CFM TIPS Index SRI Operating Memorandum

Custodian & Broker The Strategy Manager has appointed Capital International Limited (“CIL”) of Mill Court, Hope Street, Castletown, Isle of Man, IM99 5XH as lead custodian and broker to the strategy.

CIL provides international dealing, custody, investment management and portfolio administration services. At the time of publication, CIL administered over $3.5bn of assets. CIL is a member of the London Stock Exchange and is licensed by the FSC. CIL is a member of the Capital International Group.

Participation Units Participation in the CFM TIPS Strategy will be sub-divided into standard participation units with a nominal value of £1 each. The Strategy Manager may issue additional units or cancel units as necessary to facilitate contributions to or withdrawals from the CFM TIPS Strategy.

Valuation The strategy will be valued on a mark to market basis monthly on the last calendar day of each month. The Strategy Manager may at its absolute discretion determine additional valuation points on an ad hoc basis.

The strategy’s value will be determined by deducting the total liabilities from the total assets of the strategy. The value of the assets and liabilities of the strategy will be determined in accordance with CFML’s standard strategy valuation policy, which is available on request and may be published from time to time on CFML’s website.

Unit Pricing The net asset value per unit will be calculated by dividing the net asset value of the strategy by the total number of units participating in the strategy.

The Directors reserve the right to adjust the unit price on any valuation date to reflect the approximate true cost or value per unit associated with any investment or redemption from the strategy.

Publication of Unit Pricing 

The unit price of the strategy will be available on request from CFML. The unit price may also be published on CFML’s website. CFML will additionally endeavour to maintain pricing of the strategy on Bloomberg.

Introduction The CFM TIPS Index was formed by Capital Financial Markets Limited (“CFM”) in July 2010.

Operating Memorandum This Operating Memorandum details the basis by which the Index will be managed and how the index levels are calculated.

Reference Strategy The CFM TIPS Index is based on the performance of an underlying reference strategy called the CFM TIPS Strategy.

Strategy Manager The CFM TIPS Strategy is managed by Capital Financial Markets Limited (“CFML”) of Mill Court, Hope Street, Castletown, Isle of Man, IM99 5XH.

CFML is a specialist provider and issuer of contracts for difference and spread bet contracts. CFML is regulated by the Isle of Man Government Financial Supervision Commission (“FSC”) to conduct investment business.

CFML is a wholly owned subsidiary of Capital International Limited (“CIL”). CIL is a member of the London Stock Exchange and is also licensed by the FSC. CIL is a member of the Capital International Group.

Investment Manager The Strategy Manager has appointed Arbiter Fund Management Ltd (“Arbiter”) of Tenterden House, 3 Tenterden Street, Hanover Square, London, W1S 1TD as the discretionary investment manager of the CFM TIPS Strategy.

Arbiter is an institutional investment manager that specialises in technical trading systems applied to FX, commodity, equity and bond markets. Arbiter are regulated by the UK Financial Services

Authority (“FSA”).

www.capital-iom.com

Contributions & Withdrawals The CML TIPS Strategy is a private strategy operated by CFML. From time to time CFML may choose to contribute additional monies to or withdraw monies from the strategy at it’s absolute discretion.

Contribution and withdrawals may only be made on a valuation date. The amount of the contribution or withdrawal (after deduction of any charges) divided by the unit price on that valuation date will determine the number of units invested or disinvested.

Investment Objective To maximise returns and manage volatility through long or short exposure to the emerging market equity indices, commodity and foreign exchange markets.

Base Currency Sterling

Management Approach The strategy is actively managed by the Investment Manager in accordance with the investment strategy detailed below.

Investment Strategy The Trend Investment Programme (“TIP”) is an established technically based trading system designed to profit from medium term trends in major financial markets.

At the core are a set of moving average algorithms which attempt to identify when market trends start and guide the manager. The system looks to build investment by increasing exposure if the trend develops, but shutting the position down should it not.

The CFM TIP Strategy will pursue three sub-strategies focused on emerging market equity indices, commodity markets and foreign exchange markets.

Leverage The CFM TIP Strategy will use leverage to amplify returns. Leverage is achieved through the use of contracts for difference to obtain the desired market exposures. The amount of leverage applied at any one time is determined by the Investment Manager. Typically the strategy will operate with 3 times leverage.

Restrictions Each sub-strategy will typically account for no more than one third of the overall strategy exposure. The Investment Manager reserves the right to exceed this limit.

Risk Trading foreign exchange, commodities and derivatives with leverage carries a high degree of risk. Leverage has the effect of significantly magnifying price movements such that a relatively small movement in the underlying market can have a disproportionately large impact on the leveraged trade.

The CFM TIP Strategy will typically maintain 3 times leverage meaning that a 1% movement in the underlying markets would equate to a 3% movement in the strategy.

The CFM Strategy manages risk a combination of trade diversification and stop loss strategies. Trade diversification aims to limit the impact of losses occurring in any one trade by balancing trades across a variety of asset classes, markets and securities.

Stop losses will be maintained and managed on all trades to guard against extreme market events.

Fees, Charges and Expenses An initial charge of £250 will be applied to all new trading accounts.

An Investment Management Fee of 2.7% per annum will be calculated and deducted monthly. This equates to approximately 0.9% of the leverage notional strategy exposure. The investment management fee is inclusive of custody and administration.

A performance fee of 20% of net new profits will be deducted monthly.

General Expenses All dealing and clearing costs will passed onto the strategy. 

Capital Financial Markets Limited Capital House Circular Road Douglas Isle of Man IM1 1AG

www.capital-iom.com/CFML T : +44 (0) 1624 654200 E: info@capital-iom.com

Contact Details

Capital International Limited and Capital Financial Markets Limited are members of the Captial International Group

Capital International is a member of the London Stock Exchange and is licensed by the Isle of Man Financial Supervision Commission Capital Financial Markets Limited is licensed by the Isle of Man Financial Supervision Commission

Registered Address: Capital House, Circular Road, Douglas, Isle of Man, IM1 1AG

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