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General Details
The prospectus is created as an offer document for a new or existing company seeking to raise capital from either private or public investors using an Initial Public Offering (IPO). In some situations a private company not using a stock market will create a document known as an Information Memorandum. Both documents set out to provide detailed information about the company, its mission, strategy, operations, financial information and investment risks.
Company: Secure Hedge Fund (SHF)Outstanding Shares: 9,202,043
Company Website:
Board of Directors
Chief Executive Officer: Duke MercyFund Manager: Duke Mercy
Director: Daman Shan
Director: Lajnus1 Balut
Prospectus
CEO's Real Life Name: PrivateCEO's Real Life Location: The Netherlands
(Real life details are optional as the WSE is a fictional securities exchange based on avatars in the virtual world of Second Life.)
Cash on Hand: L$160,000.00Land Owned: 0m2
Land Value: L$0.00/m2
Net Tangible Assets (NTA): L$$160,000.00
(NTA is calculated as the total assets of a company, minus any intangible assets such as goodwill, patents and trademarks, less all liabilities divided by Shares Outstanding. Also known as "net asset value", NAV or "book value", BV.)
Monthly Revenue: L$30,000.00
Monthly Expenses: L$0.00
Chairman's Letter
Dear potential and current shareholders,Second Life has seen an extreme increase in inhabitants over the past months and analysts expect this booming trend to continue in the near future. This booming trend in Second Life is clearly visible in the huge demand for raising money by listing companies on the WSE as well. As a result, some of the companies listed on the WSE have already doubled a few times. However, not everyone wants to go public with their company by listing it on the WSE as some people prefer to keep their companies private. Therefore there is still a large market for private investments that remains unavailable for the public. Apart from this, not all companies listed at the WSE have seen impressive raises either: some are currently even sold for far less than their Initial Public Offering price or didn't have the genuine intentions that they claimed to have.
All of this calls for a professional Hedge Fund that protects you from the risks of investing in individual companies and participates in the profitability of private investments that are unavailable for the public. That is exactly what the Secure Hedge Fund plans to be doing. By emphasizing on Risk Management, diversity and fundamental research, the SHF aims to perform well above the market while maintaining a risk-averse portfolio. Part of these goals will already be reached by investing in both stocks listed on the WSE, possibly other stock exchanges, as well as privately owned companies. I expect a promising, interesting and profitable future for the SHF and I hope you want to participate in it and share in the success.
Yours sincerely,
Duke Mercy
Business Overview
The goal of the SHF is to become the leading investment corporation listed on the WSE. That is not our only goal however; the SHF also aims to provide its shareholders with a safe and risk-averse way of investing in the WSE and SL’s overall booming economy. The SHF will specialize in Risk Management, while maintaining an excellent rate of return.Business Strategy
The main Business Strategy of the SHF is threefold:- Day trading: A certain part of the funds will be managed extremely actively on the WSE to profit from small price fluctuations by buying and selling stocks simultaneously during the whole day.
- Investment: Extensive fundamental research will be done to determine which stocks to invest in on long-term. Depending on the available funds, the market sentiment and the trading activity on the WSE the actual amount of money invested on long-term may be smaller or larger. Other stock exchanges are to be considered as well.
- Private: If any promising private investment opportunities arise, the SHF will certainly consider them.
Apart from this, the SHF will try to maintain a normal market surrounding its own stock. Because the SHF is a Hedge Fund rather than an ordinary company, it will keep the price of its stock around its real intrinsic value.
The SHF will therefore show up as buyer and seller of the SHF stock, to create liquidity and stability in its own stock price. The SHF will try to keep the stock price within a 10% range of the Net Asset Value Per Share (NAVPS) at all times. Apart from exceptional situations where someone buys or sells a large amount of shares, this should mean that the SHF will always trade around its intrinsic value. Any money that the SHF makes from being a market maker in its own share will be for the better of the shareholders of the SHF.
Business Strengths
The WSE is a relatively new stock market that is still in its child shoes. For this reason the investment opportunities are extreme, which can easily be observed from the various companies that have already doubled up various times. These investment opportunities obviously come with great risk too, however. This requires a consistent and effective Risk Management to avoid extreme losses. Furthermore the future of SL is looking very promising as well and as a result the private investments the SHF will be participating in may prove to be extremely profitable as well. The great investment opportunities combined with a decent Risk Management will be strength of the SHF.Market Overview
While the SHF will have some competition with other investment companies, this does not limit the abilities of the SHF too much. Investing in securities is something that is done independently and the competition with the other investment companies will translate itself mainly in the means of performance: who achieves a good rate of return and who takes the least risk in doing so. The SHF will try to distinguish itself from its competitors by having an extensive and conscious Risk Management, which, in the long run, should ensure a more reliable and secure profit instead of some lucky ‘gambles’.Use of Capital
All the money gained from Initial Public Offering will be invested in a variety of stocks.The fund manager (Duke Mercy) will not be paid a salary, however there will be a 10% performance fee on the profits earned by the SHF during a month (if the SHF makes profit). This ensures that the fund manager will have to perform well in order to profit from the SHF himself. Furthermore, the fund manager will be investing $500-$1000 of his own money in the SHF as well, which should help the credibility of the fund manager and ensure that he does everything he can to perform well.
Every month will start with a complete report of the previous month, obviously including important info like the total amount of outstanding shares, the increase / decrease in the amount of outstanding shares, the profit / loss gained in the past month, the total *Fair Value of the assets owned and, with that, the Net Asset Value Per Share (NAVPS) of the SHF. Furthermore, also at the start of the month, a dividend will be posted at 20% of the Profit Per Share. If no profit was made or the dividend payout would represent less than L$ 0.01 per share, no dividend will be paid out.
Please be aware that the actual amount of shares the company would have after a fully subscribed IPO (10 million shares) does *not* represent the real amount of "outstanding shares". The amount of outstanding shares are defined as those shares that are actually sold to investors - all the shares that are not sold to investors are owned by the company itself. Dividend on those shares will simply stay in the company. The reason for having more shares is to be able to let the amount of outstanding shares vary and increase easily.
Risk Factors
We can basically subdivide the risks in three categories: general risks of SL, general risks of any company listed at the WSE and risks specific to the SHF. Because the first two risks are general risks of trading at the WSE, I will only be elaborating on the latter risk.The list of specific risks for the SHF is not that extensive really. In fact, it all comes down to one thing only:
- The investments Duke Mercy makes on behalf of the SHF may turn out wrong and as a result the SHF stock may loose a big portion of its value.
While the description of the risk that you are taking by investing in the SHF is simple and short, the effect this has on the management of the SHF is certainly not. To minimize the risk as much as possible, Risk Management will play a central role in the management of the SHF.
In short, this Risk Management will at least consist of:
- Spreading the money wisely over a variety of companies. This also means spreading it between higher risk (with higher profit opportunities) and lower risk investments and investing it in various market sectors instead of just one.
- Avoiding extremely large positions in specific companies, as such positions may be difficult to sell when wanted.
- Investing in both stocks on the WSE, other stock exchanges and promising private investment opportunities.
- Active and daily management of the SHF portfolio.
Management
The Secure Hedge Fund will be run and controlled by Duke Mercy. Fund management is not necessarily something that requires an extensive team of directors, as is shown by enough successful real life (hedge) funds.While Duke Mercy has the necessary trading experience in real life stock markets to run the SHF, he also realizes that the WSE is considerably different from real life stock markets. Some companies listed on the WSE have already doubled up a few times and these profit opportunities obviously come with enormous risks. The WSE will obviously do their best to prevent huge scandals and white collar crime, but due to the nature of SL their abilities will be limited and being cautious is therefore the only real defense we have. As mentioned, Risk Management will therefore be a major aspect in the management of the SHF and may even be the key factor that determines the eventual success. Duke Mercy realizes this and will therefore continuously check the risk-aversion of the investment portfolio of the SHF.
Daman Shan and Lajnus1 Balut are directors, who will advise Duke Mercy and help mostly with the fundamental analysis of the companies quoted on the WSE.