Capital Holdings Funds

The Capital Holdings Funds aim to provide investors with long-term capital appreciation while managing risks and reducing volatility. To achieve this they invest in a selection of hedge funds, thoroughly screened and monitored by experienced experts.

The Capital Holdings Funds consist of four funds each with its own investment focus:

Multi-Manager Concept

Superior long-term performance is achieved by selecting the most capable and appropriate investment managers; and the key to selecting suitable managers is experience. LCH was the first multi-manager hedge fund of its type and The Capital Holdings Group now has more than 35 years of experience in evaluation and selection, having retained more than 300 managers since launch in November 1969.

Experience is also a key feature in the management of The Capital Holdings Funds. Investment decisions are taken by senior investment professionals who occupy senior management positions in the different sponsoring institutions. This ensures that the most seasoned professionals are making the decisions and that the extensive resources of the sponsoring institutions can be tapped into. The management of the funds assesses the suitability of underlying investment managers according to demanding qualitative and quantitative criteria, which typically include:

• superior return in both favourable and unfavourable market conditions;
• clearly defined investment focus;
• ability to act independently from major financial institutions;
• co-investment of part of the manager's personal assets.

Each manager's fee structure and ability to cope with growth of assets under management are also given consideration in the search for the best performing managers in their field.

The allocation of assets across managers fitting the above criteria is also continually under review as even the most capable managers can become out of phase with market conditions. The management of the funds actively seeks to adjust the amount of assets allocated to each manager to ensure that the selected mix of manager styles enables the funds to fully exploit opportunities presented by the dynamically changing investment environment.

The managers each pursue their own distinctive investment strategy and, in aggregate, they encompass a wide range of styles and techniques. The investment managers have full discretion of the assets allocated to them and are free to use leverage and hedging techniques as a means to optimise their returns. Consideration is also given to the risk/reward trade-off implied by their management style. These measures achieve significant reduction of risk, especially when compared with other funds that employ only one manager or concentrate on a single investment sector or style.

Various Investment Styles

Funds can be categorised according to their investment style:

1. Equity Long/Short - managers investing on the long and short side in equities, based mainly on fundamental company research;
2. Global Macro - Global Macro aims to profit from world-wide themes in equity, bond, currency and commodity markets;
3. Arbitrage - these strategies aim to profit from pricing inefficiencies that arise between related securities due to temporary influences;
4. Fixed Income - strategies aimed specifically at investing long and short in fixed income instruments.

The Capital Holdings Funds focus mainly on Long/Short equity and Global Macro strategies. Trading Capital Holdings combines Global Macro and Trading strategies and offers those specialised strategies to investors.

Stability

The Capital Holdings Funds offer investors the chance to participate in the performance of some of the most sophisticated and active managers, but in a diversified and controlled way thereby managing to avoid the high volatility of returns typically found in single-manager funds of this type. Furthermore, the risk exposure to the approach of any one of the underlying managers is limited to the amount allocated to that manager.

Transparency and Secondary Market

The Capital Holdings Funds (except ACH) offer investors good transparency and issue a net asset value per share every day. The Funds (except TCH) are listed on the Official Segment of the stock market of Euronext Amsterdam and, for the convenience of investors and under the terms listed in the prospectus, shares may be purchased or sold daily on the exchange and over the counter in London.