«Geprüfter Jahresbericht per 29 September 2011 Seiten 1-19 Annual Report and Financial Statements for the year ended 29 September 2011 Pages 20-38 GL ...»
Based on the above figures the value of units in the Natural Resources Fund at 30 September 2011 was CHF 115.42 per unit (2010:
CHF 128.04 per unit).
Copies of the Natural Resources Fund reports are available free of charge on request from the Designated Manager.
GL Target Funds - Galileo Japan Fund Principal Manager's Report (continued) Results As at 29 September 2011, the net assets of the Fund amounted to Yen 1,977,041,811 represented by 150,561.8645 units (2010: Yen 2,361,750,551 represented by 172,886.2137 units).
Based on the above the value of units in the Fund at 29 September 2011 was Yen 13,131 per unit (2010: Yen 13,661 per unit).
The Principal Manager does not propose the payment of a distribution for the year under review (2010: Yen nil).
Performance The Galileo Japan Fund ended the twelve month reporting period with a loss of -3.9% whereas the Nikkei 225 Index decreased -7.1%.
Since inception of the Fund in 2002 the outperformance adds up to more than 32%.
Market & Fund Review This reporting year was one of the most challenging years we ever faced. It started in Q4 2010 when the Bank of Japan intervened to weaken the JPY and the US Fed announced its QE2 program. This kick-started a rally between September last year and February this year, and brought the Nikkei back close to 11’000. But all this changed on March 2011, when an earthquake struck Japan. In only a few days the Nikkei plummeted 17%. A week later the JPY reached an all-time high of JPY 77 against the USD before slipping back into the trading range established in prior months. After the initial shock, the stock market rallied and closed Q1 down around 5%. But the Fukushima situation didn’t come under control and uncertainty regarding the economic recovery still heavily weighed on the market in Q2 2011. In Q3 Japanese shares were dragged down by global stock markets. Besides being impacted by lower global growth forecasts, Japan is suffering under a very strong Japanese Yen, as well as a political system that seems unable to break out of its paralysis.
The Fund was again able to beat the index in this challenging reporting period. In addition, its volatility was much lower than the respective equity indices. The Fund suffered only modest losses during the stress phase after the rally and outperformed massively in the volatile first quarter of the year (+2.3% vs. -4.6% of the Index). In Q2 some managers were too optimistic after the brief recovery, consequently they gave back a part of their gains as Japanese equity markets reversed their bullish trend and started declining again. But thanks to flexible strategies employed, we still outperformed the index during this time. We maintained the portfolio’s conservative positioning during Q3. The major change in the portfolio has been the selling of funds which are not theme-oriented.
Style Allocation as per 29 September 2011 Equity long/short The Fund’s exposure to equity long/short strategies was increased up to 91%.
Equity long-only By the end of September, the Fund holds 13% in equity long-only strategies.
Cash The net cash level was -4%, which will ultimately be covered by way of redemption of underlying investments.
Outlook Even if we’re facing now a different Japan than one year ago we see that the valuations of some Japanese equities have reached absurd lows. We expect the situation to normalise in the medium-term, which will generate positive returns.
GL Target Funds - Galileo Japan Fund Principal Manager's Report (continued) Statement of Principal Manager’s Responsibilities The Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended) (the “Law”) requires the Principal Manager to prepare financial statements for each annual accounting period which give a true and fair view of the financial affairs of the Fund and of its total
return for the year. In preparing the financial statements the Principal Manager is required to:
• select suitable accounting policies and apply them consistently;
• make judgments 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 Fund will continue in business.
The Principal Manager is responsible for the management of the Fund in accordance with the provisions of its principal documents, The Collective Investment Schemes (Class B) Rules 1990 made under The Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended) and the Swiss Collective Investment Schemes Act. The Principal Manager, together with the Trustee, is also responsible for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Independent Auditor KPMG Channel Islands Limited has expressed its willingness to continue in office as the Fund’s auditor.
Directors of GL Funds (Guernsey) Limited 25 January 2012 GL Target Funds - Galileo Japan Fund Trustee’s responsibilities and report Statement of Trustee’s responsibilities in respect of the financial statements of the Fund It is the duty of the Trustee to enquire into the conduct of the Manager in the management of the Fund in each annual accounting period and report thereon to Unitholders.
The Trustee is also responsible for safeguarding the assets of the Fund and together with the Manager, for taking reasonable steps for the prevention and detection of fraud, error and non-compliance with law and regulations.
Report of the Trustee to the Unitholders of GL Target Funds – Galileo Japan Fund In our opinion the Manager has managed, in all material respects, the Fund during the year ended 29 September 2011 in accordance with the provisions of the principal documents and The Collective Investment Schemes (Class B) Rules 1990 made under The Protection of Investors (Bailiwick of Guernsey) Law, 1987 (as amended).
We confirm that we have taken into our custody or under our control all the property of the Fund and hold it in trust for the Unitholders in accordance with the provisions of the principal documents and the Class B Rules.
HSBC Custody Services (Guernsey) Limited Arnold House St Julian’s Avenue St Peter Port Guernsey GY1 3NF 25 January 2012 Independent Auditor’s Report to the Unitholders of GL Target Funds - Galileo Japan Fund We have audited the financial statements of GL Target Funds – Galileo Japan Fund (the “Fund”) for the year ended 29 September 2011 which comprise the Statement of Total Return, the Statement of Change in Net Assets attributable to Unitholders, the Balance Sheet and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards.
This report is made solely to the Fund’s unitholders in accordance with our Terms of Engagement as detailed in our letter of 10 November 2011 and rule 4.02(3) of The Collective Investment Schemes (Class B) Rules 1990. Our audit work has been undertaken so that we might state to the trustees those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the trustees, for our audit work, for this report, or for the opinions we have formed.
Respective responsibilities of manager and auditor
As explained more fully in the manager’s report set out on page 23 – 25, the manager is responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board's (APB's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Fund’s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Manager; and the overall presentation of the financial statements. In addition we read all the financial and non-financial information in the Principal Manager’s Report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.
Opinion on financial statements
In our opinion the financial statements:
• give a true and fair view of the state of the Fund’s affairs as at 29 September 2011 and of its total deficit for the year then ended;
• are in accordance with United Kingdom Accounting Standards;
• have been properly prepared in accordance with The Collective Investment Schemes (Class B) Rules 1990 and the principal documents; and
• comply with Article 89 paragraph 1 letters a – h of the Swiss Collective Investment Schemes Act.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where The Collective Investment Schemes (Class B) Rules 1990 require us
to report to you if, in our opinion:
• the manager has not kept proper accounting records; or
• the financial statements are not in agreement with the accounting records; or
• we have not received all the information and explanations, which to the best of our knowledge and belief are necessary for the purpose of our audit.
KPMG Channel Islands Limited Chartered Accountants 25 January 2012 GL Target Funds - Galileo Japan Fund Statement of Total Return For the year ended 29 September 2011
The financial statements on pages 26 to 34 were approved by the Board of Directors of GL Funds (Guernsey) Limited on 25 January 2012 and are signed on its behalf by:
Directors of GL Funds (Guernsey) Limited The notes on pages 28 to 34 form part of these financial statements GL Target Funds - Galileo Japan Fund Notes to the Financial Statements 1 Principal Accounting Policies The following accounting policies have been applied consistently in dealing with items which are considered material in relation to
the Fund’s financial statements:
Basis of preparation The financial statements have been prepared under the historical cost convention, adjusted by the revaluation of investments and in accordance with applicable United Kingdom Accounting Standards (“UK GAAP”) and with the Statement of Recommended Practice for Authorised Funds issued by the Investment Management Association in October 2010 (“the IMA SORP 2010”).
Investments Listed and unlisted investments are valued based upon prices received from investment advisers, fund managers, and from stock exchanges where available. Prices may not be current and may differ significantly from the values that would have been used had a ready market existed for the securities, and differences could be material. The Principal Manager may have to determine the valuations itself or rely on plausible estimated values in respect of each investment. The Principal Manager has no reason to believe that the valuations used are unreasonable. All purchases and sales are recognised at trade date and are inclusive of transaction costs.
The Fund may also enter into derivative transactions in the form of investment in forward foreign currency contracts, options, swaps or index futures. The purpose of these financial instruments is efficient portfolio management. In particular forward foreign currency contracts may be used to manage currency risk arising from holdings of investments exposed to currencies other than Japanese Yen and futures may be used to manage market risk.
Realised and unrealised gains or losses on investments are included in net capital gains / (losses) in the Statement of Total Return.
In calculating the gain or loss on disposal of investments the weighted average cost per unit is used as a proxy for cost.
Income Bank deposit interest and income arising on those investments which bear interest are accrued on a daily basis. On acquisition of interest bearing investments the interest element is segregated from capital and taken to revenue. Income arising from equity holdings is accounted for on an ex-dividend basis and included gross of any irrecoverable withholding taxes. Where applicable, income also includes rebates of management fees charged to the underlying investments of the Fund.
Expenses For accounting purposes all expenses are charged against income and accounted for on an accruals basis as incurred.
Foreign Exchange Foreign monetary current assets and liabilities are translated into Japanese Yen at the rates of exchange ruling at the balance sheet date. All transactions in foreign currencies are translated into Yen at the rate ruling at the date of the transaction. Realised foreign exchange gains and losses and movements in unrealised gains and losses are recognised within net capital gains / (losses) in the Statement of Total Return.
The Fund’s principal exposure to foreign currency risk arises from its investments in assets priced in currencies other than Japanese Yen. It is the Fund’s policy to hedge against this currency risk by entering into forward foreign currency contracts to sell the currency represented by the market value of these investments. Outstanding forward foreign exchange contracts are revalued at the rates of exchange ruling at the balance sheet date and the gain or loss recorded in the Balance Sheet.
The exchange rates used as at 29 September 2011 were as follows: