1. Hedge Fund

2. Member list  Lam, Ho-kei Jan023011  Ng, Lok-hang Jessica033125  Chan, Ka-po Kate033139  Lee, Tak-ming Alvin033228  Wong, Wing-yin Winnie034025  Kwan, Cheuk-shing Elvis035052

3. History of Hedge Fund

4.  Hedge  trying to offset possible losses  begin in 1949 by Alfred Winslow Jones  his strategy posted on “Fortune”  short selling and leverage  1952  A.W. Jones & Co  First Hedge Fund  continuous profit  combination of shared risk to ensure goals  father of hedge fund History of Hedge Fund

5.  Fail & success, quiet & hot  over 2 decades  Late 1990s  Great development & grow rapidly  Currently, over 6,000 exist in industry  size at $1 trillion History of Hedge Fund (con ’ t)

6. Hedge Funds in Hong Kong  History of hedge funds  relatively short in Hong Kong  Intended for sale to public  to be authorized by SFC  comply with hedge funds guidelines issued by SFC in 2002

7.  First three authorized funds  First quarter of 2003  2 single hedge funds & 1 FHF  Figures from AisaHedge  first half of 2005  new hedge funds about US $3.5 billions established in Asia  1/3 were entered Hong Kong Hedge Funds in Hong Kong (con ’ t)

8. Retail Hedge Fund in Hong Kong

9. History 5/2002  SFC released conclusion of consultation on offering of hedge fund to HK public  SFC issued long-awaited guidelines permitting offering hedge funds sale to HK public 11/2002  SFC also released the Guidelines on Hedge Funds Reporting Requirements  SFC announced authorization of the first 3 hedge funds 200613 authorized retail hedge funds  Matt Dillon is the 13th one

10. First Retail Hedge Fund  Approved by the Special Administrative Region’s regulator SFC  Offer to public beyond  Professionals  fund manager, divisions of banks, insurance companies &certain pension fund  Private Placement  limited number of persons

11. Changes in Regulations  Allow fund managers to single strategy hedge funds, FoHFs & capital-guaranteed hedge funds to retail investors  Minimum subscriptions  $50,000 for single strategy fund  $10,000 for FoHFs

12. First Retail Hedge Fund (con ’ t)  Authorization of first 3 hedge funds on 28/11/2002  2 single strategy hedge funds  JF Asia Absolute Return Fund  JF Greater China Absolute Return Fund  one FoHFs  HSBC Global Strategy Hedge Fund

13. Regulation of Hedge Funds in Hong Kong

14. Regulation  Authorization regime govern by SFC  Get authorization before selling in the market  Specific requirements on fund managers  Minimum purchase amount

15. Fund manager  4 additional requirements  Assets under management (AUM)  Risk management profile  Internal control system  Information disclosure

16. Fund manager (con ’ t)  Professional expertise  5-year general experience  2-year experience in specific hedge fund strategy

17.  Amount of assets under management  At least US$100 million Fund manager (con ’ t)

18.  Risk management and internal control system 1. Consider business nature 2. Consider business risk 3. Set up risk management process 4. Monitor the model Fund manager (con ’ t)

19.  Appointments of representatives and agents  agents involved in the daily operation e.g. administrators, custodians, prime brokers  Sufficient know-how in their own areas  Provide adequate information and training to their selling agents Fund manager (con ’ t)

20. Regulatory Parameters

21.  If any company has not complies with the various requirements, then:  liable for a fine of up to HK$100,000  If it incurred for matters (e.g.: prospectus containing an untrue statement )  Additional penalties (fines of up to HK$500,000 and imprisonment for up to three years)

22. Regulatory Parameters (con’t)  Prospectus included:  any prospectus, notice, circular, brochure, advertisement, or other document  offering any shares or debentures of a company to the public  calculated to invite offers offering any shares or debentures of a company to the public

23. Offer to 'The Public'  There is an exemption:  exempt from the requirement to prepare and register a prospectus  It is necessary that:  He offer is either not made to 'the public',or;  The offer falls within one of the available statutory exemptions

24. Offer to 'The Public‘ (con’t)  Two available exemptions:  Professionals only  Private placement

25. Six types of Hedge Funds in Hong Kong

26. Six Types of Hedge Fund in Hong Kong  HSBC Global Strategy Hedge-USD HSBC Global Strategy Hedge-USD  JF Asia Absolute Return-Notional Class JF Asia Absolute Return-Notional Class  AJF Greater China Absolute Return-0301 AJF Greater China Absolute Return-0301  JF Japan Absolute Return-0308 JF Japan Absolute Return-0308  JF Korea Absolute Return-0309 JF Korea Absolute Return-0309  Man Hedge Diversified Ltd Man Hedge Diversified Ltd

27. HSBC Global Strategy Hedge Fund 匯豐環球策略對沖基金  NAV (2006-03-31) 12.499  Total Net Assets 17,960 (in thousand)

28. Fund performance  Annual Returns (%, USD)  Growth of $10,000  2004 gain 5.16%  2005gain 8.73%  Now gain 4.24%

29. Fund fact  Minimum Purchase(USD )  Initial Investment  10,000  Additional  1,000

30. Fund fact(con’t)  Annual Expense  Mgt & Distribution Fee  1.65%  Sales Fees  Initial  5.25%  Deferred  ---

31. JF Asia Absolute Return JF 亞洲先鋒基金  NAV (2006-04-21)  44.0127  Total Net Assets(000's)  85,300

32. How has this fund performed?  Annual Returns (%, USD) Growth of $10,000  2003 27.5%  2004 -4.13%  2005 -1.67%  Now 17.93%

33. Fund fact  Minimum Purchase(USD )  Initial Investment  50,000  Annual Expense  Mgt & Distribution Fee  1.00%  Sales Fees  Initial  5.00%

34. JF Japan Absolute Return JF 日本先鋒基金  NAV (2006-04-21)  17589.9200  Total Net Assets(000's)  44,905,300

35. How has this fund performed?  Annual Returns (%, USD) Growth of $10,000  2004 23.86%  2005 7.13%  Now -1.62%

36. Fund Fact  Annual Expense  Mgt & Distribution Fee  1.00%  Sales Fees  Initial  5.00%  Deferred  ---

37. Case Study 1 HSBC Global Strategy Hedge Fund  a fund of hedge funds  a diversified portfolio made up of equity long/short hedge funds

38. What does this fund own?  Cash 3.5%  Stock 0%  Bond 0%  Others 96.5%

39. HSBC Global Strategy Hedge Fund (Con’t)  Inception Date:2003-02-28  Manager Name: Team Managed  Fund Advisor: HSBC Republic Investment Limited

40. Fund performance  Annual Returns (%, USD)  Growth of $10,000  2004 gain 5.16%  2005gain 8.73%  Now gain 4.24%

41. HSBC Global Strategy Hedge Fund (con’t) Fund: HSBC Global Strategy Hedge Fund – USD Benchmark: ---Total Return

42. How risky is this fund ?  Worst Quarter Return2.54%  Number of Funds in Category: 5  diversify risks

43. Case Study 2 JF Asia Absolute Return - Notional Class A  Aggressively managed portfolio of equities, bonds and currencies, and derivatives of any of these  Investing primarily in the Asia-Pacific region (including Japan)

44. JF Asia Absolute Return - Notional Class A(Con’t)  Inception Date:1998-10-30  Manager Name: Victor Lee  Mgr Start Date: 2005-07-18

45. How has this fund performed?  Annual Returns (%, USD) Growth of $10,000  2003 27.5%  2004 -4.13%  2005 -1.67%  Now 17.93%

46. JF Asia Absolute Return - Notional Class A (Con’t) Fund: HSBC Global Strategy Hedge Fund – USD Benchmark: ---Total Return

47. How risky is this fund ?  Worst Quarter Return 12.34%  Number of Funds in Category: 5  Risk Profile(3-year standard Deviation)