JYT/DEACONSADVICE.DOCX

RACV Tower 485 Bourke Street Melbourne VIC 3000 Australia GPO Box 4592 Melbourne VIC 3001 DX 445 Melbourne Tel + 61 (0)3 8686 6000 Fax + 61 (0)3 8686 6505 www.deacons.com.au Other Offices Brisbane Canberra Perth Sydney Independent Affiliated Firms Hong Kong Indonesia Malaysia People's Republic of China Singapore Taiwan Thailand Vietnam

10 January 2006 DRAFT Email: shawn@absolutealpha.com.au Mr Shawn Richard Absolute Alpha Level 41 2 Park Street SYDNEY NSW 2000 Our Ref: 2582136 Dear Shawn Investments in offshore entities

1. Introduction and background

1.1 We have previously provided you with advice in relation to proposed investments by the Alpha Strategic Fund (Alpha Fund) in the following offshore entities:

(1) Huntleigh Investment Fund (Huntleigh);

(2) Atlantis Capital Markets Cayman LDC (Atlantis);

(3) Cornell Capital Partners Offshore Ltd (Cornell); and

(4) Radcliffe Offshore Investors SPC Ltd (Radcliffe).

1.2 The Alpha Fund is a registered managed investment scheme and governed by Chapter 5C of the Corporations Act 2001 (Act).

1.3 Pursuant to section 601FC(4) of the Act, a responsible entity may only invest scheme property, or keep scheme property invested, in another managed investment scheme if that other scheme is registered subject to relief provided for by ASIC Class Order 98/55. ASIC Class Order 98/55 allows a maximum of 10% of the value of the assets (net liabilities) of the registered scheme to be invested in unregistered schemes.

Deacons Page 2

31/05/2011

JYT/DEACONSADVICE.DOCX

1.4 You have asked us to consider how the Alpha Fund can invest more than 10% of the Fund’s net assets in the above offshore investments in the instances that they are unregistered managed investment schemes. You have asked us to expand on our earlier advice outlining the options available to the Alpha Fund.

1.5 As per our telephone conversation on 9 January 2006, you have asked us to consider what changes could be made to the structure of Atlantis to enable investment by the Alpha Fund.

1.6 The definition of a managed investment scheme in section 9 of the Corporations Act, that requires the scheme to have the following features:

(1) people contribute money or money’s wealth as consideration to acquire rights (interests) to benefits produced by the scheme;

(2) any of the contributions are to be pooled, or used in a common enterprise to produce financial benefits for the people who hold the interests; and

(3) the holders of the interest do not have day to day control over the operation of the scheme [our emphasis].

1.7 Where all of the above criteria are not met, the investment in the offshore investment will not be an unregistered managed investment scheme.

2. Huntleigh

2.1 We have previously provided advice dated 11 August 2005 that we are of the opinion that the Huntleigh investment does not constitute an unregistered managed investment scheme. Our advice remains.

3. Atlantis

3.1 As indicated on page 20 of the Offering Memorandum Atlantis has the power to create “classes” of shares. If Atlantis is willing to designate a single, separate class to the Alpha Fund (as the sole investor), we believe that no “pooling” of assets will occur and thus the investment in Atlantis will not constitute a managed investment scheme.

3.2 The separate class of shares issued to the Alpha Fund should be administered and maintained separately from other classes of shares. With reference to page 12 of the Radcliffe Offering Memorandum, we understand that under the provisions of the Companies Law, where a Cayman Islands company is established as an SPC, the debts, liabilities, obligations and expenses incurred by one “class of shares” are only enforceable against the assets of the same “class of shares” and not against the assets of any other class. In order for the Alpha Fund to receive such treatment with respect to the debts, liabilities, obligations and expenses of each “class of shares”, Atlantis will need to keep separate and distinct records for each “class of shares” and hold and account for the assets associated with each “class of shares” separately from the other assets of any other class.

Deacons Page 3

31/05/2011

JYT/DEACONSADVICE.DOCX

3.3 We are of the opinion that if this occurs, our advice in Huntleigh can be applied, and there is no “pooling” of assets need to satisfy the definition of a managed investment scheme.

3.4 However, the above information regarding the Cayman Islands law should be confirmed by Atlantis. Confirmation should also be obtained from Atlantis that it is able to hold assets separately for the benefit of a particular class of shareholders under its governing laws.

3.5 We recommend that if this approach is to be adopted, a letter of confirmation be obtained from Atlantis confirming that the “class of shares” issued to the Alpha Fund are held separately, physically and legally. Such a letter will ensure that the Alpha Fund has taken reasonable steps to ensure that its investments are appropriate and conform. Please find attached a copy of the template letter.

4. Cornell

4.1 Page 6 of Offering Memorandum indicates that Cornell is able to issue separate series of shares. Whilst we acknowledge that the existence of “series of shares” is generally used for the purposes of calculation of fees and returns and high water marks, it can equally be applied to assist investment.

4.2 If Cornell were to issue the Alpha Fund with its own separate series in the fashion discussed above in relation to Atlantis, we would be satisfied that the investment would not constitute a managed investment scheme.

5. Radcliffe

5.1 An investment in the Convertible Crossover Portfolio would constitute a managed investment scheme. However, should Radcliffe establish a segregated portfolio as discussed at the top of page 12 of its Offering Memorandum, with the Alpha Fund as the sole investor in that portfolio, we believe that such an investment would not constitute a managed investment scheme.

Should you have any questions please do not hesitate to contact Julie Tramsak on (03) 8686 6527.

Deacons Page 4

31/05/2011

JYT/DEACONSADVICE.DOCX

Yours faithfully John Herlihy Partner Deacons Contact: Julie Tramsak Direct line: +61 (0)3 8686 6527 Email: julie.tramsak@deacons.com.au