TIDMDASL
RNS Number : 0714R
Dexion Alpha Strategies Limited
23 April 2009
Dexion Alpha Strategies Limited (the "Company")
ANNUAL FINANCIAL REPORT
The Company has today, in accordance with DTR 6.3.5, released its Annual
Financial Report for the year ended 31 December 2008. The Report is available
from the Company's website www.dexionalpha.com and will shortly be available for
inspection at the UK Listing Authority's Document Viewing Facility, which is
located at:
Financial Services Authority
25 The North Colonnade
Canary Wharf
London E14 5HS
The Report gives notice to its Shareholders of this year's annual general
meeting, which will be held on 16 June 2009.
Chairman's Statement
I am pleased to present Shareholders with the Annual Report and Accounts of
Dexion Alpha Strategies Limited for the year ended 31 December 2008.
The Company experienced a challenging year as the volatility in global financial
markets had a negative impact on both the Company's net asset value ("NAV") and
its share price, the discount to NAV widening as equity markets fell steeply
with investors chasing liquidity. In view of these circumstances, the Company
instigated a range of responses designed to reduce the discount, including share
buybacks. These actions, combined with improved discrimination in the markets,
have led to the discount narrowing in the first quarter of 2009.
Over 2008 the published NAV of the Company's GBP shares fell by 18.86%. The
annualised NAV return from inception to 31 December 2008 has been -2.60% with
annualised volatility of 9.12%. The Board understands that in the extremely
turbulent conditions of 2008 the Investment Adviser has remained consistent to
its investment style focused on security selection as opposed to the direction
of the market.
The market price of the Company's GBP shares fell by 45.00% over the period as
negative net asset performance, together with significant stock market
volatility and investors' rush to find liquidity led to considerable discount
levels towards the end of the year. However, since the beginning of the year
there has been a settling of market volatility and the published NAV has begun
to improve, with 0.42% year to date as at end of February 2009, and average
discounts have begun to narrow.
Throughout a difficult year the Board has remained focused on addressing the
best interests of investors with a comprehensive programme of corporate actions
aimed at actively managing the discount. The Board has taken steps through
treasury powers and share buybacks to support the liquidity of the stock. These
powers enable shares to be held in treasury which can be reissued at or above
NAV or otherwise cancelled. In addition the Company has responded to investor
concerns with an increased level of communication including an investor
conference, regular audio conference calls with the Investment Adviser, a new
extensive monthly report providing a significant increase in the level of
transparency and several written pieces providing explanations regarding details
of the corporate actions.
In November 2008 the Board announced that foreign exchange losses arising from
the Company's currency hedging arrangements, implemented to reduce the impact of
fluctuations in currency exchange rates on the Company's Sterling and Euro
ordinary shares, had resulted in significant utilisation of its credit
facility. This led the Board to determine that it was appropriate temporarily to
suspend the operation of its currency hedging arrangements. The move was taken
to minimise the risk that the Company exceeded its credit limits should there be
a further significant appreciation in the value of the US Dollar. In late
December 2008 the Board announced that the Company had sufficient available
liquidity to reinstate its currency hedging arrangements in full through the use
of monthly rolling forward foreign exchange contracts.
The Company's Articles of Association incorporate discount management provisions
requiring a continuation vote (of the relevant class of Ordinary Shares) to be
proposed by way of ordinary resolution if, in any rolling 12 month period (with
effect from 1 January 2008), the Ordinary Shares of a particular class have
traded, on average, at a discount equal to or in excess of 5% of the average Net
Asset Value per Share of that class by reference to the weekly NAV estimates
released in that period and the closing mid-market Share prices 5 business days
after each such estimate is released. If a Continuation Resolution of a class is
not passed the Directors will be required to formulate Redemption Proposals to
be put to that class within 2 months of such failure, either offering to redeem
Shares of that class at an amount which each Share of that class would have
received on a return of capital on a NAV Calculation Date determined by the
Directors in accordance with the Articles (less the costs of redemption
including the costs of realising investments) or alternative proposals which the
Board (in its absolute discretion) determines have a substantially equivalent
economic effect.
Over the 12 month period ended 22 January 2009, the GBP Shares, EUR Shares and US$
Shares traded, on average, at a discount to their respective NAVs of 11.54%,
12.79% and 12.57% respectively.
Accordingly, the Board was required under the Articles to propose Continuation
Resolutions in respect of all three classes of Shares within 4 months of the
discount floor provision being triggered and on 31 March 2009 the Board issued a
shareholder circular convening currency class meetings to consider Continuation
Resolutions.
Despite anticipating that 2009 would be a challenging year for the financial
markets, the Board remains confident that in the Investment Adviser's bottom-up
manager selection skills will continue to add significant value.
I look forward to welcoming Shareholders to the Annual General Meeting of the
Company at 1.00 pm on 16 June 2009, which will be held at the Company's
registered office at 1 Le Truchot, St Peter Port, Guernsey.
Stephen Jones
Chairman
20 April 2009
StatementS of Directors' Responsibilities in Respect of the Annual Financial
Report
In accordance with Chapter 4 of the Disclosure and Transparency Rules, we
confirm that to the best of our knowledge:
* The financial statements contained within the Annual Report for the year ended
31 December 2008, of which this statements of results is an extract, have been
prepared in accordance with applicable International Financial Reporting
Standards, on a going concern basis, and give a true and fair view of the
assets, liabilities, financial position and return of the Company;
* The Chairman's Statement include a fair review of the important events that have
occurred during the financial year and their impact on the financial statements;
* 'Financial Risk Management' includes a description of the Company's principal
risk and uncertainties; and
* 'Related Parties 'includes details of related party transactions that have taken
place during the financial year.
On behalf of the Board
Stephen Jones Christopher Hill
Director Director
20 April 2009
BALANCE SHEET
AS AT 31 DECEMBER (Audited)
+-------------------------------+-------------+-------------+
| | 2008 | 2007 |
| | GBP | GBP |
+-------------------------------+-------------+-------------+
| Assets | | |
+-------------------------------+-------------+-------------+
| Investments designated at | 107,708,581 |149,071,300 |
| fair value through profit or | | |
| loss | | |
+-------------------------------+-------------+-------------+
| Accounts receivable | 2,074,839 | 180,109 |
+-------------------------------+-------------+-------------+
| Forward foreign currency | 9,999 | 409,413 |
| contracts | | |
+-------------------------------+-------------+-------------+
| Cash at bank | 288,104 | 2,934,367 |
+-------------------------------+-------------+-------------+
| Total assets | 110,081,523 |152,595,189 |
+-------------------------------+-------------+-------------+
| Liabilities | | |
+-------------------------------+-------------+-------------+
| Forward foreign currency | 1,355,034 | 360,181 |
| contracts | | |
+-------------------------------+-------------+-------------+
| Accounts payable and accrued | 2,891,992 | 3,187,855 |
| expenses | | |
+-------------------------------+-------------+-------------+
| Bank overdraft | 15,071,695 | 11,430,649 |
+-------------------------------+-------------+-------------+
| Total liabilities | 19,318,721 | 14,978,685 |
+-------------------------------+-------------+-------------+
| Net assets | 90,762,802 |137,616,504 |
+-------------------------------+-------------+-------------+
| Represented by: | | |
+-------------------------------+-------------+-------------+
| Shareholders' funds and | | |
| reserves | | |
+-------------------------------+-------------+-------------+
| Called up share capital | - | - |
+-------------------------------+-------------+-------------+
| Special reserve | 93,834,690 |120,112,611 |
+-------------------------------+-------------+-------------+
| Retained earnings | (3,071,888) | 17,503,893 |
+-------------------------------+-------------+-------------+
| Total shareholders' funds | 90,762,802 |137,616,504 |
+-------------------------------+-------------+-------------+
| Net assets per GBP Share | GBP0.9117 |GBP1 .1 233 |
+-------------------------------+-------------+-------------+
| Net assets per EUR Share | EUR1 .1 284 | EUR1 .5952 |
+-------------------------------+-------------+-------------+
| Net assets per US$ Share | US$1 | US$1 .9845 |
| | .5816 | |
+-------------------------------+-------------+-------------+
INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER (Audited)
+------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
| | GBP | GBP |
+------------------------------------------+--------------+--------------+
| Income | (14,730,374) | 21,013,450 |
| Net (losses)/gains on financial assets | | |
| held at fair value through | | |
| profit or loss | | |
+------------------------------------------+--------------+--------------+
| | | 119,886 |
| Net foreign exchange (losses)/gains | (3,012,795) | |
| | | |
+------------------------------------------+--------------+--------------+
| Interest income on financial assets that | 79,305 | 300,977 |
| are not at fair value | | |
| through profit or loss | | |
| | | |
+------------------------------------------+--------------+--------------+
| Other investment income | 144,811 | 80,671 |
+------------------------------------------+--------------+--------------+
| Net investment (expense)/income | (17,519,053) | 21,514,984 |
+------------------------------------------+--------------+--------------+
| Expenses | | |
+------------------------------------------+--------------+--------------+
| Management fee | (1,758,937) | (2,138,978) |
+------------------------------------------+--------------+--------------+
| Performance fee | - | (1,715,697) |
+------------------------------------------+--------------+--------------+
| Fund administration fee | (179,169) | (155,257) |
+------------------------------------------+--------------+--------------+
| Audit fee | (26,000) | (21,302) |
+------------------------------------------+--------------+--------------+
| Fees paid to auditors for non-audit | (14,329) | (11,644) |
| services | | |
+------------------------------------------+--------------+--------------+
| Other professional fees | (180,593) | (129,944) |
+------------------------------------------+--------------+--------------+
| Directors' remuneration and expenses | (68,035) | (55,511) |
+------------------------------------------+--------------+--------------+
| Directors' and officers' insurance | (17,132) | (17,557) |
+------------------------------------------+--------------+--------------+
| Custodian charges | (77,482) | (91,643) |
+------------------------------------------+--------------+--------------+
| Credit facility fees | (149,425) | (37,950) |
+------------------------------------------+--------------+--------------+
| Sundry expenses | (249,411) | (82,794) |
+------------------------------------------+--------------+--------------+
| Total operating expenses before finance | (2,720,513) | (4,458,277) |
| costs | | |
+------------------------------------------+--------------+--------------+
| Finance costs | | |
+------------------------------------------+--------------+--------------+
| Interest expense on financial | (336,215) | (109,107) |
| liabilities that are not at fair value | | |
| through profit or loss | | |
+------------------------------------------+--------------+--------------+
| Total return for the year | (20,575,781) | 16,947,600 |
+------------------------------------------+--------------+--------------+
| Basic & Diluted earnings per GBP Share | GBP(0.2117) | GBP0.1198 |
+------------------------------------------+--------------+--------------+
| Basic & Diluted earnings per EUR Share | EUR(0.4668) | EUR0.1 616 |
+------------------------------------------+--------------+--------------+
| Basic & Diluted earnings per US$ Share | US$(0.4029) | US$0.21 59 |
+------------------------------------------+--------------+--------------+
| All items derive from continuing activities. |
+------------------------------------------+--------------+--------------+
STATEMENT OF CHANGES IN NET ASSETS
ATTRIBUTABLE TO EQUITY SHAREHOLDERS (Audited)
+------------------------------------------+------------------------------------------+-------------+
| FOR THE YEAR ENDED 31 DECEMBER | | 2007 |
| | | GBP |
+ +------------------------------------------+ +
| | 2008 | |
| | GBP | |
+------------------------------------------+------------------------------------------+-------------+
| Net assets attributable to equity | 137,616,504 |128,244,473 |
| shareholders at start of year | | |
+------------------------------------------+------------------------------------------+-------------+
| Amount paid on redemption | (8,499,554) | - |
+------------------------------------------+------------------------------------------+-------------+
| Purchases of own shares | (17,778,367) |(7,575,569) |
+------------------------------------------+------------------------------------------+-------------+
| Total return for the year | (20,575,781) | 16,947,600 |
+------------------------------------------+------------------------------------------+-------------+
| Net assets attributable to equity | 90,762,802 |137,616,504 |
| shareholders at end of year | | |
+------------------------------------------+------------------------------------------+-------------+
CASHFLOW STATEMENT
FOR THE YEAR ENDED 31 DECEMBER (Audited)
+------------------------------------------+--------------+--------------+
| | 2008 | 2007 |
| | GBP | GBP |
+------------------------------------------+--------------+--------------+
| Operating activities | | |
+------------------------------------------+--------------+--------------+
| Total return for the year | (20,575,781) | 16,947,600 |
+------------------------------------------+--------------+--------------+
| Adjustments: | | |
+------------------------------------------+--------------+--------------+
| Net losses/(gains) on financial assets | 14,730,374 |(21,013,450) |
| held at fair value through profit or | | |
| loss | | |
+------------------------------------------+--------------+--------------+
| Net foreign exchange losses/(gains) | 3,012,795 | (119,886) |
+------------------------------------------+--------------+--------------+
| Changes in operating assets and | | |
| liabilities: | | |
+------------------------------------------+--------------+--------------+
| Increase in creditors | 964,631 | 1,434,426 |
+------------------------------------------+--------------+--------------+
| (Increase)/decrease in debtors | (508,784) | 107,304 |
+------------------------------------------+--------------+--------------+
| Net cash outflow from operating | (2,376,765) | (2,644,006) |
| activities | | |
+------------------------------------------+--------------+--------------+
| Investing activities | | |
+------------------------------------------+--------------+--------------+
| Purchase of investments | (29,763,923) |(34,533,149) |
+------------------------------------------+--------------+--------------+
| Proceeds from sale of investments | 79,573,442 | 25,776,963 |
+------------------------------------------+--------------+--------------+
| Realised (losses)/gains from forward | (24,429,347) | 2,197,117 |
| foreign currency contracts | | |
+------------------------------------------+--------------+--------------+
| Net cash inflow/(outflow) from investing | 25,380,172 | (6,559,069) |
| activities | | |
+------------------------------------------+--------------+--------------+
| Financing activities | | |
+------------------------------------------+--------------+--------------+
| Purchase of own shares | (17,778,367) | (7,575,569) |
+------------------------------------------+--------------+--------------+
| Payment on redemption | (8,499,554) | - |
+------------------------------------------+--------------+--------------+
| Net cash outflow from financing | (26,277,921) | (7,575,569) |
| activities | | |
+------------------------------------------+--------------+--------------+
| Decrease in cash and cash equivalents | (3,274,514) |(16,778,644) |
+------------------------------------------+--------------+--------------+
| Exchange (losses)/gains on cash and cash | (3,012,795) | 119,886 |
| equivalents | | |
+------------------------------------------+--------------+--------------+
| Cash and cash equivalents at beginning | (8,496,282) | 8,162,476 |
| of the year | | |
+------------------------------------------+--------------+--------------+
| Cash and cash equivalents at end of the | (14,783,591) | (8,496,282) |
| year | | |
+------------------------------------------+--------------+--------------+
| Analysis of cash and cash equivalents at | | |
| end of the year | | |
+------------------------------------------+--------------+--------------+
| Cash at bank | 288,104 | 2,934,367 |
+------------------------------------------+--------------+--------------+
| Bank overdraft | (15,071,695) |(11,430,649) |
+------------------------------------------+--------------+--------------+
| | (14,783,591) | (8,496,282) |
+------------------------------------------+--------------+--------------+
| Cash flow from operating activities | | |
| include: | | |
+------------------------------------------+--------------+--------------+
| Interest received | 101,585 | 322,520 |
+------------------------------------------+--------------+--------------+
| Interest paid | (317,495) | (96,282) |
+------------------------------------------+--------------+--------------+
Financial risk management
The Company, in pursuing its investment objective, enters into investment
transactions in financial instruments, principally the investment portfolio, the
holding of which gives exposure to risks, which include market risk, liquidity
risk, and default/credit risk. Asset allocation is determined by the Company's
Investment Adviser who manages the distribution of the assets to achieve the
investment objectives. Divergence from target asset allocations and the
composition of the portfolio is monitored by the Company's Investment
Adviser. The nature and extent of the financial instruments outstanding at the
balance sheet date and the risk management policies employed by the Company are
discussed below.
1) Capital risk management
The Company manages its capital to ensure that it is able to continue as a going
concern. The capital structure of the Company consists of equity attributable to
shareholders, including issued share capital, reserves and retained earnings. In
order to comply with The Companies (Guernsey) Law, 2008, the Company will
maintain or adjust capital structure, dividends paid to shareholders, if any, or
reduce its outstanding debt.
Gearing ratio
It is not proposed that the Company should have any long-term or fixed
structural gearing. If, in the future it was proposed to introduce such gearing,
the introduction of any such gearing would be subject to the prior approval of
Shareholders. The Company may be indirectly exposed to gearing to the extent
that underlying funds are themselves geared. The Company has a loan facility
with Northern Trust (Guernsey) Limited of the lower of GBP30 million or 20 per
cent. of its net asset value for short-term or temporary liquidity purposes. The
facility agreement was increased to the lower of GBP30 million and 35 per
cent. of NAV on 4 November 2008 and expired on 31 January 2009. With effect from
1 February 2009 the facility was reduced to up to the lower of GBP20 million and
20 per cent. of NAV. The expiry date of the facility is the banking day being
three calendar months from the date of the bank's written notice advising the
Company of the termination of the facilities. The next annual review for this
facility is due by 28 February 2010. As at 31 December 2008, this facility was
drawndown by GBP15 million.
2) Market risk
Market risk embodies the potential for both loss and gains and includes price
risk, interest rate risk and currency risk.
The Company's strategy on the management of investment risk is driven by the
Company's investment objective. The Company's market risk is managed on a daily
basis by the Investment Adviser in accordance with policies and procedures in
place. The Company seeks to achieve its investment objective through investment
in an actively managed portfolio of underlying funds diversified across a range
of alternative investment strategies which target emerging and/or
under-exploited sources of alpha. The Investment Adviser allocates the Company's
assets either directly or indirectly to underlying funds (which may include
funds managed or advised by the Investment Adviser) investing across the
following strategies:
* Asian Opportunities
* Emerging Markets Macro
* European Loan Opportunities
* Special Situations
* Healthcare Opportunities
* Commodity Strategies
* Energy & Emissions
* Environmental Strategies
* Short-Term Managed Futures
Although the Investment Adviser allocates the Company's assets among portfolio
managers employing one or more of the strategies described above, the Investment
Adviser is not required to follow a rigid investment policy and, subject to
maintaining an appropriate spread of funds and investment strategies, the
Company's assets may be deployed in whatever funds and investment strategies the
Investment Adviser deems appropriate.
The exact number of funds and strategies used may vary over time but the
Directors intend that the Company should be invested directly or indirectly in a
minimum of 20 underlying funds implementing at least 4 different strategies at
all times.
Generally the Investment Adviser seeks (i) not to invest more than 7.5 per
cent. of the Company's total assets in any one underlying fund which may be
accessed either directly or indirectly (other than in relation to the European
Loan Opportunities strategy which currently comprises a single investment into
an existing fund of the Irish RMF Umbrella Unit Trust), (ii) not to invest more
than 20 per cent. of the Company's total assets in any one underlying fund or
funds managed by a single portfolio manager and (iii) not to invest more than 25
per cent. of the Company's total assets in any single strategy, although it may
deviate from any such guidelines from time to time, subject always to the
maximum exposures, introduced in accordance with the Listing Rules of the UK
Listing Authority.
It is the intention of the Company to be substantially fully invested at all
times, although the Investment Adviser may use its discretion to hold cash or
equivalent investments from time-to-time.
a) Price risk
Market price risk arises mainly from uncertainty about future prices of
financial instruments held by the underlying funds. It represents the potential
loss that might be suffered through holding market positions in the face of
price movements. The Company's investment portfolio is indirectly exposed to
market price fluctuations which are monitored by the Investment Adviser in
pursuance of its investment objectives and policies. Adherence to investment
guidelines and to investment and borrowing restrictions set out in the Company's
Investment Policy and stated above mitigate the risk of excessive exposure to
any particular type of fund. In addition to strict adherence to investment
policy restriction, the Company diversifies exposure to market risk by spreading
its investments using different trading strategies. At the reporting date, the
assets of the portfolio were allocated in the following strategies:
+----------------------------------------+-------------+-------------+
| | 2008 | 2007 |
| | GBP | GBP |
+----------------------------------------+-------------+-------------+
| Investment Strategy | | |
+----------------------------------------+-------------+-------------+
| Asian Opportunities | 25,978,640 | 27,582,463 |
+----------------------------------------+-------------+-------------+
| Commodity Strategies | 8,407,455 | 25,613,361 |
+----------------------------------------+-------------+-------------+
| Emerging Markets Macro | 7,356,523 | 10,990,902 |
+----------------------------------------+-------------+-------------+
| Energy and Emissions | 12,611,182 | 14,515,235 |
+----------------------------------------+-------------+-------------+
| Environmental Strategies | 6,305,591 | 5,441,829 |
+----------------------------------------+-------------+-------------+
| European Loan Opportunities | 6,305,591 | 11,361,625 |
+----------------------------------------+-------------+-------------+
| Healthcare Opportunities | 8,251,943 | 14,480,716 |
+----------------------------------------+-------------+-------------+
| Short-Term Managed Futures | 9,458,386 | - |
+----------------------------------------+-------------+-------------+
| Special Situations | 18,916,773 | 31,648,257 |
+----------------------------------------+-------------+-------------+
| Investments in advance | 4,116,497 | 7,436,912 |
+----------------------------------------+-------------+-------------+
| Portfolio total | 107,708,581 |149,071,300 |
+----------------------------------------+-------------+-------------+
Price sensitivity analysis
The Company uses the HFRI Fund of Funds Composite Index and the FTSE All Share
Total Return Index as benchmarks to regularly monitor the evolution of the beta
of its portfolio and assess overall performance and risk of its portfolio. The
beta of the portfolio is calculated separately versus each of the
above-mentioned benchmarks, and has been reasonably constant throughout the
year, but it will change with the composition of the portfolio. The Investment
Adviser uses correlation, beta, standard deviation, among other statistical
techniques, to test how the portfolio might reasonably be expected to react
under the prolonged rise or drawdown of its benchmarks, based on historical data
about risk and return. The results of this analysis are used to re-assess risk
and if necessary, rebalance the composition of the portfolio, and the Manager
cautions against using the findings of these statistical techniques as reliable
predictors of future performance. The table below illustrates the likely impact
of a rise or fall of the HRFI Fund of Funds Composite Index by 10 per cent. on
the net assets value of the Company at the reporting date, under the assumption
that all other factors remain constant:
Carrying
Increase of 10%Carrying Decrease of 10%
amount
P&L Impact amount P&L Impact
Financial instruments designated at
fair value through profit or loss - 2008 107,708,581 11,524,818
107,708,581 (11,524,818)
Financial instruments designated at fair
value through profit or loss - 2007 149,071,300 15,503,415
149,071,300 (15,503,415)
Actual trading results may differ from the above sensitivity analysis and those
differences may be material.
b) Interest rate risk
Substantially all of the Company's assets are non-interest bearing investments
and its exposure to interest rate changes is limited. The Company, however, has
a bank overdraft of GBP15,071,695 (2007:GBP11,430,649) at the year end and is
therefore subject to cashflow interest rate risk due to fluctuations in the
prevailing levels of market interest rates. The short term investments included
within cash equivalents and bank overdraft have an overnight maturity, and as a
result they have a limited exposure to fair value interest rate risk due to
fluctuations in the prevailing levels of market interest rates.
The following table details the Company's exposure to interest rate risks. It
includes the Company's assets and liabilities at fair values, categorised by the
earlier of contractual repricing or maturity date measured by the carrying value
of the assets and liabilities.
+---------------------------------+--------------+--------------+--------------+
| At 31 December 2008 | Less | Non-interest | Total |
| | than | Bearing | GBP |
| | 1 | GBP | |
| | month | | |
| | GBP | | |
+---------------------------------+--------------+--------------+--------------+
| Assets | | | |
+---------------------------------+--------------+--------------+--------------+
| Financial assets at fair value | | | |
| through profit or loss | | | |
+---------------------------------+--------------+--------------+--------------+
| Investments | - | 107,708,581 | 107,708,581 |
+---------------------------------+--------------+--------------+--------------+
| Forward foreign currency | - | 9,999 | 9,999 |
| contracts | | | |
+---------------------------------+--------------+--------------+--------------+
| Loans and receivables | | | |
+---------------------------------+--------------+--------------+--------------+
| Cash and cash equivalents | 288,104 | - | 288,104 |
+---------------------------------+--------------+--------------+--------------+
| Accounts receivable | - | 2,074,839 | 2,074,839 |
+---------------------------------+--------------+--------------+--------------+
| Total assets | 288,104 | 109,793,419 | 110,081,523 |
+---------------------------------+--------------+--------------+--------------+
| Liabilities | | | |
+---------------------------------+--------------+--------------+--------------+
| Financial liabilities at fair | | | |
| value through profit or loss, | | | |
| held for trading | | | |
+---------------------------------+--------------+--------------+--------------+
| Forward foreign currency | - | (1,355,034) | (1,355,034) |
| contracts | | | |
+---------------------------------+--------------+--------------+--------------+
| Other financial liabilities (at | | | |
| amortised cost) | | | |
+---------------------------------+--------------+--------------+--------------+
| Bank overdraft | (15,071,695) | - | (15,071,695) |
+---------------------------------+--------------+--------------+--------------+
| Accounts payable | - | (2,891,992) | (2,891,992) |
+---------------------------------+--------------+--------------+--------------+
| Total liabilities | (15,071,695) | (4,247,026) | (19,318,721) |
+---------------------------------+--------------+--------------+--------------+
| Total interest sensitivity | (14,783,591) | | |
| analysis gap | | | |
+---------------------------------+--------------+--------------+--------------+
The Company has a facility agreement with Northern Trust (Guernsey) Limited. The
interest rate which applies to all drawings under the facility is calculated at
1.25 per cent. over Northern Trust (Guernsey) Limited's cost of funds in the
relevant currency. The amount drawn down at 31 December 2008 was GBP15,071,695
(2007: GBP11,430,649). Credit facility fees incurred amounted to GBP149,425
(2007:GBP37,950).
Less than Non-interest
1 month Bearing Total
At 31 December 2007
GBP GBP GBP
+---------------------------------+--------------+-------------+--------------+
| Assets | | | |
| Financial assets at fair value | | | |
| through profit or loss | | | |
+---------------------------------+--------------+-------------+--------------+
| Investments | - | 149,071,300 | 149,071,300 |
+---------------------------------+--------------+-------------+--------------+
| Forward foreign currency | - | 409,413 | 409,413 |
| contracts | | | |
+---------------------------------+--------------+-------------+--------------+
| Loans and receivables | | | |
+---------------------------------+--------------+-------------+--------------+
| Cash and cash equivalents | 2,934,367 | - | 2,934,367 |
+---------------------------------+--------------+-------------+--------------+
| Accounts receivable | - | 180,109 | 180,109 |
+---------------------------------+--------------+-------------+--------------+
| Total assets | 2,934,367 | 149,660,822 | 152,595,189 |
+---------------------------------+--------------+-------------+--------------+
| Liabilities | | | |
+---------------------------------+--------------+-------------+--------------+
| Financial liabilities at fair | | | |
| value through profit or loss, | | | |
| held for trading | | | |
+---------------------------------+--------------+-------------+--------------+
| Forward foreign currency | - | (360,181) | (360,181) |
| contracts | | | |
+---------------------------------+--------------+-------------+--------------+
| Other financial liabilities (at | | | |
| amortised cost) | | | |
+---------------------------------+--------------+-------------+--------------+
| Bank overdraft | (11,430,649) | - | (11,430,649) |
+---------------------------------+--------------+-------------+--------------+
| Accounts payable | - | (3,187,855) | (3,187,855) |
+---------------------------------+--------------+-------------+--------------+
| Total liabilities | (11,430,649) | (3,548,036) | (14,978,685) |
+---------------------------------+--------------+-------------+--------------+
| Total interest sensitivity | (8,496,282) | | |
| analysis gap | | | |
+---------------------------------+--------------+-------------+--------------+
Interest sensitivity analysis
As at 31 December 2008, an increase of 100 basis points in interest rates would
have decreased the net assets attributable to shareholders and changes in net
assets attributable to shareholders by GBP147,836. As at 31 December 2007, an
increase of 100 basis points in interest rates would have decreased the net
asset attributable to shareholders and changes in net assets attributable to
shareholders by GBP84,968. A decrease of 100 basis points would have had an
equal and opposite effect.
Actual trading results may differ from the above sensitivity analysis and those
differences may be material.
c) Currency risk
The principal exposure to currency risk arises from investments denominated in
currencies other than the base currency. The value of such investments may be
affected favourably or unfavourably by fluctuations in exchange rates,
notwithstanding any efforts made to hedge such fluctuations. A significant
portion of the Company's investments at the balance sheet date are denominated
in currencies other than the base currency hence the exposure to currency risk
in this manner is significant. The Company may from time to time enter into
transactions in derivative instruments and take short positions with a view to
hedging the portfolio's currency exposure. At the reporting date, the Company
has hedged almost all foreign currency position by selling them forward.
As at 31 December 2008, the net currency exposure of the Company expressed in
sterling was as follows:
+------------------+--------------+-------------+-----------+--------------+
| | USD | EUR | GBP | Total |
| | GBP | GBP | GBP | GBP |
+------------------+--------------+-------------+-----------+--------------+
| Investments held | 101,926,152 | 5,782,429 | - | 107,708,581 |
| at fair value | | | | |
+------------------+--------------+-------------+-----------+--------------+
| Cash and cash | (15,071,695) | 46,529 | 241,575 | (14,783,591) |
| equivalents | | | | |
+------------------+--------------+-------------+-----------+--------------+
| Other net | (663, 810) | (24,580) | (128,763) | (817,153) |
| liabilities | | | | |
+------------------+--------------+-------------+-----------+--------------+
| Total net long | 86,190,647 | 5,804,378 | 112,812 | 92,107,837 |
| position | | | | |
+------------------+--------------+-------------+-----------+--------------+
| Effect of | (90,369,183) | (5,452,365) | - | (95,821,548) |
| forward foreign | | | | |
| currency | | | | |
| contracts | | | | |
+------------------+--------------+-------------+-----------+--------------+
| Net exposure | (4,178,536) | 352,013 | 112,812 | (3,731,711) |
+------------------+--------------+-------------+-----------+--------------+
As at 31 December 2007, the net currency exposure of the Company expressed in
sterling was as follows:
+----------------------+---------------+--------------+-------------+---------------+
| | USD | EUR | GBP | Total |
| | GBP | GBP | GBP | GBP |
+----------------------+---------------+--------------+-------------+---------------+
| Investments | 130,272,763 | 11,361,625 | - | 141,634,388 |
| held at fair | | | | |
| value | | | | |
+----------------------+---------------+--------------+-------------+---------------+
| Cash and cash | (8,569,628) | 84,367 | (11,021) | (8,496,282) |
| equivalents | | | | |
+----------------------+---------------+--------------+-------------+---------------+
| Other net | 6,247,184 | (407,433) | (1,410,585) | 4,429,166 |
| assets/(liabilities) | | | | |
+----------------------+---------------+--------------+-------------+---------------+
| Total net long | 127,950,319 | 11,038,559 | (1,421,606) | 137,567,272 |
| position | | | | |
+----------------------+---------------+--------------+-------------+---------------+
| Effect of | (132,381,615) | (11,491,888) | - | (143,873,503) |
| forward foreign | | | | |
| currency | | | | |
| contracts (Note | | | | |
| 13) | | | | |
+----------------------+---------------+--------------+-------------+---------------+
| Net exposure | (4,431,296) | (453,329) | (1,421,606) | (6,306,231) |
+----------------------+---------------+--------------+-------------+---------------+
Since the Company has hedged all its foreign currency position as illustrated by
the table above, any subsisting foreign exchange risk is immaterial so no
sensitivity analysis has been carried out.
On 13 November 2008 the Company announced the temporary suspension of its
currency hedging arrangements following a further significant appreciation in
the value of the US dollar against sterling and euros. The Directors noted their
intention to reinstate the currency hedging arrangements as soon as practicable,
which was achieved on 23 December 2008.
Liquidity risk
The Company's financial instruments include investments in other open-ended
investment funds which are not traded in an organised public market and which
generally may be illiquid. As a result, the Company may not be able to liquidate
its investments in these instruments quickly at an amount close to its fair
value in order to meet its liquidity requirements, or to respond to specific
events such as a deterioration in the credit worthiness of any particular
issuer. At times of disrupted markets, this may include the imposition of 'side
pockets' and/or 'redemption gates' sometimes at short notice. This risk is
monitored by the Investment Adviser and is mitigated by holding a diversified
portfolio of collective investment schemes that are subject to reasonable rules
for redemptions.
The table below analyses the Company's financial liabilities into relevant
maturity groupings based on the remaining period at the balance sheet date to
the contractual maturity date. The amounts in the table are the contractual
undiscounted cash flows. Balances due within 12 months equal their carrying
balances, as the impact of discounting is not significant.
+----------------------+--------------------+-----------+------------+
| At 31 December 2008 | Within | 1 - 3 | Total |
| | 1 month | months | GBP |
| | GBP | GBP | |
+----------------------+--------------------+-----------+------------+
| Bank overdraft | 15,071,695 | - | 15,071,695 |
+----------------------+--------------------+-----------+------------+
| Accounts payable | 2,866,081 | 25,911 | 2,891,992 |
+----------------------+--------------------+-----------+------------+
| | 17,937,776 | 25,911 | 17,963,687 |
+----------------------+--------------------+-----------+------------+
| At 31 December 2007 | | | |
+----------------------+--------------------+-----------+------------+
| Bank overdraft | 11,430,649 | - | 11,430,649 |
+----------------------+--------------------+-----------+------------+
| Accounts payable | 1,501,065 | 1,686,790 | 3,187,855 |
+----------------------+--------------------+-----------+------------+
| | 12,931,714 | 1,686,790 | 14,618,504 |
+----------------------+--------------------+-----------+------------+
Credit risk
Credit risk is the risk that a counterparty to a financial instrument will fail
to discharge an obligation or commitment that it has entered into with the
Company.
Credit risk generally is higher when a non-exchange traded financial instrument
is involved because the counterparty for non-exchange traded financial
instruments is not backed by an exchange clearing house. The Company is also
exposed to credit risk on the financial assets with its brokers.
The carrying amounts of financial assets best represent the maximum credit risk
exposure at the balance sheet date. This relates also to financial assets
carried at amortised cost as they have a short-term to maturity.
+---------------------------------------------+---------------------------------------------+-------------+
| At the reporting | | 2007 |
| date, the | | GBP |
| Company's | | |
| financial assets | | |
| exposed to credit | | |
| risk amounted to | | |
| the following: | | |
+ +---------------------------------------------+ +
| | 2008 | |
| | GBP | |
+---------------------------------------------+---------------------------------------------+-------------+
| Financial assets | 107,718,580 | 149,480,713 |
| at fair value | | |
| through profit or | | |
| loss | | |
+---------------------------------------------+---------------------------------------------+-------------+
| Accounts | 2,074,839 | 180,109 |
| receivable | | |
+---------------------------------------------+---------------------------------------------+-------------+
| Cash and cash | 288,104 | 2,934,367 |
| equivalents | | |
+---------------------------------------------+---------------------------------------------+-------------+
| | 110,081,523 | 152,595,189 |
+---------------------------------------------+---------------------------------------------+-------------+
Credit risk arising on transactions with brokers relates to transactions
awaiting settlement. Risk relating to unsettled transactions is considered small
due to the short settlement period involved and the credit quality of the
brokers used.
Investments made by the Company and the funds in which it invests may not be
regulated by the rules of any stock exchange or investment exchange or other
regulatory body or authority. The counterparties to such investments have no
obligation to make markets in such investments. Furthermore, the Company and
such funds will be subjected to the risk of bankruptcy of, or the inability or
refusal to perform with respect to such investments by, the counterparties with
which the Company or such funds deal.
The Investment Adviser carries out rigorous due diligence procedures before
investing in an underlying manager's fund. Procedures are also in place to
monitor the managers on a regular basis, thereby ensuring that the Company
limits its exposure to credit risk on its underlying funds.
The Company monitors the credit rating and financial positions of the brokers
used to further mitigate this risk. Substantially all of the assets of the
Company are held by Northern Trust (Guernsey) Limited. Bankruptcy or insolvency
of the Custodian may cause the Company's rights with respect to securities held
by the Custodian to be delayed or limited.
All of the cash held by the Company is held by the Custodian and certain other
financial institutions. Bankruptcy or solvency by the Custodian or other
financial institutions may cause the Company's rights with respect to the cash
held by the Custodian and other financial institutions to be delayed or limited.
The Company monitors its risk by monitoring the credit rating of the Custodian
and other service providers. If the credit quality or the financial position of
the Custodian and other service providers deteriorates significantly the
Investment Adviser may move the cash holdings to another custodian or financial
institution. The credit rating of the Northern Trust Corporation from Standard &
Poor's at the year end was AA (2007: AA-).
The Company's Investment Adviser analyses credit concentration based on the
counterparty and strategy of the financial assets that the Company holds.
The Company's financial assets exposed to credit risk were concentrated in the
following industries:
+----------------------------------------+-----------+-----------+
| | 2008 | 2007 |
| | % | % |
+----------------------------------------+-----------+-----------+
| Hedge Funds | 97.85 | 97.96 |
+----------------------------------------+-----------+-----------+
| Banking | 1.89 | 0.12 |
+----------------------------------------+-----------+-----------+
| Others | 0.26 | 1.92 |
+----------------------------------------+-----------+-----------+
| Total | 100.00 | 100.00 |
+----------------------------------------+-----------+-----------+
Related Parties
Manager
Dexion Capital (Guernsey) Limited (the "Manager") is remunerated at a monthly
rate of 0.125% per month of the Total Assets of the Company (out of which it
pays the trail commissions payable to qualifying investors, fees payable to the
Investment Adviser and fees payable to the Investment Consultant) for the
provision of investment management services.
Additionally, the Manager is entitled to a performance fee, provided the total
assets attributable to a class of ordinary shares at the end of one financial
year (having adjusted for any issues, redemptions or repurchases of ordinary
shares arising on conversion of C shares or conversion from or to ordinary
shares of other classes and for any contingent or accrued but unpaid
liabilities) are greater than the value of the total assets attributable to that
class of ordinary shares (as adjusted) at the end of any previous financial
year, a performance fee equivalent to 10% of the amount by which the year-end
total assets attributable to that class of ordinary shares exceed the greatest
value of the total assets attributable to that class of shares at the end of any
previous financial year.
The investment management agreement may be terminated by either party giving to
the other not less than twelve 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.
The management fee is calculated on the NAV Calculation Date in each calendar
month and is payable monthly in arrears. The performance fee is calculated and
payable annually in arrears.
The Manager is responsible for the fees paid to RMF Investment Management (the
"Investment Adviser").
Secretary
Dexion Capital (Guernsey) Limited (the "Secretary") performs secretarial duties
for which it was remunerated at an annual fee of GBP24,000.
These are not full statutory accounts. The full audited accounts for 31 December
2008 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.dexionalpha.com
+--------------------------------------------------------------------------------+
| Enquiries: |
| Carol Kilby |
| Dexion Capital (Guernsey) Limited |
| Tel: +44 (0)1481 743943 |
| |
+--------------------------------------------------------------------------------+
This information is provided by RNS
The company news service from the London Stock Exchange
END
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