Annual Financial Report - Yea

RNS Number : 4122R

BlueCrest AllBlue Fund Ltd

29 April 2009

 



29 April 2009

BlueCrest AllBlue Fund Limited

(the 'Company')

Annual Financial Report for the year ended 31 December 2008

BlueCrest AllBlue Fund Limited (LSE: BABS, BABU, BABE) today, in accordance with DTR 6.3.5, releases its annual results for the year ended 31 December 2008. The Company is a self-managed closed-ended investment company incorporated in Guernsey, focused on providing consistent long-term capital growth through an investment policy of investing substantially all of its assets in AllBlue Limited ('AllBlue') or any successor vehicle of AllBlue. The Shares of the Company are admitted to the Official List and to trading on main market of the London Stock Exchange.

Note: AllBlue Limited is a fund of hedge funds exempted company incorporated with limited liability in the Cayman Islands as an open-ended investment company. 

Copies of the Annual Financial Report will be available from the Company's website www.bluecrestallblue.co.uk on 30 April 2009. 

For further information, please visit www.bluecrestallblue.co.uk or contact:

Anson Fund Managers Limited, Secretary

01481 722260

  CHAIRMAN'S STATEMENT

Dear Shareholder,

The 2008 financial year saw significant progress by the Company in its second full year of trading. Investment performance in exceptionally challenging markets was in line with expectations notwithstanding very difficult trading conditions, particularly in the fourth quarter of the year. In June 2008 the Company completed the migration of its listing from the AIM Market of the London Stock Exchange to the Official List and changed its name to BlueCrest AllBlue Fund Limited. In July 2008, the Company raised £92.7 million following a successful placing and offer for subscription of C shares. This was achieved despite the challenging capital markets environment during the year.  

Investment and Share Price Performance

During 2008, the published Sterling Share NAV rose from 111.84p to 124.89, a return of 11.66% for the year, which is within the targeted range of 10% to 15%. Within the underlying AllBlue fund into which the Company invests, five of the six major strategies delivered positive returns for the year. This represents a very strong performance relative to alternative asset management indices and to broader asset classes in general:

                                                                                   2008

HFRI Fund Weighted Composite Index                  (19.0%)

MSCI World Index Gross Total Return (USD)        (40.3%)

BarclaysCap Global Bond index                                6.8%

Notwithstanding the appreciation in NAV, the market price of a Sterling Share fell from 117p to 103.75p over the year. A combination of the global financial crisis and weaker performance from a number of companies in our sector has precipitated a decline in share prices across the sector which is now characterised by trading levels at significant discounts to NAV. The average discounts over the year for each of the Sterling, Euro and US Dollar Share classes were 2.5%, 3.4% and 2.8%, respectively.

Taking advantage of the prevailing discount, the Company repurchased 450,000 of its Sterling Shares during the year at a weighted average cost of 107.14 pence, which represented a weighted average discount to the then-prevailing NAV of 13.4%.  

Despite excellent underlying investment performance, the Company has triggered its rolling 12 month discount floor provision for both the Euro class and US Dollar class of shares, by reference to the final NAV as at 27 February 2009 and 31 March 2009, respectively.

This requires, in accordance with the Company's articles of incorporation, a continuation vote to be proposed for these classes of shares by way of ordinary resolutions. In the Board's opinion, it is likely that the Company's rolling 12 month discount floor provision will also be triggered for the Sterling class of shares by reference to the final NAV as at 30 April 2009. 

On the assumption that the Sterling class triggers the requirement for a continuation vote within the anticipated time-frame, as referred to above, it is proposed that the continuation votes for all three share classes will be held at the same time. Accordingly, the Board intends to post a circular to Shareholders once all three share classes have triggered a requirement for a continuation vote. The circular will convene separate class meetings to be held at which the requisite continuation resolutions will be proposed.

Impact of Changed Financial Environment

The significantly changed environment during the fourth quarter had relatively little impact on the investment objectives, allocations, leverage and risk management of AllBlue and the Underlying Funds.

Although AllBlue received approximately 30% net redemptions during the fourth quarter, in line with the hedge fund industry as a whole, it was able to reduce its investments in the Underlying Funds accordingly without any impact on the desired allocations to underlying strategies. Where adjustments to capital allocations did occur, the driver was typically to reduce exposure to areas considered most at risk (e.g. emerging markets) whilst increasing allocations to areas deemed most likely to deliver stronger returns (e.g. trend following systematic trading). The report by Bluecrest as the manager of AllBlue on page 12 contains a more detailed review of the returns for the year from the different underlying strategies.

Risk and Leverage

BlueCrest has advised the Company that its established risk management practices and policies continued to be applied during the period and proved robust despite the volatile environment. This helped to restrict the maximum drawdown (on a weekly observed basis) during the period to approximately 1.5%.

Your Board is informed that the Underlying Funds to which AllBlue allocates capital do not, in general, rely on explicit leverage to fund investment positions, and as such were largely unaffected by the global deleveraging of the fourth quarter and the associated decline in availability of leverage during the year. BlueCrest's measure of implicit leverage in the Underlying Funds it manages, the levels of unencumbered cash within those funds, remained within targeted ranges and on a weighted basis across the Underlying Funds, ended the year at approximately 56% of assets under management.  

In the context of the financial difficulties facing the financial sector, BlueCrest has advised the Company that it has taken a number of steps to control counterparty exposure in the Underlying Funds. These exposures are well-diversified, and tiered according to BlueCrest's perception of associated counterparty risk. BlueCrest has also taken steps to ensure that counterparty balances are, where and to the extent possible contained in segregated accounts in order to minimise credit exposure.

The Board

During the year, the Board appointed Jonathan Hooley and Andrew Dodd as non-executive directors. Mr Hooley was also appointed as Chairman of the Audit Committee.

Outlook

The Company has enjoyed a positive start to 2009, and has been advised by BlueCrest that the investment environment for trading-based strategies remains attractive.

I look forward to reporting to you again in the Interim Report and Accounts for the period ended 30 June 2009. 

Richard Crowder

Chairman

  Management Report

A description of important events which have occurred during the financial year, their impact on the performance of the Company as shown in the financial statements and a description of the principal risks and uncertainties facing the Company, together with an indication of important events that have occurred since the end of the financial year and the Company's likely future development is given in the the Chairman's Statement on page 9 to 11, the Report of the Directors on pages 27 to 35 and the notes to the financial statements on pages 48 to 64 and is incorporated here by reference.

There were no material related party transactions which took place in the financial year, other than those disclosed at note 5 to the financial statement.

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, give a true and fair view of the assets, liabilities, financial position and profit 
                        or loss of the Company; and

(b)         This Management 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.

Richard Crowder            Jonathan Hooley

Director                            Director

  STATEMENT OF OPERATIONS        

For the year ended 31 December 2008                                                

	Notes		Sterling Share Class		Euro Share Class		US$ Share Class		Total
			£		€		$		£
Net gain on financial assets at fair value through profit or loss	6		23,992,457		751,300		1,610,492		26,225,629
Operating expenses	2		(1,186,262)		(36,387)		(75,274)		(1,259,383)
Currency consolidation adjustment			-		-		-		2,955,097
Increase in net assets attributable to shareholders			22,806,195		714,913		1,535,218		27,921,343
Earnings per share for the year			Pence (£)		Cent (€)		Cents ($)
- Basic and Diluted	4		13.79		12.74		12.60

In arriving at the results for the financial year, all amounts above relate to continuing operations.

There are no recognised gains or losses for the year other than those disclosed above.

Reconciliation of basic and diluted earnings per share for investment purposes to earnings per share per the financial statements:

			Pence (£)		Cent (€)		Cents ($)
Earnings per share for investment purposes			14.51		13.39		13.22
Adjustment to include expenses on an accruals basis			(0.72)		(0.66)		(0.62)
Earnings per share per the financial statements			13.79		12.73		12.60

  BALANCE SHEET

as at 31 December 2008

	Notes		Sterling Share Class		Euro Share Class		US$ Share Class		Total
			£		€		$		£
FIXED ASSETS
Unquoted financial assets designated as at fair value through profit or loss	6		256,625,844		7,845,388		25,226,771		281,412,397
CURRENT ASSETS
Receivables	7		49,045		205		377		7,295
Cash at bank			837,331		13,610		43,391		880,075
			886,376		13,815		43,768		887,370
LIABILITIES EXCLUDING NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS
Payables	8		135,215		14,957		53,831		144,195
			135,215		14,957		53,831		144,195
NET CURRENT ASSETS / (LIABILITIES)			751,161		(1,142)		(10,063)		743,175
TOTAL ASSETS LESS CURRENT LIABILITIES			257,377,005		7,844,246		25,216,708		282,155,572
NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS			257,377,005		7,844,246		25,216,708		282,155,572
Represented by:
CAPITAL AND RESERVES
Share capital	9		-		-		-		-
Share premium	10		-		-		-		-
Purchase of own shares	11		(483,079)		-		-		(483,079)
Distributable reserves	12		257,860,084		7,844,246		25,216,708		282,638,651
			257,377,005		7,844,246		25,216,708		282,155,572
SHARES IN ISSUE			205,485,106		6,500,194		20,719,155
NAV PER SHARE			£1.2525		€1.2068		$1.2171

Reconciliation of published NAV per share to NAV per share per the financial statements:

			Sterling (£)		Euro (€)		US$ ($)
Published NAV per share			1.2526		1.2070		1.2182
Adjustment to include expenses on an accruals basis			(0.0001)		(0.0002)		(0.0011)
NAV per share per the financial statements			1.2525		1.2068		1.2171

The published NAV per represents the NAV per share attributable to shareholders in accordance with the Prospectus.

The financial statements were approved by the Board of Directors on 29 April 2009 and are signed on its behalf by:

Richard Crowder    Jonathan Hooley

Director                    Director

  STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS

for the financial year ended 31 December 2008

		Sterling Share Class		Euro Share Class		US$ Share Class		Total
		£		€		$		£
Opening balance		150,920,222		6,174,123		10,738,553		160,868,140
Issue of shares		86,411,419		1,930,000		9,544,950		94,797,140
Share issue costs		(864,114)		(19,300)		(95,450)		(947,972)
Increase in net assets attributable to shareholders excluding currency consolidation adjustment		22,806,195		714,913		1,535,218		24,966,246
Currency consolidation adjustment		-		-		-		2,955,097
		259,273,722		8,799,736		21,723,271		282,638,651
Purchases of own shares		(483,079)		-		-		(483,079)
Share conversions		(1,413,638)		(955,490)		3,493,437		-
Closing balance		257 377,005		7,844,246		25,216,708		282,155,572

STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO SHAREHOLDERS

for the financial year ended 31 December 2007

		Sterling Share Class		Euro Share Class		US$ Share Class		Total
		£		€		$		£
Opening balance		137,357,032		5,706,673		9,807,554		146,208,645
Issue of shares		-		-		-		-
Share issue costs		-		-		-		-
Increase in net assets attributable to shareholders excluding currency consolidation adjustment		13,765,213		467,450		930,999		14,588,653
Currency consolidation adjustment		-		-		-		272,865
		151,122,245		6,174,123		10,738,553		161,070,163
Purchases of own shares		(202,023)		-		-		(202,023)
Closing balance		150,920,222		6,174,123		10,738,553		160,868,140

STATEMENT OF CASH FLOWS            

for the year ended 31 December 2008                    

		Sterling Share Class		Euro Share Class		US$ Share Class		Total
		£		€		$		£
Operating activities
Increase in net assets attributable to shareholders		22,806,195		714,913		1,535,218		24,966,246
Less: Unrealised appreciation on financial assets at fair value through profit or loss		(23,168,989)		(546,576)		(972,931)		(24,769,564)
Less; Realised gains on conversions		(541,826)		(196,756)		(624,335)		(1,157,743)
Less: Interest income		(60,900)		(1,306)		(2,309)		(63,297)
Add: Interest expense		11,573		406		758		12,342
Less: (Decrease) / Increase in accrued expenses		(52,790)		7,634		39,727		(14,094)
Add: (Increase) / Decrease in prepayments and accrued income		(39,434)		169		344		(39,250)
Net cashflow from operating activities		(1,046,171)		(21,516)		(23,528)		(1,065,360)
Investing activities
Interest received		60,900		1,306		2,309		63,297
Purchase of financial assets		(84,529,941)		(1,919,166)		(9,470,026)		(92,853,963)
Proceeds from sale of financial assets		1,275,812		41,711		84,045		1,373,278
Net cashflow from investing activities		(83,193,229)		(1,876,149)		(9,383,672)		(91,417,388)
Financing activities
Proceeds of issue of shares		86,411,419		1,930,000		9,544,950		94,797,140
Share issue costs		(864,114)		(19,300)		(95,450)		(947,972)
Purchase of own shares		(483,079)		-		-		(483,079)
Interest paid		(11,573)		(406)		(758)		(12,342)
Net cashflow from financing activities		85,052,653		1,910,294		9,448,742		93,353,747
Cash at beginning of period		24,078		981		1,849		25,731
Currency consolidation adjustment		-		-		-		(16,655)
Increase in cash and cash equivalents		813,253		12,629		41,542		870,999
Cash at end of period		837,331		13,610		43,391		880,075

NOTES TO THE FINANCIAL STATEMENTS

1     ACCOUNTING POLICIES

(a)    Basis of preparation

The financial statements have been prepared in conformity with International Financial Reporting Standards and applicable Guernsey law. The financial statements have been prepared on an historical cost basis except for the measurement at fair value of unquoted financial assets designated at fair value through profit or loss.

The financial statements are presented in GBP because that is the currency of the primary economic environment in which the Company operates.

The following Standards or Interpretations have been issued but not yet effective for the year ended 31 December 2008:

IFRS 2 (revised 2008) Share-based Payment effective for annual periods beginning on or after 1 January 2009.

IFRS 3 (revised 2008) Business Combinations effective for annual periods beginning on or after 1 July 2009.

IFRS 8 Operating Segments effective for annual periods beginning on or after 1 January 2009.

IFRIC 13 Customer Loyalty Programmes effective for annual periods beginning on or after 1 July 2008.

IFRIC 15 Agreements for the Construction of Real Estate, effective for annual periods beginning on or after 1 January 2009.

IFRIC 16 Hedges of a Net Investment in Foreign Operation, effective for annual periods beginning on or after 1 October 2009.

IAS 1 (revised 2007) Presentation of financial statements effective for annual periods beginning on or after 1 January 2009.

IAS 23 (revised 2008) Borrowing Costs effective for annual periods on or after 1 January 2009.

IAS 27 (revised 2008) Consolidated and Separate Financial Statements effective for annual periods beginning on or after 1 July 2009.

Amendments to IAS 32 and IAS 1 Puttable Financial Instruments effective for annual periods beginning on or after 1 January 2009.

Amendments to IFRS 2 Vesting Conditions and Cancellations, effective for annual periods beginning on or after 1 January 2009.

Amendments to IFRS 1 and IAS 27 Cost of an Investment in a Subsidiary, Jointly Controlled Entity or Associate, effective for annual periods beginning on or after 1 January 2009.

Amendments to IAS 39 and IFRS 7 Reclassification of Financial Assets effective for annual periods beginning on or after 1 July 2008

Amendments to IFRS 7 Improving disclosures about Financial Instruments effective for annual periods beginning on or after 1 October 2009

Amendments to IAS 39 Eligible hedged items effective for annual periods beginning on or after 1 July 2009

IFRIC 17 Distribution of Non-cash Assets to owners effective for annual periods beginning on or after 1 July 2009

IFRIC 18 Transfer of assets from customers effective for annual periods beginning on or after 1 July 2009

Amendment to IFRIC 9 and IAS 39 Embedded derivatives effective for annual periods beginning on or after 30 June 2009.

These Standards and Interpretations may require additional disclosure in future financial statements.

The Company has early adopted the amendment made to IAS 28 through the 2008 Annual Improvements Project (applicable for accounting periods beginning on or after 1 January 2009) in relation to disclosures for investments in associates accounted for at fair value in accordance with IAS 39.

(b)    Going concern

As described in note 9, should the average 12 month discount of the share price of any class exceed 5% of net asset value per share, the Company is obliged to offer a continuation vote to class shareholders. As at the balance sheet date, none of the Company's three share classes had triggered the discount management provisions. However, both the Euro and US Dollar share classes triggered the provision after the balance sheet date and it is expected that the Sterling Class will trigger in the near future.

There is a material uncertainty as to whether any or all classes of shareholder would vote to discontinue their share class which may cast a significant doubt about the likelihood of the Company to continue as a going concern. Notwithstanding such uncertainty, the financial statements are prepared on a going concern basis because on the basis of their present assessment the expectations of the Directors are that the Company will continue for the foreseeable future.

    If it were expected that classes of shareholders would vote to discontinue their share class, the financial statements would be prepared on a break up basis. Subject to the matters referred to in note 14 (c), no adjustments would be required to the carrying amounts of the investments or other net asset, but a provision would be required for the costs of winding up the Company. The directors estimate these costs would be immaterial relative to the NAV of the Company.

(c)    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 £600.

(d)    Expenses

All expenses are accounted for on an accruals basis.

(e)    Interest income

Interest income is accounted for on an accruals basis.

(f)    Share issue costs

The share issue costs incurred during the year in relation to the issue of C shares amounted to £864,114 in the Sterling share class, €19,300 in the Euro share class and $95,450 in the US Dollar share class. 

Because the Company's ordinary shares have no fixed redemption date the costs are recognised in the statement of changes in equity.

(g)    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.

(h)    Investments

All investments are designated upon initial recognition as financial assets at 'fair value through profit or loss'. Investments are initially recognised on the date of purchase at cost, being the fair value of the consideration given, excluding transaction costs associated with the investment, with unrealised gains and losses on investments and impairment of investments recognised in the Statement of Operations. Investments are derecognised on disposal.

Realised gains or losses are determined on the disposal of investments and unrealised gains or losses are determined based on the change in value of investments since the prior period.

In order to assess whether any impairment of the unquoted investments has occurred and in order to determine the recoverable amount of the unquoted investments, the Directors consider the net asset value of the underlying investment in AllBlue Limited.

The Company's net asset value is based on valuations of unquoted investments. In calculating the net asset value and the net asset value per Share, the Administrator relies on net asset values of the shares in AllBlue Limited supplied by the administrator of AllBlue Limited. Those net asset values are based on the market value of the various investments held by AllBlue Limited.

(i)    Foreign currency translation

The financial statements are presented in Sterling, which is the Company's functional and presentation currency. Transactions 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 balance sheet date. All differences are taken to the Statement of Operations.

Income and expense items are translated at the average exchange rates for the period. Exchange differences arising on currency consolidation due to translation of foreign currency balances to presentation currency are taken to the Statement of Operations.

(j)    Segment information

In the opinion of the directors, the Company has only one business and geographical segment, being investment in three share classes of a fund of hedge funds incorporated in the Cayman Islands.

(k)    Shares

Sterling, Euro and US Dollar shares have been reclassified as liabilities in accordance with IAS 32 because the Company as a whole does not have the power to determine the outcome of the continuation votes by share class under the discount management provisions of the articles described in note 9. This represents a change from prior accounting periods and has no effect on either the individual share class profit or loss for the year or amount of net assets attributable to shareholders. The Directors have been advised that this treatment does 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.

2    OPERATING EXPENSES

		1 Jan 2008 to 31 Dec 2008
		Sterling Share Class		Euro Share Class		US$ Share Class		Total
		£		€		$		£
Shareholder liaison agent's fee		687,655		24,116		45,062		733,332
Administration fees		79,950		2,804		5,239		85,261
Directors' remuneration		141,950		4,978		9,302		151,379
Registration fees		22,187		778		1,454		23,661
Directors & Officers insurance		13,899		487		911		14,822
Broker fees		56,398		1,978		3,696		60,144
Audit fees		16,879		592		1,106		18,000
Annual fees		17,860		626		1,170		19,046
Legal & Professional fees		140,657		4,933		9,217		150,000
Nominated Advisor fees		8,205		288		538		8,750
Printing of annual reports		(3,751)		(132)		(246)		(4,001)
Printing of interim reports		(1,500)		(53)		(98)		(1,600)
Bank interest on overdraft facility		11,573		406		758		12,342
Bank facility fee and charges		51,853		1,886		3,524		55,425
(Profit) / Loss on exchange		(1,567)		(6,166)		(4,372)		(9,122)
Other operating expenses		4,914		172		322		5,240
		1,247,162		37,693		77,853		1,322,680
Less: Bank interest earned		(60,900)		(1,306)		(2,309)		(63,297)
Total expenses for the year		1,186,262		36,387		75,274		1,259,383

With effect from 1 August 2008, the Company dispensed with the services of the Shareholder liaison agent. During the year under review, £733,332 (2007: £997,774) of costs were incurred with this service provider.

		1 Jan 2007 to 31 Dec 2007
		Sterling Share Class		Euro Share Class		US$ Share Class		Total
		£		€		$		£
Shareholder liaison agent's fee		935,625		38,599		71,892		997,774
Administration fees		64,553		2,663		4,960		68,841
Directors' remuneration		48,761		2,012		3,747		52,000
Registration fees		16,094		664		1,237		17,163
Directors & Officers insurance		15,131		624		1,163		16,136
Broker fees		14,066		580		1,081		15,000
Audit fees		9,028		372		694		9,628
Annual fees		11,890		491		914		12,680
Legal & Professional fees		1,125		46		86		1,199
Nominated Advisor fees		15,717		648		1,208		16,761
Printing of annual reports		7,523		310		578		8,022
Printing of interim reports		4,464		184		343		4,760
Bank interest on overdraft facility		12,110		500		930		12,914
Bank facility fee and charges		14,632		506		935		15,443
(Profit) / Loss on exchange		1,220		1,424		(2,755)		853
Other operating expenses		3,869		161		297		4,127
		1,175,808		49,784		87,310		1,253,303
Less: Bank interest earned		(3,796)		(132)		(213)		(3,993)
Total expenses for the year		1,172,012		49,654		87,097		1,249,310

3    DIRECTORS' REMUNERATION

For the period from 1 January 2008 to 19 June 2008, each director received a fee of £15,000 per annum from the Company, except for the Chairman who received £20,000 for the period. From 19 June 2008, each director received a fee of £35,000 per annum from the Company, except for the Chairman, who received £50,000 per annum. The Chairman of the Audit Committee is also paid an additional fee of £5,000 per annum (increased from £2,000 per annum on 19 June 2008). Upon migration to the LSE, each director also received additional remuneration in the sum of £10,000 each. Mr Dodd waived his entitlement to a fee.

The directors of the Company are considered key management personnel.

4    EARNINGS PER SHARE

The earnings per each class of share is based on the net gain for the year of £22,806,195 (2007: £13,765,213) and 165,337,468 (2007: 135,194,714) shares in the Sterling share class, €714,913 (2007: €467,450) and 5,612,979 (2007: 5,676,877) shares in the Euro share class and $1,535,218 (2007: $930,999) and 12,182,427 (2007: 9,632,602) shares in the US$ share class, each being the weighted average number of shares in issue during the year.

5    RELATED PARTY TRANSACTIONS

Transactions with related parties are made on items equivalent to those that prevail in an arm's length transaction.

Anson Fund Managers Limited is the Company's administrator and secretary, Anson Registrars Limited is the Company's registrar, transfer agent and paying agent and Anson Administration (UK) Limited is the Company's UK Transfer agent. John R Le Prevost is a director and controller of Anson Fund Managers Limited, Anson Registrars Limited and Anson Administration (UK) Limited. £108,922 (2007: £86,004) of costs were incurred by the Company with these related parties in the year, of which £25,379 (2007: £6,893) was due to these related parties at 31 December 2008.

In accordance with IAS 28 the Company's investment transactions with AllBlue Limited represent a holding in excess of 20%, therefore they are effectively transactions with a related party. The totals of such transactions are shown in Note 6.

6    INVESTMENTS DESIGNATED AT FAIR VALUE THROUGH PROFIT OR LOSS

		As at 31 December 2008
UNQUOTED FINANCIAL ASSETS		Sterling Share Class		Euro Share Class		US$ Share Class		Total
		£		€		$		£
Portfolio cost brought forward		130,773,126		5,492,777		9,319,964		139,505,585
Unrealised appreciation on valuation brought forward		20,301,412		687,314		1,430,123		21,527,068
Valuation brought forward		151,074,538		6,180,091		10,750,087		161,032,653
Movements in the period:
Gross share conversions in the year		(1,413,638)		(955,490)		3,493,437		-
Adjustment for realised gains on share conversions		541,826		196,756		624,335		1,157,743
Purchases at cost		84,529,941		1,919,166		9,470,026		92,853,963
Sales		(1,275,812)		(41,711)		(84,045)		(1,373,278)
Exchange gains on currency balances		-		-		-		2,971,752
Portfolio cost carried forward		213,155,443		6,611,498		22,823,717		235,115,765
Unrealised appreciation on valuation carried forward		43,470,401		1,233,890		2,403,054		46,296,632
Valuation carried forward		256,625,844		7,845,388		25,226,771		281,412,397
Realised gains on sales		823,468		204,724		637,561		1,456,065
Increase in unrealised appreciation		23,168,989		546,576		972,931		24,769,564
Gains on investments		23,992,457		751,300		1,610,492		26,225,629

		As at 31 December 2007
UNQUOTED FINANCIAL ASSETS		Sterling Share Class		Euro Share Class		US$ Share Class		Total
		£		€		$		£
Portfolio cost brought forward		132,291,000		5,551,000		9,419,000		140,839,371
Unrealised appreciation on valuation brought forward		5,461,831		172,515		417,851		5,791,376
Valuation brought forward		137,752,831		5,723,515		9,836,851		146,630,747
Movements in the period:
Adjustment to opening valuation for share conversions		-		-		-		-
Purchase at cost		-		-		-		-
Sales		(1,517,874)		(58,223)		(99,036)		(1,610,560)
Exchange gains on currency balances		-		-		-		276,774
Portfolio cost carried forward		130,773,126		5,492,777		9,319,964		139,505,585
Unrealised appreciation on valuation carried forward		20,301,412		687,314		1,430,123		21,527,068
Valuation carried forward		151,074,538		6,180,091		10,750,087		161,032,653
Realised gains on sales		97,644		2,303		5,824		102,271
Increase in unrealised appreciation		14,839,581		514,799		1,012,272		15,735,692
Gains on investments		14,937,225		517,102		1,018,096		15,837,963

  7    RECEIVABLES

		31 December 2008
		Sterling Share Class		Euro Share Class		US$ Share Class		Elimina-tion		Total
		£		€		$		£		£
Prepayments		6,841		205		377		-		7,295
Inter class loan accounts		42,204		-		-		(42,204)		-
		49,045		205		377		(42,204)		7,295
		31 December 2007
		Sterling Share Class		Euro Share Class		US$ Share Class		Elimina-tion		Total
		£		€		$		£		£
Prepayments		9,611		374		721		-		10,249
Inter class loan accounts		-		-		-		-		-
		9.611		374		721		-		10,249

8    PAYABLES

		31 December 2008
		Sterling Share Class		Euro Share Class		US$ Share Class		Elimina-tion		Total
		£		€		$		£		£
Accrued shareholder liaison agent's fee		-		-		-		-		-
Accrued administration fees		20,811		623		1,148		-		22,193
Accrued registration fees		2.988		89		165		-		3,186
Accrued broker fees		36,211		1,084		1,997		-		38,616
Accrued bank facility fee		51,574		1,545		2,845		-		55,000
Accrued audit fees		16,879		506		931		-		18,000
Accrued printing costs		4,689		140		259		-		5,000
Inter class loan accounts		-		10,908		46,372		(42,204)		-
Other sundry accruals		2,063		62		114		-		2,200
		135,215		14,957		53,831		(42,204)		144,195

		31 December 2007
		Sterling Share Class		Euro Share Class		US$ Share Class		Total
		£		€		$		£
Accrued shareholder liaison agent's fee		164,100		6,392		12,310		175,000
Accrued administration fees		5,415		211		406		5,775
Accrued registration fees		1,048		41		79		1,118
Accrued broker fees		-		-		-		-
Accrued bank facility fee		-		-		-		-
Accrued audit fees		7,502		292		563		8,000
Accrued printing costs		9,940		387		746		10,600
Inter class loan accounts		-		-		-		-
Other sundry accruals		-		-		-		-
		188,005		7,323		14,104		200,493

9    SHARE CAPITAL

Authorised Share Capital

An unlimited number of Unclassified shares of no par value each.

Issued Share Capital		Sterling Share Class		Euro Share Class		US$ Share Class		Total
		£		€		$		£
Number of shares in issue at 31 December 2008		205,485,106		6,500,194		20,719,155		232,704,455
The movement in shares took place as follows:
Date of movement		Number of Sterling Shares		Number of Euro Shares		Number of US$ Shares
Issue 21 April 2006		2
Issue 25 May 2006		135,283,597		5,676,877		9,632,602
As at 31 December 2007		135,283,597		5,676,877		9,632,602
Conversion 1 April 2008		2,323,063		(1,064,142)		(2,999,848)
Cancellation 19 May 2008		(198,000)		-		-
Conversion 1 July 2008		(9,400)		-		19,068
Conversion of C shares 4 September 2008		71,997,994		1,663,467		8,086,481
Conversion 1 October 2008		(3,462,150)		223,992		5,980,852
Purchase of treasury shares 26 November 2008		(100,000)		-		-
Purchase of treasury shares 16 December 2008		(100,000)		-		-
Purchase of treasury shares 19 December 2008		(150,000)		-		-
Purchase of treasury shares 31 December 2008		(100,000)		-		-
		205,485,106		6,500,194		20,719,155

As detailed in Note 11, the following Sterling shares were purchased by the Company during the year:

Date		Number of shares		Amount £
26 November 2008		100,000		108,592
16 December 2008		100,000		111,222
19 December 2008		150,000		160,069
31 December 2008		100,000		103,196

On 4 August 2008, the Company issued the following no par value C shares (of which an unlimited number were authorised): 86,411,419 Sterling shares, 1,930,000 Euro shares and 9,544,950 US Dollar shares. All of the C shares issued were fully paid These shares were issued under terms that stated that the Company could, at its discretion, redeem all or any of the C shares by agreement with the holders and at a price agreed between the Company and the C shareholders. The C shares were converted to Ordinary shares on 4 September 2008 as shown on the previous page. A conversion ratio was applied based on the relevant Net Asset Values of each share class on that date. The new Ordinary Shares ranked pari passu with the Ordinary Shares then in issue.

In the event of a return of capital on a winding-up or otherwise, shareholders are entitled to participate in the distribution of capital after paying all the debts and satisfying all the liabilities attributable to the relevant share class.

The holders of shares of the relevant share class shall be entitled to receive by way of capital any surplus assets of the share class in proportion to their holdings. In the event that the share class has insufficient funds or assets to meet all the debt and liabilities attributable to that share class, any such shortfall shall be paid out of funds or assets attributable to the other share classes in proportion to the respective net assets of the relevant share classes as at the date of winding-up.

The Company's Articles incorporate a discount management provision (which applies to each class of Ordinary Shares individually) that will require a continuation vote to be proposed in respect of the particular class of Ordinary Shares at a class meeting of the relevant Shareholders (by way of ordinary resolution) if, over the previous 12 month rolling period commencing from 1 January 2008, the relevant class of Ordinary Shares has traded, on average (calculated by averaging the closing mid-market share price on the dates which are 5 Business Days after the date on which each estimated Published NAV announcement is made for each NAV Calculation date over the period) at a discount in excess of 5 per cent to the average Net Asset Value per Ordinary Share of that class (calculated by averaging the NAV per Ordinary Share of that class as at the NAV Calculation Date at the end of each month during the period).

In the event that a vote to continue is proposed and passed for any class of Ordinary Shares as a result of the operation of such mechanism, no further continuation vote will be capable of being proposed for that class for a further 12 months.

If such continuation vote is not passed, the Directors will be required to formulate redemption proposals to be put to the Shareholders of that class offering to redeem their Ordinary Shares at the relevant Published Net Asset Value on the NAV Calculation Date immediately preceding such redemption (less the costs of all such redemptions). However, where one or more such resolutions in respect of the same period is/are not passed and the class(es) of Ordinary Shares involved represent 75 per cent, or more of the Company's net assets attributable to all Ordinary Shares at the last NAV Calculation Date on or immediately preceding the date of the latest continuation resolution being defeated, the Directors may first (at their discretion) put forward alternative proposals to all Shareholders to offer to repurchase their Shares or to reorganise, reconstruct or wind up the Company. If, however, such alternative proposals are not passed by the necessary majority of shareholders of the relevant class, the Directors must proceed to offer to redeem the relevant class(es) of Ordinary Shares on the terms described above.

Where following redemption of any class of Ordinary Shares under the discount management provision, the number of Ordinary Shares of that class remaining in issue represent less than 25 per cent, of the Ordinary Shares of that class in issue immediately before such redemption or the listing for such class of Ordinary Shares on the Official List is withdrawn or threatened to be withdrawn or the Directors determine that the conditions for the continued listing of that class are not (or they believe will not be) met, then the Company may redeem the remaining issued Ordinary Shares of that class within 3 months of such determination at a redemption price equal to the Net Asset Value of Ordinary Shares of that class on the NAV Calculation Date selected by the Directors for such purpose (less the costs of such redemption).

10    SHARE PREMIUM

		Sterling Share Class		Euro Share Class		US Dollar Share Class		Total
		£		€		$		£
Share premium as at 1 January 2008		-		-		-		-
Share premium on shares issued		86,411,419		1,921,975		9,525,995		94,776,479
Less: Share issue costs		(864,114)		(11,275)		(76,495)		(927,311)
Transfer to retained earnings		(85,547,305)		(1,910,700)		(9,449,500)		(93,849,168)
Balance as at 31 December 2008		-		-		-		-

There was no share premium or movement in the share premium account in the previous year.

The Company has passed a shareholder resolution to cancel the amount standing to the credit of its share premium account (less any formation expenses set off against the share premium account). The Directors obtained from the Court in Guernsey an order confirming such cancellation of the share premium account in accordance with the Companies Laws. The reserve created is available as distributable profits to be used for all purposes permitted by the Companies Laws, including the buy back of shares and the payment of dividends.

11    PURCHASE OF OWN SHARES            

31 Dec 2008

		Sterling Share Class		Euro Share Class		US Dollar Share Class		Total
		£		€		$		£
Balance as at 1 January 2008		202,023		-		-		202,023
Cancelled during the year		(202,023)		-		-		(202,023)
Acquired during the year		483,079		-		-		483,079
Balance as at 31 December 2008		483,079		-		-		483,079

31 Dec 2007

		Sterling Share Class		Euro Share Class		US Dollar Share Class		Total
		£		€		$		£
Balance as at 1 January 2007		-		-		-		-
Acquired during the year		202,023		-		-		202,023
Balance as at 31 December 2007		202,023		-		-		202,023

The treasury shares reserve represents 450,000 Sterling Shares purchased in the market at various prices per share ranging from £1.03 to £1.11 and held by the Company for cancellation. The brought forward balance of 198,000 Sterling Shares were cancelled on 19 May 2008.

12    DISTRIBUTABLE RESERVES    

                                31 Dec 2008

		Sterling Share Class		Euro Share Class		US Dollar Share Class		Total
		£		€		$		£
Balance as at 1 January 2008		151,122,245		6,174,123		10,738,553		161,070,163
Transfer from share premium		85,547,305		1,910,700		9,449,500		93,849,168
Net gain for the year attributable to shareholders		22,806,195		714,913		1,535,218		24,966,246
Cancellation of treasury shares		(202,023)		-		-		(202,023)
Share conversions		(1,413,638)		(955,490)		3,493,437		-
Currency consolidation adjustment		-		-		-		2,955,097
Balance as at 31 December 2008		257,860,084		7,844,246		25,216,708		282,638,651

                                31 Dec 2007

		Sterling Share Class		Euro Share Class		US Dollar Share Class		Total
		£		€		$		£
Balance as at 1 January 2007		137,357,032		5,706,673		9,807,554		146,208,645
Net gain for the year attributable to shareholders		13,765,213		467,450		930,999		14,588,653
Currency consolidation adjustment		-		-		-		272,865
Balance as at 31 December 2007		151,122,245		6,174,123		10,738,553		161,070,163

13    FINANCIAL INSTRUMENTS

The Company's main financial instruments comprise:

(a)    Cash and cash equivalents that arise directly from the Company's operations; and

(b)    Shares held in AllBlue Limited.

14    FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

The main risks arising from the Company's financial instruments concerns its shares in AllBlue Limited and the risks attaching to those shares which are market price risk, credit risk, liquidity risk and interest rate risk as explained below.

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 AllBlue Limited for the purpose of meeting ongoing expenses of the Company. Thereafter the Board recognises that the Company has via its holding of shares in AllBlue Limited an indirect exposure to the risks summarised below though it must be noted that there is little or nothing which the Board can do to manage each of these risks within AllBlue Limited ('AllBlue') or the underlying funds in which AllBlue invests (the 'underlying fund(s)').

(a)    Price Risk

The success of AllBlue's and the underlying 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 underlying funds' investments. Volatility or illiquidity could impair the underlying funds' profitability or result in losses.

Details of the Company's Investment Objectives and Policy are given on page 1.

Price sensitivity

The Company invests substantially all its assets in AllBlue and does not undertake any significant borrowing or hedging activity at the Company level. Its performance is therefore directly linked to the net asset value of AllBlue, which itself is driven by the net asset values of the underlying funds, each of which hold a large number of positions in listed and unlisted securities.

At 31 December 2008, if the net asset value of AllBlue had been 10% higher with all other variables held constant, the net gain attributable to shareholders for the year would have been £28,141,240 (2007: £16,103,265) greater, arising due to the increase in the fair value of financial assets at fair value through profit or loss.

If the net asset value of AllBlue had been 10% lower with all other variables held constant, the net gain attributable to shareholders for the year would have been £28,141,240 (2007: £16,103,265) lower, arising due to the decrease in the fair value of financial assets at fair value through profit or loss.

The sensitivity is higher in 2008 than in 2007 because of an increase in the net financial assets and liabilities at fair value through profit or loss at the balance sheet date.

(b)    Credit Risk

The nature of commercial arrangements made in the normal course of business between many prime brokers and custodians means that in the case of any one prime broker or custodian defaulting on its obligations to AllBlue or any of the underlying funds, the effects of such a default may have negative effects on other prime brokers with whom AllBlue or such underlying fund deals. The underlying funds and, by extension, AllBlue and the Company may, therefore be exposed to systemic risk when AllBlue or an underlying fund deals with prime brokers and custodians whose creditworthiness may be interlinked.

The assets of AllBlue and the underlying funds may be pledged as margin with prime brokers or other counterparties or held with prime brokers or banks. In the event of the default of any of these prime brokers, banks or counterparties, AllBlue or the underlying funds may not receive back all or any of the assets pledged or held with the defaulting party.

The maximum credit risk to which the Company was exposed at the year end was £281,412,397 (2007: £161,032,653).

The main concentration of risk for the Company relates to the investments in AllBlue, as these are the only investments the Company has.

(c)    Liquidity Risk

In some circumstances, investments may be relatively illiquid making it difficult to acquire or dispose of them at the prices quoted on the various exchanges. Accordingly, an underlying fund's ability to respond to market movements may be impaired and, consequently, the underlying fund may experience adverse price movements upon liquidation of its investments which may in turn affect the value of AllBlue and hence the Company's investment in AllBlue. Settlement of transactions may be subject to delay and administrative formalities.

There can be no assurance that the liquidity of the investments of AllBlue and the underlying 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 AllBlue and the value of Shares in the Company. For such reasons AllBlue's treatment of redemption requests may be deferred in exceptional circumstances including if a lack of liquidity may result in difficulties in determining the net asset value and the net asset value per share in AllBlue. This in turn would limit the ability of the Directors to realise the Company's investments in AllBlue should they consider it appropriate to do so and may result in difficulties in determining the net asset value of a Share in the Company.

The market prices, if any, for such illiquid investments tend to be volatile and may not be readily ascertainable and the relevant underlying fund 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 underlying funds' positions may magnify the effect if 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 underlying 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 underlying 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 underlying 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 Company's shares in issue are traded on the London Stock Exchange ('LSE'). However, in certain circumstances there may be a limited market for the shares and it may not be possible for investors to achieve liquidation of their holding within a short time period or for the investor to realise the full anticipated value of the shares.

The Company has the use of an overdraft facility in order to settle share redemptions at times when no cash funds are available.

(d)    Interest Rate Risk

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.

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.

(e)    Leverage by Underlying Funds

Certain underlying funds in which the Company may have an economic interest operate with a substantial degree of leverage and are not limited in the extent to which they either may borrow or engage in margin transactions. The positions maintained by such underlying funds may in aggregate value be in excess of the net asset value of AllBlue. This leverage presents the potential for a higher rate of total return but will also increase the volatility of AllBlue and, as a consequence, the Company, including the risk of a total loss of the amount invested.

(f)    Capital management

The investment objective of the Company is to provide shareholders with consistent long-term capital growth through an investment policy of investing substantially all of its assets in AllBlue Limited ('AllBlue') or any successor vehicle to AllBlue.

As the Company's Ordinary Shares are traded on the LSE, the Ordinary Shares may trade at a discount to their Net Asset Value per Share. However, in structuring the Company, the Directors have given detailed consideration to the discount risk and how this may be managed.

At the last annual general meeting, the Directors were granted authority to buy back up to 14.99 per cent of the Ordinary Shares in issue. The Company's authority to make purchases of its own issued Ordinary Shares will expire at the conclusion of the next general meeting of the Company. A renewal of such authority to make purchases of Ordinary Shares will be sought at the next Shareholder meeting of the Company. The timing of any purchases will be decided by the Board.

The Directors intend that purchases will only be made pursuant to this authority through the market, for cash, at prices below the prevailing Net Asset Value per Share where the Directors reasonably believe such purchases will result in an increase in the Net Asset Value per Share of the remaining Ordinary Shares. 

Following approval of the Court in Guernsey, the Company resolved to cancel the amount standing to the credit of its share premium account following Admission. The amount released on cancellation has been credited as a distributable reserve in the books of account and may be used by the Company for the purpose of funding purchases of its Ordinary Shares as described above and the payment of dividends.

The Company's authorised share capital is such that further issues of new Ordinary Shares could be made. Subject to prevailing market conditions, the Board may decide to make one or more further such issues or reissues of Ordinary 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 of the Companies Laws 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 until the time of the Company's annual general meeting in 2009 by a special resolution of Shareholders dated 30 May 2008. The Directors intend to request that the authority to allot Shares on a non-pre-emptive basis is renewed at each subsequent annual general meeting of the Company

Unless authorised by Shareholders, the Company will not issue further Ordinary Shares or reissue Ordinary Shares out of treasury for cash at a price below the prevailing Net Asset Value per Share unless they are first offered pro rata to existing Shareholders.

The Company monitors capital on the basis of the carrying amount of equity as presented on the face of the balance sheet. Capital for the reporting period under review is summarised as follows:

		2008			2007
		GBP			GBP
Purchase of own shares		(483,079)			(202,023)
Retained earnings		282,638,651			161,070,163
Total		282,155,572			160,868,140

E&OE - in transmission

 

END

 

 

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