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SCHRODER OFFSHORE CASH FUND

An open-ended unit trust constituted by a Trust Deed dated 15 April 1997, made between Schroder Investment Management (Guernsey) Limited and Barings (Guernsey) Limited

as amended by a Supplemental Trust Deed dated 2 August 2001 made between Schroder Investment Management (Guernsey) Limited,

Barings (Guernsey) Limited and RBSI Trustee Services (Guernsey) Limited and authorised by the Guernsey Financial Services Commission under The Protection

of Investors (Bailiwick of Guernsey) Law, 1987, as a Class A Scheme

SUPPLEMENT TO EXPLANATORY MEMORANDUM

FOR UK INVESTORS

If you are in any doubt about the contents of this Explanatory Memorandum, which constitutes the scheme particulars of Schroder Offshore Cash Fund, you should consult your independent adviser authorised pursuant to the Financial Services and Markets Act 2000. The Directors of Schroder Investment Management (Guernsey) Limited, whose names appear on page 14 of the accompanying Explanatory Memorandum, are the persons responsible for the information contained in this Supplement and accept responsibility accordingly. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of the information.

Legal/1400/SOCF sp July 2006 1

SCHRODER

OFFSHORE CASH FUND

(“the Fund”)

SUPPLEMENT TO EXPLANATORY MEMORANDUM

FOR UK INVESTORS This Supplement to Explanatory Memorandum forms part of the Explanatory Memorandum and has been prepared for United Kingdom investors. Definitions set out on page 6 of the Explanatory Memorandum apply in this Supplement unless the context otherwise requires. The Fund is an open-ended unit trust constituted by a Trust Deed dated 15 April 1997 made between Schroder Investment Management (Guernsey) Limited and the Original Trustee, as amended by a Supplemental Trust Deed dated 2 August 2001 made between Schroder Investment Management (Guernsey) Limited, the Original Trustee and RBSI Trustee Services (Guernsey) Limited. The Fund is authorised by the Guernsey Financial Services Commission under The Protection of Investors (Bailiwick of Guernsey) Law 1987, as a Class A Scheme. Units in the Fund were initially listed on the Channel Islands Stock Exchange on 19 February 1999. These units represent the original class of units, as referred to herein as A Units. A second class of units, called the B Units, were launched on the 28th January 2005. The B Units are not listed on any stock exchange. The A Units and the B Units together comprise the Units in the Fund (“Units”). A copy of this Supplement and the Explanatory Memorandum have been delivered, as required by the appropriate legislation and regulations, to the Financial Services Authority in the United Kingdom. Potential investors are referred to the Risk Warnings and other information as set out on page 3 of this Supplement. UK Representative. The UK representative of the Fund is Schroder Investment Management Limited of 31 Gresham Street, London EC2V 7QA. Under a Facilities Agreement dated 4 August 1997, Schroder Investment Management Limited was appointed by Schroder Investment Management (Guernsey) Limited to provide facilities in the United Kingdom as required under the Financial Services Authority Handbook, Collective Investment Schemes Sourcebook, 17.4. The Agreement is entered into for an indefinite period and may be terminated by the giving of three months notice by either party. Redemption of Units In addition to the procedure for redemptions set out in “Redemption of Units” on page 20 of the Explanatory Memorandum, application for redemptions may be made to Schroder Investment Management Limited at its office at 31 Gresham Street, London EC2V 7QA and payment of the redemption proceeds may be obtained therefrom. Particulars of the procedure to be followed in connection with the subscription for and redemption of units are set out in the Explanatory Memorandum. Complaints about the Fund may also be made to Schroder Investment Management Limited at the above address.


Information available to UK Holders Copies of the contracts mentioned in paragraph 14 of the Explanatory Memorandum (“Material Agreements”) including the Trust Deed, as amended, establishing the Fund and the current Explanatory Memorandum, may be obtained free of charge during normal office hours from Schroder Investment Management Limited at 31 Gresham Street, London EC2V 7QA. The preceding day's Offer Price and Redemption Price will be published in the “FT Managed Funds Service” section of the Financial Times under the heading “Schroder Investment Management (Guernsey) Limited” and/or such other newspapers as the Directors may from time to time determine. For reasons beyond the control of the Manager, these may not necessarily be the current prices. The most recently published prices of Units are also available from the registered office of the Fund at Trafalgar Court, Les Banques, St. Peter Port, Guernsey, Channel Islands and from Schroder Investment Management Limited at 31 Gresham Street, London EC2V 7QA and may be obtained either orally or in writing. Holders of Units will be sent copies of the most recent audited accounts and unaudited half-yearly reports of the Fund and, annually, a valuation showing the number and value of Units held. Taxation Taxation information for UK investors is set out on page 16 of the Explanatory Memorandum. Risk Warnings Investors should be aware that the investments of the Fund are subject to normal market fluctuations and other risks inherent in investing in securities. There can be no assurance that any appreciation in value of investments will occur. The value of investments and the income derived therefrom may fall as well as rise and investors may not recoup the original amount invested in the Fund. There is no assurance that the investment objectives of the Fund will actually be achieved. Investors are reminded that in certain circumstances their right to redeem Units may be suspended. The Fund does not qualify under the UK Financial Services Compensation Scheme. Any applicant in the United Kingdom applying for Units in response to this invitation will not have the right to cancel his agreement as afforded to him by the cancellation rules contained in Chapter 6 of the United Kingdom Financial Services Authority’s Conduct of Business Sourcebook. The Fund does not carry out investment business in the United Kingdom and is not regulated by The Financial Services and Markets Act 2000 of the United Kingdom. The Explanatory Memorandum has been approved by Schroder Investment Management Limited, which is authorised and regulated in the conduct of investment business under the Financial Services and Markets Act 2000 by the United Kingdom Financial Services Authority.


SCHRODER OFFSHORE CASH FUND

EXPLANATORY MEMORANDUM Valid as at: 7 August 2006

T:\G-FNDSEC\lm\1400\2006\Offshore Cash Expl Mem-07-08-06 Final.DOC

Important Schroder Offshore Cash Fund (“the Fund”) is an open-ended unit trust constituted by a Trust Deed dated 15 April 1997 made between Schroder Investment Management (Guernsey) Limited and the Original Trustee, as amended by a Supplemental Trust Deed dated 2 August 2001 made between Schroder Investment Management (Guernsey) Limited, the Original Trustee and RBSI Trustee Services (Guernsey) Limited. The Fund was authorised as a Class A Scheme on 16 April 1997 by the Guernsey Financial Services Commission under the Protection of Investors (Bailiwick of Guernsey) Law, 1987. In giving this authorisation the Commission does not vouch for the financial soundness of the Fund or for the correctness of any of the statements made or opinions expressed with regard to it. Copies of this Explanatory Memorandum have been delivered to the Guernsey Financial Services Commission. This document is based on the law and practice currently in force in the Island of Guernsey and is subject to changes therein. This Explanatory Memorandum constitutes the scheme particulars of the Fund. The Fund is a recognised scheme under Section 270 of the United Kingdom Financial Services and Markets Act 2000 (“the Act”). This Explanatory Memorandum has been approved by Schroder Investment Management Limited for the purposes of Section 21 of the Act. In giving such approval Schroder Investment Management Limited gives no advice or recommendation as to the merits of investing in the Fund and expresses no opinion as to the suitability of such investment for any person. Schroder Investment Management Limited is regulated by the Financial Services Authority in the conduct of investment business. All or most of the protections provided by the United Kingdom regulatory system do not apply and compensation under the Financial Services Compensation Scheme established under the Act will not be available. Guernsey is a designated territory under Section 270 of the Act and investors are therefore offered the protection provided for under the compensation scheme operated by the Guernsey regulatory authorities. Units in the Fund were initially listed on the Channel Islands Stock Exchange on 19 February 1999. These units represent the original class of units, as referred to herein as A Units. A second class of units, called the B Units, were launched on the 28 January 2005. The B Units are not listed on any stock exchange. The A Units and the B Units together comprise the Units in the Fund (“Units”). The distribution of this Explanatory Memorandum and the offering of Units in certain jurisdictions may be restricted, and accordingly persons into whose possession this document comes are required by the Trustee and the Manager to inform themselves about and to observe any such restrictions. This Explanatory Memorandum does not constitute, and may not be used for the purpose of, an offer or solicitation by any person in any jurisdiction (i) in which such offer or solicitation is not authorised or (ii) in which such person is not qualified to make such offer or solicitation or (iii) to any person to whom it is unlawful to make such offer or solicitation. None of the Units have been or will be registered under the United States Securities Act of 1933, as amended, and, none of the Units may be offered or sold, directly or indirectly, in the United States of America, its territories or possessions or any areas subject to its jurisdiction (the “United States”) or to any citizen or resident thereof, any corporation, partnership or other entity created or organised in or under the laws of the United States or any political subdivision thereof, any agency or branch of a foreign entity located in the United States or any estate or trust that is subject to United States federal income taxation regardless of the source of its income. In addition, the Fund has not been registered under the United States Investment Company Act of 1940, as amended. Accordingly, the Units are being offered and sold under circumstances to preclude the Fund from having to register under the Investment Company Act. Units are offered on the basis of the information and representations contained in this Explanatory Memorandum and no other information and representations relating thereto are authorised. This Explanatory Memorandum will be issued as a continuing explanatory memorandum. Factual references should nonetheless be read as made at the date of this Explanatory Memorandum. If you are in any doubt about the contents of this Explanatory Memorandum, you should consult your solicitor, accountant or other financial adviser. Schroder Investment Management Limited is acting for the Manager in relation to this Explanatory Memorandum and matters relating thereto and it or any of its associates may have an interest or position in Units in the Fund. It will not be acting for or offering advice to, any other person (unless other arrangements apply between Schroder


Investment Management Limited and such person) in relation to investment in the Fund and will not be responsible for providing protections afforded to its customers in relation thereto. Investors should be aware that, whilst the price of a Unit will normally rise as income accrues in respect of underlying investments, such price may fall in certain circumstances such as a substantial change in interest rates. Investors should note that the price of Units can go down as well as up. Persons interested in acquiring Units should inform themselves as to: (a) the legal requirements for such acquisition within the countries of their nationality, residence, ordinary

residence or domicile; (b) any foreign exchange restriction or exchange control requirements which they might encounter on

acquisition or disposal of Units; and (c) the income tax and other taxation consequences which might be relevant to the acquisition, holding,

redemption, sale or transfer of Units under the relevant laws of the jurisdiction to which they are subject. The Directors of the Manager, whose names appear under “Management and Administration” below, are responsible for the information contained in this document. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case) the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information. The Directors accept responsibility accordingly. Notices or other documents required or authorised to be served on the Fund in Guernsey may be served at the registered office of the Manager, Trafalgar Court, Les Banques, St. Peter Port, Guernsey, Channel Islands, GY1 3QL and in the United Kingdom may be served at the offices of Schroder Investment Management Limited, 31 Gresham Street, London, EC2V 7QA.


Contents

DEFINITIONS....................................................................................................................................... 6 SUMMARY ........................................................................................................................................... 8 INVESTMENT POLICY..................................................................................................................... 10 DIVIDEND POLICY........................................................................................................................... 11 INVESTMENT RESTRICTIONS ....................................................................................................... 12 MANAGEMENT AND ADMINISTRATION .................................................................................... 14 TAXATION ......................................................................................................................................... 16 GENERAL INFORMATION .............................................................................................................. 18

MANAGER SCHRODER INVESTMENT MANAGEMENT (GUERNSEY) LIMITED Trafalgar Court, Les Banques, St. Peter Port, Guernsey, Channel Islands, GY1 3QL.* Telephone: 0044-1481-745-120 Facsimile: 0044-1481-745071 INVESTMENT ADVISER SCHRODER INVESTMENT MANAGEMENT LIMITED 31 Gresham Street, London, EC2V 7QA.* ADMINISTRATOR AND REGISTRAR NORTHERN TRUST INTERNATIONAL FUND ADMINISTRATION SERVICES (GUERNSEY) LIMITED Trafalgar Court, Les Banques, St. Peter Port, Guernsey, Channel Islands, GY1 3QL.* BANKERS, TRUSTEE AND CUSTODIAN RBSI TRUSTEE SERVICES (GUERNSEY) LIMITED Royal Bank Place, 1 Glategny Esplanade, St Peter Port, Guernsey, Channel Islands, GY1 4BQ. * AUDITORS ERNST & YOUNG LLP, Chartered Accountants 14 New Street, St. Peter Port, Guernsey, Channel Islands GYI 4AF. LEGAL ADVISERS TO THE MANAGER (on matters of Guernsey Law) OGIER & Le MASURIER, Coutts House, Le Truchot, St Peter Port, Guernsey, Channel Islands, GY1 1WD.


UK REPRESENTATIVE SCHRODER INVESTMENT MANAGEMENT LIMITED 31 Gresham Street, London EC2V 7QA.* * Also the registered office of such institution.


Definitions

The following definitions apply in this Explanatory Memorandum, which constitutes the scheme particulars of the Fund, unless the context otherwise requires. Expressions not defined in this Explanatory Memorandum have the meanings ascribed to them in the Trust Deed of the Fund. “A Units” are those Units listed on the Channel Islands Stock Exchange. The term A Units

is used to distinguish between the original unit class of the Fund and B Units. A management charge will be levied against the value of A Units. The holders of A Units will not be invoiced separately..

“Administrator” Northern Trust International Fund Administration Services (Guernsey) Limited. “Approved Bank” means a person who is licensed under The Banking Supervision (Bailiwick of

Guernsey) Law, 1994 or under The Banking Business (Jersey) Law, 1991 or is authorised to carry on a banking or deposit-taking business under the law of any member state of the European Union or under the law of any other country or territory which may be listed in notices issued from time to time by the Guernsey Financial Services Commission.

“B Units” are those units which were launched on 28 January 2005. The B Units will be

invoiced separately by the Manager in respect of any management fee due. The B Units will only be offered to investors who are clients of the Manager or its affiliates and have a discretionary management agreement covering the charging structure relevant to the Holders' investments in such units. B Units will bear their pro-rata share of the fees payable to the Administrator, Trustee and any other additional costs.

“Business Day” a day which is a business day in the Bailiwick of Guernsey and in England. “CIS Rules” the Collective Investment Scheme (Class A) Rules 2002 made under the

Protection of Investors (Bailiwick of Guernsey) Law, 1987. “Custodian” RBSI Trustee Services (Guernsey) Limited. “Directors” the directors of the Manager. “Extraordinary Resolution” means a resolution proposed and passed as an extraordinary or special resolution

at a meeting of Holders duly convened and held in accordance with the CIS Rules and carried, whether on a show of hands or on a poll, by a majority consisting of 75% (or any other proportion specified under applicable law) of the total number of votes cast for and against such resolution at a general meeting of Holders or (as the case may be) class meeting, of which notice specifying the intention to propose the resolution as an extraordinary or special resolution has been duly given;

“Government and other Public Securities” means, subject to the CIS Rules, loan stock, bonds and other instruments creating

or acknowledging indebtedness issued or guaranteed (i) by or on behalf of the government of the United Kingdom, of Northern Ireland, of any member state of the European Union, or by the government of Australia, Canada, Japan, New Zealand, Switzerland or the United States of America; or (ii) a local authority in


the United Kingdom or any other member State of the European Union; or (iii) an international organisation the members of which include the United Kingdom or another member State of the European Union.

“Holder” a person for the time being entered in the register of Unit holders or the first

named holder in the case of joint holders. “Investment Adviser” or “SIM” Schroder Investment Management Limited. “Manager” Schroder Investment Management (Guernsey) Limited. “Minimum Investment” has the meaning ascribed to it on page 8. “Original Trustee” Barings (Guernsey) Limited. “Registrar” Northern Trust International Fund Administration Services (Guernsey) Limited. “SIM” Schroder Investment Management Limited. “Trustee” RBSI Trustee Services (Guernsey) Limited. “transferable securities” has the meaning set out in the CIS Rules and includes, inter alia, shares, stocks,

debentures, bonds, certificates of deposit, partnership interests and warrants but does not include an investment the title to which cannot be transferred or can be transferred only with the consent of a third party.

“Units” means both the A Units and the B Units. “United States Person” includes any citizen or resident of the United States of America, its territories

and possessions including the State and District of Columbia and all areas subject to its jurisdiction (including the Commonwealth of Puerto Rico), any corporation, trust, partnership or other entity created or organised in or under the laws of the United States of America, any state thereof or any estate or trust the income of which is subject to United States federal income tax, regardless of source. The expression also includes any person falling within the definition of the term “US Person” under the Regulation S promulgated under the United States Securities Act of 1933.

“Valuation Day” a day which is a Business Day.

“Valuation Point” 11.45 a.m. on each Valuation Day and such other times as the Manager may in

its discretion determine.


Summary The Fund Schroder Offshore Cash Fund is an open-ended unit trust authorised by the Guernsey Financial Services Commission as a Class A Scheme under the Protection of Investors (Bailiwick of Guernsey) Law, 1987. The Fund is a recognised scheme under Section 270 of the Financial Services and Markets Act 2000 and has been rated Aaa and MR1+ by Moody's Investors Service Limited. All Units will be denominated in Sterling, however, the Fund has the ability to issue separate classes of units denominated in different currencies with the approval of the Trustee. The Fund currently has two Unit classes. A Units and B Units. The only differences between the A Units and the B Units are that:

• A management charge will be levied on the value of the A Units whereas the Manager of the B Units will invoice Holders separately for the management fee in respect of B Units;. All other costs and expenses will be shared on a pro rata basis;

• the A Units are listed on the Channel Islands Stock Exchange while the B Units are not listed; • the B Units are only offered to a restricted class of persons and have higher minimum investment

requirements. Except where expressly provided otherwise the administration and management of the Units and the rights and obligations attached to the Units are identical and as provided for by this Information Memorandum. Minimum Investment The minimum investment in the purchase of A Units is £10,000 or the equivalent thereof in any other currency in which Units may be denominated. The minimum subsequent investment is £5,000 or the equivalent as appropriate. The minimum investment in the purchase of B Units is £1,000,000 or the equivalent thereof in any other currency in which Units may be denominated. The minimum subsequent investment is £20,000 or the equivalent as appropriate. The Manager reserves the right to reduce or waive the minimum investment levels of both Units. How to Buy Units The simplest way to buy Units of either class is to complete an Application Form appended to this Explanatory Memorandum and send it to the Manager in Guernsey. If you are investing £15,000 or more, we would advise you to pay by telegraphic transfer, and details of how to do this are given with the Application Form. Unless previously agreed with the Manager in writing, your investment can only be made on receipt of cleared funds. You may also pay for your investment in US Dollars or any other major currency. The Manager will arrange any necessary foreign exchange conversion, at your expense, once it has received cleared funds. Applications received by the Manager or its agents will, if accepted and provided they are accompanied by cleared funds, be dealt with on a forward price basis and be treated as applications for the issue of Units on the next Valuation Day following their receipt or if received on a Valuation Day prior to 11.45 a.m. (Guernsey time) will be treated as applications for the issue of Units at the offer price determined as at the Valuation Point on that day. Valuation days are each Business Day. The Manager will send you a contract note on or before the second Business Day next following the relevant Valuation Day with details of your investment and your account number. The account number should be quoted when making any additional investments or in other correspondence with the Manager.


Verification Requirements It is a term of the issue of Units that, in order to ensure compliance with the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Law, 1999 (as amended) and the Criminal Justice (Proceeds of Crime) (Bailiwick of Guernsey) Regulations, 2002 (“the Law and Regulations”), the Manager or the Administrator may require verification of the identity of the person by whom or on whose behalf an application form is lodged with payment (which requirements are referred to below as the “verification of identity requirements”). The person(s) (the “applicant”) who, by lodging an application form as described above, applies for the allocation to him of Units shall thereby be deemed to agree to provide the Manager or the Administrator with such information and other evidence as it may require in order to satisfy the verification of identity requirements and to permit the Manager or the Administrator to make such enquiries of third parties as they may consider necessary to meet the requirements of the Law and Regulations. If the Manager or the Administrator determines that the verification of identity requirements apply to an application and that such requirements have not been satisfied (which the Manager or the Administrator shall in its absolute discretion determine), the Manager or the Administrator may treat the application as defective or may confirm the allotment of units to the applicant but such shares will not be issued to him or registered in his name until the verification of identity requirements have been satisfied (which the Manager or the Administrator shall in its absolute discretion determine). If the application is not treated as defective and the verification of identity requirements are not satisfied within such period, being not less that fourteen days after a request for evidence of identity is despatched to the applicant, as the Manager or the Administrator may in its absolute discretion allow, the Manager or the Administrator will be entitled to make arrangements (at its absolute discretion as to manner, timing and terms) to sell or redeem the Units (and for that purpose the Manager or the Administrator will be deemed to be expressly authorised to act as agent of the applicant). Any proceeds of sale (net of expenses) of such Units which shall be issued to and registered in the name of the purchaser(s), or an amount equivalent to the original payment, whichever is the lower, will be held by the Manager or the Administrator on trust for the applicant, subject to the requirements of the Law and Regulations. Neither the Manager nor the Administrator, its employees or agents will be liable to any person for any loss suffered as a result of the exercise of any such discretion or as a result of the sale of any Units. Return of an application form with the appropriate payment will constitute a warranty from the applicant that the Law and Regulations will not be breached by acceptance of such payment. If the verification of identity requirements apply, failure to provide the necessary evidence of identity may result in such acceptance being treated as invalid. The verification of identity requirements will not usually apply: (a) if the applicant is a regulated financial services business (as defined by the Law and Regulations) in

Guernsey; or (b) if the applicant is a financial services business from a country or territory whose authorised financial

services businesses may be treated as though they were local (as determined by the Law and the Regulations and the Guidance Notes on the Prevention of Money Laundering and Countering the Financing of Terrorism issued thereunder) and who appears from time to time on a supervisor/regulator’s list of financial services businesses authorised in that country or territory.

Pricing of Units The Fund has adopted a single pricing regime for both classes of Units. On each Valuation Day the Fund will be valued at the Valuation Point to determine the price at which Units in each class may be issued and redeemed. There will be no preliminary charge payable. Further details of the procedure for the issue and redemption of Units are contained on pages 18 to 21. The Manager has not adopted a policy in relation to large deals. Issuing of Certificates Certificates are only issued at your specific request. Some investors prefer not to hold certificates because, if lost, an indemnity satisfactory to the Manager and the Registrar must be provided by the investor before a new certificate can be issued. It is often easier just to keep contract notes.


How to sell Units You may realise all of your investment, or part of it, subject to the Minimum Investment requirements, by issuing instructions by telex, facsimile or in writing by normal course of post to the Manager. Any redemption order received by post, telex or fax before 11.45 a.m. (Guernsey time) on a Valuation Day will, if accepted, be dealt with on a forward price basis at the price calculated on that day. If you wish to redeem using the telex or fax facility, please provide the following details:

• Your name and Holder account number. • The number of Units you wish to redeem. • How you wish to be paid.

Uncertificated Registered Units If you have uncertificated Units, the proceeds of redemption can be credited direct to your bank account in accordance with the details entered on the Application Form. If you wish to have the proceeds of a redemption paid to you by cheque, it will be sent to your registered address or, in the case of joint holdings, to the address of the first named Holder, unless an original signed confirmation of alternative arrangements has been received by the Manager from the Holder(s). Certificated Registered Units If you have certificated Units you must return the duly endorsed certificates before redemption proceeds can be paid to you. Unitholder Reports An annual valuation showing the number and value of your Units and the audited annual report and accounts of the Fund will be sent to you at your registered address. The date on which the Fund’s annual accounting period ends in each year is 31 December. Audited annual reports for the fiscal year ending 31 December will normally be published and despatched to Holders and the Channel Islands Stock Exchange within 4 months after the end of the annual accounting period. The Fund has an interim accounting period ending on 30 June in each year. Unaudited interim reports and accounts for the six months ending 30 June will normally be published and despatched to Holders and the Channel Islands Stock Exchange within 2 months after the end of the half-yearly accounting period. Publication of Prices The price of Units will be published in the FT Managed Funds Service section of the Financial Times under the heading “Schroder Investment Management (Guernsey) Limited”. The prices shown will reflect the prices calculated on the latest Valuation Day. For reasons beyond the control of the Manager, published prices may not be the current prices. The most recent published prices and most recent yields are available from the Manager at its registered office and may be obtained either orally or in writing. Please remember that the price of Units may fall as well as rise. Reminder Please do not forget to let the Manager know (in writing) of any changes in your circumstances, e.g. change of bank account details, change of address, change of financial adviser.


Investment Policy The Fund's principal investment objective is to achieve a money market linked return with minimum risk to capital. The Fund is designed to offer investors a high degree of protection and access to wholesale money markets whilst providing a high degree of liquidity. The Fund is a money market fund for the purposes of the CIS Rules, which specify that the property of the Fund must consist of “money market fund assets”. These include certain Government and other Public Securities, cash and near cash; certain deposits which are repayable within 12 months; bills of exchange repayable within 12 months and which are accepted by an Approved Bank; and certain debentures, debenture stock, loan stock, bonds, and certificates of deposit which are repayable within 12 months, not subordinated and are issued by an Approved Bank, admitted to official listing on the Channel Islands Stock Exchange or in a member state of the European Union, or which are traded on or under the rules of an eligible securities market. The Fund will normally make investments from which income will be received by the Fund without any deduction of withholding tax. The Fund may engage in efficient portfolio management (certain derivatives transactions or forward transactions in currency) in accordance with the provisions of the CIS Rules. The CIS Rules stipulate that scheme property may only be used for efficient portfolio management where the transaction is economically appropriate; where the exposure is fully covered by cash or other scheme property sufficient to meet any obligation to pay or deliver that could arise; and where the transaction is entered into either to reduce risk, to reduce cost and/or to generate additional capital or income for the Fund with no (or an acceptably low level of) risk. The CIS Rules also permit the Fund to engage in certain stocklending activities for the purposes of efficient portfolio management, that is when it reasonably appears to be economically appropriate to do so with a view to generating additional income of the Fund with no, or an acceptable degree of, risk. Stocklending involves a lender transferring securities to a borrower otherwise than by sale, with the borrower transferring those securities (or securities of the same type and amount) back to the lender at a later date. In accordance with good market practice, a separate transaction by way of transfer of assets is also involved for the purpose of providing collateral to the “lender” to cover him against the risk that the future transfer back of the securities may not be satisfactorily completed. Moody's Investors Service Limited has given the Fund a credit rating of Aaa and a market risk weighting of MR1+. In order to maintain a market risk rating of MR1+ the maximum weighted average maturity of instruments held within the Fund will be sixty days. The B Units have an identical investment objective and policy to the A Units.

Dividend Policy Although dividends are permitted by the Trust Deed (the annual income allocation date being 2 January) it is intended that no dividends will be paid and that the whole of the net income attributable to the Fund will be accumulated within the Fund as and when earned and will be reflected in the price of the Units. As such, although permitted by the Trust Deed, the Trustee does not operate an equalisation procedure.

Listing Units in the Fund were initially listed on the Channel Islands Stock Exchange on 19 February 1999. These units represent the original class of units, as referred to herein as A Units. A second class of units, called the B Units, were launched on the 28 January 2005. The B Units are not listed on any stock exchange.


Investment Restrictions The main limits on investments are as follows: (a) No more than 5% in value of the Fund shall consist of instruments, other than Government and other Public

Securities, issued by any one issuer. (b) In respect of amounts exceeding £1,000,000, no more than 10% in value of the Fund shall be deposited

with any one person; provided that up to 20% in value of the Fund may be deposited with one person if that person is an Approved Bank not in the same group as the Trustee or the Manager and provided further that the amount of the deposit does not exceed 10% of such Approved Bank’s issued capital and reserves as shown in its most recently published annual accounts.

(c) Provided that no more than 35% in value of the Fund shall consist of Government and other Public

Securities issued by any one issuer, there is no limit on the amount which may be invested in Government and other Public Securities or Government and other Public Securities issued by any one issuer or of any one issue.

(d) The Fund may invest more than 35% in value of the Fund in Government and other Public Securities issued

by any one issuer, provided that: (i) the Fund may only invest up to 30% of its value in Government and other Public Securities of any

one issue; and (ii) the Fund must include Government and other Public Securities of at least six different issues issued

by that or another issuer. More than 35% of the Fund may be, but as at the date hereof is not, invested in Government and other Public Securities issued by of the government of the United Kingdom or the governments of Australia, Austria, Belgium, Canada, Finland, France, Germany, Ireland, Italy, Japan, Luxembourg, the Netherlands, New Zealand, Portugal, Spain, Switzerland or the United States of America.

(e) No more than 80% in value of the Fund shall be invested in transferable securities. (f) At least 35% in value of the Fund shall consist of instruments or deposits which are redeemable or

repayable within two weeks or which are capable of being transferred without the consent of a third party (any issuer being regarded as a third party for these purposes).

(g) The maximum period for deposits is six months with a maximum penalty of seven days' interest calculated

at ordinary commercial rates. (h) No more than 5% of the value of the Fund may be directed to initial outlay (as that term is defined in the

CIS Rules) in respect of off-exchange transactions with any one counterparty. (i) The Fund may not:-

(i) make loans or give guarantees; (ii) invest in commodities, land or buildings; (iii) invest in other collective investment schemes; (iv) borrow for investment purposes.

It is not intended that the Fund will have an interest in any immoveable property (e.g. its office) or tangible moveable property (e.g. office equipment).


ELIGIBLE MARKETS

The Fund may now invest in securities markets and derivatives markets which are Eligible Markets as defined in the CIS Rules. Eligible markets generally include any market established in a member state of the European Union or the European Economic Area (“member state”) on which transferable securities admitted to official listing in the member state are dealt in or traded.

In the case of all other markets, in order to qualify as an eligible market, the Manager, after consultation with the Trustee, must be satisfied that the relevant market

a) is regulated; b) operates regularly; c) is recognised; and d) is open to the public.

For the purposes of paragraph 11(d) of Schedule 2 of the CIS Rules the Manager, after consultation with the Trustee, has decided that the following securities exchanges are eligible markets in the context of the investment policy of the Fund.

COUNTRY USA: i) NASDAQ (the electronic inter-dealer quotation system of America operated

by the National Association of Securities Dealers Inc); ii) any exchange registered with the Securities and Exchange Commission as a

national stock exchange including the New York Stock Exchange, the American Stock Exchange, and the stock exchanges of Boston, Cincinnati, Midwest, Pacific and Philadelphia;

iii) the market in transferable securities issued by or on behalf of the Government of the United States of America conducted through those persons for the time being recognised and supervised by the Federal Reserve Bank of New York and known as primary dealers; and

iv) the Over-the-Counter Market regulated by the National Association of Securities Dealers Inc.


Management and Administration Manager The Manager of the Fund is Schroder Investment Management (Guernsey) Limited which is a company limited by shares incorporated in Guernsey on 15 March, 1989. Its ultimate holding company is Schroders plc which is incorporated in England and Wales. The Manager has authorised and issued and fully paid up share capital of £100,000. The Manager was licensed to carry on controlled investment business in the Bailiwick of Guernsey on 25 May 1990 pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987. Pursuant to the Trust Deed dated 15 April 1997, the Manager is responsible for the management and administration of the Fund. It has delegated certain functions to Northern Trust International Fund Administration Services (Guernsey) Limited including valuing the assets and liabilities of the Fund and maintaining the accounts of the Fund. Schroder Investment Management Limited has been appointed to provide discretionary fund management services to the Fund. The directors of the Manager and their significant activities not connected with the business of the Manager are as follows:- Richard John Corbin (British) is a Fellow of the Chartered Association of Certified Accountants and is currently the the Director of Finance Administration and Compliance of Schroders (C.I.) Limited, a Channel Islands subsidiary of Schroders plc which conducts banking and investment management business. He joined Schroders (C.I.) Limited as Compliance Officer in June, 1999, having previously worked in accounting, fund administration and global custody with the Bank of Bermuda (Guernsey) Limited for 18 years, of the which the latter 9 years were in a management capacity. Christopher Martin Walter Hill (British) is an Associate of the Chartered Institute of Bankers. Mr Hill has recently retired as Managing Director of Guernsey International Fund Managers Limited. In addition, he is a director of a number of Guernsey-based management companies and funds. He has more than 20 years experience in the field of offshore banking and fund administration. Mark Julian Smith (British) is an Executive Director of Schroder Investment Management Limited and an Executive Vice President of Schroder Investment Management North America Inc. He graduated from Cambridge University and joined the investment division of J. Henry Schroder Wagg in 1983. In 1986 he was transferred to Schroder Capital Management International Inc. (now Schroder Investment Management North America Inc.) in New York, with responsibility for US equity research. He returned to London in 1989. All the Directors act in a non-executive capacity. The address of all the Directors, for the purposes of the Fund, is that of the Manager. The material provisions of certain agreements entered into by the Manager in connection with the Fund which may be relevant to holders are summarised under the heading “Material Agreements”. Administrator and Registrar The Administrator and Registrar is Northern Trust International Fund Administration Services (Guernsey) Limited which is a company limited by shares incorporated in Guernsey on 29 May, 1986. Its ultimate holding company is a wholly owned subsidiary of Northern Trust GSF Holdings Limited which is in turn wholly owned by Northern Trust Corporation. Northern Trust Corporation and its subsidiaries comprise the Northern Trust Group, one of the world’s leading providers of global custody and administration services to institutional and personal investors. Trustee The Trustee of the Fund is RBSI Trustee Services (Guernsey) Limited, a company which was incorporated with limited liability in Guernsey on 27 October 2000 and whose principal activity is the provision of trustee and custodian services to collective investment schemes. As at the date of this document the Trustee’s issued and paid up share capital is £1 million divided into 1 million shares of £1 each. The Trustee is licensed to carry on


controlled investment business in the Bailiwick of Guernsey pursuant to the Protection of Investors (Bailiwick of Guernsey) Law, 1987. RBSI Trustee Services (Guernsey) Limited is a wholly owned subsidiary of RBSI Securities Services (Holdings) Limited which in turn is owned 30 percent by Bank of New York International Financing Corporation and 70 percent by The Royal Bank of Scotland International (Holdings) Limited. The Royal Bank of Scotland International (Holdings) Limited is ultimately owned by Royal Bank of Scotland Group plc, a company registered in Scotland. The Trustee is responsible for the keeping of the register but has delegated this function to the Registrar. The Trustee is responsible for the custody of the assets of the Fund under the terms of the Trust Deed. It will also provide, subject to the Investment Restrictions, banking and related services to the Fund on normal banking terms and will be entitled to retain all benefits arising therefrom. The material provisions of certain agreements entered into by the Trustee in connection with the Fund which may be relevant to holders are summarised under the heading “Material Agreements”. Investment Adviser The Manager, with the consent of the Trustee, has entered into an Investment Advisory Agreement with Schroder Investment Management Limited (“SIM”) under which SIM has full discretionary powers over the investment of the property of the Scheme subject to compliance with all applicable investment restrictions and the overall responsibility and right of veto of the Manager. SIM is a subsidiary of Schroders plc, the holding company of an international asset management group whose origins date back to 1804. The shares of Schroders plc are listed on the London Stock Exchange. Schroders has been involved in asset management since 1922 and provides investment services, research and marketing functions from offices in countries located throughout the world. Worldwide funds under investment management and advisory contracts world-wide at 30 June 2004 were valued at £100 billion. SIM is authorised and regulated by the Financial Services Authority in the conduct of investment business. Certain material provisions of the Investment Advisory Agreement which may be relevant to holders are summarised under the heading “Material Agreements”.

Taxation Set out below is a summary based on the Manager's understanding of certain income tax and other provisions and practices in force that may be relevant to investors. Prospective purchasers who are in any doubt as to the tax and exchange control consequences of acquiring, holding or disposing of Units should consult their professional advisers. Tax levels or reliefs are liable to change. The Fund (a) In Guernsey The Income Tax Authority in Guernsey has confirmed that the Fund is eligible for exemption from income tax in Guernsey under the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989. This exemption must be applied for annually and, if granted, currently entails payment of an annual fee of £600 by the Fund to the States of Guernsey. The following information is also noted with regards to taxation in Guernsey:

(i) European Union Directive on the Taxation of Savings Income


On 3 June 2003, the European Union (“EU”) Council of Economic and Finance Ministers adopted a directive on the taxation of savings income in the form of interest payments (the “EU Savings Tax Directive”). Each EU Member State , from 1 July 2005, is required to provide to the tax authorities of another EU Member State details of payments of interest (or other similar income) paid by a person within its jurisdiction to or for the benefit of an individual resident in that other EU Member State; however, Austria, Belgium and Luxembourg will instead apply a withholding tax system for a transitional period in relation to such payments.

Guernsey is not subject to the EU Savings Tax Directive. However, the Advisory and Finance Committee of the States of Guernsey (whose functions in this respect have been assumed by the States of Guernsey Policy Council) announced that, in keeping with Guernsey's policy of constructive international engagement, Guernsey would introduce a withholding tax system in respect of payments of interest, or other similar income, made to an individual beneficial owner resident in an EU Member State by a paying agent situate in Guernsey (the terms "beneficial owner" and "paying agent" are defined in the EU Savings Tax Directive). The withholding tax system will apply for a transitional period prior to the implementation of a system of automatic communication to EU Member States of information regarding such payments. During this transitional period, such an individual beneficial owner resident in an EU Member State will be entitled to request a paying agent not to withhold tax from such payments but instead to apply a system by which the details of such payments are communicated to the tax authorities of the EU Member State in which the beneficial owner is resident. However, under the current proposals in respect of the implementation of such a withholding tax system in Guernsey the issuer is not be obliged to levy withholding tax in respect of interest payments made by it to a paying agent. Accordingly, the Fund will not offer this option. In keeping with other European jurisdictions, it has been determined that automatic disclosure of investor information in accordance with the Directive provision will be made in accordance with the Guernsey law.

Investors who wish to elect for a withholding tax option should NOT invest in this Fund because the Administrator will apply a system by which the details of such interest payments will ultimately be communicated to the tax authorities of the EU Member State in which the individual investor is resident.

(ii) European Union Code of Conduct on Business Taxation

On 3 June 2003, the European Union Council of Economic and Finance Ministers reached political agreement on the adoption of a Code of Conduct on Business Taxation (the “Code”). Guernsey is not a member of the European Union, however, the Advisory and Finance Committee of the States of Guernsey has announced that, in keeping with Guernsey’s policy of constructive international engagement, it intends to propose legislation to replace the Guernsey exempt company regime by the end of 2008 with a general zero rate of corporate tax.

(b) In the United Kingdom It is the intention of the Manager to conduct the affairs of the Fund so as to ensure that it will not become resident in the United Kingdom. Accordingly, and provided that the Fund does not carry on a trade in the United Kingdom through a branch or agency situated therein, the Fund will not be subject to United Kingdom corporation tax or income tax. Investors (a) In the United Kingdom Chapter V Part XVII of The Income and Corporation Taxes Act, 1988, of the United Kingdom contains provisions whereby persons resident or ordinarily resident in the United Kingdom for tax purposes and branches or agencies of non-resident companies carrying on business in the United Kingdom will be subject to income tax (or corporation tax on income, depending on their particular circumstances) on gains realised on disposals of interests in offshore funds which do not distribute all of their income to shareholders from year to year. For these purposes investors should note that no dividends will be paid and that the whole of the net income attributable to the assets of the Fund will be accumulated within the Fund and reflected in the price of the Units. Any gain on disposal will be taxable as income. For corporate investors Units will be treated as loan relationships under Chapter 11 Finance Act 1996, resulting in movements in their value being taxable as income on an accruals basis.


(b) In Guernsey No capital gains tax, death duties, inheritance taxes, wealth taxes or value added taxes are levied in Guernsey (other than ad valorem probate fees). No stamp duty is payable in Guernsey on the creation, transfer or redemption of Units. Investors who are resident in Guernsey for tax purposes will be liable to Guernsey income tax in respect of any distributions of income paid on Units. The above is based on the law and practice currently in force and is subject to change therein. Prospective investors should ascertain from their professional advisers the consequences to them of acquiring, holding, redeeming, transferring or selling Units under the relevant laws of the jurisdictions to which they are subject, including the tax consequences and any exchange control requirements.

General Information 1. Characteristics of Units The property of the Fund is held by the Trustee on trust for the Holders in proportion to the number of undivided shares in the Fund represented by their Units. The holding of a Unit represents a beneficial interest under a trust. While both income and accumulation Units in the Fund can be issued, currently only accumulation Units are in issue. There is no segregation of the property of the fund between Holders of the A Units and Holders of the B Units The B Units will only be offered to investors who are clients of the Manager or its affiliates and have a discretionary management agreement covering the charging structure relevant to the Holders’ investments in such Units. The Manager reserves the right at its entire discretion upon serving 30 days notice to transfer the holdings of B Units to A Units at the prevailing subscription and redemption price. A management charge will be levied against the value of A Units. The management charge in respect of B Units will be invoiced to and borne by the Holders of B Units. 2. Dealing in Units (a) Applications for issue and redemption Postal, telex, fax or telephone instructions for the issue and redemption of Units will, if accepted by the Manager, be dealt with at the price calculated by the Manager at the Valuation Point on the relevant Valuation Day. Each Business Day is a Valuation Day. The Manager will be available to receive requests for the issue and redemption of Units from Monday to Friday, between the hours of 9.00 and 5.15 p.m (Guernsey time). Applications received prior to 11.45 a.m. (Guernsey time) on a Valuation Day will be dealt with on that Valuation Day on a forward price basis and applications received after 11.45 a.m. (Guernsey time) on such day will be held over until the next Valuation Day, when they will also be dealt with on a forward price basis. (b) Foreign Currency Exchange The base currency of the Units is Sterling and, where possible, application should be made in Sterling. However, where payment in respect of the issue or redemption of Units is tendered or requested in a freely marketable currency other than Sterling, the necessary foreign exchange transactions will be arranged by the Manager for the account of, and at the expense of, the applicant. Neither the Manager nor the Trustee will take any responsibility for the rate of exchange obtained and the Manager is under no obligation to account to Holders for any profit which it may make in arranging such transactions. (c) Suspension of dealings


The Manager may, either with the prior agreement of the Trustee or as the Trustee requires, suspend the creation, sale and redemption of Units if the Manager or the Trustee (as the case may be) is of the opinion that due to exceptional circumstances there is good and sufficient reason to do so having regard to the interests of Holders. The suspension of dealings in Units must cease as soon as practicable after the Manager or the Trustee (as the case may be) is no longer of the opinion that exceptional circumstances referred to above continue to apply and in any event within 28 days of the commencement of the suspension. If at any time it appears to the Trustee that there is insufficient property in the Fund by way of cash or near cash, property related assets or other assets capable of early liquidation to enable the Trustee to cancel Units as necessary to enable the Manager to meet the demand or likely demand for redemption of Units, the Trustee must require the Manager to suspend the creation, sale and redemption of Units (whether by way of issue, redemption, purchase or sale). Any suspension initiated by the Trustee on the above grounds expires on the 28th day after the date of the suspension. However, if it appears to the Manager or the Trustee that it is desirable in the interests of Holders that the suspension should be extended beyond such 28 day period, the Manager or the Trustee (as the case may be) may request the Guernsey Financial Services Commission to extend the extension. Whenever the Manager or the Trustee (as the case may be) declares a suspension as described above, then it must inform the Guernsey Financial Services Commission of the suspension and the reasons for it and it must also give notice of the suspension and the reasons for it to the Channel Islands Stock Exchange. (d) Manager dealing as principal In the event that the Manager deals as principal in the Units it is under no obligation to account to the Trustee or the Holders for any profit which it may make on the issue of Units or the re-issue or cancellation of Units which it has redeemed. The Manager may not issue Units at a price greater than the relevant offer price or redeem Units at a price less than the relevant redemption price. 3. Issue of Units Units are created by the Trustee and issued by the Manager. Units may be sold on any Valuation Day provided there is no suspension of valuation. The minimum initial subscription for A Units is £10,000, though subsequent applications may be made by existing Holders for a minimum of £5,000. The minimum initial subscription for B Units is £1,000,000, though subsequent applications may be made by existing Holders for a minimum of £20,000. The Manager may, with the approval of the Trustee, either generally or in a particular case alter the minimum value or number of Units to be issued. The Manager reserves the right at its entire discretion upon serving 30 days notice to transfer the holdings of B Units to A Units at the prevailing subscription and redemption price. Units are sold at an offer price determined by the Manager on the Valuation Day of not less than the redemption price and of not more than a sum calculated by ascertaining the value of the net assets of the Fund (and, where the Manager requires the payment of a dilution levy, adding an appropriate provision for fiscal and purchase charges which would be incurred) on the assumption that all the investments comprised in the Fund are to be purchased or acquired at the Valuation Point and dividing the amount so calculated by the total number of Units in issue and deemed to be in issue. The offer price will be calculated to at least four significant figures. No preliminary charge will be payable. Authorised schemes may suffer dilution (reduction) in the value of scheme property as a result of the costs incurred in dealing in underlying investments and of any spread between the buying and selling price of such investments and the Manager is permitted by the CIS Rules to require the payment of a dilution levy in connection with such costs. The Manager does not currently require the payment of a dilution levy as an addition to the price of Units on their creation or sale. The scheme property is valued as follows. Fixed deposits and commercial paper are valued at cost. Certificates of deposit are valued so as to be consistent both with bank deposits and commercial paper. Other investments are valued at the latest available mid-market prices.


It is anticipated that the offer price and the redemption price of the Units will be the same. However, in order to ensure fairness between Holders it may be necessary in certain circumstances for the offer price to be higher than the redemption price if, for example, where the redemption price has to reflect losses incurred on the premature realisation of investments in the Fund which may be necessary to meet redemption requests. Applications to issue Units may be given to the Manager either by post, telex, fax or telephone (whether or not on the Application Form attached to this Explanatory Memorandum). Telephone, telex and facsimile applications should be confirmed in writing containing the information required in the Application Form. Written applications which are not on an Application Form should include the information required by the Application Form. Unless otherwise agreed in writing with the Manager, cleared funds must be received by the Manager by the relevant Valuation Day in order for an application to be processed. Investors are advised to allow five Business Days for cheques to clear. In circumstances where the Manager is permitted under the CIS Rules to refuse to issue Units on application, the application monies will be returned to the applicant in the manner in which they were received at the risk of the applicant. Subscription monies received will initially be paid into a client account pending settlement of the transaction and interest, if any, arising on such a client account will accrue for the benefit of the Manager. 4. Contract Notes and Certificates Contract notes will be issued for Units purchased on or before the second Business Day next following the relevant Valuation Day. These will show the number of Units purchased and price used and your account number, which should be quoted by an investor in any future correspondence with the Manager. If requested, Certificates will be issued within 21 days of receipt by the Manager or the Registrar of details of the proposed registered holders and the payment for the Units, and will be sent by post, at the risk of the Holder(s), to the Holder first named on the register. Uncertificated Units rather than Certificates are recommended by the Manager as they may be cancelled or transferred by telex, facsimile or written instruction to the Manager without the need to return any document of title. Dealings in Units in certificated form will require, in addition to the above instructions, the return of the relevant Certificate(s) to the Manager duly renounced. 5. Transfer of Units Every Holder is entitled to transfer Units by writing in the usual or common form, so long as registration of the transfer does not result in either the transferor or the transferee holding Units with a value less than the Minimum Investment. Units may not be transferred to “non-qualified” persons as referred to in paragraph 7 below without the prior written consent of the Manager. 6. Redemption of Units Procedure for Redemptions (a) Subject to sub-paragraph (b) hereof Units will be redeemed on any Valuation Day provided there is no

suspension of dealings; (b) Any request by a Holder for the redemption of Units must be by telex, facsimile or in writing requesting

redemption addressed to the Manager at its registered office at Trafalgar Court, Les Banques, St. Peter Port, Guernsey, Channel Islands, GY1 3QL and must be accompanied by the relevant Certificate(s) if issued. The Manager will redeem Units so tendered for redemption at the redemption price on the Valuation Day specified below.

A Holder wishing to redeem Units must deliver a redemption request to the Manager prior to 11.45 a.m. (Guernsey time) on the Valuation Day as at which he wishes such redemption to occur. The redemption


price may be more or less than the price paid by the Holder for his Units, depending on the value of the Fund's net assets at that time. Payment for Units redeemed will ordinarily be made in Sterling within two Business Days after the relevant Valuation Day.

A Holder may not withdraw a request for redemption except in the event of suspension of dealings and in such event a withdrawal will be effective if written notification is received by the Manager before the termination of the period of suspension. If the request is not so withdrawn, the redemption will be made, subject to the requirements set out above, on the Valuation Day next following the end of the suspension. If a Holder requests the cancellation of Units, the Manager may arrange that in lieu of paying the redemption price to the Holder in cash the Holder shall receive a transfer of scheme property or, if required by the Holder, the net proceeds of sale of the relevant scheme property, provided that (i) where the Manager elects to do so it must give written notice to the Holder concerned before the proceeds of the redemption would otherwise become payable in cash that, in lieu of such payment, the Holder will receive a transfer of scheme property (or the net proceeds of sale of the relevant scheme property, as the case may be); and (ii) the scheme property to be transferred (or sold, as the case may be) must be selected by the Manager in consultation with the Trustee. Such selection must be made with a view to achieving no more advantage or disadvantage to the Holder concerned than to the continuing Holders.

(c) If the value of the Fund falls below £10,000,000 on each Valuation Day for a period of four consecutive

weeks, the Manager may in its sole discretion, by not less than two weeks written notice sent to each Holder at his registered address expiring on a Valuation Day, redeem at the redemption price all but not some of the Units on the next Valuation Day and elect to wind-up the Fund.

(d) All Units not previously redeemed will be redeemed on 31st December 2097 (or if that day is not a

Valuation Day, the next following Valuation Day) at the redemption price then prevailing. (e) A contract note will be despatched on or before the second Business Day next following the relevant

Valuation Day, giving details of the Units redeemed and the price used. (f) The redemption price will be not more than the offer price and not less than a sum calculated by

ascertaining the value of the net assets of the Fund (and, where the Manager imposes a dilution levy, deducting therefrom such sum as the Manager may consider represents the appropriate allowance of duties and charges in relation to the realisation of all the investments comprised within the Fund) on the assumption that the investments are to be in issue or deemed to be in issue at the Valuation Point and dividing the amount so calculated by the total number of Units in issue and deemed to be in issue. The price will be calculated to at least four significant figures. Authorised schemes may suffer dilution (reduction) in the value of scheme property as a result of the costs incurred in dealing in underlying investments and of any spread between the buying and selling price of such investments and the Manager is permitted by the CIS Rules to require the payment of a dilution levy in connection with such costs. The Manager does not currently impose a dilution levy on the redemption or cancellation of Units.

(g) Cheques in satisfaction of a request for redemption will be issued not later than close of business on the

second Business Day following the later of (a) the next Valuation Day after receipt of the request for redemption confirmed in writing (if appropriate) with all relevant information or (b) receipt of the Certificate(s), if any, duly renounced as to the appropriate number of Units. Redemption proceeds paid out of the assets of the Fund will be held in a client account until payment can be made to the redeeming shareholder. Interest, if any, will accrue to the benefit of the Manager.

(h) For amounts in excess of £10,000 an applicant may request payment of proceeds by telegraphic transfer.

This will be done at the cost and at the risk of the applicant.


(i) Part only of any holding may be redeemed as long as it leaves Units valued at not less than the Minimum Investment.

(j) The cancellation price last notified to the Trustee is available on request. 7. Restrictions on Holdings The Manager has the power to impose such restrictions (other than any restriction on transfer) as it may think necessary for the purpose of ensuring that no Units in the Fund are acquired or held directly or beneficially by: (a) any United States person or (b) a person in breach of the law or regulations of any jurisdiction or (c) any person or persons whose ownership, in the opinion of the Manager, might subject the Fund, the Trustee, the Manager or other Holders to adverse tax or regulatory consequences or other pecuniary disadvantage. If the Manager is aware that any Units are owned directly or beneficially by any such person (“a non-qualified person”) the Manager shall redeem all such Units as if the nonqualified person had requested the Manager to do so. Any person who reasonably appears to the Manager to be a non-qualified person or who has failed to provide satisfactory information and evidence to the Manager in connection therewith will be deemed to be a non-qualified person. 8. Publication of Prices The prices of Units will be published in the “FT Managed Funds Service” section of the Financial Times under the heading “Schroder Investment Management (Guernsey) Limited”. For reasons beyond the control of the Manager, these may not necessarily be the current prices. The prices will also be notified to the Channel Islands Stock Exchanges following calculation. 9. Voting Rights Holders have voting rights in meetings of Holders. On a vote on a show of hands every Holder who (being an individual) is present in person or (being a body corporate) is represented by its proxy shall have one vote. On a poll every Holder who is present in person or by proxy shall have one vote for every complete Unit and a further one part of one vote proportionate to any fraction of a Unit of which he is the Holder and a Holder entitled to more than one vote need not, if he votes, use all his votes or cast all the votes he uses in the same way. A body corporate being a Holder may authorise any person (who need not be a Holder) as it thinks fit to act as its representative at any meeting of Holders and the person so authorised shall be entitled to exercise the same powers on behalf of the body corporate which he represents as the body corporate could exercise if it were an individual Holder. An individual Holder may appoint such person as he thinks fit to act as his proxy at a meeting of Holders. Such person need not be a Holder. In the case of joint Holders, the vote of the first named Holder (or his proxy) as shown in the Register shall be accepted to the exclusion of the other joint Holders. The voting rights exercisable at a meeting of Holders are exercised by a show of hands unless a poll is demanded by the Chairman of the meeting or by one or more Holders present in person or by proxy registered as holding or representing in the aggregate not less than one twentieth in value of Units for the time being in issue. The quorum for a meeting of Holders is at least two Holders present in person or by proxy registered as holding one tenth in value of the Units for the time being in issue. Neither the Manager nor any Associate of the Manager is entitled to vote at or be counted in a quorum in respect of Units held by it, except when such Units are held as a bare trustee or nominee on behalf of a person entitled to vote and from whom voting instructions have been received. No persons other than Holders may vote at meetings. Holders do not have the right to vote at any meeting called by a company included within the Fund's portfolio. The Manager may exercise the voting rights at such meetings. 10. Meetings of Holders


(a) A meeting of Holders, duly convened and held, may by Extraordinary Resolution:

(i) sanction any modification, alteration or addition to the provisions of the Trust Deed required to be sanctioned in such manner by the CIS Rules;

(ii) remove the Manager and remove the Trustee; (iii) approve any arrangement where it is proposed that, for the purposes of reconstruction, the property

of the Fund shall become the property of another body or scheme; (iv) approve any change to, or introduction of, any of the provisions of this Explanatory Memorandum

relating to the investment objectives and policy of the Fund; (v) determine that the Fund shall be wound up; (vi) approve any change to the maximum and current rates or amounts of the payments made to the

Manager out of the Fund.

11. Fees and Expenses (a) Manager's Charges In respect of A Units the Manager currently receives a management fee of 0.10 per cent. per annum of the value of the Fund. The fee is accrued daily and paid monthly in arrears. The Manager is entitled to charge a maximum fee of 0.5 per cent. per annum of the value of the Fund. Such maximum fee may only be increased on the passing of an Extraordinary Resolution. Any permanent increase of the actual rate of management charge within the maximum is subject to the Manager giving three months' written notice to Holders. Out of its charges the Manager pays the fees of the Investment Adviser. In respect of A Units the management charge is levied against the value of the A Units. The Manager will charge a fee in relation to the B Units which will be invoiced separately to the B Unit Holders. This fee will be in accordance with an agreed discretionary management agreement. (b) Administrator's Charges The Administrator currently receives a fee, paid out of the assets of the Fund, of 0.075 per cent per annum of the value of the Fund, subject to a minimum fee of £30,000. The Administrator is entitled to charge a maximum fee of 0.10 per cent per annum, on the first £75 million and 0.075 per cent. per annum thereafter, of the value of the Fund on a mid market basis, subject to a minimum fee of £30,000 per annum or such higher amount as may be agreed in writing between the Manager and the Administrator from time to time. (c) Trustee's Charges RBSI Trustee Services (Guernsey) Limited is entitled to fees payable out of the assets of the Fund, at a rate of 0.030 per cent. per annum of the first £150 million, 0.02 per cent. per annum of the second £150 million and 0.005 per cent. per annum thereafter of the value of the Fund's assets in its custody, calculated on a mid market basis (“Periodic Charge”). In addition to the payment of the Periodic Charge, the Trustee shall be entitled to be paid transaction fees at the rate of £35 per security transaction (“transaction fees”). Such transaction fees shall accrue when the relevant transaction is a purchase or sale, but not a redemption at maturity. The Trustee shall also be entitled to be paid safekeeping fees at the rate of 0.020 % per annum on the portfolio of assets excluding cash on fixed and call deposits and to make a charge of £25 for each deposit made with third parties (“deposit fees”). Transaction fees and deposit fees shall accrue when the relevant transaction or deposit is effected and shall be paid to the Trustee in the same manner and at the same time as the Periodic Charge.


For an initial period to 17 December 2004, the Trustee, agreed a partial waiver of the fees to be paid from the assets of the Fund and the amount currently charged is at the rate of 0.025 per cent. per annum of the first £150 million, 0.02 per cent. per annum of the second £150 million and 0.005 per cent. per annum thereafter of the value of the Fund's assets in its custody, calculated on a mid market basis (“Periodic Charge”). In addition to the payment of the Periodic Charge, the Trustee shall be entitled to be paid transaction fees at the rate of £35 per security transaction (“transaction fees”). Such transaction fees shall accrue when the relevant transaction is a purchase or sale, but not a redemption at maturity. The Trustee shall also be entitled to be paid safekeeping fees at the rate of 0.0175 % per annum on the portfolio of assets excluding cash on fixed and call deposits and to make a charge of £22 for each deposit made with third parties (“deposit fees”). Although this initial waiver period has expired, as at the date of this document notice of the fee waiver ending had not yet been provided by the Trustee. All safekeeping fees, transaction fees and deposit fees are inclusive of any sub-custodian fees. (d) Other Charges and Expenses In addition, the following expenses, inter alia, may be paid by the Fund: the fees and expenses of the Auditors; the fees of any regulatory authority; the cost of publishing the prices of the Units; the cost of printing and distributing Scheme Particulars and Annual and Interim Reports and associated marketing documentation; the annual fee payable to the States of Guernsey Income Tax authority and the Channel Islands Stock Exchange Generally, the charges and expenses to be paid out of the Fund are as permitted in the Trust Deed or any rules or regulations relating to Class A Schemes from time to time. The amounts of any such charges and expenses will be determined by reference to actual cost. The costs of establishing the Fund and the initial issue of Units has been borne by Schroder Investment Management Limited. 12. Winding Up The Fund must terminate by 31st December 2097 (unless a Unanimous Resolution is passed postponing the termination). The Fund will be wound up on the authorisation of the Fund as a Class A Scheme being revoked by the Guernsey Financial Services Commission; or when an Extraordinary Resolution is passed determining that the Fund shall be wound up; or where any agreement by the Guernsey Financial Services Commission to a request by the Manager for the revocation of the declaration of authorisation is respect of the Fund becomes effective; or if the value of the Fund falls below £10,000,000 for a period of four consecutive weeks and the Manager in its sole discretion elects to wind up the Fund. Upon the Fund being wound up, the Trustee shall, as soon as practicable, realise the property of the Fund and after paying all liabilities of the Fund, distribute the remaining proceeds to Holders in proportion to their holdings. The Trustee shall be entitled to demand the production of evidence of title to Units and to retain a sufficient amount to cover the costs of winding up. If the Manager so directs, Holders may receive their proportionate entitlements in specie. The Fund may also be wound up on the passing of an Extraordinary Resolution approving the reconstruction of the Fund with another body or scheme and the winding up will be in accordance with that resolution or the terms of the approved reconstruction. 13. Removal of Manager The Manager may be removed by notice in writing given by the Trustee to the Manager in the following circumstances:

i) if an order is made or a resolution is passed for the winding up of the Manager (except a voluntary liquidation for the purposes of reconstruction or unitisation on terms previously approved in writing by the Trustee) or if its affairs are declared to be “en etat de desastre”; or

ii) if a receiver is appointed of the undertaking of the Manager or any part thereof; or


iii) if an Extraordinary Resolution be passed removing the Manager (or to determine that it be removed as soon as this is permitted by law); or

iv) if the Holders of a three-quarters majority in value of the Units in existence (excluding Units held or

deemed to be held by the Manager or by any associate of the Manager) make a request to the Trustee in writing that the Manager be removed; or

v) if the Manager ceases to be licensed under The Protection of Investors (Bailiwick of Guernsey) Law,

1987; or

vi) if for good and sufficient reason the Trustee is of the opinion and so states in writing that a change of manager is desirable in the interests of Holders.

14. Material Agreements The following agreements have been entered into and are or may be material: (a) The Trust Deed between the Manager and the Original Trustee dated 15 April 1997, as amended by the

Supplemental Trust Deed dated 2 August 2001, pursuant to which the Fund is established. The Manager and the Trustee are paid fees out of the assets of the Fund for the performance of their duties and are reimbursed for out-of-pocket expenses. The fees payable to the Manager and the Trustee are detailed in paragraphs 11(a) and 11(c) respectively above. The Trust Deed contains provisions whereby the Manager and the Trustee are not liable for any loss unless the same is consequent upon their fraud, gross negligence or wilful default. The Fund may be wound up in the circumstances detailed in paragraph 12 above.

(b) The Administration Agreement between the Manager, the Original Trustee and the Administrator dated 15

April 1997, as amended by a Side Letter dated 8 August 2000 and a Novation Agreement dated 2 August 2001, whereby the Administrator agrees to administer the Fund on a day to day basis. The Administrator is paid a fee out of the assets of the Fund for the performance of its duties and is reimbursed for out of pocket expenses. The fee payable to the Administrator is detailed in paragraph 11(b) above. The Administration Agreement contains a provision whereby the Administrator and its servants and agents are not, in the absence of negligence, wilful default or bad faith, responsible for any loss or damage which the Manager or the Trustee may sustain or suffer as a result of the Administrator’s obligations under the Administration Agreement. The Administration Agreement is terminable on 90 days' written notice or earlier upon certain breaches by, or the insolvency of, any party or the termination of the Fund. The Administration Agreement does not provide that the Administrator is entitled to any compensation in respect of such termination.

(c) The Registrar Agreement between the Original Trustee and the Registrar dated 15 April 1997, as amended

by a Novation Agreement dated 2 August 2001. The Registrar is entitled to fees for the performance of its duties which are paid by the Trustee in such amounts and at such times as shall be agreed between the parties. The Registrar Agreement contains a provision whereby the Registrar is not liable in respect of any loss consequent upon any cause which is beyond its reasonable control. The Trustee indemnifies the Registrar against all claims and demands which may be made against the Registrar in respect of any loss or damage sustained (or alleged to have been sustained) or suffered by a third party in connection with the affairs of the Trustee or the Fund (otherwise than by the bad faith, negligence or wilful default of the Registrar). The Registrar Agreement is terminable on 90 days' written notice or earlier upon certain breaches by, or the insolvency of, the Registrar or the termination of the Fund or the Trustee ceasing to be the Trustee of the Fund. On termination of the Registrar Agreement, the Registrar is entitled to receive all fees and other monies accrued due up to the date of termination but is not entitled to compensation in respect of such termination.

(d) The Investment Advisory Agreement between the Manager and Schroder Investment Management (UK)

Limited dated 14 July 2000, as novated in favour of the Investment Adviser by a Novation Agreement dated 25 November 2003, whereby the Investment Adviser has been granted full discretionary powers over the investment of the property of the Fund subject to compliance with all applicable investment restrictions and the overall responsibility and right of veto of the Manager. The Investment Adviser receives a fee payable by the Manager out of the fees it receives from the Fund as detailed in paragraph 11 (a) above. The Investment Adviser accepts responsibility for loss to the Manager to the extent that such loss is due to the negligence, wilful default or fraud of itself or its delegates and employees, but the Investment Adviser


is not otherwise liable for any loss to the Manager and makes no warranty as to the performance or profitability of the Fund or any part of it. The Investment Advisory Agreement is terminable by the Investment Adviser on three month’s written notice to the Manager (or immediately if required by any competent regulatory authority), or by the Manager at any time by written notice to the Investment Adviser. Termination does not affect accrued rights, indemnities, existing commitments or any contractual provision intended to survive termination but is without penalty or other additional payment. The Manager must pay the fees of the Investment Adviser pro rata to the date of termination and also any additional expenses necessarily incurred by the Investment Adviser in terminating the Investment Advisory Agreement and will bear any losses necessarily realised in settling or concluding outstanding obligations.

15. Indemnity In the event that a Holder to whom a Certificate has been issued has lost or destroyed the Certificate, the Holder, in order to obtain a new Certificate, must complete a form of indemnity addressed to both the Manager and to the Trustee and counter-signed by a bank. Forms of indemnity should be obtained from the Manager. 16. Litigation The Directors are not aware of any litigation or arbitration proceedings pending or threatened against the Fund. 17. Documents available for Inspection Copies of the following documents, which do not form part of this document, may be inspected on Business Days during normal business hours at the registered office of the Manager, the Trustee, or the Administrator in Guernsey, and at the offices of Schroder Investment Management Limited in London:- 1. The Trust Deed and the Supplemental Trust Deed constituting the Fund and the material agreements referred

to in paragraph 14 above (the “Material Agreements”); 2. The Protection of Investors (Bailiwick of Guernsey) Law, 1987 and the CIS Rules; 3. Annual Report for the fiscal year ending 31 December and Interim Report for the six months ending 30 June

(the “Accounts”); 4. Latest copy of the Scheme Particulars. Copies of the Material Agreements and the Accounts may be obtained free of charge during normal office hours from Schroder Investment Management Limited at 31 Gresham Street, London EC2V 7QA.
