TIDMGSDO TIDMGSDE TIDMGSDU
RNS Number : 6169F
Goldman Sachs Dynamic Opportunities
28 April 2011
Goldman Sachs Dynamic Opportunities Limited (the "Company")
Annual Financial Report The Company has today, in accordance
with DTR 6.3.5, released its Annual Financial Report for the year
ended 31 December 2010. The Report is available from the Company's
website
www2.goldmansachs.com/services/investing/closed-ended-investments/index.
htmland will shortly be submitted to the National Storage Mechanism
and will also shortly be available for inspection at
www.hemscott.com/nsm.do
Chairman's Statement
I am pleased to present shareholders with this annual report of
Goldman Sachs Dynamic Opportunities Limited ("GSDO" or the
"Company") for the year ended 31 December 2010.
The Company's net asset value rose by 12.85% during 2010
(measured in Sterling terms, net of fees). As detailed in the
Investment Manager's Report, the Company began the year on a strong
note that generally continued through to April. The Company
experienced negative monthly performance in May and June ending the
first half of the year with cumulative performance of -0.14%
(measured in U.S. Dollar terms, net of fees). The second half of
the year saw stronger performance with both the third and fourth
quarters contributing positively to the overall annual return. This
strong second half added 5.88% (measured in U.S. Dollar terms, net
of fees) to cumulative performance. On an annualised basis the
Company generated 5.73% during 2010 (measured in U.S. Dollar terms,
net of fees).
It should be noted that the performance differences between the
Sterling and USD share classes for the first half of the year were
largely due to currency fluctuations that were not hedged during
the first quarter. As previously communicated, the Company entered
into a new credit facility in March 2010 and, as a result of the
increased liquidity this facility provided and demand from Sterling
investors, currency hedging for the Sterling share class was
reinstated on 30 March 2010. Performance between the two share
classes has realigned since the currency hedge was reinstated. The
USD share class generated 3.27% from April to December and the
Sterling share class generated 3.11% over the same time period.
The Company realised positive performance from each of its
underlying sectors during 2010. The Event Driven allocation
contributed 4.53% to annual performance whilst the Equity/Long
Short and Tactical Trading sectors also had strong years,
contributing 2.27% and 1.83% to annual performance, respectively
(measured in U.S. Dollar terms, net of underlying Advisor fees
only).
The Investment Manager implemented few changes to the Company's
investment portfolio for the first three quarters of 2010 and then,
in the fourth quarter, three Advisors were added across the Event
Driven, Equity Long/Short and Tactical Trading sectors. With these
new allocations, together with a slight reallocation of capital
amongst the existing Advisors, there has been an increase in the
allocation to the Tactical Trading sector and a decrease in the
allocation to the Equity Long/Short sector during 2010, whilst the
Event Driven allocation ended the year at a similar level to that
at the end of 2009.
Each share class enjoyed positive NAV performance in 2010and the
average share price discount over the relevant 12 month period
decreased from the year before from 21%to 15% (for the Sterling
share class). Despite this, as each share class had traded at a
greater than 5% average discount of share price to NAV over the 12
month period( ) continuation votes for each share class were
triggered. These votes took place in April 2011 and the vote of the
GBP Share class passed whilst those for the US$ Shares and EUR
Shares failed. Redemption proposals will be put forward to holders
of the US$ Shares and EUR Shares on the register on the relevant
record date by mid-June 2011.
The Board is pleased with performance particularly in the second
half of 2010, and as the Company moves into 2011 the Board believes
that underlying Advisors are well positioned to benefit from the
opportunities that the current environment provides. The Board
remains positive on the outlook for performance during 2011.
I look forward to writing to you again in the report for the
first half of 2011.
Christopher Sherwell
Chairman
27 April 2011
Statement of Directors' Responsibilities in Respect of the
Annual Financial Report
The Companies (Guernsey) Law, 2008 requires the Directors to
prepare financial statements for each financial year which give a
true and fair view of the state of affairs of the Company and of
the profit or loss for that year. In preparing those financial
statements, the Directors are required to:
-- select suitable accounting policies and apply them
consistently;
-- make judgements and estimates that are reasonable and
prudent;
-- state whether applicable accounting standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors confirm that they have complied with the above
requirements in preparing the financial statements.
The Directors are responsible for keeping proper accounting
records which disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with The Companies (Guernsey) Law,
2008. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
Responsibility Statement under the Disclosure and Transparency
Rules 4.1.12
The Directors confirm to the best of their knowledge that:
i) the financial statements, prepared in accordance with the
applicable accounting standards, give a true and fair view of the
assets, liabilities, financial position and net income or loss of
the Company; and
ii) 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.
Statement of Assets and Liabilities (Audited)
As at As at
31 December 31 December
2010 2009
US$ US$
ASSETS
Financial assets at fair value through
profit or loss 292,008,693 349,551,024
Cash and cash equivalents 24,362,803 69,748,549
Subscriptions in investees, made in advance 20,000,000 -
Amount due from Investees 609,962 550,404
Other receivables 32,527 26,067
Total assets 337,013,985 419,876,044
============ ============
LIABILITIES
Current liabilities
Financial liabilities at fair value through
profit or loss 6,785,238 -
Redemptions payable 12,483,167 62,835,004
Management fee 801,391 1,031,950
Legal fees 84,338 354,726
Custodian fee 42,991 -
Administration fee 27,228 17,200
Other expenses 271,528 371,377
------------ ------------
Total current liabilities, excluding
net assets attributable
to holders of repayable shares 20,495,881 64,610,257
============ ============
Net assets attributable to holders of
repayable shares 316,518,104 355,265,787
============ ============
Net assets per GBP share GBP1.1226 GBP0.9948
Net assets per US$ share US$2.0865 US$1.9735
Net assets per EUR share EUR1.5080 EUR1.3340
Statement of Comprehensive Income (Audited)
For the year For the year
ended ended
31 December 31 December
2010 2009
US$ US$
Income
Interest income 10,418 64,520
Net changes in financial assets and
financial liabilities at fair value
through profit or loss 37,299,349 95,858,928
Other income 1,201,624 695,149
Total income 38,511,391 96,618,597
============= =============
Expenses
Management fee 5,926,463 7,136,719
Legal fees 494,004 864,403
Listing sponsor fees 171,931 618,044
Administration fee 179,287 118,948
Custodian fee 176,400 -
Directors' remuneration and expenses 129,552 117,615
Audit fee 82,526 108,457
Bank Interest and overdraft facility
fees 439,015 130,203
Other expenses 249,978 390,123
Total operating expenses 7,849,156 9,484,512
============= =============
Change in net assets from operations 30,662,235 87,134,085
============= =============
Other comprehensive income:
Currency translation differences (1,985,110) (843,465)
------------- -------------
Total comprehensive income 28,677,125 86,290,620
============= =============
Return per GBP share GBP0.1293 GBP0.0453
Return per US$ share US$0.0083 US$0.4554
Return per EUR share EUR0.2659 EUR0.2021
All items derive from continuing activities.
Statement of Changes in Equity and Net Assets Attributable to
Holders of Repayable Shares (Audited)
Net Assets
For the year ended 31 December Attributable
2010 to
Holders of
Repayable
Shares
US$
Net assets at beginning of year 355,265,787
Total comprehensive income for
the year 28,677,125
Redemption of shares (67,424,808)
Net assets at end of year 316,518,104
============
Net Assets
Attributable
to
For the year ended 31 December
2009 Holders of
Repayable
Shares
US$
Net assets at beginning of year 515,067,190
Total comprehensive income for
the year 86,290,620
Redemption of shares -(246,092,023)
Net assets at end of year 355,265,787
=============
Statements of Cash Flows (Audited)
For the year For the year
ended ended
31 December 31 December
2010 2009
US$ US$
Cash flows from operating activities
Net income/(loss) from Operations 30,662,235 87,134,085
Adjustments to reconcile net
increase/(decrease) in net assets
to net cash from operating activities:
Net changes in fair value through profit
or loss (27,154,746) (95,858,928)
Purchase of financial assets at fair value
through profit or loss (37,500,000) -
Proceeds from sales of financial assets
at fair value through
profit or loss 125,729,699 303,533,630
Net unrealised loss on forward currency
contracts 3,252,616 -
(Increase) in subscriptions in investees,
made in advance (20,000,000) -
(Increase) in amount due from investees (59,558) -
(Increase)/decrease in operating assets (6,460) 67,112
Increase/(decrease) in operating liabilities (547,777) 47,692
Net cash from operating activities 74,376,009 294,923,591
============== ==============
Cash flows from financing activities
Redemption of shares (118,131,425) (183,257,019)
Effect of change in fair value of redemptions
payable 354,780 -
-------------- --------------
Net cash inflow/(outflow) from financing
activities (117,776,645) (183,257,019)
============== ==============
Net cash increase/(decrease) in cash and
cash equivalents (43,400,636) 111,666,572
============== ==============
Cash and cash equivalents/(bank overdraft)
at beginning of year 69,748,549 (41,074,558)
Effect of exchange rate on translation (1,985,110) (843,465)
Cash and cash equivalents at end of year 24,362,803 69,748,549
============== ==============
Significant Agreements and Related parties
a) Investment Manager
The Investment Manager is remunerated at a rate of 1.5% per
annum of the Total Assets attributable to each class of ordinary
shares as at each month end (out of which it pays the trail
commission payable to qualifying investors) and 0.75% per annum of
the Total Assets of the redemption portfolio for the provision of
investment management services. Additionally, the Investment
Manager is entitled to a performance fee, provided that the value
of the Net Assets attributable to each Class of ordinary shares at
the end of one financial period (having made adjustments for any
issues or repurchases of ordinary shares and for any contingent or
accrued but unpaid liabilities) is greater than the value of Net
Assets attributable to that class of ordinary shares at the end of
the previous financial period. The Investment Manager will be
entitled to a performance fee equivalent to 10% of the amount by
which the year-end Net Assets attributable to each class of
ordinary shares exceeds the greatest value of the Net Assets
attributable to each class of ordinary shares at the end of any
previous financial period. No performance fee is charged to the
redemption portfolio. The investment management agreement may be
terminated by either party giving to the other not less than 60
days notice, or otherwise upon notice in circumstances where,
amongst other things, one of the parties commits and fails to
rectify a material breach of the investment management agreement,
has a receiver appointed over substantially all of its assets or an
order is made or an effective resolution passed for its winding up.
The investment management agreement will terminate automatically if
a continuation resolution is not passed and a special
resolution
for the winding-up of the Company is subsequently passed; or if
a special resolution is passed pursuant to section 391 of The
Companies (Guernsey) Law, 2008, as amended, requiring the Company
to be wound up, subject to payment of fees to the Investment
Manager for a further 60 days. Goldman, Sachs & Co. did not
hold a beneficial ownership of shares with voting rights in the
Sterling class, Euro class, or the US$ class at 31 December 2010
and 31 December 2009. Additionally, Goldman, Sachs & Co. held
shares in each class in a nominee capacity which has no voting
rights. During the year, management fees were US$5,926,463 (2009:
US$7,136,719). Management fees payable at year end were US$801,391
(2009: US$1,031,950).
b) Directors' Remuneration and expenses
The annual Directors' fees comprise GBP34,000 paid to Mr
Sherwell, the Chairman, (increased from GBP30,000 on 1 July 2010),
GBP28,000 to Mr Legge, Chairman of the Audit Committee, (increased
from GBP25,000 on 1 July 2010) and GBP25,000 to Mr Morgan
(increased from GBP22,000 on 1 July 2010). Mr Baillie is affiliated
with the Investment Manager and waived his right to a fee of
GBP25,000.
c) Administrator
RBC Offshore Fund Managers Limited (the "Administrator")
performs administrative duties for which it is currently
remunerated at an annual rate of 0.05% (maximum fee allowable is
0.06%) of the Total Assets of each class of shares of the Company,
payable monthly in arrears (subject to a minimum fee of US$100,000
per annum).
Effective 12 January 2010, the annual remuneration rate for
administration fees was 0.05%; (0.025% for the period from 1
January 2009 to 12 January 2010). During the year, administration
fees were US$179,287 (2009: US$118,948). Administration fees
payable at 31 December 2010 were US$27,228 (2009: US$17,200).
d) Custodian
Royal Bank of Canada (Channel Islands) Limited (the "Custodian")
is currently remunerated at an annual rate of 0.05% (maximum fee
allowable is 0.06%) of the Total Assets of each class of shares of
the Company thereafter, payable quarterly in arrears and subject to
a minimum fee of US$20,000 per annum.
Effective 12 January 2010, the annual remuneration rate for
custodian fees was 0.05%. Custodian fees had been waived for the
period from 1 January 2009 to 12 January 2010 as reimbursement for
a non-recurring administrative event. During the year, custodian
fees were US$176,400 (2009: Nil). Custodian fees payable at 31
December 2010 were US$42,991 (2009: Nil). Had the custodian fees
not been waived, the fees for the year ended 31 December 2009 would
have been US$237,896.
e) Credit facility
The following table summarises the Company's overdraft facility
(the "Facility") and is as follows:
Commitment
Time periods Maximum amount Interest rate(3) fee
Lesser of
02/03/10 - $45,000,000; 35% of
31/12/10(1) the collateral value LIBOR plus 1.50% 1.00%
Lesser of
$30,000,000; 20% of
Net Value of Assets
31/12/09 - and the collateral
05/03/10(2) value LIBOR plus 0.65% 0.15%
Lesser of
$30,000,000; 20% of
Net Value of Assets
and the collateral
30/07/09 - 31/12/09 value LIBOR plus 0.65% 0.15%
Lesser of
$120,000,000; 20% of
Net Value of Assets;
or 100% of the
01/11/08 - 30/07/09 collateral value LIBOR plus 0.65% 0.15%
() (1) New facility with Royal Bank of Canada, Grand Cayman
effective 2 March 2010. Maturity Date: 28 February 2012. Effective
28 February 2011, the Facility was renewed with the same terms.
(2) The Facility with Royal Bank of Canada (Channel Islands)
Limited matured effective 5 March 2010.
(3) London Interbank Offered Rate ("LIBOR").
Financial Risk Management
The Company may invest in positions in a variety of Investees
and forward currency contracts as determined by its investment
management strategy.
The Investees' investing activities expose the Company to
various types of risks that are associated with the financial
investments and markets in which they invest. The significant types
of financial risks which the Company is exposed to are market risk,
liquidity risk and credit risk. The prospectus provides details of
these and other types of risks, some of which are additional to
that information provided in these financial statements.
Asset allocation is determined by the Company's Investment
Manager who manages the allocation of assets to achieve the
investment objectives as detailed in Note 2 of the Annual Report
and Financial Statements - Investment objective. Achievement of the
investment objectives involves taking risks. The Investment Manager
utilises analysis, research and risk management techniques when
making investment decisions. Divergence from target asset
allocations and the composition of the portfolio are monitored by
the Company's Investment Manager.
The risk management policies employed by the Company are
detailed below.
a) Market risk
The potential for changes in the fair value of the Company's
investment portfolio is referred to as market risk. Commonly used
categories of market risk include currency risk, interest rate risk
and other price risk.
-- Currency risk may result from exposures to changes in spot
prices, forward prices and volatilities of currency exchange
rates.
-- Interest rate risk may result from exposures to changes in
the level, slope and curvature of the yield curve, the volatilities
of interest rates, mortgage prepayment speeds and credit
spreads.
-- Other price risk is the risk that the value of an instrument
will fluctuate as a result of changes in market prices other than
those arising from currency risk or interest rate risk.
The Company's market risk management strategy is driven by the
Company's investment risk and return objectives. The purpose of
these objectives is to produce a portfolio that generates a return
distribution that meets the following standards:
-- Consistency with the Investment Manager and Board
expectations. The risk capital consumed by the Investment Manager
should approximate the risk budget articulated in the risk and
return objectives for the Company.
-- Returns should be derived from Investment Manager strengths
(e.g. knowledge of particular Investees, portfolio construction
techniques, etc.)
-- The result of a well articulated and well defined process and
risk culture.
The Investment Manager has recommended to the Board that it will
manage market risk through the application of risk budgeting
principles and the Board has agreed. At the Investee level, market
risk is monitored on a regular basis. Where position level detail
is available, the Investment Manager monitors its exposure to
market risk through a variety of analytical techniques, including
Value at Risk ("VaR"). Where position level detail is unavailable,
the Company relies on risk reports provided by the Investees as
well as through open communication channels with the Advisors of
the Investees, which generally includes site visits and monthly
conference calls ("Due Diligence Process"). As part of the ongoing
Due Diligence Process, the Investment Manager evaluates a number of
critical risk factors including, but not limited to the review of
an Investee's liquidity, its concentration of investments held as
well as its leverage in an effort to determine the level of risk at
the Investees. As the Company is primarily a price taker from the
Investees, there is no guarantee that the ongoing Due Diligence
Process and oversight in place will be adequate to ensure that
errors or fraud will not take place at an Investee level. The
Company's maximum risk of loss is limited to the Company's
investment in the Investees.
Tracking Error
Predicted tracking error is one possible measure of the forward
looking or forecasted dispersion of a portfolio's excess returns
(defined as differences between the Company's returns and those of
its benchmark). More specifically, it is the forward looking
forecast of the standard deviation of such excess returns. Normal
statistical distributions of returns suggests that approximately
two thirds of the time the Company's returns will lie in a range
equal to the benchmark return plus or minus the predicted tracking
error estimate if the market behaves in a manner suggested by the
historical relationships used to produce the predictions. Predicted
tracking error is derived from current holdings and historical
return patterns. Predicted tracking error measures therefore apply
statistical probabilities (and the language
of uncertainty) and so cannot be completely predictive of actual
results. Realised (Historical) Tracking Error is the standard
deviation of the difference between the performance of a portfolio
and that of its benchmark. Assuming a normal distribution of excess
returns, the realised gross excess returns above or below the
benchmark will be within a portfolio's expected gross excess
returns plus or minus the Company's Predicted Tracking Error
approximately two thirds of the time.
The following table sets forth the Company's Annualised
Predicted Tracking Errors at 31 December 2010 and 31 December
2009:
31 December
Benchmark 2010 31 December 2009
3 Month LIBOR 6.60% 9.60%
The following table sets forth the Company's Predicted One Day
Tracking Errors at 31 December 2010 and 31 December 2009:
31 December
Benchmark 2010 31 December 2009
3 Month LIBOR 0.42% 0.60%
Predicted Tracking Error calculations contain inherent
limitations and different Tracking Error methodologies and
distributional assumptions could produce a materially different
result. Such limitations include, but are not limited to, the
assumption that historical market risk factors are good predictors
of future market risk, and that historical volatility of returns
will be repeated in the future. In addition, changes in the
investment positions could create material differences between
predicted and realised levels of Tracking Error. Predicted Tracking
Error is most effective in estimating risk exposures in markets
without sudden fundamental changes or sudden shifts in market
conditions. Also, past tracking error is not indicative of future
tracking errors and there can be no assurance that future levels of
tracking error experienced by the Company will be at levels
reflected by the Company's historical performance, or will
be at levels suggested by predictive forecasts. Moreover, there
can be no assurance that historically achieved levels of volatility
are predictive of levels that will be produced in the future.
VaR
VaR is a statistically based estimate of the potential loss in
value of the Company's investments due to adverse market movements
over a defined time horizon with a specified confidence level. VaR
is presented below as a sensitivity analysis of the Company's
investment portfolio. The Investment Manager believes that the VaR
assumptions it utilises are reasonable given that VaR is only one
determinant in the Investment Manager's overall risk
management.
In general the Company obtains VaR from Predicted Tracking Error
(TE) by scaling the annualised TE forecast into a daily forecast
(by dividing by the square root of 252, representing the number of
business days in a year) and then multiplying that result by 1.645
to give a 95% confidence level. 1.645 is a statistical measure of
the distance from the mean, within which 95% of a data set will be
located in a normally distributed data set. In other words the
Company's VaR assessment assumes a normal distribution and is based
on assuming that all instruments are linear instruments (i.e. lack
optionality).
For the VaR numbers reported below, a one-day time horizon and a
95% confidence level were used. This means that there is a 5%
probability (i.e. 1 day out of 20), the Company will experience
losses in an amount equal to the reported VaR or greater. Losses
greater than or equal to the reported VaR would be anticipated to
occur, on average, about once a month. Losses on a single day can
exceed reported VaR by significant amounts. Losses can also
accumulate over a longer time horizon such as a number of
consecutive trading days.
The Company's Predicted One Day VaR for 31 December 2010 and 31
December 2009 is shown below:
31 December
2010 31 December 2009
One Day VaR 0.68% 0.99%
The Predicted One Day VaR for the benchmark for 31 December 2010
and 31 December 2009 is shown below:
31 December
2010 31 December 2009
3 Month LIBOR
One Day VaR 0.05% 0.06%
The Investment Manager uses historical volatility data of
returns and correlation amongst the Investees to estimate the
Company's VaR. Given its reliance on historical data, VaR is most
effective in estimating risk exposures in markets in which there
are no sudden fundamental changes or sudden shifts in market
conditions. An inherent limitation of VaR is that the distribution
of past changes in market risk factors may not produce accurate
predictions of future risk. Different VaR methodologies and
distributional assumptions could produce a materially different
VaR. Moreover, VaR calculated for a one-day time horizon does not
fully capture the market risk of positions that cannot be
liquidated or offset with hedges within one day. Changes in VaR
between reporting periods are generally due to changes in levels of
exposure, volatilities and/or correlations among asset classes.
(i) Currency risk
The Company and its Investees may invest in financial
investments and enter into transactions denominated in currencies
other than its functional currency. Consequently, the Company may
be exposed to risks that the exchange rate of its functional
currency relative to other foreign currencies may change in a
manner that has an adverse effect on the value of that portion of
the Company's assets or liabilities denominated in currencies other
than the functional currency. Exposure to foreign currency risk at
the Investee Level is unknown and the Company does not manage this
risk. The Company may enter into forward currency contracts as a
way of managing foreign exchange risk for specific share classes
and as such the amounts of assets exposed to currency risk are not
significant.
To the extent unhedged, the value of the Company's net assets
will fluctuate with U.S. Dollar exchange rates as well as with
price changes of an Advisor's investments in the various local
markets and currencies. Forward currency contracts and options may
be used by Advisors to hedge against currency fluctuations, but the
Advisors are not required to use such techniques, and there can be
no assurance that such hedging transactions will be available or,
even if undertaken, effective.
(ii) Interest rate risk
The Investees may invest in fixed income securities and interest
rate swap contracts. Any change to relevant interest rates for
particular securities may result in the advisors being unable to
secure similar returns on the expiry of contracts or the sale of
securities. In addition, changes to prevailing interest rates or
changes in expectations of future rates may result in an increase
or decrease in the value of the securities held. In general, if
interest rates rise, the value of fixed income securities will
decline. A decline in interest rates will in general have the
opposite effect. The majority of the Company's financial assets and
liabilities are non-interest bearing. As a result, the Company is
not subject to significant amounts of risk due to fluctuations in
the prevailing levels of market interest rates. Any excess cash and
cash equivalents are invested at short-term market interest
rates.
(iii) Price risk
Price risk is the risk that the value of the Investees'
financial investments will fluctuate as a result of changes in
market prices, other than those arising from currency risk or
interest rate risk whether caused by factors specific to an
individual investment, its issuer or any factor affecting financial
investments traded in the market.
As the Company's investments in Investees are carried at fair
value with fair value changes recognised in the Statement of
Comprehensive Income, all changes in market conditions will
directly affect net assets.
The investments in the Investees are valued based on the latest
available unaudited redemption price of such shares as determined
by the administrator of the Investees. Furthermore, valuations
received from the administrator of the Investees may be estimates
and such values generally can be used to calculate the NAV of the
Company. Such estimates provided by the administrators of the
Investees may be subject to subsequent revisions which may not be
restated for the purposes of the Company's final month-end NAV. See
Note 3(b) of the Annual Report and Financial Statements - Investees
for further information regarding investment valuation.
Currency, interest rate and price risk are managed by the
Company's Investment Manager as part of the integrated market risk
management processes described above.
b) Liquidity risk
Liquidity risk is the risk that the Company will encounter
difficulty in meeting obligations associated with financial
liabilities. The Company's investments in the Investees can be
redeemed on a limited basis. As a result, the Company may not be
able to liquidate quickly some of its investments in these
instruments in order to respond to specific events such as
deterioration in the creditworthiness of any particular Investee.
The Company, being closed-ended, is able to invest its portfolio
with less regard to the issues arising from the limited liquidity
of the Investees than would be the case for open-ended funds of
hedge funds. In order to help mitigate liquidity risk, the Company
maintains a short-term overdraft facility as detailed in Note 9(e)
of the Annual Report and Financial Statements - Credit
facility.
The Advisors of the Investees may, at their discretion, transfer
a portion of the Company's investment into share classes where
liquidity terms are directed by the Advisor in accordance with the
respective Investee's offering memorandum, commonly referred to as
side pocket share classes. These side pocket share classes may have
restricted liquidity and prohibit the Company from fully
liquidating its investments without delay. The Company's Investment
Manager attempts to determine the Investees strategy on side
pockets prior to making an allocation to the Investee through its
due diligence process. However, no assurance can be given on
whether or not the Investee will implement side pockets during the
investment period. The Advisors of the Investees may also, at their
discretion, suspend redemptions or implement other restrictions on
liquidity which could impact the Company. As at 31 December 2010,
US$29,057,526 or 9% (2009: US$34,924,631 or 10%) of Net Assets,
inclusive of amounts payable to redeeming Shareholders, were
considered illiquid by the Company due to restrictions implemented
by certain Advisors of the Investees.
Certain of the Company's Investees may have liquidity exposure
related to the Advisors' estimates of the recovery value of claims
against Lehman Brothers Holdings, Inc. and for certain of its
subsidiaries and affiliates ("Lehman"), including cash claims
involving amounts owed to the Investees by Lehman and/or
proprietary claims involving recovery of Investees' assets held by
Lehman at the time of its insolvency. These estimates are based on
information received from the majority, but not all of, the
Advisors, and the Company has no way of independently verifying or
otherwise confirming the accuracy of the information provided. As a
result, there can be no guarantee that such estimates are accurate.
There is significant uncertainty with respect to the ultimate
outcome of the Lehman insolvency proceedings, and therefore the
amounts ultimately recovered from Lehman could be materially
different than such estimates. Based on the information received,
the gross indirect exposure to Lehman did not materially affect the
Company's net assets attributable to holders of repayable
shares.
The following table summarises the liquidity provisions related
to the Company's investments in Investees at 31 December 2010:
Remaining
Redemption Holding
Investees Period Period(2)
Eton Park Overseas Fund Limited (1) Annually None
TPG-Axon Partners (Offshore) Limited (1) Quarterly None
Goldman Sachs BH Fund Offshore SPC Monthly None
Silver Point Capital Offshore Fund Limited Annually None
(1)
Moore Global Investments Limited Quarterly None
Anchorage Capital Partners Offshore Fund Annually None
Limited
AKO Fund Limited Quarterly None
The Children's Investment Fund Every 3 years 3 months
Goldman Sachs Classic Offshore Holdings, Quarterly 9 months
Ltd
Conatus Capital Overseas, Ltd Quarterly None
DE Shaw Oculus International Fund Quarterly None
Perry Partners International Inc. Quarterly None
Yannix Fund Limited Quarterly None
Transtrend Fund Alliance - OmniTrend (USD) Monthly None
Spinnaker Global Opportunity Fund Every 3 years 6 months
Moon Capital Global Equity Offshore Fund Quarterly None
Limited
Harbinger Capital Partners Special Situations N/A N/A
Offshore Fund, Ltd. (1)
Spinnaker GEM Redemption Pool Limited (1) N/A N/A
Amaranth International Limited (1) N/A N/A
GLG Tisbury Fund Limited (1) N/A N/A
(1) This Investee has notified the Company of certain
restrictions on liquidity, which may include side pocket
investments, suspended redemptions or other implemented
restrictions on liquidity.
(2) Represents remaining holding period of locked-up
investees.
The table below sets forth the liabilities of the Company as at
31 December 2010 and 31 December 2009 and are rated into relevant
maturity groupings based on the earliest potential settlement.
Amounts due within 12 months equal their carrying balances.
Financial liabilities
Less than Greater than
31 December 2010 1 year 1 year No Stated Maturity
US$ US$ US$
Financial liabilities
at fair value through
profit or loss 6,785,238 - -
Redemptions payable - - 12,483,167
Other liabilities 1,227,476 - -
Repayable shares - - 316,518,104
8,012,714 - 329,001,271
=========== ============= ===================
Less than Greater than
31 December 2009 1 year 1 year No Stated Maturity
US$ US$ US$
Redemptions payable 62,835,004 - -
Other liabilities 1,775,253 - -
Repayable shares - - 355,265,787
64,610,257 - 355,265,787
=========== ============= ===================
Some of the investments made by the Company may not be readily
realisable and their marketability may be restricted, in particular
because markets in those investments may be made only by the
relevant Advisor who may allow redemptions only at specific times
and dates, and it may be difficult for the Company to sell or
realise its investments in whole or in part.
c) Credit risk
Credit risk is the risk that one party to a financial investment
will cause a financial loss by failing to discharge an obligation.
The Investment Manager has adopted procedures to reduce credit risk
related to the Company's dealings with counterparties and
Investees. Before transacting with any counterparty or Investee,
the Investment Manager or its affiliates evaluate both
creditworthiness and reputation by conducting a credit analysis of
the party, their business and reputation. The credit risk of
approved counterparties and Investees is then monitored on an
ongoing basis, including periodic reviews of financial statements
and interim financial reports as needed.
Investee risk is monitored within VaR as described above.
At 31 December 2010 and 31 December 2009, the following
financial assets were exposed to counterparty credit risk:
Investments in Investees, Cash and cash equivalents, amounts due
from Investees and other receivables. The carrying amounts of
financial assets best represent the maximum credit risk exposure at
the year end date. The main concentration to which the Company is
exposed arises from investments in Investees. However there is no
significant concentration arising on investments in an individual
Investee.
The maximum exposure to credit risk as at the reporting date can
be analysed as follows for the year ended 31 December 2010 and 31
December 2009:
Financial assets
31 December 31 December
2010 2009
US$ US$
Financial assets at fair value through
profit or loss 292,008,693 349,551,024
Amount due from Investees 609,962 550,404
Subscriptions in investees, made in
advance 20,000,000 -
Cash and cash equivalents 24,362,803 69,748,549
Total assets exposed to credit risk 336,981,458 419,849,977
============ ============
The Investees held by the Company are not actively traded and
have no credit ratings available. The Company maintains its cash
and cash equivalents, when held, at RBC, which is subject to the
Company's credit risk monitoring policies as described above.
Share capital
31 December 31 December
2010 2009
US$ US$
Authorised: unlimited number of shares
of no par value - -
- -
============ ============
Issued and fully paid
GBP shares of no par value 159,768,713 176,674,709
US$ shares of no par value 10,710,735 22,066,468
EUR shares of no par value 6,606,264 14,574,570
As of 31 March, 30 June, 30 September and 31 December of each
year a shareholder may elect to convert some or all of his Ordinary
Shares of one currency class into Ordinary Shares of another
currency class.
In August 2009, the Company reported an additional conversion
between share classes operated in respect of the July 2009
Conversion Calculation Date as set out in the redemption proposals
and redemption offer circular dated 2 June 2009.
The rights attaching to the Ordinary Shares are as follows:
a) Subject to any restrictions set out in the Company's Articles
of Association, each Ordinary Share carries one vote per share at a
general meeting.
b) The holders of Ordinary Shares of the relevant classes shall
confer the right to dividends declared in accordance with the
Company's Articles of Association.
c) No dividend or other distribution shall be made or paid by
the Company on any of its Shares between the Calculation Time and
the Conversion Time and no dividend shall be declared with a record
date falling between the dates.
d) The Ordinary Share Surplus shall be divided amongst the
Ordinary Shareholders pro rata according to their holdings as if
the Ordinary Share Surplus comprised the assets of the Company
available for distribution.
e) The capital and assets of the Company shall on a winding-up
be divided amongst the Shareholders on the basis of the capital
attributable to the respective classes of Shares at the date of
winding up and amongst the members of a particular class pro rata
according to their holdings of Shares of that Class.
Expenses incurred for each share class are charged to that
class.
2010 Continuation resolutions and redemptions
A meeting to consider the 2010 continuation resolutions was held
on 23 April 2010. Shareholders passed a continuation resolution for
the GBP Shares, however, continuation resolutions for the EUR
Shares and the US$ Shares failed to pass. As announced on 24 June
2010, the Board received acceptances for redemption proposals for
29,090,245 US$ shares and 4,130,495 EUR shares. The shares were
cancelled in July 2010 and as a result, all holders of the redeemed
shares ceased to be Shareholders in the Company and are classified
as unsecured creditors on the Statement of Assets and Liabilities.
See Note 11 of the Annual Report and Financial Statements -
Redemptions payable.
2011 Continuation resolutions and redemptions
Over the current period and similar to the prior year, the
Company's GBP Shares, the EUR Shares and the US$ Shares traded, on
average, at discounts to their respective Net Asset Values in
excess of the discount management provisions, as described in the
Articles of Association, and accordingly, the Company announced on
13 January 2011 that the Company was required to propose 2011
continuation resolutions in respect to each share class. See Note
17 of the Annual Report and Financial Statements - Subsequent
Events - 2011 Continuation Resolutions for more information.
These are not full statutory accounts. The full audited accounts
for 31 December 2010 will be sent to Shareholders and will be
available for inspection at Canada Court, Upland Road, St Peter
Port, Guernsey, the registered office of the Company or the
Company's website
www2.goldmansachs.com/services/investing/closed-ended-investments/index.
html.
Enquiries:
Robin Amer
RBC Offshore Fund Managers Ltd
Tel: +44 (0)1481 744130
This information is provided by RNS
The company news service from the London Stock Exchange
END
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