another year of growth, page-3

I agree that these AUM increases and improving markets should bode well for HFA. The way i see it asset management is a fairly simple business model to understand, HFA earn a % management fee for assets under management and a performance fee on positive outperformance of the funds. With rising AUM and rising performance of the funds, earnings should improve fairly significantly i would have thought.

I do have a small position in HFA but the things that stops me taking a bigger position is the convertible note on the balance sheet. The 6% interest rate is reasonable but the way i read how the notes can be converted does concern me. The annual statements say that it can be converted at USD 0.9766 (currently about 1.05 AUD) at anytime.

The current face value of the note (as at 31/12/13) is $82M so i calculate 84 million new shares, not an insignificant number when there are only 119 M shares on issue. With so much potential new shares this would surely limit the upside past this conversion price in the short term anyway. Mind you at current price of $0.83 that is still a 26% upside to $1.05.

I would be interested in anyone else's thoughts?