Final Results
29 January 2010
THE THROGMORTON TRUST PLC
Announcement of results in respect of the year ended
30 November 2009
Chairman's Statement
Performance
I am pleased to report that the Company has performed well during the year to
30 November 2009. Markets have rallied since March and the share prices of UK
small and mid cap companies have generally been strong. At the year end the
undiluted net asset value per share ("NAV") had increased by 64.4% whilst the
share price had risen by 100.0%. By comparison, the Hoare Govett Smaller
Companies plus AIM (ex Investment Companies) Index increased by 59.4%. (All
percentages calculated in sterling terms with income reinvested).
The CFD portfolio generated positive returns for shareholders amounting to
£1,447,000. In the early part of the year, the short CFD position contributed to
the performance. The Manager unwound the net short position at the end of the
first calendar quarter and established a net long position which provided
incremental performance in the second half. The CFD portfolio ranged from 21.0%
to 31.0% of NAV during the year with an average of 27.0%. Further analysis is
given in the Investment Manager's Report.
Under the terms of the management agreement with BlackRock, any outperformance
of the benchmark index from 11 September 2008 onwards will give rise to a
performance fee. For the year ended 30 November 2009 the performance fee
amounted to £353,000. For the purposes of calculating the performance fee, the
total return for the year amounted to 61.8% giving an outperformance of 2.4%.
Details of the performance fee calculation are shown in note 3.
Revenue return and dividends
Revenue return per share for the year amounted to 4.24 pence compared with 3.85
pence for the previous year, a rise of 10.1%. The increase is due to the
repayment of interest relating to the refund of prior years' VAT in the current
year, which contributed 1.68 pence to revenue return. The prior year revenue
return was also inflated by a refund of VAT which contributed 1.12 pence to
revenue in this period. After adjusting for the impact of VAT related items,
like for like revenue return for the year had fallen by 6.2% from 2.73 pence in
the prior year to 2.56 pence in the current year. This decrease mainly reflects
the change in composition of the portfolio following the reorganisation that
took place after the transfer of the investment mandate to BlackRock in 2008
and the subsequent tender offer. Further details relating to the interest
repayment on the VAT refund are given below.
The Directors are proposing a final dividend of 2.20 pence per share, which
represents an increase of 18.9% (2008: 1.85 pence) together with a special
dividend of 2.00 pence (2008: 3.00 pence) per share making a total dividend for
the year of 4.75 pence per share. The final and special dividends are payable
on 26 March 2010 to shareholders on the Company's register on 19 February 2010
(ex dividend date is 17 February 2010).
Tender offers
In July 2008 the Board announced that it would, at its discretion, implement
tender offers, subject to shareholder approval. This discretion was exercised
on 3 July 2009 and a 10% tender offer was implemented as at 1 September 2009.
The tender price of 126.55 pence per share was paid to shareholders on
23 September 2009.
It was announced on 26 November 2009 that having reviewed the current position
of the Company, including the continued strong performance, the Board had
decided not to exercise its discretion to implement a tender offer in February
2010.
Subscription shares
At a general meeting held on 1 October 2009, shareholders approved a proposal
to make a bonus issue of subscription shares.
Following the general meeting a total of 14,822,901 subscription shares were
allotted to ordinary shareholders on the Company's register at 5.00 p.m. on
30 September 2009, by way of a bonus issue on the basis of one subscription share
for every five ordinary shares held at that date.
The subscription shares confer the right, exercisable on each of 31 January,
30 April, 31 July and 31 October between 31 January 2010 and 31 October 2011,
inclusive, to subscribe for all or any of the ordinary shares to which the
subscription shares relate at the price of 146.00 pence per share. The detailed
terms and conditions of the subscription shares are set out in the Prospectus
dated 3 September 2009.
Refund of VAT
I am pleased to report that following the success of the Association of
Investment companies ("AIC") and JPMorgan Claverhouse Investment Trust plc
challenge to the imposition of VAT on management fees charged in investment
trusts, HMRC has now repaid all of the irrecoverable VAT incurred by the
Company outside of the 1996 - 2001 period for which protective claims were time
barred, together with interest thereon. The Board has elected to join the PwC
Investment Trust Company Restitution Action to seek to recover VAT incurred
during the excluded period directly from HMRC.
AIFM Directive
The European Union's ("EU") draft "AIFM Directive" is a controversial measure
aimed at regulating alternative investment funds which, in its current form,
has major implications for your Company and other investment trusts.
The AIC believes that the draft AIFM Directive is not proportionate because it
threatens serious, negative consequences for all listed investment companies
without providing compensating benefits. These issues arise regardless of the
company's asset allocation, size, domicile or the market in which their shares
are traded. The AIC recognises the far reaching implications of the AIFM
Directive on listed investment companies and is currently engaged with the EU
to seek the development of rules which would allow the business model of the
listed investment company sector to continue (albeit with additional regulatory
obligations). I have written to MEPs in support of the AIC stance. BlackRock is
also making representations to the EU to seek a final form of the AIFM
Directive which will regulate companies such as this one in a more
proportionate, fair and effective way.
New Articles of Association
At the forthcoming Annual General Meeting, shareholders will be asked to
approve new Articles of Association (the "Articles") in substitution for the
current Articles. The new Articles will take account of the implementation in
August 2009, of the Companies (Shareholders' Rights) Regulations 2009 and in
October 2009 of the final parts of the Companies Act 2006.
Further details of the proposed changes to be introduced in the new Articles
are set out in the Directors' Report and the Notice of Annual General Meeting
within the annual report.
Outlook
Global markets and economies are emerging from recession and starting to show
signs of recovery. Uncertainty remains about the strength, pace and
sustainability of future economic growth but we are confident that our
commitment to good quality growth companies combined with the opportunities
provided by the CFD portfolio will continue to reward shareholders.
Richard Bernays
Chairman
29 January 2010
Interim Management Report and Responsibility Statement
The Chairman's statement above and the Investment Managers' Report following
give details of important events which have occurred during the period and
their impact on the financial statements.
Principal risks
The key risks faced by the Company are set out below. The Board regularly
reviews and agrees policies for managing each risk, as summarised below.
Performance risk - The Board is responsible for deciding the investment
strategy to fulfil the Company's objective and monitoring the performance of
the Investment Manager. An inappropriate strategy may lead to poor performance.
To manage this risk the Investment Manager provides an explanation of
significant stock selection decisions and the rationale for the composition of
the investment portfolio. The Board monitors and maintains an adequate spread
of investments in order to minimise the risks associated with factors specific
to particular sectors, based on the diversification requirements inherent in
the Company's investment policy.
Income/dividend risk - The amount of dividends and future dividend growth will
depend on the Company's underlying portfolio. Any change in the tax treatment
of the dividends or interest received by the Company may reduce the level of
dividends received by shareholders. The Board monitors this risk through the
receipt of detailed income forecasts and considers the level of income at each
meeting.
Regulatory risk - The Company operates as an investment trust in accordance
with section 842 of ICTA. As such the Company is exempt from capital gains tax
on the profits realised from the sale of its investments. The Investment
Manager monitors investment movements, the level and type of forecast income
and expenditure and the amount of half yearly dividends to ensure that the
provisions of section 842 are not breached. The results are reported to the
Board at each meeting.
Operational risk - In common with most other investment trust companies, the
Company has no employees. The Company therefore relies upon the services
provided by third parties and is dependent on the control systems of the
Investment Manager and the Company's other service providers. The security, for
example, of the Company's assets, dealing procedures, accounting records and
maintenance of regulatory and legal requirements, depend on the effective
operation of these systems. These are regularly tested and monitored and an
internal control report, which includes an assessment of risks together with
procedures to mitigate such risks, is prepared by the Investment Manager and
reviewed by the Audit Committee at least twice a year. The Investment Manager
produces an annual SAS70 report which is reviewed by its auditors and gives
assurance regarding the effective operation of controls.
Financial risks - The Company's investment activities expose it to a variety of
financial risks that include market price risk, foreign currency risk and
interest rate risk. The Company has approximately 34.6% of its portfolio
invested in AIM traded securities, and, by the very nature of its investment
objective, largely invests in smaller companies, and liquidity in these
securities can from time to time become constrained, making these investments
difficult to realise at or near published prices, giving rise to additional
liquidity risk. This is taken into consideration by the Directors when
determining the valuation of these holdings. There are also risks linked to the
Company's use of derivative transactions including CFDs. Further details are
disclosed in note 19 of the annual report, together with a summary of the
policies for managing these risks and liquidity and credit risks.
Related party transactions
The investment management fee for the year charged by BlackRock was £838,000
(2008: £508,000). In addition a performance fee was payable of £353,000 (2008:
£377,000). At the year end, an amount of £905,000 was outstanding in respect of
these fees (2008: £377,000).
The Company's prime broker, Merrill Lynch International, is associated with
BlackRock. At the year end, the Company had a negative cash balance of £40,000
(2008: a positive cash balance of £3,708,000) with the prime broker. The
Company also had an investment in BlackRock's Institutional Cash Fund of
£14,000 (2008: £9,999,000) at the year end.
Directors' responsibility statement
The Directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law they have prepared the financial statements in
accordance with applicable laws and UK Accounting Standards (UK Generally
Accepted Accounting Practice).
The Directors are required to ensure that the financial statements give a true
and fair view of the affairs of the Company as at the end of each financial
year and of the profit or loss of the Company for that period.
In preparing those financial statements, the Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgements and estimates that are reasonable and prudent; and
- state whether applicable UK accounting standards have been followed, subject
to any material departures disclosed and explained in the financial statements.
The Directors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and to enable them to ensure that the financial statements comply with
the Companies Act 2006. They have general responsibility for taking such steps
as are reasonably open to them to safeguard the assets of the Company and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Directors' Report, Directors' Remuneration Report and Corporate
Governance Statement that comply with that law and those regulations.
The Directors have delegated responsibility to the Investment Manager for the
maintenance and integrity of the Company's corporate and financial information
included on the Investment Managers' website. Legislation in the United Kingdom
governing the preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
The Directors confirm to the best of their knowledge that:
- the financial statements, prepared in accordance with applicable accounting
standards, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Company; and
- the annual report includes a fair view of the development and performance of
the business and the position of the Company, together with a description of
the principal risks and uncertainties that it faces.
Investment Manager's Report
Market review and overall investment performance
Markets have rallied strongly since last March as hopes have built that
economies are stabilising and recovery is in prospect. This has enabled us to
recover a significant part of the losses sustained in the latter part of 2008.
During the year to 30 November 2009 the NAV rose by 64.4% and the benchmark
rose by 59.4%. Over this period larger companies lagged, with the FTSE100 Index
rising by only 26.3%. (All percentages calculated in sterling terms with income
reinvested).
Long only portfolio performance
Our best performance came in the technology sectors. Software was our largest
overweight sector during the year and on average our holdings increased in
value by 71%. The largest percentage increases came from holdings in Alterian
and Fidessa, both key global players in their areas of customer marketing and
communications software and financial trading software respectively. Holdings
in SDL and Aveva also performed very well. Our technology hardware stocks also
performed well with holdings in Pace, a leading global supplier of set top
boxes, seeing very strong growth and earnings upgrades leading to its share
price more than tripling, and Dmatek, a supplier of electronic monitoring
technology, being acquired.
Some of our resources and emerging markets related investments achieved strong
share price increases, notably Emerald Energy, which was acquired by Sinochem,
and City of London Investment Group, which manages funds predominantly invested
in emerging markets.
A number of investments performed poorly. Endace, which supplies solutions
mainly to government security agencies, banks and telecoms companies to allow
them to ensure that internet traffic is secure, suffered as customers delayed
placing orders. London Capital did not experience a repeat of the highly
volatile trading conditions of late 2008 which enabled its spread betting
operations to achieve extraordinary returns. Intercytex saw its key drug fail
in trials. Mouchel did not win key contracts, and suffered lower utilisation in
its consultancy operations which are largely public sector orientated. Umeco's
share price was weak following concern about its lack of cash generation, high
gearing and weaker aerospace markets. Connaught and Alternative Networks saw
their shares derated. Connaught is largely public sector focussed, and
Alternative Networks saw reduced corporate usage of its telecoms devices as
spending controls tightened. We have sold our holdings in Mouchel, Intercytex,
Umeco and Connaught.
Activity
Our strategy for much of the year under review was to increase exposure to
early cyclical companies. We generally bought companies with strong market
positions, preferably serving international markets, and with proprietary
technology or strong brands. Purchases during the year included Cookson,
Charter, Spectris, Renishaw, Halfords and Headlam. Cookson stands to benefit
from a recovery in steel consumption in China; a significant part of its
supplies are consumables. Charter is an engineering group which through its
welding supplies division is, like Cookson, a direct beneficiary of a recovery
in steel consumption. Spectris and Renishaw design and supply measurement tools
and instrumentation; most of their sales are international with the Asia
Pacific region being important. Halfords and Headlam are both well run UK
orientated consumer companies, which dominate their markets and have attractive
and safe dividend yields.
The companies we sold had either disappointed, such as Mouchel, or were overly
dependent on either UK government spending, such as Babcock and Chemring, or
the UK consumer, but lacking some of the more defensive characteristics found
in stocks such as Halfords and Headlam.
CFD portfolio
The CFD portfolio generated good returns during the year, although the first
half of the financial year, in particular March and April, were very difficult
as poor quality, highly leveraged stocks rallied sharply; in many cases we were
short of these stocks. As the year progressed we closed out a number of short
positions, increasing the net long positions such that, including the long only
portfolio, we are currently 110% net exposed to markets. At the year end the
CFD portfolio comprised 63 positions (2008: 72), of which 35 were long
positions, representing investments mainly in our preferred core holdings such
as Rotork, Aveva and Abcam.
Overall, the CFD portfolio generated net positive returns for shareholders
amounting to £1,447,000, with the long CFD positions performing particularly
well. Gross assets in the CFD portfolio ranged from 21.0% to 31.0% of NAV
during the year with an average of 27.0%.
Portfolio positioning
We are focussed mainly on good quality growth companies which meet our criteria
for core holdings; these are the large positions in the portfolio. Many have
strong, leading technology including holdings such as Fidessa, Aveva, Pace,
Dechra Pharmaceuticals, Domino Printing Sciences, BATM Advanced Communications,
Alterian, Kewill, Intec Telecom Systems and Spirent. Other portfolio holdings
have well known brands, for example Rathbone Brothers, Rensburg Sheppards,
Brewin Dolphin and Abcam. Others provide excellent exposure to emerging
markets, many of which we expect to lead global GDP growth over the next five
years, for example City of London Investment Group, ITE Group, Rotork,
Spirax-Sarco and Victrex.
We increased our exposure to real estate companies during the second half of
the financial year. Our preferred location in this sector is the West End of
London, represented by holdings in Derwent London, Shaftesbury and Great
Portland Estates. We also like the developers which have excellent management
and track records, notably St Modwen Properties, Development Securities and
Helical Bar.
Within the resources sectors our larger holdings are sensibly valued producers,
including oil producers Premier Oil, Gulfsands Petroleum and Valiant Petroleum,
and mining companies Eastern Platinum, Petropavlovsk (formerly Peter Hambro
Mining) and International FerroMetals. We hold a number of small investments in
companies with potentially very significant upside. These include oil
exploration companies such as Falklands explorers Desire Petroleum and Falkland
Oil & Gas. Amongst the junior miners we hold small stakes in Zimbabwe
orientated Mwana Africa, which is growing its gold production and is generally
very well placed to benefit from any rehabilitation of Zimbabwe, and Petra
Diamonds, which recently found a 507 carat diamond at its Cullinan mine.
Our other cyclical holdings include construction related companies such as
Keller, a leading global player in ground preparation, housebuilder Bellway,
and engineering consultancy WSP Group.
We are generally cautious about the outlook for the UK economy. It faces
headwinds which are stronger than most developed economies, including high
public sector debt, with the likelihood of large increases in taxes and further
reductions in public sector spending soon after the impending general election.
We continue to hold shares in a few very defensive companies, for example
Caretech, which has a high level of long term contracted revenue, a strong
management team and scope to gain significant market share.
We maintain significant underweight positions in UK discretionary consumer
related sectors especially travel & leisure and general retailers.
A review of the portfolio's style relative to our benchmark shows unsurprising
results. Our long only portfolio beta is 0.94, reflecting our preference for
less volatile stocks. The tracking error has edged down slightly over the last
six months. Relative to our benchmark our portfolio is comprised of stocks
which, in general have positive share price momentum, are smaller in market
capitalisation terms, are not value stocks are less frequently traded and have
greater than average exposure to international markets.
Outlook
Developed economies are starting to recover from a painful recession. Recovery
is expected to be slow, but we hope that we can look forward to a gradual
recovery and a return to a period of growth which should continue for many
years to come. Cyclical recovery stocks have performed very strongly since
March; many have already seen their share prices double from cyclical lows. The
quality growth companies which we know best, and which dominate our portfolio,
have lagged during the rally since last March, but they should fare better as
investors switch to companies they are willing to hold for the medium term.
There are already early signs that this is happening, and that we are moving
back into more of a stock pickers market. This should favour our investment
approach.
Mike Prentis and Richard Plackett
BlackRock Investment Management (UK) Limited
29 January 2010
Fifty Largest Investments
as at 30 November 2009
Market % of
value total Prospective
Company £'000 portfolio PE ratio* Description
Fidessa 2,498 2.3 19.0 Development and
marketing of
financial trading
and connectivity
software
Brewin Dolphin Holdings 2,319 2.2 13.9 Fund management
and stockbroking
Aveva Group 2,289 2.1 19.7 Development and
marketing of
engineering
computer software
Abcam# 2,058 1.9 22.9 Production and
distribution of
research-grade
antibodies and
associated
products
Domino Printing Sciences 1,930 1.8 12.5 Manufacturer of
inkjet and laser
commercial
printers
BATM Advanced 1,914 1.8 7.9 Development and
Communications production of data
and
telecommunications
products
City Of London 1,799 1.7 10.9 Management of
Investment Group# investment funds
primarily invested
in emerging
markets
Victrex 1,780 1.7 18.8 Manufacture and
supply of PEEK
thermoplastic
products
Rensburg Sheppards 1,757 1.6 13.7 Private client
fund management
Rotork 1,703 1.6 15.6 Engineering,
manufacturing and
design of valve
actuators
Eastern Platinum# 1,626 1.5 - Exploration,
development and
production of
platinum group
metals
Spirax-Sarco Engineering 1,616 1.5 14.4 Design and
manufacture of
steam management
systems
ITE Group 1,599 1.5 12.7 Organisation of
trade exhibitions
in Russia and
other FSU
countries
Pace 1,534 1.4 11.8 Design and sale of
digital set top
boxes
Rathbone Brothers 1,506 1.4 17.8 Private client
fund management
Dechra Pharmaceuticals 1,435 1.3 15.7 Development,
manufacture and
supply of
veterinary
products
Shaftsbury 1,433 1.3 30.4 Ownership and
management of
retail and leisure
property in
London's West End
Alterian 1,421 1.3 12.4 Development and
sale of software
to improve
customer
communication and
marketing
Charter International 1,290 1.2 14.2 Supply of welding
consumables and
air and gas
handling equipment
Research Now# 1,286 1.2 15.5 Provision of
international
online fieldwork
and panel
specialists
Gulfsands Petroleum# 1,260 1.2 8.5 Exploration and
production of oil
in Syria and Iraq
Hutchison China Meditech# 1,217 1.1 - Development and
supply of
traditional
Chinese medicines
to the Chinese
market
Hargreaves Services# 1,185 1.1 7.9 Mining, importing,
processing and
supply of coal and
related products
Keller Group 1,149 1.1 8.7 Provision of
ground engineering
solutions
JKX Oil & Gas 1,142 1.1 5.8 Production of oil
and gas in the
Ukraine and other
eastern European
countries
Petropavlovsk 1,142 1.1 13.7 Mining of gold in
Russia
Valiant Petroleum 1,138 1.1 9.7 Exploration and
production of oil
and gas in the
North Sea region
Ultra Electronics 1,127 1.0 13.5 Supply of
Holdings electronic defence
systems
Hardy Underwriting 1,123 1.0 8.3 Provision of
Bermuda insurance and
re-insurance
Premier Oil 1,123 1.0 14.8 Exploration of oil
and gas in the
North Sea and Asia
Spirent Communications 1,118 1.0 14.9 Design and supply
of telecoms
testing systems
Intec Telecom Systems 1,090 1.0 14.1 Supply of telecoms
billing software
and related
services
Endace# 1,080 1.0 10.4 Provision of
telecoms networks
security solutions
Mothercare 1,054 1.0 18.6 Supply of baby and
children's
products
Derwent London 1,047 1.0 24.1 Ownership and
management of
office property in
London's West End
Planet Payment# 989 0.9 - Provider of
payment solutions
Avocet Mining# 930 0.9 15.4 Gold exploration
and production
Immunodiagnostic Systems# 902 0.8 20.1 Development and
supply of
diagnostic testing
systems
Cookson 872 0.8 27.0 Supply of
materials to the
global steel and
other industries
SDL 869 0.8 14.5 Supply of
multilingual
translation
software and
translation
services
Care UK 849 0.8 9.9 Provision of care
to the elderly and
disabled
Chaucer Holdings 823 0.8 7.4 Provision of
insurance and
re-insurance
International 792 0.7 4.7 Mining and supply
FerroMetals of ferrochrome
Senior 790 0.7 7.6 Manufacture and
supply of
components for the
aerospace and
automotive sectors
Caretech# 790 0.7 16.0 Provision of long
term care for
individuals with
learning
difficulties
Connaught 780 0.7 13.4 Services to
improve the
quality of social
housing
Aquarius Platinum 761 0.7 23.6 Exploration,
development and
production of
platinum group
metals
Great Portland Estates 748 0.7 10.7 Ownership and
management of
office property in
London's West End
Bellway 746 0.7 30.6 Housebuilding
IQE# 746 0.7 33.9 Manufacture and
supply of compound
semiconductor
wafers
50 largest investments 64,175 59.5
Remaining investments 41,580 38.6
UK equity portfolio 105,755 98.1
CFD portfolio** 2,042 1.9
Total investments 107,797 100.0
* Prospective PE ratio derived using late 2009 analyst estimates and relates to
the next set of full year results for each company.
** CFDs are disclosed under current assets and liabilities on the Balance
Sheet. No individual positions (long or short) would, if physically held,
exceed 1.1% of total investments.
# Traded on the Alternative Investment Market of the London Stock Exchange.
Disclosure of the Company's smaller holdings would not add materially to
shareholders' understanding of the Company's portfolio structure and priority
investment themes, hence only the fifty largest investments have been
disclosed.
Distribution of Investments
as at 30 November 2009
% of total
long only
Sector portfolio
Oil & Gas Producers 7.0
Oil Equipment, Services & Distribution 1.1
-----
Oil & Gas 8.1
-----
Chemicals 2.2
Industrial Metals 1.0
Mining 8.9
-----
Basic Materials 12.1
-----
Construction & Materials 1.6
Aerospace & Defence 2.3
General Industrials 0.8
Electronic & Electrical Equipment 4.7
Industrial Engineering 6.9
Industrial Transportation 0.1
Support Services 7.1
-----
Total Industrials 23.5
-----
Beverages 1.9
Household Goods 2.0
Personal Goods 0.1
-----
Consumer Goods 4.0
-----
Health Care Equipment & Services 3.3
Pharmaceuticals & Biotechnology 2.5
Food and Drug Retailers 0.6
-----
Health Care 6.4
-----
General Retailers 3.1
Media 4.3
Travel & Leisure 1.9
-----
Consumer Services 9.3
-----
Fixed Line Telecommunications 0.7
-----
Telecommunications 0.7
-----
Electricity 0.6
-----
Utilities 0.6
-----
Non-life Insurance 2.1
Real Estate 5.8
General Financial 9.7
-----
Financials 17.6
-----
Software & Computer Services 11.6
Technology Hardware & Equipment 6.1
-----
Technology 17.7
-----
Total 100.0
-----
Analysis of the UK and AIM traded long only portfolio
% of
Index portfolio
FTSE 250 43.0%
AIM 34.6%
FTSE Small Cap 21.9%
FTSE Fledgling 0.5%
Distribution of contracts for difference portfolio
% %
Long Short %
Sector exposure exposure Total
Basic materials 12.7 - 12.7
Consumer goods 22.3 (9.7) 12.6
Consumer services 33.0 (21.0) 12.0
Financials 15.4 - 15.4
Food and beverages - (2.4) (2.4)
Industrials 59.1 (45.9) 13.2
Oil & gas 9.7 (3.2) 6.5
Technology 43.4 (13.4) 30.0
----- ----- -----
Total 195.6 (95.6) 100.0
----- ----- -----
Historical Record
Assets
Creditors:
amounts
falling
NAV Isssued Total due after Equity Mid-market
absolute share assets less more than shareholders' NAV per price per
Year to return capital liabilities one year funds share share
30 November % £'000 £'000 £'000 £'000 p p
2009 +54.2 4,224 106,917 - 106,917 144.3 115.8
2008 -51.9(4) 6,863 77,029 - 77,029 93.5(1) 62.8
2007 -2.4 7,003 304,683 32,169 272,514 194.6(2) 152.0
2006 +16.2 8,179 358,381 32,169 326,212 199.4(2) 164.3
2005 +27.8 9,130 345,553(2) 32,169 313,384(2) 171.6(2,3) 142.0
2004 +28.0 11,488 340,746(3) 32,194 308,552(3) 134.3(2,3) 110.3
2003 +35.4 11,600 277,557 34,119 243,438 104.9(2) 84.0
2002 -24.9 11,863 228,953 45,126 183,827 77.5 59.0
2001 -9.7 11,886 290,332 45,126 245,206 103.2 81.0
2000 -0.8 12,414 328,844 45,127 283,717 114.3 94.3
(1). NAV per continuing share.
(2). Prior charges at par.
(3). Restated for changes in accounting policies: the principal changes were to
value investments at bid (previously mid) market value and to account for
dividends in the period in which they are paid.
(4). Includes £5.5 million in respect of the write-back of prior years' VAT.
Revenue
Net Revenue
Total Revenue revenue Available return
gross finance Revenue before for per share Dividends
Year to revenue costs expenses taxation Taxation distribution £'000 per share
30 November £'000 £'000 £'000 £'000 £'000 £'000 p p
2009 5,201(5) 11 1,783 3,407 4 3,403 4.24 4.85
2008 7,562(6) 798 1,912 4,852 4 4,848 3.85 5.40
2007 6,196 1,983 1,851 2,362 14 2,348 1.54 2.20
2006 7,113 1,937 1,915 3,261 - 3,261 1.84 2.00
2005 7,064 1,973 1,898 3,193 - 3,193 1.58 1.75
2004 7,428 2,136 1,715 3,577 - 3,577 1.55 1.60
2003 7,383 2,550 1,510 3,323 - 3,323 1.40 1.50
2002 7,177 2,582 1,472 3,123 58 3,065 1.29 1.50
2001 8,092 2,611 1,926 3,555 196 3,359 1.40 1.50
2000 9,299 2,616 2,043 4,640 166 4,474 1.70 1.50
(5). Includes interest of £2,469,000 received in relation to the refund of prior years' VAT.
(6). Includes £2,284,000 in respect of the write back of prior years' VAT.
Income Statement
for the year ended 30 November 2009
Revenue Revenue Capital Capital
return return return return Total Total
2009 2008 2009 2008 2009 2008
Notes £'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on
investments held at
fair value through
profit or loss - - 39,899 (125,374) 39,899 (125,374)
Net return on
contracts for
differences 142 34 1,305 2,221 1,447 2,255
Income from
investments held at
fair value through
profit or loss 2 2,551 4,565 - - 2,551 4,565
Other income 2 39 679 - - 39 679
Investment management
and performance fees 3 (210) (422) (981) (1,640) (1,191) (2,062)
Write back of prior
years' VAT 3 - 2,284 - 3,254 - 5,538
Interest on write
back of prior years'
VAT 2 2,469 - - - 2,469 -
Operating expenses 4 (563) (428) 532 (1,399) (31) (1,827)
----- ----- ------ ------- ------ -------
Net return/(loss)
before finance costs
and taxation 4,428 6,712 40,755 (122,938) 45,183 (116,226)
Finance costs (11) (798) - (2,174) (11) (2,972)
Costs on redemption
of debenture stocks - - (30) (10,297) (30) (10,297)
Change in tender
offer provision (1,010) (1,062) 1,111 14,954 101 13,892
----- ----- ------ ------- ------ -------
Return/(loss) on
ordinary activities
before taxation 3,407 4,852 41,836 (120,455) 45,243 (115,603)
----- ----- ------ ------- ------ -------
Taxation on ordinary
activities (4) (4) - - (4) (4)
----- ----- ------ ------- ------ -------
Return/(loss) on
ordinary activities
after taxation 3,403 4,848 41,836 (120,455) 45,239 (115,607)
----- ----- ------ ------- ------ -------
Return/(loss) per
ordinary share 8 4.24p 3.85p 52.07p (95.63p) 56.31p (91.78p)
----- ----- ------ ------- ------ -------
The total column of this statement represents the Income Statement of the
Company. The supplementary revenue and capital return columns are both prepared
under guidance published by the Association of Investment Companies. The
Company had no recognised gains or losses other than those disclosed in the
Income Statement and the Reconciliation of Movements in Shareholders' Funds.
Accordingly, no Statement of Recognised Losses has been prepared. All items in
the above statement derive from continuing operations. No operations were
acquired or discontinued during the year.
Reconciliation of Movements in Shareholders' Funds
for the year ended 30 November 2009
Share Captial
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
For the year ended 30 November 2009
At 30 November 2008 6,863 35,272 8,327 19,648 6,919 77,029
Return for the year - - - 41,836 3,403 45,239
Issue of subscription
shares 148 - - (148) - -
Share issue costs - - - (265) - (265)
Transfer of assets to
tender pool - - - (10,639) - (10,639)
Shares purchased and
cancelled 9,10 (2,787) - 2,787 - - -
Dividends paid and
declared (see (a)
below) 7 - - - - (4,447) (4,447)
----- ------ ------ ------ ----- -------
At 30 November 2009 4,224 35,272 11,114 50,432 5,875 106,917
----- ------ ------ ------ ----- -------
For the year ended 30 November 2008
At 30 November 2007 7,003 35,272 8,187 216,860 5,192 272,514
(Loss)/return for the
year - - - (120,455) 4,848 (115,607)
Transfer of assets to
tender pool - - - (74,439) - (74,439)
Shares repurchased
and cancelled 9,10 (140) - 140 (3,771) - (3,771)
Proceeds from shares
sold through mix and
match facility - - - 1,453 - 1,453
Dividends paid and
declared (see (b)
below) 7 - - - - (3,121) (3,121)
----- ------ ------ ------ ----- -------
At 30 November 2008 6,863 35,272 8,327 19,648 6,919 77,029
----- ------ ------ ------ ----- -------
a. Final dividend of 1.85p per share and a special dividend of 3.00p per share
for the year ended 30 November 2008, declared on 1 April 2009 and paid on 1 May
2009 and interim dividend of 0.55p per share for the six months ended 31 May
2009, declared on 27 July 2009 and paid on 17 August 2009.
b. Final dividend of 1.70p per share for the year ended 30 November 2007,
declared on 29 February 2008 and paid on 27 March 2008 and interim dividend of
0.55p per share for the six months ended 31 May 2008, declared on 8 August 2008
and paid on 12 September 2008.
Balance Sheet
as at 30 November 2009
30 30
November November
2009 2008
Notes £'000 £'000
Fixed assets
Investments held at fair value
through profit or loss 107,553 93,042
------- -------
Current assets
Debtors 350 1,457
Contracts for differences 2,784 3,893
Cash 17 3,790
------- -------
3,151 9,140
------- -------
Creditors - amounts falling due
within one year
Other creditors (3,005) (22,126)
Bank overdraft (40) -
Amounts due in respect of the
contracts for differences (742) (3,027)
------- -------
(3,787) (25,153)
------- -------
Net current liabilities (636) (16,013)
------- -------
Net assets 106,917 77,029
------- -------
Capital and reserves
Share capital 9 4,224 6,863
Share premium account 10 35,272 35,272
Capital redemption reserve 10 11,114 8,327
Capital reserve 10 50,432 19,648
Revenue reserve 10 5,875 6,919
------- -------
Total equity shareholders' funds 106,917 77,029
======= =======
Net asset value per ordinary share 11 144.26p 93.54p
======= =======
Cash Flow Statement
for the year ended 30 November 2009
Year ended Year ended
30 November 30 November
2009 2008
Note £'000 £'000
Net cash inflow from operating activities 4(b) 3,007 8,171
------- -------
Servicing of finance (303) (3,061)
Capital expenditure and financial
investment
Purchase of investments (91,322) (155,456)
Proceeds from sale of investments 117,587 233,127
------- -------
Net cash inflow from capital expenditure
and financial investment 26,265 77,671
------- -------
Equity dividends paid (4,447) (3,121)
------- -------
Net cash inflow before financing 24,522 79,660
------- -------
Financing
Purchase of ordinary shares - (2,683)
Distributions to tender shareholders (28,306) (42,020)
Redemption of debenture stock (30) (42,466)
------- -------
Net cash outflow from financing (28,336) (87,169)
------- -------
Decrease in cash in the year (3,814) (7,509)
======= =======
Notes to the financial statements
1. Accounting policies
The policies set out below have been applied consistently throughout the year.
Basis of preparation
The Directors, having considered the nature and liquidity of the portfolio and
the Company's investment objective, and the Company's income and expenditure,
are satisfied that the Company has adequate resources to continue in
operational existence for the foreseeable future. For this reason they continue
to adopt the going concern basis in preparing the financial statements. Ongoing
annual expenses (excluding any performance fees) are approximately 1.3% of net
assets. The Company's principal risks, risk management policies and procedures
are set out in the annual report.
The Company's financial statements have been prepared in accordance with UK
Generally Accepted Accounting Practice ("UK GAAP") and with the Statement of
Recommended Practice "Financial Statements of Investment Trust Companies"
("SORP") revised in January 2009. All of the Company's operations are of a
continuing nature.
The Company's financial statements are presented in sterling, which is the
currency of the primary economic environment in which the Company operates. All
values are rounded to the nearest thousand pounds (£'000) except where
otherwise stated.
2. Income
2009 2008
£'000 £'000
Investment income:
UK listed dividends 2,282 4,217
Overseas listed dividends 269 348
----- -----
2,551 4,565
----- -----
Other income:
Deposit interest 6 614
Underwriting commission 33 65
----- -----
39 679
----- -----
Interest on VAT refund 2,469 -
----- -----
Total 5,059 5,244
----- -----
Total income comprises:
Dividends 2,551 4,565
Interest 6 614
Other income 33 65
Interest on VAT refund 2,469 -
----- -----
5,059 5,244
----- -----
3. Investment management and performance fees
2009 2009 2009 2008 2008 2008
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Investment
management fees 210 628 838 422 1,263 1,685
Performance fees - 353 353 - 377 377
--- --- ----- ----- ----- -----
210 981 1,191 422 1,640 2,062
Write back of
prior years' VAT - - - (2,284) (3,254) (5,538)
--- --- ----- ----- ----- -----
Total 210 981 1,191 (1,862) (1,614) (3,476)
--- --- ----- ----- ----- -----
The terms of the investment management agreement with BlackRock provide for a
basic management fee, payable quarterly in arrears, of 0.7% per annum on the
gross asset value of the Company's long only portfolio plus the gross value of
the underlying equities, long and short, to which the Company is exposed to
derivatives through its CFD portfolio. In addition, BlackRock is entitled to a
performance fee of 12.5% of any net asset value (total return) outperformance
against the Hoare Govett Small Companies plus AIM (ex Investment Companies)
Index. The performance fee is subject to a high watermark such that, if in a
performance period the Company underperforms the Index, in a future
performance period a performance fee is only payable on the net asset value
return that represents the net outperformance. In addition, the performance fee
in any performance period will be capped at 4.99% of the average value of the
Company's assets.
Performance fees have been wholly allocated to the capital reserve as the
performance has been predominantly generated through capital returns of the
investment portfolio. At 30 November 2009, there is a performance fee payable
to the Investment Manager of £353,000 (2008: £377,000).
The net asset value and share price performance with income reinvested which
have been disclosed in the financial highlights in the annual report include
the subscription share reinvestment, assuming the subscription share
entitlement per share was sold and the proceeds reinvested on the first day of
trading. This reinvestment factor has been excluded from the calculation of
total return for the purposes of calculating the performance fee. In addition,
the impact of VAT recovered as a result of the JPMorgan Claverhouse case,
interest thereon, accounting adjustments relating to the management fee waiver
and the basic management fee have also been excluded from performance
calculations. After adjusting for these factors, and including the impact of
reinvestment of dividends paid in the period, the cum-income, total return NAV
used to calculate the performance fee amounted to 151.37p, generating
outperformance of 2.4% above the benchmark and a performance fee of £353,000.
BlackRock have agreed to waive the management fees payable to the Company up to
the level of transition and restructuring costs of £1,068,000. This fee waiver
benefit has been amortised over the initial period of the management contract
of 24 months. A credit of £532,000 has been applied to the capital column of
the Income Statement - see note 4 for further details.
4. Operating activities
2009 2009 2009 2008 2008 2008
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
(a) Other operating
expenses
Auditors'
remuneration:
- audit services 28 - 28 40 - 40
- other services 25 - 25 - 20 20
Registrar's fee 41 - 41 40 - 40
Directors
remuneration 106 - 106 117 - 117
Termination costs - (532) (532) - 1,379 1,379
Other administrative
costs 363 - 363 231 - 231
--- --- --- --- ----- -----
563 (532) 31 428 1,399 1,827
--- --- --- --- ----- -----
2009 2008
The Company's total expense ratio
("TER"), calculated as a
percentage of average net assets
and using expenses, excluding
interest costs, VAT written back
and management fee waiver credit,
after relief for taxation was: 1.3% 1.2%
Auditors' remuneration - other services comprised £25,000 relating to the
provision of taxation compliance services. Fees of £40,000 were also paid to
Ernst & Young LLP in respect of non audit services provided in relation to the
tender offer and bonus issue of subscription shares. These fees were charged
directly to the capital reserve.
(b) Reconciliation of net return before finance costs and taxation to net cash
flow from operating activities
2009 2008
£'000 £'000
Net gain/(loss) before finance costs and
taxation 45,183 (116,226)
(Less)/add capital (gains)/losses (40,755) 122,938
------ -------
Net return before finance costs and taxation 4,428 6,712
Decrease in accrued income 233 241
Decrease/(increase) in debtors 225 (321)
(Decrease)/increase in creditors (1,405) 1,328
Expenses charged to capital (449) (3,039)
VAT write back to capital - 3,254
Income taxation deducted at source (14) -
Overseas withholding taxation suffered (6) (4)
Scrip dividends included in investment income (5) -
------ -------
Net cash inflow from operating activities 3,007 8,171
------ -------
5. Directors emoluments
The aggregate emoluments of the Directors, excluding VAT, where applicable, for
the year ended 30 November 2009 were £106,000 (2008: £117,000). The emoluments
of the Chairman, who was also the highest paid Director were £30,000 (2008: £
30,000). The Company does not have a share option scheme or any incentive
scheme. No pension contributions were made in respect of the Directors. There
were no employees other than the Directors.
6. Finance costs
2009 2009 2009 2008 2008 2008
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Debenture interest - - - 403 1,208 1,611
Overdraft interest 2 - 2 15 - 15
Interest payable to
subsidiary
undertakings 9 - 9 380 966 1,346
-- -- -- --- ----- -----
11 - 11 798 2,174 2,972
-- -- -- --- ----- -----
Finance costs are allocated, insofar as they relate to financing the Company's
investments, 25/75 between revenue and capital to reflect the Directors'
expected long term splits of returns from the investment portfolio.
7. Dividends
Dividends paid or proposed 2009 2008
on equity shares: Record date Payment date £'000 £'000
2007 final of 1.70p 29 February 2008 27 March 2008 - 2,366
2008 interim of 0.55p 8 August 2008 12 September 2008 - 755
2008 final of 1.85p 3 April 2009 1 May 2009 1,523 -
2008 special of 3.00p 3 April 2009 1 May 2009 2,471 -
2009 interim of 0.55p 31 July 2009 27 August 2009 453 -
----- -----
4,447 3,121
----- -----
The Directors have proposed a final dividend of 2.20 pence per share and a
special dividend of 2.00 pence per share (2008: Final 1.85p, Special 3.00p).
The dividends will be paid, subject to shareholders approval on 26 March 2010,
to shareholders on the Company's register on 19 February 2010. The proposed
final dividend has not been included as a liability in these financial
statements as final dividends are only recognised in the financial statements
when they have been approved by shareholders.
The total dividends payable in respect of the year which form the basis of
section 842 of the ICTA and section 832 of the Companies Act 2006, and the
amounts proposed meet the relevant requirements as set out in this legislation.
2009 2008
£'000 £'000
Dividends paid or proposed
on equity shares:
Interim paid 0.55p (2008: 0.55p) 453 755
Final proposed of 2.20p* (2008: 1.85p) 1,631 1,523
Special dividend of 2.00p* (2008: 3.00p) 1,482 2,471
----- -----
3,566 4,749
----- -----
*based upon 74,116,108 ordinary shares.
8. Return per ordinary share
Revenue and capital returns per share are shown below and have been calculated
using the following:
2009 2008*
Net revenue return attributable to ordinary
shareholders (£'000) 3,403 4,848
Net capital return attributable to ordinary
shareholders (£'000) 41,836 (120,455)
------- -------
Total return (£'000) 45,239 (115,607)
------- -------
Equity shareholders' funds (£'000) 106,917 77,029
------- -------
The weighted average number of ordinary shares
in issue during each year, on which the return
per ordinary share was calculated, was: 80,343,189 125,966,485
The actual number of ordinary shares in issue at
the end of each year, on which the net asset
value was calculated, was: 74,116,108 82,351,197
*For 2008 comparatives, the figures noted represent amounts attributable to
continuing shareholders.
2009 2009 2009 2008 2008
Revenue Capital Total Revenue Capital 2008
p p p p p Total
Return/(loss) per share
Calculated on weighted
average number of shares 4.24 52.07 56.31 3.85 (95.63) (91.78)
----- ----- ------ ---- ----- -----
Net asset value per share 144.26 93.54
----- ----- ------ ---- ----- -----
9. Share capital
Continuing Tender Treasury Subscription Total
shares shares shares shares shares
number number number number number
(nominal) (nominal) (nominal) (nominal) (nominal) £'000
Authorised share capital
comprised:
Ordinary shares of 5p
each 460,000,000 460,000,000 23,000
----------- ---------- --------- ---------- ----------- ------
Allotted, issued and
fully paid:
Shares in issue at
30 November 2008 82,351,197 54,900,675 - - 137,251,872 6,863
Shares cancelled
following initial tender
offer - (46,700,675) - - (46,700,675) (2,335)
Shares transferred into
treasury following
initial tender offer - (8,200,000) 8,200,000 - - -
Shares tendered - August
2009 (8,235,089) 8,235,089 - - - -
Shares cancelled August
2009 tender offer - (835,089) - - (835,089) (42)
Shares transferred into
treasury following
August 2009 tender - (7,400,000) 7,400,000 - - -
Treasury shares
cancelled - - (8,200,000) - (8,200,000) (410)
Subscription shares:
Issue of subscription
shares of 1p each - - - 14,822,901 14,822,901 148
----------- ---------- --------- ---------- ----------- ------
74,116,108 - 7,400,000 14,822,901 96,339,009 4,224
----------- ---------- --------- ---------- ----------- ------
During the year no ordinary shares were purchased and cancelled (2008:
2,806,404 ordinary shares). Under the August 2009 tender offer, 8,235,089
ordinary shares were tendered and cancelled (2008: 54,900,675). The number of
ordinary shares excluding treasury shares in issue at the year end was
74,116,108 (2008: 82,351,197) and the number of subscription shares in issue
was 14,822,901.
10. Reserves
Capital
reserve
Capital arising on
reserve revaluation
Share Capital arising on of
premium redemption investments investments Revenue
account reserve sold held reserve
£'000 £'000 £'000 £'000 £'000
At 1 December 2008 35,272 8,327 83,758 (64,110) 6,919
Movement during the year:
Shares cancelled - 2,787 - - -
Revenue return for the year - - - - 3,261
Transfer to tender pool - - (10,639) - -
Change in value of tender
pool - - 1,111 - -
Issue of subscription
shares - - (148) - -
Subscription share issue
costs - - (265) - -
Redemption of debenture
stocks - - (30) - -
Losses on realisation of
investments - - (32,096) - -
Changes in investment
holding gains - - - 71,994 -
Gains on foreign currency
transactions - - 1 - -
Gains on contracts for
differences - - 129 1,176 142
Finance costs, investment
management and performance
fee charged to capital
after taxation - - (449) - -
Dividends paid during the
year - - - - (4,447)
------ ------ ------ ------ -----
At 30 November 2009 35,272 11,114 41,372 9,060 5,875
------ ------ ------ ------ -----
11. Net asset value per ordinary share
2009 2008
Net assets attributable to ordinary
shareholders (£'000) 106,917 77,029
The actual number of ordinary shares in
issue at the end of each year, on which
the net asset value per share was
calculated, was: 74,116,108 82,351,197
Net asset value per ordinary share 144.26p 93.54p
Ordinary share price 115.75p 62.75p
---------- ----------
Exiting shares
Liability attributable to tendering and
mix and match shareholders (£'000) - 17,768
Shares attributable to tendering
shareholders - 54,900,675
Shares attributable to mix and match
shareholders - 1,127,000
---------- ----------
Total shares in respect of which proceeds
are payable from the tender pool - 56,027,675
---------- ----------
Net asset value per share - 31.71p
---------- ----------
The Company had in issue at the year end 14,822,901 subscription shares which
confer the right to subscribe at set times to all or any of the ordinary shares
to which the subscription shares relate at a price of 146.00 pence per share.
To the extent that the Company's NAV is in excess of the exercise price, the
subscription shares are considered to be dilutive and a fully diluted net asset
value per share is calculated by adjusting the shareholders' funds for
consideration receivable on the exercise of all subscription shares and
dividing by the total number of shares that would have been in issue at
30 November 2009 had all the subscription shares been converted. As the Company's
NAV was below the exercise price at 30 November 2009, the subscription shares
are deemed not to be dilutive and no diluted net asset value or earnings per
share value has been calculated.
12. Publication of non statutory accounts
The financial information contained in this announcement does not constitute
statutory accounts as defined in the Companies Act 2006. The 2009 annual report
and financial statements will be filed with the Registrar of Companies after
the Annual General Meeting.
The report of the Auditor for the year ended 30 November 2009 contains no
qualification or statement under section 498(2) or (3) of the Companies Act
2006.
The comparative figures are extracts from the audited financial statements of
The Throgmorton Trust PLC and its subsidiaries for the year ended 30 November
2008, which have been filed with the Registrar of Companies. The report of the
Auditor on those accounts contained no qualification or statement under section
498 of the Companies Act.
This announcement was approved by the Board of Directors on 29 January 2010.
13. Annual Report
Copies of the annual report will be sent to members shortly and will be
available from the registered office, c/o The Company Secretary, The
Throgmorton Trust PLC, 33 King William Street, London EC4R 9AS. This report
will also be available on the BlackRock Investment Management website at
www.blackrock.co.uk/its.
14. Annual General Meeting
The Annual General Meeting of the Company will be held at 33 King William
Street, London EC4R 9AS on Friday, 12 March 2010 at 12:00 p.m.
For further information, please contact:
Jonathan Ruck Keene, Managing Director, Investment Companies, BlackRock
Investment Management (UK) Limited
Tel: 020 7743 2178
Mike Prentis, BlackRock Investment Management (UK) Limited
Tel: 020 7743 2312
Richard Plackett, BlackRock Investment Management (UK) Limited
Tel: 020 7743 4869
Emma Phillips, Media & Communication, BlackRock Investment Management (UK)
Limited
Tel: 020 7743 2922
William Clutterbuck, The Maitland Consultancy
Tel: 020 7379 5151
29 January 2010
33 King William Street
London EC4R 9AS
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