TIDMAIA
To ALTIN AG Shareholders
Baar, 25 February 2016
Re: Request by Alpine Select AG to call an Extraordinary General
Meeting
Dear Shareholders,
In December 2016 ALTIN AG ("ALTIN") will be celebrating its 20th
anniversary. This constitutes one of the longest-running track
records in the fund of hedge fund industry and certainly in the
listed hedge fund sector. Over this period ALTIN has delivered an
annualised NAV performance of over 6% and its shares have
appreciated by +189.6%, outperforming both equities and bonds. In
particular ALTIN has delivered a very attractive risk adjusted
performance relative to global equities.
Since its inception in 1996, ALTIN has experienced a number of
challenging periods, most notably the 2008 crisis that has left
such a heavy mark on the hedge fund industry as a whole. Although
ALTIN did not emerge from this crisis unscathed, investors were
never subjected to the gates or side pockets that plagued the hedge
fund industry. This is down, first and foremost, to ALTIN's
permanent capital structure and, secondly, to the manager having
judiciously avoided frauds and the more opaque or leveraged hedge
fund strategies that resulted in large proportions of investors'
capital being wiped out.
The four years between 2008 and 2012 were the most difficult in
ALTIN's history. The Board recognised that performance needed
improving and that the discount to NAV, which had remained
stubbornly above 30%, had to be vigorously addressed. Discounts to
net asset values of this magnitude are usually associated with hard
to value assets, impaired balance sheets or investments that are
extremely difficult to realise. In ALTIN's case, none of these
potential issues were relevant, as less than 2% of its portfolio
could be classified as being distressed or difficult to realise.
The discount was therefore, in the Board's opinion, down to
medium-term performance issues and the need for a clearer strategy
on discount management. It is in this spirit that in early 2013,
the Directors of ALTIN concluded to further increase the
independent oversight and proposed the appointment of Mr Roger
Rüegg, as an independent Director, who is an expert in alternative
investments and fund governance. A further measure was to hire a
totally independent CEO, Mr Tony Morrongiello, to implement and
steer strategic issues, most notably the discount management
policy. Simultaneously, the investment manager undertook a
substantial review of the portfolio, which was completed by early
2013. The portfolio was refocused to take advantage of the
permanent capital base and with a more bottom up and long term
investment profile. Last but not least, ALTIN introduced a discount
management policy, which has been instrumental in reducing the
discount by over 50%.
Over the last three years, since the Board of Directors and the
new CEO embarked on these strategic changes, the shares have risen
by over +40%, fuelled by a +12% rise in NAV and a halving of the
discount. The shares have outperformed the MSCI World index by 25%
and the NAV has beaten the HFRI Hedge Fund index by 7% (percentage
point difference, respectively).
Although we are pleased with these results, investors should
rest assured that the Board and the management do not consider that
this is mission accomplished, as there is still work to be done to
rein in the discount on a sustainable long term basis and to
improve the liquidity in the underlying shares, as well as ensuring
that the manager continues to deliver on the long term performance
target.
We have made considerable efforts over the last couple of years
to re-establish ALTIN's presence in the UK market, where it had
over 30% of its shareholders, and which coincided with a period
when the shares were trading at a premium to NAV. In early 2015, we
appointed Cantor Fitzgerald as our UK brokers and Marten & Co
as our providers of sponsored research and investor marketing
support. Management conducted a number of road shows in the UK
during the course of 2015 and we are pleased to report that we are
seeing a growing interest and a developing UK investor base.
ALTIN's management has every confidence that the UK market holds
great promise, especially at a difficult time for equity markets,
which is exactly when ALTIN is proving its worth: since equity
markets peaked in the summer of 2015, the MSCI World index has
fallen by over 15% whilst ALTIN shares have remained largely
stable. More noteworthy is the fact that, in January 2016, whilst
equity markets have had the worst start to the year since the Great
Depression, ALTIN has delivered a stable performance. We are
therefore convinced that ALTIN is continuing to deliver value to
its shareholders and will do so in the future.
The Directors of ALTIN are therefore categorically opposed to
the requested distribution of a gross dividend of CHF 68'994'120
(CHF 20 per share before deduction of 35% Swiss withholding tax)
out of the retained earnings for a number of fundamental
reasons:
1. The Board of Directors is of the opinion that the payment of
such a large dividend does not comply with Swiss law, as ALTIN does
not have sufficient liquidity to settle the dividend claims at the
due date. ALTIN's auditors have formally confirmed this opinion.
This is a clear demonstration to what extent Alpine Select AG's
("Alpine Select") proposal is irresponsible, short term in nature
and not in the best interests of ALTIN or its shareholders as a
whole.
2. The distribution of a dividend from retained earnings will be
subject to a 35% withholding tax, which will be extremely
detrimental to most investors, but not to Alpine Select which, as a
Swiss corporate entity, will be in a position to reclaim most of
the tax in a relatively short period of time. Many private Swiss
investors will actually see the dividend proposed by Alpine Select
taxed at an even higher rate. The dividend will force those foreign
investors that may be fortunate enough to benefit from a double
taxation agreement between their countries and Switzerland, to go
through a lengthy and complex process to try to reclaim back a
portion of this tax. The dividend proposed by Alpine Select, in our
opinion only has their own interests at heart and totally
disregards the position of many investors.
3. The distribution of such a large dividend would send an
extremely negative signal to the market and de facto put an end to
all the successful efforts that have been made over the last few
years to broaden ALTIN's appeal. The significant reduction in size
would of course imply an increase in ALTIN's total expense ratio,
as there are expenses that, unlike the management fee, are fixed
and cannot be compressed beyond a certain point. In addition, the
liquidity of the underlying shares would be severely impacted,
making ALTIN much harder to market, especially to an institutional
investor base.
4. The Board regularly reviews the merits of a potential
dividend policy but it goes without saying that should a dividend
policy be proposed by the current Board, it would be measured and
sustainable over the long term, not a one-off destructive payment
that favours mainly one, albeit significant shareholder.
5. It is the opinion of the Board, the management and ALTIN's
advisors, that the payment of such a large dividend could be a
contributing factor towards a widening of the discount. Alpine
Select might not care as they are in a privileged position that
will always allow them to realise retained earnings in a tax
efficient manner but for most other shareholders, this will be seen
as a very negative development.
6. Alpine Select never sought to engage in a dialogue with
ALTIN's Board of Directors before it issued this surprisingly
hostile requisition. We are surprised by this sudden move to an
aggressive stance, as just recently Alpine Select had praised the
work done by ALTIN's management and Board over the last few years
and had always declared themselves as long term supporters of
ALTIN.
The Board reiterates its long-term commitment to narrowing and
stabilising the discount to NAV.
In 2013, when the shares were trading at a discount of over 30%
to NAV the Board introduced a discount management policy that was
underpinned by two key principles, namely:
1. ALTIN is an absolute return vehicle and over the medium term,
the share price should appreciate in line with the historically
achieved NAV performance of 6% per annum.
2. During periods when ALTIN might trade at a wide discount to
NAV, investors should be able to count on two drivers of share
price performance: the returns from the underlying hedge fund
portfolio (6%) and a proportion of the discount, as this should be
narrowing over time.
On this basis, the Board made a clear commitment that whilst the
discount remained elevated, it would buy back capital if in any
calendar year the share price did not appreciate by at least 10%.
In 2013 the Board had already conducted a 10% capital buy back and
a further 10% of capital was repurchased in early 2015 as the
shares in 2014 had only appreciated by 8.6% (on the back of a 6%
performance in NAV), thereby missing the stated 10% target.
Noteworthy is the +11.4% share price performance (SIX) of 2015
which represents a substantial outperformance to equity
benchmarks.
Over the last three years the Board has therefore bought back
20% of the capital in a very efficient manner, that at the same
time allowed investors to sell shares back to ALTIN at a premium to
the prevailing share price and also boosted NAV as the shares were
bought at a discount to NAV.
The Board takes this opportunity to reassure investors that the
current discount management policy remains firmly in place for 2016
and beyond if the discount should remain in double-digit territory.
We also understand that as the discount narrows and hopefully
disappears, it will be very important to introduce a slightly
revised policy, with the objective of preventing a persistently
wide discount from recurring.
Composition and broadening of the Board
February 25, 2016 02:00 ET (07:00 GMT)
Board independence remains at the core of good corporate
governance and the proposed replacement of most of the existing
Board by management or appointees of Alpine Select goes
fundamentally against this principle. The Board as proposed by
Alpine Select would clearly be serving the interests of one
substantial minority shareholder.
Despite being in disagreement with the motions put forward by
Alpine Select, we nonetheless are proposing to nominate Mr Thomas
Amstutz to the Board of ALTIN, with the objective of working
constructively with Alpine Select in order to allow ALTIN to
prosper and meet all shareholder expectations over the long
term.
CALL TO ACTION
-- Vote NO on the proposed dividend payout
-- Vote NO on the proposed recall of Dr. Peter Altorfer, Eric M.C.
Syz and André Pabst
-- Vote NO on the election of Gerhard Niggli
-- Vote NO on the election of Dr. Dieter Dubs
-- Vote YES on the election of Thomas Amstutz
Lastly, we would like to thank you, our esteemed shareholders
for your continued trust and support over the years.
ALTIN AG
Letter to Shareholders (PDF)
https://www.altin.ch/p/CNTP_662285_EN
ALTIN AG ¦ Neuhofstrasse 8 ? CH - 6340 Baar ¦ Switzerland
Tel: +41 (0)41 760 62 57 ¦ Fax: +41 (0)41 761 92 23 ¦
info@altin.ch ¦ www.altin.ch
View source version on businesswire.com:
http://www.businesswire.com/news/home/20160224005890/en/
This information is provided by Business Wire
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February 25, 2016 02:00 ET (07:00 GMT)
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