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ABSOLUTE RETURN STRATEGY SICAV
(Société d'Investissement à Capital Variable)
Annual Report and Audited Financial Statements
For the year ended December 31, 2010
R.C.S. Luxembourg : B- 900 86
No subscription can be received on the basis of financial reports. Subscriptions are only valid if made on the basis of the current prospectus
accompanied by the latest annual report and the most recent semi-annual report, if published thereafter.
ABSOLUTE RETURN STRATEGY SICAV
Table of Contents
Management, Administration and Independent Auditor
Page
3
General Information
Market Synopsis
4
6
Review of the Sub-Funds
8
Independent Auditor’s Report
Statement of Net Assets
10
12
Statement of Operations and Changes in Net Assets
Changes in the Number of Shares
13
14
Statistics
14
Market Neutral
Schedule of Investments
15
Directional Managers
Schedule of Investments
17
Notes to the Financial Statements
19
2
ABSOLUTE RETURN STRATEGY SICAV
Management, Administration and Independent Auditor
CHAIRMAN
Mr Peter George SIERADZKI
Director
Bank Insinger de Beaufort N.V.
Amsterdam
DIRECTORS
Mr Jacobus Johannes HUMAN
Director
Insinger de Beaufort Asset Management N.V.
Amsterdam
Mr Steve GEORGALA
Partner
Maitland & Co.
Paris
Mr Marcel ERNZER
Independent Director
54, rue de Cessange
L- 1320 Luxembourg
REGISTERED OFFICE
69, route d'Esch
L- 1470 Luxembourg
R.C.S.Luxembourg B- 90086
INVESTMENT MANAGER
Insinger de Beaufort Asset Management N.V.
Herengracht 537
NL-1017 BV Amsterdam
DISTRIBUTOR
Bank Insinger de Beaufort N.V.
Herengracht 537
NL- 1017 BV Amsterdam
DEPOSITARY AND CENTRAL ADMINISTRATION
RBC Dexia Investor Services Bank S.A.
14, Porte de France
L- 4360 Esch-sur-Alzette
REGISTRAR AND TRANSFER AGENT
RBC Dexia Investor Services Bank S.A.
14, Porte de France
L- 4360 Esch-sur-Alzette
INDEPENDENT AUDITOR
Ernst & Young S.A.
7. rue Gabriel Lippmann
Parc d'Activité Syrdall 2
L- 5365 Munsbach
3
ABSOLUTE RETURN STRATEGY SICAV
General Information
The annual general meeting of Shareholders of ABSOLUTE RETURN STRATEGY SICAV (the “Company”) is held at the registered
office of the Company or at such other place in Luxembourg as indicated in the convening notice on the last Wednesday of
April of each year at 2 p.m. Luxembourg time. If any such day is not a bank business day in Luxembourg, it will be held on the
next following bank business day in Luxembourg.
Notices of all general meetings will be published in the “Mémorial, Recueil des Sociétés et Associations” of Luxembourg (the
“Mémorial”) and in at least one Luxembourg newspaper (to the extent required by Luxembourg law) and will be sent by mail
to the holders of registered Shares at least 8 days prior to the meeting at their addresses according to the register of
Shareholders.
Such notices will include the agenda and specify the time and place of the meeting, the conditions of admission, and will
refer to the requirements of Luxembourg law with regard to the necessary quorum and majorities required for the meeting.
The requirements as to attendance, quorum and majorities at all general meetings will be those laid down in Articles 67 and
67-1 of the law of August 10, 1915 (as amended) of the Grand Duchy of Luxembourg and in the Company's Articles of
Incorporation.
Each entire Share is entitled to one vote. Fractions of Shares however participate in the distribution of dividends (if any) or in
the distribution of the liquidation proceeds.
The Annual Report and Audited Financial Statements will be published within 4 months after the end of the financial year and
the unaudited semi-annual reports will be published within 2 months at the end of the relevant period. The reports include
separate information on each of the Sub-Funds as well as combined information on all Sub-Funds. The reports are available at
the registered office of the Company during normal business hours. The financial year end of the Company is December 31 of
each year.
A detailed schedule of portfolio movements of the Sub-Funds is available free of charge upon request at the registered office
of the Company.
The Net Asset Values, Subscription and Redemption Prices of the Sub-Funds and Classes are available at the registered office
of the Company. Shares of all the Sub-Funds, as and when issued, shall be listed on the Luxembourg Stock Exchange.
Under current legislation and practice, Shareholders are not subject to any capital gains, income, withholding, inheritance or
other taxes in Luxembourg (except for Shareholders domiciled, resident or having a permanent establishment in Luxembourg
and for certain former residents of Luxembourg owning more than 10% of the share capital of the Company).
Potential investors should consult their professional advisers on the possible tax or other consequences of buying, holding,
converting, transferring or selling any of the Shares under the laws of their countries of citizenship, residence or domicile.
The EU Savings Directive does not apply to Absolute Return Strategy SICAV. This fund is out of scope.
The annual and semi-annual accounts can be obtained, free of charge, at the offices of the Investment Manager or can be
downloaded, free of charge, from the website of the Investment Manager under the link:
http://www.insinger.com/nl/Beleggen.aspx
4
ABSOLUTE RETURN STRATEGY SICAV
General Information (continued)
Expense ratio
The expense ratio of each Sub-Fund is calculated by dividing the total expenses by the average Net Asset Value of each SubFund. The average Net Asset Value for the year ended December 31, 2010 is calculated by averaging the Net Asset Value of
each Valuation of each Sub-Fund during 2010. The calculation of the expense ratio of the underlying funds is based on
available information of the funds.
Absolute Return Strategy sicav - Market Neutral
The average Net Asset Value for the year ended December 31, 2010 is USD 46,104,421. The expense ratios as at December 31,
2010 are as follows (percentages are expressed per annum) :
- excluding performance fees and the expense ratios of the underlying funds: 1.89%
- including the expense ratios of the underlying funds: 4.71%
All above expense ratios exclude the performance fees in the underlying funds as these are not yet known and difficult to
estimate. There were no performance fees for Absolute Return Strategy SICAV.
Absolute Return Strategy sicav - Directional Managers
The average Net Asset Value for the year ended December 31, 2010 is USD 63,264,971. The expense ratios as at December 31,
2010 are as follows (percentages are expressed per annum) :
- excluding performance fees and the expense ratios of the underlying funds: 1.82%
- including the expense ratios of the underlying funds: 4.23%
All above expense ratios exclude the performance fees in the underlying funds as these are not yet known and difficult to
estimate. There were no performance fees for Absolute Return Strategy SICAV.
5
ABSOLUTE RETURN STRATEGY SICAV
Market Synopsis
Macro review
Last year was dominated by various crises in the Eurozone. In early May, the euro countries attempted to ward off the crisis by
creating the European Financial Stability Facility, or EFSF, a EUR750 billion fund for hard-up euro countries only able to finance
their national debt at extremely high interest rates. Greece ultimately borrowed EUR110 billion, followed in the autumn by
Ireland with a bail-out of EUR67.5 billion. It is generally feared that Portugal will be the next candidate, but the real fear
concerns the position of Spain: the EFSF is probably not large enough to bail it out. At the end of October, Chancellor Merkel
warned that the EFSF was a temporary emergency fund which could not guarantee the national debt of euro countries
indefinitely. From 2013, government bonds would again have to be issued which oblige investors to pay up in the event of the
issuing country defaulting and having to restructure its debt. President Trichet of the ECB tried to persuade Merkel otherwise,
unsuccessfully, but it has to be said that her position is understandable.
Merkel’s stance gets straight to the heart of the matter with the Eurozone: it may be a monetary union, but there is no single
financial-economic policy. The latter still lies with the individual member states and if they pursue a highly irresponsible policy
(or even commit fraud, as in the case of Greece), then the stronger member states, such as Germany and the Netherlands,
cannot be expected to foot the bill. The exit of the strong or even the weak countries from the union is a potential structural
solution, because this involves not just the high budget deficits and national debt of the various countries, but also their
balance of payments. Countries such as the Netherlands and Germany have high surpluses on the current account of their
balance of payments. Countries such as Greece and Portugal have structural deficits and can no longer get the situation
under control by devaluing their currencies. This lack of balance requires the continuous transfer of capital from the stronger
countries to the weaker countries, using whatever method (e.g. the EFSF). In order to be able to compete with countries such
as Germany, wages in the PIIGS countries (Portugal, Ireland, Italy, Greece and Spain) will have to be cut, which will cause
huge social problems and potentially push these countries into a downward deflationary spiral. One alternative is of course to
raise wages in the strong countries.
Those sceptics who never believed in the viability of the euro (chiefly found in London, where they retained the British pound)
may ultimately be proved right, but in the short term the most obvious policy is one of perseverance. European leaders have
already demonstrated this by creating the EFSF and the increasingly strict conditions linked to its use. It seems likely that they
will continue along this route. Further economic recovery is required to combat the euro crisis. There is high economic growth
in Europe, but mainly in Germany, where the economy is now growing at about 4% a year. Germany is making the most of the
weak euro: after a very strong rally following the 2008/2009 crisis, export growth is managing to stay at over 20% on an annual
basis! The weak euro may lead to an overheated Germany economy in 2011/2012, but that is a worry that the authorities are
happy to live with.
Further turbulence can be expected in the Eurozone in 2011, but it is impossible to predict its scale. Things may turn out better
than expected, however, and the market’s attention could shift to the situation in the US or Japan, where national debt
expressed as a percentage of the GDP is still higher than in the Eurozone. In Japan’s case, much higher: over 200%! Whatever
the case, there is one encouraging sign: the markets responded better to the problems in October/November than they did
during the Greek crisis in May. The panic about events in the Eurozone therefore appears to be abating. It is possible that the
euro crisis has already passed its low, but for the sake of caution we are adhering to our policy of not investing in European
banks or in bonds and equities of PIIGS countries.
In 2010, it was possible to earn a higher return in the US. Not only did the equity markets there perform better, euro investors also
made a moderate profit on the US dollar. In November and December, the US economy showed so many signs of recovery
that most of the markets around the world closed the year on a high. In spite of the signs of recovery, in December the US
president decided to extend his predecessor’s tax breaks and as a result the budget deficit for 2011 is likely to remain high. The
Fed is also clearly still concerned as it decided to introduce a second round of quantitative easing (QE II) in early November:
over the next few months, the Fed is going to buy up government bonds worth about USD100 billion each month in order to
keep down the long-term yield. In the short term, the Fed’s intervention appears to be working as risk appetite is clearly rising,
with low credit spreads on corporate credits and higher equity prices.
In the third quarter, the most notable development in the bond market was the fall in the yield on German government bonds
to just above 2%. We cast doubt in our previous publication on whether such a bond still held any investment value in view of
the very low interest being paid. Since then, the rate has climbed back to about 3%. Even at its current level of about 3%,
however, we still cannot call it particularly attractive. After all, in the long term there are significant risks to what is seen as the
ultimate safe bond: the situation in the Eurozone could get so out of hand that investors even start to doubt the
creditworthiness of Germany. Corporate credits remain more attractive than government bonds, although yields have fallen
sharply compared to their high during the credit crisis in the autumn of 2008. With a view to part of our bond portfolio yielding a
greater return, we also invested via a fund in short-term emerging market debt, which pays a higher rate of interest while the
debtor quality compares favourably to Western debtors.
MSCI World index earned a profit of 17.2% in euros in 2010, while the Eurostoxx 50 index in fact noted a loss of 5.8%. Equity
markets in the PIIGS countries plummeted but the German market, for instance, did not and even succeeded in growing by
16% in 2010. The Dutch AEX index was about average for Europe with a profit of 5.7%. Although over the past few years we
have increasingly invested outside Europe, in the expectation that the bear market in the US dollar was over, our managed
portfolios traditionally place a certain emphasis on investment in high-quality European companies. This meant that the
investment return on equities in 2010 lagged behind that of the global index. We were in fact too quick to structure the
portfolios more defensively.
6
ABSOLUTE RETURN STRATEGY SICAV
Market Synopsis (continued)
The renewed cyclical rally of the last few months of 2010 fits in with the standard market recovery in the wake of a severe crisis.
In order to respond to this, over the past few months we have again expanded our holdings in more cyclical investments in our
managed portfolios. More importantly, we have increased the equity weighting in our mixed portfolios in order to profit to a
greater extent from the rally which is expected to persist in the first half of 2011. We anticipate that the Northern European
markets will continue to outperform the PIIGS countries in 2011. At the same time, we believe it is too soon to invest in European
banks in view of the problems in the Eurozone and the rising capital requirements which the sector will have to meet over the
next few years. As we expect emerging markets to perform relatively well, we have recently also expanded our investment in
emerging markets. These markets are still not overvalued, and the majority of countries are not burdened by extremely high
debt as is the case in most Western countries.
The lack of movement during the larger part of the year meant that most hedge funds performed only moderately well. Multimanager funds, which aim to spread risk widely, were again unable to compensate for their losses of 2008 in 2010. Gold was
again one of our most successful investments in 2010. The gold price seems to be chiefly driven by a total lack of confidence in
the policies of central banks, such as the Fed, which reduced interest rates to almost zero and are also turning to quantitative
easing by buying up government bonds. As we anticipate no change in the short term to those policies of the major central
banks so devastating to savers, we will retain our investment in gold for the time being.
Absolute Return Strategy SICAV
2010 was a challenging and disappointing year for hedge funds given that most other asset classes, including investment
grade bonds, high yield bonds, equities and commodities, all delivered better returns than hedge funds. Hedge funds still
provided positive returns, yet they were relatively muted. Multi-manager funds, which aim to spread risk widely, were still
unable to regain the losses experienced in 2008.
On the Long/Short side, it was not a year that favoured fundamental stock picking, the mainstay of the industry. Rather, there
was a clear high beta trend that favoured emerging markets, commodities and cyclical sectors. Stock pickers were not
rewarded in this environment, but in fact often suffered as lower quality companies rallied in line with this clear theme. Toward
the end of the year, fundamentals began to assert themselves again as emerging market relative performance peaked,
suggesting that 2011 may also be a better year for Long/Short strategies.
For Macro/CTA, the high degree of uncertainty and sharp trend reversals during the year created a difficult environment that
saw many funds, especially CTAs, provide muted returns. Many managers lowered their overall levels of risk exposure as the
year progressed, uncomfortable with the lack of visibility. 2011 is likely to remain challenging for CTA’s as long as trends remain
volatile.
Within Event Driven, the best results were generated by Distressed Managers, who continued to benefit from the tightening of
risk spreads across the corporate spectrum, and were able to buy at discounted prices from banks who needed to shrink their
balance sheets, Distressed Debt is unlikely to have a good a year again in 2011, and we expect that M&A strategies might fare
better at this stage in the cycle.
Relative value strategies performed better than most others in 2011, benefiting in many cases from the high volatility
experienced in interest rate, forex and commodity markets that were detrimental for many CTA’s. They should continue to do
well in 2011 as long as these volatilities remain elevated.
January 2011
7
ABSOLUTE RETURN STRATEGY SICAV
Review of the Sub-funds
Absolute Return Strategy SICAV – Market Neutral
During the past year the managers continued to reduce the concentration risk within Absolute Return Strategy SICAV - Market
Neutral (the “Fund”) by reducing large positions and diversifying the portfolio further with several new, high quality names.
Over the course of 2010, nine new funds were purchased in the Fund: Global Trading Strategies, Rohatyn Asia, Horizon,
Highbridge, Altis Global Futures, Graham K4D15, Taconic Offshore, Arrowgrass Intl. and Black River Global Trading. The
following six funds were also fully redeemed out of the Fund: Alphagen Capella, Castlerigg Intl, Trafalgar Catalyst, Trafalgar
Recovery and Advent Global Opportunity. At the end of 2010 ARS Market Neutral held 20 underlying hedge funds.
The top performer of 2010 within the Fund was the Advent Global Opportunity Strategy Fund (11.71%). Advent took
advantage of opportunities across the broad credit market as well as within the capital structure. We took full profits on the
Advent fund, redeeming at year end.
The bottom performer in 2010 was Ionic Capital International (-7.22%). Ionic was unable to successfully lock in returns in May
when volatility was at an historical high level, and the diversification benefit of the several sub-strategies did not prove to work.
We fully redeemed from Ionic towards the end of the year.
For the year as a whole, the fund returned 5.23%. This performance reflected the Funds more conservative risk profile resulting
from the large liquidity positions and conservative manager selection, generating a slightly higher return than the 4.63% set by
the HFRX Global Hedge EUR Index.
The NAV of ARS Market Neutral – Class B (EUR) increased from EUR 95.00 to EUR 99.97 resulting in a performance of 5.23% for the
year 2010.
The Class D (GBP) was paid in full to the investors with the last NAV calculated for this share class on 30 June 2010 (NAV of GBP
103.92) and Class A (USD) was also paid in full to the investors with the last NAV calculated on 31 August 2010 (NAV of USD
106.50). The reason for this decision by the Board of Directors is as these classes became too small to properly manage it.
Outlook
The Fund entered 2011 well diversified both by strategy and manager. We therefore expect the Fund to reflect the overall
performance of conservative-diversified fund of hedge fund benchmarks in 2011, with some of the managers adding
additional alpha. As discussed above, we expect 2011 to be driven more by fundamentals that was in the case in 2010. This
impacts both equity and fixed income strategies. Equity fundamentals are likely to be an increasingly important driver for the
performance of long/short equity, whether directional or market neutral, and the portfolio is well positioned for this through its
addition of fundamental, market neutral long/short managers in 2010. Additionally, the combination of systematic and
discretionary global macro and CTA funds should provide diverse exposure to the trends and volatility that may continue
throughout 2011, and we increased our exposure to these managers over the course of 2010. We also added to event driven
managers over the year, which will allow the fund to take advantage of an expected increase in M&A activity in 2011.
Luxembourg, April 21, 2011
The Board of Directors
8
ABSOLUTE RETURN STRATEGY SICAV
Review of the Sub-funds (continued)
Absolute Return Strategy SICAV – Directional Managers
During the past year the managers continued to reduce the concentration risk within Absolute Return Strategy SICAV –
Directional Managers (the “Fund”) by reducing large positions and diversifying the portfolio further with several new, high
quality names.
Over the course of 2010, three new funds were purchased in the Fund: Global Trading Strategies, Rohatyn Asia and Horizon.
The following six funds were also fully redeemed out of the Funds: Abchurch, Alphagen Capella, Bristol Intl. Fund, Castlerigg
Intl, Cambrian and Rodinia. At the end of 2010 the Fund held 14 underlying hedge funds
The top performer of 2010 within the Fund was the Winton Futures Fund (14.43%). Winton’s top performing sector in 2010 was
bonds, with positive contributions from currencies, interest rates, precious metals and crops. We took profit on Winton during
the year, reducing the position slightly.
The bottom performers in 2010 were Ionic Capital International (-7.22%) and the Tell Fund (-5.68%). Ionic was unable to
successfully lock in returns in May when volatility was at an historical high level, and the diversification benefit of the several
sub-strategies did not prove to work. We fully redeemed from Ionic towards the end of the year. The Tell Fund lost 9.37% in
November which was mainly caused by investments in the Irish theme leading to a negative year performance only for the
second time since inception of the Tell Fund in 1996. We also reduced Tell during the year, prior to the poor performance in the
second half of the year.
For the year as a whole, the fund returned 1.63%. This performance reflected the Funds more conservative risk profile resulting
from their large liquidity positions and conservative manager selection, and led to a lower return than the 4.63% set by the
HFRX Global Hedge EUR Index.
The NAV of ARS Directional Managers – Class B (EUR) increased from EUR 104.05 to EUR 105.75 resulting in a performance of
1.63% for the year 2010.
The Class D (GBP) was paid in full to the investors with the last NAV calculated for this share class on 30 June 2010 (NAV of GBP
102.48) and Class A (USD) was also paid in full to the investors with the last NAV calculated on 31 August 2010 (NAV of USD
116.30). The reason for this decision by the Board of Directors is as these classes became too small to properly manage it.
Outlook
The Fund entered 2011 well diversified both by strategy and manager. We therefore expect the Fund to reflect the overall
performance of diversified fund of hedge fund benchmarks in 2011, with some of the managers adding additional alpha. As
discussed above, we expect 2011 to be driven more by fundamentals that was in the case in 2010. This impacts both equity
and fixed income strategies. Equity fundamentals are likely to be an increasingly important driver for the performance of long/
short equity, whether directional or market neutral, and the portfolio is well positioned for this. Additionally, the combination of
systematic and discretionary global macro and CTA funds should provide diverse exposure to the trends and volatility that
may continue throughout 2011, and we increased our exposure to these managers over the course of 2010.
Luxembourg, April 21, 2011
The Board of Directors
9
Independent Auditor’s Report
To the Shareholders of
Absolute Return Strategy SICAV
69, route d'Esch
L-1470 Luxembourg
Following our appointment by the Annual General Meeting of the Shareholders by the Board of Directors of the SICAV of April
29, 2010, we have audited the accompanying financial statements of Absolute Return Strategy SICAV (the "SICAV") and each
of its Sub-Funds, which comprise the statement of net assets and the schedule of investments as at December 31, 2010 and
the statement of operations and changes in net assets for the year then ended and a summary of significant accounting
policies and other explanatory notes to the financial statements.
Board of Directors of the SICAV's responsibility for the financial statements
The Board of Directors of the SICAV is responsible for the preparation and fair presentation of these financial statements in
accordance with Luxembourg legal and regulatory requirements relating to the preparation and presentation of the financial
statements and for such internal control as the Board of Directors of the SICAV determines is necessary to enable the
preparation and presentation of financial statements that are free from material misstatement, whether due to fraud or error.
Responsibility of the “réviseur d'entreprises agréé”
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 as adopted for Luxembourg by the “Commission de Surveillance du
Secteur Financier”. 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 judgement of the réviseur d'entreprises agréé, 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 réviseur d'entreprises agréé 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 the Board of Directors of the SICAV 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 give a true and fair view of the financial position of Absolute Return Strategy SICAV and
of each of its Sub-Funds as at December 31, 2010 and of the results of their operations and changes in their net assets for the
year then ended in accordance with Luxembourg legal and regulatory requirements relating to the preparation and
presentation of the financial statements.
Without qualifying our opinion, we draw attention to Notes 2 and 9 of the financial statements. As explained therein, the
financial statements include investments in underlying investment funds which are valued at USD 31,916,182 (representing
59.71% of net assets) in Absolute Return Strategy SICAV – Market Neutral and USD 40,795,322 (representing 73.94% of net
assets) in Absolute Return Strategy SICAV – Directional Managers, whose fair values have been derived from unaudited net
asset values provided by such funds or their agents in accordance with the prospectus. An investment representing 10.53% of
the net assets of Absolute Return Strategy SICAV – Directional Managers has valued 51% of its underlying investments based on
valuation techniques incorporating assumptions not based on observable market data. The value attributed to the underlying
investment funds may differ from the value that would have been used had the underlying audited financial statements of
such investments been available and had valuation assumptions been based on observable market data, such differences
could be material. In addition, investee funds representing 3.12% of the NAV in Absolute Return Strategy SICAV - Market
Neutral and 12.49% of the NAV in Absolute Return Strategy SICAV - Directional Managers at December 31, 2010 have raised
gates potentially impacting the liquidity of the respective Sub-Funds.
10
Independent Auditor’s Report (continued)
Other Matter
Supplementary information included in the annual report has been reviewed in the context of our mandate but has not been
subject to specific audit procedures carried out in accordance with the standards described above. Consequently, we
express no opinion on such information. However, we have no observation to make concerning such information in the
context of the financial statements taken as a whole.
ERNST & YOUNG
Société Anonyme
Cabinet de révision agréé
Kerry NICHOL
Luxembourg, April 21, 2011
11
ABSOLUTE RETURN STRATEGY SICAV
Statement of Net Assets
as at December 31, 2010
Market Neutral
USD
Directional Managers
USD
Total
USD
(2)
33,400,921
10,935,743
9,043,420
15,729
-
49,079,725
1,387,379
2,775,211
2,002,188
82,480,646
12,323,122
11,818,631
15,729
2,002,188
(6)
139,441
228,029
53,763,283
134,819
55,379,322
274,260
228,029
109,142,605
(3)
(5)
131,556
46,813
136,659
315,028
53,448,255
139,994
66,926
206,920
55,172,402
271,550
113,739
136,659
521,948
108,620,657
99.97
105.75
400,126.117
390,448.760
Note
ASSETS
Investments in securities at market value
Cash at bank
Amounts receivable on sale of investments
Amounts receivable on subscriptions
Investments paid in advance
Unrealised profit on forward foreign exchange
contracts
Other assets
TOTAL ASSETS
LIABILITIES
Management commission payable
Taxes and expenses payable
Other liabilities
TOTAL LIABILITIES
TOTAL NET ASSETS
Net asset value per share
"B" Shares (EUR)
Number of shares outstanding
"B" Shares (EUR)
The accompanying notes form an integral part of these financial statements.
12
ABSOLUTE RETURN STRATEGY SICAV
Statement of Operations and Changes in Net Assets
for the year ended December 31, 2010
Market Neutral
USD
Directional Managers
USD
Total
USD
51,094,855
82,866,113
133,960,968
(2)
43
234,818
234,861
2
15,859
15,861
45
250,677
250,722
(3)
(8)
(699,594)
(30,319)
(934,264)
(48,977)
(1,633,858)
(79,296)
(8)
(82,738)
(18,984)
(20,815)
(3,066)
(2,548)
(168,263)
(1,026,327)
(791,466)
7,757,260
(83,187)
(33,583)
(26,943)
(2,938)
(12,568)
(27,950)
(1,170,410)
(1,154,549)
5,631,740
(165,925)
(52,567)
(47,758)
(6,004)
(15,116)
(196,213)
(2,196,737)
(1,946,015)
13,389,000
(4,107,969)
(383,425)
2,474,400
(4,386,554)
(400,658)
(310,021)
(8,494,523)
(784,083)
2,164,379
(4,822,846)
1,467,880
(5,407,058)
1,536,600
(10,229,904)
3,004,480
(880,566)
(4,180,479)
(5,061,045)
12,009,045
(8,775,079)
53,448,255
12,469,329
(35,982,561)
55,172,402
24,478,374
(44,757,640)
108,620,657
Note
NET ASSETS AT THE BEGINNING OF THE YEAR
INCOME
Bank interest
Other income
TOTAL INCOME
EXPENSES
Management and performance fee
Depositary bank fees
Domiciliation, administration and transfer agent
fees
Audit fees, printing and publishing expenses
Taxe d'abonnement
Bank charges
Bank interest
Other charges
TOTAL EXPENSES
NET INCOME / (LOSS) FROM INVESTMENTS
Net realised profit / (loss) on sale of investments
Net realised profit / (loss) on forward foreign
exchange contracts
Net realised profit / (loss) on foreign exchange
NET REALISED PROFIT / (LOSS)
Change in net unrealised appreciation /
(depreciation) on:
- investments
- forward foreign exchange contracts
NET INCREASE / (DECREASE) IN NET ASSETS AS A
RESULT OF OPERATIONS
EVOLUTION OF THE CAPITAL
Issue of shares
Redemption of shares
NET ASSETS AT THE END OF THE YEAR
(4)
(2)
(2)
(2)
The accompanying notes form an integral part of these financial statements.
13
ABSOLUTE RETURN STRATEGY SICAV
Changes in the Number of Shares
for the year ended December 31, 2010
Market Neutral
Directional
Managers
USD
“A" Shares
Number of
Number of
Number of
Number of
shares
shares
shares
shares
outstanding at the beginning of the year
issued
redeemed
outstanding at the end of the year
16,223.535
(16,223.535)
-
23,752.382
111.361
(23,863.743)
-
EUR
“B" Shares
Number
Number
Number
Number
of
of
of
of
shares
shares
shares
shares
outstanding at the beginning of the year
issued
redeemed
outstanding at the end of the year
348,031.742
94,624.567
(42,530.192)
400,126.117
519,777.664
91,075.309
(220,404.213)
390,448.760
GBP
“D" Shares
Number of
Number of
Number of
Number of
shares
shares
shares
shares
outstanding at the beginning of the year
issued
redeemed
outstanding at the end of the year
9,953.788
(9,953.788)
-
12,881.345
(12,881.345)
-
Statistics
Market Neutral
USD
Directional
Managers
USD
53,448,255
51,094,855
62,577,416
55,172,402
82,866,113
109,173,151
December 31, 2010
“A" Shares (USD)
“B" Shares (EUR)
“D" Shares (GBP)
99.97
-
105.75
-
December 31, 2009
“A" Shares (USD)
“B" Shares (EUR)
“D" Shares (GBP)
107.32
95.00
105.44
115.52
104.05
103.90
December 31, 2008
“A" Shares (USD)
“B" Shares (EUR)
“D" Shares (GBP)
101.02
89.75
90.02
110.09
99.36
97.50
Total Net Asset Value
December 31, 2010
December 31, 2009
December 31, 2008
Net asset value per share at the end of the year
The accompanying notes form an integral part of these financial statements.
14
ABSOLUTE RETURN STRATEGY SICAV
Market Neutral
Schedule of Investments
as at December 31, 2010
(expressed in USD)
Description
Quantity
Currency
Average Cost
Fair Value
(note 2)
% net
assets
Transferable securities admitted to an official stock exchange listing
Investment funds
Multi-Strategy Relative Value
Westlb Horizon Mm Target-A-Cap
147,237
EUR
2,559,690
2,559,690
2,383,573
2,383,573
4.46
4.46
Others
Innocap Graham K4D15
JPMIF High St Mkt N Shs B E C
210,801
10,728
USD
EUR
2,000,000
1,783,356
3,783,356
2,051,905
1,540,473
3,592,378
3.84
2.88
6.72
Total - Investment funds
6,343,046
5,975,951
11.18
Total - Transferable securities admitted to an official stock exchange listing
6,343,046
5,975,951
11.18
Other transferable securities
Investment funds
Convertible
Advent
Advent
Advent
Advent
Arbitrage
Convertible Arbitrage - Class B Series 1
Convertible Arbitrage - Class B Series 2
Convertible Arbitrage - Class B1 Series 1
Enhanced Phoenix Offshore - Series 1
9,378
71
9,836
6,855
USD
USD
USD
USD
1,059,915
1,000,000
6,385,372
8,445,287
1,640,355
9,855
1,480,691
3,130,901
3.07
0.02
2.77
5.86
735
728
EUR
EUR
1,027,154
1,025,922
2,053,076
989,159
987,505
1,976,664
1.85
1.85
3.70
57
92
917
USD
USD
USD
550,874
550,874
407,096
1,468
20,201
428,765
0.76
0.04
0.80
8,950
1,173
1,500
EUR
EUR
USD
2,018,030
1,502,674
1,500,000
5,020,704
1,900,656
1,524,806
1,484,739
4,910,201
3.56
2.86
2.78
9.20
16,000
2,400
EUR
USD
2,094,240
2,400,000
4,494,240
2,164,932
2,432,118
4,597,050
4.05
4.55
8.60
1,293
6,149
2,258
1,500
USD
USD
USD
USD
129,274
593,079
225,781
1,500,000
151,114
700,639
242,100
1,622,220
0.28
1.31
0.45
3.03
CTA
Altis Global Futures Portfolio Sub Class B1 - EUR Lead
Series
Altis Global Futures Portfolio EUR B1 - 15.11.10
Distressed
Orn European Distressed Debt Fund Ltd Series 1
Trf Liquidating Spv USD D/1
Trf Liquidating Spv USD E/1
Macro
Comac Glob Macro Fund EUR/Cap
Global Trading Strategies -DRohatyn Group Asia Opp -A5- Hi
Multi-Strategy Diversified
Arrowgrass Int -B- EUR NI S0810
Black River GL Trading -L-S.235
Multi-Strategy Event
Castlerigg Intl -L- S.01 0109
Castlerigg Intl -Sc- S.1 0109
Castlerigg Intl-Sr-S1-0109-USD
Oz Europe Ovs II G Prime 32
The accompanying notes form an integral part of these financial statements.
15
ABSOLUTE RETURN STRATEGY SICAV
Market Neutral
Schedule of Investments (continued)
as at December 31, 2010
(expressed in USD)
Description
Quantity
Currency
Average Cost
Fair Value
(note 2)
% net
assets
2,400
USD
2,400,000
4,848,134
2,410,612
5,126,685
4.51
9.58
166
USD
144,193
144,193
166,750
166,750
0.32
0.32
22,500
1,054
20,000
USD
USD
EUR
2,250,000
2,000,000
2,443,500
6,693,500
2,294,496
2,083,380
2,710,078
7,087,954
4.29
3.89
5.07
13.25
Total - Investment funds
32,250,008
27,424,970
51.31
Total - Other transferable securities
32,250,008
27,424,970
51.31
Total Investment Portfolio
38,593,054
33,400,921
62.49
Taconic Off Fd 1.5 -A- NR S.71
Multi-Strategy Relative Value
Amaranth International Ltd - Class D1 Series 9264
Others
Davidson Kempner/-C- TR3 10/10
Highbridge L/S Equity Ptg Shs
Horizon Port I -EUR Vot Shs-
The accompanying notes form an integral part of these financial statements.
16
ABSOLUTE RETURN STRATEGY SICAV
Directional Managers
Schedule of Investments
as at December 31, 2010
(expressed in USD)
Description
Quantity
Currency
Average Cost
Fair Value
(note 2)
% net
assets
5,854
USD
2,589,334
2,589,334
4,686,181
4,686,181
8.49
8.49
8,509
EUR
1,460,425
1,460,425
3,942,730
3,942,730
7.15
7.15
15,362
EUR
2,553,740
2,553,740
2,205,935
2,205,935
4.00
4.00
Total - Investment funds
6,603,499
10,834,846
19.64
Total - Transferable securities admitted to an official stock exchange listing
6,603,499
10,834,846
19.64
Transferable securities admitted to an official stock exchange listing
Investment funds
CTA
Winton Futures Fund Ltd
Macro
The Tell Fund
Others
JPMIF High St Mkt N Shs B E C
Other transferable securities
Investment funds
Distressed
Davidson Kdoi -A- Tr 2 01Jan10
Europe Equity Long Short
Egerton European Equity Class B
Global Equity Long Short
Altima Gl Sp S B Eur 17a-2 S20
Altima Global Special Situation Fund - Class B Series
02-17
Altima Global Special Situation Fund - Class B Series
12-17
Altima Global Special Situation Fund - Class B Series
12-20
Altima Global Special Situation Fund - Class B Series
14-17
Altima Global Special Situation Fund - Class B Series
14-20
Altima Global Special Situation Fund - Class B Series
15-17
Altima Global Special Situation Fund - Class B Series
15-20
Altima Global Special Situation Fund - Class B Series
16-17
Altima Global Special Situation Fund - Class B Series
16-20
Altima Global Special Situation Fund - Class B Series
2-20
Altima Global Special Situation Fund - Class B Series
3-17
4,844
USD
5,000,000
5,000,000
9,434,754
9,434,754
17.10
17.10
60,172
EUR
2,333,557
2,333,557
4,341,851
4,341,851
7.87
7.87
38
EUR
37,182
49,344
0.09
688
EUR
718,557
846,055
1.53
144
EUR
136,227
156,579
0.28
209
EUR
186,806
229,413
0.42
32
EUR
24,554
2,156
-
32
EUR
24,574
2,171
-
166
EUR
122,639
217,900
0.40
166
EUR
122,741
219,426
0.40
552
EUR
819,146
710,587
1.29
550
EUR
816,668
715,562
1.30
686
EUR
731,470
851,978
1.54
179
EUR
167,892
222,223
0.40
The accompanying notes form an integral part of these financial statements.
17
ABSOLUTE RETURN STRATEGY SICAV
Directional Managers
Schedule of Investments (continued)
as at December 31, 2010
(expressed in USD)
Description
Quantity
Currency
Average Cost
Fair Value
(note 2)
% net
assets
178
EUR
186,781
223,779
0.41
41
EUR
38,102
-
-
50
EUR
41,402
-
-
247
EUR
251,898
314,313
0.57
386
EUR
362,959
496,823
0.90
156
EUR
179,785
118,241
0.21
174
EUR
195,697
133,250
0.24
34
EUR
37,651
-
-
34
EUR
37,591
-
-
53
EUR
73,074
81,343
0.15
142
EUR
143,660
5,457,056
218,695
5,809,838
0.40
10.53
13,426
1,951
2,500
EUR
EUR
USD
3,027,045
2,500,024
2,500,000
8,027,069
2,850,984
2,556,732
2,474,565
7,882,281
5.17
4.63
4.49
14.29
3,163
3,000
USD
USD
302,473
3,000,000
3,302,473
360,418
3,244,440
3,604,858
0.65
5.88
6.53
147,237
EUR
2,559,690
2,559,690
2,383,573
2,383,573
4.32
4.32
Others
Horizon Port I -EUR Vot Shs-
30,000
EUR
3,665,250
3,665,250
4,065,117
4,065,117
7.37
7.37
US Equity Long Short
The Raptor Private Holdings
1,381
USD
1,080,796
1,080,796
722,607
722,607
1.31
1.31
Total - Investment funds
31,425,891
38,244,879
69.32
Total - Other transferable securities
31,425,891
38,244,879
69.32
Total Investment Portfolio
38,029,390
49,079,725
88.96
Altima Global Special Situation Fund - Class B Series
3-20
Altima Global Special Situation Fund - Class B Series
4-17
Altima Global Special Situation Fund - Class B Series
4-20
Altima Global Special Situation Fund - Class B Series
5-17
Altima Global Special Situation Fund - Class B Series
5-20
Altima Global Special Situation Fund - Class B Series
7-17
Altima Global Special Situation Fund - Class B Series
7-20
Altima Global Special Situation Fund - Class B Series
8-17
Altima Global Special Situation Fund - Class B Series
8-20
Altima Global Special Situation Fund - Class B Series
9-17
Altima Global Special Situation Fund - Class B Series
9-20
Macro
Comac Glob Macro Fund EUR/Cap
Global Trading Strategies -DRohatyn Group Asia Opp -A5- Hi
Multi-Strategy Event
Castlerigg Intl -Sc- S.2 0109
Oz Europe Ovs II G Prime 33
Multi-Strategy Relative Value
Westlb Horizon Mm Target-A-Cap
The accompanying notes form an integral part of these financial statements.
18
ABSOLUTE RETURN STRATEGY SICAV
Notes to the Financial Statements
for the year ended December 31, 2010
Note 1 – Organisation
ABSOLUTE RETURN STRATEGY SICAV (the "Company") is an open-ended investment company with variable capital,
incorporated in the Grand Duchy of Luxembourg as a "société anonyme" on the basis of the law of August 10, 1915 on
Commercial Companies (the "law of 1915") as amended and qualifies as a "Société d'Investissement à Capital Variable"
("SICAV") on the basis of part II of the law of December 20, 2002 on Collective Investment Undertakings (the "law of 2002").
Accordingly, the Company does not comply with the European Community Council Directive on Undertakings for Collective
Investment in Transferable Securities.
The Company was incorporated in Luxembourg on November 29, 2002 for an unlimited period. The Articles of Incorporation of
the Company were published in the "Mémorial, Recueil des Sociétés et Associations" of Luxembourg on December 28, 2002.
The Company is registered with the "Registre de Commerce et des Sociétés", Luxembourg, under number B-90086.
The Company is structured as an "umbrella fund" containing a variety of different portfolios (“Sub-Funds”) of specific assets in
various reference currencies. Each such Sub-Fund is designated by the name of the Company, followed by a generic name.
Further, the shares of each Sub-Fund (the “Shares”) may, as the Board of Directors shall so determine from time to time, be
issued in one or more classes of Shares (each such class being referred to herein as a "Class"), whose assets will be commonly
invested pursuant to a specific investment policy of the respective Sub-Fund, but where a specific sales and redemption
charge structure, fee structure, distribution policy, hedging policy, reference currency or other specificity is applied to each
such Class. At present, the following Sub-Funds are offered to investors:
Absolute Return Strategy SICAV - Market Neutral (Reference Currency : USD)
The Investment Manager allocates the assets of this Sub-Fund in order to minimise the correlation in investment performance
between the Sub-Fund and the MSCI World Index (USD basis). The Investment Manager will try to achieve this objective by
investing the assets of the Sub-Fund in Alternative UCIs that seek to minimise the beta of such Alternative UCI with the local
market. Such Alternative UCIs will typically fall into the category of risk arbitrage, distressed securities, equity long/short market
neutral and convertible arbitrage.
The following Classes of Shares are offered in this Sub-Fund:
– A- Shares: denominated in USD and fully exposed to fluctuations in the USD exchange rate relative to the major currencies
in which the Sub-Fund is invested. A-Shares are available for any type of investor. On July 30, 2010 due to the size of AShares the Directors decided to proceed with the compulsory redemption of this class of shares. The total redemption
occured with trade date August 31, 2010 and was effective in the Net Asset Value as at end September 2010.
– B and C-Shares: denominated in EUR for Euro-based investors wishing to invest in a USD-based portfolio, whilst having their
exchange rate risk actively managed. It should be noted that there can be no guarantee that the B and C-Shares would
be fully hedged at times when the US Dollar appreciates against the underlying investment currencies of the Sub-Fund. BShares are available for any type of investor. C-Shares are available to Institutional Investors only.
– D-Shares: denominated in GBP for GBP-based investors wishing to invest in a USD-based portfolio, whilst having their
exchange rate risk actively managed. It should be noted that there can be no guarantee that the D-Shares would be fully
hedged at times when the US Dollar appreciates against the underlying investment currencies of the Sub-Fund. D-Shares
are available for any type of investor. On May 27, 2010 due to the size of classe D-Shares the Directors decided to proceed
with the compulsory redemption of this class of shares. The total redemption occured with trade date June 30, 2010 and
was effective in the Net Asset Value as at end July 2010.
As at December 31, 2010 only B Shares are outstanding.
Absolute Return Strategy SICAV - Directional Managers (Reference Currency : USD)
This Sub-Fund will invest in Investment Funds which aim to achieve very high returns through investments in global security and
currency markets. Such Investment Funds will try to achieve these high levels of return by identifying mis-pricings in the market
and subsequently taking large positions to benefit from this. The increased level of risk is expected to be more than offset by
the higher level of returns achieved.
19
ABSOLUTE RETURN STRATEGY SICAV
Notes to the Financial Statements (continued)
for the year ended December 31, 2010
Note 1 – Organisation (continued)
The following Classes of Shares are offered in this Sub-Fund:
– A-Shares: denominated in USD and fully exposed to fluctuations in the USD exchange rate relative to the major currencies
in which the Sub-Fund is invested. A-Shares are available for any type of investor. On July 30, 2010 due to the size of AShares the Directors decided to proceed with the compulsory redemption of this class of shares. The total redemption
occured with trade date August 31, 2010 and was effective in the Net Asset Value as at end September 2010.
– B and C-Shares: denominated in EUR for Euro-based investors wishing to invest in a USD-based portfolio, whilst having their
exchange rate risk actively managed. It should be noted that there can be no guarantee that the B and C-Shares would
be fully hedged at times when the US Dollar appreciates against the underlying investment currencies of the Sub-Fund. BShares are available for any type of investor. C-Shares are available to Institutional Investors only.
– D-Shares: denominated in GBP for GBP-based investors wishing to invest in a USD-based portfolio, whilst having their
exchange rate risk actively managed. It should be noted that there can be no guarantee that the D-Shares would be fully
hedged at times when the US Dollar appreciates against the underlying investment currencies of the Sub-Fund. D-Shares
are available for any type of investor. On May 27, 2010 due to the size of classe D-Shares the Directors decided to proceed
with the compulsory redemption of this class of shares. The total redemption occured with trade date June 30, 2010 and
was effective in the Net Asset Value as at end July 2010.
As at December 31, 2010 only B Shares are outstanding.
The Directors may at any time create additional Sub-Funds and/or Classes.
The Company operates as a fund-of-funds, the investment objective of each Sub-Fund being the investment of at least 50% of
its net assets in other open-ended undertakings for collective investment ("UCIs") using alternative management strategies,
generally also known as "hedge funds" or as "alternative UCIs" (hereinafter defined as the "Alternative UCIs"). On an ancillary
basis, each Sub-Fund may also invest in closed-ended Alternative UCIs.
Note 2 – Significant accounting policies
The financial statements have been prepared in conformity with legal and regulatory requirements in Luxembourg,
applicable to investment funds, including the following significant accounting policies.
a) Investments
Each share or unit in an open-ended UCI is valued at the last available Net Asset Value whether estimated or final, which is
computed for such units or shares at or prior to the valuation day on which the Net Asset Value of the Shares of the Sub-Fund is
determined and as approved by the Central Administration of the Company.
In assessing the valuation of the underlying funds, reliance is placed upon unaudited Net Asset Values supplied by the
underlying funds or their administrators, which may be subject to adjustment upon finalisation of the audit of their financial
statements.
The financial statements include investments in underlying investment funds which are valued at USD 31,916,182 (representing
59.71% of net assets) in Absolute Return Strategy SICAV – Market Neutral and USD 40,795,322 (representing 73.94% of net
assets) in Absolute Return Strategy SICAV – Directional Managers, whose fair values have been derived from unaudited net
asset values provided by such funds or their agents in accordance with the prospectus. An investment representing 10.53% of
the net assets of Absolute Return Strategy SICAV – Directional Managers has valued 51% of its underlying investments based on
valuation techniques incorporating assumptions not based on observable market data. In addition, the value attributed to the
underlying investment funds may differ from the value that would have been used had the underlying audited financial
statements of such investments been available and had valuation assumptions been based on observable market data, such
differences could be material.
In respect of shares or units held by the Company, for which issues and redemptions are restricted and a secondary market
trading is effected between dealers who, as main market makers, offer prices in response to market conditions, the Directors
may decide to value such shares or units in line with the prices so established.
If events have occurred which may have resulted in a material change in the Net Asset Value of such shares or units in other
UCI’s since the day on which the latest Net Asset Value was calculated, the value of such shares or units may be adjusted in
order to reflect, in the reasonable opinion of the Board of Directors, such change of value.
20
ABSOLUTE RETURN STRATEGY SICAV
Notes to the Financial Statements (continued)
for the year ended December 31, 2010
Note 2 – Significant accounting policies (continued)
Securities (including shares or units in closed-ended UCIs) which are quoted or dealt in on a stock exchange are valued at
their latest available publicised stock exchange closing price or, for securities quoted or dealt on several stock exchanges, at
the closing price on the stock exchange which is normally the principal market for such security.
Securities traded on another regulated market operating regularly, recognised and open to the public (a "regulated market"),
are valued as near as possible to that for quoted securities.
In the event that any of the securities held in any portfolio at the valuation day are not quoted or traded on a stock exchange
or another regulated market or, for any one of the securities, no price quotation is available, or if the price as determined
pursuant to the above mentioned paragraphs is not in the opinion of the Board of Directors representative of the fair market
value of the relevant securities, the value of such securities is determined based on the reasonably foreseeable sales price
determined prudently and in good faith.
If, since the valuation day there has been a material movement in the quotations on the markets on which a substantial
portion of the investments of the Company attributable to a particular Sub-Fund is listed or dealt in, the Board of Directors may,
in order to safeguard the interests of the Shareholders and the Company, cancel the first valuation and carry out a second
valuation.
Should circumstances so require, the Board of Directors may also adopt other valuation methods in accordance with
generally accepted procedures.
The valuations for all investments were made using the latest prices available on December 31, 2010.
b) Net realised profit (loss) on sales of investments
The net realised profit or loss on sales of investments is determined on the basis of the average cost of investments.
c) Transactions in foreign currencies
Principal closing exchange rate used as of December 31, 2010 is:
1 EUR = 1.336250 USD
The value of the assets and liabilities denominated in a currency other than the reference currency of the relevant Sub-Fund or
Class will be translated at the prevailing exchange rates in Luxembourg at the Closing Date. Income and expenses in
currencies other than the Sub-Fund’s currency are translated into the Sub-Fund’s currency at the exchange rates prevailing at
the transaction date.
d) Combined financial statements of the Company
The total Net Asset Value of the Company is equal to the sum of the net assets of the various Sub-Funds translated into USD at
the prevailing exchange rates in Luxembourg as at the valuation day.
e) Cost of investment securities
The cost of investment securities expressed in currencies other than the Sub-Fund’s currency is translated into the Sub-Fund’s
currency at the exchange rate applicable at the purchase date.
f) Forward foreign exchange contracts
Outstanding forward foreign exchange contracts are valued on the basis of forward exchange rates prevailing at the relevant
valuation date and the resulting unrealised profits or losses are included in the statement of operations and changes in net
assets. Realised profits and losses on matured forward foreign exchange contracts are also included in the statement of
changes in net assets.
g) Advance on investments
Payments made prior to the year end to acquire investments in advance of the calculation of the underlying fund’s net asset
value per share/unit are recorded as 'Investments paid in advance' in the Statement of Net Assets.
21
ABSOLUTE RETURN STRATEGY SICAV
Notes to the Financial Statements (continued)
for the year ended December 31, 2010
Note 2 – Significant accounting policies (continued)
h) Subscriptions in advance
Subscriptions received in advance of the year end are credited to the “subscriptions received in advance” account until the
net asset value has been calculated.
i) Income
Dividends are recognized on an ex-dividend basis, net of withholding taxes in the country of origin. Interest is recognized on an
accrual basis.
Note 3 – Management and performance fees
Management fees
As remuneration for its services, the Investment Manager receives from the SICAV an annual fee at the maximum annual rate
of 1.75% on both sub-funds applicable on the average net assets of these sub-funds.
The actual management fees charged during the year ended December 31, 2010 are:
(a) 1.50% p.a. of the average net assets attributable to Class A, Class B and Class D.
(b) 0.60% p.a. of the average net assets attributable to Class C.
Performance fees
In addition to the management fee, the Investment Manager receives a performance fee of the absolute performance (high
water mark) of the Sub-Funds’ net assets during a month, at the following rate:
(a) 10% p.a. of the net assets attributable to Class A, Class B and Class D.
(b) no performance fee will be calculated for Class C.
The performance fee is calculated and accrued on each valuation day and is payable on each valuation day for each
Share Class in the currency of that Share Class. Once the performance fee is paid out to the Investment Manager, the
outperformance of the Sub-Fund is reset to zero for the purposes of the calculation of the subsequent performance fee.
Should there be no performance fee payable on a given valuation day, there is no reset. Once paid, a performance fee will
not be refunded should future losses occur. As of December 31, 2010 there were no performance fees paid.
Rebates
The Investment Manager has not received rebates from the underlying funds in which the Sub-Funds invest during the year
ended December 31, 2010.
Note 4 – Taxation
Under current law and practice, which may change from time to time, the Company is not liable to any Luxembourg income
tax, nor are dividends paid by the Company liable to any Luxembourg withholding tax. Income and capital gains on the
Company's investments, however, may be subject to withholding or capital gains taxes in certain countries.
However, the Sub-Funds are liable in Luxembourg to an annual tax ("taxe d'abonnement") of at present 0.05% per annum of
their net assets, payable quarterly and calculated at the end of the relevant quarter.
In respect to Shares of a Sub-Fund or Class being dedicated to Institutional Investors only, the assets attributed to such SubFund or Class are liable in Luxembourg to a “taxe d’abonnement” of 0.01% per annum of their net assets, payable quarterly
and calculated at the end of the relevant quarter.
22
ABSOLUTE RETURN STRATEGY SICAV
Notes to the Financial Statements (continued)
for the year ended December 31, 2010
Note 5 – Taxes and expenses payable
Taxe d'abonnement (note 4)
Depositary bank commission, domiciliation,
administration and transfer agent fees
Audit fees, printing and publication expenses
Market
Neutral
USD
Directional
Managers
USD
6,484
6,683
17,162
23,167
17,219
43,024
46,813
66,926
Note 6 – Forward foreign exchange contracts
As at December 31, 2010, Market Neutral had entered into the following outstanding forward foreign exchange contract:
Purchase
EUR
21,076,402
USD
Sale
Maturity date
28,000,000
01/03/2011
Unrealised gain
(in USD)
139,441
139,441
As at December 31, 2010, Directional Managers had entered into the following outstanding forward foreign exchange
contract:
Purchase
EUR
18,301,645
USD
Sale
Maturity date
24,300,000
01/03/2011
Unrealised gain
(in USD)
134,819
134,819
Note 7 – Dividends
The Company does not distribute dividends.
Note 8 – Depositary, administration and transfer agency fees
The Company pays fees to RBC Dexia Investor Services Bank S.A., for its rendering of services as Depositary and Central
Administrative Agent and Registrar and Transfer Agent, in accordance with normal banking practices in Luxembourg.
The actual Depositary Custody fees rate is set to 0.07% annually, the Central Administration fees is set at EUR 25,000 per SubFund annually and the Transfer Agency Fees amounted for the year 2010 to USD 45,571 for Absolute Return Strategy SICAV Market Neutral and USD 45,600 for Absolute Return Strategy SICAV - Directional Managers.
23
ABSOLUTE RETURN STRATEGY SICAV
Notes to the Financial Statements (continued)
for the year ended December 31, 2010
Note 9 – Liquidity
The following underlying funds as held by Absolute Return Strategy SICAV were gated as at 31 December 2010:
Fair Value
(in USD)
- Market Neutral
Amaranth International Ltd - Class D1 Series 9264
Castlerigg Intl -L-S.01 0109
Castlerigg Intl -Sc-S.1 0109
Castlerigg Intl -Sr-S.1 0109 USD
Orn European Distressed Debt Fund Ltd Series 1
- Directional Managers
Altima Gl Sp S B Eur 17a-2 S20
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Castlerigg Intl -Sc-S.2 0109
The Raptor Private Holdings
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
-Class
-Class
-Class
-Class
-Class
-Class
-Class
-Class
-Class
-Class
-Class
-Class
-Class
-Class
-Class
-Class
-Class
-Class
B
B
B
B
B
B
B
B
B
B
B
B
B
B
B
B
B
B
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
02-17
12-17
12-20
14-17
14-20
15-17
16-17
16-20
2-20
3-17
3-20
5-17
5-20
7-17
7-20
9-17
9-20
15-20
% net assets
166,750
151,114
700,639
242,100
407,096
1,667,699
0.32
0.28
1.31
0.45
0.76
3.12
49,344
846,055
156,579
229,413
2,156
2,171
217,900
710,587
715,562
851,978
222,223
223,779
314,313
496,823
118,241
133,250
81,343
218,695
219,426
360,418
722,607
6,892,863
0.09
1.53
0.28
0.42
0.40
1.29
1.30
1.54
0.40
0.41
0.57
0.90
0.21
0.24
0.15
0.40
0.40
0.65
1.31
12.49
24
ABSOLUTE RETURN STRATEGY SICAV
Notes to the Financial Statements (continued)
for the year ended December 31, 2010
Note 9 - Liquidity (continued)
As at March 31, 2011, the following redemption gates are applicable:
Fair Value
at December 31, 2010
(in USD)
% net assets
166,750
151,114
700,639
242,100
407,096
1,468
21,201
1,690,368
0.31
0.28
1.31
0.45
0.76
0.04
3.15
49,344
846,055
156,579
229,413
2,156
0.09
1.53
0.28
0.42
-
2,171
217,900
710,587
715,562
851,978
222,223
223,779
314,313
496,823
118,241
133,250
81,343
218,695
219,426
360,418
722,607
6,892,863
0.40
1.29
1.30
1.54
0.40
0.41
0.57
0.90
0.21
0.24
0.15
0.40
0.40
0.54
1.31
12.38
- Market Neutral
Amaranth International Ltd - Class D1 Series 9264
Castlerigg Intl -L-S.01 0109 *
Castlerigg Intl -Sc-S.1 0109 *
Castlerigg Intl -Sr-S.1 0109 USD *
Orn European Distressed Debt Fund Ltd Series 1
Trf Liquidating Spv USD D/1
Trf Liquidating Spv USD E/1
- Directional Managers
Altima Gl Sp S B Eur 17a-2 S20
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
-Class B
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Altima Global Special Situation
Castlerigg Intl -Sc-S.2 0109 *
The Raptor Private Holdings *
Fund
Fund
Fund
Fund
Fund
-Class
-Class
-Class
-Class
-Class
B
B
B
B
B
Series
Series
Series
Series
Series
02-17
12-17
12-20
14-17
14-20
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
Fund
-Class
-Class
-Class
-Class
-Class
-Class
-Class
-Class
-Class
-Class
-Class
-Class
-Class
B
B
B
B
B
B
B
B
B
B
B
B
B
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
Series
15-17
16-17
16-20
2-20
3-17
3-20
5-17
5-20
7-17
7-20
9-17
9-20
15-20
* These underlying funds have issued side pockets which can also not be redeemed.
Note 10 – Subsequent event
The base currency of the two sub-funds Absolute Return Strategy Sicav - Market Neutral and Absolute Return Strategy Sicav Directional Managers will be changed from USD to EUR on January 3, 2011.
25