RNS Number:5348D
Dexion Trading Limited
07 September 2007
DEXION TRADING LIMITED
INTERIM RESULTS - PRELIMINARY ANNOUNCEMENT
THE BOARD OF DIRECTORS OF DEXION TRADING LIMITED ANNOUNCE UNAUDITED RESULTS FOR
THE 6 MONTH PERIOD ENDED 30 JUNE 2007. THESE ARE EXTRACTS TAKEN FROM THE
UNAUDITED ACCOUNTS FOR THE 6 MONTH PERIOD ENDED 30 JUNE 2007, APPROVED BY THE
BOARD OF DIRECTORS ON 7 SEPTEMBER 2007.
UNAUDITED STATEMENT OF TOTAL RETURN
For the period ended 30 June 2007
(Expressed in pounds sterling)
2007 2006
# #
Gains on investments 7,600,456 3,156,147
7,600,456 3,156,147
Income 7,864 11,982
Management fee (686,384) (656,887)
Performance fee (666,879) (229,364)
Expenses (253,204) (217,458)
(1,598,603) (1,091,727)
Total return for the period 6,001,853 2,064,420
Net increase in shareholders' funds 6,001,853 2,064,420
from operating activities
Return per # Share 7.23 p 2.49 p
The Company has no other gains or losses other than the return for the period
All items derive from continuing activities
UNAUDITED BALANCE SHEET
As at 30 June 2007
(Expressed in pounds sterling)
2007 2006
# #
Investments 94,156,897 88,368,782
Current assets
Cash at bank 2,707,393 -
Sales awaiting settlement 392,517 -
Debtors 6,880 141,449
3,106,790 141,449
Liabilities due within one year
Forward currency deals awaiting settlement (433,270) (1,318,260)
Bank overdraft 612,918 1,753,493
Creditors 837,952 373,968
1,017,600 809,201
Net current assets/(liabilities) 2,089,190 (667,752)
Net assets 96,246,087 87,701,030
Represented by:
Shareholders' funds and reserves
Special reserve 81,547,500 81,547,500
Other reserves 14,698,587 6,153,530
Total shareholders' funds 96,246,087 87,701,030
Net assets per # Share 115.96p 105.66p
UNAUDITED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
For the period ended 30 June 2007
(Expressed in pounds sterling)
2007 2006
# #
Opening shareholders' funds 90,244,234 85,636,610
Total recognised gain for the 6,001,853 2,064,420
period
Closing shareholders' funds 96,246,087 87,701,030
UNAUDITED CASHFLOW STATEMENT
For the 6 month period ended 30 June 2006
(Expressed in pounds sterling)
2007 2006
# #
Operating activities
Net operating loss for the financial period (1,598,603) (1,091,727)
Increase/(decrease) in creditors 165,567 (233,034)
Decrease/(increase) in debtors 271,489 (34,064)
Net cash outflow from operating activities (1,161,547) (1,358,825)
Investing activities
Investments acquired (28,038,702) (33,600,318)
Proceeds from sale of investments 29,838,167 32,564,101
Realised gains from forward foreign currency contracts
1,493,039 3,993,206
Net cash inflow from investing activities 3,292,504 2,956,989
Increase in cash and cash equivalents 2,130,957 1,598,164
Exchange loss on cash and cash equivalents (74,202) (997,673)
Cash at the beginning of the period 37,720 (2,353,984)
Cash and cash equivalents at the end of the period 2,094,475 (1,753,493)
Analysis of cash and cash equivalents at end of the period
Cash at bank 2,707,393 -
Bank overdraft (612,918) (1,753,493)
2,094,475 (1,753,493)
Chairman's Interim Statement
Introduction
I am pleased to present shareholders with this interim report for the 6 months
to 30 June 2007 which has been a period of significant activity for the Company.
The Board announced on 12 June 2007 that, after consultation with major
Shareholders and following discussions between the Company's Investment Manager,
Dexion Capital (Guernsey) Limited, and its sub-manager, FRM Investment
Management Limited, it had determined to put proposals to Shareholders that
Permal Investment Management Services Limited should be appointed as the
Company's new investment adviser with effect from 1 October 2007.
A circular, together with an accompanying prospectus, was posted to Shareholders
on 14 August 2007 containing full details of the Proposals and convening the
Extraordinary General Meeting which was held on 5 September 2007 where
Shareholders approved the Proposals.
Over the period from inception in November 2004 to 31 May 2007 (the latest
practicable date prior to Board instructing FRM to liquidate substantially all
of the Company's investments), the Net Asset Value of the Company's # Shares
appreciated at an annualised rate of 6.15%. (in sterling terms) with annualised
volatility of 3.90%. Over the same period the mid-market share price of the
Company's # Shares increased at an annualised rate of 2.31%.
As previously reported, following consultation between the Board, the Investment
Manager and FRM, a number of adjustments were made to the Company's portfolio in
2006 in order to address investment performance, the most significant of which
were implemented by the end of October 2006 with an increase in the Company's
weighting towards trend-following systematic strategies, a reduction in the
Company's allocation to relative value arbitrage strategies and a reduction in
the number of underlying managers in the Company's portfolio as a means of
increasing the risk/reward profile of the portfolio.
Notwithstanding these changes and a general improvement in the Company's net
asset performance, in the Board's opinion, the Company's net asset and share
price performance since inception has not been sufficient to generate
significant levels of buying interest from new and existing investors. In
particular, over the period from 1 January 2007 to 11 June 2007, the day prior
to the announcement by the Company of the Proposals, the Company's # Shares
traded at an average mid-market discount to NAV of 5.9%.
Accordingly, even if there were to be a prolonged period of strong investment
performance for the balance of 2007, in the Board's opinion it is likely that
the Company's discount floor provision would be triggered at the end of the
current financial year, requiring the Directors, at the Company's next annual
general meeting in June 2008, to propose an ordinary resolution for the Company
to continue as an investment company.
After consultation with the Investment Manager and major Shareholders, the Board
felt it was appropriate to act ahead of any continuation vote and move
responsibility for the day-to-day management of the Company's investment
portfolio from FRM to Permal, allowing Shareholders who wished to retain
exposure to directional trading strategies under the management of Permal to do
so and making arrangements for those Shareholders who did not wish to continue
to exit part or all of their investment.
In this regard, the Board proposed a tender offer for Shareholders to exit part
or all of their investment for cash at a price per # Share which reflects the
prevailing NAV at 28 September 2007 (as adjusted) less the relevant costs and
expenses incurred by the Company in connection with implementing the Proposals.
On 7 September 2007, the Board announced that valid acceptances under the
tender offer were received for 34,720,493 million # Shares, representing 41.83
per cent. of the Company's issued share capital.
In addition, the Board is currently seeking additional capital for the Company
from new and existing investors which will be achieved through a Placing and
Offer for Subscription of C Shares, the results of which are expected to be
announced on 1 October 2007.
Investment Review
The Board has instructed FRM to liquidate substantially all of the Company's
investments for cash through sales or redemptions of those investments in order
to fund valid acceptances of the tender offer and to reinvest in Permal FX,
Financials & Futures Ltd. It is expected that substantially all such sales and
redemptions will have been effected by 30 September 2007 although the proceeds
may not be realised until 31 October 2007 (or later in certain limited cases).
Notwithstanding this backdrop, the net asset value of the Company's # Shares
appreciated by 6.65% (in sterling terms) over the first six months of 2007,
continuing the positive run of performance following the portfolio restructuring
referred to above.
Systematic Trading strategies, having exerted a drag on returns in the first
quarter, were a major driver of returns as strong trends in fixed income and
foreign exchange markets proved profitable for long term technical strategies.
Equity markets proved to be slightly more difficult to trade however as
developed markets remained range bound in the latter part of the quarter.
Within the Discretionary Trading section of the portfolio, the strategy of
focusing on specialist managers in commodities and emerging markets proved
profitable. The Company's emerging markets managers continued to find niche
trading opportunities in instruments such as Argentinean GDP warrants in an
attempt to diversify away from the more crowded consensus trades and a
commodity-focused manager was able to profit from high levels of volatility in
grains and also a variety of trades structured on the expectation of reduced
natural gas demand in the US.
Relative Value Macro managers acted as a diversifier in the portfolio and made a
solid contribution to returns. Managers lost money as they built long positions
at the front end of the US and European yield curves in anticipation of a
reversal in the strong uptrend in yields. These losses however were more than
offset by a variety of intelligently structured carry trades with long gamma
trades in major FX crosses being used to hedge any potential sudden reduction in
risk appetite. Managers were also well rewarded for their long positions at the
short end of the US curve as fears of a US consumer slowdown resurfaced at the
end of the second quarter.
A Relative Value manager focusing on event driven strategies continued to
benefit from record levels of deal flow and the manager outperformed his peers
during June by over-hedging his book as uncertainty over the completion of a
number of financial sector deals caused spreads to widen.
Company Outlook
On behalf of the Board I would like to thank FRM Investment Management Limited
for their hard work and dedication to the management of the Company's portfolio
over the period from inception.
Looking forward, we are excited about the relationship forged with Permal. The
investment objective of Permal FX is to provide investment returns that have
lower risk than traditional investment returns and, over time, to achieve above
market returns. To achieve this objective, Permal FX seeks high quality
portfolio managers and invests its assets in either discretionary accounts or
portfolio funds managed by such managers.
I look forward to keeping Shareholders actively informed on the progress of the
Proposals.
Christopher P. Spencer
Chairman
7 September 2007
END
This information is provided by RNS
The company news service from the London Stock Exchange
END
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