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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Castle Asia | LSE:CASA | London | Ordinary Share | GB00B0MSVZ38 | RED PTG PREF SHS NPV KGR ASIA DYNAMIC1 £ |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 101.25 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
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TIDMCASA
CASTLE ASIA ALTERNATIVE PCC LIMITED
(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: fundcosec@intertrustgroup.com
For immediate
release
24 March 2011
CASTLE ASIA ALTERNATIVE PCC LIMITED - STERLING CLASS
(a closed-ended protected cell company incorporated in Guernsey with
registration number 43789)
For the year ended 31 December 2010
The financial information attached does not constitute the Company's statutory
accounts for the year ended 31 December 2010, but is derived from those
accounts. Statutory accounts for 2010 are available on the Company's website
www.castleaa.com. Ernst & Young as auditors have reported on the accounts and
their report was unqualified.
In accordance with the prospectus, the Directors have not declared an interim
dividend and do not recommend the payment of a final dividend for the year.
The Extraordinary General Meeting of the Company will be held on 18 April 2011,
to give Shareholders the opportunity to vote on the future of the Company.
Further details can be found in the Circular dated 14 March 2011.
Company Secretary
Intertrust Fund Services (Guernsey) Limited
Annual Report
2010
castle
ASIA ALTERNATIVE PCC LIMITED
Contents 1
Castle Asia Alternative PCC Limited 2010
Contents
2 Company profile
3 Financial summary
4 Chairman's statement
5 Investment adviser's review
6 Directors' report
14 Directors' responsibilities
15 Independent auditor's report to the members of
Castle Asia Alternative PCC Limited
17 Income statement
18 Statement of financial position
19 Statement of changes in equity
20 Statement of cash flows
21 Notes to the financial statements
42 Investment portfolio
43 Investor information
2 Company profile
Castle Asia Alternative PCC Limited 2010
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 annual report and audited financial
statements cover the year ended 31 December 2010.
Redemption facility
As referred to in the Chairman's Statement on page 4, the Company issued a
circular on 14 March 2011 convening an Extraordinary General Meeting for 18
April 2011, to give Shareholders the opportunity to vote on the future of the
Company. In the event that Shareholders do not vote to continue the Company
they will be given, at the same meeting, the opportunity to vote to place the
Company in voluntary liquidation. Notwithstanding those proposals, and 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
Asia 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
31 December 2010 the Fund was invested in 22 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 has been to remain substantially fully invested at all times,
whilst retaining modest amounts of liquid resources to cover short term
liquidity requirements. However, in view of the proposals referred to above,
redemption instructions have been issued in relation to the less liquid
constituents of the Company's portfolio.
Financial highlights 3
Castle Asia Alternative PCC Limited 2010
Financial summary
for the year ended 31 December 2010
At At
31 31
December December %
2010 2009 movement
Net Asset Value per redeemable
participating preference share 105.62p 108.21p -2.4
Share price 96.00p 90.50p +6.1
Redeemable participating preference shares
in issue 48,115,362 54,458,427 -11.6
Total cellular net assets GBP50,818,024 GBP58,930,515 -13.8
Market capitalisation GBP46,190,748 GBP49,284,876 -6.3
Share price discount to net asset value
per share 9.1% 16.4% -
Total expense ratio (TER) + 1.5% 1.4% -
+ The TER has been calculated by taking the operating costs of the Company,
(excluding liquidation cost provisions and loan interest) divided by the
average net asset value during the year.
4 Chairman's statement
Castle Asia Alternative PCC Limited 2010
Chairman's statement
In the Chairman's statement contained in the Company's half yearly report for
the period from 1 January 2010 to 30 June 2010 the Board stated that:
"...we recognise 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 it
will 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."
This proposal was formulated after discussions with the Company's larger
Shareholders which led the Board to conclude that the timing proposed would
both allow a reasonable period of time for the positive actions undertaken by
the Investment Adviser to improve performance to take effect and balance the
interests of Shareholders with different time horizons.
Following the receipt of correspondence from the Company's largest Shareholder,
whose holding was acquired after the discussions referred to above had taken
place, the Board decided to conduct a further round of Shareholder
consultations in January 2011 as to the future direction of the Company.
As announced on 31 January 2011, as a result of the views expressed by
Shareholders in the second round of consultations, the Board concluded that a
continuation vote should be put to Shareholders earlier than the June 2011
Annual General Meeting, and, should the continuation vote not be passed,
Shareholders would be given the opportunity at the same meeting to wind up the
Company voluntarily.
The Proposals are described in greater detail in the Circular dispatched to
Shareholders on 14 March 2011. They will allow Shareholders to vote on the
Company's continuation at an Extraordinary General Meeting (EGM) on 18 April
2011. If this continuation vote is not passed, proposals will be put to
Shareholders at this same meeting, together with the Class Meeting for the
voluntary liquidation of the Company. The Board considers that it is still
appropriate to put a continuation vote to Shareholders, albeit at an earlier
date than originally intended, given their earlier commitment to do so.
However, the Board acknowledges that, regardless of its own views as to the
future prospects for the Company, given the sentiments expressed by
Shareholders in the second round of consultations, the continuation vote is
unlikely to be passed. As a result of this, redemption instructions have been
issued in relation to the less liquid constituents of the Company's portfolio.
It is currently expected that the Company's currency hedging programme will
remain in place until the Company is placed into voluntary liquidation.
Following this, the Company's assets will be subject to movements of the
Sterling/US Dollar exchange rate.
I would like to thank Shareholders for their support during the life of the
Company. As a Board, we continue to believe that the Asian region will deliver
superior investment returns to the long term investor. However, we recognise
that while Asian hedge funds, as an asset class, continue to have difficulties
delivering satisfactory performance, Shareholders may wish to seek those
returns through other means.
Rupert Dorey
Chairman
24 March 2011
Investment adviser's review 5
Castle Asia Alternative PCC Limited 2010
Investment adviser's review
The year 2010 has provided a challenging market environment for Asian hedge
funds as a whole. Whilst the leading Pan-Asia equity indices posted
double-digit returns for the year, most of this performance has been achieved
in the more 'insulated' markets of South-East Asia, India and Chinese B-Shares,
areas where hedge fund portfolios tend to have little representation due to
liquidity and access limitations. In contrast, in the markets where most
exposure is concentrated, namely Japan, Hong Kong and China, returns from the
leading indices ranged from -3% for NKY225 to +5% for HSI. In addition to the
limited support from markets generally, variable-biased long/short equity
managers in particular, which were overrepresented in the portfolio, struggled
with the fast rotation between 'risk on' and 'risk off' mode, leading to low
net exposures in market rallies and higher allocations during corrections. The
most extreme example of this was seen over the month of May 2010. As the
inability of some managers to cope with this new market regime became apparent
over the first half of 2010, we shifted capital away from variable-biased
managers to either market-neutral or more consistently directional strategies
with less active net exposure management. This worked well for the portfolio,
with newly added managers contributing strongly over the second half of the
year.
Long/short equity strategies ended the year marginally down as managers
struggled to capture the rapid rotation between risk on/risk off mode in the
market. The allocation to these strategies rose from 64% at the beginning of
the year to 74% by year end. While the majority of holdings ended the year in
positive territory, two aggressive Pan-Asia managers in particular delivered
disappointing results.
Relative value managers as a group contributed positively to the Fund. Led by a
multi-strategy fund, all but one managers were up with the negative outlier
being a volatility arbitrage trader.
The portfolio maintained low exposures to event driven strategies, with two
funds ending the year up whilst one manager was redeemed after causing losses
to the portfolio over the first half of 2010. Collectively, event driven
managers had a marginally negative contribution to the NAV.
The number of managers was increased to 22 by the end of December 2010 from 21
managers at the end of December 2009 with 6 subscriptions to new managers and
complete exits from 5 managers. While some of these transactions have been
replacements of existing managers, the portfolio has also shifted exposure from
less promising strategies into more niche, alpha-generative areas. One of the
new additions is a managed account on the LGT Capital Partners platform, which
offers the benefits of increased transparency and control of assets.
Exposure levels have decreased from approximately 180% at the beginning of the
year to 166% at year end, with a meaningful reduction in risk over November/
December.
LGT Capital Partners (Asia-Pacific) Limited
24 March 2011
6 Directors' report
Castle Asia Alternative PCC Limited 2010
Directors' report
The Directors have pleasure in submitting their Annual Report and the Audited
Financial Statements for the year ended 31 December 2010. In view of the
proposals set out in the circular dated 14 March 2011, and as referred to in
the Chairman's Statement on page 4, the accounts have been prepared on a
break-up basis.
Principal Activities
The Company is a Guernsey registered closed-ended Protected Cell Company
established with one Cell known as Sterling Class (the "Cell" or the "Fund").
The Cell's redeemable participating preference shares are listed on the London
Stock Exchange. The Cell's 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. The Cell's Investment Adviser
seeks to achieve a Sterling net annualised return in excess of 12%, with a
volatility of less than 10% over the course of an investment cycle (typically
five years).
Revenue and dividends
The income statement on page 17 shows a revenue account loss for the year
amounting to GBP1,230,924 (2009: loss of GBP769,435) which has been transferred
from revenue reserves. It also shows a net capital loss of GBP534,034 (2009: gain
of GBP4,465,334) comprising gains on investments of GBP2,119,803 (2009: gain of GBP
296,787) and capital loss on currency and derivative movements of GBP2,653,837
(2009: gain of GBP4,168,547) which have been transferred from capital reserves.
The Directors have not paid an interim dividend and do not recommend the
payment of a final dividend for the year (2009: nil).
Assets
At the year end the net assets attributable to the redeemable participating
preference shares were GBP50,818,024 (31 December 2009: GBP58,930,515). Based on
this figure the net asset value of a redeemable participating preference share
in the Cell was 105.62p (31 December 2009: 108.21p).
Share capital
As at 31 December 2010 the Company had 50,028,540 shares in issue in relation
to the Cell of which 1,913,178 shares were held in treasury (31 December 2009:
59,649,105 in issue of which 5,190,678 shares were held in treasury). During
the year the Company cancelled 4,215,000 treasury shares. Further details of
these transactions are disclosed in note 11 to the financial statements.
Directors' report 7
Castle Asia Alternative PCC Limited 2010
Substantial shareholdings in the Cell
At 1 March 2011 the holders of redeemable participating preference shares in
excess of 3% were as follows:
Registered Holder Percentage
of total
Number of issued
Participating participating
preference preference
shares shares
Vidacos Nominees Ltd 14,383,951 29.3%
CSFBI
HSBC Global Custody 5,349,275 10.9%
Nominee (UK)
BNP Paribas Arbitrage 5,210,000 10.6%
Vidacos Nominees Ltd DMG7 3,093,936 6.3%
HSBC Global Custody 3,042,638 6.2%
Nominee
The Bank of New York 2,500,000 5.1%
(Nominees) Ltd
JP Morgan Clearing Corp 2,050,000 4.2%
So far as the Directors are aware there is no other interest of 3% or more in
the shares of the Cell.
Crest registration
The Cell trades its Shares by way of Crest registration and Shareholders have
the option to hold stock in either certified or uncertificated form.
Directors
The Directors who served on the Board during the year, together with their
beneficial interests and those of their families at 31 December 2010, were as
follows:
Redeemable Participating Preference
Shares
31.12.2010 31.12.2009
Rupert Dorey 50,000 50,000
(Chairman)
Nigel Rich 20,000 20,000
Chris Russell 20,000 20,000
Alan Smith nil nil
As at 24 March 2011 there had been no changes in the above details.
8 Directors' report
Castle Asia Alternative PCC Limited 2010
The Directors are:
Rupert Dorey (Chairman)
Rupert Dorey has over 22 years' experience in debt capital markets,
specialising in credit related products, including derivative instruments. Mr
Dorey's expertise is principally in the areas of debt distribution, origination
and trading, covering all types of debt from investment grade to high yield and
distressed debt. He was at Credit Suisse First Boston for 17 years from 1988 to
2005, and from 2000 until he left was head of sterling credit sales.
Previously, he held a number of positions at Credit Suisse First Boston,
including establishing Credit Suisse First Boston's high yield debt
distribution business in Europe, fixed income credit product coordinator for
European offices and head of UK Credit and Rates Sales. Mr Dorey currently sits
on a number of Boards of alternative investment companies, including
International Public Partnerships Ltd, Partners Group Global Opportunities Ltd
and CQS Diversified Fund Ltd.
Nigel Rich CBE, FCA
Nigel Rich is Chairman of SEGRO plc, Chairman of Xchanging plc, a non-executive
Director of Bank of Philippine Islands (Europe) plc, Pacific Assets Trust plc
and of Matheson and Co. He was previously Chairman of Exel plc and CP Ships
Limited, and earlier in his career he was Managing Director of Jardine Matheson
Holdings. His other activities include being Co-Chairman of the Philippine
British Business Council. He is a Fellow of the Institute of Chartered
Accountants in England and Wales.
Chris Russell, FCA
Chris Russell was appointed to the board in June 2009. He is deputy chairman of
F&C Commercial Property Trust Ltd and of the Association of Investment
Companies (AIC) and a non-executive director of Enhanced Index Funds pcc,
Hanseatic Asset Management Ltd, HSBC Infrastructure Company Ltd, JP Morgan
Japan Smaller Companies Trust plc, The Korea Fund Inc. and Schroders (C.I.)
Ltd.
He was formerly Head of Overseas Businesses at Gartmore Investment Management
plc. Prior to Gartmore, he was a holding board director of the Jardine Fleming
Group in Asia. He is a Fellow of the Institute of Chartered Accountants in
England and Wales and a Fellow of the Society of Investment Professionals.
Alan Smith
Alan Smith was the Vice Chairman, Pacific Region, of Credit Suisse First Boston
from 1997 until he retired in December 2001. Prior to joining Credit Suisse
First Boston, he was Chief Executive of the Jardine Fleming Group from 1983 to
1994 and then Chairman from 1994 to 1996. He has over 28 years' banking
experience in Asia. He was twice elected as a council member of The Stock
Exchange of Hong Kong and was a member of the Hong Kong Special Administrative
Region Government's Economic Advisory Committee. He holds a law degree from
Bristol University and was admitted as a solicitor in England in 1967 and in
Hong Kong in 1970. He was a member of the Hong Kong Government's Standing
Committee on Company Law Reform for 10 years. Mr Smith is a Director of Asia
Credit Hedge Fund, Global Investment House, KSC, Kingway Brewery Holdings
Limited, Noble Group Limited, Genting Hong Kong Limited, United International
Securities Limited and VXL Capital Limited.
Directors' report 9
Castle Asia Alternative PCC Limited 2010
Corporate Governance
Since the Company has a London Stock Exchange listing, the Annual Report and
Audited Financial Statements must disclose:
(a) whether or not it complies with the corporate governance regime of the
Company's country of incorporation;
(b) the significant ways in which its actual corporate governance practices
differ from those set out in the Combined Code; and
(c) the unexpired term of service contract of any Director proposed for
election or re-election at the forthcoming Annual General Meeting and, if any
Director for election or re-election does not have a service contract, a
statement to that effect.
The Board of Directors believe that the principles of the revised AIC Code of
Corporate Governance ("the AIC Code") issued by the Association of Investment
Companies ("AIC") in February 2006 and amended in May 2007 and March 2009, are
appropriate to its circumstances and the following statement details how this
has been applied to the affairs of the Company. In February 2006, the Financial
Reporting Council (the "FRC") confirmed that investment companies who report in
accordance with the AIC Code will be deemed to have met their obligations under
the Combined Code on Corporate Governance. Details of the AIC Code are publicly
available and can be found on their website at www.theaic.co.uk.
The principles laid down by the two Codes are similar but there are some areas
where the AIC Code is more specifically applicable to investment companies. The
Directors attach importance to the matters set out in the AIC Code, and the
Directors believe that the Company was fully compliant with all of the
principles of the AIC Code in 2010.
The Board
The Company is led and controlled by a Board comprising four non-executive
Directors, all of whom have wide experience and are considered to be
independent. The Company does not have any employees. The Board believes that
it is in the shareholders' best interests for the Chairman to be the point of
contact for all matters relating to the governance of the Company and as such
has not appointed a senior independent non-executive Director.
Nomination Committee
The Nomination Committee is chaired by Rupert Dorey and is responsible for the
Board appraisal process and for making recommendations to the Board on the
appointment of new Directors.
Remuneration and Management Engagement Committee
The Remuneration and Management Engagement Committee is responsible for
reviewing the remuneration of Directors and for reviewing the terms of the
contracts of key service providers. The committee is chaired by Chris Russell.
Audit Committee
The Board has an Audit Committee which is chaired by Nigel Rich which meets at
least twice a year to review the interim and full year financial statements.
The Company's external auditors are invited to attend the meeting regarding the
full year financial statements. In addition the Board reviews the independence
and objectivity of the auditors.
10 Directors' report
Castle Asia Alternative PCC Limited 2010
In the event that Shareholders vote to continue the Company in its current form
it is intended that one-third, or the number nearest to but not exceeding one
third, of the Directors shall retire and offer themselves for reappointment at
each Annual General Meeting (AGM) in accordance with the Articles of
Association.
The Directors are kept up-to-date on Corporate Governance issues through
bulletins and training materials provided both from time to time by the Company
Secretary, the Board Adviser and the AIC, and through externally sourced
training events and materials.
The Board meets at least quarterly to review the overall business of the
Company and to consider matters specifically reserved for its review. At these
meetings the Board monitors the investment performance of the Fund.
The Directors also review the Company's activities every quarter to ensure that
it adheres to the Fund's investment policies or, if appropriate, to make any
changes to those policies. Additional ad hoc reports are received as required
and Directors have access at all times to the advice and services of the
Company Secretary, who assists the Board in ensuring that Board procedures are
followed and that applicable rules and regulations are complied with.
The Board met during the year to review its performance and composition and was
satisfied on both subjects. In addition, following the informal evaluation of
performance of the Board, its committees and individual Directors, it is
considered that the performance of all Directors continues to be effective and
they have demonstrated commitment to their roles.
The Company maintains Directors' and Officers' liability insurance which
provides insurance cover for Directors against certain personal liabilities
which they may incur by reason of their duties as Directors.
The Company has a procedure whereby the Board is entitled to obtain independent
advice where relevant at the expense of the Company.
Meeting Attendance
The table below sets out the number of Board and Committee meetings held during
the year and the number of meetings attended by each Director.
Remuneration
and
Management
Board Audit Nomination Engagement
Meetings Committee Committee Committee
Number
of
meetings 4 3 1 1
Meetings
attended
Rupert
Dorey 4 3 1 1
Nigel
Rich 4 3 1 1
Chris
Russell 4 2 1 1
Alan
Smith 4 N/A N/A N/A
Directors' report 11
Castle Asia Alternative PCC Limited 2010
The emoluments of the Directors for the years ended 31 December 2010 and 2009
were as follows:
2010 2009
Director fees GBP fees GBP
Rupert Dorey (Chairman) 28,000 24,000
Dennis Phillips (retired 16 June 2009) - 6,884
Nigel Rich| 22,000 19,500
Alan Smith 18,500 16,750
Chris Russell (appointed 16 June 2009) 18,500 9,866
Total 87,000 77,000
With effect from 1 July 2009, the Chairman's fee increased to GBP28,000, the
Audit Committee Chairman's fee increased to GBP22,000 and the Directors' fees
increased to GBP18,500 each.
| Audit Committee Chairman.
The Company has no formal service contracts with the Directors.
The Secretary and Administrator
Intertrust Fund Services (Guernsey) Limited ("the Administrator") was appointed
Administrator and Secretary under an agreement dated 22 September 2008. The
agreement may be terminated by either party giving no less than six months'
notice.
The Administrator is entitled to a fee payable by the Company quarterly in
arrears at a rate of 10 basis points of the Net Asset Value (NAV) of the Fund
up to the value of GBP75 million, and then 5 basis points on the balance of any
NAV over GBP75 million, calculated over the relevant quarter period, and subject
to a minimum fee of GBP60,000 per annum. Administration fees due to Intertrust
Fund Services (Guernsey) Limited for the year ended 31 December 2010 totalled GBP
65,000 of which GBP5,000 is in relation to estimated liquidation costs (2009: GBP
62,972).
Investment Adviser
The Directors are responsible for the determination of the Company's investment
policy and have overall responsibility for the Company's activities. The
Directors have contractually delegated the overall responsibility for the
management of the Cell's investment portfolio to LGT Capital Partners
(Asia-Pacific) Limited, subject to the overriding supervision of the Directors.
The Investment Adviser is entitled to a fee payable by the Cell monthly in
arrears at a rate of 77.5 basis points of the Net Asset Value of the Cell.
Investment Adviser fees payable for the year totalled GBP413,333 (2009: GBP
416,750). In addition the Investment Adviser is entitled to a performance fee,
details of which can be found in note 12 (beginning on page 29). The agreement
may be terminated by either party giving no less than six months' notice.
In the event that Shareholders vote to continue the Company in its current form
the Directors are of the opinion that the continuing appointment of the
Investment Adviser, pursuant to the terms of the Investment Advisory agreement,
is beneficial to the interests of shareholders as a whole.
12 Directors' report
Castle Asia Alternative PCC Limited 2010
Board Adviser
Frostrow Capital LLP as Board Adviser, is engaged to oversee, on behalf of the
Board, the accounting, administrative and company secretarial services provided
to the Company by its service providers. During the year the Board Adviser was
contracted to receive 12.5 basis points of the Net Asset Value of the Cell,
payable monthly in arrears. Board Adviser fees payable for the year totalled GBP
66,160 (2009: GBP72,928). The agreement may be terminated by either party giving
no less than six months' notice.
Details of all fee arrangements can be found in note 12 (beginning on page 29)
of these financial statements.
Relations with Shareholders
In conjunction with the Board, the Investment Adviser keeps under review the
register of members of the Cell and has established a pro active marketing and
investor relations programme whereby shareholders are kept up to date with the
performance of the Company. In addition, the Investment Adviser maintains the
Company's website at www.castleaa.com.
Accountability and audit
a) Statement of going concern
Following the announcement on 31 January 2011 as a result of the views
expressed by the Company's largest shareholders, the Board concluded that a
continuation vote should be put to shareholders earlier than the June 2011
Annual General Meeting. Should the continuation vote not be passed,
shareholders will be given the opportunity to wind up the Company voluntarily.
Given the sentiments expressed by shareholders, the Board believes the
continuation vote at the EGM scheduled to take place on 18 April 2011, is
unlikely to be passed. As a result the financial statements are prepared on a
break-up basis, as the Company is no longer deemed to be a going concern.
Further details can be found in the Chairman's statement on page 4 and in the
Circular dated 14 March 2011.
b) Internal control
The Board is responsible for establishing and maintaining the Company's system
of internal control and reviewing its effectiveness. The Administrator is
responsible for all the operational aspects of the Company's business and
therefore the Board is reliant on the Administrator's internal control systems
including the financial, operational and compliance controls and risk
management. The Audit Committee has received assurance from the Administrator
that it has in place robust financial controls in respect of the Company and
that these controls are subject to audit by the Administrator's compliance and
internal audit functions and, in addition, that these controls are subject to
external audit. The Board has received assurance that no weaknesses or breaches
in those controls have been identified which might have affected the Company
during the year. The Administrator's procedures are designed to manage rather
than eliminate risk and by their nature can only provide reasonable but not
absolute assurance against material misstatement or loss.
The Board has reviewed the need for an internal audit function. The Board has
decided that the systems and procedures employed by the Administrator,
including its internal audit function and the review of its annual financial
report by a firm of independent auditors, adequately safeguards the Company's
assets. An internal audit function specific to the Company is therefore
considered unnecessary.
Directors' report 13
Castle Asia Alternative PCC Limited 2010
c) Audit
So far as each Director is aware, there is no relevant audit information of
which the Company's auditor is unaware. Each Director has taken all the steps
he ought to have taken as a Director to make himself aware of any relevant
audit information and to establish that the Company's auditor is aware of that
information.
On behalf of the Board.
R O Dorey
Chairman
24 March 2011
14 Directors' responsibilities
Castle Asia Alternative PCC Limited 2010
Directors' responsibilities
The Directors are responsible for preparing the financial statements in
accordance with applicable Guernsey Law and generally accepted accounting
principles. Guernsey Company Law requires the Directors to prepare financial
statements for each financial year which give a true and fair view of the state
of affairs of the Company and of the profit or loss of the Company for that
period. In preparing the financial statements the Directors are required to:
(a) select suitable accounting policies and apply them consistently;
(b) make judgements and estimates that are reasonable and prudent;
(c) state whether applicable accounting standards have been followed; and
The Directors confirm that the financial statements comply with the above
requirements. They also confirm that they have been prepared on a break-up
basis. Further details can be found in the Director's report starting on page 6
and note 2 beginning on page 21.
The Directors are also responsible for keeping proper accounting records that
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements comply with the
requirements of The Companies (Guernsey) Law, 2008. They are also responsible
for safeguarding the assets of the Company and for taking reasonable steps for
the protection against, and the detection of, fraud and other irregularities.
Directors' responsibility statement
We confirm that to the best of our knowledge:
1. the financial statements, prepared in accordance with International
Financial Reporting Standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company; and
2. the Investment Adviser's review includes a fair review of the
development, performance and position of the Company, together with a
description of the principal risks and uncertainties faced by the Company.
On behalf of the Board
R O Dorey
Chairman
24 March 2011
Independent auditor's report to the members of Castle Asia Alternative PCC 15
Limited
Castle Asia Alternative PCC Limited 2010
Independent auditor's report to the members of
Castle Asia Alternative PCC Limited
We have audited the financial statements of Castle Asia Alternative PCC Limited
for the year ended 31 December 2010 which comprise the Income statement,
Statement of financial position, Statement of changes in equity, Statement of
cash flows and the related notes 1 to 22. The financial reporting framework
that has been applied in their preparation is applicable law and International
Financial Reporting Standards (IFRSs) as adopted by the European Union. The
financial statements have been prepared on a break up basis.
This report is made solely to the Company's members, as a body, in accordance
with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been
undertaken so that we might state to the Company's members those matters we are
required to state to them in an auditor's report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Directors' Responsibilities Statement set out on
page 14, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view. Our
responsibility is to audit and express an opinion on the financial statements
in accordance with applicable law and International Standards on Auditing (UK
and Ireland). Those standards require us to comply with the Auditing Practices
Board's Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the
financial statements sufficient to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or
error. This includes an assessment of: whether the accounting policies are
appropriate to the company's circumstances and have been consistently applied
and adequately disclosed; the reasonableness of significant accounting
estimates made by the directors; and the overall presentation of the financial
statements.
Opinion on financial statements
In our opinion the financial statements:
· give a true and fair view of the state of the Company's affairs as at 31
December 2010 and of its loss for the year then ended;
· have been properly prepared in accordance with IFRSs as adopted by the
European Union; and
· have been prepared in accordance with the requirements of the Companies
(Guernsey) Law, 2008.
16 Independent auditor's report to the members of Castle Asia Alternative PCC
Limited
Castle Asia Alternative PCC Limited 2010
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
under the Companies (Guernsey) Law, 2008 we are required to report to you if,
in our opinion:
· proper accounting records have not been kept; or
· the financial statements are not in agreement with the accounting
records; or
· we have not received all the information and explanations we require for
our audit.
under the Listing Rules we are required to review:
· the part of the Corporate Governance Statement relating to the Company's
compliance with the nine provisions of the June 2008 Combined Code specified
for our review.
Michael Bane
for and on behalf of Ernst & Young LLP
Guernsey, Channel Islands
Date: 24 March 2011
Financial statements 17
Castle Asia Alternative PCC Limited 2010
Income statement
for the year ended 31 December 2010
Year ended 31 December 2010 Year ended 31 December 2009
Revenue Capital Total Revenue Capital Total
Notes GBP GBP GBP GBP GBP GBP
Operating
income
Net gains on
investments 9c - 2,119,803 2,119,803 - 296,787 296,787
Net (losses)/
gains on
derivatives 5 - (2,736,660) (2,736,660) - 4,871,589 4,871,589
Other foreign
exchange
gains/
(losses) 5 - 82,823 82,823 - (703,042) (703,042)
Interest and
similar
income 3 188 - 188 77,653 - 77,653
188 (534,034) (533,846) 77,653 4,465,334 4,542,987
Operating
expenses
Investment
advisory,
Board
advisory and
Administrator
fees 6 (539,493) - (539,493) (552,650) - (552,650)
Custodian fee (51,459) - (51,459) (39,286) - (39,286)
Directors'
fees (87,000) - (87,000) (77,000) - (77,000)
Other
expenses 4 (161,464) - (161,464) (165,842) - (165,842)
Total
operating
expenses (839,416) - (839,416) (834,778) - (834,778)
Operating
(loss)/profit
before
liquidation
expenses and
finance costs (839,228) (534,034) (1,373,262) (757,125) 4,465,334 3,708,209
Liquidation
expenses 10 (129,950) - (129,950) - - -
Termination
general
expenses in
relation to
the
anticipated
liquidation 10 (241,300) - (241,300) - - -
Finance costs
Loan interest - - - (12,068) - (12,068)
Bank loan/
overdraft
interest (20,446) - (20,446) (242) - (242)
Net (loss)/
profit for
year (1,230,924) (534,034) (1,764,958) (769,435) 4,465,334 3,695,899
Basic and
diluted
(loss)/
earnings per
redeemable
participating
preference
share 17 (2.41)p (1.05)p (3.46)p (1.36)p 7.91p 6.55p
The Company does not have any income or expenses which are not included in the
loss for the year. Accordingly the "loss for the year" is also the "total
comprehensive income" for the year; as defined in IAS 1 (revised) and no
separate Statement of Comprehensive Income has been presented.
All of the profit and total comprehensive income for the year is attributable
to the owners of the Company.
There are zero earnings attributable to the management shares.
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.
The notes 1 to 22 are an integral part of these financial statements.
18 Financial statements
Castle Asia Alternative PCC Limited 2010
Statement of financial position
as at 31 December 2010
31
December 31 December
2010 2009
Notes GBP GBP
Non-current assets
Financial assets held at fair value through
profit or loss 9 - 57,257,981
- 57,257,981
Current assets
Financial assets held at fair value through
profit or loss 9 51,923,847 -
Cash and cash equivalents 99,671 2,106,889
Amounts due from redemptions awaiting
settlement - 48,183
Other receivables 14,767 21,258
Total current assets 52,038,285 2,176,330
Total assets 52,038,285 59,434,311
Current liabilities
Bank loan 15(d) 622,199 -
Other payables 10 550,574 228,487
Fair value of derivative financial 9(d),
instruments 19 47,486 275,307
Total liabilities 1,220,259 503,794
Net assets 50,818,026 58,930,517
Shareholders funds
Management shares 11 2 2
Share premium account 51,679,925 60,680,018
Reserves 16 (861,901) (1,749,503)
Total equity 50,818,026 58,930,517
Net asset value per redeemable participating
preference share 18 105.62p 108.21p
Net asset value per management share 100.00p 100.00p
These financial statements were approved by the Board of Directors on 24 March
2011.
Signed on behalf of the Board
R O Dorey
Chairman
Company Registration Number 43789 (Registered in Guernsey)
The notes 1 to 22 are an integral part of these financial statements.
Financial statements 19
Castle Asia Alternative PCC Limited 2010
Statement of changes in equity
for the year ended 31 December 2010
for the
year ended Shares held
31 Management Share in Capital Revenue
December Shares Premium Treasury Reserve Reserve Total
2010 GBP GBP GBP GBP GBP GBP
Balance at
31
December
2009 2 60,680,018 (4,351,037) 6,377,176 (3,775,642) 58,930,517
Treasury
shares
cancelled - (3,498,308) 3,498,308 - - -
Shares
purchased
for
treasury - - (845,748) - - (845,748)
Shares
redeemed
during the
year - (5,447,188) - (5,447,188)
Redemption
expenses - (54,597) - - - (54,597)
Loss for
the year - - - (534,034) (1,230,924) (1,764,958)
Balance at
31
December
2010 2 51,679,925 (1,698,477) 5,843,142 (5,006,566) 50,818,026
for the
year
ended Shares held
31 Management Share in Capital Revenue
December Shares Premium Treasury Reserve Reserve Total
2009 GBP GBP GBP GBP GBP GBP
Balance
at 31
December
2008 2 60,730,018 (50,000) 1,911,842 (3,006,207) 59,585,655
Treasury
shares
cancelled - (50,000) 50,000 - - -
Shares
purchased
for
treasury - - (4,351,037) - - (4,351,037)
Profit/
(loss)
for the
year - - - 4,465,334 (769,435) 3,695,899
Balance
at 31
December
2009 2 60,680,018 (4,351,037) 6,377,176 (3,775,642) 58,930,517
The notes 1 to 22 are an integral part of these financial statements.
20 Financial statements
Castle Asia Alternative PCC Limited 2010
Statement of cash flows
For the year ended 31 December 2010
31 December 31 December
2010 2009
GBP GBP
Cash flows from operating activities
Net (loss)/profit for year (1,764,958) 3,695,899
Add back: interest payable 20,446 12,310
Losses/(gains) on investments held at fair value 534,034 (4,465,334)
through profit or loss and foreign exchange gains
/(losses)
Dividends - (76,311)
Bank interest - (1,342)
Decrease/(increase) in other receivables 6,491 (11,734)
Increase/(decrease) in other payables 322,087 (28,642)
Purchases of investments held at fair value (38,244,883) (31,157,673)
through profit or loss
Sales of investments held at fair value through 45,747,002 41,018,928
profit or loss
Short term interest - 2,870
Net settlement on derivatives (2,964,480) 4,262,979
Net cash inflow from operating activities before 3,655,739 13,251,950
interest
Interest paid (20,446) (12,310)
Net cash inflow from operating activities 3,635,293 13,239,640
Financing activities
Shares redeemed (5,447,188) -
Redemption expenses (54,597) -
Repurchase of treasury shares (845,748) (4,272,038)
Credit facility drawdown/(repayment) 622,199 (6,967,667)
Net cash outflow from financing activities (5,725,334) (11,239,705)
(Decrease)/increase in cash and cash equivalents (2,090,041) 1,999,935
during the year
Reconciliation of cash flow to movement in net
cash
(Decrease)/increase in cash and cash equivalents (2,090,041) 1,999,935
during the year
Cash and cash equivalents at beginning of year 2,106,889 809,996
Effect of foreign exchange rate changes 82,823 (703,042)
Cash and cash equivalents at end of year 99,671 2,106,889
Cash and cash equivalents consist of:
Cash and cash equivalents 99,671 2,106,889
99,671 2,106,889
The notes 1 to 22 are an integral part of these financial statements.
Notes to the financial statements 21
Castle Asia Alternative PCC Limited 2010
Notes to the financial statements
for the year ended 31 December 2010
1. Organisation and 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 has initially been established with one Cell in accordance with the
Ordinance: Sterling Class. The Sterling Class Cell was listed on 22 November
2005 on the London Stock Exchange.
2. Principal Accounting Policies
a) Basis of preparation
The financial statements have been prepared in accordance with International
Financial Reporting Standards ("IFRS") as adopted by the EU issued by the
International Accounting Standards Board (IASB) and with the Statement of
Recommended Practice "Financial Statements of Investment Trust Companies" (AIC
SORP) issued in January 2009, insofar as it is not inconsistent with IFRS.
The financial statements have been prepared on a total company basis and not on
a cell-by-cell basis as there is currently only one cell. The only non-cellular
assets and liabilities are in respect of the two management shares of no par
value issued at GBP1 each fully paid and represented by cash and cash
equivalents.
The financial statements have not been prepared on a going concern basis, as
given the sentiments of the Company's largest Shareholders, the Board concluded
that a continuation vote should be put to Shareholders at an Extraordinary
General Meeting (EGM) on 18 April 2011. If this continuation vote is not
passed, proposals will be put to Shareholders at this same meeting, together
with the Class Meeting for the voluntary liquidation of the Company. The Board
believes that the continuation vote at the EGM is unlikely to be passed.
As a result, the financial statements have been prepared on a break-up basis,
with the financial assets being reclassified in current assets and provision
made for the costs of winding up the Company. Further details can be found in
note 10 on page 28.
b) IASB and IFRIC have issued the following standards and interpretations
which are not yet effective and have not been adopted:
Effective
date
IAS Classification of Rights Issues 1
32 February
2010
IFRS Financial Instruments: 1 January
9 Classification and Measurement 2013
IAS Related Party Disclosures 1 January
24 2011
IFRIC Prepayments of a Minimum Funding 1 January
14 Requirement 2011
IFRIC Extinguishing Financial Liability 1 July
19 with Equity Instruments 2010
IFRS Limited Exemption from Complying 1 July
1 with IFRS 7 disclosure 2010
We have not performed any analysis to assess the impact of these changes.
22 Notes to the financial statements
Castle Asia Alternative PCC Limited 2010
c) Operating segments
IFRS 8 requires entities to define operating segments and segment performance
in the financial statements based on information used by the Board of
Directors. The Board is considered to be the chief operating decision maker. An
operating segment is a group of assets and operations engaged in providing
products or services that are subject to risks and returns that are different
from those of other operating segments.
The sole operating segment of the Company is investing in hedge funds. The
results published in this Annual Report therefore correspond to the sole
operating segment of investing in hedge funds.
d) Use of estimates
The preparation of financial statements in conformity with IFRS requires the
Company to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. The estimates and associated assumptions
are based on historical experience and various other factors that are believed
to be reasonable under the circumstances, the results of which form the basis
of making the judgments about carrying values of assets and liabilities that
are not readily apparent from other sources. Actual results could differ from
these estimates. See also note 2 g (iii).
Fair value of investments
The investments have been valued based on information supplied by the Fund
Administrator of the Cell's underlying investments.
e) Foreign exchange
Transactions in foreign currencies are recorded at the exchange rate prevailing
at the date of the transaction. Monetary assets and liabilities denominated in
foreign currencies are revalued into sterling at the exchange rates prevailing
at the Statement of financial position date. Realised and unrealised exchange
gains and tosses are included in the statement of income. Translation
differences on non-monetary items, such as financial assets held at fair value
through profit or loss, are reported as part of the fair value gain or loss.
f) Cash and cash equivalents
Cash and cash equivalents comprise demand, call and term deposits with a
maturity of three months or fewer. For the purpose of the cash flow statement,
cash and cash equivalents comprise all cash, short-term deposits and other
money market instruments with an original maturity of three months or fewer,
net of bank overdrafts on demand.
g) Financial instruments
Under IAS 39, the Company has designated all its investments and securities
into the financial assets held at fair value through the profit or loss
category. This category was chosen as it reflects the business of an investment
fund: the assets are managed and their performance evaluated on a fair value
basis and management decisions are therefore reflected in the Income Statement.
The Company's policy is for the Investment Adviser and the Board of Directors
to evaluate the information about these financial assets on a fair value basis
together with other related financial information. The category of financial
assets and liabilities held at fair value through profit or loss comprises:
· Financial instruments designated at fair value through profit or loss
upon initial recognition.
· Financial assets other than those held at fair value through profit or
loss are classified as loans and receivables and are carried at amortised cost,
less impairment losses, if any.
· Financial liabilities that are not designated at fair value through
profit or loss include payables under repurchase agreements and accounts
payable.
Notes to the financial statements 23
Castle Asia Alternative PCC Limited 2010
(i) Recognition
The Company recognises financial assets and financial liabilities on the date
it becomes a party to the contractual provisions of the instrument.
Regular way purchases and sales of financial assets are recognised on a trade
date basis. From this date any gains and losses arising from changes in fair
value of the financial assets or financial liabilities are recorded.
(ii) Measurement
Financial instruments are measured initially at fair value (transaction price).
Transaction costs on financial assets and financial liabilities held at fair
value through profit or loss are expensed immediately.
Subsequent to initial recognition, all instruments classified at fair value
through profit or loss are measured at fair value with changes in their fair
value recognised under net gains in the Income Statement.
Financial assets classified as loans and receivables are carried at amortised
cost, less impairment losses, if any.
Financial liabilities, other than those held at fair value through profit or
loss, are measured at amortised cost.
(iii) Fair value measurement principles
Fund investments for which market quotations are not readily available are
valued at their fair values as described in the process below. The Fund
investments are normally valued at the underlying net asset value as advised by
the managers/administrators of these funds, unless the Directors are aware of
good reason why such a valuation would not be the most appropriate indicator of
fair value. The responsibility for determining the fair value lies exclusively
with the Board of Directors. In estimating the fair value of fund investments,
the Board of Directors considers all appropriate and applicable factors
relevant to their value, including but not limited to the following:
· Reference to the investment vehicle's reporting information;
· Reference to transaction prices; and
· Results of operational and environmental assessments.
All fair valuations may differ significantly from values that would have been
used had ready markets existed and the differences could be material.
(iv) Realised gains and de-recognition
Realised gains on financial investments and securities are shown on a net basis
in the Income Statement. Realised gains are recognised as being the difference
between the cost value of an investment and the proceeds received upon the sale
of the investment in the year that the investment was sold.
The Company ceases to recognise a financial asset when the contractual rights
to the cash flows from the financial asset expire. A financial liability ceases
to be recognised when the obligation specified in the contract is discharged,
cancelled or expired.
(v) Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount is reported in
the Statement of financial position when there is a legally enforceable right
to set off the recognised amounts.
(vi) Income
Bank deposit interest is accounted for on an accruals basis. Dividends are
accounted for when the right to receive them arises.
24 Notes to the financial statements
Castle Asia Alternative PCC Limited 2010
h) Derivative financial investments - forward currency contracts
A forward currency contract obligates the Company to receive or deliver a fixed
quantity of foreign currency at a specified price on an agreed basis. These
contracts are accounted for when any contract becomes binding and are valued in
the Statement of financial position at the period end forward rate. Realised
and unrealised gains and losses are included in the Income Statement.
i) Share capital
Redeemable participating preference shares are classified as equity. Management
shares are issued in accordance with Guernsey Law in order that the redeemable
participating preference shares may be issued, as there must be non redeemable
shares. Incremental costs directly attributable to the issue of new shares are
shown in equity as a deduction from the proceeds. Further details are disclosed
in note 11.
j) Treasury shares
Shares held in treasury are deducted from equity, are shown within the reserves
on the Statement of financial position and are recognised at cost.
Consideration received from the sale of such shares is also recognised in
equity with any difference between the proceeds from sale and the original cost
being taken to capital reserves.
k) Functional and presentational currency
The financial information is shown in sterling, being the Company's
presentational currency. In arriving at the functional currency the Directors
have considered the following:
(i) the primary economic environment of the Company;
(ii) the currency in which the original capital was raised;
(iii) the currency in which distributions are made;
(iv) the currency in which performance is evaluated; and
(v) the currency in which the capital would be returned to Shareholders on a
break up basis.
The Directors have also considered the currency to which the underlying
investments are exposed and liquidity is managed.
The Directors are of the opinion that sterling best represents the functional
currency.
3. Interest and similar income
2010 2009
GBP GBP
Dividends - 76,311
Bank interest 188 1,342
Total income 188 77,653
Notes to the financial statements 25
Castle Asia Alternative PCC Limited 2010
4. Other operating expenses
Other operating expenses are composed as follows:
2010 2009
GBP GBP
Board expenses* 7,838 32,441
Registrar's fees 28,281 12,447
Legal and professional fees 34,291 34,711
Auditor's remuneration 20,153 27,379
LGT bank commitment fees 28,141 25,374
Sundry expenses 42,760 33,490
Total 161,464 165,842
*During the year ended 31 December 2009, a Board meeting was held in Hong Kong.
5. Foreign exchange and derivative (losses)/gains
2010 2009
Net (losses)/gains on GBP GBP
derivatives
Realised (losses)/gains on (2,964,480) 5,146,896
forward currency contracts
Unrealised gains/(losses) on 227,820 (275,307)
forward currency contracts
(2,736,660) 4,871,589
2010 2009
Other foreign exchange and GBP GBP
derivatives (losses)/gains
Realised currency gains/ 82,730 (915,085)
(losses)
Unrealised currency gains 93 212,043
82,823 (703,042)
Total foreign exchange and (2,653,837) 4,168,547
derivatives (losses)/gains
6. Investment advisory, Board advisory and Administrator fees
Investment advisory, Board advisory and Administrator fees are composed as
follows:
2010 2009
GBP GBP
Investment Adviser 413,333 416,750
Board Adviser fees 66,160 72,928
Administrator fees 60,000 62,972
Total 539,493 552,650
7. Finance costs
2010 2009
GBP GBP
Loan interest - 12,068
Bank loan/overdraft interest 20,446 242
Total 20,446 12,310
26 Notes to the financial statements
Castle Asia Alternative PCC Limited 2010
8. Taxation
During the year the Company was exempt from Guernsey Income Tax under theIncome Tax (Exempt Bodies) (Guernsey) Ordinance 1989 and was charged an annual
exemption fee of GBP600.
9. Financial assets and liabilities
a. Categories of Investments
2010 2009
Designated at Fair % of Fair % of
fair value value net value net
through profit assets assets
or loss GBP GBP
- Listed - - 6,356,919 10.8
securities
- Non listed 51,923,847 102.2 50,901,062 86.4
investment
funds
51,923,847 102.2 57,257,981 97.2
Financial
liabilities at
fair value
through profit
or loss
Held for
trading
- Derivative (47,486) 0.1 (275,307) 0.5
financial
instrument
(47,486) 0.1 (257,307) 0.5
b. Movement on Investments
2010 2009
GBP GBP
Opening valuation 57,257,981 59,571,860
Purchases at cost 38,244,883 34,650,325
Sales proceeds (45,698,820) (37,260,991)
Realised gains on sales 4,627,306 5,547,151
Movement in unrealised (2,507,503) (5,250,364)
appreciation on
revaluations on
investments
Closing valuation 51,923,847 57,257,981
Investments as shown on 51,923,847 57,257,981
Statement of financial
position
Comprising:
Closing book cost 47,001,087 49,851,257
Closing unrealised 4,922,760 7,406,724
appreciation
Closing valuation 51,923,847 57,257,981
Investments as shown on 51,923,847 57,257,981
Statement of financial
position
Notes to the financial statements 27
Castle Asia Alternative PCC Limited 2010
9. Financial assets and liabilities (continued)
c. Net gains on financial assets at fair value through profit or loss
2010 2009
GBP GBP
Net movement in gains on
financial assets at fair
value through profit or loss
Realised gains on sales 4,627,306 5,547,151
Movement in unrealised (2,507,503) (5,250,364)
appreciation on revaluation
of investments
2,119,803 296,787
Forward foreign exchange contracts
d. Outstanding contracts to buy and sell GBP
As at 31 Financial
December Closing Contract Contract asset/
2010 Contracted Contract rate value value (liability)
rate
Maturity USD GBP GBP
date
31 1.5751 buy 1.5587 26,990,000 17,135,420 (180,339)
January
2011
28 1.5656 buy 1.5584 25,500,000 16,287,789 (75,344)
February
2011
31 March 1.5396 buy 1.5580 27,940,000 18,148,160 214,682
2011
31 March 1.5378 sell 1.5580 (770,000) (500,715) (6,485)
2011
51,070,654 (47,486)
Financial
Closing Contract Contract asset/
Contracted Contract rate value value (liability)
rate
As at 31
December
2009
Maturity USD GBP GBP
date
29 1.6401 buy 1.6168 31,480,000 19,193,835 (277,038)
January
2010
26 1.6345 buy 1.6165 32,490,000 19,878,247 (221,305)
February
2010
31 March 1.5972 buy 1.6161 30,360,000 19,008,741 223,036
2010
58,080,823 (275,307)
In accordance with the Company's investment objectives and policies the Company
may enter into forward foreign exchange contracts traded over the counter to
hedge specific foreign currency payments. As there is no assurance that these
hedges will be effective in achieving the offsetting of changes in the cash
flows attributable to the currency risk on these specific foreign currency
payments it is the policy of the Company not to apply hedge accounting.
28 Notes to the financial statements
Castle Asia Alternative PCC Limited 2010
10. Other payables
2010 2009
GBP GBP
Directors' fees 21,750 -
Auditor's remuneration 18,000 15,050
Treasury shares purchase awaiting - 78,999
settlement
Custodian fees 5,673 8,897
Investment Adviser's fees 66,844 76,016
Board Adviser's fees 10,661 12,470
Administrator's fees 14,901 16,874
Broker settlement - 8,682
Other creditors and accruals 41,495 11,499
Liquidation expenses* 129,950 -
Termination general expenses in 241,300 -
relation to the anticipated
liquidation*
550,574 228,487
* Liquidation and termination general expenses represent a provision for
liquidation fees expected to be incurred to the estimated winding up date of
the Company.
The estimated liquidation expenses to the anticipated liquidation amount to GBP
129,950, which represents 0.3% of the Company's net asset value.
The estimated termination general expenses in relation to the anticipated
liquidation amount to GBP241,300 which represents 0.5% of the Company's net asset
value. These expenses represent the Company's management and general expenses
for the period 1 January 2011 to the expected date of liquidation of 18April
2011. In view of the fact that these accounts have been prepared on a break-up
basis, provisions have been made for these expenses as at 31 December 2010.
11. Shareholders' equity
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").
2010 2009
Management shares - Issued 2 2
and fully paid
Redeemable participating
preference shares
Opening balance 54,458,427 59,649,105
Shares transferred to (937,500) (5,190,678)
treasury
Shares redeemed (5,405,565) -
48,115,362 54,458,427
Treasury shares
Opening balance 5,190,678 50,000
Shares transferred from 937,500 5,190,678
preference shares
Shares cancelled (4,215,000) (50,000)
1,913,178 5,190,678
Notes to the financial statements 29
Castle Asia Alternative PCC Limited 2010
11. Shareholders' equity (continued)
Management shares
Two Management Shares of GBP1 each in issue are beneficially owned by two
Intertrust Fund Services (Guernsey) Limited (formerly Fortis Fund Services
(Guernsey) Limited) nominee companies.
The Management Shares were created to comply with Guernsey Company Law, under
which there must be a class of non-redeemable shares in issue in order that the
cellular shares may be redeemable participating preference shares in accordance
with Guernsey Company Law. The sums paid up on the management shares are
credited to the non-cellular assets of the Company. The management shares do
not carry any rights to dividends and holders of management shares are only
entitled to participate in the non-cellular assets of the Company on a
winding-up.
Redeemable participating preference shares
The holders of the 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 the cell and have no entitlement to participate in
the distribution of any assets attributable to any other cell. Holders of
Shares are entitled to attend and vote at general meetings of the Company.
Under the discretionary redemption facility the Directors may at their sole
discretion offer the holders of Shares an opportunity to redeem all or part of
their holdings on a bi-annual basis. Although Shares are redeemable, redemption
is at the sole discretion of the Directors.
Treasury shares
As at 31 December 2010 the total number of Shares held in Treasury was
1,913,178 representing 3.82% of the issued share capital.
As at 31 December 2009 the total number of Shares held in Treasury was
5,190,678 representing 8.70% of the issued Share capital.
Subsequent to the Company's year end, on the 7 January 2011, 975,678 Shares
which were bought back in December 2009 to be held in Treasury, were cancelled.
12. Fee arrangements in place during the year ended 31 December 2010
In relation to its investment and administration activity the Company has
entered into the following fee arrangements:
Investment Advisory Fee (payable to LGT Capital Partners (Asia-Pacific)
Limited)
Under an Investment Advisory Agreement dated 22 September 2008, the basis for
Investment Advisory Fees, payable to the Investment Adviser, LGT Capital
Partners (Asia-Pacific) Limited, was 77.5 basis points of the Net Asset Value
of the Cell, payable quarterly in arrears. Following amendment to the
Investment Advisory Agreement, effective from 1 July 2009, the Investment
Advisory fee is payable monthly as calculated on the last business day of each
month.
Performance fee
The Investment Adviser is also entitled to a performance fee in respect of any
financial year in which the Net Asset Value (NAV) of the Fund increases by more
than 3% over the higher of 98.25 pence and the NAV at which a performance fee
was last paid of 121.14p (the "High Water Mark").The performance fee is equal
to 10% of any increase in the NAV over the High Water Mark during the financial
year over and above 3%. The aggregate Investment Advisory and performance fees
payable in any one year are capped at 4% of NAV. No performance fee is due for
the year ended 31 December 2010 (2009: nil).
30 Notes to the financial statements
Castle Asia Alternative PCC Limited 2010
12. Fee arrangements in place during the year ended 31 December 2010
(continued)
Board Advisory Fee (payable to Frostrow Capital LLP)
On 1 January 2008 Frostrow Capital LLP was appointed as the Board Adviser, to
oversee, on behalf of the Board, the accounting, administrative and company
secretarial services provided to the Company by its service providers. During
the year the Board Adviser was entitled to a fee of 12.5 basis points per annum
of the Net Asset Value of the Cell, accrued daily and payable monthly in
arrears.
Administration Fee (payable to Intertrust Fund Services (Guernsey) Limited)
On 22 September 2008, Intertrust Fund Services (Guernsey) Limited, (formerly
Fortis Fund Services (Guernsey) Limited), ("the Administrator") was appointed
as Company Secretary and Administrator to the Company. Under the Administration
Agreement of this date the Administrator is entitled to receive a fee of 10
basis points of the Net Asset Value of the Cell, up to a value of GBP75 million
and 5 basis points on any amounts of the Net Asset Value over GBP75 million,
subject to a minimum of GBP60,000 per annum. This fee is payable quarterly in
arrears.
Custodian Fee (payable to ABN AMRO Custodial Services (Ireland) Limited)
On 1 February 2010 the Company appointed ABN AMRO Custodial Services (Ireland)
(formerly Fortis Prime Fund Solutions Custodial Services (Ireland) Limited) as
its Custodian. The Company pays to the Custodian an annual fee of 0.03% per
annum of the Fund's Net Asset Value, subject to a minimum annual fee of GBP
17,000. The Custodian is also entitled to receive transaction charges of EUR300
per subscription, redemption, conversion or transfer and EUR20 per cash
transaction.
13. Related parties
LGT Capital Partners (Asia-Pacific) Limited, (the "Investment Adviser"), Crown
China Segregated Portfolio, (formerly KGR Capital China Absolute Return SP)
(which is held as an investment and managed by LGT Capital Partners) and the
Directors are regarded as related parties. The only related party transactions
are described below:
The Loan from LGT Bank, amounting to GBP622,199 which was repaid on 14 January
2011, 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.
The fees and expenses payable to the Investment Adviser are as disclosed in
note 6 and 12. The outstanding Investment Adviser fee due at the year end was GBP
66,844 (2009: GBP76,016).
Fees earned by the Directors of the Company, all of which comprise short term
benefits under Directors' remuneration agreements during the year were GBP87,000
(2009: GBP77,000) a further breakdown of which is provided in the Directors'
report on page 11. GBP21,750 was outstanding as at the year end (2009: nil).
During the year the Company held shares in Crown China Segregated Portfolio
Series 7 which was managed by the Investment Adviser to the Company. An
agreement is in place to ensure that any fees received by the Investment
Adviser in relation to this investment will be rebated back to the Company so
as to avoid double charging. Any rebate due is deducted from the fee payable to
the Investment Adviser as disclosed above. The Company continued to hold
positions in Crown Managed Accounts - Nezu and Crown Managed Accounts - Penta
both of which are also managed by the Investment Adviser. Also during the year,
the Company invested in one new Fund - Crown Amazon Segregated Portfolio also
managed by the Investment Adviser. Investment in these funds is made on an
arms-length basis, with the Company's terms of investment being identical to
that of other investors with no association to the Investment Adviser.
Notes to the financial statements 31
Castle Asia Alternative PCC Limited 2010
14. Operating segment reporting
The following table analyses the Fund's operating income per geographical
location. The basis for attributing the operating income is the place of
incorporation of the instrument's counterparty.
2010 2009
GBP GBP
Asia 1,708,400 373,098
Europe (2,653,649) 4,168,547
Guernsey - 1,342
Cayman Islands 411,403 -
(533,846) 4,542,987
The following table analyses the Fund's operating income per investment type.
2010 2009
GBP GBP
Investments in funds 2,119,803 373,098
Derivative financial
instruments (2,736,660) 4,871,589
Interest income 188 1,342
Other foreign exchange gain/
(loss) 82,823 (703,042)
(533,846) 4,542,987
15. Financial risk management objectives and policies
The Company's principal activity and primary investment objective is to seek
long-term capital appreciation through investment in a diversified
multi-manager, multi-strategy portfolio of hedge funds investing in Asia. The
Investment Adviser seeks to accomplish the investment objective by investing
the assets of the Company predominantly in hedge funds worldwide, which invest
in Asia, whose managers employ a variety of investment strategies. The
underlying portfolio managers' investment methods may include, but are not
limited to, convertible/capital structure arbitrage, credit based, event
driven, fixed income arbitrage and hedged equity.
The Investment Adviser's investment process constitutes a three stage procedure
comprising manager selection, portfolio construction and ongoing portfolio
management.
Manager selection involves a screening of participants within the hedge fund
universe in Asia in order to identify suitable candidates for consideration.The
analysis and screening methodology undertaken involves quantitative analysis of
all funds within each investment strategy, use of a proprietary quantitative
ranking model, meetings with managers, discussions with prime brokers and
newsletter reviews. This process results in the construction of a 'top tier
focus list' of managers which is then subject to detailed due diligence, with
the intention of selecting managers with, inter alia, a clear and successful
'edge' in investment strategy, a sensible and well executed investment process
and appropriate and sufficient operational risk controls.
Portfolio construction involves the adoption of a 'top down' approach
underpinned by risk analytics. The Investment Adviser combines the benefit of
its experience in hedge fund markets in Asia with macro economic and strategy
analysis and quantitative analytics (e.g. risk/diversification measurements,
calculation of management exposure) in order to construct an appropriate
portfolio. Factors which the Investment Adviser will consider include portfolio
diversification (in terms of manager, strategy and style), liquidity profile of
the underlying investment and value at risk monitoring.
32 Notes to the financial statements
Castle Asia Alternative PCC Limited 2010
15. Financial risk management objectives and policies (continued)
Ongoing portfolio management focuses on all areas which could impact on the
construction of the portfolio or its risk profile. This involves a number of
actions, including monitoring of underlying managers and portfolio risk,
trailing performance analysis, the creation of watch lists and efficient
portfolio management.
The processes above and the following policies and procedures to mitigate risk
have been in place throughout the year.
The main risks to which the Company is exposed are market risk (including
currency risk, price risk and interest rate risk), credit risk and liquidity
risk.
(a) Market risk
The Company's exposure to market risk is comprised mainly of movements in the
net asset value of investee hedge funds making up the Company's investment
portfolio, which are mainly denominated in currencies other than sterling, and,
to the extent that the Company incurs indebtedness, changes in interest rates
that change its cost of borrowings.The exposure to market risk is made up of
changes in foreign currency exchange rates, interest rates and market prices.
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 currency
exchange rates.
The Cell invests in underlying funds which are predominantly denominated in US
dollars. From time to time, funds denominated in other currencies may be
selected. The Company has had exposure to fluctuations in the exchange rate
between Sterling and the US dollar.
In an attempt to reduce the impact on the Company of currency fluctuations,
under normal circumstances, the Company enters into a contract or contracts
involving the forward sale of the total value of all investments in their
currency of denomination for sterling delivery. These contracts are then closed
out at the end of each period with a further foreign exchange transaction and a
new forward contract established. A consequence of this hedging strategy is
that any changes in the value of the investments between the periods of each
contract will not be hedged.
In view of the hedges entered into by the Company during the year, and the
recent movements in the exchange rate between sterling and the US dollar, the
Directors consider that the currency risk of the denomination of the underlying
funds is mitigated. The Company's investments themselves are exposed to
currency risk but this is reflected in their valuation and forms part of price
risk.
At 31 December 2010 the Company's net currency exposure was as follows:
2010 2009
GBP GBP
Euro 411 -
US dollar 36,219 2,070,593
The above analysis includes amounts due from redemptions awaiting settlement
and excludes short term other receivables and other payabies. The analysis
excludes the forward foreign exchange contracts disclosed in note 9.
At 31 December 2010, should the US dollar and Euro have strengthened, or
weakened, by 10% against sterling and all other variables, including the price
of the Company's investments, had held constant,
Notes to the financial statements 33
Castle Asia Alternative PCC Limited 2010
15. Financial risk management objectives and policies (continued)
the net assets attributable to shareholders would have decreased, or increased,
by GBP9,967 (2009: GBP187,977).
Price risk
Price risk is the risk that the fair value of future cash flows of a financial
instrument will fluctuate because of changes in market prices (other than those
arising from currency risk or interest rate risk), whether those changes are
caused by factors specific to the individual financial instrument or its
issuer, or factors affecting similar financial instruments traded on the
market.
The Company is exposed to market price risk arising from its investment in a
variety of hedge funds.
The Company's exposure to market price risk is managed by the Investment
Adviser, which has a robust monitoring process through which the investment
performance of the funds within the portfolio is assessed. Investment
performance is monitored on a weekly basis to ensure that NAV movements in the
underlying funds are consistent with the Company's strategy. In addition, the
Investment Adviser holds a detailed monthly investment committee meeting at
which the performance of the portfolio is monitored.
The Company's exposure to price risk takes the form of net asset value
movements delivered by the underlying hedge fund investments. The Directors
consider that the Investment Adviser manages the Company's exposure to price
risk by way of its rigorous investment process, as described.
If the price of the underlying hedge funds as at 31 December increased, or
decreased, by 10% the net asset value of the Company would increase/decrease by
GBP5,192,385 (2009: GBP5,725,798).
The Company has classified its financial assets designated at fair value
through profit or loss and the Fair Value of derivative financial instruments
using a fair value hierarchy that reflects the significance of the inputs used
in making the fair value measurements. The hierarchy has the following levels:
· Level 1 - quoted prices (unadjusted) in active markets for identical
assets or liabilities;
· Level 2 - inputs other than quoted prices included with Level 1 that are
observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices); and
· Level 3 - inputs for the asset or liability that are not based on
observable market data (unobservable inputs), such as assets which are Gated,
Side Pocketed and Redemption Suspended.
Level
As of 31 1 Level 2 Level 3 Total
December 2010 GBP GBP GBP GBP
Assets/
(liabilities)
Financial
investments
designated at
fair value
through
profit or
loss - 51,768,347 155,500 51,923,847
Fair value of
derivative
financial
instruments - (47,486) - (47,486)
Assets
measured at
fair value - 51,720,861 155,500 51,876,361
34 Notes to the financial statements
Castle Asia Alternative PCC Limited 2010
15. Financial risk management objectives and policies (continued)
As at 31 December 2010, Eastern Advisor Fund and Bennelong Asia Pacific (both
classed as side-pocketed) have been classified as level three. All of the
remaining investments have been classified as level two as the inputs for the
assets are based on observable market data which has been obtained from the
underlying Managers of the funds.
As of 31 Level 1 Level 2 Level 3 Total
December 2009 GBP GBP GBP GBP
Assets/
(liabilities)
Financial
investments
designated at
fair value
through
profit or
loss 6,356,919 50,529,985 371,077 57,257,981
Fair value of
derivative
financial
instruments - (275,307) - (275,307)
Assets
measured at
fair value 6,356,919 50,254,678 371,077 56,982,674
As at 31 December 2009, Akamatsu Fund and Artradis Barracuda had been
classified as level one as they were quoted on a recognised exchange and
Eastern Advisor Fund (side-pocketed) and Bennelong Asia Pacific (side-pocketed)
had been classified as level three. All of the remaining investments have been
classified as level two.
Level 3 Reconciliation
A reconciliation disclosing the changes during the year for the financial
assets and liabilities designated at fair value through profit or loss
classified as being level three is set out below.
2010 2009
GBP GBP
Assets
As at 1 January 371,077 9,062,853
Total losses during the year (215,577) (649,561)
Acquisitions - 1,942,365
Disposals - (7,213,935)
Transfers in - 137,986
Transfers out - (2,908,631)
Assets as at 31 December 155,500 371,077
During the year ended 31 December 2010, no investments were transferred into or
from level three.
Notes to the financial statements 35
Castle Asia Alternative PCC Limited 2010
15. Financial risk management objectives and policies (continued)
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in market interest
rates.
The Company's interest-bearing financial assets and liabilities expose it to
risks associated with the effects of fluctuations in the prevailing levels of
market interest rates on its financial position and cash flows.
The Company holds only modest amounts of cash on deposit and therefore exposure
to interest rate changes is limited to the effect on cash.
The following table details the Company's exposure to interest rate risk as at
31 December 2010.
Financial Floating rate Total
assets/ financial 2010
(liabilities) assets/
on which no (liabilities)
interest is 2010
paid
2010
GBP GBP GBP
Euro - 411 411
Sterling (47,486) 63,041 15,555
US Dollars 51,923,847 (585,980) 51,337,867
51,876,361 (522,528) 51,353,833
Financial Floating rate Total
assets/ financial 2009
(liabilities) assets/
on which no (liabilities)
interest is 2009
paid
2009
GBP GBP GBP
Sterling (275,307) 84,479 (190,828)
US Dollars 57,257,981 1,991,594 59,249,575
56,982,674 2,076,073 59,058,747
The above analysis includes all loans, but excludes short term other
receivables and other payables as all the material amounts are non-interest
bearing.
At 31 December 2010, should interest rates have increased by 100 basis points
with all other variables held constant, the increase in net assets attributable
to redeemable participating preference shareholders for the year would amount
to approximately GBP7,219 (at 31 December 2009: GBP20,761 offset by a decrease in
the net assets attributable to redeemable participating preference shareholders
by approximately GBP19,916). A decrease of 100 basis points would have had an
equal but opposite effect.
(b) Credit risk
Credit risk is the risk that one party to a financial instrument will cause a
financial loss for the other party by failing to discharge an obligation.
In addition there is the risk that an investee hedge fund is unable to satisfy
valid redemption instructions delivered by the Company. The Directors consider
that the Investment Adviser manages the Company's exposure to this credit risk
by way of its rigorous investment process, as described above.
36 Notes to the financial statements
Castle Asia Alternative PCC Limited 2010
15. Financial risk management objectives and policies (continued)
The Company manages its exposure to credit risk by hedging. The counterparty
for the hedging transactions, the loan held at year end, in addition to the
maintenance of cash deposit accounts, is LGT Bank who hold a Moody's credit
rating of Aa3.
The Company also holds cash deposits with ABN AMRO Custodial Services (Ireland)
Limited who have a Moody's credit rating of A1.
The Company's maximum exposure to credit risk is the carrying value of the
assets on the Statement of financial position.
As at 31 December 2010 the exposure to credit risk was as follows:
2010 2009
GBP GBP
Financial assets at fair value 51,923,847 57,257,981
through profit or loss
Amounts due from redemptions - 48,183
awaiting settlement
Other receivables 14,767 21,258
Cash and cash equivalents 99,671 2,106,889
52,038,285 59,434,311
(c) Liquidity risk
Liquidity risk is the risk that an entity will encounter difficulty in meeting
obligations associated with its financial liabilities.
The Company's exposure to liquidity risk mainly arises through the inability to
recover funds invested in an underlying portfolio fund through the usual fund
redemption process.
Investee hedge funds typically require notice of redemption of between 30 and
90 days and have either monthly or quarterly dealing days.
The liquidity of the Company's portfolio of investments remains under close
review by the Investment Adviser and the Board. The investments within the
investment portfolio can be broken down into the following categories,
describing their current position regarding their ability to make redemptions;
Normal redemption - no change from that as laid out in their prospectus.
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 current time with the balance being held until such time, if
at all, that the illiquid investments can be redeemed. The investments which
fall into this category are:
% of
Net Assets
Bennelong Asia Pacific 0.2%
Eastern Advisor 0.1%
0.3%
Notes to the financial statements 37
Castle Asia Alternative PCC Limited 2010
15. Financial risk management objectives and policies (continued)
As at 31 December 2010 the redemption status of the investment portfolio of the
Company can be summarised as follows:
At 31 December 2010 Normal Side
redemption pocketed
% of fair value of financial 99.7% 0.3%
assets
At 31 December 2009
% of fair value of financial 99.4% 0.6%
assets
The Investment Adviser adopts a rigorous fund selection process which is
designed to include management of the Company's exposure to liquidity risk.
Once a fund is selected for inclusion within the investment portfolio, all
operational aspects of the investee fund are closely monitored on a continuous
basis by the Investment Adviser, including the ability to make redemptions. The
Board receives a report on a quarterly basis from the Investment Adviser which
includes reference to the redemption status of each fund. These procedures were
in place throughout the year.
The maturity profile of the Company's assets and liabilities as at 31 December
2010 was as follows:
1 month
or
1 to 3 3 to 6
less months months Total
GBP GBP GBP GBP
Assets:
Financial
assets at
fair value
through
profit or
loss - 48,256,269 3,667,578 51,923,847
Other
receivables 14,767 - - 14,767
Cash and
cash
equivalents 99,671 - - 99,671
114,438 48,256,269 3,667,578 52,038,285
Liabilities:
Loan payable (622,199) - - (622,199)
Other
payables - (550,574) - (550,574)
Unrealised
positions on
forward
foreign
exchange
contracts (180,338) 132,852 - (47,486)
(802,537) (417,722) - (1,220,259)
38 Notes to the financial statements
Castle Asia Alternative PCC Limited 2010
15. Financial risk management objectives and policies (continued)
The maturity profile of the Company's assets and liabilities as at 31 December
2009 was as follows:
1 month
or
less 1 to 3 3 to 6 Total
months months
GBP GBP GBP GBP
Assets:
Financial
assets at
fair value
through
profit or
loss - 57,257,981 - 57,257,981
Amounts due
from
redemptions
awaiting
settlement 48,183 - - 48,183
Other
receivables 21,258 - - 21,258
Cash and
cash
equivalents 2,106,889 - - 2,106,889
2,176,330 57,257,981 - 59,434,311
Liabilities:
Other
payables - (228,487) - (228,487)
Unrealised
positions on
forward
foreign
exchange
contracts (277,038) 1,731 - (275,307)
(277,038) (226,756) - (503,794)
1,899,292 57,031,225 - 58,930,517
(d) Management of capital
The Board, with the assistance of the Investment Adviser, manages the capital
of the Company in accordance with the Company's investment objectives and
policies. During the year ended 31 December 2010, the Company's overall
strategy remained unchanged from 2009.
The capital structure of the Company consists of proceeds from the issue of
preference shares and the reserve accounts, as disclosed on the Statement of
financial position. The Board, with the assistance of the Investment Adviser
reviews the capital structure on an ongoing basis. The Company does not have
any externally imposed capital requirements.
The loan facility provided by LGT Bank is to be used for hedging purposes and
to assist in maintaining liquidity.
LGT Bank have provided a facility which allows the drawdown of fixed advances
and of overdrafts in current accounts, but in total is limited to the lowest of
the following three scenarios:
(1) GBP15,000,000; or
(2) 20% of the Net Asset Value of the Cell; or
(3) 35% of the Cell's three month average market capitalisation.
This facility is valid until further notice, although it may be terminated by
either party subject to three months' notice or immediately on any event of
default. As at 31 December 2010, GBP622,199 was drawn down on this facility.
On fixed amounts drawn down the facility attracts interest at a rate equivalent
to the lender's interbank market rate two days prior to the drawdown, plus a
margin of 0.9% per annum. On any overdraft the interest rate will be the
standard variable overdraft rate as set by the lender, calculated daily and
charged quarterly.
Notes to the financial statements 39
Castle Asia Alternative PCC Limited 2010
15. Financial risk management objectives and policies (continued)
(e) Fair value disclosure
In the opinion of the Directors there is no material difference between the
book values and the fair values of the financial assets and liabilities.
16. Reserves
Capital Capital Shares
Reserve Reserve held in Revenue
Realised Unrealised Treasury Reserve Total
As at 31
December
2010 2010 2010 2010 2010 2010
GBP GBP GBP GBP GBP
Opening
Balance 563,970 5,813,206 (4,351,037) (3,775,642) (1,749,503)
Realised
gains on
investments 4,627,305 - - - 4,627,305
Movement in
unrealised
loss on
investments - (2,507,502) - - (2,507,502)
Realised
losses on
forward
currency
contracts (2,964,480) - - - (2,964,480)
Unrealised
gain on
forward
currency
contracts - 227,820 - - 227,820
Other
realised
and
unrealised
currency
gains 82,730 93 - - 82,823
Revenue
loss for
the year - - - (1,230,924) (1,230,924)
Treasury
shares
cancelled - - 3,498,308 - 3,498,308
Shares
purchased
for
Treasury - - (845,748) - (845,748)
2,309,525 3,533,617 (1,698,477) (5,006,566) (861,901)
Capital Capital Shares
Revenue Total
Reserve Reserve held in Reserve
Realised Unrealised Treasury
As at 31 2009 2009 2009 2009 2009
December
2009
GBP GBP GBP GBP GBP
Opening
Balance (13,167,312) 15,079,154 (50,000) (3,006,207) (1,144,365)
Realised
gain on
investments 5,547,151 - - - 5,547,151
Movement in
unrealised
loss on
investments - (5,250,364) - - (5,250,364)
Realised
gains/
(losses) on
forward
currency
contracts 7,972,088 (2,825,192) - - 5,146,896
Unrealised
loss on
forward
currency
contracts - (275,307) - - (275,307)
Other
realised
and
unrealised
currency
gains/
(losses) 212,043 (915,085) - - (703,042)
Revenue
loss for
the year - - - (769,435) (769,435)
Treasury
shares
cancelled - - 50,000 - 50,000
Shares
purchased
for
Treasury - - (4,351,037) - (4,351,037)
563,970 5,813,206 (4,351,037) (3,775,642) (1,749,503)
40 Notes to the financial statements
Castle Asia Alternative PCC Limited 2010
17. Basic and diluted (loss)/earnings per Redeemable Participating Preference
Share
Revenue loss per redeemable participating preference share is based on the loss
attributable to the redeemable participating preference shares of GBP1,230,924
(2009: GBP769,435) and on the weighted average number of redeemable participating
preference shares in issue of 50,984,811 (2009: 56,443,003). Capital earnings
per redeemable participating preference share is based on the net capital loss
attributable to the redeemable participating preference shares of GBP534,034
(2009: GBP4,465,334 gain) and on the weighted average number of redeemable shares
in issue of 50,984,811 (2009: 56,443,003).
18. 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
50,818,026 (2009: GBP58,930,515) and on the redeemable participating preference
shares in issue at the year end of 48,115,362 (2009: 54,458,427).
19. Derivative Financial Instrument: Forward Foreign Exchange Contract
The Company hedges its US dollar exposure by entering into forward sales of US
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 US dollars. Occasionally, the Company may invest in funds that
are denominated in currencies other than US dollars and because of this it may,
from time to time be necessary for the Company to hedge against its exposure to
these currencies. At the year end there were four outstanding forward
contracts, as disclosed in note 9, totalling US$79,660,000 against sterling
(2009: US$94,330,000). These contracts showed an aggregate unrealised loss at
31 December 2010 of GBP47,486 (at 31 December 2009: loss GBP275,307).
20. Ultimate controlling party
In the opinion of the Directors on the basis of shareholdings advised to them
the Company has no ultimate controlling party.
21. Reconciliation of published valuation to financial statements
GBP
Net assets per financial statements 50,818,026
Adjustment to accruals 8,259
Adjustment to financial assets held at fair 155,636
value through profit or loss
Liquidation and termination general 371,250
expenses
Net assets per published valuation 51,353,171
Notes to the financial statements 41
Castle Asia Alternative PCC Limited 2010
22. Subsequent events - proposals relating to the continuation of the Company
Subsequent to the Company's year end, the Company issued a circular which was
dispatched to Shareholders on 14 March 2011 convening an Extraordinary General
Meeting for 18 April 2011. At the meeting Shareholders will be given the
opportunity to vote on the future of the Company. In the event that
Shareholders do not vote to continue the Company, they will be given, at the
same meeting, the opportunity to vote to place the Company into voluntary
liquidation.
42 Investment portfolio
Castle Asia Alternative PCC Limited 2010
Investment portfolio
at 31 December 2010
% of
Fair Value Net
Investments GBP Assets
Schroder International Selection
Fund 3,780,183 7.5
Indus Pacific Opportunities Fund 3,512,078 6.9
Real Return Asian Fund 3,488,476 6.9
Clairvoyance Asia Fund Limited 3,416,696 6.7
Alphadyne Investment Strategies
Fund Limited 3,300,517 6.5
EB Asia Absolute Return Fund 3,147,830 6.2
Crown Amazon Segregated
Portfolio 3,088,156 6.1
Crown Managed Accounts - Nezu 2,786,940 5.5
Horizon Portfolio I Limited 2,758,267 5.4
LIM China Master Fund SPC
Limited 2,524,713 5.0
Whitney Japan Investors Fund 2,438,332 4.8
Triskele China Fund 2,396,552 4.7
Crown China Segregated Portfolio 2,303,296 4.5
Octagon Pan Asia Fund 2,207,979 4.3
Rockhampton Fund 2,152,520 4.3
LIM Asia Multi-Strategy Fund 2,101,570 4.1
PD Star Fund Limited 1,939,285 3.8
Segantii Asia Pacific Equity
Multi-Strategy Fund 1,679,270 3.3
Crown Managed Accounts - Penta 1,384,357 2.7
Matchpoint Asia Fund Limited 1,361,330 2.7
Bennelong Asia Pacific (side
pocketed)+ 99,100 0.2
Eastern Advisor Fund (side
pocketed)+ 56,400 0.1
Total investment portfolio 51,923,847 102.2
Net current liabilities (1,105,821) (2.2)
Net assets 50,818,026 100.0
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 Bennelong Asia Pacific and Eastern Advisor Fund which have a 50%
provision applied to their 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 43
Castle Asia Alternative PCC Limited 2010
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 LGT Capital Partners
(Guernsey) Limited (Asia-Pacific) Limited
Suite 4203 Two Exchange
Martello Court Square
Admiral Park 8 Connaught Place
St Peter Port PO Box 13398
Guernsey GY1 3HB Hong Kong
Legal Adviser (UK) Banker and Custodian
ABN AMRO Custodial Services
Norton Rose LLP (Ireland) Limited
(formerly Fortis Prime Fund
3 More London Riverside Solutions Custodial
London SE1 2AQ Services (Ireland) Limited)
Fortis House, Park Lane
Legal Adviser (Guernsey) Spencer Dock
Carey Olsen Dublin 1
Carey House Ireland
(effective date 1 February
Les Banques 2010)
7 New Street
St Peter Port
Guernsey GY1 4BZ
Broker Auditor
Winterflood Securities
Limited Ernst & Young LLP
The Atrium Building,
Cannon Bridge PO Box 9
25 Dowgate Hill Royal Chambers
London EC4R 2GA St Julian's Avenue
St Peter Port
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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