FOR THE YEAR ENDED 31 DECEMBER

Transcription

1 ANNUAL REPORT FOR THE YEAR ENDED 31 DECEMBER 2015 Registration No

2 TABLE OF CONTENTS PAGE COMPANY INFORMATION 2-4 DIRECTORS REPORT 5-8 CUSTODIAN S REPORT 9 INVESTMENT MANAGERS REPORTS INDEPENDENT AUDITOR S REPORT STATEMENT OF FINANCIAL POSITION STATEMENT OF COMPREHENSIVE INCOME STATEMENT OF CHANGES IN NET ASSETS ATTRIBUTABLE TO HOLDERS OF REDEEMABLE PARTICIPATING SHARES STATEMENT OF CASH FLOWS NOTES TO THE FINANCIAL STATEMENTS SCHEDULE OF INVESTMENTS TOP 20 PURCHASES AND SALES (Unaudited)

3 COMPANY INFORMATION DIRECTORS Jeremy Stenham** Colm Torpey* Alan White* Robert Burke** * Non-executive directors ** Independent non-executive director REGISTERED OFFICE Effective from 30 November st Floor, College Park House South Frederick Street Dublin 2 Ireland Formerly 1 George s Quay Plaza George s Quay Dublin 2 Ireland MANAGER AND INVESTMENT MANAGER Effective from 30 November 2015 Lantern Structured Asset Management Limited 1 st Floor, College Park House South Frederick Street Dublin 2 Ireland Formerly Lantern Structured Asset Management Limited 1 George s Quay Plaza George s Quay Dublin 2 Ireland INVESTMENT MANAGER FOR LANTERN SOLIDAR AGGRESSIVE FUND, LANTERN SOLIDAR ETHICAL FUND, LANTERN SOLIDAR FLEX 40 FUND, LANTERN SOLIDAR FLEX 70 FUND, LANTERN SOLIDAR FLEX 100 FUND. INVESTMENT MANAGER FOR INDEPENDENT AKTIV MIX, INDEPENDENT AKTIV MAX, INDEPENDENT FONDDOKTORN PLUS. Fonder AB Brunnsgatan 5 SE Stockholm Sweden Independent Investment Group Sweden AB Västra Norrlandsgatan Umeå Sweden INVESTMENT MANAGER FOR Prognosia AB PROGNOSIA SUPERNOVA MASTER FUND, Postgatan 28 PROGNOSIA GALAXY MASTER FUND Gothenburg Sweden INVESTMENT MANAGER TO ASSET PORTFOLIO UBS Luxembourg Financial Group Asset Management S.A. 33A Avenue J.F. Kennedy L-1855 Luxembourg 2

4 COMPANY INFORMATION (Continued) ADMINISTRATOR, REGISTRAR AND TRANSFER AGENT Effective from 18 December 2015 MUFG Alternative Fund Services (Ireland) Limited 1 George s Quay Plaza George s Quay Dublin 2 Ireland Formerly UBS Fund Services (Ireland) Limited 1 George s Quay Plaza George s Quay Dublin 2 Ireland CUSTODIAN Effective from 30 November 2015 UBS (Luxembourg) S.A. Dublin Branch 1st Floor, College Park House South Frederick Street Dublin 2 Ireland Formerly UBS (Luxembourg) S.A. Dublin Branch 1 George s Quay Plaza George s Quay Dublin 2 Ireland HEAD OFFICE OF THE CUSTODIAN PROMOTER AND GLOBAL DISTRIBUTOR UBS (Luxembourg) S.A. 33 Avenue JF Kennedy Luxembourg 1855 S.D. Luxembourg UBS Limited 1 Finsbury Avenue London EC2M 2PP United Kingdom COMPANY SECRETARY Effective from 30 November 2015 Colm Torpey 1 st Floor, College Park House South Frederick Street Dublin 2 Ireland Formerly Colm Torpey 1 George s Quay Plaza George s Quay Dublin 2 Ireland LEGAL ADVISORS McCann FitzGerald Riverside One Sir John Rogerson s Quay Dublin 2 Ireland 3

5 COMPANY INFORMATION (Continued) AUDITOR SWEDISH PAYING AGENT KPMG Chartered Accountants and Statutory Audit Firm 1 Harbourmaster Place IFSC Dublin 1 Ireland Skandinaviska Enskilda Banken AB Sergels Torg 2 SE- 106 Stockholm Sweden 4

6 DIRECTORS REPORT The Directors present to the shareholders the annual report together with the audited financial statements for LSAM SF 3 Plc (the Company ) for the year from 1 January 2015 to 31 December Results, Activities and Future Developments The results of operations are set out on pages 31 to 32. A detailed review of activities is contained in the Investment Managers Reports on pages 10 to 24. The Directors intend to continue to develop the activities of the Company. Structure The Company is incorporated with limited liability as an open-ended investment company with variable capital under the laws of Ireland. The Company is an umbrella fund consisting of different funds (the Funds ) comprising of one or more class of shares. The Company is established as a segregated liability company meaning that the assets and liabilities of each Fund are separate from one another. In addition, the assets of each Fund are invested separately in accordance with the relevant investment objective and policy of that Fund. The share classes within each Fund rank pari passu with each other in most respects although they may differ as to certain matters including currency of denomination, hedging strategies (if any), dividend policy, the level of fees and expenses to be charged, subscription or redemption procedures or the minimum subscription and minimum holding amount. A separate portfolio of assets is not maintained for each share class. The investment objective and policies and other details in relation to each Fund are set out in the relevant Supplement which forms part of and should be read in conjunction with the Prospectus dated 13 February The Company is approved by the Central Bank of Ireland (the Central Bank ) as an UCITS investment vehicle under the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 and the Central Bank (Supervision and Enforcement) Act 2013 (Section 48 (1)) (Undertakings for Collective Investment in Transferable Securities) Regulation 2015 (the UCITS Regulations ). As at 31 December 2015, the Company had eight Funds in operation. Additional Funds may be established by the Directors with the prior approval of the Central Bank. Directors Listed below are the Directors who held office during the year and as at 31 December 2015: Mr. Jeremy Stenham (British) Mr. Colm Torpey Mr. Alan White Mr. Robert Burke Directors and Secretary s Interests Colm Torpey and Alan White are both employed by companies within the UBS AG group. Colm Torpey, Alan White, and since 6 January 2015 Robert Burke, also act as directors of the Manager of the Company, Lantern Structured Asset Management Limited ( LSAM Investments or the Manager ). None of the Directors and Secretary and their spouses and minor children held any interest during the period in any material contract for the provision of services which was significant to the business of the Company. None of the Directors and Secretary and their spouses and minor children held any interest in the Company or Group at any time during the period with the exception of Alan White and Colm Torpey who each held one 1 subscriber share in the Company. Dividend Policy The Directors will have absolute discretion as to the payment of dividends. No dividends were paid or payable for the year ended 31 December 2015 (2014: nil). Soft Commission There have been no soft commission arrangements affecting the Company during the year (2014: nil). 5

7 DIRECTORS REPORT (CONTINUED) Accounting Records While the Directors are responsible for ensuring that adequate accounting records are kept by the Company pursuant to the Companies Act 2014 (the Act ), the day to day management of these responsibilities has been delegated to MUFG Alternative Fund Services (Ireland) Limited as Administrator, who ensure that the requirements of Sections 281 to 285 of the Act are complied with. The accounting records are maintained at 1 George s Quay Plaza, Georges Quay, Dublin 2, Ireland. The Directors are also responsible for preparing a Directors Report that complies with the requirements of the Act. Statement of Directors Responsibilities in respect of the Annual Report and the Financial Statements The Directors are responsible for preparing the Annual Report and Company s financial statements, in accordance with applicable law and regulations. Irish company law requires the Directors to prepare financial statements for each financial year. Under the law, the Directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards ( IFRS ) as adopted by the EU. Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position of the company as at the financial year end date and of the financial performance and cash flows of the Company for that financial year and otherwise comply with the Companies Act In preparing these financial statements we are required to select suitable accounting policies for the Company s financial statements and then apply them consistently; make judgements and estimates that are reasonable and prudent; state whether the financial statements have been prepared in accordance with applicable accounting standards, identify those standards, and note the effect and the reasons for any material departure from those standards; and prepare the financial statements on a going concern basis unless it is inappropriate to presume that the Company will continue in business. The Directors are responsible for keeping adequate accounting records that disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Act and the UCITS Regulations. They are also responsible for taking such steps as are reasonably open to them to safeguard the assets of the Company. In this regard they have entrusted the assets of the Company to a Custodian for safe-keeping. They have general responsibility for taking such steps as are reasonably open to them to prevent and detect fraud and other irregularities. The Directors are also responsible for preparing a Directors Report that complies with the requirements of the Act. Significant Events during the Year The feeder funds to Prognosia Supernova Master Fund and Prognosia Galaxy Master Fund fully redeemed their shareholding on 18 March As a result, there are no shareholders remaining in Prognosia Supernova Master Fund and Prognosia Galaxy Master Fund. The Independent Precious Metal Securities Fund s approval was withdrawn by the Central Bank of Ireland on 23 June On 29 June 2015, the Supplements for Independent Fonddoktorn Plus and Independent Aktiv Max were revised via Supplement addendum filed with the Central Bank of Ireland to revise the permitted levels of leverage for each Fund. The following Funds were approved by the Central Bank of Ireland on 3 November 2015: UBS Risk Controlled Growth Fund (USD) UBS Risk Controlled Growth Fund (SGD) These Funds were registered as Restricted Schemes in Singapore on 16 November These Funds are expected to commence operations during

8 DIRECTORS REPORT (CONTINUED) Significant Events during the Year (Continued) Lantern Ethical Fund, Lantern Flex 70 Fund and Lantern Flex 40 Fund ceased using pooling arrangements from 17 November During the reporting period, MUFG Investor Services, the global asset servicing arm of Mitsubishi UFJ Financial Group, reached an agreement with UBS Asset Management to acquire its Alternative Fund Services business, which includes UBS Fund Services (Ireland) Limited. The transaction was finalised on 14 December The administrator, registrar and transfer agent changed its name from UBS Fund Services (Ireland) Limited to MUFG Alternative Fund Services (Ireland) Limited on 18 December Significant Events Post Year End On 12 February 2016, the Custodian issued to the Company a notice of termination in respect of the Custodian Agreement with effect from 13 May 2016 or such other date as may be agreed between the parties. At the date of this report, an effective termination date has not yet been agreed. The Company is currently seeking a replacement Custodian, and intends to have one in place later during The feeder funds to Lantern Aggressive Fund and Lantern Flex 100 Fund fully redeemed their shareholding on 23 March As a result there are no shareholders remaining in Lantern Aggressive Fund and Lantern Flex 100 Fund. The feeder funds to Lantern Flex 70 Fund and Lantern Flex 40 Fund fully redeemed their shareholding on 4 March As a result there are no shareholders remaining in Lantern Flex 70 Fund and Lantern Flex 40 Fund. The feeder fund to Lantern Ethical Fund fully redeemed its shareholding on 13 April As a result there are no shareholders remaining in Lantern Ethical Fund. There were no other significant events post year end up to the date of approving this report having a material impact on the financial statements. Key performance indicators Key performance indicators monitored for each fund include: the month to month movement in the NAV per share; the share capital movements; and the logs of any errors, or breaches in investment restrictions. Risk management The Company is an investment vehicle. Each Fund has its own investment objective, as described in the Prospectus and related Supplement, and summarised in the notes to the financial statements. The Company is authorised in accordance with the UCITS Regulations and consequently is subject to various investment limits and risk management requirements set out in these Regulations, as well as other investment limits and restrictions described in the Prospectus and Supplements. The Funds may be exposed to various financial risks, including market risk (e.g. price risk, currency risk, interest rate risk), credit risk and liquidity risk. The Funds typically seek to profit from market risk, whether on a leveraged or unleveraged basis, while mitigating issuer/counterparty credit risk and liquidity risk as further described in the Prospectus and Supplements. Further details on the Company s financial risks, as well as exposures at year end, are set out in the notes to the financial statements. 7

9 DIRECTORS REPORT (CONTINUED) Related Parties Connected Party Transactions The Central Bank of Ireland UCITS Regulations, paragraph 41(1) 'Restrictions on transactions with connected persons' states that any transaction between a UCITS and the management company or depositary to a UCITS; and their delegates or sub-delegates (excluding any non-group company sub-custodians appointed by the depositary); and any associated or group companies of these ( connected persons ) must be conducted at arm's length; and transactions must be in the best interests of the unit-holders of the UCITS. The Board of Directors is satisfied that there are arrangements (evidenced by written procedures) in place, to ensure that the obligations set out in paragraph 41(1) are applied to all transactions with connected persons; and the board is satisfied that transactions with connected persons entered into during the period complied with the obligations set out in this paragraph. Corporate Governance Statement Statement of Compliance The Company has adopted in full the voluntary Code of Corporate Governance for Collective Investment Schemes and Management Companies issued by the Irish Funds Industry Association, the text of which is available from the IFIA website, The Company has been in compliance with the Corporate Governance Code during the year ended 31 December Independent Auditor KPMG, Chartered Accountants and Registered Auditor have expressed their willingness to continue in office in accordance with Section 383(2) of the Companies Act On behalf of the Board of Directors: Director: Colm Torpey Date: 15 April 2016 Director: Alan White Date: 15 April

10 CUSTODIAN S REPORT STATEMENT OF CUSTODIAN S RESPONSIBILITIES The Custodian is required under the Central Bank of Ireland UCITS Regulations to ensure that, inter alia, it: satisfies itself that the sale, issue, repurchase, redemption, cancellation, and valuation of shares of the Company are carried out in accordance with the Notices and the Memorandum and Articles of Association; takes into its custody, or under its control, all assets of the Company and holds them in safekeeping for the shareholders in accordance with the Notice and the Memorandum and Articles of Association; and enquires into the conduct of the Company in the accounting period and reports thereon to the shareholders, in a report, which shall contain matters prescribed by the notices. CUSTODIAN S REPORT TO THE SHAREHOLDERS OF LSAM SF 3 PLC We have inquired into the conduct of LSAM SF 3 Plc for the year ended 31 December 2015 in our capacity as Custodian to the Company. This report, including the opinion, has been prepared for and solely for the shareholders in the Company as a body, in accordance with the UCITS Regulations and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown. In our opinion the Company has been managed in the period in all material respects: in accordance with the limitations imposed on the investment and borrowing powers of the Company by the Memorandum and Articles of Association and by the Central Bank under the powers granted to the Central Bank of Ireland pursuant to the UCITS Regulations; and otherwise in accordance with the provisions of the Memorandum and Articles of Association and Authority pursuant to the UCITS Regulations. Mark O'Connor Ian Fitzpatrick UBS (Luxembourg) S.A. Dublin Branch 1st Floor, College Park House South Frederick Street Dublin 2 Ireland Date: 15 April

11 INVESTMENT MANAGER S REPORT Lantern Aggressive Fund The Fund was launched on 9 May The Fund performance in this report reflects the period from 31 December 2014 to 31 December Market Commentary 2015 proved to be a very turbulent year for the stock markets. We had strong performance for the first half of the year, especially for the first quarter, but worse for the second half of the year. US (S&P500) and Sweden (OMXS30) both gained 1 and 2 percent, respectively, during However, there were strong moves in currencies, especially for the USD, which made the annual return for US stock markets return approximately 10 percent in SEK. Japan (Nikkei 225) performed very well with approximately 20 percent, while Emerging Markets performed less well with a fall of approximately 8 percent, all in SEK. The year was volatile with several smaller corrections and a major correction in August. Many of the recoils at the stock markets occurred due to financial uncertainty regarding the Greek economy, such as the ability to repay their debt and whether they would leave the Euro Cooperation or not. The discussions on when the Federal Reserve would start to raise their rate also caused some turbulence at the markets. The bull run at the Shanghai stock market somewhat ended in June with heavy drops, which took another leg down in August again. In August the Chinese Yuan devalued which started to cause concerns about what condition the Chinese economy really is in. Brent lost 30 percent in SEK this period, even after losing 37 percent in the year of In total we believe the price fall will be a positive factor for the global economy going into 2016.The winners will be the global consumers and that will improve global growth. There were also very large movements in the fixed income markets. For 2015, as it was for 2014, the expectation was for US rates to take off. The first rate hike from FED occurred in December US 10 Yr yield moved between 1.64 and 2.48, to end the period at German 10 bund yield moved between 0.07 at the lowest to 0.98 at the highest, and ended the period at Expectations for the rate cycle in US is about four rate hikes in 2016, but it will be dependent on coming economic statistics. The graph of the NAV of the Fund for the period ended 31 December 2015 is as follows: Lantern Aggressive Return 6.53% Volatility 25.59% 10

12 INVESTMENT MANAGER S REPORT (CONTINUED) Lantern Aggressive Fund (Continued) Investment Strategy Performance When we started the year the fund was over weighted in the Swedish, Continental Europe, and the Japanese stock markets compared to an all country world index. In Continental Europe the fund was over weighted to the German DAX. The Fund was under weighted the US and Emerging Markets outside Asia. We started the year with a leverage of 1.5 and reduced the leverage in two steps during the first quarter down to 1.2. We increased the leverage in May and August again, and reduced it in November. At the end of the period the leverage was at The main changes in our allocation were done in August where the Fund reduced the exposure in Sweden by 4 percent and in Japan with 2 percent and by 6 percent in Asia ex Japan. We increased our exposure to USA by 12 percent. Even after our change in the allocation the fund was still over weighted Swedish, Continental Europe and the Japanese stock markets compared to an all country world index. The fund was under weighted the US and Emerging Markets at the end of the period. Returns during the year were heavily affected by currency movements. We gained where we had bought USD vs SEK and where we had sold EUR vs SEK, but we lost where we sold JPY vs SEK. The Lantern Aggressive Fund increased 6.53 percent during the period. Market Outlook We started this year with a lot of turbulence at the markets, mainly caused by worries about the condition of the Chinese economy and its devaluation of its currency. We are at the same time maybe heading for a new era after the Federal Reserve now have raised their rate and begun its rate hike cycle. This has been expected for a long period of time and it is a possible step to a normalisation of the economic situation. The big question for the markets is if the American, and the global, economy is ready for this. The low oil price will support growth for the global economy and the consumers, which is needed. We will probably still prefer the stock markets compared to the fixed income markets, even though there are a lot of risks appearing for this year. The stimulus from the Central Banks will continue to be predominantly even this year in efforts to increase both growth and inflation. Even though the valuations at the stock markets are not cheap, we believe the valuations is better there than at the fixed income markets. We expect a turbulent year at both stock markets and the fixed income markets, with a small but better gain at the stock markets. Fund Data The portfolio weights as at 31 December 2015 for the Lantern Aggressive Fund are as follows: 11

13 INVESTMENT MANAGER S REPORT (CONTINUED) Lantern Ethical Fund The Fund was launched on 9 May The Fund performance in this report reflects the period from 31 December 2014 to 31 December Market Commentary 2015 proved to be a very turbulent year for the stock markets. We had strong performance for the first half of the year, especially for the first quarter, but worse for the second half of the year. US (S&P500) and Sweden (OMXS30) both gained 1 and 2 percent, respectively during However, there were strong moves in currencies, especially for the USD, which made the annual return for US stock markets return approximately 10 percent in SEK. Japan (Nikkei 225) performed very well with approximately 20 percent, while Emerging Markets performed less well with a fall of approximately 8 percent, all in SEK. The year was volatile with several smaller corrections and a major correction in August. Many of the recoils at the stock markets occurred due to financial uncertainty regarding the Greek economy, such as the ability to repay their debt and whether they would leave the Euro Cooperation or not. The discussions on when the Federal Reserve would start to raise their rate also caused some turbulence at the markets. The bull run at the Shanghai stock market somewhat ended in June with heavy drops, which took another leg down in August again. In August the Chinese Yuan devalued which started to cause concerns about in what condition the Chinese economy really is. Brent lost 30 percent in SEK this period, even after losing 37 percent in the year of In total we believe the price fall will be a positive factor for the global economy going into 2016.The winners will be the global consumers and that will improve global growth. There were also very large movements in the fixed income markets. For 2015, as it was for 2014, the expectation was for US rates to take off. The first rate hike from FED occurred in December US 10 Yr yield moved between 1.64 and 2.48, to end the period at German 10 bund yield moved between 0.07 at the lowest to 0.98 at the highest, and ended the period at Expectations for the rate cycle in US is about four rate hikes in 2016, but it will be dependent on coming economic statistics. The graph of the NAV of the Fund for the period ended 31 December 2015 is as follows: Lantern Ethical Return 4.42% Volatility 18.92% 12

14 INVESTMENT MANAGER S REPORT (CONTINUED) Lantern Ethical Fund (Continued) Investment Strategy Performance We started the year with a leverage of 1.2 and reduced the leverage in two steps during the first quarter down to 0.9. We increased the leverage in May and August again, and reduced it in November. At the end of the period the leverage was at The allocation was not changed during the period. Lantern Ethical Fund increased 4.42 percent during the period. Market Outlook We started this year with a lot of turbulence at the markets, mainly caused by worries about the condition of the Chinese economy and its devaluation of its currency. We are at the same time maybe heading for a new era after the Federal Reserve now have raised their rate and begun its rate hike cycle. This has been expected for a long period of time and it is a possible step to a normalisation of the economic situation. The big question for the markets is if the American, and the global, economy is ready for this. The low oil price will support growth for the global economy and the consumers, which is needed. We will probably still prefer the stock markets compared to the fixed income markets, even though there are a lot of risks appearing for this year. The stimulus from the Central Banks will continue to be predominantly even this year in efforts to increase both growth and inflation. Even though the valuations at the stock markets are not cheap, we believe the valuations is better there than at the fixed income markets. We expect a turbulent year at both stock markets and the fixed income markets, with a small but better gain at the stock markets. Fund Data The portfolio weights as at 31 December 2015 for the Lantern Ethical Fund are as follows: 13

15 INVESTMENT MANAGER S REPORT (CONTINUED) Lantern Flex 40 Fund The Fund was launched on 9 May The Fund performance in this report reflects the period from 31 December 2014 to 31 December Market Commentary 2015 proved to be a very turbulent year for the stock markets. We had strong performance for the first half of the year, especially for the first quarter, but worse for the second half of the year. US (S&P500) and Sweden (OMXS30) both gained 1 and 2 percent, respectively, during However, there were strong moves in currencies, especially for the USD, which made the annual return for US stock markets return approximately 10 percent in SEK. Japan (Nikkei 225) performed very well with approximately 20 percent, while Emerging Markets performed less well with a fall of approximately 8 percent, all in SEK. The year was volatile with several smaller corrections and a major correction in August. Many of the recoils at the stock markets occurred due to financial uncertainty regarding the Greek economy, such as the ability to repay their debt and whether they would leave the Euro Cooperation or not. The discussions on when the Federal Reserve would start to raise their rate also caused some turbulence at the markets. The bull run at the Shanghai stock market somewhat ended in June with heavy drops, which took another leg down in August again. In August the Chinese Yuan devalued which started to cause concerns about in what condition the Chinese economy really is. Brent lost 30 percent in SEK this period, even after losing 37 percent in the year of In total we believe the price fall will be a positive factor for the global economy going into 2016.The winners will be the global consumers and that will improve global growth. There were also very large movements in the fixed income markets. For 2015, as it was for 2014, the expectation was for US rates to take off. The first rate hike from FED occurred in December US 10 Yr yield moved between 1.64 and 2.48, to end the period at German 10 bund yield moved between 0.07 at the lowest to 0.98 at the highest, and ended the period at Expectations for the rate cycle in US is about four rate hikes in 2016, but it will be dependent on coming economic statistics. The graph of the NAV of the Fund for the period ended 31 December 2015 as follows: Lantern Flex 40 Return 0.31% Volatility 8.09% 14

16 INVESTMENT MANAGER S REPORT (CONTINUED) Lantern Flex 40 Fund (Continued) Investment Strategy Performance At the beginning of the year the fund was over weighted in the Swedish, Continental Europe, and the Japanese stock markets compared to an all country world index. In Continental Europe the fund was over weighted to the German DAX. The Fund was under weighted the US and Emerging Markets outside Asia. The main changes in our allocation were done in August where the Fund reduced the exposure in Sweden by 1.6 percent and in Japan with 0.8 percent and by 2.4 percent in Asia ex Japan. We increased our exposure to USA by 4.8 percent. Even after our change in the allocation the fund was still over weighted Swedish, Continental Europe and the Japanese stock markets compared to an all country world index. The fund was under weighted the US and Emerging Markets at the end of the period. Returns during the year were heavily affected by currency movements. We gained where we had bought USD vs SEK and where we had sold EUR vs SEK, but we lost where we sold JPY vs SEK. Leverage was unchanged during the period. The funds fixed income exposure was equally split between STIBOR 90 and IBoxx European corporate bond index at the beginning of the year. In March we increased Stibor 90 by 10 percent and achieved a fixed income exposure in the fund to 70 percent. In May we reduced the fixed income exposure to 60 percent again and bought 10 percent Markit iboxx Eur High Yield Index. The fixed income exposure was then 20 percent Stibor 90, 30 percent European Corporate Bond and 10 percent High Yield Index in Euro. In December we reduced Stibor 90 with another 5 percent. Lantern Flex 40 Fund increased 0.31 percent during the period. Market Outlook We started this year with a lot of turbulence at the markets, mainly caused by worries about the condition of the Chinese economy and its devaluation of its currency. We are at the same time maybe heading for a new era after the Federal Reserve now have raised their rate and begun its rate hike cycle. This has been expected for a long period of time and it is a possible step to a normalisation of the economic situation. The big question for the markets is if the American, and the global, economy is ready for this. The low oil price will support growth for the global economy and the consumers, which is needed. We will probably still prefer the stock markets compared to the fixed income markets, even though there are a lot of risks appearing for this year. The stimulus from the Central Banks will continue to be predominantly even this year in efforts to increase both growth and inflation. Even though the valuations at the stock markets are not cheap, we believe the valuations is better there than at the fixed income markets. We expect a turbulent year at both stock markets and the fixed income markets, with a small but better gain at the stock markets. Fund Data The portfolio weights as at 31 December 2015 for the Lantern Flex 40 Fund are as follows: 15

17 INVESTMENT MANAGER S REPORT (CONTINUED) Lantern Flex 70 Fund The Fund was launched on 9 May The Fund performance in this report reflects the period from 31 December 2014 to 31 December Market Commentary 2015 proved to be a very turbulent year for the stock markets. We had strong performance for the first half of the year, especially for the first quarter, but worse for the second half of the year. US (S&P500) and Sweden (OMXS30) both gained 1 and 2 percent, respectively, during However, there were strong moves in currencies, especially for the USD, which made the annual return for US stock markets return approximately 10 percent in SEK. Japan (Nikkei 225) performed very well with approximately 20 percent, while Emerging Markets performed less well with a fall of approximately 8 percent, all in SEK. The year was volatile with several smaller corrections and a major correction in August. Many of the recoils at the stock markets occurred due to financial uncertainty regarding the Greek economy, such as the ability to repay their debt and whether they would leave the Euro Cooperation or not. The discussions on when the Federal Reserve would start to raise their rate also caused some turbulence at the markets. The bull run at the Shanghai stock market somewhat ended in June with heavy drops, which took another leg down in August again. In August the Chinese Yuan devalued which started to cause concerns about in what condition the Chinese economy really is. Brent lost 30 percent in SEK this period, even after losing 37 percent in the year of In total we believe the price fall will be a positive factor for the global economy going into 2016.The winners will be the global consumers and that will improve global growth. There were also very large movements in the fixed income markets. For 2015, as it was for 2014, the expectation was for US rates to take off. The first rate hike from FED occurred in December US 10 Yr yield moved between 1.64 and 2.48, to end the period at German 10 bund yield moved between 0.07 at the lowest to 0.98 at the highest, and ended the period at Expectations for the rate cycle in US is about four rate hikes in 2016, but it will be dependent on coming economic statistics. The graph of the NAV of the Fund for the period ended 31 December 2015 is as follows: Lantern Flex 70 Return 2.83% Volatility 13.29% 16

18 INVESTMENT MANAGER S REPORT (CONTINUED) Lantern Flex 70 Fund (Continued) Investment Strategy Performance At the beginning of the year the fund was over weighted in the Swedish, Continental Europe, and the Japanese stock markets compared to an all country world index. In Continental Europe the fund was over weighted to the German DAX. The Fund was under weighted the US and Emerging Markets outside Asia. The main changes in our allocation were done in August where the Fund reduced the exposure in Sweden by 2.8 percent and in Japan with 1.4 percent and by 4.2 percent in Asia ex Japan. We increased our exposure to USA by 8.4 percent. Even after our change in the allocation the fund was still over weighted Swedish, Continental Europe and the Japanese stock markets compared to an all country world index. The fund was under weighted the US and Emerging Markets at the end of the period. Returns during the year were heavily affected by currency movements. We gained where we had bought USD vs SEK and where we had sold EUR vs SEK, but we lost where we sold JPY vs SEK. Leverage was unchanged during the period. The funds fixed income exposure was equally split between STIBOR 90 and IBoxx European corporate bond index at the beginning of the year. In March we increased Stibor 90 by 10 percent and achieved a fixed income exposure in the fund to 40 percent. In May we reduced the fixed income exposure to 30 percent again and bought 5 percent Markit iboxx Eur High Yield Index. The fixed income exposure was then 10 percent Stibor 90, 15 percent European Corporate Bond and 5 percent High Yield Index in Euro. In December we reduced Stibor 90 with another 5 percent. Lantern Flex 70 Fund increased 2.83 percent during the period. Market Outlook We started this year with a lot of turbulence at the markets, mainly caused by worries about the condition of the Chinese economy and its devaluation of its currency. We are at the same time maybe heading for a new era after the Federal Reserve now have raised their rate and begun its rate hike cycle. This has been expected for a long period of time and it is a possible step to a normalisation of the economic situation. The big question for the markets is if the American, and the global, economy is ready for this. The low oil price will support growth for the global economy and the consumers, which is needed. We will probably still prefer the stock markets compared to the fixed income markets, even though there are a lot of risks appearing for this year. The stimulus from the Central Banks will continue to be predominantly even this year in efforts to increase both growth and inflation. Even though the valuations at the stock markets are not cheap, we believe the valuations is better there than at the fixed income markets. We expect a turbulent year at both stock markets and the fixed income markets, with a small but better gain at the stock markets. Fund Data The portfolio weights as at 31 December 2015 for the Lantern Flex 70 Fund are as follows: 17

19 INVESTMENT MANAGER S REPORT (CONTINUED) Lantern Flex 100 Fund The Fund was launched on 9 May The Fund performance in this report reflects the period from 31 December 2014 to 31 December Market Commentary 2015 proved to be a very turbulent year for the stock markets. We had strong performance for the first half of the year, especially for the first quarter, but worse for the second half of the year. US (S&P500) and Sweden (OMXS30) both gained 1 and 2 percent, respectively, during However, there were strong moves in currencies, especially for the USD, which made the annual return for US stock markets return approximately 10 percent in SEK. Japan (Nikkei 225) performed very well with approximately 20 percent, while Emerging Markets performed less well with a fall of approximately 8 percent, all in SEK. The year was volatile with several smaller corrections and a major correction in August. Many of the recoils at the stock markets occurred due to financial uncertainty regarding the Greek economy, such as the ability to repay their debt and whether they would leave the Euro Cooperation or not. The discussions on when the Federal Reserve would start to raise their rate also caused some turbulence at the markets. The bull run at the Shanghai stock market somewhat ended in June with heavy drops, which took another leg down in August again. In August the Chinese Yuan devalued which started to cause concerns about in what condition the Chinese economy really is. Brent lost 30 percent in SEK this period, even after losing 37 percent in the year of In total we believe the price fall will be a positive factor for the global economy going into 2016.The winners will be the global consumers and that will improve global growth. There were also very large movements in the fixed income markets. For 2015, as it was for 2014, the expectation was for US rates to take off. The first rate hike from FED occurred in December US 10 Yr yield moved between 1.64 and 2.48, to end the period at German 10 bund yield moved between 0.07 at the lowest to 0.98 at the highest, and ended the period at Expectations for the rate cycle in US is about four rate hikes in 2016, but it will be dependent on coming economic statistics. The graph of the NAV of the Fund for the period ended 31 December 2015 is as follows: Lantern Flex 100 Return 5.03% Volatility 19.79% 18

20 INVESTMENT MANAGER S REPORT (CONTINUED) Lantern Flex 100 Fund (Continued) Investment Strategy Performance At the beginning of the year the fund was over weighted in the Swedish, Continental Europe, and the Japanese stock markets compared to an all country world index. In Continental Europe the fund was over weighted to the German DAX. The Fund was under weighted the US and Emerging Markets outside Asia. We started the year with a leverage of 1.2 and reduced the leverage in two steps during the first quarter down to 0.9. We increased the leverage in May and August again, and reduced it in November. At the end of the period the leverage was at The main changes in our allocation were done in August where the Fund reduced the exposure in Sweden by 4 percent and in Japan with 2 percent and by 6 percent in Asia ex Japan. We increased our exposure to USA by 12 percent. Even after our change in the allocation the fund was still over weighted Swedish, Continental Europe and the Japanese stock markets compared to an all country world index. The fund was under weighted the US and Emerging Markets at the end of the period. Returns during the year were heavily affected by currency movements. We gained where we had bought USD vs SEK and where we had sold EUR vs SEK, but we lost where we sold JPY vs SEK. Lantern Flex 100 Fund increased 5.03 percent during the period. Market Outlook We started this year with a lot of turbulence at the markets, mainly caused by worries about the condition of the Chinese economy and its devaluation of its currency. We are at the same time maybe heading for a new era after the Federal Reserve now have raised their rate and begun its rate hike cycle. This has been expected for a long period of time and it is a possible step to a normalisation of the economic situation. The big question for the markets is if the American, and the global, economy is ready for this. The low oil price will support growth for the global economy and the consumers, which is needed. We will probably still prefer the stock markets compared to the fixed income markets, even though there are a lot of risks appearing for this year. The stimulus from the Central Banks will continue to be predominantly even this year in efforts to increase both growth and inflation. Even though the valuations at the stock markets are not cheap, we believe the valuations is better there than at the fixed income markets. We expect a turbulent year at both stock markets and the fixed income markets, with a small but better gain at the stock markets. Fund Data The portfolio weights as at 31 December 2015 for the Lantern Flex 100 are as follows: 19

21 INVESTMENT MANAGER S REPORT (CONTINUED) Independent Aktiv Mix The Fund was launched on 19 September The Fund performance in this report reflects the period from 31 December 2014 to 31 December Market Commentary The Developed Markets are in a long term positive trend and the Emerging Markets are in a long term negative trend. Note that the long term trends in the Developed Markets are now challenged. These trends have continued the whole year and there have not been any trend changes during the period. Investment Performance The Fund s performance in 2015 was -2.27%. The largest positive contribution to the Fund s return came from the exposure to Developed Markets and MSCI World. The leverage has been changed between 30% and 60% during the period. The graph of the NAV of the Fund for the period ended 31 December 2015 is as follows: Independent Aktiv Mix Return -2.27% Volatility 6.71% Market Outlook and investment strategy The Fund is managed according to an adaptive quantitative model. Any change in portfolio weights and leverage will be made when changes in market behavior feed through our models and indicate an allocation change. Fund Data The portfolio weights and holdings as at 31 December 2015 are as follows: 50 % Sweden 50 % Developed Markets Effective Leverage: 59% 20

22 INVESTMENT MANAGER S REPORT (CONTINUED) Independent Aktiv Max The Fund was launched on 19 September The Fund performance in this report reflects the period from 31 December 2014 to 31 December Market Commentary The Developed Markets are in a long term positive trend and the Emerging Markets are in a long term negative trend. Note that the long term trends in the Developed Markets are now challenged. These trends have continued the whole year and there have not been any trend changes during the period. Investment Performance The Fund s performance in 2015 was -0.36%. The largest positive contribution to the Fund s return came from the exposure to Developed Markets and MSCI World. The leverage has been changed between 80% and 120% during the period. The graph of the NAV of the Fund for the period ended 31 December 2015 is as follows: Independent Aktiv Max Return -0.36% Volatility 16.69% Market Outlook and investment strategy The Fund is managed according to an adaptive quantitative model. Any change in portfolio weights and leverage will be made when changes in market behaviour feed through our models and indicate an allocation change. Fund Data The portfolio weights and holdings as at 31 December 2015 are as follows: 50% Sweden 50% Developed Markets Effective Leverage: 121% 21

23 INVESTMENT MANAGER S REPORT (CONTINUED) Independent Fonddoktorn Plus The Fund was launched on 19 September The Fund performance in this report reflects the period from 31 December 2014 to 31 December Market Commentary The Developed Markets are in a long term positive trend and the Emerging Markets are in a long term negative trend. Note that the long term trends in the Developed Markets are now challenged. These trends have continued the whole year and there have not been any trend changes during the period. Investment Performance The Fund s performance 2015 was -8.56%. The exposure to Emerging Markets was the largest negative contribution. The leverage has been changed between 80% and 130% several times during the period. The graph of the NAV of the Fund for the period ended 31 December 2015 is as follows: Independent Fonddoktorn Plus Return -8.56% Volatility 20.13% Market Outlook and investment strategy The Fund is managed according to an adaptive quantitative model. Any change in portfolio weights and leverage will be made when changes in market behaviour feed through our models and indicate an allocation change. Fund Data The portfolio weights and holdings as at 31 December 2015 are as follows: 52% Sweden 48% Emerging Market Asia Effective Leverage: 132% 22

24 INVESTMENT MANAGER S REPORT (CONTINUED) Prognosia Supernova Master Fund The Fund was launched on 11 June The Fund ceased operations on 18 March The Fund performance in this report reflects the period from 31 December 2014 to termination date 18 March Market Commentary The Fund held approximately 100% market exposure against the NDUEEGF Index through swaps during the whole reporting period. The Fund s performance for the reporting period was 11.72%. The largest positive contribution to the Fund s return came from the exposure to Emerging Markets. The graph of the NAV of the Fund for the period is as follows: Prognosia Supernova Master Fund Return 11.72% Volatility 18.21% Investment Strategy Performance There were no changes to the leverage factor or any other changes that are relevant to the performance numbers. Some underperformance due to initial spread cost for the swap exposure and general fees have been a minor drag on performance since inception. Market Outlook The Fund ceased operations on 18 March

25 INVESTMENT MANAGER S REPORT (CONTINUED) Prognosia Galaxy Master Fund The Fund was launched on 11 June The Fund ceased operations on 18 March The Fund performance in this report reflects the period from 31 December 2014 to termination date 18 March Market Commentary The Fund held approximately 100% market exposure against the NDDUWI Index through swaps during the whole reporting period. The Fund s performance for the reporting period was 15.05%. The only performance driver for the reporting period was the MSCI World Index. The graph of the NAV of the Fund for the period is as follows: Prognosia Supernova Master Fund Return 15.05% Volatility 14.90% Investment Strategy Performance There were no changes to the leverage factor or any other changes that are relevant to the performance numbers. Some underperformance due to initial spread cost for the swap exposure and general fees have been a minor drag on performance since inception. Market Outlook The Fund ceased operations on 18 March

26 INDEPENDENT AUDITOR S REPORT TO THE MEMBERS OF LSAM SF 3 PLC We have audited the English language version of the financial statements of LSAM SF 3 Plc ( the Company ) for the year ended 31 December 2015 which comprise the Statement of Financial Position, the Statement of Comprehensive Income, the Statement of Changes in Net Assets Attributable to Holders of Redeemable Participating Shares, the Statement of Cash Flows, and the related notes. The financial reporting framework that has been applied in their preparation is Irish law and International Financial Reporting Standards (IFRS) as adopted by the European Union. Opinions and conclusions arising from our audit 1 Our opinion on the financial statements is unmodified In our opinion the financial statements: give a true and fair view of the assets, liabilities and financial position of the Company as at 31 December 2015 and of its changes in net assets attributable to holders of redeemable participating shares for the year then ended; have been properly prepared in accordance with IFRS as adopted by the European Union; and have been properly prepared in accordance with the requirements of the Companies Act 2014, the European Communities (Undertakings for Collective Investment in Transferable Securities) Regulations 2011 and the Central Bank (Supervision and Enforcement) Act 2013 (Section 48(1)) (Undertakings for Collective Investment in Transferable Securities) Regulations Our conclusions on other matters on which we are required to report by the Companies Act 2014 are set out below We have obtained all the information and explanations which we consider necessary for the purposes of our audit. In our opinion the accounting records of the Company were sufficient to permit the financial statements to be readily and properly audited and the financial statements are in agreement with the accounting records. In our opinion the information given in the Directors Report is consistent with the financial statements. 3 We have nothing to report in respect of matters on which we are required to report by exception ISAs (UK & Ireland) require that we report to you if, based on the knowledge we acquired during our audit, we have identified information in the annual report that contains a material inconsistency with either that knowledge or the financial statements, a material misstatement of fact, or that is otherwise misleading. In addition, the Companies Act 2014 requires us to report to you if, in our opinion, the disclosures of directors remuneration and transactions required by sections 305 to 312 of the Act are not made. Basis of our report, responsibilities and restrictions on use As explained more fully in the Statement of Directors Responsibilities set out on page 6 the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view and otherwise comply with the Companies Act Our responsibility is to audit and express an opinion on the financial statements in accordance with Irish law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Financial Reporting Council s Ethical Standards for Auditors. An audit undertaken in accordance with ISAs (UK & Ireland) involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of: whether the accounting policies are appropriate to the Company s circumstances and have been consistently applied and adequately disclosed; the reasonableness of significant accounting estimates made by the directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report. 25