Patrol Investments plc

Global Opportunities Portfolio

The Fund comprises of three separate portfolios that are referred to as Sub-funds. The Sub-Funds available are;

• Sterling Class
• Euro Class
• Dollar Class

Each Sub-fund has a Supplementary Document that defines the investment objectives, investment powers, functionaries, fees and other details sufficient to enable prospective experienced investors to make an informed investment decision.

THE HEDGE FUND INDUSTRY

A hedge fund is a collective investment vehicle that seeks positive absolute returns irrespective of directional moves in traditional asset classes such as equities and fixed income securities. The concept, and first hedge fund having been established over 50 years ago.

There are estimated to be 6,000 funds in existence now, and growth has been substantial over the last few years. At the end of 2003, it was estimated that there was US$ 1 Trillion invested with hedge fund managers. The principal attractions to investors being enhanced returns, diversification and the non-correlation with traditional asset classes.

For many hedge funds the investment objective is to produce absolute returns at all times, regardless of market conditions, adjusted to bear the lowest possible risk for that target return. This is different to the traditional asset allocation approach that seeks to measure performance in relative terms – typically in relation to a benchmark index. Traditional funds normally have a close correlation to the benchmark that they follow and as a result are exposed to directional moves in the underlying benchmark.

The majority of hedge funds do not measure their performance against a benchmark and will instead target positive absolute returns. As a result, most hedge funds are aiming to achieve the best risk adjusted returns by controlling the level of potential gain or loss for the overall portfolio. Unlike traditional funds, hedge funds are able to take long and short positions in a variety of financial instruments to achieve their targeted return.

The reasons for investing in a hedge fund are twofold. The first, and most important driver, being the prospect of enhanced returns - this is achieved through investment skill and increased investment flexibility. The second important driver is risk management – many hedge funds attempt to offer positive returns with a low correlation to traditional asset classes that can offer investors downside protection in falling markets.

INVESTMENT STRATEGY

The strategy of the Sub-fund is to develop a hybrid hedge fund combining global macro and long/short equity investment strategies. The Sub-fund will trade only highly liquid markets to avoid the risk of market dislocation. The Sub-fund intends to make investments into a defined universe of investment products. This will be confined to individual equities (limited to components of the Nasdaq 100, S&P 100, FTSE 100, Eurostoxx 50, Dow Jones Industrial and SMI indices) and contracts for differences on FTSE 100 components; stock index futures & options and interest rate sensitive futures & options in Europe, the United Kingdom & North America; G10 currency pair spot and forward foreign exchange & currency futures; Comex Gold futures & options.

This universe of investment products should enable the Sub-fund to develop a portfolio that uses strategies involving long and short positions in them. These strategies should enable the Sub-fund to identify a regular stream of high reward/low risk trades.

The Sub-fund intends to develop a portfolio of open positions that reflect the high reward/low risk trades that are identified. The construction of the portfolio will be carefully monitored to ensure that overall the portfolio maintains a quantifiable and low level of risk. The Sub-fund will limit the number of open positions to no more than 15 at any one time excluding any foreign exchange position taken to hedge exposure and cash deposits.

On the basis of standard risk measurement techniques, as at the date of this document and assuming that normal market conditions apply, an individual equity trade would risk approximately 0.165% of the Sub-fund’s value, i.e. on a GBP 10 million portfolio the risk per trade would be GBP 16,500. With regard to other investment products the risk tolerance is slightly higher, at approximately 0.22% of the Sub-fund’s value, i.e. on a GBP 10 million portfolio the risk per trade would be GBP 22,000. In addition to the risk controls applied to individual trades, the Sub-fund will attempt to reduce systematic risk by having both long and short positions in different investments.

The Sub-fund aims to produce returns with low variance, i.e. to record an annualised standard deviation of 6 – 9% and to be non-correlated with traditional asset classes; in particular the Morgan Stanley Composite World Index and the J.P.Morgan Government bond indices. This will provide true diversification and as a result will reduce portfolio volatility. This is achieved through using the defined universe of investment products to construct a portfolio with characteristics that are substantially different from traditional funds.

In normal market conditions, with all 15 open positions being closed out for a loss due to stop losses being triggered; the Sub-fund will carry an approximate risk of between 2.75% and 3.3% of the portfolio’s value depending upon the mix of investments. In abnormal market conditions, the losses could be significantly higher.

The Directors believe that in normal market conditions this potential loss of approximately 3.3% is unlikely to come about, as there is a degree of non-correlation between positions. If the Sub-fund were to suffer these maximum losses for 4 consecutive months, or were to suffer a cumulative loss for any one trading year of more than 12%, the Sub-fund will cease trading immediately. In this situation, the Directors and the Investment Manager would review the investment strategies of the Sub-fund and redefine them to lower the overall risk profile of the Sub-fund.

Prospective investors are reminded that no investment is or can be without an element of risk and that the value of their investment can rise or fall. The Directors have identified various risk factors relevant to this Sub-fund detailed in the section headed “Risk Factors” and stress that it is important that these are read and understood by prospective investors.

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