TIDMSED
RNS Number : 4882M
Saltus European Debt Strategies Ltd
17 August 2011
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SALTUS EUROPEAN DEBT STRATEGIES LIMITED
(The "Company") (Registered in Guernsey - Number 46912)
Registered Office:
2(ND) FLOOR, REGENCY COURT, GLATEGNY ESPLANADE,
ST PETER PORT, GUERNSEY GY1 3NQ
TELEPHONE: +44 1481 720321 FACSIMILE: +44 1481 716117
E-MAIL: Funds@bfgl.com
For immediate Release 17 August 2011
---------------------- ---------------
INTERIM REPORT 2011
Saltus European Debt Strategies Limited today announces its
Interim Results for the six months ended 30 June 2011
SUMMARY INFORMATION
Principal Activity
Saltus European Debt Strategies Limited ("the Company") is an
authorised closed-ended investment scheme domiciled in Guernsey.
The Company is listed and traded on the London Stock Exchange.
Investment Objective and Policy
The Company's investment objective is to produce annual returns
in excess of 3-month Sterling LIBOR plus 7.5 per cent over a
rolling 5-year period, with annual standard deviation of under 5
per cent.
The Company's investment policy is to invest in a portfolio of
absolute return funds, which is expected to comprise mostly of
debt-oriented hedge funds, but which may also include long only
debt funds and closed-ended limited partnerships with longer
lock-ups.
Asset Allocation by Hedge Fund Strategy
Excluding cash, the estimated allocation to underlying hedge
fund strategies as at 30 June 2011 was as follows:
Direct Wtg%
----------------------- -------
Distressed 64.4%
Multi-Strategy Credit 29.8%
Asset Backed Lending 5.5%
Leveraged Loans 0.3%
Total 100.0%
----------------------- -------
Look-through * Wtg%
----------------------- -------
Distressed 56.2%
Special Situations 16.8%
High Yield Long/Short 12.4%
Asset Backed Lending 6.9%
Credit Trading 3.4%
Other 2.4%
Leveraged Loans 1.9%
----------------------- -------
Total 100.0%
----------------------- -------
The top table shows the allocation of the Company to the
underlying managers by strategy type. The bottom table breaks down
the multi-strategy managers by positions to give a look through of
the underlying portfolio exposure of the Company.
*Estimate by Saltus Partners LLP based on interviews with a
sample of underlying managers.
Analysis of Significant Investments
At 30 June 2011 the Company's investment portfolio comprised the
following principal holdings:
% of
Market Value Portfolio
Name of Investment Strategy GBP Value
-------------------------------- ---------------- ------------- -----------
Multi-strategy
King Street Europe Fund credit 2,929,866 13.88%
Apollo European Principal
Finance LP Distressed 2,832,520 13.42%
Fortelus Special Situations Distressed 2,611,172 12.37%
Strategic Value Restructuring
Fund Distressed 2,547,130 12.07%
RAB European Credit Multi-strategy
Opportunities Fund credit 2,233,408 10.58%
OCM European Principal
Opportunities Fund Distressed 1,984,907 9.41%
Trafalgar Recovery Fund Distressed 1,473,103 6.98%
Ironshield Special Situations
Fund Distressed 1,342,738 6.36%
Asset backed
Trafalgar Kahala Jet Fund lending 1,153,793 5.47%
Multi-strategy
Cognis I Fund credit 999,399 4.74%
Trafalgar Discovery Fund Distressed 382,465 1.81%
ORN European Distressed Debt
Fund Distressed 242,358 1.15%
Sub Total 20,732,859 98.24%
-------------------------------------------------- ------------- -----------
Other (individually less than
1% of portfolio value) 370,755 1.76%
-------------------------------------------------- ------------- -----------
Total 21,103,614 100.00%
-------------------------------------------------- ------------- -----------
RESPONSIBILITY STATEMENT
To the best of our knowledge, and in accordance with the
applicable reporting principles for interim financial reporting,
the interim condensed financial statements give a true and fair
view of the assets, liabilities, financial position and profit or
loss of the Company, and the interim management report of the
Company 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 opportunities and risks associated
with the expected development of the Company for the remaining
months of the fiscal year.
C Sherwell R Dorey
Director Director
16 August 2011
CHAIRMAN'S STATEMENT
I am pleased to present our shareholders with this set of
interim condensed unaudited financial statements for Saltus
European Debt Strategies Limited covering the period from 1 January
2011 to 30 June 2011.
Performance Review
Over the six month period, the Company's net asset value per
share increased 2.5% to 63.3p as at 30 June 2011. This was made up
of a -0.5% loss in the underlying value of the investments and a
foreign exchange translation gain of 3.0%. The share price
increased 5.1% over the same period, both as a result of the NAV
improvement and a slight narrowing of the share price discount to
18.6%.
By comparison, during what proved to be a volatile trading
period equities ended up relatively flat (MSCI Europe: 1.8%),
whilst continued low levels of defaults provided strong returns for
high yield credit (Bank of America Merrill Lynch Euro High Yield
Master: 4.7%) but fewer opportunities for event-driven distressed
managers (HFR Distressed Index: 0.7%).
Investment Review
The return for the period, prior to foreign exchange gains, was
made up as follows:
[Refer to Chart 1]
An otherwise reasonable performance was marred by the write-off
of the remaining value in the Cognis liquidating portfolio, at a
cost of 3% of NAV - the bulk of the value remaining in this fund
comprised a single investment which was subject to a litigation,
which the manager had been unwilling to provide against, and which
they had expected to win. However the judgement found against them
and this has resulted in a full write-down on the remaining value
in that fund.
At the end of the period, the Company had an estimated total
gross long book of 75% of NAV and gross short book of 25%, giving
an estimated net exposure of 50%.
Review of Investment Activity
During the period new investments were made totalling GBP1.8m,
including meeting outstanding capital commitments, and redemptions
were received totalling GBP1.5m. Since the period end a further
GBP0.7m, EUR1.5m and $0.4m has been received and EUR0.9m spent
meeting existing capital commitments. As a result of this the
Company's remaining commitments now total approximately GBP1.3m,
the majority of which we expect to be called down by the year
end.
Company Liquidity and share buyback activity
The Company had net cash resources of GBP3.3 million as at 30
June 2011 (GBP4.3 million as at 15 August 2011, being the latest
practical date before the printing of this document) to meet its
outstanding capital commitments, working capital requirements and
engage in share buyback activity. Having obtained a whitewash
approval from shareholders at the annual general meeting of the
Company in May, the Company was able to recommence its share
buyback programme, acquiring and cancelling 2,158,210 shares during
the first six months. A further 486,631 shares have been purchased
and cancelled since 30 June 2011 and we expect to continue to use
surplus cash for this purpose.
Looking forward
Default volumes in Europe remained negligible - with only 2
rated issuers defaulting during the last quarter, bringing the
total number of European rated defaults for the year-to-date to 5.
The trailing 12 month default rate now stands at 1%. Moody's
forecast that this will double to a still low level of 2% within
the next 12 months, although their pessimistic scenario (for which
we may be heading) calls for default rates to exceed 5% within the
next year.
Managers continued to report increased selling by banks as their
portfolios are now provided at levels equal to or below the market
value, so they can sell without taking further losses.
Overall European credit quality continues to deteriorate in both
absolute terms and relative to the US, although this has not
resulted in any pick-up in default activity thus far.
The Sub-Manager anticipates that rising default rates combined
with distressed debt ownership moving from banks to hedge funds
will be positive for returns available to distressed debt managers
in the medium term.
As previously announced, the Board has indicated its intention
to hold a winding-up vote at the next annual general meeting. The
Board intends to consult with shareholders prior to this.
G. Baird
Chairman
16 August 2011
INDEPENDENT REVIEW REPORT
FOR THE PERIOD ENDED 30 JUNE 2011
Introduction
We have been engaged by the Company to review the condensed
unaudited set of financial statements in the interim report for the
six months ended 30 June 2011 which comprises the Statement of
Comprehensive Income, the Statement of Changes in Shareholders'
Equity, Statement of Financial Position, Statement of Cash Flows
and related notes 1 to 23. We have read the other information
contained in the interim report and considered whether it contains
any apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
Directors' Responsibilities
The interim report is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the interim report in accordance with the Disclosure and
Transparency Rules of the United Kingdom's Financial Services
Authority.
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with International Financial
Reporting Standards (IFRSs) as adopted by the European Union. The
condensed set of financial statements included in this interim
report has been prepared in accordance with International
Accounting Standard 34, "Interim Financial Reporting", as adopted
by the European Union.
Our Responsibility
Our responsibility is to express to the Company a conclusion on
the condensed set of financial statements in the interim report
based on our review.
Our report has been prepared in accordance with the terms of our
engagement to assist the Company in meeting its responsibilities in
respect of half-yearly financial reporting in accordance with the
Disclosure and Transparency Rules of the United Kingdom's Financial
Services Authority and for no other purpose. No person is entitled
to rely on this report unless such a person is a person entitled to
rely upon this report by virtue of and for the purpose of our terms
of engagement or has been expressly authorised to do so by our
prior written consent. Save as above, we do not accept
responsibility for this report to any other person or for any other
purpose and we hereby expressly disclaim any and all such
liability.
Scope of Review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, "Review of
Interim Financial Information performed by the Independent Auditor
of the Entity" issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK and Ireland) and consequently does not enable us to
obtain assurance that we would become aware of all significant
matters that might be identified in an audit. Accordingly, we do
not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the interim report for the six months ended 30 June 2011 is not
prepared, in all material respects, in accordance with
International Accounting Standard 34, as adopted by the European
Union, and the Disclosure and Transparency Rules of the United
Kingdom's Financial Services Authority.
BDO Limited
Chartered Accountants
Place du Pre, Rue du Pre, St Peter Port, Guernsey
Date: 16 August 2011
STATEMENT OF COMPREHENSIVE INCOME (unaudited)
For the six month period ended 30 June 2011
1 January 1 January 1 January
2011 to 2010 to 2010 to
30 June 31 December 30 June
2011 2010 2010
(unaudited) (audited) (unaudited)
Notes GBP GBP GBP
Net gains/(losses) on fair
value through profit or loss
investments 11 49,289 (131,131) (1,305,591)
Other gains and losses 5 74,669 41,580 761,170
----------- ----------- -----------
123,958 (89,551) (544,421)
----------- ----------- -----------
Income
Other operating income 6 531,027 114,788 99,401
Expenses
Management and performance
fees 8 (124,702) (262,599) (133,069)
Other expenses 8 (157,194) (237,875) (119,729)
----------- ----------- -----------
(281,896) (500,474) (252,798)
----------- ----------- -----------
Net income/(expenses) 249,131 (385,686) (153,397)
----------- ----------- -----------
Finance costs 7 (2,208) (225) (247)
----------- ----------- -----------
Profit/(loss) for the financial
period/year 370,881 (475,462) (698,065)
Other comprehensive income - - -
----------- ----------- -----------
Total comprehensive
income/(expense) 370,881 (475,462) (698,065)
=========== =========== ===========
Basic and Diluted
Earnings/(Loss) per Ordinary
Share 10 0.94p (1.14)p (1.66)p
Weighted Average Number of
Ordinary Shares outstanding 10 39,373,778 41,744,798 42,046,353
All items in the above statement derive from continuing
operations.
All income is attributable to the Ordinary Shares of the
Company.
The accompanying notes on pages 11 to 22 form an integral part
of the condensed unaudited Financial Statements.
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (unaudited)
Share Distributable Accumulated
Premium Reserve Profits/(losses) Total
Notes GBP GBP GBP GBP
For the six
month period
ended 30 June
2011
(unaudited)
At 31 December
2010 - 41,821,632 (16,844,359) 24,977,273
Total
comprehensive
income for the
financial
period - - 370,881 370,881
Ordinary shares
cancelled
during the
period 16(b) - (1,123,181) - (1,123,181)
At 30 June 2011 - 40,698,451 (16,473,478) 24,224,973
======= ============= ================ ===========
Share Distributable Accumulated
Premium Reserve Profits/(losses) Total
Notes GBP GBP GBP GBP
For the year
ended 31 December
2010 (audited)
At 31 December
2009 - 42,609,792 (16,368,897) 26,240,895
Total
comprehensive
expense for the
year - - (475,462) (475,462)
Ordinary shares
cancelled during
the year 16(b) - (788,160) - (788,160)
At 31 December
2010 - 41,821,632 (16,844,359) 24,977,273
======= ============= ================ ==========
Share Distributable Accumulated
Premium Reserve Profits/(losses) Total
Notes GBP GBP GBP GBP
For the six month
period ended 30
June 2010
(unaudited)
At 31 December
2009 - 42,609,792 (16,368,897) 26,240,895
Total
comprehensive
expense for the
financial
period - - (698,065) (698,065)
Ordinary shares
cancelled during
the period 16(b) - (28,159) - (28,159)
At 30 June 2010 - 42,581,633 (17,066,962) 25,514,671
======= ============= ================ ==========
The accompanying notes on pages 11 to 22 form an integral part
of the condensed unaudited Financial Statements.
STATEMENT OF FINANCIAL POSITION (unaudited)
At 30 June 2011
30 June 31 December 30 June
2011 2010 2010
(unaudited) (audited) (unaudited)
Notes GBP GBP GBP
Non-current assets
Investments at fair value
through profit or loss 11 21,103,614 20,747,754 21,272,818
------------ ------------ ------------
Current assets
Prepayments 8,392 11,207 7,056
Due from broker 11 - 6,663 32,861
Investments receivable - - 681,421
Cash and cash equivalents 12 3,285,011 4,267,967 3,584,126
------------ ------------ ------------
Total current assets 3,293,403 4,285,837 4,305,464
------------ ------------ ------------
Current liabilities
Accrued expenses 14 (65,444) (56,318) (63,611)
Other payables 16 (106,600) - -
Total current liabilities (172,044) (56,318) (63,611)
------------ ------------ ------------
Net current assets 3,121,359 4,229,519 4,241,853
------------ ------------ ------------
Net assets 24,224,973 24,977,273 25,514,671
============ ============ ============
Equity attributable to
equity holders
Share capital 15 - - -
Share premium 16 (a) - - -
Other distributable reserve 16 (b) 40,698,451 41,821,632 42,581,633
Accumulated losses (16,473,478) (16,844,359) (17,066,962)
------------ ------------ ------------
Total shareholders' equity 24,224,973 24,977,273 25,514,671
============ ============ ============
Net asset value per Ordinary 17 63.30p 61.78p 60.75p
Share
The condensed unaudited Financial Statements on pages 7 to 22
were approved by the Board of Directors and authorised for issue on
16 August 2011. They were signed on its behalf by:-
C Sherwell R Dorey
Director Director
The accompanying notes on pages 11 to 22 form an integral part
of the condensed unaudited Financial Statements.
STATEMENT OF CASH FLOWS (unaudited)
For the six month period ended 30 June 2011
1 January 1 January
2011 1 January 2010 2010
to to to
30 June 31 December 30 June
2011 2010 2010
(unaudited) (audited) (unaudited)
Notes GBP GBP GBP
Cash flows from operating
activities
Profit/(loss) for the
period/year 370,881 (475,462) (698,065)
Decrease/(increase) in
prepayments and other
receivables 2,815 (48) (677,318)
Increase/(decrease) in
accrued expenses 9,126 (12,157) (4,864)
----------- -------------- -----------
382,822 (487,667) (1,380,247)
11 &
Purchase of investments 18 (1,845,789) (1,695,486) (759,591)
11 &
Sales of investments 18 1,545,881 6,555,450 3,893,833
----------- -------------- -----------
82,914 4,372,297 1,753,995
Adjustment for:
Movement in unrealised
losses/(gains) on
investments 11 694,129 (4,319,196) (1,947,766)
Realised (gains)/losses on
investments 11 (743,418) 4,450,327 3,253,357
Net cash inflow from
operating activities 33,625 4,503,428 3,059,586
----------- -------------- -----------
Cash flows from financing
activities
Buy back of shares for
cancellation 16 (b) (1,016,581) (788,160) (28,159)
Net cash outflow from
financing activities (1,016,581) (788,160) (28,159)
----------- -------------- -----------
Net (decrease)/increase in
cash and cash equivalents (982,956) 3,715,268 3,031,427
Cash and cash equivalents
at beginning of period/year 4,267,967 552,699 552,699
----------- -------------- -----------
Cash and cash equivalents 12 &
at end of period/year 18 3,285,011 4,267,967 3,584,126
=========== ============== ===========
The accompanying notes on pages 11 to 22 form an integral part
of the condensed unaudited Financial Statements.
NOTES TO THE CONDENSED UNAUDITED FINANCIAL STATEMENTS
For the six month period ended 30 June 2011
1. GENERAL INFORMATION
Saltus European Debt Strategies Limited is an authorised
closed-ended investment scheme domiciled in Guernsey. The Company's
Share Capital consists of Ordinary Shares. The Ordinary Shares are
listed on the London Stock Exchange.
The Company invests in a portfolio consisting primarily of
absolute return funds, which is expected to comprise mostly
debt-oriented hedge funds, but which may also include long-only
debt funds and closed-ended limited partnerships with longer
lock-ups. The Company's investment strategy is to provide annual
returns in excess of 3-month Sterling LIBOR plus 7.5 per cent over
a rolling 5-year period, and annual standard deviation of under 5
per cent.
The financial information for the year to 31 December 2010 is
derived from the financial statements delivered to the UK Listing
Authority. The Auditors reported on these financial statements,
their report was unqualified and did not contain a statement under
Section 263 (2) of the Companies (Guernsey) Law, 2008.
These condensed interim financial statements have been reviewed,
not audited.
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The condensed unaudited financial statements of the Company have
been prepared in accordance with International Accounting Standard
("IAS") 34, Interim Financial Reporting and should be read in
conjunction with the annual financial statements for the year ended
31 December 2010, which have been prepared in accordance with
International Financial Reporting Standards ("IFRS") as adopted by
the European Union.
Accounting Convention
The interim condensed unaudited financial statements have been
prepared under the historical cost or amortised cost basis, except
for the revaluation of certain financial instruments. The principal
accounting policies adopted are set out below. The preparation of
interim condensed unaudited financial statements in conformity with
International Financial Reporting Standards requires the Company to
make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the interim condensed
unaudited financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could
differ from those estimates.
The interim condensed unaudited financial statements are
presented in Sterling because that is the currency of the primary
economic environment in which the Company operates and the currency
in which capital is raised. The functional currency of the Company
is also considered to be Sterling.
Standards and Interpretations in issue but not yet effective
At the date of authorisation of these interim condensed
unaudited Financial Statements, the following Standards and
interpretations, which have not been applied in these interim
condensed unaudited Financial Statements but will be relevant in
future periods, were in issue but not yet effective:
IFRS 9 - Financial Instruments - Classification and Measurement
- for accounting periods beginning on or after 1 January 2013.
The Directors believe that other pronouncements, which are in
issue but not yet operative or adopted by the Company, will not
have a material impact on the interim condensed unaudited Financial
Statements of the Company.
The Directors believe that the interim condensed unaudited
Financial Statements contain all of the information required to
enable Shareholders and potential investors to make an informed
appraisal of the investment activities and profits and losses of
the Company for the period to which it relates and does not omit
any matter or development of significance.
Investments
The Directors value all investments in funds at the net asset
value of that fund as at the relevant valuation date as determined
in accordance with the terms of the funds and as notified to the
Company by the relevant fund manager or the relevant administrator.
The valuation date of each fund may not always be coterminous with
the valuation date of the Company and in such cases the valuation
of the fund at the last valuation date is used in conjunction with
other related financial information.
The net asset values reported by the relevant fund managers
and/or fund administrators and used by the Directors as at 30 June
2011 may be unaudited as at that date and may differ from the
amounts which would have been realised from a redemption of the
investment in the relevant fund as at 30 June 2011.
Investments are recognised and derecognised on the trade date
where a purchase or sale is under a contract whose terms require
delivery within the timeframe established by the market concerned,
and are initially measured at fair value.
Investments are classified as fair value through profit or loss.
As the Company's business is investing in financial assets with a
view to profiting from their total return in the form of interest,
dividends or increases in fair value, listed equities and fixed
income securities are designated as fair value through profit or
loss on initial recognition. The Company manages and evaluates the
performance of these investments on a fair value basis in
accordance with its investment strategy, and information about the
Company is provided internally on this basis to the Company's key
management personnel.
Financial assets designated as at fair value through profit or
loss are measured at subsequent reporting dates at fair value,
which is either the bid price or the last traded price, depending
on the convention of the exchange on which the investment is
quoted. Investments in units of unit trusts or shares in Open Ended
Investment Companies ("OEICs") are valued at the closing price
released by the relevant investment manager.
Gains and losses arising from changes in the fair value of
investments classified as fair value through profit or loss are
recognised in the Statement of Comprehensive Income.
Foreign Exchange
Foreign currency assets and liabilities are translated into
Sterling at the rate of exchange ruling at the reporting date (30
June 2011: GBP1: US$ 1.6054 and GBP1: EUR 1.1073; 31 December 2010:
GBP1: US$ 1.5657 and GBP1: EUR 1.1671; 30 June 2010: GBP1:US$
1.4945 and GBP1: EUR 1.2214). Transactions in foreign currencies
are translated at the rate of exchange ruling on the transaction
date. Differences thus arising are dealt with in the Statement of
Comprehensive Income.
Forward Currency Contracts
A forward currency contract obligates the Company to receive or
deliver a fixed quantity of foreign currency at a specified price
on an agreed future date. These contracts are accounted for when
any contract becomes binding and are valued in the Statement of
Financial Position at the period end present value of the quoted
forward price. Realised and unrealised gains and losses are
included in the Statement of Comprehensive Income. The Company had
no forward currency contracts at 30 June 2011, 31 December 2010 or
30 June 2010.
Income
Dividend income from investments is recognised when the
Shareholders' rights to receive payment has been established,
normally the ex-dividend date.
Interest income is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate
applicable, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
asset to the asset's net carrying amount.
Expenses
All expenses are accounted for on an accruals basis and are
presented as revenue items except for expenses that are incidental
to the disposal of an investment which are deducted from the
disposal proceeds.
Finance Costs
Finance costs are accounted for on an accruals basis and relate
to bank interest resulting from the Company drawing down on the
facility with Bank Julius Baer & Co Limited. All finance costs
are expensed through the Statement of Comprehensive Income as
incurred.
Financial Instruments
Financial assets and financial liabilities are recognised on the
Company's Statement of Financial Position when the Company becomes
a party to the contractual provisions of the instrument. The
Company shall offset financial assets and financial liabilities if
the Company has a legally enforceable right to set off the
recognised amounts and interests and intends to settle on a net
basis.
A financial asset (in whole or in part) is derecognised
either:
- when the Company has transferred substantially all the risk
and rewards of ownership;
- when it has not retained substantially all the risk and
rewards and when it no longer has control over the asset or a
portion of the asset; or
- when the contractual right to receive cash flow has
expired.
Other Receivables
Other receivables do not carry any interest and are short-term
in nature and are accordingly stated at their nominal value as
reduced by appropriate allowances for estimated irrecoverable
amounts.
Cash and Cash Equivalents
Cash includes amounts held in interest bearing overnight
accounts and debt balances. Cash and cash equivalents comprise bank
balances and cash held by the Company including short-term bank
deposits with an original maturity of three months or less. The
carrying value of these assets approximates their fair value.
Financial Liabilities and Equity
Financial liabilities and equity are classified according to the
substance of the contractual arrangements entered into. An equity
instrument is any contract that evidences a residual interest in
the assets of the Company after deducting all of its liabilities.
Financial liabilities and equity are recorded at the proceeds
received, net of issue costs.
A financial liability (in whole or in part) is derecognised when
the Company has extinguished its contractual obligations, it
expires or is cancelled. Any gain or loss on derecognition is taken
to the Statement of Comprehensive Income.
Other Accruals and Payables
Other accruals and payables are not interest-bearing and are
stated at their nominal value.
Derivative Financial Instruments
The Company's activities expose it primarily to the financial
risks of changes in foreign exchange rates. The Company uses
forward foreign exchange contracts to hedge these exposures. The
Company does not use derivative financial instruments for
speculative purposes.
The use of financial derivatives is governed by the Company's
policies approved by the Board of Directors, which provide written
principles on the use of financial derivatives. The Company does
not use hedge accounting and all gains or losses on forward foreign
exchange contracts are taken to the Statement of Comprehensive
Income.
Interest-bearing Loans and Borrowings
Interest-bearing borrowings are recognised initially at fair
value less attributable transaction costs. Subsequent to initial
recognition, interest bearing borrowings are stated at amortised
cost with any difference between cost and redemption value being
recognised in the Statement of Comprehensive Income over the period
of the borrowings on an effective interest basis.
Operating Segments
The Directors are of the opinion that the Company is engaged in
a single segment of business of investing in a portfolio consisting
primarily of absolute return funds, which is expected to comprise
mostly debt-oriented hedge funds, but which may also include
long-only debt funds and closed-ended limited partnerships with
longer lock-ups.
3. GOING CONCERN AND OTHER CRITICAL ACCOUNTING JUDGEMENTS
The Board's assessment of the Company's position as at 30 June
2011 and the factors impacting the forthcoming period are set out
in the Chairman's Statement on pages 4 to 5. As part of its efforts
to control the Company's share price discount to net asset value,
the Board has committed to shareholders to put a resolution for the
winding-up of the Company at the Annual General Meeting to be held
in 2012. The financial position of the Company, its cash flows, and
its liquidity position is set out of pages 7 to 10 of the condensed
unaudited Financial Statements.
The Company has considerable financial resources and after
making enquiries the Directors have a reasonable expectation that
the Company has adequate resources to continue in operational
existence for the foreseeable future. Accordingly the Directors
continue to adopt the going concern basis in preparing the
condensed unaudited Financial Statements.
In the application of the Company's accounting policies, which
are described in note 2 to the condensed unaudited Financial
Statements, management is required to make judgements, estimates
and assumptions about the carrying amount of assets and liabilities
that are not readily apparent from their sources. The estimates and
associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may
differ from these estimates.
The estimates and underlying assumptions are reviewed on an
on-going basis. Revisions to accounting estimates are recognised in
the period in which the estimate was revised if the revision
affects only that period or in the period of the revision and
future periods if the revision affects both current and future
periods.
Critical judgements in applying accounting policies
The most critical judgement, apart from those involving
estimates (see below), that management has made in the process of
applying the Company's accounting policies and that have the most
significant effect on the amounts recognised in the Financial
Statements, is in respect of functional currency.
Functional currency and presentation currency
The Board of Directors considers Sterling the currency that most
faithfully represents the economic environment in which the Company
operates. Sterling is the currency in which the Company measures
its performance and reports its results, as well as the currency in
which capital is raised.
Key sources of estimation uncertainty
The following key assumption and source of estimation
uncertainty at the reporting date has a significant risk of causing
a material adjustment to the carrying amounts of assets and
liabilities within the next financial year:
Fair value of Investments at fair value through profit or
loss
As disclosed in note 1, the Company invests in debt oriented
hedge funds. The investments are valued at the net asset value of
the funds as at the relevant valuation date in accordance with the
terms of the funds and as notified by the relevant fund manager /
administrator. However the valuation date may be non-coterminous
with the valuation date of the Company and hence in such cases the
latest valuation is used in conjunction with other related
financial information.
The values used in the condensed unaudited Financial Statements
may be unaudited as at that date and hence may differ from the
amount which may have been realised on redemption of the investment
at the reporting date.
4. SEGMENT INFORMATION
Operating segments are reported in a manner consistent with the
internal reporting provided to the chief operating decision maker.
The chief operating decision maker, who is responsible for
allocating resources and assessing performance of the operating
segments, has been identified as the Board of Directors of the
Company.
For management purposes, the Company is organised in to one main
operating segment, which focuses on long term growth from
investments. All of the Company's activities are interrelated, and
each activity is dependent on the others. Accordingly, all
significant operating decisions are based upon analysis of the
Company as one segment. The financial results from this segment are
equivalent to the financial statements of the Company as a
whole.
In terms of the funds in which the Company invests, these are
predominantly incorporated in the United States and Europe. The
underlying investments in the funds however, may be in other
countries.
Geographical information:
1 January 1 January
2011 1 January 2010 2010
to to to
30 June 31 December 30 June
2011 2010 2010
(unaudited) (audited) (unaudited)
GBP GBP GBP
Net gains/(losses) on fair value
through profit or loss investments
by location of assets
United States 110,049 (881,988) (805,945)
Europe (60,760) 750,857 (499,646)
----------- -------------- -----------
49,289 (131,131) (1,305,591)
=========== ============== ===========
Non-current assets by location
of assets
United States 3,803,650 2,375,671 2,652,340
Europe 17,299,964 18,372,083 18,620,478
----------- -------------- -----------
21,103,614 20,747,754 21,272,818
=========== ============== ===========
5. OTHER GAINS AND LOSSES
1 January 1 January
2011 1 January 2010 2010
to to to
30 June 31 December 30 June
2011 2010 2010
(unaudited) (audited) (unaudited)
GBP GBP GBP
Held for trading: Derivative
financial instruments:
Net realised foreign exchange
gains on forward foreign exchange
contracts and currency translations - 37,119 761,170
Net gains on currency translations 74,669 4,461 -
74,669 41,580 761,170
=========== ============== ===========
6. OTHER OPERATING INCOME
1 January 1 January
2011 1 January 2010 2010
to to to
30 June 31 December 30 June
2011 2010 2010
(unaudited) (audited) (unaudited)
GBP GBP GBP
Other operating income arising
on financial assets at fair
value through profit or loss:
Investment income 527,130 110,593 98,768
Bank interest 3,897 4,195 633
531,027 114,788 99,401
=========== ============== ===========
7. FINANCE COSTS
1 January 1 January
2011 1 January 2010 2010
to to to
30 June 31 December 30 June
2011 2010 2010
(unaudited) (audited) (unaudited)
GBP GBP GBP
Finance costs arising on financial
liabilities not at fair value
through profit or loss:
Bank debt interest 2,208 225 247
=========== ============== ===========
The bank interest resulted from the Company's debt facility with
Bank Julius Baer & Co Limited entered into on 5 April 2011. See
note 21 for further detail.
8. EXPENSES
1 January 1 January
2011 1 January 2010 2010
to to to
30 June 31 December 30 June
2011 2010 2010
(unaudited) (audited) (unaudited)
GBP GBP GBP
Management fees 124,702 262,599 133,069
----------- -------------- -----------
Other expenses:
Legal and professional fees 41,219 8,162 1,311
Directors' remuneration 34,960 69,716 34,417
Listing fees 11,406 16,175 7,150
Auditors' remuneration for
audit services 10,910 24,500 13,161
Advisers fees 10,734 15,299 7,499
Accounting, secretarial and
administration fees 10,477 22,451 11,441
Registrar fees 10,193 17,077 8,437
Miscellaneous expenses 8,824 14,225 4,006
Directors & Officers Insurance 6,731 14,257 7,439
Custodian fees 6,551 13,539 6,835
Trading commissions 2,106 2,959 586
Statutory fees 2,083 4,100 2,032
Bank facility fees 1,000 15,415 15,415
157,194 237,875 119,729
----------- -------------- -----------
Total expenses 281,896 500,474 252,798
=========== ============== ===========
The Company has no employees. The Directors are the only key
management personnel of the Company. Their remuneration disclosed
above is all in respect of short-term employee benefits.
No amounts were paid to the auditors during the period in
respect of non-audit services.
Management and Performance fees
The Company is responsible for the fees of the Manager in
accordance with the Investment Management Agreement between the
Company and the Manager dated 6 June 2007.
For the services performed under the Investment Management
Agreement, the Company pays the Manager a management fee equal to
1% per annum of total assets, calculated and payable monthly in
arrears.
The Manager compensates the Sub-Manager for its services to the
Company under the terms of the Sub-Management Agreement.
In addition to the management fee, subject to a high water mark
and a hurdle rate of the mean monthly LIBOR plus 2 per cent, the
Manager will be entitled to a performance fee equivalent to 10% of
the amount by which the net asset value attributable to the shares
at the end of each accounting period exceeds the greater of the
initial net asset value and the greatest period end net asset value
for any previous calculation period. The fee is calculated in
respect of each period of 12 months ending on 31 December. No
performance fee was payable in respect of this period (31 December
2010 and 30 June 2010: GBPnil). The high water mark of the Company
is currently 98.5p per Share.
The Investment Management Agreement may be terminated by either
party giving to the other not less than twelve months' written
notice.
Administration fees
The Company is responsible for the fees of the Administrator
(Butterfield Fulcrum Group (Guernsey) Limited) in accordance with
the Administration Agreement made between the Company and the
Administrator dated 6 June 2007.
In respect of the services provided under the Administration
Agreement, the Company pays the Administrator a fee which shall not
exceed 0.085% per annum of the net asset value of the Company,
subject to a minimum annual payment of GBP10,000. In addition, the
Administrator is entitled to receive fees for any extraordinary
duties performed to be charged on a time spent basis. The
Administration Agreement is terminable by either side on three
months' notice.
Custodian fees
The Company is responsible for the fees of the Custodian (Bank
Julius Baer & Co Limited) in accordance with the Custodian
Agreement made between the Company and the Custodian dated 6 June
2007.
In respect of the services provided under the Custodian
Agreement, the Company pays the Custodian a quarterly fee at the
rate of 0.05% of the net asset value of the Company per annum
subject to a minimum fee of GBP3,325 per quarter. The Custodian
Agreement is terminable by either side on three months' notice. The
Custodian does not have any decision making discretion relating to
the investment of the assets of the Company.
9. TAX STATUS
The Company is exempt from Guernsey income tax under the Income
Tax (Exempt Bodies) (Guernsey) Ordinance 1989 and is charged an
annual exemption fee of GBP600.
10. BASIC AND DILUTED EARNINGS/(LOSS) PER ORDINARY SHARE
Basic and diluted earnings/(loss) per Share are calculated by
dividing net income/(expense) available by the weighted average
number of Ordinary Shares outstanding during the period.
1 January 1 January
2011 1 January 2010 2010
to to to
30 June 31 December 30 June
2011 2010 2010
Number of Number of Number of
Ordinary Ordinary Ordinary
Shares Shares Shares
(unaudited) (audited) (unaudited)
Weighted average number of
Ordinary Shares 39,373,778 41,744,798 42,046,353
=========== =============== ===========
11. INVESTMENTS
1 January 1 January
2011 1 January 2010 2010
to to to
30 June 31 December 30 June
2011 2010 2010
(unaudited) (audited) (unaudited)
GBP GBP GBP
Fair value through profit or
loss investments
Opening fair value as at beginning
of period/year 20,747,754 25,715,052 25,715,052
Purchases at cost 1,845,789 1,695,486 759,591
Sales - proceeds (1,539,218) (6,531,653) (3,896,234)
- realised gains/(losses) on
sales 743,418 (4,450,327) (3,253,357)
Movement in unrealised
(losses)/gains on investments for
the period/year (694,129) 4,319,196 1,947,766
49,289 (131,131) (1,305,591)
----------- -------------- -----------
Closing fair value at end of
period/year 21,103,614 20,747,754 21,272,818
=========== ============== ===========
Closing cost 22,249,529 21,199,540 24,096,034
Unrealised losses on investments (1,145,915) (451,786) (2,823,216)
----------- -------------- -----------
Closing fair value at end of
period/year 21,103,614 20,747,754 21,272,818
=========== ============== ===========
As at 30 June 2011 GBPnil (31 December 2010: GBP6,663; 30 June
2010: GBP32,861) of investment sales proceeds were receivable.
12. CASH AND CASH EQUIVALENTS
1 January 1 January
2011 1 January 2010 2010
to to to
30 June 31 December 30 June
2011 2010 2010
(unaudited) (audited) (unaudited)
GBP GBP GBP
Opening cash and cash equivalents 4,267,967 552,699 552,699
Net movement in the period/year (982,956) 3,715,268 3,031,427
----------- -------------- -----------
Closing cash and cash equivalents 3,285,011 4,267,967 3,584,126
=========== ============== ===========
Cash and cash equivalents comprise bank balances and cash held
by the Company including short-term bank deposits with an original
maturity of three months or less. The carrying value of these
assets approximates to their fair value.
13. CURRENT ASSETS AND LIABILITIES
The Directors consider that the carrying amount of other
receivables and other payables approximates to their fair
value.
14. ACCRUED EXPENSES
30 June 31 December 30 June
2011 2010 2010
(unaudited) (audited) (unaudited)
GBP GBP GBP
Management fee 20,207 21,238 23,093
Directors' remuneration 17,335 - 17,577
Auditors' remuneration 10,335 16,750 10,662
Registrar fee 3,779 3,750 3,251
Printing costs 3,701 4,681 2,603
Advisers' fee 3,342 6,359 2,507
Administration fee 1,694 1,805 1,963
Custodian fee 1,084 1,130 1,202
Sundry expenses 3,967 605 753
----------- ----------- -----------
65,444 56,318 63,611
=========== =========== ===========
15. SHARE CAPITAL
Authorised Capital
The Company has the power to issue an unlimited number of shares
of no par value which may be issued as Ordinary Shares or C Shares
or otherwise and which may be denominated in Sterling, Euros, US
Dollars or any other currency. The redeemable shares are redeemable
at the option of the Company, not shareholders.
Issued Capital Treasury Ordinary Shares Total
30 June 2011 (unaudited)
At 1 January 2011 - 40,429,912 40,429,912
Shares cancelled during the
period - (2,158,210) (2,158,210)
-------- --------------- -----------
At 30 June 2011 - 38,271,702 38,271,702
======== =============== ===========
31 December 2010 (audited)
At 1 January 2010 - 42,059,889 42,059,889
Shares cancelled during the
year - (1,629,977) (1,629,977)
-------- --------------- -----------
At 31 December 2010 - 40,429,912 40,429,912
======== =============== ===========
30 June 2010 (unaudited)
At 1 January 2010 - 42,059,889 42,059,889
Shares cancelled during the
period - (60,000) (60,000)
-------- --------------- -----------
At 30 June 2010 - 41,999,889 41,999,889
======== =============== ===========
The rights attaching to the Ordinary Shares are as follows:
Ordinary shareholders have one vote at a meeting of the Company
for each share held. The Ordinary shareholders are entitled to
receive all dividends declared out of the assets attributable to
their respective share class. Upon winding up, the holders of
Ordinary shares are entitled to receive a pro rata portion of the
capital attributable to their respective share class according to
their holdings of shares.
Upon incorporation, 2 Ordinary Shares of no par value each were
issued. Following the launch of the Company on the London Stock
Exchange the Company had issued a total of 48,000,000 Ordinary
Shares of no par value.
Further Issues of Shares
The Company's Articles of Association provide the Directors with
wide powers to issue further shares (of one or more currency
classes and whether as C shares or ordinary shares) on a
non-pre-emptive basis and without seeking further shareholder
approval.
Buy Back of Ordinary Shares and Authority to Buy Back Shares
The Company has authority to repurchase up to 14.99 per cent of
its issued share capital. The Directors intend to seek annual
renewal of this authority from shareholders.
16. RESERVES
a) Share Premium Account
30 June 31 December 30 June
2011 2010 2010
(unaudited) (audited) (unaudited)
GBP GBP GBP
Share Premium Account as at - - -
beginning and end of the period/year
=========== =========== ===========
b) Other Distributable Reserve
1 January 1 January
2011 1 January 2010 2010
to to to
30 June 31 December 30 June
2011 2010 2010
(unaudited) (audited) (unaudited)
GBP GBP GBP
Other Distributable Reserve
as at beginning of period/year 41,821,632 42,609,792 42,609,792
Ordinary Shares cancelled (1,123,181) (788,160) (28,159)
----------- -------------- -----------
Other Distributable Reserve
as at end of period/year 40,698,451 41,821,632 42,581,633
=========== ============== ===========
As at 30 June 2011 GBP106,600 (31 December 2010 and 30 June
2010: GBPnil) of share transactions were unsettled.
With confirmation of the Royal Court in Guernsey on 6 July 2007
the amount standing to the credit of the Share Premium Account of
the Company was cancelled and credited to a Distributable Reserve
which is able to be applied in any manner in which the Company's
profits available for distribution are able to be applied,
including the purchase or the Company's own shares and the payment
of dividends.
17. NET ASSET VALUE PER ORDINARY SHARE
The net asset value per Ordinary Share of 63.30p (31 December
2010: 61.78p, 30 June 2010: 60.75p) is based on the net assets at
the period end of GBP24,224,973 (31 December 2010: GBP24,977,273,
30 June 2010: GBP25,514,671) and on 38,271,702 (31 December 2010:
40,429,912, 30 June 2010: 41,999,889) Ordinary Shares, being the
number of Ordinary Shares in issue at the period end.
18. NOTES TO THE CASH FLOW STATEMENT
Purchases and sales of investments are considered to be
operating activities of the Company, given its purpose, rather than
investing activities. The cash flows arising from these activities
are shown in the Cash Flow Statement.
Cash and cash equivalents (which are presented separately on the
face of the Statement of Financial Position) comprise cash at
bank.
19. COMMITMENTS AND CONTINGENT LIABILITIES
At 30 June 2011, 31 December 2010 and 30 June 2010 there were no
commitments in respect of forward foreign exchange contracts with
the Custodian.
At 30 June 2011 the Company had the following outstanding
capital commitments:
- Apollo, EUR2,166,997 (31 December 2010: EUR2,001,881; 30 June
2010: EUR2,510,188); and
- Oaktree, EUR375,000 (31 December 2010: EUR625,000; 30 June
2010: EUR1,125,000); and
- Ffenics I Fund, EUR102,339 and USD157,000 (31 December 2010
and 30 June 2010; nil).
Using month end exchange rates the total outstanding commitment
was GBP2,485,893.
Pursuant to the Company's custody agreement with Bank Julius
Baer & Co Limited, the Company is required to keep its
outstanding capital commitments fully cash collateralised.
The Company has no other financial commitments as at 30 June
2011, 31 December 2010 or 30 June 2010.
The Company has no contingent liabilities at the reporting
date.
20. RELATED PARTY TRANSACTIONS
Saltus (Channel Islands) Limited (the "Manager"), Saltus
Partners LLP (the "Sub-Manager") and the Directors are regarded as
related parties. The only related party transactions are described
below:
The fees and expenses payable to the Manager are explained in
Note 8. The management fee balance due at the end of the period was
GBP20,207 (31 December 2010: GBP21,238, 30 June 2010: GBP23,093).
There was no performance fee balance due at the period end (31
December 2010 and 30 June 2010: GBPnil).
There were no direct transactions with the Sub-Manager during
the period.
The fees payable to each independent non-executive director from
1 April 2010 were: Mr G Baird, Chairman, who receives GBP29,000 per
annum (prior to 31 March 2010: GBP25,000); Mr R Dorey who receives
GBP20,000 per annum (prior to 31 March 2010: GBP15,000); and Mr C
Sherwell who receives GBP19,000 per annum (prior to 31 March 2010:
GBP15,000) plus an additional GBP2,500 per annum for being Chairman
of the Audit Committee.
Mr J Macintosh is a director of the Manager and a partner in the
Sub-Manager and as such he has waived his right to remuneration as
a director of the Company.
21. BANK FACILITIES
Prior to 6 June 2010 the Company had a multi-currency revolving
overdraft, loan and foreign exchange facility with Bank Julius Baer
& Co Limited. This facility expired on 6 June 2010. On 5 April
2011 the Company entered into a GBP250,000 overdraft facility with
Bank Julius Baer & Co Limited for investment and general
working capital requirements. This facility is subject to annual
review. The Board is confident that the Company has sufficient
available resources from its existing cash balances and redeemable
investments to meet its working capital commitments and outstanding
uncalled capital commitments as they fall due.
22. RECONCILIATION OF ACCOUNTING NAV AND PUBLISHED NAV PER
SHARE
Net Asset NAV per NAV per
Value Share Net Asset Value share
30 June 31 December 31 December
30 June 2011 2011 2010 2010
(unaudited) (unaudited) (audited) (audited)
GBP GBP GBP GBP
Published Net Asset
Value 24,224,973 0.6330 24,982,175 0.6179
Adjustments to
expense accruals - - (4,902) (0.0001)
------------ ----------- --------------- -----------
Net Asset Value 24,224,973 0.6330 24,977,273 0.6178
============ =========== =============== ===========
Net Asset NAV per
Value Share
30 June
30 June 2010 2010
(unaudited) (unaudited)
GBP GBP
Published Net Asset Value 25,515,850 0.6075
Adjustments to expense
accruals (1,179) -
------------ -----------
Net Asset Value 25,514,671 0.6075
============ ===========
23. EVENTS AFTER THE REPORTING PERIOD
From 1 July 2011 to the date of approval of these condensed
unaudited financial statements, the Company acquired 486,631 of its
own Ordinary Shares for cancellation at an average price of 50.23p
per Share.
The Company has appointed Butterfield Bank (Guernsey) Limited as
Custodian of the assets of the Company, effective 16 August 2011.
The new Custodian is now actively engaged in the process of
transferring the custody of the Company's investments from Bank
Julius Baer & Co Limited to itself. The new Custodian is
entitled to receive an annual fee of the higher of 0.05% of the net
asset value of the Company or GBP9,500, payable quarterly in
arrears. The agreement may be terminated on 90 days notice.
MANAGEMENT AND ADMINISTRATION
Directors
G Baird (Chairman)
R Dorey
J Macintosh +
C Sherwell
+ Representative of the Manager and Sub-Manager
Registered Office and Directors' Address Administrator and
Secretary
2nd Floor Butterfield Fulcrum Group (Guernsey) Limited
Regency Court 2nd Floor
Glategny Esplanade Regency Court
St Peter Port Glategny Esplanade
Guernsey St Peter Port
GY1 3NQ Guernsey GY1 3NQ
Manager Registrar
Saltus (Channel Islands) Limited Capita IRG Registrars
(Guernsey) Limited
2nd Floor 2nd Floor
Regency Court 1 Le Truchot
Glategny Esplanade St Peter Port
St Peter Port Guernsey GY1 4AE
Guernsey GY1 3NQ
Sub-Manager Legal Advisers in Guernsey
Saltus Partners LLP Carey Olsen
18 Dering Street Carey House
London W1S 1AQ Les Banques
St Peter Port
Guernsey GY1 4BZ
Custodian Legal Advisers In United Kingdom
Butterfield Bank (Guernsey) Limited Macfarlanes LLP
P.O. Box 25 20 Cursitor Street
Regency Court London
Glategny Esplanade EC4A 1LT
St Peter Port
Guernsey GY1 3AP
Independent Auditors Financial Adviser/Corporate Broker
BDO Limited Cenkos Securities Plc
P O Box 180 6.7.8 Tokenhouse Yard
Place du Pre London
Rue du Pre EC2R 7AS
St Peter Port
Guernsey GY1 3LL
Enquiries:
Company Secretary
Butterfield Fulcrum Group (Guernsey) Limited
2(nd) Floor
Regency Court
Glategny Esplanade
St Peter Port
Guernsey GY1 3NQ
Tel: 01481 720321
Fax: 01481 716117
This information is provided by RNS
The company news service from the London Stock Exchange
END
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