merrill lynch investment solutions - marshall wace tops

Merrill Lynch Investment Solutions - Marshall Wace TOPS UCITS Fund(Market Neutral)

August 2009

FOR INSTITUTIONAL INVESTORS


Source: Marshall Wace LLPConfidential to recipient; not for reproduction or redistribution. Please refer to pages 39-42 for Important Disclosures.

2222

•

Founded in 1997 by Paul Marshall, Ian Wace and Duncan Ford. The business remains privately owned

•

More than eleven years of consistent commitment to the interests of investors. No gates imposed or NAVs suspended by any funds managed by

Marshall Wace

•

Industry leading information and risk management systems

•

Robust global infrastructure and compliance procedures

Hong Kong

Opened in October 2006Pan-Asia tradingTOPS contributor managementOperationsIncorporates MW GaveKal Asia Limiteda joint venture between Marshall Waceand GaveKal established in June 2008

About Marshall Wace

Greenwich, Connecticut

Opened in July 2004North and Latin American tradingTOPS contributor managementPortfolio management & optimisationAmericas risk managementOperationsGlobal financial managementAmericas Investor relations and marketing

LONDON HEADQUARTERS

Opened in 1997 European tradingTOPS contributor managementPortfolio management & optimisationManagement of Core investment strategyGlobal investment teamGlobal risk managementOperationsInvestor relations and marketingFinance, accounting and technologyLegal, compliance and human resources



3

Merrill Lynch Role as Sponsor

Merrill Lynch has established a Luxembourg Sicav (Merrill Lynch Investment Solutions), approved by the Luxembourg regulator – CSSF

Merrill Lynch International acts as Sponsor for the Sicav and as such has the following duties:

Appointment of custodian and administrator

Obtaining approval from the CSSF for the Sicav and related Sub-Funds

Payment of fees and expenses connected with the management and operation of the Fund

Risk monitoring and compliance reporting for the Fund in accordance with UCITS III regulations

Trade monitoring and reconciliation of NAV levels as provided by the administrator (EURO-VL Luxembourg S.A.)

Marshall Wace LLP is the Investment Manager for the first sub-fund of the Sicav

Further sub-funds will be added to the Sicav in due course



4444

Alpha CaptureIn 2001, Marshall Wace began development of the MW TOPS strategy to poll selected salespeople, country specialists, sector specialists and strategists initially in European equity markets and subsequently in all of the major global equity markets. This stemmed from a belief that there is alpha residing in the expertise, information and analytical edge of these market practitioners that is rarely measured and therefore remains largely unrealised.

Since 2002, the MW TOPS strategies have sought to identify and extract this alpha through a web-based interface with these contributors. We seek to identify patterns in their behaviour and to cross reference their trade ideas with others. By synthesising sophisticated data on individuals and by exploiting patterns of behaviour within the overall network of market participants, Marshall Wace is able to create highly diversified and active portfolios. Relatively high levels of turnover facilitate the extraction of idiosyncratic returns for clients and mitigate unwanted risks.

Marshall Wace TOPS (Trade Optimised Portfolio System)

•

Marshall Wace TOPS is a unique investment process which, as at June 2009, captured the idea flow of ca. 2,000 equity sales people, sector specialists, country specialists and strategists worldwide in real time.

•

Marshall Wace receives approximately 100,000 equity ideas per annum via the TOPS process. As at June 2009, the database contained ca. 1,214,901 entries* globally.

•

Through proprietary optimisation techniques and robust risk management processes, the Marshall Wace TOPS portfolios* have delivered strong performance since July 2002 with high success ratios and minimal sectoral, country or market cap risk.

•

Marshall Wace TOPS has a proven track record of alpha generation in a variety of market conditions. Marshall Wace has been operating a successful market neutral strategy within the European TOPS applications between October 2006 and November 2007.

*Inception of European TOPS: July 2002; inception of Americas TOPS: February 2005; inception of Asian TOPS: June 2006; inception of Global TOPS: May 2007



5

Merrill Lynch Investment Solutions – Marshall Wace TOPS UCITS Fund (Market Neutral) The Opportunity

Accessing the unique Market Neutral TOPS strategy through a UCITS III framework

UCITS III Luxembourg Fund

•

Highly regulated – investor protection and risk diversification

•

Weekly liquidity

•

Transparency – daily confirmed NAVs, monthly factsheets

•

Regulated service provider and independent risk monitoring

•

Price verification and accounting – done by third parties

•

Fiscal advantages versus traditional offshore funds in certain jurisdictions

•

Simplified access to alternative investment strategies through an approved regulatory framework

Equity Market Neutral TOPS

•

Extremely liquid strategy

•

Highly diversified portfolio

•

Unique and differentiated source of alpha and return

•

Industry leading information and risk management systems

•

Minimal correlation to equity markets

•

Low correlation to other market neutral strategies

•

Minimal key man risk



6

Investment ObjectiveTo provide consistent absolute returns by capturing the alpha residing in the stock ideas of contributors sales people in investment banks, research boutiques and local brokers worldwide.

The Marshall Wace TOPS UCITS Fund (Market Neutral) aims to generate an annualised return (after payment of fees and expenses) of 8-10% with a low volatility target of 3-5%.

Merrill Lynch Investment Solutions – Marshall Wace TOPS UCITS Fund (Market Neutral) Fund Characteristics

Fund Characteristics

•

Regional Coverage: Predominantly European with global reach

•

Investment instruments include: Listed equities, Index futures

•

Liquidity: On average 98% of the portfolio can be liquidated in one day

•

Net Market Exposure Range: -15% / +15%

•

Concentration: Highly diversified portfolio of approximately 1000-1500 names

Maximum holding in a single stock, normally no more than 3% of NAV

•

Turnover 3-5 times per month



777

Marshall Wace TOPS UCITS Fund (Market Neutral) Fund Characteristics (Continued)

• Structural portfolio diversification supported by disciplined risk management practices and culture - across countries, sectors and stocks

• All major sources of risk (Factor, Country, Sector, Liquidity) controlled to emphasise stock specific risk

• No use of complex illiquid derivative instruments

Risk Management Targets

Sector Exposure 12.5% NAV

Country Exposure 12.5% NAV

Mid-Cap Exposure 20% NAV

Single Factor Exposure 15% TR**

Net Market Exposure +/- 15% NAV

Emerging Market Exposure 5% NAV

Single Stock Exposure normally <3% NAV

** TR = Total Risk

Real Time Dynamic Risk Management

•

Portfolio assessed in real time using multiple fundamental factors (including industry groups, size, growth, momentum and exchange rate sensitivity).

•

Marshall Wace operates a daily screening process to monitor risk limits.

•

Factor risk mitigated either using sector swaps or customized baskets.

Structural Portfolio Diversification

•

The frequency of idea generation and the high diversification within the portfolio ensures that no single factor dominates over time.

•

The breadth and style diversity of alpha source among contributors ensure the polling mechanism is not biased towards a particular factor.

•

Unlike quant models, the TOPS process relies on dynamic human inputs responding to changing market conditions, rather than passive-factor models.



88

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

-2.0% -1.0% 0.0% 1.0% 2.0%

Lipper Global Hedge Equity Market Neutral Index Net Daily Returns (X-Axis)

Mar

shal

l Wac

e TO

PS U

CIT

S Fu

nd (M

arke

tN

eutr

al) N

et D

aily

Ret

urns

(Y-A

xis)

-10%

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

-10% -5% 0% 5% 10%

MSCI AC Daily TR Net Europe Local Index Net Daily Returns (X-Axis)

Mar

shal

l Wac

e TO

PS U

CIT

S Fu

nd (M

arke

tN

eutr

al) N

et D

aily

Ret

urns

(Y-A

xis)

88

Marshall Wace TOPS UCITS Fund (Market Neutral) Market and Strategy Correlation

The strategy exhibits minimal correlation with the market1,2 or with other market neutral hedge fund strategies3,2

1 MSCI AC Daily TR Net Europe Local Index 2 Analysis based on daily data from 31 December 2007 to 30th June 20093 As measured by the Lipper Global Hedge/Equity Market Neutral Index

Correlation: 0.10137Correlation: -0.03883



9

Investment Manager

Sponsor

Investment Strategy

Domicile

Launch Date

Share Classes

Currency Denomination

Issue Price

Minimum Subscription

Subscription Deadline

Redemption Deadline

Valuation Day

Investment Management Fee

Performance Fee (A Shares)

Performance Fee (B Shares)

Sales Charge

Redemption Charge

Operating and Administrative Expenses

1 See Important Disclosures on page 40 for Definition

Marshall Wace LLP

Merrill Lynch International

Market Neutral - Long/Short Equity

Luxembourg

November 2007

Accumulation and Income Shares

Euros (Acc. & Inc.), Sterling (Acc. & Inc.) and US$ (Acc.)

€100, £100 and US$100

€1m, £1m and US$1m

12 p.m. Luxembourg time; 3 Banking days prior to the relevant Valuation Day

12 p.m. Luxembourg time; 3 Banking days prior to the relevant Valuation Day

Every Wednesday of the month that is a Banking Day

1.75% p.a.

25% of the outperformance above EONIA® Total Return Benchmark1

15% of the outperformance above High-Water Mark

None

None

0.30% p.a.

Merrill Lynch Investment Solutions – Marshall Wace TOPS UCITS Fund (Market Neutral) Institutional Share Classes: (Sub-Fund of the Merrill Lynch Investment Solutions SICAV)

FOR INSTITUTIONAL INVESTORS 10

Merrill Lynch Investment Solutions – Marshall Wace TOPS UCITS Fund (Market Neutral) – Performance Review



11

Performance Review: July 2009

/Morgan Stanley Capital International Inc. (“MSCI”)/Lipper Indices/Merrill Lynch International

¹Return net of all fees. Past performance is not necessarily indicative of future results

Merrill Lynch Investment Solutions - Marshall Wace TOPS UCITS Fund Portfolio Liquidity (Days to liquidate – July 2009) Market Capitalisation Analysis (as of 31st July 2009)

Source: Merrill Lynch International Source: Merrill Lynch International

Other ‡

Small Cap

Mid Cap

Large Cap

-40% -30% -20% -10% 0% 10% 20% 30% 40%

Short Long Short Long

0-1 day99.50%

1-5 days0.50%

2008

Marshall Wace TOPS UCITS Fund (Market Neutral)¹

JanuaryReturn

FebruaryReturn

MarchReturn

AprilReturn

May Return

June Return

July Return

August Return

September Return

October Return

November Return

December Return

2008 YTD Return

Share Class A (Acc) EUR 0.76% 2.22% -1.55% 0.48% 1.99% 2.60% -3.31% -0.97% -7.07% -0.68% 0.47% 1.06% -4.34%

MSCI Daily AC TR Net Europe Local Index -11.67% -0.04% -2.56% 6.08% 1.18% -9.71% -2.26% 1.74% -12.10% -14.28% -5.06% 0.61% -40.34%

Lipper Global Hedge/Equity Market Neutral -0.88% 1.44% 0.20% 0.38% 0.83% 0.61% -0.86% -2.33% -2.49% -3.60% -0.31% 1.91% -5.12%

2009

Marshall Wace TOPS UCITS Fund (Market Neutral)¹

JanuaryReturn

FebruaryReturn

MarchReturn

AprilReturn

May Return

June Return

July Return

August Return

September Return

October Return

November Return

December Return

2009 YTD Return

Share Class A (Acc) EUR 1.70% 0.31% 0.74% 0.21% 1.08% 0.61% -0.12% 4.61%

MSCI Daily AC TR Net Europe Local Index -6.17% -9.01% 3.98% 13.01% 4.93% -2.12% 9.32% 12.64%

Lipper Global Hedge/Equity Market Neutral -1.81% -0.93% 1.35% 0.60% 3.84% -0.34% 0.38% 3.04%



12

Performance Review: July 2009 - Exposures

Sector and Country exposures as at 31st July 2009 – Share Class A (Acc.) EUR

/Merrill Lynch International

‡ Positions with no specific category

Marshall Wace TOPS UCITS Fund Exposures by Sector

Longs as % NAV

Shorts as % NAV

Marshall Wace TOPS UCITS Fund Exposures by Country

Longs as % NAV

Shorts as % NAV

Automobiles & Components 1.68% -0.68% Africa/Middle East 0.00% 0.00%Banks 4.76% -4.53% Developed Asia 5.23% -5.34%Capital Goods 5.72% -6.37% East Europe 0.00% 0.00%Commercial Services & Supplies 1.19% -1.24% Latin America 0.01% -0.01%Consumer Durables & Apparel 1.23% -1.60% North America 16.37% -16.35%Consumer Services 1.77% -1.27% Other Asia 2.57% -2.48%Diversified Financials 2.76% -1.70% West Europe 40.39% -39.89%Energy 4.64% -5.32% Other‡ 0.01% -0.01%Food & Staples Retailing 2.45% -2.12% Total 64.58% -64.07%Food Beverage & Tobacco 3.88% -4.07%Health Care Equipment & Servic 1.95% -1.99%Household & Personal Products 0.35% -1.30%Insurance 2.75% -1.98%Materials 5.13% -5.50%Media 1.82% -1.71%Pharmaceuticals, Biotechnology 5.76% -5.47%Real Estate 1.25% -1.43%Retailing 2.10% -2.98%Semiconductors & Semiconductor 1.12% -0.97%Software & Services 1.83% -1.56%Technology Hardware & Equipmen 1.75% -1.28%Telecommunication Services 3.52% -3.83%Transportation 2.45% -1.36%Utilities 2.50% -2.93%Other‡ 0.24% -0.88%Total 64.58% -64.07%



13

% Contributors Generating Opportunistic FundamentalPositive Alpha TOPS TOPS

Rolling 12 months to Mar-09 75% 75%Rolling 12 months to Dec-08 70% 67%Rolling 12 months to Sep-08 62% 57%Rolling 12 months to Jun-08 76% 68%

13

Marshall Wace TOPS UCITS Fund (Market Neutral) Adapting to the Market Environment - September 2008 to March 2009

Temporary reversion in positive alpha generation by contributors

• Improved profit-taking discipline

• Shorter duration of ideas

• Smaller position size

• Lower gross market exposure

• Lower net market exposure

• Increased level of focus by contributors

TOPS Contributors Behaviour in Challenging Markets

• New optimisation algorithms across all models

• Newly developed risk barometers to assist the management of gross market exposure (GME) and realised volatility

• Tightened risk targets – sector and country

Optimisation and Risk Management Evolution

Improved Contributor Alpha Generation

Early Warning Indicators



1414

Portfolio Weight Overlap

100%

51%

41%37%

100%

50%

40%

100%

50%

100%

51%

41%50%

37%40%

50%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Apr-09 May-09 Jun-09 Jul-09

2 April 09 Portfolio 1 May 09 Portfolio 1 June 09 Portfolio 1 July 09 Portfolio

1414

Marshall Wace TOPS UCITS Fund (Market Neutral) The Current Market Environment

•

Reduced Gross Market Exposure. As at end July 09 GME is ca. 130% and it averaged 105% in H1 09 compared to 74% in Q4 08 and 175% in Q3 08

•

Early Warning Indicators assisting the management of GME and realised volatility

•

The constant submission of fresh ideas allows the TOPS portfolios to evolve with changing market conditions. This is an important dynamic of risk

management as contributors seek to identify new opportunities for alpha delivery

As at July 1st 2009, only 37% positions overlap with those held on

2nd April 2009

Marshall Wace TOPS UCITS Fund (Market Neutral) GME

129%

114%

86%

141%

187%196%208%

225%224%224%202%

246%

70%66%97% 92%

99%113%

114%

40%

90%

140%

190%

240%

290%

Jan-08Feb-08Mar-08Apr-08May-08Jun-08Jul-08Aug-08Sep-08Oct-08Nov-08Dec-08Jan-09Feb-09Mar-09Apr-09May-09Jun-09Jul-09



15

Summary: Key Benefits to Investors

• Highly regulated for investor protection

• Weekly liquidity

• Regulated service provider and independent risk monitoring

• Transparency – daily confirmed NAVs, monthly factsheets

• Price verification and accounting – done by third parties

• Fiscal advantages versus traditional offshore funds in certain jurisdictions

UCITS III Luxembourg Fund

• More than 10 years of consistent commitment to investors: no gates imposed, no liquidity terms changed

• Robust global infrastructure and compliance systems

• Industry leading information and risk management systems

• More than 10 year history of superior risk-adjusted returns

Marshall Wace LLP

• Revolutionary investment process with long record of superior risk-adjusted returns

• Extremely liquid strategy

• Highly diversified portfolios

• Diversified source of alpha

• Minimal key man risk

TOPS

• Unique source of alpha and return, differentiated from other long/short equity, quant or systematic strategies

• Minimal correlation to equity markets

• Low correlation to other market neutral strategies

Market Neutral TOPS


Marshall Wace TOPS - Investment Process

A unique investment process designed to capture, optimise and monetise the alpha within the brokerage industry



17

Marshall Wace TOPS Investment Process

A unique, quasi-industrial, end-to-end process to extract and monetise value from the brokerage industry



1818

Idea Collection

•

Unique access to market breadth and stock depth - Marshall Wace was polling 291 brokerage houses and 1,974 individuals in real-time as at the end of June 2009

Note: Houses are double counted if they contribute to more than one TOPS strategy

European TOPS Contributor Profile Houses Individuals

Opportunistic TOPS 68 374

Fundamental TOPS 25 717

European EM TOPS Contributor Profile Houses Individuals

Total 14 119

Americas TOPS Contributor Profile Houses Individuals

Total 126 232

Asian TOPS Contributor Profile Houses Individuals

Total 58 532



1919

•

A dedicated team - Relationship managers work to recruit, train, evaluate and motivate contributors

•

Feedback - contributor training and clarity of incentive process encourage commitment to the process and performance of the contributor

•

Focus - The process conditions contributor behaviour to focus on a small number of current ideas which increases contributor success ratios.

•

Alpha generation - As an indication, in the rolling 12 month period to 30 June 2009, over 68% of contributors in Fundamental TOPS and over 63% of contributors in Opportunistic TOPS have demonstrated positive alpha generation.

1The above analysis includes the annualised alpha generation of contributors who have been in the system for at least 6 months

Relationship Management and Contributor Behaviour

Fundamental TOPS - Distribution of alpha by contributor1

Opportunistic TOPS - Distribution of alpha by contributor1

-100%

-50%

0%

50%

100%

150%

200%

0% 10%

20%

30%

40%

50%

60%

70%

80%

90%

100%Al

pha

by C

ontri

buto

r(ro

lling

12

mon

th d

ata

to 3

0 Ju

ne 2

009)

% of Contributors-100%

-50%

0%

50%

100%

150%

0% 10%

20%

20%

30%

40%

50%

50%

60%

70%

80%

80%

90%

100%

Alph

a by

Con

tribu

tor

(rolli

ng 1

2 m

onth

dat

a to

30

June

200

9)

% of Contributors



20

Optimisation

•

Marshall Wace’s proprietary optimisation process uses complex algorithms to filter, compare, evaluate and rank investment ideas

•

Alpha from optimisation has grown steadily over time with the expansion of the dataset



21

Optimisation – Modular Approach

Multi-dimensional analysis of contributor skill set

Stock Selection

Market, Country & Sector Timing

Volatility and Risk Appetite

Optimisation of dataset according to 2 key modules

Long and Short Alpha Applications

•Separate processes for long and short alpha extraction, by region and sector where applicable

•Optimised portfolio construction neutral to major risk factors

•Driven by both stock level and individual contributor analysis

High Frequency Application

•Focus on market themes and shorter- term alpha generation

•Limited factor exposures

•Based on dynamic pattern recognition among groups of contributors and the return profile of individual contributors over time

Position Sizing



22

Portfolio Construction

•

Well developed optimisation algorithms - allow Marshall Wace to consolidate multiple contributors to create portfolios which combine high conviction ideas with exceptional portfolio diversification

•

Structural advantages in portfolio construction - the optimisation process delivers a high success ratio with a short portfolio tail

Distribution of Profits by Stock between Strategies from 1 January 2005 to 31 March 2009



23

Risk Management – Oversight, Control and Advisory Integrated into Portfolio Construction

• Independent risk management function

–

Independent risk management function reports directly into CEO

•

Real-time screening process and stress testing

–

Monitoring live and projected versions of the portfolio

– Automated system-generated alerts to track limit breaches

– Systematic tracking of status, actions and comments. Monitored by risk team daily and signed off by CIO monthly

•

Detailed reporting infrastructure

–

Enhances understanding of portfolio risk exposures

– Standardised historic and real-time reports

– Analysis of current as well as hypothetical portfolios

•

Portfolio risk profiles built using multiple risk models from several providers

– Integrated statistical and fundamental factor models

– Varying investment/forecast horizons

•

Regular liaison between risk and portfolio management

– Assessing and discussing portfolio risk dynamics

– Providing optimisation and facilitating risk integration

– A suite of proprietary tools designed to avoid a back-ward looking bias and enabling ad-hoc risk investigation

Oversight and Control Risk Advisory Services to Portfolio Managers

Risk summary across all strategies Historical archiving and screeningCurrent exposure snapshot



24

•

Real-time risk barometers covering a range of proprietary TOPS-specific and market-driven risk metrics aiming to identify market conditions in which risk taking is likely to be more, or less, rewarded

– Includes traditional risk metrics such as dispersion, volatility, correlation and bid-offer spreads

– Assessing contributor behaviour, risk appetite and positioning within the TOPS system provides a unique measurement of market sentiment and conviction that enhances the signal

Risk Management Development – Early Warning Indicators

The analysis provided above is intended for illustrative purposes only and is not a guide to the current risk indicators for any TOPS portfolio



25

Trade Execution and Commission Allocation

•

High frequency trading - facilitated by a highly scaleable trading platform

•

Quantitative measurement - Marshall Wace measures all executions to ensure best execution for its clients

•

Idea generator rarely execution counterparty - No more than 10% of ideas are executed by the counterpart who supplied the idea

•

“Meritocratic” commission allocation process - rewards brokers for total relationship with Marshall Wace to create a virtuous circle of alpha generation and capture

•

Scalable - small individual ticket size reduces market implementation costs

• Performance in TOPS

• Performance in trade execution

Services provided

•Trading ideas

•Trade execution

Commission Allocation Process

Commission allocation basis

Brokers MW TOPS



26

Idea Delivery and Compliance

•

Full electronic audit trail - the process provides electronic audit trail for all ideas submitted through the TOPS system

•

All ideas are screened by Marshall Wace - all ideas submitted through the TOPS system are subject to pre-trade and post- trade compliance reviews, whether acted upon or not

•

Extensive use of technology - Marshall Wace uses word recognition software to facilitate additional efficient compliance screening

•

Ability to return path information flow - Marshall Wace makes available to brokers’ compliance departments files detailing contributions from their employees. These include the time stamp of idea flow and the investment rationales as supplied to Marshall Wace

•

Compliance review in real time - account manager and compliance teams may also have special access to the TOPS website allowing them to view all user actions, submissions and rationales in real time



27

The TOPS Team

Trading

3 personnel

Relationship Management

2 personnel

Trading

4 personnel


4 personnel

Trading

2 personnel


3 personnel

IT and Systems Development

3 Personnel


17 Personnel


6 personnel

Operations and Compliance

3 Personnel


9 Personnel


4 Personnel

Asian TOPS

11 Personnel

Americas TOPS

15 Personnel

Anthony Clake

Global Product Manager (Partner)

Global Optimisation Team

13 personnel

Global Risk Management Team

4 personnel

James Hanson

Head of RiskJames Netherthorpe

Head of Trading (Partner)

Quantitative Execution & Analytics Team

7 personnel

European TOPS

33 Personnel


Market Neutral TOPS & Balanced TOPS



29

Market Neutral TOPS & Balanced TOPS*

Marshall Wace Balanced TOPS* TOPS UCITS Fund (Market Neutral)

Geography Europe Predominantly Europe with Global reach

Volatility Target 4-6% 3-5%

Net Return Target 10-12% p.a. 8-10% p.a.

Launch Date Oct 2006 Nov 2007

Number of Positions >1,000 >1,000

A comparison of the strategies is provided below

The Market Neutral TOPS strategy is an evolution of the Balanced TOPS strategy which operated within European TOPS for the 13 month period 1 October 2006-1 November 2007, with an average gross capital allocation of $480m since launch. The strategy has employed a variety of alpha extraction and optimisation techniques designed to maximise risk-adjusted returns in a variety of market conditions. The Marshall Wace TOPS UCITS Fund (Market Neutral) exploits these techniques whilst targeting a lower volatility for investors, but with improved liquidity terms.

*The gross performance history and analysis of Balanced TOPS is set out over the next few pages. Information on the Balanced TOPS strategy is provided for information purposes only, to illustrate the investment process. The performance of the Marshall Wace TOPS UCITS Fund (Market Neutral) will differ from that of the Balanced TOPS strategy and the historic data should therefore be interpreted accordingly. Past performance of the Balanced TOPS strategy is not a guide to future performance of the Marshall Wace TOPS UCITS Fund (Market Neutral).



30

Balanced TOPS* - Performance

/Citi Hedge Fund Services (Ireland) Limited/Morgan Stanley Capital International Inc. (“MSCI”)/Eonia FBE

Balanced TOPS* performance analysis from inception1 to 31st October 2007

3 EONIA®: Euro OverNight Index Average, see Important Disclosures (p.31) for description4 Calculated from estimated daily gross returns

*The Balanced TOPS strategy was managed as a sub-strategy within the European share classes of the Marshall Wace TOPS Fund (a Cayman open-ended investment company) between 1 October 2006 and 1 November 2007. Information on the Balanced TOPS strategy is provided for information purposes only to illustrate the investment process. Performance of the Marshall Wace TOPS UCITS Fund (Market Neutral) will differ from that of the Balanced TOPS strategy and therefore historic data should be interpreted accordingly. Past performance of the Balanced TOPS strategy is not a guide to future performance of the Marshall Wace TOPS UCITS Fund (Market Neutral).

1 Inception date: October 2006

2 MSCI Europe All Country Total Return IndexThe above analysis of Balanced TOPS is based on estimated daily gross returns



31

-1.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

-0.5% 0.0% 0.5% 1.0% 1.5% 2.0%

Lipper Global Hedge/Equity Market Neutral Index Monthly Returns

Bala

nced

TO

PS*

Mon

thly

Ret

urns

(Gro

ss)

-2.0%

-1.5%

-1.0%

-0.5%

0.0%

0.5%

1.0%

1.5%

2.0%

-4.0% -3.0% -2.0% -1.0% 0.0% 1.0% 2.0% 3.0% 4.0%

Balanced TOPS* Daily Estimate Returns (Y-Axis)MSC

I Eur

ope

AC T

R Ne

t Loc

al D

aily

Ret

urns

(X

-Axi

s)

Balanced TOPS* – Market and Strategy Correlation

Balanced TOPS* strategy exhibits minimal correlation with the market1,2 or with other market neutral hedge fund strategies

1 MSCI Europe All Country Total Return Index since 1st October 20062 Analysis based on daily data from 1st October 2006 to 31st October 2007

/Citi Hedge Fund Services (Ireland) Limited/Morgan Stanley Capital International Inc. (“MSCI”)/Reuters Lipper

Analysis based on the 13 month period 1st October 2006 – 31st October 2007

R2 – See glossary (p.35) for description

R2=0.0054 R2=0.0371


Analysis based on the 13 month period 1st October 2006 – 31st October 2007



32

/Citi Hedge Fund Services (Ireland) Limited/Morgan Stanley Capital International Inc. (“MSCI”)

Balanced TOPS* - Volatility

Balanced TOPS* strategy exhibits low volatility vs the market1

1MSCI Europe All Country Total Return Index since 1st October 2006



Appendices



34

The Expansion of TOPS

•

2001 Inception of Contributor data collection

•

July 2002 Launch of Opportunistic TOPS as sub-strategy of Eureka (Euro) Fund

•

September 2003 Launch of Fundamental TOPS as sub-strategy of the Eureka (Euro) Fund

•

January 2005 Launch of European TOPS Fund allowing direct investment in European TOPS

•

February 2005 Launch of MW Americas Fund

•

Summer 2005 Expansion of European TOPS to include Emerging Markets

•

March 2006 Launch of TOPS Diversified (sub-trust offering 50:50 allocation to Opportunistic and Fundamental TOPS)

•

Summer 2006 Launch of Asian TOPS

•

May 2006 Expansion of Americas TOPS to include LATAM specialists

•

September 2006 Marshall Wace commence polling of Global specialists

•

December 2006 Listing of MW TOPS Limited on the NYSE Euronext Amsterdam Exchange

•

May 2007 Launch of Global TOPS

•

November 2007 Launch of Market Neutral TOPS

•

November 2007 Launch of Marshall Wace TOPS UCITS Fund (Market Neutral)

•

June 2008 Listing of MW TOPS Limited on the London Stock Exchange

•

March 2009 Launch of MW Developed Europe TOPS UCITS Fund



35

TOPS Website*

* This website is not accessible to the public



36

Service Providers

UCITS III Fund

(MW TOPS UCITS)Created as a sub-fund under MLIS

SICAV

Sponsor (MLI)

ISDA Counterparty

(MLI)

ISDA Counterparty

(Deutsche Bank)

ETD Brokers

Investment Manager

(Marshall Wace)

Merrill Lynch Investment Solutions

SICAV

Transfer Agent

(Soc Gen European Fund Services)

Administrator

(Euro-VL)

Custodian

(Soc Gen)

Sub-Custodian

(ML)

Transfer Agency AgreementSponsor Agreement

ISDA Agreement

ISDA Agreement

Give Up Agreement

Investment Management Agreement

Custody Agreement

Administrator Agreement

Sub-Custody Agreement

Give Up Agreements



37

Key Personnel

•

Paul Marshall, Chairman & Chief Investment Officer (Manager-led Strategies)

Paul Marshall is a founding partner of Marshall Wace LLP and was responsible for the development of the ‘Core’ investment management process, utilized both within the flagship Eureka (Euro) Fund and also now available as a stand-alone strategy. As CIO for manager-led strategies he has overall responsibility for the development of this part of the firm’s business. Within his role as Chairman, Paul has responsibility for business development and corporate governance and, through his chairmanship of the Partnership Management Committee and the Investment Advisory Committee, plays a central role in the strategic direction of the firm.

Paul was formerly a Director of Mercury Asset Management, where he was Chief Investment Officer for European Equities. At the time of his departure in 1997 he was responsible for a team of 15 managing US$12 billion in European Equities.

•

Ian Wace, Chief Executive Officer

Ian Wace is a founding partner of Marshall Wace LLP. As CEO, he has overseen the growth and development of the company since the launch of the Eureka (Euro) Fund in 1997. Marshall Wace employs over 160 personnel, and operates from offices in London, Greenwich, Connecticut and Hong Kong. Under his stewardship, the firm pioneered the development of TOPS and is now extending its manager-based product offering. The company is one of Europe’s largest privately-owned alternative asset managers, recognised for its robust infrastructure and investment processes. As CEO, Ian is closely involved with all aspects of the management of the firm and is instrumental in driving forward the broad range of initiatives which will take the company through its next phase of growth.

Prior to founding Marshall Wace, Ian was Global Head of Equity and Derivative Trading at Deutsche Morgan Grenfell (‘DMG’), where he was responsible for Equity Sales Trading, Programme Trading, Proprietary Trading, Stock Lending and Balance Sheet Management. Prior to joining DMG in 1995, he worked for eleven years at SG Warburg, where in 1988, as the youngest ever Director, he was appointed head of European Equity Sales and in 1993, head of Proprietary Trading.

•

Anthony Clake – MW TOPS Global Product Manager

Anthony Clake has been responsible for the evolution of the TOPS strategies since their inception in 2001. As the Global Product Manager for TOPS, he has overseen the geographic expansion of this investment process across Europe, Asia, North and South America as well as Emerging Markets. In recognition of his contribution to the development of Marshall Wace Anthony was made a partner of the firm in 2004.

Anthony joined Marshall Wace in August 2001 directly from university following consultancy work with the company during 1999 and 2000. Previously he studied Philosophy, Politics and Economics at Queen's College, Oxford. He was elected to the Gibbs scholarship for obtaining the highest marks awarded in preliminary and final examinations.`



3838

Key Personnel

•

James Hanson – Head of RiskJames Hanson joined Marshall Wace in April 2009 as Head of Risk. Previously James was Chief Risk Officer at Polar Capital Partners, a multi-strategy hedge fund manager, and also at Charlemagne Capital, an emerging markets specialist hedge fund manager. He also spent six years at JP Morgan Investment Management both in New York and London. James studied Mathematics, Operational Research, Statistics and Economics (M.O.R.S.E.) at Warwick University where he was awarded a First Class degree.

•

James Netherthorpe – Head of TradingJames Netherthorpe joined Marshall Wace in October 2002 to develop the firm’s trading capabilities. He is now responsible for a global team of eight traders and is a partner of the firm.Prior to this, James worked for five years in Pan-European equity sales trading at Goldman Sachs. From 1990 to 1997, he was at UBS in Pan-European Equity Sales and was head of the desk from 1995. Before this, he spent three years in New York working in Pan-European equity sales for Prudential Securities.

•

Nick Nielsen – Head of Quantitative TradingNick Nielsen joined Marshall Wace in March 2008 to develop the firm’s quantitative and programmatic trading capabilities. He is now responsible for a global team of four.Prior to this, Nick worked for four years at Citadel Investment Group, where he built the European long/short trading desk and was head trader for the Global Markets and Quantitative strategies team with direct responsibility for the execution of equity and non-equity statistical arbitrage and high frequency trading across North America, Asia and Europe. Before this, Nick spent two years at Goldman Sachs working as a trader and financial engineer on the High Frequency/Statistical Arbitrage desk.

•

Anthony Marber – Head of Investor RelationsAnthony Marber has overall responsibility for marketing and client relationship management.Anthony joined Marshall Wace in January 2004. Previously, he had been a Director of Mercury Asset Management, specialising in the management of a broad range of performance-orientated fixed income and currency portfolios. He subsequently co-founded a CTA trading fixed income and currency derivatives.

Source: Marshall Wace LLPConfidential to recipient; not for reproduction or redistribution.


IMPORTANT DISCLOSURES

Past performance is not necessarily indicative of future results. Unless otherwise stated, returns are after trading costs, administration, management and incentive fees (“Net”).

•

Alpha, Europe

For the Core and European TOPS strategies, the benchmark for Alpha calculation is the MSCI Europe All Country Total Return Index (with net dividends). The MSCI Total Return Indices measure the market performance, including price performance and income from dividend payments. MSCI's Daily Total Return (DTR) methodology reinvests dividends in indices the day the security is quoted ex-dividend (xd-date). Dividends are not considered in price indices. This series approximates the minimum possible dividend reinvestment. The dividend is reinvested after deduction of withholding tax, applying the rate to non-resident individuals who do not benefit from double taxation treaties. MSCI uses withholding tax rates applicable to Luxembourg holding companies, as Luxembourg applies the highest rates. The Funds are not restricted to investing in those securities which comprise the above index, their performance may or may not correlate to the index, and they should not be considered proxies for the index.

•

Alpha, US

For the US TOPS strategy, the benchmark for Alpha calculation is the MSCI Americas Total Return Index. The MSCI Americas Total Return Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in North and South America. MSCI Total Return Indices measure the market performance, including price performance and income from dividend payments. The Fund is not restricted to investing in those securities which comprise the index, its performance may or may not correlate to the index, and it should not be considered a proxy for the index.

•

Alpha, Asia

For the I Trust (Japan), the benchmark for Alpha calculation is the TOPIX Total Return Price Index a capitalisation-weighted index of all the companies listed on the First Section of the Tokyo Stock Exchange. For the K Trust (Asia Ex-Japan) the benchmark for Alpha calculation is the MSCI Daily TR Net AC Asia Pacific Ex Japan Local Index. This index is a capitalisation weighted index that monitors the performance of stocks from the Asia Pacific region excluding the country of Japan. For the L Trust (Asia Diversified), the benchmark for Alpha calculation is a 40:60 weighting of the TOPIX Total Return Price Index and the MSCI Daily TR Net AC Asia Pacific Ex Japan Local Index.

•

Gross Returns

Gross returns are presented before management and incentive fees, and include the reinvestment of all income, but are after trading costs and administration fees. Actual returns will be reduced by investment advisory fees and other expenses that may be incurred in the management of the account. The collection of fees produces a compounding effect on the total rate of return net of management and incentive fees. As an example, the effect of investment management fees (excluding incentive fees) on the total value of a client’s portfolio assuming (a) monthly fee assessment, (b) USD1,000,000 investment, (c) portfolio return of 8%* a year, and (d) 2% annual investment advisory fee would be USD21,322 in the first year, and cumulative effects of USD140,996 over five years and USD400,244 over ten years. Actual investment advisory fees incurred by clients may vary.

*this figure is only illustrative and is not guaranteed. Return figure may be affected by future changes in the tax treatment of income and capital gains within the portfolio and by fluctuations in exchange rates.

•

Sharpe Ratio

The Sharpe ratio is calculated by subtracting the risk free rate from the rate of return for a portfolio, and dividing the result by the Standard Deviation of the portfolio returns

Risk Free Rate of Return used is EONIA

Sharpe Ratio = (Total Period Return – Risk Free Rate over Period) Standard Deviation over Period

•

R Squared

R2 is a statistical measure that represents the proportion (on a scale of 0 – 1.0) of the movements in a fund’s value that can be explained by movements in its benchmark index. A lower R2 indicates that a fund’s performance pattern has been less correlated with its benchmark index

•

Sortino Ratio

The Sortino ratio is calculated by subtracting the risk free rate from the rate of return for a portfolio, and dividing by the Standard Deviation of the negative portfolio returns. Risk Free Rate of Return used is EONIA

•

Eonia®

(Euro OverNight Index Average) is an effective overnight rate computed as a weighted average of all overnight unsecured lending transactions in the interbank market initiated within the euro area by the contributing panel banks.

•

MSCI data

MSCI data is owned and copyrighted by Morgan Stanley Capital International Inc., Copyright ©2008. All rights reserved.



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Where this communication constitutes a financial promotion/marketing communication it is issued and approved for distribution in the UK by Merrill Lynch International only to, and directed at, (a) persons who have professional experience in matters relating to investments falling within Article 19(1) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”) or (b) high net worth entities, and other persons to whom it may otherwise lawfully be communicated, falling within Article 49(1) of the Order (all such persons together being referred to as “relevant persons”). This communication must not be acted on or relied on by persons who are not relevant persons. Any investment or investment activity to which this communication relates is only available to relevant persons and will be engaged in only with relevant persons. The UK compensation scheme and rules for the protection of retail clients do not apply to the services provided or products sold by non-UK regulated affiliates.

The information herein was obtained from various sources. We do not guarantee its accuracy. This information is for your private information and is for discussion purposes only. A variety of market factors and assumptions may affect this analysis, and this analysis does not reflect all possible loss scenarios. Some products may place your capital at risk, yield figures quoted may not display all the short and long term prospects for the investment. There is no certainty that the parameters and assumptions used in this analysis can be duplicated with actual trades. Any historical exchange rates, interest rates or other reference rates or prices which appear above are not necessarily indicative of future exchange rates, interest rates, or other reference rates or prices. Neither the information, recommendations or opinions expressed herein constitutes an offer to buy or sell any securities, futures, options, or investment products. Merrill Lynch may trade for its own account in the securities or other products described here and may also from time to time perform or solicit investment banking or other services for, or from, any entity mentioned herein. Foreign currency denominated investments are subject to fluctuations in exchange rates that could have a positive or adverse effect on the investor’s return. Unless otherwise stated, any pricing information in this message is indicative only, is subject to change and is not an offer to deal. Some investments or services may have complex charging structures and the firm may receive more than one element of remuneration. Where relevant, the price quoted is exclusive of tax and delivery costs. Any reference to the terms of executed transactions should be treated as preliminary and subject to our written confirmation.

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Additional Information Regarding Investing in the Marshall Wace TOPS UCITS Fund (Market Neutral) (The “Fund”)

Any offering of the Fund can be made only by means of delivery of the Fund’s prospectus and applicable supplement (together, the “Prospectus”), which contain material information not contained herein, including a discussion of the terms of investment and information regarding investment risks and conflicts of interest. Any representation to the contrary is not permitted. In the event of such offering, the information in this document will be superseded, amended and/or supplemented in its entirety by the Prospectus. The Prospectus should be carefully reviewed prior to any determination to invest in the Fund and any investment decision with respect to the Fund should be made solely upon the information contained in the Prospectus.

No information in this document should be construed as providing financial, investment or other professional advice in relation to the Fund. The information contained herein is for the sole use of the intended recipient and may not be copied or otherwise distributed or published. An investment in the Fund is speculative, involves substantial risks and is not appropriate for all investors. Any investor interested in investing in the Fund should conduct its own investigation and analysis of the Fund and should consult its own professional advisers as to the risks involved in making such an investment. An investment in the Fund is expected to have limited liquidity. No secondary market is expected to develop for the Shares. A significant or total loss of investment could occur. Foreign currency denominated investments are subject to fluctuations in exchange rates that could have a positive or adverse effect on an investor’s return. Neither the past performance of Marshall Wace LLP nor any of the TOPS strategies is indicative of future results of the Fund.

Any projections or analysis provided to assist the recipient of this presentation in evaluating the matters described herein may be based on subjective assessments and assumptions and may use one among alternative methodologies that produce different results. A variety of market factors and assumptions may affect this analysis, and this analysis does not reflect all possible loss scenarios. There is no certainty that the parameters and assumptions used in this analysis can be duplicated with actual trades. Accordingly, any projections or analyses should not be viewed as factual and should not be relied upon as an accurate prediction of future results. The indices for which information is presented in this document may or may not hold substantially similar instruments to those that the Fund holds. Indices reflect passive returns whereas the Fund is a managed investment that charges fees.




Selling Restrictions and Investment Risks

SELLING RESTRICTIONS:The Fund may only be offered and distributed to investors in accordance with all relevant local laws and regulations. The distribution of this presentation and the offering or purchase of Shares may be restricted in certain jurisdictions. It is the responsibility of any persons in possession of this document and any persons wishing to subscribe for Shares to inform themselves of, and to observe, all applicable laws and regulations of any relevant jurisdiction. Prospective applicants for the Fund should inform themselves as to the legal requirements of so applying, and any applicable exchange control regulations and taxes in the countries of their respective citizenship, residence or domicile. The tax implications of investing in the Fund will depend on individual financial circumstances and the investor’s country of residence. Applications to invest in the Fund must only be made on the basis of the Prospectus and subscription documentation. The information below is for general guidance only and further information is available in the Prospectus.

Luxembourg: The Fund has been registered for public distribution in Luxembourg. The Fund may be registered for public distribution in other jurisdictions in the future. For an up to date list of those jurisdictions contact your distributor.

United Kingdom: The Fund is not a recognised collective investment scheme for the purposes of the Financial Services and Markets Act 2000 (“FSMA”). The promotion of the Fund and the distribution of the Prospectus is accordingly restricted by law.

United States: The Shares have not been and will not be registered under the U.S. Securities Act of 1933, as amended (the “1933 Act”), or the securities laws of any of the states of the United States. The Shares may not be offered, sold or delivered directly or indirectly in the United States or to or for the account or benefit of any U.S. Person except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the 1933 Act and any applicable state laws. The Fund has not been and will not be registered under the U.S.

INVESTMENT RISKS:Investment Company Act of 1940, as amended (the “1940 Act”) and Shares will only be sold to U.S. Persons who are “qualified purchasers”, as defined in the 1940 Act. There has not been and will not be a public offering of the Shares in the United States.

Investment in the Fund carries substantial risk. There can be no assurance that the investment objectives of the Fund will be achieved and investment results may vary substantially over time. Investment in the Fund is not intended to be a complete investment programme for any investor. Investment in the Fund is intended for experienced investors who are able to understand and accept the risks involved.

A prospective investor should appreciate that the value of any investment, and any income from any investment, may go down as well as up and that an investor’s capital is at risk and the investor may not receive back the amount invested. Past performance is not necessarily indicative of future results.

Persons considering investing in the Fund should read the risk disclosure in the Prospectus.

Merrill Lynch International registered address is Merrill Lynch Financial Centre, 2 King Edward Street, London EC1A 1HQ.


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