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Statement re Investment Policy

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

 

27 June 2008

The Company's investment policy is to produce absolute returns through a range of hedge fund strategies. The Company meets this by investing substantially all of its assets in New Star Multi Strategy Master Hedge Fund Limited (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 ('New Star').

In the period since the Company's launch on 1 August 2006 to 13 June 2008, the net asset value total return on the Income Shares and the Growth Shares has been 11.96 per cent. and 11.57 per cent. respectively. Between 1 January 2008 and 13 June 2008 the net asset value total return on the Income Shares and Growth Shares is 3.34 per cent. and 2.64 per cent. respectively.

The Company is a closed-ended fund listed on the London Stock Exchange's AIM Market and on the Channel Islands Stock Exchange. As such, capital gains made by UK taxpaying shareholders in the Company are subject to UK capital gains tax.

New Star Multi Strategy Hedge Fund Limited ('Multi Strategy') is a Cayman-domiciled open-ended hedge fund with monthly liquidity. At 31 May 2008, its assets were approximately $108 million. It also invests substantially all of its assets in the Master Fund and its shares are listed on the Irish Stock Exchange. Multi Strategy is an offshore fund for UK tax purposes and has applied for 'distributor fund' status for the period since launch to 30 June 2007 and has conducted its affairs thereafter in accordance with the requirements of such status; thereby providing UK tax payers with an investment return which should be subject to UK capital gains tax. 

Following recent announcements by HM Revenue and 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.

The Company intends to put forward reconstruction proposals to provide shareholders with the option of either a rollover into Multi Strategy, a cash exit or a combination of the two. 

Shareholders' entitlements to receive shares in Multi Strategy or cash will be based on the full net asset value per share, after allowing for the costs of implementing the proposals estimated at less than 1 per cent. of net asset value. Shareholders may only roll over into Multi Strategy to the extent that they are able to meet the investment requirements of Multi Strategy.

A circular setting out the proposals in detail and giving notice of the requisite extraordinary general meetings is expected to be dispatched to shareholders in due course and, assuming shareholders approve the resolutions to be proposed at the extraordinary general meeting, the proposals are expected to be implemented in full by the end of August 2008.

Enquiries: 

Ravi Anand, New Star Asset Management Limited, 020 7225 9292

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. 

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