Man AHL Diversified Futures Ltd - Fundsupermart.com

Man AHL Diversified Futures Ltd 

Report and Financial Statements 

For the year ended 30 September 2013


Table of Contents 

Page 

Corporate information 3 

Report of the custodian 5 

Statement of financial position 6 

Statement of changes in equity 7 

Statement of comprehensive income 8 

Statement of cash flows 9 

Notes to the financial statements 10 

Independent auditors’ report 29 

2


Corporate information 

Directors 

Investment Manager 

Michael B Collins 

Man Investments Limited 

Argonaut Limited 

Riverbank House 

Argonaut House 

2 Swan Lane 

5 Park Road London EC4R 3AD 

Hamilton HM 09 

United Kingdom 

Bermuda 

Introducing Broker and Marketing Adviser 

Shirelle Jones is an alternate director to 

Man Investments AG 

Mr Collins Huobstrasse 3 

8808 Pfäffikon SZ 

Dawn C Griffiths 

Switzerland 

Conyers Dill & Pearman Limited 

Clarendon House 

Services Manager 

2 Church Street Man Investments AG 

Hamilton HM 11 Huobstrasse 3 

Bermuda 


Switzerland 

John Collis (resigned 31 March 2013) was an alternate director to 

Ms Griffiths 

Valuation Service Provider 

Citibank Europe plc 

David Smith 

1 North Wall Quay 

Equus Asset Management Partners 

Dublin 

27 Queen Street Ireland 

Hamilton HM11 

Bermuda 

Legal advisor as to matters of Bermudian law 


Company Secretary and Registered Office 


of the Company 

2 Church Street 

Christine Perinchief Hamilton HM 11 

To 31 December 2012 

Bermuda 

Citi Hedge Fund Services, Ltd. 

Hemisphere House 

Custodian 

9 Church Street HSBC Institutional Trust Services (Asia) Limited 


HSBC Main Building 

Bermuda 

1 Queen’s Road Central 

Hong Kong 

From 1 January 2013 

Citi Fund Services (Bermuda), Ltd. 

Principal Paying Agent 

5 Reid Street To 31 December 2012 



Bermuda 



Hong Kong Representative Hamilton HM 11 

Man Investments (Hong Kong) Limited 

Suite 1301 Chater House From 1 January 2013 

8 Connaught Road Central Citi Fund Services (Bermuda), Ltd. 

Hong Kong 

5 Reid Street 


Bermuda 

Effective as of 1 January 2013 the Company’s registered office provider, Registrar and Principal Paying Agent formally changed its name from 

‘Citi Hedge Fund Services, Ltd.’ to ‘Citi Fund Services (Bermuda), Ltd’ (“Citi Bermuda”). As of the same date Citi Fund Services (Bermuda), Ltd 

changed its registered office address, and thus the registered office address for all companies for which it provides registered office, to 5 Reid 

Street, Hamilton HM 11, Bermuda. 

3


Corporate information (continued) 

Auditors 

Registrar 

Ernst & Young Ltd. To 31 December 2012 

3 Bermudiana Road Citi Hedge Fund Services, Ltd. 



Bermuda 



Shareholder Services Provider 

Bermuda 


1 North Wall Quay From 1 January 2013 

Dublin 1 


Ireland 

5 Reid Street 


Bermuda 

4


Statement of financial position 

As at 30 September 2013 

Notes 

2013 

USD 

2012 

USD 

Current assets 

Cash at bank 3 366,128,245 632,000,077 

Cash with brokers 3 105,780,701 97,458,097 

Due from brokers 4,282,697 - 

Financial assets at fair value through profit or loss (Cost: $19,108,697; 2012: Nil) 4 90,941,617 33,630,387 

Subscription receivable 197,882 201,683 

Prepayments and other assets 47,969 697,054 

Total current assets 567,379,111 763,987,298 

Current liabilities 

Financial liabilities at fair value through profit or loss (Cost: $(11,017,025); 2012: Nil) 4 (101,036,213) (27,560,439) 

Redemption payable (3,021,396) (2,833,408) 

Due to brokers (2,206,559) (5,625,656) 

Accounts payable and accrued expenses 7,8 (2,111,972) (3,546,500) 

Total current liabilities (108,376,140) (39,566,003) 

Net Assets Attributable to Holders of Redeemable 

Participating Shares 459,002,971 724,421,295 

Which are represented by: 

Equity 

15,260,148 (2012: 20,994,600) Redeemable Participating Shares with a Net Asset 

Value per Redeemable Participating Share of USD 30.07 (2012: USD 34.50) 9 459,002,971 724,421,295 

Management Shares 

Issued, uncalled ordinary Management Share capital 

(12,000 Management Shares of USD 1.00 each) 9 - - 

Approved and authorised for issue on behalf of the Board on 23 January 2014. 

Dawn Griffiths 

Director 

Michael Collins 

Director 

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

6


Statement of changes in equity 

For the year ended 30 September 2013 

2013 

USD 

2012 

USD 

Net Assets Attributable to Holders of Redeemable Participating Shares at 

beginning of year 724,421,295 1,060,996,444 

Net loss for the year attributable to Redeemable Participating Shareholders (72,226,756) (107,261,676) 

Issue of 1,268,529 (2012: 12,028,466 ) Redeemable Participating Shares 42,500,002 420,771,911 

Redemption of 7,002,981 (2012: 18,437,341) Redeemable Participating Shares (235,691,570) (650,085,384) 


end of year 459,002,971 724,421,295 


7


Statement of comprehensive income 


Notes 

2013 

USD 

2012 

USD 

Income 

Interest income 2 1,856,398 4,826,316 

Net loss on financial assets and liabilities at fair value through profit or loss 6 (47,894,195) (75,371,504) 

Net gain on foreign exchange 6 442,816 943,497 

(45,594,981) (69,601,692) 

Expenses 

Management and incentive fees 7,8 (17,923,348) (25,967,028) 

Introducing broker fees 7,8 (5,974,449) (8,652,448) 

Director fees 7,8 (14,157) (10,139) 

Custody fees 7 (117,380) (40,569) 

Auditor fees (27,000) (13,636) 

Legal and Other Professional fees 8 (149,747) (140,396) 

Bank charges (129,953) (129,811) 

Other connected person expenses 7,8 (1,734,435) (2,040,711) 

Other expenses 7 (504,777) (478,135) 

Interest expense 2 (56,529) (187,111) 

(26,631,775) (37,659,984) 

Net loss for the year attributable to Redeemable 

Participating Shareholders (72,226,756) (107,261,676) 


8


Statement of cash flows 


2013 

USD 

2012 

USD 

Cash flows from operating activities 

Net loss for the year attributable to Redeemable Participating Shareholders (72,226,756) (107,261,676) 

Adjustments to reconcile net loss for the year to net cash used in operating activities: 

Financial assets and liabilities at fair value through profit or loss 16,164,544 15,405,984 

Due from brokers (4,282,697) - 

Due to brokers (3,419,097) (14,488,435) 

Prepayment and other assets 649,085 (697,054) 

Accounts payable and accrued expenses (1,434,528) (14,049,848) 

Net cash used in operating activities (64,549,449) (121,091,029) 

Cash flows from financing activities 

Proceeds on issue of Redeemable Participating Shares 42,503,803 420,570,228 

Payments on redemption of Redeemable Participating Shares (235,503,582) (647,251,976) 

Net cash used in financing activities (192,999,779) (226,681,748) 

Net change in cash and cash equivalents (257,549,228) (347,772,777) 

Cash and cash equivalents at beginning of year 729,458,174 1,077,230,951 

Cash and cash equivalents at end of year 471,908,946 729,458,174 

Cash and cash equivalents consist of: 

Cash at bank 366,128,245 632,000,077 

Cash with brokers 105,780,701 97,458,097 

471,908,946 729,458,174 

Supplemental disclosure of cash flow information: 

Interest paid (80,624) (187,111) 

Interest received 12,451,699 4,129,262 


9


Notes to the financial statements 


1. General 

Man AHL Diversified Futures Ltd (the “Company”) was incorporated under the laws of Bermuda on 11 September 1997 and carries on business as 

an open-ended investment company, trading a diversified portfolio of international interbank currency and financial futures. The Company 

commenced trading on 12 May 1998. 

2. Summary of Significant Accounting Policies 

a) Accounting convention 

The financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International Accounting 

Standards Board (“IASB”) and where relevant, in accordance with the provisions of the Hong Kong Securities & Futures Commission Code on Unit 

Trusts and Mutual Funds pursuant to the Securities and Futures Ordinance (Cap 571) April 2003 (as amended effective 25 June 2010). The financial 

statements have been prepared on historical cost basis except for financial assets and liabilities held at fair value through profit or loss that have 

been accounted for based on fair value. 

b) Changes in Accounting Policy and Disclosure 

The following new standards and amendments to standards are relevant but not yet effective for the Company’s operations: 

IAS 27 – Separate Financial Statements (as revised in 2011) 

As a consequence of the new IFRS 10 and IFRS 12, what remains in IAS 27 is limited to accounting for subsidiaries, jointly controlled entities, and 

associates in separate financial statements. As the Company has no subsidiaries, this amendment has no impact on the Company‘s financial 

position or performance and becomes effective for annual periods beginning on or after 1 January 2013. 

IFRS 9 – Financial Instruments: Classification and Measurement 

IFRS 9 as issued reflects the first phase of the IASB’s work on the replacement of IAS 39 and applies to classification and measurement of financial 

assets and financial liabilities as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January 2015. In subsequent 

phases, the IASB will address hedge accounting and impairment of financial assets. The adoption of the first phase of IFRS 9 is not expected to 

have an effect on the classification and measurement of the Company‘s financial assets and liabilities. The Company will quantify the effect in 

conjunction with the other phases, when issued, to present a comprehensive picture. 

IFRS 10 – Consolidated Financial Statements 

IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated financial 

statements. It also replaces SIC-12 Consolidation - Special Purpose Entities. IFRS 10 establishes a single control model that applies to all entities 

including ‘special purpose entities’. The changes introduced by IFRS 10 will require management to exercise significant judgement to determine 

which entities are controlled, and therefore required to be consolidated by a parent, compared with the requirements that were in IAS 27. This 

standard becomes effective for annual periods beginning on or after 1 January 2013. This amendment is not expected to have an impact on the 

Company’s financial position or performance. 

IFRS 13 – Fair Value measurement 

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is required to 

use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. This standard 

becomes effective for annual periods beginning on or after 1 January 2013. 

At the date of authorisation of the financial statements there were a number of Standards and Interpretations which were in issue but not yet 

effective. The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material impact on the 

financial statements of the Company. 

The accounting policies have been consistently applied by the Company in the current and prior year. 

10


Notes to the financial statements (continued) 


2. Summary of Significant Accounting Policies (continued) 

c) Use of Accounting Judgements and Estimates 

The preparation of financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions that affect 

the amounts reported and disclosures made in these financial statements and accompanying notes, including certain valuation assumptions. 

Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or 

liabilities in the future. 

d) Going Concern 

The Company’s management has made an assessment of the Company’s ability to continue as a going concern and is satisfied that the Company 

has resources to continue in business for the foreseeable future. Furthermore, the management is not aware of any material uncertainties that may 

cast significant doubt upon the Company’s ability to continue as a going concern, therefore, the financial statements continue to be prepared on a 

going concern basis. 

e) Revenue Recognition 

Interest on financial assets held at fair value through profit or loss for the year are credited to net gain loss on financial assets and liabilities at fair 

value through profit or loss in the statement of comprehensive income on an accrual basis. 

f) Financial Assets and Liabilities at Fair Value through Profit or Loss 

Valuation of investments 

This category has two sub-categories: (i) financial assets and liabilities held for trading; and (ii) those designated by management at fair value through 

profit or loss at initial recognition. Financial assets or liabilities held for trading are acquired or incurred principally for the purpose of selling or 

repurchasing in the short term. Derivatives are also categorised as held for trading by definition. 

After initial measurement, the Company measures financial instruments, which are classified as at fair value through profit or loss, at their fair values. 

IAS 39 indicates that for listed assets and liabilities the best evidence of fair value is usually the last bid price for securities held and offer price for 

securities sold short. 

Financial instruments are designated at fair value through profit and loss because they are managed on a fair value basis. 

Regular-way purchases and sales of investments are recognised on the trade date, which is the date on which the Company commits to purchase 

or sell the asset. Investments are initially recognised at fair value. Investments are derecognised when the rights to receive cash flows from the 

investments have expired or the Company has transferred substantially all risks and rewards of ownership. 

The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading securities) is based on quoted market 

prices at the statement of financial position date. The quoted market price used for financial assets held by the Company is the current ‘bid’ price, 

whilst the ‘ask’ price is used for financial liabilities. When the Company holds derivatives with offsetting market risks, it uses midmarket prices as a 

basis for establishing fair values for the offsetting risk positions and applies the bid or asking price to the net open position, as appropriate. 

The Company may from time to time invest in financial instruments that are not traded in an active market (for example over-the-counter derivatives 

and private placements of both equities and fixed income securities). The fair value of these financial instruments is determined based on observable 

inputs such as current interest and currency rates. 

g) Securities Sold Short 

The Company may engage in securities sold short. A short sale is a transaction in which the Company sells a security it does not own. The proceeds 

received for short sales are recorded as liabilities and the Company records an unrealised gain or loss to the extent of the difference between the 

proceeds received and the value of the open short position. The Company records a realised gain or loss when the short position is closed. By 

entering into short sales, the Company bears the market risk of an unfavourable change in the price of the security sold short in excess of the 

proceeds received. Short sales expose the Company to potentially unlimited liability. 

11




2. Summary of significant accounting policies (continued) 

h) Derivatives 

The Company may trade derivative financial instruments, including futures and forwards whose values are based upon an underlying asset, index, 

currency or interest rate. The unrealised gains or losses, rather than contract or notional amounts, represent the approximate future cash flows from 

trading. 

Derivative financial instruments are recognised at fair value on the date on which a derivative contract is entered into and are subsequently remeasured 

at their fair value. Fair values are obtained from quoted market prices in active markets, including recent market transactions, and 

valuation techniques, including discounted cash flow models and options pricing models, as appropriate. Models are calibrated by back testing to 

actual transactions to ensure outputs are reliable. Models use observable data to the extent practicable. However, areas such as credit risk (both 

own and counterparty); volatilities and correlations require the Board of Directors to make estimates. Changes in assumptions about these factors 

could affect the reported fair value of derivative financial instruments at the valuation date. 

All derivative financial instruments are carried in assets when amounts are receivable by the Company and in liabilities when amounts are payable by 

the Company. Changes in the fair values of derivatives are included in the statement of comprehensive income. During the year, when the contract is 

open, changes in the value of the contracts are recognised as unrealised appreciation or depreciation to reflect the fair value of the contract at the 

last day of the valuation period. When the contract is closed, the Company records a realised gain or loss equal to the difference between the 

proceeds from (or cost of) the closing transaction and the Company’s basis in the contract. 

The Company may engage in futures contracts, forward contracts and swap contracts. 

– Futures contracts 

Futures contracts are recorded on the trade date and are valued at the applicable closing bid or offer prices on the last business day of the period. 

The difference between the original contract amount and the fair value of the open futures position is reflected as unrealised appreciation or 

depreciation in the statement of financial position and as a net change in unrealised appreciation or depreciation in the statement of comprehensive 

income. Realised gains or losses are recognised on the closing or trade date of the contract and are included in revenue under net realised 

gain/(loss) on futures contracts in the statement of comprehensive income. 

– Forward contracts 

Forward contracts are recorded on the trade date and are valued at the applicable foreign exchange rates on the last business day of the period. 

The difference between the fair value of the original contract amount and the fair value of the open forward contract position is reflected as 

unrealised appreciation or depreciation on open forward contracts in the statement of financial position and as a net change in unrealised 

appreciation or depreciation on open forward contracts in the statement of comprehensive income. Realised gains or losses are recognised on the 

maturity or trade date of the contract and are included in net realised gain/(loss) on forward contracts in the statement of comprehensive income. 

– Swap contracts 

Swaps are contractual agreements between two parties to exchange streams of payments over time based on specified notional amounts. The 

Company’s main swap contracts consist of interest rate swaps and credit default swaps as detailed below. 

– Interest Rate Swaps 

Interest rate swaps relate to contracts taken out by the Company with major brokers in which the Company either receives or pays a floating rate of 

interest in return for paying or receiving, respectively, a fixed rate of interest. The payment flows are usually netted against each other, with the 

difference being paid by one party to the other. Changes in the value of the interest rate swap agreements and amounts received or paid in 

connection with these contracts, are recognised as net gains/(losses) on investments at fair value through profit or loss in the statement of 

comprehensive income. 

– Credit Default Swaps 

The Company may enter into credit default swaps for speculative purposes or to manage its exposure to certain sectors of the market or to reduce 

credit risk. The Company may enter into credit default swap agreements to provide a measure of protection against the default of an issuer (as buyer 

of protection) and/or gain credit exposure to an issuer to which it is not otherwise exposed (as seller of protection). Credit default swaps are 

agreements in which one party pays fixed periodic payments to a counterparty in consideration for a guarantee from the counterparty to make a 

specific payment should a negative credit event take place (e.g. default, bankruptcy or debt restructuring). The Company may either buy or sell (write) 

credit default swaps. 

If a credit event occurs, as a buyer, the Company will either receive from the seller an amount equal to the notional amount of the swap and deliver 

the referenced security or underlying securities comprising of an index or receive a net settlement of cash equal to the notional amount of the swap 

less the recovery value of the security or underlying securities comprising of an index. As a seller (writer), the Company will either pay the buyer an 

amount equal to the notional amount of the swap and take delivery of the referenced security or underlying securities comprising of an index or pay 

a net settlement of cash equal to the notional amount of the swap less the recovery value of the security or underlying securities comprising of an 

index. 

12




2. Summary of significant accounting policies (continued) 

h) Derivatives (continued) 

The periodic payments received or made by the Company are included in net realised gain/(loss) on investments at fair value through profit or loss in 

the statement of comprehensive income. Swaps are marked-to-market daily and changes in value are recorded as unrealised 

appreciation/(depreciation). When the swap is terminated, the Company will record a realised gain/(loss) equal to the difference between the 

proceeds from (or cost of) the closing transaction and the Company’s basis in the contract, if any. Swap transactions involve, to varying degrees, 

elements of credit and market risk in excess of the amounts recognised in the statement of financial position. Such risks involve the possibility that 

there will be no liquid market for these agreements, that the counterparty to the agreements may default on its obligation to perform or disagree as 

to the meaning of the contractual terms in the agreements, and that there may be unfavourable changes in interest rates and/or market values 

associated with these transactions. 

i) Realised and Unrealised Gains and Losses 

All realised and unrealised gains and losses on securities and derivatives are recognised as net gain/(loss) on financial assets and liabilities at fair 

value through profit or loss in the statement of comprehensive income. The cost of securities sold is accounted for on a First In – First Out (“FIFO”) 

basis. The unrealised gain or loss on open derivative contracts is calculated as the difference between the contracted rate and the rate to close out 

the contract. Realised gains or losses include net gains on contracts which have been settled or offset by other contracts. 

j) Functional and Presentational Currency 

The primary objective of the Company is to generate returns in United States dollars, its capital-raising currency. The liquidity of the Company is 

managed on a day-to-day basis in United States dollars in order to handle the issue and redemption of the Company’s Redeemable Participating 

Shares. The Company performance is also evaluated in United States dollars. Therefore, as United States dollars is considered as the currency that 

most faithfully represents the economic effects of the underlying transactions, events and conditions, the Company’s functional currency is United 

States dollars. The Directors have also chosen United States dollars as the presentational currency. 

k) Foreign Currency 

Transactions during the year denominated in foreign currencies have been translated at the rates of exchange ruling at the dates of transactions. For 

foreign currency transactions and foreign currency investments held at the year end, the resulting gains or losses are included in the net gain/(loss) 

on financial assets and liabilities at fair value through profit or loss in the statement of comprehensive income. Assets and liabilities denominated in 

foreign currencies are translated at the rates of exchange in effect at the date of the statement of financial position. 

l) Interest Income and Expense 

Interest income and expense are recognised in the statement of comprehensive income on an accruals basis, in line with the contractual terms. 

m) Other Expenses 

All expenses are recognised in the statement of comprehensive income on an accruals basis. 

n) Reclassification of Prior Year Comparative Figures 

Certain prior year comparatives have been reclassified to conform to the current year’s presentation. 

o) Redeemable Participating Shares 

Redeemable Participating Shares are redeemable at the Redeemable Participating Shareholder’s option. The Redeemable Participating Shares are 

carried at the redemption amount that is payable at the statement of financial position date if the Redeemable Participating Shareholders exercise 

their right to redeem their participating shares. 

p) Distributions 

It is not the intention of the Directors to make any distribution of net income by way of dividends. Net income will, therefore, effectively be 

represented in the value of the Redeemable Participating Shares. 

13




3. Cash and Cash Equivalents and Due from/(to) Brokers 

At year end amounts disclosed as Cash at bank and Cash with broker were held at Citibank N.A., ABN Amro, Barclays Bank, Mizuho Bank, Royal 

Bank of Scotland, National Bank of Abu Dhabi, Commerzbank AG and BNP Paribas (the “Banks”), and Deutsche Bank, J.P. Morgan, Royal Bank of 

Scotland, Credit Suisse, and Merrill Lynch (the “Brokers”). Cash at bank in the statement of financial position comprises cash on hand, term deposits, 

demand deposits, short-term deposits in banks and short-term highly liquid investments that are readily convertible to known amounts of cash and 

which are subject to an insignificant risk of changes in value, with original maturities of three months or less. Cash with broker include amounts 

transferred as collateral against open futures and forward contracts and other derivatives. Amounts receivable from short sales and collateral may be 

restricted in whole or in part until the related securities are purchased. To the extent that securities are purchased on margin, the margin debt may 

be secured on the related securities. The maturities of the term deposits held by the Company are listed below: 

Counterparty 

Maturity date 

Commerzbank AG 01 October 2013 

National Bank of Abu Dhabi 01 October 2013 

Barclays Bank 04 October 2013 

National Bank of Abu Dhabi 23 October 2013 

Mizuho Bank 23 October 2013 

4. Financial Assets and Liabilities at Fair Value through Profit or Loss 

The following tables summarise financial assets and liabilities at fair value through profit or loss as at 30 September. The table also discloses the % 

of Net Assets for each derivative position and the notional amount at year end, with the exception of forward currency contracts, which are 

disclosed by the payable and receivable legs entered into by the Company. 

Notional 

2013 

Fair Value 

USD 

% of 

Net 

Assets 

Notional 

2012 

Fair Value 

USD 

% of 

Net 

Assets 

Financial assets at fair value through profit or loss 

Derivatives 

Commodity futures 156,837,385 6,295,922 1.37 269,132,615 5,109,560 0.71 

Foreign exchange futures - 205,277 0.04 28,675,630 173,014 0.02 

Forward currency contracts 2,760,258,974 16,713,953 3.64 1,564,041,470 8,803,325 1.22 

Interest rate futures 2,453,949,712 6,146,005 1.34 7,057,722,917 12,061,821 1.66 

Index futures 536,367,420 2,047,733 0.45 449,311,137 801,332 0.11 

Commodity forwards 29,531,603 406,209 0.09 153,652,626 6,681,335 0.92 

Credit default swap 281,127,000 19,097,884 4.16 - - - 

Interest rate swap 3,925,679,071 40,028,634 8.72 - - - 

Total derivatives 10,143,751,165 90,941,617 19.81 9,522,536,395 33,630,387 4.64 

Total financial assets at fair value through profit or loss 10,143,751,165 90,941,617 19.81 9,522,536,395 33,630,387 4.64 

14




4. Financial Assets and Liabilities at Fair Value through Profit or Loss (continued) 

Notional 

2013 

Fair Value 

USD 

% of 

Net 

Assets 

Notional 

2012 

Fair Value 

USD 

% of 

Net 

Assets 

Financial liabilities at fair value through profit or loss 

Derivatives 

Commodity futures (220,680,732) (4,180,047) (0.91) (185,078,309) (7,302,453) (1.00) 

Foreign exchange futures (16,466,215) (7,880) - (25,569,358) (219,502) (0.03) 

Forward currency contracts (2,768,003,199) (24,458,178) (5.32) (1,561,254,754) (6,016,610) (0.83) 

Interest rate futures (550,105,165) (3,110,889) (0.68) (752,891,678) (4,616,128) (0.64) 

Index futures (17,199,993) (4,593,242) (1.00) (7,961,950) (5,911,118) (0.82) 

Commodity forwards (29,656,346) (530,952) (0.12) (150,465,918) (3,494,628) (0.48) 

Credit default swap (851,646,999) (11,914,479) (2.60) - - - 

Interest rate swap (4,013,733,028) (52,240,546) (11.38) - - - 

Total derivatives (8,467,491,677) (101,036,213) (22.01) (2,683,221,967) (27,560,439) (3.80) 

Total financial liabilities at fair value through profit or loss (8,467,491,677) (101,036,213) (22.01) (2,683,221,967) (27,560,439) (3.80) 

The Company invests in a range of derivative securities, as detailed above. The derivatives are cleared through the following brokers, who are 

situated in the following countries,; Deutsche Bank, England, J.P. Morgan Chase Bank, Scotland, The Royal Bank of Scotland plc, Scotland, Credit 

Suisse, Australia and Merrill Lynch, London. 

The Company’s Swap notional amounts should be reviewed on a net basis. 

The Company’s Foreign exchange futures held at 30 September consisted only of short positions which have been split by Market Value gain or loss 

in the above table. 

The following table details the movements in notional values of the portfolio since the end of the preceding accounting period. 


Opening Net Additions/Realisations Closing 

Commodity futures 269,132,615 (112,295,230) 156,837,385 

Foreign exchange futures 28,675,630 (28,675,630) - 

Forward currency contracts 1,564,041,470 1,196,217,504 2,760,258,974 

Interest rate futures 7,057,722,917 (4,603,773,205) 2,453,949,712 

Index futures 449,311,137 87,056,283 536,367,420 

Commodity forwards 153,652,626 (124,121,023) 29,531,603 

Credit default swap - 281,127,000 281,127,000 

Interest rate swap - 3,925,679,071 3,925,679,071 

Total 9,522,536,395 621,214,770 10,143,751,165 



Commodity futures (185,078,309) (35,602,423) (220,680,732) 

Foreign exchange futures (25,569,358) 9,103,143 (16,466,215) 

Forward currency contracts (1,561,254,754) (1,206,748,445) (2,768,003,199) 

Interest rate futures (752,891,678) 202,786,513 (550,105,165) 

Index futures (7,961,950) (9,238,043) (17,199,993) 

Commodity forwards (150,465,918) 120,809,572 (29,656,346) 

Credit default swap - (851,646,999) (851,646,999) 

Interest rate swap - (4,013,733,028) (4,013,733,028) 

Total (2,683,221,967) (5,784,269,710) (8,467,491,677) 

15





Derivative financial instruments 

The Company trades derivative financial instruments, including futures, swaps and currencies whose values are based upon an underlying asset, 

index, currency or interest rate. The net unrealised gains or losses, rather than contract or notional amounts, represent the Company’s approximate 

future cash flows from trading activities. 

Forward contracts 

As part of its portfolio management techniques, the Company may use forward contracts to economically hedge its non-functional currency liability 

to Redeemable Participating Shareholders (although formal hedge accounting is not used). The Company may also use forward contracts for 

speculative trading purposes. Forward contracts entered into by the Company represent a firm commitment to buy or sell an underlying asset, or 

currency at a specified value and point in time based upon an agreed or contracted quantity. The realised/unrealised gain or loss is equal to the 

difference between the value of the contract at the commencement and the value of the contract at settlement date/year end date and are included 

in the statement of comprehensive income. 

Futures contracts 

The Company may use exchange-traded futures for speculative trading purposes or to maintain the appropriate exposure to stock markets in 

accordance with the Investment Manager’s recommended overall asset allocation. Futures are contracts for delayed delivery of commodities, 

securities or money market instruments in which the seller agrees to make delivery at a specified future date of a specified commodity or instrument, 

at a specified price or yield. Gains and losses on futures are recorded by the Company based upon market fluctuations and are recorded as net 

gain/(loss) on financial assets and liabilities at fair value through profit or loss in the statement of comprehensive income. 

Swap contracts 

At 30 September 2013, the Company was exposed, via its investments in swap contracts, to the underlying positions representing financial 

instruments for which notional amounts are summarised on pages 14 and 15. 

Fair value of financial instruments 

The Company classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in determining the 

measurements in line with IFRS 7. 

The fair value hierarchy has the following levels: 

 

 

 

Level 1 - Quoted market price in an active market for an identical instrument. 

Level 2 - Valuation techniques based on observable inputs. This category includes instruments valued using: quoted market prices in 

active markets for similar instruments; quoted prices for similar instruments in markets that are considered less than active; or other 

valuation techniques where all significant inputs are directly or indirectly observable from market data. 

Level 3 - Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation technique 

includes inputs not based on observable data and the unobservable inputs could have a significant impact on the instrument's valuation. 

This category includes instruments that are valued based on quoted prices for similar instruments where significant unobservable 

adjustments or assumptions are required to reflect differences between the instruments. 

At the reporting date any listed equities, debt securities and publicly traded derivatives are included within Level 1 of the hierarchy where their fair 

values are based on quoted market prices or binding dealer price quotations, without any deduction for transaction costs. 

For all other financial instruments, fair value is determined using valuation techniques. Valuation techniques include net present value techniques, 

comparison to similar instruments for which market observable prices exist, options pricing models and other relevant valuation models. 

The Company uses widely recognised valuation models for determining fair values of over-the-counter derivatives. For these financial instruments, 

inputs into models are market observable and are, therefore, included within Level 2. 

The Company has no level 3 financial instruments. 

16





Fair value of financial instruments (continued) 

The following tables analyse the fair value hierarchy of the Company’s financial assets and liabilities measured at fair value at 30 September 2013 

and 30 September 2012: 



Level 1 

USD 

Level 2 

USD 

Level 3 

USD 

Total 

Fair Value 

USD 

Derivatives 

Commodity futures 6,295,922 - - 6,295,922 

Foreign exchange futures 205,277 - - 205,277 

Forward currency contracts - 16,713,953 - 16,713,953 

Interest rate futures 6,146,005 - - 6,146,005 

Index futures 2,047,733 - - 2,047,733 

Commodity forwards - 406,209 - 406,209 

Credit default swap - 19,097,884 - 19,097,884 

Interest rate swap - 40,028,634 - 40,028,634 

Total derivatives 14,694,937 76,246,680 - 90,941,617 

Total financial assets at fair value through profit or loss 14,694,937 76,246,680 - 90,941,617 

Financial liabilities at fair value through profit 

or loss 

Level 1 

USD 

Level 2 

USD 

Level 3 

USD 

Total 

Fair Value 

USD 

Derivatives 

Commodity futures (4,180,047) - - (4,180,047) 

Foreign exchange futures (7,880) - - (7,880) 

Forward currency contracts - (24,458,178) - (24,458,178) 

Interest rate futures (3,110,889) - - (3,110,889) 

Index futures (4,593,242) - - (4,593,242) 

Commodity forwards - (530,952) - (530,952) 

Credit default swap - (11,914,479) - (11,914,479) 

Interest rate swap - (52,240,546) - (52,240,546) 

Total derivatives (11,892,058) (89,144,155) - (101,036,213) 

Total financial liabilities at fair value through 

profit or loss (11,892,058) (89,144,155) - (101,036,213) 

17







Level 1 

USD 

Level 2 

USD 

Level 3 

USD 

Total 

Fair Value 

USD 

Derivatives 





Index futures 801,332 - - 801,332 

Commodity forwards - 6,681,335 - 6,681,335 




Level 1 

USD 

Level 2 

USD 

Level 3 

USD 

Total 

Fair Value 

USD 

Derivatives 





Index futures (5,911,118) - - (5,911,118) 

Commodity forwards - (3,494,628) - (3,494,628) 


Total financial liabilities at fair value through profit or loss (18,049,201) (9,511,238) - (27,560,439) 

18




5. Financial Risk Management 

The Company’s investment activities expose it to the various types of risk which are associated with the financial instruments and markets in which it 

invests. The most important types of financial risks to which the Company is exposed are market risk, credit risk and liquidity risk. Market risk 

includes security price risk interest rate risk and foreign currency risk. The Investment Manager manages these risks on an aggregate basis along 

with the risks associated with its investing activities as part of its overall risk management policies. 

The nature and extent of the financial instruments outstanding at the dates of the statement of the financial position and the risk management 

policies employed by the Company are discussed below. 

Overall risk management 

The Company seeks to generate returns through investing in the AHL Programme. 

The Investment Manager distinguishes between two primary risk levels, which are risks at the Company level, and risks at the underlying investment 

level. Accordingly, the Investment Manager has implemented procedures to manage risks associated with both the Company and its underlying 

investments. 

At the Company level 

Risk management at the Company level can be segregated into pre and post-investment risk management. Pre-investment risk management 

involves determining asset allocation and portfolio construction. Thereafter, risk management involves conducting risk and return analysis, 

monitoring the relevant Company specific portfolio restrictions and investment guidelines and managing currency, interest rate, credit and liquidity 

risks at the Company level and making relevant adjustments to asset allocation and portfolio construction. 

Risk considerations or the need to bring the portfolio back in line with product guidelines may trigger a rebalancing of the portfolio, which is typically 

done on a weekly basis by the Investment Manager's portfolio management team. 

AHL 

In the case of the AHL Programme, the trading activity is managed by AHL. AHL identifies opportunities to profit from price movements in more than 

300 diverse international markets through specialised investment techniques, advanced technology and daily risk control. 

The AHL Programme seeks to identify and take advantage of upward and downward price trends. Trading takes place around-the-clock and realtime 

price information is used to respond to price movements across a diverse range of global markets. Investment rules are executed within a 

systematic framework. 

AHL employs a number of risk measures including proprietary measurement methods similar to the industry standard Value-at-Risk ("VaR") and 

conducts daily stress testing based on historical data. Depending upon the risks identified, AHL may alter the exposure to different markets it trades 

in. 

Substantially, all derivative contracts are transacted on a margin basis. The Investment Manager manages the risk associated with these 

transactions by maintaining margin deposits in compliance with individual exchange regulations and internal guidelines. The Investment Manager 

also takes an active role in managing and controlling the Company’s market and counterparty risks, monitoring trading activities and margin levels 

daily and, as necessary, deposits additional collateral or reduces positions. 

Market risk 

Market risk is the risk that fair value or future cash flows of financial instruments will fluctuate due to changes in market variables such as interest 

rates, foreign exchange rates and security prices. 

There are many risk measures used by the Investment Manager, however one generally understood measure is annualised volatility. Annualised 

volatility is a measure of risk that is calculated as the standard deviation of the returns on the NAV per Redeemable Participating Share from 

inception up the reporting date. 

As it is based on the NAV per Redeemable Participating Share, annualised volatility incorporates all performance characteristics of the Company 

including the impact of interest rate movements and currency exchange differences from inception. Although the direct investments of the Company 

may change, the investment strategies employed by its underlying investments will not significantly change, meaning that the risk and return 

characteristics that the Company is exposed to are broadly consistent. 

Annualised volatility has limitations as it assumes a normal distribution of periodic returns, which may not be fully representative of hedge fund 

behaviour. The annualised volatility will also be a more accurate measure where more data points exist. Annualised volatility is based upon historical 

data. There is no guarantee of trading performance and past performance is no indication of future performance or results. 

As at 30 September 2013, the annualised volatility for the Company was 11.28% (2012: 10.17%) calculated on a weekly basis. 

19




5. Financial Risk Management (continued) 

Interest rate risk 

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. 

The Company is directly exposed to interest rate risk through its investment strategy, which is deliberately designed to generate returns through 

trading strategies focussed on exploiting price differentials in rates. The sensitivity of these exposures is modelled through the overall volatility 

analysis provided in the market risk section. 

The Company is significantly exposed to interest rate risk on cash at bank and brokers, Interest Rate Futures and Interest Rate Swaps held at 30 

September 2013. 

The following table details the Company's exposure to interest rate risk by the earlier of contractual maturities or re-pricing: 


Less than one 

month 

USD 

One month 

to one year 

USD 

Over one 

year 

USD 

Not exposed to 

interest rate 

USD 

Current Assets: 

Cash at bank 366,128,245 - - - 366,128,245 

Cash with brokers 105,780,701 - - - 105,780,701 

Due from brokers 4,282,697 - - - 4,282,697 

Financial assets at fair value through profit or loss - 7,001,573 39,173,066 44,766,978 90,941,617 

Subscription receivable - - - 197,882 197,882 

Prepayment and other assets - - - 47,969 47,969 

Total 

USD 

Total current assets 476,191,643 7,001,573 39,173,066 45,012,829 567,379,111 

Current Liabilities: 

Due to brokers (2,206,559) - - - (2,206,559) 

Financial liabilities at fair value through profit or loss - (6,184,864) (49,166,571) (45,684,778) (101,036,213) 

Redemption payable - - - (3,021,396) (3,021,396) 

Accounts payable and accrued expenses - - - (2,111,972) (2,111,972) 

Total current liabilities (excluding Net Assets 

Attributable to Holders of Redeemable Participating 

Shares) (2,206,559) (6,184,864) (49,166,571) (50,818,146) (108,376,140) 

Total interest rate sensitivity gap 473,985,084 816,709 (9,993,505) (5,805,317) 459,002,971 

Cumulative interest rate sensitivity gap 473,985,084 474,801,793 464,808,288 459,002,971 459,002,971 

20





Interest rate risk (continued) 


Less than one 

month 

USD 

One month 

to one year 

USD 

Over one 

year 

USD 


interest rate 

USD 


Cash at bank 416,221,077 215,779,000 - - 632,000,077 

Cash with brokers 97,458,097 - - - 97,458,097 

Financial assets at fair value through profit or loss - 5,823,477 6,238,344 21,568,566 33,630,387 

Subscription receivable - - - 201,683 201,683 

Prepayment and other assets - - - 697,054 697,054 

Total 

USD 

Total current assets 513,679,174 221,602,477 6,238,344 22,467,303 763,987,298 


Due to brokers (5,625,656) - - - (5,625,656) 

Financial liabilities at fair value through profit or loss - (4,446,741) (169,387) (22,944,311) (27,560,439) 

Redemption payable - - - (2,833,408) (2,833,408) 

Accounts payable and accrued expenses - - - (3,546,500) (3,546,500) 

Total current liabilities (excluding Net Assets 

Attributable to Holders of Redeemable 

Participating Shares) (5,625,656) (4,446,741) (169,387) (29,324,219) (39,566,003) 

Total interest rate sensitivity gap 508,053,518 217,155,736 6,068,957 (6,856,916) 724,421,295 

Cumulative interest rate sensitivity gap 508,053,518 725,209,254 731,278,211 724,421,295 724,421,295 

Liabilities not exposed to interest rate risk comprise accounts payable and accrued expenses. These amounts normally require contractual 

settlement within one quarter and, in all cases, within one year. 

The following tables details the effect on net assets should interest rates have increase/decreased by 50 basis points (bps) with all other variables 

remaining constant: 


Less than one 

month 

USD 

One month 

to one year 

USD 

Over one 

year 

USD 


interest rate 

USD 

Net assets – 50 bps increase 476,355,009 820,793 (10,043,473) (5,805,317) 461,327,012 

Net assets – 50 bps decrease 471,615,159 812,625 (9,943,537) (5,805,317) 456,678,930 

Total 

USD 


Less than one 

month 

USD 

One month 

to one year 

USD 

Over one 

year 

USD 


interest rate 

USD 

Net assets – 50 bps increase 510,593,786 218,241,515 6,099,302 (6,856,916) 728,077,687 

Net assets – 50 bps decrease 505,513,250 216,069,957 6,038,612 (6,856,916) 720,764,903 

Total 

USD 

21





Currency risk 

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. 

The Company is exposed to currency risk though its investments in non-USD denominated investments. The Investment Manager has an active 

procedure to monitor foreign exchange exposures and manages this risk though offsetting non USD denominated balances and entering into 

offsetting forward foreign exchange contracts. 

Monetary assets and liabilities denominated in foreign currencies are summarised below: 


Amounts are expressed in their USD equivalents 

USD EUR CAD JPY HKD KRW Other Total 


Cash at bank 359,305,069 6,823,176 - - - - - 366,128,245 

Cash with brokers 67,263,953 17,534,009 2,440,290 3,265,640 1,876,241 4,770,945 8,629,623 105,780,701 

Due from brokers 3,406,297 876,400 - - - - - 4,282,697 

Financial assets at fair 

value through profit or 

loss 20,093,067 16,057,115 2,395,475 887,536 6,501,005 2,949,369 42,058,050 90,941,617 

Subscription receivable 197,882 - - - - - - 197,882 

Prepayments and other 

assets 47,969 - - - - - - 47,969 

Total current assets 450,314,237 41,290,700 4,835,765 4,153,176 8,377,246 7,720,314 50,687,673 567,379,111 


Due to brokers (2,172,533) (34,026) - - - - - (2,206,559) 

Financial liabilities at fair 

value through 

profit or loss (22,873,841) (12,789,517) (2,261,862) (1,721,027) (8,729,721) (1,633,141) (51,027,104) (101,036,213) 

Redemption payable (3,021,396) - - - - - - (3,021,396) 

Accounts payable and 

accrued expenses (2,111,972) - - - - - - (2,111,972) 

Total current liabilities (30,179,742) (12,823,543) (2,261,862) (1,721,027) (8,729,721) (1,633,141) (51,027,104) (108,376,140) 

Net assets 420,134,495 28,467,157 2,573,903 2,432,149 (352,475) 6,087,173 (339,431) 459,002,971 

22





Currency risk (continued) 

Monetary assets and liabilities denominated in foreign currencies are summarised below. The amounts stated represent the Company’s pre-hedged 

exposure and do not take account of the significantly reduced sensitivity to foreign currency risk that results from currency hedging techniques used 


Amounts are expressed in their USD equivalents 

USD EUR CAD JPY HKD KRW Other Total 


Cash at bank 632,000,075 - - - - - 2 632,000,077 

Cash with brokers 78,763,000 15,964,715 (500,051) (2,844,601) (1,774,240) 6,733,854 1,115,420 97,458,097 

Financial assets at fair 

value through profit or 

loss 10,144,488 5,128,679 609,902 1,738,707 324,377 2,253,884 13,430,350 33,630,387 

Subscription receivable 201,683 - - - - - - 201,683 

Prepayments and other 

assets 697,054 - - - - - - 697,054 

Total current assets 721,806,300 21,093,394 109,851 (1,105,894) (1,449,863) 8,987,738 14,545,772 763,987,298 


Due to brokers (5,625,656) - - - - - - (5,625,656) 

Financial liabilities at fair 

value through 

profit or loss (14,911,613) (6,912,510) (711,881) (936,904) (1,064) (86,356) (4,000,111) (27,560,439) 

Redemption payable (2,833,408) - - - - - - (2,833,408) 

Accounts payable and 

accrued expenses (3,546,500) - - - - - - (3,546,500) 

Total current liabilities (26,917,177) (6,912,510) (711,881) (936,904) (1,064) (86,356) (4,000,111) (39,566,003) 

Net assets 694,889,123 14,180,884 (602,030) (2,042,798) (1,450,927) 8,901,382 10,545,661 724,421,295 

Other price risk 

Price risk is the risk that the price of a financial instrument will fluctuate due to changes in market conditions influencing, directly or indirectly, the 

value of the instrument. 

The Company is exposed to price risk from its investments. Due to the nature of the trading strategies followed by these investments, no direct 

relationship between any market factors and the expected prices of the investments can be reliably established. 

Price risk is managed through the overall risk management processes described above. 

Credit/Counterparty risk 

Credit risk is the risk that an issuer or counterparty will be unable to meet a commitment that it has entered into with the Company. 

The Company's maximum exposure to credit risk (not taking into account the value of any collateral or other security held) in the event that the 

counterparties fail to perform their obligations as of 30 September 2013 in relation to each class of recognised financial assets, other than derivatives, 

is the carrying amount of those assets in the statement of financial position. 

With respect to derivative financial instruments, credit risk arises from the potential failure of counterparties to meet their obligations under the 

contract or arrangement. Credit risk is mitigated for the AHL Programme through the diversity of counterparties and regular monitoring of 

concentration risk. 

With regards to the credit default swaps, the maximum exposure as a result of a potential future credit event is disclosed as the notional amount in 

Note 4. 

23





Credit/Counterparty risk (continued) 

The significant exposures are to the Banks and the Brokers. 

The table below analyses the Company’s exposure of cash at bank and cash at brokers by rating agency category at 30 September 2013. 

Counterparty Moody’s Rating 2013 

USD 

2013 

% 

Credit Suisse A1 39,100,100 8.3 

Mizuho Bank A1 20,000,078 4.2 

ABN Amro A2 100 - 

Barclays Bank A2 96,602,478 20.5 

BNP Paribas A2 93,040,166 19.7 

Deutsche Bank A2 12,121,456 2.6 

Citibank NA A3 33,387,624 7.1 

Royal Bank of Scotland A3 29,456,710 6.2 

National Bank of Abu Dhabi Aa3 78,009,327 16.5 

J.P Morgan Aa3 23,575,579 5.0 

Commerzbank AG Baa1 45,088,467 9.6 

Merrill Lynch Baa2 1,526,861 0.3 

471,908,946 100 

The Investment Manager performs due diligence on all counterparties before they become a service provider or counterparty to the Company, and 

credit quality checks are part of this process. The credit quality of the Company's Banks, Brokers and any lenders is regularly monitored and 

factored into allocation decisions. 

Liquidity risk 

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. Redeemable participating 

shareholder redemption requests are the main liquidity risk for the Company. 

The Company’s Redeemable Participating Shares are redeemable at the redeemable participating shareholder’s option on each Dealing Day with 

one day written notice. The Company is therefore potentially exposed to periodic redemptions by its redeemable participating shareholders. The 

exposure to liquidity risk through redeemable participating shareholder redemption requests is managed by specifically setting the redemption notice 

period to accommodate the expected liquidity of the underlying investments as agreed by the Investment Manager. 

The Company’s investments include listed securities/exchange-traded futures contracts which are considered readily realisable as they are all listed 

on major recognised exchanges. 

The Company’s financial instruments also include investments in derivative contracts traded over-the-counter, which are not quoted in an active 

public market and which generally may be illiquid. As a result, the Company may not be able to liquidate quickly some of its investments in these 

instruments at an amount close to their fair value in order to meet its liquidity requirements. 

6. Net Gain/(Loss) on Financial Assets and Liabilities at Fair Value through Profit or Loss 

2013 

USD 

2012 

USD 

Realised and unrealised gain/(loss) on investments 

Net realised loss on investments (23,637,978) (59,965,520) 

Net realised currency gain/(loss) on cash 829,751 (1,032,252) 

Total net realised loss (22,808,227) (60,997,772) 

Movement in net unrealised loss on investments (24,256,217) (15,405,984) 

Movement in net unrealised currency (loss)/gain (386,935) 1,975,749 

Total net movement in unrealised loss (24,643,152) (13,430,235) 

Net loss on financial assets and liabilities at fair value through profit or loss (47,451,379) (74,428,007) 

Total realised and unrealised loss on investments (47,894,195) (75,371,504) 

Total realised and unrealised currency (loss)/gain 442,816 943,497 

24




7. Fees, commissions and other expenses 

Management and incentive fees 

The Investment Manager will be entitled to a management fee of 3% per annum of the Net Asset Value of the Company (the ‘Management Fee’) 

accrued daily from 4 September 2012 and weekly prior to 4 September 2012, and calculated on the aggregate Net Asset Value at the immediately 

preceding Valuation Point. The Management fee is payable monthly in arrears by the Company. 

Incentive fees are calculated and accrued daily at each Valuation Point and payable annually in arrears at the rate of 20% of any net appreciation 

(after deduction of the management fee but prior to deduction of the incentive fee) in the Net Asset Value (NAV) per Redeemable Participating Share 

on the last Valuation Point in the relevant financial year of the Company above any previous highest NAV per Redeemable Participating Share on any 

preceding Dealing Day on which an incentive fee had previously been paid, multiplied by the number of Redeemable Participating Shares 

outstanding on the Valuation Point in respect of which the incentive fee is calculated. 

Where an investor redeems Redeemable Participating Shares part way through a financial year, the incentive fee accrued in respect of those 

Redeemable Participating Shares is crystallised and paid at the end of the year. There were no incentive fees accrued during the financial year. 

Management and incentive fees payable in respect of the AHL Programme are paid to Man Investments AG in consideration for marketing advisory 

and investment management services. 

Service Manager and Administration fees 

Man Valuation Services Limited (“MVSL”) ceased to be the valuation agent for the Company from 29 March 2011 and was appointed as the 

Administrative Agent (up to 3 September 2012) for which they continued to receive an administration fee and remunerate Citco Fund Services (Hong 

Kong) Limited who provided valuation agent services for the period from 29 March 2011 to 3 September 2012. Citibank Europe plc (the “Valuation 

Agent”) was appointed as valuation agent on 4 September 2012. 

Man Investments AG was appointed as Service Manager (the “Service Manager”) on 4 September 2012 and provides a service manager function to 

the Company for which it receives a fee of 0.23 basis points of the Net Asset Value, as determined on each Valuation Day (approximately equivalent 

to 0.23% per annum of the Net Asset Value of the Redeemable Participating Shares). 

The Service Manager will pay fees to Citibank Europe plc (the “Valuation Agent”) for Valuation services ("Valuation Fees"), Registrar services, 

Shareholder services and other related administration costs. 

Company Secretary fees 

The Company secretary fees are charged by Citi Fund Services (Bermuda), Ltd., at an annual fixed fee of USD 3,000 payable quarterly in arrears. 

Introducing Broker fees 

Introducing Broker fees of USD 5,974,449 (2012: USD 8,652,448) were paid to Man Investments AG (the “introducing broker”). Institutional charges 

of USD 1,453,793 (2012: USD 303,617) which cover exchange and other third party costs, which are payable to brokers, have been netted against 

realised gains/losses and unrealised gains/losses on investments. 

Introducing Broker fees, excluding institutional charges, are calculated at a rate of 1% per annum of the NAV as determined on each Valuation Point, 

were paid to the Introducing Broker. 

Hong Kong representative fees 

The Hong Kong representative is paid a fee, calculated monthly at an amount of up to USD 5,000 per annum. 

25




7. Fees, commissions and other expenses (continued) 

Custodian fees 

The Custodian shall be paid by the Company a fee accruing at each Valuation Point and paid monthly at a rate of up to 0.02% per annum of the 

NAV subject to a minimum annual fee of USD 15,000. In addition, the Custodian is entitled to be reimbursed for all out-of pocket expenses properly 

incurred by it in the performance of its duties. 

Taxation 

There is currently no taxation imposed on income or capital gains by the Government of the Bermuda Islands. Under current Bermuda law, the 

Company is not obligated to pay any taxes in Bermuda on either income or capital gains. The Company has received an undertaking from the 

Minister of Finance in Bermuda pursuant to the provisions of the Exempted Undertakings Tax Protection Act 1966 which exempts the Company 

from any such Bermuda taxes, at least until 28 March 2035. 

8. Related Party Transactions 

Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in 

making financial or operational decisions. 

Master Multi-Product Holdings Ltd, a Bermuda incorporated company with directors in common with the Company, is a related party through its 

100% holding of the Management Shares in the Company. Master Multi-Product Holdings Ltd is itself owned by Codan Trust Company Limited in 

its capacity as trustee of the Master Multi-Product Purpose Trust, a special purpose trust formed under the laws of Bermuda. 

The immediate controlling party of the Company is therefore Master Multi-Product Holdings Ltd. 

Man Investments Limited is a related party as it is the Investment Manager of the Company. Man Investments Limited is a subsidiary of Man Group 

plc and therefore all subsidiaries of Man Group plc are also related parties. During the year, the Company has transacted with the following 

subsidiaries of Man Group plc: 




Conyers Dill & Pearman is a related party as Dawn C Griffiths is a director of the Company and a partner of the law firm. 

The following transactions, which were entered into in the ordinary course of business and on normal commercial terms took place between the 

Company and its related parties. 

Fees payable 


Related party 

Type of fee 

Total 

Fees 

USD 

at 30 September 

2013 

USD 

Conyers Dill & Pearman Limited Legal fees 5,664 - 

Directors Directors’ fees 14,157 - 

Man Investments AG Introducing Broker fees 5,974,449 405,925 

Man Investments AG Management fees 17,923,348 1,217,776 

Man Investments (Hong Kong) Limited Hong Kong representative fees 6,250 1,250 

Man Investments AG Service Manager and Administration fees 1,728,185 438,584 


Related party 

Type of fee 

Total 

Fees 

USD 

Fees payable 

at 30 September 

2012 

USD 

Conyers Dill & Pearman Limited Legal fees 140,396 133,836 

Directors Directors’ fees 10,139 3,365 

Man Investments AG Crystallised incentive fee 8,583 8,582 

Man Investments AG Introducing Broker fees 8,652,448 - 


Man Investments AG Service Manager and Administration fees 148,302 - 


Man Fund Management (Guernsey) Limited Service Coordination fees 1,887,409 - 

26




9. Share Capital 

Management Shares of the Company 

The Company has an authorised share capital of USD 762,000 comprising 12,000 Management Shares of par value USD 1, and 75,000,000 

Redeemable Participating Shares of par value USD 0.01. The 75,000,000 Redeemable Participating Shares of par value USD 0.01 carry 100% of 

the voting rights. The Management Shares do not carry voting rights for as long as there are shares of any other class in issue. 

The Management Shares are owned 100% by Master Multi-Product Holdings Ltd, a Bermuda incorporated company, which is itself owned by 

Codan Trust Company Limited in its capacity as trustee of the Master Multi-Product Purpose Trust, a special purpose trust formed under the laws of 

Bermuda pursuant to a Deed of Trust made by Codan Trust Company Limited dated 14 December 2005. 

The holders of Management Shares are not entitled to any dividend whatsoever in respect of their Management shares. In the event of a winding up 

or dissolution of the Company, the holders of Management Shares are entitled to an amount equal to the par value thereof, if paid up, and the 

surplus assets of the Company. However, the holders of the Management Shares have agreed irrevocably to waive their entitlement to any amounts 

which exceed the par value of their ordinary shares and have authorised the Company to credit any such amounts to the Shares Account for the 

benefit of the Redeemable Participating Shareholders. The Management Shares have been issued but not called. No amount is recognised until the 

Management Shares are called. 

Redeemable Participating Shares 

The Redeemable Participating Shares of the Company are divided into two tranches: Tranche A and Tranche B. The Company is offering only 

Participating Tranche A Shares to investors at the Subscription Price from (and including) 4 September 2012. The Directors have resolved that all 

Redeemable Participating Shares issued by the Company prior to 4 September 2012 shall be converted to Tranche B Shares on 4 September 2012. 

Redeemable Participating Shareholders wishing to purchase additional Redeemable Participating Shares from 4 September 2012 onwards must 

subscribe for Participating Tranche A Shares (unless the Directors may decide otherwise from time to time). 

Redeemable Participating Shares are redeemable, and written notices to redeem Redeemable Participating Shares should be received by Citibank 

(Hong Kong) or the Shareholder Services Provider at the contact address referred to in the 'Names and addresses' section of this Prospectus not 

later than 17:00 pm (Hong Kong time) one Business Day prior to the Dealing Day on which the redemption is to take place, except in the event that 

the calculation of the Net Asset Value per Redeemable Participating Share has been suspended. 

Capital Management 

As a result of the ability of investors to redeem Redeemable Participating Shares, the capital of the Company can vary depending on the demand for 

redemptions from and subscriptions to the Company. The Company is not subject to externally imposed capital requirements and has no 

restrictions on the issue and redemption of Redeemable Participating Shares other than those described in the financial statements. 

The Company’s objectives for managing capital are: 

 

 

 

 

To invest the capital in investments meeting the description, risk exposure and expected return indicated in the Prospectus; 

To achieve consistent returns while safeguarding capital by participating in derivative and other advanced capital markets; 

To maintain sufficient liquidity to meet the expenses of the Company, and to meet redemption requests as they arise; and 

To maintain sufficient size to make the operation of the Company cost-efficient. 

Refer to Note 5, 'Financial risk management,' for the policies and processes applied by the Company in managing its capital. 

Redemption fees 

In case Tranche B Redeemable Participating Shares are redeemed before they have been in issue for the periods shown below, the current Net 

Asset Value per Redeemable Participating Share redeemed will be paid by the Company to the Shareholder after deduction of a fee for early 

redemption, which will, in turn be paid to the Introducing Broker primarily to compensate it for the costs of marketing the Redeemable Participating 

Shares, as follows: 

27




9. Share Capital (continued) 

Tranche B 

Redeemable Participating Shares redeemed on a Dealing Day 

before they have been in issue for: 

Fee for early redemption: 

2 years 4.0 % of redemption price per Redeemable Participating Share 



There will be no redemption fee applied on Tranche B Redeemable Participating Shares which are redeemed after they have been in issue for six 

years. No redemption fees will be applied for redemptions of Tranche A Redeemable Participating Shares. 

Performance table 

Total NAV 

NAV per redeemable 

participating share 

Highest redeemable 


Lowest redeemable 


at year end issue price during the redemption price 

year 

during the year 

USD USD USD USD 

2013 459,002,971 30.07 37.72 30.36 

2012 724,421,295 34.50 39.70 34.02 

2011 1,060,996,444 38.72 40.81 37.05 

2010 1,279,584,383 38.54 38.54 34.43 

2009 1,553,254,539 37.74 42.59 36.46 

2008 1,291,193,256 35.39 40.45 31.59 

2007 651,269,454 31.59 33.61 27.42 

2006 643,458,025 28.02 30.68 25.43 

2005 443,272,796 25.70 25.70 21.23 

2004 402,168,856 21.34 24.35 20.48 

2003 279,686,621 21.66 23.05 17.08 

2002 168,310,686 19.88 19.63 14.87 

2001 88,496,120 18.22 18.11 12.03 

2000 38,606,292 12.15 13.04 11.30 

1999 62,879,308 12.35 12.76 11.24 

10. Events during the year 

There were no significant events during the year. 

11. Subsequent events 

Subsequent to the year end subscriptions of USD 4,600,605 and redemptions of USD 52,046,958 were applied to the Company, up to 9 January 

2014. 

There were no other significant events since the year end. 

12. Contingent Liabilities and Commitments 

There were no contingent liabilities or commitments as at 30 September 2013 (2012: none). 

13. Soft Commission Arrangements 

There were no soft commission arrangements in place during the year. 

28

Ernst & Young Ltd. 

#3 Bermudiana Road 

Hamilton HM 11, Bermuda 

P.O. Box HM 463 

Hamilton, HM BX, Bermuda 

Tel: +1 441 295 7000 

Fax: +1 441 295 5193 

www.ey.com/bermuda 

www.ey.com 

INDEPENDENT AUDITORS' REPORT 

TO THE BOARD OF DIRECTORS AND SHAREHOLDERS 

MAN AHL DIVERSIFIED FUTURES LTD 

We have audited the accompanying financial statements of Man AHL Diversified Futures Ltd (the 

“Company”) which comprise the statement of financial position as at 30 September 2013 and the 

statement of changes in equity, the statement of comprehensive income and the statement of cash 

flows for the year then ended, and a summary of significant accounting policies and other explanatory 

information. 

Management’s Responsibility for the Financial Statements 

Management is responsible for the preparation and fair presentation of these financial statements in 

accordance with International Financial Reporting Standards, the relevant disclosure provisions of the 

Memorandum and Articles of Association of the Company and the relevant disclosure requirements 

set out in Appendix E to the Hong Kong Code on Unit Trusts and Mutual Funds of the Securities and 

Futures Commission of Hong Kong (the “Code”), and for such internal control as management 

determines is necessary to enable the preparation of financial statements that are free from material 

misstatement, whether due to fraud or error. 

Auditors’ Responsibility 

Our report is made solely to you, as a body, and for no other purpose. We do not assume 

responsibility towards or accept liability to any other person for the contents of this report. 

Our responsibility is to express an opinion on these financial statements based on our audit. We 

conducted our audit in accordance with International Standards on Auditing. Those standards require 

that we comply with ethical requirements and plan and perform the audit to obtain reasonable 

assurance whether the financial statements are free from material misstatement, and whether the 

financial statements are in accordance with the relevant disclosure provisions of the Memorandum 

and Articles of Association of the Company and the disclosure requirements of the Code. 

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures 

in the financial statements. The procedures selected depend on the auditors' judgment, including the 

assessment of the risks of material misstatement of the financial statements, whether due to fraud or 

error. In making those risk assessments, the auditor considers internal control relevant to the entity's 

preparation and fair presentation of the financial statements in order to design audit procedures that 

are appropriate in the circumstances, but not for the purpose of expressing an opinion on the 

effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of 

accounting policies used and the reasonableness of accounting estimates made by management, as 

well as evaluating the overall presentation of the financial statements. 

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis 

for our audit opinion. 

A member firm of Ernst & Young Global Limited

Opinion 

In our opinion, the accompanying financial statements present fairly, in all material respects, the 

financial position of Man AHL Diversified Futures Ltd as at 30 September 2013 and its financial 

performance and cash flows for the year then ended in accordance with International Financial 

Reporting Standards. 

Report on Other Legal and Regulatory Requirements 

We report that the financial statements have been properly prepared in accordance with the relevant 

disclosure provisions of the Memorandum and Articles of Association of the Company and the 

disclosure requirements of Appendix E of the Code. 

23 January 2014


Unaudited Interim Financial Statements 

For the period from 1 October 2012 to 31 March 2013


Table of Contents 

Corporate information 3 

Page 

Statement of financial position (unaudited) 5 

Statement of changes in equity (unaudited) 6 

Statement of comprehensive income (unaudited) 7 

Statement of cash flows 8 

Notes to the financial statements 9 

2


Corporate information 

Directors 

Investment Manager 

Michael B Collins 


Argonaut Limited 

Riverbank House 

Argonaut House 

2 Swan Lane 

5 Park Road London EC4R 3AD 


United Kingdom 

Bermuda 

Introducing Broker and Marketing Adviser 

Shirelle Jones is an alternate director to 


Mr Collins. Etzelstrasse 27 


Dawn C Griffiths 

Switzerland 



Services Manager 

2 Church Street Man Investments AG 

Hamilton HM 11 Huobstrasse 3 

Bermuda 


Switzerland 

John Collis is an alternate director to 

Ms Griffiths. 

Valuation Service Provider 


David Smith 


Equus Asset Management Partners 

Dublin 

27 Queen Street Ireland 

Hamilton HM11 

Bermuda 

Legal advisor as to matters of Bermudian law 


Company Secretary and Registered Office 


of the Company 


Christine Perinchief Hamilton HM 11 

c/o Citi Fund Services (Bermuda), Ltd. 

Bermuda 


Custodian 


HSBC Institutional Trust Services (Asia) Limited 

9 Church Street HSBC Main Building 


1 Queen’s Road Central 

Bermuda 

Hong Kong 


5 Reid Street 


Bermuda 

Effective as of 1 January 2013 the Company’s registered office provider, Registrar and Principal Paying Agent formally changed its 

name from ‘Citi Hedge Fund Services, Ltd.’ to ‘Citi Fund Services (Bermuda), Ltd’ (“Citi Bermuda”). As of the same date Citi Bermuda 

changed its registered office address, and thus the registered office address for all companies for which it provides registered office, to 

5 Reid Street, Hamilton HM 11, Bermuda. 

3


Corporate information (continued) 

Principal Paying Agent 








5 Reid Street 


Bermuda 

Hong Kong Representative 


Suite 1301 Chater House 

8 Connaught Road Central 

Hong Kong 

Registrar 






Bermuda 



5 Reid Street 


Bermuda 

Auditors 

Ernst & Young Ltd. 

3 Bermudiana Road 


Bermuda 

Shareholder Services Provider 



Dublin 1 

Ireland 

4


Statement of financial position 

As at 31 March 2013 

Notes 

31 March 

2013 

US$ 

30 September 

2012 

US$ 

Current assets 

Cash at bank 3 480,086,507 632,000,077 

Cash with brokers 3 121,596,113 97,458,097 

Financial assets at fair value through profit or loss 4 55,786,070 37,249,701 

Subscription receivable 230,084 201,683 

Prepayment and other assets 166,220 697,054 

Total current assets 657,864,994 767,606,612 

Current liabilities 

Bank overdraft 3 (218) - 

Financial liabilities at fair value through profit or loss 4 (46,425,066) (31,179,753) 

Redemption payable (1,810,002) (2,833,408) 

Due to brokers (1,184,767) (5,625,656) 

Accounts payable and accrued expenses 5 (2,426,071) (3,546,500) 

Total current liabilities (51,846,124) (43,185,317) 

Net Assets Attributable to Holders of Redeemable 

Participating Shares 606,018,870 724,421,295 

Which are represented by: 

Equity 

17,383,929 (2012: 20,994,600) Redeemable Participating Shares with a Net Asset 

Value per Redeemable Participating Share of US$34.86 (2012: US$34.50) 606,018,870 724,421,295 

Manager Shares 

Issued, uncalled ordinary Manager Share capital 

(12,000 Manager Shares of US$1.00 each) - - 

Approved and authorised for issue on behalf of the Board on 16 May 2013. 

David Smith 

Director 

Dawn Griffiths 

Director 


5


Statement of changes in equity 

For the period from 1 October 2012 to 31 March 2013 

Period ended 

31 March 

2013 

US$ 

Period ended 

31 March 

2012 

US$ 


beginning of period 724,421,295 1,060,996,444 

Net income/(loss) for the period attributable to Holders of Redeemable 

Participating Shares 4,129,442 (86,544,934) 

Issue of 704,100 (2012: 12,028,466 ) Redeemable Participating Shares 23,884,853 48,433,588 

Redemption of 4,314,771 (2012: 18,437,341) Redeemable Participating Shares (146,416,720) (160,935,681) 


end of period 606,018,870 861,949,417 


6


Statement of comprehensive income 


Notes 

Period ended 

31 March 

2013 

US$ 

Period ended 

31 March 

2012 

US$ 

Income 

Interest income 2 8,079,942 2,531,686 

Net gain/(loss) on financial assets and liabilities at fair value through 

profit or loss 7,772,678 (68,985,532) 

Net (loss)/gain on foreign exchange (864,022) 1,056,952 

14,988,598 (65,396,894) 

Expenses 

Management and incentive fees 5 (9,611,384) (14,313,309) 

Other expenses 5 (1,149,353) (1,385,196) 

Interest expense 2 (49,328) (105,750) 

Transaction and brokerage costs 5 (49,091) (5,343,785) 

(10,859,156) (21,148,040) 

Net income/(loss) for the period attributable to Holders of 

Redeemable Participating Shares 4,129,442 (86,544,934) 


7


Statement of cash flows 


Period ended 

31 March 

2013 

US$ 

Period ended 

31 March 

2012 

US$ 

Cash flows from operating activities 

Net income/(loss) for the period attributable to Holders of Redeemable Participating Shares 4,129,442 (86,544,934) 

Adjustments to reconcile net income/(loss) for the period to net cash used in operating 

activities: 

Financial assets and liabilities at fair value through profit or loss (3,291,056) 23,629,867 

Prepayment and other assets 530,834 - 

Due to brokers (4,440,889) - 

Accounts payable and accrued expenses (1,120,429) (13,443,585) 

Net cash used in operating activities (4,192,098) (76,358,652) 

Cash flows from financing activities 

Proceeds on issue of Redeemable Participating Shares 23,856,452 48,433,588 

Payments on redemption of Redeemable Participating Shares (147,440,126) (160,935,681) 

Net cash used in financing activities (123,583,674) (112,502,093) 

Net change in cash and cash equivalents (127,775,772) (188,860,745) 

Cash and cash equivalents at beginning of period 729,458,174 1,057,116,860 

Cash and cash equivalents at end of period 601,682,402 868,256,115 

Cash and cash equivalents consist of: 

Cash at bank 480,086,507 672,308,242 

Cash with brokers 121,596,113 195,947,882 

Bank overdraft (218) - 

Cash due to brokers - (9) 

601,682,402 868,256,115 

Supplemental disclosure of cash flow information: 

Interest paid (73,423) (105,750) 

Interest received 8,610,776 2,531,686 


8


Notes to the financial statements 


1. General 

Man AHL Diversified Futures Ltd (the “Company”) was incorporated under the laws of Bermuda on 11 September 1997 and carries on 

business as an open-ended investment company, trading a diversified portfolio of international interbank currency and financial futures. 

The Company commenced trading on 12 May 1998. 

Terms defined in the Prospectus shall, unless the context otherwise requires, have the same meaning in these financial statements. 

2. Summary of Significant Accounting Policies 

a) Accounting convention 

The financial statements are prepared in accordance with International Financial Reporting Standards (“IFRS”) issued by the International 

Accounting Standards Board (“IASB”) and where relevant, in accordance with the provisions of the Hong Kong Securities & Futures 

Commission Code on Unit Trusts and Mutual Funds pursuant to the Securities and Futures Ordinance (Cap 571) April 2003 (as amended 

effective 25 June 2010). The financial statements have been prepared on the historical cost basis except for financial assets and liabilities 

held at fair value through profit or loss that have been accounted for based on fair value. 

b) Changes in Accounting Policy and Disclosure 

The following amendments to standards have been adopted by the Company in the current period: 

IAS 1 – Financial Statement Presentation — Presentation of Items of Other Comprehensive Income (“OCI”) 

The amendments to IAS 1 change the grouping of items presented in OCI. Items that can be reclassified to profit or loss at a future point 

in time (for example, upon derecognition or settlement) are presented separately from items that will never be reclassified. The 

amendment affects presentation only and has therefore no impact on the Company‘s financial position or performance. The amendment 

became effective for annual periods beginning on or after 1 July 2012. 

The following new standards and amendments to standards are relevant but not yet effective for the Company’s operations: 

IAS 27 – Separate Financial Statements (as revised in 2011) 

As a consequence of the new IFRS 10 and IFRS 12, what remains in IAS 27 is limited to accounting for subsidiaries, jointly controlled 

entities, and associates in separate financial statements. As the Company has no subsidiaries, this amendment has no impact on the 

Company‘s financial position or performance. The amendment becomes effective for annual periods beginning on or after 1 January 2013. 

IFRS 9 – Financial Instruments: Classification and Measurement 

IFRS 9 as issued reflects the first phase of the IASB’s work on the replacement of IAS 39 and applies to classification and measurement of 

financial assets and financial liabilities as defined in IAS 39. The standard is effective for annual periods beginning on or after 1 January 

2015. In subsequent phases, the IASB will address hedge accounting and impairment of financial assets. The adoption of the first phase of 

IFRS 9 will have an effect on the classification and measurement of the Company‘s financial assets but will potentially have no impact on 

classification and measurements of financial liabilities. The Company will quantify the effect in conjunction with the other phases, when 

issued, to present a comprehensive picture. 

9





b) Changes in Accounting Policy and Disclosure (continued) 

IFRS 10 – Consolidated Financial Statements 

IFRS 10 replaces the portion of IAS 27 Consolidated and Separate Financial Statements that addresses the accounting for consolidated 

financial statements. It also replaces SIC-12 Consolidation — Special Purpose Entities. IFRS 10 establishes a single control model that 

applies to all entities including ‘special purpose entities’. The changes introduced by IFRS 10 will require management to exercise 

significant judgement to determine which entities are controlled, and therefore required to be consolidated by a parent, compared with 

the requirements that were in IAS 27. This standard becomes effective for annual periods beginning on or after 1 January 2013. This 

amendment has no impact on the Company‘s financial position or performance. 

IFRS 13 – Fair Value measurement 

IFRS 13 establishes a single source of guidance under IFRS for all fair value measurements. IFRS 13 does not change when an entity is 

required to use fair value, but rather provides guidance on how to measure fair value under IFRS when fair value is required or permitted. 

The Company is currently assessing the impact that this standard will have on the financial position and performance and the Directors do 

not believe it will impact the current measurement techniques being employed. This standard becomes effective for annual periods 

beginning on or after 1 January 2013. 

At the date of authorisation of the financial statements there were a number of Standards and Interpretations which were in issue but not 

yet effective. The Directors anticipate that the adoption of these Standards and Interpretations in future periods will have no material 

impact on the financial statements of the Company. 

The accounting policies have been consistently applied by the Company in the current period and prior year. 

c) Use of Accounting Judgements and Estimates 

The preparation of financial statements in accordance with IFRS requires management to make judgements, estimates and assumptions 

that affect the amounts reported and disclosures made in these financial statements and accompanying notes, including certain valuation 

assumptions. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the 

carrying amount of assets or liabilities in the future. 

d) Going Concern 

The Company’s management has made an assessment of the Company’s ability to continue as a going concern and is satisfied that the 

Company has resources to continue in business for the foreseeable future. Furthermore, management is not aware of any material 

uncertainties that may cast significant doubt upon the Company’s ability to continue as a going concern, therefore, the financial 

statements continue to be prepared on a going concern basis. 

e) Revenue Recognition 

Interest on financial assets held at fair value through profit or loss for the period are credited to net gain or loss on financial assets and 

liabilities at fair value through profit or loss in the statement of comprehensive income on an accruals basis. 

10





f) Financial Assets and Liabilities at Fair Value through Profit or Loss 

Valuation of investments 

Financial instruments are designated at fair value through profit and loss because they are managed on a fair value basis. This category 

has two sub-categories: (i) financial assets and liabilities held for trading; and (ii) those designated by management at fair value through 

profit or loss at initial recognition. Financial assets or liabilities held for trading are acquired or incurred principally for the purpose of 

selling or repurchasing in the short term. Derivatives are also categorised as held for trading as the Company does not designate any 

derivatives as hedges in a hedging relationship. 

After initial measurement, the Company measures financial instruments, which are classified as at fair value through profit or loss, at their 

fair values. IAS 39 indicates that for listed assets and liabilities the best evidence of fair value is usually the last bid price for securities held 

and offer price for securities sold short. 

Regular-way purchases and sales of investments are recognised on the trade date, which is the date on which the Company commits to 

purchase or sell the asset. Investments are initially recognised at fair value. Investments are derecognised when the rights to receive cash 

flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership. 

The fair value of financial instruments traded in active markets (such as publicly traded derivatives and trading securities) is based on 

quoted market prices at the statement of financial position date. The quoted market price used for financial assets held by the Company is 

the current ‘bid’ price, whilst the ‘ask’ price is used for financial liabilities. When the Company holds derivatives with offsetting market risks, 

it uses midmarket prices as a basis for establishing fair values for the offsetting risk positions and applies the bid or asking price to the 

net open position, as appropriate. 

The Company may from time to time invest in financial instruments that are not traded in an active market (for example over-the-counter 

derivatives and private placements of both equities and fixed income securities). 

g) Securities Sold Short 

The Company may engage in securities sold short. A short sale is a transaction in which the Company sells a security it does not own. The 

proceeds received for short sales are recorded as liabilities and the Company records an unrealised gain or loss to the extent of the 

difference between the proceeds received and the value of the open short position. The Company records a realised gain or loss when the 

short position is closed. By entering into short sales, the Company bears the market risk of an unfavourable change in the price of the 

security sold short in excess of the proceeds received. Short sales expose the Company to potentially unlimited liability. 

h) Offsetting Financial Instruments 

Financial assets and liabilities are offset and the net amount reported in the statement of financial position when there is a legally 

enforceable right to set-off the recognised amounts and there is an intention to settle on a net basis or realise the assets and settle the 

liability simultaneously. 

i) Derivatives 

The Company, in its normal course of investing and trading activities, may enter into transactions in derivative financial instruments based 

on expectations of future market movements and conditions. The fair value of derivative financial instruments at the reporting date 

generally reflects the amount that the Company would receive or pay to terminate the contract at the reporting date. Many derivative 

financial instruments are exchange traded or traded in the over-the-counter market where market values are readily obtainable. These 

transactions have market and off-balance sheet risk and may have credit and liquidity risk. 

11





i) Derivatives (continued) 

Derivative financial instruments are recognised at fair value on the date on which a derivative contract is entered into and are 

subsequently re-measured at their fair value. Fair values are obtained from quoted market prices in active markets, including recent market 

transactions, and valuation techniques, including discounted cash flow models and options pricing models, as appropriate. Models are 

calibrated by back testing to actual transactions to ensure outputs are reliable. Models use observable data to the extent practicable. 

However, areas such as credit risk (both own and counterparty); volatilities and correlations require the Board of Directors to make 

estimates. Changes in assumptions about these factors could affect the reported fair value of derivative financial instruments at the 

valuation date. 

All derivative financial instruments are carried in assets when amounts are receivable by the Company and in liabilities when amounts are 

payable by the Company. Changes in the fair values of derivatives are included in the statement of comprehensive income. During the 

period, when the contract is open, changes in the value of the contracts are recognised as unrealised appreciation or depreciation to 

reflect the fair value of the contract at the last day of the valuation period. When the contract is closed, the Company records a realised 

gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Company’s basis in the 

contract. 

The Company may engage in futures contracts and forward contracts. 

– Futures contracts 

Futures contracts are recorded on the trade date and are valued at the applicable closing bid or offer prices on the last business day of 

the period. The difference between the original contract amount and the fair value of the open futures position is reflected as unrealised 

appreciation or depreciation on the statement of financial position and as a net change in unrealised appreciation or depreciation in the 

statement of comprehensive income. Realised gains or losses are recognised on the closing or trade date of the contract and are included 

in revenue under net realised gain/(loss) on financial assets and liabilities at fair value through profit or loss in the statement of 

comprehensive income. 

– Forward currency contracts 

Forward currency contracts are recorded on the trade date and are valued at the applicable foreign exchange rates on the last business 

day of the period. The difference between the fair value of the original contract amount and the fair value of the open forward currency 

contract position is reflected as unrealised appreciation or depreciation on open forward currency contracts on the statement of financial 

position and as a net change in unrealised appreciation or depreciation on open forward currency contracts in the statement of 

comprehensive income. Realised gains or losses are recognised on the maturity or trade date of the contract and are included in net 

realised gain/(loss) on financial assets and liabilities at fair value through profit or loss in the statement of comprehensive income. 

j) Realised and Unrealised Gains and Losses 

All realised and unrealised gains and losses on securities and derivatives are recognised as net gain/(loss) on financial assets and liabilities 

at fair value through profit or loss in the statement of comprehensive income. The cost of securities sold is accounted for on a First In – 

First Out (“FIFO”) basis. The unrealised gain or loss on open derivative contracts is calculated as the difference between the contracted rate 

and the rate to close out the contract. Realised gains or losses include net gains on contracts which have been settled or offset by other 

contracts. 

12





k) Foreign Currency 

The primary objective of the Company is to generate returns in United States dollars, its capital-raising currency. The liquidity of the 

Company is managed on a day-to-day basis in United States dollars in order to handle the issue and redemption of the Company’s 

Redeemable Participating Shares. The Company performance is also evaluated in United States dollars. Therefore, as United States dollars 

is considered as the currency that most faithfully represents the economic effects of the underlying transactions, events and conditions, 

the Company’s functional and presentational currency is United States dollars. 

Transactions during the period denominated in foreign currencies have been translated at the rates of exchange ruling at the dates of 

transactions. For foreign currency transactions and foreign currency investments held at the period end, the resulting gains or losses are 

included in the net gain/(loss) on foreign exchange in the statement of comprehensive income. Assets and liabilities denominated in 

foreign currencies are translated at the rates of exchange in effect at the date of the statement of financial position. 

l) Taxation 

There is currently no taxation imposed on income or capital gains by the Government of the Bermuda Islands. Under current Bermuda law, 

the Company is not obligated to pay any taxes in Bermuda on either income or capital gains. The Company has received an undertaking 

from the Minister of Finance in Bermuda pursuant to the provisions of the Exempted Undertakings Tax Protection Act 1966 which exempts 

the Company from any such Bermuda taxes, at least until 28 March 2035. 

m) Interest income and expense 

Interest income and expense are recognised in the statement of comprehensive income on an accruals basis, in line with the contractual 

terms. 

n) Other Expenses 

All expenses are recognised in the statement of comprehensive income on an accruals basis. 

o) Reclassification of Prior Year Comparative Figures 

Certain prior year comparatives have been reclassified to conform to the current period’s presentation. 

p) Participating Shares 

Participating Shares are redeemable at the Participating Shareholders’ option. The Participating Shares can be put back to the Company 

under redemption terms set out in the Company’s offering documents. 

3. Cash and Cash Equivalents and Due from/(to) Brokers 

At period end amounts disclosed as Cash and Cash with/to broker were held at Citibank N.A., ABN Amro, Barclays Bank, J.P. Morgan, 

Royal Bank of Scotland and Standard Chartered Bank (the “Banks”), Deutsche Bank, J.P. Morgan, Royal Bank of Scotland, Merrill Lynch and 

Credit Suisse (the “Brokers”). These include amounts transferred as collateral against open futures and forward contracts and other 

derivatives. Amounts receivable from short sales and collateral may be restricted in whole or in part until the related securities are 

purchased. To the extent that securities are purchased on margin, the margin debt may be secured on the related securities. 

13




4. Financial Assets and Liabilities at Fair Value through Profit or Loss 

The following tables summarise financial assets and liabilities at fair value through profit or loss as at 31 March 2013 and 30 September 

2012: 

The table also discloses the % of Net Assets for each derivative position and the notional amount at period/year end, with the exception 

of forward currency contracts, which are disclosed by number of contracts entered into by the Company. 

31 March 

30 September 

2013 

% of 

2012 

% of 

Fair Value 

Net 

Fair Value 

Net 

Quantity 

US$ 

Assets 

Quantity 

US$ 

Assets 

Financial assets at fair value through profit or 

loss 

Derivatives 

Commodity futures (237) 6,440,885 1.06 589 4,998,993 0.69 

Foreign exchange futures 738 172,082 0.03 (791) 173,014 0.02 

Forward currency contracts 3,752 13,274,565 2.19 3,351 19,103,974 2.64 

Interest rate futures 23,881 11,546,823 1.91 25,310 12,061,821 1.67 

Index futures 3,423 3,324,134 0.55 2,230 801,332 0.11 

Commodity forwards (195,602) 2,388,404 0.39 74 110,567 0.02 

Credit default swaps (420,000,000) 11,081,136 1.83 - - - 

Interest rate swaps (54,449,862,727) 7,558,041 1.25 - - - 

Total derivatives (54,870,026,772) 55,786,070 9.21 30,763 37,249,701 5.14 

Total financial assets at fair value through profit 

or loss (54,870,026,772) 55,786,070 9.21 30,763 37,249,701 5.14 

14





31 March 

30 September 

2013 

% of 

2012 

% of 

Fair Value 

Net 

Fair Value 

Net 

Quantity 

US$ 

Assets 

Quantity 

US$ 

Assets 

Financial liabilities at fair value through profit or 

loss 

Derivatives 

Commodity futures (116) (5,172,783) (0.85) 158 (5,625,258) (0.78) 

Foreign exchange futures (86) (120,779) (0.02) 58 (219,502) (0.03) 

Forward currency contracts 3,513 (12,699,047) (2.10) 1,399 (13,130,550) (1.81) 

Interest rate futures (784) (1,940,763) (0.32) 1,414 (4,616,128) (0.64) 

Index futures 1,966 (2,130,684) (0.35) 6,152 (5,911,118) (0.82) 

Commodity forwards 2,019 (756,081) (0.12) (106) (1,677,198) (0.23) 

Credit default swaps (110,000,000) (8,925,422) (1.47) - - - 

Interest rate swaps (50,384,721) (14,679,507) (2.42) - - - 

Total derivatives (160,378,209) (46,425,066) (7.66) 9,075 (31,179,753) (4.30) 

Total financial liabilities at fair value through 

profit or loss (160,378,209) (46,425,066) (7.65) 9,075 (31,179,753) (4.30) 

The Company invests in a range of derivative securities, as detailed above. The derivatives are cleared through brokers in the following 

cities; Deutsche Bank, London, J.P. Morgan Chase Bank, London, The Royal Bank of Scotland plc, Edinburgh and Credit Suisse, Sydney. 

The following table details the movements in portfolio holdings since the end of the preceding accounting period. 



Commodity futures 589 (826) (237) 

Foreign exchange futures (791) 1,529 738 

Forward currency contracts 3,351 401 3,752 

Interest rate futures 25,310 (1,429) 23,881 

Index futures 2,230 1,193 3,423 

Commodity forwards 74 (195,676) (195,602) 

Credit default swaps - (420,000,000) (420,000,000) 

Interest rate swaps - (54,449,862,727) (54,449,862,727) 

Total 30,763 (54,870,057,535) (54,870,026,772) 

15







Commodity futures 158 (274) (116) 

Foreign exchange futures 58 (144) (86) 

Forward currency contracts 1,399 2,114 3,513 

Interest rate futures 1,414 (2,198) (784) 

Index futures 6,152 (4,186) 1,966 

Commodity forwards (106) 2,125 2,019 

Credit default swaps - (110,000,000) (110,000,000) 

Interest rate swaps - (50,384,721) (50,384,721) 

Total 9,075 (160,387,284) (160,378,209) 

Forward currency contracts 

As part of its portfolio management techniques, the Company may use forward currency contracts to economically hedge its nonfunctional 

currency liability to Shareholders (although formal hedge accounting is not used). Forward contracts entered into by the 

Company represent a firm commitment to buy or sell an underlying asset, or currency at a specified value and point in time based upon 

an agreed or contracted quantity. The realised/unrealised gain or loss is equal to the difference between the value of the contract at the 

commencement and the value of the contract at settlement date/period end date and is included in the statement of comprehensive 

income. 

Futures contracts 

The Company may use exchange-traded futures to maintain the appropriate exposure to stock markets in accordance with the Investment 

Manager’s recommended overall asset allocation. Futures are contracts for delayed delivery of commodities, securities or money market 

instruments in which the seller agrees to make delivery at a specified future date of a specified commodity or instrument, at a specified 

price or yield. Gains and losses on futures are recorded by the Company based upon market fluctuations and are recorded as net 

gain/(loss) on financial assets and liabilities at fair value through profit or loss in the statement of comprehensive income. 

Fair value of financial instruments 

The Company classifies fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in determining 

the measurements in line with IFRS 7. 

16






The fair value hierarchy has the following levels: 

 

 

 

Level 1 - Quoted market price in an active market for an identical instrument. 

Level 2 - Valuation techniques based on observable inputs. This category includes instruments valued using: quoted market 

prices in active markets for similar instruments; quoted prices for similar instruments in markets that are considered less than 

active; or other valuation techniques where all significant inputs are directly or indirectly observable from market data. 

Level 3 - Valuation techniques using significant unobservable inputs. This category includes all instruments where the valuation 

technique includes inputs not based on observable data and the unobservable inputs could have a significant impact on the 

instrument's valuation. This category includes instruments that are valued based on quoted prices for similar instruments where 

significant unobservable adjustments or assumptions are required to reflect differences between the instruments. 

When fair values of listed equity and debt securities at the reporting date, as well as, publicly traded derivatives, are based on quoted 

market prices or binding dealer price quotations, without any deduction for transaction costs, the instruments are included within Level 1 

of the hierarchy. 

For all other financial instruments, fair value is determined using valuation techniques. Valuation techniques include net present value 

techniques, comparison to similar instruments for which market observable prices exist, options pricing models and other relevant 

valuation models. 

The Company uses widely recognised valuation models for determining fair values of over-the-counter derivatives. For these financial 

instruments, inputs into models are market observable and are, therefore, included within Level 2. 

The Company has no Level 3 financial instruments. 

17





The following tables analyse the fair value hierarchy of the Company’s financial assets and liabilities measured at fair value at 31 March 

2013 and 30 September 2012: 

As at 31 March 2013 

Total 

Level 1 

Level 2 

Level 3 

Fair Value 

US$ 

US$ 

US$ 

US$ 


Derivatives 





Index futures 3,324,134 - - 3,324,134 

Commodity forwards - 2,388,404 - 2,388,404 

Credit default swaps - 11,081,136 - 11,081,136 

Index futures - 7,558,041 - 7,558,041 



Total 

Level 1 

Level 2 

Level 3 

Fair Value 

US$ 

US$ 

US$ 

US$ 


Derivatives 





Index futures (2,130,684) - - (2,130,684) 

Commodity forwards - (756,081) - (756,081) 

Credit default swaps - (8,925,422) - (8,925,422) 

Interest rate swaps - (14,679,507) - (14,679,507) 



18







Total 

Level 1 

Level 2 

Level 3 

Fair Value 

US$ 

US$ 

US$ 

US$ 


Derivatives 





Index futures 801,332 - - 801,332 

Commodity forwards - 110,567 - 110,567 



Total 

Level 1 

Level 2 

Level 3 

Fair Value 

US$ 

US$ 

US$ 

US$ 


Derivatives 





Index futures (5,911,118) - - (5,911,118) 

Commodity forwards - (1,677,198) - (1,677,198) 



5. Related Party Transactions 

Master Multi-Product Holdings Ltd, a Bermuda incorporated company, is a related party through its 100% holding of the Manager Shares 

in the Company. 

19




5. Related Party Transactions (continued) 

The ultimate controlling party of the Company is therefore Master Multi-Product Holdings Ltd. 

Man Investments Limited is a related party as it is the Investment Manager of the Company. Man Investments Limited is a subsidiary of 

Man Group plc and therefore all subsidiaries of Man Group plc are also related parties. During the period, the Company has transacted 

with the following subsidiaries of Man Group plc: 

Man Investments AG. 

Man Group plc companies are also involved, in varying capacities, in the management of the companies the Company has invested in, as 

set out in Note 4. 

Conyers Dill & Pearman is a related party as Dawn C Griffiths is a director of the Company and a partner of the law firm. 

The following transactions took place between the Company and its related parties. 

Total 

Fees payable 

For the period ended 31 March 2013 

Fees 

at 31 March 2013 

Related party 

Type of fee 

US$ 

US$ 

Directors Directors’ fees - 3,365 

Man Investments AG Transaction and brokerage costs 3,226,776 468,120 


Man Investments AG Service Coordination fees 758,765 758,765 

Man Investments (Hong Kong) Limited Hong Kong representative fees - 3,154 

Total 

Fees payable 

For the period ended 30 September 2012 

Fees 

at 30 September 2012 

Related party 

Type of fee 

US$ 

US$ 

Conyers Dill & Pearman Limited Legal fees 140,396 133,836 

Directors Directors’ fees 10,139 3,365 

Man Investments AG Crystallised incentive fee 8,583 8,582 

Man Investments AG Transaction and brokerage costs 8,652,448 - 


Man Investments AG Valuation fees 148,302 - 


Man Fund Management (Guernsey) Limited Service Coordination fees 1,887,409 - 

20

Man AHL Diversified Futures Ltd - Fundsupermart.com

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