About the Fund

The Citadel Value Fund is a SICAV based in Luxemburg, one of Europe's principal fund centres. It was established on January 3rd, 2002 and began trading on February 11th, 2002. A SICAV is an open-ended investment fund. In an open-ended fund, investors can enter or leave on an on-going basis (in the Fund's case every 2 weeks) and the size of the Fund adjusts accordingly with new shares being issued, or existing shares withdrawn. As investors enter the Fund, they purchase shares at the same Net Asset Value per share as the share is currently valued at. This puts new and existing shareholders on exactly the same footing.

Regulation

The Citadel Value Fund has a permit from, and falls under the regulation of the Luxemburg regulatory authority, Commission de Surveillance du Secteur Financier (CSSF). As such it must comply with numerous requirements, most of which are described in the Fund's prospectus. The legislation under which the Fund operates is based on a European Union directive which gives the Fund the possibility - subject to local registrations - of being freely marketed throughout the EU. In addition to Luxemburg, the Citadel Value Fund is currently registered with the Autoriteit Financiele Markten (AFM) allowing it to be sold to the general public in the Netherlands.

Listing

The Citadel Value Fund SICAV is listed on the Luxemburg Stock Exchange.

Fee structure

The Fund's fee structure is composed of a modest fixed fee, plus an incentive fee based on the absolute returns received by shareholders. We believe that the level of fees should be tied to what investors in the Fund earn, and not to how successful the Fund is in accumulating assets. Therefore, unlike the traditional mutual fund which usually charges between 1% and 2% of assets under management as an annual 'management' fee, irrespective of performance, the Citadel Value Fund's advisory fee is a minimal 0.75% per year.

The incentive fee is based on two variables; the annual average EURIBOR rate (a benchmark European interest rate), and the Fund's absolute performance in a particular year. The Euribor is the hurdle rate. That means that if the average annual Euribor rate was 5%, then the first 5% of the Fund's performance in that year is free from an incentive fee. Naturally, if the annual performance is negative there is no incentive fee. Above the risk-free 'hurdle rate', 20% of the Fund's performance will accrue as an incentive fee.

Assuming an EURIBOR rate of 5%, and an annual perfomance of about 8.5 to 9% (i.e. somewhat above the 7-8% long-term historical average for equities) the total investment advisory fees (advisory fee + incentive fee) will approximate that of the 'average' equity fund (about 1.5%). Only by performing better than stocks have historically done, will the total fees be higher. Should the Fund's performance be worse than this historical average, then its fees will be considerably less than those of the 'average' equity fund.

Fee summary

Advisory fee:            0.75% of the Net Asset Value (NAV)

Incentive fee:            20% of all gains exceeding the 'risk-free' or hurdle rate (defined as the annual
                                   average EURIBOR rate)

Subscription fee:      0%

Redemption fee:      1% of the NAV

The Fund charges a limited redemption fee, which accrues in full to the Fund and its remaining shareholders. It has three purposes:

1. pay the substantial transaction costs (subscription & redemption) incurred by the fund and its remaining shareholders

2. compensate investors still in the fund for the costs associated with freeing up cash to meet redemption's

3. reinforce the long-term investment horizon of the fund

Buy and sell spreads

In many funds which are traded on an exchange, investors pay a spread based upon the difference between the market price and the fund's NAV when buying or selling. This can amount to 1% or even more. Because all shares of the Citadel Value Fund are issued or redeemed directly by the Fund, investors do not pay a spread. The market price for subscriptions and redemptions (excluding the redemption fee) is exactly the same as the NAV per share.

Service providers

The Fund is supported by several reputable and professional organisations.

• KBL European Private Bankers S.A. serves as custodian which, among other activities, involves safe-keeping the Fund's assets such as shares and cash.

• The administrator of the Fund is Kredietrust Luxembourg which, in-turn, has delegated the function to the European Fund Administration (EFA). As such, EFA is responsible for calculating the Net Asset Value, maintaining the shareholder registry and, generally, taking care of most administrative matters.

• The Fund's auditor is HRT Révision S.A.

Some additional data on the fund

Class 'P' (private investors) shares:  ISIN code: LU0141953439
Bloomberg code: CITVALU LX

UCITS IV regulation

Voting Policy:  Under UCITS IV legislation all Luxembourg SICAVS are required to have a formal voting policy and publish this on their websites.  The following is Citadel’s policy:

An integral part of the Fund’s investment strategy is to closely monitor the business, operational and financial status of companies held in the portfolio.  This includes reviewing proposals which are put to a shareholder vote.  In most cases the matters submitted to a vote are routine in nature and are not deemed to be material to the value of the Fund’s investment.  In such cases any potential benefit to be gained from exercising its voting rights is outweighed by the time, hassle and costs of doing so.  In these cases the Fund makes no use of its rights.  In cases where the result of a shareholder vote could lead to a material change in the value of a Fund’s investment in a security, and where furthermore the Fund possesses significant voting rights which could influence the final result, the Fund does exercises its rights.  The Fund naturally exercises its voting rights solely on the basis of what is determined to be in the best interests of the Fund and its shareholders.  

Conflict of interest procedure:  As required by UCITS IV legislation Citadel has created a formal conflict of interest procedure.  Shareholders may request a copy at info@citadelfund.com.

Complaints procedure:  Since the recent implementation of UCITS IV legislation all Luxembourg SICAVS are required to have a formal complaints procedure and publish it on their website.  Any formal complaints may be addressed to the Citadel Value Fund, attn: Mme. M. Watté-Bollen, Director and sent in writing to the Fund's registered address at 11, rue Aldringen, L-1118 LUXEMBOURG.  The full complaints procedure can be requested at info@citadelfund.com.