Half-yearly Report

22nd Aug 2012 11:00

BlackRock Absolute Return Strategies Ltd Half Yearly Financial Report 30 June 2012

The Company is managed with the intention of realising all remaining assets inthe portfolio, in a manner consistent with the principles of prudent investmentmanagement and spread of investment risk, with a view to returning investedcapital to shareholders in an orderly manner.Financial Highlights As at As at 30 June 31 December 2012 2011 Change % NAV per Share £9.80 £9.95 -1.5 Total Net Assets (1) £13,995,683 £96,507,688 -85.5 Mid-Market Share Price £9.56 £9.31 2.7 Discount to NAV 4.8% 6.4% 1.6

(1) The change in total net assets is attributable to market movements and the realisation of the Company's assets and their distribution to Shareholders through the compulsory redemption of shares pursuant to the wind-down process.

Details about the Company are available at www.blackrockinternational.com/bars.

Chairman's Statement

Over the six month period ended 30 June 2012, the net asset value ("NAV") ofthe Company's Sterling Shares decreased by 1.5%, and the share price rose by2.7%.During the period, the Company continued to be managed with the intention ofrealising all remaining assets in the portfolio, in a manner consistent withthe principles of prudent investment management and spread of investment risk,with a view to returning invested capital to Shareholders in an orderly manner.The Investment Manager has therefore continued the realisation of the Company'sinvestments and I am pleased to report that since the commencement of themanaged wind-down cash proceeds of approximately £89 million, US$13 million and€12 million have been returned to shareholders.

Merger of the share classes

Following the first compulsory redemption of shares, the number of sharesoutstanding in respect of each share class reduced substantially. As a result,the time and cost incurred to maintain the three share classes becameproportionately more expensive and therefore the Board decided to merge theseclasses into a single Sterling class.

On 9 March 2012, the Company's Euro and US Dollar share classes were merged into the Sterling class. The merger took place through a conversion of all Euro and US Dollar shares into Sterling shares and the Euro and US Dollar share classes were subsequently cancelled.

Redemption of shares

Under the terms of the managed wind-down, the Board and the Manager arecommitted to distributing as much of the available cash as quickly asreasonably practical having regard to cost efficiency and working capitalrequirements. The first and second distributions to Shareholders of the cashproceeds from the realisation of the Company's investments were made on 10February 2012 and 6 July 2012, when 73.5% and 55.9% respectively of theCompany's then issued share capital was redeemed. Details of the payments madeto Shareholders are given in note 6 to the financial statements.

Going Concern Basis

This half yearly report has been prepared on a basis other than that of a going concern as a consequence of the intention to liquidate the Company. Further details are provided in note 2.

Outlook

The Company intends to continue to make distributions to Shareholders by meansof further redemptions, until its NAV decreases to an amount such that it isconsidered appropriate to put the Company into voluntary liquidation. The Boardwill then consider, in light of the then prevailing market conditions andShareholders' views, proposing a resolution for the immediate voluntaryliquidation of the Company. At present, based on the current liquidity profile,the Directors believe that the Company may be in a position to put forward aresolution for voluntary liquidation during 2013. However, this is subject tochange depending on the ability of the Company to realise its assets.The portfolio is now significantly more illiquid than it was at the beginningof the period and the Directors have asked the Investment Manager to exploreopportunities in the secondary market for illiquid assets with a view togenerating liquidity at a faster pace. In the preent circumstances, the Board is advised that the market would require a material discount for the realisationof assets in the secondary market. In addition, owing to the nature of these investments an active resale market may not be readily available and prices

obtained on the date of sale may be materially different than the value recorded by the private investment funds.

Further announcements regarding the progress of the realisation and the redemption of shares will be made in due course.

Colin MaltbyChairman22 August 2012

Interim Management Report and Responsibility Statement

The Chairman's Statement and the Investment Manager's Report give details ofthe important events which have occurred during the period to 30 June 2012 andup to the date of this report and their impact on the financial statements.

Principal risks and uncertainties

The principal risks faced by the Company can be divided into various areas as follows:

- Strategy/performance;- Regulatory;- Market;

- General economic and market conditions;

- Operational;- Counterparty;- Manager; and- Financial.

A detailed explanation of the risks relating to the Company was set out in theCompany's prospectus dated 4 April 2008 and can be found on pages 4 to 30 ofthe Securities Note. More recently, the Board reported on the principal risksand uncertainties faced by the Company on pages 17 to 19 of the annual reportand financial statements for the year ended 31 December 2011. This report alsoset out the risks disclosed on page 9 of the circular sent to Shareholders on15 July 2011, regarding the proposed managed wind-down of the Company. Alldocuments are available on the Company's website atwww.blackrockinternational.com/bars/Library/Literature.In the view of the Board, there have not been any changes to the fundamentalnature of these risks since the publication of the prospectus, circular toshareholders and the latest annual report. The principal risks anduncertainties as summarised above are equally applicable to the remaining sixmonths of the financial year as they were to the period under review.

Further information is given in relation to financial instruments with off-balance sheet risk in note 4 of the notes to the financial statements.

Related party transactions

The Manager and the Investment Manager are regarded as related parties and details of the investment management and performance fees payable are set out in note 7. Other related party transactions, including the related party transactions with the Directors, are set out in note 10.

Directors' responsibility statement

The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements.

The Directors confirm to the best of their knowledge and belief that:

- the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with accounting principles generally accepted in the United States of America; and

- the Interim Management Report together with the Chairman's Statement and Investment Manager's Report, include a fair review of the information required by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules.

The half yearly financial report was approved by the Board on 22 August 2012 and the above responsibility statement was signed on its behalf by the Chairman.

Colin MaltbyFor and on behalf of the Board22 August 2012Investment Manager's ReportRelative ValueRates managers saw mixed results during the first half of 2012. For the mostpart, managers were defensively positioned at the beginning of the year, due tothe perceived risks of potentially adverse developments in Europe. As a result,several managers maintained shorts in European sovereign credits, as well astrades with long volatility profiles in Europe and Asia. However, marketspositively viewed developments associated with Greece and the LTRO program,which in turn negatively impacted these trades. However, much of the sameactivity created smaller sized relative value dislocations from which managerswere generally able to profit. While the direction of major monetary policyactions in the second quarter held few surprises, select developments didtrigger withdrawals of risk capital that widened dislocations in certain bondrelative value trades, leading to widening spreads in these trades during thequarter. Such events included the risk-off sentiment associated withdevelopments in Spain and Greece, the JP Morgan hedging loss announcement, andthe Fed's positioning on the potential implementation of QE3. Overall, earlygains from relative value trades along the UK and Canadian yield curves weremostly offset by June losses in LIBOR-related trading and retracing tail riskhedges as macro fears eased at quarter-end.In the first quarter, convergence-based managers generally posted strongresults, helped by gains from both outright and special situation trades, aswell a new issue activity. Although the market as a whole continues tocontract, the environment remained favorable for convertible bonds, withvaluations improving across most regions. However, in the second quarter,managers suffered slight setbacks, particularly as convertible bond supplydecreased 6.7% to $203.4 billion, with only $6.6 billion in new issuance,according to Barclays Research. Because of the scant new issuance and dwindlingexisting supply, opportunities were relatively limited for convertible bondarbitrage strategies, and valuations for outright convertible holdingscontinued to remain strong relative to their intrinsic values. Specialsituation holdings were the dominant driver of performance during the period,such as credit positions in issuers expected to pursue tenders or exchanges,capital structure trades (often involving hybrid securities) that takeadvantage of mispriced securities, and/or sovereign-based hedges that help toreduce credit and interest rate exposure through fundamentally weak governmentsituations.Volatility strategy performance was again dispersed by manager, driving mixedoverall results for the period. Equity volatility (as measured by the VIXIndex) started the year at 23.5, dropping to 15.5 at the end of the firstquarter, then finishing moderately up at the end of June at approximately 17.1.However, these figures mask the substantial volatility of the VIX during theperiod, experiencing numerous swings during the quarter that reached highs of26.6 on 1 June as investors grew increasingly concerned over the financialhealth of Spain, Greece, and the larger Eurozone. As a result, volatility-basedtail risk hedges generally performed well in May, having underperformed earlierin the year. Growing single-stock dispersion during the April-May earningsseason generally contributed to performance, as did volatility-relatedsovereign credit and flattener positions. However, correlation levels also rosein May, detracting from single-stock volatility mispricing opportunities at thepeak of concern in early June. Also, select event-driven volatility tradesdetracted.

Event Driven

Merger arbitrage managers generally produced positive returns for the quarter,benefiting from tighter deal spreads and ongoing progress in several existingdeals. In general, new deal activity was relatively healthy, as risingcorporate cash levels and competitive pressure drove corporate activity insectors such as energy, technology and pharmaceuticals. Event-related equitystrategies generated modest gains during the second quarter in a relativelyquiet period of activity. While merger and acquisition volume rebounded to over$510 billion globally versus $470 billion in the first quarter, according todata from Bloomberg, it was down significantly compared to over $650 billion inthe second quarter of 2011. Deal volume fell over 20% during the first half of2012 versus the same period for 2011. The reduced supply of deals combined withinvestors' chase for yield within the low interest rate environment resulted ingenerally low risk spreads for outstanding deals. For the second quarteroverall, annualised risk spreads tended to fall within the mid-to-high singledigit range for deals that appeared more secure, leaving little room for error.Distressed strategies generated broad-based gains in the first quarter,supported by a favorable market backdrop and positive developments across manycore holdings. Of note, the Washington Mutual estate began to distributecapital, with an initial payout of roughly 75% of expected proceeds coming inMarch. Elsewhere, a number of longstanding holdings in the real estate andfinancial sectors, post-reorganisation equities and distressed mortgagesecurities contributed to gains. Although absolute returns were moderate,distressed strategies made a relatively larger contribution to overallperformance in the second quarter. The most notable event was the firstdistributions from the Lehman estate. While managers experienced gains in thefirst quarter in anticipation of this event, Lehman claims continued to tradestrongly post-distribution as potential rates of return remained comparativelyattractive. New corporate default activity continued to be muted overall,though managers are becoming active in certain situations. Managers alsogenerated returns in "below the radar" corporate situations where theyindividually, or within strategic alliances, engaged companies directly todevelop capital solutions.

Fundamental Long/Short

For equity managers, long holdings benefited in the first quarter from bothidiosyncratic factors and a healthy tailwind from sharply rising markets asfear over the economy and the situation in Europe faded. In general, marketsrewarded risk-taking, with cyclical sectors such as energy, financials,technology and consumer discretionary showing the most strength. In addition,many companies that experienced the most pronounced sell-offs near the end of2011 surged in the opening months of 2012. Still, many managers were skepticalof the first quarter rally and cautiously positioned themselves to reducedownside risk while maintaining the potential for gains should markets continueto strengthen. The second quarter turned out to be a difficult environment forequity managers, with many giving back a portion of the strong gainsexperienced in the first quarter. Investor risk attitudes shifted once again,turning more conservative on poor economic news in the US, and yet anotherround of concerns regarding the financial stability of Europe. On the longside, sharp losses from disappointing headlines in May were partially offset bya rally in the closing days of June, but long-biased managers still generallysuffered from market headwinds despite help from idiosyncratic trades,company-specific short positions and index hedges. Not surprisingly, some ofthe largest shorter-term detractors included economically sensitive equityissues such as technology, energy and financials.Credit managers also profited from the bounce in markets during the firstquarter but remained unconvinced that the key drivers of the downturn in 2011were resolved. In general, high yield issues purchased near market lows lastSeptember improved on strong company-specific results. Mortgage-basedstrategies experienced a strong resurgence in demand and liquidity, whichhelped to recover a majority of the losses suffered in 2011. On the back ofthis price rally, managers took profits in certain long holdings and sought toidentify more relative value opportunities. During the second quarter, long/short credit strategies generated modest gains, posting positive results inApril and June while broadly guarding value in May. Despite moderate creditspread widening, credit indices generally gained ground with rates fallingoverall. Investors have maintained demand for credit, driven by appetite foryield and a theoretically more defensive posture (e.g., relative to equities)in the face of decreasing economic growth globally. While this has contributedto positive technicals for credit, as evidenced by positive flows intobond-related mutual funds and ETFs, it can also serve to mask weakness at theindividual credit level. Sentiment across long/short credit managers has becomeless constructive on US growth and continues to be largely negative on Europe.Within this framework, managers are emphasizing short positions in industriesthat would be directly affected by weaker consumer demand, such as retail, aswell as industries undergoing fundamental changes.

Direct Sourcing

Direct sourcing strategies generated consistent gains throughout the first halfof 2012. Manager activity in the space spanned a number of segments, such ascommercial real estate, aviation and energy debt finance. Certain managers havealso been active in the capital structures of middle-market corporations facingdifficulties. In the second quarter, a notable portion of returns - andvolatility of returns - was driven by energy related investments. In the energysector, managers are observing a basic pattern of demand for capital faroutstripping the supply. The supply side continues to be hindered by banks thatare conservative with their lending, cyclical uncertainties around economicgrowth and energy demand out of China, as well as declining prices for manyenergy commodities, engendering broader caution around energy-relatedinvesting. On the demand side, many corporations are facing significantpressures to develop new projects and sites, or in some cases to shift to newforms of production, all of which requires meaningful capital. Notably, giventhe depression of natural gas prices, some companies are seeking to shift theirproduction focus from gas to oil. Given the uncertainties noted above andimbalance of supply and demand for capital, managers have been able to extractmeaningful economics and protections when sourcing deals, including cash flowand/or asset overcollateralisation and covenants tied to certain productionlevels or events (e.g., asset sales).Mark WoolleyBlackRock Alternative Advisors22 August 2012

Asset Allocation 30 June 2012

Discipline and Strategy % Relative Value Capital Structure 2.3Convergence 13.6Rates 7.8Statistical 0.2Volatility 0.7 ---- 24.6 ----Event Driven Distressed 15.5Mergers/Acquisitions 0.8Corporate Actions 1.6 ---- 17.9 ----Fundamental Long/Short Equity Selection 26.0Equity Active Value 2.1Credit 17.8 ---- 46.0 ----Direct Sourcing Lending 2.5Equity Financing 3.9Real Estate 2.9Insurance 0.0 ---- 9.2 ----

Discipline allocations may not sum to 100% due to residual allocations to other disciplines such as Directional Trading as well as rounding differences.

Geographic % North America 73.6Western Europe 15.5Emerging Markets 6.5Developed Asia 4.5Statistical Summary

Aggregate Leverage of Underlying Managers

3.3x

Gross US Dollar Long Exposure

332%

Gross US Dollar Short Exposure

-291%

Number of Investment Programs

14

% by Top 5 Investment Programs

53.7%

Statement of Assets and Liabilities30 June 2012 30 June 30 June 31 December 2012 2011 2011 US$ US$ US$ Notes (unaudited) (unaudited) (audited)Assets Investments in privateinvestment funds, at fairvalue (cost 30.06.12$15,352,162;30.06.11:$169,371,366; 31.12.11:$42,926,377) 3 15,243,176 188,126,590 42,376,512 Unrealised gain on forward foreign currency exchangecontracts 5 - 813,315 684,253 Cash and cash equivalents 903,322 6,134,805 34,799,906 Cash and cash equivalents denominated in foreigncurrencies (cost 30.06.12:$29,540,000; 31.12.11: $52,963,288) 28,726,378 - 52,663,009 Due from private investment funds 6,362,079 7,924,304 59,401,129 Other assets 27,350 73,549 86,003 ---------- ----------- ----------- 51,262,305 203,072,563 190,010,812 ---------- ----------- -----------Liabilities Due to redeemed shareholders 28,684,952 - - Management fees payable 7 104,295 735,026 454,780 Performance fees payable 7 75,135 601,241 73,779 Accounts payable and accruedexpenses 212,405 233,832 230,660 Other liabilities 203,197 - 151,812 ---------- ----------- ----------- 29,279,984 1,570,099 911,031 ---------- ----------- -----------Net assets 21,982,321 201,502,464 189,099,781 ========== =========== ===========Statement of Operationsfor the six months ended 30 June 2012 Six months ended Year ended 30 June 30 June 31 December 2012 2011 2011 US$ US$ US$ Notes (unaudited) (unaudited) (audited) Income Interest 42,323 977 12,891 --------- ---------- ----------Expenses Management fees 7 275,706 1,440,520 2,593,296Performance fees 7 75,135 601,241 73,779

Administration and custody fees 24,000 50,732

101,340Other professional fees 352,859 261,724 746,485 --------- ---------- ---------- 727,700 2,354,217 3,514,900 --------- ---------- ----------Net investment loss (685,377) (2,353,240) (3,502,009) --------- ---------- ----------Net realised gain on: Investments in private investment funds 878,448 1,509,982 17,026,621 Forward foreign currencyexchange contracts 1,593,507 8,491,656 1,353,097 --------- ---------- ---------- 2,471,955 10,001,638 18,379,718 --------- ---------- ----------Net change in unrealised gain(loss) on: Investments in privateinvestment funds 440,879 4,663,582 (14,839,350) Forward foreign currencyexchange contracts (684,253) (2,091,367) (2,220,429) --------- ---------- ---------- (243,374) 2,572,215 (17,059,779) --------- ---------- ----------Increase (decrease) in net assets resulting fromoperations 1,543,204 10,220,613 (2,182,070) ========= ========== ==========Statement of Changes in Net Assetsfor the six months ended 30 June 2012 Six months ended Year ended 30 June 30 June 31 December 2012 2011 2011 US$ US$ US$ (unaudited) (unaudited) (audited)

Net assets, beginning of period 189,099,781 199,771,123

199,771,123

----------- -----------

-----------

Increase (decrease) in net assets:From operationsNet investment loss (685,377) (2,353,240) (3,502,009) Net realised gain on investments inprivate investment funds 878,448 1,509,982

17,026,621

Net realised gain on forward foreigncurrency exchange contracts 1,593,507 8,491,656

1,353,097

Net change in unrealised gain (loss) on investments in private investmentfunds 440,879 4,663,582

(14,839,350)

Net change in unrealised gain (loss) on forward foreign currency exchangecontracts (684,253) (2,091,367) (2,220,429) ----------- ----------- ----------- 1,543,204 10,220,613 (2,182,070) ----------- ----------- -----------From capital transactions Conversion to nil (30.06.11:12,15531.12.11 1,054,012) US Dollardenominated shares - 126,876 10,781,494 Conversion to nil (30.06.11: 62,11231.12.11: 62,112) Euro denominatedshares - 891,305

891,305

Conversion to 663,525 (30.06.11: 977,783 31.12.11 977,783) Sterlingdenominated shares 10,648,497 15,927,107

15,927,107

Conversion of 457,729 (30.06.11: 1,549,353 31.12.11: 1,549,353) USDollar denominated shares (4,762,723) (16,163,703)

(16,163,704)

Conversion of 441,405 (30.06.11: 54,467 31.12.11: 61,090) Euro denominated shares (5,885,774) (781,585) (869,891) Conversion of nil (30.06.11: 73,25431.12.11: 679,436) Sterling denominated shares - - (10,566,311) Buy back of nil (30.06.11: 116,976 31.12.11: 116,976) US Dollar denominated shares - (1,021,795) (1,021,795) Buy back of nil (30.06.11: 87,611 31.12.11: 87,611) Euro denominatedshares - (1,002,932)

(1,002,932)

Buy back of nil (30.06.11: 495,731 31.12.11: 495,731) Sterling denominated shares - (6,464,545) (6,464,545) Redemption of 1,269,514 (30.06.11: nil 31.12.11:nil) US Dollardenominated shares (12,940,421) - - Redemption of 1,224,241 (30.06.11: nil 31.12.11:nil) Euro denominatedshares (16,438,843) - - Redemption of 8,937,624 (30.06.11:nil 31.12.11:nil) Sterlingdenominated shares (139,281,400) - - ----------- ----------- ----------- (168,660,664) (8,489,272) (8,489,272) ----------- ----------- -----------

Net assets, end of period/year 21,982,321 201,502,464

189,099,781 =========== =========== ===========Statement of Cash Flowsfor the six months ended 30 June 2012 Six months ended Year ended 30 June 30 June 31 December 2012 2011 2011 US$ US$ US$ (unaudited) (unaudited) (audited) Cash provided by (used in): Operating activities Increase (decrease) in net assetsresulting from operations 1,543,205 10,220,613

(2,182,070)

Adjustments to reconcile increase (decrease) in net assets resultingfrom operations to cash providedby (used in) operating activities: Net realised gain on investments in private investment funds (878,448) (1,509,982)

(17,026,621)

Net change in unrealised (gain) loss on investments in private investment funds (440,879) (4,663,582)

14,839,350

Net change in unrealised (gain) loss on forward foreign currency

exchange contracts 684,253 2,091,367 2,220,429 Purchases of investments in private investment funds - (14,982,920) (14,982,920) Sales of investments in private investment funds 81,491,713 18,660,780 108,947,740 Decrease (increase) in other assets 58,653 5,914 (6,540) Decrease in management fees payable (350,485) (3,978) (284,224) Increase (decrease) in performance fees payable 1,356 111,280

(416,182)

Decrease in accounts payable andaccrued expenses (18,255) (2,308) (5,480) Increase in other liabilities 51,385 - 151,812 ----------- ---------- ----------Cash provided by operatingactivities 82,142,497 9,927,184 91,255,294 ----------- ---------- ----------Financing activities

Payments on redemption of Shares (139,975,712) - - Payments on buy backs of Shares - (8,489,272)

(8,489,272)

----------- ----------

----------

Cash used in financing activities (139,975,712) (8,489,272)

(8,489,272)

----------- ----------

----------

(Decrease) increase in cash andcash equivalents (57,833,215) 1,437,912 82,766,022 ----------- ---------- ----------Cash and cash equivalents Beginning of period/year 87,462,915 4,696,893 4,696,893 ----------- ---------- ----------End of period/year 29,629,700 6,134,805 87,462,915 ----------- ---------- ----------

Supplemental disclosures of cash

flow information Cash received during the periodfor interest 42,323 -

12,891

----------- ----------

----------

Conversion to US Dollar, Euro andSterling denominated shares 10,648,497 16,945,288

27,599,906

Conversion of US Dollar, Euro and Sterling denominated shares (10,648,497) (16,945,288)

(27,599,906)

========== ==========

==========

In-kind purchases/sales ofinvestments 3,289,249 78,502 9,717,233 ========== ========== ==========Financial Highlightsfor the six months ended 30 June 2012 6 months ended 6 months ended Year ended 30 June 2012 30 June 2011 31 December 2011 Share Class Share Class Share Class (unaudited) (unaudited) (audited) £ $ € £ $ € £Per shareoperatingperformance: Net asset value, beginningof period/year 9.95 10.16 9.87 9.89 10.16 9.87 9.89 ---------- --------- ---------- ----------- ---------- ---------- ----------Income from investment operations Net investment loss (0.32) (0.13) (0.11) (0.13) (0.19) (0.17) (0.18) Net realised and unrealisedgain on investments andforward foreigncurrencyexchange contracts 0.17 0.41 0.40 0.42 0.22 0.23 0.24 ---------- --------- ---------- ----------- ---------- ---------- ----------Total from investment operations (0.15) 0.28 0.29 0.29 0.03 0.06 0.06 ---------- --------- ---------- ----------- ---------- ---------- ----------Net asset value, end ofperiod/year 9.80 10.44 10.16 10.18 10.19 9.93 9.95 ========== ========= ========== =========== ========== ========== ==========Total return*Before management fees (0.70%) 3.85% 3.87% 4.00% 1.72% 1.88% 1.93%Management fees (0.59%) (0.74%) (0.70%) (0.72%) (1.32%) (1.31%) (1.31%) Performance fees (0.19%) (0.30%) (0.28%) (0.31%) (0.04%) (0.02%) (0.05%) ---------- --------- ---------- ----------- ---------- ---------- ---------- (1.48%) 2.81% 2.89% 2.97% 0.36% 0.55% 0.57% ---------- --------- ---------- ----------- ---------- ---------- ----------Ratios/supplemental data**:Net assets, end of period/year 13,995,683 7,156,971 16,984,992 105,720,960 17,606,148 16,533,427 96,507,688 ========== ========= ========== =========== ========== ========== ==========Ratio of expenses to averagenet assets Before management fees 1.81% 0.32% 0.32% 0.32% 0.43% 0.43% 0.43%Management fees 1.16% 1.47% 1.39% 1.44% 1.30% 1.32% 1.32%Performance fees 0.18% 0.45% 0.27% 0.29% 0.33% 0.01% 0.02% ---------- -------- ---------- ----------- ---------- ---------- ---------- 3.15% 2.24% 1.98% 2.05% 2.06% 1.76% 1.77% ========== ========= ========== =========== ========== ========== ==========Ratio of net investment lossto average net assets Before management fees (1.81%) (0.32%) (0.32%) (0.32%) (0.43%) (0.43%) (0.43%)Management fees (1.16%) (1.47%) (1.39%) (1.44%) (1.30%) (1.32%) (1.32%)Performance fees (0.18%) (0.45%) (0.27%) (0.29%) (0.33%) (0.01%) (0.02%) ---------- --------- ---------- -----------

---------- ---------- ----------

(3.15%) (2.24%) (1.98%)

(2.05%) (2.06%) (1.76%) (1.77%)

========== ========= ========== ===========

========== ========== ==========

* Total return is not annualised and is calculated for each class of shares.

An individual shareholder's return may vary from the results included above due to the timing of investments.

** Ratios have been calculated for each class as a whole. For the purpose of calculating these ratios, average net assets are calculated before 30 June 2012, 30 June 2011 and 31 December 2011 shareholder redemptions, if any.

Notes to Financial Statements

1. The Company

BlackRock Absolute Return Strategies Ltd (the "Company") is a limited liabilityregistered closed ended investment company incorporated in Jersey on 18 March2008. The Company's Shares were listed on the London Stock Exchange on 24 April2008 and commenced unconditional trading on 29 April 2008. With effect from 1 January 2009, under the new taxation regime that became effective in Jersey,the Company's tax status changed from that of an exempt company, whereby theCompany's liability to Jersey taxation was generally limited to the exemptcompany fee of £600 per year to a zero tax rate company. Taxes relating tolocal income, profits and capital gains are not levied on the Company.

The Company has been established with an unlimited life and its Board of Directors is independent of the Investment Manager.

Prior to 25 August 2011 the Company's investment objective was to generate absolute returns in excess of the yields on short-term LIBOR securities, while endeavouring to minimise the corresponding level of volatility. The Company sought to generate these returns irrespective of the performance of any particular sector of the global capital markets.

In accordance with the Circular to Shareholders dated 15 July 2011 and theresolution passed at the subsequent Extraordinary General Meeting and classmeetings of the Euro, Sterling and Dollar Shareholders held on 25 August 2011,the Company has commenced a managed wind-down in order to enable Shareholdersto realise in an orderly manner their investment in the Company.

The revised investment objective and policy approved by Shareholders at the meetings held on 25 August 2011 is as follows:

The Company will be managed with the intention of realising all remainingassets in the Portfolio, in a manner consistent with the principles of prudentinvestment management and spread of investment risk, with a view to returninginvested capital to the Shareholders in an orderly manner.BlackRock Financial Management, Inc. ("BFM"), a Delaware corporation, is theCompany's Investment Manager and BlackRock (Channel Islands) Limited ("BCI") isthe Manager. BCI is responsible for implementing the Company's investmentpolicies and objectives as set forth by the Board of Directors. BlackRockAlternative Advisors ("BAA"), a business unit within BFM, is responsible forthe Company's investment management decisions, including identifying,evaluating, and monitoring independent investment managers, as well asdetermining the allocation of the Company's assets among these managers. BFM isregistered as an investment advisor with the United States Securities andExchange Commission and as a commodity pool operator with the United StatesCommodity Futures Trading Commission. Note 10 gives further details oftransactions with these related parties.

2. Significant accounting policies

The accompanying unaudited financial statements have been prepared inaccordance with generally accepted accounting principles in the United Statesof America ("US GAAP"). Amounts as at 31 December 2011 included in theunaudited financial statements have been derived from the audited financialstatements as of that date. The accompanying unaudited financial statementsshould be read in conjunction with our Annual Report for the year ended 31 December 2011. Our significant accounting policies have not changed since 31 December 2011.In the opinion of management, the accompanying unaudited financial statementsreflect all adjustments, consisting only of normal recurring items, necessaryfor their fair presentation in conformity with US GAAP for complete financialstatements. The results of operations for interim periods are not necessarilyindicative of the results to be expected for a full year.

Going concern

On 25 August 2011, the Company's shareholders resolved to amend the Company's Investment Objective and policy to commence a managed wind-down process.

73.5% of the Company's share capital was redeemed at the close of business on10 February 2012 by way of a compulsory partial redemption of shares byreference to the unaudited monthly NAV of the Company as at December 2011.Following the merger of the US Dollar and Euro denominated shares into theSterling share class on 9 March 2012, a further 55.9% of the remaining Sterlingshares were redeemed at the close of business on 6 July 2012 by reference tothe unaudited estimated monthly NAV of the Company as at May 2012. Furtherdetails of the redemptions are provided in note 6.

The Directors of the Company anticipate liquidating the rest of the portfolio, delisting the Company from the stock exchange and putting the Company into voluntary liquidation in due course.

Accordingly, the Directors no longer consider the Company to be a going concernand the financial statements have been prepared on the basis other than that ofa going concern. No material adjustments arose as a result of ceasing to applythe going concern basis.Given that the financial statements have been prepared on a fair value basis,there has not been any significant impact due to the basis other than that of agoing concern. However consideration has been given to this fact in determiningthe fair value of investments.

Cash and cash equivalents

Cash and cash equivalents include investments with an original maturity of three months or less. Cash and cash equivalents include all cash which is not under the direction of any independent investment manager. All cash is held with the Sub-Administrator, (Note 8), as custodian of the Company.

Private investment funds

The Company's investments in private investment funds, valued at US$15,243,176(30 June 2011: US$188,126,590; 31 December 2011 US$42,376,512) (69.34% (30 June2011: 93.36%; 31 December 2011: 22.41%) of net assets), are stated at fairvalue, which has been estimated by BAA in the absence of readily ascertainablemarket values. These fair values are based primarily on the net asset value andother financial information provided by the management of each underlyingprivate investment fund and are reflected net of any accrued management andincentive fees due to underlying managers as required by each privateinvestment fund's respective operating agreement. Private investment fund netasset values are generally provided monthly but may also be provided quarterly.The underlying investments of each private investment fund are accounted for atfair value as described in the private investment fund's financial statements.The fair value of certain investments may be estimated by underlying managersin the absence of observable market data. Owing to the inherent uncertainty ofthese estimates, these values may differ from the values that would have beenused had a ready market for these investments existed and the differences couldbe material. In addition, the calculated fair value of certain investments,including restricted or illiquid securities, may differ from the values thatwould have been used had a ready market existed. Due to the nature of theseinstruments, an active resale market may not be readily available and pricesobtained on the date of sale may be materially different than the valuerecorded by the private investment funds.If the reported net asset value of a private investment fund is not availableor BAA determines, based on its own due diligence and investment monitoringprocedures, that the reported net asset value of any private investment fund isnot representative of fair value, and the difference between fair value and thereported value is material, BAA shall estimate the fair value of the privateinvestment funds in good faith. For the periods ended 30 June 2012, 30 June2011 and 31 December 2011, no such fair value adjustments were recorded.Investment transactions are accounted for on a trade date basis. Realised gainsand losses on investment transactions are determined using average cost. Gainsand losses from investments in private investment funds, which are net of allfees and allocations to the investment advisors of the funds, are reflected asa net gain or (loss) on investments in the statement of operations.

Fair value of financial instruments

The fair value of the Company's assets and liabilities which qualify as financial instruments under Accounting Standards Codification ("ASC") 825, Financial Instruments approximates the carrying amounts presented in the statement of assets and liabilities.

Forward foreign currency exchange contracts

The Company entered into forward foreign currency exchange contracts for thepurchase or sale of a specific foreign currency at a fixed price on a futuredate for hedging purposes. Risks may arise upon entering into these contractsfrom the potential inability of the counterparty to meet the terms of thecontracts. The gain or loss arising on the foreign currency exchange contractsis recorded for financial statement purposes as unrealised until the contractsettlement date. Upon maturity or early settlement of the contracts, anyapplicable gain or loss is recorded as realised for financial statementpurposes. Effective February 2012, the foreign currency hedging program ceased,in accordance with the managed wind-down.

Foreign currency translation

The Company's reporting currency is United States dollars. Assets andliabilities originating in non-United States dollar denominated currencies aretranslated into United States dollars at the appropriate rates of exchange ineffect at the date of the financial statements. Income and expense transactionsoriginated in non-United States dollar denominated currencies have beentranslated into United States dollars at the prevailing exchange rates on thedate of the transaction.The Company does not isolate that portion of the operating results arising fromchanges in foreign currency exchange rates from the results arising fromchanges in market prices of investments held. Such fluctuations are includedwithin the net gains or losses on investments in the statement of operations.

Use of estimates

The preparation of financial statements in accordance with US GAAP requiresmanagement to make estimates and assumptions that affect the reported amountsof assets and liabilities and disclosures of contingent assets and liabilitiesas of the date of the financial statements and the reported amounts of revenuesand expenses during the reporting period. Actual results could differ fromthose estimates.

New accounting pronouncements

In May 2011, the FASB issued ASU No. 2011-04, Fair Value Measurement (Topic820) - Amendments to Achieve Common Fair Value Measurement and DisclosureRequirements in US GAAP and IFRSs. The update changes the wording used todescribe many of the requirements in US GAAP for measuring fair value and fordisclosing information about fair value measurements. Amongst other changes,the update requires reporting entities to disclose a description of thevaluation processes used and certain quantitative information about thesignificant unobservable inputs used for level 3 fair value measurements. Theupdate is effective for interim and fiscal years beginning after 15 December2011. The adoption did not have a material impact on the financial statementsof the Company.In December 2011, the FASB issued amended guidance which will enhancedisclosures required by US GAAP by requiring improved information aboutfinancial instruments and derivative instruments that are either (1) offset or(2) subject to an enforceable master netting arrangement or similar agreement,irrespective of whether they are offset. This information will enable users ofan entity's financial statements to evaluate the effect or potential effect ofnetting arrangements on an entity's financial position, including the effect orpotential effect of rights of set-off associated with certain financialinstruments and derivative instruments. An entity is required to apply theamendments for annual reporting periods beginning on or after 1 January 2013and interim periods within those annual periods. An entity should provide thedisclosures required by those amendments retrospectively for all comparativeperiods presented. The Company is in the process of evaluating the impact thatthis guidance will have on its financial statements.

Income taxes

The Company determines whether a tax position of the Company is more likelythan not to be sustained upon examination by the applicable taxing authority,including resolution of any related appeals or litigation processes, based onthe technical merits of the position. The tax impact to be recognised ismeasured as the largest amount that is greater than 50% likely of beingrealised upon ultimate settlement which could result in the Company recording atax liability that would reduce net assets. The Company invested directly andindirectly in various jurisdictions and is therefore subject to varyingpolicies and statutory time limitations with respect to examination of taxpositions. The Company has reviewed its tax positions and believes it is morelikely than not that they will be sustained upon examination.

3. Investments

As at 30 June 2012, the Company held investments in private investment fundswith a total fair value of US$15,243,176 (30 June 2011: US$188,126,590; 31December 2011 US$42,376,512), (69.34% of net assets (30 June 2011: 93.36%; 31 December 2011: 22.41%)). No investments in private investment funds held by theCompany exceeded 5% of the Company's net assets at 30 June 2011 or 31 December2011. Summary information reflecting the Company's investments in privateinvestment funds as at 30 June 2012 is detailed below. Investments held by theCompany which exceed 5% of net assets are individually identified, whilesmaller investments in other funds are aggregated. The Company is not able toobtain complete investment holding details on each of the private investmentfunds held within the Company's portfolio in order to determine whether theCompany's proportional share of any investments held by the private investmentfund exceeds 5% of the net assets of the Company at the end of each period.

Primary % of Fund's Primary Geographic RedemptionsInvestment Fair Value Net Assets Disciplines Location* Permitted Citadel $5,239,068 23.83% Relative North QuarterlyKensington Value America, Global Developed Strategies Asia, Fund Ltd. Emerging Markets CVI Global 1,898,602 8.64% Direct Emerging QuarterlyValue Fund B Sourcing Markets L.P.** Wayzata 1,421,813 6.47% Event Emerging QuarterlyRecovery Fund Driven Markets (Cayman) II Ltd.** TPG-Axon 1,230,720 5.60% Fundamental Emerging N/APartners Long/Short Markets (Offshore), Ltd.** Quintessence 1,215,744 5.53% Relative Emerging N/AOverseas LP Value Markets Other funds 4,237,229 19.27% ----------- ------ Total $15,243,176 69.34% =========== ======

* Refers to the primary geographic locations of the investments held by the private investment fund.

** Investment made through a master fund managed by BlackRock or its affiliates as discussed in Note 10.

Geographical allocation as a percentage of the Company's net assets at 30 June2012 comprised 51.0% (30 June 2011: 53.5%; 31 December 2011: 13.4%) allocatedto North America, 10.7% (30 June 2011: 22.2%; 31 December 2011: 5.5%) toWestern Europe, 3.1% (30 June 2011: 8.9%; 31 December 2011: 1.4%) to DevelopedAsia, and 4.5% (30 June 2011: 8.8%; 31 December 2011: 2.1%) to EmergingMarkets.The agreements relating to investments in private investment funds provide forcompensation to the investment managers or general partners in the form ofmanagement fees generally ranging from 0% to 2% per annum of net assets orpartners' capital and incentive fees or allocations generally ranging from 0%to 20% of net profits earned. The private investment funds' management fees andincentive fees or allocations are reflected in the increase (decrease) in netassets resulting from operations in the statement of operations.ASC 820, Fair Value Measurement ("ASC 820"), provides a framework for measuringfair value and requires specific disclosures about financial instruments. ASC820 permits the Company, as a practical expedient, to estimate the fair valueof a private investment fund based on the net asset value per share or itsequivalent if the net asset value of the private investment fund is calculatedin a manner consistent with the measurement principles of ASC Topic 946,Investment Companies - Financial Services. The Company uses the practicalexpedient to estimate fair value of all private investment funds. In addition,ASC 820 includes a hierarchy that classifies inputs employed to determine fairvalue. Investments measured and reported at fair value are classified anddisclosed in one of the following categories:

Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2 - Quoted prices in markets that are not considered to be active foridentical assets or liabilities, quoted prices in active markets for similarassets or liabilities and inputs other than quoted prices that are directlyobservable or indirectly through corroboration with observable market data. Ifa reporting entity has the ability to redeem its investment with the privateinvestment fund at the net asset value per share (or its equivalent) at themeasurement date or within the near term and there are no other liquidityrestrictions, the Company's investment in the private investment fund shall becategorised as a Level 2;Level 3 - Inputs that are both significant to the fair value measurement andunobservable, including investment specific inputs that are not derived frommarket data and inputs that cannot be corroborated by market data. Thedetermination of fair value for investments included in the level 3 categoryrequires considerable subjectivity and estimation. Investments in privateinvestment funds that are currently subject to liquidity restrictions that willnot be lifted in the near term shall be categorised as a Level 3.The Company's investments in private investment funds not otherwise traded on asecurities exchange are classified within level 2 or level 3 of the fair valuehierarchy as the value of these interests are primarily based on the respectivenet asset value reported by management of each underlying private investmentfund rather than actual market transactions and other observable market data.The determination of whether such investment will be classified in level 2 orlevel 3 is assessed at the partnership or class level and based upon theability to redeem such investment within a reasonable period of time (within 90days of any month-end during the period). If an investment in a privateinvestment fund may be redeemed within 90 days of any month-end during theperiod and the fair value of the investment is based on information provided bymanagement of the underlying fund it is classified as level 2; in all othercases it will be classified as level 3. The Company's investments in foreigncurrency exchange contracts are classified within level 2 of the fair valuehierarchy, because they are valued using directly observable foreign currencyspot rates and forward foreign currency rates.The following tables summarise the valuation of the Company's investments underthe ASC 820 fair value hierarchy as at 30 June 2012, 30 June 2011 and 31 December 2011:30 June 2012 Level 1 Level 2 Level 3 Total US$ US$ US$ US$Assets Investments in private investment funds* Relative Value (a) - - 8,364,256 8,364,256 Fundamental Long/Short (b) - - 2,516,683 2,516,683 Event Driven (c) - - 2,463,635 2,463,635 Direct Sourcing (d) - - 1,898,602 1,898,602 ----- ----------- ---------- ----------Total investments inprivate investment funds - - 15,243,176 15,243,176 ===== =========== ========== ==========30 June 2011 Level 1 Level 2 Level 3 Total US$ US$ US$ US$Assets Investments in private investment funds* Relative Value (a) - 24,325,112 46,601,425 70,926,537 Fundamental Long/Short (b) - 22,831,774 26,179,535 49,011,309 Event Driven (c) - 28,774,118 36,597,262 65,371,380 Direct Sourcing (d) - - 2,817,364 2,817,364 ----- ----------- ----------- -----------Total investments in private investment funds - 75,931,004 112,195,586 188,126,590 ----- ----------- ----------- -----------Derivatives Forward foreign currency exchange contracts - 813,315 - 813,315 ----- ----------- ----------- ----------- - 76,744,319 112,195,586 188,939,905 ===== =========== =========== ===========31 December 2011 Level 1 Level 2 Level 3 Total US$ US$ US$ US$Assets Investments in private investment funds* Relative Value (a) - - 15,154,070 15,154,070 Fundamental Long/Short (b) - 605,320 12,056,248 12,661,568 Event Driven (c) - 2,210,840 10,121,264 12,332,104 Direct Sourcing (d) - - 2,228,770 2,228,770 ----- ----------- ----------- -----------Total investments in private investment funds - 2,816,160 39,560,352 42,376,512 ----- ----------- ----------- -----------Derivatives Forward foreign currencyexchange contracts - 684,253 - 684,253 ----- ----------- ----------- ----------- - 3,500,413 39,560,352 43,060,765 ===== =========== =========== ===========* In determining the classification of investments in private investment fundsincluded in the tables above, no consideration was given to the classificationof securities held by each underlying private investment fund.

(a), (b), (c) and (d), see footnotes at the end of Note 3.

The changes in investments measured at fair value using level 3 inputs for thesix months ended 30 June 2012 and 30 June 2011 and the year ended 31 December2011 are reflected below:30 June 2012 Relative Fundamental Event Direct Value(a) Long/Short(b) Driven(c) Sourcing(d) Total US$ US$ US$ US$ US$ Balance, 1 January 2012 15,154,070 12,056,248 10,121,264 2,228,770 39,560,352 Sales (7,829,011) (10,116,975) (7,540,837) (389,494) (25,876,317) Realised and unrealised gain (loss), net 1,039,197 577,410 (116,792) 59,326 1,559,141 --------- --------- ---------

--------- ---------- Balance, 30 June 2012 8,364,256 2,516,683 2,463,635 1,898,602 15,243,176

--------- --------- --------- --------- ----------Changes in unrealisedgain (loss) related to the Company's level 3 investments held at 30 June 2012 272,734 (27,815) (138,248) 58,249 164,920 ========= ======== ========= ======== ========= 30 June 2011 Relative Fundamental Event Direct Value(a) Long/Short(b) Driven(c) Sourcing(d) Total US$ US$ US$ US$ US$ Balance, 1 January2011 43,108,852 12,796,093 27,868,742

5,243,496 89,017,183

Purchases (sales),net 1,259,245 2,990,328 7,872,821 (2,607,360) 9,515,034 Realised and unrealised gain (loss), net 2,233,328 1,871 855,699

181,228 3,272,126 Transfers in to level 3* - 10,391,243 - - 10,391,243 Transfers out of level 3 - - - - - ---------- ---------- ----------

--------- ----------- Balance, 30 June 2011 46,601,425 26,179,535 36,597,262 2,817,364 112,195,586

---------- ---------- ---------- --------- -----------Changes in unrealised gain (loss) related to the Company's level 3 investments held at 30 June 2011 2,417,908 519,963 809,320

149,677 3,896,868

========== ========= =========

======== ===========

* Transfers in to level 3 occurred due to additional subscriptions into existing share classes of currently held private investment funds, subject to lock up periods of at least 90 days as of 30 June 2011.

31 December 2011 Relative Fundamental Event Direct Value(a) Long/Short(b) Driven(c) Sourcing(d) Total US$ US$ US$ US$ US$

Balance, 1 January 2011 43,108,852 12,796,093 27,868,742

5,243,496 89,017,183

Strategy reclassification (3,574,827) 4,222,560 - (647,733) - Purchases 10,420,437 1,418,579 1,700,000 - 13,539,016 Sales (41,601,651) (6,219,669) (17,992,970) (2,695,526) (68,509,816) Realised and unrealisedgain (loss), net 3,099,047 (161,315) (1,454,508)

328,533 1,811,757

Transfers into level 3** 3,702,212 - - - 3,702,212 Transfers out of level 3 - - - - - ---------- ---------- ---------- --------- ----------Balance, 31 December 2011 15,154,070 12,056,248 10,121,264

2,228,770 39,560,352

---------- ---------- ---------- --------- ----------Changes in unrealised gain (loss) related to the Company's level 3 investments held at 31 December 2011 1,909,446 639,266 (239,364)

198,734 2,508,082

========== ========== ==========

========= ==========

** Transfers out of level 3 were due to the expiration of fund level gates and lock up periods during the year ended 31 December 2011.

(a), (b), (c) and (d), see footnotes at the end of Note 3.

The Company recognised transfers in and out of level 3 above at 1 January. Realised and unrealised gains (losses) recorded for level 3 investments are reported as net realised gain on investments in private investment funds and net unrealised gain (loss) on investments in private investment funds, respectively, in the statement of operations.

ASC 820 requires additional disclosure to assist in understanding the natureand risk of the investments by major category. The table below summarises thefair value and other pertinent liquidity information of the underlyinginvestments by major category as at 30 June 2012, 30 June 2011 and 31 December2011:30 June 2012 Illiquid Redemption Fair Value Investments(1) Gates(2) Lock-ups(3) Redemption NoticeMajor Category US$ US$ US$

US$ Frequency(4) Period(4)

Relative Value (a) 8,364,256 3,367,397 3,554,766

- Quarterly 45 days Fundamental 2,516,683 2,478,327 - - N/A N/ALong/Short(b) Event Driven (c) 2,463,635 2,463,635 - - N/A N/A Direct Sourcing(d) 1,898,602 1,898,602 - - N/A N/A ---------- ---------- --------- ----- Total 15,243,176 10,207,961 3,554,766 - ========== ========== ========= =====

(1) Represents private investment funds that cannot be voluntarily redeemed bythe Company at any time. This includes (i) private investment funds that areliquidating and making distribution payments as their underlying assets aresold, (ii) suspended redemptions/withdrawals, and (iii) side pocket holdings.These types of investments may be realised within 1 to 5 years from 30 June2012, depending on the specific investment and market conditions. This does notinclude private investment funds with gates and lock-ups, which are notedabove.(2) Represents the portion of the private investment fund for which there areinvestor level and enacted fund level gates. The gates have been in place for33 months, and the time at which these restrictions will be lifted cannot beestimated.

(3) Represents investments that cannot be redeemed without a fee due to a lock-up provision.

(4) Redemption frequency and redemption notice period reflect general redemption terms, and exclude liquidity restrictions noted above.

(a), (b), (c) and (d), see footnotes at the end of Note 3.

30 June 2011 Illiquid Redemption Fair Value Investments(1) Gates(2) Lock-ups(3) Redemption NoticeMajor Category US$ US$ US$ US$ Frequency(4) Period(4) Relative Value 70,926,537 6,103,040 36,564,948 4,655,311 Monthly, 30-90 days(a) Quarterly, Semi-Annually Fundamental 49,011,309 4,362,860 3,453,519 6,250,352 Quarterly, 45-90 daysLong/Short(b) Annually Event Driven 65,371,380 3,896,729 8,584,370 17,190,990 Monthly, 30-150 days(c) Quarterly, Annually, Bi-Annually Direct 2,817,364 2,817,364 - - Annually 90 daysSourcing(d) ----------- ---------- ---------- ---------- Total 188,126,590 17,179,993 48,602,837 28,096,653 =========== ========== ========== ==========

(1) Represents private investment funds that cannot be voluntarily redeemed bythe Company at any time. This includes (i) private investment funds that areliquidating and making distribution payments as their underlying assets aresold, (ii) suspended redemptions/withdrawals, and (iii) side pocket holdings.These types of investments may be realised within 1 to 3 years from 30 June2011, depending on the specific investment and market conditions. This does notinclude private investment funds with gates and lock-ups, which are notedabove.

(2) Represents investor level and fund level gates. The gates have been in place for 21 to 24 months at 30 June 2011, and the time at which these restrictions will be lifted cannot be estimated.

(3) Represents investments that cannot be redeemed without a fee due to a lock-up provision. The lock-up period for these investments ranged from 6 months to 21 months at 30 June 2011.

(4) Redemption frequency and redemption notice period reflect general redemption terms, and exclude liquidity restrictions noted above.

Private investment funds that have an investor level gate and are still in the lock-up period are represented in both (2) and (3) in the table above.

(a), (b), (c) and (d), see footnotes at the end of Note 3.

31 December 2011 Illiquid Redemption Fair Value Investments(1) Gates(2) Lock-ups(3) Redemption NoticeMajor Category US$ US$ US$ US$ Frequency(4) Period(4) Relative Value 15,154,070 2,278,078 13,894,096 - Quarterly 45-65 days(a) Fundamental 12,661,568 3,341,094 2,981,317 - Quarterly, 45-90 daysLong/Short(b) Annually Monthly, Event Driven 12,332,104 2,697,376 2,443,975 4,384,445 Quarterly, 60-90 days(c) Direct 2,228,770 2,228,770 - - - -Sourcing(d) ---------- ---------- ---------- --------- Total 42,376,512 10,545,318 19,319,388 4,384,445 ========== ========== ========== =========

(1) Represents private investment funds that cannot be voluntarily redeemed bythe Company at any time. This includes (i) private investment funds that areliquidating and making distribution payments as their underlying assets aresold, (ii) suspended redemptions/withdrawals, and (iii) side pocket holdings.These types of investments may be realised within 1 to 3 years from 31 December2011 depending on the specific investment and market conditions. This does notinclude private investment funds with gates and lock-ups, which are notedabove.

(2) Represents investor level and fund level gates. The gates have been in place for 27 to 30 months, and the time at which these restrictions will be lifted cannot be estimated.

(3) Represents investments that cannot be redeemed without a fee due to a lock-up provision. The lock-up period for these investments was 12 months at 31 December 2011.

(4) Redemption frequency and redemption notice period reflect general redemption terms, and exclude liquidity restrictions noted above.

Private investment funds that have an investor level gate and are still in the lock-up period are represented in both (2) and (3) in the table above.

(a) Investment strategies within this class seek to profit from the mispricingof related financial instruments. This discipline utilises quantitative andqualitative analysis to identify securities or spreads between securities thatdeviate from their theoretical fair value and/or historical returns. The fairvalues of the investments in this class have been estimated using the net assetvalues provided by management of the private investment funds.

(b) Investment strategies within this class involve buying and/or selling a security or financial instrument believed to be significantly under-or over-priced by the market in relation to its potential value. The fair values of the investments in this class have been estimated based on the net asset values provided by management of the private investment funds.

(c) Investment strategies within this class concentrate on companies that are,or may be, subject to extraordinary corporate events such as restructurings,takeovers, mergers, liquidations, bankruptcies or other corporate events. Thefair values of the investments in this class have been estimated based on thenet asset values provided by management of the private investment funds.(d) Investment strategies within this class seek to profit from the increasingdisintermediation of the financial services sector by entering into directtransactions with corporations, other institutions or individuals. The fairvalues of the investments in this class have been estimated using the net assetvalues provided by management of the private investment funds.

4. Financial instruments with off-balance sheet risk

The Company's investments in private investment funds involve varying degreesof interest rate risk, credit and counterparty risk, and market, industry orgeographic concentration risks for the Company. While BAA monitors these risks,the varying degrees of transparency into and potential liquidity of thesecurities in the private investment funds may hinder BAA's ability to manageand mitigate these risks.Market risk

The Company holds certain derivative instruments (see Note 5) that involve varying degrees of off-balance sheet market risk, and changes in the market values of the financial instruments underlying such derivative instruments frequently result in changes in the Company's unrealised gains or (losses) on such derivative instruments as reflected in the statement of operations. Off-balance sheet market risk exists when the maximum potential loss on a particular financial instrument is greater than the carrying value of such financial instrument.

The private investment funds in which the Company is invested utilise a widevariety of financial instruments in their trading strategies includingover-the-counter ("OTC") options, futures, forward and swap agreements andsecurities sold but not yet purchased. Several of these financial instrumentscontain varying degrees of off-balance sheet risk where the maximum potentialloss on a particular financial instrument may be in excess of the amountsrecorded on each private investment fund's balance sheet. The privateinvestment funds are required to account for all investments on a fair valuebasis and recognise changes in unrealised gains and losses in their statementsof operations. In determining the fair values for these instruments, theprivate investment funds will make estimates about future interest rates,default probabilities, volatilities and other pricing factors. These estimatesof fair value could differ from actual results. The Company's maximum exposureto market risks related to the private investment funds is limited to amountsincluded in the Company's investments in private investment funds recorded asassets in the statement of assets and liabilities.

The Company's exposure to market risk is influenced by a number of factors, including the relationships among the derivative instruments held by the Company as well as the volatility and liquidity in the markets in which the derivative instruments are traded.

Credit and counterparty risk

The credit and counterparty risk associated with derivative instruments arises from possible counterparty non-performance and is limited to the derivative instruments in a gain position.

The Company is indirectly subject to certain credit risks arising from theinvestments made by the private investment funds. Credit risk is the amount ofaccounting loss that the private investment funds would incur if a counterpartyfailed to perform its obligations under contractual terms. The Company is alsosubject to the credit risk that the private investment funds fail to performunder their respective agreements.The Company may be directly subject to credit risks arising from OTC derivativefinancial instrument transactions. The Company's direct exposure to credit riskat any point in time is limited to amounts included in the Company's unrealisedgain on derivative financial instruments recorded as assets or liabilities onthe statement of assets and liabilities. The Company enters into OTC derivativefinancial instruments transactions only with major commercial and investmentbanks in an effort to limit its OTC risk.

Liquidity risk

The private investment funds invest in securities and investments with variousdegrees of liquidity and as such the Company is subject to certain redemption/withdrawal provisions, in accordance with the private investment funds'offering agreements. These provisions generally range from monthly to annualredemptions/withdrawals, with 60 to 180 days notice.Certain of the Company's private investment funds have the ability to suspendredemptions/ withdrawals, and restrict redemptions/withdrawals through thecreation of side pockets. At 30 June 2012, 15.98% (30 June 2011: 1.64%; 31 December 2011: 1.59%) of the Company's net assets were subject to privateinvestment funds that had suspended redemptions/withdrawals (including thoseprivate investment funds undergoing liquidation); and 30.46% (30 June 2011:6.89%; 31 December 2011: 3.99%) of the Company's net assets were investeddirectly in side pockets maintained by private investment funds. The Company'sability to liquidate its investment in a private investment fund that hasimposed such provisions may be adversely impacted. In such cases, until theCompany is permitted to liquidate its interest in a private investment fund,the Company's residual interest remains subject to continued exposure tochanges in valuations.The Company may also invest in closed-end investments that may not permitredemptions/ withdrawals or in private investment funds that impose an initial"lock-up" period before a redemption/withdrawal can be made. In addition,certain of the Company's private investment funds have the ability to imposeredemption gates, and in so doing, may reduce the Company's requestedredemption/withdrawal below the requested amount.

5. Derivative financial instruments

ASC 815, Derivatives and Hedging, is intended to improve financial reportingabout derivative instruments and hedging activities by requiring enhanceddisclosures to enable investors to better understand how those instruments andactivities are accounted for, how and why they are used, and their effects onan entity's financial position, financial performance, and cash flows.The Company entered into forward foreign currency exchange contracts for thepurchase or sale of a specific foreign currency at a fixed price on a futuredate. Such contracts have been entered into for the purpose of hedging theCompany's share classes denominated in currencies other than United Statesdollars (Note 6). Gains and losses on forward foreign currency exchangecontracts exclusive to participating share classes denominated in currenciesother than United States dollars are specifically allocated to the respectiveparticipating share class. The contractual amounts of these instrumentsrepresent the exposure the Company has to the respective currencies associatedwith these financial instruments. The measurement of the risks associated withforward foreign currency exchange contracts is meaningful only when all relatedand offsetting transactions are considered.The following tables summarise the fair value of the Company's derivativeinstruments and the location on the statement of assets and liabilities at 30June 2011 and 31 December 2011. The foreign currency hedging program ceased inFebruary 2012. There were no derivative instruments held at 30 June 2012. Asset derivatives Liability derivatives 30 June 2011 Location Fair value Location Fair valueDerivatives US$ US$ Foreign exchange Unrealised gain 813,315 Unrealised loss -contracts on foreign on foreign exchange exchange contracts contracts Asset derivatives Liability derivatives 31 December 2011 Location Fair value Location Fair valueDerivatives US$ US$ Foreign exchange Unrealised gain 684,253 Unrealised loss -contracts on foreign on foreign exchange exchange contracts contracts The following tables present the effect of derivative instruments on theCompany's financial performance and the location on the statement ofoperations:30 June 2012 Gain (loss) onDerivatives Location derivatives US$ Foreign exchange Net realised gain on foreign exchange 1,593,507contracts contracts Foreign exchange Net change in unrealised gain (loss) contracts on foreign exchange contracts (684,253)30 June 2011 Gain (loss) onDerivatives Location derivatives US$ Foreign exchange Net realised gain on foreign exchange 8,491,656contracts contracts Foreign exchange Net change in unrealised gain (loss) contracts on foreign exchange contracts (2,091,367)31 December 2011 Gain (loss) onDerivatives Location derivatives US$ Foreign exchange Net realised gain on foreign exchange 1,353,097contracts contracts Foreign exchange Net change in unrealised gain (loss) contracts on foreign exchange contracts (2,220,429)

The obligations under these financial instruments as at 30 June 2011 and 31 December 2011 were as follows:

30 June 2011 Contract to Contract to Currency Settlement date deliver receive Fair value € 30 September 2011 $24,423,699 €17,050,000 $241,282 £ 30 September 2011 $169,134,860 £105,830,000 $572,032 31 December 2011 Contract to Contract to Currency Settlement date deliver receive Fair value € 31 March 2011 $22,389,108 €17,120,000 $522,422 £ 31 March 2011 $149,147,972 £97,130,000 $2,382,260

It was the Company's general practice to enter into a forward foreign currency exchange contract for each foreign currency share class for a duration of approximately 3 months.

The Company's unrealised gain (loss) relating to forward foreign currency exchange contract obligations at 31 December 2011 was US$684,253, resulting in a net change in unrealised gain (loss) of US$(684,253) for the period ended

30 June 2012. The outstanding financial instruments have certain margin provisionsthat call for cash payments to the contract counterparties to the extent thatthe unrealised loss is in excess of certain amounts. Amounts owed, if any, tothe counterparty related to these financial instruments are secured by pledgingthe assets held by the Company, which are attributable to shareholders inclasses denominated in currencies other than United States dollars.

At 30 June 2011 and 31 December 2011 all open forward foreign currency exchange contracts were with a single counterparty.

6. Share capital, voting rights, share conversion and redemption

Authorised:

100 Management sharesUnlimited shares of any class Net Asset Shares in Treasury Shares in Treasury Shares in

Treasury Value

issue Shares issue Shares issue

Shares Per

at at at at at

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30 June 30 June 30 June 30 June 31 December 31 December 30 June 2012 2012 2011 2011 2011 2011 2012 Management Shares 2 - 2 - 2 - - US Dollar denominated Shares - - 685,386 282,481 1,727,243 - - Euro denominated Shares - - 1,672,269 251,789 1,665,646 - - Sterling denominated Shares 3,234,654 - 10,381,673 1,642,526 9,702,237 - £9.80

Shareholders have the right to receive notice of and to attend and vote at general meetings of the Company.

Management Shares carry no right to distribution of profits, or except when there are no shares in issue, to receive notice of or vote at general meetings of the Company.

It is not the intention of the Company to pay dividends, however the Directors have the option to declare a dividend, if deemed appropriate.

Conversion of shares

In accordance with the provisions of the Company's Articles of Association, theBoard announced on 21 November 2011 that with immediate effect it had resolvedto suspend the Company's share conversion facility, which had previouslyenabled shareholders of any one class of shares to convert all or part of theirholding into any other class of shares on a quarterly basis. The Company's Euroand US Dollar denominated shares were merged into the Sterling class as at theclose of business on 9 March 2012. The merger took place through a conversionof all the Euro and US Dollar denominated shares into Sterling shares inaccordance with the Company's standard share conversion mechanism. Theconversion was effected on the basis of the ratio of the February estimatedmonthly NAV per share of the class of shares held (calculated in Euros and USDollars) to the February estimated monthly NAV per share of the Sterling shareclass.First Redemption

At the close of business on 10 February 2012, 73.5% of the Company's issued share capital was redeemed. The payments made to Shareholders and the number of shares of each share class redeemed were as follows:

Number Resulting of shares shares Amount per redeemed outstanding share paid US Dollar denominated Shares 1,269,514 457,729 $10.1927 Euro denominated Shares 1,224,241 441,405 €9.9256 Sterling denominated Shares 7,131,108 2,571,129

£9.9465

Merger of Share Classes

At the close of business on 9 March 2012 the following conversion of shares occurred:

Total number of Total number ofCurrency of Share to be converted shares to be new Sterling converted shares Euro 441,405 366,762 US Dollar 457,729 296,763Second RedemptionAt the close of business on 6 July 2012, 55.9% of the Company's issued sharecapital was redeemed. The payment made to Shareholders and the number of sharesredeemed were as follows: Number Resulting of shares shares Amount per redeemed outstanding share paid Sterling denominated Shares 1,806,516 1,428,138 £10.1096Voting rightsWith effect from 1 January 2012, the voting rights of both the Euro andSterling denominated shares were re-calculated in accordance with theprovisions of the Articles of Association of the Company. The voting rights ofthe Sterling denominated shares remained unchanged at 1.5 per share and thevoting rights of the Euro denominated shares remained unchanged at 1.3 votesper share.

Following the share merger on 9 March 2012, each remaining Sterling share has one voting right.

As at 30 June 2012, 31 December 2011 and 30 June 2011, the issued share capital and share voting rights were as follows:

30 June 2012 Number of Votes per Voting shares share rights Management Shares 2 - - US Dollar denominated Shares - - - Euro denominated Shares - - - Sterling denominated Shares 3,234,654 1 3,234,654 ---------Total voting rights 3,234,654 ========= 31 December 2011 Number of Votes per Voting shares share rights Management Shares 2 - - US Dollar denominated Shares 1,727,243 1 1,727,243 Euro denominated Shares 1,665,646 1.3 2,165,339 Sterling denominated Shares 9,702,237 1.5 14,553,355 ----------Total voting rights 18,445,937 ========== 30 June 2011 Number of shares (excluding treasury Votes per Voting shares)* share rights Management Shares 2 - - US Dollar denominated Shares 685,386 1 685,386 Euro denominated Shares 1,672,269 1.3 2,173,949 Sterling denominated Shares 10,381,673 1.5 15,572,509 ----------Total voting rights 18,431,844 ==========

*On 30 June 2011, there were 282,481 US Dollar denominated Shares, 251,789 Euro denominated Shares and 1,642,526 Sterling denominated Shares held in treasury. These were cancelled on 20 July 2011. There are no shares held in treasury.

The US Dollar denominated shares and the Euro denominated shares were convertedinto Sterling shares on 9 March 2012. Each Sterling denominated share has onevoting right.

At the date of this report the total share voting rights were 3,234,654.

7. Management and performance fees

The Company entered into a Management Agreement with BCI to provide certaininvestment management services to the Company. Under this agreement, BCI earnsa quarterly investment management fee equal to one quarter of 1.5% of the NAVand an annual performance fee equal to 10% of the amount, if any, by which theNAV at the end of a calculation period exceeds the higher of (i) the NAV at thedate of Admission and (ii) the NAV at the end of any previous calculationperiod. As provided in the registration document, the amount of fees paid toBCI is determined based on the net assets and the performance of the Companyfor the respective calculation period. Management and performance fees arecalculated prior to any adjustments to the NAV of the relevant share class forthe relevant calculation period related to the profits, losses and expenses ofany currency hedging undertaken by the Company. For the year ended 31 December2011 and the periods ended 30 June 2012 and 30 June 2011, the management feesunder this agreement were: Period ended Period ended Year ended 30 June 30 June 31 December 2012 2011 2011Share class US$ US$ US$

US Dollar denominated Shares 11,446 110,292

177,100 Euro denominated Shares 13,899 168,787 307,072 Sterling denominated Shares 250,361 1,161,441 2,109,124 ------- --------- --------- 275,706 1,440,520 2,593,296 ======= ========= =========

Following Shareholder approval of the managed wind-down on 25 August 2011, theCompany and the Manager agreed that with effect from that date the ManagementAgreement would be amended to reflect that no management fee would be payablein respect of any cash or distribution received by or on behalf of the Companyas a result of realising any of the Company's assets in connection with themanaged wind-down and held by the Company pending distribution to Shareholders.

For the year ended 31 December 2011 and the periods ended 30 June 2012 and 30 June 2011, the performance fees under this agreement were:

Period ended Period ended Year ended 30 June 30 June 31 December 2012 2011 2011Share class US$ US$ US$

US Dollar denominated Shares 10,777 67,969

45,143 Euro denominated Shares 13,177 65,573 1,878

Sterling denominated Shares 51,181 467,699

26,758 ------ ------- ------ 75,135 601,241 73,779 ====== ======= ======

As at 30 June 2012, an amount of US$104,295 (30 June 2011: US$735,026; 31 December 2011: US$454,780) was payable in respect of the management fee. As at 30 June 2012, an amount of US$75,135 (30 June 2011: US$601,241; 31 December 2011: US$73,779) was payable in respect of the performance fee.

8. Administration and custody fees

Under the terms of an Administration Agreement, UBS Fund Services (Cayman)Limited (the "Sub-Administrator") has agreed to perform certain financial,custodial, accounting, administrative and other services. For the period ended30 June 2011, US$24,000 (period ended 30 June 2011: US$50,732; year ended 31 December 2011: US$101,340) was incurred for the Sub-Administrator's services inaccordance with the Administration Agreement.

9. Auditor fees

Under the terms of the engagement with the Company's auditor, Deloitte LLP, toaudit the Company's annual financial statements, the Company paid US$113,816for the audit of accounts for the year ended 31 December 2011. As at 30 June2012, US$69,613 (30 June 2011: US$58,086) was accrued in respect of theanticipated audit fee for the year ending 31 December 2012.

10. Related party transactions

During the periods ended 30 June 2012 and 30 June 2011 and the year ended 31 December 2011, there were investment transactions with other entities managedby BFM. The consideration paid and received in connection with each of thesetransactions was based on the prevailing net asset value of the investment atthe date of the transaction. None of these transactions had a material impacton the performance of the Company.The Company may invest in one or more master funds through which the Companyand other funds or accounts managed by BFM or its affiliates may invest for theprimary purpose of consolidating investments by these funds and accounts into asingle investment in one or more private investment funds.

The Directors of the Company consider that all transactions with related parties have been made at values which approximate the values for which such transactions would have been made with third parties.

The Board currently consists of four non-executive Directors. With theexception of Mr Le Feuvre, who is a BlackRock employee, all are considered tobe independent of the Company's Manager and free from any business or otherrelationship which could interfere materially with the exercise of theirindependent judgement. Mr Le Feuvre, as an employee of BlackRock, is deemed tobe interested in the Company's management agreement. None of the Directors hasa service contract with the Company. The Chairman receives an annual fee of

£35,000, the Chairman of the Audit and Management Engagement Committee receives an annual fee of £27,000 and the other Director receives an annual fee of £25,000. Mr Le Feuvre waived the entitlement to his fee.

One member of the Board, Mr Maltby, holds 425 Sterling shares in the Company.

The total remuneration payable to Directors was US$73,855 for the period ended30 June 2012 (period ended 30 June 2011: US$87,102; year ended 31 December2011: US$162,928). This amount includes fees for Directors' services,reimbursement for travel and other out-of-pocket expenses relating toattendance at meetings and other matters, including any such expenses relatingto the performance of due diligence for the benefit of the Company.Through its investment in a master fund managed by BlackRock or its affiliates,the Company was invested in R3 Capital Partners (C), Ltd. (the "R3 Fund"), afund vehicle previously managed by R3 Capital Partners ("R3"). Effective 30 April 2009, BlackRock assumed responsibilities for the management of the R3Fund and a number of R3 employees are now employed by BlackRock. In connectionwith this arrangement, the Company's investment advisory fee calculation wasmodified to exclude the amounts invested in the R3 Fund.

11. Line of credit

The Company entered into an Uncommitted Facility Agreement (the "FacilityAgreement") and related Security Agreement with the Sub-Administrator. Advancesunder the Facility Agreement were secured by all of the Company's investmentsin private investment funds. Under the Facility Agreement, the Company waspermitted to borrow at a rate based on the UBS base rate. The FacilityAgreement was terminated on 30 September 2011 as a result of the managedwind-down.The Company had also entered into a Committed Facility Agreement and relatedSecurity Agreement with the Sub-Administrator. Advances under the CommittedFacility Agreement were secured by all of the Company's investments in privateinvestment funds. The amount of the Committed Facility was US$10,000,000. TheCommitted Facility Agreement was subject to renewal on 1 October 2011 and wasnot renewed, as a result of the managed wind-down.

12. Indemnifications

The Company enters into contracts that contain a variety of indemnifications. The Company's maximum exposure under these agreements, if any, is unknown. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.

13. Subsequent events

Management has evaluated subsequent events occurring up to 22 August 2012, thedate that these financial statements were available to be issued. Allsignificant events that have occurred subsequent to the balance sheet date butprior to 22 August 2012 have been reported in these financial statements.At the close of business on 6 July 2012, 55.9% of the Company's issued sharecapital was redeemed by way of a compulsory partial redemption of shares byreference to the unaudited estimated monthly NAV of the Company as at May 2012of £10.1096 per share. The redemption was effected pro rata to holdings ofshares on the register at the close of business on 6 July 2012. The paymentmade to Shareholders in respect of their redeemed Sterling denominated shareswas £18,263,154 ($28,726,378).

No significant events, other than those reported, occurred subsequent to the balance sheet date but prior to 22 August 2012, that would have a material impact on the financial statements.

14. Publication of non statutory accounts

The financial information contained in this half yearly report does notconstitute statutory accounts as defined in the Companies (Jersey) Law 1991.The financial information for the six months ended 30 June 2012 and 30 June2011 has not been audited. The information for the year ended 31 December 2011has been extracted from the latest published audited financial statements,which have been filed with the Jersey Financial Services Commission. The reportof the Auditor for the year ended 31 December 2011 contains no qualificationand did not contain statements under section 113B(3) or (6) of the Companies(Jersey) Law 1991 (as amended).

15. Approval of the half yearly financial report

The half yearly financial report was approved by the Directors on 22 August 2012.

Copies of the half yearly financial report will be posted to shareholders assoon as practicable. Copies will also be available to the public from theCompany's registered office at One Waverley Place, Union Street, St Helier,Jersey, and on the Company's website at www.blackrockinternational.com/bars.Independent Review Reportto BlackRock Absolute Return Strategies LtdWe have been engaged by the Company to review the financial statements in thehalf-yearly financial report for the six months ended 30 June 2012 whichcomprises the statement of assets and liabilities, statement of operations,statement of changes in net assets, statement of cash flows, financialhighlights and the related notes 1 to 15. We have read the other informationcontained in the half-yearly financial report and considered whether itcontains any apparent misstatements or material inconsistencies with theinformation in the condensed set of financial statements.This report is made solely to the Company in accordance with InternationalStandard on Review Engagements (UK and Ireland) 2410 "Review of InterimFinancial Information Performed by the Independent Auditor of the Entity"issued by the Auditing Practices Board. Our work has been undertaken so that wemight state to the Company those matters we are required to state to it in anindependent review report and for no other purpose. To the fullest extentpermitted by law, we do not accept or assume responsibility to anyone otherthan the Company, for our review work, for this report, or for the conclusionswe have formed.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 accounting principles generally accepted in the United States of America and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

Our responsibility

Our responsibility is to express to the Company a conclusion on the financial statements in the half-yearly financial report based on our review.

Scope of review

We conducted our review in accordance with International Standard on ReviewEngagements (UK and Ireland) 2410 "Review of Interim Financial InformationPerformed by the Independent Auditor of the Entity" issued by the AuditingPractices Board for use in the United Kingdom. A review of interim financialinformation consists of making inquiries, primarily of persons responsible forfinancial and accounting matters, and applying analytical and other reviewprocedures. A review is substantially less in scope than an audit conducted inaccordance with International Standards on Auditing (UK and Ireland) andconsequently does not enable us to obtain assurance that we would become awareof 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 tobelieve that the financial statements in the half-yearly financial report forthe six months ended 30 June 2012 are not prepared, in all material respects,in accordance with the accounting principles generally accepted in the UnitedStates of America and the Disclosure and Transparency Rules of the UnitedKingdom's Financial Services Authority.Emphasis of matter - valuation of investments based on management estimatesIn forming our conclusion on the financial statements, which is not modified,we have considered the adequacy of the disclosure made in note 2 to thefinancial statements which explains the uncertainty of the estimates of thefair values of the private investment funds. The financial statements includeinvestments in private investment funds valued at US$15,243,176 (69.34% of netassets) as of 30 June 2012, whose fair values have been estimated by managementin the absence of readily ascertainable fair values. Management's estimates arebased primarily on the net asset value and other financial information providedby management of each underlying private investment fund. Different assumptionswill impact the measurement of the investments which may have an effect on thefinancial statements. It is not possible to quantify the potential effects ofthe resolution of this uncertainty.

Emphasis of matter - financial statements prepared other than on a going concern basis

In forming our conclusion on the financial statements, which is not modified,we have considered the adequacy of the disclosure made in note 2 to thefinancial statements, which explains that the financial statements have beenprepared on a basis other than that of a going concern as a result of theDirectors' intention to liquidate the Company.Deloitte LLPChartered AccountantsLondon, United Kingdom22 August 2012

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