TIDMHAST
RNS Number : 0052V
Henderson Alternative Strat Tst PLC
04 August 2020
Legal Entity Identifier: 213800J6LLOCA3CUDF69
HERSON ALTERNATIVE STRATEGIES TRUST PLC
Financial Report for the year ended 31 March 2020
This announcement contains regulated information
INVESTMENT OBJECTIVE
The Company's Investment Objective and Policy was changed on 3
July 2020, following approval from shareholders in general meeting.
The new Investment Objective is to conduct an orderly realisation
of the assets of the Company, to be effected in a manner that seeks
to achieve a balance between returning cash to shareholders
promptly and maximising value whilst retaining investment trust status.
PERFORMANCE HIGHLIGHTS(1)
-- Total dividend of 5.50p per ordinary share for the year to 31 March 2020
-- NAV of 286.9p at the year end
-- NAV total return of -13.8% over the year to 31 March 2020
31 March 2020 31 March 2019
--------------------------------- -------------- --------------
NAV per ordinary share 286.9p 335.5p
Total return per ordinary share (46.1p) 9.8p
Share price per ordinary share 212.0p 270.0p
Market capitalisation GBP82.0m GBP104.4m
Discount(2) 26.1% 19.5%
Interim dividend - 5.00p
Final dividend(3) 5.50p 2.50p
-------------- --------------
Total dividend 5.50p 7.50p
-------------- --------------
Number of investments(4) 40 44
Ongoing charge(5) 0.90% 0.94%(6)
1. Figures in respect of the year ended 31 March 2020 compared
to the previous 18-month period ended 31 March 2019
2. Discount calculated using year-end audited NAVs including current-year revenue
3. 2020 final dividend subject to shareholder approval at the
annual general meeting on 16 September 2020
4. Excludes nil-valued securities
5. Calculated using the methodology prescribed by the AIC
6. Annualised for the 18 -months ended 31 March 2019
CHAIRMAN'S STATEMENT
I present to shareholders the full year report and financial
statements of the Company for the year ended 31 March 2020.
Company Background
Your Company has pursued a specialist multi-strategy and
alternatives investment approach for many years, and which predates
the move to our current investment manager ( Henderson Investment
Funds Limited appointed April 2013 ). During this period, the
Alternatives asset class has grown in size and scope, with many new
opportunities appearing in the investment universe. Their common
thread is that these require careful selection, diligence and
curation and your Board remain of the view that a listed investment
company structure, with professional and independent governance, is
an important access vehicle for many investors who seek exposure to
a diversified portfolio of alternative assets. However, your Board
recognises that the prevalence of persistent discounts to net asset
values (which exist for many reasons, poor performance included) is
a less attractive feature for long term investors.
New Company Investment Strategy
Your Board recognises that hitherto the Company has failed,
despite the opportunities presented, to deliver the net asset value
improvement and share price performance anticipated by its
shareholders. Having considered at length the options available to
it, as well as evaluating the potentially beneficial impact of
share buybacks, tender offers and continuation votes, your Board
asked its recently appointed senior manager Alex Barr in September
2019 to undertake a thorough review of the portfolio and the
Company's competitive positioning. As we set out in January (
Company Update announcement, 16 January 2020, RNS number 9478Z ),
that review concluded that the best way to improve performance, and
to reduce the persistent discount, would be to increase its
investment in more illiquid alternative investment strategies which
demand enhanced due diligence and offer the rewards which accrue
from skilled stock selection. The Board was advised also that its
larger shareholders had little appetite for any increase in the
illiquidity of the portfolio and that, for many, there was a
preference for realising their investment in an orderly fashion.
Accordingly, the Board committed itself to bring forward proposals
to return cash to shareholders by realising the Company's portfolio
of assets in an orderly and, wherever possible, in a
value-generating manner.
In February the Board set out details ( publication of Circular
and Notice of General Meeting, 24 February 2020, RNS number 8101D )
of a modified Investment Objective and Policy that would allow the
Company's assets to be realised in both a methodical and orderly
manner and to strike a balance between selling assets promptly and
maximising value. We also gave notice of a general meeting to be
held on 25 March. Shortly before this meeting, having monitored the
disruptive impact of the COVID-19 virus on markets, which is
discussed fully by your investment managers in their report, and
which gave rise to highly volatile market conditions, we announced
( Adjournment of General Meeting notice, 19 March 2020, RNS number
8490G ) that an immediate change to an active realisation policy
would not be in the best interests of shareholders and, in the
light of Government restrictions, that the general meeting would be
adjourned to a future date.
Having reiterated in that announcement our commitment to put
before shareholders the resolution set out on 24 February, the
Board took advantage of government legislation on general meetings
to hold the meeting on 3 July 2020, at which the resolution was
passed by poll and a majority of 99.9% of shareholders who voted.
As a result, the Manager has now commenced the programme to realise
the Company's assets in an orderly manner, and further details will
be sent to shareholders once sufficient cash has been raised to
start returning it to them.
Performance, Discount and Dividend
During the period under review the Company's Net Asset Value
("NAV") per share fell to 286.9p. Inclusive of the final dividend
of 2.5p paid on 2 August 2019 shareholders received a (Sterling)
NAV total return of -13.8% for the year to 31 March 2020. By way of
comparison, the Company's benchmark, the FTSE World Total Return
Index, returned -6.0% for the same period whilst the Company's
share price fell by 20.8% (Index source, Bloomberg, NAV source
Janus Henderson Investors) both on a total return basis.
A number of factors affected the Company's portfolio
performance, particularly in its final quarter. Whilst the
Company's private equity portfolio delivered good relative
performance in the first half of the financial year, such gains
were lost during the turmoil at year end. In the uncertainty
created by the apparently unstoppable spread of COVID-19 and the
closing-down of economies by concerned authorities, few companies
were able to escape the severe market downturn. The prices of
companies which offer alternative asset strategies tend to suffer
disproportionately as a consequence of their comparative lack of
transparency and of their illiquid nature. Poor price performance
tends to be exacerbated by the inability to trade in volume owing
to the disappearance of those who previously made markets in the
shares. Already susceptible to such elements, the Company lost
further support as a result of the Board's decision to postpone its
EGM, in line with Government advice to companies. Fortunately, the
Company's hedge fund and commodities strategies proved resilient
and outperformed their respective indices whilst April proved a
better month both for asset and share price appreciation.
Your investment managers address these issues in detail in their
report which covers the adverse effect of stock selection in the
first half of the financial year and the impact on the Company's
portfolio in February and March of indiscriminate selling of all
risk assets, which they consider to be the primary driver of
negative performance.
At the period-end, the share price discount to NAV stood at 26%,
having widened over the period from 20%, for the reasons outlined
earlier. The discount has since narrowed to 10.6% at 17 July 2020
(the latest practicable date before this report).
Having committed in our last Annual Report (for the 18-month
period to end March 2019) to maintain current dividend levels and,
having said that we would use accumulated revenue reserves where
necessary, your Board's view remains unchanged. Indeed, given the
uncertainty around cancellation of dividends more generally
throughout this crisis, the role listed investment companies play
as reliable sources of income is as important as ever. In
anticipation of shareholder approval at the AGM, your Board is
pleased to propose a dividend of 5.5p per share (2019: interim:
5.0p; final: 2.5p (18-month period)) which will be payable on 12
October 2020 to shareholders on the register on 24 September
2020.
Fund Management Team
It has been a difficult year for our managers and their
thoughtful response to the unusual challenges of markets and
economies should not be underestimated by shareholders. Having
obtained shareholder approval to change our Investment Policy, the
Board now looks to our managers to realise our investment portfolio
and to maximise and return the best attainable value to our
shareholders.
Outlook
The social, economic and financial impact of COVID-19, has been,
and remains, immense, with great uncertainty governing the shape of
policy response and the nature and timing of recovery. With many
individual businesses and certain business sectors requiring
wholesale recapitalisation, with huge damage caused to fragile
supply chains and with heavily dented consumer confidence, few
business models remain truly unaffected. Some of these less damaged
businesses sit within the alternatives space (certain
'availability' based infrastructure assets ( an 'availability
based' project allows a private infrastructure company to receive
regular payments, per the agreed contract terms, once the asset has
been 'delivered and is available for use'. Payments are therefore
not contingent on usage levels ) , for example) but equally there
are areas that may see significant asset write-downs. For many
illiquid asset classes net asset values for the first quarter will
not be available for some time and the full financial impact will
take time to become clear. The consequence of such limited
visibility is reflected in wider spreads for many assets
(regardless of whether public or private), itself a function of
lower volumes and more limited buyer availability.
Your investment team remained fully aware of the Board's
commitment to introduce a resolution to realise the assets of the
Company, and agreed with the Board that further illiquid assets
would not be added to the existing portfolio and that best efforts
should be made to enhance the liquidity profile of the Company's
investment portfolio as the shareholder vote approached. As stated
previously, the full realisation process is expected to last no
longer than two years.
Due to continued restrictions and uncertainties about the
COVID-19 pandemic, this year's Annual General Meeting will be held
as a closed meeting for the safety of our shareholders. I would
strongly encourage shareholders to use their forms of proxy to
vote, and, if they have any questions they would like to submit to
the Board, or the Fund Managers, to do so in advance of the meeting
by writing to ITSecretariat@janushenderson.com.
Richard Gubbins
Chairman
3 August 2020
FUND MANAGERS' REPORT
Overview
At the end of March 2020 the Company was invested in 40
individual investments, accounting for 93.6% of the NAV.
Performance
In local currency terms the portfolio generated a total return
of -12.7%, and in sterling terms -11.8% (Includes investment
returns (and fees) on the Company's cash allocations, and all fees
charged by underlying managers during the year. Excludes management
and other fees charged by Henderson Investment Funds Limited)
We set out asset class level performance contribution (Sterling,
gross of fees. Source - Janus Henderson Investors) here:
Investment category Contribution % Average Weighting%
Private Equity -4.1 31.2
--------------- -------------------
Hedge Funds 0.6 18.2
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Public Equity -5.4 14.8
--------------- -------------------
Credit -3.0 12.7
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Property -0.6 10.0
--------------- -------------------
Commodities 0.7 4.8
--------------- -------------------
Global financial markets experienced a wholesale sell-off in
February and March 2020 as a direct reaction to the COVID-19 virus'
spread throughout the world, and the subsequent steps taken to lock
down many nations' economies. The cessation of most forms of
travel, trade, economic development, hospitality and leisure have
left very few asset classes unaffected, and many countries remain
in some form of restrictive lock down or are taking steps to
remobilise their economies and social systems. Portfolio
performance was therefore significantly negative for the year under
review as a direct result of this, and combined with the impact
earlier in the financial year from key stock events experienced in
mid-2019 discussed below.
We discuss performance by sector and start with private
equity.
As set out in out in our half year report ( update for the
six-month period to 30 September 2019 ), we saw strong performance
from listed private equity (PE) investments (which included
Harbourvest Global Private Equity and 3i Group), and unlisted
investments Mantra Secondary Opportunities and Renewable Energy
& Environmental Infrastructure Fund II ("REEIF"). The listed PE
portfolio saw re-ratings as well as strong underlying NAV growth,
whilst Mantra and REEIF achieved healthy, profitable exits from
underlying investments during the period. As markets reacted
adversely in the final quarter of the Company's year to the rapidly
developing COVID-19 pandemic, listed private equity discounts
widened as investors became concerned over the quality of lagged
NAVs and those funds' over-commitment ratios ( Private Equity
limited partnership funds report (for those reporting quarterly) on
a one quarter lagged basis. Certain listed 'fund of private equity
funds' use fair value adjustments to reflect changes in value of
similar assets in public equity vehicles ) . Whilst the private
equity industry has become more conservative in the wake of the
2007-2009 global financial crisis ("GFC") with regard to leverage
use and commitment coverage, the greater prevalence of debt usage
throughout the private equity eco-structure is of a more recent
issue. The immediate outlook for portfolio company exits (sales)
has been, and remains, of additional concern, and was a key factor
in listed private equity discount widening.
Riverstone Energy, the listed private equity investor in US oil
and gas ventures, fell heavily in the three months to mid-October
last year, against the backdrop of a declining oil price and which
translated into reduced growth forecasts for US domestic energy
producers. Subsequent to this unhappy occurrence, the onset of
COVID-19 dented heavily oil related investments' values owing to
the significant drop in demand for oil - the IEA ( International
Energy Agency ) expect global oil demand to fall by a record
9.3mb/d ( source, IEA Oil market Report April 2020. Mb/d is
'million barrels per day' ) year-on-year in 2020. Our thesis for
holding Riverstone post its initial fall was predicated on its deep
value discount to NAV, indeed, the company's current market
capitalisation remains less than its balance sheet net cash ( as at
1 May, source - JP Morgan ). This state of affairs has allowed
Riverstone's board to take action to narrow the discount (to NAV)
by returning cash and we were pleased to see a significant share
buyback announced this May and subsequently enacted. Riverstone
has
since rallied over 60% ( source, Bloomberg. Riverstone performance +68% 1/5/20 to 14/5/20 ).
Our hedge fund exposure delivered a positive contribution to
performance which was led by the Blackrock European Hedge Fund and
Sagil Latin American Opportunities Fund. With the former, drivers
to performance have come from a bias to quality and growth, select
long positions in the US and Europe and a very timely rapid move
out of value cyclicals. Whilst the latter fund saw a low-teens
drawdown in March, the 11-month performance prior had been strong,
resulting thereby in a net positive return for the 12-month period.
As we noted in our half year report, Sagil had impressed us in
2019, given the volatility originating in Argentina over the
summer.
Our credit exposure as a whole benefited from a general
tightening in spreads over the first half of our reporting year,
although, sadly, such gains disappeared when spreads widened in the
first quarter this year. The Ashmore Emerging Markets Short
Duration Fund, with its three largest geographic exposures in
China, Argentina and Ecuador, fell heavily as some of its liquid
holdings saw disproportionate declines when investors made
decisions to 'sell what they could, rather than what they wanted to
' ( source, Ashmore, 'Emerging View, April 2020' ).
Within our public equity allocation, we were hurt by the
economic exposure ( 'economic exposure' represents the investment
in the underlying index multiple multiplied by the number of
contracts held ) to our Euro Stoxx 50 Index Dividend Future (
expiry date 16/12/22 ) investment, a marked detractor to
performance. Our original purchase was based on the better
risk/reward characteristics of dividend futures at the time versus
mainstream European equities. Dividends have historically proven to
be more robust than earnings in previous recessions, and are also
not subject normally to the de-rating effect that stocks suffer
from as investors de-risk in the face of economic uncertainty.
Nevertheless, dividend futures are vulnerable to significant price
weakness in moments of heightened volatility as experienced this
March, and this was notably pronounced as companies were forced to
stop distributions in return for state bailouts (or took the
opportunity to delay or cut dividends in order to preserve cash).
As dividends are generally paid from profits from the previous
calendar year, we feel confident that by 2022 most cyclical sectors
will have re-instated their payouts, while more defensive companies
will feel confident enough to resume their progressive payment
policies. Moreover, weaker companies which cannot support dividend
distributions tend to fall out of the index and are replaced by
firms that have proven to have more resilient characteristics.
Burford Capital , a litigation funding business, fell heavily in
August following a critical research note published by short-seller
Muddy Waters. The circa 50% fall in Burford's share price was
concentrated over a two-day period. Muddy Waters' report had,
amongst other points, alleged that Burford misrepresented returns
and had poor governance. Whilst Burford management acted swiftly to
address all issues, absolute performance has remained lacklustre,
with many investors reluctant to return, despite significant
resolution of transparency and liquidity concerns. The former
(transparency, and in particular, its improvement) was one of
several catalysts that we felt might serve to rebuild 'the fragile
confidence in the company' that we referred to in our half year
results. Whilst not fully immune from the COVID-19 crisis (which
may impact on short term realisations and cash deployment)
litigation funding remains an attractive long-term asset class,
with pay-off structures not dissimilar to venture capital. This
longer-term thesis is supported by the significant discount to
which Burford trades compared to analysts' price targets.
Positive performance was delivered from Worldwide Healthcare
Trust, driven by underlying M&A activity and more recently
strong performance in biotech and medical devices.
Within our property allocation the contribution from Summit
Properties and Urban Logistics was positive. however Overall
returns, however, were impacted in this area by the long-term
holding of CEIBA Investments, the listed Cuban Real Estate investor
which has seen its discount to NAV widen primarily as a result of
tightening US sanctions against Cuba. Whilst Cuba appears not to
have been affected significantly by COVID-19, CEIBA has suffered
hotel closures, has had to curtail hotel and resort development as
a result of unavoidable lockdown and control measures and has
consequently announced the cancellation of its 2020 dividend.
Our commodity exposure is effected through the Bank of America
Merrill Lynch Commodity market neutral approach which performed
strongly over the year. This systematic strategy generates returns
from persistent inefficiencies ('risk premia') in commodity futures
markets. The strategy performs particularly well when there is
over-supply in markets, which became especially acute late in the
period when most economies went into lockdown and demand for basic
resources evaporated.
Activity
It has been an eventful year, with post-December portfolio
decisions taken in the context of the 'risk-on' market environment
that followed Boris Johnson's decisive UK electoral win in
mid-December replaced by the rapid global onset of COVID-19 through
2020. The national (and broader European) Brexit angst seen through
all of 2019 and the uncertainty around the China/US trading
relationship seem long forgotten now, though these were pillars of
our market view only six months ago. With regard to 2020 events, it
feels helpful for context to highlight the levels of market
volatility experienced - the VIX (The VIX index or Chicago Board
Options Exchange Volatility Index. Estimates the expected
volatility of the S&P500 index) delivered volatility levels in
February and March considerably greater than those seen at the peak
of concerns during the GFC and other similar market events. Indeed
volatility remained elevated into summer 2020. Experience of past
events reminds us that our ability (or otherwise) to act with any
degree of certainty through such extraordinary periods is likely to
be tested and we dwell on this in the outlook and strategy
section.
Our new investments were all in liquid or listed strategies and
funded through a combination of ongoing distributions from legacy
private equity, other liquidity events, and asset sales.
In June we added the CIFC Global Floating Rate Credit Fund .
CIFC is a US-based credit specialist and one of the largest
managers of CLOs ( Collateralised Loan Obligations - single
securities backed by a pool of (usually) corporate loans. As
implied, the loans are collateralised (or backed) by assets). The
strategy invests in debt tranches of CLOs, with a minimum 45% in
investment grade loans and targets a total return of 8%. Whilst the
CLO asset class has not escaped events this year, the fund has
outperformed the broader CLO market. We believe that the manager
will be able to continue to generate attractive returns. Whilst
underlying loan default rates are forecast to approach levels
similar to the aftermath of the financial crisis we believe the
manager's focus on higher-rated tranches will protect capital
losses even if distributions are temporarily delayed.
In July we added positions in Augmentum Fintech and New Energy
Solar. Augmentum focuses on early-stage investing in fintech
(financial technology) companies within Europe and has a number of
fundamentally attractive holdings. As a result of COVID-19 we do
see some short-term pressure on the financing of fintech, and
similar issues on very near-term growth, but, with proven benefits
accruing to both personal and enterprise adopters of fintech. New
Energy Solar is an Australian-listed solar park developer and
operator and has experienced so far no direct impact from COVID-19.
We continue to see such assets as good diversifiers and New Energy
offers a c7% yield. We follow with attentiveness the sale process
currently underway for part interests in some of their assets.
Within this latter infrastructure space we also introduced
International Public Partnerships ("INPP") and added to HICL
Infrastructure immediately after the UK general election. In the
long build up to the election there had been much speculation with
regard to a possible Labour government's intentions potentially to
nationalise PFI/PPP contracts. Such speculation had weighed heavily
on this sector. INPP was added to bolster our existing listed
infrastructure exposure as was 3i Infrastructure ('3IN") on the
final day of our financial year. 3IN has an exceptionally
attractive diversified portfolio of economic infrastructure assets
which includes Tampnet, an offshore communications network operator
focused on the North Sea and Gulf of Mexico.
Within private equity we added two new listed names, Oakley
Capital Investments and Pantheon International. Oakley has a strong
track record of investing alongside successful entrepreneurs in
high growth areas. We were able to buy the shares at a particularly
wide discount owing to some technical selling as the trust moved to
the specialist funds segment of the London Stock Exchange. As we
note in the performance review, listed private equity names
performed well in our first half and, indeed, continued to do so
until February. Pantheon was introduced towards the end of March,
following the heavy discount widening seen in listed private equity
and after the decision to postpone the general meeting of Henderson
Alternative Strategies Trust (HAST). Pantheon has a high quality,
well diversified portfolio and, importantly in respect of HAST's
requirements, has good liquidity. In view of HAST's possible move
to a realisation mandate, Pantheon was added only as a small
position. Whilst Private Equity will be impacted by this crisis,
with further deterioration in finalised NAVs for this year's first
two quarters likely, the discount widening seen in March appears to
over-compensate for this outcome. Listed PE names have behaved more
or less as they did during the GFC and history suggests that adding
these names at the point of maximum pessimism can be sensible.
We sold Summit Properties, a listed real estate business in
February, having trimmed in November after a period of strong
performance. Having become increasingly concerned about governance
of the business, and liquidity in the shares, our full exit came
shortly before an unattractive take private bid.
In respect of trading activity, in the first half of the year we
added to Safeguard Scientifics and Sigma Capital Group at
attractive valuations and we also increased our investment in Sagil
Latin American Opportunities Fund. We took profits in stocks which
had performed particularly well, such as 3i Group PLC and
Harbourvest Global Private Equity and improved overall liquidity by
trimming less frequently traded holdings such as CEIBA Investments
and Axiom European Financial Debt. We also consolidated our
emerging market debt positions. We sold out of our local currency
exposure and invested the proceeds into the USD denominated short
duration fund run by Ashmore (Ashmore Emerging Markets Short
Duration Fund). In our second half year, we have been active in 3i,
both trimming and adding again as market conditions changed. We
de-risked our position in German residential property business
Deutsche Wohnen in March, by trimming it to raise cash and had
similarly trimmed our position in the relatively illiquid Urban
Logistics in December, following strong performance.
Outlook and Portfolio Strategy
In the latter part of 2019 investors' focus had been on the
ongoing deterioration in key global economic indicators and on
rising recessionary fears. Economic data appeared, however, to
improve in early 2020, boosting hopes thereby that earnings might
justify the high valuations of elevated global equity markets. As
we suggested in our opening comments, everything changed with the
spread of COVID-19. Of the many ways in which this is different
from the GFC, it is perhaps the humanitarian consequences that are
likely to have the most profound impact, not just on society but on
how any portfolio of financial assets behaves. With 2020 consensus
forecasts for the G8 having fallen from 1% to -5%, and a wide
difference in estimated timelines to eventual recovery, it is clear
that many businesses - starved of footfall and, in many cases,
capital - will suffer irreversible damage. Equity markets do seem
to be looking through these challenges which partially explains the
post-March 'risk-on' rally that appears to have restored some
equilibrium. It may be that investors are choosing to focus more on
the upside risks, for example, faster release of countrywide
lockdowns, or better news on vaccine development. The year to
date performance of technology has been extraordinary, for
instance, with the NASDAQ 9.6% up versus its February peak and
20.1% up year to date in dollar terms.
For many of our asset classes, credit and private equity in
particular, managers will face significant challenges in delivering
performance from existing portfolios, but for those with
established longer-term investments, and those with cash to deploy
now, the post crisis investment period is likely to offer rewarding
opportunities.
As managers we have been through extraordinary market events
previously and have learnt that patience must play its role in
portfolio management, particularly in alternatives and particularly
in times such as these. Our approach to trading through this period
has not been wholly to discard risk assets in a rapidly falling
market but, rather, to test recovery scenarios against our original
investment theses, which for the most part appear intact. As
managers of this portfolio, we have the additional challenge of not
only managing to an equity-based benchmark, but to continue to do
that whilst mindful that shareholders appeared supportive of
adopting a realisation investment policy. As your Chairman, Richard
Gubbins, notes in the preceding report, this was originally due to
be put to shareholders in March but was adjourned, and the meeting
subsequently reconvened and resolution passed in early July. We
agreed with your Board that we would not make any commitments to
illiquid assets, nor did we pre-empt the outcome of that vote by
moving to realise assets before it. Where we traded, it was with a
liquidity and quality improvement bias. Since the resolution has
now passed, we have begun to liquidate assets in a careful and
considered way and will provide updates on the expected liquidity
timeline via our monthly factsheets.
Alex Barr, James de Bunsen and Peter Webster
Fund Managers, Janus Henderson Investors
3 August 2020
INVESTMENT PORTFOLIO
Portfolio
Market
Value
Investments Focus GBP'000 %
-------------------------------------------------- ---------------- ---------- ----------
BlackRock European Hedge Fund Limited (3) Hedge Funds 8,520 8.2
Mantra Secondary Opportunities (4) Private Equity 7,735 7.4
Bank of America Merrill Lynch Commodity (2) Commodities 6,917 6.7
Sagil Latin America Opportunities Fund (3) Hedge Funds 5,605 5.4
Renewable Energy & Environmental Infrastructure
Fund Ii (A) (4) Private Equity 5,286 5.1
KLS Sloane Robinson Emerging Market Equity
Fund (3) Public Equity 5,023 4.8
HICL Infrastructure (1) Public Equity 4,405 4.2
DMS UCITS Platform ICAV CIFC Gbl Floating
Rate Cdt B2 (3) Credit 4,281 4.1
Worldwide Healthcare Trust PLC (1) Public Equity 4,243 4.1
Ceiba Investments Limited (1) Property 4,211 4.1
-------------------------------------------------- ---------------- ---------- ----------
Ten largest 56,226 54.1
Majedie Asset Management Tortoise Fund (3) Hedge Funds 4,062 3.9
Baring Vostok Investments Limited Core (2) Private Equity 3,444 3.3
Intl Public Partner (1) Public Equity 3,244 3.1
Ashmore Emerging Markets Short Duration Fund
(3) Credit 3,191 3.1
Harbourvest Global Private Equity Limited
(1) Private Equity 2,663 2.6
Safeguard Scientifics Inc (1) Private Equity 2,449 2.4
3i Group plc (1) Private Equity 2,357 2.3
Eurovestech plc (2) Private Equity 2,343 2.3
Princess Private Equity Holding Limited (1) Private Equity 2,172 2.1
Urban Logistics REIT (1) Property 2,117 2.0
Twenty largest 84,268 81.2
Helium Selection Fund(3) Hedge Funds 2,025 1.9
Oakley Capital Investments (1) Private Equity 1,921 1.8
NB Distressed Debt Investment Fund Limited
- Global Shares (1) Credit 1,904 1.8
Sigma Capital Group PLC (1) Public Equity 1,601 1.5
Deutsche Wohnen (1) Property 1,549 1.5
New Energy Solar (1) Public Equity 1,390 1.3
Axiom European Financial Debt Fund Limited
(1) Credit 1,196 1.2
Toro Limited (1) Credit 1,175 1.1
Burford Capital Ltd (1) Public Equity 1,118 1.1
3i Infrastructure plc (1) Public Equity 1,051 1.0
-------------------------------------------------- ---------------- ---------- ----------
Thirty largest 99,199 95.4
Amber Trust SCA (4) Private Equity 960 0.9
Firebird Republics Fund SPV (4) Private Equity 911 0.9
Augmentum Fintech PLC (1) Private Equity 708 0.7
Riverstone Energy Limited (1) Private Equity 597 0.6
ASM Asian Recovery Fund (4) Hedge Funds 549 0.5
NB Distressed Debt Investment Fund Limited
- Extended Life Shares (1) Credit 429 0.4
Century Capital Partners IV L.P. (4) Private Equity 378 0.4
Pantheon International (1) Private Equity 66 0.1
Armadillo Investments (4) Private Equity 64 0.1
Thirty nine largest 103,858 100.0
-------------------------------------------------------------------- ---------- ----------
Other investments Various - 100.0
-------------------------------------------------- --------------- ---------- ----------
Total Investments (excluding
derivatives) 103,858 100.0
-------------------------------------------------------------------- ---------- ----------
EUX Euro Stoxx 50 Index Dividend
22 Future (Exp 16/12/22)(5) (2,158)
-------------------------------------------------------------------- ---------- ----------
Cash and other net current
assets 9,271
-------------------------------------------------------------------- ---------- ----------
Net assets 110,971
-------------------------------------------------------------------- ---------- ----------
1. Listed on Major Market
2. Listed on Minor Market
3. Unlisted investment with redemption rights
4. Unlisted investment without redemption rights
5. The unrealised loss of 2,158,000 represents the difference
between the "economic exposure" and the settlement value
1. Major Market includes London Stock Exchange full listing and
AIM), Euronext and Singapore Stock Exchange
2. Minor Market includes: Luxembourg Stock Exchange, Channel
Islands Stock Exchange, Bermuda Stock Exchange, ISDX and LMMX
Managing Risks
In accordance with the AIC Code and FRC Guidance, the Board has
established procedures to identify and manage risk and to determine
the principal risks and uncertainties to which the Company is
exposed in achieving its long-term objectives. The Company's
principal risks are considered to be those that would threaten its
business model, future performance, reputation, solvency and
liquidity. In addition, it is the Board's responsibility to
identify emerging risks which it defines as events, trends or
uncertainties that are at an early stage of development but could
pose a significant threat to the Company's future and require
further monitoring and investigation.
Principal Risks
The Board, with the assistance of the Manager, regularly carries
out a robust assessment of the principal risks facing the Company
and seeks assurance that the risks are appropriately evaluated and
that effective mitigating controls are in place, where possible. To
aid the process, the Company has drawn up a detailed risk matrix,
where the individual risks and the application of any relevant
controls are described. Such safeguarding measures may be
established by the Board itself: for example, the Board has put in
place a schedule of investment limits and restrictions, appropriate
to the Company's investment objective and policy, to which the
Manager must adhere and report upon monthly. Alternatively, the
design and application of controls may be delegated by the Board to
the Company's third-party service providers, who report regularly
to the Board on the effectiveness of their control environments.
Using a colour coded traffic light system, each risk within the
matrix is assessed, scored and prioritised according to the
severity of its potential impact on the Company and its likelihood
of occurrence. The principal risks which have been identified as
part of this process, and the steps taken by the Board to mitigate
these, are set out in the table below.
The Board does not consider these principal risks to have
changed during the course of the reporting period and up to the
date of this report with the exception of the 'risks associated
with Brexit' that are now considered as an emerging risk. In light
of the circumstances, COVID-19 is specifically referred to in
operational risk.
Risk Controls and mitigation
--------------------------------------------------------
Investment Strategy and
Performance The Board monitors investment performance at
Poor investment performance each meeting and the Fund Managers are committed
to maintaining a diversified portfolio. Market
risk is mitigated through the activities set
out in note 15 to the financial statements.
As the new Investment Policy is implemented,
the Board will monitor the liquidity and stability
Failure of the Manager of the portfolio.
The Board seeks assurances that the Manager
maintains and tests business continuity plans
Loss of Fund Manager or to ensure operations can be maintained in the
management team event of a business disruption.
The Board seeks assurances from the Managers
Failure of strategy that the Multi-Asset team is suitably resourced
and that the Fund Managers are appropriately
remunerated and incentivised in their roles.
The Board examines strategy and whether it
remains appropriate at each meeting, which
includes distribution strategy, market communication,
drift from mandate and regulatory change. The
Board reacts to any indication that the strategy
has failed, which it has done by putting a
change of Investment Objective and Policy to
shareholders earlier this year.
----------------------------------- --------------------------------------------------------
Operational Risks including
Cyber
Risks, Pandemic and Epidemic
Risks
and Risks Relating to Terrorism The Board receives a quarterly internal control
and report from the Manager to assist with the
International Conflicts ongoing review and monitoring of internal controls
Risk of loss through inadequate and risk management systems it has in place.
or failed
internal procedures, policies, The Board regularly receives reports from the
processes, Manager's Internal Audit, Risk, Compliance,
systems or human error. Information Security and Business Continuity
This includes risk of loss Teams. This provides assurance that the Manager
to the Company's third-party has appropriate policies and procedures in
service providers as a result place to be able to continue in operation and
of inadequate procedures, maintain stability in times of such risks.
policies, processes, systems In particular, the Board asks the Manager to
or confirm that the Fund Manager can continue
human error. to manage the portfolio in these circumstances.
The Board has received assurance from Janus
Risk of financial loss, Henderson that the impact of the COVID-19 pandemic
disruption or damage to has been managed and that the Manager's key
the reputation of the Company, third-party providers have appropriate policies
the Manager and the Company's and procedures such that service to the Company
other third-party service has not been adversely affected.
providers, as a result of
failure of information technology The Board makes similar enquiries of its key
systems. third-party service providers to gain assurance
that they too have appropriate policies and
Risk of loss as a result procedures in place to be able to continue
of external events in operation and maintain stability in times
outside of the Board's control of such risks.
such as
pandemic and/or epidemic Please refer to the Report of the Audit Committee
risks and risks in the annual report for further details about
relating to terrorism and/ Internal Control and Risk Management.
or international
conflicts that disrupt and
impact the global economy.
This includes the risk of
loss to the Company's third-party
service providers that are
also disrupted and impacted
by such events.
----------------------------------- --------------------------------------------------------
Regulatory/Operational
Failure of a key third-party The Board receives regular reporting from its
service provider key third-party service providers.
Breach of internal controls The Audit Committee reviews the independently
Loss of s.1158 status audited reports on the effectiveness of internal
controls in place at each of its key third-party
Breach of company law or service providers, monitors compliance with
Listing Rules resulting the investment mandate and receives quarterly
in suspension internal control reports from the Manager and
quarterly reports from the depositary on the
safe custody of the Company's assets.
The Manager regularly reviews and reports on
compliance with s.1158.
----------------------------------- --------------------------------------------------------
Discount
The Company's shares trade The Board monitors the level of the Company's
at an increasingly wide discount to NAV per share and reviews the average
discount to NAV NAV for the AIC Flexible Investment sector
at each meeting.
The Board regularly reviews with the Fund Managers
and the Company's brokers measures to maintain
demand in the Company's shares, including a
full range of discount control mechanisms.
----------------------------------- --------------------------------------------------------
The Board considers these risks to have remained unchanged throughout
the year under review.
Emerging Risks
With the help of the Manager's research resources and using its own market
intelligence, the Board continually monitors the changing risk landscape
and any emerging and increasing threats to the Company's business model.
Such emerging risks could cause disruption for the Company, if ignored,
but, if identified, could provide business opportunities. The emerging
risks identified below are currently being evaluated and monitored.
Risks Associated with Brexit It is difficult to evaluate all of
Risk that whatever the implications the potential implications on the
of the UK's exit from the European Company's business and the wider
Union and any forthcoming trade economy. The main exposures are related
negotiations to potential currency volatility
and transitional arrangements, the affecting the value of the Company's
portfolio will be subject to greater holdings. The Board is confident
market price risk volatility and that the Manager and its other key
specific stock risk as a result. service providers will continue to
operate for the foreseeable future
whatever the outcome of the trade
negotiations and transitional arrangements
following the UK's departure from
the EU
VIABILITY STATEMENT
The directors have assessed the viability of the Company over
the expected realisation period (expected to be no longer than two
years) taking account of the Company's current position and the
potential impact of the principal risks and uncertainties as
documented in this Strategic Report. In assessing viability, the
directors have considered the approval by shareholders of the
change to the Company's investment objective and policy with a view
to realising the Company's assets in an orderly manner in order to
return cash to shareholders and subsequently liquidate the Company.
The directors have a reasonable expectation that the Company will
be able to continue in operation and meets its liabilities as they
fall due until such date that the Company is put into members'
voluntary liquidation. The assessment has considered the possible
impact of the principal risks and uncertainties facing the Company
throughout the realisation period and the likelihood of their
materialising in severe but plausible scenarios, and the
effectiveness of any mitigating controls in place.
The directors took into account the nature of the investment
portfolio, including its liquidity, redemption restrictions that
exist on certain investments, and the income stream that the
current portfolio generates in considering the viability of the
Company over the realisation period and its ability to meet
liabilities as they fall due.
The directors do not expect there to be any significant change
in the current principal risks and in the adequacy of the
mitigating controls over the realisation period. The directors do
not envisage any other events that would prevent the Company from
continuing to operate over that period as the Company's assets are
sufficiently liquid, its commitments are limited and the Company
intends to continue to operate as an investment trust until it is
placed into liquidation. In making their assessment, the directors
have considered the impact that the ongoing Covid-19 pandemic may
have on the realisation plan and subsequent liquidation.
The ongoing operation of the Company was subject to a
continuation vote every three years, with the next vote due to take
place in 2021. The approval by shareholders of the change in
investment objective and policy, which will see the orderly
realisation of the Company's assets and cash returned to
shareholders means the continuation vote will no longer be
necessary.
Based on this assessment, the directors have a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the assessment
period.
STATEMENT OF DIRECTORS' RESPONSIBILITIES UNDER DTR 4.1.12
Each of the directors confirms that, to the best of their
knowledge:
-- the financial statements, which have been prepared in
accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards comprising FRS 102
and applicable law), give a true and fair view of the assets,
liabilities, financial position and profit of the Company; and
-- the annual report includes a fair review of the development
and performance of the business and the position of the Company,
together with a description of the principal risks and
uncertainties that it faces.
For and on behalf of the Board
Graham Oldroyd
Director
3 August 2020
INCOME STATEMENT
Year ended 31 March 18-months ended
2020 31 March 2019
GBP'000 GBP'000
Revenue Capital Revenue Capital
return return Total return return Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- ------------------------------ --------- ---------- ---------- --------- --------- ----------
(Losses)/gains on investments
at fair value through
9 profit or loss - (18,575) (18,575) - 2,285 2,285
Exchange differences - 15 15 - 32 32
2 Investment income 2,211 - 2,211 3,312 - 3,312
--------- ---------- ---------- --------- --------- ----------
Gross revenue and capital
gains 2,211 (18,560) (16,349) 3,312 2,317 5,629
Investment management
3 fees (151) (602) (753) (247) (989) (1,236)
4 Other expenses (409) (273) (682) (611) - (611)
--------- ---------- ---------- --------- --------- ----------
Net return before finance
costs and taxation 1,651 (19,435) (17,784) 2,454 1,328 3,782
5 Finance costs (3) (10) (13) - (1) (1)
--------- ---------- ---------- --------- --------- ----------
Net return before taxation 1,648 (19,445) (17,797) 2,454 1,327 3,781
6 Taxation (17) - (17) - - -
--------- ---------- ---------- --------- --------- ----------
8 Net return after taxation 1,631 (19,445) (17,814) 2,454 1,327 3,781
--------- ---------- ---------- --------- --------- ----------
8 Return per ordinary share 4.22p (50.27p) (46.05p) 6.34p 3.43p 9.77p
--------- ---------- ---------- --------- --------- ----------
The Total columns of this statement represent the Income
Statement of the Company. The Revenue return and Capital return
columns are supplementary to this and are prepared under guidance
published by the AIC. The Company had no recognised gains or losses
other than those recognised in the Income Statement. No operations
were acquired or discontinued in the year. All revenue and capital
items in the above statement derive from continuing operations.
STATEMENT OF CHANGES IN EQUITY
Year ended 31 March 2020
Share premium Capital
Share account redemption Capital Revenue
capital GBP'000 reserve reserve reserve Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- ------------------- ---------- -------------- ------------ --------------------- ---------- ----------
Balance at 1 April
2019 9,670 10,966 8,783 98,582 1,751 129,752
Net return after
taxation - - - (19,445) 1,631 (17,814)
7 Ordinary dividends - - - - (967) (967)
---------- -------------- ------------ --------------------- ---------- ----------
Balance at 31
March 2020 9,670 10,966 8,783 79,137 2,415 110,971
---------- -------------- ------------ --------------------- ---------- ----------
18-months ended 31 March 2019
Share premium Capital
Share account redemption Capital Revenue
capital GBP'000 reserve reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------- ---------- -------------- ------------ --------------------- ---------- ----------
Balance at 1
October
2017 9,670 10,966 8,783 97,255 3,068 129,742
Net return after
taxation - - - 1,327 2,454 3,781
7 Ordinary dividends - - - - (3,771) (3,771)
---------- -------------- ------------ --------------------- ---------- ----------
Balance at 31
March 2019 9,670 10,966 8,783 98,582 1,751 129,752
---------- -------------- ------------ --------------------- ---------- ----------
STATEMENT OF FINANCIAL POSITION
Year ended 31 18-months ended
March 2020 31 March 2019
Notes GBP'000 GBP'000
-------- --------------------------------------- ---------------- ----------------
Fixed Assets
Investments held at fair value through
9 profit or loss - 113,014
Current assets
Portfolio Investments held at fair
9 value through profit or loss 103,858 -
Money market fund investments held
9 at fair value through profit or loss 7,553 14,810
10 Debtors 1,231 2,600
Cash and cash equivalents 32 -
Total current assets 112,674 17,410
---------------- ----------------
Creditors: amounts falling due within
11 one year (1,703) (672)
Net current assets 110,971 16,738
---------------- ----------------
Total assets less current liabilities 110,971 129,752
---------------- ----------------
Capital and reserves
12 Called up share capital 9,670 9,670
Share premium account 10,966 10,966
Capital redemption reserve 8,783 8,783
Capital reserve 79,137 98,582
Revenue reserve 2,415 1,751
---------------- ----------------
Total equity shareholders' funds 110,971 129,752
---------------- ----------------
8 Net asset value per ordinary share 286.91p 335.46p
The financial statements were approved and authorised for issue
by the Board of Directors on 3 August 2020.
Graham Oldroyd
Director
3 August 2020
CASH FLOW STATEMENT
Year ended 31 18-months ended
March 2020 31 March 2019
GBP'000 GBP'000
------------------------------------------------- --------------- ---------------
Cash flows from operating activities
Net return before taxation (17,797) 3,781
Add back: finance costs 13 1
Losses/(gains) on investments held at fair value
through profit or loss 18,575 (2,285)
Withholding tax on dividends deducted at source (17) -
Decrease/(increase) in prepayments and accrued
income 414 (971)
(Decrease)/increase in other creditors (22) 283
Exchange movements: cash and cash equivalents 18 8
Net cash inflow from operating activities 1,184 817
--------------- ---------------
Cash flows from investing activities
Purchases of investments held at fair value
through profit or loss (42,946) (31,458)
Sales of investments held at fair value through
profit or loss 37,716 44,231
Purchases of money market fund held at fair
value through profit or loss (30,142) (43,283)
Sale of money market fund held at fair value
through profit or loss 37,399 33,191
Future contract cash movements (2,158) 104
--------------- ---------------
Net cash inflow from investing activities (131) 2,785
--------------- ---------------
Cash flows from financing activities
Equity dividends paid (967) (3,771)
Interest paid (13) (1)
--------------- ---------------
Net cash outflow from financing activities (980) (3,772)
--------------- ---------------
Net increase/(decrease) in cash and equivalents 73 170
Cash and cash equivalents at beginning of year (23) 155
Exchange movements (18) (8)
--------------- ---------------
Cash and cash equivalents/(bank overdraft) 32 (23)
--------------- ---------------
The presentation of future contracts cash movements were
previously disclosed under operating activities. These have been
reclassified in the current year and are now disclosed under
investing activities
NOTES TO THE FINANCIAL STATEMENTS
1 Accounting Policies
a) Basis of preparation
The Company is a registered investment company as defined in Section
833 of the Companies Act 2006 and is incorporated in the United Kingdom.
It operates in the United Kingdom and is registered at the address
in the annual report.
The financial statements have been prepared in accordance with the
Companies Act 2006, FRS 102 - the Financial Reporting Standard applicable
in the UK and Republic of Ireland and with the Statement of Recommended
Practice Financial Statements of Investment Trust Companies and Venture
Capital Trusts ("SORP") which was issued in October 2019.
The principal accounting policies applied in the presentation of these
financial statements are set out below. Other than being prepared on
a non-going concern basis and the reclassification of fixed asset investments
to be classified as current assets as explained in policy (h) in the
financial statements, these policies have been consistently applied
to all the periods presented. There have been no other significant
changes to the accounting policies compared to those set out in the
Company's Annual Report for the 18-month period ended 31 March 2019.
The financial statements have been prepared under the historical cost
basis except for the measurement at fair value of investments. In applying
FRS 102, financial instruments have been accounted for in accordance
with Section 11 and 12 of the Standard.
On 26 February 2018, the Company announced that it was changing its
financial year end from 30 September to 31 March with the aim of aligning
more closely its reporting cycle to the receipt of valuations from
the unquoted funds and other unlisted investments held in the portfolio.
Therefore, the current financial accounting period for which financial
statements have been prepared is the first twelve month period reported
since the change. The comparative amounts presented in the financial
statements (including the related notes) are for the 18-month period
ended 31 March 2019 and are therefore not entirely comparable.
b) Going concern
As set out in the Chairman's Statement, the directors put forward to
shareholders a proposal to change the Company's investment objective
and policy with a view to realising the Company's assets and returning
cash to shareholders before putting the Company into members' voluntary
liquidation. The resolution to start this process was approved by shareholders
at the general meeting on 3 July 2020. The directors believe that members
will voluntarily resolve to liquidate the Company in due course following
an initial realisation period and return of cash to shareholders. As
a result of this, these financial statements have been prepared on
a non-going concern basis. Further detail on the considerations and
impact on the financial statements is provided in policies (g) and
(h).
The directors do however believe that the Company has adequate resources
to continue in operational existence, continue to operate as an investment
trust and meet its ongoing liabilities for the realisation period until
it is placed into liquidation.
c) Income
Investment income is included in the Income Statement and taken to
the revenue return on an ex-dividend basis except where, in the opinion
of the directors, the dividend is capital in nature in which case it
is taken to the 'Gains or losses on investments held at fair value
through profit or loss' in the capital return column. Deposit interest
is included on an accrual basis.
d) Expenses and interest
Expenses and interest payable are accounted for on an accruals basis.
e) Investment management fees and finance costs
The investment management fee and interest payable have been allocated
20% to revenue and 80% to capital. The allocation is in line with the
long-term historic split of returns, in the form of income and capital
gains respectively, from the investment portfolio.
f) Taxation
The taxation charge represents the sum of current and deferred taxation.
Current taxation is based on the results showing in the accounts and
is calculated using the prevailing taxation rates. Deferred taxation
is accounted for in respect of all material timing differences to the
extent that it is probable that an asset or liability will crystallise.
Timing differences are differences arising between the Company's taxable
profits and its results as stated in the accounts which are capable
of reversal in one or more subsequent periods.
The tax currently payable is based on the taxable profit for the period.
Taxable profit differs from net profit as reported in the Income Statement
because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are never
taxable or deductible. The Company's liability for the current period's
tax is calculated using the applicable rate of corporation tax for
the accounting period.
In line with the recommendations of the AIC SORP, the allocation method
used to calculate tax relief on expenses presented against capital
returns in the supplementary information in the Income Statement is
the 'marginal basis'. Under this basis, if taxable income is capable
of being offset entirely by expenses presented in the revenue return
column of the Income Statement, then no tax relief is transferred to
the capital return column.
Deferred taxation is provided on all timing differences that have originated
but not been reversed by the Statement of Financial Position date.
This is subject to deferred tax assets only being recognised if it
is considered more likely than not that there will be suitable profits
from which the future reversal of timing differences can be deducted.
Any liability to deferred tax is provided at the average rate of tax
expected to apply based on tax rates and laws that have been enacted
or substantively enacted at the Statement of Financial Position date.
Deferred tax assets and liabilities are not discounted to reflect the
time value of money.
g) Investments
The Company's investments are categorised as "fair value through profit
or loss". All investments are held at fair value. For listed investments,
this is deemed to be quoted bid prices as at 31 March 2020 or closing
prices for SETS stocks sourced from the London Stock Exchange.
Derivative financial instruments are initially recorded at fair value
on the date on which the derivative contract is entered into and are
subsequently remeasured at fair value. Changes in fair value of derivative
financial instruments are recognised in the Income Statement.
Unquoted investments are valued at fair value based on the latest available
information, principally net asset value, and with reference to the
International Private Equity and Venture Capital Valuation Guidelines,
December 2018 and the Special Valuation Guidance issued in March 2020.
Changes in the fair value of investments held at fair value through
profit or loss and gains and losses on disposal are recognised in the
Income Statement as "Gains or losses on investments held at fair value
through profit or loss".
Transaction costs incurred on the purchase and disposal of investments
are included in gains or losses on investments held at fair value through
profit and loss as disclosed in note 9 in the annual report. All purchases
and sales are accounted for on a trade date basis. As set out in policy
(b), the financial statements have been prepared on a non-going concern
basis. There have, however, been no changes to the basis of valuation
of investments. The Company continues to value its financial assets
on the basis disclosed in this policy. The time frame envisaged for
the managed wind-down of the portfolio does not affect the valuation
of assets or liabilities on the Company's balance sheet.
h) Significant judgements and estimates
The preparation of financial statements requires the Company to make
judgements, estimates and assumptions that affect amounts reported
for assets and liabilities at the Statement of Financial Position date
and the amounts reported for revenues and expenses during the period.
The estimates and associated assumptions are based on historical experience
and other factors that are believed to be reasonable under the circumstances.
The results form the basis of making judgements about carrying values
of assets and liabilities that are not readily apparent from other
sources. However, the nature of estimation means that the actual outcomes
could differ from those estimates, possibly significantly. The estimates
and underlying assumptions are reviewed on an ongoing basis. The estimates
relate to the fair value of unquoted investments where there is no
appropriate market price. See notes 9 and 17 in the annual report for
more information.
Critical accounting judgements and key sources of estimation uncertainty
used in preparing the financial information are continually evaluated
and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable. The
resulting estimates will, by definition, seldom equal the related actual
results.
The key estimates, and assumptions, that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities relate to the valuation of the Company's unquoted level
3 investments (see note 17 in the annual report). 15.3% of the Company's
portfolio is comprised of level 3 investments (31 March 2019: 16.2%).
These are all valued in line with accounting policy 1(g) in the annual
report. Under the accounting policy the reported net asset value methodology
has been adopted in valuing those investments, as described further
in the annual report.
As the Company has judged that it is appropriate to use reported NAVs
in valuing the unquoted investments as set out in note 17, the Company
does not have any key assumptions concerning the future, or other key
sources of estimation uncertainty in the reporting period, which may
have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year.
Whilst the Board considers the methodologies and assumptions adopted
in the valuation of unquoted investments are supportable, reasonable
and robust, because of the inherent uncertainty of valuation the values
used may differ significantly from the values that would have been
used had a ready market for the investment existed and the differences
could be significant. These values may need to be revised as circumstances
change and material adjustments may still arise as a result of a reappraisal
of the unquoted investments' fair value within the next year.
As set out on in the annual report, the directors have considered that
the financial statements should be prepared on a non-going concern
basis. A significant proportion of costs to return cash to shareholders
will relate to the costs of tender exercises to return cash prior to
the liquidation. The timing and value of any such costs will depend
on when progress is made to liquidate the portfolio and the directors
consider it appropriate to make a return of cash. Any future costs
relating to the return of cash to shareholders will therefore be provided
for when the Company becomes obliged to make such payments.
In respect of other future costs associated with the liquidation of
the Company, these will primarily be legal costs and liquidator costs.
Such costs associated with the subsequent members' voluntary liquidation
are expected to be in a range of GBP120,000 to GBP150,000. As the exact
cost and time frame for incurring these costs is uncertain and not
material to the financial statements as a whole, no provision has been
made in these financial statements for any future costs and they will
be charged as the related services are provided.
Any costs associated directly with the orderly wind down of the Company
will be charged to capital reserves. Costs incurred during the year
and charged to capital total GBP273,000 and are disclosed in note 4.
Other ongoing administrative costs will continue to be incurred as
the Company continues to operate and will be recognised on an accruals
basis.
The directors consider that the proposed wind up of the Company has
no material impact on the valuation of the Company's investments or
other assets and liabilities and therefore the assets are measured
in the Statement of Financial Position at fair value and liabilities
are measured at amounts expected to be paid. In coming to this conclusion,
the directors have considered whether there has been any material write
downs of investment subsequent to the year end or through the initial
realisation process which may indicate that carrying values at year-end
are not representative of fair value or realisable amounts.
As the financial statements are prepared on a non-going concern basis,
all assets and liabilities have been classified as current assets and
liabilities in the current year.
i) Cash and cash equivalents
Cash comprises cash in hand and on demand deposits.
j) Foreign currencies
The results and financial position of the Company are expressed in
pounds Sterling, which is the functional and presentational currency
of the Company. Sterling is the functional currency because it is the
currency of the primary economic environment in which the Company operates.
Transactions recorded in overseas currencies during the period are
translated into Sterling at the appropriate daily exchange rates. Monetary
assets and liabilities and equity investments held at fair value through
profit or loss which are denominated in foreign currencies at the Statement
of Financial Position date are translated into Sterling at the exchange
rates ruling at that date.
Any gains or losses on the translation of foreign currency balances,
whether realised or unrealised, are taken to the capital or to the
revenue return of the Income Statement, depending on whether the gain
or loss is of a capital or revenue nature.
k) Capital and reserves
Called up share capital represents the nominal value of ordinary shares
issued.
The share premium account represents the premium above nominal value
received by the Company on issuing shares net of issue costs.
The revenue reserve represents accumulated revenue profits retained
by the Company that have not currently been distributed to shareholders
as a dividend.
The capital redemption reserve represents the nominal value of ordinary
shares that have been repurchased and cancelled.
Gains and losses on realisations of fixed asset investments, and transaction
costs, together with appropriate exchange differences, are dealt with
in the Capital Reserve. A portion of the investment management fee
and finance costs, together with any tax relief, is also taken to this
reserve. Increases and decreases in the valuation of fixed asset investments
are dealt with in this reserve. The cost of share buybacks is also
charged directly to this reserve.
l) Distributable reserves
The Company's realised capital reserve and revenue reserve may be distributed
by way of a dividend.
m) Dividends payable
Interim dividends are recognised in the period in which they are paid
and final dividends are recognised when approved by shareholders. Dividends
are dealt with in the Statement of Changes in Equity.
Year ended 18-months ended
31 March 2020 31 March 2019
2 Investment Income GBP'000 GBP'000
---------------------------------------------- -------------------- --------------------
Income from equity shares and securities
UK investment income 584 352
Overseas income 1,353 2,843
Property income distributions 195 75
-------------------- --------------------
2,132 3,270
-------------------- --------------------
Other income
Interest from money market fund investments 72 40
Other income 7 2
-------------------- --------------------
79 42
-------------------- --------------------
Total income 2,211 3,312
-------------------- --------------------
3 Year ended 18-months ended
31 March 2020 31 March 2019
Investment Management Fees GBP'000 GBP'000
--------------------------------------------- -------------------- --------------------
Revenue
Investment management fee 151 247
Capital
Investment management fee 602 989
--------------------
Total 753 1,236
-------------------- --------------------
Details of the fee basis are contained in the
annual report.
For the period 1 October 2017 to 31 March 2018, the management fee
was charged at a rate of 0.70% per annum, payable quarterly in arrears
based on the net asset value at the relevant quarter end. With effect
from 1 April 2018, the rate was reduced to 0.60% per annum on the first
GBP250,000,000 of the net asset value and 0.55% per annum in excess
thereof.
Year ended 18-months ended
31 March 2020 31 March 2019
4 Other Expenses GBP'000 GBP'000
---------------------------------------------- -------------------- --------------------
Revenue
General expenses 221 357
Directors' fees 105 165
Auditor's remuneration - fees payable
to the Company's auditor for the audit
of the Company's statutory accounts
(1) 49 39
Depositary charges 34 50
-------------------- --------------------
409 611
1 These figures include VAT. Fees for audit services excluding VAT
were GBP41,200 (2015: GBP32,300).
In addition, costs incurred to date in connection with the modification
of the Company's investment objective and policy have been charged
to capital and amounted to GBP273,000 (2019: nil)
Year ended 31 18-months ended
March 2020 31 March 2019
5 Finance costs GBP'000 GBP'000
------------------------------------------------------ -------------------- ----------------------
Bank overdraft interest 9 1
Interest on derivatives margin cash 4 -
-------------------- ----------------------
13 1
-------------------- ----------------------
Allocated to capital (10) (1)
3 -
-------------------- ----------------------
6 Taxation
a) Analysis of the charge for the period
Year ended 18-months ended
31 March 2020 31 March 2019
GBP'000 GBP'000
----------------------------------------------------------------------- ---------------- -----------------
Overseas withholding taxes 17 -
Current tax charge for the year/period 17 -
---------------- -----------------
b) Factors affecting the tax charge for the period
Year ended 18-months ended
31 March 2020 31 March 2019
GBP'000 GBP'000
----------------------------------------------------------------------- ---------------- -----------------
Net return on before taxation (17,797) 3,781
---------------- -----------------
Corporation tax 19.0% (2019: 19%) (3,381) 718
Non-taxable dividends (281) (512)
Non-taxable losses/(gains) on investments 3,421 (92)
Expenses not deductible for tax purposes 52 -
Movement in unutilised management expenses 192 (108)
Non-taxable exchange differences (3) (6)
Overseas withholding tax 17 -
Total taxation charge for the period 17 -
---------------- -----------------
The Company's profit for the accounting year is taxed at an effective
rate of 19.0% (2019: 19%).
The Company is subject to taxation on gains arising from the realisation
of investments in non-qualifying offshore funds but is otherwise exempt
from taxation on chargeable gains. Excess management expenses are available
to be offset against future taxable profits including any profits on
the disposal of interests in non-qualifying offshore funds. The position
at the period-end is as follows:
Year ended 18-months ended
31 March 2020 31 March 2019
GBP'000 GBP'000
----------------------------------------------------------------------- ---------------- -----------------
Excess management expenses 8,231 7,722
Unrealised appreciation on non-qualifying
offshore funds (6,135) (6,632)
Excess management expenses 2,096 1,090
---------------- -----------------
No provision for deferred taxation has been made in the current or
prior accounting year. The Company has not provided for deferred tax
on capital gains or losses arising on the revaluation and disposal
of investments, as it is exempt from tax on these items because of
its investment trust status, except for those arising from the realisation
of investments in non-qualifying offshore funds. The Company has not
recognised a deferred tax asset totalling GBP398,000 (2019: GBP185,000)
based on a prospective corporation tax rate of 19% (2019: 17%). The
deferred tax asset arises as a result of having unutilised management
expenses in excess of unrealised appreciation on non-qualifying offshore
funds. These expenses will only be utilised, to any material extent,
if the Company has profits chargeable to corporation tax in the future,
because changes are made to the tax treatment of the capital gains
made by investment trusts, where disposals of non-qualifying offshore
funds would otherwise result in a tax charge or there are other changes
to the Company's investment profile which require them to be used.
Year ended 18-months ended
31 March 2020 31 March 2019
7 Dividends on equity shares GBP'000 GBP'000
----------------------------------------------------------------------- ---------------- -----------------
2019 interim dividend 5.00p - 1,934
2019 final dividend 2.50p (2017: 4.75p) 967 1,837
967 3,771
---------------- -----------------
The proposed final dividend of 5.50p per share is subject to approval
by shareholders at the Annual General Meeting and has not been included
as a liability in these financial statements. This dividend of GBP2,127,000
(2019: GBP967,000) is the basis on which the requirements of Section
1158 of the Corporation Tax Act 2010 are considered. The revenue available
for distribution by way of dividend for the period is GBP1,631,000
(2019: GBP2,454,000). Dividends paid in the financial period ended
31 March 2019 reflect the longer 18-month period over which accounts
were prepared, and included an interim and final dividend.
All dividends have been paid or will be paid out of revenue profits
or the revenue profits.
8 Returns/Net asset value per Ordinary Share
----------------------------------------------------------------------- ---------------- -----------------
The return per ordinary share is based on the net loss attributable
to the ordinary shares of GBP17,814,000 (2019: GBP3,781,000 gain) and
on 38,678,638 ordinary shares (2019: 38,678,638) being the weighted
average number of ordinary shares in issue during the year. The return
per ordinary share can be further analysed between revenue and capital,
as below:
Year ended 18-months ended
31 March 2020 31 March 2019
GBP'000 GBP'000
----------------------------------------------------------------------- ---------------- -----------------
Net revenue return 1,631 2,454
Net capital return (19,445) 1,327
---------------- -----------------
Net total return (17,814) 3,781
---------------- -----------------
Weighted average number of ordinary
shares in issue during the year / period 38,678,638 38,678,638
Year ended 18-months ended
31 March 2020 31 March 2019
pence pence
----------------------------------------------------------------------- ---------------- -----------------
Revenue return per ordinary share 4.22 6.34
Capital return per ordinary share (50.27) 3.43
---------------- -----------------
Total return per ordinary share (46.05) 9.77
---------------- -----------------
The Company does not have any dilutive securities. Therefore, the basic
and diluted returns per share are the same. The net asset value per
share is based on the net assets of GBP110,971,000 (2019: GBP129,752,000)
divided by the number of shares in issue at the end of the year/period
38,678,638 (2019: 38,678,638). The net asset value per ordinary share
at 31 March 2020 was 286.91p (2019: 335.46p)
The movements during the period of the assets attributable to the ordinary
shares were as follows:
Year ended 18-months ended
31 March 2020 31 March 2019
GBP'000 GBP'000
---------------- -----------------
Total net assets at 1 April 129,752 129,742
Total net return after taxation (17,814) 3,781
Ordinary dividends paid in the year (967) (3,771)
Net assets attributable to the ordinary
shares at period end 110,971 129,752
---------------- -----------------
Nominal value of
total shares in
issue
9 Share capital Shares in issue GBP'000
----------------------------------------------------------------------- ---------------- -----------------
Allotted, issued and fully paid ordinary
shares of 25p
At 1 April 2019 38,678,638 9,670
---------------- -----------------
Allotted, issued and fully paid ordinary
shares of 25p
At 1 October 2017 38,678,638 9,670
---------------- -----------------
No shares were bought back in the period to 31 March 2020 or in the
period to 24 July 2020 subsequent to the year-end.
Every shareholder has the right to one vote for each share held.
10 Related party transactions
Other than the relationship between the Company and its directors,
the provision of services by the Manager is the only related party
arrangement currently in place as defined in the Listing Rules. Other
than fees payable by the Company in the ordinary course of business
and the provision of marketing services, there have been no material
transactions with this related party affecting the financial position
of the Company during the year under review.
11 2020 Financial statements
The figures and financial information for the 12 months ended 31 March
2020 are compiled from an extract of the latest financial statements
of the Company and do not constitute the statutory accounts for that
year. Those financial statements included the report of the auditors
which was unqualified and did not contain a statement under either
section 498(2) or section 498(3) of the Companies Act 2006. They have
not yet been delivered to the Registrar of Companies.
12 2019 Financial statements
The figures and financial information for the year ended 31 March 2019
are compiled from an extract of the published financial statements
of the Company and do not constitute the statutory accounts for that
year. Those financial statements have been delivered to the Registrar
of Companies and included the report of the auditors which was unqualified
and did not contain a statement under either section 498(2) or section
498(3) of the Companies Act 2006.
13 Dividend
The final dividend, if approved by the shareholders at the annual general
meeting, of 5.50p per ordinary share will be paid on 12 October 2020
to shareholders on the Register of Members at the close of business
on 25 September 2020. The Company's shares will be traded ex-dividend
on 24 September 2020.
14 Annual Report
Copies of the Annual Report for the 12 months ended 31 March 2020 will
be posted to shareholders in December and will be available on the
Company's website www.hendersonalternativestrategies.com or in hard
copy from the Corporate Secretary, Henderson Secretarial Services Limited,
201 Bishopsgate, London EC2M 3AE.
15 Annual General Meeting
The annual general meeting will be held on Wednesday 16 September 2020
at 11.30am.
For further information please contact:
Alex Barr James de Sausmarez
Fund Manager Director and Head of Investment
Henderson Alternative Strategies Trusts
Trust plc Henderson Investment Funds Limited
Telephone: 020 7818 2824 Telephone: 020 7818 3349
James de Bunsen Laura Thomas
Fund Manager Investor Relations and PR Manager
Henderson Alternative Strategies Henderson Investment Funds Limited
Trust plc Telephone: 020 7818 2636
Telephone: 020 7818 3869
Peter Webster
Fund Manager
Henderson Alternative Strategies
Trust plc
Telephone: 020 7818 6116
Neither the contents of the Company's website nor the contents
of any website accessible from hyperlinks on the Company's website
(or any other website) is incorporated into, or forms part of, this
announcement.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR SSLEFDESSEEA
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