amethyst arbitrage fund (& topaz multi-strategy …units of the funds is made pursuant to the...

CRYSTALLINEMANAGEMENT INC.

AMETHYST ARBITRAGE FUND(& TOPAZ MULTI-STRATEGY FUND)

OVERVIEW

Sept. 2013

An alternative source of portfolio stability & added-value


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IMPORTANT NOTICE

The information, tools and materials presented in this document are provided to you for information purposes only and do

not constitute an offer to sell or a solicitation of an offer to buy any security in any jurisdiction in Canada. The offering of

units of the Funds is made pursuant to the Offering Memorandum only to those investors in specific jurisdictions of

Canada who meet certain eligibility of minimum purchase requirements. While every effort has been made to provide

accurate data, no warranty is made to, and no reliance should be placed on, the fairness, accuracy, completeness or

timeliness of the information contained herein. Indicated rates of return include historical annual compounded total returns

for the period indicated, including changes in security value and the reinvestment of all distributions and do not take into

account income taxes payable that could reduce returns. The funds are not guaranteed; their values may change

frequently and past performance may not be indicative of future results.

Amethyst Arbitrage Fund’s strategies involve convertible securities arbitrage (a), merger arbitrage (b) and to a much

lesser extent, other event-driven arbitrage opportunities (c). Although an average representation of the relative strategy

weights through time would be 50/45/5% respectively, there is no single hedge fund index depicting this strategy mix. The

returns of the following benchmarks are presented: the HFRI (Hedge Fund Research Index) Convertible Arbitrage, Merger

Arbitrage and Event Driven sub-indices, all of which are comparable to some aspect of Amethyst’s strategies. Correlation

are presented based on traditional market indices / asset classes for additional analysis in a portfolio construction context.

This presentation refers to the Amethyst Arbitrage FundAmethyst Arbitrage FundAmethyst Arbitrage FundAmethyst Arbitrage Fund, the vehicle

through which Topaz gains exposure to arbitrage strategies

(currently comprising 100% of the Fund)


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HIGHLIGHTS

• NICHE MARKET PRODUCT : Diversified arbitrage fund focused on

CANADA, using - Convertible SecuritiesConvertible SecuritiesConvertible SecuritiesConvertible Securities

- Event Driven (mainly M&As)Event Driven (mainly M&As)Event Driven (mainly M&As)Event Driven (mainly M&As)- FixedFixedFixedFixed----Income (mainly carry/rollover), Income (mainly carry/rollover), Income (mainly carry/rollover), Income (mainly carry/rollover), added 2012

• COMPELLING ANNUALIZED RETURN of 8.6 %, includingincludingincludingincluding the historical fall 2008 credit crisis

• CLIENT BASE - 85% Pension Plans, Foundations & FoHF- 15% HNW and Sub-Advisors

• REPUTABLE & INDEPENDENT 3rd PARTY SERVICE PROVIDERSAuditor, Prime-broker, Fund Administrator, and Trustee

Last

month3 mth 6 mth YTD 1 yr 3 yr 5 yr

Incep-

tion

Amethyst ONshore 0.76 -1.8 -3.7 -3.8 -5.2 3.2 3.7 8.6

As of Jul. 31, 2013

Annualized Return (%)Return (%)


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FUND ADVISOR

CRYSTALLINE MANAGEMENT INC.

• Privately-held Montreal-based Investment Advisor with 10 employees, established in 1998

• Regulated by the Financial Markets Authority (Quebec) and the Ontario Securities Commission (OSC)

• Dedicated to Hedge Fund Management in geographical and/or investment technology “niches”

• Investment management team with more than 60 cumulative years of experience in Canadian capital markets

• Directors & shareholders:o Marc AMIRAULT, President, Principal Manager (Amethyst)

o Jean-Pierre LANGEVIN, Vice President, Portfolio Manager

o Bradley P. SEMMELHAACK, Co-Portfolio Manager (Amethyst)

o Claude PERRON, Chairman


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UNHEDGEDUNHEDGEDUNHEDGEDUNHEDGED

ARBITRAGE («ARBITRAGE («ARBITRAGE («ARBITRAGE (« Market & Delta NeutralMarket & Delta NeutralMarket & Delta NeutralMarket & Delta Neutral »)»)»)»)

PARTIALLY HEDGEDPARTIALLY HEDGEDPARTIALLY HEDGEDPARTIALLY HEDGED

MARKET NEUTRALMARKET NEUTRALMARKET NEUTRALMARKET NEUTRAL

• Market Neutral

RISK

• Little or no market risk hedging• Only long and/or short; little or no asset match• Directional exposure

• Emerging markets• Momentum investing• Managed Futures• High Yield• Global macro• Distressed securities

• Part of market risk is hedged• Long and/or short bias; low asset matching• Directional residual exposure

• Long/Short Stock• Short bias

• Market risk hedged, residual specific risk• No long/short bias, high asset matching• Non-directional

• Mergers & acquisitions arbitrage• Fixed income arbitrage • Regulation “D”• Convertible arbitrage

ARBITRAGE is the « purest » form of hedge funds:It is not based on any market trend anticipation

• Market risk hedged and controlled specific risk• No long/short bias, very high asset matching• Non-directional

OVERVIEWHEDGE FUNDS

Amethyst Arbitrage

Fund’s strategies

CLASSIFICATION ACCORDING TO THE NATURE OF THE STRATEGIESCLASSIFICATION ACCORDING TO THE NATURE OF THE STRATEGIESCLASSIFICATION ACCORDING TO THE NATURE OF THE STRATEGIESCLASSIFICATION ACCORDING TO THE NATURE OF THE STRATEGIES


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RETURN 5 to 10 % above 91day CAN TBills

VOLATILITY 5 to 7 % annualized

SECONDARY OBJ. Capital preservation

Very low correlation w/ traditional asset classes

AMETHYSTINVESTMENT OBJECTIVES & STRATEGIES

Triple strategy, primary focus on Canadian opportunities Typical range

1. CONVERTIBLE SECURITIES ARBITRAGE (40-60%)• Convertible Debentures & Synthetic Convertibles• Warrants

2. EVENT DRIVEN ARBITRAGE (20-40%)• Mergers & Acquisitions• Other ‘pure’ arbitrage opportunities (receipts, etc…)

3. FIXED INCOME ARBITRAGE (15-25%)• Carry & Roll down• Curve / Directional


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• Non-directional, with no Manager market forecasts

• Under normally functioning capital markets, each set of arbitrage positions therefore offers

- Market risk almost completely taken away

- Substantial decrease of issuer-specific risk

Amethyst is part of the Low Risk category of Hedge Funds

The Manager uses only Arbitrage Strategies to Exploit a Niche Market of Structural Inefficiencies

From July 1998 to September 2008, Amethyst’s return volatility level was remarkably stable, at mid-point between that of JP

Morgan World Bonds & CANADA Long Bonds.

AMETHYSTARBITRAGE – RETURNS WITHOUT FORECASTS


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FAVORABLE CONDITIONS in CANADA

o M&A (Focus on Canadian deals < $ 1G)

• Friendly environment = Less risks

• Less competition = Higher yields, typically 6 – 10% before leverage

o Convertibles (Hard assets bias, long term intrinsic value)

• Typical mid-cap issues, unrated

• High coupon & cheap, typical credit spreads of 500-750 bps over Tbills (still around 950 bps in portfolio)

o Fixed Income

• Limited market breadth = More anomalies

• More levels of ‘government-type’ issuers

EXPERTISEo > 70 years of combined experience in arbitrage in Canada

AMETHYST’s EDGEFOCUS on SMALLER SIZE ARBITRAGE OPPORTUNITIES

A market subset too expensive to tackle for mid-size/large foreign hedge funds

A LITTLE EXTRA …

US prime-brokers have a more limited access to small and

mid-cap stock borrowing in Canada then local PB’s


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PERFORMANCEvs. TRADITIONAL ASSET CLASSES

* Sharpe Ratio based on CAN 91 Day T-Bills

HFR: Hedge Fund Research

Major market reversals from July 1998 to 2010• 1998 Asian credit crisis• 2000 Tech bubble & crash• 2001 Recession & recovery

• 2005 Resource sector upsurge• 2008 Financial crisis• 2009-13 Recovery?

• Despite the major 2008 crisis, annualized return since inception (1998) higher than that of Canadian long term bonds

• Very low correlation = Substantial diversification benefits

FROM Jul. 1998 to Jul.

2013AMETHYST (onshore),

NET OF ALL FEES

91d CAN

T-BILLS

CAN Long

Term BondsS&P/TSX

HFRI

Composite

Index

Annualized Return 8.61 %8.61 %8.61 %8.61 % 2.85 % 7.01 % 5.91 % 7.10 %

Annualized Standard

Deviation8.62 %8.62 %8.62 %8.62 % 0.50 % 6.58 % 16.21 % 7.34 %

Sharpe Ratio(*) 0.670.670.670.67 - 0.63 0.19 0.58

Correlation with

Amethyst---- - 0.02 - 0.02 - 0.02 - 0.02 + 0.01+ 0.01+ 0.01+ 0.01 + 0.43+ 0.43+ 0.43+ 0.43 + 0.42+ 0.42+ 0.42+ 0.42


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PERFORMANCEMONTHLY RETURN HISTORY

MONTHLY RETURN SERIES (Amethyst onshore), NET OF ALL FEES

Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year

1998 - - - - - - -0.32 2.69 2.60 1.79 0.44 1.45 8.92

1999 -1.22 0.84 1.25 -2.11 3.11 0.75 2.35 1.34 -1.00 -0.32 1.41 0.91 7.43

2000 0.98 0.21 3.01 2.81 3.06 1.95 -0.22 3.98 3.21 -0.45 -0.57 0.40 19.82

2001 3.27 -1.62 -0.80 1.82 4.36 0.35 0.12 -1.08 -0.97 0.04 1.16 0.70 7.42

2002 1.73 0.88 1.75 0.42 0.27 -2.44 -1.37 1.30 -0.38 0.20 0.39 1.39 4.12

2003 2.41 1.81 0.54 0.57 0.90 -0.16 0.61 2.88 1.34 0.91 1.29 1.32 15.35

2004 1.41 2.19 1.48 0.34 0.17 -0.15 0.44 -0.45 1.82 0.38 0.47 1.41 9.89

2005 0.91 1.36 -1.49 -0.37 0.23 1.91 0.72 1.75 0.24 0.28 2.28 -0.76 7.21

2006 1.49 3.03 3.96 2.50 0.47 0.98 0.29 0.98 -0.51 0.84 -2.71 2.43 14.49

2007 1.59 1.70 0.02 1.19 -0.28 0.38 0.74 0.54 1.57 0.91 -0.63 2.58 10.77

2008 -1.67 1.63 1.37 1.11 1.79 0.98 1.70 1.46 -3.51 -20.08 -13.25 -2.04 -28.81

2009 2.75 2.74 4.71 8.24 7.27 0.57 5.25 4.10 2.05 3.90 0.90 2.75 55.45

2010 0.95 0.75 0.96 1.32 -0.60 0.40 1.66 1.91 1.40 2.58 1.37 1.28 14.87

2011 2.39 -0.50 0.72 0.33 -0.32 0.40 0.63 -1.08 -1.04 0.90 1.42 1.31 5.24

2012 1.99 0.91 0.36 -0.16 -2.65 0.37 0.60 -0.36 -1.57 -2.68 1.29 1.92 -0.11

2013 -0.09 -0.48 -0.78 -0.69 -0.45 -2.12 0.76 0.00 0.00 0.00 0.00 0.00 -3.80


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PERFORMANCEACCUMULATED VALUE


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TOPAZ

MULTI-STRATEGY FUND

OFFERING

• MultiMultiMultiMulti----Strategy Hedge Fund Strategy Hedge Fund Strategy Hedge Fund Strategy Hedge Fund which will gradually offer a mixture of a limited number of low covariance alternative strategies

• Currently 100% invested in arbitrageCurrently 100% invested in arbitrageCurrently 100% invested in arbitrageCurrently 100% invested in arbitrage, via the Amethyst Arbitrage Fund (offshore)

• Step-by-step addition of complementary strategies starting next year


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INVESTMENT OBJECTIVES• ReturnReturnReturnReturn 10 - 12% > 91 days T-Bills

• VolatilityVolatilityVolatilityVolatility 6 - 8 % annualized

• CorrelationCorrelationCorrelationCorrelation < 0.4 with traditional CDN asset classes

TAX EFFICIENT STRUCTURE• No distributions

• Capital Gains taxable only on disposition, planned for Jan. 2017

A QUALITY ALTERNATIVE ASSET, based on solid 14 year track-record of the Amethyst Arbitrage Fund

• Substantial diversification effect (bond & equity portfolios)o Attractive 8.6% ann. returno Low 8.6% volatility, low correlation (< 0.5)

• Low entry point, at $25,000 for accredited investors

• No front/end load fees, no lock-up

• Tax efficient structure

TOPAZSUMMARY

The 2013 federal

budget forces acceptance of subscriptions

<= redemptions in any given month


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TOPAZADMINISTRATIVE STRUCTURE

TOPAZ MULTI-STRATEGY FUNDLEGAL STRUCTURE

• Canadian Pooled Fund Trust• RPP, RRSP, RRIF & DPSP

SERVICE PROVIDERS

• Trustee ComputerShare Co. of Canada• Administrator RBC Dexia Investor Services• Auditors PricewaterhouseCoopers LLC

LIQUIDITY • Minimum Invest. $ 25,000 ($150,000 non-accredited)• Currency $CDN• Valuation/Dealing Monthly• Redemption notice 30 days• Lockup Period None

FEES • Structure Class I 1.5% (>= $1,000,000)Class H 1.7% Class R 2.5%, incl. 1% incl. 1% incl. 1% incl. 1% trailertrailertrailertrailer

+ 20% of excess return

• High Water Mark Yes (perpetual)

AUM (07/13) • Current $CDN 50 million

Management

Performance


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EXHIBIT IEXHIBIT IEXHIBIT IEXHIBIT I

AMETHYST ARBITRAGE FUND

Added value in

Canadian Bond

&

Composite Hedge Fund

portfolios


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TYPICAL BOND PORTFOLIOIMPACT OF INCLUDING AMETHYST


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EXHIBIT IIEXHIBIT IIEXHIBIT IIEXHIBIT II

ARBITRAGE STRATEGY -

AN EXAMPLE


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HUDSON BAY Acquisition of SAKSA Win-Win-Win ARBITRAGE CASE

Hudson Bay makes an all CASH offer for Saks on July 29, 2013:

- Price: 16$/share of SKS

- Expected close: Dec. 31, 2013

- After announcement SKS opened at $15.80

Long SKS at $15.90 and wait for 5 months until the deal closes to make 1.45 % annualized,

before leverage.... Not very exciting.

using Saks CONVERTIBLE DEBT ONVERTIBLE DEBT ONVERTIBLE DEBT ONVERTIBLE DEBT for the same deal… Much more interesting.

Annual Coupon 7.50 % Maturity Dec. 1, 2013Conversion ratio 180.5869 Issued $US 120 M

Trading Price $ 287.00 Parity $ 287.86

Typical Merger Arb

With Convertible Debt


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HUDSON BAY Acquisition of SAKSA Win-Win-Win ARBITRAGE CASE

BETTER POSITIONBETTER POSITIONBETTER POSITIONBETTER POSITION Long SKS convertible debt, and Short SKS stockLong SKS convertible debt, and Short SKS stockLong SKS convertible debt, and Short SKS stockLong SKS convertible debt, and Short SKS stockbased on conversion ratio based on conversion ratio based on conversion ratio based on conversion ratio (100% Hedged (100% Hedged (100% Hedged (100% Hedged with with with with lockedlockedlockedlocked----in returnin returnin returnin return).).).).

POSITIVE CARY: Collect the 7.5% Coupon until Dec 1 = very attractive return on Capital due to 100% short position.

CAPTAURE VOLATILITY: Trading short position as SKS stock price hovers around the takeover price.

RISKS: If deal cancelled, downside is hedged viashort position (while still earning coupon).

Upside: Low probability of premium expansion on the convertible.

No benefit if there is a higher takeover bid.

amethyst arbitrage fund (& topaz multi-strategy …units of the funds is made pursuant to the...

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