Exhibit 99.1
BASSETT INDUSTRIES ALTERNATIVE
ASSET FUND, L.P.
FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS’ REPORT
DECEMBER 31, 2005
A CLAIM OF EXEMPTION FROM CERTAIN REGULATORY REQUIREMENTS HAS BEEN FILED WITH THE COMMODITY FUTURES TRADING COMMISSION PURSUANT TO REGULATION 4.7 BY THE COMMODITY POOL OPERATOR OF BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
CONTENTS
| | |
Affirmation of the Commodity Pool Operator | | 1 |
| |
Independent Auditors’ Report | | 2 |
| |
Financial Statements | | |
| |
Statement of Financial Condition | | 3 |
| |
Statement of Operations | | 4 |
| |
Statement of Changes in Partners’ Capital | | 5 |
| |
Statement of Cash Flows | | 6 |
| |
Condensed Schedule of Investments | | 7 |
| |
Notes to Financial Statements | | 8-10 |
BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
AFFIRMATION OF THE COMMODITY POOL OPERATOR
To the best of the knowledge and belief of the undersigned, the information contained in the annual report for the year ended December 31,2005 is accurate and complete.
Louis W. Moelchert, Jr., Managing Member of
Private Advisors, LLC the General Partner of
Bassett Industries Alternative Asset Fund, L.P.
Commodity Pool Operator:
Private Advisors, LLC
1800 Bayberry Court, Suite 300
Richmond, VA 23226
(804) 289-6000
Commodity Pool:
Bassett Industries Alternative Asset Fund, L.P.
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| | | | | | |
| | Certified Public Accountants | | Rothstein, Kass & Company, P.C. 4 Becker Farm Road Roseland, NJ 07068 tel 973.994.6666 fax 973.994.0337 www.rkco.com | | Beverly Hills Dallas Denver Grand Cayman New York Roseland San Francisco Walnut Creek |
INDEPENDENT AUDITORS’ REPORT
To the Partners of Bassett Industries Alternative Asset Fund, L.P.
We have audited the accompanying statement of financial condition of Bassett Industries Alternative Asset Fund, L.P. (the “Fund”), including the condensed schedule of investments, as of December 31, 2005, and the related statements of operations, changes in partners’ capital and cash flows for the year then ended. These financial statements are the responsibility of the General Partner of the Fund. Our responsibility is to express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by the General Partner, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Bassett Industries Alternative Asset Fund, L.P. as of December 31, 2005, and the results of its operations, changes in its partners’ capital and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
Roseland, New Jersey
April 24, 2006
| | | | | | |
| | 2 | | Affiliated Offices Worldwide  |
BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
STATEMENT OF FINANCIAL CONDITION
December 31, 2005
| | | |
ASSETS | | | |
Investments in private investment companies,at fair value
(cost $30,902,960) | | $ | 51,595,679 |
Cash and cash equivalents | | | 276,995 |
| | | |
| | $ | 51,872,674 |
| | | |
LIABILITIES AND PARTNERS’ CAPITAL | | | |
Liabilities | | | |
Other expenses payable | | $ | 28,349 |
Capital withdrawals payable | | | 3,214 |
| | | |
Total liabilities | | | 31,563 |
Partners’ capital | | | 51,841,111 |
| | | |
| | $ | 51,872,674 |
| | | |
See accompanying notes to financial statements.
3
BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
STATEMENT OF OPERATIONS
Year Ended December 31, 2005
| | | | |
Investment income, interest | | $ | 5,336 | |
| | | | |
Expenses | | | | |
Management fee | | | 492,742 | |
Other expenses | | | 60,898 | |
| | | | |
Total expenses | | | 553,640 | |
| | | | |
Net investment income (loss) | | | (548,304 | ) |
| | | | |
Realized and unrealized gain on investments | | | | |
Net realized gain on investments in private investment companies | | | 2,821,693 | |
Net change in unrealized appreciation or depreciation on investments in private investment companies | | | 1,883,526 | |
| | | | |
Net gain on investments | | | 4,705,219 | |
| | | | |
Net income | | $ | 4,156,915 | |
| | | | |
See accompanying notes to financial statements.
4
BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
STATEMENT OF CHANGES IN PARTNERS’ CAPITAL
Year Ended December 31, 2005
| | | | | | | | | | | | |
| | | General
Partner | | | Limited
Partner | | | Total | |
Partners’ capital,beginning of period | | $ | 19,896 | | | $ | 47,667,514 | | | $ | 47,687,410 | |
Capital withdrawals | | | (1 | ) | | | (3,213 | ) | | | (3,214 | ) |
Allocation of net income | | | 1,721 | | | | 4,155,194 | | | | 4,156,915 | |
| | | | | | | | | | | | |
Partners’ capital,end of period | | $ | 21,616 | | | $ | 51,819,495 | | | $ | 51,841,111 | |
| | | | | | | | | | | | |
See accompanying notes to financial statements.
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BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
STATEMENT OF CASH FLOWS
Year Ended December 31, 2005
| | | | |
Cash flows from operating activities | | | | |
Net income | | $ | 4,156,915 | |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | | | | |
Net change in unrealized appreciation or depreciation on investments in private investment companies | | | (1,883,526 | ) |
Changes in operating assets and liabilities: | | | | |
Cost of investments in private investment companies, at fair value | | | (2,249,702 | ) |
Redemptions receivable from private investment companies | | | 250,000 | |
Other expenses payable | | | 16,493 | |
Management fee payable | | | (114,684 | ) |
| | | | |
Net change in cash and cash equivalents | | | 175,496 | |
Cash and cash equivalents,beginning of period | | | 101,499 | |
| | | | |
Cash and cash equivalents,end of period | | $ | 276,995 | |
| | | | |
See accompanying notes to financial statements.
6
BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
CONDENSED SCHEDULE OF INVESTMENTS
December 31, 2005
| | | | | | | | |
| | | Redemptions
Permitted | | Percentage of
Partners’ Capital | | | Fair Value |
Investments in private investment companies, at fair value | | | | | | | | |
United States | | | | | | | | |
Direct lending | | | | | | | | |
Styx Partners, L.P. | | Annually | | 41.1 | % | | $ | 21,293,513 |
Distressed | | | | | | | | |
Contrarian Capital Trade Claims, L.P. | | Quarterly | | 16.8 | | | | 8,683,537 |
Multi-Strategy | | | | | | | | |
HBK Fund, L.P. (.13% Owned) * | | Quarterly | | 22.6 | | | | 11,697,000 |
Drawbridge Special Opportunities Fund LP | | Annually | | 10.4 | | | | 5,419,898 |
D.B. Zwirn Special Opportunities Fund, L.P. | | Tri-Annually | | 8.4 | | | | 4,376,325 |
| | | | | | | | |
Total multi-strategy | | | | 41.4 | | | | 21,493,223 |
Other | | | | 0.2 | | | | 125,406 |
| | | | | | | | |
Total investments in private investment companies, at fair value
(cost $30,902,960) | | | | 99.5 | % | | $ | 51,595,679 |
| | | | | | | | |
| * | The below information is disclosed because the Fund’s proportionate share exceeds 5% of the Fund’s partners’ capital. |
| | | | | | | | |
| | | Principal or
Number of
Contracts | | HBK Fund, L.P.
Fair Value | | Fund’s
Proportionate
Share |
Investments in securities | | | | | | | | |
United States Treasury | | | | | | | | |
US Treasury Notes, 4.13%-4.50% Due 11/08-11/15 | | 1,812,550,000 | | $ | 1,815,383,000 | | $ | 2,378,152 |
US Treasury Bonds, 3.88%-5.38% Due 2/13-2/31 | | 845,810,000 | | | 875,621,000 | | | 1,147,064 |
US Treasury Futures, Expiration 03/06 | | 11,925 | | | 12,396,000 | | | 16,239 |
US Treasury Options, Expiration 02/06 | | 6,000 | | | 5,738,000 | | | 7,517 |
| | | | | | | | |
Total United States Treasury (cost $2,683,546,000) | | | | $ | 2,709,138,000 | | $ | 3,548,972 |
| | | | | | | | |
Securities sold short | | | | | | | | |
United States Treasury | | | | | | | | |
US Treasury Notes, 2.63%-5.00% Due 5/07-11/15 | | 3,994,662,500 | | $ | 3,889,107,000 | | $ | 5,094,730 |
US Treasury Bonds, 5.38% Due 2/31 | | 45,900,000 | | | 51,635,000 | | | 67,642 |
US Treasury Bond Strips Due 2/24-8/25 | | 85,920,000 | | | 34,951,000 | | | 45,786 |
US Treasury Options Expiration 1/06-5/06 | | 2,532 | | | 22,537,000 | | | 29,523 |
US Treasury Futures, Expiration 03/06 | | 6,587 | | | 6,512,000 | | | 8,531 |
| | | | | | | | |
Total United States Treasury (proceeds $3,983,704,000) | | | | $ | 4,004,742,000 | | $ | 5,246,212 |
| | | | | | | | |
See accompanying notes to financial statements.
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BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
| 1. | Nature of operations and summary of significant accounting policies |
Nature of Operations
Bassett Industries Alternative Asset Fund, L.P. (the “Fund”), a Delaware limited partnership, commenced operations on July 1, 1998. The Fund is managed by Private Advisors, LLC (the “General Partner”). Bassett Furniture Industries, Inc. and the General Partner are currently the only partners.
The objective of the Fund is to achieve consistent, positive returns, while attempting to reduce risk and volatility, by placing its capital with a variety of private investment companies and experienced portfolio managers. Such hedge funds and portfolio managers will employ a variety of trading styles or strategies, including, but not limited to, convertible arbitrage, merger or risk arbitrage, distressed debt, long/short equity, multi-strategy and other market-neutral strategies. The General Partner has discretion to make all investment and trading decisions, including the selection of portfolio managers. The General Partner will select portfolio managers on the basis of various criteria, including, among other things, the manager’s investment performance during various time periods and market cycles, the company’s infrastructure, and the manager’s reputation, experience, training and investment philosophy. In addition, the General Partner will generally require that each portfolio manager have a substantial personal investment in the investment program. Refer to the Fund’s offering memorandum for more information.
Cash and Cash Equivalents
The Fund considers its investment in short-term money market funds to be a cash equivalent.
Investments in Private Investment Companies
In accordance with the Limited Partnership Agreement, investments in private investment companies are valued by the General Partner at fair value utilizing the net asset valuations provided by the underlying private investment companies, unless the General Partner determines some other valuation is more appropriate. A majority of the underlying investments of the private investment companies is comprised of cash and cash equivalents and readily marketable securities.
Investment Income
Interest is recognized on the accrual basis.
Income Taxes
The Fund does not record a provision for income taxes because the partners report their share of the Fund’s income or loss on their income tax returns. The financial statements reflect the Fund’s transactions without adjustment, if any, required for income tax purposes.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the General Partner to make estimates and assumptions that affect the amounts disclosed in the financial statements. Actual results could differ from those estimates.
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BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
In accordance with the Limited Partnership Agreement, profits and losses of the Fund are allocated to partners according to their respective interests in the Fund.
Limited partners have redemption rights which contain certain restrictions with respect to rights of withdrawal from the Fund as specified in the Limited Partnership Agreement.
Capital withdrawals payable represent amounts due to or on behalf of partners based on withdrawals effective through December 31, 2005.
| 3. | Related party transactions |
The Fund pays the General Partner, a quarterly management fee equal to 0.25% (1.0% per annum) of the Fund’s net asset value at the beginning of each quarter.
| 4. | Investments in private investment companies |
As of December 31, 2005, the Fund invested in private investment companies, none of which were related parties.
The following table summarizes the Fund’s investments in private investment companies as of December 31, 2005. Private investment companies in which the Fund invested 5% or more of its partners’ capital are individually identified, while smaller investments are aggregated. The management agreements of the private investment companies provide for compensation to the managers in the form of fees ranging from 1 % to 2% annually of net assets and performance incentive allocations equal to 20% of net profits earned.
| | | | | | | | | | | | | | | |
Investment | | % of Partners’
Capital | | | Fair Value | | Net
Earnings | | Annual Fee Percentages* | |
| | | | | Management | | | Incentive | |
Styx Partners, L.P. | | 41.1 | % | | $ | 21,293,513 | | $ | 1,880,954 | | 1.00 | % | | 20.00 | % |
HBK Fund, L.P. | | 22.6 | | | | 11,697,000 | | | 874,000 | | 1.50 | | | 20.00 | |
Contrarian Capital Trade Claims, L.P. | | 16.8 | | | | 8,683,537 | | | 1,119,176 | | 1.50 | | | 20.00 | |
Drawbridge Special Opportunities Fund LP | | 10.4 | | | | 5,419,898 | | | 419,898 | | 2.00 | | | 20.00 | |
D.B. Zwim Special Opportunities Fund, L.P. | | 8.4 | | | | 4,376,325 | | | 376,325 | | 2.00 | | | 20.00 | |
Other Funds | | 0.2 | | | | 125,406 | | | 34,866 | | | | | | |
| | | | | | | | | | | | | | | |
Total | | 99.5 | % | | $ | 51,595,679 | | $ | 4,705,219 | | | | | | |
| | | | | | | | | | | | | | | |
| * | The General Partner was unable to obtain the specific fee amounts for the above funds. The applicable fee percentage was substituted for the fee amounts. |
9
BASSETT INDUSTRIES ALTERNATIVE ASSET FUND, L.P.
NOTES TO FINANCIAL STATEMENTS
| 5. | Concentration of credit risk |
In the normal course of business, the Fund maintains its cash balances in financial institutions, which at times may exceed federally insured limits. The Fund is subject to credit risk to the extent any financial institution with which it conducts business is unable to fulfill contractual obligations on its behalf. The General Partner monitors the financial condition of such financial institutions and does not anticipate any losses from these counterparties.
Financial highlights for the year ended December 31, 2005 are as follows:
| | | |
Total return | | 8.7 | % |
| | | |
Ratio to average limited partners’ capital Expenses | | 1.1 | % |
| | | |
Net investment income (loss) | | (1.1 | )% |
| | | |
Financial highlights are calculated for the limited partner. The ratios do not reflect the Fund’s proportionate share of income and expenses of the underlying private investment companies.
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