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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Bluecrest BL £ | LSE:BBTS | London | Ordinary Share | GG00B7MSX903 | RED ORD NPV GBP |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 101.75 | 0.00 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Jan 2020 to Jan 2025
TIDMBBTS
RNS Number : 3635X
BlueCrest BlueTrend Limited
28 August 2015
BlueCrest BlueTrend Limited
Interim Condensed Financial Statements
For the period ended 30 June 2015 (Unaudited)
ABOUT THE COMPANY
The Company was incorporated in Guernsey on 10 February 2012 as a non-cellular company limited by shares under the Companies (Guernsey) Law, 2008, as amended, with registration number 54646.
From launch on 23 March 2012 until 17 July 2014 the Company had Sterling and US$ Share classes in issue.
Following completion of the tender offer for up to 100 per cent of each class of share in issue (excluding treasury shares) announced on 5 June 2014 (the 'Tender Offer'), the US$ underlying investments in the BlueTrend Fund Limited and BlueTrend 2x Leveraged Fund Limited were redeemed.
On 18 July 2014, the US$ Share Class was delisted from the Official List of the UK Listing Authority and closed. All remaining US$ Shares which were not tendered pursuant to the Tender Offer were compulsorily converted into the Sterling Share Class on that date.
The Sterling Share Class remains admitted to trading on the main market of the London Stock Exchange and listed on the Premium Listing of the Official List of the UK Listing Authority.
As at 8 August 2015, the last practicable date prior to the publication of this report, the Company's total issued share capital consisted of 39,054,052 Ordinary Sterling Shares, of which 3,773,924 Shares were held in treasury, resulting in total voting rights of 35,280,128.
Investment Objective and Policy
The Company's investment objective is to seek to achieve long term appreciation in the value of its assets.
The Company is a feeder fund and pursues its investment objective by principally investing its assets in BlueTrend Fund Limited ("BlueTrend Fund") which in turn invests into the market through an investment in BlueTrend Master Fund Limited ("BlueTrend Master Fund"). The Company is permitted to retain up to 19.9 per cent of its total assets in cash or cash equivalents for working capital purposes and to enable it to fund its discount management policy.
Notwithstanding the retention of assets in cash or cash equivalents, it is the intention of the Company to maintain a substantially similar economic exposure to that which would be achieved by investing 100 per cent of its available net assets in BlueTrend Fund. The Company seeks to maintain such a substantially similar economic exposure by investing an amount broadly equivalent to its total assets held in cash or cash equivalents (up to 19.9 per cent of its total assets) in BlueTrend 2x Leveraged Fund Limited ("BlueTrend Leveraged Fund") which in turn invests into the market through an investment in BlueTrend 2x Leveraged Master Fund Limited ("BlueTrend Leveraged Master Fund").
BlueTrend Leveraged Master Fund has a substantially similar investment strategy to BlueTrend Master Fund, save for the fact its aggregate investment exposure is approximately twice that of BlueTrend Master Fund. BlueTrend Leveraged Master Fund may not always be invested in an identical investment portfolio to that of BlueTrend Master Fund (together, the "Master Funds") which may result in differing investment returns for the Company compared to a 100 per cent investment in BlueTrend Fund. In addition, BlueTrend Leveraged Master Fund and BlueTrend Leveraged Fund incur different ongoing costs and expenses to those incurred by BlueTrend Master Fund and BlueTrend Fund.
BlueTrend Fund Limited
BlueTrend Fund was incorporated with limited liability in the Cayman Islands on 16 March 2004 as an exempted company under the provisions of the Companies Law (2011 Revision) of the Cayman Islands. It is organised as a feeder fund. All assets of BlueTrend Fund (to the extent not retained in cash) are invested in the ordinary shares of BlueTrend Master Fund, a fund incorporated in the Cayman Islands. Investors in the Company are therefore offered an opportunity to participate indirectly in BlueTrend Master Fund's investment portfolio.
The principal investment objective of BlueTrend Master Fund is to seek to achieve long-term appreciation in the value of its assets. BlueTrend Master Fund seeks to achieve its investment objective through the implementation of a systematic trading model or portfolio of systematic trading models. Such model(s) trade in a number of debt, equity, foreign exchange and commodity instruments, and derivatives relating to those instruments, including swaps, indices, forwards, futures and option contracts.
BlueTrend Master Fund has maximum flexibility to invest in a wide range of instruments, including listed and unlisted equities, debt securities (which may be below investment grade), other collective investment schemes (which may be open-ended or closed-ended, listed or unlisted and which may employ leverage), currencies, futures, options, warrants, swaps and other derivative instruments. Derivative instruments may be exchange-traded or over-the-counter. BlueTrend Master Fund may engage in short sales. BlueTrend Master Fund may also retain amounts in cash or cash equivalents, including money market and similar funds pending reinvestment or if this is considered appropriate to the investment objective.
BlueTrend Master Fund seeks to achieve its investment objective through the implementation of a systematic trading model or portfolio of systematic trading models. Such model(s) trade in a number of debt, equity, foreign exchange and commodity instruments, and derivatives relating to those instruments, including swaps, indices, forwards, futures and option contracts.
BlueTrend Master Fund may, as part of its investment policy and/or for hedging purposes, utilise both exchange traded and over-the-counter derivatives, including but not limited to futures, forwards, swaps, options and contracts for differences.
BlueTrend Master Fund has not imposed a limit on the extent to which borrowing or leverage may be employed.
FINANCIAL HIGHLIGHTS
Hot Features
Premium
Sterling Share Class Sterling Share Class
(as at 30 June 2015) (as at 31 December
2014)
Total Net Assets GBP35,095,783 GBP37,053,382
NAV per Share GBP0.995 GBP1.039
NAV performance (4.23%) 16.43%
Mid-Market Share Price GBP1.02375 GBP1.0025
Premium/(Discount)
to NAV 2.89% (3.51%)
BlueCrest Capital Management LLP ("BlueCrest")
BlueCrest Capital Management Limited ("BlueCrest CML")
At launch and until 1 July 2014, the appointed investment manager of the Master Funds was BlueCrest Capital Management LLP (the "Initial Investment Manager"), an English-incorporated limited liability partnership operating solely out of its permanent establishment in Guernsey.
In order to align the operations of the investment manager of the Master Funds with its place of establishment and thereby achieve greater legal and regulatory certainty going forward, it was proposed and approved that the Initial Investment Manager transfer its assets and liabilities to a newly established Guernsey-domiciled investment manager, BlueCrest Capital Management Limited (the "New Investment Manager"), a Guernsey domiciled company, acting solely in its capacity as general partner of BlueCrest Capital Management LP, a Guernsey-domiciled limited partnership. The New Investment Manager was established in Guernsey. As was the case for the Initial Investment Manager, the New Investment Manager is licensed by the Guernsey Financial Services Commission ("GFSC"), registered as an investment adviser with the US Securities and Exchange Commission, registered as a commodity pool operator and commodity trading advisor with the US Commodity Futures Trading Commission and registered or licensed with other regulatory authorities, as appropriate.
The existing sub-investment managers, appointed by the Initial Investment Manager on behalf of the Master Funds to manage a portion of the assets of the Master Funds in the Initial Investment Manager's place, each as an agent of the Company and the Master Fund, will retain their roles as sub-investment managers.
The New Investment Manager has assumed the Initial Investment Manager's responsibility for the supervision and ongoing monitoring of the sub-investment managers in the performance of their duties as agents of the Funds, and retains the responsibility for performing risk management functions for the Master Funds.
Investments ("Systematica")
On 29 September 2014 the Company noted the announcement by BlueCrest CML of its intention to launch an independent firm, Systematica Investments ("Systematica"), which would comprise its systematic investment management business, under the leadership and management of Leda Braga. The launch of Systematica took place during January 2015 at which time it took over the management of the BlueTrend programme. BlueCrest retain an economic interest in the business and the two organisations continue to co-operate in areas of mutual benefit and where operating efficiencies can be achieved, thus the day to day management of the Company and its investment strategy is unaffected.
Currency Risk Management
The Directors do not intend that the Company will carry out any currency hedging arrangements. The base currency of BlueTrend Fund and BlueTrend Leveraged Fund (the "Feeder Funds") and the Master Funds is US Dollars. Accordingly, the administrator of the Feeder Funds may seek to hedge the foreign exchange exposure of the assets of the Master Funds attributable to the Sterling denominated shares of the Feeder Funds in order to neutralise, so far as possible, the impact of fluctuations in the Sterling/US Dollar exchange rates.
Dividend Policy
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The investment objective of the Company is directed towards long-term capital appreciation. Accordingly, it is not envisaged that any dividends will be paid by the Company. This does not however preclude the Directors from declaring a dividend at any time in the future subject always to the relevant terms of the Articles and the relevant provisions of The Companies (Guernsey) Law, 2008 (the 'Companies Law').
Discount management provisions
Share repurchases
The Directors will implement a Share buyback programme, subject to sufficient portfolio liquidity, to buy back Shares in the market if they trade at a discount of two per cent or more to the latest published Net Asset Value ("NAV"). The price at which Shares are repurchased may be at a wider discount than two per cent to the latest published NAV to reflect market volatility. In accordance with the Listing Rules, the Directors sought shareholder authority to buy back up to 14.99 per cent of the Shares in issue approved at the extraordinary general meeting ('EGM') held on 19 January 2015.
This authority expired on 30 June 2015 when shareholders resolved to permit the maximum number of shares authorised to be purchased as 5,288,491 Ordinary Shares denominated in Sterling ("Sterling Shares") or if less, such number of Sterling Shares which is equal to the 14.99 per cent. of the Sterling Shares, excluding shares held in treasury, as at the date of the Annual General Meeting ('AGM').
This authority will expire within 15 months of the annual general meeting date or, if earlier, at the end of the next annual general meeting of the Company to be held in 2016. During the six month period ended 30 June 2015 the Company repurchased 385,000 Sterling Shares; 200,000 for treasury and 185,000 for cancellation. The average discount for the Sterling Share Class during the six months to 30 June 2015 was 1.24 per cent.
Treasury Shares
The Company's Articles allow it to hold up to 10 per cent of its issued Shares in treasury when those Shares have been purchased by the Company. As at 30 June 2015, the Company had 3,773,924 Sterling Shares in treasury (31 December 2014: 3,573,924 Sterling Shares). As at 8 August 2015 the Company held 3,773,924 Sterling Shares in treasury.
Further issues of Shares
Subject to the terms of the Companies Law, the Listing Rules and the Articles, in order to manage any Share price premium to NAV if the Directors believe there is investor demand that cannot be satisfied through the secondary market to raise additional capital for investment, the Company may seek to issue additional Shares or sell Shares out of treasury. Further issues or sales of Shares would only be made if the Directors determine such issues or sales to be in the best interests of shareholders, and the Company as a whole, and access to BlueTrend Fund and BlueTrend Leveraged Fund is available. Relevant factors in making such determination and the price at which Shares will be issued or sold include NAV performance, share price rating and perceived investor demand. In the case of further issues or sales of Shares of an existing class, the Directors' authority to allot and issue or sell out of treasury shall only be exercised at prices which are greater than the then latest published NAV of the relevant Share class. The Directors have shareholder authority to dis-apply pre-emption rights in connection with the allotment and issue of up to 7,301,936 Sterling Shares. This authority will expire 15 months from 30 June 2015 or, if earlier, at the end of the next annual general meeting to be held in 2016.
Going Concern
The preparation of the unaudited condensed interim financial statements (the "financial statements") requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates. In preparing these financial statements, the significant judgements made by management in applying the Company's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements for the year ended 31 December 2014. The Company's Articles state that at the start of each calendar year the Company shall calculate the average of the monthly NAVs as at the end of each of October, November and December in the previous year. If that average is less than US$100 million the Company shall call a general meeting at which the Directors shall propose an Ordinary Resolution for the continuation of the Company (the 'Continuation Vote'). The average NAV for the last three months of 2014 was less than US$100 million. Accordingly, on 26 February 2015 the Company issued a Shareholder Circular convening an Extraordinary General Meeting which was held on 25 March 2015. The sole resolution proposed was an ordinary resolution to seek Shareholder approval for the Company to continue its business as a closed ended investment company. The Continuation Vote was passed and the results were announced on 25 March 2015. Since the Continuation Vote passed, the share price discount to NAV has narrowed and at times the shares have traded at a premium to NAV. As a result the buy back has not operated since March 2015. The Directors have been working closely with the Corporate Broker with a view to growing the assets under management from their current position. The cash being kept available for the purpose of own share buybacks (approx. GBP5m.) has now largely been re-invested in the BlueTrend Fund. In the absence of further fund raising, the average of the monthly NAV for the fourth quarter of 2015 is likely to be below US$100 million. The directors anticipate a further Continuation Vote being triggered however we are confident that the outcome will once again be favourable.
Conclusion
Having considered the Company's investment objective, risk management and capital management policies, the nature of the portfolio and expenditure projections, the Directors believe that the Company is able to meet its liabilities as they fall due, as it has adequate cash resources to continue in operational existence.
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
The Board reviews risks each quarter and monitors the existing risk control activity designed to mitigate these risks. The principal risks associated with the Company are:
Operational risk: The Board is ultimately responsible for all operational facets of performance including cash management, asset management, regulatory and listing obligations. The Company has no employees and so enters into a series of contracts/legal agreements with a series of service providers to ensure both operational performance and the regulatory obligations are met. The Company uses well established, reputable and experienced service providers and their continued appointment is assessed at least annually.
Investment risk: Although the Board is responsible for the investment policy, due to the nature of the Company the Board has little discretion in such management. The success of the Company depends on the diligence and skill of the Investment Manager of the Company's primary investment in the Feeder Funds. There is a risk that any underperformance of funds which the Company's capital is invested in would lead to a reduction of the NAV or of the share price rating. The Board formally monitors the investment performance each quarter, periodically meets the Investment Manager and attends regular investment update calls to further supplement their knowledge of the investment process and strategy.
Concentration risk: The Company's principal exposure is to the Feeder Funds, therefore, the Company is exposed to concentration risk through these two funds. The Board considers that both funds are highly diversified in their exposures to the underlying assets of the Master Funds. The Board believes that this mitigates certain aspects of concentration risk. The Board actively monitors the exposures of BlueTrend Fund, BlueTrend Leveraged Fund and the underlying assets.
Leverage risk: The Company does not undertake structural borrowings but will not maintain exactly 1:1 economic exposure to BlueTrend Fund at all times because of factors including, but not limited to, Share issuance and buybacks, general expenses and the exact level of leverage embedded in BlueTrend Leveraged Fund from time to time. The Board regularly monitors the exposure to BlueTrend Fund and rebalances when required. BlueTrend Fund does not undertake structural leverage. BlueTrend Leveraged Fund seeks to maintain a position which is approximately 2X times leveraged to BlueTrend Fund. This leverage may not be maintained or be constant because of changes to the leverage facility made available to BlueTrend Leveraged Fund. The Board monitors the performance of the Company against the performance of BlueTrend Fund. Leverage exists in the underlying funds either through formal borrowing facilities or embedded in derivative positions. Some of the underlying funds held by BlueTrend Fund will be exposed to significant gross leverage. The Board monitors the performance and strategies of each underlying fund and the exposure of BlueTrend Fund to each underlying fund.
Counterparty risk: The Company is exposed to counterparty risk directly and indirectly via BlueTrend Fund, BlueTrend 2x Leveraged Fund and the underlying funds. Systematica provide reporting to the Board of the counterparty exposures of BlueTrend Fund and the controls exercised around counterparty exposure. The Company seeks to ensure that it does not have undue direct counterparty exposures in line with market practices. BlueTrend Leveraged Fund has counterparty exposure to the leverage provider.
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Credit risk: The Company is exposed to credit risk both directly through cash and cash equivalents and applies controls accordingly. The Company is also exposed to credit risk more broadly through the Feeder Fund investments in the Master Funds and their ultimate underlying investments. The Board believes that credit risk is well diversified through the exposures taken by BlueCrest.
Regulatory risk: The Company is required to comply with the UK Listing Authority ('UKLA') rules and the Financial Conduct Authority ('FCA') disclosure and transparency rules and the requirements imposed by the Guernsey Financial Services Commission. Any failure to comply could lead to criminal or civil proceedings. Although responsibility ultimately lies with the Board, the Secretary also monitor compliance with regulatory requirements.
Associated Risk:
Share price discount risk. The Company has a discount control mechanism provision which is designed to mitigate this risk. In the event the Sterling Shares have traded at an average discount to NAV of more than 5 per cent in any calendar quarter, the Directors will consider, subject to any legal or regulatory requirements, implementing a redemption offer of up to 25 per cent of the Sterling Shares in issue. The Directors will implement a share buyback programme, subject to sufficient portfolio liquidity, to buy back shares in the market if they trade at a discount of two per cent or more to the latest published NAV.
RESPONSIBILITIES STATEMENT
The Directors confirm that to the best of their knowledge:
-- the interim financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union; and
-- the interim financial report meets the requirements of an interim management report (as defined below), and includes a fair review of the information required by:
a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication of important events that have occurred during the first period of the financial year; and their impact on the interim financial report; and a description of the principal risks and uncertainties of the remaining six months of the year; and
b) DTR 4.2.8R of the Disclosure and Transparency Rules, being related party transactions that have taken place in the first period of the current financial year and that have materially affected the financial position or performance of the Company during the period; and any changes in the related parties transactions described in the last annual report that could have a material effect on the financial position or performance of the Company in the first six months of the current financial year.
Huw Salter
Chairman of the Audit Committee
27 August 2015
CHAIRMAN'S STATEMENT
On behalf of the Board, I present Shareholders with the Interim Financial Report and Accounts of BlueCrest BlueTrend Limited (the 'Company') for the period ended 30 June 2015.
Financial Results and performance
It has been a volatile first half year with the Company delivering a Sterling Share Class Net Asset Value ('NAV') performance of between +10.61% as at 31 March 2015 to -4.23% for the period ended 30 June 2015.
As at 31 July 2015, the latest practicable date prior to the publication of this report, the Company's NAV per share had increased 1.49% to GBP1.0546 per share since 1 January 2015.
Corporate Actions
Two Extraordinary General Meetings were held in the first half year:
Renewal of Buyback Authority
In accordance with the Listing Rules, the Directors sought shareholder authority to buy back up to 14.99 per cent of the Shares in issue approved at the extraordinary general meeting ('EGM') held on 19 January 2015.
This authority expired on 30 June 2015 when shareholders resolved to permit the maximum number of shares authorised to be purchased as 5,288,491 Ordinary Shares denominated in Sterling ("Sterling Shares") being 14.99 per cent. of the Sterling Shares in issue, excluding shares held in treasury, as at the date of the Annual General Meeting.
Continuation Vote
As the average of the Company's monthly net asset value as at the end of October, November and December 2014 was less than US$100m.,in accordance with the Company's Articles of Incorporation, your Board proposed that a continuation vote be put to Shareholders by way of ordinary resolution. The vote was passed by Shareholders on 25 March 2015.
Going Concern
The Directors consider it appropriate to prepare the unaudited Interim Financial Statements on the Going Concern basis. The analysis of the Directors' decision is explained on Page 6 of this report. Since the Continuation Vote passed, the share price discount to NAV has narrowed and at times the shares have traded at a premium to NAV. As a result the buy back has not operated since March 2015. The Directors have been working closely with the Corporate Broker with a view to growing the assets under management from their current position. The cash being kept available for the purpose of own share buybacks (approx. GBP5m.) has now largely been re-invested in the BlueTrend Fund. In the absence of further fund raising, the average of the monthly NAV for the fourth quarter of 2015 is likely to be below US$100 million. The directors anticipate a further Continuation Vote being triggered however we are confident that the outcome will once again be favourable.
Outlook
The Company continues with its investment objective and policy and as stated above is working with its Corporate Broker with a view to growing the assets under management from their current position.
Annual General Meeting
The Annual General Meeting was held on 30 June 2015. All resolutions were passed and announced to the market on 30 June 2015.
Wayne Bulpitt
Chairman
27 August 2015
REPORT OF THE INVESTMENT MANAGER OF BLUETREND FUND LIMITED
Over the period from 1 January 2015 to 30 June 2015 BlueTrend Class B Sterling Shares was -4.26%
Q1 Performance Review
Net performance for BlueTrend Class B Sterling Shares in the first quarter was +10.61%. BlueTrend's performance for the quarter was strong, with six of the seven sectors posting positive returns. The largest contributions to performance came from the bonds and equities sectors. The Margin to Equity of the fund finished the quarter lower, having stood at 16.2% at the end of December, and finishing the quarter at 14.9%. The most significant changes to the distribution of risk within the portfolio (in terms of VaR) were a decrease to the fixed income sectors and an increase to the equities sector. At the end of the period the two largest contributions to risk were the equities sector at 36% and the bonds sector at 22%. Looking at the performance by month:
January resulted in all seven sectors seeing positive performance. Long positioning across fixed income markets continued through January, across both the bonds and short interest rates sectors. Price action resulted from a host of monetary policy interventions by major central banks that led to a strong rally in bonds. The bond sector contained the majority of the best performing individual markets, with the US 5 YR Note posting the strongest gains. The long exposure to equities maintained relatively constant over the month and resulted in positive performance contribution to the fund, particularly from long positions in European equity markets. The commodities complex contributed positively to performance, with gains being driven by the energies sector. For the most part, commodities continued their trends from the previous year, with a variety of factors such as the continued strength of the dollar, as well as OPEC-induced over supply, leading to further declines in energy prices. The currency sector also contributed positively. The dollar staged its largest rally since June 2012, with the fund benefitting from a short EUR position. The program had largely removed the Swiss Franc from its core strategies avoiding the negative impact from the decision by the Swiss National Bank to remove the currency cap against the Euro.
February saw a difficult start to the month, however, BlueTrend recovered strongly towards the end of the month, led by returns from equities and to a lesser extent some gains in the currencies space. BlueTrend entered the month of February with long exposure in global equity indices and continued to increase exposure over the month as equity markets discounted GREXIT risk and potential contagion effects. The MSCI World Index was up 5.68%. European equities led the way, especially after a short term solution was found for Greece with a 6.85% gain in the STOXX Europe 600 Index. However, all regions contributed to performance, with Europe & Asia strongest while US equities made a late comeback to new highs towards the end of the month.
It was a difficult month for fixed income, which saw very weak performance at the start of February. However, after the Greek saga found some resolution, European bonds once again traded to new lows in yield terms with the German Bund trading of 0.30% while Italian BTPs touched yields of 1.327%. Elsewhere, both the US and UK saw weakness in fixed income throughout the month with yields rallying back to where they were at the start of the year, with the US 10 Year Yield finishing at 1.99% and the UK 10 Year Yield at 1.80%. After the strong gains in fixed income in January, BlueTrend suffered a small relative loss on its fixed income positioning in February, demonstrating the effectiveness of the risk control that the program has in place.
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The currencies sector contributed positively to returns with the Dollar index finishing the month higher, albeit in a relatively tight range over the month. The fund generated gains from both a short JPY position as well as a long NZD position. The commodities space also suffered reversals in most sectors with only metals avoiding losses. Energy markets continued the rally which started in late January, hurting the fund's short positioning in the sector. Similarly short positioning in crops was to the detriment of fund performance. Despite a somewhat volatile month, BlueTrend finished March with positive returns as gains from fixed income, energies and FX offset losses in equities and crops. It was a tough start to the month for fixed income which saw yields initially go higher. However, with the ECB ratcheting up bond purchases and a commitment to buying bonds even with negative yields, European bonds once again traded to new lows. In yield terms, the German Bund made new all-time low of 0.18%, Italian BTP'S also touched new lows at 1.12%. Despite all the hubris regarding rate rises in the US, treasuries once again found a buyer in the medium to long term part of the curve, 10 year yields fell again below 2% and traded as low as 1.87% while 30 year bonds traded as low as 2.45%. Accordingly, BlueTrend benefitted from its continued long bias to the sector. In equities, we saw a continuation of the theme of US equities underperforming their European counterparts. March saw plenty of speculation and discussion on the timing of rates rise in the US with Yellen turning somewhat dovish towards the end of the month. US equities suffered from profit taking as investors feared a tightening cycle after a long period of easy monetary policy. BlueTrend retained a long bias over the course of the month and, although the exposure moved around intra month, the fund suffered modest losses from long positioning in a number of markets including the S&P as well as the FTSE Index.
The currencies sector was a source of gains for the fund as the dollar index continued to rally against a number of currencies as it continued a long uptrend since July of last year. Eventually the DXY traded at around 100, a level not seen since 2003 which led to an element of profit taking as the month drew to a close. Monetary policy divergences are becoming more evident causing volatility in the space and creating ample opportunities.
BlueTrend made positive returns from the currency space despite this profit taking into month end and, in particular, short exposure to the Euro and Swedish krona were a source of gains. The commodities space also contributed to the fund returns although, as in other sectors, it was a volatile ride. The energy markets saw tremendous volatility throughout March. West Texas Intermediate (WTI) made fresh lows only to be driven sharply higher on geo political concerns. Despite this choppy range, BlueTrend produced positive performance in the energy space with a short Brent crude position being a significant source of profits. Elsewhere in commodities the fund experienced modest losses in crops from a short bias to the sector while the metals sector contribution was essentially flat.
Q2 Performance Review
Net performance for BlueTrend Class B Sterling Shares in the second quarter was -13.44%.
It was a tough quarter for BlueTrend, with only positive performance coming from one of the seven sectors traded, metals. The quarter was dominated by events surrounding the Greek debt crisis resulting in investor malaise and confusion. The positive contribution from metals was eclipsed by negative returns mainly in the bonds and equities sectors. The margin to equity of the fund finished lower from the previous quarter, having stood at 14.9% at the end of March, and finishing the quarter at 11.9%.
There were significant changes to the distribution of risk within the portfolio (in VaR terms) throughout the quarter. Risk in all sectors fluctuated throughout the quarter with six of the seven sectors seeing a reduction in risk by the end of the quarter. The bond and equities sectors led the way in terms of significant risk decreases and metals ended the quarter with increased risk. The commodities complex was the highest overall risk contributor by quarter end with energies providing most of the risk.
Looking at performance by month:
Despite a good start to April, BlueTrend finished the month with negative performance, led by losses in the bonds and FX sectors, as the end of the month saw an aggressive reversal in the US Dollar (USD) and major fixed income markets.
Long positioning across fixed income markets continued through April. The fixed income sector saw a positive start to the month as yields fell in all major developed bond markets, most notably in the German ten year bond with yields at a record low of 6bps. However, a dramatic reversal towards the end of the month erased performance, with yields in Germany rallying off the lows to end the month yielding 36 bps.
Price action was fierce and resulted from over positioning in EU bonds due to QE related monetary policy from the ECB. In the U.S., yields followed a similar path although less violently than in Europe.
BlueTrend maintained long exposure to the equities sector throughout the month of April, favouring Asian and US equities over EU equities for the majority of the month. This regional diversification benefitted performance, and despite an aggressive sell off towards the end of the month, the equities space posted a positive return in April. European indices saw negative monthly performance with notable indices like the DAX having one of their worst monthly losses since 2011.
The commodities complex was relatively flat in April, albeit with extreme volatility, especially in the metals space. Gold and silver were down on the month in the face of USD weakness. In the energies
sector, USD weakness and tensions in the Middle East led to a positive environment for energy prices. WTI continued to put pressure on short positions as it was squeezed to a new high for the year. The agriculture space was strong with gains seen in short corn and wheat positions, where both trended lower in the face of good supply and higher yields due to better weather.
The currency sector saw negative performance in April. Large volatility due to over positioning in short EUR and long USD against many other currencies contributed to negative performance. The DXY index showed the USD completely reversing previous gains and posting the worst performance since 2011. Large crosses like EURUSD squeezed aggressively as a result of interpretation that recent soft data from the US will force the FED to delay the timeline of rate rises. Elsewhere, the Reserve Bank of Australia and Reserve Bank of New Zealand contributed to volatility and USD weakness, by not cutting rates as many expected.
Long positioning across fixed income markets continued through May. The month started with aggressive price moves to the downside and continued to get worse throughout the month, albeit at a much slower pace. Yields traded sharply higher in all major developed bond markets. Most notably, the German 10 YR continued to see historic moves in daily volatility, while yields traded back to the 0.72% level, despite the ongoing QE programme by the ECB. Volatility was not just confined to Europe, as we saw very large moves in Asian, Australian, and US bonds as well. Long position in JPN 10 YR and AUST 3 YR positions were amongst the largest detractors in the fund in May.
BlueTrend maintained long exposure to the equities sector throughout the month of May. It was a volatile month for equities, with no real direction in the space. Equities finished the month slightly negative in this range bound environment. Exposure remained fairly balanced across the three major regions, the US, Europe, and Asia. US equities posted positive performance, with both Asian and European equities detracting from performance slightly.
The currency sector contributed positively in May. USD strength against other currencies resulted in positive contribution from the sector. The short JPY and SEK forward positions were top contributors for the fund. The long NZD forward position withdrew from these gains and resulted in the fund's largest detractor for the month.
The commodities complex also detracted from performance in May. Energies was the largest detractor of the three sectors with metals following closely behind. The crops sector was only a slight detractor for the month. BlueTrend ended May with short exposure in the three sectors. Despite the overall negative contribution from the complex, short corn and short copper positions added positively on this month's return.
BlueTrend experienced a challenging month in June with six out of seven sectors posting negative returns, with only the metals sector contributing positively. The bonds and equities sectors were the largest negative contributor. European bond yields continued to trade in a volatile fashion throughout June amid investor concerns regarding liquidity and QE distortions. Equity markets around the world also saw large levels of volatility throughout the month. For example, China saw -10% moves intraday and the Eurostoxx gaped down nearly -5% on the open after the Greek Prime Minister called a referendum to accept creditor proposals.
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Long positioning across fixed income markets continued through June. Further confusion around US interest rate hikes saw the US 10 YR yield close out the month near 2.35%. German bonds continued to sell off, with yields settling at 0.75% by the end of June. Investor concerns over liquidity and inventory levels across the street played out in volatile short term moves. Long positioning in the Japanese 10 YR accounted for the biggest losses in the bond sector. Eurodollar was the largest detractor in the rates sector with varied exposure throughout June, ending the month with long exposure. BlueTrend maintained mixed exposures to equities throughout the month, but ended June with an overall aggregate short exposure. General weakness throughout the month was apparent. The close of the month brought about a downturn in European and US equities resulting from concerns over Greece. Asian equities struggled to contain the moves seen in China. The Shanghai Composite displayed large daily swings in both directions. Short positioning in the VIX was amongst the worst performing markets in June.
Currencies was one of our worst performing sectors in June. For the most part, the USD traded sideways throughout the month.
This was largely due to absolute malaise in EUR/USD, whereby EUR/USD appeared stuck in a small range for much of June despite equities and bonds both moving aggressively on Greek headlines. In aggregate, BlueTrend continues to be long USD in the face of this choppy trading. The short SEK forward position was the largest detractor in the sector.
The commodities bucket continued to face difficulties in June. Crops served as the biggest laggard on performance, followed by energies, whilst metals contributed positively in June. Short positioning in crops in the beginning of the month largely contributed to the negative performance as adverse weather conditions fuelled a large rally towards the end of the month. Short wheat and corn positions were large contributors to the negative performance in the crop sector. Short positioning in energies also proved difficult, with short natural gas positions causing a drag on performance after prices came off their lows from early in the month. Metals was the lone positive performing sector, with copper and palladium amongst the top performing markets in the fund in June.
While disappointing, the drawdown experienced over the second quarter was not beyond the bounds of expectations when looking at the live trading history. As noted above, BlueTrend has reacted to the increased volatility in markets and the uncertainty surrounding the end game for Greece seen throughout the quarter by substantially reducing risk in the majority of the sectors traded. The overall fund VaR dropped from 1.11% as of 30 March 2015 to 0.79% as of 30 June 2015.
UNAUDITED INTERIM CONDENSED STATEMENT OF COMPREHENSIVE INCOME
For the six months ended 30 June 2015
Ordinary Shares
Total
Note GBP
Income
Interest income from cash and
cash equivalents 2,762
Net loss on financial assets
at fair value through profit
or loss 6 (1,191,499)
Total net income (1,188,737)
----------------
Expenses
Directors' fees 3 45,000
Transaction costs 185,933
Administration and secretarial
fees 3 48,310
Legal and professional fees 46,703
Other operating expenses 3,407
Audit fees 10,590
Regulatory fees 9,899
Total operating expenses 349,842
----------------
Operating loss and total comprehensive loss for the
period (1,538,579)
Loss per share Pence (GBP)
Basic and diluted 4 (4.346)
All items in the above statement derive from continuing operations.
There are no items in other comprehensive income for the period other than those disclosed above.
The notes form an integral part of these unaudited condensed interim financial statements.
For the six months ended 30 June 2014
Ordinary Shares
Sterling US$ Share
Share Class Class Total
Note GBP $ GBP
Income
Interest income from cash
and cash equivalents 12,141 6,508 16,104
Net gain on financial assets
at fair value through profit
or loss 6 4,477,210 2,704,284 6,009,287
Total net income 4,489,351 2,710,792 6,025,391
-------------- -------------- --------------
Expenses
Directors' fees 3 31,224 23,720 45,217
Transaction costs 31,483 23,426 45,325
Administration and secretarial
fees 3 24,292 24,159 38,520
Legal and professional fees 10,969 8,415 15,944
Other operating expenses 8,178 6,112 11,786
Audit fees 11,291 5,850 14,710
Audit related fees 5,454 4,014 7,801
Regulatory fees 8,637 8,038 13,353
Total operating expenses 131,528 103,734 192,656
-------------- -------------- --------------
Finance income:
Gain on Company share buy backs 615,247 229,527 753,163
Gain on redemptions through the
Tender Offer 1,205,435 948,157 1,759,719
Offer
Finance charge:
Profit allocated to shares classified
as liabilities 1 (6,178,505) (3,784,742) (7,228,656)
-------------- -------------- --------------
Net Finance charge (4,357,823) (2,607,058) (4,715,774)
Profit for the year
Items that may be reclassified subsequently to profit
and loss
Currency aggregation adjustment 1 - - (1,116,961)
-------------- -------------- --------------
Other Comprehensive Income - - (1,116,961)
-------------- -------------- --------------
Total Comprehensive Income - - (1,116,961)
-------------- -------------- --------------
Earnings per share Pence (GBP) Cents ($) Pence (GBP)
Basic and diluted 4 6.218 5.011 4.133
The Earnings per share for the US$ Class for the period ended 30 June 2014 was US$0.05011. The Class closed on 30 June 2014.
All items in the above statement derive from continuing operations.
There are no items in other comprehensive income for the period other than those disclosed above.
INTERIM CONDENSED STATEMENT OF FINANCIAL POSITION
As at 30 June 2015
Ordinary Shares
As at As at
30 June 2015 31 December
2014
(Unaudited) (Audited)
Sterling Share Sterling Share
Class Class
Note GBP GBP
Non-Current Assets
Investments designated as fair
value through profit or loss 6 29,641,970 33,110,774
Current Assets
Other receivables and prepayments 5 13,328 7,245
Cash and cash equivalents 5,501,564 4,237,721
Total assets 35,156,862 37,355,740
---------------- ----------------
Current Liabilities
Payables 7 61,079 302,358
---------------- ----------------
Net Assets 35,095,783 37,053,382
---------------- ----------------
EQUITY
Stated Capital and Reserves 9 35,095,783 37,053,382
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35,095,783 37,053,382
---------------- ----------------
Number of ordinary shares (GBP
class, excluding treasury shares) 35,280,128 35,665,128
Net asset value per share Pence (GBP) Pence (GBP)
0.995 1.039
The NAV per share per the financial statements is equal to the published NAV per share. The published NAV per share represents the NAV per share attributable to shareholders in accordance with the Prospectus.
The unaudited condensed interim financial statements on pages 16 to 21 were approved and authorised for issue by the Board of Directors on 27 August 2015 and are signed on its behalf by:
Huw Salter
Director
The notes form an integral part of these unaudited condensed interim financial statements.
UNAUDITED INTERIM CONDENSED STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
For the six months ended 30 June 2015
Ordinary Shares
Sterling Share US$ Share
Class Class Total
Note GBP $ GBP
Net assets at the beginning
of the
period attributable to holders
of
redeemable ordinary shares 37,053,382 - 37,053,382
Treasury shares purchased
and cancelled 10 (205,350) - (205,350)
Treasury shares purchased
and held in treasury 10 (213,670) - (213,670)
Share issue costs 11 - - -
--------------- ---------- ------------
Net decrease from share transactions 36,634,362 36,634,362
Decrease in net assets attributable
to
holders of redeemable ordinary
shares 11 (1,538,579) (1,538,579)
Balance at 30 June 2015 35,095,783 - 35,095,783
--------------- ---------- ------------
UNAUDITED INTERIM CONDENSED STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE ORDINARY SHARES
For the six months ended 30 June 2014
Ordinary Shares
Sterling Share US$ Share
Class Class Total
Note GBP $ GBP
Net assets at the beginning
of the
period attributable to holders
of
redeemable ordinary shares 93,380,488 81,394,948 142,540,933
Treasury shares purchased
and cancelled 10 (15,806,642) (6,714,330) (19,845,704)
Share conversions 11 7,061,386 (11,563,670) -
Share issue costs 11 (10,583) (4,553) (13,592)
--------------- ------------- -------------
Net decrease from share transactions (8,756,109) (18,282,553) (19,859,296)
Increase in net assets attributable
to
holders of redeemable ordinary
shares 11 6,178,505 3,784,742 8,345,617
Currency aggregation adjustment - - (1,116,961)
--------------- ------------- -------------
Net assets prior to transfer
to equity 90,802,884 66,897,137 129,910,293
--------------- ------------- -------------
Shares redeemed awaiting settlement 57,029,172 44,812,388 83,226,055
US$ Shares awaiting compulsory
conversion - 22,084,749 12,910,526
--------------- ------------- -------------
Balance at 30 June 2014 33,773,712 - 33,773,712
--------------- ------------- -------------
UNAUDITED INTERIM CONDENSED STATEMENT OF CASH FLOWS
For the period ended 30 June 2015
Total
Note GBP
Cash flows from operating
activities
Interest received 1,381
Operating expenses paid (175,337)
Proceeds from disposal of
investments 1,857,113
Net cash generated from operating
activities 1,683,157
----------
Cash flows from financing
activities
Purchase of treasury shares (419,020)
Share issue & Share redemption
costs (294)
----------
Net cash used in financing
activities (419,314)
----------
Net increase in cash and cash equivalents during the
period 1,263,843
Cash and cash equivalents at the beginning of the period 4,237,721
Cash and cash equivalents at the end of the period 5,501,564
----------
For the period ended 30 June 2014
Ordinary Shares
Sterling US$
Share Class Share Class Total
Note GBP $ GBP
Cash flows from operating
activities
Interest received 12,047 6,507 16,003
Operating expenses paid (141,380) (109,631) (207,244)
Purchase of investments (12,343,847) (5,388,009) (15,552,787)
Proceeds from disposal of
investments 36,543,460 29,821,678 54,541,722
Net cash generated from operating
activities 24,070,280 24,330,545 38,797,694
------------- ------------- -------------
Cash flows from financing
activities
Purchase of treasury shares (15,540,880) (6,499,934) (19,450,048)
Conversions between
share classes 7,061,386 (11,563,670) -
Share issue costs (10,645) (4,553) (13,381)
------------- ------------- -------------
Net cash used in financing
activities (8,490,139) (18,068,157) (19,463,429)
------------- ------------- -------------
Net increase/ (decrease)
in cash and cash equivalents
during the period 15,580,141 6,262,388 19,334,265
Cash and cash equivalents
at the beginning of the period 3,691,585 7,884,089 8,453,371
Effect of exchange rate changes
on cash and cash equivalents - - (246,018)
------------- ------------- -------------
Cash and cash equivalents
at the end of the period 19,271,726 14,146,477 27,541,618
------------- ------------- -------------
The notes form an integral part of these unaudited condensed interim financial statements.
NOTES TO THE UNAUDITED INTERIM CONDENSED FINANCIAL STATEMENTS
For the period ended 30 June 2015
1. ACCOUNTING POLICIES
Reporting Entity
The Company is a self-managed closed-ended investment company incorporated in Guernsey on 10 February 2012 with registered number 54646 with an unlimited life. Effective from 18 July 2014, the Company has one class of shares in issue, being Sterling Shares (the "Shares").
Basis of Preparation
These unaudited interim condensed financial statements ("financial statements") for the period 1 January 2015 to 30 June 2015 have been prepared in accordance with International Accounting Standard 34 (Interim Financial Reporting) issued by the International Accounting Standard ("IAS") and adopted by the EU ("IAS 34") and the Disclosure and Transparency Rules ("DTR's") of the UK's Financial Conduct Authority and in accordance with applicable Guernsey law.
The financial statements do not include all of the information required for full financial statements, and should be read in conjunction with the financial statements of the Company as at and for the year ended 31 December 2014. The financial statements of the Company as at and for the year ended 31 December 2014 were prepared in accordance with International Financial Reporting Standards ("IFRS").
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The information for the year ended 31 December 2014 is derived from the Financial Statements delivered to the UK Listing Authority, and does not constitute Statutory Accounts as defined by Guernsey Law. A copy of the Statutory Accounts for that year has been delivered to the Shareholders. The Auditor's Report on those Financial Statements was not qualified.
The accounting policies applied by the Company in these financial statements are consistent with those applied by the Company in its financial statements for the year ended 31 December 2014.
The preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets and liabilities, income and expense. Actual results may differ from these estimates.
In preparing these condensed unaudited interim financial statements, the significant judgements made by management in applying the Company's accounting policies and the key sources of estimation uncertainty were the same as those that applied to the financial statements for the year ended 31 December 2014.
New standards, interpretations and amendments adopted
The accounting policies in the preparation of the financial statements are consistent with those followed in the preparation of the financial statements for the year ended 31 December 2014.
Standards or Interpretations not yet adopted
A number of new standards, amendments to standards and interpretations have been issued or amended by the IASB, are not yet effective and have not been applied in preparing these financial statements. The following standards will in the future apply to the Company:
IFRS 9 - Financial Instruments: Classification and measurement of financial assets
IFRS 9 - Financial Instruments is effective for accounting periods beginning on or after 1 January 2018 (EU endorsement pending). The Board have reviewed the impact of IFRS9 on the Company and they do not expect there to be any changes to the measurement of items in the Financial Statements but recognise additional disclosure may be required.
Summary of significant accounting policies
Interest income
Interest income is recognised in the statement of comprehensive income for all interest-bearing financial instruments using the effective interest method.
Net gain/loss on financial assets at fair value through profit or loss
Net gain/loss on financial assets at fair value through profit or loss includes all realised and unrealised fair value changes and foreign exchange differences, but excludes interest and dividend income. Net realised gain/loss on financial assets at fair value through profit or loss is calculated using the average cost method.
Expenses
All expenses are accounted for as the related services are performed. Expenses relating to the Company are allocated across the share classes proportionally based on the relative Net Asset Values ("NAV") of each share class.
Taxation
The Company has been granted exemption under the Income Tax (Exempt Bodies) (Guernsey) Ordinance, 1989 from Guernsey Income Tax, and is charged an annual fee of GBP1,200. (2014: GBP600).
Cash and cash equivalents
Cash and cash equivalents are defined as call deposits and short term deposits readily convertible to known amounts of cash and subject to insignificant risk of changes in value, together with bank overdrafts. For the purposes of the Statement of Cash Flows, cash and cash equivalents consist of cash and deposits at bank, together with bank overdrafts.
Due from and due to brokers
Amounts due from and to brokers represent receivables for securities sold and payables for securities purchased that have been contracted but not yet settled or delivered respectively on the statement of financial position date.
Financial instruments
Financial assets and financial liabilities are recognised in the Company's Statement of Financial Position when the Company becomes a party to the contractual provisions of the instrument.
Financial assets
The classification of financial assets at initial recognition depends on the purpose for which the financial asset was acquired and its characteristics. All financial assets are initially recognised at fair value. All purchases of financial assets are recorded at trade date, being the date on which the Company became party to the contractual requirements of the financial asset. The Company's financial assets comprise only of loans and receivables and investments designated at fair value through profit or loss.
Loans and receivables
Loans and receivables assets are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They principally comprise trade and other receivables and cash and cash equivalents. They are initially recognised at fair value plus transaction costs that are directly attributable to the acquisition, and subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. The effect of discounting on these financial instruments is not considered to be material.
Financial assets designated at fair value through profit or loss upon initial recognition
Classification - All investments are designated upon initial recognition as financial assets at "fair value through profit or loss" on the basis that they are part of a group of financial assets which are managed, and have their performance evaluated, on a fair value basis in accordance with risk management and investment strategies of the Company as set out in the Company's offering document.
Recognition and measurement - Investments are initially recognised on the date of purchase (on 'trade date' basis) at cost, being the fair value of the consideration given, excluding transaction costs associated with the investment.
De-recognition - A financial asset (in whole or in part) is derecognised either when the Company has transferred substantially all the risks and rewards of ownership; or when it has neither transferred nor retained substantially all the risks and rewards and when it no longer has control over the assets or a portion of the asset; or when the contractual right to receive cash flows from the asset has expired.
Fair value estimation - In order to assess the fair value of unquoted investments the NAVs of the underlying funds are taken into consideration. The investments in the unquoted investments, BlueTrend Fund Limited and BlueTrend 2x Leveraged Fund Limited (together the "Feeder Funds"), are primarily valued based on the latest available redemption price of such units for each fund, as determined by the Feeder Funds' administrators.
The Company reviews the details of the reported information obtained and considers the liquidity of the Feeder Funds or their underlying investments, the value date of the NAV provided, any restrictions on redemptions, and the basis of accounting and, in instances where the basis of accounting is other than fair value, fair valuation information provided by the Feeder Funds' administrators. If necessary, the Company makes adjustments to the NAV of the Feeder Funds to obtain the best estimate of fair value.
Financial liabilities
Classification - The classification of financial liabilities at initial recognition depends on the purpose for which the financial liability was issued and its characteristics. The Company's financial liabilities consist of only financial liabilities measured at amortised cost and these include trade payables and other short-term monetary liabilities.
Recognition and measurement - All financial liabilities are initially recognised at fair value net of transaction costs incurred. Financial liabilities are recorded on trade date, being the date on which the Company becomes party to the contractual requirements of the financial liability.
Financial liabilities at amortised cost are initially recognised at fair value and subsequently carried at amortised cost using the effective interest rate method.
De-recognition - A financial liability (in whole or in part) is derecognised when the Company has extinguished its contractual obligations, it expires or is cancelled. Any gain or loss on de-recognition is taken to the statement of comprehensive income.
Foreign currency translation
The Company's total financial statements are presented in Sterling, which is the Company's functional and presentation currency. Operating expenses in foreign currencies are initially recorded at the functional currency rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are translated at the functional currency rate of exchange ruling at the reporting date. Previously, investments in the US$ share class were initially recorded in US Dollars and translated into the Company's functional currency at the reporting date. The US$ assets were sold during the year ended 31 December 2014. All differences on these foreign currency translations are taken to the Statement of Comprehensive Income.
The foreign currency translation differences on aggregation of the historical US$ Class were taken to the currency aggregation adjustment in the Statement of Comprehensive Income.
Significant shareholdings
The Company has applied the exemption available under IAS 28 to account for the investments in the Feeder Funds under IAS 39, Financial Instruments: Recognition and Measurement. In accordance with IAS 39, the Company has accounted for the holding in the Feeder Funds at fair value, with changes in fair value recognised in profit or loss.
Segment information
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For management purposes, the Company is organised into one main operating segment, which invests in the share classes of the Feeder Funds which are incorporated in the Cayman Islands. All of the Company's activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based upon the Company as one segment. The financial statements from this segment are equivalent to the financial statements of the Company as a whole.
Shares
The shares in issue have been previously classified as liabilities in accordance with IAS 32 because of the provisions contained in the Company's Articles of Incorporation.
This treatment did not result in the shares being treated as a liability for the purpose of applying the solvency test set out in Section 527 of the Companies (Guernsey) Law, 2008 (the "Law").
Following the closure of all the US$ dollar share class in 2014, the Sterling Shares no longer met the definition of a financial liability in accordance with IAS 32 and as such were classified and accounted for as equity. In the Statement of Comprehensive Income for the period ended 30 June 2014 and year ended 31 December 2014, the profit from the beginning of the year until the closure of the US$ share class was included in 'Profit allocated to shares classified as liabilities' for shares classified as liabilities whereas profit after the closure of the US$ share class was included in 'Profit for the year' for shares classified as equity. The movement in the net assets until the closure of the US$ share class was presented in the Statement of Changes in Net Assets Attributable to Holders of Redeemable Ordinary Shares whilst the movement in net assets from the time the shares were classified as equity was presented in the Statement of Changes in Shareholders' Equity.
In line with the Prospectus, the expenses incurred for the initial placing were borne by the Company up to a maximum of 1 per cent of the gross issue proceeds. The initial placing expenses included placing fees and commissions, registration, listing and admission fees, the cost of settlement and escrow arrangements, printing, advertising and distribution costs, legal fees, and any other applicable expenses incurred in connection with the offering of shares. All such expenses were recognised in the Statement of Changes in Net Assets attributable to holders of redeemable ordinary shares, reducing the issue proceeds received.
2. CRITICAL ACCOUNTING JUDGEMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY
The preparation of the Company's financial statements requires management to make judgements, estimates and assumptions that affect the reported amounts recognised in the financial statements and disclosure of contingent liabilities. However, uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the asset or liability affected in future periods.
Estimates and assumptions
The key assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities are discussed below. The management of the Company based its assumptions and estimates on parameters available when the financial information was prepared. However, existing circumstances and assumptions about future developments may change due to market changes or circumstances arising beyond the control of the Company. Such changes are reflected in the assumptions when they occur.
Fair value of financial assets at fair value through profit or loss
The Directors consider that the confirmed NAVs for the investments in the Feeder Funds, as described in Note 1 and produced by the Feeder Funds' administrators, represent the fair value of the investments held by the Company.
3. AGREEMENTS AND RELATED PARTIES
Investments
The Company's investments include holdings of:
BlueTrend Fund Limited Class BlueTrend 2x Leveraged Fund
B as a % of the total fund Limited Class A as a % of
value the total fund value
30 June 2015 0.91% 23.96%
30 June 2014 1.8% 33.3%
These transactions are transactions with related parties as defined within IAS 24, Related Party Disclosures. The totals of such transactions are shown in Note 6.
Administration agreement
The Company has appointed Dexion Capital (Guernsey) Limited as Secretary and Administrator (or Designated Manager) pursuant to the Administration Agreement. In such capacity, the Administrator is responsible for the general secretarial functions required by the Law and for ensuring that the Company complies with its continuing obligations as an investment company holding a premium listing on the Official List and admitted to trading on the main market of the London Stock Exchange. The Administrator is also responsible for the Company's general administrative functions such as the calculation of the NAV of the shares, the maintenance of accounting and statutory records and, if required, the safekeeping of any share certificates and other documents of title relating to the investment of the Company's cash and other assets. In addition, at the direction and request of the Board, the Administrator is responsible for taking the required actions to adjust the Company's portfolio in order that investments are made in accordance with the Company's investment policy. The Administrator is entitled to an annual fee in respect of administration services from the Company calculated by reference to the NAV, such fee not to be less than GBP3,750 per calendar month. In addition, the Administrator is paid a minimum fee per annum of GBP25,000 in respect of company secretarial services and GBP16,000 per annum (plus inflation in each year).
For the period ended 30 June 2015, the Administration fee was GBP22,315 (30 June 2014: GBP22,203) and the Secretarial fee was GBP18,061 (30 June 2014: GBP24,118). Of these amounts an Administration fee of GBP7,521 (30 June 2014: GBP3,822) and a Secretarial fee of GBP6,233 (30 June 2014: GBP3,988) were unpaid at the period end.
Directors' remuneration and other interests
The Directors are related parties and are remunerated for their services at a fee not to exceed GBP35,000 per annum (GBP50,000 for the Chairman). In addition, the chairman of the audit committee receives an additional GBP5,000 per annum for his services in this role. Andrew Dodd, the sole non-independent director, has waived his fee for his services as a director. For the period ended 30 June 2015, the Directors' fees amounted to GBP45,000 (30 June 2014: GBP45,217). Of this amount GBP7,500 (30 June 2014: GBP7,555) was unpaid at the period end.
Wayne Bulpitt held 25,000 Sterling Class Shares at the period end (30 June 2014: 25,000).
Huw Salter held 20,000 Sterling Class Shares at the period end (30 June 2014: 20,000).
For the period ended 30 June 2015
4. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the profit/(loss) for the period by the weighted average number of ordinary shares in issue during the year, excluding the average number of shares purchased by the Company and held as treasury shares.
Ordinary
Sterling
For the period ended 30 June Share Class
2015
Loss for the period (1,538,579)
Weighted average number of
ordinary shares in issue 35,401,951
-------------
Pence (GBP)
Loss per share (4.346)
-------------
Ordinary shares
Sterling US$ Share Total
For the period ended 30 June Share Class Class
2014
Profit allocated to shares
classified as liabilities
for the period 6,178,505 3,784,742 7,228,656
Weighted average number of
ordinary shares in issue 99,355,372 75,535,925 174,891,297
------------- ----------- ------------
Pence (GBP) Cents ($) Pence (GBP)
Earnings per share 6.218 5.011 4.133
------------- ----------- ------------
5. OTHER RECEIVABLES AND PREPAYMENTS
As at 30 June As at 31 December
2015 2014
GBP GBP
Prepayments
Directors indemnity insurance 7,790 2,066
Other 5,538 5,179
13,328 7,245
---------------- ------------------
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6. FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS
Total
As at 30 June 2015 Ordinary
Shares
Sterling
Share Class
GBP
Unlisted managed funds
Cost brought forward 31,102,470
Disposals during the period (1,857,113)
Equalisation impact (420,193)
Unrealised gain on valuation
carried forward 816,806
--------------
Financial assets at fair
value
through profit or loss 29,641,970
--------------
Movement in unrealised
gains/(losses) on valuation (1,362,701)
Realised gains /(losses)
on disposals 171,202
--------------
Net gains on financial
assets
at fair value through profit
or loss (1,191,499)
--------------
Ordinary shares
As at 31 December 2014 Sterling US$ Share Total
Share Class Class
GBP $ GBP
Unlisted managed funds
Cost brought forward 101,320,899 80,810,692 151,649,178
Purchases at fair value 23,395,297 5,754,517 26,750,920
Disposals during the period (93,441,674) (86,513,415) (144,768,389)
Equalisation impact (172,052) (51,794) (30,205)
Currency aggregation adjustment - - (2,499,034)
Unrealised gain on valuation
carried forward 2,008,304 - 2,008,304
------------- ------------- --------------
Financial assets at fair
value
through profit or loss 33,110,774 - 33,110,774
------------- ------------- --------------
Movement in unrealised
gains/(losses) on valuation 13,341,302 7,487,326 17,583,149
Realised gains /(losses)
on disposals (6,773,451) (4,783,042) (9,483,221)
------------- ------------- --------------
Net gains on financial
assets
at fair value through profit
or loss 6,567,851 2,704,284 8,099,928
------------- ------------- --------------
Ordinary shares
As at 30 June 2014 Sterling US$ Share Total
Share Class Class
GBP $ GBP
Unlisted managed funds
Cost brought forward 101,320,899 80,810,692 151,649,178
Purchases at fair value 12,436,847 5,754,517 15,871,208
Disposals during the period (40,829,563) (34,678,929) (61,742,121)
Redemptions awaiting settlement (41,627,153) (51,886,280) (71,959,364)
Currency aggregation adjustment - - (2,517,871)
Unrealised losses on valuation
carried forward (2,397,176) - (2,397,176)
------------- ------------- -------------
Financial assets at fair
value
through profit or loss 28,903,854 - 28,903,854
------------- ------------- -------------
Unrealised gains on valuation 8,758,818 6,996,693 12,887,866
Realised (losses) on disposals (4,281,608) (4,292,409) (6,878,579)
------------- ------------- -------------
Net gains on financial
assets
at fair value through profit
or loss 4,477,210 2,704,284 6,009,287
------------- ------------- -------------
7. PAYABLES
As at 30 June As at 31 December
2015 2014
GBP GBP
Contingent redemption fee
payable - 234,260
Directors' fees 7,500 7,500
Transaction costs 13,056 14,543
Administration and secretarial
fees 13,754 10,369
Accounts preparation 7,934 8,000
Other expenses 6,438 7,836
Audit fees 12,397 19,850
61,079 302,358
-------------- ------------------
8. STATED CAPITAL
Authorised share capital - An unlimited number of unclassified shares of no par value.
Sterling Share Class
Number of shares in issue at 30
June 2015
(excluding treasury shares) 35,280,128
-------------------------
The movement in shares took place Number of Sterling Share
as follows: Class
Brought forward as at 31 December
2014
(excluding treasury shares) 35,665,128
Redemption 2 January 2015 for treasury (200,000)
Redemption 31 March 2015 for cancellation (185,000)
As at 30 June 2015 35,280,128
-------------------------
Sterling Share Class
Number of shares in issue at
31 December 2014 35,665,128
--------------------------
The movement in shares took place Number of Sterling Share
as follows: Class
Brought forward as at 31 December
2013 104,641,389
Conversion 2 January 2014 (18,528)
Redemption 3 January 2014 (380,000)
Redemption 7 January 2014 (350,000)
Redemption 14 January 2014 (2,000,000)
Redemption 21 January 2014 (640,000)
Redemption 28 January 2014 (170,000)
Conversion 3 February 2014 9,650,596
Redemption 4 February 2014 (150,000)
Redemption 11 February 2014 (3,211,000)
Redemption 18 February 2014 (748,000)
Conversion 3 March 2014 (10,000)
Redemption 4 March 2014 (1,335,000)
Redemption 11 March 2014 (1,020,000)
Redemption 18 March 2014 (3,240,000)
Redemption 20 March 2014 (5,000,000)
Conversion 1 April 2014 (527,461)
Conversion 1 May 2014 (796,730)
Redemption 1 July 2014 (Tender
Offer) (60,271,795)
Conversion 1 July 2014 (Compulsory
conversion) 13,153,657
Redemption 22 July 2014 (100,000)
Redemption 29 July 2014 (250,000)
Redemption 4 August 2014 (255,000)
Redemption 12 August 2014 (1,190,000)
Redemption 27 August 2014 (2,025,000)
Redemption 2 September 2014 (1,050,000)
Redemption 9 September 2014 (962,000)
Redemption 16 September 2014 (1,000,000)
Redemption 23 September 2014 (1,300,000)
Redemption 30 September 2014 (1,700,000)
Redemption 14 October 2014 (75,000)
Redemption 21 October 2014 (425,000)
Redemption 28 October 2014 (235,000)
Redemption 25 November 2014 (100,000)
Redemption 2 December 2014 (100,000)
Redemption 9 December 2014 (660,000)
Redemption 22 December 2014 (485,000)
As at 31 December 2014 35,665,128
--------------------------
In order to manage any share price premium to net asset value, if the Directors believe there is investor demand that cannot be satisfied through the secondary market, the Company may seek to issue additional shares ("tap issues") or sell shares out of treasury, subject to access to the Feeder Funds being available.
As explained in Note 1, the Company's shares are recognised as equity subsequent to the closure of the US$ Class.
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On return of capital or a winding-up of the Company, the surplus assets attributable to a class of shares (as determined by the Directors) and available for distribution shall be paid to holders of shares of each class pro rata to the relative NAV of each of the classes of shares calculated in accordance with the Articles. Within each such class, such assets shall be divided pari-passu among the holders of shares of that class in proportion to the number of shares of such class held by them.
If, as at 31 March, 30 June, 30 September or 31 December in any calendar year, the ordinary shares of any class in issue have, over the last three calendar months preceding such date, traded at an average discount to NAV of more than 5 per cent the Directors will consider, subject to any legal or regulatory requirements, implementing a redemption offer. The Company will offer to redeem up to 25 per cent of the shares (excluding shares held in treasury) of such class then in issue at the NAV per share at the redemption date that occurs two months after the discount calculation period, less costs attributable to the relevant redemption offer. When made, the terms of the redemption offer will provide that shareholders requesting in excess of 25 per cent of their shares to be redeemed will have their redemption requests in respect of such excess accepted pro rata to the size of their shareholding if, and then only to the extent that, total redemption requests are made for less than 25 per cent of the prevailing issued share capital of the Company.
At the beginning of each calendar year, the management of the Company shall calculate the average of the monthly NAVs as at the end of each of October, November and December in the preceding calendar year. If such average is less than US$100 million the Company will, no later than the last business day of February in that year, call a general meeting to be held by no later than the date falling 28 days after the notice convening the general meeting is published by the Company. At that general meeting, the Directors will propose an ordinary resolution for the continuation of the Company. If the continuation resolution is not passed by shareholders, proposals will be put forward by the Directors to conduct an orderly winding-up or reconstruction of the Company which, for the avoidance of doubt, shall include an option that allows shareholders to realise their entire holding for cash at NAV less costs. The Directors will cause a general meeting of the Company to be convened for a date not later than 180 days after the date of the general meeting at which the continuation resolution is not passed (or, if adjourned, the date of the adjourned meeting).
The Listing Rules require at least 25 per cent. of each class of Shares of a listed company to be in "public
hands" (as defined in the Listing Rules) (the "Shares in Public Hands Requirement"). In particular, any Shareholders with an interest in 5 per cent. or more of the Shares of any class are excluded from the definition of "public hands" in relation to that class. In addition, the Shares held by the Directors are also excluded from the number of Shares held in "public hands".
Due to the average NAV not meeting the requirements of the Articles (noted above), on 26 February 2015, the Company issued a Shareholder Circular convening an EGM to be held on 25 March 2015. The sole ordinary resolution was to seek Shareholder approval for the Company to continue its business as a closed ended investment company.
As described in the Chairman's statement, the Company passed its Continuation Vote and the results were announced on 25 March 2015.
9. EQUITY AND NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE ORDINARY SHARES
Ordinary shares
Total Total
30 June 2015 - Equity As at As at
30 June 2015 31 December
Equity 2014
Net Assets
Attributable
to Holders
of Redeemable
Ordinary
Shares
GBP GBP
Represented by:
Stated Capital - -
Treasury shares (3,523,838) (3,310,168)
Distributable reserves 38,619,621 40,363,550
35,095,783 37,053,382
-------------- ---------------
10. TREASURY SHARES
Ordinary shares
Sterling US$ Share
30 June 2015 Share Class Class Total
GBP $ GBP
Brought forward as at 1 January
2015 3,310,168 - 3,310,168
Shares purchased for cancellation/treasury 419,020 - 419,020
Treasury shares sold - - -
Treasury shares cancelled (205,350) - (205,350)
(No. of Treasury Shares 3,773,924) 3,523,838 - 3,523,838
------------- ---------- ----------
Ordinary shares
Sterling US$ Share
31 December 2014 Share Class Class Total
GBP $ GBP
Brought forward as at 1 January
2014 18,481,914 996,189 19,102,325
Shares purchased for cancellation/treasury 84,643,793 50,349,034 114,077,345
Treasury shares cancelled (99,815,539) (51,345,223) (129,869,502)
(No. of Treasury Shares 3,573,924) 3,310,168 - 3,310,168
------------- ------------- --------------
Ordinary shares
Sterling US$ Share
30 June 2014 Share Class Class Total
GBP $ GBP
Brought forward as at 1 January
2014 18,481,914 996,189 19,102,325
Shares purchased for cancellation/treasury 15,806,642 6,714,330 19,731,774
Treasury shares cancelled (34,288,556) (7,710,519) (38,834,099)
(No. of Treasury Shares -
nil) - - -
------------- ------------ -------------
11. DISTRIBUTABLE RESERVES
Ordinary shares
Sterling Total
30 June 2015 Note Share Class
GBP GBP
Balance at 1 January 2015 40,363,550 40,363,550
Cancellation of Treasury
shares (205,350) (205,350)
Net change from share transactions
for the period 40,158,200 40,158,200
Decrease in net assets attributable
to holders of redeemable
shares - equity (1,538,579) (1,538,579)
------------- ------------
Balance at 30 June 2015 38,619,621 38,619,621
------------- ------------
Sterling US$ Share Total
31 December 2014 Note Share Class Class
GBP $ GBP
Balance at 1 January 2014 111,862,402 82,391,137 161,643,258
Cancellation of Treasury
shares (99,815,539) (52,522,907) (130,665,382)
Share conversions (including
from Tender Offer) 19,978,425 (33,648,419) -
Share conversion & buy back
costs (18,877) (4,553) (21,616)
------------- ------------- --------------
Net change from share transactions
for the period (79,855,991) (86,175,879) (130,686,998)
Increase in net assets attributable
to holders of redeemable
shares - financial liabilities 6,178,505 3,784,742 7,228,656
Increase in net assets attributable
to holders of redeemable
shares - equity 2,178,634 - 2,178,634
------------- ------------- --------------
Balance at 31 December 2014 40,363,550 - 40,363,550
------------- ------------- --------------
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The Companies (Guernsey) Law, 2008 does not require share premium to be held in a separate account and any share premium at which the shares are issued can be used for all purposes, including the buy- back of shares and the payment of dividends, provided that the Company would after distribution still meet the solvency test as such is defined in the 2008 Law. Accordingly, upon the issue of shares the entire amount of share premium received on the issue of such shares is immediately recognised in distributable reserves.
12. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Company's objective in managing risk is the creation and protection of shareholder value. Risk is inherent in the Company's activities, but it is managed through a process of ongoing identification, measurement and monitoring, subject to risks limits and other controls.
Risk management structure
The Company's Board of Directors is responsible for identifying and controlling risks and is ultimately responsible for the overall risk management of the Company.
Risk mitigation
So far as the Company is concerned, the only risk the Board can monitor and control is the liquidity risk attaching to its ability to realise shares in the Feeder Funds for the purpose of meeting ongoing expenses of the Company. Thereafter the Board recognises that the Company has, via its holding of shares in the Feeder Funds, an indirect exposure to the risks summarised below. However there is little or nothing which the Board can do to manage each of these risks within the Feeder Funds or the Master Funds, in which the Company invests under the current investment objective of the Company.
Risk concentration
The main risks arising from the Company's financial instruments concerns its holding of shares in the Feeder Funds and the risks attaching to those shares, which are market price risk, credit risk, liquidity risk, interest rate risk, and increased volatility due to leverage employed by the Master Funds as explained below.
(a) Market risk
Market risk is the risk that the fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest rates, foreign exchange rates and pricing.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. The prices of securities tend to be sensitive to interest rate fluctuations.
Unexpected fluctuations in interest rates could cause the corresponding prices of long positions and short positions adopted to move in directions which were not originally anticipated. In addition, interest rate increases generally increase the interest or carrying costs of investments. However, the Company's investments designated as at fair value through profit or loss are non-interest bearing, and therefore are not exposed to interest rate risk.
The Company's own cash balances are not materially exposed to interest rate risk as cash and cash equivalents are held on floating interest rate deposits with banks and the Company does not rely on income from bank interest to meet day to day expenses.
Currency risk
Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in foreign exchange rates. The Company previously invested in financial instruments and enters into transactions that are denominated in US Dollars (USD) through its US$ share class. Consequently, the Company was exposed to risk that the exchange rate of Sterling, relative to the USD, may change in a manner that has a favourable or adverse effect on the reported value of the Company's financial assets or financial liabilities that are denominated in USD. At the reporting date the carrying value of the Company's net assets held in USD was Nil (31 December 2014: GBPnil).
Currency sensitivity
At 30 June 2015 the Company held no USD assets or liabilities (31 December 2014: GBPnil).
Price risk
The success of the Feeder Funds and, therefore, the Company's activities will be affected by general economic and market conditions, such as interest rates, availability of credit, inflation rates, economic uncertainty, change in laws, trade barriers, currency exchange controls and national and international political circumstances. These factors may affect the level and volatility of securities' prices and the liquidity of the Master Funds' investments. Volatility or illiquidity could impair the Master Funds' profitability or result in losses.
Price sensitivity
The Company invests substantially all its assets in the Feeder Funds and does not undertake any significant structural borrowing or hedging activity at the Company level. Its performance is therefore directly linked to the NAV of the Feeder Funds, which are driven by the NAVs of the Master Funds. Overall portfolio diversification by the Master Funds is achieved by trading in more than 150 investments globally across a number of key asset classes.
At 30 June 2015 (30 June 2014 for comparative), if the NAV of the Feeder Funds had been 10% higher with all other variables held constant, the Profit for the period and Equity in 2015 and the net assets attributable to shareholders for the period ended June 2015 would have increased as stated below, arising due to the increase in the fair value of financial assets at fair value through profit or loss.
As at 30 As at 31
June 2015 December
2014
GBP GBP
Sterling shareholders 2,964,197 3,311,077
Total 2,964,197 3,311,077
----------- ----------
A 10% decrease in the NAV at 30 June 2015 (31 December 2014 for comparative) would have resulted in an equal but opposite effect to the amounts shown above.
(b) Credit risk
The Company is exposed to credit risk, which is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation.
The nature of commercial arrangements made in the normal course of business between many prime brokers and custodians means that, in the event of any one prime broker or custodian defaulting on its obligations to the Master Funds the effects of such a default may have negative effects on other prime brokers with whom the Master Funds deal. The Master Funds, and by extension, the Feeder Funds and the Company may, therefore, be exposed to systemic risk when the Master Funds deal with prime brokers and custodians whose creditworthiness may be interlinked.
The assets of the Master Funds may be pledged as margin with prime brokers or other counterparties or held with prime brokers or banks whereas the assets of the Feeder Funds, to the extent not invested in the Master Funds are held with banks. In the event of the default of any of these prime brokers, banks or counterparties, the Feeder Funds may not recover back all or any of the assets pledged or held with the defaulting party.
The Company's risk on liquid funds is minimised as all their money is held by the Royal Bank of Scotland International Limited at the Guernsey branch which has an S&P short term credit rating of A-3.
The maximum credit risk to which the Company was exposed at the period-end was:
Sterling Share Sterling Share
Class Class
As at 30 June As at 31 December
2015 2014
GBP GBP
Investments 29,641,970 33,110,775
Cash and cash equivalents 5,501,564 4,237,721
35,143,534 37,348,496
--------------- -------------------
The main concentration of risk for the Company relates to the investments. None of these amounts are impaired nor past due but not impaired.
(c) Liquidity risk
Liquidity risk is the risk that the company may not be able to generate sufficient cash resources to settle its obligations in full as they fall due or can only do so on terms that are materially disadvantageous.
The Company may redeem its shares in each of the Feeder Funds only on a monthly basis. However, if the Feeder Funds receive applications to redeem in respect of more than 25 per cent of their aggregate shares in issue in respect of any redemption date, then they are entitled to scale down the redemption requests on a pro rata basis so as to carry out only sufficient redemptions which, in aggregate, amount to 25 per cent of their shares in issue. As such, in circumstances where the Company wishes to redeem part or all of its holdings in the Feeder Funds, they may not be able to achieve this on a single redemption date and the Company may not be able to realise all of its investments through a single redemption request.
There can be no assurance that the liquidity of the investments of the Feeder Funds will always be sufficient to meet redemption requests as and when made. Any such lack of liquidity may affect the ability of the Company to realise its shares in the Feeder Funds and the value of shares in the Company. For such reasons the Feeder Funds' treatment of redemption requests may be deferred in exceptional circumstances including that of a lack of liquidity which may result in difficulties in determining the NAV and the NAV per share in the Feeder Funds. This in turn would limit the ability of the Directors to realise the Company's investments should they consider it appropriate to do so and may result in difficulties in determining the NAV of a share in the Company. There was no deferral of redemptions in respect of the Feeder Funds during the period.
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In some circumstances, investments held by underlying funds of the Master Funds may be relatively illiquid making it difficult to acquire or dispose of them at the prices quoted on the various exchanges. Accordingly, the Master Funds' ability to respond to market movements may be impaired and, consequently, the Master Funds may experience adverse price movements upon liquidation of its investments which may in turn affect the value of the Feeder Fund's and hence the Company's investments. Settlement of transactions may be subject to delay and administrative formalities.
The market prices, if any, for such illiquid investments tend to be volatile and may not be readily ascertainable and the Master Funds may not be able to sell them when it desires to do so or to realise what it perceives to be their fair value in the event of a sale.
The size of the Master Funds' positions may magnify the effect of a decrease in market liquidity for such instruments. Changes in overall market leverage, deleveraging as a consequence of a decision by the counterparties with which the Master Funds enter into repurchase/reverse repurchase agreements or derivative transactions to reduce the level of leveraging, or the liquidation by other market participants of the same or similar positions may also adversely affect the Master Funds' portfolios.
The sale of restricted and illiquid securities often requires more time and results in higher brokerage charges or dealer discounts and other selling expenses than does the sale of securities eligible for trading on national securities exchanges or in the over-the-counter markets.
The Master Funds may not be able readily to dispose of such illiquid investments and, in some cases, may be contractually prohibited from disposing of such investments for a specified period of time. Restricted securities may sell at a price lower than similar securities that are not subject to restrictions on resale.
The table below details the residual contractual maturities of financial liabilities:
0-3 months Total
GBP GBP
As at 30 June 2015:
Accrued expenses 61,079 61,079
61,079 61,079
----------- -------
0-3 months Total
GBP GBP
As at 31 December 2014:
Accrued expenses 302,358 302,358
302,358 302,358
----------- --------
(d) Leverage by underlying funds
Each of the Master Funds may employ leverage for the purposes of making investment, the funding of redemptions, the payment of expenses and/or to fund the repayment of other borrowings. The Master Funds may employ leverage (including through borrowings) in order to increase investment exposure with a view to achieving their target returns at target volatilities. The positions maintained by the Master Funds may, in aggregate value be in excess of the net asset value of the Master Funds. This leverage presents the potential for a higher rate of total returns but will also increase the volatility of the Master Funds and, as a consequence, the Company, including the risk of a total loss of the amount invested.
(e) Capital management
The investment objective of the Company is to achieve long term appreciation in the value of its assets through an investment policy of investing substantially all of its assets in the Feeder Funds, which in turn invests into the market through investments in the Master Funds.
The Company's shares are traded on the London Stock Exchange and may trade at a discount to their NAV per share. However, in structuring the Company, the Directors have given detailed consideration to the discount risk and how this may be managed. The Directors are authorised to buy back up to 14.99 per cent of the aggregate number of each class of shares in issue. The Company's authority was renewed as the annual general meeting held on 30 June 2015, to expire within 15 months of this date or, if earlier, at the end of the next annual general meeting of the Company to be held in 2016.
The Directors intend that purchases will only be made pursuant to this authority through the market, for cash, at prices below the prevailing NAV per share. In addition, if the Directors consider the share buy-back programme has not been effective in correcting a market imbalance, the Directors will, subject to the requirements of the Law, make a redemption offer to shareholders of that class.
The Company's Articles allow it to hold up to 10 per cent of each class of shares in issue in treasury when those shares have been purchased by the Company. It is the intention of the Board that any shares that might be held in treasury would be reissued only at a price equal to or above the NAV per share.
The Company's authorised share capital is such that further issues of new ordinary shares could be made. Subject to prevailing market conditions, and only if the Board determines that such issues are in the best interest of shareholders, the Board may decide to make one or more further such issues or reissues of shares for cash from time to time. Any further issues of new ordinary shares or reissues of ordinary shares held in treasury will rank pari-passu with ordinary shares in issue.
There are no provisions within the Law which confer rights of pre-emption in respect of the allotment of shares. There are, however, pre-emption rights contained in the Articles, but the Directors have been granted the power to issue further Shares on a non-pre-emptive basis for a period concluding immediately prior to the first annual general meeting of the company. The Directors intend to request that the authority to allot shares on a non-pre-emptive basis is renewed at each subsequent general meeting of the Company.
(f) Fair value statement
The carrying value of all financial instruments approximate the fair value at the period end.
(g) Fair value estimation
At 30 June 2015, 100% of financial assets at fair value through profit or loss comprise investments in the Feeder Funds that have been fair valued in accordance with the policies set out in Note 2. The shares of the Feeder Funds are not publicly traded and redemption can be made by the Company only on the redemption dates and subject to the required notice periods specified in the offering documents of each of the Feeder Funds. As a result, the carrying values of the Feeder Funds may not be indicative of the values ultimately realised on redemption. The funds are managed by portfolio managers who are compensated by the respective funds for their services. Such compensation generally consists of an asset-based fee and a performance-based incentive fee. Such compensation is reflected in the valuation of the Company's investment in each of the Feeder Funds.
The Feeder Funds are not traded on an active market and therefore their fair value is determined using valuation techniques. The value is primarily based on the latest available redemption price of the Feeder Funds' shares as reported by the administrators of the Feeder Funds. The Company may make adjustments to the value based on considerations such as liquidity of the Feeder Fund or the Master Funds, the valuation date of the NAV, any restrictions on redemptions and the basis of accounting.
IFRS 13 requires fair value to be disclosed by the source of inputs, using a three-level hierarchy:
- Quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1);
- Inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly (as prices) or indirectly (derived from prices) (Level 2); and
- Inputs for the asset or liability that are not based on observable market data (unobservable inputs) (Level 3).
For financial instruments that are recognised at fair value on a recurring basis, the Company determines whether transfers have occurred between Levels in the hierarchy by re-assessing categorisation (based on the lowest level input that is significant to the fair value measurement as a whole) at the end of the reporting period.
The investments held by the Company have been classified as Level 2. This is in accordance with the fair value hierarchy.
13. EVENTS AFTER THE REPORTING PERIOD
On 17 July 2015, the Dexion Capital Group, including Dexion Capital (Guernsey) Limited as administrator, was acquired by Challenger Limited, an Australian listed life company. There is no change to the services provided by the administrator as a result of this acquisition.
SCHEDULE OF INVESTMENTS (Unaudited)
As at 30 June 2015
Securities portfolio Nominal Holdings Valuation Valuation Total Assets
Source Currency
GBP %
BlueTrend Fund Limited
* Class B Sterling Shares 98,521 GBP24,595,400 24,595,400 69.95
BlueTrend 2x Leveraged Fund Limited
* Series 33 GBP shares 27,971 GBP3,109,744 3,109,744 8.84
* Series 34 GBP shares 19,377 GBP1,936,826 1,936,826 5.51
-------------
5,046,570 14.35
----------- -------------
Portfolio value 29,641,970 84.30
----------- -------------
SCHEDULE OF INVESTMENTS (Unaudited)
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