, liabilities, demands, costs, charges and claims incurred by it as a resultof negligence, wilful default or fraud of the Investment Manager and its members, managers,officers, directors, agents and employees.

The Company may terminate the Investment Management Agreement at any time by giving theInvestment Manager not less than 24 months’ prior notice in writing. In lieu of providing24 months’ notice, the Company may pay a termination fee equal to the Management Fees andthe Incentive Fees that the Investment Manager would have earned if the Investment ManagementAgreement had not been terminated prior to the end of the 24 month notice period (calculatedbased on the fees earned by the Investment Manager during the 12 month periodpreceding termination).

The Company may terminate the Investment Management Agreement for cause by giving theInvestment Manager not less than 60 days’ prior notice in writing, if the Investment Managercommits any material breach with respect to its obligations under the Investment ManagementAgreement and fails (in the case of a breach capable of rectification) to make good such breachwithin 30 days of receipt of written notice from the Company requiring it to do so. Suchtermination shall not take effect until the Company has appointed a replacementinvestment manager.

The Company may terminate the Investment Management Agreement by giving notice to theInvestment Manager, effective forthwith, if the Investment Manager is dissolved or unable to payits debts or commits any act of bankruptcy or if a receiver is appointed over all or a substantialportion of its assets or ceases to hold any licence, permission, authorisation or consent necessaryfor the performance of its duties under the Investment Management Agreement.

The Investment Manager may resign its appointment at any time by giving the Company not lessthan three months’ prior notice in writing, provided that such termination shall not take effectuntil the earlier of (i) the date on which the Company has appointed a replacement investmentmanager and (ii) the date falling six months after the date on which the Investment Manager gavesuch notice. The Investment Manager may resign its appointment by giving the Company not lessthan 60 days’ prior notice in writing if the Company commits any material breach with respect toits obligations under this Agreement and fails to make good any breach within 30 days of receiptof written notice from the Investment Manager requiring it to do so.

The Investment Manager may resign its appointment by giving notice in writing to the Company,effective forthwith, if the Company is dissolved or is unable to pay its debts or commits any actof bankruptcy or if a receiver is appointed over all or a substantial portion of its assets.

The Company will pay to the Investment Manager a Management Fee, an Incentive Fee andcertain expenses as described in Part III of this Prospectus.

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The Investment Manager may at any time delegate certain duties under the InvestmentManagement Agreement to any Associate of the Investment Manager. The Investment Manager’sliability to the Company for all matters so delegated shall not be affected thereby and theInvestment Manager shall remain liable in respect of losses to the Company resulting from theacts or omissions of any such delegate, provided that any losses are caused by the negligence,wilful default or fraud on the part of the Investment Manager, its Associates, or its or theirdirectors, members, managers, officers, agents, delegates or employees.

The Investment Manager and any entity controlled by or under common control with it, currentlydo not sponsor and shall not raise or sponsor any new investment fund, company or investmentvehicle (private or public) which targets as its primary investment category investments inPrimary Target Investments, it being understood that no such fund, company or investment vehicleshall be prohibited from investing in Primary Target Investments.

The Investment Manager Agreement was originally executed by the Company, Cheyne CapitalManagement Limited (“CCML”) and Trebuchet. Pursuant to an agreement dated 29 December2006, CCML transferred by way of novation the benefit and burden of its rights and obligationsunder the Investment Management Agreement to the Investment Manager with the consent of theCompany and Trebuchet in connection with the Investment Manager’s conversion into a limitedliability partnership structure.

Conditional upon the approval of Ordinary Shareholders at the EGM and Bonus Issue Admissionoccurring, the Investment Management Agreement will be amended pursuant to the InvestmentManagement Agreement Side Letter dated 17 August 2010. The Investment ManagementAgreement Side Letter provides that the Management Fee payable will, with effect from BonusIssue Admission, be equal to 1.75 per cent. per annum of the Adjusted NAV of the Company otherthan to the extent that such value is comprised of any investment where the underlying assetportfolio is managed by the Investment Manager. The Adjusted NAV will be equal to theprevailing NAV calculated in accordance with the Company’s accounting policies increased by anamount equal to the number of Preference Shares in issue (excluding Preference Shares held intreasury) multiplied by the Preference Share Notional Value. In addition, the InvestmentManagement Agreement Side Letter requires that at least 70 per cent. of the Company’s Net AssetValue will comprise Residual Income Positions and Real Estate Debt as opposed to PrimaryTarget Investments in accordance with the proposed investment policy and amends the conflictsarrangements pursuant to which the Investment Manager is subject as described in Part III of thisProspectus under the heading “Conflicts”.

The Investment Management Agreement is governed by English law.

7.2 Administration Agreement

The Company is party to an Administration Agreement with Kleinwort Benson (Channel Islands)Fund Services Limited dated 8 December 2005, pursuant to which the Administrator provides forthe day-to-day administration of the Company, including maintenance of accounts and provisionof a company secretary.

For the provision of services under the Administration Agreement, the Administrator is entitled toreceive fees which will be agreed in writing from time to time between the Company and theAdministrator. The Administrator is currently entitled to receive from the Group an administrationfee of 0.125 per cent. of the gross asset value of the Group up to €80,000,000 and0.0325 per cent. of the gross asset value of the Group greater than €80,000,000. In addition tothe fees payable, the Company will reimburse the Administrator for all reasonable expensesincurred by the Administrator in connection with the performance of its services under theAdministration Agreement.

The Administration Agreement had an initial term of three years, since which the agreementautomatically renews for successive two-year terms unless 90 days’ notice of non-renewal isdelivered by the Company or six months’ notice by the Administrator, in either case to take effectbefore expiry of the relevant term. The Administration Agreement may be terminated

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immediately by the Administrator if the Company ceases to hold any applicable regulatorylicences or consents in Guernsey. The Administration Agreement may be terminated immediatelyby the Company if the Administrator ceases to be qualified to act pursuant to any applicable law,including the Protection of Investors (Bailiwick of Guernsey) Law, 1987 or the Administratorbecomes or is deemed to become resident for tax purposes to carry on business elsewhere than inGuernsey and the Company has not approved such tax residency. The Administration Agreementmay be terminated immediately by either party on the occurrence of certain specified events or ifthe other party is materially in breach of the Administration Agreement and fails (in the case of abreach capable of being remedied) to remedy such breach within 30 days of receipt of a writtennotice from the other requiring it to do so.

The Administrator will not be liable for any loss or damage suffered by the Company or any otherperson in connection with the Administration Agreement, unless such loss or damage arisesdirectly or indirectly from some act of negligence, recklessness, bad faith, wilful default, fraud orfailure to comply with its obligations under the Administration Agreement. The Company hasindemnified the Administrator against all actions, proceedings, claims and demands (includingvarious costs and expenses directly incidental thereto), which may be brought or made against theAdministrator in respect of any loss or damage sustained or suffered in connection with theperformance of its duties save to the extent that such loss or damage arises directly or indirectlyfrom some act of negligence, recklessness, bad faith, wilful default, fraud or failure to complywith its obligations under the Administration Agreement.

The Administration Agreement is governed by English law.

7.3 Sub-Administration Agreement

The Company is party to a Sub-Administration Agreement with the Administrator and theSub-Administrator, dated 8 December 2005 (as amended), pursuant to which theSub-Administrator provides certain administration services to the Company, including thepreparation and maintenance of such books, records and accounts as necessary. TheSub-Administrator is be entitled to receive a fee from the Administrator for these services whichis to be paid out of the Administrator’s own fee and which will be agreed in writing from time totime between the Company and the Administrator and the Sub-Administrator. The Administratorwill remain liable to the Company for the activities of the Sub-Administrator.

The Sub-Administration Agreement had an initial term of three years, since which the agreementautomatically renews for successive two-year terms unless 90 days’ notice of non-renewal isdelivered by the Company or six months’ notice by the Administrator or Sub-Administrator, ineither case to take effect before expiry of the relevant term. The Sub-Administration Agreementmay be terminated immediately by the Administrator or the Sub-Administrator if the Companyceases to hold any applicable regulatory licences or consent in Guernsey. The Sub-AdministrationAgreement may be terminated immediately by the Company if the Sub-Administrator is no longerpermitted to perform its obligations under any applicable law or regulation. TheSub-Administration Agreement may be terminated immediately by any party on the occurrenceof certain specified events or if any other party is materially in breach of the Sub-AdministrationAgreement and fails (in the case of a breach capable of being remedied) to remedy such breachwithin 30 days of receipt of a written notice from either of the parties not in breach requiring itto do so.

The Sub-Administrator will not be liable to the Administrator for any loss or damage directly orindirectly suffered or incurred by the Company or the Administrator or any other person inconnection with the Sub-Administration Agreement, unless such loss or damage arises directly orindirectly from some act of negligence, recklessness, bad faith, wilful default, failure to complywith its obligations under the Sub-Administration Agreement or fraud on the part of theSub-Administrator or any person to whom it may delegate or sub-contract its duties (to the extentpermitted to do so under the Sub-Administration Agreement) in performance of its duties. TheAdministrator has indemnified the Sub-Administrator against all actions, proceedings, claims anddemands (including various costs and expenses directly incidental thereto) which may be brought

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or made against the Sub-Administrator in respect of any loss or damage sustained or suffered inconnection with the performance of its duties save to the extent that such loss or damage arisesdirectly or indirectly from some act of negligence, recklessness, bad faith, wilful default, failureto comply with its obligations under the Sub-Administration Agreement or fraud on the part ofthe Sub-Administrator.

The Sub-Administration Agreement was amended by way of a novation agreement dated 9 June2010 whereby Investors Fund Services (Ireland) Limited novated its rights and obligationspursuant to the Sub-Administration Agreement to the Sub-Administrator.

The Sub-Administration Agreement is governed by English law.

7.4 Registrar Agreement

The Company is party to a registrar agreement with Capita Registrars (Guernsey) Limited (the“Registrar”) dated 8 December 2005 (the “Registrar Agreement”), pursuant to which theRegistrar provides registration services to the Company which entail, among other things, theRegistrar having responsibility for the transfer of shares, maintenance of the share register andacting as transfer and paying agent.

For provision of the registrar services, the Registrar is entitled to receive a basic fee based on thenumber of Shareholder accounts subject to an annual minimum charge of £7,500. In addition tothis basic fee, the Registrar is entitled to receive additional fees for specific actions.

The Registrar has appointed Capita Registrars (the “UK Transfer Agent”) to provide transferagent services to the Company, for which it will receive a fee payable by the Registrar. TheRegistrar will remain liable to the Company for the activities of the UK Transfer Agent.

The Registrar Agreement can be terminated on 90 days’ notice given by the Company or sixmonths’ notice given by the Registrar. The Registrar Agreement may be terminated immediatelyby the Company if the Registrar is no longer permitted or qualified to perform its obligationsunder any applicable law or regulation or the Registrar becomes or is deemed to become residentfor tax purposes to carry on business elsewhere than in Guernsey and the Company has notapproved such tax residency. The Registrar Agreement may be terminated immediately by eitherparty on the occurrence of certain specified events or if the other party is materially in breach ofthe Registrar Agreement and fails (in the case of a breach capable of being remedied) to remedysuch breach within 30 days of receipt of a written notice from the other requiring it to do so.

Except in the case of the fraud of the Registrar or its delegates, sub-contractors, agents, officers oremployees, the aggregate liability of the Registrar and its agents, delegates, sub-contractors,officers or employees arising out of or in connection with the Registrar Agreement is limited to thelesser of £1,000,000 or an amount equal to ten times the total annual fee payable to the Registrarand the Registrar or its delegates, sub-contractors, agents, officers or employees shall not be liableto the Company in connection with the Registrar Agreement for indirect or consequential loss ordamage, loss of profit, revenue, actual or anticipated savings or goodwill, in all cases (whethercaused by negligence or otherwise). The Company has indemnified the Registrar and its agents,officers and employees against all and any liabilities which may be suffered or incurred by theRegistrar and its agents, officers and employees in connection with the performance of its dutiesunder the Registrar Agreement save to the extent that such liabilities may be due to the negligence,recklessness, bad faith, wilful default, failure to comply with its obligations under the RegistrarAgreement or fraud of the Registrar or its agents, officers or employees.

The Registrar Agreement is governed by English law.

7.5 Custody Agreement

The Company is party to a Custody Agreement with State Street Custodial Services (Ireland)Limited dated 8 December 2005 (as amended), pursuant to which the Custodian is responsible forproviding custodial services which include being global custodian of all the investments andproperty of the Company, the safekeeping and registration of property for the Company and thesettlement of all transactions relating to the property. The Custodian is a company incorporated

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in Ireland under the Companies Acts 1963 to 2003 on 6 September 1994 under registered number221775. The address of the registered office of the Custodian is set out in the section titled“Corporate Information”.

For the provision of services under the Custody Agreement, the Custodian is entitled to receive afee which will be agreed in writing from time to time between the Company and the Custodian.The Custodian is currently entitled to receive from the Group a custodian fee of 0.03 per cent. ofthe gross asset value of the Group up to €80,000,000 and 0.02 per cent. of the gross asset valueof the Group greater than €80,000,000, plus additional fees in relation to transaction fees,statutory reporting, corporate secretarial fees and other out of pocket expenses. In addition to thisfee, the Company will reimburse the Custodian for reasonable out of pocket expenses incurredfor the benefit of the Company.

The Custody Agreement has an initial term of three years, since which the agreementautomatically renews for successive two-year terms unless 90 days’ notice of non-renewal isdelivered by the Company or six months’ notice by the Custodian, in either case to take effectbefore expiry of the relevant term. The Company may terminate the Custody Agreement at anytime if the Custodian is no longer permitted or qualified to perform its obligations pursuant to anyapplicable law or regulation. The Custody Agreement may be terminated immediately by eitherparty on the occurrence of certain specified events or if the other party is materially in breach ofthe Custody Agreement and fails (in the case of a breach capable of being remedied) to remedysuch breach within 30 days of receipt of a written notice from the other requiring it to do so.

The Custodian will not be liable for any loss, damage or expense directly or indirectly suffered orincurred by the Company or any other person in connection with the Custodian’s performance ofits duties, unless such loss or damage arises directly or indirectly from some act of negligence,recklessness, bad faith, wilful default, failure to comply with the obligations under the CustodyAgreement or fraud of the Custodian in the performance or non-performance of the Custodian’sduties. The Company has indemnified the Custodian against any and all actions, proceedings,claims and demands (including various costs and expenses directly incidental thereto) which maybe brought or made against the Custodian in respect of any loss or damage sustained or sufferedby it in connection with the performance of its duties pursuant to any applicable law or regulation.

The Custodian Agreement was amended by way of a novation agreement dated 9 June 2010whereby Investors Trust & Custodial Services (Ireland) Limited novated its rights and obligationspursuant to the Custody Agreement to the Custodian.

The Custody Agreement is governed by English law.

7.6 Relationship Agreement

The Investing Fund currently holds 15,773,804 Ordinary Shares representing 59.2 per cent. of theExisting Ordinary Shares in the Company (excluding any exercise of the InvestmentManager Options).

The Company is party to a relationship agreement with the Investing Fund dated 8 December2005 (the “Relationship Agreement”) which regulates the ongoing relationship between theparties. The Relationship Agreement will continue for so long as the Investing Fund and itsassociates and persons acting in concert with it control directly or indirectly an interestrepresenting at least 10 per cent. of the issued Ordinary Share capital of the Company.

Pursuant to the Relationship Agreement and subject to applicable legal and regulatoryrequirements: (i) the Investing Fund will exercise its rights and will procure (insofar as it is able)that any associate exercises its shareholder rights so as to ensure that the Company is capable atall times of carrying on its business and making decisions independently of the Investing Fundand its associates and that the agreement is otherwise implemented in full; (ii) the Investing Fundwill use all reasonable endeavours to procure that no action is taken by it or any of its associatesto prejudice the listing of the Shares on the Official List of the London Stock Exchange; (iii) theInvesting Fund has agreed that the Company shall operate and make decisions for the benefit ofShareholders as a whole; (iv) the Investing Fund has agreed and undertaken and shall, in respect

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of any of its associates, use its reasonable endeavours to procure, that, inter alia, agreementstransactions and relationships between any member of the group and the Investing Fund and/orany associates of the Investing Fund will be conducted at arm’s length and on a normalcommercial basis; (v) the membership of the Board will at all times be in compliance with theapplicable Listing Rules for investment companies; and (vi) the parties will and will procure, sofar as they are able, that its associates (in the case of the Investing Fund) or members of its group(in the case of the Company) shall not enter into, novate, vary or abrogate any material agreement,arrangement or transaction between, among others, any member of the group and the InvestingFund or any associate unless approved by a resolution of the Board.

If the Investing Fund proposes to dispose of any of its Shares at any time, it has undertaken toprovide the Company with as much prior notice as is reasonably practicable of the proposeddisposal and carry out such prior consultations with the Company during such notice period as isreasonably practicable in the circumstances. The notification and consultation provisions do notapply to a proposed disposal, that taken together with other disposals in the preceding 90 dayperiod, does not reduce the holding of the Investing Fund by more than 5 per cent., of theCompany’s issued share capital.

The Relationship Agreement also provides for the provision of reasonable assistance by theInvesting Fund in meeting applicable legal and regulatory requirements in connection with theissue by the Company of any further shares fully-paid ranking pari passu with the Shares. TheRelationship Agreement also provides for the Company to provide reasonable assistance to theInvesting Fund on the same basis in connection with placings or offers of Shares by eitherof them.

7.7 Investment Manager Options

A summary of the Investment Manager Options granted by the Company on 8 December 2005 isset out in Part III of this Prospectus.

7.8 Trade Mark Licence

The Investment Manager and the Company have entered into a Trade Mark Licence dated8 December 2005 pursuant to which the Investment Manager has granted to the Company anon-exclusive royalty-free licence to use the names “Queen’s Walk” and “Queen’s WalkInvestment Limited” in connection with the Company’s business. The Trade Mark Licenceterminates if the Investment Manager ceases to be the Company’s investment manager. The TradeMark Licence is governed by English law.

7.9 Placing and Open Offer Agreement

The Placing and Open Offer Agreement dated 17 August 2010 between Liberum Capital, theCompany and the Investment Manager whereby the Company has agreed, subject to certainconditions that are typical for an agreement of this nature, the last condition being Open OfferAdmission, to issue the New Ordinary Shares to be issued pursuant to the Placing and Open Offerat the Offer Price. Liberum Capital has agreed, subject to certain conditions that are typical foran agreement of this nature, the last condition being Open Offer Admission, to use reasonableendeavours to procure subscribers for the New Ordinary Shares to be issued under the Placing atthe Offer Price.

In consideration for the provision of their services under the Placing and Open Offer Agreement,the Company will pay to Liberum Capital, the following: (a) if Liberum Capital procures eitherone or two New Investors that subscribe for New Ordinary Shares pursuant to the Placing andOpen Offer, a commission of 2.5 per cent. of the aggregate value of the New Ordinary Sharesissued pursuant to the Placing and Open Offer; (b) if Liberum Capital procures either three or fourNew Investors that subscribe for New Ordinary Shares pursuant to the Issue, a commission of3.0 per cent. of the aggregate value of the New Ordinary Shares issued pursuant to the Placingand Open Offer; or (c) if Liberum Capital procures five or more New Investors that subscribe forNew Ordinary Shares pursuant to the Placing and Open Offer, a commission of 3.25 per cent. ofthe aggregate value of the New Ordinary Shares issued pursuant to the Placing and Open Offer.

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For the purposes of (a) to (c) above “New Investor” means an investor who (i) subscribes for notless than 250,000 New Ordinary Shares pursuant to the Issue, (ii) retains a shareholding of notless than 250,000 Ordinary Shares in the Company for a period of four weeks post closing of thePlacing and Open Offer, and (iii) is not an existing Shareholder of the Company. Liberum Capitalwill be paid a commission of not less than 2.5 per cent. of the aggregate value of the NewOrdinary Shares issued pursuant to the Placing and Open Offer and Liberum Capital will not beconsidered a New Investor. In addition, conditional on the New Ordinary Shares allotted pursuantto the Placing and Open Offer being admitted to the Official List and to trading on the mainmarket of the London Stock Exchange, the Company will pay to Liberum Capital a corporatefinance advisory fee of £100,000.

The fees described above exclude any commissions payable to placees required to be paid tosecure their placing commitments, such placing commissions to be payable by the Company uponOpen Offer Admission. The aggregate value of the placing commissions will not equate to morethan 1.25 per cent. of the aggregate value of the New Ordinary Shares to be issued pursuant tothe Placing and Open Offer.

The obligations of the Company to issue New Ordinary Shares and the obligations of LiberumCapital to use reasonable endeavours to procure subscribers for the New Ordinary Shares to beissued under the Placing, are subject to conditions, including, amongst others, Open OfferAdmission occurring by not later than 0800 hours on 16 September 2010 or such later time and/ordate as Liberum Capital may agree with the Company and the Placing and Open Offer Agreementnot having been terminated. Liberum Capital may terminate the Placing and Open OfferAgreement in certain circumstances that are typical for an agreement of this nature prior to OpenOffer Admission. These circumstances include the breach by the Company or the InvestmentManager of the warranties given pursuant to the Placing and Open Offer Agreement, theoccurrence of certain material adverse changes in the condition (financial or trading) of theCompany, and certain adverse changes in financial, political or economic conditions.

The Company has agreed to pay by way of reimbursement to Liberum Capital, any stamp duty orstamp duty reserve tax arising on the issue of the New Ordinary Shares by them under the Placingand Open Offer and the Company has agreed to pay or cause to be paid (together with any relatedvalue added tax) certain costs, charges, fees and expenses of, or in connection with, or incidentalto, amongst others, the Placing, Open Offer and Open Offer Admission or the other arrangementscontemplated by the Placing and Open Offer Agreement.

The Company and the Investment Manager have given certain representations, warranties,undertakings and indemnities to Liberum Capital.

The Company has undertaken to Liberum Capital in the Placing and Open Offer Agreement thatit will not, during the period beginning at the date of the Placing and Open Offer Agreement andending six months after the date of Open Offer Admission, without the prior written consent ofLiberum Capital, offer, issue, lend, sell or contract to sell, grant options in respect of or otherwisedispose of, directly or indirectly any New Ordinary Shares, Preference Shares or any securitiesconvertible into, or exchangeable for, or enter into any transaction with the same economic effectas, or agree to do any of the foregoing (other than the New Ordinary and Preference Shares issuedpursuant to the Placing and Open Offer and the Bonus Issue).

The Placing and Open Offer Agreement is governed by English law.

8. Investment Restrictions

The Company will only invest in accordance with its investment policy as described in Part I of thisProspectus. In order to comply with the requirements of the UK Listing Authority and other regulatorybodies the Company undertakes to comply with the following restrictions for so long as they arerequirements of the UK Listing Authority or other regulatory bodies:

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• not more than 10 per cent., in aggregate, of the value of the total assets in the Company’s portfolioof assets may be invested in other listed investment companies (including listed investment trusts)except that this restriction shall not apply to investments in investment companies or investmenttrusts which themselves have stated investment policies to invest no more than 15 per cent. oftheir total assets in other listed investment companies (including listed investment trusts);

• it will not conduct a trading activity which is significant in the context of its Group as awhole; and

• the Company will, at all times, invest and manage its assets in a way which is consistent with itsobject of spreading investment risk and in accordance with the published investment policy setout on pages 52 to 55 of this Prospectus.

In the event of any breach of investment restrictions applicable to the Company, Shareholders will beinformed of the actions to be taken by the Investment Manager by an announcement issued through aRIS or a notice sent to Shareholders at their registered address.

The Company will comply with the investment restrictions as set out above for so long as they remainrequirements of the UK Listing Authority. If the Resolution proposing the proposed investment policyis approved at the EGM, the Directors do not currently intend to propose any further material changesto the Company’s investment policy, save in the case of exceptional or unforeseen circumstances. Asrequired by the Listing Rules, any material change to the investment policy of the Company will onlybe made with the approval of Shareholders.

9. The City Code on Takeovers and Mergers

The City Code has not, and does not seek to have, the force of law. It has, however, been acknowledgedby both the UK government and other UK regulatory authorities that those who seek to take advantageof the securities markets in the UK should conduct themselves in matters relating to takeovers inaccordance with best business standards and so according to the City Code.

The City Code is issued and administered by the Panel. It applies to all takeover and mergertransactions, however effected, where the offeree company is, inter alia, a listed or unlisted publiccompany resident in the UK or the Channel Islands and to certain categories of privatelimited companies.

Under Rule 9 of the City Code, any person who acquires shares which, when taken together with sharesalready held or acquired by persons acting in concert with that person, carry 30 per cent., or more ofthe voting rights of a company to which the City Code applies, or any person who, together with personsacting in concert with that person, holds not less than 30 per cent., but not more than 50 per cent., ofthe voting rights of such a company and acquires additional shares is normally required by the Panel tomake a general offer to shareholders of that company to acquire their shares. An offer under Rule 9 mustbe in cash and at the highest price paid within the preceding 12 months for any shares in the companyby the person required to make the offer or any persons acting in concert with him.

The following persons are regarded by the Panel as acting in concert and constituting a concert party:the Investment Manager, the directors of the Investment Manager, together with their close relatives andany trusts through whom they act, the Investing Fund, certain directors of the Investing Fund, any otherfunds that are under the discretionary management of the Investment Manager to the extent of thatdiscretionary management, certain portfolio managers of such funds, and the members of theInvestment Management Team (the “Concert Party”).

The members of the Concert Party are deemed to be acting in concert for the purposes of the City Code.Investors should note that as at 16 August 2010 (the latest practicable date prior to the publication of thisProspectus), the Concert Party was interested, in aggregate, in 16,433,584 Ordinary Shares, representing59.2 per cent., of the Ordinary Shares in issue as at that date. Investors should also note that if theInvestment Manager Options were fully exercised the Concert Party would be interested, in aggregate, in18,683,584 Ordinary Shares, representing 70.12 per cent., of the Ordinary Shares in issue.

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Assuming that 13,322,328 Ordinary Shares are issued pursuant to the Placing and Open Offer,immediately following Open Offer Admission, the Concert Party will control 30 per cent. or more butless than 50 per cent., of the voting rights in the Company. The Concert Party will not be able to acquirefurther Ordinary Shares without incurring an obligation under Rule 9 to make a general offer toShareholders unless such acquisition arises from the exercise of the Investment Manager Options. ThePanel has agreed to waive the obligation to make a general offer that would otherwise have arisen onsuch exercise. As noted in Part I of this Prospectus, the Investing Fund has agreed not to participate inthe Placing and Open Offer and, as a result, will not receive New Ordinary Shares.

On a reduction or dilution of the interest of the Concert Party in Shares to not less than 30 per cent., ofthe voting rights in the Company, its members may acquire further Ordinary Shares in limitedcircumstances including as part of a share subscription approved by an independent vote at aShareholders’ meeting and, in the case of acquisitions of Ordinary Shares, not exceeding 1 per cent., ofthe voting rights in the Company in any 12 month period where the percentage shareholding of therelevant member of the Concert Party or the Concert Party itself does not thereby exceed the highestpercentage holding of such member or the Concert Party in the previous 12 month period.

10. Orderly marketing arrangements

Subject to Liberum procuring purchases for at least 25 per cent. of the Preference Shares issued to theInvesting Fund pursuant to the Bonus Issue, the Investing Fund has undertaken to the Company andLiberum Capital that for a period of six months following Bonus Issue Admission, it will seek only totrade its holding of Preference Shares through Liberum Capital in an orderly fashion.

11. General

11.1 In the 12 months immediately preceding the date of this document there has been nogovernmental, legal or arbitration proceedings (including any such proceedings which arepending or threatened of which the Company is aware) since the Company’s incorporation whichmay have, or have had in the recent past significant effects on the Company’s and/or the Group’sfinancial position or profitability.

11.2 The Company is of the opinion that the Group has sufficient working capital for its presentrequirements, that is, for 12 months from the date of this Prospectus.

11.3 The expenses of the Company attributable to the Placing and Open Offer and the Bonus Issue arethose which are necessary to implement the Placing and Open Offer and the Bonus Issue. Theseexpenses will be met by the Company and will be paid on or about Open Offer Admission saveas described below. Such expenses will be written off in the first year following Bonus IssueAdmission and will include registration, listing and admission fees, corporate finance fees,printing, advertising and distribution costs, legal fees and other applicable expenses. TheCompany’s expenses in connection with the Placing and Open Offer and the Bonus Issue areestimated to amount to €1,764,000.

11.4 The Investment Manager may be a promoter of the Company and will or may receiveManagement Fees and other payments from the Company as described in Part III of thisProspectus. Save as disclosed in this paragraph, no amount or benefit has been paid or given tothe Investment Manager by the Company and none is intended to be paid or given.

11.5 Deloitte & Touche, a member of the Institute of Chartered Accountants in England and Wales,have been the only auditors of the Company since its incorporation.

11.6 Trebuchet was incorporated in Ireland on 19 May 2005. Pursuant to the articles of association ofTrebuchet, the Company has the right to appoint a majority of the board of directors of Trebuchet.Talmai Morgan and Graham Harrison, who are directors of the Company, have been appointeddirectors of Trebuchet. To ensure that the Company will be able to maintain a majority of the boardof directors of Trebuchet in the future, the Company has been allotted a single share in Trebuchetcarrying the right to appoint a majority of the board of directors. Trebuchet was established for thesole purpose of acquiring and holding interests in certain assets, including certain assets in the InitialABS Portfolio. The Company has acquired an economic exposure to such investments through the

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acquisition of an unsecured participation note (the “Participation Note”) issued by Trebuchet. TheInvestment Manager manages the investments of Trebuchet pursuant to the terms of the InvestmentManagement Agreement. This ensures that the Company’s investments are managed in accordancewith the investment objective and policy of the Company. Trebuchet is a “qualifying company” withinthe meaning of section 110 of the Irish Taxes Consolidation Act 1997 and accordingly its taxableprofits will be subject to tax at a rate of 25 per cent. Payments under the Participation Note can bepaid gross to the Company and the income portion of such payments will be deductible by Trebuchet.Consequently, it is anticipated that Trebuchet will have a minimal amount of taxable income. Theactivities of Trebuchet are exempt for Value Added Tax (VAT) purposes under the VAT Act of 1972.

11.7 The Company does not have and does not expect that it will have, nor has it had since itsincorporation, any employees and it neither owns nor occupies any premises.

11.8 The Company anticipates that its typical investors will be institutional and other sophisticated orprofessional investors who wish to invest in a predominantly income-producing investment whoare capable themselves of evaluating the merits and risks of the investment and who havesufficient resources both to invest in potentially illiquid securities and to be able to bear any losses(which may equal the whole amount invested) that may result from the investment.

11.9 The annual report and accounts of the Company will be made for the 12 month period ending31 March in each year. Copies of the annual audited financial statements will be sent to eachShareholder. It is expected that this will be within 120 days of the end of the relevant accountingperiod. In addition, copies of the annual audited financial statements and the semi-annualunaudited interim reports will be made available for inspection at and may be obtained uponrequest from the registered office of the Company shortly thereafter. These financial statementsand reports will contain information as to the Company’s Net Asset Value as at their dates.

11.10 It is intended that the annual general meeting of the Company will normally be held in Septemberof each year. The annual general meeting of the Company will be held in Guernsey or such otherplace as may be determined by the Board of Directors. Notices convening the general meeting ineach year will be sent to Shareholders (or the applicable class of Shareholders if relevant) at theirregistered addresses or given by advertisement not later than 21 days before the date fixed for themeeting. Other general meetings may be convened from time to time by the Directors by sendingnotices to Shareholders at their registered addresses or by Shareholders requisitioning suchmeetings in accordance with Guernsey law, and may be held in Guernsey or elsewhere.

11.11 The Company’s Existing Ordinary Shares are listed on the Official List of the UK ListingAuthority and admitted to trading on the main market of the London Stock Exchange. Noapplication is being made for the Shares to be listed or dealt in on any stock exchange orinvestment exchange other than to the Official List of the UK Listing Authority and to trading onthe main market of the London Stock Exchange. Neither the Shares nor any securities of the sameclass as the Shares are already admitted to trading on any regulated market or equivalent market.

11.12 No securities have been sold or are available in whole or in part to the public in connection withthe Offer.

11.13 The business address of each of the Directors is the registered office of the Company.

11.14 Liberum Capital has given and not withdrawn its written consent to the issue of this Prospectuswith references to its name in the form and context in which such references appear.

11.15 The Investment Manager has given and not withdrawn its written consent to the issue of thisProspectus with references to its name in the form and context in which such references appear.

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12. Capitalisation and Indebtedness

The following tables show the Company’s unaudited gross indebtedness as at 30 June 2010 (the latestpracticable date prior to the posting of this Prospectus):

Total current debt As at 30 June 2010

Guaranteed NilSecured NilUnguaranteed/unsecured Nil

Total non-current debt As at 30 June 2010

Guaranteed NilSecured NilUnguaranteed/unsecured Nil

As at the date of this document, the Company had no indirect or contingent indebtedness.

As at the date of this document, the Company had nil net indebtedness.

The following table shows the capitalisation of the Company as at 31 March 2010. The informationbelow has been extracted without material adjustment from the audited report and financial statementsof the Company for the year to 31 March 2010.

Shareholders’ equity As at 31 March 2010 (€)

Share capital NilLegal reserve NilOther reserves 99,329,841

Total 99,329,841

There has been no material change to the capitalisation of the Company since 31 March 2010.

13. Documents available for Inspection

Copies of the following documents are available for inspection at the offices of Herbert Smith LLP,Exchange House, Primrose Street, London EC2A 2HS and at the registered office of the Companyduring usual business hours on any weekday (Saturdays, Sundays and public holidays excepted) fromthe date of this Prospectus until Bonus Issue Admission:

• the Memorandum and Articles of Incorporation of the Company;

• the Revised Memorandum and Articles of Incorporation of the Company;

• the audited report and accounts for the financial years to 31 March 2008, 31 March 2009 and31 March 2010;

• the Circular; and

• this Prospectus.

In addition, copies of this Prospectus are available, for inspection only, from the Document ViewingFacility, UK Listing Authority, The Financial Services Authority, 25 The North Colonnade, CanaryWharf, London E14 5HS.

Further copies of this Prospectus may be obtained, free of charge, from the registered office of theCompany and from Cheyne Capital Management (UK) LLP, Stornoway House, 13 Cleveland Row,London SW1A 1DH.

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DEFINITIONS AND GLOSSARY

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

ABS asset-backed securities which are debt securities which have theirinterest and principal repayments sourced principally from a genericgroup of income producing assets

Adjusted NAV the Net Asset Value of the Company calculated in accordance with theCompany’s accounting policies increased by an amount equal to theAggregate Preference Share Notional Value

Administration Agreement the administration agreement between the Company and theAdministrator dated 8 December 2005

Administrator Kleinwort Benson (Channel Islands) Fund Services Limited

Affiliate an affiliate of, or person affiliated with, a specified person; a personthat directly, or indirectly through one or more intermediaries, controlsor is controlled by, or is under common control with, theperson specified

the Preference Share Notional Value multiplied by the number ofPreference Shares in issue (excluding Preference Shares held intreasury)

AIFM Directive the European Commission’s proposed Directive on AlternativeInvestment Fund Managers

the personalised application forms relating to the Open Offer beingsent to Qualifying Certificated Open Offer Shareholders together withthis Prospectus, in respect of the New Ordinary Shares

the Articles of Incorporation of the Company in force from time totime

Associate shall have the same meaning as given in the FSA’s rules

the board of directors of the Company

Bonus Issue the issue of Preference Shares, free of subscription cost to QualifyingBonus Issue Shareholders on the basis of 1.25 Preference Shares forevery 1 Ordinary Shares held as at the Bonus Issue Record Date

Bonus Issue Admission admission of the Preference Shares issued pursuant to the Bonus Issueto the Official List and to trading on the London Stock Exchange’s mainmarket for listed securities and such admissions becoming effective

Bonus Issue Record Date the record date for qualification for the Bonus Issue, being 5.00 p.m.on 16 September 2010

Business Day any day (other than a Saturday or a Sunday) on which commercialbanks are open for general business in London and Guernsey

Capita Registrars a trading name of Capita Registrars Limited

CDO collateralised debt obligation which is a debt obligation issued inmultiple classes secured by an underlying portfolio of investments

Cheyne Capital Cheyne Capital Management (UK) LLP

Board of Directors orDirectors or Board

Articles or Articles ofIncorporation

Application Forms and eachan Application Form

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Circular the circular issued by the Company dated 17 August 2010 inconnection with the Extraordinary General Meeting

City Code The City Code on Takeovers and Mergers

CMBS commercial mortgage-backed securities, being interests in orobligations secured by a commercial mortgage loan or a pool ofcommercial mortgage loans

Companies Law The Companies (Guernsey) Law, 2008 (as amended)

Company Queen’s Walk Investment Limited and, where relevant, its subsidiariesand subsidiary undertakings

Concert Party the group of Shareholders and certain funds and persons deemed by thePanel to be acting in concert for the purposes of the City Code moreparticularly described in the City Code from time to time, furtherdetails of which are set out in paragraph 9 of Part IX of this Prospectus

CREST the relevant system as defined in the CREST Regulations in respect ofwhich Euroclear is operator (as defined in the CREST Regulations) inaccordance with which securities may be held in uncertificated form

the CREST Courier and Sorting Service established by Euroclear tofacilitate, among other things, the deposit and withdrawal of securities

CREST Manual the rules governing the operation of CREST, consisting of the CRESTReference Manual, CREST International Manual, CREST CentralCounterparty Service Manual, CREST Rules, Registrars ServiceStandards, Settlement Discipline Rules, CCSS Operations Manual,Daily Timetable, CREST Application Procedure and CREST Glossaryof Terms (all as defined in the CREST Glossary of Terms promulgatedby Euroclear on 15 July 1996 and as amended since)

CREST member a person who has been admitted to Euroclear as a system member (asdefined in the CREST Regulations)

CREST participant a person who is, in relation to CREST, a system-participant (as definedin the CREST Regulations)

CREST Regulations the Uncertificated Securities Regulations 2001 (SI 2001 No.2001/3755), as amended

CREST Sponsor CREST participant admitted to CREST as a CREST sponsor

CREST sponsored member CREST member admitted to CREST as a sponsored member

Custodian State Street Custodial Services (Ireland) Limited

Custody Agreement the custody agreement between the Company and the Custodian dated8 December 2005 (as amended)

Default Shares Shares in the capital of the Company in respect of which the Companyhas requested disclosure of the identity of any person (other than theShareholder) who has an interest in such Shares and the nature of suchinterest and the requested information has not been supplied to theCompany within the prescribed period in accordance with theCompany’s Articles

Defaulting Shareholder a Shareholder who, having been requested to do so by the Directors,fails to provide certain information regarding the interests of otherpersons in the Shares held by that Shareholder

CREST Courier andSorting Service

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the disclosure and transparency rules made by the FSA under Part VIof the FSMA

the Ordinary Shares of the Company which are expected to be in issuefollowing the completion of the Placing and Open Offer, comprisingExisting Ordinary Shares and New Ordinary Shares

ERISA the US Employee Retirement Income Security Act of 1974, asamended from time to time, and the applicable regulations thereunder

Euro or € or EUR the lawful single currency of member states of the EuropeanCommunities that adopt or have adopted the Euro as their currency inaccordance with the legislation of the European Union relating toEuropean Monetary Union

Euroclear Euroclear UK & Ireland Limited, the operator of CREST

Exchange Shares shares issued or transferred to the Investing Fund in exchange for theInitial ABS Portfolio

the United States, Canada, Australia, Japan and South Africa and anyother jurisdiction where the extension or availability of the Placing andOpen Offer would breach any applicable law

Existing Ordinary Shares the Ordinary Shares in issue as at the date of this Prospectus

the extraordinary general meeting of the Company due to be held on15 September 2010 at which Shareholders will validly vote upon,amongst other business, the Required Resolutions in accordance withGuernsey law

the Financial Services Authority acting in its capacity as the competentlisting authority for the purposes of Part 6 of the FSMA

Form of Proxy means the form of proxy issued to Shareholders entitled to attend andvote at the EGM

FSMA Financial Services and Markets Act 2000, as amended

GBP or pound Sterling the lawful currency of the United Kingdom

GFSC the Guernsey Financial Services Commission

Group the Company and its subsidiary, Trebuchet Finance Limited, and anyother consolidated subsidiaries of the Company from time to time

Gross Assets the sum of all investments held in the Investment Portfolio, cash andcash equivalents and net other assets/(liabilities), includingminority interests

Hurdle Rate an amount equal to a simple interest rate equal to 2 per cent. per quartersubject to the reset mechanism as set out on pages 74 and 75 ofthis Prospectus

IFRS International Financial Reporting Standards

Incentive Fee the incentive fee payable by the Company to the Investment Manager inaccordance with the terms of the Investment Management Agreement

Initial ABS Portfolio a portfolio of investments acquired prior to its initial public offering ofOrdinary Shares on 23 November 2005 from, amongst other sellers,the Investing Fund

Financial ServicesAuthority or FSA

Extraordinary GeneralMeeting or EGM

Excluded Territories andeach an Excluded Territory

Enlarged Issued OrdinaryShare Capital

Disclosure andTransparency Rules

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Investing Fund Cheyne ABS Opportunities Fund LP, acting by its general partner,Cheyne ABS Opportunities General Partner Inc, and (as the contextrequires) such general partner itself, which is an open-endedinvestment fund managed by the Investment Manager from whom theCompany acquired the Initial ABS Portfolio

Investment Committee Messrs Shamez Alibhai and Ravi Stickney

the investment management agreement, as amended from time to time,initially between the Company, Trebuchet and the Investment Managerdated 8 December 2005, and to which other special purpose vehiclesmay, if so required, become party in the future pursuant to a Deedof Adherence

the side letter between the Company, Trebuchet and the InvestmentManager dated 17 August 2010 summarised in paragraph 7 of Part IXof this Prospectus

the investment management team of Cheyne Capital led by theInvestment Committee

Investment Manager Cheyne Capital Management (UK) LLP, a limited liability partnershipincorporated in England (registered number OC321484). The addressof the registered office of the Investment Manager is set out in thesection titled “Corporate Information”

Investment Manager Options the Investment Manager options described under the heading“Investment Manager Options” in Part III of this Prospectus

Investment Portfolio at any time, the ABS, MBS, RMBS, CMBS, Residual IncomePositions or other investments, rights to investments, instruments andsecurities in which the Company’s assets are invested

Liberum Capital Liberum Capital Limited

Listing Rules the listing rules made by the Financial Services Authority for thepurposes of Part VI of the FSMA

London Stock Exchange London Stock Exchange plc

LTV loan to value

Management Fee the management fee payable by the Company to the InvestmentManager in accordance with the terms of the Investment ManagementAgreement

MBS mortgage backed securities

the Memorandum of Incorporation of the Company in force from timeto time

Net Asset Value or NAV at any time, the net asset value of the Company in total or the net assetvalue per Ordinary Share (as the context requires), calculated inaccordance with the Company’s accounting policies

New Ordinary Shares Ordinary Shares issued pursuant to the Placing and Open Offer

the notice contained in the Circular convening the EGM dated17 August 2010

Notice of ExtraordinaryGeneral Meeting

Memorandum orMemorandum ofIncorporation

Investment ManagementTeam

Investment ManagementAgreement Side Letter

Investment ManagementAgreement

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Offer Price the price at which New Ordinary Shares are being offered pursuant tothe Placing and Open Offer, being €2.00

Official List Official List of the UK Listing Authority

Open Offer the invitation by the Company to certain Qualifying Open OfferShareholders to apply for New Ordinary Shares on the terms andsubject to the conditions set out in this Prospectus

Open Offer Admission admission of the New Ordinary Shares issued pursuant to the Placingand Open Offer to the Official List and to trading on the London StockExchange’s Main Market for listed securities and such admissionsbecoming effective

Open Offer Entitlements the pro rata entitlements to subscribe for New Ordinary Sharesallocated to Qualifying Open Offer Shareholders pursuant to theOpen Offer

Open Offer Record Date the record date for qualification for the Open Offer, being 5.00 p.m. on13 August 2010

Ordinary Shareholders holders of Ordinary Shares

Ordinary Shares the shares of no par value in the capital of the Company

Overseas Shareholders holders of Existing Ordinary Shares and/or New Ordinary Shares with aregistered address in, or who are citizens, residents or nationals of, or arelocated or incorporated in jurisdictions outside of the United Kingdom

Panel the UK Panel on Takeovers and Mergers, which operates the City Code

Payment Date 31 March, 30 June, 30 September and 31 December in each year from31 December 2010 to 31 December 2017 inclusive and the date of finalrepayment of the Preference Shares

Placees those investors participating in the Placing

Placing the placing of the New Ordinary Shares with the Placees subject toclawback under the Open Offer

the Placing and Open Offer Agreement between the Company, theInvestment Manager and Liberum Capital dated 17 August 2010

Preference Dividend an amount in Sterling equal to 8 per cent. per annum of the PreferenceShare Notional Value

Preference Shareholders holders of Preference Shares

£1.00

Preference Shares redeemable shares of no par value each in the capital of the Companydesignated as Preference Shares

Prevailing Exchange Rates in respect of any conversion of Sterling into Euro or of Euro intoSterling, as the case may be, on any relevant date, the prevailing spotrate of exchange chosen by the Directors in good faith for the purposesof such conversion

Primary Target Investments investments with the key characteristics described on page 53 ofthis Prospectus

Preference Share NotionalValue

Placing and Open OfferAgreement

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Prospectus Directive Directive 2003/71/EC and any relevant implementing measure in eachRelevant Member State

Prospectus Rules the prospectus rules made by the Financial Services Authority for thepurposes of Part VI of the FSMA

holders of Ordinary Shares as set out in the Register on the BonusIssue Record Date with the exclusion of (i) holders of Ordinary Shareswith a registered address in, or who are citizens, residents or nationalsof, or are located or incorporated in any Excluded Territory and(ii) US Persons

Qualifying Open Offer Shareholders holding Ordinary Shares incertificated form

Qualifying Open Offer Shareholders holding Ordinary Shares inuncertificated form

holders of Ordinary Shares as set out in the register of members of theCompany on the Open Offer Record Date with the exclusion of(i) holders of Ordinary Shares with a registered address in, or who arecitizens, residents or nationals of, or are located or incorporated in anyExcluded Territory and (ii) US Persons

Real Estate Debt Investments debt secured, directly or indirectly, by commercial or residentialproperties within Western Europe or the United Kingdom having someor all of the characteristics set out on page 55 of this Prospectus

Receiving Agent Capita Registrars

Register the register of members of the Company

Registrar Capita Registrars (Guernsey) Limited

Registrar Agreement the registrar agreement between the Company and the Registrar dated8 December 2005

Regulation S Regulation S under the US Securities Act

Relationship Agreement the relationship agreement between the Company and the InvestingFund dated 8 December 2005

the date on which the Prospectus Directive is implemented in aRelevant Member State

Relevant Member State any Member State of the European Economic Area which hasimplemented the Prospectus Directive

Repayment Amount an amount equal to (i) the Preference Share Notional Value increasedby (ii) any accrued but unpaid Preference Dividend

Required Resolutions means the special resolution proposed at the EGM to amend theArticles by accommodating the Preference Share rights and makecertain other consequential amendments to the Articles, approve thePlacing and Open Offer and the Bonus Issue and approve eachmodification, variation or abrogation of the rights attached to OrdinaryShares; and the ordinary resolutions proposed at the EGM to:(i) amend the Company’s investment policy in the manner described inPart I of this Prospectus, and (ii) approve the issue of New OrdinaryShares at the Offer Price which is a discount of more than 10 per cent.to the middle market price of the Existing Ordinary Shares at the timeof announcing the terms of the Placing and Open Offer

Relevant ImplementationDate

Qualifying Open OfferShareholders

Qualifying CREST OpenOffer Shareholders

Qualifying CertificatedOpen Offer Shareholders

Qualifying Bonus IssueShareholders

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Residual Income Positions assets currently held in the Investment Portfolio which aresubordinated tranches of ABS that are, in most cases, unrated and, inmany cases, represent the residual income typically retained by theoriginator of a securitisation transaction as the “equity” or “firstloss” position

Restricted Shareholders Ordinary Shareholders as at the Open Offer Record Date and theBonus Issue Record Date (as applicable) with a registered address in,or who are citizens, residents or nationals of or are located orincorporated in any Excluded Territory or are US Persons

Revised Articles the proposed restated Articles upon which Shareholders will be askedto vote on the adoption thereof at the Extraordinary General Meeting

Revised Memorandum the proposed restated Memorandum upon which Shareholders willbe asked to vote on the adoption thereof at the ExtraordinaryGeneral Meeting

RIS a regulatory information service, being one of the service providerslisted in Schedule 12 of the Listing Rules

RMBS residential mortgage-backed securities, being interests in orobligations secured by pools of residential mortgage loans

Shareholders the holders of Shares

Shares the Ordinary Shares and/or Preference Shares (as appropriate)

SME Small or medium enterprise

SPV special purpose vehicle

Sub-Administrator State Street Fund Services (Ireland) Limited

the sub-administration agreement between the Company and theSub-Administrator dated 8 December 2005 (as amended)

a supplement to the Prospectus produced in accordance with rule 3.4of the Prospectus Rules

Taxes Act Income and Corporation Taxes Act 1988

Trebuchet Trebuchet Finance Limited, a special purpose vehicle incorporated inIreland on 19 May 2005 with registered number 402419

UK Listing Authority the FSA in its capacity as the competent authority for listing in theUnited Kingdom pursuant to Part IV of the FSMA

UK Transfer Agent Capita Registrars

$ or US$ or US Dollars the lawful currency of the United States of America

United Kingdom or UK the United Kingdom of Great Britain and Northern Ireland

United States or US the United States of America, its territories and possessions, any Stateof the United States, and the District of Columbia

USE Unmatched Stock Event

US Investment Company Act the US Investment Company Act of 1940, as amended

US Person US person within the meaning given to it in Regulation S under theUS Securities Act

Supplement to theProspectus

Sub-AdministrationAgreement

150

US Securities Act the US Securities Act of 1933, as amended

US Tax Code the US Internal Revenue Code of 1986, as amended

Western Europe means Andorra; Austria; Belgium; Denmark; Finland; France;Germany; Gibraltar; Guernsey; Iceland; Ireland, Isle of Man; Italy;Jersey; Liechtenstein; Luxembourg; Monaco; the Netherlands;Norway; Portugal; San Marino; Spain; Sweden; and Switzerland

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Millnet Financial (8623-01)