Fund Profiles

The Rhicon Strategic program is a short to medium-term discretionary trading strategy focused primarily on currencies. The strategy applies technical analysis to implement fundamental, market or purely technical views. The individual trading approaches of Rhicon's three Investment Managers are combined to capture profits across three different time frames. The methodology benefits from a uniquely robust risk management framework, coupled with diversification over managers and time periods.The investment managers independently generate their own study of the market, a process that benefits from each their individual expertise. Each manager assesses fundamental, technical and market developments, across their chosen time frame. Whilst there is a strong degree of collaboration and discussion, trading decision- making is entirely autonomous. The approach is applied predominantly to the G-10 currency markets, although liquid emerging market currencies are often traded. Trades are typically implemented via the cash spot market although options can also be used. The managers thus benefit from a broad set of markets and instruments to best implement a trading view to generate absolute returns.

The three managers each trade one of the following books, depending on their natural expertise and trading experience.Intra-day trading [Ryan McLaughlin] - applying pattern recognition, candlestick methodology, oscillators and short-term moving averages. The focus is on active trading, concentrated in few positions with strict risk management. The manager benefits from his experience as a premier market-maker with a network of market information providers. Within this book there are typically 50-60 trades per month, with positions rarely being held for more than 1-2 days. Short-term trading [Christopher Brandon] - the emphasis is on identifying strong technical setups using a set of proprietary tools developed over the past decade. These comprise a unique combination of classic technical analysis such as candlesticks and pattern recognition with an array of market specific studies such as oscillator divergence and ichimoku clouds. The focus is on identifying vulnerable points in the market that can lead to a change in short-term sentiment. There are typically 20-25 trades per month, with positions being held from within an intra-day basis to approximately 5 days.

Medium-term trading [Peter Jacobson] - seeks to capture somewhat broader technical set-ups and fundamental developments. The manager benefits from his experience at evaluating investor sentiment and the market's mis-pricing of potential economic outcomes. Technical analysis is used to judge how best to implement an established view. The technical focus is to find the optimal application of a trade idea - which market instruments to be traded, entry levels, expected profit potential, and most importantly the stage at which a position no longer conforms to the original view. There are typically ten trades per month, with these being held from 1-2 days to 2-3 weeks.

An emphasis on a strict and disciplined approach to risk management has always been at the cornerstone of Rhicon's underlying trading philosophy. Controlling the downside risk on each and every trade provides us with two significant advantages in our strategy. The first is that it enables the managers to focus on selecting trades with high reward/risk ratios. Our unique set of market analysis tools means that is not uncommon for trades to be put on with a potential 8:1 ratio. Strict discipline in respecting both the stop loss level and the take profit target are what determines our success over the medium term. The second advantage is that it ensures capital preservation mandates are respected, crucial to staying in the market over a long period of time.

The application of technical analysis with a robust risk management philosophy helps remove the

Risk is allocated in three ways. It is allocated across the entire portfolio, inside each trading book and within the construction of each individual trade.

At an overall portfolio level, there is maximum monthly stop loss limit for the strategy at -4%. This is then divided between the managers so that the short and medium term books have a maximum monthly stop loss of -1.5% and the intra-day book has a monthly maximum stop loss of -1%.

The maximum monthly stop loss for each book and the average number of trades each manager executes per month forms the basis of the consistency of the risk allocated to each and every single trade. The intra-day trading book typically trades up to 50 or 60 times per month, and will generally risk between 0.02%-.04% on any given trade. The short-term book on the other hand trades approximately 20-25 times per month will risk 0.05%-.09% on any given trade. Finally, the medium term trading book which trades on average 10 to 12 times per month will risk .10%-.15% on each trade. This consistent approach to risk allocation per trade in a discretionary strategy is the key to generating steady returns over time.

Within these constraints, the actual risk allocated to each trade is based on its merits. Generally speaking the risk per trade is lower the shorter its time frame. In addition, the strength of the technical setup and fundamental considerations (described in 11) will impact the risk allocated. This combination of a simple yet robust approach is the key to our minimal draw-downs and high risk adjusted returns.

Risk is monitored in real time, with daily snapshots provided to our investors. If the maximum monthly stop loss is hit in any book in any month (which has not come close to occurring) the manager must cease to trade. If this were the case on three months running, an objective assessment would be carried out internally (and with communication to our investors) as to that manager's viability within the overall portfolio

Peter Jacobson is one of the founding principals of the firm. He started his career in foreign exchange in 1993 at Citibank Sydney, and thereafter at Swiss Bank Corporation in Geneva in 1995. From 1996, Peter headed the European currency desk at Goldman Sachs International Finance in London until 1998 when he relocated to expand and develop the JPY currency desk for Goldman Sachs International Bank in Tokyo. Peter co-founded Rhicon in 2000.

Paul Liew joined Rhicon in mid 2008 and is the quantitative system programmer and a Portfolio Manager of the Rhicon Systematic Currency Program. He previously worked at Morgan Stanley as a Proprietary Trader where he focused on high frequency algorithmic FX trading, and prior to that was a Quantitative Analyst at Tribeca Global Management (Asia). He holds a Ph.D in Engineering and Bachelor of Engineering (Hons) from the Na! tional University of Singapore.