25 Nov 2009 09:00
RNS Announcement
BRAMDEAN ALTERNATIVES LIMITED (the "Company")
INTERIM REPORT AND CONDENSED HALF-YEARLY FINANCIAL STATEMENTS
The Company has today, in accordance with DTR 6.3.5, released its Interim Report and Condensed Half-Yearly Financial Statements for the period from 1 April 2009 to 30 September 2009. The Report is available on the Company's website www.bramdeanalternatives.com and will shortly be available for inspection at the UK Listing Authority's Document Viewing Facility, which is located at:
Financial Services Authority
25 The North ColonnadeCanary Wharf
London E14 5HS
| Table of Contents | Page |
| Chairman's Statement | 03 |
| Bramdean Asset Management LLP's Review | 04 |
| Management and Administration | 17 |
| Summary Information | 19 |
| Independent Review Report | 22 |
| Condensed Half-Yearly Balance Sheet | 24 |
| Condensed Half-Yearly Statement of Comprehensive Income | 25 |
| Condensed Half-Yearly Statement of Changes in Equity | 26 |
| Condensed Half-Yearly Statement of Cash Flows | 27 |
| Notes to the Condensed Half-Yearly Financial Statements | 28 |
| Schedule of Investments | 41 |
Chairman's Statement
This report covers the period from 1 April 2009 to 30 September 2009. After a poor start to the year, equity markets started to rally in March and this was sustained through the period under review. This strength resulted from better than expected corporate results in the major markets. Bramdean Alternatives Limited (the "Company") saw some benefit from this rally through its hedge fund holdings, but private equity funds take a cautious view on valuations and do not tend to mark up the value of underlying investments until they are sure that a rally can be sustained. Thus, the Company only saw a small upward movement in the value of its private equity holdings during this period and would expect valuations to be marked up further over the coming months.
During the period under review, the Sterling Share class net asset value ("NAV") declined by 4.4%, while the U.S. Dollar Share class NAV rose by 6.7%. The latter was a more accurate indicator of the underlying performance of the portfolio as the majority of the Company's assets are held in U.S. Dollars. In the past, the Company has engaged in currency hedging. However, as the Company now has a modest over-commitment at the total fund level, Bramdean Asset Management LLP (the "Investment Manager") took the decision not to hedge back into Sterling for the holders of that share class. The depreciation in the U.S. Dollar against Sterling in the period therefore led to a translational decline in the Sterling Share class NAV. At the end of September, the Sterling Share class NAV was 86.13 pence and the U.S. Dollar Share class NAV was US$0.8003.
Between the beginning of April and the end of September, the Sterling Share price rose from 42.5 pence to 53.5 pence, representing an increase of 25.9%. This rise was achieved on low trading volumes. The U.S. Dollar Share price rose from US$0.55 to US$0.60 over the period with virtually no volume in the shares. This represented a rise of 9.1%. The rise in the share prices of both share classes meant that the discount to NAV on both shares was reduced. Within the private equity fund of funds sector, discounts generally reduced as investors became more confident about the outlook for these funds following the recovery in equity markets.
Although your Board of Directors is pleased that there has been some recovery in the share prices of both asset classes, it remains of concern to them that those share prices are still standing at significant discounts to the respective NAVs. The Board continues to closely monitor the situation and would expect that a recovery in private equity valuations would have a positive impact on the share prices of both asset classes.
The Company had no debt at 30 September 2009. In line with the Company's dividend policy, the Board has not recommended payment of an interim dividend.
On 19 November 2009, the appointment of Aberdeen Asset Managers Limited ("Aberdeen") as the investment manager of the Company in place of Bramdean Asset Management LLP was announced. This followed a period of consultation with the Company's principal shareholders and consideration by the Board and its advisers as to the future of the Company. In the five months since the current Board was appointed a wide range of options have been considered and the Board is delighted that consensus has been reached with the principal shareholders over the appointment of Aberdeen. The Board believes that the Company will benefit from being rebranded and that Aberdeen will be well-placed to manage the Company's portfolio successfully and work with the Board to maximise returns to shareholders. The Board would also like to wish all at Bramdean Asset Management every success in the future.
Jonathan D Carr
Chairman
25 November 2009
Note: References to the "Investment Manager" in this Interim Report and Condensed Half-Yearly Financial Statements are to be read as a reference to Bramdean Asset Management LLP, the Company's investment manager for the period under review.
Bramdean Asset Management LLP's Review
Performance
During the first half of the Company's financial year, the U.S. Dollar Share class NAV rose by 6.7%. As the majority of the Company's assets are denominated in U.S. Dollars and all of the cash is held in U.S. Dollars, this gives the clearest picture in terms of the performance of the underlying assets. The Sterling Share class NAV fell by 4.4% over the period.
As the Chairman has stated, when equity markets recover, it takes some time for this improvement to be reflected in private equity valuations. There are, however, a handful of funds in the portfolio which hold instruments that are quoted and so some recovery has been seen in pricing for these funds. In particular, SVG Strategic Recovery Fund II L.P. saw a sharp rise in its NAV during July and Oaktree OCM Opportunities VIIb L.P. also performed well during that month. The Investment Manager is pleased that the Company's NAV has increased in value in U.S. Dollar terms during the first half of the financial year and feels that the Company's portfolio is well placed to benefit should private equity valuations begin to recover.
At the end of September, the Company's Private Equity & Specialty Funds were only 46.2% drawn. This reflected the fact that the underlying managers had been cautious as markets entered the bear phase. The funds are now in a position to do deals at lower prices, although the lack of debt finance has been an issue. This has meant that these funds have generally had to put more equity into deals, although this does have the benefit of reducing the risk to investors. The Investment Manager was strongly of the opinion that the industry was over-leveraging deals just prior to the credit crunch, which is why the mega buy-out funds were generally avoided. As the Chairman has also stated, the markets have risen against a background of better than expected corporate earnings. Companies in private equity ownership have also benefited from the economic upturn. Failures within the portfolio have been significantly lower than might have been expected given the depth of the recession.
Investment portfolio
The portfolio performed relatively well in the period under review. There were two major reasons for this. The first is that the Investment Manager had a low exposure to mega buy-out funds and no exposure to private equity real estate funds, the areas of the private equity industry that performed worst over the 18-month period. The second was that the Company did not employ any leverage.
In order to reduce the Company's over-commitment to Private Equity & Specialty Funds, the Investment Manager sold the commitment to LimeTree Emerging Beachfront Land Investment Fund II L.P. ("LimeTree"). The Investment Manager felt that it would be prudent to remove it from the portfolio, thus releasing the Company from nearly US$5 million of undrawn commitment. Following this sale, the Company had 17 investments in Private Equity & Specialty Funds at the end of September.
At 30 September 2009, there were only two holdings in the Transitional portfolio. These were Aarkad Plc ("Aarkad") and Defender Ltd ("Defender"). A redemption notice for Aarkad was submitted in November 2008. However, because of the nature of the underlying assets and the level of redemptions being sought by investors, redemptions were frozen. Aarkad provides bridging loans to property developers in the UK in the commercial and residential sectors on a conservative basis. However, the scale of the decline in property values has resulted in a number of defaults leading to repossessions. The underlying manager is in the process of liquidating the fund. Defender was a Bernard L Madoff Securities LLC ("Madoff") feeder fund and sits in the portfolio at zero value. At the end of September there were five funds within the Strategic Hedge Funds portfolio.
Hedging activity
Sterling recovered against the U.S. Dollar during the period under review. There was no hedge in place during this period. This was because the Investment Manager did not believe that it was prudent to try and hedge a purely translational risk in the current environment. The Company's assets are predominately denominated in U.S. Dollars and the cash is held in U.S. Dollars. The undrawn commitments on the Private Equity & Specialty Funds are predominantly in U.S. Dollars and so the key consideration is that there is no mismatch between the Company's liabilities and the cash and assets held to meet these. If the Investment Manager was to hedge and the Sterling/U.S. Dollar rate moved in the wrong direction, there would be a large cash outflow, which would leave the Company with less resources to meet draw-downs.
Looking at the long-term average rate for Sterling/U.S. Dollar, the Investment Manager believes that it is prudent to maintain an unhedged policy for the Sterling Share class for the time being, though the Investment Manager will continue to monitor the position.
Private Equity Funds portfolio review
There were 11 Private Equity Funds in the Company's Portfolio as at 30 September 2009. Five of the Company's Private Equity Funds are 2006 vintage, four funds are 2007 vintage and two funds are 2008 vintage. Of the 11 funds, two are secondaries funds.
The majority of the funds in the Company's portfolio are still at a relatively early stage in their investment cycle with the exception of the two secondaries funds, Coller International Partners V L.P. ("Coller") and Greenpark International Investors III L.P. ("Greenpark"). These funds were selected to provide vintage year diversification for the Company.
During the period under review, there were a number of distressed sellers of private equity commitments, which gave these funds further opportunities to invest. In the future, the Company is unlikely to buy secondaries funds as vintage year diversification will be built into the portfolio going forward.
During the first six months of the Company's current financial year, the Private Equity Funds returned +7.49%.
Given that private equity is essentially equity. It is inevitable, therefore, that downward valuations will occur when markets are weak. As has been stated by the Chairman earlier in this report, it takes time for private equity valuations to recover once markets begin to improve and the recent rally in markets is not reflected yet in the Company's NAV. As long as markets continue to remain firm, there will be further upward revaluations, which will lead to a rise in the Company's NAV. However, if markets see another fall, this will not be the case.
Given the downturn in markets and the inability of companies to float on the quoted markets, there have only been a very small number of realisations since the Company began trading. Coller, Greenpark and Goldman Sachs Capital Partners VI L.P. ("Goldman Sachs") are the only funds that have made distributions and the total value to the Company of these since launch has been US$4.2 million.
The Company has benefited from the fact that the majority of its managers were cautious about the outlook for markets at the time the commitments were made. The 2006 vintage funds and Silver Lake Partners III L.P. are all large cap funds, which had made some investments before the credit crunch began to bite. Some of these deals were executed at prices which proved to be over-inflated, but the funds were able to obtain significant debt financing at the time, which has been difficult to achieve since. However, the managers have advised that they are able to get debt finance for good quality deals currently, although they are being obliged to put in significantly more equity than they would have had to in 2007. The Investment Manager generally feels happier with the reduced level of leverage that is now being included in these deals as it reduces the risk taken by the Company's underlying investors.
The cautious approach employed by the Investment Manager led to an overweight position relative to other similar portfolios in mid-cap buy-out funds. The Company has commitments to Goldman Sachs, AIG Brazil Special Situations Fund II L.P. ("AIG Brazil") and Thoma Bravo Fund IX L.P., all of which operate in this area of the market. Throughout the bear market, there has been more activity in the mid-cap buy-out market and Goldman Sachs in particular has continued to do deals. An issue has arisen with AIG Brazil following the departure of key personnel and the Company understands that further investments will not be made by this fund pending resolution of this issue.
The Company has the ability to over-commit to Private Equity & Specialty Funds in order to manage its cash flows efficiently and to gain the maximum possible investment exposure for the portfolio. It was not the policy of the Investment Manager to over-commit at the overall fund level the outset given the negative view of markets that was held.
However, the Madoff write-off and write-downs by private equity funds led to the Company becoming overcommitted. As at 30 September 2009, the Company had commitments of US$216 million to Private Equity & Specialty Funds and the total net asset value was US$187 million. Undrawn commitments stood at US$113 million, while the value of the Company's hedge funds and cash, which are available to meet draw-downs on these funds, was US$105 million. The gap of US$8 million is not considered material by the Investment Manager.
The Company has the power to leverage the portfolio by up to 25% of NAV. The fact that the Company's commitments are relatively lightly drawn has meant that this has not been an issue to date.
Specialty Funds portfolio review
The Company had seven Specialty Funds in the portfolio at the year end but, as reported earlier, the commitment to LimeTree was sold in order to reduce the Company's over-commitment level. As a result, there are now six Specialty Funds in the portfolio. The role of these funds is to provide diversification within the portfolio and some of the funds that have been selected are expected to make their best returns in difficult market conditions. Having been negative about the outlook for markets when the Company floated, the Investment Manager placed a large emphasis on distressed debt and three out of six managers in this part of the portfolio operate in this area.
Most of the funds in this part of the portfolio are at a relatively early stage of development, although two of the distressed funds are now heavily drawn. Since the financial year end, the Specialty Funds have returned +52.48%.
Transitional portfolio review
It should be noted that the Company's cash level was very high at the end of September. This reflected the Investment Manager's caution over previous months. The Company is over-committed to Private Equity & Specialty Funds and so must ensure that it has sufficient resources to meet draw-downs. Cash should only be invested in other assets if the Investment Manager believes that a higher return can be made and the emphasis in this part of the portfolio must be on capital preservation. The Investment Manager is currently looking for suitable alternatives to cash for investment.
Strategic Hedge Funds portfolio review
There are five funds in the Strategic Hedge Funds portfolio. In the six-month period ended 30 September 2009, the Strategic Hedge Funds portfolio returned +7.76%. RMF Investment Management, Nassau Branch ("RMF") managed this portfolio prior to the change in investment manager; effective 1 October 2009, RMF changed its name to Man Investments (CH) AG.
The equity and credit market rally which had begun in March continued through the beginning of the second quarter, setting an optimistic backdrop for investors. As market speculation rose in May that the worst of the global downturn was over, equity markets continued their ascent, again assisting equity-focused strategies. Paulson Advantage Plus Ltd bounced back to post a gain, the majority of this driven by exposure to gold-related names. Deephaven Global Multi-Strategy Fund Ltd was able to cash in on credit and convertible bond exposure as both sectors have been profitable for investors during 2009. D.E. Shaw Oculus International Members Interest also profited from a diversified variety of trades in fixed income positions, inflation-linked bonds, certain municipal bond trades, and the energy and systematic equity portion of the portfolio.
As world equities continued to move upwards during the third quarter, conditions for hedge fund managers remained positive. King Street Capital Ltd was up over the third quarter and continued to generate positive performance.
During the period under review, the Company completed its programme of tactically reducing its allocation to hedge funds. The Company redeemed its holdings in Alydar Fund Limited, Atticus European Fund Ltd, Evergreen MAC Ltd, Kaiser Trading Diversified 2X Segregated Portfolio, Kaiser Trading Fund SPC, Kei Ltd, Lansdowne UK Equity Fund Ltd and Roy G Niederhoffer Negative Correlation Fund Ltd. The Company expects part of these proceeds will be redeployed into new investments, with the remainder held in cash to fund Private Equity & Specialty draw-downs.
Portfolio Strategy and outlook
Markets have been extremely strong during the first half of the Company's financial year. This has largely been due to the fact that company profits have held up better than analysts had expected. Over the next few months, the outlook will crucially depend on what happens to inflation and interest rates. Markets are expecting a relatively modest pick up in inflation and a small rise in interest rates. However, following the policy of quantitative easing that was pursued by the UK and U.S. governments, there must be a risk that inflation comes through more strongly than expected and that interest rates have to rise to a higher level. If this were to happen, the nascent recovery would be compromised.
Against this background, markets look fully valued at the current level. The Investment Manager has been looking to invest some of the Company's cash, but has taken a cautious approach due to the need to preserve resources to meet draw-downs.
As the Company is now fully committed within its Private Equity & Specialty Funds portfolios, there is no scope to make further commitments for the time being. If the market recovery is sustained, then private equity funds will be able to make realisations and, as this process begins, the Company will be able to look again at new funds and consider making new commitments.
Hedge funds suffered significantly when Lehman Brothers went into administration in the fourth quarter of 2008, recording some of the worst returns in their history. They continued to see poor returns in the first few months of 2009. However, things have improved markedly for hedge funds as equity markets have recovered and there is now more confidence among investors about committing new money to the sector. That renewed confidence is shared, but concern about the valuation levels of equities means that there is still caution about committing new money to equity-based strategies.
Nicola K C Horlick
Chief Executive Officer
Bramdean Asset Management LLP
Portfolio Holdings (Invested Capital) as at 30 September 2009
| Fund | Description | Strategy | Portfolio Weighting % | Fund Size |
| PRIVATE EQUITY & SPECIALTY FUNDS PORTFOLIO | ||||
| AIG Brazil Special Situations Fund II L.P. | AIG Brazil was established to invest in lower technology industries in Latin America. The resignation of the fund's manager was announced just prior to the announcement of the sale of AIG Investments to Pacific Century Group on 5 September 2009. As a result of the resignation, the fund has entered a 'suspension mode', whereby it may only engage in run-off activities. The manager is now operating the fund as though the investment period has been terminated and agreed to consult with the Company on any potential add-on investments prior to investment. | Special situations - Latin America | 0.9% | US$591.9 million |
| Coller International Partners V L.P. | Coller is a global secondaries private equity manager that purchases limited partnership interests and also directly acquires portfolios of companies from corporations looking to divest non-core assets. It provides the Company with vintage year diversification (ie exposure to the 2005 vintage and prior). The manager has been very prudent in allocating its capital and should benefit from increased distressed selling in the secondaries market. | Secondaries | 3.3% | US$4.7 billion |
| DFJ Athena L.P. | DFJ Athena takes minority positions in start-up entities in Korea or in U.S. companies of Korean entrepreneurs. The fund's focus is to invest in technology-based start-up companies in Korea and leverage its parent company's (Draper Fisher Jurvetson) international venture network to commercialise these companies' technologies in foreign markets. The manager continues to build a strong investment pipeline. | Venture Capital - Korea, U.S. | 2.1% | US$28 million |
| Goldman Sachs Capital Partners VI L.P. | Goldman Sachs Capital Partners uses the investment bank's ability to source deal flow to invest in private equity transactions globally across all strategies and market cap sizes, though it tends to focus on mid-cap companies and transactions. The manager believes the majority of the investments have strong fundamentals and will navigate the recession successfully; it therefore remains confident of producing strong returns for investors. | Global mega buy-out | 2.0% | US$20 billion |
| Greenpark International Investors III L.P. | Greenpark is a secondaries private equity manager that purchases primary limited partnership interests focusing on Europe and the Middle East. The fund is weathering a challenging exit climate but the manager is reassured by a recent review which showed an encouraging overall outlook for the major underlying funds in the portfolio. | Secondaries | 6.2% | €732.3 million |
| HIG Bayside Debt & LBO Fund II L.P. | HIG is the largest lower-middle-market private equity firm specialising in distressed and distressed-for-control transactions in the U.S. The manager seeks situations where there are few competing bidders and where HIG is in a position to drive the restructuring process. The manager continues to find the market favourable and is expecting to benefit from the large number of restructurings it foresees taking place in the coming months as companies struggle to deal successfully with the deleveraging process. | U.S. -Distressed debt and growth equity | 1.8% | US$3 billion |
| MatlinPatterson Global Opportunities Partners III L.P. | MatlinPatterson is a global distressed-for- control manager, taking positions in companies in distressed situations with the aim of controlling and driving the financial and operational restructuring of the company. It will also take minority positions in companies to trade around stressed and distressed situations. The current environment has greatly increased pressure on companies looking to obtain financing and this has consequently pushed many of them into distressed situations, presenting the fund with a very favourable investment landscape. | Global Distressed- | 2.7% | US$5 billion |
| Oaktree OCM Opportunities VIIb L.P. | Oaktree is a distressed debt manager and focuses on acquiring debt securities at discounted prices during stressed and distressed cycles. The manager is capable of taking control and driving the financial and operational restructuring if it does not feel that it is getting the right value from a transaction. The distressed strategy is typically one of the best performing asset classes during an economic or financial downturn, and Oaktree's 'b' funds (follow-on funds to the regular funds) are usually invested during the most acute distressed periods in economic cycles. | Global Distressed debt | 8.2% | US$10.9 billion |
| Pine Brook Capital Partners L.P. | Pine Brook focuses on mid-to-large-cap growth equity in the energy and financial services sectors. Its strategy is to invest ahead of current industry practices and/or to take advantage of under-served markets. The fund will allocate capital to investments in tranches to protect capital until the business model is proven (similar to a venture capital-type investment philosophy). | Global - growth equity | 1.2% | US$1.4 billion |
| Resonant Music I L.P. | Resonant was established by Cutting Edge Music Holdings, a leading music supervisor in the UK and U.S. with the help of the Investment Manager. The fund was conceived to exploit an anomaly in the music-for-film and TV industry, acquiring the copyrights to the original scores for music in both feature films and made for TV productions. These copyrights provide a long-term income stream and in combination will create a valuable music publishing catalogue. The pipeline remains very strong. | U.S. & UK - Music-for-film financing | 1.1% | US$13.3 million |
| Rho Ventures VI L.P. | Rho Ventures is a U.S. venture capital firm which takes minority positions in start-up entities in the technology and life sciences sectors. The manager takes a top-down view and has demonstrated the ability to invest opportunistically in venture sectors which are particularly attractive at certain points in time, especially when valuations are comparatively low in the current market environment. | U.S. Venture Capital - Life sciences and technology | 0.7% | US$510 million |
| Silver Lake Partners III L.P. | Silver Lake is a leading technology specialist in the large-cap private equity buy-out sector. The firm invests globally in established, cash flow generative businesses which are leaders in their respective industries. The manager is continuing to look for, and to take advantage of, the opportunities presented by the current valuation environment, and also continues to be seen as a preferred partner of technology company management teams. | Global Large buy-out | 2.1% | US$9.3 billion |
| SVG Strategic Recovery Fund II L.P. | SVG takes large minority stakes in publicly-listed, small-to-medium-size UK companies and works with management to make fundamental changes within the firm to increase the company's share price. This is essentially a friendly, activist strategy of applying private equity techniques in public markets. The manager believes that the impact of protracted depressed exit multiples should be more than offset by the increased availability at attractive valuations of new, high quality opportunities. | UK Activist small-cap | 3.4% | £42.5 million |
| Tenaya Capital V L.P. (formerly Lehman Brothers Venture Partners V L.P.) | Tenaya co-invests in the mid-stage rounds of venture financing alongside many of the top-tier U.S. venture capital firms. The manager specialises in financial analysis, valuations, and investment banking and does not try to compete with the early-stage venture capital firms with which it partners. The manager has the ability to source from, and co-invest in, transactions with premier venture capital firms and is seeing increased deal-flow in the marketplace. | U.S. - Mid-stage venture capital | 1.6% | US$286 million |
| Terra Firma Capital Partners III L.P. | Terra Firma is a leading private equity firm and focuses on strategic turnarounds of mid-to-large-cap companies. The manager is known both for its contrarian views on companies and its willingness to redefine business models. Terra Firma has a large investment team with substantial operating experience and actively participates in the restructuring of its portfolio companies to generate value through changing strategic direction and identifying new sources of revenue. | Europe Large Buy-out | 1.8% | €5.4 billion |
| Thoma Bravo Fund IX L.P. | Thoma Bravo is a U.S. growth equity private equity firm which focuses on buy-and-build investing in software, services and other consolidating industries by identifying talented management and a platform company operating in a niche industry segment. The manager is cautious in the current environment, still finding price expectations too high, but remains focused on asset-light industries with the potential to increase in value. | U.S. - Growth strategy | 1.3% | US$822 million |
| Thomas H. Lee Parallel Fund VI L.P. | Thomas H Lee is an established large-cap private equity firm which focuses primarily on the U.S., with opportunistic investments in Europe. The manager has an extensive network which it uses to source deals and management teams to operate the businesses. The manager only gets involved in situations where the valuations are attractive and as its macro outlook remains conservative this view informs and explains its current cautious approach to new deals. | U.S. - Mega buy-out | 3.7% | US$8.2 billion |
| STRATEGIC HEDGE FUNDS PORTFOLIO | ||||
| Deephaven Global Multi-Strategy Fund Ltd. | Deephaven is a U.S.-based multistrategy relative value manager. Deephaven and Stark Investments ("Stark") entered into an asset purchase agreement in January 2009 and Stark agreed, subject to the approval of the Deephaven investors, to acquire substantially all of the assets of Deephaven and its subsidiaries. The transfer of the Deephaven Global Multi-Strategy Fund to Stark has resulted in Stark beginning a liquidation of this fund at the end of May with the entire liquidation scheduled to be completed within the next year. The manager continues to de-risk/liquidate the Deephaven portfolio at a moderate pace and remains committed to distributing proceeds in a timely fashion. | Multi-strategies relative value | 1.6% | US$849.2 million |
| D.E. Shaw Oculus International Members Interest | This D.E. Shaw fund is a systematic macro trader with four sub-strategies: futures and currency-related strategies, equity statistical arbitrage strategies, asset class-based inefficiencies and discretionary investing. The manager's way of looking at asset class/instruments in the search for mispricing and anomalies is exceptional. Since its inception, this fund is among the strongest performing global macro funds and is likely to provide strong returns and diversification in the current environment. | Global trading | 5.0% | US$12 billion |
| King Street Capital Ltd. | A well-established and experienced U.S.-based distressed fund, King Street has a rare set of skills in credit markets: the ability to trade credit markets from the short side, as well as participate in more typical periods of strong distressed performance, namely when spreads tighten amid an economic recovery. The manager has been tactically playing the strengthening credit markets, actively adjusting exposure by increasing core long positions and lightening the short book. | Distressed | 1.7% | US$12.1 billion |
| Paulson Advantage Plus Ltd. | The manager of this fund employs a diversified special situations strategy with the flexibility to allocate to credit opportunities on an opportunistic basis. The manager had previously concentrated its long positions in those parts of the economy that do best in a recession, namely healthcare, tobacco and utilities, and concentrated its shorts in those parts that do worst, namely financials. However, over this period the manager cleared its short financials exposure, reacting to the changing market environment, and became long a number of high conviction names. The manager has focused a significant portion of its event arbitrage exposure in 'financial recovery' names. | Special situations | 2.5% | US$10.6 billion |
| Rye Select Broad Market XL Portfolio Ltd. | The relative value fund was launched in September 2006 and specialised in derivative arbitrage and index trades. On 11 December 2008, Bernard L Madoff, founder of Bernard L Madoff Investment Securities LLC, was arrested by U.S. federal law enforcement and charged with securities fraud. He was jailed in June 2009 for a period of 150 years. Madoff Securities subadvised Rye Select and acted as a broker/dealer executing the investment strategy. Exposure in the portfolio was written to zero, impacting the NAV for November 2008. The Company's advisers continue to monitor and assess the class action lawsuits to analyse the developments from a legal and strategic perspective.
| Derivative arbitrage | Write-down | N/A |
| Transitional portfolio | ||||
| Aarkad Plc | The Aarkad strategy was to build a diversified portfolio of highly-collateralised specialty structured finance loans primarily consisting of short-term duration secured loans collateralised by residential development property in the UK and Ireland. The Company decided to redeem from Aarkad in November 2008. However, the fund was suspended in January 2009 pending a restructuring. The level of recovery from the Company's investment in Aarkad remains unclear given the uncertainty in the fund's underlying markets so a further write-down should be expected. | Structured finance | 3.0% | US$630 million |
| Defender Ltd. | This fund was launched in May 2007 and the majority of its assets were traded by Bernard L Madoff Securities LLC, based on a trading authorisation agreement with the fund. On 11 December 2008, Bernard L Madoff, founder of Bernard L Madoff Investment Securities LLC, was arrested by U.S. federal law enforcement and charged with securities fraud. He was jailed in June 2009 for a period of 150 years. In consultation with the Company's auditors, PricewaterhouseCoopers CI LLP, it was agreed that the Defender Ltd exposure in the portfolio should be written down to zero, which impacted the NAV for November 2008. The Company continues to monitor and assess the class action lawsuits to analyse the developments from a legal and strategic perspective. | Relative value derivative arbitrate | Write-down | N/A |
Management and Administration
Directors
Jonathan D Carr, Chairman
(appointed 18 June 2009)
David S Copperwaite
(appointed 18 June 2009)
Mark R Tucker
(appointed 18 June 2009)
Directors during the period of this report
Ceasar N Anquillare
(removed 18 June 2009)
M Peter S Barton
(resigned 11 May 2009)
Michael D Buckley
(removed 18 June 2009)
Brian P Larcombe
(removed 18 June 2009)
Nicholas D Moss
(removed 18 June 2009)
Investment Manager (in the period to 19 November 2009)
Bramdean Asset Management LLP35 Park Lane
London W1K 1RBUnited Kingdom
Investment Manager (with effect from 19 November 2009)
Aberdeen Asset Managers Limited
One Bow Churchyard
London EC4M 9HHUnited Kingdom
Company Secretary, Administrator and Registered Office
RBC Offshore Fund Managers LimitedCanada CourtUpland Road
St Peter Port
Guernsey GY1 3QEChannel Islands
Custodian
Royal Bank of Canada (Channel Islands) Limited
Islands) LimitedCanada CourtUpland Road
St Peter Port
Guernsey GY1 3BQChannel Islands
Company Brokers
Matrix Corporate Capital LLPOne Vine Street
London W1J 0AHUnited Kingdom
JPMorgan Cazenove
20 Moorgate
London EC2R 6DAUnited Kingdom
Independent Auditors
PricewaterhouseCoopers CI LLPPO Box 321
National Westminster House
Le Truchot
St Peter Port
Guernsey GY1 4NDChannel Islands
UK Solicitors to the Company
Herbert Smith LLP
Exchange House
Primrose Street
London EC2A 2HSUnited Kingdom
Guernsey Advocates to the Company
Ogier
Ogier House
St Julian's Avenue
St Peter Port
Guernsey GY1 1WAChannel Islands
Registrar
Capita Registrars (Guernsey) LimitedPO Box 627
St Sampson
Guernsey GY1 4PPChannel Islands
Summary Information
Incorporation and principal activity
Bramdean Alternatives Limited (the "Company") was incorporated on 5 January 2007 in Guernsey, Channel Islands, with limited liability under The Companies (Guernsey) Law, 1994 (as amended) as an investment holding company. The Company is now a Guernsey closed-ended investment company, following its admission to the London Stock Exchange. Trading in the Company's U.S. Dollar and Sterling Shares commenced on 9 July 2007.
Synopsis
The Company entered into an investment management agreement with Bramdean Asset Management LLP (the "Investment Manager"). The Investment Manager is responsible for the management of the Company's assets, subject to the overall supervision of the Board. The Investment Manager's investment team is led by its Chief Executive Officer, Nicola Horlick.
The management fee is equal to one-twelfth of 1.5% per month of the Net Asset Value ("NAV"), payable monthly in arrears with a 10% performance fee subject to an 8% return with a high watermark.
As noted in the Chairman's Statement, references to the "Investment Manager" in this Interim Report and Condensed Half-Yearly Financial Statements are to be read as a reference to Bramdean Asset Management LLP, the Company's investment manager for the period under review.
Investment objective and policy
The investment objective of the Company is to generate long-term capital gains. The Company invests in a diversified portfolio of Private Equity Funds, Hedge Funds and other Specialty Funds as described below. The Company may also hold direct holdings in unquoted companies and quoted securities.
The Company seeks to hold a broadly diversified portfolio of investments by country, industry sector, investment stage and size of investment, as well as by strategy.
The Company seeks to operate within the asset allocation ranges set out below. While the Company is establishing its strategic allocation to Private Equity & Specialty Funds, the Company manages the capital that is committed but not yet called in a Transitional portfolio. This portfolio invests in funds that reflect the characteristics of private equity and is also structured to preserve the capital over the medium-term and be as liquid as possible so that the Company can satisfy capital calls.
Summary of the key terms of the investment management agreement between the Company and Aberdeen Asset Managers Limited ("Aberdeen")
Aberdeen has been appointed, subject to the overall supervision of the Board of the Company, the Company's investment policy and Articles of Incorporation and all applicable laws and regulations that are notified to Aberdeen by the Company from time to time, to manage with discretionary powers the investments of the Company.
Either the Company or Aberdeen may terminate the investment management agreement on 12 months' prior notice provided that such notice does not expire before 19 November 2012. However, the Company may terminate the agreement sooner in certain circumstances customary in an agreement of this kind.
The annual management fee that is, and performance fee that may be, payable to Aberdeen by the Company are to be calculated on the same basis as the fees that were payable by the Company to Bramdean Asset Management LLP (the Investment Manager in the period to 19 November 2009).
In the event that the Company undertakes a purchase of shares by way of a tender or otherwise returns capital to its shareholders (other than by on-market share buy-backs conducted in the ordinary course of business) in the period up to 19 November 2012, Aberdeen will be paid by the Company an amount equal to up to one year's management fee on the amount attributable to those shares.
Aberdeen may, with the consent of the Company, delegate the performance of its functions, powers, authorities, duties and discretions under the investment management agreement provided that any delegation of investment management or advisory functions may only be delegated to an associate of Aberdeen.
The investment management agreement contains provisions under which the Company exempts Aberdeen, its associates and its delegates from liability and indemnifies Aberdeen, its associates and delegates against liability incurred, inter alia, in performing its duties under the agreement other than to the extent that the liability results from Aberdeen's or its associates' or delegates' fraud, negligence or wilful default or breach of the agreement by Aberdeen or its associates or delegates. These exemptions from liability and indemnities are of a customary nature for contracts of this type.
Asset allocation ranges
The Company operates on the basis of the following long-term asset allocation ranges:
Private Equity Funds and Direct Holdings 30%-60%
Hedge Funds 15%-45%
Specialty Funds 10%-30%
The actual percentage of the Company's gross assets invested in Private Equity Funds and direct holdings, Strategic Hedge Funds and Specialty Funds may fall outside of these ranges.
Private Equity Funds and direct holdings
The Private Equity Funds portfolio comprises investments primarily in the buy-out, growth equity, venture capital, secondaries and mezzanine debt sectors. The Company may also make co- investments, either directly with the general partners of the private equity funds that the Company invests in, or via a co-investment fund. The underlying Private Equity Funds are expected to be primarily invested in Europe and the United States. No co-investments have been made to date.
Strategic Hedge Funds
The Company invests in a concentrated range of Hedge Funds which pursue multiple investment strategies - specifically: Relative Value, Event Driven, Equity Hedged, Global Macro and Managed Futures to create balance within the portfolio. The Company will typically hold 10 to 15 underlying Hedge Funds at any given point in time within its Strategic Hedge Funds portfolio. The Strategic Hedge Funds portfolio is neither style nor strategy specific.
Prior to the change in investment manager on 19 November 2009, RMF Investment Management, Nassau Branch ("RMF") was the investment sub-manager under the terms of an investment sub-management agreement. RMF was responsible, until 19 November 2009, for taking decisions on all individual hedge funds which formed part of the Company's Strategic Hedge Funds portfolio. Effective 1 October 2009, RMF changed its name to Man Investments (CH) AG.
Specialty Funds
The Company invests in a globally diversified portfolio of Specialty Funds which include, but are not limited to:
Real estate funds;
Infrastructure funds;
Natural resources funds; and
Structured finance funds.
Over-commitment
The Company recognises that the capital it commits to its Private Equity & Specialty Funds is likely to be drawn over a medium-term period. So that the Company's portfolio may be as fully invested as possible, the Company pursues an over-commitment policy relative to its commitments on a fully-drawn basis. The Company's over-commitment position as at 30 September 2009 is detailed in the Investment Manager's Review.
Gearing
The Company may borrow up to 25% of the NAV of the Company for short-term purposes as may be necessary for settlement of transactions, or for long-term purposes to fund over-commitments to Private Equity & Specialty funds, to fund hedging contracts or to meet ongoing expenses. The Company will also be geared indirectly to the extent that underlying funds are themselves geared.
Schedule of investments
The schedule of investments held by the Company as of 30 September 2009 is set out at the end of this document.
Share Conversion election
Investors may, subject to the approval of the Directors, have the opportunity to convert their Shares from one currency Share class to another twice per year, on 30 April and 31 October.
At 30 September 2009, the Company's issued share capital was as follows:
| Number of issued Sterling Shares | 90,715,319 (53.6%) |
| Number of issued U.S. Dollar Shares | 78,573,876 (46.4%) |
| Total Shares in issue | 169,289,195 |
| Number of Sterling voting rights | 183,190,515 (70.0%) |
| Number of U.S. Dollar voting rights | 78,573,876 (30.0%) |
| Total voting rights | 261,764,391 |
For comparison, at 31 March 2009, the Company's issued share capital was as follows:
| Number of issued Sterling Shares | 92,142,177 (54.8%) |
| Number of issued U.S. Dollar Shares | 76,116,060 (45.2%) |
| Total Shares in issue | 168,258,237 |
| Number of Sterling voting rights | 186,071,912 (71.0%) |
| Number of U.S. Dollar voting rights | 76,116,060 (29.0%) |
| Total voting rights | 262,187,972 |
Statement of Directors' responsibilities
The Directors confirm that this Interim Report and Condensed Half-Yearly Financial Statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' and that the Interim Report includes a fair review of the information required by Disclosure and Transparency Rules (DTR) 4.2.7 and 4.2.8, namely:
•an indication of important events that have occurred during the first six months and their impact on the Condensed Half-Yearly Financial Statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
•material related party transactions in the first six months and any material changes in the related party transactions described in the last annual report
The Directors of the Company are listed in Management & Administration.
By order of the Board:
Jonathan D Carr
Chairman
David S Copperwaite
Director
Independent review report to Bramdean Alternatives Limited
Introduction
We have been engaged by the Company to review the condensed set of financial statements in the half-yearly financial report for the six months ended 30 September 2009, which comprises the Statement of Comprehensive Income, Balance Sheet, Statement of Changes in Equity, Statement of Cash Flows and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the interim financial information.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
As disclosed in Note 2, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards. The interim financial information included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting'.
Our responsibility
Our responsibility is to express to the Company a conclusion on the interim financial information in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the interim financial information in the half-yearly financial report for the six months ended 30 September 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.
PricewaterhouseCoopers CI LLP
Chartered Accountants
Guernsey, Channel Islands
25 November 2009
(a) The maintenance and integrity of Bramdean Alternatives Limited's website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.
(b) Legislation in Guernsey governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Condensed Half-Yearly Balance Sheet
As at 30 September 2009
| | | 30 September 2009 | 31 March 2009 |
| | Notes | US$ | US$ |
| | | | |
| Assets | | | |
| Financial assets at fair value through profit or loss | 5 | 108,757,220 | 112,609,762 |
| Cash and cash equivalents | | 79,410,165 | 54,309,273 |
| Trade and other receivables | 7 | 132,718 | 9,697,124 |
| Total assets | | 188,300,103 | 176,616,159 |
| | | | |
| Liabilities | | | |
| Trade and other payables | 8 | 458,438 | 509,856 |
| Total liabilities | | 458,438 | 509,856 |
| Net assets | | 187,841,665 | 176,106,303 |
| | | | |
| | | | |
| Represented by | | | |
| Share Capital | 11 | 4 | 4 |
| Share Premium | 11 | 258,759,096 | 258,759,096 |
| Revenue reserves | 16 | (70,917,435) | (82,652,797) |
| Total shareholders’ funds | | 187,841,665 | 176,106,303 |
| | | | |
| Net asset value per share US$ Shares Sterling Shares | 13 13 | USD 0.8003 GBP 0.8613 | USD 0.7503 GBP 0.9010 |
| | | | |
| | | | |
| The notes to the Condensed Half-Yearly Financial Statements are an integral part of these financial statements. The financial statements were approved by the Board of Directors on 25 November 2009 and signed on its behalf by: J D Carr Director D S Copperwaite Director | |||
Condensed Half-Yearly Statement of Comprehensive Income
For the period from 1 April 2009 to 30 September 2009
| 1 April 2009 to 30 September 2009 | 1 April 2008 to 30 September 2008 | ||
| Notes | US$ | US$ | |
| Income | |||
| Net income from investments in limited partnerships and directly held investments | 82,803 | 376,928 | |
| Net interest income from cash and cash equivalents | 301 | 33,204 | |
| Net changes in fair value of financial assets at fair value through profit or loss: | |||
| Net gains / (losses) on investments | 6 | 14,389,098 | (16,326,212) |
| Net losses on foreign exchange | (48,602) | (7,966,713) | |
| Net income / (loss) | 14,423,600 | (23,882,793) | |
| Expenses | |||
| Investment Management fees | 9 | 1,355,509 | 1,910,049 |
| Legal and professional fees | 19 | 513,738 | 98,910 |
| Brokerage | 19 | 338,391 | 30,000 |
| Printing and communication costs | 181,592 | 171,485 |
| Directors' fees | 9 | 94,336 | 187,694 |
| Administration fees | 9 | 45,188 | 63,673 |
| Travelling expenses | 43,320 | 16,000 | |
| Audit fees | 39,750 | 50,000 | |
| Custody fees | 9 | 37,937 | 60,611 |
| Directors' and officers' insurance | 32,616 | 23,305 | |
| Bank charges | 5,861 | 6,556 | |
| Total operating expenses | 2,688,238 | 2,618,283 | |
| Net income / (loss) from operations | 11,735,362 | (26,501,076) | |
| Total comprehensive income / (loss) | 11,735,362 | (26,501,076) |
| Earnings per share | |||
| US$ Shares | 14 | USD 0.0472 | (USD 0.0644) |
| Sterling Shares | 14 | GBP 0.0568 | (GBP 0.1266) |
The Company had no other gains or losses other than the net income from operations disclosed in this statement.
All income and expenditure relates to continuing activities.
The notes to the Condensed Half-Yearly Financial Statements are an integral part of these financial statements.
Condensed Half-Yearly Statement of Changes in Equity
For the period from 1 April 2009 to 30 September 2009
| Share Capital and Share Premium | Revenue Reserves | Total | ||
| Notes | US$ | US$ | US$ | |
| Net assets at 1 April 2008 | 259,186,784 | (2,785,879) | 256,400,905 | |
| Repurchase of Shares | 11 | (427,684) | - | (427,684) |
| Net loss from operations | - | (26,501,076) | (26,501,076) | |
| Net assets at 30 September 2008 | 258,759,100 | (29,286,955) | 229,472,145 | |
| Net assets at 1 April 2009 | 258,759,100 | (82,652,797) | 176,106,303 | |
| Net income from operations | - | 11,735,362 | 11,735,362 | |
| Net assets at 30 September 2009 | 258,759,100 | (70,917,435) | 187,841,665 | |
The notes to the Condensed Half-Yearly Financial Statements are an integral part of these financial statements.
Condensed Half-Yearly Statement of Cash Flows
For the period from 1 April 2009 to 30 September 2009
| 1 April 2009 to 30 September 2009 | 1 April 2008 to 30 September 2008 | ||
| Notes | US$ | US$ | |
| Cash flows from operating activities | |||
| Net income / (loss) for the period | 11,735,362 | (26,501,076) | |
| Net interest income from cash and cash equivalents | (301) | (33,204) | |
| Adjustments for unrealised (gains) / losses on investments | 6 | (13,480,268) | 9,254,482 |
| Decrease in trade and other payables | (51,418) | (1,380,018) | |
| Decrease / (increase) in trade and other receivables | 9,564,406 | (17,707,723) | |
| Purchase of investments | (9,453,202) | (69,062,242) | |
| Proceeds from sale of investments | 26,786,012 | 93,780,413 | |
| Net cash inflows / (outflows) from operating activities | 25,100,591 | (11,649,368) | |
| Cash flows from investing activities | |||
| Net interest income from cash and cash equivalents | 301 | 33,204 | |
| Net cash inflows from investing activities | 301 | 33,204 | |
| Cash flows from financing activities | |||
| Repurchase of shares | - | (427,684) | |
| Net cash outflows from financing activities | - | (427,684) | |
| Net change in cash and cash equivalents for the period | 25,100,892 | (12,043,848) | |
| Cash and cash equivalents at beginning of the period | 54,309,273 | 27,948,491 | |
| Cash and cash equivalents at end of the period | 79,410,165 | 15,904,643 | |
The notes to the Condensed Half-Yearly Financial Statements are an integral part of these financial statements.
Notes to the Condensed Half-Yearly Financial Statements
for the period from 1 April 2009 to 30 September 2009
1. General information
Bramdean Alternatives Limited (the "Company") was incorporated with limited liability and registered in Guernsey on 5 January 2007. The Company's U.S. Dollar and Sterling Shares were listed on the London Stock Exchange on 9 July 2007 whereupon the Company became a closed-ended investment company, domiciled in Guernsey. The Company is now authorised by the Guernsey Financial Services Commission.
2. Significant accounting policies
The following accounting policies have been applied consistently in dealing with items which are considered material in relation to the Company's financial statements.
a) Basis of preparation
The Annual Financial Statements are prepared in accordance with International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board (IASB), and interpretations issued by the International Financial Reporting Interpretations Committee (IFRIC).
The Condensed Half-Yearly Financial Statements for the period 1 April 2009 to 30 September 2009 have been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and International Accounting Standard 34, 'Interim Financial Reporting'. The Condensed Half-Yearly Financial Statements do not include all of the information required for the Annual Financial Statements and should be read in conjunction with the Annual Financial Statements for the year ended 31 March 2009, which have been prepared in accordance with IFRS.
The accounting policies applied are consistent with those of the Annual Financial Statements for the year ended 31 March 2009, as described in those Annual Financial Statements.
The following standards and amendments to existing standards have been published and are mandatory for accounting periods beginning on or after 1 January 2009 or later periods:
• IAS 1 (Revised) 'Presentation of Financial Statements'. The revised standard prohibits the presentation of items of income and expenses (that is 'non-owner changes in equity') in the statement of changes in equity, requiring 'nonowner changes in equity' to be presented separately from owner changes in equity. All 'non-owner changes in equity' are required to be shown in a performance statement.
Entities can choose whether to present one performance statement (the statement of comprehensive income) or two statements (the income statement and the statement of comprehensive income). The Company has elected to present one statement: the statement of comprehensive income.
• IAS 32 (Amendment), 'Financial Instruments: Presentation', and IAS 1 (Amendment) 'Presentation of Financial Statements' - 'Puttable financial instruments and obligations arising on liquidation' (the "Amendment").
The Amendment requires puttable financial instruments that meet the definition of a financial liability to be classified as equity where certain criteria are met. Those criteria include: the puttable instruments must entitle the holder to a pro rata share of net assets; the puttable instruments must be the most subordinated class and that class features must be identical; there must be no contractual obligations to deliver cash or another financial asset other than the obligation on the issuer to repurchase; and the total expected cash flows from the puttable instrument over its life must be based substantially on the profit or loss of the issuer. The Company's Sterling Shares and U.S. Dollar Shares are both classified as equity.
• IAS 39 (Amendment), 'Financial Instruments: Recognition and measurement' (effective from 1 January 2009). The definition of financial asset or financial liability at fair value through profit or loss as it relates to items that are held for trading is amended. This clarifies that a financial asset or liability that is part of a portfolio of financial instruments managed together with evidence of an actual recent pattern of short-term profit taking is included in such a portfolio on initial recognition. The adoption does not have an impact on the Company's financial statements.
IFRS 7, (Amendment), 'Disclosures - Improving Disclosures about Financial Instruments' requires fair value measurements to be disclosed by the source inputs, using a three level hierarchy:
Level 1 - Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2 - Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (ie as prices) or indirectly (ie derived from prices).
Level 3 - Inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). A financial instrument's level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The Amendment will be applied in the Company's annual financial statements for the year ended 31 March 2010.
• IFRS 8, 'Operating segments' (effective from 1 January 2009); replaces IAS 14 'Segment reporting'. The new standard requires a 'management approach', under which segment information is presented on the same basis as that used for internal reporting purposes.
The Board has considered the requirements of IFRS 8 'Operating Segments', and is of the view that the Company is engaged in three segments of business: investment in the Private Equity & Specialty Funds portfolio, the Strategic Hedge Funds portfolio and the Transitional portfolio. The Board, as a whole, has been determined as constituting the chief operating decision maker of the Company. The key measure of performance used by the Board to assess the Company's performance and to allocate resources is the total return on the Company's net asset value, as calculated under IFRS, together with the performances of each of the three portfolios.
3. Operating segments
The Company is engaged in three segments of business: investment in the Private Equity & Specialty Funds portfolio, the Strategic Hedge Funds portfolio and the Transitional portfolio. Information on the movement in value of the investments held in each portfolio is disclosed in Note 5 - Financial assets at fair value through profit or loss.
The Company is domiciled in Guernsey. All of the Company's income from investments is from underlying investments that are incorporated in countries other than Guernsey. The Company has no assets classified as non-current assets.
The Company has a highly diversified portfolio of investments and no single investment accounts for more than 20% of the Company's income.
4. Taxation
The Company is domiciled in Guernsey. The Company is exempt from paying income tax in Guernsey. The Company is registered for taxation purposes in Guernsey where it pays an annual exempt status fee which is currently £600 under The Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 (as amended).
5. Financial assets at fair value through profit or loss
| 30 September 2009 | 31 March 2009 | |
| US$ | US$ | |
| Cost at beginning of the period | 155,307,028 | 222,889,855 |
| Additions | 9,453,202 | 102,078,215 |
| Disposals | (28,114,916) | (165,270,808) |
| Realised gains / (losses) on investments | 1,328,904 | (4,390,234) |
| Cost at end of the period | 137,974,218 | 155,307,028 |
| Unrealised losses on investments | (29,216,998) | (42,697,266) |
| Market value at end of the period | 108,757,220 | 112,609,762 |
The operating segments of the financial assets at fair value through profit or less are analysed as follows:
| 30 September 2009 | Private Equity & Specialty Funds portfolio US$ | Strategic Hedge Funds portfolio US$ | Transitional portfolio US$ | Total US$ |
| Cost at beginning of the period | 86,361,281 | 46,651,649 | 22,294,098 | 155,307,028 |
| Additions | 9,452,730 | 472 | - | 9,453,202 |
| Disposals | (137,507) | (22,782,867) | (5,194,542) | (28,114,916) |
| Realised gains / (losses) on investments | (212,091) | 1,340,551 | 200,444 | 1,328,904 |
| Cost at end of the period | 95,464,413 | 25,209,805 | 17,300,000 | 137,974,218 |
| Unrealised losses on investments | (12,550,091) | (4,916,551) | (11,750,356) | (29,216,998) |
| Market value at end of the period | 82,914,322 | 20,293,254 | 5,549,644 | 108,757,220 |
| 31 March 2009 | Private Equity & Specialty Funds portfolio US$ | Strategic Hedge Funds portfolio US$ | Transitional portfolio US$ | Total US$ |
| Cost at beginning of the year | 45,731,234 | 78,343,147 | 98,815,474 | 222,889,855 |
| Additions | 42,501,314 | 23,188,494 | 36,388,407 | 102,078,215 |
| Disposals | (1,858,189) | (60,753,736) | (102,658,883) | (165,270,808) |
| Realised gains / (losses) on investments | (13,078) | 5,873,744 | (10,250,900) | (4,390,234) |
| Cost at end of the year | 86,361,281 | 46,651,649 | 22,294,098 | 155,307,028 |
| Unrealised losses on investments | (24,855,024) | (6,234,575) | (11,607,667) | (42,697,266) |
| Market value at end of the year | 61,506,257 | 40,417,074 | 10,686,431 | 112,609,762 |
6. Net changes in fair value of financial assets at fair value through profit or loss
The net realised and unrealised investment gain or loss from trading in financial assets and financial liabilities shown in the Income Statement for the period to 30 September 2009 is analysed as follows:
| 1 April 2009 to 30 September 2009 US$ | 1 April 2008 to 30 September 2008 US$ | |
| Unrealised gains / (losses) on investments | 13,480,268 | (9,254,482) |
| Capital call expenses | (420,074) | (967,413) |
| Realised gains / (losses) on investments | 1,328,904 | (6,104,317) |
| 14,389,098 | (16,326,212) |
7. Trade and other receivables
| 30 September 2009 US$ | 31 March 2009 US$ | |
| Prepayments | 111,093 | 95,057 |
| Due from brokers | 14,178 | 9,595,413 |
| Accrued interest | 7,447 | 6,654 |
| 132,718 | 9,697,124 |
8. Trade and other payables
| 30 September 2009 US$ | 31 March 2009 US$ | |
| Management fees | 229,333 | 227,354 |
| Administration fees | 7,645 | 7,579 |
| Custody fees | 6,325 | 6,447 |
| Sundry expenses | 215,135 | 268,476 |
| 458,438 | 509,856 |
9. Significant agreements and related parties
Investment management: The Company has appointed Bramdean Asset Management LLP as its Investment Manager. The Investment Manager is paid by the Company a monthly fee equal to one-twelfth of 1.5% of the NAV of the Company (before deduction of any performance fee). The fee is calculated and accrued as at the last business day of each month and is paid monthly in arrears.
Total fees payable to the Investment Manager for the period from 1 April 2009 to 30 September 2009 amounted to US$1,355,509 (period 1 April 2008 to 30 September 2008 - US$1,910,049) of which US$229,333 was outstanding at 30 September 2009 (31 March 2009 - US$227,354).
In addition, the Investment Manager is entitled to a performance fee of 10% with respect to each class of shares based on the total increase in the NAV of the relevant class at the end of each performance year (ending 31 March each year). For a performance fee to be paid, the Investment Manager must achieve returns in excess of 8% (subject to a high watermark). No performance fee has been earned in the period to 1 April 2009 to 30 September 2009 (1 April 2008 to 30 September 2008 - nil).
Administration: The Administrator is paid by the Company a fee of not greater than 0.06% per annum of the NAV of the Company, subject to a minimum annual fee of £50,000.
Total fees payable to the Administrator for the period 1 April 2009 to 30 September 2009 amounted to US$169,555 (1 April 2008 to 30 September 2008 - US$63,673) of which US$7,645 was outstanding at 30 September 2009 (31 March 2009 - US$7,579).
Custody: The Custodian is paid by the Company a fee not greater than 0.06% per annum of the NAV of the Company, subject to a minimum annual fee of £10,000.
Total fees payable to the Custodian for the period 1 April 2009 to 30 September 2009 amounted to US$37,937 (1 April 2008 to 30 September 2008 - US$60,611) of which US$6,325 was outstanding at 30 September 2009 (31 March 2009 - US$6,447).
Transactions with Directors: With effect from 1 September 2009 the Chairman of the Board receives an annual fee of £37,500, the remaining two Directors each receive an annual fee of £25,000, with the Chairman of the Audit Committee receiving an additional £5,000 per annum.
Between 18 June 2009 and 31 August 2009 the Chairman of the Board received fees at an annual rate of £22,000 with the remaining two Directors each receiving fees at an annual rate of £20,000.
Directors' fees are paid quarterly in advance. Total fees payable for the period to 30 September 2009 amounted to US$94,336 (30 September 2008 - US$187,694). No fees were outstanding at 30 September 2009 (31 March 2009 - nil).
The fees for the previous Board, who were removed on 18 June 2009, were as follows: the Chairman received fees at an annual rate of £75,000 and each of the remaining Directors received fees at an annual rate of £27,000, with the Chairman of the Audit Committee receiving fees at an annual rate of an additional £5,000.
10. Financial risk management
The Company maintains positions in a variety of investees and forward currency contracts as determined by its investment management strategy.
The investees' own investing activities expose the Company to various types of risks that are associated with the financial investments and markets in which they invest. The significant types of financial risks, to which the Company is exposed are market price risk, credit risk and liquidity risk.
Asset allocation is determined by the Company's Investment Manager who manages the allocation of assets to achieve the investment objectives as detailed in the Summary Information in this document. Achievement of the investment objectives involves taking risks. The Investment Manager exercises judgement based on analysis, research and risk management techniques when making investment decisions. Divergence from target asset allocations and the composition of the Portfolio is monitored by the Board.
The significant types of risks that the Company is exposed to are detailed below:
a) Capital management policies and procedures
The Company's capital management objectives are:
• to ensure the Company's ability to continue as a going concern; and
• to provide an adequate return to shareholders.
The Company seeks to achieve these objectives by adopting the investment objectives set out in the Summary Information section.
b) Market price risk
The potential for changes in the fair value of the Company's investment portfolio is referred to as market price risk. Commonly used categories of market price risk include currency risk, interest rate risk and other price risk.
• Currency risk may result from exposure to changes in spot prices, forward prices and volatilities of currency
exchange rates.
• Interest rate risk may result from exposures to changes in the level, slope and curvature of the various yield curves, the volatility of interest rates, and credit spreads.
• Other price risk is the risk that the value of an instrument will fluctuate as a result of changes in market prices other than those arising from currency risk or interest rate risk.
i) Market price risk management
The Company's unlisted equity securities are susceptible to market price risk arising from uncertainties about future values of the investment securities. The Investment Manager provides the Company with investment recommendations that are consistent with the Company's objectives.
The valuation method of these investments is described within the accounting policies. The nature of some of the Company's investments, which are unquoted investments in private equity funds, means that the investments are valued by the Investment Manager on behalf of the Company after due consideration of the most recent available information from the underlying investments as adjusted where relevant by the Directors. While the underlying fund managers may utilise various model-based approaches to value their investment portfolios, on which the Company's valuations are based, no such models are used directly in the preparation of fair values of the investments.
Market price risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. The investments of the Company are subject to normal market fluctuations and the risks inherent with investment in financial markets. The maximum risk resulting from financial instruments held by the Company is determined by the fair value of the financial instruments. The Investment Manager moderates this risk through careful selection of funds managed by experienced fund managers, which meet the investment objectives outlined in the Summary Information section; the Company's market price risk is managed through diversification of the investment portfolio. Through a variety of analytical techniques, the Investment Manager monitors, on a daily basis,
ii) Currency risk
The Company has assets and liabilities denominated in currencies other than U.S. Dollars, its functional currency. The Company is therefore exposed to currency risk, as the value of the assets and liabilities denominated in other currencies fluctuates due to changes in exchange rates. The Company may from time to time engage in currency hedging in an attempt to reduce the impact on the Sterling Shares of currency fluctuations. The Company may manage the U.S. Dollar exposure of the Sterling Shares through the use of forward foreign exchange contracts although there can be no guarantee that the management of currency risk and exposure will be successful. As a result, the NAV of the different classes of share may differ over time as the differing gains and losses realised on the hedging contracts are applied to the relevant class of share.
Due to the volatile movement between the U.S. Dollar, Sterling and the Euro, the Company discontinued hedging its U.S. Dollar, Sterling and Euro exposure to both Share Classes to eliminate the cash flow volatility caused by hedging currencies.
The table below summarises the Company's exposure to currency risks at the period end:
| Assets | US$ | GBP | EUR | Total |
| Financial assets at fair value through profit or loss | 87,239,612 | 6,471,176 | 15,046,432 | 108,757,220 |
| Cash and short term notes | 79,405,053 | 3,584 | 1,528 | 79,410,165 |
| Other assets and liabilities | (221,678) | (104,042) | - | (325,720) |
| Total at 30 September 2009 | 166,422,987 | 6,370,718 | 15,047,960 | 187,841,665 |
| Assets | US$ | GBP | EUR | Total |
| Financial assets at fair value through profit or loss | 95,325,615 | 3,423,451 | 13,860,696 | 112,609,762 |
| Cash and short term notes | 54,297,797 | 11,453 | 23 | 54,309,273 |
| Other assets and liabilities | 9,360,687 | (173,419) | - | 9,187,268 |
| Total at 31 March 2009 | 158,984,099 | 3,261,485 | 13,860,719 | 176,106,303 |
iii) Interest rate risk
The Company is exposed to interest rate risk. The Company invests primarily in private equity and hedge funds that are non interest bearing investments, primarily subject to market price risk. Investees may invest in fixed income securities and interest rate swap contracts. Interest receivable on bank deposits or payable on loan positions will be affected by fluctuations in interest rates. Changes to prevailing interest rates or changes in expectations of future rates may result in an increase or decrease in the value of the securities held. In general, if interest rates rise, the value of fixed income securities will decline. A decline in interest rates will, in general, have the opposite effect.
Although the majority of the Company's financial assets and liabilities are non interest bearing, cash and cash equivalents represents 42% of the Company's net asset value (31 March 2009 - 31%). As a result, the Company is subject to significant risk due to fluctuations in the prevailing levels of market interest rates. Any excess cash and cash equivalents are invested at short-term market interest rates. As at 30 September 2009 the Company's interest bearing assets and liabilities, all of which receive or pay interest at a variable rate, were as follows:
| 30 September 2009 US$ | 31 March 2009 US$ | ||
| Cash and cash equivalents | 79,410,165 | 54,309,273 |
iv) Other price risk
Other price risk is the risk that the value of the investees' financial investments will fluctuate as a result of changes in market prices, other than those arising from currency risk or interest rate risk whether caused by factors specific to an individual investment, its issuer or any factor affecting financial investments traded in the market.
As the Company's investments are carried at fair value with fair value changes recognised in the Income Statement, all changes in market conditions will directly affect the overall NAV.
The investments are valued based on the latest available unaudited price of such shares or interests as determined by the administrator or general partner of the investees. Furthermore, valuations received from the administrator or general partner of the investees may be estimates and such values can generally be used to calculate the NAV of the Company. Such estimates provided by the administrators or general partner of the investees may be subject to subsequent revisions which may not be restated for the purpose of the Company's final month-end NAV.
Currency, interest rate and other price risks are managed by the Investment Manager as part of the integrated market price risk management processes.
c) Credit risk
The Company takes on exposure to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. The Investment Manager has adopted procedures to reduce credit risk related to the Company's dealings with counterparties. Before transacting with any counterparty, the Investment Manager or its affiliates evaluate both creditworthiness and reputation by conducting a credit analysis of the party, its business and its reputation. The credit risk of approved counterparties is then monitored on an ongoing basis, including periodic reviews of financial statements and interim financial reports as needed. Impairment provisions are provided for losses, if any, that have been incurred by the balance sheet date.
At 30 September 2009 and 31 March 2009, the following financial assets were exposed to counterparty credit risk: cash and cash equivalents and other receivables. The carrying amounts of financial assets best represent the maximum credit risk exposure at the year end date. There were no significant concentrations of credit risk at 30 September 2009 or 31 March 2009.
The Company places cash deposits with counterparties whose credit ratings are all investment graded. Ratings for fixed deposits, as rated primarily by Moody's, that subject the Company to credit risk at 30 September 2009 are noted below:
| 30 September 2009 | 31 March 2009 | |||
| Credit ratings for short-term notes | Rating | % of NAV | Rating | % of NAV |
| BNP Paribas Group | Aa1 | 11.61 | Aa1 | 10.72 |
| Deutsche Bank | Aa1 | 10.32 | Aa1 | 3.41 |
| Bank of Scotland | A1 | 8.19 | A1 | 2.84 |
| Royal Bank of Canada | - | - | Aaa | 3.98 |
| Royal Bank of Scotland International | A1 | 12.38 | A1 | 9.30 |
d) Liquidity risk
The table overleaf sets forth the liquidity risk of the Company as at 30 September 2009. All liabilities represent amounts falling due within 12 months. Amounts due within 12 months equal their carrying balances.
| Less than one year 30 September 2009 US$ | Less than one year 31 March 2009 US$ | |
| Financial Liabilities |
| |
| Trade and other payables | 458,438 | 509,856 |
Based on communications with General Partners and the Investment Manager's best estimates, the outstanding commitments are expected to be drawn-down with the following maturity profile:
| 30 September 2009 US$ million | 31 March 2009 US$ million | |
| Maturity | ||
| Less than 3 months | 12 | 13 |
| 3 - 6 months | 12 | 13 |
| 6 - 12 months | 20 | 24 |
| 1 - 2 years | 37 | 41 |
| Greater than 2 years | 32 | 42 |
| 113 | 133 |
11. Share capital and share premium
| 30 September 2009 US$ | 31 March 2009 US$ | |
| Share capital | ||
| Management shares | ||
| Authorised: 10,000 shares of £1.00 each | ||
| 2 Management Shares of £1.00 each | 4 | 4 |
| 4 | 4 | |
| Shares | ||
| Authorised: unlimited number of shares of no par value | ||
| Share premium issued and fully paid | ||
| 90,715,319/92,142,177 Sterling Shares of no par value | 182,551,802 | 184,415,481 |
| 78,573,876/76,116,060 U.S. Dollar Shares of no par value | 76,207,294 | 74,343,615 |
| 258,759,096 | 258,759,096 | |
| Ordinary shares | ||
| Authorised: unlimited number of shares of no par value | ||
| Issued and fully paid | ||
| Balance as at 1 April 2009 | 258,759,096 | 259,186,780 |
| Nil / 260,000 Sterling Shares repurchased | - | (427,684) |
| Balance as at 30 September 2009 | 258,759,096 | 258,759,096 |
The authorised share capital of the Company on incorporation was £10,000 divided into 10,000 shares of £1.00 each. On 31 May 2007, a special resolution was passed by the Company to increase the share capital to an unlimited number of participating shares of no par value ("Shares"), which, upon issue, the Directors were able to designate as Sterling Shares, U.S. Dollar Shares or otherwise as determined by the Directors at the time of issue, and 10,000 Management Shares of £1.00 each.
The Shares were issued on 4 July 2007 as a result of the Company announcing the placing and offer for subscription of its Shares on 6 June 2007.
The rights attaching to the Ordinary Shares are as follows:
a) On 30 April and 31 October of each year a shareholder may elect to convert some or all of their Shares of one currency class into Shares of another currency class.
b) Subject to any restrictions set out in the Company's Articles of Incorporation, each U.S. Dollar Share carries one vote per share and each Sterling Share carries 2.0194 vote per share at a general meeting.
c) The capital and assets of the Company shall on a winding-up be divided (following payment to the holders of Management Shares of sums up to the nominal value paid up thereon) amongst the holders of Shares on the basis of the capital and assets attributable to the respective classes of Shares at the date of winding-up and amongst the holders of Shares of a particular class pro rata according to their holdings of Shares in that class.
On 22 May 2009, certain holders of Shares in the Company owning Sterling Shares elected to switch into U.S. Dollar Shares on the basis of the NAV of the Company's Shares as at 30 April 2009. As a result of the switch, 1,429,183 Sterling Shares were converted into 2,461,821 U.S. Dollar Shares and 4,005 U.S. Dollar Shares were converted into 2,325 Sterling Shares.
12. Commitments
The table below summarises commitments to the underlying investments of the Company.
| Total Commitments | Outstanding Commitments | |||
| Currency | US$ | Currency | US$ | |
| AIG Brazil Special Situations II L.P. | 2,800,000 | 654,864 | ||
| Coller International Partners V L.P. | 15,000,000 | 7,666,816 | ||
| DFJ Athena L.P. | 10,000,000 | 5,190,000 | ||
| Goldman Sachs Capital Partners VI L.P. | 15,000,000 | 8,397,984 | ||
| Greenpark International Investors III L.P. | €14,600,000 | 21,340,661 | €3,056,896 | 4,468,232 |
| HIG Bayside Debt & LBO Fund II L.P. | 15,000,000 | 11,975,000 | ||
| MatlinPatterson Global Opportunities Partners III L.P. | 10,000,000 | 4,728,946 | ||
| Oaktree OCM Opportunities Fund VIIb L.P. | 15,000,000 | 3,000,000 | ||
| Pine Brook Capital Partners L.P. | 10,000,000 | 7,494,032 | ||
| Resonant Music I L.P. | 5,453,000 | 3,390,153 | ||
| Rho Ventures VI L.P. | 10,000,000 | 8,500,000 | ||
| Silver Lake Partners II L.P. | 15,000,000 | 10,216,179 | ||
| SVG Strategic Recovery Fund II L.P. | £7,500,000 | 11,995,010 | £2,618,906 | 4,188,507 |
| Tenaya Capital V L.P.* | 12,500,000 | 8,813,191 | ||
| Terra Firma Capital Partners III L.P. | €15,000,000 | 21,925,337 | €6,733,796 | 9,842,716 |
| Thoma Bravo Fund IX L.P. | 10,000,000 | 7,600,000 | ||
| Thomas H. Lee Fund VI L.P. | 15,000,000 | 6,745,006 | ||
| At 30 September 2009 | 216,014,008 | 112,871,626 |
*Formerly Lehman Brothers Venture Partners V L.P.
13. Net Asset Value ("NAV")
The NAV of each Sterling Share is determined by dividing the net assets of the Company attributable to the Sterling Shares of £78,132,138 (US$124,956,728) by 90,715,319, being the number of Sterling Shares in issue at the period end.
The NAV of each U.S. Dollar Share is determined by dividing the net assets of the Company attributable to the U.S. Dollar Shares of US$62,884,937 by 78,573,876, being the number of U.S. Dollar Shares in issue at the period end.
14. Earnings per share
Basic earnings per share is calculated by dividing the returns attributable to holders of Shares in a particular class by the weighted average number of Shares in that class in issue during the period. There were no potentially dilutive shares in issue at 30 September 2009 (30 September 2008 - nil).
15. Controlling party
In the opinion of the Directors on the basis of shareholdings advised to them, the Company has no immediate or ultimate controlling party.
16. Revenue reserves
| 30 September 2009 | 31 March 2009 | |
| US$ | US$ | |
| Opening revenue reserves | (82,652,797) | (2,785,879) |
| Change in net assets from operations | 11,735,362 | (79,866,918) |
| Closing revenue reserves | (70,917,435) | (82,652,797) |
| Revenue reserves attributable to Management Shares | - | - |
| Revenue reserves attributable to Sterling Shares | (57,595,078) | (65,422,380) |
| Revenue reserves attributable to U.S. Dollar shares | (13,322,357) | (17,230,417) |
| (70,917,435) | (82,652,797) |
17. Exchange rates
As at 30 September 2009 and 31 March 2009, the exchange rates used (against US$) in preparation of these financial statements are as follows:
| 30 September | 31 March | |
| 2009 US$ | 2009 US$ | |
| Sterling | 1.5993 | 1.4333 |
| Euro | 1.4617 | 1.3277 |
18. Business segments and geographical analysis
For management purposes the Company has one sole principal activity and that is to make investments. The investment objective of the Company is to generate long-term capital gains by investing in a diversified portfolio of private equity funds, hedge funds and other specialty funds. As this is the primary and sole business activity, the results disclosed in the Balance sheet and Income statement are sufficient to satisfy the primary segmental reporting requirements of IFRS 8.
The geographical allocation of investments at 30 September 2009 was as follows:
| 30 September 2009 | 31 March 2009 | |
| North America | 75% | 60% |
| Europe | 14% | 22% |
| Global | 8% | 15% |
| Asia & Other | 3% | 3% |
19. Legal and professional fees and brokerage
During the period 1 April 2009 to 30 September 2009, the Company incurred legal and professional fees of US$513,738 (1 April 2008 to 30 September 2008 - US$98,910). The Company incurred brokerage fees of US$338,391 during the period 1 April 2009 to 30 September 2009 (1 April 2008 to 30 September 2008 - US$30,000). The significant increases were a result of exceptional corporate activity during the period under review connected with an extraordinary general meeting of the Company requisitioned by a major shareholder and the subsequent appointment of the new Board of Directors to the Company on 18 June 2009.
20. Comparative figures - repurchase of Shares
The comparative figure for repurchase of Shares in the period from 1 April 2008 to 30 September 2008 is US$427,684. The Condensed Half-Yearly Financial Statements for the period from 1 April 2008 to 30 September 2008 state this figure at US$578,641. The difference relates to US$150,957 of costs that were moved from the share premium account to the income statement following the 31 March 2009 audit. This adjustment had no impact on the NAV of the Company.
21. Event after the reporting period - appointment of Aberdeen Asset Managers Limited
On 19 November 2009, Aberdeen Asset Managers Limited was appointed as the Investment Manager of the Company in place of Bramdean Asset Management LLP.
22. Event after the reporting period - share conversion
On 28 October 2009, certain holders of Shares in the Company owning Sterling Shares elected to switch into U.S. Dollar Shares and certain holders of Shares in the Company owning U.S. Dollar Shares elected to switch into Sterling Shares on the basis of the NAV of the Company's Shares at 31 October 2009. As a result of the switch, 76,500 Sterling Shares have been converted into U.S. Dollar Shares; 321,790 U.S. Dollar Shares have been converted into Sterling Shares.
Schedule of Investments
As at 30 September 2009
| Investments (Cost US$95,464,413) Private Equity & Specialty Funds portfolio | Investment called/cost US$ unless stated | Fair Value US$ | % of NAV | ||
| AIG Brazil Special Situations Fund II L.P. | 1,661,674 | 1,650,214 | 0.9 | ||
| Coller International Partners V L.P. | 6,187,500 | 6,183,968 | 3.3 | ||
| DFJ Athena L.P. | 4,810,000 | 3,894,397 | 2.1 | ||
| Goldman Sachs Capital Partners VI L.P. | 5,412,747 | 3,815,000 | 2.0 | ||
| Greenpark International Investors III L.P. | €7,979,067 | 11,662,915 | 6.2 | ||
| HIG Bayside Debt & LBO Fund II L.P. | 3,025,000 | 3,358,261 | 1.8 | ||
| MatlinPatterson Global Opportunities Partners III L.P. | 5,918,865 | 5,100,000 | 2.7 | ||
| Oaktree OCM Opportunities Fund VIIb L.P. | 12,000,000 | 15,424,254 | 8.2 | ||
| Pine Brook Capital Partners L.P. | 2,226,678 | 2,256,028 | 1.2 | ||
| Resonant Music I L.P. | 2,062,847 | 1,998,169 | 1.1 | ||
| Rho Ventures VI L.P. | 1,500,000 | 1,237,436 | 0.7 | ||
| Silver Lake Partners III L.P. | 4,498,658 | 3,989,854 | 2.1 | ||
| SVG Strategic Recovery Fund II L.P. | £4,046,168 | 6,471,176 | 3.4 | ||
| Tenaya Capital V L.P. † | 3,189,520 | 3,063,370 | 1.6 | ||
| Terra Firma Capital Partners III L.P. | €2,314,799 | 3,383,517 | 1.8 | ||
| Thoma Bravo Fund IX L.P. | 2,146,024 | 2,493,889 | 1.3 | ||
| Thomas H. Lee Parallel Fund VI L.P. | 7,650,640 | 6,931,874 | 3.7 | ||
| 82,914,322 | 44.1 | ||||
| Investments (Cost US$25,209,805) | Nominal | Fair Value | % of | ||
| Strategic Hedge Funds portfolio | Holding | US$ | NAV | ||
| Deephaven Global Multi-Strategy Fund Ltd. | 1,131 | 3,067,288 | 1.6 | ||
| D.E. Shaw Oculus International Members Interest | 7,083,333 | 9,321,482 | 5.0 | ||
| King Street Capital Ltd. | 8,011 | 3,161,152 | 1.7 | ||
| Paulson Advantage Plus Ltd. | 9,471 | 4,743,332 | 2.5 | ||
| Rye Select Broad Market XL Portfolio Ltd.* | 7,673 | - | - | ||
| 20,293,254 | 10.8 | ||||
| Investments (Cost US$17,300,000) | Nominal | Fair Value | % of | ||
| Transitional portfolio | Holding | US$ | NAV | ||
| Aarkad Plc | 5,152,395 | 5,549,644 | 3.0 | ||
| Defender Ltd.* | 10,136 | - | - | ||
| 5,549,644 | 3.0 | ||||
| Total Investments | 108,757,220 | 57.9 |
| Fixed-term deposits | Fair Value US$ | % of NAV | |||
| Bank of Scotland | 15,005,195 | 8.0 | |||
| BNP Paribas Group | 21,282,625 | 11.3 | |||
| Deutsche Bank | 18,905,945 | 10.1 | |||
| Royal Bank of Scotland International | 22,674,801 | 12.1 | |||
| 77,868,566 | 41.5 | ||||
| Cash | 1,541,599 | 0.8 | |||
| Other assets less liabilities | (325,720) | (0.2) | |||
| 1,215,879 | 0.6 | ||||
| 187,841,665 | 100.0 |
*Because of their exposure to Bernard L. Madoff Investment Securities LLC, these investments were written down to nil value. The Company continues to monitor the situation on behalf of its investors and to make every appropriate effort to seek recovery of the assets.
†Formerly Lehman Brothers Venture Partners V L.P.