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Launched in February of 1998, the Vertex Fund's primary objective is to maximize returns on an absolute basis. We look for investment opportunities on a global basis and unlike many hedge funds, the Vertex Fund does not use futures and leveraging is restricted to 15% of total portfolio assets. The fund is appropriate as part of a portfolio or as a portfolio in and of itself, in order to reduce correlation with traditional equity and fixed income funds, and for those with long investment horizons.

Vertex Fund investors should benefit from the downside protection inherent in the fund's hedged component.

Often hedge funds will concentrate on one specific strategy. Experience has taught us that opportunities in any one strategy may become scarce from time to time therefore many strategies are used to drive performance. The strategy chosen is based on the relative risk return tradeoff against others. Our investment style can best be described as opportunistic.

The fund managers concentrate on the following strategies:

Merger Arbitrage

Merger arbitrage seeks to capture the price spread between current market prices of corporate securities and their value upon successful completion of a takeover, merger, spin-off, or similar transaction involving more than one firm. This opportunity involves buying the stock of target companies after a merger announcement and shorting the acquiring company's shares.

The common stock of target companies typically trades at a discount to the present value of the merger offer. This discount represents both the time value of money and the possibility that the merger will not be consummated. Factors affecting the size of the discount are the possibility of a higher offer, the ease or difficulty in hedging the merger and regulatory issues. Vertex One mitigates the risk of a merger not going through by taking a portfolio management approach and diversifying into many different merger transactions.

Covered Call and Option Writing

Covered call writing consists of the sale of a call option while simultaneously owning the underlying security. The objective of writing calls against a stock held is to increase income and decrease volatility within the portfolio. Returns come from both collection of option premiums and increases in the underlying stock held. Downside protection is equal to the amount of the option premium collected.

Event Driven

Event driven strategies focus on identifying investment opportunities that benefit from specific events or conditions. Event driven strategies involve taking positions in companies that are anticipated to be the subject of a merger, bankruptcy or other special situation. These positions are not typically hedged, thus are influenced by market conditions and involve vigorous fundamental analysis.

Distressed Securities

Both debt and equity are considered as opportunities. Distressed securities are those issued by firms that are either close to, in or coming out of bankruptcy. The two most common types of transaction that are undertaken in the Vertex Fund involve:

1) Selling short shares of companies that are expected to declare or have already declared bankruptcy. Prior to a taking a position, an analysis of the financial statements will reveal that liabilities are far in excess of assets rendering the equity (shares) worthless.

2) Selling short one class of a distressed company's capital structure and purchasing another. An example is selling the firm's equity short and purchasing the firm's bonds. Returns come from both the gain on the short position when the equity falls towards zero and the bondholders' portion of the proceeds from the liquidation of the firm's assets.

Convertible Arbitrage

Convertible arbitrage is an investment strategy whereby one is simultaneously long the convertible securities and short the underlying equities of the same issuer, "working the spread" between the two types of securities. This is considered a relatively conservative market neutral strategy (low correlation to the market) with a medium term investment period and medium expected volatility. Profits are made when the stock price falls more than that of the convertible security, which eventually retains its value as a straight bond or preferred. The position is hedged against the short becoming offside resulting from the conversion of the bond to equity.

Other strategies are used to a greater or lesser extent depending upon shifting risks and returns of investment opportunities over time. By combining these different strategies within one fund, Vertex One has delivered excellent returns that have low correlation with the stock market with very low monthly volatility.

Please read the Vertex Fund Offering Memorandum for more information.

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