TIDMHAST
RNS Number : 4295Z
Henderson Alternative Strat Tst PLC
15 December 2017
HERSON ALTERNATIVE STRATEGIES TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE YEARED 30 SEPTEMBER 2017
This announcement contains regulated information
INVESTMENT OBJECTIVE
The Company exploits global opportunities not normally readily
accessible in one vehicle to provide long-term growth to
shareholders via a diversified, international, multi-strategy
portfolio which also offers access to specialist funds including
hedge and private equity. The Company aims to outperform the FTSE
World Total Return Index on a total return basis (a combination of
income and capital growth) in Sterling terms.
PERFORMANCE HIGHLIGHTS
-- Second consecutive year of solid share price and NAV total
return performance.
-- Share price and NAV total return of 19.8% and 10.8% compared
with benchmark of 15.4%.
-- Discount narrowed to 13.1% from 19.3%.
-- Ordinary dividend increase of 25%.
-- Valuable source of diversification and potential reward
through a genuinely differentiated investment portfolio.
30 September 30 September
2017 2016
--------------------------- --------------- --------------
NAV per ordinary share(1) 335.4p 308.7p
Total return per ordinary
share(2) 32.2p 36.4p
Share price per ordinary
share 291.5p 249.1p
Market capitalisation GBP112.7m GBP107.1m
Discount(3) 13.1% 19.3%
Dividend for year(4) Ordinary 4.75p Ordinary
3.8p
- Special 2.6p
Ongoing charge(5) 1.02% 1.00%
Number of investments(6) 54 57
1 Net asset value total return per ordinary share
2 Share price total return using mid-market closing prices
3 Calculated using year-end audited NAVs including current year
revenue
4 2017 dividend subject to approval at the AGM to be held on 24
January 2018
5 The prior year ongoing charge has been updated to amend an
inconsistency in the calculation method
6 Includes nil valued securities
Sources: Morningstar Direct, Janus Henderson, Datastream,
Association of Investment Companies (AIC)
CHAIRMAN'S STATEMENT
Performance
I am pleased to report that the Company delivered another
12-month period of robust performance during the financial year to
30 September 2017. The Company's share price total return was 19.8%
which compared with an increase of 15.4% in the Company's
benchmark, the FTSE World Total Return Index (in Sterling). In
addition, the Company's share price total return compared
favourably with the 12.8% average weighted share price total return
of its AIC Flexible Investment Sector peer group. The Company also
produced a solid NAV total return of 10.8%, well above its
informal, annualised, long-term NAV total return target of 8.0%.
The Company's five investment categories each made a positive
contribution to returns, reflecting thereby the attractive quality
of its portfolio holdings. The Fund Managers' Report provides a
review of portfolio activity and investment performance during the
financial year.
Share Price Discount
The Company's share price discount to NAV per share narrowed
significantly over the year from 19.3% to 13.1%, with the Company's
average discount during the year of 15.8% comparing favourably with
19.9% in the prior financial year. The Board believes that two
consecutive years of significantly improved investment performance,
combined with sustained marketing of the Company's shares to both
professional and retail investors, have been crucial in helping to
address the Company's discount. Continuance of this investment
performance should, over time, help to narrow the discount
further.
In January 2017 the Company completed a tender offer for 10% of
its ordinary shares at a discount of 5% to NAV, less tender costs.
The tender offer, which was agreed to in early 2015 as part of the
Company's last triennial continuation vote process, resulted in the
return of almost GBP13.0 million of cash to participating
shareholders. This, in addition to the tender offer in December
2014, means that these two buy-backs in the space of three years
have returned to shareholders GBP25.8 million. Although the Board
has no current plans for further tender offers, it will continue to
consider the use of additional discount control measures, as and
when appropriate. The Board is, however, conscious that measures
which reduce the Company's market capitalisation are likely to make
it less attractive to those investors who have minimum size
requirements for their fund investments.
Dividend
The Company is again able to pursue a progressive dividend
policy given the healthy level of income generated by its
investment portfolio. The Board is therefore proposing a 25%
increase to the Company's ordinary dividend to 4.75p per share for
the year to 30 September 2017.
Board Changes
After many years of service to the Company, Graham Fuller will
not offer himself for re-election as a Director at the AGM to be
held on 24 January 2018. On behalf of the Board I would, in advance
of the AGM, like to extend sincere thanks to Graham for his many
valued contributions during his time as a Director. Jamie Korner
will assume Graham's mantle as the Board's Senior Independent
Director at the AGM.
I would also like to welcome Mary-Anne McIntyre to the Board
following her appointment with effect from 1 September 2017. As
announced previously, Mary-Anne brings a wealth of experience from
the asset management industry, particularly in relation to
distribution and marketing, which is a key area of focus for the
Board. Subject to the continuation vote being passed at the 2018
AGM, it is the Board's intention to consider the appointment of one
more director to the Board to balance and complement the Board's
existing skills.
Triennial Continuation Vote
In accordance with the Company's Articles of Association the
Board is proposing the Company's triennial continuation vote as an
ordinary resolution at the AGM on 24 January 2018.
The Board is unanimous in its recommendation that shareholders
vote in favour of this resolution. In reaching its decision the
Board has carefully considered a number of factors, the most
important of which are outlined below.
First, the Company's investment performance has improved
significantly. In April 2013 Janus Henderson inherited an
underperforming, poorly-positioned and relatively illiquid
portfolio which the Fund Managers stated might take up to three
years to restructure. This proved to be the case, but two
consecutive financial years of double-digit share price and NAV
total returns have demonstrated that the restructuring has been
successful. In addition, as highlighted in their report, the Fund
Managers are confident that the Company's investment portfolio is
well-positioned to deliver further attractive returns over the
long-term.
Second, the Board is strongly of the view that the Company
provides professional and retail investors with a genuinely
differentiated investment proposition by seeking to deliver equity
equivalent long-term returns from a well-diversified portfolio of
niche, hard-to-access or complex alternative and specialist asset
funds. The Board believes the Company has no obvious peer listed on
the UK stock market and the Company's recent success in attracting
new investors to its shareholder register is evidence that it has a
genuine raison d'être.
Third, considerable progress has been made since 2015 in
narrowing the Company's discount to net asset value. The Board
believes that there is scope for further improvement in both of the
Company's asset value and share price if performance remains robust
and marketing activity is maintained at current levels.
Fourth, given the nature of the Company's investment mandate,
the Company's portfolio includes a number of illiquid holdings
which, if exited in a time-limited portfolio liquidation, would
attract discounts to the valuations ascribed to them currently by
the Company. There are also a number of mature holdings which are
themselves engaged in self-liquidation processes which may prove
very difficult to complete fully within a limited timeframe. In
view of these considerations, the Board believes that it is
important for shareholders to be aware that a vote against
continuation, which then leads to a portfolio liquidation, may be
value-damaging and may not necessarily result in either the full or
timely return in cash of the Company's NAV (less the costs
associated with any portfolio liquidation process).
Investment Objective and Policy
The Board has approved certain minor changes to the wording of
the investment objective and policy of the Company to provide
further clarity to investors. None of the changes were material and
they therefore do not require shareholder consent. The updated
investment objective and policy is set out in full in the Annual
Report.
Annual General Meeting
The Company's AGM will be held at the offices of Janus Henderson
Investors, 201 Bishopsgate, London EC2M 3AE on 24 January 2018 at
11.30am. I would encourage as many shareholders as possible to
attend as it is an opportunity to meet the Board and to watch a
presentation from our Fund Managers. The AGM will also 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.janushenderson.com/ukpi/content/trustslive.
Financial Year End
Subject to the continuation vote being passed, the Board is
considering changing the Company's financial year end of 30
September to 31 March, with the aim of more closely aligning the
Company's year-end reporting cycle to reporting received from
unquoted private equity funds and other unlisted investments within
the portfolio. Should it be decided that this would be of benefit
to the Company, it would be the intention that an appropriate
announcement be made in early 2018.
Outlook
As we move towards 2018, global financial markets are generally
regarded to be at relatively high valuation levels, with US equity
and global fixed income markets good examples of such conditions.
In such an environment the Board believes that the Company provides
investors with a valuable source of diversification and potential
reward through its genuinely differentiated investment
portfolio.
The Board and Janus Henderson believe that our investment
portfolio contains a range of attractive NAV growth opportunities.
The Board, in unanimously supporting the continuation vote, has
every confidence that the Fund Managers will deliver this growth
and I would like to take this opportunity of thanking all of our
shareholders who have supported us during a period where our
investment portfolio has been completely repositioned with a solid
performance now being demonstrated.
Richard Gubbins
Chairman
14 December 2017
FUND MANAGERS' REPORT
Market Overview
The year to 30 September 2017 was another positive period for
world equity markets. Generally high valuations were supported by
global GDP growth running at above 3% for the sixth successive year
and by improving corporate earnings in both developed and emerging
economies. The constructive macro-economic environment helped
equity markets absorb the significant levels of financial and
political risk in evidence across the world during the period.
Markets were also able to withstand the beginnings of sustained
reductions in quantitative easing.
Against this favourable backdrop developed market equities
produced attractive returns. The US market moved ahead as investors
were quick to interpret the surprise victory of President Trump in
November 2016 as beneficial for US economic growth. European
markets began to recover from several years of relative
underperformance compared to the US as concerns over deflation
diminished, as the German economy gathered momentum and there was
evidence of improved economic performance in countries such as
Spain and France. In the UK, both the economy and the equity market
perhaps proved more resilient than many commentators predicted
following the June 2016 vote to leave the European Union. In Japan,
a weaker yen was one of several factors which boosted the equity
market.
The recovery of emerging market equities after some difficult
years continued, with the prominent emerging economies of Brazil,
Russia, India and China each making progress. Brazil benefited from
the depreciation of its currency and from some degree of political
stability. Russia continued its gradual recovery from the adverse
impact of Ukraine-related sanctions and the collapse of the oil
price in late 2014. India thrived on the business-friendly approach
of its government led by Prime Minister Modi and also recovered
well from the shock of last November's demonetisation scheme.
Finally, China overcame some of the immediate concerns regarding
increasing levels of debt within its economy and also an
over-heating property market.
Although US interest rates have started to rise and
accommodative monetary policies may have peaked in developed
economies, the market consensus is that future rate rises are
likely to be modest and gradual and that low interest rates will
continue to support elevated global equity valuations for some
time. In our view, however, there is absolutely no room for
investor complacency given the scope for either serious central
bank policy errors, higher than expected inflation in the US or the
escalation of any number of other major financial or political
risks which currently exist around the globe. With global fixed
income markets also trading at historically high valuations our
overall mood is one of caution.
Although the Company's focus is on alternative and specialist
asset classes, our experience tells us that it is rare that any of
these are unaffected by macro-economic or wider market forces. As
members of Janus Henderson's Multi-Asset business, we benefit from
access to the wealth of macro-economic and global market experience
which resides within our team. We draw on this to help shape our
top-down view of the world which we then apply to our thinking
regarding the Company's key areas of investment.
The Company's Investment Proposition
Given the current investment environment, some investors will be
understandably eager to seek alternative sources of return to those
provided by mainstream equity and fixed income investment
portfolios. We believe that the Company offers such diversification
through its genuinely differentiated investment proposition.
Since assuming the management of the Company's underperforming,
poorly-positioned and relatively illiquid portfolio in April 2013,
our aim has been to create a high-quality portfolio of 30 to 40
alternative and specialist asset funds capable of delivering
equity-equivalent returns over the long-term, which means periods
of at least five years. We seek to invest mainly in funds which are
either niche, complex or hard-to-access and which the Company's
shareholders may not be able to own directly. The Company's
flexible global investment mandate allows us to use a wide range of
asset types and investment strategies to generate our informal
long-term annualised NAV total return target for the Company of
8.0% per annum. If we achieve this informal target we believe that
the
Company's performance will compare favourably with long-term
global equity returns. In addition, we are focusing on delivering
these returns, if possible, with lower volatility than global
equity markets.
Given the scope of the Company's mandate, our investment
universe is large. It is, however, also of very variable quality.
Our focus is therefore on identifying the best available assets or
investment strategies which are managed or run by proven investment
teams. We also pay great attention to the price at which we invest
and have clear return expectations for each individual holding.
In summary, the Company aims to provide investors with an
alternative route to obtaining long-term equity-equivalent returns.
The nature of the Company's mandate, as outlined in the Company's
formal investment policy, does not seek in its investment portfolio
to replicate the composition of its benchmark, the FTSE World Total
Return Index (in Sterling). In the short-term, it is therefore
likely that the Company's performance will diverge either
positively or negatively from its benchmark. Our aim, however, is
to ensure that the Company exceeds its benchmark over the
longer-term.
Company Performance
The Company's share price total return was 19.8% (2016: 14.5%).
This compared with the 15.4% increase in the Company's FTSE World
Index (in Sterling) benchmark. The Company also delivered a NAV
total return of 10.8% (2016: 13.4%), well above the Company's
informal long-term annualised target of 8.0%. Pleasingly, this was
the Company's second consecutive year of double-digit share price
and NAV total returns following the restructuring of our investment
portfolio.
The Company's share price discount to NAV per share showed a
material improvement over the period, narrowing from 19.3% to
13.1%. As always, we believe that good NAV performance combined
with an active marketing programme to existing and potential
shareholders is the best way to address the Company's discount.
Portfolio Performance and Activity
The 30 largest holdings represent 96.1% of the Company's total
investment portfolio by value.
The table below shows the contribution of each of the Company's
five investment categories to the gross total return of the
Company's investment portfolio (including cash and cash equivalents
and money market funds) during the year.
Investment Category Contribution % Average Weighting
%
---------------------- --------------- ------------------
Specialist Sector 3.5 30.2
---------------------- --------------- ------------------
Private Equity 3.5 26.1
---------------------- --------------- ------------------
Hedge 2.0 20.0
---------------------- --------------- ------------------
Property 1.1 8.9
---------------------- --------------- ------------------
Specialist Geography 1.0 8.0
---------------------- --------------- ------------------
Source: Janus Henderson
Period: 1 October 2016 to 30 September 2017
Note: Cash and cash equivalents, money market funds and funds in
liquidation contributed 0.5% with an average weighting of 6.8%
It is pleasing to note that all the Company's investment
categories made positive contributions to the Company's NAV
performance with only a handful of individual holdings detracting
from returns. We believe that this reflects the consistently high
quality of the portfolio and our vigilance regarding the returns
available across the diverse range of asset classes represented in
the Company's investment universe.
Specialist Sector
The Company's Specialist Sector investment category is very
flexible. It is used to obtain exposure to any sector, usually
through a proven specialist manager, and to good-quality assets
which can meet the Company's target return.
At the year-end this investment category represented 29.3% of
the Company's total investments (2016: 32.5%) and contributed 3.5%
to the Company's gross total return. At the start of the financial
year our heaviest weighting in this investment category was in
listed credit-related funds with underlying exposures to a range of
developed market debt instruments including, most notably, senior
secured leveraged loans. During the year we reduced our exposure to
this particular asset class by exiting our holdings in Voya Prime
Rate Trust and Carador Income Fund PLC and selling some of our
position in Blackstone/GSO Loan Financing Limited. Although the
prospects for the senior secured leveraged loan market remain
positive we observed that loan valuations had increased
significantly leaving limited scope thereby for further value
growth in these funds above and beyond their already attractive
cash yields.
Our largest Specialist Sector investment during the period was a
GBP4.6 million purchase of The Biotech Growth Trust plc, a
UK-quoted investor in listed biotech companies. We had identified
the biotech sector as significantly undervalued given the strong
long-term growth drivers such as the developed world's ageing
population and the rapidly increasing healthcare spend in emerging
markets. In addition, we expect to see regular merger and
acquisition activity in the sector as large pharmaceutical
companies seek access to innovative new treatments.
Private Equity
The Company's private equity holdings provide investors with
access to an asset class which, when managed well, has delivered
long-term returns consistently above those of listed equity
markets. At the year-end the Private Equity investment category
represented 29.1% of the Company's total investments (2016: 29.3%)
and contributed 3.5% to the Company's gross total return. The
investments are well-diversified by asset type, investment
strategy, vintage and geography. We obtain exposures through listed
and unlisted vehicles run by proven managers.
Some of our listed fund holdings such as Standard Life Private
Equity Trust plc and Princess Private Equity Holding Limited
performed strongly as they continued to benefit from attractively
priced portfolio exits, often well above their carrying values. In
response we decided to realise some profit by trimming both
positions. The cash proceeds were put towards a new GBP2.6 million
investment in Safeguard Scientifics Inc., a long-established
US-listed private equity vehicle with direct investments in, we
believe, a significantly undervalued portfolio of healthcare,
financial services and digital media companies seeking to exploit
new technologies in their sectors.
Amongst our unlisted private equity investments Mantra Secondary
Opportunities continued to perform well as it pursued its niche
strategy investing globally in mature private equity limited
partnerships at attractive valuations. The fund is a six-year
lock-up which is coming to the end of its three-year investment
period. During the year a further USD 0.8 million was deployed
under the Company's USD 10 million commitment to the fund.
Hedge
The Hedge fund investment category is used mainly to access
long/short strategies which aim to deliver equity-equivalent
returns in rising markets but may be expected to outperform
equities in falling markets given the ability to employ shorting
strategies (selling borrowed stocks with a view to buying them back
less expensively in the future). Hedge fund holdings were 22.4% of
the Company's total investments at the year-end (2016: 16.3%) and
contributed 2.0% to the Company's gross total return.
Given our concerns regarding elevated equity market valuations
we were keen to add exposure to the Hedge fund investment category
during the year. The identification of the right quality of
managers and investment strategies is not easy in a sector which
has seen many expensive failures. We did, however, manage to make
two new investments. First, we invested GBP4.0 million in Sagil
Latin American Opportunities Fund ("Sagil"), a long/short fund
investing mainly in Latin American equity instruments. We monitored
Sagil for over a year before investing. The fund, which is run by a
boutique manager, has an outstanding long-term track record in all
market conditions and has delivered better than median equity
returns but with significantly lower volatility. Performance since
our investment in Sagil has been outstanding. Second, we invested
GBP4.2 million in the Helium Selection Fund, a boutique managed
fund focused predominantly on merger arbitrage and event-driven
investing in Europe and the US.
Overall the Company's Hedge fund sleeve performed well during
the year. We are currently seeking one or two additional
investments to take our Hedge fund allocation up to the full 30% of
portfolio value permitted under the Company's investment
limits.
Property
The Company's Property investment category is designed to
provide access to niche or specialist property opportunities. At
the year-end it represented 9.4% of the Company's total investments
(2016: 11.9%) and contributed 1.1% to the Company's gross total
return.
Last year we were unable to find any new property funds of
sufficient quality to add to the Company's Property sleeve. We
therefore made no new investments.
We did, however, make an additional GBP0.3 million investment in
Summit Germany Limited, a UK-listed fund investing in German
property. The fund focuses on major cities and has a bias towards
offices and industrial buildings. It delivered good returns during
the year. The Company's other main property holding is in CEIBA
Investments Limited, an unlisted company which has invested in
good-quality commercial and hotel properties in Cuba. These assets
generate hard currency cash flows and have performed well in recent
years which has resulted in a series of valuation uplifts. Happily,
Hurricane Irma caused minimal damage to the company's
properties.
During the year we also sold our remaining holding in Ediston
Property Investment Company, a UK-listed investor in UK regional
retail and commercial property. The fund is very well managed and
had met our target returns so, with the uncertainties of the Brexit
process beginning to weigh on the UK economy, we decided to make a
final exit.
Specialist Geography
This investment category is used to obtain specialist equity or
debt market exposure to particular countries or regions which
reflects our macro-economic preferences within developed, emerging
or frontier markets. Specialist Geography holdings represented 9.7%
of the Company's total investments at the year-end (2016: 10.0%)
and contributed 1.0% to the Company's gross total return.
We made two new investments in the Specialist Geography category
during the year. First we invested GBP3.8 million in Ashmore SICAV
EM Local Currency Broad Bonds Fund, an unlisted daily-dealt fund
managed by Ashmore Group, an emerging markets specialist. The fund
invests in local currency debt instruments issued mainly by
governments. Our rationale for investing is that a number of
emerging market currencies are now recovering from significant
corrections and may be set for a period of stability against an
improving global macro-economic backdrop. The fund's current yield
is nearly 7%. We also invested GBP4.5 million in the KLS Sloane
Robinson Emerging Market Equity Fund, an open-ended daily-dealt
vehicle which invests in listed emerging market stocks with a
strong bias towards Asia. This replaced the Company's holding in
Genesis Emerging Markets Limited, a UK-listed vehicle which had
delivered strong returns since our investment in early 2016.
Outlook
Our message this year is very similar to that of 12 months ago.
Global financial markets are generally at high valuations but face
significant levels of financial and political uncertainty as we
move into 2018. We relish the challenge this creates for us, as our
job is to use the Company's flexible mandate to provide our
investors with a high-quality alternative to mainstream investment
vehicles by offering an attractive and differentiated source of
diversified return.
The Company faces its triennial continuation vote in January
2018. We believe we now have some very positive messages to convey
to shareholders as we approach the vote. Above all, we have
completed the essential and challenging restructuring of the
Company's poorly-positioned and relatively illiquid inherited
portfolio. As a consequence, investment performance has improved
significantly with two consecutive years of satisfactory returns.
We also believe that the Company's investment portfolio currently
contains a range of attractive NAV growth opportunities.
We therefore hope very much that shareholders will support the
Company's continuation in January 2018.
Ian Barrass and James de Bunsen
Fund Managers
INVESTMENT PORTFOLIO
Market
Value Portfolio
Investments Focus GBP'000 %
CEIBA Investments Limited(4) Property 6,862 5.5
BlackRock European Hedge Fund
Limited(3) Hedge 6,717 5.4
Mantra Secondary Opportunities(4) Private Equity 5,887 4.8
Majedie Asset Management Tortoise
Fund(3) Hedge 5,548 4.5
Riverstone Energy Limited(2) Private Equity 5,391 4.4
Schroder Gaia Indus PacifiChoice
Asia Fund(3) Hedge 5,232 4.2
Specialist
The Biotech Growth Trust(2) Sector 5,105 4.1
Baring Vostok Investments Limited
Core(1) Private Equity 5,063 4.1
Summit Germany Limited(2) Property 4,771 3.9
Helium Selection Fund(3) Hedge 4,607 3.7
----------------------------------------------------- --------------------- -------- ----------
Ten largest 55,183 44.6
Polar Capital Global Financials Specialist
Trust plc(2) Sector 4,588 3.7
KLS Sloane Robinson Emerging Specialist
Market Equity Fund(3) Geography 4,410 3.6
Sagil Latin America Opportunities
Fund(3) Hedge 4,355 3.5
Harbourvest Global Private Equity
Limited(2) Private Equity 4,222 3.4
Eurovestech plc(1) Private Equity 4,100 3.3
Specialist
Worldwide Healthcare Trust PLC(2) Sector 3,870 3.1
Ashmore SICAV Emerging Markets Specialist
Local Currency Broad Fund(3) Geography 3,843 3.1
Specialist
Toro Limited(2) Sector 3,821 3.1
NB Distressed Debt Investment Specialist
Fund Limited - Global Shares(2) Sector 3,754 3.0
Princess Private Equity Holding
Limited(2) Private Equity 3,084 2.5
Twenty largest 95,230 76.9
Specialist
Tetragon Financial Group Limited(2) Sector 2,791 2.3
Standard Life Private Equity
Trust plc(2) Private Equity 2,736 2.2
Renewable Energy and Infrastructure Specialist
Fund II(4) Sector 2,718 2.2
Safeguard Scientifics, Inc.(2) Private Equity 2,596 2.1
Ashmore SICAV Emerging Markets Specialist
Short Duration Fund(3) Geography 2,582 2.1
Chenavari Capital Solutions Specialist
Limited(2) Sector 2,497 2.0
Axiom European Financial Debt Specialist
Fund Limited(2) Sector 2,487 2.0
Blackstone/GSO Loan Financing Specialist
Limited(2) Sector 2,485 2.0
Century Capital Partners IV
L.P.(4) Private Equity 1,433 1.2
Amber Trust SCA(4) Private Equity 1,391 1.1
----------------------------------------------------- --------------------- -------- ----------
Thirty largest 118,946 96.1
ASM Asian Recovery Fund(4) Hedge 1,334 1.1
Specialist
Firebird Republics Fund SPV(4) Geography 1,062 0.9
NB Distressed Debt Investment
Fund Limited - Extended Life Specialist
Shares(2) Sector 1,043 0.8
Specialist
EF Realisation Co Limited(2) Sector 613 0.5
Specialist
Zouk Solar Opportunities Limited(4) Sector 509 0.4
Specialist
Value Catalyst Fund Limited(4) Sector 97 0.1
Armadillo Investments Limited(4) Liquidation 70 0.1
Baring Vostok Investments Limited
Cell(4) Private Equity 14 0.0
Specialist
Prosperity Voskhod Fund Limited(4) Geography 2 0.0
Total Investments 123,690 100.0
---------------------------------------------------------------------------- -------- ----------
1 Listed on minor market
2 Listed on major market
3 Unlisted investment - with redemption
rights
4 Unlisted investment - without redemption rights
PRINCIPAL RISKS
The Board, with the assistance of Janus Henderson, has carried
out a robust assessment of the principal risks facing the Company
including those that would threaten its business model, future
performance, solvency or liquidity. In carrying out this
assessment, the Board has considered the market uncertainty arising
from the UK's negotiations to leave the EU. 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 Janus 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 Janus Henderson has a clearly
portfolio may not match defined investment philosophy
the performance of the and manages a broadly diversified
benchmark through divergent portfolio to mitigate this
geographic, sector or stock risk.
selection. In addition,
the Company may be affected
by economic conditions.
------------------------------------ ------------------------------------
Discount
The level of the discount The Company has the ability
varies depending upon performance, to issue and purchase its
market sentiment and investor own shares, including under
appetite. a tender offer, which can
reduce discount volatility.
------------------------------------ ------------------------------------
Regulatory/Operational
Failure to comply with The Board regularly considers
applicable legal and regulatory the risks associated with
requirements could lead the Company and receives
to a suspension of the both formal and regular
Company's shares, fines reports from Janus Henderson
or a qualified audit report. and third-party service
providers addressing these
A breach of Section 1158 risks.
of the Corporation Tax
Act 2010 could lead to
the Company being subject
to corporation tax on realised
capital gains.
Failure of Janus Henderson
or third-party service
providers could prevent
accurate reporting and
monitoring of the Company's
financial position.
------------------------------------ ------------------------------------
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 this 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, 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
as 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. 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 due to
take place at the 2018 AGM. The Directors fully 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 comprising FRS 102
and applicable law), give a true and fair view of the assets,
liabilities, financial position and profit of the Company; and
-- 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
14 December 2017
INCOME STATEMENT
Year ended Year ended
30 September 2017 30 September 2016
Revenue Capital Revenue Capital
return return Total return return Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- ----------------------- --------- --------- ---------- --------- --------- ----------
Gains on investments
at fair value through
profit or loss - 11,684 11,684 - 12,977 12,977
Exchange differences - (55) (55) - 254 254
2 Investment income 2,644 - 2,644 3,685 - 3,685
--------- --------- ---------- --------- --------- ----------
Gross revenue and
capital gains 2,644 11,629 14,273 3,685 13,231 16,916
Investment management
3 fees (91) (821) (912) (85) (766) (851)
4 Other expenses (442) - (442) (354) - (354)
--------- --------- ---------- --------- --------- ----------
Net return before
finance costs and
taxation 2,111 10,808 12,919 3,246 12,465 15,711
Finance costs - (1) (1) (7) (66) (73)
--------- --------- ---------- --------- --------- ----------
Net return before
taxation 2,111 10,807 12,918 3,239 12,399 15,638
5 Taxation (15) - (15) (16) - (16)
--------- --------- ---------- --------- --------- ----------
Net return after
7 taxation 2,096 10,807 12,903 3,223 12,399 15,622
--------- --------- ---------- --------- --------- ----------
Return per
7 ordinary share 5.23p 26.97p 32.20p 7.50p 28.85p 36.35p
--------- --------- ---------- --------- --------- ----------
The total column of this statement represents the Income
Statement of the Company. The revenue return and capital return
columns are supplementary to this and are prepared under guidance
published by the AIC. 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.
STATEMENT OF CHANGES IN EQUITY
Year ended 30 September 2017
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- ------------------- ---------- ----------- -------------- ------------ -------------- ----------
Balance at
1 October
2016 10,744 10,966 7,709 99,507 3,722 132,648
Net return
after taxation - - - 10,807 2,096 12,903
Shares bought
back - tender
offer (1,074) - (1,074) (13,059) - (13,059)
6 Ordinary dividends - - - - (2,750) (2,750)
Balance at
30 September
2017 9,670 10,966 8,783 97,255 3,068 129,742
---------- ----------- -------------- ------------ -------------- ----------
Year ended 30 September 2016
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- ------------------- ------------ ----------- -------------- ------------ ---------- ------------
Balance at
1 October
2015 10,744 10,966 7,709 87,108 1,917 118,444
Net return
after taxation - - - 12,399 3,223 15,622
6 Ordinary dividends - - - - (1,418) (1,418)
Balance at
30 September
2016 10,744 10,966 7,709 99,507 3,722 132,648
------------ ----------- -------------- ------------ ---------- ------------
STATEMENT OF FINANCIAL POSITION
2016
2017 GBP'000
Notes As at 30 September GBP'000
-------- ----------------------------- ---------- ------------------------
Fixed Assets
Investments held at fair
value through profit or
loss 123,690 111,935
Current assets
Investments held at fair
value through profit or
loss 4,718 22,868
Debtors 1,545 689
Cash at bank 155 -
Total current assets 6,418 23,557
---------- ------------------------
Creditors: amounts falling
due within one year (366) (2,844)
Net current assets 6,052 20,713
---------- ------------------------
Total assets less current
liabilities 129,742 132,648
---------- ------------------------
Capital and reserves
8 Called up share capital 9,670 10,744
Share premium account 10,966 10,966
Capital redemption reserve 8,783 7,709
Capital reserve 97,255 99,507
Revenue reserve 3,068 3,722
---------- ------------------------
Total equity shareholders'
funds 129,742 132,648
---------- ------------------------
Net asset value per ordinary
7 share 335.44p 308.66p
The financial statements were approved and authorised for issue
by the Board of Directors on 14 December 2017.
Graham Oldroyd
Director
CASH FLOW STATEMENT
Year ended
30 September Year ended
2017 30 September
GBP'000 2016 GBP'000
--------------------------------------- ------------- --------------
Cash flows from operating activities
Net return before taxation 12,918 15,638
Add back: finance costs 1 73
Gains on investments held at fair
value through profit or loss (11,684) (12,977)
Withholding tax on dividends deducted
at source (15) (16)
Increase in prepayments and accrued
income (381) (47)
Increase/(decrease) in accruals
and deferred income 32 (190)
Exchange movements: cash and cash
equivalents - (6)
------------- --------------
Net cash inflow from operating
activities 871 2,475
------------- --------------
Cash flows from investing activities
Purchases of investments held
at fair value through profit or
loss (36,122) (43,465)
Sales of investments held at fair
value through profit or loss 33,068 55,434
Purchases of current asset investments
held at fair value through profit
or loss (27,631) (51,612)
Sales of current asset investments
held at fair value through profit
or loss 45,781 35,739
------------- --------------
Net cash inflow/(outflow) from
investing activities 15,096 (3,904)
------------- --------------
Cash flows from financing activities
Share buybacks (13,059) -
Equity dividends paid (2,750) (1,418)
Interest paid (1) (73)
Net cash outflow from financing
activities (15,810) (1,491)
Net increase/(decrease) in cash
and equivalents 157 (2,920)
Cash and cash equivalents at beginning
of year (2) 2,912
Exchange movements - 6
Cash and cash equivalents at end
of year 155 (2)
Comprising:
Cash held/(overdrawn) at bank 155 (2)
155 (2)
------------- --------------
The accompanying notes are an integral part of the financial
statements.
NOTES TO THE FINANCIAL STATEMENTS
1 Accounting policies
Basis of preparation
The Company is a registered investment company
as defined in Section 833 of the Companies Act
2006 and is incorporated in the United Kingdom.
It operates in the United Kingdom and is registered
at the address set out in the Annual Report.
The Financial Statements have been prepared in
accordance with the Companies Act 2006, FRS 102
- the Financial Reporting Standard applicable
in the UK and Republic of Ireland (which is effective
for periods commencing on or after 1 January 2015)
and with the Statement of Recommended Practice
'Financial Statements of Investment Trust Companies
and Venture Capital Trusts' ("SORP") issued in
November 2014 and updated in January 2017 with
consequential amendments.
The Company has early adopted the amendments to
FRS 102 in respect of fair value hierarchy disclosures
as published in March 2016.
The principal accounting policies applied in the
presentation of these Financial Statements are
set out below. These policies have been consistently
applied to all the years presented. There have
been no significant changes to the accounting
policies compared to those set out in the Company's
Annual Report for the year ended 30 September
2016.
The Financial Statements have been prepared under
the historical cost basis except for the measurement
at fair value of investments. In applying FRS
102, financial instruments have been accounted
for in accordance with Sections 11 and 12 of the
Standard. All of the Company's operations are
of a continuing nature.
Going concern
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 to continue in operational existence
for at least twelve months from the date of approval
of the financial statements. The Company's shareholders
are asked every three years to vote for the continuation
of the Company, this will be put to shareholders
at the AGM in January 2018. The validity of the
going concern basis depends on the outcome of
the continuation vote on which the Board is recommending
that shareholders vote in favour. In particular,
no provision has been made for the cost of winding-up
the Company or liquidating its investments in
the event that the resolution is not passed. Having
assessed these factors, the principal risks and
other matters discussed in connection with the
viability statement, the Board has determined
that it is appropriate for the financial statements
to be prepared on a going concern basis.
2017 2016
2 Investment Income GBP'000 GBP'000
------ ----------------------------------------------- ------------ ---------
Income from equity shares and securities
UK investment income 286 224
Overseas income 2,297 3,242
Property income distributions 32 176
------------ ---------
2,615 3,642
------------ ---------
Other income
Interest from money market funds 27 35
Bank interest - 7
Other income 2 1
------------ ---------
29 43
------------ ---------
Total income 2,644 3,685
------------ ---------
3 Investment Management 2017 2016
Fees GBP'000 GBP'000
------ ----------------------------------------- ------------ ---------
Revenue
Investment management
fee 91 85
Capital
Investment management
fee 821 766
Total 912 851
------------ ---------
2017 2016
4 Other expenses GBP'000 GBP'000
----- ------------------------------------------------ ------------ -------------------------
Revenue
General expenses 263 179
Directors' fees 107 105
Auditor's remuneration - fees payable
to the Company's auditor for the audit
of the Company's annual accounts(1) 38 36
Depositary charges 34 34
------------ -------------------------
442 354
------------ -------------------------
1 These figures include VAT. Fees for audit services
excluding VAT were GBP31,450 (2015: GBP30,000).
5 Taxation
a) Analysis of the charge for the year
2017 2016
GBP'000 GBP'000
----- ------------------------------------------------ ------------ -------------------------
Overseas withholding taxes 30 31
Overseas tax reclaimable (15) (15)
Total taxation charge for the year 15 16
------------ -------------------------
b) Factors affecting the tax charge for the year
2017 2016
GBP'000 GBP'000
----- ------------------------------------------------ ------------ -------------------------
Net return on ordinary activities before
taxation 12,918 15,638
------------ -------------------------
Corporation tax 19.5% (2016: 20.0%) 2,519 3,128
Non-taxable dividends (461) (658)
Non-taxable gains on investments (2,278) (2,646)
Gains on disposal of non-qualifying
offshore funds 8 248
Movement in unutilised management expenses 201 (72)
Non-taxable currency losses 11 -
Overseas withholding tax 15 16
Total taxation charge for the year 15 16
------------ -------------------------
The Company's profit for the accounting year is
taxed at an effective rate of 19.5% (2016: 20.0%).
The Company is subject to taxation on gains arising
from the realisation of investments in non-qualifying
offshore funds but is otherwise exempt from taxation
on chargeable gains. Excess management expenses
are available to be offset against future taxable
profits including any profits on the disposal
of interests in non-qualifying offshore funds.
The position at the year end is as follows:
2017 2016
GBP'000 GBP'000
------------------------------------------------ ------------ -------------------------
Excess management expenses 6,494 5,458
Unrealised appreciation on non-qualifying
offshore funds (4,833) (4,387)
Excess management expenses 1,661 1,071
------------ -------------------------
No provision for deferred taxation has been made
in the current or prior accounting year. The Company
has not provided for deferred tax on capital gains
or losses arising on the revaluation and disposal
of investments as it is exempt from tax on these
items because of its investment trust status except
for those arising from the realisation of investments
in non-qualifying offshore funds. The Company
has not recognised a deferred tax asset totalling
GBP282,000 (2016: GBP182,000) based on a prospective
corporation tax rate of 17% (2016: 17%). The UK
Government announced in July 2015 that the corporation
tax rate is set to be cut to 19% in 2017 and 18%
in 2020. These reductions in the standard rate
of corporation tax were substantially enacted
on 26 October 2015 and became effective from 18
November 2015. The rate for 2020 was subsequently
lowered to 17% by the Finance Act 2016. The deferred
tax asset arises as a result of having unutilised
management expenses in excess of unrealised appreciation
on non-qualifying offshore funds. These expenses
will only be utilised, to any material extent,
if the Company has profits chargeable to corporation
tax in the future because changes are made to
the tax treatment of the capital gains made by
investment trusts, where disposals of non-qualifying
offshore funds would otherwise result in a tax
charge or there are other changes to the Company's
investment profile which require them to be used.
2017 2016
6 Dividends on equity shares GBP'000 GBP'000
----- ------------------------------------------------ ------------ -------------------------
2016 final dividend paid 3.80p (2015:
3.30p) 1,633 1,418
2016 special dividend 2.60p (2015:
nil) 1,117 -
------------ -------------------------
2,750 1,418
The proposed final dividend of 4.75p per share
is subject to approval by shareholders at the
Annual General Meeting and has not been included
as a liability in these financial statements.
This dividend of GBP1,837,235 (2016: GBP2,750,000
including the special dividend) is the basis on
which the requirements of Section 1158 of the
Corporation Tax Act 2010 are considered. The revenue
available for distribution by way of dividend
for the year is GBP2,096,000 (2016: GBP3,223,000).
All dividends have been paid or will be paid out
of revenue profits.
Returns/Net asset value per ordinary
7 share
----- -------------------------------------------- ---------------- -------------------------
The return per ordinary share is based on the
net return attributable to the ordinary shares
of GBP12,903,000 (2016: GBP15,622,000) and on
40,068,008 ordinary shares (2016: 42,976,264)
being the weighted average number of ordinary
shares in issue during the year. The return per
ordinary share can be further analysed between
revenue and capital, as below:
2017 2016
GBP'000 GBP'000
---------------- -------------------------
Net revenue return 2,096 3,223
Net capital return 10,807 12,399
---------------- -------------------------
Net total return 12,903 15,622
---------------- -------------------------
Weighted average number of ordinary
shares in issue during the year 40,068,008 42,976,264
2017 2016
Pence Pence
Revenue return per ordinary share 5.23 7.50
Capital return per ordinary share 26.97 28.85
---------------- -------------------------
Total return per ordinary share 32.20 36.35
---------------- -------------------------
The Company does not have any dilutive securities,
therefore the basic and diluted returns per share
are the same.
The net asset value per share is based on the
net assets of GBP129,742,000 (2016: GBP132,648,000)
divided by the number of shares in issue at the
year end 38,678,638 (2016: 42,976,264). The net
asset value per ordinary share at 30 September
2017 was 335.44p (2016: 308.66p).
The movements during the year of the assets attributable
to the ordinary shares were as follows:
2017 2016
GBP'000 GBP,000
---------------- -------------------------
Total net assets at 1 October 132,648 118,444
Total net return on ordinary activities
after taxation 12,903 15,622
Ordinary dividends paid in the year (2,750) (1,418)
Ordinary shares bought back - tender
offer (13,059) -
---------------- -------------------------
Net assets attributable to the ordinary
shares at 30 September 129,742 132,648
---------------- -------------------------
Nominal
value of
total shares
Shares in issue
8 Share capital in issue GBP'000
----- -------------------------------------------- ---------------- -------------------------
Allotted, issued and fully
paid ordinary shares of 25p
At 1 October 2016 42,976,264 10,744
Shares bought back and cancelled (4,297,626) (1,074)
---------------- -------------------------
At 30 September 2017 38,678,638 9,670
---------------- -------------------------
Allotted, issued and fully
paid ordinary shares of 25p
At 1 October 2015 42,976,264 10,744
At 30 September 2016 42,976,264 10,744
---------------- -------------------------
In January 2017, a tender offer, for up to 10%
of the Company's shares, was fully subscribed.
As a result, 4,297,626 ordinary shares were bought
back and subsequently cancelled. The cost of the
purchases amounted to GBP12,952,000 and a further
GBP107,000 of costs were incurred in connection
with the tender offer. The total costs of GBP13,059,000
were charged to Capital Reserve.
Every shareholder has the right to one vote for
each share held.
9 Related Party Transactions
Other than the relationship between the Company
and its Directors, the provision of services by
the Manager is the only related party arrangement
currently in place as defined in the Listing Rules.
Other than fees payable by the Company in the
ordinary course of business and the provision
of sales and marketing services, there have been
no material transactions with this related party
affecting the financial position of the Company
during the year under review.
10 2017 financial statements
The figures and financial information for the
year ended 30 September 2017 are compiled from
an extract of the latest financial statements
of the Company and do not constitute the statutory
accounts for that year. Those financial statements
included the report of the auditors which was
unqualified and did not contain a statement under
either section 498(2) or section 498(3) of the
Companies Act 2006. They have not yet been delivered
to the Registrar of Companies.
11 2016 financial statements
The figures and financial information for the
year ended 30 September 2016 are compiled from
an extract of the published financial statements
of the Company and do not constitute the statutory
accounts for that year. Those financial statements
have been delivered to the Registrar of Companies
and included the report of the auditors which
was unqualified and did not contain a statement
under either section 498(2) or section 498(3)
of the Companies Act 2006.
12 Dividend
The final dividend, if approved by the shareholders
at the Annual General Meeting, of 4.75p per ordinary
share will be paid on 7 February 2018 to shareholders
on the register of members at the close of business
on 12 January 2018. The Company's shares will
be traded ex-dividend on 11 January 2018.
13 Annual Report
Copies of the Annual Report for the year ended
30 September 2017 will be posted to shareholders
in December and will be available on the Company's
website www.hendersonalternativestrategies.com
or in hard copy from the Corporate Secretary,
Henderson Secretarial Services Limited, 201 Bishopsgate,
London EC2M 3AE.
14 Annual General Meeting
The Annual General Meeting will be held on Wednesday
24 January 2018 at 11.30am at 201 Bishopsgate,
London EC2M 3AE.
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
For further information please contact:
Ian Barrass James de Sausmarez
Fund Manager Director and Head of Investment
Henderson Alternative Strategies Trusts
Trust plc Henderson Investment Funds
Telephone: 020 7818 2964 Limited
Telephone: 020 7818 3349
James de Bunsen Sarah Gibbons-Cook
Fund Manager Investor Relations and
Henderson Alternative Strategies PR Manager
Trust plc Henderson Investment Funds
Telephone: 020 7818 3869 Limited
Telephone: 020 7818 3198
This information is provided by RNS
The company news service from the London Stock Exchange
END
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