Montrose Capricorn Finance Fund Suspension Update, Jan 2009

Capricorn Finance Fund Update, 16th Jan 2009

The objective of this communication is to update investors on the repayment of capital following the notification letter dated 11 November 2008.

We are working closely with the underlying managers in the Capricorn Finance Fund to generate liquidity in order  to repay investors as soon as possible. However that the underlying managers are also trying to avoid a “fire” sale of assets, which would lead to substantial losses for investors.

As you probably know the current market environment remains  very difficult for all financial assets. Many hedge funds have needed to take action to preserve the liquidity of their funds. These actions have included the imposition of gates, restructuring or suspension of redemptions altogether.  Conditions change constantly with managers taking action at very short notice.

There is consequently an industry-wide lack of liquidity in the hedge fund industry. Asset based lending managers are not immune from these developments.

With the general lack of liquidity across the hedge fund industry the receipt of capital from the underlying managers is happening much slower than was expected. The Capricorn Finance Fund can only start to repay investors once capital is returned to the fund by the underlying managers.

In addition capital received from the underlying managers must first be used to pay off the lender of capital to the Finance Fund. Once this has occurred the full proceeds of redemptions can be repaid to investors.

We will keep all investors advised of material developments regarding capital repayments, which will be dependent on the liquidity crisis easing and managers returning capital to the Finance Fund.

Montrose Asset Management Limited

P.O. Box 673
Trafalgar Court
Admiral Park
St Peter Port
Guernsey
GY1  3SW

Tel: +44 1481 703193
Fax: +44 1481 703199

www.montroseasset.com

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