Ann: Response to Media Speculation, page-29

Mate have you seen their market update:

https://hotcopper.com.au/threads/ann-market-update.4240405/?post_id=33650995

"Commenting on the outcome, Blue Sky’s interim Managing Director, Mr Kim Morison said while the profit impact of the changes being announced is disappointing, the Company was delivering on its
announcement of 7 May 2018 to review its business and management structure and reduce fixed costs
to align with recurring management fees."

"“The restructure, coupled with the independent review of carrying values of investments, will affect Blue
Sky’s FY18 financial performance and we expect the review and other items announced today will have
an unaudited $59.4 million negative impact on NPAT."

"Blue Sky expects a net cash balance of approximately $32.3 million at 30 June 2018."

"Blue Sky does not expect to pay a dividend in relation to the year ended 30 June 2018."


If you go back and read the half year report, they had 51 million in cash in the bank. In March they raised an additional 100million. So if their announcement is to be believed (which given how often they change their mind, who knows) they have gone thru - Circa 120million in 6 months. Hold up.... $120 Million in 6 months has left into the world... gone.... Thats 20 Mil a month they are burning thru...... So on the 30th of June they had 6 weeks of cash left in the bank at their current spending rates.....

Also read the commentary, ASIC is investigating them they admitted that this week. The tricky thing is, they are not telling lies, they are not breaking the law at all. They just created a really complex system of interconnected companies and funds that in the end spit out numbers. Those number say, look you made, 10% to 20% this year but its a 5 year investment, so we will have to wait to give that to you. You sit there, pretty happy your $250k investment potters along, 5 years later, your super excited, you investment is now sitting on $500k ITS DOUBLED, but hang on............. problems in the market arrive........ we are having issues with selling the investments.............. the market doesn't understand our product.......... conditions have deteriorated..... Fees are continuing to be paid to the managers...... after 2 years later, they say....... well other unit holders just want out, sorry but we had to sell the investments at a discount, so you only get $200k back after fees (if your lucky). These investments are high risk, highly leveraged and in some cases highly speculative.

Even if Blue Sky have by their involvement materially increased the book value of the water rights, they are not telling lies, the valuations are being done correctly, its just those valuations are being based on Blue Sky's trades, if as they told AFR last week represent between 10% and 25% of the trades in the public arena, then that is material impact on those valuations. But thats not illegal or wrong, its a function of the market and a bubble.

The fact of the matter, most of the professional alternative fund manager groups out in the world, don't record their performance profits until they realize the cash from the sale of the asset. It removes the incentive to "pad" the valuations on any given day. Look at Moelis's product. They manage 3 Billion in funds and can run the division profitably with just the management fees and not recording performance fees until funds are exited.

These things don't need to be this complex and interconnected. Even look at the way they provided loans to the investments in trouble to hide the performance issues. I also don't like how they give slightly different messages on different forums. So BLA market updates say one thing, BAF market updates give slightly different details, then you hear commentary in the media quoting the company, giving slightly different commentary. Noting ever seems to be the whole truth, just snippets to give you a glimpse of the good bits but not the bad.

Honestly there is just WAY too many red flags around this company.

But seriously do not make a call on just my word at all. NEVER EVER. I could be wrong, its happened before, it will happen again.

Pull out the reports, pull out all the market updates, go to BAF and pull the monthly NTA reports (they are all very rosy, no hint at all of the underlying problems with any investments). You can use google to do a news search and read the AFR commentary on the company in order.