NSAI Newstar AB Inc

    RNS Number : 4888A
  New Star Absolute Return Fund PCC 
  04 August 2008
   

    New Star Absolute Return Fund PCC Limited (the "Company")


    4 August 2008

    Recommended Proposals for the Reconstruction and Winding-Up of the Company

    Introduction
    A Circular has been despatched to Shareholders today detailing a proposed reconstruction and winding-up of the Company. Under these
Proposals and subject to meeting certain requirements, Shareholders will have the choice of either rolling over their investment in the
Company into an investment in New Star Multi Strategy Hedge Fund Limited ("Multi Strategy"); electing to receive cash in respect of their
investment in the Company at a value close to the net asset value of that investment; or electing for a combination of the two options.

    The Proposals are conditional on certain approvals, including the approval of shareholders at general
    and at separate Cell meetings.

    Background to the Proposals
    Since the Company's launch on 1 August 2006, the Company has sought to achieve its investment policy of producing absolute returns
through a range of hedge fund strategies by investing substantially all of its assets in New Star Multi Strategy Master Hedge Fund Limited,
a Cayman domiciled open-ended hedge fund (the "Master Fund"). The Master Fund invests in New Star's hedge fund strategies and, since 1 May
2008, has been managed by Mark Harris and Craig Heron of New Star Asset Management.
    In the period since the Company's launch to 18 July 2008 (being the latest practicable date prior to publication of the Circular), the
net asset value total return on the Income Shares and the Growth Shares has been 9.64 per cent. and 9.08 per cent. respectively.  In the
period from 1 January 2008 to 18 July 2008, the net asset value total return on the Income Shares and the Growth Shares was 1.08 per cent.
and 0.35 per cent. respectively.
    Shares in the capital of the Company, which is a closed-ended fund, have been admitted to trading on AIM and the to the Channel Islands
Stock Exchange ("CISX") and are listed on the Official List of the CISX. As such, chargeable gains made by UK taxpaying Shareholders are
subject to UK capital gains tax. The admission to trading on AIM and the CISX and the listing on the Official List of the CISX results in
considerable fixed costs. The total expense ratio of the Company (prior to taking into account any performance fee payable by the Company to
the Manager) for the twelve months ended 30 June 2008 was 3.23 per cent..
    Multi Strategy is a Cayman domiciled open-ended hedge fund with monthly liquidity whose shares are listed or expected to be listed on
the Irish Stock Exchange. US$ Shares in Multi Strategy are admitted to the Official List of the Irish Stock Exchange and to trading on the
Main Market of the Irish Stock Exchange. Application will be made to the Irish Stock Exchange for the Multi Strategy Sterling Shares and the
Multi Strategy Sterling Income Shares (each as defined below) to be admitted to the Official List of the Irish Stock Exchange and to trading
on the Main Market of the Irish Stock Exchange on or before the date at which the Proposals are implemented. As at 18 July 2008, its assets
were approximately US$106 million. Multi Strategy also invests substantially all of its assets in the Master Fund and, therefore, provides
substantially the same investment exposure as the Company.

Multi Strategy is an offshore fund for UK tax purposes, has applied for "distributor fund" status in respect of the Multi Strategy Sterling
Shares for the period since launch to 30 June 2008, has sought to conduct its affairs thereafter in accordance with the requirements of such
status, and intends to apply for such status for the Multi Strategy Shares thereafter; thereby providing UK taxpayers with an investment
return which should be subject to UK capital gains tax.  The total expense ratio of Multi Strategy (prior to taking into account any
performance fee payable by Multi Strategy to the Manager) for the twelve months ended 30 June 2008 was 1.80 per cent. (this compares to 3.23
per cent. for the Company in respect of the same period).
    Following recent announcements by HM Revenue & Customs regarding changes in the tax treatment of offshore funds, the Directors
understand that the UK capital gains tax regime for funds, such as Multi Strategy, should be more certain than was previously the case.
Accordingly, the same capital gains tax treatment as is currently available in respect of the Company should be available for Shareholders
resident in the UK for tax purposes who validly elect to roll over their interest in the Company into Multi Strategy.

    Accordingly, the Directors and the Manager have concluded that the interests of Shareholders would be best served by a voluntary
liquidation of the Company, with Shareholders being offered the opportunity of (i) receiving cash at close to the net asset value of their
investment; (ii) rolling over their investment into Multi Strategy; or (iii) a combination of both.

    Outline of Proposals
    The proposed scheme of reconstruction provides Shareholders with the opportunity:
    *     subject to satisfying the Multi Strategy Investment Requirements, to roll over their interests in Income Shares into such number
of newly created income shares in Multi Strategy at an issue price of �100.00 each ("Multi Strategy Sterling Income Shares") as is equal to
the aggregate Income Share Terminal Asset Value of their Income Shares;
    *     subject to satisfying the Multi Strategy Investment Requirements, to roll over their interests in Growth Shares into such number
of existing sterling shares in Multi Strategy ("Multi Strategy Sterling Shares") at their prevailing net asset value as is equal to the
aggregate Growth Share Terminal Asset Value of their Growth Shares;
    *     to receive an amount in cash equal to the aggregate Income Share Terminal Asset Value of their Income Shares and the aggregate
Growth Share Terminal Asset Value of their Growth Shares (the "Cash Option"); or
    *     subject to satisfying the Multi Strategy Investment Requirements, to elect for a combination of Multi Strategy Sterling Income
Shares (in respect of Income Shares held) and/or Multi Strategy Sterling Shares (in respect of Growth Shares held) and cash.

    The value of a Shareholder's entitlement under the Scheme will depend on their share in the value of the net assets attributable to the
Cell in which their Shares were issued at the time the Scheme was implemented, referred to as the Terminal Asset Value in respect of each
such Cell. The Terminal Asset Value in respect of each Cell will be calculated by taking the assets attributable to the relevant Cell at the
Calculation Date (expected to be 5.00 p.m. on 22 August 2008) and deducting all of the relevant liabilities attributable to that Cell
(including the estimated contingent liabilities of the Cell and a proportion of the costs and expenses incurred or to be incurred by the
Company and the Liquidator in connection with the Proposals) and the Liquidator's retention for unknown liabilities of that Cell (expected
to be �50,000 in respect of the Income Cell and the Growth Cell in aggregate).

    The costs and expenses in connection with the Proposals will be attributed to each Cell proportionate to the aggregate Net Asset Value
of the total number of Income Shares (in respect of the Income Cell) and the aggregate Net Asset Value of the total number of Growth Shares
(in respect of the Growth Cell) in issue at the Calculation Date, in each case expressed as a percentage of the aggregate Net Asset Value of
the total number of Shares then in issue (excluding the Management Shares).

    Investment Requirements
    Pursuant to the Proposals, Shareholders are only entitled to elect to roll over some or all of their interests in Income Shares into
Multi Strategy Sterling Income Shares and Growth Shares into Multi Strategy Sterling Shares (the "Multi Strategy Option") to the extent that
they have satisfied certain investment requirements as set out in the Circular (the "Multi Strategy Investment Requirements"). Shareholders
who fail to satisfy the Multi Strategy Investment Requirements will be irrevocably deemed to have elected for cash in respect of their
holding of Shares in respect of which they have failed to satisfy the Multi Strategy Investment Requirements.
    Shareholders who do not submit a Form of Election (in respect of certificated Income Shares and Growth Shares, as applicable) or a TTE
Instruction (in respect of uncertificated Income Shares and Growth Shares, as applicable) will be deemed irrevocably to have elected for the
Cash Option in respect of their entire holding of Income Shares or Growth Shares (as applicable).

    Overseas Shareholders are not being provided with a Form of Election nor will they be entitled to submit a TTE Instruction and will be
irrevocably deemed to have elected for the Cash Option in respect of their entire holding of Shares.

    Cancellation of admission to trading on AIM and the CISX and to listing on the Official List
    of the CISX

    If the Proposals are approved by Shareholders, the Company will be liquidated and its admission to trading on AIM and the CISX and the
listing of the Shares on the Official List of the CISX will be cancelled.

    Expected Timetable

    
                                                 2008
 Date from which it is advised              15 August
 that dealings in Shares should
 only be made on the basis of
 cash settlement and immediate
 delivery of document of title
 Latest time for receipt of           1.00 p.m. on 20
 Forms of Election                             August
 Latest time for receipt of TTE       1.00 p.m. on 20
 Instructions from Shareholders                August
 holding Shares in
 uncertificated form
 Record Date for the purposes         5.00 p.m. on 20
 of Elections and Company*s                    August
 Register closes
 Latest time for receipt of           3.00 p.m. on 20
 Forms of Proxy for the Income                 August
 Share Cell Meeting
 Latest time for receipt of           3.10 p.m. on 20
 Forms of Proxy for the Growth                 August
 Share Cell Meeting
 Latest time for receipt of           3.20 p.m. on 20
 Forms of Proxy for the First                  August
 General Meeting
 Latest time for receipt of           3.30 p.m. on 20
 Forms of Proxy for the Second                 August
 General Meeting
 Shares admission to trading on       7.00 a.m. on 21
 AIM suspended                                 August
 Shares admission to trading on       7.00 a.m. on 21
 the CISX and listing on the                   August
 Official List of the CISX
 suspended
 Income Share Cell Meeting*           3.00 p.m. on 22
                                               August
 Growth Share Cell Meeting*           3.10 p.m. on 22
                                               August
 First General Meeting*               3.20 p.m. on 22
                                               August
 Second General Meeting*              3.30 p.m. on 22
                                               August
 Shares reclassified as                     22 August
 Reclassified Shares**
 Effective Date for                         22 August
 implementation of Proposals
 Cancellation of admission to         7.00 a.m. on 26
 trading of Shares on the CISX                 August
 and cancellation of listing of
 Shares on the Official List of
 the CISX
 Entitlement of Income                      29 August
 Shareholders (other than those
 who have elected, or are
 deemed to have elected, for
 the Cash Option) to Multi
 Strategy Sterling Income
 Shares determined
 Entitlement of Growth                      29 August
 Shareholders (other than those
 who have elected, or are
 deemed to have elected, for
 the Cash Option) to Multi
 Strategy Sterling Shares
 determined
 Contract notes in respect of        on or as soon as
 Multi Strategy Sterling Income   practicable after 1
 Shares and Multi Strategy                  September
 Sterling Shares despatched
 Cheques despatched to            within 14 days of 1
 Shareholders who have elected              September
 (or are deemed to have
 elected) for the Cash Option
 and CREST payments made
 Cancellation of admission to          7.00 a.m. on 2
 trading of Shares on AIM                   September


    * If the Income Share Cell Meeting and/or the Growth Share Cell Meeting is/are adjourned for any reason it/they shall be reconvened on 5
September 2008 at the same time as such meetings are currently convened for. In such circumstances, the First General Meeting and the Second
General Meeting will be automatically adjourned until 5 September 2008 at the same time as such meetings are currently convened for and the
timetable for the events occurring thereafter will be delayed accordingly.

    ** The reclassification of the Shares will occur immediately following the passing of the Resolution proposed at the Second General
Meeting, this being expected to be at approximately 3.30 p.m. on 22 August 2008, provided that the Resolutions proposed at both of the Cell
Meetings and the First General Meeting are passed. The reclassification is a technical requirement of the Scheme. Shares will be
reclassified according to the Elections made (or deemed to have been made) by Shareholders.

    Capitalised terms used in this announcement shall have the same meaning as set out in the Circular dated 4 August 2008, unless otherwise
defined.

    Enquiries: 

    Ravi Anand/Alex Duncan, New Star Asset Management Limited, 020 7225 9292/9290
    Susan Walker, KPMG Corporate Finance - nominated adviser, 020 7311 1000
    KPMG Corporate Finance, a division of KPMG LLP which is authorised and regulated by the Financial Services Authority for investment
business activities, is acting for the Company as nominated adviser in relation to the matters set out in this announcement and is not
acting for any other person in relation to these matters. KPMG Corporate Finance will not be responsible to anyone other than Company for
providing the protections afforded to its clients or for providing advice in relation to the contents of this announcement. 

    END

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