THAMES RIVER MULTI HEDGE PCC LIMITED

THAMES RIVER MULTI HEDGE PCC LIMITED Table of Contents Page Management and Administration Chairman’s Report Responsibility Statement Investment Mana...
Author: Noel Chandler
2 downloads 3 Views 161KB Size
THAMES RIVER MULTI HEDGE PCC LIMITED

Table of Contents

Page Management and Administration Chairman’s Report Responsibility Statement Investment Manager's Report Schedule of Investments Unaudited Balance Sheet Unaudited Statement of Changes in Equity Unaudited Income Statement Unaudited Cash Flow Statement Notes to the Unaudited Financial Statements Information about the Company

2 3 5 6 8 11 12 14 15 16 21

1

THAMES RIVER MULTI HEDGE PCC LIMITED MANAGEMENT AND ADMINISTRATION Directors William Backhouse LVO (Chairman, Independent) Christopher Martin Walter Hill (Independent) Victor Holmes Paul Hillary Le Page (Independent) David George Peter Scholfield (Independent) Eleanor Carmel Fitzgerald (as permanent alternate director to V. Holmes)

Investment Manager Thames River Capital LLP, 51 Berkeley Square, London W1J 5BB, United Kingdom

Registered Office Trafalgar Court, Les Banques, St. Peter Port, Guernsey GY1 3QL

Secretary, Administrator, Registrar & Channel Islands Sponsor Northern Trust International Fund Administration Services (Guernsey) Limited, PO Box 255, Trafalgar Court, Les Banques, St. Peter Port, Guernsey GY1 3QL

Custodians HSBC Private Bank (Guernsey) Limited, HSBC Private Bank Building, Rue du Pré, St. Peter Port, Guernsey GY1 1LU

Independent Auditors PricewaterhouseCoopers CI LLP, P.O. Box 321, National Westminster House, Le Truchot, St. Peter Port, Guernsey GY1 4ND

Bear, Stearns International Limited, One Canada Square, London E14 5AD. United Kingdom Legal Advisers English Law Herbert Smith, Exchange House, Primrose Street, London EC2A 2HS, United Kingdom

Broker Cenkos Securities plc, 6.7.8 Tokenhouse Yard, London EC2R 7AS, United Kingdom

Guernsey Law Ozannes, 1 Le Marchant Street, St. Peter Port, Guernsey GY1 4HP

CREST Agent Computershare Investor Services (Channel Islands) Limited, Ordinance House, 31 Pier Road, St Helier, Jersey JE4 8PW

2

THAMES RIVER MULTI HEDGE PCC LIMITED CHAIRMAN’S REPORT Welcome to the fourth interim report for Thames River Multi Hedge PCC Limited (the “Company”) and more specifically of its protected cell Thames River Hedge+. For approximately half of our investors this will be their first report since investing in the C share issue in July and as such, I would like to extend a warm welcome to them. For the benefit of our new investors, I should explain that my report typically consists of three sections, namely: an assessment of the performance of the Company and our investment manager; a brief synopsis of the market environment and finally a review of major events for the Company. The last six months have been a somewhat turbulent period for global financial markets as the global credit market crisis has caused investors to question the safety of traditional safe haven investments such as bank deposits and money market funds. I am delighted to report however that the Sterling, Euro, and US Dollar classes of Thames River Hedge+ have delivered their best interim period of performance since inception. The three share classes have appreciated by 15.9%, 15.8% and 17.9% and their net asset values (NAVs) have appreciated by 12.6%, 11.8% and 12.7% respectively. A comparison with some popular hedge fund indices may help our investors put this performance into perspective. The popular HFRI Fund of Funds index published by Hedge Fund Research Inc has returned 4.8% over the same period and the CSFB Tremont Hedge Fund Index (which measures the performance of the hedge fund industry on an invested capital weighted basis) has returned 6.4%. The three share classes of your Company have also outperformed global equity and bond markets with the MSCI World (Gross) Index returning 9.3% over the review period and the JP Morgan Global Government Bond Index returning 5.3%. The interim period began with unbridled optimism as strong corporate earnings data in the US and Europe and high levels of corporate activity underpinned equity markets, culminating in the S&P 500 reaching a new high in May. Private equity bids for public companies became progressively more audacious and the £11.1bn KKR bid for Alliance Boots in the UK marked the first private equity buy-out of a FTSE 100 company. Bond markets by way of contrast suffered heavy selling and 2-year JGB yields reached a 10-year high in May. This was followed by a sharp sell-off in the US Treasury market in June as news emerged that China was intending to reduce its sovereign wealth fund holdings in Treasuries. China also fuelled a massive speculative rally in Pacific basin equities by relaxing rules on investments in overseas markets in an attempt to diffuse a speculative bubble in its domestic equity market. News of substantial losses in two Bear Stearns funds brought sub-prime debt back into the headlines at the end of June. Fear returned to capital markets as European banks began to disclose sub-prime losses in a variety of products ranging from Collateralised Debt Obligations (CDOs) through to money market funds. CDO and leveraged loan issuance effectively dried up in July as credit buyers began to doubt the integrity of the credit rating system. Investment banks were faced with the prospect of absorbing a $300bn pipeline of debt to fund committed buy-outs and began to de-leverage their balance sheets and scale back their proprietary trading activities. Contagion from de-leveraging trades spread into the hedge fund sector in August and some highly leveraged relative value strategies incurred heavy losses. The portfolio of Thames River Hedge+ was well positioned to weather the storm and produced a positive return in a month when the vast majority of hedge funds and funds of hedge funds lost money. The Federal Reserve rode to the rescue in September and cut interest rates by a larger than anticipated 0.5% in a bid to restore confidence in the banking system and the period ended with a substantial rally in equity and credit markets. At the time of writing this rally has given way to a sharp correction in most markets due to renewed credit market worries.

3

THAMES RIVER MULTI HEDGE PCC LIMITED CHAIRMAN’S REPORT (continued) I have mentioned in previous reports that your board has been working to raise the profile of the Company. I am delighted to report that a combination of a successful C share issue in July and organic growth of the Company through investment performance has grown our asset base from £78.5m at the end of March to £159.6m at the end of September. We have also just closed a third C share issue raising a further £83.5m (before expenses) of capital thus taking the Company assets to approximately £248m. This will make Thames River Hedge+ one of the largest funds in the London listed, closed-end, fund of hedge funds sector. Size has many advantages in that it enables institutional investors to build meaningful positions in Thames River Hedge+ and it has also resulted in more broker and media coverage for your Company. In addition, larger closed-end funds tend to benefit from increased secondary market liquidity. Our investors may also benefit from a reduction in premium/discount volatility as the Company builds a more diversified investor base. It is important to emphasise however that your board will not compromise investment performance by capital raising as I hope that the strong run of performance following our C share issue in July demonstrates. Our investment manager has a strong pipeline of new ideas to fund and I hope that his report, which follows, will help to give you all some insight into the prospects for the Company as we move solidly into the second half of our financial year.

William Backhouse 28 November 2007

4

THAMES RIVER MULTI HEDGE PCC LIMITED RESPONSIBILITY STATEMENT

In preparing these condensed financial statements for the six months to 30 September 2007 the Directors confirm that, to the best of their knowledge: (a)

the condensed set of financial statements has been prepared in accordance with the international accounting standard applicable to the interim financial reporting adopted pursuant to the procedure provided for under Article 6 of Regulation (EC) No. 1606/2002 of the European Parliament and the Council of 19 July 2002;

(b)

the interim management report includes a fair review of the information required by Regulation 8(2) of the Transparency Regulations 2007 (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year); and

(c)

the interim management report includes a fair review of the information required by Regulation 8(3) of the Transparency Regulations 2007 (disclosure of related parties' transactions and changes therein).

The half-yearly financial report has not been audited or reviewed by the auditors.

5

THAMES RIVER MULTI HEDGE PCC LIMITED INVESTMENT MANAGER’S REPORT GENERAL REVIEW OF THE HALF YEAR TO 30 SEPTEMBER 2007 This financial year started off strongly with the MSCI World index of equity markets up close to 5% for the month of April and bonds also producing a positive result as measured by the Lehman Aggregate Bond Index. This was fuelled by a rising global risk appetite and the first quarter earnings season surprising on the upside. Thames River Hedge+ (the “Fund”) returned 1.5% for the month with mixed results from our underlying funds. April was followed by another positive month for the financial markets and for the Fund although bonds turned negative in May as investors started getting nervous about inflation and US housing market concerns. Continued nervousness due to the US housing market woes impacted both the equity and bond markets in June with exceptional volatility as the US 10 year bond yield rose by 70bp in only four weeks. Thames River Hedge+ was able to produce a positive result in June in the most part due to the short sub-prime exposure in some of our underlying funds especially the various Paulson funds. Interestingly, we may look back at this month as the defining point where global capital markets seemed to have decoupled from the US and instead focused on the East. Jitters in the financial markets carried on into July as investors started seeking a safe haven in US and other government bonds and the Fund had a stellar 4.4% month gain due to the substantial underlying short exposure to the sub-prime debt market. The long-anticipated bursting of the credit bubble occurred in August with such ferocity that the US and EU central banks had to inject huge amounts of liquidity into the money markets to prevent a full-scale credit meltdown. Lending in the inter-bank market dried up as concerns regarding the exposure of banks to the sub-prime market dented their confidence in each other. The commercial paper market also dried up causing extensive damage in the asset backed markets, especially special investment vehicles (SIVs). Thames River Hedge+ was able to eke out a marginally positive return in August again due to the short sub-prime exposure and the structural bias in the portfolio against quantitative hedge fund strategies. September saw the markets rebound as the US Federal Reserve slashed interest rates with further cuts expected if the lack of confidence in the credit markets continued. Again the Fund’s return was positive although performance on this occasion was driven by our emerging markets managers and those with long equity exposure. In addition, in September for the first time, we bought S&P 500 put options to provide a macro hedge against the impact on financial markets of the credit bubble bursting. Performance Overall, for the first six months of the year Thames River Hedge+ produced strong overall returns notwithstanding the turbulent market conditions and we are pleased to have missed the downdraft from the credit markets over the summer and the problems that hit the quantitative hedge fund strategies, where the Fund had little exposure. In summary, the NAV performance of each of the share classes for the six months was: Sterling Shares +12.60% Euro Shares +11.75% Dollar Shares +12.73% Although a significant portion of the strong performance came from our short sub-prime debt exposure, principally through the Paulson funds, the rest of the portfolio did perform in line with targeted returns. By comparison the HFR Fund of Funds Composite Index (active index) was up 4.8% and the MSCI Hedge Invest Index (passive index) up 2.1% over the same period. The core sub-portfolio has performed in line with expectations with six out of the 14 core managers having produced double digit returns in the first half year. Notable performers were Paulson Advantage Plus (68%), GLG Emerging Markets (19%) Nevsky (21%), Bennelong Global Special Opportunities (15%) and Lafayette Street (13%). None of the funds in the core sub-portfolio produced a negative return for the period. The seed sub-portfolio’s two investments were both up around 10% for the period as Asian markets showed strong growth; we remain positive on the outlook for these funds. The special situations sub-portfolio had a stunning return as the Paulson Credit Opportunities funds delivered returns ranging from 143% to 212% due to their significant short exposure to financials and the sub-prime debt market. Other notable performers were our shipping and commodities funds producing 10% returns each for the year to date and our carbon assets fund up 15%.

6

THAMES RIVER MULTI HEDGE PCC LIMITED INVESTMENT MANAGER’S REPORT (continued) Performance (continued) We introduced a fourth sub-portfolio being the currency sub-portfolio at the end of April and allocated around 1% to this portfolio. Innovation is at the heart of Thames River Hedge+’s investment strategy and we are excited about the prospects for this portfolio. However, we believe in “pyramiding” into new ideas for risk management purposes. The currency sub-portfolio is a multi-manager currency portfolio that aims to outperform cash by 10% per annum over the long run, with a volatility target of 10%, and target correlations with returns on equity and bond markets of zero. It seeks to harness three key return drivers to achieve these objectives. The first of these is currency market inefficiency, which exists because the largest groups of participants in currency markets are transacting for reasons other than to make money. These include international equity managers, whose currency transactions are largely driven by their equity investment decisions, central banks, whose currency transactions are largely driven by policy objectives, and corporates, whose currency transactions are largely driven by their import and export transactions. The second key return driver is selection of superior currency managers who have above average ability to identify and exploit these opportunities to make money. The third is the portfolio engineering process that we employ to take advantage of the fact that correlations between returns for different currency managers tend, on average, to be quite low. This allows us to construct a portfolio of currency managers that we expect will generate more than twice the return per unit of risk than the average for the constituent managers. Having got off to a somewhat slow start in the turbulent markets in April to July, this sub-portfolio gave back all its positive performance and suffered losses in August. The sub-portfolio has, since August, returned to generating satisfactory returns. Outlook As we write this report, markets continue to be volatile as the extent of credit losses on the major banks’ balance sheets is being slowly revealed but remains substantially unknown. Until normal trading conditions return, thus allowing these positions to be traded out rather than relying on risk managers’ best estimates to decide the extent of bank write-downs, we remain bearish of financial markets and expect difficult market conditions well into next year. However, once markets clear, we see potentially exciting opportunities especially in the credit markets and longer term in the distressed part of the credit markets. We also believe that emerging markets are increasingly reducing their reliance on the US and other developed markets as the primary driver of economic growth and we are looking to build this theme in the portfolio over the medium term.

Thames River Capital LLP 28 November 2007

7

THAMES RIVER MULTI HEDGE PCC LIMITED SCHEDULE OF INVESTMENTS As at 30 September 2007 Financial assets at fair value through profit or loss Funds The Alphagen Tucana Fund Ltd Davidson Kempner Distressed Opportunities International Ltd Episode Inc Paulson Advantage Plus Ltd Stanfield Offshore Leveraged Assets I Bennelong Global Special Opportunities Fund Ltd The Drake Global Opportunities Fund Ltd Lafayette Street Fund Offshore Ltd BlueCrest Strategic Ltd Nevsky Fund Ltd Sector Speculare (Private Equity) III Fund CQS Directional Opportunities Feeder Fund Ltd Paulson Credit Opportunities II Ltd GLG Emerging Markets Fund BueCrest Special Situations Ferox Fund Ltd GPS Income Fund (Cayman) Ltd Highview Global Macro Fund Ltd Paulson Credit Opportunities Ltd The Merchant Commodity Fund Plenum Power Fund Ltd Carbon Assets Fund Davidson Kempner Healthcare International Ltd LAPP Strategic Fund I Ltd Ecofin Special Situations Utilities Fund Ltd RAB Octane Fund Ltd New Star Firefly Hedge Fund Ltd Alpstar Secured Bank Loan Fund Ltd Thames River 2X Currency Alpha Fund Ltd HSBC Global Technology Alpha Fund IRG TMT Asia Fund Cheyne Long/Short Structured Credit Fund Inc Global Maritime Investments Ltd The Winton Evolution Fund CPIM Structured Credit Fund 20 Inc Altima Global Special Opportunities Fund Ltd Copernico Special Situations Fund MBA Latin America Opportunity Fund Ltd Red Star Double Alpha Segregated Portfolio

Strategy Equity Long/Short Distressed Macro Event Driven Credit Multi-Strategy Macro Equity Long/Short Macro Equity Long/Short Other Multi-Strategy Credit Macro Multi-Strategy Convertible Arbitrage Equity Long/Short Macro Credit Commodity Trading Other Other Equity Long/Short Equity Long/Short Equity Long/Short Equity Long/Short Equity Long/Short Credit Currency Equity Long/Short Event Driven Credit Other Commodity Trading Credit Equity Long/Short Other Multi-Strategy Equity Long/Short

Options OTC S&P 500 Put Option - strike 1480 expiry 21.12.07 OTC S&P 500 Put Option - strike 1530 expiry 21.12.07

Nominal Holding 144,305 23,855 182,023 84,383 16,986 170,832 20,000 97,960 128,598 2,272 158,347 8,069 31,023 38,435 82,142 58,183 7,949 4,638 11,714 23,379 4,394 30,000 4,773 46,637 35,070 24,675 29,419 32,438 4,015 29,924 3,005 26,305 19,275 2,121 18,377 1,986 14,291 1,455 7,519

260 118

8

Fair Value US$'000 26,264 26,216 24,422 21,954 21,718 21,061 21,021 20,902 20,129 17,441 16,579 11,936 10,612 10,196 9,501 8,472 8,465 7,507 7,484 6,064 5,317 5,304 5,127 5,104 4,304 3,909 3,790 3,705 3,654 3,616 3,316 3,116 2,613 2,469 2,141 2,052 1,664 1,548 1,213

% of NAV 8.00 7.98 7.44 6.68 6.61 6.41 6.40 6.36 6.13 5.31 5.05 3.63 3.23 3.10 2.89 2.58 2.58 2.29 2.28 1.85 1.62 1.62 1.56 1.55 1.31 1.19 1.15 1.13 1.11 1.10 1.01 0.95 0.80 0.75 0.65 0.62 0.51 0.47 0.37

807 546 383,259

0.25 0.17 116.69

THAMES RIVER MULTI HEDGE PCC LIMITED SCHEDULE OF INVESTMENTS (continued) As at 30 September 2007 Financial assets at fair value through profit or loss (continued)

Subtotal brought forward

Fair Value US$'000

% of NAV

383,259

116.69

Open Forward Foreign Currency Transactions Currency Sold Euro Class USD 4,068,485

Currency Bought

Currency Rate

Maturity Date

Unrealised Gain US$'000

% of NAV

EUR

1.4231

31.10.07

27

0.01

STG

2.0361

31.10.07

3,465 3,492

1.06 1.07

386,751

117.76

Unrealised Loss US$'000

% of NAV

Sterling Class USD 312,454,097

Total financial assets at fair value through profit or loss Financial liabilities at fair value through profit or loss Open Forward Foreign Currency Transactions Currency Sold Investment level EUR 3,833,000

Currency Bought

Currency Rate

Maturity Date

USD

1.4232

31.10.07

Total financial liabilities at fair value through profit or loss Total Net Investments at Fair Value Other Net Liabilities Total Net Assets

(37)

0.01

(37)

0.01

386,714 (58,303) 328,411

9

117.75 (17.75) 100.00

THAMES RIVER MULTI HEDGE PCC LIMITED SCHEDULE OF INVESTMENTS (continued) As at 30 September 2007 Analysis of Total Portfolio by Investment Strategy at 30 September 2007

Equity Long/Short Macro Credit Multi-Strategy Other Distressed Event Driven Commodity Trading Convertible Arbitrage Currency Open Forward Foreign Currency Transactions Options

Number of Funds

Fair Value US$'000

% of Total Investments

12 5 6 4 5 1 2 2 1 1

39

102,187 83,275 48,776 44,046 31,477 26,216 25,270 8,533 8,472 3,654 3,455 1,353 386,714

26.43 21.54 12.61 11.39 8.14 6.78 6.53 2.21 2.19 0.94 0.89 0.35 100.00

Number of Funds

Fair Value US$'000

% of Total Investments

Analysis of Total Portfolio by Investment Strategy at 31 March 2007

Equity Long / Short Macro Credit Event Driven Multi-Strategy Other Convertible Arbitrage Commodity Trading Distressed Open Forward Foreign Currency Transactions

11 5 6 3 3 5 1 2 1 37

10

48,584 30,688 22,025 18,299 13,571 13,274 7,982 7,626 5,795 (395) 167,449

29.01 18.33 13.16 10.93 8.10 7.93 4.77 4.55 3.46 (0.24) 100.00

THAMES RIVER MULTI HEDGE PCC LIMITED UNAUDITED BALANCE SHEET As at 30 September 2007 September 2007 US$

March 2007 US$

9,967,806 5,029,960 386,750,167 401,747,933

3,100,290 7,252,551 54,063 167,859,117 178,266,021

(64,364,793) (4,384,372) (4,551,580) (36,596) (73,337,341)

(16,052,020) (1,825,146) (1,251,250) (410,225) (19,538,641)

Total Net Assets

328,410,592

158,727,380

Capital and revenue attributable to the Fund's equity holders Share Capital Share Premium Retained Earnings Total Equity

4 263,902,429 64,508,159 328,410,592

4 124,786,439 33,940,937 158,727,380

107,440,821 2,151,251 3,485,806

59,786,339 2,397,469 2,517,000

£1.4621 €1.3561 $1.2126

£1.2975 €1.2135 $1.0757

Notes Assets Cash Debtors Receivable on unsettled trades Financial assets at fair value through profit or loss Total Assets

1

Liabilities Bank borrowing Creditors Payable on unsettled trades Financial liabilities at fair value through profit or loss Total Liabilities

2

1

Shares in Issue Sterling Shares Euro Shares Dollar Shares

4 4 4

Net Asset Value per Share Sterling Shares Euro Shares Dollar Shares

The accompanying notes form an integral part of these financial statements.

11

THAMES RIVER MULTI HEDGE PCC LIMITED UNAUDITED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 September 2007

Share Capital US$

Share Premium US$

Retained Earnings US$

Total US$

Management Shares

4

-

-

4

Sterling Shares Opening balance 1 April 2007 Issue of shares Redemption of shares Switches Net gain for the period Closing balance 30 September 2007

2 2

119,968,192 135,307,124 2,971,477 258,246,793

32,179,013 29,609,284 61,788,297

152,147,207 135,307,124 2,971,477 29,609,284 320,035,092

Euro Shares Opening balance 1 April 2007 Issue of shares Redemption of shares Switches Net gain for the period Closing balance 30 September 2007

2 2

2,364,927 860,729 (1,251,196) 1,974,460

1,507,615 666,640 2,174,255

3,872,544 860,729 (1,251,196) 666,640 4,148,717

Dollar Shares Opening balance 1 April 2007 Issue of shares Redemption of shares Switches Net gain for the period Closing balance 30 September 2007

-

2,453,320 2,948,137 (1,720,281) 3,681,176

254,309 291,298 545,607

2,707,629 2,948,137 (1,720,281) 291,298 4,226,783

Total Opening balance 1 April 2007 Issue of shares Redemption of shares Net gain for the period Closing balance 30 September 2007

4 4

124,786,439 139,115,990 263,902,429

33,940,937 30,567,222 64,508,159

The accompanying notes form an integral part of these financial statements.

12

158,727,380 139,115,990 30,567,222 328,410,592

THAMES RIVER MULTI HEDGE PCC LIMITED UNAUDITED STATEMENT OF CHANGES IN EQUITY For the six months ended 30 September 2006

Share Capital US$

Share Premium US$

Retained Earnings US$

Total US$

Management Shares

4

-

-

4

Sterling Shares Opening balance 1 April 2006 Issues of shares Redemption of shares Switches Net gain for the period Closing balance 30 September 2006

2 2

78,033,435 78,033,435

7,436,041 5,098,123 12,534,164

85,469,478 5,098,123 90,567,601

Euro Shares Opening balance 1 April 2006 Issues of shares Redemption of shares Switches Net loss for the period Closing balance 30 September 2006

2 2

6,037,446 (1,016,532) 5,020,914

Total Opening balance 1 April 2006 Issues of shares Redemption of shares Switches Net gain for the period Closing balance 30 September 2006

4 4

84,070,881 (1,016,532) 83,054,349

489,230 (117,047) 372,183

7,925,271 4,981,076 12,906,347

The accompanying notes form an integral part of these financial statements.

13

6,526,678 (1,016,532) (117,047) 5,393,099

91,996,156 (1,016,532) 4,981,076 95,960,700

THAMES RIVER MULTI HEDGE PCC LIMITED UNAUDITED INCOME STATEMENT For the six months ended 30 September 2007

Notes 1

Revenue Deposit interest Dividend Income Net gain on financial assets and liabilities at fair value through profit or loss Total revenue Expenses Performance fees Management fees Custody fees General expenses Administration fees Directors' fees Directors' and Officers' insurance Total operating expenses

1

Operating profit

1

September 2007 US$

September 2006 US$

572

82,849 -

37,705,769 37,706,341

6,007,166 6,090,015

4,049,658 1,627,134 148,582 103,842 100,416 81,494 21,000 6,132,126

727,519 48,655 33,858 48,302 74,720 21,973 955,027

31,574,215

5,134,988

Finance costs - interest expense

(1,006,993)

Net gain for the year attributable to the Fund's equity holders

30,567,222

(153,912) 4,981,076

September 2007 Sterling Euro Shares Shares

Earnings per share Net gain attributable to the Fund's equity holders (US dollars) Number of shares in issue (weighted average in the year) Basic earnings per share (expressed in US$ per share) Basic earnings per share in share class currency

29,609,284 83,613,580 35.41¢ 17.67p

666,640 2,274,360 29.31¢ 21.53¢

US Dollar Shares 291,298 3,001,403 9.71¢ 9.71¢

September 2006 Earnings per share Net gain attributable to the Fund's equity holders (US dollars) Number of shares in issue (weighted average in the year) Basic earnings per share (expressed in US$ per share) Basic earnings per share in share class currency

5,098,123 41,792,831 12.20¢ 6.59p

(117,047) 3,897,796 (3.00)¢ (2.37)¢

The accompanying notes form an integral part of these financial statements.

14

N/A N/A N/A N/A

THAMES RIVER MULTI HEDGE PCC LIMITED UNAUDITED CASH FLOW STATEMENT For the six months ended 30 September 2007 September 2007

September 2006

US$

US$

Cash Flow from Operating Activities Purchase of financial assets at fair value through profit or loss

(231,075,487)

(38,262,421)

55,122,725

38,807,561

(3,572,328) 2,551 (179,522,539)

(2,201,900) 82,922 (1,573,838)

(1,028,365)

(153,912)

Proceeds from sale of financial assets at fair value through profit or loss and forward foreign currency contracts Other operating expenses Interest received Net Cash Outflow from Operating Activities Cash Flow from Financing Activities Interest paid Proceeds from issuance of shares

142,078,461

Redemption of shares Net Cash (Outflow)/Inflow from Financing Activities

(2,971,477) 138,078,619

(1,016,532) (1,170,444)

Net Decrease in Cash and Cash Equivalents

(41,443,920)

(2,744,282)

Cash and cash equivalents at beginning of the period

(12,951,730)

(5,482,284)

(1,337)

(355)

(54,396,987)

(8,226,921)

9,967,806 (64,364,793) (54,396,987)

90,027 (8,316,948) (8,226,921)

Exchange loss on cash and cash equivalents Cash and Cash Equivalents at the end of the period Cash and Cash Equivalents at the end of the period Cash at bank Bank overdraft

The accompanying notes form an integral part of these financial statements.

15

-

THAMES RIVER MULTI HEDGE PCC LIMITED NOTES TO THE FINANCIAL STATEMENTS 30 September 2007 1. Significant accounting policies The principal accounting policies applied in the preparation of these financial statements are set out below. (a) Basis of preparation These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). The financial statements have been prepared under the historical cost convention, as modified by the revaluation of financial assets and liabilities held at fair value through profit or loss. The preparation of financial statements in conformity with IFRS requires the use of accounting estimates. It also requires management to exercise its judgement in the process of applying the Company’s accounting policies. (b) Interest income and expense Interest income and expense are recognised in the Income Statement using the effective interest method. (c) Financial assets and liabilities at fair value through profit or loss (i) Classification The Company classifies its investments in investment funds and derivatives as financial assets or financial liabilities at fair value through profit or loss. These financial assets and financial liabilities are classified as held for trading or designated by the Board of Directors at fair value through profit or loss at inception. (ii) Recognition/derecognition Purchases and sales of investments are recognised on the trade date – the date on which the Company commits to purchase or sell the investment. Investments are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred all risks and rewards of ownership. (iii) Measurement Financial assets and financial liabilities at fair value through profit or loss are initially recognised at fair value. Transaction costs are expensed in the Income Statement. Subsequent to initial recognition, all financial assets and financial liabilities at fair value through profit or loss are measured at fair value. Gains and losses arising from changes in the fair value of the financial assets or financial liabilities at fair value through profit or loss category are presented in the Income Statement in the period in which they arise. For the purpose of preparing these financial statements investments are subsequently re-measured at fair value based on the latest available unaudited net asset value provided by the relevant fund manager or administrator as at the dealing date nearest to 30 September 2007, being the date of the Balance Sheet. In the opinion of the directors, there is no material difference between the fair value of investments measured at the dealing date and the fair value as at 30 September 2007. Bank interest income is recognised in the Income Statement within “Deposit interest” using the effective interest method.

16

THAMES RIVER MULTI HEDGE PCC LIMITED NOTES TO THE FINANCIAL STATEMENTS (continued) 30 September 2007 1. Significant accounting policies (continued) (d) Forward Foreign Currency Contracts Forward foreign currency contracts are treated as derivative contracts. The unrealised gain or loss on open forward foreign currency transactions is calculated as the difference between the contracted rate and the market rate to close out the forward foreign currency contract at 30 September 2007. Fair values are obtained from quoted market prices in active markets. At the period end, the counterparties to the open forward foreign currency contracts were Bear Stearns International and HSBC Private Bank (Guernsey) Limited. (e) Operating Expenses The Company is responsible for all normal operating expenses including audit fees, stamp and other duties and charges incurred on the acquisition and realisation of investments. (f) Translation of Foreign Currencies Items included in the Company’s financial statements are measured using the currency of the primary economic environment in which it operates (the “functional currency”). This is the US dollar, which reflects the Company’s primary activity of investing in US dollar denominated assets, although the Sterling Shares are sterling denominated and the Euro Shares are euro denominated. The Company has also adopted the US dollar as its presentation currency. Foreign currency transactions are translated into the functional currency using the exchange rate prevailing on the transaction date. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at period end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the Income Statement. Translation differences on non-monetary items such as financial instruments held at fair value through profit or loss are reported as part of fair value gain or loss. (g) Rights and Obligations Although the options held in the portfolio are over–the-counter options for which Bear, Stearns International is the counterparty, these instruments are valued at the market settlement price of the equivalent exchange traded options. (h) Cash and Cash Equivalents Cash comprises cash on hand, demand deposits and cash at broker. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant changes in value with a maturity of less than three months. (i) Share Capital Sterling Shares, Euro Shares and Dollar Shares are only redeemable at the discretion of the directors and are classified as equity. (j) Borrowings Borrowings are classified as current liabilities unless the Company has an unconditional right to defer settlement of the liability for at least 12 months after the balance sheet date.

17

THAMES RIVER MULTI HEDGE PCC LIMITED NOTES TO THE FINANCIAL STATEMENTS (continued) 30 September 2007

2.

Bank Borrowing At the period end the bank overdraft of US$64,364,793 (March 2007: US$16,052,020, September 2006 US$8,316,948) was provided by HSBC Private Bank (Guernsey) Limited. The interest rate charged during the period was one week LIBOR plus 0.75%.

3.

Related Party Transactions The Company has entered into an investment management agreement with the Investment Manager. All fees in relation to the Investment Manager are disclosed separately in the Income Statement with amounts outstanding at the period end shown in note 5, Creditors. The Company has also entered into an Administration Agreement with Northern Trust International Fund Administration Services (Guernsey) Limited (the “Administrator”). The Administrator has delegated part of the administration of the Company’s portfolio to Northern Trust International Fund Administration Services (Ireland) Limited. Mr Holmes resumed his role as managing director of the Administrator in May 2007 at which time he also moved from managing director to chairman of Northern Trust International Fund Administration Services (Ireland) Limited. Mr Holmes has appointed Ms Fitzgerald as his permanent alternate in place of Mr Carey. Ms Fitzgerald is a senior client relationship manager at the Administrator.

4.

Shareholders’ Funds Two Management Shares were issued at £1.00 each and are beneficially owned by the Investment Manager. Management Shares do not entitle the holders to any dividend and on a winding up entitle the holder to receive the amount paid up thereon and to participate in the assets attributable to any noncellular assets of the Company but not otherwise to participate in the assets attributable to any cell. The holders of Management Shares are entitled to attend and vote at general meetings of the Company. Holders of Sterling Shares, Euro Shares and Dollar Shares are entitled to attend and to vote at general meetings of the Company. On 1 March 2007 5,182,762 Sterling Shares were issued for cash at an issue price of £l.280 per share. As at 30 June 2007, 718,384 Euro Shares and 1,513,000 Dollar Shares were switched into 1,076,243 Sterling Shares. On 20 July 2007, 68,366,709 C Sterling Shares, 645,389 C Euro Shares and 3,022,907 C Dollar Shares were issued. These Shares were converted into 46,578,238 Sterling Shares, 472,166 Euro Shares and 2,481,806 Dollar Shares on 29 August 2007.

18

THAMES RIVER MULTI HEDGE PCC LIMITED NOTES TO THE FINANCIAL STATEMENTS (continued) 30 September 2007 4.

Shareholders’ Funds (continued)

Authorised Unlimited number of shares of no par value Issued and Fully Paid Management Shares at £1.00 each

Sterling Class Opening balance Issued during the period Redeemed during the period Switches Balance as at 30 September 2007

5.

September 2007 US$

March 2007 US$

4

4

Number 59,786,339 46,578,239 1,076,243 107,440,821

Number 41,792,831 16,695,487 1,298,021 59,786,339

Euro Class Opening balance Issued during the period Redeemed during the period Switches Balance as at 30 September 2007

2,397,469 472,166 (718,384) 2,151,251

4,815,000 545,972 (917,204) (2,046,299) 2,397,469

Dollar Class Opening balance Issued during the period Redeemed during the period Switches Balance as at 30 September 2007

2,517,000 2,481,806 (1,513,000) 3,485,806

2,517,000 2,517,000

Exchange Rates At the period end date the exchange rates used were as follows:

Exchange Rate to US$ September March 2007 2007 0.4908 0.5098 0.7032 0.7512

Pound sterling Euro

19

THAMES RIVER MULTI HEDGE PCC LIMITED NOTES TO THE FINANCIAL STATEMENTS (continued) 30 September 2007 6.

Forward Foreign Currency Contracts a) Income Statement It is the policy of the Company to hedge the exposure between the respective Share Classes denominated in sterling and euro and the Fund’s portfolio denominated in US dollars. Gains and losses on such forward contracts are exclusively borne by the respective Share Class and reflected in the Income Statement. b) Balance Sheet As at 30 September 2007, the Fund had entered into and not closed forward foreign currency contracts to hedge the value of the respective share classes. These contracts were executed with the Fund’s custodians, Bear Stearns International Limited and HSBC Private Bank (Guernsey) Limited. All gains and losses arising from such hedging are exclusively applied to the relevant share class and reflected in their respective net asset values. Details of such contracts are included in the Schedule of Investments on page 9.

7.

Directors’ Interests in the Shares of the Company Mr Backhouse and close family members own 135,727 Sterling Shares, Mr Scholfield owns 50,000 Sterling Shares and Mr Hill owns 17,032 Sterling Shares. None of the other directors or the Company Secretary had any interest in the share capital of the Company at any time during the period, or at 30 September 2007.

8.

Taxation The Company is registered in Guernsey as an exempt company and is therefore not resident in Guernsey for the purposes of liability to Guernsey income tax. Confirmation has been sought and obtained from the administrator of income tax that, under current law and practice in Guernsey, the Company will only be liable to tax in Guernsey in respect of income arising in Guernsey, other than bank deposit interest.

9.

Subsequent Events On 16 November 2007, 80,682,558 C Sterling Shares, 50,000 C Euro Shares and 5,754,300 C Dollar Shares were issued. The directors anticipate that these C Shares will convert into Sterling Shares, Euro Shares and Dollar Shares in late December 2007 / early January 2008 at the Net Asset Value of the respective share classes calculated as at 30 November 2007. No other significant events have occurred in respect of the Company subsequent to the period end that may be deemed relevant to the accuracy of these financial statements.

20

THAMES RIVER MULTI HEDGE PCC LIMITED INFORMATION ABOUT THE COMPANY Financial Calendar Financial year end Interim results announced Final results announced

31 March November June

Annual General Meeting

August

History The Company was incorporated with limited liability in Guernsey as a protected cell company and closed ended investment company on 6 January 2004. Shares were issued following the closing of a placing and offer for subscription on 20 February 2004 and the initial capital raised was £45.2 million (approximately US$85 million). On 16 October 2006 a further £15.6 million was raised through a C Share issue. On 1 March 2007 a further £6.6 million was raised through a tap issue. On 20 July 2007 a second C Share issue raised £68.5 million and on 14 November a third C Share issue raised approximately £81.8 million net of costs. Market Information The Company’s shares are listed on the London Stock Exchange and on the Channel Islands Stock Exchange. The market prices are shown daily in the Financial Times.

Company Numbers Company registration number: 41511 London stock exchange codes: (Investment Companies) ThRvMtHdg£; ThRvMtHdg€; ThRvMtHdg$ Sterling shares: 59,786,339 Sterling ISIN number: GB0034081512 Sterling SEDOL code: 3408151 Euro shares: 2,397,469 Euro ISIN number: GB0034081629 Euro SEDOL code: 3408162 Dollar Shares: 2,517,000 Dollar ISIN number: GB00BIF2KQ35 Dollar SEDOL code: BIF2KQ3

Share Transactions The Company’s shares may be dealt in directly through a stockbroker or professional adviser acting on an investor’s behalf.

Monthly Newsletter If investors would like to receive a copy of the monthly newsletter prepared by the Investment Manager, they should contact Vanessa Lawley at Thames River Capital LLP, 51 Berkeley Square, London W1J 5BB ([email protected]).

Redemption Facility The Company has a half yearly redemption facility, activated at the discretion of the directors. If activated, shareholders may request on not less than 95 days’ notice, the redemption of all or part of their holdings for cash at the net asset value 30 June and/or 31 December.

Switching Facility On the dates when the 30 June and 31 December NAVs are calculated in each year (each a “Conversion Calculation Date”), shareholders may switch Shares of any class in issue into Shares of another class in issue by giving not less than 30 calendar days’ notice to the Company in advance of such Conversion Calculation Date. Such conversions will be on the basis of the ratio of the NAV of each class of Shares which are the subject of requests for conversion at the relevant NAV Calculation Date.

21