Montrose Asset Management Limited

Tel +44 1481 703 193

guernsey@montroseasset.com

www.montroseasset.com

RBC Offshore Fund Managers Limited (Fund Administrators)

* Estimated price. Dealing price may therefore vary from estimated price. For further information please contact the Administrator.

MONTHLY COMMENT

Markets continued their bear market rally in April with a steady stream of economic news which, although dismal, was better than expected. The S&P 500 index rose by 9.4% but remains in negative territory for the year and down by 43% from its September 2007 peak. Lower quality assets that lost significant value in 2008 were the strongest performers in April.

While economic conditions appear to have improved slightly, the outlook remains poor with significant structural issues to be dealt with before a sustainable recovery in markets can be expected. In particular the substantial levels of government debt that have been created to fix the problems is likely to suppress economic growth for several years to come. Credit markets are still not functioning normally and remain restricted with little or no liquidity.

The Funds in the Finance Fund are generally being impacted by one or more of the following issues, which have arisen from the unprecedented economic environment:

The Capricorn Finance Fund fell slightly during the month.  The performance of the underlying funds was mixed with returns varying from +0.91% at best to -6.30% at worst.  7 funds were positive for the month.

Corporate lending delivered the best returns with two fund generating +0.81% and +0.91% as new investment opportunities became profitable.  Despite difficult conditions for the industry, trade finance remained positive with a monthly return of +0.82%.

Underperformance arose from three funds which were negative by -6.30%,-5.8% and -3.27%.

The first two funds continued to be adversely impacted by industry wide revaluations of life insurance policies. This arose from the extension of life expectancies announced in the last quarter of 2008, which has adversely affected life settlements and premium financing loans. Values of insurance policies have fallen sharply in the secondary market and financing of premiums has become difficult in the current environment.

The third fund was largely impacted by commercial real estate where values remain under pressure with falling rentals, an absence of buyers and no finance available. Real estate loans continue to be either extended or put into default.

As previously advised all funds in the Finance Fund have been forced to either suspend, gate or restructure as a result of the deteriorating economic environment and the lack of liquidity. As a result no meaningful redemption proceeds were received from any managers during the month. Capital that was received was repaid to the leverage provider in terms of the financing agreement between the fund and the lender.  The loan facility has been steadily reduced down. This reduction process will continue but is currently being favourably assisted by the recovery in Sterling against the US Dollar.

We continue to closely monitor the managers of the underlying funds in order to secure redemption proceeds as soon as possible. We are also working with other large investors in the strategy to expedite the return of capital without impairing value through fire sale of assets and or loans. At present we have not received any indications of meaningful redemptions being paid out to the Finance Fund. It is therefore unfortunately not currently possible to provide investors with any degree of certainty as to when the next tranche of capital will be repaid. We understand the frustration this causes for investors during this difficult period.

We will be shortly visiting the US and will be providing more detailed analysis and comment in the next newsletter on our return.