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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Gottex Market | LSE:GMNT | London | Ordinary Share | GG00B62DZ701 | ORD NPV |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 48.75 | 0.00 | 00:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Dec 2019 to Dec 2024
TIDMGMNT
RNS Number : 6322F
Gottex Market Neutral Trust Limited
28 April 2011
Gottex Market Neutral Trust Limited (the" Company")
(a closed-ended investment company incorporated with limited liability under the laws of Guernsey with registered number 46429)
ANNUAL REPORT AND AUDITED FINANCIAL STATEMENTS - 31 DECEMBER 2010
SUMMARY INFORMATION
Structure
Gottex Market Neutral Trust Limited (the "Company") is a closed-ended investment company, registered in Guernsey on 19 February 2007 as a company limited by shares. The Company commenced business on its first dealing day on 29 March 2007 and its Shares are listed on the London Stock Exchange.
Investment Objective and Policy
Prior to 11 March 2010 the Company's investment objective was to generate consistent returns over the medium-term with low beta to major equity and fixed income market benchmarks. Although not forming part of the investment objective such returns were expected to be associated with a low degree of risk. The Company's investment policy was to invest in a diversified portfolio of hedge funds.
At an Extraordinary General Meeting ("EGM") held on 11March 2010, a managed winding down of the Company was approved. As a result of this, the new investment objective and investment policy of the Company is to realise the Company's existing investments in an orderly and timely manner, with a view to distributing cash to Shareholders at appropriate times as sufficient investments are realised. The Company will not make any new investments (other than cash and near cash equivalent securities). It is expected that the Company will put forward proposals to place the Company into liquidation before the end of July 2011.
FINANCIAL HIGHLIGHTS as at 31 December 2010 Total Net Assets - Net Asset Value per Share 00.00p
GBP2,793,374 payable to ordinary shareholders is included in Current Liabilities in the Statement of Financial Position, resulting in the total Net Assets being nil. If this liability was excluded it would result in Net assets attributable to holders of Ordinary Shares (per share) of 62.24p. The final amount payable to ordinary shareholders may differ dependent on the amount realised from investments and sales awaiting settlement.
FINANCIAL HIGHLIGHTS as at 31 December 2009 Total Net Assets GBP39,505,703 Net Asset Value per Share 87.11p
REPORT OF THE INVESTMENT MANAGER
Market and Strategy Review
The US stock market produced a stretch of solid performance during the first three months of 2010, amid growing signs that the nation's economy was emerging from the severe recession that officially began in December 2007. The market did suffer a setback in late January and early February which saw share prices decline by roughly 10% but however, the trend was steady advancement with only a few minor pullbacks. From 10 March 2009 (the day the market began its impressive advance), through the end of March 2010, all major indices were sitting on substantial double-digit gains.
The first quarter was a volatile period for global equities, with continued caution on the economy and sovereign debt worries initially taking hold in the absence of corporate news. In January, the market fell amidst fears that emerging market growth might not live up to expectations and that the worldwide economic recovery might consequently be more tepid than markets had previously hoped. Despite news that the UK has emerged from recession, investor caution on the economy continued to drive share price volatility in February. With worries about a double-dip recession consequently on investors' minds, risk aversion kept a number of consumer names, particularly retailers, under pressure. In addition, concerns about sovereign debt issues, particularly in Greece, also weighed on sentiment, but enthusiasm for Asia-focused firms and good results from UK banks helped the market to make progress overall. Towards the end of the quarter, sentiment improved notably as the results season kicked off, and the impressive resilience of many companies helped to drive stock market gains.
A stiff US dollar rally, resulting partly from ongoing concerns about the sovereign debt of several countries in the Euro zone, stymied the returns (in dollar terms) of foreign stocks in developed markets. Greece was at the forefront of those concerns, but Portugal, Ireland, Italy, and Spain also were among the nations under increasing scrutiny for their precarious financial condition.
Global corporate bonds outperformed government bonds as credit continued to experience an excess of buyers over sellers. However, government bonds generated stronger returns during the middle of the period as risk aversion came to the foreground, due to continued concerns over sovereign debt in the Eurozone, the prospect of monetary tightening in China and the announcement of President Obama's bank regulation proposals. China raised the required reserve ratio on two occasions by 50 basis points. In addition, a surprise 25 basis points hike in the US discount rate in February raised expectations of an earlier-than-expected tightening in US policy, but reports from the Fed quickly countered those expectations. Officials stressed that the move was intended to help normalise market conditions and that a hike in the US Fed Funds rate still remained a long way off.
We believe that during the second quarter of 2010 many investors were sent to the sidelines due to worsening fears about the European debt crisis, growing concerns about a possible double-dip recession in the United States, and fears of a global slowdown. May was especially challenging, with most of the major indices giving up substantial ground. The S&P 500 lost 11.43% for the quarter with no sectors able to generate a positive return on the quarter, although defensive areas such as telecom services and utilities came close.
Economic data released during the quarter reflected a still-expanding but fragile US economy. In June, the final estimate of GDP growth for the first quarter was revised downward to 2.7% from 3.0%. A flood of temporary US Census workers added more than 400,000 jobs to May's non-farm payrolls, the biggest jobs gain since March 2000. However, the overall unemployment rate remained high, at 9.7%. Weak retail sales data followed soon after. However, the most disappointing US data came from the housing market, where home sales plummeted in the first month following the expiration of a tax credit for buyers. This reminder of how dependent the US economy is on government stimulus put further pressure on risk assets toward the end of the quarter and cemented the intra-month declines in equity markets.
International equity markets fared even worse for the quarter and have suffered their worst first half since 2008. The MSCI EAFE lost 13.97% for the quarter (-13.23% YTD), with none of the markets in the index able to deliver a positive return for the period. Regionally, Europe was unsurprisingly the biggest loser, dragged down
more than 16% by the struggling southern European markets. The MSCI World Index was down 9.5% for the first half of 2010 and the FTSE 100 showed a 13.4% decline for the second quarter, the worst performance since the third quarter of 2002 when the dot.com boom collapsed.
Greece took centre stage on the European news front as the severity of its debt crisis became known. In addition, other "PIIGS" nations (namely, Portugal, Italy, Ireland, and Spain) also began to raise the alert over difficulties in refinancing their own debt.
Unlike stocks, bonds responded well to signs that the US economy might be facing slower growth than previously expected. Treasury yields dropped sharply and prices posted gains during the quarter, the largest of which occurred in longer maturities. Corporate bonds also benefited to some degree from falling yields, but gains in the sector were affected by concern about earnings growth, especially in lower-quality securities.
The global equity markets rose strongly during the third quarter despite the sustained mixed picture in the global economy. After the positive effects of the government stimulus programs started to fade out slowly, many of the production, consumption and sentiment indicators lost momentum (or even turned negative) as the developed economies continued to suffer from elevated unemployment levels, weak housing data and austerity measures that are cutting into the pace of near term growth. Fiscal challenges continued to trouble the peripheral European Union economies as Ireland revealed that the cost of supporting its banking sector could mount up to EUR50 billion, which is more than a third of the national income in 2009. Growth in the emerging economies on the other hand remained robust, supported by strong balance sheets, conservative governments, and an expanding manufacturing base, which was reflected by the continued tightening of monetary policy over the quarter.
Following the correction in June, a strong reversal of the downward trend began to set in at the beginning of the third quarter, with the result that equity markets finished July up strongly, and equity volatility plummeted. The corporate earnings season bolstered the market recovery thanks to solid earnings numbers. However, as in previous quarters the profit increases were predominantly based on efficiency and productivity gains rather than revenue growth. At mid-quarter the market rally petered out as investors revised their expectations for economic growth downwards. We believe some of the contributing factors for the swing in investors' risk appetite were the increase in jobless claims as well as weak signals from the Philadelphia Fed Index, prompting fears that the US economy might be heading for a double-dip recession. This fear of a double-dip in global economic activity receded in September, igniting a very strong month for equities globally. We believe the main catalyst to the recovery was the announcement from the US Federal Reserve that it was willing to support growth by embarking on
a second round of quantitative easing ("QE2"). Despite the positive impact the prospects of a second round of quantitative easing had on the markets it indicates as well that a self-sustaining economic recovery is yet to be seen as central banks and governments continue to play a pivotal part in artificially boosting the economy.
Although the creditworthiness and solvency of peripheral European countries dragged on the euro, the single currency's recovery against the US-dollar, the Japanese yen and the British pound sterling continued throughout the third quarter. In light of the disappointing economic data in the US and the renewed fears of a recession the Japanese yen as well as the Swiss franc acted as "retreat" currencies for investors, causing the yen to reach new 15-year highs against the greenback. As Japan's ailing economy depends on an export-led recovery, the Bank of Japan intervened by selling yen and buying dollars instead in order to devaluate their currency.
Thanks to better-than-expected macroeconomic data and improved prospects for the U.S. economy, global equity markets finished the year on a positive note, posting robust gains for the fourth quarter as a result of a
strong rebound in December. However, the fourth quarter was by no means a smooth ride, as the two-month rally in risky assets ran out of steam during November due to re-emerging concerns over sovereign debt, accompanied by a sharp reversal in investor sentiment.
At the beginning of the period, risky assets benefitted from the expectations that the U.S. Federal Reserve would further loosen its monetary policy by introducing another round of quantitative easing, "QE2", in order to support the economic recovery. With interest rates already close to zero and the more traditional policy to stimulate growth by reducing rates not being a viable option, in early November the Fed announced plans to pump USD 600 billion into the U.S. economy by the end of June 2011. This additional round of stimulus, together with the results of the mid-term Congressional elections, helped stocks to tick upwards until the European sovereign credit concerns resurged once again, this time focusing on Ireland. Ireland eventually requested (and was granted) a bailout by the European Union and the International Monetary Fund. However, this was of little comfort to market participants, and peripheral European bond yields moved to new highs while equities struggled to make headway for most of November. Simultaneously the "flight to quality" caused a sharp reversal in the recent weakness of the US dollar, strengthening against both the euro and the Japanese yen. Encouragingly, with the economic data indicating a more upbeat economic outlook, investor appetite for riskier assets revived in December.
Investors' sentiment in the bond markets was governed by the two major themes: firstly, the ongoing sovereign debt crisis in the eurozone and secondly, QE2 by the U.S. Federal Reserve. The latter drove gains in higher yielding securities in expectation of prolonged low cash rates while the crisis in the euro zone weighed on sentiment towards Europe's peripheral countries. Government bonds in Ireland, Spain and Portugal were affected in particular. Investors also began to take some profit on US, UK and German government bonds, after a strong rally and further evidence of economic recovery, ensuring that corporate bonds outperformed their government bond counterparts during the quarter.
Portfolio Review
In December 2009, the Board instructed the Investment Manager to begin placing redemptions for portfolio holdings, pending the shareholder vote in March. Throughout the year, the role of the Investment Manager has been to redeem holdings and raise cash to be returned to shareholders.
This has been carried out and, as at the end of the period, the portfolio comprises 26 hedge fund holdings valued at GBP765,348. These holdings are all in funds where liquidity is not available to investors in the normal form, and capital is being returned on an ad hoc basis over time. This level of successful liquidation of the portfolio is slightly faster than projected at the outset of the process a year ago.
Outlook
The Investment Manager has been reviewing with the Board various different proposals for the disposal of the residual assets in the portfolio.
The Investment Manager has worked with the Board to effect an exit from the remaining holdings that will maximize both the value of the portfolio and the speed of execution. The Board has accepted a bid of $845,456 (net of costs) for the remaining Investments held at 28 February 2011.
BOARD MEMBERS
Directors of the Company
The Directors have a range of expertise in the hedge fund sector and other financial sectors and have considerable experience in supervising closed-ended funds.
The Directors of the Company, all of whom are non-executive, are listed below.
Joan Beck, (Chairman), aged 64, has over 30 years' experience in the securities industry. He began his career at Pierson Holding and Pierson, the Amsterdam based merchant bank, in 1969. After obtaining his MBA at INSEAD he joined Merrill Lynch in Paris as syndicate manager before joining Morgan Stanley in 1980. From 1984 to 1995 he was deputy chairman of CS First Boston Limited in charge of the new issues business. In 1996 he was appointed vice chairman of HSBC Investment Banking. Between 2000 and 2001 he was Director General of Cazenove & Co Suisse S.A. From 2002 to the present day he has been the chairman of the European Securities Forum. He is a non-executive director of AIM listed Dealogic and POWEO, a Paris listed energy company. Mr Beck is resident in Switzerland.
Richard Hotchkis, aged 60, has some 30 years' investment experience. Until October 2006 he was an investment manager at the Co-operative Insurance Society where he started his career in 1976. Mr Hotchkis has a wide experience of equity investment in both the UK and overseas and also of the externally managed funds industry, including investment trust and other closed ended funds, offshore funds and hedge funds. He was a director of Dexion Absolute Limited. He is a director of several quoted investment companies including FRM Credit Alpha Fund and Alternative Investment Strategies. Mr Hotchkis is resident in Guernsey.
Robert Sinclair (Chairman of the Audit Committee), aged 61, is Managing Director of the Guernsey based Artemis Group and a director of a number of investment fund management companies and investment funds associated with clients of that group. Mr Sinclair was a director of The Bioscience Investment Trust plc and is Chairman of Schroder Oriental Income Fund Limited. He is a director of ING UK Real Estate Income Trust Limited and Chairman of the Audit Committee of that company. He is a Fellow of the Institute of Chartered Accountants in England and Wales. Mr Sinclair is resident in Guernsey.
Nicholas Tostevin, aged 58, is an Advocate of the Royal Court of Guernsey and the former senior partner of a Guernsey law firm. He is a non-executive director of a number of investment funds, including F&C Commercial Property Trust Limited, and of a number of captive insurance companies. Mr Tostevin is resident in Guernsey.
All of the Directors are independent of the Investment Manager.
DIRECTORS' REPORT
The Directors submit their Report together with the Company's financial statements for the financial year ended 31 December 2010, which have been prepared in accordance with International Financial Reporting Standards (IFRS), and in accordance with any relevant enactment for the time being in force; and are in agreement with the accounting records, which have been properly kept in accordance with section 238 of The Companies (Guernsey) Law, 2008.
Guernsey Regulatory Environment
The Company has received consent under the Control of Borrowing (Bailiwick of Guernsey) Ordinance, 1959 (as amended) to raise up to GBP200 million by way of shares. To receive such consent, application was made under the Guernsey Financial Services Commission's framework relating to Registered Closed-ended Investment Funds. Under this framework neither the Guernsey Financial Services Commission nor the States of Guernsey Policy Council have reviewed the prospectus and placing and offer agreement but instead have relied on specific warranties provided by the Guernsey licensed administrator of the Fund. Neither the Guernsey Financial Services Commission nor the States of Guernsey Policy Council takes any responsibility for the financial soundness of the Company or for the correctness of any of the statements made or opinions expressed with regard to it.
The Company is an authorised closed-ended collective investment scheme.
Principal Activity and Investment Objective
The original principal activity of the Company was investment with the objective to generate consistent returns over the medium-term with low beta to major equity and fixed income market benchmarks.
At an Extraordinary General Meeting held on 11 March 2010, a managed winding down of the Company was approved. As a result of this, the new investment objective and investment policy of the Company is to realise the Company's existing investments in an orderly and timely manner, with a view to distributing cash to Shareholders at appropriate times as sufficient investments are realised. The Company will not make any new investments (other than cash and near cash equivalent securities). Proposals are expected to be put forward to shareholders prior to the end of July 2011 to place the Company into liquidation.
Incorporation
The Company was registered in Guernsey, Channel Islands on 19 February 2007.
Shareholder Information
The Company announces its net asset value on a monthly basis. Estimated net asset values are also provided weekly. Under the Listing Rules the top ten holdings are announced to the London Stock Exchange each quarter.
Results and Dividends
The results for the year are set out in the Statement of Comprehensive Income. The Directors do not propose a dividend for the year.
Listings
The Company is listed on the London Stock Exchange. Trading in the Company's Ordinary Shares commenced on 29 March 2007. As a result of changes to the UK Listing Regime, the Company's Primary Listing became a Premium Listing with effect from 6 April 2010. Throughout the year the Company considers that it has complied (and intends to comply) with conditions applicable to closed ended investment companies of the new Listing Rules.
The Winding Down permits the Company to retain the listing of its Shares on the London Stock Exchange.
Life of the Company
At an Extraordinary General Meeting held on 11 March 2010, a managed winding down of the Company was approved.
Distributions
During the year the Directors approved the payment of capital redemptions to Shareholders amounting to GBP35,750,519 following the receipt of proceeds from the redemptions of investment positions received by the Company. Of this GBP6,750,000 was paid to shareholders on 4 January 2011. The Directors have also approved the payment of a capital redemption to Shareholders of GBP1,500,000 which was paid on 23 March 2011.
Directors
The Directors of the Company during the year and at the date of this report are set out on the Management and Administration page.
Directors' Interests
There are no existing or proposed service contracts between any of the Directors and the Company. The Directors were appointed by the Initial Shareholders in accordance with the Articles of Association.
At 31 December 2010, Directors of the Company held the following Ordinary GBP Shares in the Company:
Hot Features
Premium
% of issued Share
Director No. of Shares Capital
Robert Sinclair 1,980 0.044%
Nicholas Tostevin 1,980 0.044%
Richard Hotchkis 1,980 0.044%
Save for the above no Director or any person connected with any Director has any interest in the share capital of the Company either directly or beneficially.
The Directors are not aware of any, or potential, conflicts of interest in relation to their duties to the Company arising from their private interests and/or other duties.
In accordance with the Company's Articles of Association, at each annual general meeting one third of the Directors (rounded down to the nearest whole number), shall retire by rotation. Such Directors may be reappointed.
An evaluation of the performance of individual Directors was not carried out during the year due to the uncertainty surrounding the future of the Company, but the Board believes that the performance of each Director continues to be effective and demonstrates commitment to the role.
Significant Shareholdings
Shareholders with holdings more than 3 per cent. of the issued Ordinary Shares of the Company at 31 December 2010 were as follows:
Number of Percentage
Ordinary
Shares of Share Capital
Vidacos Nominees Ltd 1,286,881 28.67%
The Bank of New York (Nominees) Ltd 1,206,882 26.89%
BNP Paribas Arbitrage SNC 448,702 10.00%
Quilter Nominees Ltd 386,875 8.62%
HSBC Global Custody Nominee (UK) 395,632 8.82%
JP Morgan Securities Ltd. 192,096 4.28%
Nortrust Nominees Ltd 178,138 3.97%
Lynchwood Nominees Ltd 135,804 3.03%
Remuneration
The Board does not have separate remuneration, management engagement or nomination committees because these functions are carried out as part of the regular Board business and all Directors are independent. Directors' remuneration is considered on an annual basis.
Directors' fees for the year ended 31 December 2010 were:
Joan Beck GBP25,000 Robert Sinclair GBP22,500 Richard Hotchkis GBP20,000 Nicholas Tostevin GBP20,000 Directors fees for 2011 (up to the expected GBP51,042 termination date). The basis for this is detailed in note 1.
No Directors have been paid additional remuneration outside their normal Directors' fees.
Directors' and Officers' liability insurance cover is maintained by the Company on behalf of Directors.
Corporate Governance
As a closed-ended investment company registered in Guernsey, the Company was eligible for exemption from the requirements of the Combined Code (the "Code") issued by the UK Listing Authority. As a result of changes to the UK Listing Regime, with effect from 6 April 2010, the Company must comply with the requirements of the UK Corporate Governance Code. The Board had put in place a framework for corporate governance which it believes is suitable for an investment company and which enables the Company to voluntarily comply with the main requirements of the Code, which sets out principles of good governance and a code of best practice.
The Board considers that the Company has complied with the provisions contained in Section 1 of the Code throughout this accounting year except where indicated below. The following statement describes how the relevant principles of governance are applied to the Company.
The Board determined, as a closed-ended investment company registered in Guernsey, that it was appropriate to become a member of the Association of Investment Companies (the 'AIC') and to report against the AIC Code of Corporate Governance (the 'AIC Code') and to follow the AIC's Corporate Governance Guide for Investment Companies (the 'AIC Guide'). During February 2009 the Financial Reporting Council confirmed that by following the AIC Guide Investment Company boards should fully meet their obligations in relation to the Combined Code.
On 30 September 2010, the Financial Reporting Council provided the AIC with an updated endorsement letter to cover the fifth edition of the AIC Code. This Code takes into account the newly issued UK Corporate Governance Code that replaces the Combined Code for accounting periods commencing on or after 29 June 2010.
The Board has considered the principles and recommendations of the AIC Code by reference to the AIC Guide. The Company Secretary undertook a review of the AIC Guide. The Company Secretary undertook a review of the corporate governance principles of the Board and Committees of the Board of the Company. The Directors confirm compliance to the AIC Code.
The Company has compiled with the recommendations of the AIC Code and the relevant provisions of the UK Corporate Governance Code, except as set out below.
-- The role of the chief executive
-- Executive directors' remuneration
-- The need for an internal audit function
There is no published corporate governance regime equivalent to the UK Corporate Governance Code in Guernsey.
The Board
The Board currently consists of four non-executive Directors, all of whom are independent of the Manager. The Chairman of the Board is Joan Beck. In considering the independence of the Chairman, the Board has taken note of the provisions of the Code relating to independence, and has determined that Mr Beck is an Independent Director. As the Chairman is an Independent Director, no appointment of a Senior Independent Director has been made. The Company has no employees and therefore there is no requirement for a chief executive.
The Company has no executive directors or employees. All matters, including strategy, investment and dividend policies, gearing, and corporate governance procedures, are reserved for the approval of the Board of Directors. The Board currently meets at least quarterly and receives full information on the Company's investment performance, assets, liabilities and other relevant information in advance of Board meetings.
The Audit Committee, chaired by Mr Sinclair, operates within clearly defined terms of reference. The duties of the Audit Committee in discharging its responsibilities include reviewing the Annual and Interim Accounts, the system of internal controls and the terms of the appointment of the auditors together with their remuneration.
The Audit Committee is also the forum through which the auditor report to the Board of Directors and meets at least twice yearly. The objectivity of the auditors is reviewed by the Audit Committee which also reviews the terms under which the external auditors are appointed to perform non-audit services. The Committee reviews the scope and results of the audit, its cost effectiveness and the independence and objectivity of the auditors, with particular regard to non-audit fees. No such services were provided during the year and the Audit Committee considers KPMG Channel Islands Limited to be independent of the Company.
The table below sets out the number of Board and Committee meetings held during the year ended 31 December 2010 and the number of meetings attended by each Director.
Board Meetings Audit Committee
Held Attended Held Attended
Joan Beck 9 8 2 1
Richard Hotchkis 9 8 2 1
Robert Sinclair 9 9 2 2
Nicholas Tostevin 9 8 2 2
Individual Directors may, at the expense of the Company, seek independent professional advice on any matter that concerns them in the furtherance of their duties.
The Company maintains appropriate Directors' and Officers' liability insurance.
Internal Controls
The Board is responsible for the Company's system of internal control and for reviewing its effectiveness. The Board has therefore established an ongoing process designed to meet the particular needs of the company in managing the risks to which it is exposed, consistent with the guidance provided by the Turnbull Committee.
Such review procedures have been in place throughout the financial year and up to the date of approval of the Annual Report, and the Board is satisfied with their effectiveness. By their nature these procedures can provide reasonable, but not absolute, assurance against material misstatement or loss. At each Board meeting the Board monitors the investment performance of the Company in comparison to its stated objective. The Board also reviews the Company's activities since the last Board meeting to ensure that the Investment Manager adheres to the agreed investment policy and approved investment guidelines and, if necessary, approves changes to such policy and guidelines. In addition, the Board receives reports from the Secretary in respect of compliance matters and duties performed on behalf of the Company.
The Board has reviewed the need for an internal audit function. The Board has decided that the systems and procedures employed by the Investment Manager and the Secretary, including their internal audit functions, provide sufficient assurance that a sound system of internal control, which safeguards the Company's assets, is maintained. An internal audit function specific to the Company is therefore considered unnecessary.
Foreign Exchange Hedging
On 15 July 2010 the Board announced that the foreign exchange hedging facility with Citibank NA would be removed with effect from 31 July 2010, in order to enable additional cash resources to be utilized for the capital return process.
Non Going Concern Basis
The Company announced that the resolutions to approve the Winding Down Proposals, as described in the circular to shareholders dated 12 February 2010 (the "Circular"), were duly passed at the Company's Extraordinary General Meeting held on 11 March 2010. The Directors have considered all information available and have concluded that it is not appropriate to adopt the going concern basis in preparing the financial statements as it is expected that the Company will put forward proposals to shareholders to put the Company into liquidation before the end of July 2011. Consequently, these financial statements have been prepared in accordance with International Financial Reporting Standards on a non going concern basis. As set out in note 19 the Company expects to realise its investments and sales awaiting settlement in accordance with the indicative timetable.
Relations with Shareholders
The Board welcomes shareholders' views and places great importance on communication with its shareholders. The Chairman and other Directors are available to meet shareholders if required. The Annual General Meeting of the Company provides a forum for shareholders to meet and discuss issues with the Directors and Investment Manager of the Company.
Disclosure of Information to the Auditor
The Directors who held office at the date of the approval of financial statements confirm that, so far as they are each aware:
-- There is no relevant audit information of which the company's auditor is unaware; and
-- Each director has taken all the steps that 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
Auditors
KPMG Channel Islands Limited have expressed their willingness to continue in office as auditors until a liquidator is appointed.
Nicholas Tostevin Richard Hotchkis
Director Director
27 April 2011
STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS
The Directors are responsible for preparing the Directors report and the financial statements in accordance with applicable law and regulations. Company Law requires the Directors to prepare financial statements for each financial year. Under that law they have elected to prepare the financial statements in accordance with International Financial Reporting Standards (IFRS) and applicable law. The financial statements are required by law to give a true and fair view of the state of affairs of the Company and of the profit and loss of the Company for that period. In preparing those financial statements the directors are required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements that are reasonable and prudent;
-- state whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statement; and
-- prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of the Company and to enable them to ensure that the financial statements comply with the Companies (Guernsey) Law, 2008. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the company and to prevent and detect fraud and other irregularities.
Responsibility Statement in Accordance with Disclosure and Transparency Regulations
We the directors of the Company, confirm that to the best of our knowledge:
-- -- the financial statements, prepared in accordance with International Financial Reporting Standards, give a true and fair view of the assets, liabilities, financial position and performance of the company; and
-- -- the Annual Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that the Company faces.
Nicholas Tostevin Richard Hotchkis
Director Director
27 April 2011
INDEPENDENT AUDITOR'S REPORT TO THE MEMBERS OF GOTTEX MARKET NEUTRAL TRUST LIMITED
We have audited the financial statements of Gottex Market Neutral Trust Limited (the "Company") for the year ended 31 December 2010 which comprise the Statement of Comprehensive Income, the Statement of Changes in Equity, the Statement of Financial Position, the Statement of Cash Flows and the related notes. As described in note 1 they have been prepared on a non going concern basis. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards as issued by the IASB.
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
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 (APB'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 Board of Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report and audited financial statements to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
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 result for the year then ended;
-- are in accordance with International Financial Reporting Standards as issued by the IASB; and
-- comply with the Companies (Guernsey) Law, 2008.
Emphasis of Matter - Investments and sales awaiting settlement
We draw attention to note 19(c) in the Financial Statements which describes the uncertainty related to the amount that may ultimately be realised from the Company's investments and sales awaiting settlement. Our opinion is not qualified in respect of this matter.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where the Companies (Guernsey) Law 2008 requires us to report to you if, in our opinion:
-- the Company has not kept proper accounting records; or
-- the financial statements are not in agreement with the accounting records; or
-- we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of 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. We have nothing to report with respect to the review
Steven D. Stormonth for and on behalf of KPMG Channel Islands Limited
Chartered Accountants and Recognised Auditors
27 April 2011
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 31.December 2010
2010 2009
Investment income GBP GBP
Investment income 14,361 2,990
Loan interest income 35,384 158,056
Bank interest 664 -
------------ ------------
Total investment income 50,409 161,046
Net gains/(losses) on financial assets and
financial liabilities
Net gains on financial assets and financial
liabilities 2,049,995 2,479,790
Net (losses)/gains on forward foreign exchange
contracts (2,296,860) 4,120,276
Gains/(losses) on foreign exchange 184,813 (1,542,044)
------------ ------------
(62,052) 5,058,022
Total (loss) / income (11,643) 5,219,068
------------ ------------
Expenses
Investment management fees (209,623) (330,887)
Other expenses (740,544) (553,185)
Total operating expenses before finance costs (950,167) (884,072)
------------ ------------
Finance Costs
Interest expense - (25,780)
Total Finance Costs - (25,780)
Total comprehensive (loss)/income for the
year (961,810) 4,309,216
------------ ------------
Earnings per Ordinary Share - basic & diluted* 3.25p 9.50p
Earnings per Subordinated Non-voting Share - -
* Earnings per Ordinary Share is based on the weighted average number of Ordinary Shares. The weighted average number of ordinary Shares during the period is 29,601,499 (2009: 45,350,000).
All items in the above statements for 2010 are derived from a discontinued operation
The financial statements were approved by the Board of Directors on 27 April 2011 and signed on its behalf by:
Nicholas Tostevin Richard Hotchkis
Director Director
Statement of Changes in Equity
For the year from ended 31 Dec
2010
Capital Revenue Distributable
Reserve Reserve Reserve Total
GBP GBP GBP GBP
Opening balances (3,093,388) (1,957,285) 44,556,376 39,505,703
Total Comprehensive
Income
Profit/(loss) for the
period (62,052) (899,758) - (961,810)
Transactions with
shareholders
Redemption of
shares - - (35,750,519) (35,750,519)
Payable to ordinary
shareholders 3,155,440 2,857,043 (8,805,857) (2,793,374)
Closing balances - - - -
============ ============== ============== =============
Net assets attributable to holders of Ordinary Shares -
at the end of the year*
=============
*GBP2,793,374 payable to ordinary shareholders is included in Current Liabilities in the Statement of Financial Position, which would result in Net assets attributable to holders of Ordinary Shares (per share) of 62.24p. The final amount payable to ordinary shareholders may differ dependent on the amount realised from investments and securities sold receivable.
Net assets attributable to holders of Ordinary Shares -
at the end of the year*
For the year ended 31 December
2009
Capital Revenue Distributable
Reserve Reserve Reserve Total
GBP GBP GBP GBP
Opening balances (8,151,410) (1,208,479) 44,556,376 35,196,487
Total Comprehensive Income
Profit/(loss)
for the year 5,058,022 (748,806) - 4,309,216
Closing balances (3,093,388) (1,957,285) 44,556,376 39,505,703
============== ============ ================ ===========
Net assets attributable to holders of Ordinary Shares
at the end of the year 39,505,703
===========
Net assets attributable to the holder of the Subordinated Non-voting
Share at the end of the year
Statement of Financial Position
As at 31 December 2010
31 December 31 December
2010 2009
GBP GBP
Assets
Current Assets
Financial assets at fair value
through profit or loss 765,348 35,244,562
Cash 7,201,610 2,639,366
Loan advanced - 2,058,030
Other receivables 2,020,269 2,713
Forward foreign currency contracts - 1,965
------------
Total assets 9,987,227 39,946,636
============ ============
Equity and Liabilities
Current liabilities
Payable to Ordinary Shareholders 2,793,374 -
Forward foreign currency contracts - 178,143
Redemptions Payable 6,750,000 -
Other payables 443,853 262,790
Total liabilities 9,987,227 440,933
------------ ------------
Equity
Distributable Reserve - 44,556,376
Capital and Revenue Reserves - (5,050,673)
Total equity - 39,505,703
------------ ------------
Total equity and liabilities 9,987,227 39,946,636
============ ============
Number of Ordinary Shares in issue 4,488,134 45,350,000
============ ============
Net assets attributable to holders
of Ordinary Shares - Equity 0.00p 87.11p
Net assets attributable to holders
of Ordinary Shares - Current Liability 2,793,374 39,946,636
============ ============
The financial statements were approved by the Board of Directors on 27 April 2011 and signed on its behalf by:
Nicholas Tostevin Richard Hotchkis
Director Director
Statement of Cashflows
For the year from ended 31 Dec 2010
2010 2009
GBP GBP
Cash flows from operating activities
(Loss)/profit for the year (961,810) 4,309,216
Adjusted for:
Net gains on financial assets at fair
value through profit or loss (2,049,995) (2,479,790)
Unrealised foreign exchange (losses) (176,179) (416,741)
Interest expense - 25,780
Investment income (50,409) (161,046)
------------- -------------
Operating cash flows before movements
in working capital (3,238,393) 1,277,419
Increase in creditors 181,130 121,821
Net cash (paid)/generated from operating
activities (3,057,263) 1,399,240
------------- -------------
Cash flows from investing activities
Purchase of financial assets at fair
value through profit or loss - (34,444,443)
Sale of financial assets at fair value
through profit or loss 34,511,654 38,076,656
Loan repaid 2,058,030 213,527
Interest received 50,409 162,371
Net cash received from investing activities 36,620,093 4,008,111
------------- -------------
Cash flows from financing activities
Loan received - (9,181,012)
Interest paid (67) (245,302)
Redemption of shares (29,000,519) -
Net cash paid from financing activities (29,000,586) (9,426,314)
------------- -------------
Net increase/(decrease) in cash 4,562,244 (4,018,963)
Cash at beginning of period 2,639,366 6,658,329
Cash at end of the period 7,201,610 2,639,366
============= =============
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 31 December 2010
1. Principal Accounting Policies
Statement of Compliance
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) adopted by the International Accounting Standards Board (IASB), the London Stock Exchange Listing Rules and applicable legal & regulatory requirements of the Guernsey Law. The financial statements give a true and fair view and are in compliance with the Companies (Guernsey) Law 2008.
Basis of preparation
The financial statements are presented in Sterling which is also the functional currency of the Company in relation to 2010. The financial statements have been prepared on a fair value basis except for the measurement of financial assets and financial liabilities at net realisable value through profit or loss including forward currency deals receivable and forward currency deals payable which are measured at fair value.
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets and liabilities, income and expense.
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 may differ from these estimates.
The financial statements have been prepared on a non going concern basis as a result of the Directors' belief that the winding up proposal will be complete by the end of July 2011. Accordingly, the going concern basis of accounting is no longer considered appropriate in 2010. All assets not at fair value through profit and loss have been written down to their realisable value and a provision of estimated costs of termination (GBP247,471 relating to expenses up to date of proposed liquidation in 2011) has been provided for along with the future operating profits and losses expected to be incurred up to the date the Company ceases to exist.
The Company has accrued GBP247,471 in termination expenses as follows:
Administration fee 43,750
Directors' fees 51,042
Management fee 9,934
Custody/Trustee fee 662
General Expenses 142,083
--------
Total 247,471
It is expected that the Company will put forward proposals to place the Company into liquidation before the end of July 2011. The above termination expenses include costs estimated up to the expected termination date (31 July 2011).
The principal accounting policies adopted are set out below. These accounting policies have been applied consistently in dealing with items which are considered to be material in relation to the Company's financial statements except for the change to the non going concern basis of accounting in 2010. The Directors have sought to prepare the Financial Statements on a basis compliant with the recommendations of the Statement of Recommended Practice (SORP) for investment trusts issued by the Association of Investment Companies (AIC) in December 2005 and amended in November 2009 when the presentational guidance set out in the SORP is consistent with the requirements of IFRS and the non going concern basis of accounting.
Applicable new standards and interpretations not yet effective
The following new standard has been issued but is not yet effective for the financial year beginning 1 January 2010 and has not been early adopted.
In November 2009, the IASB issued IFRS 9 'Financial Instruments' (as updated October 2010) which becomes effective for accounting periods commencing on or after 1 January 2013.
This represents the first of a three part project to replace IAS 39 'Financial Instruments: Recognition and Measurement'. The objective of the standard is to enhance the ability of investors and other users of financial information to understand the accounting of financial assets and to reduce complexity.
The Company will not be adopting this standard as it is expected that the Company will be put into liquidation before the end of July 2011.
The Company has reviewed other upcoming standards and it is not expected that these standards will have a material impact on the financial statements.
Financial instruments
Financial assets and financial liabilities are recognised on the Company's Statement of Financial Position when the Company became a party to the contractual provisions of the instrument. Financial liabilities, other than those at fair value through profit and loss, are measured at their expected settlement amount in 2010 and in 2009 they were measured at amortised cost using the effective interest rate method.
Financial assets at fair value through profit or loss ("investments")
Investments and forward currency contracts are classified as held at fair value through profit or loss. Purchases and sales of investments are recognised on trade date (the date on which the Company commits to purchase or sell the investment). Investments purchased are initially recorded at fair value, being the consideration given and excluding transaction or other dealing costs associated with the investment. Investments are derecognised when the rights to receive cash flows from the investments have expired or the Company has transferred substantially all risks and rewards of ownership. Fair value gains and losses on investments are measured through profit or loss and are shown in note 11.
For other financial instruments, including other receivables and other payables, the carrying amounts as shown in the balance sheet at amounts approximating fair value due to the short term nature of these financial instruments.
Fair value
The fair value of listed investments is determined by reference to bid market prices at the close of business on the reporting date. For unlisted investments in shares or units in hedge funds, fair value is determined using the latest estimated net asset value from the administrator of the respective hedge fund. With many funds, particularly hedge, absolute or alternative funds, only estimated prices are available from the administrator because of the complicated nature of the asset valuations. Estimated prices are compared to the final price supplied by the underlying fund managers and any material differences are adjusted for in the financial statements.
In the event that such net asset value is not available from the relevant administrator, the fair value is estimated with care and in good faith by the Directors in consultation with the investment manager with a view to establishing the probable realisation value for such units or shares as at close of business on the relevant valuation day. The Directors have no reason to believe that the valuations used are unreasonable.
Gains and losses arising from changes in fair value of financial assets are shown as net gains or losses on financial assets through profit or loss and analysed in note 11.
Derecognition of financial instruments
A financial asset is derecognised when: (a) the rights to receive cash flows from the asset have expired, (b) the Company retains the right to receive cash flows from the asset, but has assumed an obligation to pay them in full without material delay to a third party under a "pass through arrangement"; or (c) the Company has transferred substantially all the risks and rewards of the asset, or has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.
A financial liability is derecognised when the obligation under the liability is discharged or cancelled.
Income
All income is accounted for on an accruals basis and is recognised in the Statement of Comprehensive Income. Interest income is recognised in the Statement of Comprehensive Income as it accrues, using the original effective interest rate of the instrument. Investment income is earned on distributions from investing in underlying funds, loan interest income is earned on loans advanced and bank interest income is earned on cash balances.
Expenses
Expenses are accounted for on a termination basis. Interest expense is recognised in the Statement of Comprehensive Income, accrued up to the estimated termination date, using the original effective interest rate of the instrument.
Cash and cash equivalents
Cash comprises cash on hand, overdrafts and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant changes in value.
Translation of foreign currency
Items included in the Company's Financial Statements are measured using the currency of the primary economic environment in which it operates ("the functional currency"). The currency in which the Company's shares are denominated and in which its operating expenses are incurred is Sterling. The majority of the Company's investments were denominated in US dollars and exposure to that currency could have been hedged by forward foreign currency contracts as described below. Accordingly the Directors regard Sterling as the functional currency. The Company has also adopted Sterling as its presentation currency.
Transactions in currencies other than the functional currency are recorded using the exchange rate prevailing at the transaction date. Foreign exchange gains and losses resulting from the settlement of such transactions and those from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised through profit or loss.
Translation differences on financial assets held at fair value through profit or loss are reported as part of net gains or losses on financial assets through profit or loss.
Forward foreign currency contracts
Forward foreign currency contracts are derivative contracts and as such are recognised at fair value on the date on which they are entered into and subsequently remeasured at their fair value through profit and loss. Fair value is determined by forward currency rates in active currency markets. The unrealised appreciation on open forward foreign currency contracts is calculated by reference to the difference between the contract rates and the rates to close out the contracts. All derivatives are carried as assets when fair value is positive and as liabilities when fair value is negative.
Borrowing costs
Borrowing costs are recognised as an expense and have been accrued up to the expected termination date.
Determination and presentation of operating segments
The Board has considered the requirements of IFRS 8 'Operating Segments', and is of the view that the Company is engaged in a single segment of business, being investment in hedge funds. The Board, as a whole, has been determined as constituting the chief operating decision maker of the Company. The key measure of performance used by the Board to assess the Company's performance and to allocate resources is the total return on the Company's net asset value, as calculated under IFRS, and therefore no reconciliation is required between the measure of profit or loss used by the Board and that contained in these financial statements.
The Board of Directors is charged with setting the Company's investment strategy in accordance with the Prospectus. They have delegated the day to day implementation of this strategy to its Investment Manager but retain responsibility to ensure that adequate resources of the Company are directed in accordance with their decisions. The investment decisions of the Investment Manager are reviewed on a regular basis to ensure compliance with the policies and legal responsibilities of the Board. The Investment Manager has been given full authority to act on behalf of the Company, including the authority to purchase and sell securities and other investments on behalf of the Company and to carry out other actions as appropriate to give effect thereto. Whilst the Investment Manager may make the investment decisions on a day to day basis re the allocation of funds to different investments, any changes to the investment strategy or major allocation decisions have to be approved by the Board, even though they may be proposed by the Investment Manager. The Board therefore retains full responsibility as to the major allocations decisions made on an ongoing basis. The Investment Manager will always act under the terms of the Prospectus which cannot be radically changed without the approval of the Board of Directors.
2. Taxation
The Company is exempt from taxation in Guernsey under the provisions of the Income Tax (Exempt Bodies) (Guernsey) Ordinance 1989 and has paid an annual exemption fee of GBP600 (2009:GBP600).
3. Distributions to Shareholders
It was the intention of the Company to distribute substantially all of any significant net income by way of an annual dividend. However, considering the investment objectives and policies of the Company, net income was not sufficient for the payment of dividends. To the extent that any distributions are paid they will be in accordance with the Articles, any applicable laws and the regulations of the UK Listing Authority.
During the year the Directors approved the payment of capital redemptions to Shareholders amounting to GBP35,750,519 following the receipt of proceeds from the redemptions of investment positions received by the Company. Of this GBP6,750,000 was paid to shareholders on 4 January 2011. The Directors also approved the payment of a capital redemption to Shareholders of GBP1,500,000 on 23 March 2011.
4. (Losses)/Gain on Foreign Exchange
31 December 31 December
2010 2009
GBP GBP
Realised (loss)/gain on forward foreign
currency contracts (2,473,039) 3,703,535
Movement in unrealised gain on forward
foreign currency contracts 176,179 416,741
Movement in unrealised exchange (loss)/gain
on loan advanced (221,363) 1,235,696
Realised exchange gain/(loss) on investments 406,176 (2,777,740)
(2,112,047) 2,578,232
============ ============
5. Operating Segments
The Company is domiciled in Guernsey. The Company's financial investments and derivative financial instruments and its corresponding net income arising thereon are in respect of investments in entities and derivative counterparties domiciled in both Guernsey as well as in other countries. In presenting information on the basis of geographical segments, segment investments and derivative financial instruments and the corresponding segment net investment income arising thereon are determined based on the domicile countries of the respective investment entities and derivative counterparties.
The Company has a highly diversified shareholder population and no individual investor is known to own more than 10% of the issued capital of the Company.
Geographical split of investments based on where funds are registered
Virgin
Cayman United Islands
Bermuda Islands Guernsey States (British) Total
GBP GBP GBP GBP GBP GBP
31 December
2010
Financial
assets at
fair value
through
profit or
loss 559 571,075 - - 193,714 765,348
Financial
liabilities
at fair
value
through
profit or
loss - - - - - -
Net
investment
income 4,978 8,940 - 36,491 - 50,409
31 December
2009
Financial
assets at
fair value
through
profit or
loss 787,494 30,588,767 1,965 - 3,868,301 35,246,527
Financial
liabilities
at fair
value
through
profit or
loss - - (178,143) - - (178,143)
Net
investment
income - 2,990 - 158,056 - 161,046
6. Investment Management Fees
The Company's investment manager is Gottex Fund Management SARL (the "Investment Manager"). The Investment Manager is entitled to an annual investment management fee at the rate of 0.75% of the Net Asset Value of the Company, calculated and payable monthly in arrears. The Investment Manager is also entitled to reimbursement of certain expenses incurred by it in connection with its duties.
During the year to 31 December 2010, investment management fees of GBP209,623 (31 December 2009: GBP330,887) were charged to the Company with GBP16,619 (31 December 2009: GBP25,378) payable at year end. GBP9,934 of these fees and payables relate to the termination fees for 2011. See note 1 for the basis of this estimate.
7. Performance Fee
The Investment Manager is also entitled to receive a performance fee. This is calculated as 10% of the amount by which the Net Asset Value of a Share at the end of a financial year exceeds the Net Asset Value of a Share of that class at the start of the financial year having adjusted for any distributions of the Company during the year and adding back investment management fees paid subject to (i) such increase as a percentage of the year start Net Asset Value of that Share exceeding average 3 month LIBOR during that year and (ii) the year end Net Asset Value of that Share exceeding the previous highest year end Net Asset Value for a Share of that class. The performance fee is calculated and accrued as at each valuation day and paid at the end of the fiscal year of the Company. As at 31 December 2010, there were no performance fees accrued or paid during the year (2009: Nil).
8. Administration Fee
The Company's administrator, secretary and registrar is Northern Trust International Fund Administration Services (Guernsey) Limited (the "Administrator"). The Administrator is entitled to receive an annual fee based on the Net Asset Value of the Company, as at the last valuation day in the month, payable quarterly in arrears, and at the rate of 0.1% of the Net Asset Value of the Company, subject to a minimum fee of GBP75,000 per annum.
In addition, the Administrator is entitled to be reimbursed certain expenses incurred in the course of carrying out its duties. During the year to 31 December 2010, administration fees of GBP119,123 (2009: GBP75,154) were charged to the Company and GBP62,808 (2009: GBP18,904) was payable at the year end. GBP43,750 of these fees and payables relate to the termination fees for 2011. See note 1 for the basis of this estimate.
9. Custodian Fee
The Company's custodian is Northern Trust (Guernsey) Limited (the "Custodian"). The Custodian is entitled to receive an annual fee at a rate of 0.05% per annum of the Net Asset Value of the Company calculated and accrued monthly and paid quarterly in arrears. The Company will also pay transaction fees of GBP125 for every transaction and reimburse the Custodian for certain expenses incurred in the course of carrying out its duties. During the year to 31 December 2010, custodian fees of GBP13,453 (2009: GBP18,579) were charged to the Company and GBP1,108 (2009: GBP1,675) was payable at the year end. GBP662 of these fees and payables relate to the termination fees for 2011. See note 1 for the basis of this estimate.
10. Other Expenses
31 December 31 December
2010 2009
GBP GBP
General expenses 200,167 45,892
Legal & Professional fees 157,747 245,228
Directors' fees (note 18) 138,542 94,810
Administration fee (note 8) 119,123 75,154
Custodian fee (note 9) 13,453 18,579
Audit fee 46,880 53,417
Transaction costs on financial assets at
fair value through profit or loss 64,632 20,105
Total other expenses 740,544 553,185
============ ============
Included above are fees of GBP247,471 relating to the proposed termination of the Company. See note 1 for the basis of this estimate.
11. Financial Instruments
In accordance with its investment objectives and policies, the Company holds financial instruments which at any one time may comprise the following:
-- securities held in accordance with the investment objectives and policies;
-- cash and short-term debtors and creditors arising directly from operations;
-- derivative transactions including forward currency contracts; and
-- short-term borrowings up to a maximum of the lower of 20 per cent. of the Company's Net Asset Value as at 2 April 2007 or US$80 million.
The financial instruments held by the Company are comprised principally of hedge fund assets.
(a) Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of its financial assets and liabilities are disclosed in note 1. The following table analyses the fair value of the financial assets and liabilities by category as defined in IAS 39.
(b) Measurement of financial instruments:
2010 2009
GBP GBP
% of net % of net
assets assets
attributable attributable
Fair Value to Fair Value to
GBP shareholders GBP shareholders
----------------- --------------- ----------- -------------
Financial instruments at
fair value through profit
or loss
Listed equity
securities - - 3,768,169 9.54
Unlisted equity
securities 765,348 - 31,476,393 79.68
Forward currency contracts
payable
(note 11d) - - (178,143) (0.45)
765,348 - 35,066,419 88.77
================= =============== =========== =============
Financial
instruments
categorised as Net
receivables, Net Realisable Realisable
payables and loans Amount Amount
Loan advanced (note
12) - - 2,058,030 5.21
Cash and cash
equivalents (note
14) 7,201,610 - 2,639,366 6.68
Receivables (note
13) 2,020,269 - 2,713 -
Payables (note
15) (443,853) - (262,790) (0.66)
Redemptions Payable (6,750,000) - - -
2,028,026 - 4,437,319 11.23
================= =============== =========== =============
Net Realisable Amount .APPROX. fair value
(c) Net gains on Financial Assets held at Fair Value Through Profit or Loss
2010 2009
GBP GBP
The net gains on financial assets at fair
value through profit
or loss during the period comprise:
Realised gain on financial assets
designated at fair value through profit or
loss 6,292,148 2,172,860
Net unrealised (losses)/gains on financial
assets
designated at fair value through profit or
loss (4,242,153) 306,930
Net gains on financial assets at fair value
through profit or loss 2,049,995 2,479,790
============ ==========
(d) Forward foreign exchange contracts
The Company held a number of foreign exchange contracts during the year but were terminated by 31 July 2010. The Company held no forward exchange contracts as at 31 December 2010.
As at 31 December
2009
Contract Fair Value Fair Value
Average value in Contract in GBP - in GBP -
Outstanding Exchange Foreign Value financial financial Unrealised
contracts rate currency in GBP assets liabilities gain/(loss)
Less than 3 months
Buy GBP 40,163,989 40,163,989 40,342,132 (178,143)
Sell USD 1.622 65,139,564
Buy USD 701,660
Sell GBP 1.619 (1,136,129) 1,138,094 1,136,129 1,965
41,302,083 41,478,261 (176,178)
=========== ============ ============
The Company considered it appropriate and in the best interests of the Shareholders to remove the foreign exchange hedge cover in light of the advanced stage of the disposal programme and the Shareholders were given due notice by way of announcement to the London Stock Exchange.
12. Loan advanced
The Company has a facility agreement with Citibank N.A. The loan bears interest at the overnight ask rate.
During the year the Company advanced GBP2,609,051 (2009: GBP2,072,048). At 31 December 2010 the Company had no loan advanced (2009: GBP1,046,584).
The Company has a facility agreement with Pacific Alliance Asia Opportunity Fund Limited. The loan bears interest at a rate of 12% per annum. During the year the Company advanced GBP1,037,042 (2009:GBP1,011,446). At 31 December 2010 the company had no loan advanced. (2009: 1,011,446).
13. Other Receivables
The Directors consider that the carrying value of the other receivables approximate their fair value.
31 December 31 December
2010 2009
GBP GBP
Sales awaiting settlement 2,020,269 2,713
2,020,269 2,713
============ ============
14. Cash
31 December 31 December
2010 2009
GBP GBP
Net current deposits with banks 7,201,610 2,639,366
============ ============
All cash balances are subject to variable
interest rates.
15. Other Payables
31 December 31 December
2010 2009
GBP GBP
Interest payable - 67
Investment Management fee payable (note
7) 16,619 25,378
Directors fee payable (note 18) 72,916 21,452
Administration fee payable (note 8) 62,808 18,904
Audit fee payable 47,346 33,422
Custodian fee payable (note 9) 1,108 1,675
Legal and Professional fees 60,333 146,617
Other expenses payable 182,723 15,275
443,853 262,790
============ ============
The Directors consider that the carrying value of the other payables approximate their fair value. Included in the above are 2011 termination accrued expenses of GBP247,471(see note 1).
16. Share Capital, Share Premium and Distributable Reserves
31 December 31 December
2010 2009
GBP GBP
Authorised Share Capital
Unlimited number of Unclassified Shares - -
of no par value
============ ============
The Company is a closed ended investment company. At an Extraordinary General Meeting held on 11 March 2010, the Winding Down proposals for the Company were approved. Previously the shareholders interests in ordinary shares were classified as equity in shareholders' funds. It is expected that the Company will be put into liquidation before the end of July 2011. Ordinary shareholders have been reclassed as liabilities.
The Company's capital is represented by an unlimited number of ordinary shares of no par value, and each share carries one vote. They are entitled to dividends when declared. The Company has no restrictions or specific capital requirements on the issue or repurchase of ordinary shares.
No. of Share Distributable
Shares Capital Reserve
Issued Share Capital GBP GBP
Subordinated Non-Voting
Share 1 - 1
------------- -------- --------------
Equity Shares
At 31.12.2010
GBP Ordinary Shares
Balance at start of year 45,350,000 - 44,556,376
Shares redeemed during
the year (40,861,866) - (35,750,519)
Payable to ordinary shareholders - - (8,805,857)
Balance at end of year 4,488,134 - -
------------- -------- --------------
No. of Share Distributable
At 31.12.2009 Shares Capital Reserve
GBP Ordinary Shares GBP GBP
Balance at start and end
of year 45,350,000 - 44,556,376
------------- -------- --------------
Due to the approval to wind down the Company at the Extraordinary General Meeting on 11 March 2010, the residual value due to the shareholders has been reclassified to current liabilities in the statement of financial position.
The Directors may, on issue, designate any unissued Shares as GBP Shares (or Shares of any other currency or with other special rights) or as C Shares convertible into GBP Shares (or Shares of any other currency or with other special rights) or otherwise as they see fit.
Ordinary Shares carry the right to vote at general meetings of the Company and to receive dividends and, in a winding-up rank may participate in surplus assets remaining after settlement of any outstanding liabilities of the Company.
On 1 March 2007 the Company issued to the Investment Manager for cash credited as fully paid, one Subordinated Non-voting Share with no rights to dividends or other distributions or to any capital of the Company on a winding up or otherwise. This Share was issued to facilitate any future redemption by the Company of its share capital.
On 23 February 2007 the Ordinary Shareholders passed a Special Resolution approving the cancellation of the entire amount which would stand to the credit of the share premium account immediately after the issuance of the GBP Ordinary Shares. As a result, a balance of GBP44,556,376 was transferred from share premium to distributable reserve. The Royal Court of Guernsey's approval was obtained on 3 August 2007.
At the annual general meeting held on 30 June 2008, the Ordinary Shareholders passed a Resolution granting the Company the authority to make market purchases of up to 14.99 per cent. of each class of Ordinary Shares issued by the Company. This authority expired on 22 August 2009.
The impact of the two resolutions described above are to enable the Company to effect purchases of its own Shares at a time to be decided by the Directors. Purchases will only be made, pursuant to this authority and in accordance with the rules and regulations of the UK Listing Authority, through the market for cash at prices below the prevailing Net Asset Value of an Ordinary Share where the Directors believe such purchases will result in an increase in the Net Asset Value of the remaining Ordinary Shares of that class and to assist in narrowing any discount to Net Asset Value at which Ordinary Shares of that class may trade.
At the Extraordinary General Meeting held on 11 March 2010, the special resolution passed sought the consent of shareholders to the adoption of New Articles (i) to enable compulsory redemption of Shares, (ii) to remove the requirements for continuation votes, (iii) to provide for a winding up resolution to be put forward following
the Realisation Threshold being met or exceeded so that those Shareholders voting in favour of such winding up resolution following the Realisation Threshold being met or exceeded will collectively represent sufficient of all the votes cast (on a poll) on such resolution to pass such resolution) and (iv) to generally update the Articles to comply with the provisions of the New Law as it was amended on 1 July 2008.
The Directors approved the payment capital returns of cash to Shareholders on 25 June 2010 of GBP18,000,000, on 2 August 2010 of GBP11,000,000 and 4 January 2011 of GBP6,750,000 following the receipt of proceeds from the redemptions placed by the Company. The Directors also approved the fourth payment of capital return of cash to Shareholders of GBP1,500,000 on 23 March 2011.The number of shares in the Company have decreased in line with these redemptions from distributable reserves.
17. Net Assets Attributable to Holders of Ordinary Shares
31 31
December December
2010 2009
GBP GBP
Total assets less
liabilities - 39,505,703
Less: amount attributable to Subordinated
Non-voting Share - -
Amount attributable to Ordinary
Shares* - 39,505,703
========== ===========
Number of Ordinary Shares outstanding 4,488,134 45,350,000
========== ===========
Net assets attributable to holders of Ordinary 0.0000p 87.1129p
Shares (per share)*
========== ===========
*GBP2,793,374 payable to ordinary shareholders is included in Current Liabilities in the Statement of Financial Position, which would result in Net assets attributable to holders of Ordinary Shares (per share) of 62.24p. The final amount payable to ordinary shareholders may differ dependent on the amount realised from investments and sales awaiting settlement.
18. Related Party Transactions
Parties are considered to be related if one party has the ability to control the other party or exercise significant influence over the other party in making financial or operational decisions.
The Directors are responsible for the determination of the investment policy of the Company and have overall responsibility for the Company's activities.
The Company is managed by Gottex Fund Management, SARL which is part of the Gottex Group.
The Company and the Investment Manager have entered into an Investment Management Agreement dated 1 March 2007 (as amended) under which the Investment Manager has been given responsibility for the day-to-day discretionary management of the Company's assets (including uninvested cash) in accordance with the Company's investment objective and policy, subject to the overall supervision of the Directors and in accordance with the investment restrictions in the Investment Management Agreement and the Articles of Association. Details of the investment management and performance fees to which the Investment Manager is entitled are included in notes 6 and 7.
The Company has four non-executive directors, all independent of the Manager. All Directors are entitled to receive an annual fee of GBP20,000 per annum, with the exception of the Chairman who is entitled to GBP25,000 per annum and the Chairman of the Audit Committee who is entitled to GBP22,500 per annum. Total Directors' fees for the year, including outstanding fees at the end of the year, are set out below:
31 December 31 December
2010 2009
GBP GBP
Directors' fees for the year 138,542 94,810
============ ============
Accrued at end of the period 72,916 21,452
============ ============
Include in the fees and accruals above are 2011 Directors' fees of GBP51,042.
As at 31 December 2010, Directors of the Company held the following numbers of Ordinary Shares beneficially
2010 2009
Directors Shares Shares
Robert Sinclair 1,980 20,000
Nicholas Tostevin 1,980 20,000
Richard Hotchkis 1,980 20,000
19. Financial Risk Management
Investment Objective and Policy
Prior to 11 March 2010 the Company's investment objective was to generate consistent returns over the medium-term with low beta to major equity and fixed income market benchmarks. Although not forming part of the investment objective such returns were expected to be associated with a low degree of risk. The Company's investment policy was to invest in a diversified portfolio of hedge funds.
At the Extraordinary General Meeting ("EGM") on 11March 2010, a managed winding down of the Company was approved. As a result of this, the new investment objective and investment policy of the Company is to realise the Company's existing investments in an orderly and timely manner, with a view to distributing cash to Shareholders at appropriate times as sufficient investments are realised. The Company will not make any new investments (other than cash and near cash equivalent securities).
The Fund is exposed to a variety of financial risks as a result of its activities. These risks include market risk (including price risk, interest rate risk and foreign currency risk), credit risk and liquidity risk.
(a) Market Risk
The company's activities expose it primarily to the market risks of changes in market prices, interest rates and foreign currency exchange rates.
Price risk
Market price risk arises mainly from the uncertainty about future prices of the financial instruments held by the underlying hedge funds. It represents the potential loss the Company may suffer through holding market positions in the face of price movements.
The Company's investment portfolio is exposed to market price fluctuations which are monitored by the Investment Manager in pursuance of the investment objectives and policies. Adherence to investment guidelines and to investment and borrowing powers set out in the Placing and Offer for Subscription document mitigates the risk of excessive exposure to any particular type of security or issuer. However with respect to the investment strategy utilised by hedge funds into which the Investment Manager will invest the assets of the Company there is always some, and occasionally significant degree of market risk.
Price sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to equity price risks at the reporting date. The 10% for the Company price movement estimate has been arrived at by taking the average of the total price movement changes during the year.
As at the 31 December 2010 a 10% increase in equity prices would increase payable to ordinary shareholders by 2.74%, (10% increase 2009: 8.92% increase in net assets) while a 10% decrease in equity prices would have an equal and opposite effect.
Interest rate risk
Interest receivable on bank deposits or payable on bank overdraft and any loan positions will be affected by fluctuations in interest rates. All cash balances are at variable rates, see note 14.
The Investment Manager manages the Company's exposure to interest rate risk on a daily basis in accordance with the Company's investment objective and policies.
The following table details the Company's exposure to interest rate risk on a daily basis in accordance with the Company's investment objective and policies.
At 31 December
2010
Less
Weighted than Non-interest
3-12 > 12
Average 1 month months months bearing Total
EIR % GBP GBP GBP GBP GBP
Financial
Assets
Non-interest
bearing 0.00% - - - 2,785,617 2,785,617
Cash and cash equivalents 7,201,610 - - - 7,201,610
Total financial
assets 7,201,610 - - 2,785,617 9,987,227
---------- ---------- ---------- ------------- -----------
Financial
Liabilities
Non-interest
bearing 0.00% - - - 7,193,853 7,193,853
Total financial liabilities - - - 7,193,853 7,193,853
---------- ---------- ---------- ------------- -----------
At 31 December
2009
Less
Weighted than Non-interest
3-12 > 12
Average 1 month months months bearing Total
EIR % GBP GBP GBP GBP GBP
Financial
Assets
Non-interest
bearing 0.00% - - - 35,247,275 35,247,275
Fixed interest
rate 12.00% - 1,011,446 - - 1,011,446
Floating interest
rate 0.88% - - 1,046,584 - 1,046,584
Cash and cash equivalents 2,639,366 - - - 2,639,366
Total financial
assets 2,639,366 1,011,446 1,046,584 35,247,275 39,944,671
---------- ---------- ---------- ------------- -----------
Financial
Liabilities
Non-interest
bearing 0% 178,143 - - 262,790 440,933
Total financial liabilities 178,143 - - 262,790 440,933
---------- ---------- ---------- ------------- -----------
Interest rate sensitivity
The sensitivity analysis below has been determined based on the exposure to interest rates at the reporting date and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period. A 100 bps change is used, being the average movement of the interest rates over the reporting period.
At reporting date, with all other variables held constant, a 100bps increase in interest rate would increase the value payable to shareholders by 25.78bps (2009: 1.19bps) while a 100 bps decrease in interest rate would have an equal and opposite effect.
Foreign currency risk
On 15 July 2010 the Board announced that the foreign exchange hedging facility with Citibank NA would be removed with effect from 31 July 2010, in order to enable additional cash resources to be utilized for the capital return process.
Foreign currency risk arises from fluctuations in the value of a foreign currency. It represents the potential loss the Company may suffer through holding financial instruments that will fluctuate because of foreign exchange rates.
Exchange rates exposure are managed within approved policy parameters utilising forward foreign exchange contracts as detailed in note 11(d) to the financial statements.
The Company's currency exposure relates primarily to investments and loans in USD.
At reporting date, the Company holds the following assets and liabilities in USD:
31.12.10 31.12.09
GBP GBP
$ Assets exposure 2,955,071 40,622,940
Hedge via $ forward currency
contracts - 40,163,989
---------- -----------
Net exposure 2,955,071 458,951
Foreign currency sensitivity
At reporting date, if the USD had weakened by 5% against the GBP with all other variables held constant, the value payable to ordinary shareholders would be GBP147,754 (2009: GBP22,948) lower, mainly as a result of foreign exchange losses on translation of USD denominated financial assets and liabilities to GBP. A 5% strengthening of the USD against GBP would have an equal and opposite effect.
(b) Credit Risk
Credit Risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Company.
The credit risk on cash is mitigated as cash is placed with Northern Trust (AA rating by Standard & Poors) (2009: AA rating by Standard & Poors). Debtors comprise of interest receivable and securities sold receivable. The maximum credit risk exposure as at 31 December 2010 amounts to GBP9,221,879 (2009: GBP4,700,109). It is the opinion of the Board of Directors that the carrying amounts of these financial assets represent the maximum credit risk exposure at the statement of financial position date.
In accordance with the investment restrictions as described in its Offering Memorandum, the Company may not invest more than 20% of the Company's gross assets or be exposed to the creditworthiness or solvency of any one counterparty. However, this restriction shall not apply to securities issued or guaranteed by a government, government agency or instrumentality of any European Union or OECD Member States or by any supranational authority of which one or more European Union or OECD Member States are members. Furthermore, the restriction does not apply to transactions effected with any counterparty, which advances full and appropriate collateral in respect of such transactions or where the counterparty (i) is regulated by CFTC or the FSA and (ii) has financial resources of US$ 20 million (or its equivalent in another currency).
c) Liquidity Risk
Liquidity risk is the risk that the Company will encounter difficulties in realising assets or otherwise raising funds to meet financial commitments.
The Company invests its assets in redeemable participating shares of other private investment companies which may be illiquid. As a result the Company may not be able to quickly liquidate its investments in these instruments at an amount close to their fair value in order to meet the Company's liquidity requirements or to respond to specific events such as deterioration of credit worthiness of any particular issuer.
The underlying funds held by the Company are in the process of liquidating.
The Company's Investments and sales awaiting settlement are in underlying funds that are subject to suspension, gating, side pockets, orderly wind down or liquidation and are valued at their net asset values (whether estimated or final, as appropriate) provided by their manager or administrator. These values may be unaudited or may themselves be estimates.
The Directors of the Company believe that the estimated fair value of the investments and sales awaiting settlement as stated at 31 December 2010 represents the most likely value that would have been recoverable at that time given market prices and the liquidity of the securities held. However, because of the liquidity profile of the terminating investments and the sales awaiting settlement, these estimates may differ significantly from the values that may ultimately be realised. Post year-end sales were approximately GBP225,344. On 29 March 2011 the Directors approved the sale of the remaining portfolio for $845,456 (net of costs). The investments held at 31 December 2010 have been written down to this amount, reflecting the net realizable amount.
As at 31 December
2010
Liquidity
Issue Notice Initial % of NAV
Implementation Underlying Liquidity Period For Lock-Up as at
Liquidity Issue Date Fund Name Terms Redemptions Period 31/12/2010
Days Days
BAM
Opportunity
Offshore Fund,
Side Pocket 01/04/2010 Ltd. Quarter 45 0.00%
Canyon Value
Realization
Fund (Cayman)
Side Pocket 31/10/2008 Ltd. Quarter 90 0.00%
Chestnut Fund
Ltd.
Side Pocket 30/09/2008 Sidepocket Annual 180 720D 0.00%
Cheyne Special
Situations
Liquidating 31/03/2008 Fund Quarter 30 183D 0.00%
Contrarian
Fund I
Side Pocket 31/10/2008 Offshore Annual 90 0.00%
De Shaw
Composite
International
Gated 30/11/2008 Fund Quarter 90 0.00%
DE Shaw
Composite
International
Fund Side
Side Pocket 31/01/2006 Pocket Month 90 1095D 0.00%
DKR Soundshore
Oasis Fund
Liquidating 30/09/2008 Ltd Annual 60 600D 0.00%
Goldentree
Special
Holdings I,
Side Pocket 30/09/2008 Ltd Quarter 45 548D 0.00%
Halcyon
Structured
Opportunities
Liquidating 30/06/2008 Offshore Fund Quarter 90 12M;2%<15M;1.5%<18M;1%<21M;0.5%<24M 0.00%
Oz Overseas
Fund II,
Side Pocket 31/10/2007 Limited Quarter 30 2%<1095D 0.00%
Petra Offshore
Suspended 31/08/2008 Fund Annual 90 1Y;5%<2Y 0.00%
Petra Offshore
Side Pocket 31/08/2008 Side Pocket 2 Annual 90 365D 0.00%
Plainfield
2008
Liquidating
Liquidating 30/09/2008 Limited Quarter 60 365D 0.00%
Shepherd
Investments
International
Side Pocket 30/04/2007 Ltd. Quarter 90 1095D 0.00%
Sorin Offshore
Fund Ltd,
Liquidating 30/09/2008 Class A Quarter 90 3%<365D 0.00%
TCF SPV
Side Pocket 28/02/2009 Limited Quarter 90 0.00%
Trafalgar
Liquidating 28/02/2009 Recovery Fund Quarter 90 0.00%
Tykhe
Portfolio Ltd,
Liquidating 30/11/2008 Class L Month 30 3% 0.00%
Waterfall Eden
Side Pocket 28/02/2009 Fund Ltd Annual 1095 0.00%
Whitebox
Combined Fund
Liquidating 21/10/2008 Ltd, Class A Quarter 45 0.00%
Whitebox
Combined Fund
Liquidating 21/10/2008 Ltd, Class G Quarter 45 365D 0.00%
Whitebox
Combined Fund
Liquidating 21/10/2008 Ltd, Class SB Quarter 45 365D 0.00%
Total 0.00%
As at 31 December
2009
Liquidity
Issue Notice Initial % of NAV
Implementation Underlying Liquidity Period For Lock-Up as at
Liquidity Issue Date Fund Name Terms Redemptions Period 31/12/2009
Arche Fund
Limited, Class
Suspended/Restructuring 30/06/2008 A Single 120 365D 0.31%
Chestnut Fund
SidePocket/Liquidating 30/09/2008 Side Pocket Yearly 180 720D 0.04%
Cheyne Special
Situations
SidePocket/Liquidating 31/03/2008 Fund Inc. Quarterly 30 183D 0.16%
Cheyne Special
Situations
SidePocket/Liquidating 31/03/2008 Fund Inc. Quarterly 30 183D 0.20%
Cheyne Special
Situations
SidePocket/Liquidating 31/03/2008 Fund Inc. Quarterly 30 183D 0.27%
Contrarian
Fund I
SidePocket/Liquidating 31/10/2008 Offshore Yearly 90 0.32%
D E Shaw
Composite
International
Gate 30/11/2008 Fund Quarterly 90 3.16%
D E Shaw
Composite Fund
Side
International
SidePocket/Liquidating 31/01/2006 Pocket Monthly 90 1095D 0.31%
DKR Soundshore
Oasis Fund
Gate 30/09/2008 Ltd Yearly 60 600D 2.51%
Ellington
Offshore
Partners Fund,
SidePocket/Liquidating 30/04/2009 Class A Quarterly 60 0.30%
Goldentree
Special
Holdings I,
SidePocket/Liquidating 30/09/2008 Ltd Quarterly 45 548D 0.10%
Halcyon
Structured
Opportunities
Offshore Fund
Suspended/Restructuring 30/06/2008 Ltd. Quarterly 90 12M;2%<15M;1.5%<18M;1%<21M;0.5%<24M 0.50%
New Ellington
Credit
SidePocket/Liquidating 30/09/2007 Overseas Ltd. Yearly 90 365D 0.06%
Oz Overseas
Fund II,
SidePocket/Liquidating 31/10/2007 Limited Quarterly 30 2%<1095D 0.09%
Petra Offshore
Suspended/Restructuring 31/08/2008 Fund Yearly 90 1Y;5%<2Y 0.00%
Petra Offshore
Fund Side
SidePocket/Liquidating 31/08/2008 Pocket Yearly 90 365D 0.00%
Petra Offshore
SidePocket/Liquidating 31/08/2008 Side Pocket 2 Yearly 90 365D 0.00%
Plainfield
2008
Liquidating
SidePocket/Liquidating 30/09/2008 Limited Quarterly 60 365D 1.62%
Qvt Overseas
Limited, Side
SidePocket/Liquidating 31/01/2008 Pocket Quarterly 65 1095D 0.01%
Redbrick
SidePocket/Liquidating 30/09/2008 Capital Monthly 30 5%<1Y 0.02%
Sandleman
Partners
Multi-Strategy
Fund Ltd.
Class S Series
SidePocket/Liquidating 30/06/2008 II Quarterly 65 365D 0.22%
Sandelman
Partners
Opportunity
Fund Ltd Class
B1 Series 04B
Restructuring 30/06/2008 July 2008 Quarterly 65 365D 1.23%
Sorin Offshore
Fund Ltd,
SidePocket/Liquidating 30/09/2008 Class A Quarterly 90 3%<365D 1.12%
TCF SPV
SidePocket/Liquidating 28/02/2009 Limited Quarterly 90 0.14%
Trafalgar
SidePocket/Liquidating 30/01/2009 Merchant Fund Quarterly 90 0.02%
Trafalgar
SidePocket/Liquidating 28/02/2009 Recovery Fund Quarterly 90 1.41%
Tykhe
Portfolio Ltd,
SidePocket/Liquidating 30/11/2008 Class L Monthly 30 0.03 0.00%
Waterfall Eden
Suspended/Restructuring 28/02/2009 Fund Ltd. Quarterly 60 3%<12M 1.91%
West Side
SidePocket/Liquidating 31/08/2007 Offshore Fund Quarterly 30 2.5%<12M 0.05%
Whitebox
Combined Fund
Ltd Class G
SidePocket/Liquidating 21/10/2008 8-08 Quarterly 45 365D 0.05%
Whitebox
Combined Fund,
SidePocket/Liquidating 21/10/2008 Class A Quarterly 45 0.22%
Whitebox
Multistrategy
Fund Limited,
SidePocket/Liquidating 21/10/2008 SPV Quarterly 45 365D 0.20%
Total 16.55%
Under the Wind Down proposal approved by the shareholders, the Company expects to realize its investments in accordance with the following indicative timetable:
Cumulative percentage
of entire portfolio
Realisation proceeds
received by: received by Company
31 July 2011 100
The following table details the Company's liquidity analysis for its financial liabilities. The table has been drawn up based on the undiscounted net cash flows on the financial liabilities that settle on a net basis and the undiscounted gross cash flows on those financial liabilities that require gross settlement.
Less
At 31 December 2010 than
1 month 1-3 months 3-12 months Total
GBP GBP GBP GBP
---------- ----------- ------------ ----------
Forward foreign currency
contracts - - - -
Loans payable - - - -
Management fee payable 6,685 - 9,934 16,619
Custodian fee payable 446 - 662 1,108
Audit fee payable - - 47,346 47,346
Admin fee payable 19,058 - 43,750 62,808
Directors fees payable - 21,874 51,042 72,916
General expenses payable - 182,723 - 182,723
Loan interest payable - - - -
Legal and Professional
fees - - 60,333 60,333
Redemptions Payable 6,750,000 - - 6,750,000
Payable to ordinary
shareholders - - 2,793,374 2,793,374
6,776,189 204,597 3,006,441 9,987,227
========== =========== ============ ==========
Less
At 31 December 2009 than
1 month 1-3 months 3-12 months Total
GBP GBP GBP GBP
---------- ----------- ------------ ----------
Forward foreign currency
contracts 178,143 - - 178,143
Loans payable - - - -
Management fee payable 25,378 - - 25,378
Custodian fee payable 1,675 - - 1,675
Audit fee payable - - 33,422 33,422
Admin fee payable 18,904 - - 18,904
Directors fees payable - 21,452 - 21,452
General expenses payable - 15,275 - 15,275
Loan interest payable 67 - - 67
Legal and Professional
fees - - 146,617 146,617
224,167 36,727 180,039 440,933
========== =========== ============ ==========
Fair Value Hierarchy
IFRS 7 requires the Company to classify fair value financial instruments in a fair value hierarchy that reflects the significance of the inputs used in making the measurements. IFRS 7 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under IFRS 7 are as follows:
-- Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities
-- Level 2: inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e., derived from prices)
-- Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs)
The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety is determined on the basis of the lowest level input that is significant to the fair value measurement in its entirety. For this purpose, the significance of an input is assessed against the fair value measurement in its entirety. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs, that measurement is a level 3 measurement. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgment, considering factors specific to the asset or liability.
The determination of what constitutes 'observable' requires significant judgment by the Company. The Company considers observable data to be that market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
The following tables presents the Company's financial assets and liabilities by level within the valuation hierarchy as of 31 December 2010.
The Investee Funds held by the Company are not quoted in active markets.
The Investee Funds classified in Level 2 at 31 December 2009 were fair valued using the net asset value of the Investee Fund, as reported by the respective Investee Fund's administrator.
The following table presents the transfers between levels for the year ended 31 December 2010.
Gottex Market Neutral
Fund Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
At 31 December 2010
Financial assets designated
at fair value through
profit or loss - - 765,348 765,348
Derivative financial
assets - - - -
- - 765,348 765,348
--------------------------------------- ----------- ---------- -----------
Financial liabilities
held for trading
Derivative financial
liabilities - - - -
- - - -
--------- ----------- ---------- -----------
Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
At 31 December 2009
Financial assets designated
at fair value through
profit or loss - 28,707,651 6,536,910 35,244,561
Derivative financial
assets - 1,965 - 1,965
- 28,709,616 6,536,910 35,246,526
--------------------------------------- ----------- ---------- -----------
Financial liabilities
held for trading
Derivative financial
liabilities - (178,143) - (178,143)
- (178,143) - (178,143)
--------------------------------------- ----------- ---------- -----------
During 2010 certain investments on the portfolio incurred liquidity constraints and were transferred from level 2 to level 3
At 31 December 2010 Level 2 Level 3 Total
GBP GBP GBP
Transfers from level 2 to level
3 (8,657,290) 8,657,290 -
During 2009 liquidity constraints were lifted from some investments and this resulted in transfers from level 3 to level 2.
Level 2 Level 3 Total
At 31 December 2009 GBP GBP GBP
Transfers from level 3 to level
2 480,207 (480,207) -
The following table presents movement in Level 3 for the period ended 31 December 2010.
Level
Level 3 3
2010 2009
Gottex Market Neutral
Fund GBP GBP
Opening Value 01 January 6,536,910 17,445,102
Purchases - 3,252,476
Sales (18,046,117) (10,896,092)
Transfers from level
2 to level 3 8,657,290 (480,207)
Realised gains 4,302,415 1,037,648
Unrealised gains/(losses) (685,150) (3,822,017)
Closing Value at 31
December 2010 765,348 6,536,910
============= =============
Gains or losses are included through profit or loss in the statement of comprehensive income for assets held at end of the year.
Level 3 is comprised of 26 Investee Funds which were fair valued with reference to the net asset value as reported by the Investee Fund's administrator. All of these Funds have sidepockets, redemption gates or other liquidity restrictions.
20. Capital Risk Management
The Investment Manager manages the capital of the Company in accordance with the Company's investment objectives and policies. The Fund has no restrictions or specific capital requirements on the subscriptions and redemptions of shares.
The Investment Manager reviews the capital structure on a monthly basis. It is the Company's policy not to have any long-term or fixed structural gearing. However, the Company may be indirectly exposed to gearing to the extent that the underlying funds are themselves geared.
2010 2009
GBP GBP
Borrowings - -
Cash and bank balances (7,201,610) (2,639,366)
------------ ------------
Borrowings net of cash and bank balances (7,201,610) (2,639,366)
Net assets attributable to holders of Ordinary
Shares - 39,505,703
============ ============
Ratio 0% (6.68)%
21. Reconciliation of net asset value attributable to equity shareholders to the published net asset value
2010 2009
GBP GBP
Published net asset value 10,485,263 39,505,703
Adjustments to net asset value relating to
3rd payment of capital return of cash to
shareholders (6,750,000) -
Adjustments to net asset value relating to
break up expenses (247,471) -
Adjustments to net assets value relating
to the expected sale of the portfolio (694,418)
Amounts payable to ordinary shareholders (2,793,374)
- 39,505,703
============ ===========
Published net asset value 77.26p 87.11p
Adjustments to net asset value relating to (77.26p) -
break up adjustments and payment of 3rd capital
return of cash to shareholders and amounts
payable to ordinary shareholders
0.00p 87.11p
============ ===========
These adjustments are due to the 3(rd) payment of capital return of cash to shareholders of GBP6,750,000 which was paid in January and announced on 16 December 2010, termination expenses expected to be incurred up to the expected termination date, the expected sale of the portfolio as per note 22 and the reclassification of ordinary shareholders to current liabilities.
22. Subsequent Events
The Directors approved the payment of a fourth capital return of cash to Shareholders of GBP1,500,000 on 23 March 2011.
Post year-end sales were GBP225,344.
In addition, on 29 March 2011 the Directors approved the sale of the remaining portfolio for $845,456 (net of costs). The investments held at 31 December 2010 have been written down to this amount, reflecting the net realizable amount.
TOP TEN HOLDINGS
As at 31 December 2010
Fair % of
Total
Value** Net
Description Holding GBP Assets
Plainfield 2008 Liquidating Limited 8,248 316,110 -
Cheyne Special Situations Fund 3,808 191,497 -
Shepherd Investments International
Ltd. 318 151,981 -
Waterfall Eden Fund Ltd 359 132,594 -
Halcyon Structured Opportunities
Offshore Fund 324 116,668 -
Contrarian Fund I Offshore 1,317 102,710 -
DE Shaw Composite International
Fund Side Pocket 207,252 96,802 -
DKR Soundshore Oasis Fund Ltd 114 88,916 -
Canyon Value Realization Fund (Cayman)
Ltd. 58 52,322 -
BAM Opportunity Offshore Fund,
Ltd. 86 51,573 -
** The investments held have been written down to reflect the net realizable amount as per note 22
As at 31 December 2009
Fair % of
Value Total Net
Description Holding GBP Assets
WAF Offshore Fund Limited 15,000 1,449,811 3.67
Canyon Value Realization Fund (Cayman)
Ltd. 1,856 1,417,801 3.59
Proprietary Capital 17,502 1,292,504 3.27
ASI Offshore Global Relative Value
Fund Ltd 2,000 1,272,899 3.22
GS Gamma Investments Ltd. 1,433 1,250,388 3.17
D E Shaw Composite International
Fund 1,866,036 1,247,494 3.16
Post Total Return Offshore Fund
II, Ltd. 1,827 1,216,250 3.08
Aristeia International Ltd, Class
A Voting 2,685 1,209,507 3.06
Nisswa Fund Limited Class A 886 1,191,926 3.02
Oak Hill Credit Alpha Fund (Offshore),
Ltd. 1,313 1,146,705 2.90
INVESTMENT POLICY
The Company's investment policy was to invest the Company's assets in an actively managed portfolio of hedge funds. The Investment Manager sought to achieve this by allocating the Company's assets among professionally selected hedge funds that are managed by experienced portfolio managers employing, as a group, the following investment strategies (either directly or indirectly).
-- Relative Value
-- Event Driven
-- Hedged Equities
-- Trading
At an Extraordinary General Meeting held on 11 March 2010, a managed Winding Down of the Company was approved. As a result of this, the new investment objective and investment policy of the Company is to realise the Company's existing investments in an orderly and timely manner, with a view to distributing cash to Shareholders at appropriate times as sufficient investments are realised. The Company will not make any new investments (other than cash and near cash equivalent securities).
The management and impact of the risks associated with this Investment Policy are described in detail in the notes to the Financial Statements (notes 20 and 21).
PORTFOLIO STATEMENT
As at 31 December 2010
Fair % of
Total
Description Holding Value Net
Unlisted investments (2009:
79.68%) GBP Assets
Arche Fund, Ltd 671 - -
BAM Opportunity Offshore Fund,
Ltd. 86 51,573 -
Canyon Value Realization Fund
(Cayman) Ltd. 58 52,322 -
Chestnut Fund Ltd. Side Pocket 16 2,812 -
Cheyne Special Situations Fund 3,808 191,497 -
Contrarian Fund I Offshore 1,317 102,710 -
DE Shaw Composite International
Fund 1 55,735 -
DE Shaw Composite International
Fund Side Pocket 207,252 96,802 -
DKR Soundshore Oasis Fund Ltd 114 88,916 -
Goldentree Special Holdings
I, Ltd 842 27,776 -
Halcyon Structured Opportunities
Offshore Fund 324 116,668 -
Oak Hill Credit Alpha Fund (offshore),
Ltd. 1 13 -
Oz Overseas Fund II, Limited 66 31,922 -
Petra Offshore Fund 1,482,144 - -
Petra Offshore Fund Side Pocket 117,856 - -
Petra Offshore Side Pocket 2 462,604 - -
Plainfield 2008 Liquidating
Limited 8,248 316,110 -
Shepherd Investments International
Ltd. 318 151,981 -
Sorin Offshore Fund Ltd, Class
A 30 30,433 -
TCF SPV Limited 575 28,388 -
Trafalgar Recovery Fund 175 2,423 -
Tykhe Portfolio Ltd, Class L 8,881 559 -
Waterfall Eden Fund Ltd 184 69,393 -
Whitebox Combined Fund Ltd,
Class A 32 22,842 -
Whitebox Combined Fund Ltd,
Class G 7 4,449 -
Whitebox Combined Fund Ltd,
Class SB 21 14,442 -
---------- -------
1,459,766 -
Reduction in Value** (694,418) -
---------- -------
Total Investments 765,348 -
Other Net Assets* (765,348) -
Total Value of Company - -
---------- -------
*GBP2,793,374 payable to ordinary shareholders is included in Other Net Assets.
** The investments held have been written down to reflect the net realizable amount as per note 22.
Gottex Market Neutral Trust Limited
Management and Administration
Directors
Joan Beck (Chairman) Robert Sinclair
Trafalgar Court, Les Banques, Trafalgar Court, Les Banques,
St Peter Port, Guernsey, St Peter Port, Guernsey,
Channel Islands, GY1 3QL. Channel Islands, GY1 3QL.
Richard Hotchkis Nicholas Tostevin
Trafalgar Court, Les Banques, Trafalgar Court, Les Banques,
St Peter Port, Guernsey, St Peter Port, Guernsey,
Channel Islands, GY1 3QL. Channel Islands, GY1 3QL.
(All Directors are independent of
the Investment Manager)
Investment Manager Registered Office
Gottex Fund Management, Sarl Trafalgar Court, Les Banques,
Avenue de Rhodanie 48, St Peter Port, Guernsey,
1007 Lausanne, Channel Islands, GY1 3QL.
Switzerland.
Administrator, Secretary and Custodian and Principal Banker
Registrar
Northern Trust International Northern Trust (Guernsey)
Fund Limited
Administration Services (Guernsey) P.O Box 71,
Limited,
P.O Box 255, Trafalgar Court, Les Banques,
Trafalgar Court, Les Banques, St Peter Port, Guernsey,
St Peter Port, Guernsey, Channel Islands, GY1 3DA.
Channel Islands, GY1 3QL.
Guernsey Legal Advisors Auditors
Ogier KPMG Channel Islands Limited
Ogier House, 20 New Street,
St Julian's Avenue, St Peter Port, Guernsey,
St Peter Port, Guernsey, Channel Islands, GY1 4AN.
Channel Islands, GY1 1WA.
UK Legal Advisors
Binghams LLP
41 Lothbury,
London EC2R 7HF.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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