TIDMCASA
CASTLE ASIA ALTERNATIVE PCC LIMITED ("the Company")
(Registered in Guernsey - Number 43789)
Registered Office:
MARTELLO COURT, ADMIRAL PARK, ST PETER PORT, GUERNSEY, GY1 3HB
_____________________________
TELEPHONE: +44 1481 211000
FACSIMILE: +44 1481 211001
e-mail fundscosec@intertrustgroup.com
For immediate
release
26 August 2010
CASTLE ASIA ALTERNATIVE PCC LIMITED ("the Company")
(Registered in Guernsey - Number 43789)
ANNOUNCEMENT OF RESULTS
For the period from 1 January 2010 to 30 June 2010
The financial information set out in the announcement does not constitute the
Company's half-yearly financial report and unaudited condensed financial
statements for the period from 1 January 2010 to 30 June 2010, but is derived
from those financial statements. The financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS). Whilst the
financial information included in this announcement has been computed in
accordance with IFRS, this announcement does not itself contain sufficient
information to comply with IFRS.
A copy of the half-yearly financial report and unaudited condensed financial
statements will be available on the Company's website www.castleaa.com from 26
August 2010.
Company Secretary
Intertrust Fund Services (Guernsey) Limited
Company Secretary
Martello Court
Admiral Park
St Peter Port
Guernsey GY1 3HB
Tel: 01481 211000
Fax: 01481 211001
LGT Capital Partners (U.K.) Limited
General Manager: Mark White
Investor Relations: Pia Skogstrom
Tel: 0207 529 0960
Company profile
General information
Castle Asia Alternative PCC Limited (the "Company") was registered on 13
October 2005 in Guernsey, Channel Islands, as a closed-ended protected cell
company in accordance with the provisions of The Protected Cell Companies
Ordinance, 1997 and The Companies (Guernsey) Law, 1994.
The Fund's redeemable participating preference shares were listed on the
Official List of the UK Listing Authority and commenced trading on the London
Stock Exchange on 22 November 2005. The half yearly report and unaudited
condensed financial statements cover the period from 1 January 2010 to 30 June
2010.
Redemption facility
Subject to certain limitations and the Directors exercising their discretion to
operate the Redemption Facility on any relevant occasion, Shareholders may
request bi-annually on 30 June or 31 December for the redemption of all or part
of their holdings of Shares for cash. Any redemption will be effected at the
estimated prevailing Net Asset Value per Share on the Redemption Date (less the
costs of redemption, which may include early redemption penalties in respect of
Investee Funds). If the Directors choose to operate the Redemption Facility on
any given occasion, they will make an announcement to that effect through a
Regulatory Information Service provider. Notice of intention to redeem must
then be given to the Secretary and Administrator by Shareholders not less than
70 days prior to the proposed Redemption Date. Further details of this facility
are set out within the Registration document dated 26 June 2008.
Investment objective
The Fund is a Fund of hedge funds. Its objective is to seek long term capital
appreciation through investment in a diversified multi-manager, multi-strategy
portfolio of hedge funds investing predominantly in Asia.
Investment policy
The Investment Adviser aims to capture a significant part of the performance of
Asian markets over the investment cycle whilst mitigating a substantial
proportion of the volatility of those markets. Returns are expected to be
significantly influenced by the performance of equity markets in particular. At
30 June 2010 the Fund was invested in 20 underlying funds spread across 14
hedge fund strategies and across 6 jurisdictions.
The underlying portfolio managers' investment strategies include, but are not
limited to, convertible/ capital structure arbitrage, credit based, event
driven,fixed income arbitrage and long/short equity.
The Fund's policy is to remain substantially fully invested at all times,
whilst retaining modest amounts of liquid resources to cover short term
liquidity requirements.
Financial highlights for the six months ended 30 June 2010
At
At 31 %
30 June December
2010 2009 movement
Net Asset Value per redeemable participating 101.80p 108.21p -5.9
preference share
Share price 89.00p 90.50p -1.7
Redeemable participating preference shares in 53,620,927 54,458,427 -1.5
issue
Total cellular net assets GBP54,585,262 GBP58,930,515 -7.4
GBP47,722,625 GBP49,284,876 -3.2
Market capitalisation
Share price discount to Net Asset Value per share 12.6% 16.4% -
Total expense ratio (TER) + 1.6% 1.4% -
Annualised return since launch 0.8% 2.4% -
+ The TER has been calculated by taking the annualised operating costs of the
Company (excluding loan interest) divided by the average Net Asset Value in the
period/year.
Chairman's statement
Performance
Although the Asian region has proved to be economically robust so far this
year, the six months to the end of June proved a difficult period for stock
markets generally and for the Company's portfolio. During the period,the net
asset value (NAV) per share declined from 108.21p to 101.78p, a fall of 5.9%.
The Company's share price declined from 90.5p to 89.0p, a fall of 1.7% and the
share price discount to net asset value per share stood at 12.6% at the period
end.
These are disappointing results, in particular by reference to the Company's
investment objective of seeking long term capital appreciation.
The events of the last two years have certainly been exceptional but it does
appear that Asian hedge funds, as an asset class, have not delivered the
returns that were hoped for. However it should also be borne in mind that the
annualised NAV return since inception of 0.8%, is ahead of the Sterling hedged
MSCI Asia Pacific index which has produced an annualised loss of 7.4% over the
corresponding period, with a much higher volatility of 19.6% versus 8.3% for
the company.
Redemption Facility
In August 2010, 10% of the Company's share capital was redeemed under the
Redemption opportunity that was announced earlier in the year. Following
cancellation of the redeemed shares the issued share capital of the Company is
50,623,540 shares, of which 2,508,178 are held in treasury.
In addition, during the period to 30 June 2010, 837,500 shares were repurchased
for holding in treasury and 3,450,000 shares held in treasury were cancelled.
Your Board recognises that after the cancellation of shares through the
redemption facility, the Company's size is a concern, particularly with regard
to the liquidity of its shares in the secondary market. The Company's total
expense ratio, however, remains competitive at 1.6%, a level which continues to
compare favourably with the Company's peer group.The Board remains focussed on
the key issues facing the Company, namely: improvement in the Company's
investment performance, broadening of the Company's shareholder base and
increasing the size of the Company.
Investment Policy and Objectives
Against a background of difficult market conditions over the life of the
Company to date, and in particular by reference to the very low interest rate
environment currently prevailing, your Board has reviewed the Company's
investment policy and the following revised investment policy has been agreed
with the investment adviser:
The investment advisor aims to capture a significant part of the performance of
Asian equity markets over the investment cycle whilst mitigating a substantial
proportion of the volatility of those markets.
Your Board highlights that this change has no effect on the Company's
investment objective which remains unchanged
Outlook
I reported in my 2009 full year statement that your Board remained hopeful for
the prospects for the investment portfolio and that the investment portfolio
was well positioned to respond to future volatility. In the short term this has
not proved to be the case, with the allocation to long/short equity strategies
being particularly disappointing.
We continue to believe that the Asian region will deliver superior investment
returns to the long term investor. However we recognize that if Asian hedge
funds, as an asset class, continue to have difficulties in delivering
satisfactory performance, shareholders may wish to seek those returns through
other means. Accordingly, the Board has decided that rather than diminish the
prospects for improved returns through further shrinkage of the Company by
making available a redemption facility at the end December 2010, it will
instead propose the introduction of a continuation vote. It is proposed that
the first such vote be tabled at the company's next Annual General Meeting
expected to be held in June 2011 with further opportunities to vote on the
Company's continuation at the two subsequent Annual General Meetings.
The intention behind the Board's decision to offer a continuation vote is to
give the Investment Adviser an appropriate period of time to demonstrate the
validity of their belief that a well-selected portfolio of Asian hedge funds
can deliver attractive, risk-adjusted returns for investors. In the meantime,
the Board will maintain its policy of buying shares for Treasury to control the
discount and cancelling them if not subsequently reissued within a year.
Rupert Dorey
Chairman
26 August 2010
Investment adviser's review
The Net Asset Value (NAV) ended the first half of 2010 down 5.9% net of fees
and expenses after a 8.3% gain in 2009. After a strong 2009, increased risk
aversion by investors during the first six months of 2010 created a challenging
environment. Over the 55-month period since inception, the annualised return of
the NAV per share was 0.8%.
Review of markets
Asia Pacific equities recorded mixed performances during the first half of
2010. After a volatile but positive first quarter, most Asian markets
experienced major sell-offs in the second quarter, largely triggered by the
European sovereign debt crisis, though certain markets with less exposure to
the world economy performed decently. Indonesia became the top performer after
a strong rebound in June,while Thailand, Malaysia,Vietnam and India recorded
modest gains as well. On the opposite end, investors turned more cautious on
China as concerns of the economy over-heating mounted. China (on-shore)
finished the first half 28% lower,while the other larger and more developed
markets in the region also experienced losses.
Japan equities were down along the rest of Asia, with small-caps outperforming
large-caps and the JASDAQ index as an exception gaining 5% over this six-month
period.
Performance of Pan Asia equity indices (over the six month period)
For commodities, previous metals were the best performers, as gold continued
its bull run and rose 13% over the period. Brent crude range-traded and
finished the first half down 3%. Overall, the broader S&P GSCI index fell by
11%.
Credit markets had a volatile first half of the year. In April, the spreads on
investment grade and high yield bonds had reached their lowest levels in almost
three years. However, the European crisis triggered a flight to quality and
widened spreads significantly by the end of June.
Review of fund performance
We saw a certain degree of divergence between attribution of performance by
equity strategies and non-equity strategies in the six month period under
review. Not surprisingly, long/short strategies contributed the majority of the
losses during the six month period. Within the long/short style, most of our
Japan long/short managers contributed positively to the performance, and
collectively generated 0.3% of returns over the six-month period.
Relative value and event driven strategies also contributed slightly negatively
to performance. Whilst a number of relative value managers benefited from
meaningful exposure to FX and ADR vs Local arbitrage trades, these gains were
completely offset by losses in an arbitrage fund with a long volatility bias.
Portfolio review
Change in strategy allocation over the six month period
The number of managers had been reduced to 20 by the end of June 2010 from 21
managers at the end of December 2009. Over the six-month period, the portfolio
saw a subscription into one new fund and a complete redemption from two other
funds.
In terms of strategy allocation going forward, we are cognisant of the effect
of global headwinds on the Asian markets, but remain a firm believer in the
Asian growth story. We continue to put emphasis on increasing alpha orientation
via fundamental, event-driven strategies, and strategies with non-correlated
return profiles, and on diversifying into strategies outside of Greater China.
Our returns in the first half were disappointing. In the light of this we have
conducted an extensive review of our investment process and the individual
holdings in the portfolio. Our conclusion is that after a period of
considerable difficulty for Asian hedge fund managers, we now expect to see an
investment environment which is more conducive to successful active
management. As a result, we continue to believe that a well-selected portfolio
of Asian hedge funds will be able to demonstrate an attractive risk/return
profile for investors and achieve our objective of capturing a significant
proportion of the returns of Asian assets with substantially less volatility.
As at 30 June 2010, funds managed or advised by LGT Capital Partners owned
975,000 shares of the Company.
LGT Capital Partners (Asia-Pacific) Limited
26 August 2010
Interim management report
Details of important events that affected the Company during the half year
ended 30 June 2010 can be found in the Chairman's Statement and the Investment
Adviser's Review beginning on page 4.
Risks and uncertainties
Market, credit and liquidity risk are the major risks associated with the
Company. The Company has established parameters for managing these risks which
are reviewed regularly. Further information on the principal long-term risks
and uncertainties of the Company is included in the latest annual report,
starting on page 36.The Board has provided the Investment Adviser with
guidelines and limits for the management of market risk, gearing and financial
assets and liabilities. Other key risks identified by the Board that could
affect the Company's performance are as follows:
Performance risk: The performance risk of the portfolio delivered by the
Investment Adviser's strategy relative both to the Company's objectives and to
the MSCI Asia Pacific index is monitored closely by the Board.
Discount volatility: The Company's share price can trade at a discount to the
underlying net asset value per share. The Company may purchase shares in the
market with a view to addressing any imbalances between the supply of and
demand for shares, to increase the Net Asset Value per share and to assist in
maintaining a narrow discount to Net Asset Value per share in relation to the
price at which shares may be trading.
Regulatory risk: The Company operates in a complex regulatory environment and
faces a number of regulatory risks. Breaches of regulations, such as the UKLA
Listing Rules and the Companies (Guernsey) Law, 2008, could lead to a number of
serious outcomes and reputational damage. The Audit Committee monitors
compliance with regulations by reviewing relevant reports from the Secretary
and Administrator,and Investment Adviser.
Foreign exchange risk: The Company is exposed to fluctuations in exchange
rates, as it invests in underlying funds which are predominantly denominated in
U.S. Dollars. In an attempt to reduce the impact on the Company of currency
fluctuations, the Company uses a hedging contract or contracts each month
involving the three month forward sale of approximately one third of the total
value of all investments in their currency of denomination for sterling
delivery. The intention is that in aggregate these contracts should create a
total gain (or loss) that offsets the loss (or gain) that results from holding
assets that are denominated in U.S. Dollars or other currencies.
Gearing risk:The use of the credit facility established with LGT Bank increases
gearing risk, however it is the Board's intention that the facility should not
be used to introduce permanent net gearing to the Company's capital structure
and will only be used for covering short term funding requirements.
In the view of the Board, these principal risks and uncertainties are as
applicable to the remaining six months of the year as they were to the six
months under review.
Responsibility statement
Directors' responsibilities
The Directors are responsible for preparing the half yearly report in
accordance with applicable law and regulations. The Directors confirm that to
the best of their knowledge the half yearly condensed financial statements,
within the half yearly report, give a true and fair view of the assets,
liabilities, financial position and earnings for the period, and have been
prepared in accordance with IAS 34 'Interim Financial Reporting'. The Directors
further confirm that the Chairman's Statement and the Interim Management Report
include a fair review of the information required by 4.2.7R and 4.2.8R of the
FSA's Disclosure and Transparency Rules.
The half yearly report has not been reviewed or audited by the Company's
auditors.
The half yearly report was approved by the Board on 26 August 2010 and the
above responsibility statement was signed on its behalf by:
R O Dorey
Chairman
26 August 2010
Income statement for the six months ended 30 June 2010
(unaudited) (unaudited) (audited)
Six months ended 30 June 2010 Six months ended 30 June 2009 Year ended 31 December 2009
Revenue Capital Total Revenue Capital Total Revenue Capital Total
Notes GBP GBP GBP GBP GBP GBP GBP GBP GBP
Operating
income
Net gains/
(loss) on
investments - 1,480,358 1,480,358 - (2,815,773) (2,815,773) - 296,787 296,787
Net (loss)/
gains on 7 - (4,907,010) (4,907,010) - 2,296,120 2,296,120 - 4,871,589 4,871,589
derivatives
Other foreign
exchange
gains/ - 288,434 288,434 - 2,894,188 2,894,188 - (703,042) (703,042)
(loss)
Interest and
similar 3 - - - 66,175 - 66,175 77,653 - 77,653
income
- (3,138,218) (3,138,218) 66,175 2,374,535 2,440,710 77,653 4,465,334 4,542,987
Operating
expenses
Investment
advisory,
Board
advisory
and (283,163) - (283,163) (257,233) - (257,233) (552,650) - (552,650)
Administrator
fees
Custodian fee (9,892) - (9,892) (18,762) - (18,762) (39,286) - (39,286)
Directors' (43,500) - ( 43,500) (33,224) - (33,224) (77,000) - (77,000)
fees
Other (104,209) - (104,209) (90,050) - (90,050) (165,842) - (165,842)
expenses
Total
operating
expenses
before (440,764) - (440,764) (399,269) - (399,269) (834,778) - (834,778)
finance costs
Operating
profit/(loss)
before (440,764) (3,138,218) (3,578,982) (333,094) 2,374,535 2,041,441 (757,125) 4,465,334 3,708,209
finance costs
Finance costs
Loan interest (9,524) - (9,524) (12,413) - (12,413) (12,068) - (12,068)
Loan
arrangement - - - (10,333) - (10,333) - - -
fee
Bank
overdraft - - - (160) - (160) (242) - (242)
interest
Net profit/
(loss) for (450,288) (3,138,218) (3,588,506) (356,000) 2,374,535 2,018,535 (769,435) 4,465,334 3,695,899
period/year
Earnings/
(loss) per
redeemable
participating
preference 5 (0.84)p (5.83)p (6.67)p (0.62)p 4.14p 3.52p (1.36)p 7.91p 6.55p
share
There are zero earnings attributable to the management shares.
All revenue and capital items in the above statement derive from continuing
operations.
The total column of this Income Statement is prepared in accordance with
International Financial Reporting Standards (IFRS). The revenue and capital
columns are supplementary to this and are prepared under guidance published by
the Association of Investment Companies.
Balance sheet as at 30 June 2010
(unaudited) (unaudited) (audited)
30 June 30 June 31 December
2010 2009 2009
Notes GBP GBP GBP
Non-current assets
Financial assets held at fair value 54,619,744 48,185,203 57,257,981
through profit or loss
54,619,744 48,185,203 57,257,981
Current assets
Cash and cash equivalents 50,234 4,887,613 2,106,889
Advance applications - 2,430,503 -
Amounts due from redemptions awaiting 11,000 444,519 48,183
settlement
Other receivables 19,022 15,512 21,258
Fair value of derivative financial 7 218,174 2,872,405 -
instruments
298,430 10,650,552 2,176,330
Total assets 54,918,174 58,835,755 59,434,311
Current liabilities
Bank loan 10 162,105 - -
Other payables 170,805 192,583 228,487
Fair value of derivative financial 7 - - 275,307
instruments
Total liabilities 332,910 192,583 503,794
Net assets 54,585,264 58,643,172 58,930,517
Shareholders funds
Management shares 8 2 2 2
Share premium account 57,873,563 60,680,018 60,680,018
Reserves (3,288,301) (2,036,848) (1,749,503)
Total equity 54,585,264 58,643,172 58,930,517
Net asset value per redeemable 6 101.80p 104.67p 108.21p
participating preference share
Net asset value per management share 100.00p 100.00p 100.00p
These financial statements were approved by the Board of Directors on 26 August
2010.
Signed on behalf of the Board
R O Dorey
Chairman
Statement of changes in equity
Unaudited for the six months ended 30 June 2010
(unaudited)
for six Management Share Shares held Capital Revenue
months ended
30 June 2010 Shares Premium in Treasury Reserve Reserve Total
GBP GBP GBP GBP GBP GBP
Balance at
31 December 2 60,680,018 (4,351,037) 6,377,176 (3,775,642) 58,930,517
2009
Treasury
shares - (2,806,455) 2,806,455 - - -
cancelled
Shares
purchased - - (756,747) - - (756,747)
for treasury
Loss for the - - - (3,138,218) (450,288) (3,588,506)
period *
Balance at 2 57,873,563 (2,301,329) 3,238,958 (4,225,930) 54,585,264
30 June 2010
(unaudited)
for six Management Share Shares held Capital Revenue
months ended
30 June 2009 Shares Premium in Treasury Reserve Reserve Total
GBP GBP GBP GBP GBP GBP
Balance at
31 December 2 60,730,018 (50,000) 1,911,842 (3,006,207) 59,585,655
2008
Shares
purchased - (50,000) 50,000 - - -
for
cancellation
Shares
purchased - - (2,961,018) - - (2,961,018)
for treasury
Profit/
(loss) for - - - 2,374,535 (356,000) 2,018,535
the period *
Balance at 2 60,680,018 (2,961,018) 4,286,377 (3,362,207) 58,643,172
30 June 2009
(audited)
for the year Management Share Shares held Capital Revenue
ended
31 December Shares Premium in Treasury Reserve Reserve Total
2009
GBP GBP GBP GBP GBP GBP
Balance at
31 December 2 60,730,018 (50,000) 1,911,842 (3,006,207) 59,585,655
2008
Shares
purchased - - (4,351,037) - - (4,351,037)
for the
treasury
Treasury
shares - (50,000) 50,000 - - -
cancelled
Profit/
(loss) for - - - 4,465,334 (769,435) 3,695,899
the year*
Balance at
31 December 2 60,680,018 (4,351,037) 6,377,176 (3,775,642) 58,930,517
2009
* The profit/(loss) for the period/year is the total income and expenses
recognised in equity.
The aggregate of the Capital and Revenue reserves equates to the retained
earnings per Balance Sheet.
Cash flow Statement for the six months ended 30 June 2010
(unaudited) (unaudited) (audited)
30 June 30 June 31 December
2010 2009 2009
GBP GBP GBP
Cash flows from operating activities
Net (loss)/profit for period/year (3,588,506) 2,018,535 3,695,899
Add back interest payable 9,524 12,573 12,310
Losses/(gains) on investments held at
fair value through
profit or loss and foreign exchange 3,138,218 (2,374,535) (4,465,334)
gains/(losses)
Interest and similar income - (66,175) (77,653)
Decrease/(increase) in other receivables 2,236 (5,988) (11,734)
Increase/(decrease) in other payables 21,317 14,453 (28,642)
Purchase of investments held at fair (18,262,862) (16,613,750) (31,157,673)
value through profit or loss
Sale of investments held at fair value 22,418,641 28,649,684 41,018,928
through profit or loss
Short term interest - 66,175 2,870
Net settlement on derivatives (5,400,491) (576,285) 4,262,979
Net cash (outflow)/inflow from operating (1,661,923) 11,124,687 13,251,950
activities before interest
Interest paid (9,524) (160) (12,310)
Net cash (outflow)/inflow from operating (1,671,447) 11,124,527 13,239,640
activities
Financing activities
Repurchase of treasury shares (835,746) (2,961,018) (4,272,038)
Repurchase loan - (6,980,080) -
Credit facility drawdown/(repayment) 162,105 - (6,967,667)
Net cash outflow from financing (673,641) (9,941,098) (11,239,705)
activities
(Decrease)/increase in cash and cash (2,345,088) 1,183,429 1,999,935
equivalents during the period/year
Reconciliation of cash flow to movement
in net cash
(Decrease)/increase in cash and cash (2,345,088) 1,183,429 1,999,935
equivalents during the period/year
Cash and cash equivalents at beginning 2,106,889 809,996 809,996
of period/year
Effect of foreign exchange rate changes 288,433 2,894,188 (703,042)
Cash and cash equivalents at end of 50,234 4,887,613 2,106,889
period/year
Cash and cash equivalents consist of:
Cash and cash equivalents 50,234 4,887,613 2,106,889
Bank overdraft - - -
50,234 4,887,613 2,106,889
Notes to the financial statements for the six months ended 30 June 2010
1 Principal activity
The Company is a Guernsey incorporated, closed-ended, Protected Cell Company
with an unlimited life, governed by the provisions of The Companies (Guernsey)
Law, 2008 and The Protected Cell Companies Ordinance, 1997 (the
"Ordinance").The Company was initially established with one Cell in accordance
with the Ordinance: Sterling Class (formerly KGR Asia Dynamic 1 (GBP)). Castle
Asia Alternative PCC Limited, formerly KGR Absolute Return PCC Limited, was
listed on 22 November 2005 on the London Stock Exchange. The Company retains
the option to create new Cells with different investment objectives and terms
in the future.
The information included in these financial statements in respect of the year
ended 31 December 2009 does not constitute statutory accounts. A copy of the
statutory accounts for that year has been filed with the Guernsey Financial
Services Commission and the FSA. The auditors report on those accounts was not
qualified.
2 Principal accounting policies
Basis of preparation
The condensed financial statements have been prepared in accordance with
International Financial Reporting Standards ("I FRS") issued by the
International Accounting Standards Board (IASB) and with the Statement of
Recommended Practice "Financial Statements of Investment Trust Companies and
Venture Capital Trusts" (AIC SORP) issued in January 2009, insofar as it is not
inconsistent with IFRS. The accounting policies adopted are consistent with
those of the annual financial statements for the year ended 31 December 2009,
as described in those financial statements.
The financial statements are prepared on a fair value basis for financial
assets at fair value through profit and loss and derivative financial
instruments. Other financial assets and liabilities are stated at amortised
cost.
New Accounting Standards
Certain new standards and amendments to existing standards have been published
that are mandatory for the Company's accounting periods beginning on or after 1
January 2010. The only standards which are relevant to the Company are as
follows:
IFRS 3 (revised, 'Business combinations' and consequential amendments to IAS
27, 'Consolidated and separate financial statements', IAS 28,'Investments in
associates' and IAS 31,'Interests in joint ventures', effective prospectively
to business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after 1 July
2009. The Company does not have any joint ventures.The above mentioned
standards have no impact on the financial statements of the Company.
There are a number of non-urgent, relatively minor changes to approximately 12
existing standards and interpretations which are part of the IASB's annual
improvements project published in May 2009. These amendments are mostly
applicable as from 1 January 2010. The following standards have been amended: I
FRS 2 revised 'Share-based payments'. I FRS 5 Non-current Assets Held for Sale
and Discontinued Operations'. IFRS 8 'Operating Segments'. IAS 1 'Presentation
of Financial Statements'. IAS 7 'Statement of Cash Flows'. IAS 17 'Leases'. IAS
18 Revenue', IAS 36 'Impairment of Assets, IAS 38 'Intangible Assets', IAS 39
'Financial Instruments: Recognition and Measurement', IFRIC 9 'Reassessment of
Embedded Derviatives'. IFRIC 16 'Hedges of a Net Investment in a Foreign
Operation', and IFRIC 18 'Transfer of assets from customers'.There was no
material effectwith the implementations of the changes in the standards.
Operating segments
The sole operating segment of the Company is investing in hedge funds and the
results published in this report correspond to the sole operating segment of
investing in hedge funds.
3 Interest and similar income
(unaudited) (unaudited) (audited)
30 June 30 June 31 December
2010 2009 2009
GBP GBP GBP
Dividends - 64,833 76,311
Bank interest - 1,342 1,342
Total income - 66,175 77,653
4 Taxation
During the period, the Company was exempt from Guernsey Income Tax under the
Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 and was charged an annual
exemption fee of GBP600. It is expected that the Company will continue to qualify
for exempt status in the future.
5 Basic and diluted earnings/(loss) per redeemable participating preference
share
The revenue loss per redeemable participating preference share is based on the
loss attributable to the redeemable participating preference shares of GBP450,288
(30.6.2009: GBP356,000; 31.12.2009: GBP769,435) and on the weighted average number
of redeemable participating preference shares in issue of 53,854,260
(30.6.2009: 57,378,470; 31.12.2009: 56,443,003). The capital loss per
redeemable participating preference share is based on the net capital loss
attributable to the redeemable participating preference shares of GBP3,138,218
(30.6.2009: gain of GBP2,374,535; 31.12.2009: gain of GBP4,465,334) and on the
weighted average number of redeemable shares in issue of 53,854,260 (30.6.2009:
57,378,470; 31.12.2009: 56,443,003).
6 Net asset value per redeemable participating preference share
The net asset value per redeemable participating preference share is based on
net assets attributable to redeemable participating preference shares of GBP
54,585,262 (30.6.2009: GBP58,643,170; 31.12.2009: GBP58,930,515) and on the
redeemable participating preference shares in issue at the half year end of
53,620,927 (30.6.2009:56,029,105; 31.12.2009:54,458,427).
7 Derivative Financial Instruments: Forward Foreign Exchange Contracts and
gains/(losses)
The Company hedges its U.S. Dollar exposure by entering into forward sales of
U.S. Dollars into Sterling. The intention is that this should create a gain (or
loss) that offsets the loss (or gain) that results from holding assets that are
denominated in U.S. Dollars. Occasionally, the Company may invest in Funds that
are denominated in currencies other than U.S. Dollars and because of this from
time to time it may be necessary for the Company to hedge against its exposure
to these currencies. At the period end there were three outstanding forward
sale contracts totalling U.S.$81,840,000 against Sterling of GBP54,915,028
(maturing: 30 July 2010 $32,610,000, 31 August 2010 $24,210,000 and 30
September 2010 $25,020,000). These contracts showed an aggregate unrealised
gain of GBP218,174 at 30 June 2010 (30.6.2009 GBP2,872,405; 31.12.2009:
unrealised loss GBP275,307).
Net gain/(Ioss) on derivatives
(unaudited) (unaudited) (audited)
30 June 30 June 31 December
2010 2009 2009
GBP GBP GBP
Realised (loss)/gains on forward
currency contracts (5,125,184) (576,285) 5,146,896
Unrealised gains/(loss) on forward
currency contracts 218,174 2,872,405 (275,307)
(4,907,010) 2,296,120 4,871,589
8 Share Capital
The authorised share capital of the Company is GBP2 divided into 2 management
shares of GBP1 each and an unlimited number of no par value shares that may be
issued as cell Shares. The cell Shares are issued as redeemable participating
preference shares ('Shares').
(unaudited) (unaudited) (audited)
30 June 30 June 31 December
2010 2009 2009
GBP GBP GBP
Management shares
- Issued and fully paid 2 2 2
Redeemable participating
Number of shares
preference shares
Opening balance 54,458,427 59,649,105 59,649,105
Shares purchased to treasury (837,500) (3,620,000) (5,190,678)
53,620,927 56,029,105 54,458,427
Treasury shares Number of shares
Opening balance 5,190,678 50,000 50,000
Shares transferred from preference shares 837,500 3,620,000 5,190,678
Shares cancelled (3,450,000) (50,000) (50,000)
2,578,178 3,620,000 5,190,678
The holders of Shares attributable to a particular cell will only be entitled
to participate in the income, profits and assets attributable to that cell. On
a winding up the holders of the Shares are only entitled to participate in the
assets of that cell and have no entitlement to participate in the distribution
of any assets attributable to any other cell. Holders of the Shares are
entitled to attend and vote at general meetings of the Company.
9 Ultimate controlling party
In the opinion of the Directors on the basis of shareholdings advised to them
the Company has no ultimate controlling party.
10 Loan facility
Throughout the period LGT Bank have provided a loan facility to the Company
which allows the drawdown of fixed advances and of overdrafts in current
accounts, the total is limited to the lowest of the following three scenarios:
(i) GBP15,000,000, or
(ii) 20% of the Net Assets Value of the cell, or
(iii) 35% of the cell's three month average market capitalisation.
An amount of GBP162,105 was drawn on the facility as at 30 June 2010 (30 June
2009: nil; 31 December 2009: nil) and the facility is valid until further
notice.
The notice period to terminate the facility is six months.
Any amount drawn on the facility is a related party transaction by virtue of
the fact that LGT Bank and the Investment Adviser, LGT Capital Partners
(Asia-Pacific) Limited, are both members of the LGT Group.
11 Reconciliation of published valuation to financial statements
GBP
Net assets per financial statements 54,585,264
Adjustment to accruals (9,470)
Net assets per published valuation 54,575,794
12 Subsequent events
Since the Balance sheet date of 30 June 2010, 10% of the Company's Share
Capital was redeemed under the Redemption opportunity as disclosed in the
circular dated 19 March 2010.
In addition, a further 100,000 shares were bought back for Treasury and 170,000
shares which were previously held in Treasury were cancelled.
Following cancellation of the redeemed shares and the Treasury share
transactions noted above, the issued share capital of the Company is 50,623,540
of which 2,508,178 shares are held in Treasury.
Investment portfolio at 30 June 2010
Fair Value % of
Investments GBP Net Assets
Clairvoyance Asia Fund Limited 4,032,469 7.4
Alphadyne Investment Strategies Fund Limited 3,991,961 7.3
Crown Managed Accounts - Nezu 3,967,589 7.2
EB Asia Absolute Return Fund 3,667,815 6.7
Artradis Barracuda 3,579,608 6.6
Indus Pacific Opportunities Fund 3,557,938 6.5
Real Return Asian Fund 3,371,426 6.2
LIM Asia Multi-Strategy Fund 3,190,516 5.8
Akamatsu Fund 2,939,244 5.4
Rockhampton Fund 2,845,157 5.2
Horizon Portfolio I Limited 2,817,826 5.2
Segantii Asia Pacific Equity Multi-Strategy 2,721,593 5.0
PD Star Fund Limited 2,618,866 4.8
Triskele China Fund 2,409,363 4.4
East of Suez Fund 2,321,493 4.3
Crown China Segregated Portfolio 2,221,105 4.1
Octagon Pan Asia Fund 2,138,251 3.9
Crown Managed Accounts - Penta 1,931,116 3.5
Eastern Advisor Fund (side pocketed) + 150,270 0.3
Bennelong Asia Pacific (side pocketed) + 146,138 0.3
Total investment portfolio 54,619,744 100.1
Net current liabilities (34,480) (0.1)
Net assets 54,585,264 100.00
Note: The above fair values are based on formal valuations supplied to the
Company by the Administrators of the Company's underlying investments, with the
exception of Artradis Barracuda which is based on an estimated valuation.
+ Side pocketed - illiquid investments within an investee company are placed in
a separate fund and any redemptions receive only their share of the liquid
investments at the time of redemption with the balance being held until such
time, if at all, that the illiquid investments can be redeemed.
Investor information
Directors and Advisers
Directors Board Adviser
R O Dorey*# (Chairman) Frostrow Capital LLP
N M S Rich*#,CBE, FCA 25 Southampton Buildings
A H Smith# London WC2A 1AL
C Russell*#, FCA, FSIP
Registered Office Registrar
Martello Court Capita IRG (CI) Limited
Admiral Park 2nd Floor, TSB House
St Peter Port No 1 Le Truchot
Guernsey GY1 3HB St Peter Port
Guernsey GY1 4AE
Secretary and Administrator Investment Adviser
Intertrust Fund Services (Guernsey) LGT Capital Partners (Asia-Pacific)
Limited Limited
Martello Court Suite 4203 Two Exchange Square
Admiral Park 8 Connaught Place
St Peter Port PO Box 13398
Guernsey GY1 3HB Hong Kong
Legal Adviser (UK) Banker and Custodian
Norton Rose LLP ABN AMRO Custodial Services (Ireland)
Limited
3 More London Riverside (formerly Fortis Prime Fund Solutions
Custodial
London SE1 2AQ Services (Ireland) Limited)
Fortis House, Park Lane
Legal Adviser (Guernsey) Spencer Dock
Carey Olsen Dublin 1
Les Banques Ireland
7 New Street (effective date 1 February 2010)
St Peter Port
Guernsey GY1 4BZ
Auditor
Ernst & Young LLP
Broker PO Box 9
Winterflood Securities Limited Royal Chambers
The Atrium Building, Cannon Bridge St. Julian's Avenue
25 Dowgate Hill St. Peter Port
London EC4R 2GA Guernsey GY1 4AF
* Audit Committee member (Chairman N M S Rich)
Remuneration and Management Engagement Committee member (Chairman C Russell)
# Nomination Committee member (Chairman R O Dorey)
END
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