TIDMHAST
RNS Number : 6300J
Henderson Alternative Strat Tst PLC
21 December 2015
HENDERSON ALTERNATIVE STRATEGIES TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2015
This announcement contains regulated information
INVESTMENT OBJECTIVE
The Company exploits global opportunities to provide long-term
growth to shareholders via a diversified, international,
multi-strategy portfolio which offers access also to specialist
funds including hedge and private equity. The Company aims to
outperform the FTSE World Total Return Index.
PERFORMANCE HIGHLIGHTS 30 September 30 September
2015 2014
----------------------------------- -------------- --------------
NAV per ordinary share(1) 275.6p 291.9p
Total return per ordinary share (14.9)p 3.2p
Share price per ordinary share(2) 221.0p 250.9p
Market capitalisation GBP95.0m GBP119.8m
Discount(3) 19.8% 14.1%
Dividend for year(4) 3.3p 3.0p
Ongoing charge for year 0.97% 0.93%
Number of investments 57 58
1 Net Asset Value total return (including dividends
reinvested)
2 Share Price total return using mid-market prices
3 Calculated using year-end audited NAVs including current year
revenue
4 2015 dividend subject to approval at the AGM to be held on 27
January 2016
Sources: Morningstar Funddata, Henderson, Datastream
CHAIRMAN'S STATEMENT
Company Prospects
With two years of major change and restructuring behind us, your
Board continues to pursue the improvement in performance that we
anticipated at the beginning of the year. Adverse events and market
movements have conspired to continue to frustrate our expectations
and those of our investors. The beneficial effects of the change of
manager two years ago and the consequent, essential portfolio
restructuring (which reduced, in a timely manner, exposure to
emerging markets and commodity-related investments) have only shown
through in the second half of the year under review. This second
half performance has at least demonstrated that our underlying
investment portfolio has less volatility than developed
markets.
Your Board has every confidence in its experienced and dedicated
management team at Henderson and remains firmly of the view that
improved performance will be delivered in the longer term from the
chosen investment strategy and the portfolio of select funds and
alternative investments. Ian Barrass and James de Bunsen have
undertaken the management of our investment portfolio in a very
deliberate and measured manner in order to protect value for
shareholders and to put in place sound building blocks for the
future.
The Company has a clear and differentiated investment strategy
and in the past year has increased exposure to developed equity
markets whilst emerging markets offered unsatisfactory returns.
However, we will continue to explore ways whereby we can increase
significantly our chances of exceeding our global market benchmark
in the future and to expose shareholders to the long-term benefits
of investments in alternative and specialist areas such as
specialist credit, hedge funds and private equity. Such areas by
their very nature may have to be viewed as a source of longer-term
return which will not be reflected in shorter-term measures of
performance. In recognising this, your Board, together with its
management team, remain committed to achieving, on behalf of
shareholders, long-term returns superior to those of the Company's
benchmark, the FTSE World Total Return Index.
In December 2014 the Company passed its triennial continuation
vote by a significant margin. On behalf of the Board, I would again
like to thank shareholders for their continued support as the
Company strives to deliver the long-term returns their patience
deserves.
Performance
During the year the Company delivered a NAV total return of
-5.0% compared with a 0.8% rise in its FTSE World Total Return
Index global equity benchmark. However, it is very encouraging to
see that in the second half of our financial year, the Company's
NAV total return outperformed this benchmark by 6.1%. Our overall
portfolio performance is reviewed in the Fund Managers' Report.
With Henderson's restructuring of the Company's investment
portfolio largely complete, the Board expects the Company's
performance to improve steadily to acceptable and sustainable
levels of long-term NAV growth.
This, in turn, should help to render the Company more attractive
to existing and new investors and to increase market demand for its
shares, despite this year's very unsatisfactory share price total
return of
-10.8%. However, your Board considers that such a return fails
to reflect the hidden value in the underlying newly invested
portfolio, the returns from which can only be viewed over the
longer term.
Discount
The Company's share price discount to NAV per share widened from
14.1% to 19.8%. The Board believes that improved portfolio
performance is the key to a material and sustained re-rating of the
Company's shares and narrowing of the discount. The Board's
response to the Company's high discount has been to give
shareholders the opportunity to participate in two tender offers,
each for up to 10% of the Company's outstanding shares. The first
of these tender offers was fully subscribed and completed last
January, and returned a total of GBP12.8 million to tendering
shareholders at a discount of 2% to NAV less costs. The second
tender offer will be made available to shareholders if the
Company's discount averages more than 10% during the twelve months
to 30 September 2016. If the second tender offer is triggered, it
will be priced at a discount of 5% to NAV less costs. The Board
believes that the two tender offers strike the right balance
between responding to shareholder concerns regarding the Company's
persistently high discount, maintaining thereby sufficient scale
for the Company and leaving Henderson with adequate resources to
manage the Company's portfolio over the longer-term.
Change of Name
In June shareholders voted overwhelmingly in favour of the
Company's proposal to change its name from Henderson Value Trust
plc to Henderson Alternative Strategies Trust plc. The Board
believes that the new name reflects more accurately Henderson's
objective of creating a high-quality portfolio of 30 to 40
alternative asset and specialist funds capable of delivering
long-term returns above those of the Company's FTSE World Total
Return Index global equity benchmark.
Change of Broker
In March the Company announced that it had changed brokers from
Panmure Gordon & Co. to Stifel Nicolaus Europe Limited
(previously Oriel Securities). The Board would like to record its
thanks to Panmure Gordon & Co. for its very valuable
efforts.
Dividend
During 2013 the Board announced that, given Henderson's
intention to increase the level of income produced by the Company's
investment portfolio, it planned to pursue a more progressive
dividend policy. Accordingly, the dividend for the year to 30
September 2014 was doubled to 3.0p per share. Following this large
initial uplift, future increases are likely to be more modest. The
Board is therefore proposing a 10% increase in the dividend for the
year to 30 September 2015 to 3.3p per share.
Annual General Meeting
The Annual General Meeting will be held at the offices of
Henderson Global Investors, 201 Bishopsgate, London EC2M 3AE on
Wednesday 27 January 2016 at 11.30am. I would encourage as many
shareholders as possible to attend as an opportunity to meet the
Board and to watch a presentation from our Fund Managers. For the
first time, the Company's AGM will be broadcast live on the
internet. If you are unable to attend in person, you can watch the
meeting as it happens by visiting www.henderson.com/trustslive
Key Priority - Improved Performance
The Board is under no illusion that improved performance
continues to be the Company's top priority as it enters its new
financial year. The Company remains committed to the profitable
realisation of the potential within its portfolio. At the same
time, the Board, its managers and its brokers will involve
themselves in further, vigorous marketing efforts to attract new
shareholders. The success of these efforts will, to a large extent,
be determined by the Company's investment performance.
I have now been Chairman for just over one year and I am very
pleased that we now have a fresh and newly invigorated team of
directors, managers and advisers in place. I now very much look
forward to engaging with as many of our shareholders as is possible
at our AGM and, subsequently, to hear the views on our progress to
date.
Finally, I would like to thank my fellow Board colleagues, the
Company's fund managers and professional advisers for their
commitment since I became Chairman. We have an excellent team
dedicated to delivering satisfactory long-term returns for the
Company's shareholders and I look forward to reporting on further
progress towards that goal over the course of the new financial
year.
Richard Gubbins
Chairman
FUND MANAGERS' REPORT
Market Overview
(MORE TO FOLLOW) Dow Jones Newswires
December 21, 2015 02:00 ET (07:00 GMT)
The year-ended 30 September 2015 was an eventful 12 months for
world equity markets. The first half of the period to 31 March 2015
saw developed markets continue to perform well, driving the
Company's FTSE World Total Return Index global equity benchmark up
by 12.4%. The second half was very different. Another Greek crisis,
more evidence of China's economic slowdown, a devaluation of the
Chinese Renminbi and speculation regarding the timing and quantum
of US interest rate rises all contributed, amongst other things, to
a high level of market uncertainty and volatility. There were few
places to hide, with developed and emerging equity markets both
suffering over concerns regarding global growth. Accordingly, the
Company's benchmark fell by 10.3% over the six months to 30
September 2015.
Portfolio Development
Since taking over the management of the Company's investment
portfolio in April 2013 our aim has been to create a high-quality
portfolio of 30 to 40 alternative asset and specialist funds
capable of delivering long-term returns consistently above those of
the Company's global equity benchmark. Importantly, in order to
maintain the Company's position as a genuinely differentiated
investment proposition, we are looking to deliver these returns by
investing mainly in funds which are either niche, complex or
hard-to-access and which our shareholders are generally unlikely to
own directly. In addition, we prefer investments which exhibit
limited correlation to global equity markets.
Restructuring the Company's investment portfolio along these
lines has taken time, but by the 30 September 2015 year-end the
core tranche of up to 30 longer-term investments was in place.
During the new financial year we also expect to increase the number
of shorter-term tactical investments, up to a maximum of ten, in
order to take advantage of what are likely to be increasingly
volatile markets. These tactical investments will be funded partly
through cash generated from the remaining tail of inherited
illiquid holdings which, at the time of writing, represents
approximately 17% of the total portfolio.
Portfolio Performance
The Company's NAV total return was -5.0% during the year
compared with a 0.8% increase in its FTSE World Total Return Index
benchmark. The low correlation of the Company's portfolio to world
equity markets was highlighted by its relative performance against
benchmark over the year. For example, underperformance of 12.8% in
the first half in a rising market environment was followed by
second half outperformance of 6.1% as markets declined.
With our portfolio restructuring largely complete, we believe
that the Company is now well-positioned to start delivering the NAV
growth required to provide shareholders with satisfactory long-term
returns.
The Company's share price total return was -10.8%, with the
discount to NAV per share widening from 14.1% to 19.8%. It is our
view that positive share price and discount performance is
inextricably linked to the delivery of improved NAV returns, the
latter clearly being our top priority.
Portfolio Activity
Our portfolio activity during the year was focused around two
main objectives.
First, at a macro level, we sought to increase significantly the
Company's exposure to developed market assets and, where necessary,
reduce emerging market and commodity weightings. This reflected the
generally stable or improving economic outlook for the US, Europe
and Japan compared with many emerging markets and also our belief
that developed markets currently offer the Company a much deeper
and higher-quality universe of investable funds.
Secondly, we looked to further develop a number of our existing
sector-specific investment themes, most notably with regard to the
opportunities available in certain parts of both the private equity
and floating rate loan markets. Also, we added to our long/short
hedge fund sleeve in order to seek consistent absolute returns
through direct exposure to listed equities.
Purchases
Some of the key investments we made during the year are
described below. In each case we believe the relevant fund managers
and their underlying assets or investment strategies are
high-quality.
Our new private equity investments accessed a range of
investment strategies across the sector. For example, we opened a
GBP3.8 million position in Riverstone Energy Limited, a UK-listed
private equity fund mainly targeting the US shale oil and gas
sector. The experienced managers of this fund have successfully
accelerated their deployment of capital since last year's oil price
fall. We subsequently added to our holding. We made a GBP6.5
million commitment to Mantra Secondary Opportunities, an unlisted
vehicle which is pursuing a niche strategy investing globally in
mature private equity partnerships at attractive valuations. We
also invested GBP2.3 million in Apax Global Alpha Limited, a
UK-listed private equity fund managed by Apax Partners, a leading
global private equity investor. This vehicle provides access to
Apax Partners' unlisted funds and also uniquely to other
investments in public and private debt and listed equities which
are derived from Apax Partners' core private equity activities.
Finally we invested GBP4.0 million in Princess Private Equity
Holding Limited, a UK-listed private equity vehicle managed by
Partners Group, another leading private equity manager. The vehicle
makes direct debt and equity investments across the large, mid- and
small-cap buy-out markets, mainly in the US and Europe.
We increased our exposure to the floating-rate bank loan markets
through a new GBP4.0 million investment in Toro Limited. This is a
UK-listed fund which invests in European collateralised loan
obligations and other structured credit instruments and is managed
by Chenavari Capital Partners, a highly-regarded credit fund
manager. We also added to our existing position in Blackstone/GSO
Loan Financing Limited, a UK-listed vehicle with an experienced and
market-leading manager focused on the European and US secured loan
markets.
Towards the end of the year we added another investment to the
Company's hedge fund sleeve through a GBP4.1 million purchase of CT
Invest Fund, an unlisted long/short European equity fund with a
focus on pan-European large and mid-cap cyclical/industrial stocks.
We also added to our very successful existing holding in BlackRock
European Hedge Fund Limited before it was closed to further
investment.
Disposals and Redemptions
Since becoming the Company's investment manager in April 2013 we
have reduced the Company's large exposures to the emerging market
and commodity sectors. We accelerated this process during the year
in order to protect the Company's NAV as the outlook for both
sectors deteriorated further.
For example, in emerging markets we redeemed the Company's
holdings in IP Value Brazil, a fund which invests in small and
mid-cap Brazilian equities. We also reduced the Company's position
in Value Partners China Greenchip Fund Limited (Hong Kong listed
equities) and towards the end of the year issued a redemption
notice for the Company's investment in Firebird New Russia Fund
Limited (Russian and other Eastern European listed equities). With
regard to commodities, we disposed of the Company's holding in
BlackRock World Mining Trust plc during January and February. In
addition, City Natural Resources High Yield Trust plc was sold
between January and June, as opportunities arose.
Other significant activity included the redemption of the
Company's holding in SW Mitchell Small Cap European Fund, a
long/short hedge fund, which we replaced with CT Invest Fund (see
Purchases). We also demonstrated our willingness to take some
profits on partial disposals of core holdings such as Oryx
International Growth Fund Limited and Real Estate Credit
Investments PCC Limited as liquidity in these tightly-held stocks
became available.
Contribution Analysis
The following tables show the top and bottom five contributors
to the gross total return of the Company's investment portfolio
(including cash and cash equivalents) during the financial
year.
Top Five Contributors Contribution
%
------------------------------------- -------------
BlackRock European Hedge Fund
Limited 1.73
Oryx International Growth Fund
Limited 1.37
Century Capital Partners IV L.P. 0.76
CEIBA Investments Limited 0.52
Ediston Property Investment Company
plc 0.51
Source: Henderson
BlackRock European Hedge Fund Limited, a long/short European
equities hedge fund with an outstanding track record, delivered
more strong performance over the year. Oryx International Growth
Fund Limited also continued to thrive with its own successful brand
of active investment management in the UK and US small company
sectors. The prospects for CEIBA Investments Limited, an unlisted
fund invested in Cuban property, improved against a background of a
thaw in US/Cuban relations. It is pleasing to see Ediston Property
Investment Company plc emerge as a strong contributor. At the start
of the Company's financial year we invested GBP4.0 million in the
UK Initial Public Offering of this small fund which is focused on
regional UK commercial property where attractive returns are still
available. We were particularly impressed during our due diligence
process by the quality and experience of the management team and
the growth potential of the initial property portfolio. At the
other end of the spectrum in terms of fund maturity, Century
Capital Partners IV, L.P. is an unlisted private equity fund
focused on the North American insurance sector. Rather than sell
this mature fund into the secondary market at a discount to NAV, we
chose to retain the investment and wait for the underlying
portfolio companies to be realised. Only two investments now remain
and, based on the fund's exit record to date, it is reasonable to
expect these to be sold at
(MORE TO FOLLOW) Dow Jones Newswires
December 21, 2015 02:00 ET (07:00 GMT)
attractive valuations over the coming months.
Bottom Five Contributors Contribution
%
-------------------------------------- -------------
Baring Vostok Investments Limited
core -1.74
NB Distressed Debt Investment
Fund Limited - Global Shares -1.23
BlackRock World Mining Trust
plc -0.98
Ecofin Water and Power Opportunities
plc -0.81
Baring Vostok Investments Limited
cell -0.66
Source: Henderson
Two of the bottom five contributors were the Company's holdings
in the two share classes of Baring Vostok Investments Limited. This
USD-denominated vehicle is listed in the Channel Islands and holds
Russian private equity investments which are managed by Baring
Vostok, arguably the leading private equity manager operating in
Russia. Although the Russian economy has clearly been facing major
headwinds, the underlying portfolio companies in Baring Vostok's
portfolio have generally held-up well. The weakness of the Russian
Rouble has, however, severely impacted the USD value of the
Company's holdings, although we see attractive potential upside at
current price levels taking a medium-term view. The Company's
investment in NB Distressed Debt Investment Fund Limited - Global
Shares was impacted by a sell-off in the US distressed debt sector
towards the end of last year. We still, however, consider the
medium-term prospects for this fund's portfolio of distressed debt
as fundamentally unchanged and positive. Ecofin Water and Power
Opportunities plc was impacted by negative sentiment towards the
energy and utility sectors. BlackRock World Mining Trust plc
continued to suffer from the decline in mining and commodity
markets and the Company's holding was sold during January and
February.
Marketing
Marketing continues to be a priority as we seek to generate more
interest in the Company's shares working closely with both the
Company's new brokers, Stifel Nicolaus Europe Limited, and
Henderson's own investment trust marketing team.
Our marketing efforts have again taken several forms during the
year. A significant number of meetings and calls have been held
with existing, previous and potential shareholders. We have also
obtained a good level of national and trade media coverage and have
communicated regularly with the market through the Company's
Henderson sponsored website.
Outlook
At the time of writing world equity markets continue to be
plagued by uncertainty, above all, regarding global growth and the
timing and quantum of interest rate rises.
Our job is to construct a portfolio of alternative and
specialist asset funds which, over the longer-term, can
consistently outperform our mainly developed world equity market
benchmark. Building such a portfolio is, to some extent, a
"bottom-up" exercise as we seek to identify particular sectors,
managers and assets which can deliver the necessary returns. We do,
however, bring macro-economic issues into our investment process
and portfolio monitoring as we navigate through the Company's
investable universe of alternative and specialist asset funds. For
example, we have over the last year continued to shift the
geographic exposure of the Company's core portfolio towards
developed markets where we currently see the best opportunities to
implement our investment strategy.
Finally, we would stress again that we will not compromise on
the quality, entry price and return target requirements of all our
investments. We believe the quality and return potential of the
Company's investments has increased significantly over the last
year as we have progressed the restructuring of the Company's core
longer-term portfolio. This, combined with the shorter-term
tactical opportunities which we expect to emerge during the current
financial year, make us confident that the Company's outlook is
increasingly positive.
Ian Barrass and James de Bunsen
Fund Managers
INVESTMENT PORTFOLIO
Market Value Portfolio
Investments (excluding CFDs) Focus GBP'000 %
BlackRock European Hedge Fund
Limited(3) Specialist Geography 7,573 7.1
Polar Capital Global Financials
Trust plc(2) Specialist Sector 4,954 4.6
Eurovestech plc(1) Private Equity 4,393 4.1
Ediston Property Investment Company
plc(2) Property 4,380 4.1
Riverstone Energy Limited(2) Private Equity 4,229 3.9
CEIBA Investments Limited(4) Property 4,158 3.9
Princess Private Equity Holding
Limited(2) Private Equity 4,030 3.8
Blackstone/GSO Loan Financing
Limited(2) Specialist Sector 3,984 3.7
CT Invest Fund(3) Hedge 3,958 3.7
Toro Limited(2) Specialist Sector 3,956 3.7
Ten largest 45,615 42.6
Oryx International Growth Fund
Limited(2) Specialist Sector 3,750 3.5
Value Partners China Greenchip
Fund Limited(3) Specialist Geography 3,554 3.3
Pershing Square Holdings Limited(2) Hedge 3,547 3.3
NB Private Equity Partners Limited(2) Private Equity 3,416 3.2
NB Distressed Debt Investment
Fund Limited - Global Shares(2) Specialist Sector 3,408 3.2
Baring Vostok Investments Limited
core(1) Private Equity 3,142 2.9
Ishares V MSCI Japan GBP Hedged
UCITS(2) Specialist Geography 3,121 2.9
Standard Life European Private
Equity Trust plc(2) Private Equity 2,968 2.8
Firebird Republics Fund SPV(4) Specialist Geography 2,853 2.7
Weiss Korea Opportunity Fund Limited(2) Specialist Geography 2,532 2.4
------------------------------------------------ ----------------------------- --------------- -------------
Twenty largest 77,906 72.8
Tetragon Financial Group Limited(2) Specialist Sector 2,450 2.3
Mantra Secondary Opportunities(4) Private Equity 2,366 2.2
Apax Global Alpha Limited(2) Private Equity 2,319 2.2
NB Distressed Debt Investment
Fund Limited - Extended Life Shares(2) Specialist Sector 1,786 1.7
Century Capital Partners IV L.P.
(4) Private Equity 1,746 1.6
Chenavari Capital Solutions Limited(2) Specialist Sector 1,729 1.6
Renewable Energy and Infrastructure
Fund II(4) Specialist Sector 1,683 1.6
Metage Emerging Markets Opportunities
Fund(3) Hedge 1,555 1.4
Real Estate Credit Investments
PCC Limited(2) Specialist Sector 1,458 1.4
The Renewables Infrastructure
Group Limited(2) Specialist Sector 1,438 1.3
------------------------------------------------ ----------------------------- --------------- -------------
Thirty largest 96,436 90.1
ASM Asian Recovery Fund(4) Hedge 1,351 1.3
Amber Trust SCA(4) Private Equity 1,245 1.2
Baring Vostok Investments Limited
cell(1) Private Equity 1,151 1.1
EPE Special Opportunities plc
(CULS)(1) Private Equity 980 0.9
Firebird Republics Fund Limited(3) Specialist Geography 960 0.9
Zouk Solar Opportunities Limited(4) Specialist Sector 853 0.8
BP Marsh & Partners plc(2) Private Equity 733 0.7
Ludgate Environmental Fund Limited(2) Specialist Sector 712 0.7
EPE Special Opportunities plc
Ordinary(2) Private Equity 637 0.6
Acheron Portfolio Corporation
(A Shares)(1) Specialist Sector 618 0.6
(MORE TO FOLLOW) Dow Jones Newswires
December 21, 2015 02:00 ET (07:00 GMT)
------------------------------------------------ ----------------------------- --------------- -------------
Forty largest 105,676 98.9
Market Value Portfolio
Investments (excluding CFDs) Focus GBP'000 %
South African Opportunities plc(2) Property 608 0.6
Prosperity Voskhod Fund Limited
(4) Specialist Geography 203 0.2
Denholm Hall Russia Arbitrage
Fund B - Investment(4) Hedge 162 0.1
Armadillo Investments Limited(4) Liquidation 87 0.1
Value Catalyst Fund Limited(4) Specialist Sector 81 0.1
Strathdon Investments plc(4) Specialist Sector 67 0.1
Denholm Hall Russia Arbitrage
Fund B - Redemption(4) Hedge 37 0.0
Low Carbon Accelerator Limited(4) Liquidation 36 0.0
Polar Capital Global Financials
Trust plc - Subscription Shares(2) Specialist Sector 24 0.0
China CDM Exchange Centre Limited(1) Specialist Sector 1 0.0
------------------------------------------------ ----------------------------- --------------- -------------
Fifty largest 106,982 100.1
Buena Vista Latin America Fund
Limited(4) Property 0 0.0
Buena Vista Latin America Limited
(CULS)(4) Property 0 0.0
International Oil & Gas Technology
Limited(2) Specialist Sector 0 0.0
iO Adria Limited(1) Property 0 0.0
PSource Structured Debt Limited(4) Liquidation 0 0.0
Thompson Clive Investments plc(4) Liquidation 0 0.0
Total Investments (excluding CFDs) 106,982 100.1
------------------------------------------------ ----------------------------- --------------- -------------
Gross
market Fair value
CFD Investments Focus exposure of CFD Portfolio
GBP'000 GBP'000 %
Ecofin Water and Power Opportunities
plc Specialist Sector 2,423 (101) (0.1)
Total Investments 106,881 100.0
----------------------------------------------------------------- ------------ --------------- -------------
1 Listed on Minor Market (includes Luxembourg Stock Exchange, Channel
Islands Stock Exchange, ISDX and LMMX)
2 Listed on Major Market (includes London Stock Exchange (full listing
& AIM) and Euronext)
3 Unlisted investment - with Redemption
Rights
4 Unlisted investment - without
Redemption Rights
PRINCIPAL RISKS AND UNCERTAINTIES
The Board, with the assistance of Henderson, has carried out a
robust assessment of the principal risks facing the Company. The
Board has drawn up a matrix of risks and has put in place a
schedule of investment limits and restrictions, appropriate to the
Company's investment objective and policy, in order to mitigate
these risks as far as practicable. The principal risks facing the
Company are market related and include market price, foreign
exchange, interest rate, liquidity and credit risk. An explanation
of these risks and how they are mitigated is detailed in Note 15 to
the Financial Statements in the Company's Annual Report.
Some of the Company's investments are in funds, some of which
are unquoted, exposed to less developed markets and may be seen as
carrying a higher degree of risk. The Board believe that these
risks are mitigated through portfolio diversification, in-depth
analysis, the experience of Henderson and a rigorous internal
control culture. The use of CFDs involves counterparty risk
exposure.
Additional risks faced by the Company are summarised below:
Risk Controls and mitigation
---------------------------------------- ----------------------------------------
Investment Strategy
The performance of the portfolio Henderson has a clearly defined
may not match the performance of investment philosophy and manages
the benchmark through divergent a broadly diversified portfolio
geographic, sector or stock selection. to mitigate this risk.
In addition, the Company may be
affected by economic conditions.
---------------------------------------- ----------------------------------------
Discount
The level of the discount varies The Company has the ability to
depending upon performance, market issue and purchase its own shares
sentiment and investor appetite. which can reduce discount volatility.
---------------------------------------- ----------------------------------------
Regulatory/Operational
Failure to comply with applicable The Board regularly considers the
legal and regulatory requirements risks associated with the Company
could lead to a suspension of the and receives both formal and regular
Company's shares, fines or a qualified reports from Henderson and third
audit report. party service providers addressing
these risks.
A breach of Section 1158 of the
Corporation Tax Act 2010 could
lead to the Company being subject
to corporation tax on realised
capital gains.
Failure of Henderson or third party
service providers could prevent
accurate reporting and monitoring
of the Company's financial position.
The Board regularly considers the
risks associated with the Company
and receives both formal and regular
reports from Henderson and third
party service providers addressing
these risks.
---------------------------------------- ----------------------------------------
The Board considers these risks to have remained unchanged throughout
the year under review.
VIABILITY STATEMENT
The Directors have assessed the viability of the Company over a
three year period, taking account of the Company's current position
and the potential impact of the principal risks and uncertainties
as documented in the Strategic Report. The assessment has
considered the impact of the likelihood of the principal risks and
uncertainties facing the Company, in particular the Investment
Strategy risk, in severe but plausible scenarios, and the
effectiveness of any mitigating controls in place.
The Directors took into account the nature of the investment
portfolio, including its liquidity and redemption restrictions that
exist on certain investments, and the income stream that the
current portfolio generates in considering the viability of the
Company over the next three years and its ability to meet
liabilities as they fall due.
The Directors conducted this review for a period of three years
because they consider this to be an appropriate period over which
they do not expect there to be any significant change in the
current principal risks and adequacy of the mitigating controls in
place. Also the Directors do not envisage any change in strategy or
objectives or any events that would prevent the Company from
continuing to operate over that period as the Company's assets are
sufficiently liquid, its commitments are limited and the Company
intends to continue to operate as an investment trust. A
substantial financial crisis affecting the global economy could
have an impact on this assessment.
The Directors recognise that there is a continuation vote that
is due to take place at the AGM following the 30 September 2017
year end. The Directors currently support the continuation of the
Company and expect that the Company will continue to exist for the
foreseeable future, at least for the period of assessment. However,
if such a vote were not passed, the Directors would follow the
provisions in the Articles of Association relating to the winding
up of the Company and the realisation of its assets.
Based on this assessment, the Directors have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the next three year
period.
STATEMENT OF DIRECTORS' RESPONSIBILITIES (UNDER DTR 4.1.12)
Each of the Directors confirms that, to the best of their
knowledge:
-- the financial statements, which have been prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law),
give a true and fair view of the assets, liabilities, financial
position and profit of the Company; and
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-- the Annual Report includes a fair review of the development
and performance of the business and the position of the Company,
together with a description of the principal risks and
uncertainties that it faces.
The Directors consider that the Annual Report, taken as a whole,
is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company's position and
performance, business model and strategy.
For and on behalf of the Board
Graham Oldroyd
Director
INCOME STATEMENT
Year ended Year ended
30 September 2015 30 September 2014
Revenue Capital Revenue Capital
return return Total return return Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------- --------- --------- ---------- --------- --------- ----------
(Losses)/gains on investments
at fair value through
profit or loss - (7,482) (7,482) - 1,105 1,105
Exchange differences - 61 61 - (147) (147)
--------- --------- ---------- --------- --------- ----------
Net (losses)/gains on
investments - (7,421) (7,421) - 958 958
Investment income 2,090 - 2,090 2,129 - 2,129
Investment management
fees (86) (782) (868) (98) (879) (977)
Other expenses (351) (27) (378) (327) (45) (372)
--------- --------- ---------- --------- --------- ----------
Net (loss)/return before
interest and taxation 1,653 (8,230) (6,577) 1,704 34 1,738
Finance costs - interest (3) (26) (29) (19) (175) (194)
--------- --------- ---------- --------- --------- ----------
Net (loss)/return before
taxation 1,650 (8,256) (6,606) 1,685 (141) 1,544
Taxation - - - - - -
--------- --------- ---------- --------- --------- ----------
Net (loss)/return on ordinary
activities after taxation 1,650 (8,256) (6,606) 1,685 (141) 1,544
--------- --------- ---------- --------- --------- ----------
(Loss)/return per
ordinary share 3.72p (18.61)p (14.89)p 3.53p (0.30)p 3.23p
--------- --------- ---------- --------- --------- ----------
The total column of this statement represents the profit and
loss account of the Company. The Company had no recognised gains or
losses other than those recognised in the Income Statement. No
operations were acquired or discontinued in the year. All revenue
and capital items in the above statement derive from continuing
operations.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Year ended 30 September 2015
Capital redemption
Share Share premium reserve Capital Revenue
capital GBP'000 GBP'000 reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ---------- ---------------- ------------------- ---------- ---------- ----------
Balance at 1 October
2014 11,938 10,966 6,515 108,289 1,700 139,408
Return attributable
to shareholders - - - (8,256) 1,650 (6,606)
Shares bought
back - tender
offer (1,194) - 1,194 (12,925) - (12,925)
Ordinary dividends - - - - (1,433) (1,433)
Balance at 30
September 2015 10,744 10,966 7,709 87,108 1,917 118,444
---------- ---------------- ------------------- ---------- ---------- ----------
Year ended 30 September 2014
Capital redemption
Share Share premium reserve Capital Revenue
capital GBP'000 GBP'000 reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000
---------------------- ---------- ---------------- ------------------- ---------- ---------- ----------
Balance at 1 October
2013 11,938 10,966 6,515 108,430 731 138,580
Return attributable
to shareholders - - - (141) 1,685 1,544
Ordinary dividends - - - - (716) (716)
Balance at 30
September 2014 11,938 10,966 6,515 108,289 1,700 139,408
---------- ---------------- ------------------- ---------- ---------- ----------
BALANCE SHEET
As at 30 September 2015 2014
GBP'000 GBP'000
-------------------------------------------- ------------------------ ----------------------
Fixed Assets
Investments at fair value through profit
or loss 106,982 119,933
------------------------ ----------------------
Current assets
Debtors 1,990 1,037
Money market funds 6,995 16,250
Cash at bank 220 129
Cash held as CFD margin deposit 2,692 2,641
------------------------ ----------------------
Total current assets 11,897 20,057
Creditors: amounts falling due within
one year (435) (582)
------------------------ ----------------------
Net current assets 11,462 19,475
------------------------ ----------------------
Total assets less current liabilities 118,444 139,408
------------------------ ----------------------
Capital and reserves
Called up share capital 10,744 11,938
Share premium 10,966 10,966
Capital redemption reserve 7,709 6,515
Capital reserve 87,108 108,289
Revenue reserve 1,917 1,700
------------------------ ----------------------
Total equity shareholders' funds 118,444 139,408
------------------------ ----------------------
Net asset value per ordinary share (pence) 275.60 291.94
------------------------ ----------------------
CASH FLOW STATEMENT
Year ended 30 September 2015 2014
GBP'000 GBP'000
------------------------------------------------ ---------------------- --------------------
Reconciliation of revenue before interest
and taxation to net cash flows from operating
activities
Net (loss)/return before interest and taxation (6,577) 1,738
Net losses/(gains) on investments 7,421 (958)
Transaction costs 27 45
Movement in creditors (248) 293
Movement in debtors 17 (47)
---------------------- --------------------
Net cash inflow from operating activities 640 1,071
---------------------- --------------------
Returns on investment and servicing of finance
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Finance costs paid (29) (194)
---------------------- --------------------
Capital expenditure and financial investment
Purchases of fixed asset investments (38,057) (31,733)
Sales of fixed asset investments 42,630 28,913
---------------------- --------------------
4,573 (2,820)
---------------------- --------------------
Equity dividends paid (1,433) (716)
---------------------- --------------------
Management of liquid resources
Purchases of money market funds (40,699) (42,497)
Sales of money market funds 49,954 37,919
---------------------- --------------------
Net cash inflow/(outflow) from management
of liquid resources 9,255 (4,578)
Net cash inflow/(outflow) before financing 13,006 (7,237)
Financing
Shares bought back - tender offer (12,925) -
---------------------- --------------------
Increase/(decrease) in cash 81 (7,237)
---------------------- --------------------
Reconciliation of net cash flow to movement
in net cash
Movement in cash in the year 81 (7,237)
Net funds at start of the year 19,020 21,826
Net change in liquid resources (9,255) 4,578
Exchange rate differences 61 (147)
---------------------- --------------------
Net funds at end of the year 9,907 19,020
---------------------- --------------------
Net funds at the end of the year comprised cash held at bank of
GBP220,000 (2014: GBP129,000), cash held at UBS related to CFD
transactions of GBP2,692,000 (2014: GBP2,641,000) and balances held
at money market funds of GBP6,995,000 (2014: GBP16,250,000).
NOTES TO THE FINANCIAL STATEMENTS
1 Accounting policies
Basis of preparation
The financial statements have been prepared on a going concern
basis and under the historical cost basis of accounting, modified
to include the revaluation of investments at fair value. The
financial statements have been prepared in accordance with the
Companies Act 2006 and United Kingdom Generally Accepted Accounting
Practice and with the Statement of Recommended Practice ("the
SORP") for investment trusts issued by the Association of Investment
Companies ("the AIC") in January 2009. The Company's accounting
policies are consistent with the prior year.
Having considered the Company's investment objective, risk management
and capital management policies, the nature of the portfolio
and expenditure projections, the Directors believe that the Company
has adequate resources and an appropriate financial structure
in place to continue in operational existence for at least twelve
months from the date of approval of the financial statements.
The Board considers that there is reasonable evidence to support
continuing to adopt the going concern basis in preparing the
financial statements.
2015 2014
2 Investment Income GBP'000 GBP'000
----- ---------------------------------------------------------------------- ------------ --------------
Income from equity shares and securities
UK investment income 355 684
Overseas income 1,672 1,384
------------ --------------
2,027 2,068
------------ --------------
Other income
Interest from money market funds 25 32
Bank interest 12 27
Other income 26 2
------------ --------------
63 61
------------ --------------
Total income 2,090 2,129
------------ --------------
Investment Management 2015 2014
3 Fees GBP'000 GBP'000
----- ----------------------------- ----------- --------------- ---- --- ------------ --------------
Revenue
Investment management
fee 86 98
Capital
Investment management
fee 782 879
Total 868 977
------------ --------------
2015 2014
4 Other expenses GBP'000 GBP'000
------- ----------------------------------------------------- ---------------------------- --------------
Revenue
General expenses 179 199
Directors' fees 103 82
Auditor's remuneration - audit services(1) 35 30
- all other services(2) - 10
Depositary charges(3) 34 6
------------ --------------
351 327
------------ --------------
Capital
Transaction costs 27 45
Total 378 372
------------ --------------
1 These figures include VAT. Fees for audit services excluding
VAT were GBP29,000 (2014: GBP25,000).
2 2014 includes review of process for valuation of unlisted
investments.
3 Depositary appointed on 22 July 2014 to meet the requirements
of AIFMD.
2015 2014
5 Taxation GBP'000 GBP'000
------- ----------------------------------------------------- ---------------------------- --------------
Net return on ordinary activities before taxation (6,606) 1,544
----------------- --------------
The tax assessed for the year is different
from the standard rate of corporation tax
in the UK. The differences are noted below:
Corporation tax 20.5% (2014: 22%) (1,354) 340
Non-taxable dividends (335) (399)
Non-taxable losses/(gains) on investments 1,530 (201)
Gains on disposal of non-qualifying offshore
funds 414 8
Movement in unutilised management expenses (255) 252
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