16th May 2011 15:19
BLACKROCK ABSOLUTE RETURN STRATEGIES LTD
Interim Management Statement - 3 months to 31 March 2011
To the members of BlackRock Absolute Return Strategies Ltd
This interim management statement has been produced solely to provide additional information to shareholders as a body to meet the relevant requirements of the UK Listing Authority's Disclosure & Transparency Rules. It should not be relied on by any other party for any other reason.
This interim management statement relates to the period from 1 January 2011 to 31 March 2011, and contains information that covers this period, and up to the date of publication of this interim management statement. Please note further detailed performance information, including the estimated weekly net asset values are available on the Company's website www.blackrockinternational.com/bars/library/literature.
BlackRock Absolute Return Strategies Ltd is a diversified fund of hedge funds investment vehicle with exposure to absolute return strategies which seek 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 aims to generate a target net return of approximately 3 month LIBOR plus 6% per annum with a standard deviation of 8%.
Stock Performance
Cumulative Performance:
31 March 31 December 30 September 30 June Since 2011 2010 2010 2010 Launch* US$ Shares Share Price $8.82 $8.04 $8.45 $8.00 -11.8%
Net Asset Value per share $10.44 $10.16 $9.93 $9.59 4.4% Discount
15.52% 20.87% 14.90% 16.58% -EUR Shares Share Price €8.29 €8.28 €8.20 €7.81 -17.1%
Net Asset Value per share €10.14 €9.87 €9.64 €9.30 1.4% Discount
18.24% 16.11% 14.94% 16.02% - GBP Shares Share Price £8.46 £7.87 £7.97 £7.72 -15.4%Net Asset Value per share £10.17 £9.89 £9.67 £9.31 1.7%Discount 16.81% 20.42% 17.58% 17.08% -*launch 24 April 2008Manager's ReviewPerformance Commentary
The first quarter of 2011, a generally positive one for Absolute Return Strategies, was a tale of two environments. Global markets have thus far witnessed slow but steady economic improvement, including growing employment and corporate profits. Interest rates globally remain low. China has shown signs of controlling its economic growth to a more stable rate. For the better part of the quarter, investor optimism continued to grow, and prices for risky assets generally followed suit.
However, the period was also a keen reminder of the scope of potential risks that are always lurking. Geopolitical turmoil erupted throughout the Middle East as popular uprisings upended several governments, pushing energy prices stubbornly high. US housing markets remain weak, and the latest round of quantitative easing is coming to an end. The long-term solvency of several peripheral European countries remains suspect. Finally, in perhaps the most significant global shock, the impact of the earthquake, tsunami and nuclear facility instability in Japan have and continue to result in devastation on an unimaginable scale, and its effect on human lives remains foremost in our thoughts.
In environments such as these, there is real value in being able to find and maintain a prudent balance between a constantly evolving set of risks and opportunities, and ARS strategies can provide a broad set of tools for managers to do so. Our managers' focus is on idiosyncratic risks, balanced exposures and vigilant risk management efforts. This is the backbone of our effort to keep our portfolios potentially less sensitive to shocks, while taking advantage of opportunities as they arise. Below, we highlight some of this activity from each of our primary disciplines.
Relative Value - Convergence strategies were generally profitable in the first quarter, with convertible bonds continuing to enjoy the support of credit spread tightening, rising equity markets in many regions, strong capital inflows and a shortage of new issuances. For the first time since November 2007, US convertible bonds have traded above theoretical value, finishing the quarter 0.06% rich. While beneficial for long positions, these factors challenged certain managers that built short positions in convertibles trading rich relative to theoretical value. For rates managers, top-down conditions were relatively quiet for developed market sovereign credits in January and February, and the bulk of managers' investment activity focused on idiosyncratic trades. However, March was dominated by events in Japan, and certain managers responded by profitably trading around the JPY/USD swap basis, first as yen repatriation flows pushed the yen to record levels versus the US dollar and the basis widened, then as technical activity in the foreign exchange market, notably a coordinated effort by central banks to sell yen, tightened the basis as the yen was pushed lower versus the US dollar.
Event Driven - Deal activity remained robust for risk arbitrage strategies in the first quarter, with the materials sector and energy and power industries once again a source of notable deals. Most managers in the space posted positive performance for the quarter, as many notable deals closed during the quarter, including McAfee/Intel, and King Pharmaceuticals/Pfizer. Despite these positive deal outcomes, gains for the strategy were generally dampened by low risk spreads, implying a low perceived risk to many existing deals. Distressed strategies results were generally positive through the first quarter as performance was once again driven by existing situations, while new default activity remained limited. Select managers continued to identify off-the-run opportunities outside of corporate securities, including asset-backed securities. Events in Japan appeared to have limited direct impact on distressed strategies, which tended to have little to no exposure in the region.
Fundamental Long/Short - Performance in the first quarter was generally profitable, helped primarily by ongoing improvement in corporate fundamentals, and a resurgence in shareholder-centred corporate activity. While broader Japanese indices sold off substantially amidst the tragedy, the initial impact on managers has generally been tempered by a less-directional approach to the region. Nonetheless, certain managers are now finding opportunities in the market's reaction to these events, including perceived mispricings in the alternative energy sector in response to the nuclear plant crisis in Fukushima. New issue activity in the credit sector continued at a very strong pace during the quarter, benefiting long/short credit manager returns. However, amidst a strong investor debt appetite, managers are concerned that investor protections are once again eroding, and are remaining highly selective as a result.
Direct Sourcing - Activity from direct sourcing managers was largely profitable during the first quarter, continuing to be driven in part by bank divestitures. The pipeline for bank assets continues to be strong, as noted by the recent activity by a number of BAA managers that included purchases of commercial and industrial loans, as well as other loan pools purchased at significant discounts to par. Commercial real estate-related assets are also attracting more attention from some of our managers, particularly in smaller $10-20 million deals in off-the-run markets. The prospects for further opportunity in this space appear to be good - one manager cited that $1.6 trillion in US and European commercial real estate debt will be coming due within the next three years, and estimates a refinancing gap of over $280 billion.
BAA Activity
In early 2009, we undertook a project to systematically review the relationships we have with each of our underlying managers, with the goal of looking for appropriate areas in which we would improve investment terms, create investment opportunities and add value to our clients from a structuring perspective.
Over the past two years, we have made substantial progress on this project. As of 1 March 2011, we have:
* Negotiated (or are currently in negotiations for) fee discounts with 66 investment programs, representing approximately 51% of BAA platform AUM * Achieved position-level transparency with about 81% of BAA platform AUM * Negotiated enhanced governance rights with 53 investment programs, or approximately 42% of BAA platform AUM * Modified liquidity terms on 42 investment programs, or approximately 28% of BAA platform AUM * Worked with managers to develop 17 custom investment programs exclusively for BAA funds * Worked to reduce the impact of other investors on our funds, through establishing investor-level gates for 39 investment programs, or 36% of BAA platform AUM * Enhanced manager alignment of incentives through incentive fee deferral mechanisms, hurdles and/or clawbacks on 25 investment programs, or approximately 19% of BAA platform AUM
As we enter 2011, BAA will continue to seek opportunities to add concrete value from both performance and operational perspectives.
Investment Outlook
In Berkshire Hathaway's recent annual letter, Warren Buffett reminded shareholders that, "No matter how serene today may be, tomorrow is always uncertain." A week after this was published, a devastating earthquake and tsunami tragically affected Japan, and the subsequent nuclear facility instability continues to pose a threat. Meanwhile, rising Middle Eastern tensions, with particular spotlights in Libya and Egypt, have amplified geopolitical concerns in recent months. In each case, the impact on human lives is foremost in everyone's mind, but potential economic and market implications are also being actively weighed by investors.
In such situations, the ultimate financial impact is often difficult to predict as events evolve, and second- and third-order effects ripple through the economic and political fabric. For instance, many market participants have posited that the disaster in Japan will adversely affect the regional demand for goods and services, as well as certain global supply chains in the near-term; however, the rebuilding effort could support economic growth over the longer term. Meanwhile, events in the Middle East have played a role in driving oil prices higher, which may in turn influence the cost of producing and distributing goods and consumer spending, but the degree of impact may vary considerably based on users' specific price sensitivities.
We cannot predict what tomorrow will bring on the global stage, but with a focus on long and short exposures, relative value positioning and investment-level catalyst events, we nonetheless believe we hold the potential for strong risk adjusted returns. The short-term uncertainty and unstable risk appetites driven by such unexpected events can often be a source of mispricings and technical activity that favour investors focused on longer-term security fundamentals. With hedge fund industry assets recently surpassing the $2 trillion mark, we believe that a growing number of sophisticated investors agree that diversifying their investments via hedged strategies can be an important defence against an uncertain environment.
Material Events & Transactions
There were no material events or transactions, except as disclosed, during the three months to 31 March 2011, nor was the Company involved in any other material transactions during the period except the purchase and sale of securities undertaken in the normal course of its business.
Conversion of Shares
Completion of the December 2010 Share Conversion between Share Classes
The following announcement was made on 26 January 2011 in respect of the above:
The table below summarises the aggregate conversion requests received in respect of the December 2010 Currency Conversion Calculation Date:
Currency of Share Total Shares to be converted to be Currency of Share to be converted to from converted US Dollar Sterling EuroUS Dollar 30,964 - 20,369 - Total 30,964 - 20,369 - Conversion Ratios
The Currency Conversion Calculation Date was 31 December 2010. On the basis of the net asset values of the Company's Shares as at 31 December 2010 (as previously announced on 26 January 2011) (and using assumed spot currency exchange rates as appropriate at the Currency Conversion Calculation Date), the conversion ratio, calculated in accordance with the Company's Articles of Association, is as follows:
0.65782845 Sterling denominated shares for every one US Dollar denominated share
The following foreign exchange rate as at 31 December 2010 was used:
US$ / GBP 0.6405534
Shareholder CREST accounts for those shareholders for whom conversion requests have been received will be credited with new shares on 28 January 2011.
The Company has made an application to admit 20,369 Sterling denominated Shares to the official list of the UK Listing Authority and to trading on the London Stock Exchange on 28 January 2011.
March 2011 Share Conversion between Share Classes
The results of the 31 March 2011 Currency Conversion Calculation Date were released on 18 March 2011 and on 26 April 2011 the completion of the conversion was announced as follows:
The table below summarises the aggregate conversion requests received in respect of the March 2011 Currency Conversion Calculation Date:
Currency of Share Total Shares to be converted to be Currency of Share to be converted to from converted US Dollar Sterling EuroUS Dollar 1,518,389 - 917,266 62,112 Euro 54,467 12,155 40,148 - Total 12,155 957,414 62,112 Conversion Ratios
The Currency Conversion Calculation Date was 31 March 2011. On the basis of the net asset values of the Company's Shares as at 31 March 2011 (as previously announced on 26 April 2011) (and using assumed spot currency exchange rates as appropriate at the Currency Conversion Calculation Date), the conversion ratio, calculated in accordance with the Company's Articles of Association, is as follows:
0.8799571 Sterling denominated Shares for every one Euro denominated Share 0.6401019 Sterling denominated Shares for every one US Dollar denominated Share 0.7274005 Euro denominated Shares for every one US Dollar denominated Share 1.3746889 US Dollar denominated Shares for every one Euro denominated Share
The following foreign exchange rates as at 31 March 2011 was used:
GBP / Euro 1.1320GBP / US Dollar 1.6027Euro / US Dollar 1.4158
Shareholder CREST accounts for those shareholders for whom conversion requests have been received will be credited with new shares on 28 April 2011.
The Company has made an application to admit 957,414 Sterling denominated Shares, 62,112 Euro denominated Shares and 12,155 US Dollar denominated Shares to the official list of the UK Listing Authority and to trading on the London Stock Exchange on 28 April 2011.
Reverse Auction Tender
The following results of the Reverse Auction Tender Offer were announced on 17 January 2011:-
The Board of BlackRock Absolute Return Strategies Ltd (the "Company") announces the results of the reverse Auction Tender Offer for up to 5.00 per cent of each of the Sterling, Euro and US Dollar denominated Shares in issue on 13 December 2010 (the "Available Shares") which closed on 14 January 2011.
Eligible Shareholders of each Share class were able to tender for purchase some or all of their Shares at their chosen level of discount to the month-end NAV as at 31 December 2010 (each a "Discount Level") subject however to a minimum discount level of 12.00 per cent. Valid tenders were received from Shareholders in respect of;
* 1,799,423 US Dollar denominated Shares (76.91 per cent of the Company's US Dollar denominated Shares in issue on 13 December 2010, excluding treasury shares); * 246,875 Euro denominated Shares (14.09 per cent of the Company's Euro denominated Shares in issue on 13 December 2010, excluding treasury shares); and * 3,223,510 Sterling denominated Shares (32.51 per cent of the Company's Sterling denominated Shares in issue on 13 December 2010, excluding treasury shares);
The Strike Discount to be applied in determining the Strike Price for each of the Company's share classes will be:
* US Dollar denominated Shares, 14 per cent; * Euro denominated Shares, 14 per cent; and * Sterling denominated Shares, 17.5 per cent.
Those shareholders who tendered Shares at a discount level narrower than the Strike Discount applied to the relevant share class(es) will not have their Shares repurchased.
US Dollar and Euro shareholders who validly tendered Shares at a discount level wider than the Strike Discount will have all such shares repurchased in full at the Strike Price.
Shareholders who validly tendered Shares at the Strike Discount have been scaled back pro rata in proportion to other Shares tendered for redemption at the Strike Discount with approximately 14.89 per cent of each such tender of US Dollar, 4.29 per cent of each such tender of Euro and 39.11 per cent of each such tender of Sterling denominated Shares tendered being accepted.
116,976 US Dollar denominated Shares (5.0 per cent of the Company's US Dollar denominated Shares in issue on 13 December 2010, excluding treasury shares), 87,612 Euro denominated Shares (5.0 per cent of the Company's Euro denominated Shares in issue on 13 December 2010, excluding treasury shares) and 495,731 Sterling denominated Shares (5.0 per cent of the Company's Sterling denominated Shares in issue on 13 December 2010, excluding treasury shares)will be repurchased under the Reverse Auction Tender Offer.
It is expected that the Strike Price for each of the share classes will be announced on 2 February 2011.
Settlement of the Reverse Auction Redemption Offer consideration is expected to be made on, or around 10 March 2011. A further announcement advising of the settlement date will be made in due course.
Defined terms in this announcement have the same meaning as in the Circular to shareholders dated 13 December 2010.
The Reverse Auction Tender Offer Strike Price was announced on 2 February 2011 as follows:
The Board of BlackRock Absolute Return Strategies Ltd (the "Company") announces that the Strike Price for each of the Company's share classes is as follows:
US Dollar denominated Shares - US$8.66Euro denominated Shares - €8.43; andSterling denominated Shares - £8.11
The Strike Price for each class of Shares (calculated after deducting the costs and expenses of the Reverse Auction Tender offer) has been determined by taking the published net asset value per Share of the relevant class as at 31 December 2010 and applying the Strike Discount for that class of Shares as determined by the auction process.
Accordingly, 116,976 US Dollar denominated Shares, 87,611 Euro denominated Shares and 495,731 Sterling denominated Shares will be repurchased under the Reverse Auction Tender Offer and placed in treasury.
Settlement of the Reverse Auction Redemption Offer consideration is expected to be made on, or before 10 March 2011. A further announcement advising of the settlement date will be made in due course.
Defined terms in this announcement have the same meaning as in the Circular to shareholders dated 13 December 2010.
Reverse Auction Tender Consideration
On 2 March 2011 it was announced that settlement of the Reverse Auction tender Offer consideration would be made on 4 March 2011.
Voting Rights
It was announced on 26 January 2011 that with effect from 1 January 2011, in accordance with the provisions of the Company's prospectus to reflect the relative net asset values of the Company's shares on 31 December 2010 the voting rights per share had been amended to:
Euro denominated Share - 1.3 voting rights per share US Dollar denominated Share - 1 voting right per share Sterling denominated Share - 1.5 voting rights per share
Financial Report
The Company announced its financial results for the year ended 31 December 2010 on 20 April 2011.
The Board is not aware of any material events or transactions, except as disclosed herein, occurring between 1 April 2011 and the date of publication of this interim management statement which would have a material impact on the financial position of the Company.
BlackRock (Channel Islands) Limited
SecretaryDate: 16 May 2011IMPORTANT INFORMATION
AN INVESTMENT IN THE COMPANY IS SPECULATIVE AND INCLUDES A HIGH DEGREE OF RISK, INCLUDING THE RISK OF A TOTAL LOSS OF CAPITAL. THE COMPANYY AND/OR ITS UNDERLYING INVESTMENTS MAY BE ILLIQUID AND SUBJECT TO SIGNIFICANT RESTRICTIONS ON TRANSFER, AND INVESTORS SHOULD BE AWARE THAT THEY MAY BE REQUIRED TO BEAR THE RISKS ASSOCIATED WITH SUCH INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. ALL INVESTORS SHOULD CAREFULLY REVIEW THE CONFIDENTIAL PRIVATE OFFERING MEMORANDUM AND GOVERNING DOCUMENTS FOR THE COMPANYY PRIOR TO MAKING AN INVESTMENT DECISION. ANYINVESTMENT DECISION WITH RESPECT TO THE COMPANY MUST BE BASED SOLELY ON THE DEFINITIVE AND FINAL VERSION OF THE FUND'S CONFIDENTIAL PRIVATE OFFERING MEMORANDUM, GOVERNING DOCUMENTS AND SUBSCRIPTION AGREEMENT. THERE IS NO ASSURANCE THE COMPANYY WILL ACHIEVE ITS OBJECTIVES.
This document is provided for information purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any securities described herein in the United States or in any other jurisdiction, nor shall it, by the fact of its distribution, form the basis of, or be relied upon, in connection with any contract therefore. This communication is being issued by the BlackRock Alternative Advisors business unit of BlackRock, Inc. ("BAA") for informational purposes only relating to BARS (as defined below). Potential investors are urged to conduct further due diligence prior to, and to consult a professional advisor regarding the possible economic, tax, legal or other consequences of, entering into any investments or transactions described herein. All investments risk the loss of capital and the value of shares may go up as well as down. There is no guarantee or assurance that an investment in the Company will achieve its investment objective. An investment in the Company is speculative and should form only part of a complete investment program, and an investor must be able to bear the loss of its entire investment. Shares are suitable only for sophisticated investors and may involve a high degree of risk.
In receiving this document and the information contained herein, you will be deemed to have represented and agreed for the benefit of the Company, BAA and its affiliates (together with BAA, "BlackRock") that you are permitted, in accordance with all applicable laws, to receive this document and such information.
BlackRock Absolute Return Strategies Ltd (ticker symbols BARS, BARE and BARU) ("BARS" or the "Company") is a closed-ended LSE listed multimanager investment fund organized as a Jersey, Channel Islands company, which began operations on 1 May 2008. BARS seeks to generate a total annualized return of 6% above the annual yield for 3-Month LIBOR, with an 8% annualized standard deviation. No assurances can be given that the Company's objectives will be met.
No person has been authorised to give any information or make any representation not contained in this communication and if given or made any such information or representation may not be relied upon as having been authorised by BlackRock.
Certain Risk Factors
Past results are not necessarily indicative of future results. Historically, funds of funds and hedge funds have produced gains and losses due to changes within the equity, interest rate, credit, currency, commodity and related derivative markets. Additionally, gains and losses are impacted to varying degrees by investment acumen, market volatility, corporate activity, securities selections, regulatory oversight, trading volume and money flows. These elements and/or their rate of change may not be present in the future, and thus future performance may be impacted. Any investment in a fund involves a high degree of risk. Investments in funds of funds and hedge funds can be highly illiquid.
The performance of funds of hedge funds will depend on the performance of the underlying fund investments. There can be no assurance that a multimanager approach will be successful or diversified, or that the collective performance of underlying fund investments will be profitable. Underlying fund managers may be subject to limited regulation (or may not be registered with any regulatory body), may experience potential conflicts of interest with respect to their management of allocated Company assets and from time to time, vis- -vis other underlying managers, may take opposing positions with respect to particular securities or investments. The Company will rely on information provided to it by the underlying fund managers and there may be limited ability to confirm or verify such information.
Underlying fund managers may implement a variety of investment strategies and techniques, including short selling, leverage, hedging (such as derivatives, swaps, forwards, futures and options) and securities lending. Underlying fund managers may invest in a wide array of investments, including non-US investments, non-US currencies, distressed assets, illiquid investments (such as those subject to legal or regulatory restrictions on transfer), and commodities and futures, each of which may have diverse associated risks, including counterparty risk, credit risk and liquidity risk.
The secondary market for investments in the Company or its underlying fund investments is a recent development and as such may exhibit illiquidity, wide or non-existent bid-offer spreads, and brokerage charges. In addition, there may be restrictions on transferring fund investments. A fund may be leveraged, which may increase the risk of investment loss, and its performance may be volatile. Funds of funds and hedge funds may involve complex tax structures; therefore, there may be delays in distributing important tax information. Funds of funds and hedge funds are not subject to the same regulatory requirements as SEC registered funds or mutual funds and are not required to provide periodic pricing or valuation information to investors. The Company and its underlying fund investments may have significant fees and expenses that would reduce returns.
Performance Record
All share class performance represents the weighted average gross performance (net of expenses) of Q-BLK Appreciation Fund, L.P. and Q-BLK Appreciation Fund, Inc. (prior to 1 April 1998), Q-BLK Strategic Partners, Inc. (from 1 April 1998 to 31 October 2001),QIP, Ltd. (from 1 November 2001 to 31 July 2004) and QARS3-I, Ltd (from 1 August 2004 through 30 April 2008), all of which have the same investment mandate as the Company. The gross returns are then adjusted to reflect the applicable BARS - GBP, BARS - EUR, or BARS - USD fee. Performance from 1 May 2008 is net of applicable fees and currency and other expenses as applicable to each share class. The performance history of the Company includes related funds with differing fee structures. The actual net performance of the Company's historic record prior to 1 May 2008 (including USD denominated classes of the related funds and calculated for the period during which such funds are included in the historic record) was 183.2%. Certain of these funds may offer share classes denominated in a non-US currency which are not included in the calculation of the BARS' performance; these share classes generally incur additional expenses to hedge against the US Dollar. All performance numbers are estimates calculated on an accrual basis during the accounting close process for the Company and are based on estimated returns provided by each underlying fund manager. These calculations are based on estimated returns rather than final reported information in order to provide timely performance return information to investors. As a result, the performance numbers shown may differ from performance numbers based on the final financial information for each underlying fund and adjustments are made prospectively unless the Investment Manager determines the difference was material. Estimated performance numbers are particularly susceptible to inaccuracies during periods of market volatility or uncertainty, and additional information may become available subsequently that materially alters these estimates. BARS will be audited annually by an independent public accounting firm; therefore, the performance information presented herein will contain unaudited net asset value information for periods that have not yet been audited. Performance numbers themselves have not been audited. Performance results reflect the inclusion of all realized and unrealized gains and losses and the reinvestment of earnings. Risk is computed as the annualized standard deviation of monthly returns. The Sharpe Ratio for GBP, EUR and USD currencies measures the return earned over LIBOR (GBP), LIBOR (EUR) and ML T-bills, respectively, per unit of risk taken.
In calculating performance for BARS - GBP (Blended - net) and BARS - EUR (Blended - net), the USD performance (net of applicable fees and expenses) for the relevant funds has been converted to GBP and EUR, respectively, using relevant one month GBP/USD and EUR/USD spot rates and then using forward rates to hedge currency risk, each as supplied by Bloomberg L.P. In addition, the costs of currency hedging have not been included in the performance calculation nor have we assumed the hedging of any profits generated during each month. Following the 1 May 2008 launch of the GBP and EUR denominated share classes, actual performance includes hedging costs.
This performance information is an estimate that is subject to change and based in part on estimates received from the underlying funds' administrator or investment advisor, in some cases using assumptions that may be complex and susceptible to significant uncertainty, and may prove incorrect. Estimated valuations are particularly susceptible to inaccuracies during periods of market volatility or uncertainty, and additional information may become available subsequently which materially alters assumptions or other inputs to the estimates. This may result in a material change to the Company's estimated reported net asset value and performance estimate. Should the net asset value materially change, the Company will retroactively revise all capital transactions of impacted investors as appropriate.
Contribution to return estimates are based upon primary discipline. Data is current as of the date information for this report was calculated, which may be subject to ongoing reporting. It is important to note that the contribution to return estimates are based on certain opinions and assumptions about primary discipline which constitute the judgment of BAA and are subject to change. In addition, many fund managers operate under broad investment mandates and invest in multiple disciplines and/or strategies. No attempt has been made to attribute single fund manager performance across multiple disciplines. As a result, the contribution to return estimates provided herein may be of limited use.
Minor variances in column, row and sectional totals are the result of rounding and have been allowed to maintain the integrity of the underlying financial data. Information relating to the Company's performance and its underlying managers' qualifications, strategy exposure or portfolio composition was prepared by BAA based on information believed to be reliable; however, no assurance of its completeness or accuracy can be made. In some cases, the Company's underlying managers may manage more than one investment program. The performance information presented herein relates only to the described investment program. BlackRock also advises other portfolios whose historical risk/return characteristics may be significantly different.
Indices
Index performance is taken from Bloomberg Financial Markets or the index's proprietary website and is included for comparison only and, although useful for general observations, differences between the composition and construction of such indices and the Company's portfolio may limit their usefulness for direct comparisons. For example, it should be noted that hedge fund indices will vary, in some cases significantly, from the composition of the Company's portfolio in terms of the number of positions, types of hedge fund strategies included and distribution within such hedge fund strategies and other characteristics. Comparison of the Company's results to indices that represent asset classes other than hedge funds or funds of hedge funds are further limited by the significant inherent differences between such asset classes, for example in terms of risk/return, correlations and other characteristics. Moreover, index information may or may not reflect the deduction of fees and expenses (refer to specific definitions), which could further limit the comparative value of such information relative to the Company.
Characteristics of securities included within the indices are subject to change between rebalancing periods. These characteristics are applicable when securities are evaluated at rebalancing points but may be higher or lower during interim periods. Additionally, index providers may have varying methodologies for measuring and implementing constituent changes and differing rebalancing periods.
Returns for international stock and bond benchmarks are in USD terms unless otherwise noted.
FTSE All-Share Index is a capital-weighted index that includes 98-99% of the UK market capitalisation. Returns are denominated in GBP and include gross dividends. The Index is a proxy for the performance of the broad UK equity market.
MSCI World Index is a capital-weighted index that includes the largest firms making up 60% of each country's aggregate capitalisation. The Index includes 24 developed market indices. Returns are denominated in USD and include dividends. The Index is a proxy for the performance of the world's developed equity markets.
HFRI Fund of Funds Conservative Index (USD) ("HFRI FOF Conservative Index (USD) ") is an equal-weighted index representing funds of funds that invest with multiple managers focused on consistent performance and lower volatility via absolute return strategies. The Index includes funds of funds tracked by Hedge Fund Research, Inc. and is revised several times each month to reflect updated fund return information. The Index is a proxy for the performance of the universe of conservative funds of funds focused on absolute return strategies. Returns are net of fees and are denominated in USD. Source: Hedge Fund Research, Inc., © HFR, Inc. 15 April 2011, www.hedgefundresearch.com.
The BofA Merrill Lynch GBP 3-Month LIBOR Constant Maturity Index ("BofAML GBP 3-Month LIBOR") represents the GBP return on three month securities in the Eurodollar market invested at the London Interbank Offer Rate (LIBOR). LIBOR is the offer side of the interest rate banks charge each other on short-term money, and is an average derived from sixteen bank rate quotations, fixed daily by the British Bankers' Association (BBA).
Additional Information Concerning Portfolio Characteristics
Certain statements contained in this document may be forward-looking statements. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the scenarios and events described herein.
Forward-looking statements contained in this document that reference past trends or activities should not be taken as a representation that such trends or activities will necessarily continue in the future. BlackRock undertakes no obligations to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You should not place undue reliance on forward-looking statements, which speak only as of the date of this document.
The Company is not an Authorised Person under the Financial Services and Markets Act 2000 and accordingly is not registered with the United Kingdoms' Financial Services Authority. The Company will therefore only be suitable for professional or experienced investors, or those who have taken financial advice. Regulatory requirements which may be deemed necessary for the protection of retail or inexperienced investors do not apply to listed funds. By investing in the Company, you will be deemed to be acknowledging that you are a professional or experienced investor, or have taken appropriate professional advice and accepted the reduced requirements accordingly. You are wholly responsible for ensuring that all aspects of the Company are acceptable to you. Investment in listed fund may involve special risks that could lead to a loss of all of a substantial portion of such investment. Unless you fully understand and accept the nature of this fund and the potential risks inherent in this fund, you should not invest in the Company. Further information in relation to the regulatory treatment of listed funds domiciled in Jersey may be found on the website of the Jersey Financial Services Commission and www.jersyfsc.org.
Opinions and estimates offered herein constitute the judgment of BlackRock and are subject to change. All opinions and estimates are based on assumptions, all of which are difficult to predict and many of which are beyond the control of BlackRock. In addition, any calculations used to generate the estimates were not prepared with a view towards public disclosure or compliance with any published guidelines. In preparing this document, BlackRock has relied upon and assumed, without independent verification, the accuracy and completeness of information provided by third parties. BlackRock believes that the information provided herein is reliable; however, it does not warrant its accuracy or completeness.
This is an original unpublished work protected under copyright laws of the United States and other countries. All Rights Reserved. Should publication occur, then the following notice shall apply: © 2011 by BlackRock. No part of this document may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without the prior written consent of BlackRock. Any dispute, action or other proceeding concerning thus document shall be adjudicated within the exclusive jurisdiction of the courts of England. All material contained in this document (including in this disclaimer) shall be governed by and construed in accordance with the laws of England and Wales.
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