ALTUS TRUST : LYXOR ALPHA EQUITY FUND - HANG SENG INDEX REPORTS AND FINANCIAL STATEMENTS

Transcription

1 ALTUS TRUST : LYXOR ALPHA EQUITY FUND - HANG SENG INDEX REPORTS AND FINANCIAL STATEMENTS FOR THE YEAR ENDED JANUARY 31, 2011 Managed By Lyxor Asset Management A 100% SG subsidiary

2 CONTENTS Pages Administration 1 Report of the Manager 2-3 Report of the Trustee 4 Independent auditor s report 5 Statement of financial position 6 Statement of comprehensive income 7 Statement of changes in net assets attributable to holders of redeemable participating units 8 Statement of cash flows 9 Notes to the financial statements Schedule of investments Distribution statement (unaudited) 30 Statement of movements in Schedule of investments (unaudited) 31 Performance table (unaudited) 32 2

3 ADMINISTRATION Trustee Manager HSBC Trustee (Cayman) Limited Lyxor Asset Management PO BOX 484 Tour Société Générale HSBC House, 17 Cours Valmy 68 West Bay Road, Paris-La Défense Grand Cayman KYI-1106 France Cayman Islands Registered Office Custodian HSBC Trustee (Cayman) Limited Société Générale PO BOX boulevard Haussmann HSBC House, Paris 68 West Bay Road, France Grand Cayman KYI-1106 Cayman Islands Guarantor Auditors Société Générale PricewaterhouseCoopers 29 boulevard Haussmann P.O. Box Paris Strathvale House France George Town Grand Cayman KY Cayman Islands 1

4 The Alpha Equity Fund Hang Seng Index: and Asset Value per Unit). January 31, 2011 This means that on the Investment Cycle Review Date, - If the Closing Index Price is below the Initial Index Price: ALTUS TRUST: ALPHA EQUITY FUND - HANG SENG INDEX 2 REPORT OF THE MANAGER Cayman Fund offered in Hong Kong ALTUS TRUST: ALPHA EQUITY FUND - HANG SENG INDEX MANAGEMENT REPORT FROM FEBRUARY 2, 2005 TO JANUARY 31, 2011 Investment Cycle 8 Years - seeks to outperform the Index during the Investment Cycle (including the Investment Cycle Review Date) compared to the Initial Index Price; Initial NAV/Unit NAV/Unit as of February 2, 2005 NAV/Unit as of January 31, 2011 : HKD : HKD : HKD - guarantees to deliver the performance of the Index plus the Alpha recorded (if any) on the Investment Cycle Review Date, compared to the Initial Index Price. Unitholders are entitled to request the realisation of their Units on each Dealing Day during an Investment Cycle at the then prevailing Realisation Price per Unit (calculated by reference to the applicable Net STATEMENT OF MOVEMENTS IN INVESTMENT PORTFOLIO FOR THE YEAR ENDED January 31, 2011 Unitholders who realize their Units on an Investment Cycle Review Date will be entitled to receive a realisation price per Unit calculated by reference to the Net Asset Value per Unit as at the relevant Investment Cycle Review Date and which is guaranteed to be equal to: HK$10.00 x (Closing Index Price + Alpha) / Initial Index Price Percentage holdings of net assets - if the Closing Index Price is equal to or above the Initial Index Price: Investments Listed/ quoted investments February 2, 2005 January 31, 2011 Variation over the period - investors receive the Initial Offer Price; plus - 100% of the best positive performance of the Index recorded on any quarterly Lock-in Date during the Investment Cycle multiplied by the Initial Offer Price (i.e. the highest Lock-in Index Price divided by the Initial Index Price minus one). Equities BOC HONG KONG 6.35% 3.93% -2.42% CATHAY PAC AIR 1.31% 0.00% -1.31% CHEUNG KONG 6.67% 7.93% 1.26% CHINA LIFE INSURANCE 0.00% 5.64% 5.64% CHINA MER HOLD 0.89% 0.00% -0.89% CHINA MOBILE LTD 8.36% 7.91% -0.45% CHINA PETROLEUM & CHEMICAL H 0.00% 10.37% 10.37% CHINA OVERSEAS LAND &INV 0.00% 0.14% 0.14% CHINA RESOURCES 0.67% 0.13% -0.54% CHINA SHENHUA ENERGY 0.00% 7.66% 7.66% CHINA UNICOM 2.17% 0.23% -1.94% CITIC PACIFIC 1.35% 8.19% 6.84% CKI HOLDINGS 1.39% 0.00% -1.39% CLP HOLDINGS 5.04% 0.00% -5.04% CNOOC LTD 6.78% 8.40% 1.62% COSCO PACIFIC 0.95% 0.00% -0.95% DENWAY MOTORS 0.58% 0.00% -0.58% ESPRIT HOLDINGS 1.51% 0.00% -1.51% FOXCONN INTERNATIONAL 0.00% 0.66% 0.66% HANG LUNG PPT 1.21% 7.44% 6.23% HANG SENG BANK 7.75% 4.67% -3.08% HENDERSON INV 0.85% 0.00% -0.85% HENDERSON LAND 1.81% 0.12% -1.69% HONG KONG EXCHANGES 0.00% 4.03% 4.03% HK & CHINA GAS 3.40% 3.94% 0.54% HONG KONG ELECTRIC HOLDINGS LTD 2.09% 0.00% -2.09% HSBC HOLDINGS HK 8.33% 0.00% -8.33% HUTCHISON WHAMPOA 8.22% 5.32% -2.90% JOHNSON ELEC H 0.75% 0.00% -0.75% LEGEND GROUP 0.44% 0.00% -0.44% - investors receive the Initial Offer Price multiplied by the performance of the Index recorded on the Investment Cycle Review Date; plus - 100% of the best positive performance of the Index recorded on any quarterly Lock-in Date during the Investment Cycle multiplied by the Initial Offer Price (i.e. the highest Lock-in Index Price divided by the Initial Index Price minus one). Explanation of NAV evolution As of January 31, 2011, the fund Net Asset Value per Unit was HK$ 22.45, returning a performance of % from its initial offer value. This is the result of the high positive performances recorded on the lock-in dates during the 6 first years of the investment cycle.

5 This report has been prepared by Lyxor Asset Management. This is neither an offer nor solicitation to purchase units of the fund. Investors should refer to the relevant Explanatory Memorandum and Fund Specific Memorandum ( the fund offering documents ) for detailed information. Investments are not deposits or other obligations of, guaranteed or insured by the distributors of the fund, or any of their affiliates, or by any local governmental or insurance agency, and are subject to investment risks. Investors investing in funds denominated in non-local currency should be aware of the risk of exchange rate fluctuations that may cause a loss of principal. Past performance is not indicative of future performance, prices can go up or down. Distribution of this document may be restricted in certain jurisdictions; persons into whose possession this publication come should inform themselves of and observe such restrictions. This document does not constitute the distribution of any information or the making of any offer or solicitation by anyone in any jurisdiction in which such distribution or offer is not authorized or to any person to whom it is unlawful to distribute such a booklet or make such an offer or solicitation. LI & FUNG 1.05% 0.00% -1.05% MTR CORPORATION 1.79% 0.00% -1.79% PCCW 0.65% 0.00% -0.65% PETROCHINA 0.00% 4.42% 4.42% SHK PPT 6.91% 0.00% -6.91% SINO LAND CO LTD 0.00% 0.05% 0.05% SWIRE PACIFIC A 1.53% 0.00% -1.53% WHARF HOLDINGS 1.71% 0.00% -1.71% WHEELOCK 0.64% 0.00% -0.64% YUE YUEN IND 0.93% 0.05% -0.88% Total listed/ quoted investments 94.05% 91.23% -2.82% Unlisted/ unquoted investment SGA EMTN 5.13% 8.78% 3.65% Total unlisted/ unquoted investments 5.13% 8.78% 3.65% Total investments 99.18% % 0.83% Other net assets -0.13% -0.03% 0.10% Total Net Asset Value in Amount as of January 31, 2011 HKD 402,147, Underlying of the Option Initial Level Level as of Performance of the underlying Performance of the since inception of the ALPHA underlyings over 1 year EQUITY FUND - HANG SENG INDEX up to up to Performance of the underlyings over 3 years up to February 02, 2005 January 31, 2011 January 31, 2011 January 31, 2011 January 31, 2011 HANG SENG INDEX 13, , % 16.53% -0.04% Expenses : Total Expenses charged to the fund since inception (including up front fees): HKD 5,485,

6 REPORT OF THE TRUSTEE In our opinion, the Manager, Lyxor Asset Management, has, in all material respects, managed the Altus Trust : Lyxor Alpha Equity Fund - Hang Seng Index for the year ended January 31, 2011 in accordance with the provisions of the Trust Deed dated May 2, 2002, as amended. For and on behalf of HSBC Trustee (Cayman) Limited As trustee of Altus Trust : Lyxor Alpha Equity Fund Hang Seng Index 4

7 INDEPENDENT AUDITOR S REPORT To the Unitholders of Altus Trust : Lyxor Alpha Equity Fund - Hang Seng Index Report on the Financial Statements We have audited the accompanying financial statements of Altus Trust : Lyxor Alpha Equity Fund - Hang Seng Index, which comprise the statement of financial position, including the schedule of investments, as at January 31, 2011, and the statement of comprehensive income, the statement of changes in net assets attributable to holders of redeemable participating units and the statement of cash flows for the year then ended and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and for such internal control as management determines necessary to enable the preparation that are free from material misstatement, whether due to fraud or error. Management is also responsible for ensuring that the financial statements have been properly prepared in accordance with the relevant disclosure provisions of the Trust Deed dated May 2, 2002 (the Trust Deed ), and the relevant financial statements disclosure provisions specified in Appendix E of the Code on Unit Trusts and Mutual Funds established by the Securities and Futures Commission of Hong Kong (the SFC Code ). Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material aspects, the financial position of Altus Trust : Lyxor Alpha Equity Fund - Hang Seng Index as at January 31, 2011, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards. Other legal and regulatory requirements We report that the financial statements have been properly prepared in accordance with the relevant disclosure provisions of the Trust Deed and the relevant financial statements disclosure provisions specified in the SFC Code. PricewaterhouseCoopers Cayman Islands May 27,

8 STATEMENT OF FINANCIAL POSITION AS AT JANUARY 31, 2011 Note JANUARY 31, 2011 JANUARY 29, 2010 HKD HKD Assets Cash and cash equivalents 2(i) ,965, Financial assets at fair value 1, 2(d), 8 402,251, ,820, through profit or loss Other receivable 13, , Total Assets 402,265, ,829, Liabilities Due to the bank 2(i), Accrued expenses and other payables 2(k) 117, ,109, Liabilities (excluding net assets attributable 117, ,109, to holders of redeemable participating units) Net assets attributable to holders 402,147, ,720, of redeemable participating units Total Liabilities 402,265, ,829, The accompanying notes form an integral part of these financial statements. HSBC Trustee (Cayman) Limited as trustee of Alpha Equity Fund Hang Send Index Lyxor Asset Management 6

9 STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED JANUARY 31, 2011 Note JANUARY 31, 2011 JANUARY 29, 2010 HKD HKD Revenue Dividend Income 10,029, ,196, Realised gain/(loss) on investments (78,844,301.22) (77,342,373.60) Net change in unrealised gain/ 87,465, ,308, (loss) on investments Net gain/(loss) on financial assets 2(d) 8,621, ,965, at fair value through profit or loss Total Investment Income/(loss) 18,650, ,162, Expenses Management and other fees 3 (1,225,561.99) (1,178,544.88) Total Operating expenses (1,225,561.99) (1,178,544.88) Operating profit/(loss) 17,425, ,983, Finance costs Distribution to holders of 2(l) redeemable participating units Total Finance costs Increase/(decrease) in net assets 17,425, ,983, attributable to holders of redeemable participating units from operations The accompanying notes form an integral part of these financial statements. 7

10 STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE PARTICIPATING UNITS FOR THE YEAR ENDED JANUARY 31, 2011 Note JANUARY 31, 2011 JANUARY 29, 2010 HKD HKD Net assets attributable to holders of redeemable 397,720, ,254, participating units at beginning of the period Proceeds from redeemable participating units issued 6 10,109, ,755, Redemptions of redeemable participating units 6 (23,107,400.40) (28,273,841.79) Total 384,722, ,736, Increase/(decrease) in net assets 17,425, ,983, attributable to holders of redeemable participating units from operations Net assets attributable to holders 7 402,147, ,720, of redeemable participating units at end of the period The accompanying notes form an integral part of these financial statements. 8

11 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JANUARY 31, 2011 JANUARY 31, 2011 JANUARY 29, 2010 HKD HKD Cash flows from operating activities Purchase of financial assets (402,158,911.04) (456,194,900.94) Proceeds from sale of financial assets 393,127, ,381, (including realized gains) Dividend Income 10,029, ,196, Amount received on financial assets 1,221, ,165, Operating expenses paid (1,221,737.82) (1,165,496.11) Net cash (outflow)/inflow from operating activities 997, ,382, Cash flows from financing activities Proceeds from redeemable participating units issued 10,154, ,711, Redemptions of redeemable participating units (23,116,845.05) (28,264,397.14) Net cash (outflow)/inflow from financing activities (12,962,842.94) (4,552,919.36) Net increase/(decrease) in cash and cash equivalents (11,965,384.93) 11,830, Cash and cash equivalents at the beginning of the period 11,965, , Cash and cash equivalents at the end of the period (51.74) 11,965, The accompanying notes form an integral part of these financial statements. 9

12 NOTES TO THE FINANCIAL STATEMENTS Note for the attention of the reader The notes stated on the left of the financial statements are references to the Appendix E of the Code of Units Trust and Mutual Funds of the Securities and Futures Commission in Hong-Kong. Definitions Alpha Closing Index Price Exchange Index Index Shares Initial Index Price Initial Offer Period Investment Cycle Investment Cycle Review Date Investment Cycle Start Date Launch Date means, during the Investment Cycle, the highest Lock-in Index Price minus the Closing Index Price on the relevant Lock-in Date, capped at the highest Lock-in Index Price minus Initial Index Price; means the closing price of the Index on the Exchange as at the close of business on the relevant Lock-in Date; means The Stock Exchange of Hong Kong Limited or any successor thereto means the Hang Seng Index; means the shares of those companies listed on the Exchange from time to time comprising the constituent companies of the Hang Seng Index; means the closing price of the Index on the Exchange as at the close of business on the relevant Investment Cycle Start Date; means the period commencing from 9.00 a.m. (Hong Kong time) on January 14, 2005 to 4.00 p.m. (Hong Kong time) on January 28, 2005 (or such later time or date as the Manager shall determine); means a consecutive period of eight years commencing on the relevant Investment Cycle Start Date and ending on the relevant Investment Cycle Review Date means, in respect of an Investment Cycle, the Exchange Business Day falling eight years after the relevant Investment Cycle Start Date; means, in respect of the first Investment Cycle, the Launch Date and in respect of the second and subsequent Investment Cycles means the Exchange Business Day immediately following the Investment Cycle Review Date of the immediately preceding Investment Cycle; means February 2, 2005 or such later date as the Manager may determine in the event that the Offer Period is extended; 10

13 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Lock-in Date Lock-in Index Price Portfolio of Investments means, in respect of each Investment Cycle, the quarterly anniversary date of the Investment Cycle Start Date (including the Investment Cycle Review Date) or, if such date is not an Exchange Business Day, the immediately following Exchange Business Day; means the higher of the Initial Index Price or the Closing Index Price on each relevant Lock-in Date; means a portfolio comprising of Index Shares and other investments permitted under Chapter 7 of the Code on Unit Trusts and Mutual Funds provided that at least 90% of such portfolio will be comprised of Index Shares comprising of all of the constituent companies of the Hang Seng Index with such positive weighting as the Manager may in its absolute discretion from time to time determine. 1 Fund s principal activity Altus Trust (the "Trust") was formed by a Trust Deed dated May 2, 2002 and registered as an exempted trust under the Trusts Law of the Cayman Islands on May 9, The Trust was registered as a mutual fund under the Mutual Funds Law of the Cayman Islands on May 15, Altus Trust : Lyxor Alpha Equity Fund - Hang Seng Index (the "Fund") is a sub-fund of the Trust and was formed by a Supplemental Deed dated January 5, The Fund is a sub-fund of the Trust and accordingly under the laws of the Cayman Islands does not require separate registration as a trust. The Fund is a sub-fund of the Trust and accordingly under the laws of the Cayman Islands does not require separate registration as a mutual fund since it falls under the umbrella registration of the Trust. The Fund commenced operations in February The Fund is authorised by the Securities and Futures Commission in Hong Kong and is required to comply with the Code on Unit Trusts and Mutual Funds established by the Securities & Futures Commission of Hong Kong. The Altus Trust : Lyxor Alpha Equity Fund Hang Seng Index: seeks to outperform the Index (Hang Seng Index) during the Investment Cycle (including the Investment Cycle Review Date) compared to the Initial Index Price; and guarantees to deliver the performance of the Index plus the Alpha (the highest Lock-in Index Price minus the Closing Index Price on the relevant Lock-in Date, capped at the highest Lock-in Index Price minus Initial Index Price) recorded (if any) on the Investment Cycle Review Date, compared to the Initial Index Price. The Hang Seng Index is a free-float capitalization-weighted index of selection of companies from the Stock Exchange of Hong Kong. The components of the index are divided into four subindexes: Commerce and Industry, Finance, Utilities, andproperties. The index was developed with a base level of 100 as of July 31,

14 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) Unitholders are entitled to request the realisation of their Units on each Dealing Day during an Investment Cycle at the then prevailing Realisation Price per Unit (calculated by reference to the applicable Net Asset Value per Unit). Unitholders who realize their Units on an Investment Cycle Review Date will be entitled to receive a realisation price per Unit calculated by reference to the Net Asset Value per Unit as at the relevant Investment Cycle Review Date and which is guaranteed to be equal to: HK$ x (Closing Index Price + Alpha) / Initial Index Price This means that on the Investment Cycle Review Date, if the Closing Index Price is equal to or above the Initial Index Price: investors receive the Initial Offer Price; plus 100% of the best positive performance of the Index recorded on any quarterly Lock-in Date during the Investment Cycle multiplied by the Initial Offer Price (i.e. the highest Lock-in Index Price divided by the Initial Index Price minus one). if the Closing Index Price is below the Initial Index Price: investors receive the Initial Offer Price multiplied by the performance of the Index recorded on the Investment Cycle Review Date; plus 100% of the best positive performance of the Index recorded on any quarterly Lock-in Date during the Investment Cycle multiplied by the Initial Offer Price (i.e. the highest Lock-in Index Price divided by the Initial Index Price minus one). The terms definitions and the details of the investment objectives are set in the Fund Specific Memorandum. Société Générale entered into a deed of guarantee for the benefit of Unitholders in respect of each Investment Cycle pursuant to which it will guarantee payment of a realisation price per Unit calculated by reference to the Net Asset Value per Unit in accordance with the formula set out above in respect of Units held and realised on each relevant Investment Cycle Review Date. Investors should note that this does not amount to a capital guarantee in respect of an investor s original investment in the Fund and the realisation price per Unit on the relevant Investment Cycle Review Date will be fully exposed to the performance, measured over the Investment Cycle Start Date to the Investment Cycle Review Date, of the Index. The deed of guarantee is conditional upon the Manager of the Fund not being removed at the request of Unitholders pursuant to Clause 25.1(c) of the Trust Deed, namely, Unitholders of not less than 50% in value of the Units in issue deliver a written request to the Trustee that the Manager should retire. The Manager has also been appointed to act as the Guarantee Claims Agent in connection with the Deed of Guarantee executed by Société Générale. 12

15 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 2 Summary of significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. (a) Basis of preparation These financial statements have been prepared on the historical cost basis, except for the revaluation of financial assets and liabilities at fair value through profit or loss and in accordance with International Financial Reporting Standards. The preparation of financial statements in accordance with International Financial Reporting Standards requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from the estimates included in the financial statements. Standards, amendments and interpretations effective in the financial year ending January 31, 2011 but not relevant for the Fund s operations: The following interpretation to existing standards has been published and is mandatory for the Fund s accounting periods beginning on or after February 1, 2010 or later periods but is not relevant for the Fund s operations: IAS 23 (amendment), Borrowing costs ; IAS 32 (amendment), Financial instruments: Presentation Classification of right issues (effective from 1 February 2010); IAS 39 and IFRIC 9 (amendments), Embedded derivatives (effective for all periods ending on or after 30 June 2009); IAS 39 and IFRS 7 (amendments), Reclassification of financial assets ; IFRS 1 (amendments), Additional exemptions for first-time adopters (effective from 1 January 2010); IFRS 2 (amendments), Group cash-settled share-based payment transactions (effective from 1 January 2010); IFRS 8, Operating segments ; IFRIC 9 Reassessment of embedded derivatives and IAS 39, Financial instruments : Recognition and Measurement (effective from 1 July 2009); IFRIC 15, Agreements for construction of real estates ; IFRIC 16 Hedges of a net investment in a foreign operation (effective from 1 July 2009); IFRIC 17, Distributions of non-cash assets to owners (effective from 1 July 2009); 13

16 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) IFRIC 18, Transfers of assets from customers (effective from 1 July 2009); and IFRIC 19, Extinguishing financial liabilities with equity instruments (effective from 1 July 2010). Standards, amendments and interpretations to existing standards which are not yet effective and not relevant for the Fund s operations: The following interpretations are mandatory for the Fund s accounting periods beginning on or after 1 July 2010 or later periods but are not relevant for the Fund s operations: IAS 24, Related party disclosures (effective from 1 January 2011); IAS 27 (revised), Consolidated and separate financial statements (effective from 1 July 2010); IAS 34 Interim financial reporting (effective from 1 January 2011); IFRS 3 (revised), Business combinations (effective from 1 July 2010); IFRS 9, Financial instruments: classification and measurement (effective from 1 January 2013); and IFRIC 13 Customer loyalty programmes (effective from 1 January 2011) All references to net assets throughout this document refer to net assets attributable to holders of redeemable participating units unless otherwise stated. (b) Segment reporting A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments. A geographical segment is engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. The Fund is invested in securities traded on regulated markets and in an Euro Medium Term Note ( EMTN ). In addition, the Cash and cash equivalent is managed so as always be more or less equal to nil. It is therefore not relevant to proceed to a segment analysis. (c) Functional and presentation currency Items included in the Fund s financial statements are measured using the currency of the primary economic environment in which it operates ( the functional currency ). This is the HK dollar, which reflects the Fund s primary activity of investing in HK assets and the fact that the units are issued in HK dollars. The presentation currency is the same as the functional currency. 14

17 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) (d) Financial assets and liabilities at fair value through profit or loss Classification Financial assets and liabilities have been designated by management at fair value through profit or loss at inception. Recognition and derecognition Regular-way purchases and sales of investments are recognised on trade date the date on which the Fund commits to purchase or sell the asset. Financial assets and liabilities are derecognised when the rights to receive cash flows from the securities have expired or have been transferred and the Fund has transferred substantially all risks and rewards of ownership. Measurement Investments are initially recognised at fair value, and transaction costs for all financial assets and financial liabilities carried at fair value through profit or loss are expensed as incurred. Gains and losses arising from changes in the fair value of the financial assets at fair value through profit or loss category are included in the statement of comprehensive income in the period in which they arise. The investments comprise an Euro Medium Term Note (EMTN) and equities. The EMTN has been issued by SGA Société Générale Acceptance N.V. and is guaranteed by Société Générale. Fair value estimation Listed investments (ie: equities of the basket) are valued at the official close of business bid price on the principal regulated market. The Euro Medium Term Note (EMTN) is valued at its fair market value as determined in good faith by the Counterparty using a pricing methodology taking into account observable market data such as time value, intrinsic value, interest rates and dividends, and non observable market data such as correlation between the constituents of the Basket of Stocks and volatility. The Manager is also able to determine the EMTN price, using its own written pricing methodology which consists in computing a set of parameters (observable traditional market datas such as interest rates, non observable implicit datas such as volatility and correlation) in an independent pricing tool (which is also commonly used by market participants). The pricing is conducted by a dedicated team. The general methodology used is a Monte Carlo approach with 10 thousand paths. Market data such as stock prices, dividends, interest rates, swap rates, or historical volatility are gathered through BLOOMBERG. Volatility matrices are gathered through TOTEM. 15

18 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) To minimise risks, should there be any doubt as to the valuation, the Manager will request an independent person to review the value of the EMTN to ensure the price quoted is fair. The resulting unrealised gains and losses on investments are recognised in the statement of comprehensive income. Security transactions are accounted for on the trade date (the date on which the order to buy or sell is executed). Realised gains and losses on sales of securities are calculated on an average cost basis and are recorded in the statement of comprehensive income. The Fund adopted the amendment to IFRS 7, effective January 1, This requires the Fund to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels: Level I Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. The type of investments which would generally be included would include equities and derivatives listed on a securities exchange. Level II Quoted prices in markets that are not considered to be active or financial instruments for which all significant inputs are observable, either directly or indirectly (including quoted prices for similar investments in active markets, interest rates and yield curves, credit risks, etc.). The type of investments which would generally be included in this category would include corporate bonds, bank debt and certain over-the-counter derivatives. Level III Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable. The type of investments which would generally be included in this category would include private or debt securities issued by private entities. The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. (e) Foreign exchange Foreign currency transactions are translated into HKD using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of assets and liabilities denominated in foreign currencies are recognised in the statement of comprehensive income and included in realised and unrealised gains / (loss) on investments. (f) Investment income and expenses Dividend income on equity is credited to Dividend Income in the statement of comprehensive income when the security is quoted as ex-dividend. All expenses are accounted for on an accrual basis. 16

19 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) (g) Redeemable participating units The Fund issues redeemable units, which are redeemable at the holder s option and are classified as financial liabilities in accordance with IAS 32, Financial Instruments Presentation. Redeemable units can be put back to the Fund at any time for cash equal to a proportionate share of the Fund s net asset value. The redeemable unit is carried at the redemption amount that is payable at the statement of financial position date if the holder exercises the right to put the unit back to the Fund. Redeemable units are issued and redeemed at the holder s option at prices based on the Fund s net assets value per unit at the time of issue or redemption. The Fund s net asset value per unit is calculated by dividing the net assets attributable to the holders of redeemable units with the total number of outstanding redeemable units. (h) Proceeds and payments on issue and redemption of units The net asset value of the Fund is computed daily. Prices for issues and redemptions are based on the latest available underlying prices on the day immediately preceding the valuation day (usually the underlying closing prices). Proceeds and payments for units issued and redeemed during fund life are shown as movements in the statement of changes in net assets attributable to holders of redeemable participating units. (i) Cash and cash equivalents Cash and cash equivalents includes cash in hand, deposits held and other short-term highly liquid investments with original maturities of three months or less. For the purpose of the statement of cash flows, cash and cash equivalents comprise bank balances net of bank overdrafts. (j) Pre-operation costs Pre-operation costs have been included in the total of Management Fees in the statement of comprehensive income. The amount charged to the fund is described in Note 3. (k) Accrued expenses and other payables Accrued expenses and other payables are recognised initially at fair value and subsequently stated at amortised cost using the effective interest method. (l) Finance costs Distributions to holders of redeemable units and other finance costs such as interest expenses are recognised in the statement of comprehensive income as finance costs. 17

20 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) (m) Critical accounting estimates and judgements Management makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. Estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are outlined below. Fair value of derivative financial instruments The Fund may, from time to time, hold financial instruments that are not quoted in active markets, such as over-the-counter derivatives. Fair values of such instruments are determined by using valuation techniques. Where valuation techniques are used to determine fair value, they are validated and periodically reviewed by experienced personnel at the Manager's. The Fund's financial assets and financial liabilities are held for the purpose of being traded or are expected to be realised within one year. 3 Fees Management fees The Manager is entitled to receive from the Fund a quarterly management fee (payable in arrears) accrued on and calculated as at each Valuation Day at the current rate of 0.30% per cent per annum of the Net Asset Value of the Fund. The maximum rate of management fee payable to the Manager pursuant to the Trust Deed is 3% per annum and any increase in the current rate up to the maximum permitted rate will only be implemented upon giving notless than 3 months notice to affected Unitholders. Management Fees are accounted for on an accrual basis. Any increase in the current rate of the management fee payable in respect of an Investment Cycle will be fixed prior to the relevant Investment Cycle Start Date and such rate will apply throughout the relevant Investment Cycle. The Manager is entitled to receive an initial sales charge on the issue of Units of up to 3% of the gross amount invested. The Manager is also entitled to receive a conversion charge of 1% if the investor elects to convert their Units into units of certain other funds of the Altus Trust. The Manager may share any fees it receives with distributors or agents procuring subscriptions in the Fund. The Manager and other companies within the Manager's group may with the prior written consent of the Trustee deal with the Fund, both as principal and agent, and, subject as provided above, may retain any benefit which they receive as a result Trustee's Fees, Hong Kong Representative Fees, Auditors Fees, Custodian Fees, Guarantor s fees and Registrar s Agent Fees 18

21 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) The Trustee fees, Hong Kong Representative fees, Auditors' fees, Custodian fees, Guarantor s fees and Registrar s Agent fees will be paid by the Manager. Establishment Costs and Expenses The preliminary establishment expenses of the Fund, including the legal fees, the costs and expenses in obtaining authorisation of the Fund in Hong Kong and in the Cayman Islands, the preparation, the translation and the printing of the Explanatory Memorandum are estimated to be approximately US$ 100,000. Such fees were paid upfront and were accounted for during the first financial year of the Fund. 4 Taxation No provision for Hong Kong profits tax has been made as interest, dividend income and realised gains on disposal of investments of the Fund are excluded from the charge to profits tax under either sections 14, 26 or 26A of the Inland Revenue Ordinance. Under Cayman Island Law, there is no income, withholding, or capital gains taxes payable by the Fund. 5 Bank loans, overdrafts and other borrowings Bank overdrafts total USD as presented in the statement of financial position as at January 31, There were no bank loans, overdrafts and other borrowings as at January 29, Redeemable participating units in issue For the year ended For the year ended January 31, 2011 January 29, 2010 Units outstanding at the beginning of the period 18,481, ,652, Units issued 466, ,158, Units redeemed (1,034, ) (1,329, ) Units outstanding at the end of the period 17,913, ,481, Net asset value per unit As at January 31, 2011 As at January 29, 2010 Net assets attributable to holders 402,147, ,720, of redeemable participating units Number of units in issue 17,913, ,481, Net asset value per unit

22 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 8 Transactions with Manager and its related parties (a) Investment transactions with related parties of the Manager The following is a summary of the transactions entered into during the year between the Fund and the Manager and its related parties, in addition to those disclosed in note 3. Related parties of the Manager are those as defined in the Code on Unit Trusts and Mutual Funds established by the Securities & Futures Commission of Hong Kong. All such transactions were entered into in the ordinary course of business and on normal commercial terms. Investment transactions with related parties of the Manager: Aggregate % of the value of % of the Fund's total Average purchases and Fund's total commission rate of Name of company sales of securities transactions paid in the year commission HKD % Year ended January 31, 2011 Société Générale 795,286, Year ended January 29, 2010 Société Générale 919,576, The Manager, Lyxor Asset Management, is also a 100% subsidiary of Société Générale. In addition to the transactions shown above, the Fund may also receive/pay other amounts on financial assets/financial liabilities from/to a related party. (b) The Fund utilises the brokerage, custodian, agency and banking services of Société Générale, related parties of the Manager. 9 Soft commission arrangements During the year, the Manager and its related parties did not enter into any soft commission arrangements with brokers. 10 Stock lending arrangements There are no stock-lending arrangements. 11 Commitments There are no commitments. 20

23 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) 12 Negotiability of assets The Fund s assets are not restricted by statutory or contractual requirements and therefore are freely negotiable. 13 Contingent liabilities There are no contingent liabilities. 14 Post-statement of financial position event There are no post-statement of financial position event. 15 Financial Risk Disclosures (a) Concentration of risks As at January 31, 2011, the Fund is mainly invested in quoted securities and an EMTN: it is therefore exposed to a variety of financial risks: market risk (including currency risk, interest rate risk and price risk), credit risk, counterparty risk and liquidity risk. Investors should be aware that the risks of the Fund will depend to a great extent on the risk of its underlying assets. (b) Market risk The Fund is subject to market fluctuations and to the risks inherent in all investments. The Realisation Price of Units and the income from them may go down as well as up. On a daily basis, the Manager performs a first set of controls including coherence controls on the NAV of the Fund and checks on the prices provided by the counterparty. Under the supervision of its Risk Management Department, the Manager performs an overall measurement of these risks. Such analysis is done through a Modified Value at Risk (MVaR) methodology which aims at defining the maximum daily decrease of the Fund s NAV under normal market conditions. To properly compare emerging markets stocks, low liquid stocks, hedge funds or private equity, the Manager is using a customized VaR since the standard deviation of the original VaR methodology is not adequate. As these asset returns are not normally distributed, the MVaR is a better measure as it accounts for standard deviation, skewness and kurtosis at a given confidence level. The Manager computes its MVaR analysis with its own IT systems using historical data (with a minimum limit set at 40 dates, under which the calculation is considered not relevant). MVaR is calculated based on historical NAVs since the fund s inception and the confidence level used for the calculation is set at 99%. The main limit of this analysis might be its reliance on historical data to simulate a future performance. The MVaR methodology covers the measurement of market price risk, interest rate risk and foreign currency risk. 21

24 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) As at January 31, 2011, in normal market conditions, the maximum daily decrease of Altus Trust: Lyxor Alpha Equity Fund - Hang Seng Index Fund s NAV should not be greater than 6.69% with a confidence level of 99 % (6.48 % on January 29, 2010). As mentioned above, the market risk of the Fund is linked to the market risk of its underlying assets. Market price risk In order to achieve its investment objective, the Fund invests in an EMTN and a basket of equities to capture the potential growth of these companies selected by the Manager at its absolute discretion. All securities investments present a risk of loss of capital. The maximum risk resulting from financial instruments is determined by the fair value of the financial instruments. Equities are valued at the official close of business bid price on their principal regulated market. As stated in Note 2d, the EMTN is valued at its fair market value as determined in good faith by the Counterparty using a pricing methodology taking into account observable market data and non observable market data. An independent valuation is performed by the Manager of the Fund. Interest rate risk The Fund s financial assets and liabilities are mostly non-interest bearing with the exception of the EMTN. As a result, the Fund 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. The tables below summarise the Fund's exposure to interest rate risks. It includes the Fund's assets and trading liabilities at fair values: At January 31, months 1-5 More than Non interest Total (in HKD) months - 1 year years 5 years bearing Asset : Financial assets at fair value ,313, ,938, ,251, through profit or loss Cash and cash equivalents Others Receivables , , Total Assets ,313, ,952, ,265, Liabilities : Accrued expenses and , , other payables Due to the bank Redeemable shares ,147, ,147, Total liabilities ,265, ,265, Total interest ,313, (35,313,137.72) - sensitivity gap

25 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) At January 29, months 1-5 More than Non interest Total (in HKD) months - 1 year years 5 years bearing Asset : Financial assets at fair value ,732, ,088, ,820, through profit or loss Cash and cash equivalents 11,965, ,965, Other receivable - 44, , Total Assets 11,965, ,732, ,132, ,829, Liabilities : Accrued expenses and ,109, ,109, other payables Redeemable shares ,720, ,720, Total liabilities ,829, ,829, Total interest 11,965, ,732, (38,697,684.69) - sensitivity gap Currency risk As of January 31, 2011 and January 29, 2010, the Fund is invested in assets which are denominated in HKD: the Fund is therefore not exposed directly to the currency risk. (c) Liquidity Risk Liquidity risk is the risk that the Fund may not be able to generate sufficient cash resources to settle its obligations in full as they fall due or can only do so on terms that are materially disadvantageous. The Fund s assets comprise mainly realisable securities, which can be readily sold and an EMTN. The Fund is exposed to daily cash redemptions of redeemable units. At closing date, the redeemable units amounted to HKD 402,147, increasing by 1.11% in comparison with January 29, 2010 (HKD 397,720,288.42). The Manager may suspend the realisation of Units or delay the payment of realisation proceeds during any periods in which the determination of the Net Asset Value of the relevant Fund is suspended. Over-The-Counter EMTN may also be illiquid. As a result, the Fund may not be able to liquidate quickly its investments in this instrument at an amount close to its fair value to meet its liquidity requirements. In order to meet realisation requests prior to Maturity Date, the Counterparty is compelled to quote a price to unwind any part of the EMTN. The price will reflect the market liquidity conditions and the size of the transactions. 23

26 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) The tables below summarise the Fund's non-derivative liabilities into relevant maturity groupings based on the remaining period at the statement of financial position date to the contractual maturity date: At January 31, 2011 Less than 3 12 More than No stated Total 3 months months 12 months maturity Liabilities : Accrued expenses and 117, , other payables Due to the bank Redeemable shares 402,147, ,147, Total liabilities 402,265, ,265, At January 29, 2010 Less than 3 12 More than No stated Total 3 months months 12 months maturity Liabilities : Accrued expenses and 12,109, ,109, other payables Redeemable shares 397,720, ,720, Total liabilities 409,829, ,829, As at January 31, 2011 and January 29, 2010, there were no financial derivative liabilities. Fair value measurement risk The following table analyses within the fair value hierarchy the Fund s financial assets and liabilities measured at fair value at January 31, 2011, as discussed in note 2 (d): Assets Level 1 Level 2 Level 3 Total Balance Financial assets 366,938, ,313, ,251, designated at fair value through profit or loss Total financial assets 366,938, ,313, ,251, at fair value Financial liabilities designated at fair value through profit or loss Total financial liabilitiesat fair value 24

27 NOTES TO THE FINANCIAL STATEMENTS (CONTINUED) The following table analyses within the fair value hierarchy the Fund s financial assets and liabilities measured at fair value at January 29, 2010, as discussed in note 2 (d): Assets Level 1 Level 2 Level 3 Total Balance Financial assets 371,088, ,732, ,820, designated at fair value through profit or loss Total financial assets 371,088, ,732, ,820, at fair value Financial liabilities designated at fair value through profit or loss Total financial liabilities at fair value The amendments to IFRS 7 require disclosure of transfers between levels. There were no transfers between levels for the year ended January 31, The following table presents the movement in Level 3 instruments for the year ended January 31, 2011 by class of financial instrument: Assets EMTN Total financial assets Opening balance 26,732, ,732, Purchases 237,650, ,650, Sales (154,866,205.72) (154,866,205.72) Gains and losses recognized in profit and loss (74,203,750.53) (74,203,750.53) Closing balance 35,313, ,313, Total gains or losses for the year included 9,349, ,349, in the statement of comprehensive income for assets held at the end of the year 25