Absolute Return Trust Limited Interim Management Statement (8327X)

TIDMABR

RNS Number : 8327X

Absolute Return Trust Limited

13 February 2013

Absolute Return Trust Limited

(a closed-ended investment company incorporated with limited liability under the laws of Guernsey with registered number 42733)

Interim Management Statement - Three Months to 31(st) December 2012

This unaudited Interim Management Statement has been produced solely to provide additional information to shareholders of Absolute Return Trust Limited ("ARTL" or the "Company") to meet the relevant requirements of the U.K. Listing Authority's Disclosure and Transparency Rules. It should not be relied upon by any other party for any other purpose.

At the Extraordinary General Meeting held on 7th September 2012, shareholders approved the special resolutions put forward to amend the Company's investment objective to a managed wind-down strategy. As a result the portfolio is in an advanced stage of liquidation. The first distribution of capital (approximately 73.8%) occurred on December 21(st) 2012.

Performance Summary

Over the three month period to 31(st) December 2012, the Net Asset Value per share of ARTL decreased by -0.1% in Sterling to GBP1.3055 per GBP1 share and -0.3% in Euro terms to EUR0.9444 per EUR1 share. At the close of business on 31(st) December 2012 the mid-market price of ARTL's Sterling shares on the London Stock Exchange was 110.1p (Euro shares EUR0.85), representing a discount of 16% to the Net Asset Value of the portfolio at the 31(st) December 2012 (11% for euro shares).

The performance of ARTL's portfolio for the three months to 31(st) December 2012 is set out below:

 
              GBP      EUR 
----------  -------  ------- 
 October 
  2012       0.20%    0.17% 
----------  -------  ------- 
 November 
  2012       -0.14%   -0.18% 
----------  -------  ------- 
 December 
  2012       -0.18%   -0.32% 
----------  -------  ------- 
 

Global markets rallied over the quarter but were volatile as the US election, concerns over the next instalment of Greece's bailout funding and the brinkmanship over the looming US fiscal cliff were never far from mind. The European sovereign debt crisis raged on and anti-austerity demonstrations flared across the periphery countries, albeit with less dramatic press coverage and market impact than seen earlier in the year, allowing investors to focus more on companies' underlying fundamentals.

Strategy Contribution

The managed wind-up of the portfolio in accordance with the revised investment objectives is now well under way. As a result of the Manager serving redemption notices on all the underlying funds, the majority of the hedge fund investments were redeemed during the quarter ended 31st December 2012. A substantial cash balance was accumulated and subsequently disbursed. A brief commentary on the remaining hedge fund investments is provided below.

Set out below is the contribution to ARTL's performance by strategy for the three months to 31(st) December 2012.

 
 Strategy              Contribution 
--------------------  ------------- 
 Macro                    0.10% 
--------------------  ------------- 
 Equity Hedged            -0.13% 
--------------------  ------------- 
 Short Bias               -0.01% 
--------------------  ------------- 
 Specialist Credit        0.01% 
--------------------  ------------- 
 Event Driven             -0.03% 
--------------------  ------------- 
 Volatility Trading       -0.39% 
--------------------  ------------- 
 Multiple Strategy        0.85% 
--------------------  ------------- 
 FP Incubator Fund        0.01% 
--------------------  ------------- 
 

The Macro managers made small gains largely due to currency trading. Short Japanese yen and long Chinese Renminbi positions in particular performed well. A fixed income orientated manager also made money from long bond positions, notably in European sovereigns.

There was no remaining exposure to the Equity Long Bias strategy as both managers were redeemed as at 30 September.

The remaining two Equity Hedged managers made a small loss overall. For one, short positions in Chemicals and Technology, as well as a long position in an oil exploration and development company detracted the most. Some these losses were offset by more discriminating European equity markets which provided fertile ground for the other manager who generated gains, long and short, in Financials, Cyclicals and Technology stocks.

Short Bias managers were effectively flat as gains from Technology related names were broadly offset by losses in certain European Financials.

The small remaining investments in the Specialist Credit strategies were broadly flat. A long position in a liquidating North American power plant business was the main highlight for one manager as the company's sale of their last two remaining power plants was granted approval by the Department of Justice.

The Event Driven strategy made a small loss. One manager made money in a position in a US regional financial institution which he had established after the company's share price had declined heavily in the wake of a regulator-imposed moratorium on dividend payments earlier in the year. In December the company announced that the regulatory conditions had been met and the share price responded swiftly at the prospect of management once again being free to manage the company's capital structure. These gains however were cancelled out by another manager's losses from a position in a Brazilian iron-ore producer.

The Multiple Strategy managers made broad-based gains with all but one manager making a positive contribution. An Asian manager contributed the lion's share of the gains as several names in his convertibles book produced outsized returns. Equities as well as certain asset-backed securities also performed well.

The residual holding in a Volatility Trading manager was the biggest detractor over the quarter as his remaining positions in certain convertible securities were marked down.

The table below shows the composition of ARTL's portfolio by strategy as at 31(st) December 2012:

 
 Strategy              Allocation 
--------------------  ----------- 
 Macro                   10.1% 
--------------------  ----------- 
 Equity Hedged           14.5% 
--------------------  ----------- 
 Specialist Credit        9.2% 
--------------------  ----------- 
 Event Driven            17.4% 
--------------------  ----------- 
 Volatility Trading       2.9% 
--------------------  ----------- 
 Multiple Strategy       45.9% 
--------------------  ----------- 
 

Portfolio Liquidity

The table below shows the current liquidity profile of the portfolio.

 
 Time to cash flow    Proportion 
-------------------  ----------- 
 Within 3 months        49.1% 
-------------------  ----------- 
 3 to 6 months          21.4% 
-------------------  ----------- 
 6 to 12 months         16.1% 
-------------------  ----------- 
 Greater than 12 
  months                13.4% 
-------------------  ----------- 
 Total                  100.0% 
-------------------  ----------- 
 

Currency Hedging

The Board intends to maintain the currency hedging programme (subject to the Company holding sufficient cash collateral) until the second distribution which is currently expected to be during the second quarter of 2013. The Company has arranged a currency hedging facility which requires the Company to hold cash collateral, and is retaining a cash balance of GBP8.0 m for this purpose. After the second capital distribution, the remaining assets will no longer be hedged for movements in the Sterling and Euro exchange rates against the US dollar.

Investment Manager

On December 13, 2012: Legg Mason, Inc. and affiliate Permal announced a definitive agreement to acquire Fauchier Partners, the Company's Investment Manager, from BNP Paribas Investment Partners. Fauchier Partners will be combined with Permal, one of the largest alternative asset managers in the world, to create an institutionally focused platform with approximately $24 billion in assets under management.

Fauchier Partners

13(th) February 2013

This information is provided by RNS

The company news service from the London Stock Exchange

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