TIDMBBTS
RNS Number : 1733L
BlueCrest BlueTrend Limited
23 April 2015
BlueCrest BlueTrend Limited
Annual Financial Report
For the year ended 31 December 2014
Guernsey Registered Number 54646
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. Details of the Tender Offer results can be found in this
report.
The Sterling Share Class remains admitted to trading on the main
market of the London Stock Exchange and listed on the Financial
Conduct Authority ('FCA') Official List.
As at 31 March 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
Sterling Class Shares
(as at 31 December 2014)
Total Net Assets GBP37,053,382
NAV per Share GBP1.039
2014 NAV performance 16.43%
Mid-Market Share Price GBP1.0025
Discount to NAV 3.51%
Following completion of the Tender Offer during 2014, the US$
Share class was not able to meet the UKL Listing Authority's Shares
in Public Hands requirement, accordingly the Directors resolved to
compulsorily convert all of the US$ Shares which had not been
tendered into Sterling Shares. The US$ Shares were converted on 1
July 2014 and US$ Share Class was delisted and closed on 18 July
2014.
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.
Launch of Systematica
On 29 September 2014 the Company noted the announcement by
BlueCrest Capital Management Limited ("BlueCrest") 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.
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
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 have
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 will expire within
15 months of the general meeting date or, if earlier, at the end of
the next annual general meeting of the Company to be held in 2015.
During the year under the buyback authority was renewed at EGM's
held on 7 February, 25 April and 19 September 2014.
During the year ended 31 December 2014 the Company repurchased
30,156,000 Sterling Shares and 7,860,439 US$ Shares, excluding the
Tender Offer. The average discount for the Sterling Share Class
during the twelve months to 31 December 2014 was 4.13 per cent. The
continued monitoring of the discount level focused on the Sterling
Shares only following the closure of the US$ Share Class on 18 July
2014.
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 31 December 2014, the Company had 3,573,924
Sterling Shares in treasury (31 December 2013: 8,764,000 Sterling
Shares and 1,118,000 US$ Shares). As at 31 March 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, the Company may seek to
issue additional Shares or sell Shares out of treasury. Further
issues or sales of Shares would only be made to raise additional
capital for investment and 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 limited to the allotment and issue of up to
14,194,820 Sterling Shares of the Sterling Shares in issue
(excluding treasury shares) as at the date of the 2014 AGM. This
authority is to expire 15 months from 18 June 2014 or, if earlier,
at the end of the next annual general meeting to be held in 2015.
The US$ Share Class authority to dis-apply pre-emption rights fell
away following the class closure.
Going Concern
The preparation of the audited 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 audited 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 2013.
As described within the Chairman's Statement under 'Discount
Management and Going Concern', the Directors put forward a Tender
Offer to provide an exit opportunity for Shareholders. The
Directors were cognisant of the requirement for the Company to be
of a sufficient size following completion of the Tender Offer, both
for liquidity purposes and also to ensure the ongoing expenses of
the Company are not a disproportionate burden on the remaining
Shareholders. Accordingly, a minimum ongoing size of GBP30 million
following completion of the Tender Offer was set and continues to
be met.
Articles of Incorporation
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 did not reach US$100 million, accordingly, on 26
February 2015 the Company issued a Shareholder Circular convening
an Extraordinary General Meeting to be held on 25 March 2015. The
sole ordinary resolution was to seek Shareholder approval for the
Company to continue its business as a closed ended investment
company. As described in the Chairman's statement, the Continuation
Vote was passed and the results were announced on 25 March
2015.
Having considered the Company's investment objective, risk
management and capital management policies, the nature of the
portfolio and expenditure projections, the Directors believe that
the Company is able to meet its liabilities as they fall due, as it
has adequate cash resources to continue in operational
existence.
CHAIRMAN'S STATEMENT
On behalf of the Board, I am pleased to present Shareholders
with the Annual Financial Report and Accounts of BlueCrest
BlueTrend Limited (the 'Company') for the year ended 31 December
2014.
Financial Results and performance
It has been a year of volatility for the Company. Performance
wise, the Company has delivered an 11.93 pence per Share return for
the full year for the Sterling Share Class. The first quarter of
the year was the most difficult. Quarter three was flat, quarters
two and four were the strongest performers.
As at 31 December 2014 the Net Asset Value per share was
GBP1.039. For the half-year ended 30 June 2014 the US$ Class NAV
was $0.8968 per share). Refer below for further information
regarding the closure of the US$ Class in July 2014.
Corporate Actions
Discount Management
Extraordinary General Meetings were held throughout the year
seeking Shareholder authority to buy back shares.
Each requested authority was approved.
Under the Shareholders' authority and excluding the Tender Offer
Redemption, during the year the Company repurchased 30,156,000
Sterling Shares and 7,860,439 US$ Shares.
Tender Offer
On 28 April 2014 the Directors announced proposals for a tender
offer for up to 25 per cent of each class of Share then in issue
(excluding Shares held in treasury) at a 2 per cent discount to net
asset value, less the costs attributable to the tender offer (the
"Tender Offer"). The amount of shares available under the proposed
offer was subsequently increased to enable shareholders to tender
up to 100 per cent of their holding, at a 2 per cent discount to
net asset value, less costs, subject to receipt of the necessary
shareholder approval.
The Tender Offer closed on 25 June 2014 and the Company
announced that tenders for 60,271,795 Sterling Shares and
47,886,715 US$ Shares had been accepted by the Company, then
representing 63.7 per cent of the Sterling Share class and 68.0 per
cent of the US$ Share class.
Following completion of the Tender Offer, the US$ Share class
was not able to meet the UKL Listing Authority's Shares in Public
Hands requirement, accordingly the Directors resolved to
compulsorily convert all of the US$ Shares which had not been
tendered into Sterling Shares. The US$ Shares were converted on 1
July 2014 and US$ Share Class was delisted and closed on 18 July
2014.
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., 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.
Reduction in Management Fees
With effect from 1 August 2014, the baseline investment
management fee applicable to the Company's investment in BlueTrend
Fund Limited and BlueTrend 2x Leveraged Fund Limited was reduced
from 2 per cent per annum to 1.5 per cent. The reduction followed
an assessment of the CTA landscape and in particular the recent
migration towards lower fees.
Going Concern
The Directors consider it appropriate to prepare the Financial
Statements on the Going Concern basis. The analysis of the
Directors' decision is explained within this report along with the
detailed results of the 2015 Continuation Vote.
Outlook
The Company continues with its investment objective and policy.
As at 10 April 2015, the latest practicable date prior to the
publication of this report, the Company's NAV per share has
increased 12.42% to GBP1.1682 per share.
The Directors are pleased with this strong start to 2015 and
believe that with trends beginning to develop this is the
opportunity for this good performance to continue.
Annual General Meeting
The Directors look forward to welcoming Shareholders to the 2015
Annual General Meeting to be held in June.
Wayne Bulpitt
Chairman
23 April 2015
REPORT OF THE INVESTMENT MANAGER OF BLUETREND FUND LIMITED
2014 ANNUAL MANAGER REPORT
BLUECREST BLUETREND LIMITED
On the invitation of the Directors of the Company, this
commentary relating to BlueTrend Fund Limited ("BlueTrend Fund"),
has been provided on behalf of Systematica Investment Limited
(acting as general partner of Systematica Investments LP)
("Systematica"), the investment manager of BlueTrend Fund, and is
provided without any warranty as to its accuracy and without any
liability incurred on the part of the Company, Systematica,
BlueTrend Fund or any other person. The commentary is not intended
to constitute, and should not be construed as, investment advice.
The commentary is provided as a source of information for
shareholders of the Company but it is not attributable to the
Company. Potential investors in the Company should seek their own
independent financial advice and may not rely on this communication
in evaluating the merits of investing in the Company.
During the last year, markets have been impacted by a number of
notable events, including the Russia/Ukraine crisis, a growing
threat from the 'Islamic State' group, the Ebola epidemic and an
extended drop in oil prices. Despite these factors, equities and
government bonds generally posted positive returns, though
performance was challenging for emerging markets and very weak for
commodities. The return generated by BlueTrend Fund over the period
under review, was 13.06% for Class B Sterling Shares and 12.68% for
Class B US$ Shares. For the year, BlueTrend Fund delivered an above
average Sharpe ratio on relatively low risk, with a more
diversified flavour of trend following, thereby recovering losses
from 2013.
PERFORMANCE ATTRIBUTION
The quarterly picture across 2014 was of a difficult first
quarter followed by a strong second quarter, a flat third quarter
and a strong fourth quarter to finish the year. The largest
contributor to performance in the period under review and in each
individual quarter were the fixed income markets, as global bond
yields went lower. In addition to fixed income, strong trends
emerged in FX (which the program captured) and Energies (where the
program had less success). The top contributing contracts in the
year were a long position in the Italian 10-year bond future as
well as Japanese Government Bond (JGB) futures. Other notable
contributors included EUR-USD as well as USD-JPY. The Brent Crude
contract was also a significant contributor to the program's
returns.
RISK ALLOCATION
In risk terms, the BlueTrend Fund strategy was predominantly
long equities and fixed income throughout the year while
commodities (energies, crops and metals) went from a long position
in the first half of the year to a short bias in the latter half of
the year. In FX, the program had mixed positioning in the first
half of the year before turning quite bullish on the US Dollar
later in the year. Fixed income was a significant part of the
BlueTrend Fund's risk (as measured by Value at Risk ("VaR"))
throughout the year ranging from 30% in March to 57% in October.
Equity exposure was more active with the program having its highest
exposure in May at 33% of the risk to a low of 8% in October. The
FX sector risk allocation fluctuated between 5 and 14% in terms of
VaR with the majority of the risk assumed in long USD positions.
The sector risk allocation to the commodity complex started the
year at 26% and ended it at 11%. The strategy was short commodities
(energies, metals and crops) by the third week in August and
remained short through the remainder of the year.
DIRECTORS
The Company has three directors all appointed on 10 February
2012.
Wayne Bulpitt (Chairman) (aged 53) is the Executive Chairman and
founder of Active Group Limited, a company that provides
professional support and management services to financial
companies. Prior to founding Active Group Limited he was a director
in the Offshore Investment Services Global Private Banking &
Trust Division at the Canadian Imperial Bank of Commerce from 1998
to 2001. He was responsible for product management, development and
distribution of his division's investment management services. Mr.
Bulpitt is a non-executive director of a number of companies. Mr.
Bulpitt is a resident of Guernsey.
Huw Salter (aged 44) Huw has spent twenty years in the offshore
financial services industry following completion of the Law
Society's Final examinations in the UK. He was until recently a
director of Intertrust's fund and trust companies; prior to that he
spent time at Investec Trust, Rothschild Trust and Edmond de
Rothschild His roles have included developing trust and
multi-family office services, acting as a director of an investment
monitoring and strategic asset allocation company and acting as the
legal and compliance officer of an investment company. Huw holds a
master's degree in international and commercial law and is a member
of the Chartered Institute of Securities and Investment. He is a
director of a number of funds, both listed and unlisted. Huw is a
Guernsey resident.
Andrew Michael Dodd (aged 43) is a principal of BlueCrest, a
member of the Executive Committee and Board of BlueCrest and an
employee of the general partner of BlueCrest Capital Management
Guernsey LP, Geneva branch. Mr. Dodd is also a director of
BlueCrest AllBlue Fund Limited, BlueTrend Leveraged Fund Limited
and BlueTrend Leveraged Master Fund Limited. He joined the
BlueCrest Group in 2006 as a principal and Chief Financial Officer.
Prior to this, he was a Managing Director at Goldman Sachs
International from 2004 to 2006. Mr. Dodd joined Goldman Sachs in
1993, where he specialised in advising insurance, banking and asset
management clients with respect to mergers and acquisitions,
capital markets, structured finance and asset/liability management.
His clients were located predominantly in the UK and Continental
Europe; however, in addition, he spent a period of his career at
Goldman Sachs and Co. in New York. Mr. Dodd holds a BA in
Philosophy, Politics and Economics from Oxford University. Mr. Dodd
is a non-executive director of a number of other companies. Mr.
Dodd is currently resident in Switzerland.
All of the Directors, with the exception of Andrew Dodd, are
considered to be independent.
REPORT OF THE DIRECTORS
The Directors present their report and financial statements for
the year ended 31 December 2014.
Principal Activity
The Company is a self-managed closed-ended investment company
incorporated in Guernsey on 10 February 2012 as a non-cellular
company limited by its shares under The Companies (Guernsey) Law,
2008, as amended. At launch, the Company had two classes of shares
in issue, being Sterling Shares and US$ Shares (together the
"Shares"); and as noted within 'About the Company' and the
'Chairman's Statement' the US$ Share class was delisted from the
official list of the UK Listing Authority and closed on 18 July
2014.
Investment Objective and Investment Policies
The investment objective and policy of the Company is as stated
in this report.
Shareholder Information
The Company announces the confirmed NAV of the Sterling Share
class on a monthly basis and a commentary on the investment
performance provided by BlueCrest. The estimated NAV of the
Sterling Share class is announced weekly to a Regulatory
Information Service. The daily market closing prices of Shares are
available on Reuters, Bloomberg and on-line.
A copy of the prospectus and supplementary prospectuses of the
Company can be found at
www.bluecrestbluetrend.com. All Shares may be dealt in directly
through a stockbroker or professional adviser acting on an
investor's behalf. The buying and selling of Shares may be settled
through CREST. The Company's register of shareholders is maintained
by Computershare Investor Services (Guernsey) Limited which can be
contacted on +44 (0)870 7074040.
Results and Dividends
The results for the year are set out in the Statement of
Comprehensive Income. The Directors did not declare any dividends
during the period under review.
Directors
The Directors all held office throughout the reporting period
and all Directors remain in office as at the date of signature of
these financial statements.
On 24 January 2014 Andrew Dodd appointed Robert Heaselgrave,
replacing Jeremy Sambrook as his alternate director for Board
meetings and subject to Mr Heaselgrave not acting as alternate for
any other director.
No Directors have a contract of service with the Company, nor
are any such contracts proposed. The interests of the Directors in
the Ordinary Shares of the Company as at the date of signature of
these financial statements are as follows:
Directors' Interests
Mr Wayne Bulpitt 25,000 Sterling Shares*
Mr Huw Salter 20,000 Sterling Shares*
(*held in Nominee name)
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
investing 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, BlueTrend Fund and its investment in
BlueTrend 2x Leveraged Fund. 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 visits 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
BlueTrend Fund and BlueTrend Leveraged Fund and, 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. 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.
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 ordinary shares in any share class 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% of the shares of that class 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.
- 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.
- 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 BlueTrend Fund and the underlying funds. 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. 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. The Company also
needs to comply with the Authorised Investment Schemes Rules
2008.
Substantial Shareholdings
The Directors have been notified of the following substantial
interests in the Company's relevant share capital:
As at 31 March 2015
Shareholders Total Shareholdings % Total Voting
Rights
BlackRock Inc., 8,649,052 24.39%
As at 31 December 2014:
Shareholders Total Shareholdings % Total Voting
Rights
Weiss Asset Management 7,394,437 20.73%
As at 31 December 2013:
Shareholders Total Shareholdings % Total Voting
Rights
Permal Investment Management Services
Limited 49,820,000 29.64%
Schroders plc 30,567,371 18.19%
HSBC Holdings plc 19,138,245 11.39%
Cazenove Capital Management Limited 10,474,850 6.23%
Net Asset Value
The NAV for accounting purposes of the Company's Shares,
including all distributable reserves as at 31 December 2014 was
GBP37,053,382 (31 December 2013: GBP93,380,488 (Sterling Shares)
and $81,394,948 (US$ Shares)).
The Company's NAV is based on valuations of unquoted
investments. In calculating the NAV and the NAV per Share of the
Company, the Administrator relies on the NAVs of the shares of the
Master Funds supplied by the administrator of the Master Funds.
Corporate Governance
Statement of Compliance with the AIC Code of Corporate
Governance
In accordance with Listing Rule 9.8.7 the Company is required to
comply with the requirements of the UK Corporate Governance Code. A
copy of the UK Corporate Governance Code is available for download
from the Financial Reporting Council's website
(www.frc.org.uk).
The Board of the Company has considered the principles and
recommendations of the Association of
Investment Companies (the "AIC") Code of Corporate Governance
(the "AIC Code as issued on February 2013") by reference to the AIC
Corporate Governance Guide for Investment Companies (the "AIC
Guide"). The AIC Code, as explained by the AIC Guide, addresses all
the principles set out in the UK Corporate Governance Code, as well
as setting out additional principles and recommendations on issues
that are of specific relevance to an investment company. In
assessing the Board's corporate governance practice for 2014, the
Company complied with the provisions of the AIC Code.
The Company is also required to comply with the Guernsey
Financial Services Commission Financial Sector Code of Corporate
Governance (the "Guernsey Code") issued in 2011. As the Company
reports under the AIC Code it is deemed to comply with the Guernsey
Code. The Board has undertaken to evaluate its corporate governance
compliance on an on-going basis. The Board considers that reporting
against the principles and recommendations of the AIC Code, and by
reference to the AIC Guide (which incorporates the UK Corporate
Governance Code), will provide better information to shareholders.
The Company has complied with the recommendations of the AIC Code
except as set out below.
The UK Corporate Governance Code includes provisions relating
to:
-- the role of the chief executive;
-- executive Directors' remuneration; and
-- the need for an internal audit function.
For the reasons set out in the AIC Code, and as explained in the
UK Corporate Governance Code, the Board considers these provisions
not relevant to the position of the Company, being a self-managed
investment company. The Company has therefore not reported further
in respect of these provisions.
The Board has deemed it not necessary to appoint a separate
nomination, remuneration and management engagement committee as
such decisions are made on a collective basis with the exception of
Andrew Dodd in relation to management committee functions, due to
the size of the Board.
Rules concerning the appointment and replacement of Directors
are contained in the Company's Articles of Incorporation and are
discussed below.
AIFM Directive
In July 2013 the European Alternative Investment Fund Management
Directive (AIFMD) came into effect with transitional provisions
until July 2014. The Company has elected to be a 'self-managed'
Guernsey AIF and as such will be treated as a non-EU AIFM for the
purposes of the Directive. The Company is not presently classified
as marketing for the purposes of the AIFMD and will register with
the relevant authorities as and when necessary.
FATCA
The Company registered for FATCA purposes on 24 November 2014
with GIIN No. 0PHJC1.99999.SL.831.
Non Main Stream Pooled Investments
The Board confirms that it conducts the Company's affairs, and
intends to continue to conduct its affairs, so that the Company's
shares will be "excluded securities" under the Financial Conduct
Authority rules.
The Board
The Board comprises three non-executive Directors each of whom
are independent for the purposes of the AIC Code and Listing Rule
15.2.12A except for Mr Dodd, who is a director of the Investment
Manager of BlueTrend Fund. The independent Chairman of the Board is
Mr Bulpitt, who was appointed on 23 March 2012 and is responsible
for leading meetings of the Board to ensure that they are efficient
and effective. Mr Bulpitt is the Executive Chairman of Active Group
Limited as stated in his biography however the Board is satisfied
that he has sufficient time available to discharge fully his
responsibilities as Chairman of the Company.
The Board has a breadth of experience relevant to the Company
and a balance of skills experience and age. The Board recognises
the importance of diversity and notes that it continues to evaluate
applicants to fill vacant positions regardless of gender and
without prejudice. Applicants will be assessed on their broad range
of skills, expertise and industry knowledge, and business and other
expertise. In view of the long-term nature of the Company's
investments, the Board believes that a stable board composition is
fundamental to run the Company properly. The Board has not
stipulated a maximum term of any Directorship.
As the Company is not a FTSE 350 company, Directors are
currently not subject to annual election by the shareholders.
However, the Directors continue to offer themselves for re-election
annually at each AGM.
Details relating to each Director's remuneration are disclosed
in note 3 to the financial statements.
Directors' Duties and Responsibilities
The Board of Directors has overall responsibility for the
Company's affairs and is responsible for the determination of the
investment policy of the Company, resolving conflicts and for
monitoring the overall portfolio of investments of the Company. To
assist the Board in the day-to-day operations of the Company,
arrangements have been put in place to delegate authority for
performing certain of the day-to-day operations of the Company to
the third-party service providers, such as the Administrator and
Company Secretary. The Board receives full details of the Company's
assets, liabilities and other relevant information in advance of
Board meetings.
The Board undertakes an annual evaluation of its own performance
and the performance of its Audit Committee and individual
Directors, to ensure that they continue to act effectively and
efficiently and to fulfil their respective duties, and to identify
any training requirements. During this evaluation the Directors
also reconfirmed that they continue to be able to allocate
sufficient time to the Company in order to discharge their
responsibilities. A full corporate governance review has been
undertaken since the publication of the previous financial
statements, which was facilitated by the Company Secretary. There
were no matters of significance raised within the findings of the
review.
The Board has undertaken an annual review of the effectiveness
of the Company's system of internal controls and the safeguarding
of the Company's assets. There were no significant matters raised
within the findings of the review.
The Directors acknowledge that the Administrator has appropriate
systems, controls and processes that are used in the production of
the financial statements and that these are re-evaluated at the end
of the financial reporting period through the approval of the
relevant financial statements. Given the size and nature of the
Company, it is not deemed necessary to form a separate remuneration
or nomination committee. The Board, as a whole, will also consider
new Board appointments.
Biographies of the Directors appear within the report,
demonstrating the wide range of skills and experience they bring to
the Board. In accordance with principle 5 of the AIC Code below are
details of all other public company Directorships and employments
held by each director and shared Directorships of any commercial
company held by two or more Directors:
Wayne Bulpitt
Insight Global Farmland Fund Ltd
Insight Consumer Debt Recovery GP I Ltd
Insight Consumer Debt Recovery GP II Ltd
Ruffer Investment Company Ltd
Ruffer Illiquid Strategies Fund of Funds 2009 Ltd
Ruffer Illiquid Strategies Fund 2011 Ltd
Ruffer Illiquid Strategies Fund 2015 Ltd
Huw Salter
RAW Alpha Systematic Fund 1
Andrew Dodd
BlueCrest AllBlue Fund Limited
Board Meetings
The Board meets at least four times a year to consider the
business and affairs of the Company for the previous quarter.
Between these quarterly meetings the Board keeps in contact by
email and telephone as well as meeting to consider specific matters
of a transactional nature. There is regular contact with the
Secretary.
Additionally it holds strategy meetings with its relevant
advisors as appropriate. The Directors are kept fully informed of
investment and financial controls and other matters that are
relevant to the business of the Company and should be brought to
the attention of the Directors. The Directors also have access,
where necessary in the furtherance of their duties, to professional
advice at the expense of the Company.
The Board considers agenda items laid out in the Notice and
Agenda which are formally circulated to the Board in advance of any
meeting as part of the board papers. Such items include but are not
limited to; investment performance, share price performance, review
of marketing and shareholder communication. The Directors may
request any Agenda items to be added that they consider appropriate
for Board discussion. In addition, each Director is required to
inform the Board of any potential or actual conflict of interest
prior to Board discussion. Board meetings are attended by
representatives of the Investment Manager of BlueTrend Fund. The
Company's corporate brokers also attend to assist the Directors in
understanding the views of major shareholders about the
Company.
During the period under review the Board met four times. A
further 13 ad-hoc board and/or committee meetings were held to deal
with matters substantially of an administrative nature and these
were attended by those Directors available at the time. The
director's attendance is summarised below compared against the
total held:
Director Quarterly Board Meetings Ad hoc Meetings
Wayne Bulpitt 4/4 7
Huw Salter 4/4 9
Andrew Dodd 3/4 5
The Board is committed to an evaluation of its performance being
carried out every year and believes that the mix of skills and
experience are appropriate to the requirements of the Company. The
Chairman regularly reviews and agrees with each director, their
training and development needs. An external evaluation as
recommended under Principle 7 of the AIC Code has been deferred
until such time that an external evaluation would be of added value
to the Company.
Directors Remuneration
The remuneration of the non-executive Directors is reviewed on
an annual basis and compared with the level of remuneration for
Directorships of other similar funds. Mr Bulpitt and Mr Salter
receive an annual fee of GBP50,000 and GBP40,000 respectively per
annum and there are no share options or other performance related
benefits available to them. Mr Dodd has waived his annual fee.
Internal Controls and Risk Management Review
The Board is responsible for the Company's system of internal
control and for reviewing its effectiveness. The Board confirms
that there is an ongoing process for identifying, evaluating and
monitoring the significant risks faced by the Company.
The Board carries out an annual review of internal controls. The
internal control systems are designed to meet the Company's
particular needs and the risks to which it is exposed. Accordingly,
the internal control systems are designed to manage rather than
eliminate the risk of failure to achieve business objectives and by
their nature can only provide reasonable and not absolute assurance
against misstatement and loss.
The Board on a semi-annual basis conducts a full review of the
Company's risk management systems including consideration of a risk
matrix which covers various areas of risk including corporate
strategy, accuracy of published information, compliance with laws
and regulations, relationships with service providers and
investment and business activities.
The Company is a self-managed investment company with no
separate investment manager; accordingly no fees are payable to an
investment manager.
Administration and Secretarial duties for the Company are
performed by Dexion Capital (Guernsey) Limited.
The Directors of the Company clearly define the duties and
responsibilities of their agents and advisors. The appointment of
agents and advisers is conducted by the Board after consideration
of the quality of the parties involved and the Board monitors their
ongoing performance and contractual arrangements. The Board has
also specified which matters are reserved for a decision by the
Board and which matters may be delegated to its agents and
advisers. Specific matters reserved exclusively for the decision of
the Board include all matters concerning the acquisition and
realisation of shares in underlying investments, the variation of
terms on which an overdraft facility is used to finance operating
costs and the invocation of any premium or discount mechanisms.
Dialogue with Shareholders
All holders of Shares in the Company have the right to receive
notice of, and attend, all general meetings of the Company, during
which the Directors are available to discuss issues affecting the
Company. The Directors are always available to enter into dialogue
with shareholders and make themselves available for such purpose
whenever required. The Company believes such communications to be
important. Reports are provided to the Board of Directors on
shareholders' views about the Company and any issues or concerns
they might have.
Board Policy on Tenure and Independence
The Board considers the tenure and independence of each Director
on an annual basis during the performance evaluation process.
Disclosure of Information to Auditor
The Directors who held office at the date of approval of this
Directors' Report confirm that, so far as they are each aware,
there is no relevant audit information of which the Company's
Auditor is unaware; and each director has taken all the steps that
he ought to have taken as a director to make himself aware of any
relevant audit information and to establish that the Company's
Auditor is aware of that information.
Auditor
Ernst & Young LLP have expressed their willingness to
continue in office as Auditor. A resolution proposing their
reappointment will be submitted at the Company's forthcoming
general meeting.
Discount Management & Going Concern
During 2014, the Company continued to buy back its shares to
assist with the management of the discount. However, the ability of
the Company to repurchase its Shares was limited both by available
cash and Shareholder authority. As a result of these limitations
and the challenging environment experienced by systematic trading
strategies over recent years, which triggered a sentiment change
for the broader systematic trend following universe, the Company's
Shares continued to trade a discount level wider than 2 per cent..
During June, the Directors determined that it was in Shareholders'
interests, both for those wishing to realise part, or potentially
all, of their investment and those seeking continued exposure to a
systematic trading strategy through an investment in the Company,
to put forward proposals for a Tender Offer as a continuation of
the Company's buy back policy.
The Tender Offer closed on 25 June 2014. Tenders for 60,271,795
Sterling Shares and 47,886,715 US$ Shares were accepted by the
Company, representing 63.7 per cent of the Sterling Share class and
68.0 per cent of the US$ Share class. Following completion of the
Tender Offer the US$ Share class did not meet the shares in public
hands requirement of the Listing Rules. Therefore, in accordance
with the Articles and the Listing Rules, the Directors resolved to
compulsorily convert all of the US$ Shares which had not been
tendered into Sterling Shares. This conversion took effect at 8
a.m. on 1 July 2014. On 18 July 2014 the US$ share class was
delisted from the official list of the UK Listing Authority and
closed. From that date the Company has only Sterling Shares in
issue.
Continuation Vote
As at 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. The result of the Continuation Vote was announced on 25
March 2015. The Board was pleased to announce that the Continuation
Vote was passed and the Company shall therefore continue with its
investment mandate.
Responsibility Statement
The Board of directors, jointly and severally confirm that, to
the best of their knowledge:
(a) the financial statements, prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company;
and
(b) the annual financial report includes or incorporates by
reference a fair review of the development and performance of the
business and the position of the Company, together with a
description of the principal risks and uncertainties that it
faces.
(c) the annual financial report includes information required by
the Rules of the UK Listing Authority, and for ensuring that the
Company complies with the provisions of the Listing Rules and the
Disclosure Rules and Transparency Rules of the UK Listing
Authority, with regard to corporate governance, require the Company
to disclose how it has applied the principles, and complied with
the provisions, of the corporate governance code applicable to the
Company.
(d) Having reviewed the annual financial report in detail and
considered all matters brought to the attention of the board during
the year, the Board of Directors conclude that the annual financial
report is fair, balanced and understandable and provides
information necessary for shareholders to assess the Company's
performance, business model and strategy.
By order of the Board.
Wayne Bulpitt Huw Salter
Director Director
23 April 2015
REPORT OF THE AUDIT COMMITTEE
We present the Audit Committee (the "Committee") Report for
2014, setting out the Committee's structure and composition,
principal duties and key activities during the year. The Committee
has reviewed the Company's financial reporting, the independence
and effectiveness of the independent auditor (the "auditor") and
the internal control and risk management systems of service
providers.
The Board is satisfied that for the year under review and
thereafter the Committee has recent and relevant commercial and
financial knowledge sufficient to satisfy the provisions of the AIC
Code.
Structure and Composition
The Committee is chaired by Mr Salter and its other member is Mr
Bulpitt. Mr Dodd is entitled to attend. The Committee operates
within clearly defined terms. Appointment to the Committee will be
for a period up to three years which may be extended for two
further periods provided the director whose appointment is being
considered remains an independent director for the period of the
extension.
The Committee conducts formal meetings at least twice a year.
The following table sets out the number of Committee meetings held
during the year ended 31 December 2014 and the number of such
meetings attended by each committee member. The auditor is invited
to attend those meetings at which the annual and interim reports
are considered. The auditor and the Committee will meet together
without representatives of either the
Administrator or Investment Manager of BlueTrend Fund (the
"Investment Manager") being present if either considers this to be
necessary.
Director Audit Committee Meetings
Huw Salter 2/2
Wayne Bulpitt 2/2
Principal Duties
The role of the Committee includes:
- monitoring the integrity of the published annual financial report of the Company;
- keeping under review the consistency and appropriateness of
accounting policies on a year to year basis. Satisfying itself that
the annual financial reports, the interim statement of financial
results (no longer required for 2015), and any other major
financial statements issued by the Company follow International
Financial Reporting Standards as adopted by the European Union and
give a true and fair view of the Company and its affairs; matters
raised by the external auditors about any aspect of the accounts
or, of the Company's control and audit procedures, are
appropriately considered and, if necessary, brought to the
attention of the board, for resolution;
- monitoring and reviewing the quality and effectiveness of the
auditors and their independence;
- considering and making recommendations to the Board on the
appointment, reappointment, replacement and remuneration of the
Company's auditor;
- monitoring and reviewing the internal control and risk
management systems of the service providers; and
- considering at least once a year whether there is a need for an internal audit function.
The complete details of the Committee's formal duties and
responsibilities are set out in the Committee's terms of reference,
a copy of which can be obtained from the Secretary.
Independent Auditor
The Committee is also the forum through which the auditor
reports to the Board of Directors. The Committee reviews the scope
and results of the audit, its cost effectiveness and the
independence and objectivity of the auditor, with particular regard
to the terms under which it is appointed to perform non audit
services including fees. The Committee has established pre-approval
policies and procedures for the engagement of Ernst & Young LLP
to provide non-audit services.
Ernst & Young LLP has been the independent auditor from the
date of the initial listing on the official list of the UK Listing
Authority.
The audit fees proposed by the auditors each year are reviewed
by the Committee taking into account the Company's structure,
operations and other requirements during the year and the Committee
makes recommendations to the Board.
The Committee considers Ernst & Young LLP to be independent
of the Company. The Committee also met with the external auditors,
in private and without service providers present, so as to provide
a forum to raise any matters of concern in confidence.
Evaluations or Assessments Made During the Year
The following sections discuss the assessments made by the
Committee during the year:
Significant Areas of Focus for the Financial Statements
The Committee's review of the interim and annual financial
report focused on:
-- Valuation of the Company's investments
-- Ownership and existence of the Company's investments
-- Continuation of the Company
The Company's investment in BlueTrend Fund and BlueTrend
Leveraged Fund represents substantially all of the net assets of
the Company and as such is the biggest factor in relation to the
accuracy of the financial statements. The Company's holdings in
BlueTrend Fund and BlueTrend Leveraged Fund have been confirmed
with the administrator of those investee funds.
To aid our review we considered reports by external service
providers, including Ernst & Young LLP and the administrator of
the underlying funds, SS&C GlobeOp, and also reports from the
external auditor on the outcome of their annual audit.
Effectiveness of the Audit
The Committee had formal meetings with Ernst & Young LLP
during the course of the year:
1) Before the start of the audit to discuss formal planning,
discuss any potential issues and agree the scope that will be
covered and
2) After the audit work was concluded to discuss any significant
matters such as those stated above.
The Board considered the effectiveness and independence of Ernst
& Young LLP by using a number of measures, including but not
limited to:
- the audit plan presented to them before the start of the audit;
- the audit results report;
- changes to audit personnel;
- the auditor's own internal procedures to identify threats to independence;
- feedback from both the Investment Manager and Administrator; and
- the Committee obtains confirmation from Ernst & Young LLP
on their independence as additional comfort for the Committee.
Further to the above, at the conclusion of the 2014 audit, the
Committee performed a specific evaluation of the performance of the
independent auditor. This is supported by the results of
questionnaires completed by the
Committee covering such areas as quality of audit team, business
understanding, audit approach and management. This questionnaire
was part of the process by which the Committee assessed the
effectiveness of the audit.
There were no adverse findings from this evaluation.
The outsourcing of any non-audit services such as interim
review, tax compliance, tax structuring, private letter rulings,
accounting advice, and quarterly reviews are normally permitted but
should be pre-approved by the Committee, or two non-executive
Directors where fees are likely to be above GBP25,000 (in
aggregate).
The annual budget for both the audit and non-audit related
services was presented to the Committee for pre-approval.
Audit Fees and Safeguards on Non-Audit Services
The table below summarises the remuneration payable by the
Company to Ernst & Young LLP during the years ended 31 December
2014 and 31 December 2013.
2014 2013
Interim review GBP GBP
Ernst & Young LLP - Guernsey 11,000 7,500
Annual audit
Ernst & Young LLP - Guernsey 20,600 24,250
The independence of Ernst & Young LLP is in the Committee's
opinion not compromised by them performing the interim review.
Internal Audit
There is no internal audit function. As all of the Directors are
non-executive and all of the Company's administration functions
have been delegated to independent third parties, the Audit
Committee considers that there is no need for the Company to have
an internal audit function. However, this matter is reviewed
periodically.
Conclusion and Recommendation
After reviewing various reports such as the operation and risk
management framework and performance reports from management,
liaising where necessary with Ernst & Young LLP, and assessing
the significant areas of focus for the financial statements listed.
The Committee is satisfied that the annual financial report
appropriately address the critical judgements and key estimates
(both in respect to the amounts reported and the disclosures). The
Committee is also satisfied that the significant assumptions used
for determining the value of assets and liabilities have been
appropriately scrutinised, challenged and are sufficiently robust.
The independent auditor reported to the Committee that no material
misstatements were found in the course of its work. Furthermore,
the Administrator confirmed to the Committee that they were not
aware of any material misstatements including matters relating to
presentation.
The Committee confirms that it is satisfied that the independent
auditor has fulfilled its responsibilities with diligence and
professional scepticism. Consequent to the review process on the
effectiveness of the independent audit and the review of audit
services, the Committee has recommended that Ernst & Young LLP
be reappointed for the coming financial year. For any questions on
the activities of the Committee not addressed in the foregoing, a
member of the Committee remains available to attend each Annual
General Meeting to respond to such questions.
Huw Salter
Audit Committee Chairman
23 April 2015
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Report of the
Directors and the annual financial report in accordance with
applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law they have
elected to prepare the financial statements in accordance with
International Financial Reporting Standards as adopted by the
European Union ("IFRS") and applicable law.
The financial statements are required by law to give a true and
fair view of the state of affairs of the Company and of the profit
or loss of the Company for that period.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and estimates that are reasonable and prudent;
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and to enable them to ensure that
the financial statements comply with the Companies (Guernsey) Law,
2008.
They have general responsibility for taking such steps as are
reasonably open to them to safeguard the assets of the Company and
to prevent and detect fraud and other irregularities.
The financial statements, prepared in accordance with
International Financial Reporting Standards as adopted by the
European Union, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the
Company.
The Directors' Report includes or incorporates by reference a
fair review of the development and performance of the business and
the position of the Company, together with a description of the
principal risks and uncertainties that it faces.
The Directors are responsible for ensuring and hereby declare
that the Annual Financial Report includes information required by
the Rules of the UK Listing Authority. They are also responsible
for ensuring that the Company complies with the provisions of the
Listing Rules and Disclosure Rules and Transparency Rules of the UK
Listing Authority which, with regard to corporate governance
require the Company to disclose how it has applied the principles,
and complied with the provisions, of the corporate governance code
applicable to the Company.
The Directors are responsible for ensuring and hereby declare
that the Annual Financial Report is fair, balanced and
understandable and provides information necessary for shareholders
to assess the Company's performance, business model and
strategy.
Signed on behalf of the Board by:
Wayne Bulpitt Huw Salter
Director Director
23 April 2015
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31 December 2014
Ordinary Shares
Sterling US$ Share
Share Class Class Total
Note $ GBP
Income
Interest income from cash and
cash equivalents 16,530 6,508 20,455
Net gain on financial assets
at fair value through profit
or loss 6 6,567,851 2,704,284 8,099,928
Total net income 6,584,381 2,710,792 8,120,383
-------------- -------------- --------------
Expenses
Directors' fees 3 76,224 23,720 90,217
Transaction costs 166,886 23,426 180,773
Administration and secretarial
fees 3 77,897 24,159 92,125
Legal and professional fees 29,563 8,415 34,538
Other operating expenses 17,238 6,112 20,846
Audit fees 28,511 5,850 31,930
Audit related fees 5,454 4,014 7,801
Regulatory fees 14,765 8,038 19,481
--------------
Total operating expenses 416,538 103,734 477,711
-------------- -------------- --------------
Operating profit 6,167,843 2,607,058 7,642,672
Finance income:
Gain on Company share buy backs 983,861 229,527 1,121,777
Gain on redemptions through
the Tender Offer 1,205,435 948,157 1,759,179
Finance charge:
Profit allocated to shares classified
as liabilities 1 (6,178,505) (3,784,742) (7,228,656)
-------------- -------------- --------------
Net Finance charge (3,989,209) (2,607,058) (4,347,700)
-------------- -------------- --------------
Profit for the year 2,178,634 - 3,294,972
Items that may be reclassified
subsequently to profit and
loss
Currency aggregation adjustment 1 - - (1,116,338)
-------------- -------------- --------------
Other Comprehensive Income - - (1,116,338)
-------------- -------------- --------------
Total Comprehensive Income 1 2,178,634 - 2,178,634
-------------- -------------- --------------
Earnings per share Pence (GBP) - Pence (GBP)
Basic and diluted 4 11.93 - 11.93
The Earnings per share for the US$ Class for the period ended 30
June 2014 was US$0.5011
All items in the above statement derive from continuing
operations.
There are no items in other comprehensive income for the period
other than those disclosed above.
The notes form an integral part of these financial
statements.
For the year ended 31 December 2013
Ordinary Shares
Sterling US$ Share
Share Class Class Total
Note GBP $ GBP
Income
Interest income from cash
and cash equivalents 24,295 4,041 26,821
Net loss on financial assets
at fair value through profit
or loss 6 (13,472,433) (11,227,886) (20,298,373)
Total net income (13,448,138) (11,223,845) (20,271,552)
------------- ------------- ---------------
Expenses
Directors' fees 3 59,393 49,124 90,000
Transaction costs 48,061 39,888 73,629
Administration and secretarial
fees 3 60,159 48,736 91,356
Legal and professional fees 12,457 10,290 19,099
Other operating expenses 18,178 14,908 27,950
Audit fees 28,376 21,549 42,082
Regulatory fees 15,064 14,325 24,231
Total operating expenses (241,688) (198,820) (368,347)
------------- ------------- ---------------
Items that may be reclassified
subsequently to profit and
loss
Currency aggregation adjustment 1 - - (882,276)
------------- ------------- ---------------
Other Comprehensive Income - - -
------------- ------------- ---------------
Decrease in net assets attributable
to holders of redeemable ordinary
shares (13,689,826) (11,422,665) (21,522,175)
------------- ------------- ---------------
Earnings per share Pence (GBP) Cents ($) Pence (GBP)
- Basic and diluted 4 (11.90) (12.15) (10.29)
All items in the above statement derive from continuing
operations.
There are no items in other comprehensive income for the period
other than those disclosed above.
The notes form an integral part of these financial
statements.
STATEMENT OF FINANCIAL POSITION
As at 31 December 2014
Ordinary Shares
Sterling
Share Class Total
Note GBP GBP
Non-Current Assets
Investments designated as fair
value through profit or loss 6 33,110,774 33,110,774
Current Assets
Other receivables and prepayments 5 7,245 7,245
Cash and cash equivalents 4,237,721 4,237,721
Total assets 37,355,740 37,355,740
Current Liabilities
Payables 7 302,358 302,358
------------- -------------
Net Assets 37,053,382 37,053,382
------------- -------------
UITY
EQUITY
Stated Capital and Reserves 37,053,382 37,053,382
9 37,053,382 37,053,382
------------- -------------
Number of ordinary shares (GBP
class) 35,665,128
Net asset value per share Pence (GBP)
1.039
The NAV per share per the financial statements is equal to the
published NAV per share. The published NAV per share represents the
NAV per share attributable to shareholders in accordance with the
Prospectus.
The financial statements were approved and authorised for issue
by the Board of Directors on 23 April 2015 and are signed on its
behalf by:
Huw Salter
Director
The notes form an integral part of these financial
statements.
As at 31 December 2013
Ordinary Shares
Sterling US$ Share
Share Class Class Total
Note GBP $ GBP
Assets
Cash and cash equivalents 3,691,585 7,884,089 8,453,371
Other receivables and prepayments 5 103,510 245,863 252,005
Financial assets at fair value
through
profit or loss 6 89,987,902 73,323,366 134,273,320
Total assets 93,782,997 81,453,318 142,978,696
------------- ----------- ------------
Liabilities
Payables 7 (402,509) (58,370) (437,763)
Net assets attributable to
holders of
redeemable ordinary shares 9 93,380,488 81,394,948 142,540,933
------------- ----------- ------------
Pence (GBP) Cents ($)
Net asset value per share 0.8924 0.8843
The NAV per share per the financial statements is equal to the
published NAV per share. The published NAV per share represents the
NAV per share attributable to shareholders in accordance with the
Prospectus.
The notes form an integral part of these financial
statements
STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF
REDEEMABLE ORDINARY SHARES
For the year ended 31 December 2014
Ordinary Shares
Sterling Share US$ 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 (27,614,621) (6,714,330) (30,529,930)
Shares cancelled - Tender
Offer 11 (57,029,172) (44,812,388) (83,226,055)
Share conversions 11 19,978,425 (33,648,419) -
Share issue costs 11 (18,877) (4,553) (22,518)
--------------- ------------- --------------
Net decrease from share transactions (64,684,245) (85,179,690) (113,778,503)
Increase in net assets attributable
to
holders of redeemable ordinary
shares before other comprehensive
income 11 6,178,505 3,784,742 7,228,656
Currency aggregation adjustment - - (1,116,338)
--------------- ------------- --------------
Net assets prior to transfer
to equity 34,874,748 - 34,874,748
--------------- ------------- --------------
Transfer to Equity (34,874,748) (34,874,748)
--------------- ------------- --------------
Balance at 31 December 2014 - - -
--------------- ------------- --------------
STATEMENT OF CHANGES IN SHAREHOLDERS EQUITY
For the year ended 31 December 2014
Ordinary Shares
Sterling Share US$ Share
Class Class Total
Note GBP $ GBP
Equity at the beginning of - - -
the year
Transfer from attributable
to holders of
redeemable ordinary shares 34,874,748 - 34,874,748
Profit for the year 11 2,178,634 - 2,178,634
Balance at 31 December 2014 37,053,382 - 37,053,382
--------------- ---------- -----------
The notes form an integral part of these financial
statements.
For the year ended 31 December 2013
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 120,714,503 96,844,824 180,292,986
Issue of shares 11 - 1,101,600 715,789
Treasury shares purchased 10 (17,205,606) (996,189) (17,826,017)
Treasury shares sold 10 898,645 - 898,645
Share conversions 11 2,675,787 (4,124,413) -
Share issue costs 11 (13,015) (8,209) (18,295)
--------------- ------------- --------------
Net decrease from share transactions (13,644,189) (4,027,211) (16,229,878)
Decrease in net assets attributable
to
holders of redeemable ordinary
shares before other comprehensive
income 11 (13,689,826) (11,422,665) (20,639,899)
Currency aggregation adjustment - - (882,276)
Decrease in net assets attributable
to holders of redeemable ordinary
shares 11 (13,689,826) (11,422,665) (21,522,175)
--------------- ------------- --------------
Net assets at the end of the
period attributable to holders
of redeemable ordinary shares 9 93,380,488 81,394,948 142,540,933
--------------- ------------- --------------
The notes form an integral part of these financial
statements.
STATEMENT OF CASH FLOWS
For the year ended 31 December 2014
Ordinary Shares
Sterling US$
Share Class Share Class Total
Note GBP $ GBP
Cash flows from operating
activities
Interest received 20,379 6,508 20,486
Operating expenses paid (392,628) (126,693) (464,894)
Purchase of investments (23,302,296) (5,388,009) (26,511,236)
Proceeds from disposal of
investments 87,072,868 81,656,384 136,352,520
Net cash generated from operating
activities 63,398,323 76,148,190 109,396,876
------------- ------------- --------------
Cash flows from financing
activities
Purchase of treasury shares (26,988,268) (6,499,934) (30,897,436)
Net funds from Conversions
between
share classes 19,947,941 (33,610,883) -
Payment of redeemed shares
via the Tender Offer (55,823,736) (43,864,230) (82,295,812)
Share issue & Share redemption
costs 11,876 (57,232) (22,516)
------------- ------------- --------------
Net cash used in financing
activities (62,852,187) (84,032,279) (113,215,764)
------------- ------------- --------------
Net increase/ (decrease)
in cash and cash equivalents
during the period 546,136 (7,884,089) (3,818,888)
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 - - (396,762)
------------- ------------- --------------
Cash and cash equivalents
at the end of the period 4,237,721 - 4,237,721
------------- ------------- --------------
The notes form an integral part of these financial
statements.
For the year ended 31 December 2013
Ordinary Shares
Sterling US$
Share Class Share Class Total
Note GBP $ GBP
Cash flows from operating
activities
Interest received 27,519 1,691 29,880
Operating expenses paid (231,088) (191,698) (355,891)
Purchase of investments (11,349,215) (7,033,146) (15,790,479)
Proceeds from disposal of
investments 24,770,283 14,389,463 33,949,577
Net cash generated from operating
activities 13,217,499 7166,310 17,833,087
------------- ------------- -------------
Cash flows from financing
activities
Proceeds from tap issuance
of ordinary shares - 1,101,600 715,789
Purchase of treasury shares (16,856,124) (981,058) (17,467,395)
Proceeds from sale of treasury
shares 898,645 - 898,645
Net funds from conversions
between
share classes 2,675,787 (4,124,413) -
Share issue costs (13,015) (8,209) (18,295)
------------- ------------- -------------
Net cash used in financing
activities (13,294,707) (4,012,080) (15,871,256)
------------- ------------- -------------
Net increase/ (decrease)
in cash and cash equivalents
during the period (77,208) 3,154,230 1,961,831
Cash and cash equivalents
at the beginning of the period 3,768,793 4,729,859 6,678,580
Effect of exchange rate changes
on cash and cash equivalents - - 187,040
------------- ------------- -------------
Cash and cash equivalents
at the end of the period 3,691,585 7,884,089 8,453,371
------------- ------------- -------------
The notes form an integral part of these financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
For the period ended 31 December 2014
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 financial statements have been prepared in accordance with
International Financial Reporting Standards and Interpretations
(collectively "IFRS") issued by the International Accounting
Standards Board ("IASB") as adopted by the European Union ("adopted
IFRS") and in accordance with applicable Guernsey law.
In addition to the requirements of adopted IFRS, the Company has
disclosed the financial information of each share class in issue in
order to provide more relevant information.
The financial information has been prepared on an historical
cost basis, except for financial assets at fair value through
profit or loss, which are measured at fair value.
The financial statements are presented in Sterling because it is
the currency of the primary economic environment in which the
Company operates.
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 2013,
except for the adoption of the following new standards and
interpretations effective as of 1 January 2014.
IFRS 10 Consolidated Financial Statements - amended by
Investment Entities, effective for annual periods beginning on or
after 1 January 2014.
IFRS 11 Joint Arrangements- replaces IAS 31 Interests in Joint
Ventures and SIC-13 Jointly-controlled Entities- Non-monetary
Contributions by Venturers effective for annual periods beginning
on or after 1 January 2014.
IFRS 12 Disclosure of Interests in Other Entities- disclosure
requirements for all forms on interests in other entities,
including joint arrangements, associates, special purpose vehicles
and other off balance sheet vehicles, effective for annual periods
beginning on or after 1 January 2014.
The above standards do not impact the annual nor interim
financial statements of the Company as it does not have any
subsidiary undertakings or joint ventures.
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 GBP600. (This fee will
increase to GBP1,200 per annum effective 1 January 2015).
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.
Financial assets designated at fair value through profit or loss
upon initial recognition-continued
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 under review. 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 are 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
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 Association.
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 meet 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,
the profit from the beginning of the year until the closure of the
US$ share class is included in 'Profit allocated to shares
classified as liabilities' for shares classified as
liabilitieswhereas profit after the closure of the US$ share class
until the year end is 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 is 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 is 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.
Judgement
In the process of applying the Company's accounting policies,
management has made the following judgement, which has the most
significant effect on the amounts recognised in the financial
statements.
Functional currency
The Board of Directors considers Sterling as the currency that
most faithfully represents the economic environment in which the
Company operates.
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.
2. AGREEMENTS AND RELATED PARTIES
Investments
The Company's investments include holdings of:
BlueTrend Fund Limited Class BlueTrend 2x Leveraged Fund
B Limited Class A
31 December
2014 32.8% 92.5%
31 December
2013 12.1% 88.5%
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) together with a one off payment in the first year of
GBP1,000 in respect of the preparation of annual and interim
accounts.
For the period ended 31 December 2014, the Administration fee
was GBP39,240 (31 December 2013: GBP50,305) and the Secretarial fee
was GBP38,656 (31 December 2013: GBP41,051). Of these amounts an
Administration fee of GBP4,068 (31 December 2013: GBP7,529) and a
Secretarial fee of GBP6,301 (31 December 2013: GBP15,071) 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 31
December 2014, the Directors' fees amounted to GBP76,224 (31
December 2013: GBP90,000). Of this amount GBP7,500 (31 December
2013: GBP7,500) was unpaid at the period end.
Wayne Bulpitt held 25,000 Sterling Class Shares at the period
end (31 December 2013: 25,000).
Huw Salter held 20,000 Sterling Class Shares at the period end
(31 December 2013: 20,000).
4. EARNINGS PER SHARE
Basic earnings per share is calculated by dividing the
profit/(loss) for the period (as represented by the profit
allocated to shares classified as liabilities together with the
profit for the year ended 31 December 2014 and the other
comprehensive income for the year) 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 31 December Share Class
2014
Profit allocated to shares
classified as liabilities
for the period 6,178,505
Profit allocated to shares
classified as equity 2,178,634
-------------
Weighted average number of
ordinary shares in issue 70,045,181
-------------
Pence (GBP)
Earnings per share 11.93
-------------
The profit on the US$ Class for the half year to 30 June 3014
was $0.05011 on a weighted average share base of 75,535,925
shares.
Ordinary shares
Sterling US$ Share Total
For the period ended 31 December Share Class Class
2013
Loss for the period GBP(13,689,826) $(11,422,665) GBP(21,522,175)
Weighted average number of
ordinary shares in issue 115,071,587 94,043,392 209,114,979
---------------- -------------- ----------------
Pence (GBP) Cents ($) Pence (GBP)
Earnings per share (11.90) (12.15) (10.29)
---------------- -------------- ----------------
5. OTHER RECEIVABLES AND PREPAYMENTS
Ordinary
31 December 2014 Sterling Total
Share Class
GBP GBP
Prepayments
Directors indemnity insurance 2,066 2,066
Other 5,179 5,179
7,245 7,245
------------- --------
Ordinary shares
Sterling US$ Share
31 December 2013 Share Class Class Total
GBP $ GBP
Interest receivable 4,698 4,926 7,673
Prepayments
Prepayment of acquisition
of investments 93,000 236,000 235,538
Directors indemnity insurance 1,337 1,113 2,022
Other 4,475 3,804 6,772
103,510 245,863 252,005
------------- ---------- --------
6. FINANCIAL ASSETS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR
LOSS
Ordinary shares
Sterling US$ Share Total
As at 31 December 2014 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 (93,613,726) (86,565,209) (144,798,594)
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
Sterling US$ Share Total
As at 31 December 2013 Share Class Class
GBP $ GBP
Unlisted managed funds
Cost brought forward 114,117,644 89,590,583 170,059,694
Purchases at fair value 11,256,214 6,797,146 15,557,565
Disposals during the year (24,052,958) (15,577,037) (33,968,081)
Currency aggregation adjustment - - (1,520,708)
Unrealised losses on valuation
carried forward (11,332,998) (7,487,326) (15,855,150)
--------------- --------------- ---------------
Financial assets at fair
value
through profit or loss 89,987,902 73,323,366 134,273,320
--------------- --------------- ---------------
Unrealised losses on valuation (14,189,757) (10,040,312) (20,282,494)
Realised gains /(losses)
on disposal 717,324 (1,187,574) (15,880)
Net losses on financial
assets
at fair value through profit
or loss (13,472,433) (11,227,886) (20,298,373)
--------------- --------------- ---------------
7. PAYABLES
Ordinary shares
Sterling
31 December 2014 Share Class Total
GBP GBP
Contingent redemption fee
payable 234,260 234,260
Directors' fees 7,500 7,500
Transaction costs 14,543 14,543
Administration and secretarial
fees 10,369 10,369
Accounts preparation 8,000 8,000
Other expenses 7,836 7,836
Audit fees 19,850 19,850
302,358 302,358
------------- --------
Ordinary shares
Sterling US$ Share
31 December 2013 Share Class Total
Class
GBP $ GBP
Directors' fees 4,965 4,198 7,500
Amount payable on purchase
of treasury shares 349,483 15,131 358,622
Transaction costs 9,632 7,997 14,462
Administration and secretarial
fees 15,135 12,359 22,600
Other expenses 5,095 4,073 7,555
Audit fees 18,199 14,612 27,024
402,509 58,370 437,763
--------- ------------- --------
8. SHARE CAPITAL
Authorised share capital
An unlimited number of unclassified shares of no par value.
Sterling US$ Share
Share Class Class
Number of shares in issue at 35,665,128 -
31 December 2014
------------- -------------
Ordinary Shares
The movement in shares took place Number of Number of
as follows: Sterling US$ Share
Share Class Class
Date of movement
(redemptions are for cancellation
unless otherwise stated)
Brought forward as at 31 December
2013 104,641,389 92,039,989
Conversion 2 January 2014 (18,528) 30,972
Redemption 3 January 2014 (380,000) -
Redemption 7 January 2014 (US$
for treasury) (350,000) (55,000)
Redemption 14 January 2014 (2,000,000) -
Redemption 21 January 2014 (640,000) -
Redemption 28 January 2014 (US$
for treasury) (170,000) (1,050,000)
Conversion 3 February 2014 9,650,596 (16,005,660)
Redemption 4 February 2014 (150,000) -
Redemption 11 February 2014 (US$
for treasury) (3,211,000) (320,000)
Redemption 18 February 2014 (748,000) -
Conversion 3 March 2014 (10,000) 16,945
Redemption 4 March 2014 (1,335,000) -
Redemption 11 March 2014 (US$
for treasury) (1,020,000) (1,350,000)
Redemption 18 March 2014 (3,240,000) -
Redemption 20 March 2014 (5,000,000) -
Redemption 25 March 2014 (US$
for treasury) - (1,248,000)
Conversion 1 April 2014 (527,461) 892,046
Redemption 2 April 2014 (US$
for treasury) - (1,940,940)
Redemption 8 April 2014 (US$
for treasury) - (776,499)
Redemption 15 April 2014 - (620,000)
Redemption 23 April 2014 - (500,000)
Conversion 1 May 2014 (796,730) 1,361,180
Redemption 1 July 2014 (Tender
Offer) (60,271,795) (47,886,715)
Conversion 1 July 2014 (Compulsory
conversion) 13,153,657 (22,588,318)
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 -
------------- -------------
Ordinary Shares
The movement in shares took place Number of Number
as follows: Sterling of US$
Share Class Share Class
Date of movement
Brought forward as at 1 January
2013 119,878,829 96,280,055
Conversion 2 January 2013 (22,078) 35,901
Treasury shares purchased 8 January (550,000) -
2013
Treasury shares purchased 22 (300,000) -
January 2013
Treasury shares purchased 29 (250,000) -
January 2013
Conversion 1 February 2013 73,693 (117,055)
Treasury shares purchased 4 February (325,000) -
2013
Treasury shares purchased 12 (1,500,000) -
February 2013
Treasury shares purchased 19 (865,000) -
February 2013
Treasury shares purchased 26 (1,250,000) -
February 2013
Conversion 1 March 2013 (13,942) 21,207
Conversion 1 March 2013 2,122,103 (3,228,000)
Treasury shares purchased 26 (150,000) -
March 2013
Conversion 2 April 2013 (332,658) 507,186
Treasury shares purchased 9 April (400,000) -
2013
Conversion 1 May 2013 (197,100) 307,221
Treasury shares sold 15 May 2013 250,000 -
Treasury shares sold 17 May 2013 100,000 -
Treasury shares sold 30 May 2013 235,000 -
Conversion 3 June 2013 (75,436) 114,976
Treasury shares sold 27 June 200,000 -
2013
Conversion 1 July 2013 15,821 (24,193)
Treasury shares sold 5 July 2013 100,000 -
Tap issue 25 July 2013 - 1,200,000
Conversion 1 August 2013 (79,415) 121,714
Treasury shares purchased 20
August 2013 (850,000) (70,000)
Treasury shares purchased 28
August 2013 - (50,000)
Conversion 2 September 2013 750,328 (1,169,018)
Treasury shares purchased 17
September 2013 (520,000) (200,000)
Treasury shares purchased 24 (1,650,000) -
September 2013
Conversion 1 October 2013 (9,300) 15,129
Treasury shares purchased 1 October (175,000) -
2013
Treasury shares purchased 8 October
2013 (670,000) (170,000)
Treasury shares purchased 15
October 2013 (1,149,000) (300,000)
Treasury shares purchased 22 (150,000) -
October 2013
Treasury shares purchased 29
October 2013 (260,000) (40,000)
Conversion 1 November 2013 273,420 (442,113)
Treasury shares purchased 4 November (627,000) -
2013
Treasury shares purchased 12 (830,000) -
November 2013
Treasury shares purchased 19 (2,250,000) -
November 2013
Treasury shares purchased 26 (835,000) -
November 2013
Conversion 2 December 2013 251,124 (415,021)
Treasury shares purchased 3 December (645,000) -
2013
Treasury shares purchased 10
December 2013 (848,000) (50,000)
Treasury shares purchased 17
December 2013 (520,000) (43,000)
Treasury shares purchased 23
December 2013 (900,000) (227,000)
Treasury shares purchased 31
December 2013 (410,000) (18,000)
As at 31 December 2013 104,641,389 92,039,989
------------- -------------
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.
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$100 million the
Company will, no later than the last business day of February in
that year, call a general meeting to be held by no later than the
date falling 28 days after the notice convening the general meeting
is published by the Company. At that general meeting, the Directors
will propose an ordinary resolution for the continuation of the
Company. If the continuation resolution is not passed by
shareholders, proposals will be put forward by the Directors to
conduct an orderly winding-up or reconstruction of the Company
which, for the avoidance of doubt, shall include an option that
allows shareholders to realise their entire holding for cash at NAV
less costs. The Directors will cause a general meeting of the
Company to be convened for a date not later than 180 days after the
date of the general meeting at which the continuation resolution is
not passed (or, if adjourned, the date of the adjourned
meeting).
On 5 June 2014, the Company issued a Shareholder Circular
offering a Tender Offer (the 'Tender Offer') for up to 100 per cent
of the then Sterling and US$ Shares in issue (minus one share). A
minimum viable size of GBP30 million following completion of the
Tender Offer (on the basis of the latest published NAV per Share as
at the date of the EGM), was set and if this could not be met the
Company would have been wound up voluntarily.
The Tender Offer closed on 25 June 2014. Tenders for 60,271,795
Sterling Shares and 47,886,715 US$ Shares were accepted by the
Company, representing 63.7 per cent of the Sterling Share class and
68.0 per cent of the US$ Share class.
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" and
following the completion of the Tender Offer, the US$ Class no
longer met the Shares in Public Hands Requirement. In accordance
with the Articles the Directors compulsorily converted all of the
untendered US$ Shares into Sterling Shares on 18 July 2014. As at
8.00 a.m. on 18 July 2014, the US$ Share Class was delisted from
the London Stock Exchange.
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$100 million the
Company shall call a general meeting at which the Directors shall
propose an Ordinary Resolution for the continuation of the
Company.
On 26 February 2015, the Company issued a Shareholder Circular
convening an EGM to be held on 25 March 2015. The sole ordinary
resolution was to seek Shareholder approval for the Company to
continue its business as a closed ended investment company.
As described in the Chairman's statement, the Company passed its
Continuation Vote and the results were announced on 25 March
2015.
9. EQUITY AND NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE
ORDINARY SHARES
Ordinary shares
Sterling US$ Share
31 December 2014 - Equity Note Share Class Class Total
GBP $ GBP
Represented by:
Stated Capital - - -
Treasury shares (3,310,168) - (3,310,168)
Distributable reserves 40,363,550 - 40,363,550
37,053,382 - 37,053,382
------------- ---------- ------------
NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE ORDINARY
SHARES
Ordinary shares
Sterling US$ Share
31 December 2013 Note Share Class Class Total
GBP $ GBP
Represented by:
Stated capital 8 - - -
Treasury shares 10 (18,481,914) (996,189) (19,102,325)
Reserves 11 111,862,402 82,391,137 161,643,259
------------- ----------- -------------
93,380,488 81,394,948 142,540,933
------------- ----------- -------------
10. TREASURY SHARES
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 sold - - -
Treasury shares cancelled (99,815,539) (51,345,223) (129,869,502)
3,310,168 - 3,310,168
------------- ------------- --------------
Ordinary shares
Sterling US$ Share
31 December 2013 Share Class Class Total
GBP $ GBP
Brought forward as at 1 January
2013 2,155,500 - 2,155,500
Treasury shares sold (898,645) - (898,645)
Treasury shares purchased 17,205,606 996,189 17,826,017
Net gain on sale of treasury
shares 19,453 - 19,453
18,481,914 996,189 19,102,325
------------- ---------- -----------
The Treasury shares represent 3,573,924 (31 December 2013:
8,764,000) Sterling Class shares held by the Company in Treasury.
There were 6,740,439 US$ Treasury shares purchased during the year
under review and subsequently cancelled as part of the Tender
Offer.
11. DISTRIBUTABLE RESERVES
Ordinary shares
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
------------- ------------- --------------
Sterling US$ Share Total
31 December 2013 Note Share Class Class
GBP $ GBP
Balance at 1 January 2013 122,870,003 96,844,824 182,448,486
Share conversions 2,675,787 (4,124,413) -
Net gain on sale of treasury
shares 19,453 - 19,453
Share issue / conversion
costs (13,015) (8,209) (18,294)
Tap issues - 1,101,600 715,789
------------- ------------- -------------
Net change from share issues
for the period 2,682,225 (3,031,022) 716,948
Decrease in net assets attributable
to holders of redeemable
shares (13,689,826) (11,422,665) (21,522,175)
------------- ------------- -------------
Balance at 31 December 2013 111,862,402 82,391,137 161,643,259
------------- ------------- -------------
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
2013: GBP49,047,204) and 0% (31 December 2013: 34%) expressed as a
percentage of net assets. The Directors do not intend that the
Company will carry out any currency hedging arrangements. Foreign
currency risk is managed at a class level in order to ensure that
there is no exposure for shareholders.
Currency sensitivity
At 31 December 2014 the Company held no USD assets or
liabilities (31 December 2013: GBP226,752 on monetary assets
only.
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, changes 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 31 December 2014 (31 December 2013 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
2014 and the net assets attributable to shareholders for the period
ended 2013 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 31 As at 31
December December
2014 2013
GBP GBP
Sterling shareholders 3,311,077 8,998,790
Dollar shareholders - 4,428,542
---------- -----------
Total 3,311,077 13,427,332
---------- -----------
A 10% decrease in the NAV at 31 December 2014 (31 December 2013
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 a credit rating of 'A'.
The maximum credit risk to which the Company was exposed at the
period-end was:
Sterling
As at 31 December 2014: Share Class Total
GBP GBP
Investments 33,110,775 33,110,775
Cash and cash equivalents 4,237,721 4,237,721
Other assets (excluding - -
prepayments)
------------- -------------
37,348,496 37,348,496
------------- -------------
Sterling US$ Share
As at 31 December 2013: Share Class Class Total
GBP $ GBP
Investments 89,987,902 73,323,366 134,273,320
Cash and cash equivalents 3,691,585 7,884,089 8,453,371
Other assets (excluding
repayments) 4,698 4,926 7,673
------------- ----------- ------------
93,684,185 81,212,381 142,734,364
------------- ----------- ------------
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.
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 Payable Total
in the event
of liquidation
GBP GBP GBP
As at 31 December 2014:
Accrued expenses 302,358 - 302,358
Stated capital 37,053,382 37,053,382
302,358 37,053,382 37,355,740
----------- ---------------- -----------
0-3 months Payable Total
in the event
of liquidation
GBP GBP GBP
As at 31 December 2013:
Accrued expenses 437,763 - 437,763
Shares - 142,540,933 142,540,933
----------- ---------------- ------------
437,763 142,540,933 142,978,696
----------- ---------------- ------------
(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 18 June
2014, 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 2015.
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.
The monthly conversion facility was in place for the period up
to 30 June 2014 whereby shareholders could request to convert their
shares in any class of shares to shares in another class. Following
the closure and delisting of the US$ Share Class on 18 July 2014
the monthly conversion is no longer applicable.
(f) Fair value statement
The carrying value of all financial instruments approximate the
fair value at the period end.
(g) Fair value estimation
At 31 December 2014, 100% of financial assets at fair value
through profit or loss comprise investments in the Master Funds and
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 7 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 19 January 2014, Shareholders approved the renewal of the
Company's ability to buy-back shares.
The Company has made the following own share purchases for
treasury since 31 December 2014:
27 January 2015 200,000 Shares at 106.76 pence per share.
The Company has made the following own share purchases for
cancellation since 31 December 2014:
31 March 2015 185,000 Shares at 110.92 pence per share.
On 26 February 2015 the Company issued a Shareholder Circular
convening an Extraordinary General Meeting for 25 March 2015. The
Shareholders were asked to consider that pursuant to Article 51 of
the Company's Articles of Incorporation, the Company shall continue
its business as a closed-ended investment company. On 25 March
2015, the Board announced that the resolution that the Company
continue its business as a Closed-ended Investment Company was
passed.
SCHEDULE OF INVESTMENTS (Unaudited)
As at 31 December 2014
Securities portfolio Nominal Holdings Valuation Valuation Total Assets
Source Currency
GBP %
BlueTrend Fund Limited
* Class B Sterling Shares 105,684 GBP27,175,091 27,175,091 72.74
BlueTrend 2x Leveraged Fund Limited
* Series 33 GBP shares 31,391 GBP3,817,236 3,817,236 10.22
* Series 34 GBP shares 19,377 GBP2,118,448 2,118,448 5.67
-------------
5,935,684 15.89
----------- -------------
Portfolio value 33,110,775 88.63
----------- -------------
As at 31 December 2013 Nominal Holdings Valuation Valuation Total Net
Securities portfolio Source Currency Assets
GBP %
BlueTrend Fund Limited
* Class B Sterling Shares 352,830 GBP80,246,383 80,246,383 56.30%
* Class B USD Shares 253,941 $65,306,645 39,443,526 27.67%
* Series 21 GBP shares 45,067 GBP3,317,019 3,317,019 2.33%
* Series 22 GBP shares 2,050 GBP143,579 143,579 0.10%
* Series 23 GBP shares 3,070 GBP213,094 213,094 0.15%
* Series 24 GBP shares 1,900 GBP130,059 130,059 0.09%
* Series 25 GBP shares 3,060 GBP231,458 231,458 0.16%
* Series 26 GBP shares 1,069 GBP75,131 75,131 0.05%
* Series 27 GBP shares 57,780 GBP3,913,196 3,913,196 2.75%
* Series 29 GBP shares 11,170 GBP1,065,033 1,065,033 0.75%
* Series 30 GBP shares 6,700 GBP652,950 652,950 0.46%
* Series 33 USD shares 41,986 $3,076,895 1,858,365 1.30%
* Series 34 USD shares 520 $36,271 21,907 0.02%
* Series 35 USD shares 1,050 $79,587 48,068 0.03%
* Series 43 USD shares 6,540 $636,526 384,445 0.27%
* Series 44 USD shares 41,650 $4,187,442 2,529,107 1.77%
Total 134,273,320 94.20%
------------ ----------
The Company's Sterling Shares are capable of being traded on the
London Stock Exchange's main market for listed securities. All
Shares may be dealt in directly through a stockbroker or
professional adviser acting on an investor's behalf. The buying and
selling of Shares may be settled through CREST.
Approximately 6 business days after the end of each month the
confirmed net asset value for each class of Share is announced,
together with information on the Company's investments and
performance report, to a regulatory information service provider of
the London Stock Exchange. In addition, on a weekly basis the
Company announces in the same manner the estimated net asset value
for each class of Share.
The ISIN, SEDOL and the London Stock Exchange mnemonic of
Sterling Share class issued by the Company to date is:
ISIN SEDOL LSE mnemonic
Sterling Class shares GG00B7MSX903 B7MSX90 BBTS
Conversion between share classes
As there are currently no US$ shares in issue, the Company no
longer offers monthly conversion between share classes.
Shareholder enquiries
The Company's CREST compliant registrar is Computershare
Investor Services (Guernsey) Limited, which maintains the Company's
register of shareholders and act as Transfer Agent and Paying
Agent. Shareholder enquiries are handled by the Transfer Agent who
may be contacted by telephone on +44 (0) 870 7074040.
Further information regarding the Company can be found on its
website at www.bluecrestbluetrend.com.
Directors Wayne Bulpitt (Chairman)
Huw Salter
Andrew Dodd
Robert Heaselgrave (alternate director for Andrew Dodd)
Registered Office 1 Le Truchot
St. Peter Port
Guernsey GY1 1WD
Channel Islands
Administrator, Secretary and Dexion Capital (Guernsey) Limited
Designated Manager 1 Le Truchot
St. Peter Port
Guernsey GY1 3SZ
Channel Islands
Corporate Broker Dexion Capital plc
1 Tudor Street
London EC4Y 0AH
United Kingdom
Legal advisers to the Company Herbert Smith Freehills LLP
Exchange House
Primrose Street
London EC2A 2HS
United Kingdom
Advocates to the Company Carey Olsen
as to Guernsey Law P.O. Box 98
Carey House
Les Banques
St. Peter Port
Guernsey GY1 4BZ
Channel Islands
Registrar, Transfer Agent and Computershare Investor Services
(Guernsey) Limited
Paying Agent 3rd Floor
NatWest House
Le Truchot
St. Peter Port
Guernsey GY1 1WD
Channel Islands
Independent Auditor of the Company Ernst & Young LLP
PO Box 9
Royal Chambers
St. Julian's Avenue
St. Peter Port
Guernsey GY1 4AF
This information is provided by RNS
The company news service from the London Stock Exchange
END
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