Bennelong Asia Pacific Multi Strategy Equity Fund Limited SEMI-ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

Transcription

1 Bennelong Asia Pacific Multi Strategy Equity Fund Limited SEMI-ANNUAL REPORT AND CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

2 TABLE OF CONTENTS PAGE Company Information 2 Investment Managers Report 3-5 Company Balance Sheet 6 Consolidated Balance Sheet 7-9 Consolidated Income Statement 10 Consolidated Statement of Changes in Net Assets attributable to holders of Redeemable Participating Shares 11 Consolidated Statement of Cash Flows 12 Consolidated Condensed Schedule of Investments Notes to the Consolidated Financial Statements

3 COMPANY INFORMATION Directors Richard Boléat (non-executive) Jean-Christian Cheysson (non-executive) Natalie Sullivan (non-executive) George Loraine (non-executive) Registered Office 12 Castle Street St. Helier, Jersey JE2 3RT Investment Managers Manager Bennelong Asset Management LLP Bennelong Asset Management Limited 6 Duke Street, St. James s 2 nd Floor, Dialogue House London SW1Y 6BN 2-6 Anley Street United Kingdom St. Helier, Jersey JE2 3QE Bennelong Asset Management (Singapore) Pte. Ltd. Administrator, Registrar and Secretary 6 Battery Road #18-05/06 Capita Financial Administrators (Jersey) Limited Singapore Castle Street Singapore St. Helier, Jersey JE2 3RT Sub-Administrator Legal Advisors PNC Global Investment Servicing (Europe) Limited as to English Law Riverside Two Schulte Roth & Zabel International LLP Sir John Rogerson s Quay Heathcoat House Grand Canal Dock 20 Saville Row Dublin 2, London W1S 3PR Republic of Ireland United Kingdom Independent Auditors as to United States Law Ernst & Young LLP Schulte Roth & Zabel LLP Liberation House 919 Third Avenue Castle Street New York, NY St. Helier, Jersey JE1 1EY United States of America Channel Islands Stock Exchange Sponsor As to Jersey Law Capita Financial Administrators (Jersey) Limited Walkers, 12 Castle Street PO Box 72 St. Helier, Jersey JE2 3RT Hill Street St. Helier, Jersey JE4 8PN Prime Brokers As to Singapore Law Rajah & Tann LLP 4 Battery Road #26-01 Bank of China Building Singapore Singapore Credit Suisse Securities Limited 1 Cabot Square, London E14 4QJ United Kingdom UBS AG 1 Finsbury Avenue, London EC2M 2PP United Kingdom Irish Stock Exchange Sponsor Goodbodys Stockbrokers Ballsbridge Park, Dublin 4 Republic of Ireland Goldman Sachs International Peterborough Court 133 Fleet Street London EC4A 2BB United Kingdom 2

4 INVESTMENT MANAGERS REPORT For the six months ended 30 June 2009 the performance for Bennelong Asia Pacific Multi Strategy Equity Fund Limited ( BAPMSEF ) Class A shares was positive 0.79%. The master-feeder fund structure is described in note 1 to the financial statements. Performance Bennelong Asia Pacific Multi Strategy Equity Fund Limited Cumulative Returns by Share Class 4% 3% Return 2% 1% 0% Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 BAMSEF Ltd - Class A (USD) Monthly Attribution by sub-strategy Bennelong Asia Pacific Multi Strategy Equity Master Fund Limited Monthly Performance Attribution by Sub-strategy 3% 2% 1% 0% -1% -2% -3% Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 SHARE CLASS ARBITRAGE VOLATILITY TRADING SPECIAL SITUATIONS TOTAL FUND 3

5 INVESTMENT MANAGERS REPORT (continued) Cumulative Attribution by sub-strategy Performance Attribution (% of NAV Offshore Class A) 1 Jan 2009 to 30 June 2009 Share Class Arbitrage Volatility Trading Special Situations IH % -5.19% +5.46% Portfolio Exposures (month end) Bennelong Asia Pacific Multi Strategy Equity Master Fund Limited Portfolio Net and Gross Exposures 220% 170% 120% 70% 20% -30% Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Gross MV of Investments (Delta Adjusted) Net Long (Short) MV Delta Adjusted Gross MV of Investments (non-delta Adjusted) Net Long (Short) MV (Non Delta Adjusted) Global equity markets commenced 2009 with a significant sell off as weak macro data and solvency fears for western world banks generated another bout of panic selling. The Chinese equity markets were one of the few exceptions as the Chinese government had announced significant stimulus measures in Q4 of 2008 in response to a 65% decline in equity markets and a rapidly slowing economy. Equity markets bounced dramatically from mid March as some US banks announced profitable trading results for January & February and investors responded positively to stimulus measures such as government support for AIG and large US banks, and further quantitative easing. Since that mid March low investor appetite for risk assets has bounced significantly with the higher beta markets and cyclical assets leading the way up. The special situations strategy provided the largest contribution to the Fund s performance in the first half of 2009 with a return of positive 5.46%. Long property exposures in Hong Kong, China and India were amongst the fund s most profitable positions during this period. The long positions in India gained significantly in the post May federal election rally whilst the Chinese and Hong Kong property exposures benefited from rising liquidity and risk appetite for hard assets. Other profitable sectors included Australian energy and mining which benefited from Chinese buying of commodities. The most significant losses in this strategy were focussed amongst short positions in diversified miners, banks and financials which rallied with the broader market during the second quarter. 4

6 INVESTMENT MANAGERS REPORT (continued) The share class arbitrage strategy contributed positive 0.52% to performance in the first six months of Following the break in the BHP-Rio merger in Q (which eliminated the hard catalyst for our share class positions in those stocks) we commenced 2009 with historically low exposures to this sub-strategy. Late in the half we did rebuild positions in these stocks as spreads expanded to historically extreme levels during the Rio Tinto rights issue trading period. The volatility trading strategy contributed negative 5.01% to performance during the first six months of In January and February this sub-strategy performed positively with significant gamma trading profits despite weakening implied volatility levels. Macro portfolio hedges such as a long call option position over the steepening of the Australian yield curve also performed positively during this period as the Australian central bank cut rates further in response to increasingly weak economic data. As markets bounced from the mid March lows implied volatility levels fell significantly as evidenced by the VIX which fell from 50% in January to approximately 25% by 30 th June. Similarly, Asian volatility markets experienced an increased supply of single stock and index volatility via yield enhanced structured products as risk appetite surged amongst retail investors. Significant profitable positions in this strategy included strategic volatility positions in FX and interest rate curves and equity/equity index in Korea and India. Conversely, losses were experienced predominantly in long volatility exposures amongst financial and banking stocks as well as in short delta index hedge positions, most notably in Hong Kong, China, Japan and the US. As at 30 June 2009 the portfolio was positioned with a net long exposure of 21% of NAV on a delta equivalent market value basis and a net long exposure of 19% on a market value basis. Gross delta adjusted exposure was at 203% of NAV. The Fund ended the first half of 2009 with 50.3bps of Vega per 1% nominal change in volatility and approximately 5.0% of NAV invested in option premium. Bennelong Asset Management LLP Bennelong Asset Management (Singapore) Pte. Ltd. 20 August

7 COMPANY BALANCE SHEET As at 30 June June December 2008* (Unaudited) (Audited) Assets Investment in Bennelong Asia Pacific Multi Strategy Equity Master Fund Limited (Cost: 797,071,687 and 1,993,924,819) 2 1,104,543,370 2,264,847,280 Unrealised gain on forward contracts 2 31,980,827 Other assets and prepaid expenses 28,664 13,511 Total assets 1,104,572,034 2,296,841,618 Liabilities Unrealised loss on forward contracts 2 (1,792,253) Performance fee payable 3 (13,114) (1,226,107) Management fee payable 3 (1,516,506) (3,586,260) Other payables and accrued expenses (54,824) (85,226) Total liabilities (excluding net assets attributable to holders of redeemable participating shares) (3,376,697) (4,897,593) Net assets attributable to holders of redeemable participating shares 2,8 1,101,195,337 2,291,944,025 * Refer to note 10. On behalf of the Board of Directors Richard Boléat Director Date: 20 August 2009 George Loraine Director The accompanying notes on pages 16 to 26 form an integral part of these unaudited Financial Statements. 6

8 CONSOLIDATED BALANCE SHEET As at 30 June 2009 Note 30 June December 2008* (Unaudited) (Audited) Assets Cash and cash equivalents 2(j) 1,097,146,630 2,699,528,579 Amounts due from brokers 2(k) 63,754,835 30,900,819 Financial assets at fair value through profit or loss 2(b),(c) 755,647, ,105,875 Amounts receivable for unsettled securities 161,216,599 51,869,858 Dividends receivable 3,338, ,857 Interest receivable 93,444 1,179,444 Other assets and prepaid expenses 90,746 50,722 Total assets 2,081,288,067 3,052,841,154 Liabilities Amounts due to broker 2(k) (20,650,000) (36,524,436) Financial liabilities at fair value through profit or loss 2(b),(c) (649,023,153) (496,181,775) Amounts payable for unsettled securities (131,405,163) (961,736) Administration fees payable 3 (147,190) (207,297) Audit fees (26,377) (73,783) Custodian stocklending fees payable (450,925) (346,867) Dividends payable on securities sold short (2,681,358) (602,608) Management fee payable 3 (1,516,506) (3,586,260) Performance fee payable 3 (13,114) (1,226,107) Interest payable (593,767) (933,074) Other payables and accrued expenses (70,127) (159,592) Total liabilities (excluding net assets attributable to holders of redeemable participating shares) (806,577,680) (540,803,535) Minority Interest 2(a) (173,515,050) (220,093,594) Net assets attributable to holders of redeemable participating shares 2,8 1,101,195,337 2,291,944,025 * Refer to note 10. The accompanying notes on pages 16 to 26 form an integral part of these unaudited Financial Statements. 7

9 CONSOLIDATED BALANCE SHEET (continued) As at 30 June 2009 Equivalent 30 June December 2008* (Unaudited) (Audited) Base Currency Equivalent Base Currency Net assets attributable to each share class Class A USD 20,432,904 20,432,904 38,758,622 38,758,622 Class B USD 65,751,341 65,751, ,570, ,570,516 Class C USD 289, ,902 14,032,154 14,032,154 Class D USD 413,192, ,192, ,055, ,055,565 Class E USD 426,481, ,481, ,787, ,787,867 Class F USD 31,596,701 31,596,701 93,303,083 93,303,083 New Management Share Class USD 1,957,300 1,957,300 2,992,731 2,992,731 Management Share Class USD 5,370,287 5,370,287 14,482,111 14,482,111 Class A EUR 938,877 UR 669,044 1,095,638 UR 784,111 Class B EUR 13,334,000 UR 9,542,689 Class D EUR 88,181,948 UR 62,838, ,998,289 UR 123,093,315 Class E EUR 31,036,153 UR 22,116, ,551,468 UR 105,597,558 Class F EUR 2,402,964 UR 1,712,352 6,981,982 UR 4,996,767 New Management Share Class AUD 13,563,527 AU$ 16,817,417 1,101,195,337 2,291,944,025 Number of redeemable participating shares outstanding Class A USD 149, ,266 Class B USD 490,893 1,534,005 Class C USD 2, ,899 Class D USD 3,651,503 6,417,443 Class E USD 3,796,679 7,687,384 Class F USD 281, ,515 New Management Share Class USD 19,461 30,183 Management Share Class USD 34,927 95,539 Class A EUR 4,823 5,700 Class B EUR 77,121 Class D EUR 559,149 1,103,989 Class E EUR 198, ,452 Class F EUR 16,260 47,816 New Management Share Class AUD 169,102 * Refer to note 10. The accompanying notes on pages 16 to 26 form an integral part of these unaudited Financial Statements. 8

10 CONSOLIDATED BALANCE SHEET (continued) As at 30 June June December 2008* (Unaudited) (Audited) Net assets per redeemable participating share outstanding Class A USD Class B USD Class C USD Class D USD Class E USD Class F USD New Management Share Class USD Management Share Class USD Class A EUR UR UR Class B EUR - UR Class D EUR UR UR Class E EUR UR UR Class F EUR UR UR New Management Share Class AUD AU$99.45 * Refer to note 10 On behalf of the Board of Directors Richard Boléat Director Date: 20 August 2009 George Loraine Director The accompanying notes on pages 16 to 26 form an integral part of these unaudited Financial Statements. 9

11 CONSOLIDATED INCOME STATEMENT 30 June June 2008* (Unaudited) (Unaudited) Investment income Net gain on financial assets and financial liabilities at fair value through profit or loss 4 36,862, ,977,439 Other income 4,412,728 1,593,564 Total investment income 41,275, ,571,003 Expenses Prime brokerage fees and borrowing costs (2,493,658) (9,362,483) Futures trading commissions 2(p) (1,434,142) (2,210,127) Administration fees 3 (596,651) (925,756) Directors' fees (39,247) (14,420) Directors' and officers' insurance fees (37,192) (37,295) Performance fees 3 (17,929,319) Management fees 3 (13,099,235) (22,035,025) Legal fees (50,085) (112,249) Audit fees (60,552) (42,268) Organisational expenses (20,726) (20,784) Other expenses (64,440) (241,870) Total operating expenses before finance costs (17,895,928) (52,931,596) Finance Costs Interest expense (2,631,869) (47,485,035) Total operating expenses (20,527,797 ) (100,416,631 ) Profit attributable to holders of redeemable participating shares before Minority Interest 20,747, ,154,372 Minority Interest 2(a) (3,339,491 ) (5,590,276 ) Profit attributable to holders of redeemable participating shares 17,408, ,564,096 The accompanying notes on pages 16 to 26 form an integral part of these unaudited Financial Statements. 10

12 CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE PARTICIPATING SHARES For the six month period ended 30 June June June 2008* (Unaudited) (Unaudited) Net assets attributable to holders of redeemable participating shares at start of period 2,291,944,025 1,682,508,155 Issue of redeemable participating shares 87,790, ,582,167 Redemption of redeemable participating shares (1,295,984,992) (94,144,995) Equalisation 37,863 (4,809,745) Profit attributable to holders of redeemable participating shares 17,408, ,564,096 Net assets attributable to holders of redeemable participating shares at end of period 1,101,195,337 2,497,699,678 * Refer to note 10. The accompanying notes on pages 16 to 26 form an integral part of these unaudited Financial Statements. 11

13 CONSOLIDATED STATEMENT OF CASH FLOWS For the six month period ended 30 June June June 2008* (Unaudited) (Unaudited) Operating Activities Profit attributable to holders of redeemable shares 17,408, ,564,096 Cash flows from Operating Activities (Increase) in financial assets at fair value through profit or loss (486,541,222 ) (1,041,767,944) Increase in financial liabilities at fair value through profit or loss 152,841, ,180,929 (Increase) in amounts due from brokers (32,854,016) (21,097,026) (Decrease) in amounts due to brokers (15,874,436) (Increase) in amounts receivable for unsettled securities (108,747,066 ) (202,645,333) Increase in amounts payable for unsettled securities 130,443, ,608,841 (Increase) in other assets and prepaid expenses (639,699) (1,608,722 ) Decrease in interest receivable 1,086, ,686 (Increase)/decrease in dividends receivable (3,132,859) 513,655 (Decrease) in interest payable (339,307) (1,325,957 ) Increase in dividends payable on securities sold short 2,078,750 8,057,075 (Decrease)/increase in management fee payable (2,069,754) 1,045,590 (Decrease) in performance fee payable (1,212,993) (30,865,316) (Decrease)/increase in minority interest (46,578,544) 90,786,300 (Decrease) in other payables (92,920) (15,020,202) (Decrease) in operating assets and liabilities (411,633,261 ) (71,994,426) Cash flows from operating activities (394,224,978 ) 31,569,670 Proceeds from issue of redeemable participating shares 87,828, ,772,422 Payments on redemption of redeemable participating shares (1,295,984,992) 94,144,995 Cash flows from financing activities (1,208,156,971) (711,627,427) Net (decrease)/increase in cash and cash equivalents for the period (1,602,381,949 ) 743,197,098 Cash and cash equivalents at start of period 2,699,528,579 3,422,915,884 Cash and cash equivalents at end of period 1,097,146,630 4,166,112,982 Supplementary information on cash flows from Operating Activities 30 June June 2008* (Unaudited) (Unaudited) Interest received 2,942,358 68,754,915 Interest paid (2,971,176) 37,053,354 Dividends received 4,637,422 21,173,643 Dividends paid on short positions (7,285,141) (27,567,130) * Refer to note 10. The accompanying notes on pages 16 to 26 form an integral part of these unaudited Financial Statements. 12

14 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS As at 30 June 2009 Analysis of investments by Geographical Region: 30 June December 2008 Region Fair value Fair value Financial assets at fair value through profit or loss Australasia 153,715,044 55,014,261 Brazil 123,354 33,354,464 China 92,626,360 53,598,151 Hong Kong 277,162,438 2,121,011 India 35,638,902 Japan 69,690,480 3,928,148 North America 12,251,220 41,374,416 Other Asia 11,087,747 9,054,910 Other Europe 12,827,014 56,991,102 South Korea 57,923,210 United Kingdom 32,601,328 13,669,412 Financial assets at fair value through profit or loss 755,647, ,105,875 Financial liabilities at fair value through profit or loss Australasia (568,968,673) (420,441,152) China (20,592,181) (128,326) Hong Kong (15,568,897) (5,384,500) India (14,945,732) (29,680,895) Japan (292,391) (6,825,810) North America (1,109,825) (1,213,966) Other Asia (2,345,980) (10,093,490) Other Europe (9,979,068) (78,750) South Korea (8,216,871) (2,096,276) United Kingdom (7,003,535) (20,238,610) Financial liabilities at fair value through profit or loss (649,023,153) (496,181,775) Net financial assets/(liabilities) at fair value through profit or loss 106,623,944 (227,075,900) The accompanying notes on pages 16 to 26 form an integral part of these unaudited Financial Statements. 13

15 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS (continued) As at 30 June 2009 Analysis of investments by Sector: 30 June December 2008 Sector Fair value Fair value Financial assets at fair value through profit or loss Basic Materials 154,296,482 96,372,306 Commodities 5,000,000 Communications 2,339,255 Consumer, Cyclical 4,997,964 Consumer, Non-cyclical 10,989,730 Currency 18,305,244 42,142,575 Diversified 963,333 Energy 73,400,686 6,582,098 Financial 283,854,093 96,352,754 Index 7,152,806 1,916,142 Industrial 49,378,496 Listed Funds 4,542,645 25,740,000 Property 84,307,842 Technology 52,461,686 Utilities 3,656,835 Financial assets at fair value through profit or loss 755,647, ,105,875 Financial liabilities at fair value through profit or loss Basic Materials (552,751,153) (330,428,788) Communications (1,025,907) Consumer, Cyclical (309,081) (21,867,011) Consumer, Non-cyclical (706,091) Currency (2,919,382) (1,212,568) Energy (1,436,595) Financial (76,722,999) (140,490,605) Index (5,756,859) (2,054,477) Industrial (7,369,535) (128,326) Property (25,551) Financial liabilities at fair value through profit or loss (649,023,153) (496,181,775) Net financial assets/(liabilities) at fair value through profit and loss 106,623,944 (227,075,900) The accompanying notes on pages 16 to 26 form an integral part of these unaudited Financial Statements. 14

16 CONSOLIDATED CONDENSED SCHEDULE OF INVESTMENTS (continued) As at 30 June 2009 Analysis of investments by Security Type: 30 June December 2008 Security Fair value Fair value Financial assets at fair value through profit or loss Contracts-for-Difference-Held Long Non-Exchange Traded 34,153,088 13,669,412 Contracts-for-Difference-Held Short Non-Exchange Traded 795,322 10,240,709 Currency Options Non-Exchange Traded 17,624,087 4,888,310 Dispersion Securities Non-Exchange Traded 117, ,429 Forward Foreign Currency Contracts Non-Exchange Traded 681,157 31,980,827 Future Contracts-Held Long Exchange Traded 3,668,725 Future Contracts-Held Short Exchange Traded 598,511 5,259 Future Contracts-Held Short Non-Exchange Traded 666,119 Interest Rate Derivatives Exchange Traded 5,273,438 Interest Rate Derivatives Non-Exchange Traded 13,627,789 69,801,282 Listed Funds Exchange Traded 4,543,103 25,740,000 Long Call Equity Options Exchange Traded 2,622,823 Long Call Index Options Exchange Traded 5,929,305 1,065,285 Long Convertible Non-Exchange Traded 5,000,000 Long Equities Exchange Traded 579,619,270 40,731,297 Long Equities Non-Exchange Traded 40,233,980 49,348,430 Long Put Equity Options Exchange Traded 270,000 Long Put Equity Options Non-Exchange Traded 2,731,555 Long Put Index Options Exchange Traded 356,924 Short Put Equity Options Exchange Traded 120,450 Swaps Non-Exchange Traded 19,814,289 12,209,022 Warrants Exchange Traded 26,262,119 Financial assets at fair value through profit or loss 755,647, ,105,875 Financial liabilities at fair value through profit or loss Contracts-for-Difference-Held Long Non-Exchange Traded (1,808,172) (830,463) Contracts-for-Difference-Held Short Non-Exchange Traded (4,311,449) Currency Options Non-Exchange Traded (325,810) (1,212,568) Forward Foreign Currency Contracts Non-Exchange Traded (2,593,572) Future Contracts-Held Long Exchange Traded (292,391) Future Contracts-Held Short Exchange Traded (507,621) Future Contracts-Held Short Non-Exchange Traded (11,450) Future Contracts-Held Short Exchange Traded (119,844) Listed Funds Exchange Traded (5,473,034) Short Call Index Options Exchange Traded (109,375) (2,054,477) Short Equities Exchange Traded (626,958,300) (469,155,779) Short Put Equity Options Exchange Traded (105,000) (72,270) Short Put Equity Options Non-Exchange Traded (490,860) Short Put Index Options Exchange Traded (58,000) Swaps Non-Exchange Traded (5,978,119) (22,736,374) Financial liabilities at fair value through profit or loss (649,023,153) (496,181,775) Net financial assets/(liabilities) at fair value through profit and loss 106,623,944 (227,075,900) The accompanying notes on pages 16 to 26 form an integral part of these unaudited Financial Statements. 15

17 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL INFORMATION Bennelong Asia Pacific Multi Strategy Equity Fund Limited (the Company ) is an open-ended investment company incorporated under the laws of Jersey and is domiciled in Jersey. The Company was incorporated, as Bennelong Flagship Fund Limited, with limited liability on 2 September 2004, for an unlimited period, with registration number On 25 January 2005, the Company changed its name to Bennelong Asia Pacific Multi Strategy Equity Fund Limited. The Company commenced operations on 1 March The registered office of the Company is located at 12 Castle Street, St. Helier, Jersey JE2 3RT. The Company had no employees during the six months period ended 30 June The Company is established as the Feeder Fund in a master-feeder structure and all of the Company s assets are invested solely in the shares of Bennelong Asia Pacific Multi Strategy Equity Master Fund Limited (the Master Fund ). These annual audited consolidated financial statements consolidate the financial statements of the Company and its subsidiaries Bennelong Asia Pacific Multi Strategy Equity Master Fund Limited (the Master Fund ) and Bennelong Asia Pacific (Mauritius) Limited (together the Group ). Bennelong Asia Pacific (Mauritius) Limited has been established to invest in Indian capital markets. The investment objective of the Master Fund is to generate absolute returns whilst focusing on capital preservation through investment and trading in globally listed and unlisted equity and derivative markets of investment grade and noninvestment grade securities taking advantage of opportunities arising from inefficiencies and imbalances between markets and individual securities as well as directional trades. The objective is to achieve long and short-term capital appreciation through investment in a portfolio consisting primarily of equity investments in companies organised or operating in the Asia Pacific region. The functional currency of the Company is US Dollar and not the local currency of Jersey reflecting the fact that substantially all of the Company s capital is denominated in US Dollars ( ). The Class A USD Shares and Class B USD Shares were listed on the Channel Islands Stock Exchange and Irish Stock Exchange on 1 March The Class A EUR Shares and Class B EUR Shares were listed on the Irish Stock Exchange on 1 April 2005 and 3 November 2005 respectively. Class D USD, Class E USD, Class F USD, Class D EUR and Class E EUR were launched on 1 May The Class D USD, Class E USD, Class D EUR and Class E EUR Shares were listed on the Channel Islands Stock Exchange on 1 May 2006 and on the Irish Stock Exchange on 6 March Class F EUR was launched on 1 June New Management Share Class USD launched on 1 November New Management Share Class AUD launched on 1 February SIGNIFICANT ACCOUNTING POLICIES (a) Basis of preparation These consolidated financial statements are prepared in accordance with IAS 34 Interim Financial Reporting issued by the International Accounting Standards Boards ( IASB ). All accounting policies adopted for the period are consistent with accounting principles generally accepted in the Island of Jersey incorporating International Financial Reporting Standards ( IFRS ) and interpretations issued by the International Financial Reporting Interpretations Committee of the IASB and are consistent with accounting policies adopted in the audited consolidated financial statements for the year ended 31 December The consolidated financial statements have been prepared under the historical-cost convention, as modified by the revaluation of financial assets and financial liabilities held at fair value through profit or loss. The Consolidated Balance Sheet presents assets and liabilities in increasing order of liquidity and does not distinguish between current and noncurrent items. All the Company s assets and liabilities are held for the purpose of being traded or are expected to be realised within one year. The Company has adopted IAS 27: Consolidated and Separate Financial Statements. These consolidated financial statements consolidate the financial statements of the Company and its subsidiaries the Master Fund and Bennelong Asia Pacific (Mauritius) Limited together ( the subsidiaries ). The Company has consolidated its interest in the Master Fund on the basis that it has the power to exercise control over the operations of the Master Fund. As at 30 June 2009 the Company owned 86.42% of the outstanding redeemable participating shares of the Master Fund and the Master Fund owned 100% of the outstanding redeemable participating shares of Bennelong Asia Pacific (Mauritius) Limited. All transactions and balances between the Company and the subsidiaries have been eliminated. The remaining outstanding redeemable participating shares of the Master Fund are held by Bennelong Asia Pacific Multi Strategy Equity Fund, L.P. and are represented as the Minority Interest on the Consolidated Balance Sheet. As at 30 June 2009 the Minority Interest was 173,515,050 and this represents the fair value of Bennelong Asia Pacific Multi Strategy Equity Fund, L.P. s investment in the Master Fund. 16

18 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (a) Basis of preparation (continued) Annual Improvements 2009 The IASB has issued Improvements for International Financial Reporting Standards Most of these amendments become effective in annual periods beginning on or after 1 January 2010 however they are not expected to be relevant to the Group s accounting policies. The new Standards and amendments that are relevant to the Group s s consolidated financial statements for the current period are as follows: IAS 1 Presentation of Financial Statements (effective from 1 January 2009): Changes in this standard suggest a number of terminology changes. The term equity holders is replaced by owners. Owners are classified as holders of instruments classified as equity. All changes in equity arising from transactions with owners in their capacity as holders of equity instruments are termed owner changes in equity. There are also the following terminology changes: Statement of financial position replaces the heading Balance Sheet ; Statement of cash flows replace Cash flow statement and; Statement of comprehensive income replaces Statement of recognised income and expenditure. The revisions to IAS 1 suggest an entity present all items of income and expense recognised in the period in a single statement of comprehensive income or in two statements: an income statement and a statement of comprehensive income. The Directors have opted not to adopt the suggested changes and the financial statements remain unchanged. Amendment to IAS 32 Financial Instruments: (effective from 1 January 2009) The main change effected by the amendment to this standard is the classification of certain qualifying instruments from financial liabilities to equity instruments. These instruments will no longer have to comply with the measurement of financial liabilities in IAS 39, Financial Instruments: Recognition and Measurement, or the disclosure requirements of IFRS 7, Financial instruments: Disclosure. This amendment has no impact on the current period financial statements. IFRS 8 Operating Segments: (effective from 1 January 2009) This IFRS specifies how a listed entity should report information about its operating segments in its financial statements. Generally the information is required to be reported on the same basis as is used internally for evaluating operating segment performance and deciding how to allocate resources to operating segments. IFRS 8 Operating Segments is only mandatory for a fund whose debt or equity instruments are traded in a public market or that files, or who is in the process of filing, its financial statements with a securities commission or other regulatory organisation for the purpose of issuing any class of instruments in a public market. For management purposes, the Fund is organised into one main operating segment, which invests in equity securities debt instruments and related derivatives. All of the Fund s activities are interrelated, and each activity is dependent on the others. Accordingly, all significant operating decisions are based upon analysis of the Fund as one segment. The financial results from this segment are equivalent to the financial statements of the fund as a whole. The following Interpretations were in effect for the current year but have no impact on the consolidated financial statements: IFRIC 13 Customer Loyalty Programmes Effective for annual periods beginning on or after 1 July 2008 IFRIC 15 Agreements for Construction of Real Estate Effective for annual periods beginning on or after 1 IFRIC 16 Hedges of Net Investment in a Foreign Operation January 2009 Effective for annual periods beginning on or after 1 October 2008 At the date of approval of these financial statements, the following Interpretations were in issue but not yet effective: IFRIC 17 Distributions of Non-cash Assets to Owners IFRIC 18 Transfers of Assets from Customers Effective for annual periods beginning on or after 1 July 2009 Effective for annual periods beginning on or after 1 July 2009 The Directors anticipate that the adoption of these Interpretations in future periods will have no material impact on the financial statements of the Group. 17

19 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (b) Valuation of investments The fair value of financial assets and liabilities traded in active markets is based on quoted market prices at the balance sheet date. IAS 39: Financial Instruments: Recognition and Measurement ( IAS 39 ) provides for securities to be valued using bid prices for long positions and offer prices for short positions. For financial assets and liabilities that are not traded in active markets, including over the counter ( OTC ) derivatives, the fair value is determined using valuation techniques. For OTC options, forward currency contracts, interest rate derivatives and other OTC derivatives, valuation techniques used include, option pricing models using observable market inputs. Other positions valued using techniques with non-market observable inputs are valued by the investment managers in accordance with the pricing policy adopted by the Group. For such positions the Investment Managers may consider; the most recent traded price, recent corporate actions/reliable news sources including management information from investee companies and the last price of a substantially similar security. As required, the Investment Managers will raise the matter with the Directors, proposing an appropriate valuation after consideration of all available information. Financial assets that are balances due from/to brokers and accounts receivable/payable are classified as loans and receivables. As at 30 June 2009 there was a difference of 5,832,106 between the reported Net Asset Value of the Company and the valuation required by IFRS. Note 8 provides a reconciliation between the reported Net Asset Value of the Company and the valuation required by IFRS. (c) Investment transactions Classification The Group has adopted the amended IAS 39 and classified all its investment securities and all derivatives as trading instruments and all are fair valued through the Consolidated Income Statement. Financial assets and liabilities held for trading are securities which are either acquired for generating a profit from short term fluctuations in price or dealer margins, or are included in a portfolio where a pattern of short term trading exists. While certain positions within the portfolio are held with a view to long term capital gains, the Group also undertakes short term trading and accordingly the Directors have classified the portfolio as held for trading. Financial assets that are balances due from/to brokers and accounts receivable/payable are classified as loans and receivables. Recognition The Group recognises financial assets and financial liabilities on the date it becomes party to the contractual provisions of the instrument. Investment transactions are accounted for on a trade date basis at fair value. Measurement Unrealised gains and losses on investments are recognised in the Consolidated Income Statement. Forwards, futures, options and any other instruments held by the Group and traded on an exchange are measured at fair value based on the last reported bid or offer price if held long or short respectively. The fair value of derivatives that are not exchange-traded is estimated at the amount that the Group would receive or pay to terminate the contract at the balance sheet date taking into account current market conditions (volatility, appropriate yield curve) and the current creditworthiness of the counterparties. Long and short equity positions are also valued at bid or offer prices with the exception of Share Class Arbitrage positions where the long stock position or contract-for-difference, short stock position or contract-for-difference and associated currency hedge positions are marked to the average mid-point of two dealer quotes received at the close of he relevant market. The fair value of the Company s investment in the Master Fund is recorded at the Net Asset Value per share, as reported in accordance with IFRS. Units or shares in other funds which are not valued in accordance with the above provisions shall be valued on the basis of the latest available redemption price for such units or shares as provided by the fund s administrator. Unrealised gains and losses are recognised in the Consolidated Income Statement. Derecognition The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire or it transfers the financial asset and the transfer qualifies for derecognition in accordance with IAS 39. The Group applies the FIFO method to determine realised gains and losses on derecognition. A financial liability is derecognised when the obligation specified in the contract is discharged, cancelled or expired. The Group s obligation for investments sold short is considered extinguished and the related liability is derecognised when the security is repurchased on the market. 18

20 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (d) Forward currency contracts A forward currency contract involves an obligation to purchase or sell a specific currency at a future date at a price set at the time the contract is made. Forward foreign exchange contracts are valued by reference to the forward price at which a new forward contract of the same size and maturity could be undertaken at the valuation date. The unrealised gain or loss on open forward currency contracts is calculated as the difference between the contract rate and this forward price and recognised in the Consolidated Income Statement. Where a forward contract is purchased to hedge the currency risk of a specific class which is issued in a currency other than the measurement currency of the Group, all gains or losses on that contract are allocated to that class. All gains and losses from trading in forward currency contracts are included in the Consolidated Income Statement. (e) Futures contracts A futures contract is an agreement between two parties to buy and sell a security, index or currency at a specific price or rate at a future date. Upon entering into a futures contract, the Group is required to deposit with a broker an amount of cash or cash equivalents equal to a certain percentage of the contract amount. This is known as initial cash margin. Subsequent payments ( variation margin ) are made or received by the Group each day, depending upon the daily fluctuation in the value of the contract. The daily changes in contract value are recorded as unrealised gains or losses and the Group recognises a realised gain or loss when the contract is closed. Unrealised gains or losses on futures contracts are recognised in the Consolidated Income Statement. (f) Foreign currency translation Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to the reporting currency at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the Consolidated Income Statement. Non-monetary assets and liabilities denominated in foreign currencies that are stated at fair value are translated to the reporting currency at the exchange rates ruling at the dates that the values are determined. (g) Equity swaps / Contracts-for-difference Equity swaps / contracts-for-difference are agreements between the Group and third parties, which allow the Group to acquire an exposure to the price movement of specific securities without actually purchasing the securities. The changes in contract values are recorded as unrealised gains or losses and the Group recognises a realised gain or loss when the contract is closed. Unrealised gains and losses on equity swaps / contracts-for-difference are recognised in the Consolidated Income Statement. Share Class Arbitrage positions where the long stock position or contract-for-difference, short stock position or contract-for-difference and associated currency hedge positions are marked to the average mid-point of two dealer quotes received at the close of the relevant market. (h) Options When the Group writes or purchases put or call options, an amount equal to the premium received or paid is recorded as a liability or an asset and is subsequently held at fair value in the Consolidated Balance Sheet. Premiums received or aid from writing or purchasing put or call options, which expire or were unexercised, are recognised on the expiration date as realised gains or losses in the Consolidated Income Statement. If an option is exercised, the premium received or paid is included with the proceeds or the cost of the transaction to determine whether the Group has realised a gain or loss on the related investment transaction in the Consolidated Income Statement. When the Group enters into a closing transaction, the Group will realise a gain or loss in the Consolidated Income Statement depending upon whether the amount from the closing transaction is greater or less than the premium received or paid. (i) Use of estimates The preparation of financial statements in accordance with IFRS requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities at the date of the financial statements and the reported amounts of income and expenses during the year. Actual results could differ from those estimates. (j) Cash and cash equivalents Cash and cash equivalents consist of cash in hand and bank and cash held with the Master Fund s prime brokers or their related entities. (k) Amounts due to/from brokers Amounts due to/from brokers represent amounts held with counterparties other than the Master Fund s prime brokers and represents amounts held as collateral for derivative activities. 19

21 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 2. SIGNIFICANT ACCOUNTING POLICIES (continued) (l) Interest, borrowing costs and dividends Interest income, interest expense and borrowing costs are accounted for on an accruals basis. Dividend income and expense are accounted for on the ex-dividend date. (m) Net Asset Value per share The Net Asset Value per share disclosed on the face of the Consolidated Balance Sheet is calculated in accordance with the IFRS by dividing net assets included in the Consolidated Balance Sheet by the number of redeemable participating shares outstanding at year end. (n) Securities sold short Securities sold short are those positions where the Group has sold a security that it does not own in anticipation of a decline in the fair value of the security and are classified as liabilities held-for-trading. To enter a short sale, the Group may need to borrow the security for delivery to the buyer. On each day the short sale transaction is open, the liability to replace the borrowed security is fair valued and an unrealised gain or loss is recorded in the Consolidated Income Statement. While the transaction is open the Group will also incur an expense for any dividends or interest that will be paid to the lender of the securities. The Group s obligation for investments sold short is considered closed and the related liability is derecognised when the security is repurchased on the market. (o) Redeemable Participating Shares In accordance with IAS 32 Financial Instruments: Presentation ( IAS 32 ), redeemable participating shares are redeemable at the shareholder s option and are classified as financial liabilities. The redeemable participating share can be put back to the Company at any time for cash equal to a proportionate share of the Company s Net Asset Value. The redeemable participating share is carried at the redemption amount that is payable at the balance sheet date if the shareholder has exercised its right to put the redeemable participating share back to the Company. Accordingly, any dividends paid/payable to the holders of redeemable participating shares are reflected in the Consolidated Income Statement as finance costs. (p) Futures trading commissions Futures trading commissions are incurred as a transaction cost and are payable to the prime brokers. Futures trading commissions are expensed as incurred on the date of transaction. (q) Netting The Master Fund has entered into master netting agreements with a number of approved brokers. Master netting arrangements do not result in an offset of balance sheet assets and liabilities, as such transactions are usually settled gross, however the credit risk associated with favourable contracts is reduced by a master netting arrangement to the extent that if an event of default occurs, all amounts with the counterparty are terminated and settled on a net basis. The Cash and Cash Equivalents amount included on the Consolidated Balance Sheet represents the net cash held with the Group s prime brokers or their related entities. Derivatives held at 30 June 2009 are presented gross on the Consolidated Balance Sheet, and netting has not been applied. 3. FEES AND EXPENSES The expenses below relate to the expenses incurred by the Group, but expenses paid by the Company and the Master Fund are separately identified. Management and Performance fee The Manager is entitled to receive from the Company a monthly management fee for providing services to the Company at an annual rate of up to 2.0% per annum of Net Asset Value. Management fees expensed during the period ended 30 June 2009 were 13,099,235 and the amount outstanding at the period end was 1,516,506. No Management fee is calculated or payable in respect of Management Shares issued. The Manager is also entitled to receive an annual performance fee (the Performance Fee ) from the Company based on the performance of the Shares of each shareholder. The Performance Fee is in turn paid by the Manager to the Investment Manager as the fee to the Investment Manager under the Investment Management Agreement. No Performance Fee is calculated or payable in respect of Management Shares issued. As the Performance Fee is calculated on a share-by-share basis this means that each share is charged a Performance Fee which equates precisely with that share s performance. This method of calculation ensures that; (i) (ii) (iii) (iv) any Performance Fee paid to the Manager is charged only to those shares, which have appreciated in value; all holders of shares of the same Class have the same amount per share at risk in the Company; all shares of the same Class have the same Net Asset Value per share. Net Asset Value per share shall include, for the purpose of calculating the Performance Fee, any accrued and unpaid performance fees; and an amount equal to any Equalisation Credit, as defined below. 20

22 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued) 3. FEES AND EXPENSES (continued) Management and Performance fee (continued) The Performance Fee is calculated in respect of each period of twelve months ending on 31 December in each year (the Calculation Period ). The Performance Fee is accrued on a monthly basis as at each dealing day. For each Calculation Period, the Performance Fee in respect of each share is equal to 20 per cent of the appreciation in the Net Asset Value per share of the relevant Class during that Calculation Period above the Net Asset Value per share of the relevant Class at the time of issue of that Share or, if issued in a previous Calculation Period, above the highest Net Asset Value per share of the relevant Class achieved as of the end of any previous Calculation Period following such date of issue (or the date on which the Company commenced business if issued at the end of the initial offer period) ( Relevant Appreciation ). The Performance Fee in respect of each Calculation Period is calculated by reference to the Net Asset Value before making any deduction for accrued Performance Fee or Equalisation Credits. If the Management Agreement is terminated before 31 December in any year the Performance Fee in respect of the then current Calculation Period will be calculated and paid as though the date of termination were the end of the relevant period. If an investor subscribes for shares at a time when the Net Asset Value (as defined below) per share of the relevant Class is other than the Peak Net Asset Value per share for that Class, certain adjustments will be made to reduce inequities that could otherwise result to the subscriber or to the Manager. The Peak Net Asset Value per Share is the greater of (i) 100 in the case of US Dollar Shares; 100 in the case of Euro Shares and AU$100 in the case of Australian Dollar Shares (being the price at which such shares were issued at the close of the Initial Offer Period) and (ii) the Net Asset Value per share of the relevant Class in effect immediately after 31 December (being the end of a Calculation Period) respect of which a Performance Fee (other than a Performance Fee Redemption, as defined below) was charged. (a) If Shares are subscribed for at a time when the Net Asset Value per Share of the relevant Class is less than the Peak Net Asset Value per Share of the relevant Class, the investor will be required to pay a Performance Fee with respect to any subsequent appreciation in the value of those shares. With respect to any appreciation in the value of those Shares from the Net Asset Value per share of the relevant Class at the date of subscription up to the Peak Net Asset Value per Share, the Performance Fee will be charged at the end of each Calculation Period by redeeming such number of the investor s shares as have an aggregate Net Asset Value equal to 20 per cent of any such appreciation (a Performance Fee Redemption ). The aggregate Net Asset Value of the shares so redeemed will be paid to the Manager as a Performance Fee. Performance Fee Redemptions are employed to ensure that the Company maintains a uniform Net Asset Value per share. As regards the investor's remaining shares, any appreciation in the Net Asset Value per share of those shares above the Peak Net Asset Value per share of the relevant Class will be charged a Performance Fee in the normal manner described above. (b) If shares are subscribed for at a time when the Net Asset Value per share of the relevant Class is greater than the Peak Net Asset Value per share of the relevant Class, the investor will be required to pay an amount in excess of the then current Net Asset Value per share equal to 20 per cent of the difference between the then current Net Asset Value per share of the relevant Class (before accrual for the Performance Fee and Equalisation Credit) and the Peak Net Asset Value per share of the relevant Class (an Equalisation Credit ). At the date of subscription the Equalisation Credit will equal the Performance Fee per Share of the relevant Class accrued with respect to the other Shares of the same Class in the Company (the Maximum Equalisation Credit ). The Equalisation Credit is payable to account for the fact that the Net Asset Value per share of that Class has been reduced to reflect an accrued Performance Fee to be borne by existing shareholders and serves as a credit against Performance Fees that might otherwise be payable by the Company but that should not, in equity, be charged against the Shareholder making the subscription because, as to such Shares, no favourable performance has yet occurred. The Equalisation Credit ensures that all holders of Shares of the relevant Class in the Company have the same amount of capital at risk per Share. The additional amount invested as the Equalisation Credit will be at risk in the Company and will therefore appreciate or depreciate based on the performance of the Company subsequent to the issue of the relevant Shares but will never exceed the Maximum Equalisation Credit. In the event of a decline as at any Dealing Day in the Net Asset Value per share of the Shares of the relevant Class, the Equalisation Credit will also be reduced by an amount equal to 20 per cent of the difference between the Net Asset Value per share of the relevant Class (before accrual of the Performance Fee and Equalisation Credit) at the date of issue and as at that Dealing Day. Any subsequent appreciation in the Net Asset Value per share of the relevant Class will result in the recapture of any reduction in the Equalisation Credit but only to the extent of the previously reduced Equalisation Credit up to the Maximum Equalisation Credit. 21