TIDMDTL
RNS Number : 2288M
Dexion Trading Limited
22 August 2013
Dexion Trading Limited (the 'Company')
INTERIM REPORT AND ACCOUNTS
The Company has today, in accordance with DTR 6.3.5, released
its Interim Report and Accounts for the period ended 30 June 2013.
The Report is available via www.dexiontrading.com and will shortly
be submitted to the National Storage Mechanism and will also
shortly be available for inspection at www.hemscott.com/nsm.do
SUMMARY INFORMATION
Principal Activity
Dexion Trading Limited (the 'Company') is a Guernsey authorised
closed-ended investment company listed on the London Stock
Exchange. Trading in the Company's Shares commenced on 29 November
2004.
Investment Objective and Investment Policy
The Company's investment objective and policy mirrors that of
Permal Macro Holdings Limited ('Permal Macro') and it operates as a
feeder fund into Permal Macro.
Permal Macro's investment objective is to provide investment
returns that have lower risk than traditional investment returns
and, over time, to achieve above market returns. To achieve this
objective, Permal Macro seeks high-quality Portfolio Managers and
invests its assets in either discretionary investment accounts or
investment vehicles managed by such Portfolio Managers. Permal
Macro's asset allocation policy is currently structured to target
an annualised return over the medium term of approximately 8 per
cent. to 12 per cent. with annualised volatility of 4 per cent. to
6 per cent. (although Permal Macro may alter this allocation policy
at any time at its sole discretion without reference or
notification to Permal Macro shareholders, including the
Company).
Permal Macro's investments are made indirectly in the global
marketplace with exposure to the financial, metal, energy,
agricultural, currency and other markets. In order to manage the
overall volatility of its investments, Permal Macro seeks to
diversify its portfolio through investment in a range of Portfolio
Funds seeking to implement trading strategies in numerous U.S. and
international currency, futures, options, forward and other
derivative markets. Some of Permal Macro's Portfolio Managers may
rely principally on equity strategies (e.g. long/short, long only),
while others may rely principally on fixed income or relative value
strategies. Permal Macro's investments are both listed and unlisted
securities.
Shareholder Information
The Company announces its net asset value on a monthly basis
together with a commentary on investment performance. Estimated net
asset values are normally provided weekly. Share price, net asset
value and performance information can also be found by eligible
Shareholders on the Company's website page which can be accessed
via www.dexiontrading.com. However, information on that website
does not form part of, nor is it incorporated by reference into
this document and that information is not available to certain
overseas Shareholders.
Financial Highlights
30 June 31 December 30 June
2013 2012 2012
----------------------------- ---------- ------------ ----------
Total Net Assets GBP132.9m GBP129.0m GBP125.8m
Net Asset Value per Share 139.15p 135.10p 131.56p
Mid-Market Share Price 133.13p 118.63p 115.75p
Discount to Net Asset Value (4.33)% (12.19)% (12.02)%
----------------------------- ---------- ------------ ----------
As at 19 August 2013, the discount had moved to 3.40 per cent..
Net Asset Value per Share and Mid-Market Share price stood at
138.58p and 133.87p respectively.
CHAIRMAN'S STATEMENT
I have pleasure in presenting this interim report for the six
months ended 30 June 2013 and would like to thank all Shareholders
for their continued support and interest.
The period under review has seen global markets generally enjoy
a positive backdrop of incremental economic improvement, modest
inflation, highly accommodative monetary policies, and low
volatility. Systemic policy risk continued to ebb, though bank
failure in Cyprus and sequestration cuts in the U.S. may create
ongoing headwinds.
During the six month period to 30 June 2013, the net asset value
('NAV') of the Company's Shares rose by 3.00 per cent.. This
increase is significantly better than the benchmark HFRX Macro
Index which fell by 1.07 per cent. over the same period. Over the
period the Company's Shares traded at an average discount to their
NAV of 7.95 per cent. and ended the period at a discount to NAV of
4.33 per cent..
Consequently, and as has happened in recent years, the rolling
12 month discount floor provision was triggered in February 2013. A
Continuation Vote was passed by Shareholders on 3 May 2013, with
73.6 per cent. of votes cast being in favour of continuance. The
Board would like to thank Shareholders for their support.
During May, the Directors determined that where the Company's
Shares have traded at an average discount to NAV equal to or in
excess of 3 per cent. in any calendar quarter, the Company may (at
the discretion of the Directors) make a redemption offer to
Shareholders for up to 30 per cent. of the Shares then in issue
(excluding Shares held in treasury). The discount is to be
calculated by reference to the weekly NAV estimates released in
that period and the closing mid-market Share price 5 business days
after each such estimate is released. Such redemption offer (if
made) would be at the Net Asset Value per Share at a redemption
date determined by the Directors following closing of any
redemption offer, less all costs attributable to that redemption
offer.
The first discount calculation period commenced on 1 July 2013
and will close on 30 September 2013. If the Board were to decide
that the Company should make a redemption offer in the
circumstances described above, terms and conditions of such would
be determined and announced at the relevant time.
I am pleased to report that the Investment Adviser, with effect
from 1 July 2013, has agreed to reduce their fee from 2 per cent.
to 1 per cent. per annum.
The Board and Manager continue to recognise the considerable
experience of the Investment Adviser. Since becoming a feeder fund
to Permal Macro Holdings Limited on 1 October 2007, the Company's
NAV has increased by 17.58 per cent. to June 2013, whilst the HFRX
Macro Index has fallen by 6.64 per cent. over the same period.
I look forward to writing to Shareholders again at the time of
the Company results for the full year 2013.
Christopher Spencer
Chairman
21 August 2013
MANAGER'S REPORT
The net asset value of the Company's Shares was up 3.0 per cent.
in the first half of 2013.
The following provides the Investment Adviser's overview of the
performance (in U.S. dollar terms) of the Portfolio by hedge fund
sub-strategy, over the period under review. Performance is shown
net of the underlying managers' fees and expenses only. References
to the Portfolio are, where the context requires, to the portfolio
of Permal Macro Holdings Ltd. ('Permal Macro' or the 'Fund'), of
which the Company is a feeder fund.
Discretionary and Systematic strategies returned 8.3 per cent.
and -2.4 per cent. respectively over the period. Natural Resources
was down 10.2 per cent., while Relative Value Arbitrage was up 6.1
per cent..
General
The first half of 2013 started positively for global markets
with many of the tail risks that had loomed through 2012 decreasing
somewhat and markets initially rallied in the lower volatility
environment. A Euro crisis in Cyprus and election stalemate in
Italy temporarily stalled the rally, which then continued through
the middle part of the first half of the year, buoyed by improving
U.S. economic data, abundant liquidity throughout financial
markets, and a resolution of the election in Italy. This burst of
optimism carried through into May, but did not last long as
volatility returned mid-month on fears of sooner-than-expected
quantitative easing tapering. June provided no relief, as concerns
about the Chinese economy hit emerging markets amid tightening
credit conditions and preliminary estimate Chinese purchasing
managers' indices fell to a nine month low. Markets were placated
in the final week after comments from the Federal Reserve that
monetary policy would remain accommodative should the U.S. economy
fall short of forecasts. The People's Bank of China also took steps
to alleviate liquidity concerns for local banking institutions.
Equity Markets
Global equity markets had a mixed first half of the year, with
the major developed market indices rallying through much of the
period and finishing higher, while emerging market indices
struggled after January and finished lower. The Nikkei 225 was the
big winner rising 31.6 per cent. as the new Abe administration
announced a JPY10.3 trillion emergency stimulus package and Bank of
Japan announced it would double the nation's money supply through
the purchase of government bonds.
The S&P 500 rose 12.6 per cent., hitting an all time high in
late May before volatility resurfaced on Fed tapering speculation.
European equities were up early in the first half of the year with
German business sentiment stronger-than-expected, but the
re-emergence of a euro crisis slowed the momentum. The resolution
of the situations in Cyprus and Italy helped to reignite the rally
but the European equity markets were hit hard in June as the region
continued to struggle to find a solution to deal with rising
unemployment, while austerity measures continued to hamper growth
as the European economy contracted for the sixth consecutive
quarter. After participating in the January rally, emerging market
equities suffered from the People Bank of China's tightening policy
and underwhelming Chinese economic data. The MSCI Emerging Markets
Asia Index fell 4.5 per cent. and the MSCI Emerging Markets Latin
America Index fell 11.3 per cent. in the period.
Fixed Income
The long-term upward trend in developed market bond prices
reversed in the late stages of the first half of the year on
concerns of a rising interest rate environment. In the first four
months of the year, U.S. yields fell modestly with the front-end of
the curve anchored by the Fed's commitment to keep rates low
through mid-2015. In May all major global bond yields moved
markedly higher, driven by the possibility of Fed tapering and the
strong sell-offs in longer-dated maturities. U.S. Treasury yields
led the way, with the 10-year up significantly over the first half
of the year, while non-U.S. yields were also dragged higher by
increasing correlations. In Japan, Japanese Government Bonds
experienced a sharp sell-off starting in the second quarter
following the aggressive policy measures by the Bank of Japan.
Emerging market bonds also sold-off sharply as they experienced
considerable capital outflows.
Foreign Exchange
The most notable market movement in foreign exchange in the
first half of the year was the aggressive devaluation of the JPY by
the Bank of Japan in its attempt to stimulate the economy. JPY
weakening started in 2012 and carried through the majority of the
first half of the year, declining below 100 against the USD for the
first time since May 2009. Early in the half year, the EUR
strengthened versus the USD on a perceived abatement of euro zone
tail risks, only to weaken on a re-emergence of issues in Europe
and hovered around the $1.30 mark, ending the period approximately
1.0 per cent. weaker. The GBP weakened by 5.8 per cent. against the
USD, suffering from signs of stagnation and a Moody's downgrade.
Emerging market currencies generally weakened against the USD as
the markets suffered from significant outflows, while the USD was
supported by Fed tapering talks.
Commodities
Commodity prices moved broadly lower in the first half of the
year with the Dow Jones-UBS Commodity Index down 10.5 per cent..
The standout detractor was gold bullion, which plummeted 27.0 per
cent. as physical demand ebbed, the strengthening USD reduced
demand for the precious metal as an alternative currency, and
investor appetite for riskier assets increased. Gold bullion added
to pressures on the gold equities sector, which also ended the
first half of the year broadly lower. The energy complex rose, as
crude oil prices climbed on strong U.S. economic data and
increasing Middle East tensions, and natural gas prices surged 20.1
per cent. in the first quarter only to give the majority of the
gains back in June as forecasts of milder weather across the
eastern U.S. signalled lower consumption. Base metal prices moved
lower on softening demand and signs of slowing industrial growth in
China. Agricultural commodity prices also fell with the Rogers
International Commodity Agriculture Index down 7.9 per cent..
Performance by Strategy
Discretionary managers
Discretionary managers account for a 58 per cent. allocation at
30 June 2013. Most managers enjoyed a strong first half of the year
benefiting particularly from the 'Japan trade', which was expressed
primarily via long the Nikkei and Topix, and short JPY. Over that
period, the 'long U.S. trade' also proved rewarding and, in
particular, long exposure to not only the S&P 500 but also
specific sectors, such as U.S. financials. In the currency sector,
managers' long USD bias against the GBP and EUR added to returns,
although this trade subsequently detracted slightly from returns in
the second quarter of the year. Tactical trading in European
peripheral bonds also proved positive over the first quarter. As
the year progressed, the Japan trade continued to be profitable for
managers, but became more tactical and optionalised, with gains
derived partly from the volatility in the JPY and Japanese
equities. Other managers went a step further and diversified their
profit stream away from Japan, choosing to successfully capitalise
on the U.S. trade primarily via continued longs in U.S. equities;
while also shorting U.S. Treasuries and implementing Eurodollar
curve steepeners which proved particularly profitable in June.
Indeed in the last two months of the period, developed market
focused managers' short global fixed income bias turned out to be
very profitable, helping to offset losses from the more emerging
market centred managers, as some of these managers suffered from
their long exposure to emerging market currencies and bonds.
Systematic managers
Systematic managers account for a 19 per cent. allocation at 30
June 2013. After being essentially flat in the first quarter of the
year, these managers struggled during what turned out to be a
particularly challenging second quarter. The trend-followers'
long-held long exposure to government bonds proved particularly
punishing amid the reversal in the last two months of the period in
the fixed income sector. The broad decline in equities in June also
proved detrimental. Additionally losses stemmed from long exposure
to commodity currencies (e.g., AUD and CAD). Among the non-trend
following managers, performances were more mixed, with gains coming
from those managers who held short positions in the NZD and AUD,
and losses from those managers with long positions in the JPY.
Relative Value Arbitrage
Relative Value Arbitrage represents a 7 per cent. allocation at
30 June 2013.A strong start to the year, driven by the buoyant
equity markets and declining stock correlations, overwhelmed
subsequent losses in June when fundamental stock picking accounted
for little as the market sell-off gathered steam.
Natural Resources
Natural Resources managers account for a 5 per cent. allocation
at 30 June 2013. Losses during the period centered primarily around
the sell-off in gold and emerging-market related equities. Other
losses came in the energy complex stemming from long crude oil at
the beginning of the second quarter, as well as long natural gas
exposure in June.
Outlook
Managers continue to hold a more favourable view of developed
markets vis-à-vis emerging markets, particularly towards the U.S.
and in Japan, where positive growth momentum continues. In the
U.S., the economy continues to exhibit resilience and to be boosted
by solid data in the housing and employment sectors. As a result,
monetary policy in the U.S. is expected to differ from its peers,
especially the Eurozone. Indeed, while the Fed has gone through
great pains to explain that it does not intend to tighten, it has
become virtually 'a fait accompli' that it will begin tapering in
September. As a result, the U.S. dollar should continue to
strengthen while U.S. 10-year yields have the potential to rise
further. As the Fed moves to taper, the European Central Bank,
however, is expected to continue to implement accommodative
policies. While there has been some marginal improvement in
economic data in Europe, the region remains susceptible to
political upheaval.
In Japan, the reflationary story is set to gain renewed traction
after the recent volatility. On the political front, the victorious
July elections have made for a very stable political climate and
served as testament to the success of Abe's aggressive quantitative
easing. Japanese equities stand to continue their rise based on
continued aggressive easing, positive earnings announcements and
the continued depreciation of the yen. Views on the Chinese economy
remain rather bleak amid a combination of growth decidedly slowing
down and authorities clamping down on excessive credit creation.
Emerging markets are faced with a challenging environment as they
directly suffer the consequences of the Chinese slowdown as well as
possible further reversals of the large investor inflows they have
benefited so greatly from in recent years.
Discretionary Macro Manager Positioning
Fixed Income
In the U.S., managers are short U.S. Treasuries in light of
continued solid economic data. They also have exposure to
Eurodollar curve steepeners. In Japan, some managers have small
short exposure to Japanese Government Bonds. In Europe, managers
are maintaining long positions along the euro curve given the
sustained continued economic malaise. In the emerging markets, the
picture is more mixed with developed market focused managers having
a short emerging market fixed income bias, while emerging market
focused counterparts are maintaining long exposures in markets they
feel have oversold indiscriminately (e.g. front-end in Brazil),
particularly against a backdrop of relatively lower growth and
inflation. Such managers are also short markets that they feel are
particularly susceptible to continued liquidation due to technical
positioning (i.e. particularly high foreign ownership).
Currencies
The developed market focused managers have a long USD bias as
they view the Fed's language on tapering as supportive of the USD.
Short exposure tends to be held in commodity currencies given the
continued pressure on the asset class. They also maintain shorts in
JPY believing that the reflation trade has further room to run, as
well as CHF due to reduced safe haven flows.
Equities
Managers have long exposure to U.S., Japanese and European
equities based on the explicit pursuit of reflationary policies by
central banks and/or positive economic data. Positioning, however,
has become far more tactical in light of recent market volatility.
Accordingly, some managers also hold long exposure to volatility in
this asset class. Developed market focused managers are generally
short emerging market equities, while emerging market focused
counterparts have essentially neutralised their equity
exposures.
Commodities
Whilst light, exposure is generally expressed through short gold
positions.
Analysis of significant investments
The ten largest holdings of the Company as at 30 June 2013 are
set out below. These investments were held via Permal Macro.
% of
Market % of issued
Value Company's share
Name of Investment Strategy (GBP) net assets capital(1)
----------------------------------- --------------- ----------- ------------ ------------
Caxton Global Investments Limited Discretionary 12,275,349 9.24 0.21
Moore Global Investments Limited Discretionary 7,259,670 5.46 0.12
Tudor BVI Global Fund Limited Discretionary 6,847,616 5.15 0.07
Permal Fixed Income Special
Opportunities Limited Discretionary 5,786,054 4.35 0.92
Permal Systematic Macro Limited Systematic 5,485,369 4.13 2.61
Graham Prop Matrix Systematic 5,242,958 3.95 0.54
Permal Global Opportunities
Limited Discretionary 4,086,804 3.08 1.39
Permal WCM Limited Systematic 3,803,520 2.86 1.50
Gavea Fund Limited Discretionary 3,767,233 2.84 0.22
Permal Ash Macro Limited Discretionary 3,761,156 2.83 2.17
----------------------------------- --------------- ----------- ------------ ------------
58,315,729 43.89
--------------------------------------------------- ----------- ------------ ------------
(1) Percentages of issued share capital are based on estimates
of Fund capital provided by underlying manager as of 30 June
2013.
Note: The total of the top 10 largest investments at 31 December
2012 was 41.90 per cent. of the Company's net assets and no holding
was larger than 9.61 percent..
Source: Dexion Capital plc calculation based on Permal data.
Whilst it is generally considered best practice to disclose the
full portfolio of an investment company, the composition of Permal
Macro's investment portfolio is the subject of confidentiality
provisions with Permal Macro.
Dexion Capital (Guernsey) Limited
21 August 2013
STATEMENT OF PRINCIPAL RISKS AND UNCERTAINTIES
The Company's assets are mainly comprised of an investment in
Permal Macro which in turn invests in hedge funds. Its principal
risks are financial in nature. This risk, and the way in which it
is managed, is described in more detail in the Annual Report for
the year ended 31 December 2012.
The Company's principal risks and uncertainties have not changed
materially since the date of that report and are not expected to
change materially for the remaining six months of the year.
RESPONSIBILITIES STATEMENT
We confirm that to the best of our knowledge:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting;
-- the interim management report (comprising of the Chairman's
Statement and Manager's Report) meet the requirements of an interim
management report, and include a fair review of the information
required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the entity during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
By order of the Board
Christopher Spencer
Director
21 August 2013
CONDENSED UNAUDITED STATEMENT OF FINANCIAL POSITION
As at As at
30 June 31 December
2013 2012
Note GBP000 GBP000
---------------------------------------------- ------ -------- ------------
Assets
Current assets
Financial assets at fair value through profit
or loss 3a 132,827 128,932
Cash and cash equivalents 111 117
Other receivables 8 3
---------------------------------------------- ------ -------- ------------
Total assets 132,946 129,052
---------------------------------------------- ------ -------- ------------
Liabilities
Current liabilities
Accounts payable and accrued expenses 6 74 48
Total liabilities 74 48
---------------------------------------------- ------ -------- ------------
Net assets 132,872 129,004
---------------------------------------------- ------ -------- ------------
Represented by:
Shareholders' equity and reserves
Share Premium 86,683 86,683
Other reserves 46,189 42,321
---------------------------------------------- ------ -------- ------------
Total Shareholders' equity 132,872 129,004
---------------------------------------------- ------ -------- ------------
Net assets per Share 8 139.15p 135.10p
---------------------------------------------- ------ -------- ------------
CONDENSED UNAUDITED STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
For the For the
six month six month
period ended period ended
30 June 2013 30 June 2012
Note GBP000 GBP000
------------------------------------------ ------ --------------- ---------------
Income
Net gains/(losses) on financial assets at
fair value through profit or loss 3b 4,095 (2,191)
Net income/(loss) 4,095 (2,191)
------------------------------------------ ------ --------------- ---------------
Expenses
Directors' remuneration and expenses 9a (43) (43)
Secretarial fees 9d (15) (11)
Fund administration fee 9e (20) (19)
Custodian fee 9f (20) (19)
Audit fee and audit related fee (16) (15)
Legal fees (18) (22)
Other professional fees (40) (44)
Other operating expenses (55) (58)
------------------------------------------ ------ --------------- ---------------
Total operating expenses before finance
costs (227) (231)
------------------------------------------ ------ --------------- ---------------
Finance costs
Interest expense - (3)
------------------------------------------ ------ --------------- ---------------
Total comprehensive income for the period 3,868 (2,425)
------------------------------------------ ------ --------------- ---------------
Basic and Diluted return/(loss) per Share 11 4.05p (2.52p)
------------------------------------------ ------ --------------- ---------------
All items derive from continuing activities.
CONDENSED UNAUDITED STATEMENT OF CHANGES IN SHAREHOLDERS'
EQUITY
FOR THE SIX MONTH PERIOD ENDED 30 JUNE 2013
Share Other
Premium Reserves Total
GBP000 GBP000 GBP000
-------------------------------------------- ------------- -------------- -------
Balance at 1 January 2013 86,683 42,321 129,004
-------------------------------------------- ------------- -------------- -------
Total comprehensive income for the period
Total return for the period - 3,868 3,868
-------------------------------------------- ------------- -------------- -------
Transactions with Shareholders, recorded
directly in equity Purchases of own Shares
for cancellation - - -
-------------------------------------------- ------------- -------------- -------
Balance as at 30 June 2013 86,683 46,189 132,872
-------------------------------------------- ------------- -------------- -------
FOR THE SIX MONTH PERIOD ENDED 30 JUNE
2012 Share Premium Other Reserves Total
GBP000 GBP000 GBP000
-------------------------------------------- ------------- -------------- -------
Balance at 1 January 2012 86,683 43,173 129,856
-------------------------------------------- ------------- -------------- -------
Total comprehensive income for the period
Total loss for the period - (2,425) (2,425)
-------------------------------------------- ------------- -------------- -------
Transactions with Shareholders, recorded
directly in equity Purchases of own Shares
for cancellation - (1,586) (1,586)
-------------------------------------------- ------------- -------------- -------
Balance as at 30 June 2012 86,683 39,162 125,845
-------------------------------------------- ------------- -------------- -------
CONDENSED UNAUDITED STATEMENT OF CASH FLOWS
For the For the
six month six month
period period ended
ended 30 June 2012
30 June GBP000
2013
GBP000
----------------------------------------------------- ---------- -------------
Cash flows from operating activities
Total comprehensive income for the period 3,868 (2,425)
Adjustments for:
Net (gains)/losses on financial assets held at
fair value through profit or loss (4,095) 2,191
(Increase)/decrease in other receivables (5) 4
Increase in accounts payable and accrued expenses 26 15
Net cash flows used in operating activities (206) (215)
----------------------------------------------------- ---------- -------------
Cash flows from investing activities
Proceeds from sale of investments 200 3,000
----------------------------------------------------- ---------- -------------
Net cash flows from investing activities 200 3,000
----------------------------------------------------- ---------- -------------
Cash flows from financing activities
Purchases of own Shares for cancellation - (1,586)
----------------------------------------------------- ---------- -------------
Net cash flows used in financing activities - (1,586)
----------------------------------------------------- ---------- -------------
Net (decrease)/increase in cash and cash equivalents (6) 1,199
----------------------------------------------------- ---------- -------------
Cash and cash equivalents at the beginning of
the period 117 (629)
----------------------------------------------------- ---------- -------------
Cash and cash equivalents at the end of the period 111 570
----------------------------------------------------- ---------- -------------
Analysis of cash and cash equivalents at the
end of the period
Cash at bank 111 570
Cash flows from operating activities include:
Interest income on financial assets that are - -
not at fair value through profit or loss
Interest expense for financial liabilities that
are not at fair value through profit or loss - (3)
----------------------------------------------------- ---------- -------------
NOTES TO THE CONDENSED UNAUDITED INTERIM FINANCIAL
STATEMENTS
1. General information
Dexion Trading Limited (the 'Company') was incorporated with
limited liability in Guernsey, Channel Islands as a closed-ended
investment company on 28 October 2004. The Company's Shares were
listed on the London Stock Exchange on 29 November 2004.
2. Significant accounting policies
a) Statement of Compliance
The condensed financial statements for the six months ended 30
June 2013 have been prepared in accordance with IAS 34 'Interim
Financial Reporting' and the Disclosures and Transparency Rules of
the UK's Financial Conduct Authority.
The condensed interim unaudited financial statements do not
include all of the information required for the full annual
financial statements and should be read in conjunction with the
annual financial statements for the Company for the year ended 31
December 2012. The annual financial statements of the Company for
the year ended 31 December 2012 were prepared in accordance with
International Financial Reporting Standards ('IFRS').
The information for the year ended 31 December 2012 is derived
from the Financial Statements delivered to the UK Listing
Authority, and does not constitute Statutory Accounts as defined by
Guernsey Law. A copy of the Statutory Accounts for that year has
been delivered to the Shareholders. The Auditors' Report on those
Financial Statements was not qualified.
The accounting policies applied by the Company in these
condensed interim financial statements are consistent with those
applied by the Company in its annual financial statements for the
year ended 31 December 2012, except as described below.
The Company has adopted the following new standard with a date
of initial application of 1 January 2013:
-- IFRS 13 Fair Value Measurement. IFRS 13 establishes a single
framework for measuring fair value and making disclosures about
fair value measurements, when such measurements are required or
permitted by other IFRSs. In particular, it unifies the definition
of fair value as the price at which an orderly transaction to sell
an asset or to transfer a liability would take place between market
participants at the measurement date. It also replaces and expands
the disclosure requirements about fair value measurements in other
IFRSs, including IFRS 7 Financial Instruments: Disclosures. Some of
these disclosures are specifically required in interim financial
statements for financial instruments; accordingly, the Company has
included additional disclosures in this regard (see Note 12 of
these financial statements).
In accordance with the transitional provisions of IFRS 13, the
Company has applied the new fair value measurement guidance
prospectively, and has not provided any comparative information for
new disclosures. Notwithstanding the above, the change had no
significant impact on the measurements of the Company's assets and
liabilities.
Applicable new standards and interpretations not yet
effective
The following new standard has been issued but is not effective
for the financial year beginning 1 January 2013 and has not been
early adopted:
-- IFRS 9, 'Financial instruments', was updated in October 2010.
The standard addresses the classification and measurement of
financial assets. IFRS 9 divides all financial assets that are
currently in the scope of IAS 39 into two classifications - those
measured at amortised cost and those measured at fair value. The
standard is not applicable until 1 January 2015 but is available
for early adoption. IFRS 9 requires that the effects of changes in
credit risk of liabilities designated as at fair value through
profit or loss are presented in other comprehensive income unless
such treatment would create or enlarge an accounting mismatch in
profit or loss, in which case all gains or losses on that liability
are presented in profit or loss. Other requirements of IFRS 9
relating to classification and measurement of financial liabilities
are unchanged from IAS 39. Its adoption is not expected to have a
significant impact on the Company's financial statements because
the majority of the Company's financial assets are designated as at
fair value through profit or loss and there are presently no
financial liabilities designated as at fair value through profit or
loss.
b) Basis of Preparation
The financial statements are prepared in pounds sterling (GBP),
which is the Company's functional and presentation currency,
rounded to the nearest thousand pounds. They are prepared on a fair
value basis for financial assets at fair value through profit or
loss. Other financial assets and financial liabilities are stated
at amortised cost.
The preparation of the condensed unaudited interim financial
statements requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and
the reported amounts of assets and liabilities, income and expense.
Actual results may differ from these estimates.
In preparing these condensed unaudited interim financial
statements, the significant judgements made by management in
applying the Company's accounting policies and the key sources of
estimation uncertainty were the same as those that applied to the
financial statements for the year ended 31 December 2012.
The Company's Shares traded at a discount to net asset value
('NAV'); over the 12 month period ended 20 February 2013, the
Shares traded, on average, at a discount to estimated NAV of 11.57
per cent., therefore triggering a further continuation vote in
early 2013. A meeting of Shareholders was held on 3 May 2013, at
which the 2013 Continuation Resolution was passed with 73.6 per
cent. of the votes cast voting in favour.
On 23 April 2013 the Board announced that the Company will adopt
an enhanced discount control policy which will be subject to the
passing of the continuation resolution in each year. Where the
Shares have traded at an average discount to NAV equal to or in
excess of 3 per cent. in any calendar quarter (initially announced
at 5 per cent. and subsequently amended) the Company may make a
redemption offer to Shareholders for up to 30 per cent. of the
Shares in issue. Any such redemption offer would be at the NAV per
share at a redemption date determined by the Board less all costs
attributable to that redemption offer. The first discount
calculation period will be from 1 July 2013 to 30 September
2013.
After making enquiries and given the nature of the Company and
its investments, the Directors are satisfied that it is appropriate
to continue to adopt the going concern basis in preparing the
financial statements.
3. Financial Instruments
a) Categories of financial instruments
As at 31 December
As at 30 June 2013 2012
--------------------------------- --------------------- -------------------
Carrying Carrying
amount % of amount % of net
GBP000 net assets GBP000 assets
--------------------------------- -------- ----------- --------- --------
Financial assets and liabilities
at fair value through profit or
loss:
Classified as fair value through
profit or loss:
- Investment in Fund of Hedge
Funds 132,827 99.97% 128,932 99.94%
Loans and receivables: 119 0.09% 120 0.09%
Financial liabilities measured
at amortised cost: (74) (0.06)% (48) (0.03)%
--------------------------------- -------- ----------- --------- --------
132,872 100.00% 129,004 100.00%
--------------------------------- -------- ----------- --------- --------
Loans and receivables presented above represent cash and cash
equivalents and other receivables as detailed in the Condensed
Unaudited Statement of Financial Position.
Financial liabilities measured at amortised cost presented above
represent accounts payable and accrued expenses as detailed in the
Condensed Unaudited Statement of Financial Position.
b) Net gains/(losses) on financial assets at fair value through
profit or loss
For the For the
six month six month
period ended period ended
30 June 2013 30 June 2012
GBP000 GBP000
------------------------------------------ ------------- ------------
Realised gains on investments 25 244
Movement in unrealised gains/(losses) on
investments 4,070 (2,435)
------------------------------------------ ------------- ------------
Net gains/(losses) on financial assets at
fair value through profit or loss 4,095 (2,191)
------------------------------------------ ------------- ------------
4. Financial risk management
The Company's financial risk management objectives and policies
are consistent with those disclosed in the financial statements for
the year ended 31 December 2012. In the opinion of the Directors,
there have been no changes to the financial risk management
objectives.
5. Operating segments
Information on realised gains and losses derived from sales of
investments are disclosed in Note 3b) to the financial statements.
The Company is domiciled in Guernsey. Substantially all of the
Company's income is from its investment in Permal Macro which is
incorporated outside Guernsey. The Directors confirm that the
Company is only invested in one segment.
The Company has no assets classified as non-current assets. The
Company indirectly has a highly diversified portfolio of
investments held via Permal Macro and the largest single underlying
investment accounts for 9.24 per cent. (31 December 2012: 9.61 per
cent.) of the Company's net assets.
Segment information provided to management is measured on the
same basis as that used in the preparation of the Company's
financial statements. Therefore no reconciliation between segmental
information provided to management and the segmental information
disclosed in the financial statements is required.
The Company also has a highly diversified Shareholder population
with only 2 investors (31 December 2012: 2 investors) having more
than 10 per cent. of the issued capital of the Company, Ericsson
Pensionsstiftelse which held 25.5 per cent. and JPMorgan Securities
Plc which held 13.7 per cent. as at 30 June 2013 (31 December 2012:
Ericsson Pensionsstiftelse 19.8 per cent. and JPMorgan Securities
Plc 11.7 per cent.).
6. Accounts payable and accrued expenses
As at As at
30 June 31 December
2013 2012
GBP000 GBP000
------------------------- ------------ ----------------
Custodian fee 3 3
Fund administration fee 3 3
Directors' remuneration 21 -
Secretarial fee 4 4
Audit fee 12 11
Other professional fees 16 17
Other operating expenses 15 10
------------------------- ------------ ----------------
74 48
------------------------- ------------ ----------------
7. Share capital
As at As at
30 June 31 December
2013 2012
GBP000 GBP000
----------------------------------------------- ------------ ----------------
Authorised
Unlimited number of Shares at no par value - -
Issued at no par value
95,486,096 Shares (31 December 2012: 95,486,096 - -
Shares)
----------------------------------------------- ------------ ----------------
Also in issue is one subordinated non-voting Share.
Reconciliation of number of Shares
As at As at
30 June 31 December
2013 2012
No. of Shares No. of Shares
---------------------------------------------- ------------- -------------
Issued Shares at the beginning of the period 95,486,096 96,998,596
Purchases of own Shares for cancellation - (1,512,500)
---------------------------------------------- ------------- -------------
Total Shares in issue (excluding Treasury
Shares) at the end of the period 95,486,096 95,486,096
---------------------------------------------- ------------- -------------
Shares in treasury at the beginning of the
period 9,117,404 10,119,404
Treasury Shares cancelled - (1,002,000)
---------------------------------------------- ------------- -------------
Total Treasury Shares at the end of the
period 9,117,404 9,117,404
---------------------------------------------- ------------- -------------
The rights attaching to the Shares are as follows:
a) the holders of existing Shares shall confer the right to all
dividends in accordance with the Articles of Association of the
Company;
b) the existing Shareholders present in person or by proxy or
(being a corporation) present by a duly authorised representative
at a general meeting have, on a show of hands, one vote and on a
poll, one vote for every Share held; and
c) the capital and surplus assets of the Company remaining after
payment of all creditors shall, on winding-up or on a return (other
than by way of purchase or redemption of own Shares) after
conversion, be divided amongst the Shareholders on the basis of the
capital attributable to the Shares at the date of winding up or
other return of capital.
8. Net asset value
The net asset value of each Share is determined by dividing the
net assets of the Company attributed to the Shares of
GBP132,872,059 (31 December 2012: GBP129,003,585) by the number of
Shares in issue at the period end (excluding Treasury Shares) of
95,486,096 (31 December 2012: 95,486,096 Shares).
9. Related Parties and Significant Agreements
Related Parties
a) Directors' Remuneration and Expenses
The annual Directors' fees comprise GBP32,000 paid to Mr
Spencer, the Chairman, GBP28,000 to Ms Goodwin as Chairman of the
Audit Committee and GBP26,000 to Mr Niven. Mr Bowie has waived his
right to his fee of GBP26,000. Directors' fees payable at 30 June
2013 were GBP20,970 (31 December 2012: GBPNil).
b) Manager
Permal Macro paid the Investment Adviser an annual fee (payable
monthly in arrears) of 2.0 per cent. of the value of the Total
Assets attributable to its class A shares in Permal Macro held by
the Company (together with certain other operational costs and
expenses) until 30 June 2013. The Investment Adviser had agreed to
rebate half of that fee to the Manager in complete discharge of the
Company's obligation to pay fees to the Manager pursuant to the
Investment Management Agreement out of which 0.5 per cent. will be
available as a trail commission to Qualifying Investors. With
effect from 1 July 2013 the annual fee payable to the Investment
Adviser was reduced from 2.0 per cent. to 1.0 per cent.. Out of
this fee the Investment Adviser will rebate 40 basis points to the
Manager.
During the period ended 30 June 2013, Permal Macro paid a total
annual fee amounting to the equivalent of GBP1,313,281 (30 June
2012: GBP1,272,290) to the Investment Adviser and half of this fee
(the equivalent of
GBP656,640, 30 June 2012: GBP636,145) was paid by the Investment Adviser to the Manager.
The Manager is responsible for discharging all the fees of the
Investment Consultant.
The Investment Management Agreement may be terminated by either
party giving to the other not less than 9 months' notice, or
otherwise in circumstances where, amongst other things, one of the
parties has a receiver appointed of its assets or if an order is
made or an effective resolution passed for the winding up of one of
the parties or if, following a continuation vote not being passed
or if a resolution for the winding-up of the Company is passed.
Under the Investment Advisory Agreement, the Company pays a
nominal fee to the Investment Adviser save where the Company's
investment in Permal Macro is redeemed otherwise than on at least
nine months' notice in which case a termination fee equal to the
fee which would otherwise have been payable if due notice had been
given in respect of the Company's investment in Permal Macro which
is then being redeemed (as at the Valuation Date immediately
preceding redemption) is payable by the Company to the Investment
Adviser. Such termination fee is not payable where redemptions are
made to fund any quarterly redemption offers which the Company may
make.
On 17 April 2012 Dexion Capital (Guernsey) Limited purchased
1,686,000 shares in the Company. As announced on 12 December 2012,
Dexion Capital (Guernsey) Limited has sold these shares pursuant to
a sale and repurchase-like agreement (structured as an accreting
strike option) under which it is expected that Dexion Capital
(Guernsey) Limited will repurchase the shares in approximately one
year, although they are entitled to purchase the shares at any time
during that period. The repurchase consideration (exclusive of
interest and charges) is equal to the disposal consideration.
During the period Dexion Capital (Guernsey) Limited will retain no
voting rights in the shares. However, all of the risk and reward of
beneficial ownership of the shares remains with Dexion Capital
(Guernsey) Limited.
c) Investment Adviser
As at 30 June 2013 Permal Asset Management, an affiliate of the
Company's Investment Adviser, owns 5,112,600 shares in the Company
(31 December 2012: 5,112,600).
d) Secretary
Dexion Capital (Guernsey) Limited (the 'Secretary') performs
secretarial duties for which it was remunerated at an annual fee of
GBP22,000. The Secretary is also remunerated for additional
meetings held over and above those quoted within the minimum
fee.
e) Administrator
RBC Offshore Fund Managers Limited (the 'Administrator'),
performs administrative duties for which it was remunerated at a
rate of 0.03 per cent. of the Net Asset Value of the Company
subject to a minimum of GBP30,000 per annum.
f) Custodian
Royal Bank of Canada (Channel Islands) Limited (the
'Custodian'), is remunerated at an annual rate of 0.03 per cent. of
the Net Asset Value of the Company subject to a minimum of
GBP10,000 per annum.
10. Taxation
The Company is registered for taxation purposes in Guernsey
where it pays an annual exempt status fee of GBP600 under the
Income Tax (Exempt Bodies) (Guernsey) Ordinances 1989.
11. Earnings per Share
The calculation of the return/(loss) per Share is based on the
total return/(loss) for the period attributable to ordinary
Shareholders of GBP3,868,474 (30 June 2012: (GBP2,424,910)) and on
the weighted average number of Shares in issue (excluding Treasury
Shares) during the period of 95,486,096 (30 June 2012:
96,147,933).
12. Fair value measurement
IFRS 13 requires the Company to classify fair value hierarchy
that reflects the significance of the inputs used in making the
measurements. IFRS 13 establishes a fair value hierarchy that
prioritises the inputs to valuation techniques used to measure fair
value.
The hierarchy gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (Level
1 measurements) and the lowest priority to unobservable inputs
(Level 3 measurements).
The three levels of the fair value hierarchy under IFRS 13 are
as follows:
Level 1 Quoted prices (unadjusted) in active markets for
identical assets or liabilities;
Level 2 Inputs other than quoted prices included within Level 1
that are observable for the asset or liability either directly
(that is, as prices) or indirectly (that is, derived from
prices);
Level 3 Inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs).
The level in the fair value hierarchy within which the fair
value measurement is categorised in its entirety is determined on
the basis of the lowest level input that is significant to the fair
value measurement in its entirety. For this purpose, the
significance of an input is assessed against the fair value
measurement in its entirety. If a fair value measurement uses
observable inputs that require significant adjustment based on
unobservable inputs, that measurement is a Level 3 measurement.
Assessing the significance of a particular input to the fair value
measurement in its entirety requires judgement, as well as/and
considering factors specific to the asset or liability.
The determination of what constitutes 'observable' requires
significant judgement by the Company. The Company considers
observable data to be that market data that is readily available,
regularly distributed or updated, reliable and verifiable, not
proprietary, and provided by independent sources that are actively
involved in the relevant market.
The Company holds one investment in Permal Macro. This
investment has been classified as Level 2 and was fair valued using
the net asset value as supplied by the third party administrator of
Permal Macro. This net asset value has been prepared on a basis
consistent with IFRS. This investment was also classified as Level
2 as at 31 December 2012.
The Board believes the Company could have redeemed its
investment at net asset value per share at the Statement of
Financial Position date.
13. Ultimate controlling party
In the opinion of the Directors, on the basis of shareholdings
advised to them, the Company has no ultimate controlling party.
14. Short term borrowing
The Company has a facility dated 18 November 2008 with Royal
Bank Canada (Channel Islands) Limited for an overdraft of
GBP20,000,000 or 15 per cent. of Net Asset Value in custody
whichever is lower. The facility is secured by an interest over
cash and the investment portfolio of the Company. The rate of
interest is fixed at Royal Bank of Canada (Channel Islands) Limited
base rate plus 1 per cent.. The facility has been extended for
drawdown or use until further notice with a review date of 18
November 2013 and it is repayable on demand.
15. Distribution policy
The Directors do not expect income (net of expenses) to be
significant and do not currently expect to declare any dividends.
In the event that future net income is significant, the Directors
may consider the distribution of net income in the form of
dividends.
16. Seasonality
The Company's operations are not affected by seasonality or
cyclicality and as such they have no impact on the interim
financial statements.
17. Subsequent Events
With effect from 1 July 2013, Permal Macro will reduce the
annual fee paid to the Investment Adviser from 2.0 per cent. to 1.0
per cent. of the value of the Total Assets attributable to its
class A shares in Permal Macro held by the Company (together with
certain other operational costs and expenses). Out of this fee the
Investment Adviser will rebate 40 basis points to the Manager.
These are not full statutory accounts. The full unaudited
accounts for 30 June 2013 will be sent to Shareholders and will be
available for inspection at 1 Le Truchot, St Peter Port, Guernsey,
the registered office of the Company or the Company's website
www.dexiontrading.com.
Enquiries:
Chris Copperwaite:
Dexion Capital (Guernsey) Limited
Tel: +44 (0) 1481 743940
This information is provided by RNS
The company news service from the London Stock Exchange
END
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