Altin AG Strong returns in 2013 & new capital reduction and dividend policy
January 15 2014 - 11:30AM
UK Regulatory
TIDMAIA
Strong returns in 2013 & new capital reduction and dividend
policy
-- Share price up +24.65%1 and NAV increase
of +10.17%2 in 2013
-- Investment mandate more than accomplished in 2013 but share price
discount remains unsatisfactory
-- Board adopts new capital reduction policy
Baar, 15 January 2014 - After reviewing the company's 2013
returns, the Board of Directors of ALTIN AG (SIX: ALTN, LSE: AIA),
the Swiss alternative investment company listed on the London and
Swiss stock exchanges, has decided to link its capital reduction
policy directly to share price performance. When share price
appreciation is satisfactory, the Board considers that
indiscriminate capital reductions are not in the best long-term
interests of the majority of shareholders and of the company.In the
future and so long as the discount does not narrow significantly,
capital will be returned to compensate investors when share price
performance falls below a 10% to 12% target. Such capital
reductions will be conducted exclusively through the repurchase of
own shares. The Board will no longer propose capital distributions
in the form of tax-free dividends out of the share premium account
in future.
Strong performance in 2013
In 2013 ALTIN more than accomplished its investment mandate,
both in terms of NAV appreciation and especially in terms of share
price increase. The NAV increased by +10.17%2, ahead of peers and
industry benchmarks, as investment decisions taken over the last 18
months added close to 3% to the 2013 performance. Despite a modest
increase in leverage, ALTIN has maintained a relatively contained
beta to equity markets, which should provide adequate downside
protection in case of a correction in risk assets. More
importantly, ALTIN's share price rose by +24.65%1, fuelled by a
partial closing of the discount and, to a lesser extent, by the two
capital reductions that were undertaken in 2013. Firstly, the
company paid a 4% dividend in the form of a tax-free return from
the share premium account and secondly, in September, it bought
back a further 10% of its capital through an innovative put option
strategy. 2013 has also been a successful year from a corporate
governance standpoint, as the company appointed Roger Rüegg as a
new independent non-executive director and Tony Morrongiello to a
newly created position as the CEO of the company.
Unsatisfactory results of discount reduction measures
Despite these good returns and the measures put in place in
2013, the discount to net asset value remains at an unsatisfactory
level (around 23% at year-end). As a consequence, the Board has
convened to determine a coherent discount management strategy that
genuinely serves the best interests of the company and all its
long-term investors. An analysis of NAV and share price evolution
since the company's inception in 1996 shows that ALTIN's level of
discount to NAV is cyclical and is essentially driven by
performance and by general market appetite for alternative
strategies. The Board has reviewed the measures implemented in 2013
by ALTIN and by its peers and has concluded that capital reduction
strategies have had only modest success in narrowing the discount
to NAV. While the Board takes very seriously into consideration
requests from some investors that demand a continuation of vigorous
capital reduction measures, the Board is concerned that an
open-ended commitment to buying back capital will inevitably have a
longer term detrimental impact on returns, by increasing the total
expense ratio of the company and by reducing liquidity in the
shares.
Focus on share price performance
Ultimately, the key element for investors is the share price
performance over the medium-term. As repeatedly reducing capital is
detrimental to their long-term interests and ultimately guts the
company of its substance, the Board has concluded that further
capital reductions will be far more effective if used as a
mechanism to compensate investors during periods of lower share
price appreciation, rather than as an indiscriminate discount
reduction instrument.
Based on the +6.4% annualised return on its investment portfolio
over its 17-year track record and until the discount narrows
significantly, the Board considers that ALTIN investors are
entitled to a share price increase of 10% to 12% on an annualised
basis, in all but the most adverse market environments. As a
consequence, as long as the share price increase meets this
explicit target, no capital reduction should be expected. On the
other hand, should the share price fail to meet this share price
return objective, the Board intends to initiate further capital
reductions via the issuance of put options or second line share
buybacks. By boosting share price performance and transferring
intrinsic value to shareholders, these capital reductions should
prove to be effective compensatory measures, whilst avoiding to
undermine the substance of the company, which as previously stated
is detrimental to the interests of long-term investors.
New investor relations programme
The best way of closing the discount is to attract new long-term
investors to the company. As a consequence, the investment manager
has pledged in 2014 to renew and re-energise its investor relations
programme focused, aside from the clear investment merits of the
portfolio, on the Board's clear commitment to return capital to
shareholders in years of share price underperformance, whilst
preserving the capital base in years when performance targets are
met.
Future capital reductions to be conducted through put options or
second line buybacks
The Board has also concluded that the capital provided by the
shareholders (nominal value and share premium account), which can
be distributed tax-free, constitute the most valuable part of the
capital structure and that a continuation of dividend distributions
out of tax-free reserves is not in the best long-term interests of
investors, especially in light of the successful capital reduction
that was conducted through the issuance of put options. Future
capital reductions will therefore be conducted exclusively through
the repurchase of own shares either via the issuance of put options
or via second line buy backs. Consequently, in 2014 the company
does not intend to distribute capital in the form of a tax-free
dividend/repayment of nominal value.
For further information, please contact:
Tony Morrongiello - Chief Executive Officer Kinlan Communications
José Galeano - Investor Relations Manager David Hothersall
Tel. +41 (0)41 760 62 60 Tel. +44 (0)20 7638 3435
info@altin.ch davidh@kinlan.net
Note to Editors
About ALTIN AG
ALTIN AG was launched in 1996 and is listed on the SIX Swiss
Exchange as well as on the London Stock Exchange. It ranks among
Switzerland's leading alternative investment companies. Currently,
ALTIN is invested in more than 40 hedge funds representing diverse
investment strategies. Its objective is to generate an absolute
compound annual return in USD terms with lower volatility than
equity markets. Owing to these characteristics and a low
correlation with equity markets, ALTIN shares provide an ideal
complement for all diversified portfolios.
www.altin.ch
1 Based on SIX Swiss Exchange share price performance at
year-end.
2 Estimated NAV performance as at 31 December 2013.
This information is provided by Business Wire
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