Half-yearly Report
21 July 2009
THE THROGMORTON TRUST PLC
Half yearly announcement of results in respect of the six months
ended 31 May 2009
As at As at
31 May 30 November
2009 2008 Change
(unaudited) (audited) %
Attributable to ordinary shareholders
Assets
Net assets (£'000) 94,430 77,029 22.6
Net asset value per share 114.67p 93.54p 22.6
- with income reinvested 28.8
Ordinary share price (mid-market) 98.00p 62.75p 56.2
- with income reinvested 66.5
Hoare Govett Smaller Companies
plus AIM (ex Investment Companies)
Index 29.9
Six months Six months
ended ended
31 May 31 May
2009 2008 Change
(unaudited) (unaudited) %
Revenue
Net return after taxation (£'000) 2,389 1,488 60.6
Return per share 2.90p 1.07p 171.0
Dividend per share
Interim 0.55p 0.55p -
The Chairman, Richard Bernays, comments:
Performance
I am pleased to report that during the six month period ended 31 May 2009, the
performance of smaller companies has led the rally in UK equity markets. Since
the beginning of March the Company's benchmark, the Hoare Govett Smaller
Companies plus AIM (excluding Investment Companies) Index has risen significantly
ahead of the FTSE 100. The recovery was based on improving sentiment towards smaller
companies with signs of economic stabilisation encouraging investors to purchase
recovery stocks.
The Company has performed well during this six month period and the net asset
value ("NAV") has increased by 28.8% with the share price rising 66.5%, all
percentages in sterling terms with income reinvested. However, this was behind the
benchmark index which performed very strongly over the same period and rose by 29.9%,
by comparison to the FTSE 100 Index which increased by only 3.0%.
Since the period end, the Company's NAV has increased by 2.1% compared to 1.9%
in the benchmark index.
The CFD portfolio incurred a loss of £1.8 million during the period but has
generated net gains of £478,000 since its inception to 31 May 2009. Overall the
CFD portfolio is now net long, with a bias to the high quality growth companies.
It remains a unique feature of the Company and we anticipate that it will contribute
significantly to performance in the future.
Further information on performance is included in the Investment Manager's Report.
Revenue return and dividends
Revenue return in the period amounted to 2.90 pence per share which includes the
net VAT payment referred to below. Excluding the net VAT payment the underlying
revenue return per share was 1.08 pence per share (2008: 1.07 pence per share).
The Board is pleased to declare an interim dividend of 0.55 pence per share
(2008: 0.55 pence per share) payable on 27 August 2009 to shareholders on the
register on 31 July 2009 (ex dividend date is 29 July 2009).
Tender offer and bonus subscription share issues
It was announced on 3 July 2009 that the Directors have resolved to exercise
their discretion to implement a tender offer (the "Tender Offer") as at 1
September 2009.
The Tender Offer will enable shareholders to tender their shares for cash,
subject to a maximum of 10 per cent. in aggregate of the shares in issue at the
relevant time.
Whilst the Tender Offer is open to all shareholders, the Directors have no
intention of tendering any of their own shares.
Following the move to BlackRock Investment Management (UK) Limited in July of
last year, the completion of the initial tender offer and the introduction of
the CFD portfolio, the Board believes that the Company is an attractive
investment opportunity and it is the Board's intention to focus on increasing
the size of the Company. In addition to the Tender Offer, the Board is
considering proposals for a bonus issue of subscription shares to shareholders
on the register after the Tender Offer.
The Board believes that subscription shares represent an opportunity for
investors to participate in any future net asset growth of the Company through
subscribing for shares, as well as having the potential to increase the size of
the Company.
A circular containing details of the Tender Offer and the procedure for tendering
shares will be sent to shareholders with this report.
VAT
Following the repayment of VAT in the sum of £5.5 million in November 2008, a
further amount of £2,469,000 has been received from HMRC in respect of simple
interest on the overpayment, all of which has been allocated to income. A
portion of this, £967,000 was attributable to tender shareholders and was factored
into the final tender distribution.
There remains a possibility that additional amounts may be recovered but there
is insufficient certainty relating to the outcomes to accrue further amounts at
this time.
Director
Simon Stevens retired as a Director of your Company following the Annual General
Meeting held on 19 March 2009 and we are particularly grateful to him for his
contribution to the Company. Simon had been a Director since 1999 and his
experience was invaluable to his fellow Directors. The Board will keep under
review the need for any changes to its size and composition.
Auditors
I am pleased to report that Ernst & Young LLP has been appointed as the
Company's independent auditor following the resignation of Deloitte LLP. A copy
of the statement of circumstances relating to the resignation of Deloitte LLP
is included with this report in accordance with the requirements of the Companies
Act 2006. The appointment of Ernst & Young LLP is the result of a recent beauty
parade and subsequent evaluation, at which a number of audit firms were considered.
Corporate Broker
Following the announcement that UBS would be withdrawing from the UK and
European Listed Investment Funds business, the Board made temporary
arrangements in respect of the provision of broking services. With effect from
29 May 2009, Oriel Securities Limited was appointed as the Company's sole
broker. A number of the personnel previously employed by UBS have joined the
Investment Funds team at Oriel Securities Limited and the Board is pleased to
continue the association with this team.
Prospects
During the six month period the Company's benchmark index has risen sharply.
Markets will continue to be volatile as economies move out of global recession.
It seems unlikely that any falls will test in the lows experienced in March 2009.
Lower quality recovery stocks have performed particularly strongly since March
with market sentiment shifting towards sectors such as travel and general
retailers which had previously been some of the worst performers. Our portfolio
positioning remains defensive, but we have added a little more risk to the portfolio
with the purchases of early cyclical recovery stocks. We are confident that this
strategy, enhanced by the opportunities provided by the CFD portfolio, will reward
shareholders well in the coming years.
Interim Management Report and Responsibility Statement
The Chairman's statement and the Investment Managers' Report give details of
important events which have occurred during the period and their impact on the
financial statements.
Principal risks and uncertainties
The principal risks faced by the Company can be divided into various areas as
follows:
- Performance;
- Income/dividend;
- Regulatory;
- Operational; and
- Financial.
The Board reported on the principal risks and uncertainties faced by the
Company in the Annual Report and Financial Statements for the year ended 30
November 2008. A detailed explanation can be found on page 16 of the Annual
Report and Financial Statements which is available on the website maintained by
the Investment Manager, BlackRock Investment Management (UK) Limited, at
www.blackrock.co.uk/its.
In the view of the Board, there have not been any changes to the fundamental
nature of these risks since the previous report and these principal risks and
uncertainties are equally applicable to the remaining six months of the
financial year as they were to the six months under review.
The Company may utilise both exchange traded and over-the-counter derivatives,
including but not limited to CFDs, as part of its investment policy. These
instruments can be highly volatile and potentially expose investors to a high
risk of loss. Further details of the risk factors associated with the use of
such derivatives can be found on page 56 of the Annual Report and Financial
Statements.
Related party transactions
The Investment Manager is regarded as a related party and details of the
management fees payable are set out in note 4.
Directors' responsibility statement
The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority
require the Directors to confirm their responsibilities in relation to the
preparation and publication of the Interim Management Report and Financial
Statements.
The Directors confirm to the best of their knowledge and belief that:
- the condensed set of financial statements contained within the half yearly
financial report has been prepared in accordance with the Accounting Standards
Board's Statement `Half Yearly Financial Reports; and
- the interim management report, together with the Chairman's Statement and
Investment Manager's Report, include a fair review of the information required
by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules.
The half yearly financial report has not been audited or reviewed by the
Company's Auditors.
The half yearly financial report was approved by the Board on 21 July 2009 and
the above Responsibility Statement was signed on its behalf by the Chairman.
Commenting upon the outlook for the Company, Mike Prentis and Richard Plackett
of BlackRock Investment Management (UK) Limited, the Investment Manager, note:
Market review and overall investment performance
Markets have rallied sharply on hopes that the global recession may be over the
worst. This is based on a number of early indicators of recovery, especially
the Chinese Purchasing Managers' Index and the latest GDP growth figures. In the
US there have been some signs that the economy is deteriorating less fast, but the
data is not showing clear trends. For instance, the May non-farm payroll
data showed a much lower level of job losses than in previous months, but the
June data showed a higher number of job losses. Some recent large company news
flow, for instance from Intel has been encouraging. In the UK, consumer confidence
measures have been surprisingly positive despite rising unemployment, and there
have been some tentative signs of improvement in the housing market.
Governments and central banks have continued to take steps to help stimulate
activity, through a combination of further cuts in interest rates, most
recently by the European Central Bank, quantitative easing, by the UK Monetary
Policy Committee and US Federal Reserve, and further steps to strengthen the
banks and encourage them to lend.
In the UK, many of the stocks that fell most sharply in 2008, heavily leveraged
housebuilders, pub companies, retailers and junior miners have seen their share
prices rallying sharply. Initially, this was probably driven by a belief that
the global economy was close to bottoming, and that UK consumers were more
prepared to spend than had been expected. The banks also appear to be taking a
pragmatic approach to highly indebted customers, seeking to avoid failures,
possibly due to behind the scenes Government pressure, whilst extracting tough
terms on refinancing through large fees and significantly higher margins.
Investors have repeatedly been prepared to support heavily discounted, dilutive
rights issues and almost all companies which have had such rights issues have
then seen their shares rise sharply better, Wolseley, Inchcape, Cookson and
Segro being a few examples. Hedge funds started to close the large short
positions in such heavily leveraged companies, often after rights issues in
which they could not participate, but which clearly left the company they had
shorted in a much stronger position.
Our positioning has been defensive, with the portfolio heavily weighted towards
our core holdings of well financed, high quality companies which had
outperformed as stockmarkets fell in 2008. Over the last several months the
share prices of many of these have remained largely unmoved, or have even
fallen, as money has been taken out of these stocks and invested in riskier,
leveraged recovery stocks. We have adopted a pragmatic approach, and have
sought to identify the best recovery stocks, generally preferring those with
market leadership and clear product differentiation. We have sold holdings
where our conviction has reduced, and in some cases have taken some profits by
reducing the size of several of our core holdings.
The Company's net asset value per share increased by 28.8% during the six month
period, but this was behind our benchmark index which rose by 29.9%. By
contrast the FTSE 100 Index increased by only 3.0%. Our benchmark index
performed very strongly. It is reviewed and updated only once a year, on 1
January. This year many of the stocks which had fallen so sharply in 2008 were
included in our benchmark. RBS, who now manage the Hoare Govett data series,
comment on the HGSC index as follows in their early May review of the first
four months of the calendar year:
"The strong ytd performance of the HGSC can in no small part be attributed to
the performance of the fallen angels - those stocks that had previously been
too large to enter the HGSC index, but fell into the index at start-2009 given
their poor performance during 2008."
Long only portfolio performance
The long only portfolio performed well in absolute terms increasing in value by
28.2%, but the portfolio struggled to keep up with the benchmark index. Our
performance in the technology area was good with our software stocks on average
gaining 43%, led by holdings in Fidessa and SDL. Fidessa shares powered ahead
as trading has remained stronger than anticipated by the market; at a recent
product demonstration management were clearly very assured. SDL also continues
to trade well as demand for language translation remains at a high level. Our
hardware stocks also performed well, on average rising 116%, led by Pace and
Dmatek. Pace has seen very strong growth in demand for its digital set top
boxes and earnings forecasts have increased by more than 70%. Dmatek was
subject to an agreed bid. We had good gains on our mining shares, with holdings
in Frontier Mining and Cambrian Mining both more than doubling following
strengthening of their financial positions.
A number of factors detracted from relative performance. Firstly, part was due
to holding more than £4 million of cash during a period when markets rose
sharply. This had to be retained to pay the final and special dividend of £4
million due in early May 2009, much of this relates to the VAT refund. This
cost us just over 1% in relative performance terms. Secondly, several holdings
released disappointing trading updates. Endace saw delays to contracts with
investment banking customers, which unsurprisingly took more time to commit to
spending; we have met with management since and trading is improving and strong
with Government customers. Umeco shares were weak ahead of renegotiating
banking facilities; this has now been done and the shares have begun to
recover. Intercytex announced one of its key drugs, Cyzact, used for the
treatment of venous leg ulcers, had failed to meet its primary endpoint. London
Capital experienced less volatile trading conditions, which led to a lower
level of profits in its spread betting activities than it had expected.
We have reduced the size of our holding in Umeco and sold the holding in
Intercytex. Thirdly, a selection of our core holdings underperformed the market;
these included our holdings in Connaught, Alternative Networks, Babcock
International, Ultra Electronics and Chemring. Alternative Networks saw a
slowdown in spending on mobile communications as corporate executives travelled
less. The other stocks were affected to an extent by worries about future
Government spending, and share prices were largely flat over the period.
Subsequent to the period end we have sold holdings in Chemring and Babcock,
reflecting our expectation that defence spending will be cut before long.
Lastly, we suffered from not owning certain benchmark stocks that performed
very strongly notably Debenhams and Ferrexpo, each of which more than tripled.
Almost all of the long portfolio's underperformance was due to sector
allocation. Our overweight position in aerospace and defence stocks and our
underweight positions in the highly cyclical sectors, retailers, travel &
leisure, and miners, accounted for this relative underperformance.
Activity
Our principal aim over the last six months has been to introduce a greater
element of high beta, early cyclical holdings into our portfolio whilst
retaining our exposure to the high quality core holdings which continue, in the
main, to trade well through the recession. We have sold holdings where we feel
trading or financial risks have not been adequately priced in shares. We have
trimmed certain other holdings where immediate outperformance looks unlikely.
The proceeds have been deployed into recovery stocks, with the focus being
well-known, liquid stocks with strong market positions; in each case we have
invested 0.5% to 0.75% of the portfolio. Recent purchases include retailers HMV
Group, London West End office developer Great Portland Estates, steel supplies
business Cookson and pub company Greene King.
Long only portfolio positioning
Despite recent purchases of more volatile recovery stocks, our portfolio beta
remains quite low, only 0.93, and so we remain vulnerable to a sharply rallying
market.
We are still defensively positioned, albeit less so than six months ago. Our
main overweight sectors remain software (Fidessa, Aveva, SDL), and wealth managers
(Rathbones, Brewin Dolphin and Rensburg Sheppards). Our main underweight sectors
are support services where we are nervous about UK corporate and UK Government
spending on all discretionary areas, travel and leisure, and food producers. In
general, we prefer companies that are exposed to international markets especially
those that are likely to remain relatively strong, such as the Far East. In the
short term we see the UK consumer facing companies as being potentially lower risk
than those companies exposed to UK corporate or public spending which is likely
to be cut.
The proportion of the portfolio held in AIM stocks has been much reduced over
the last year and now stands at 28.7%. The proportion of the portfolio in loss
making stocks is approximately 4.5%.
Gearing
Following the repayment of the debentures in August, the Company has no
financial gearing. However, the Company is exposed to the market through the
CFD portfolio, the aggregate long and short positions of which amount to
approximately 30% of net asset value. The exposure of the Company to the
markets on a net basis, the aggregate of the long portfolio, and long CFD
portfolio less the short CFD portfolio, is currently 9.6% of net asset value.
The CFD portfolio
Shareholders approved the proposal to put in place a CFD portfolio last
September, and it was subsequently formed. It comprises approximately 50
positions. The long positions are mainly in our preferred core holdings,
companies such as Ultra Electronics and Rotork. The short positions are in
companies which in some way we see as flawed. Their qualities are in many ways
the opposite of the qualities we insist on in our core holdings. For example, in
some cases we see management as too optimistic, the companies as being
essentially commoditised without pricing power, the balance sheets weak and
over leveraged, the financial record being poor or erratic. In several cases
our short positions have already proved highly profitable. However, with
increasing appetite for risk, some of these lower quality shares have performed
quite strongly since March, and so we have closed many of our short positions,
especially those in retailers and pub companies. A significant part of the gains
achieved between September and November last year have been reversed during March
and April 2009. The CFD portfolio incurred a loss of £1.8 million during the
period but has generated net gains of £478,000 since its inception to 31 May 2009.
Overall the CFD portfolio is now net long, with a bias to the high quality growth
companies.
Outlook
Markets remain unpredictable and volatile. After the recent strong run, we have
seen a modest setback since mid June. It seems likely that the setback will not
be so substantial as to test the lows of early March; this is because leading
indicators do seem to be pointing to better times ahead for the world economy.
Recent meetings with UK investors also suggested that there remains quite a bit
of money on the sidelines waiting to be invested, which should limit the extent
of a setback.
Our plan is to continue the process of the last few months, adding beta and
recovery stocks with potentially very attractive upside, whilst maintaining
faith in our core holdings but trimming the size of some of these. We may also
revisit the microcap space where many valuations are very low and where
investor appetite is rekindling.
Company Market % of total Business activity
value £'000 portfolio
Fidessa 2,733 2.8 Development and marketing of
financial trading and connectivity
software
Rathbone Brothers 2,133 2.2 Private client fund management
Rensburg Sheppards 2,089 2.2 Private client fund management
Brewin Dolphin 2,006 2.1 Fund management and stock broking
Holdings
Aveva Group 1,927 2.0 Development and marketing of
engineering computer software
Domino Printing 1,889 1.9 Manufacture of inkjet and laser
Sciences commercial printers
Dechra Pharmaceuticals 1,868 1.9 Development, manufacture and
supply of veterinary products
Pace 1,839 1.9 Design and sale of digital set top
boxes
Emerald Energy 1,786 1.9 Exploration and production of oil
and gas
Chemring Group 1,611 1.7 Manufacture and supply of defence
decoy countermeasures and
energetic materials
Victrex 1,502 1.6 Manufacture and supply of PEEK
thermoplastic products
City of London 1,491 1.5 Management of investment funds
Investment Group* primarily invested in emerging
markets
Endace* 1,426 1.5 Provision of telecoms networks
security solutions
Abcam* 1,420 1.5 Production and distribution of
research grade anti-bodies and
associated products
SDL 1,356 1.4 Supply of multilingual translation
software and translation services
Ultra Electronic 1,306 1.3 Design and supply of electronic
Holdings products to the aerospace and
defence sector
BATM Advanced 1,281 1.3 Development and production of data
Communications and telecommunication products
Rotork 1,262 1.3 Engineering, manufacturing and
design of valve actuators
Connaught 1,253 1.3 Services to improve the quality of
social housing
Kier Group 1,234 1.3 House building, construction and
project management
------ -----
20 largest investments 33,412 34.6
------ -----
Remaining investments 61,859 64.2
CFD Portfolio (951) (1.0)
Investment in
subsidiary entities 2,096 2.2
------ -----
Total investments 96,416 100.0
------ -----
* Traded on the Alternative Investment Market of the London Stock Exchange
Distribution of Investments
as at 31 May 2009
Sector %of total portfolio
Oil & Gas Producers 7.9
Oil Equipment, Services & Distribution 1.3
-----
Oil & Gas 9.2
-----
Mining 6.0
Chemicals 3.0
Industrial Metals 1.0
-----
Basic Materials 10.0
-----
Support Services 8.9
Aerospace & Defence 5.6
Industrial Engineering 4.5
Electronic & Electrical Equipment 3.6
Construction & Materials 2.4
General Industrials 0.8
Automobiles & Parts 0.2
-----
Industrials 26.0
-----
Household Goods 2.0
Beverages 1.5
Personal Goods 0.8
-----
Consumer Goods 4.3
-----
Pharmaceuticals & Biotechnology 2.6
Health Care Equipment & Services 2.3
-----
Health Care 4.9
-----
Travel & Leisure 3.7
Media 3.7
General Retailers 3.4
-----
Consumer Services 10.8
-----
Fixed Line Telecommunications 0.5
Mobile Telecommunications 0.4
-----
Telecommunications 0.9
-----
Electricity 0.2
-----
Utilities 0.2
-----
General Financial 11.4
Real Estate 3.9
Non-life Insurance 2.1
-----
Financials 17.4
-----
Software & Computer Services 13.0
Technology Hardware & Equipment 3.3
-----
Technology 16.3
-----
Total 100.0
-----
Analysis of the UK listed and AIM traded portfolio as at 31 May 2009
FTSE 250 51.5%
AIM 29.3%
FTSE Small Cap 17.2%
FTSE Fledging 1.8%
Other 0.2%
Investment Size as at 31 May 2009
< £1 m £1m to £2m > £2 m Grand Total
Number of Investments 90 35 19 144
% of portfolio 34.0 32.3 33.7 100.0
Market capitalisation as at 31 May 2009
> £1 bn £400 m to £1 bn £100 m to £400 m < £100 m TOTAL
% of portfolio 8.2 27.5 40.5 23.8 100.0
Distribution of contracts for difference portfolio
Sector Long Short Net Gross
exposure* exposure* exposure* exposure*
% % % %
Basic materials 5.3 - 5.3 5.3
Consumer goods 5.3 -6.6 -1.3 11.9
Consumer services 7.1 -1.6 5.5 8.7
Financials 4.3 -0.8 3.5 5.1
Health care - -1.3 -1.3 1.3
Industrials 27.6 -18.2 9.4 45.8
Oil & gas 4.5 - 4.5 4.5
Technology 14.6 -2.8 11.8 17.4
---- ---- ---- -----
Total 68.7 -31.3 37.4 100.0
---- ---- ---- -----
Positions 26 22 - 48
---- ---- ---- -----
*% of CFD portfolio
INCOME STATEMENT
Six Six Six Six Six Six
months months Year months months Year months months Year
ended ended ended ended ended ended ended ended ended
31.05.09 31.05.08 30.11.08 31.05.09 31.05.08 30.11.08 31.05.09 31.05.08 30.11.08
revenue revenue revenue capital capital capital total total total
(unaudited)(unaudited)(audited)(unaudited)(unaudited)(audited)(unaudited)(unaudited) (audited)
Notes £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains/
(losses) on
investments
held at
fair value
through
profit or
loss - - - 19,800 (25,336) (125,374) 19,800 (25,336) (125,374)
Income from
investments
held at
fair value
through
profit or
loss 3 1,190 2,079 4,565 - - - 1,190 2,079 4,565
Net return
on
contracts
for
differences 68 - 34 (1,845) - 2,221 (1,777) - 2,255
Interest on
write back
of prior
years' VAT 3 2,469 - - - - - 2,469 - -
Other
income 3 23 382 679 - - - 23 382 679
Investment
management
and
performance
fees 4 (95) (202) (422) (286) (714) (1,640) (381) (916) (2,062)
Write back
of prior
years' VAT 4 - - 2,284 - - 3,254 - - 5,538
Operating
expenses 5 (258) (257) (428) 262 - (1,399) 4 (257) (1,827)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net return
before
finance
costs and
taxation 3,397 2,002 6,712 17,931 (26,050) (122,938) 21,328 (24,048) (116,226)
Costs/
premium on
early
redemption
of
debenture
stocks - - - (30) - (10,297) (30) - (10,297)
Finance
costs (2) (513) (798) - (1,429) (2,174) (2) (1,942) (2,972)
Change in
tender
offer
provision (1,006) - (1,062) 1,105 - 14,954 99 - 13,892
-------- -------- -------- -------- -------- -------- -------- -------- --------
Return on
ordinary
activities
before
taxation 2,389 1,489 4,852 19,006 (27,479) (120,455) 21,395 (25,990) (115,603)
Tax on
ordinary
activities - (1) (4) - - - - (1) (4)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Return on
ordinary
activities
after
taxation 8 2,389 1,488 4,848 19,006 (27,479) (120,455) 21,395 (25,991) (115,607)
-------- -------- -------- -------- -------- -------- -------- -------- --------
Return per
ordinary
share: 8 2.90p 1.07p 3.85p 23.08p (19.85p) (95.63p) 25.98p (18.78p) (91.78p)
-------- -------- -------- -------- -------- -------- -------- -------- --------
The total column of this statement represents the Income Statement of the
Company. The supplementary revenue and capital 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. All items
in the above statement derive from continuing operations. No operations were
acquired or discontinued during the period.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Share Capital
Share premium redemption Capital Revenue
capital account reserve reserve reserve Total
£'000 £'000 £'000 £'000 £'000 £'000
For the six months ended 31 May 2009 (unaudited)
At 30 November 2008 6,863 35,272 8,327 19,648 6,919 77,029
Return for the
period - - - 19,006 2,389 21,395
Tender offer shares
cancelled (2,335) - 2,335 - - -
Dividends paid* - - - - (3,994) (3,994)
----- ------ ------ ------ ----- ------
At 31 May 2009 4,528 35,272 10,662 38,654 5,314 94,430
----- ------ ------ ------ ----- ------
For the six months ended 31 May 2008 (unaudited)
At 30 November 2007 7,003 35,272 8,187 216,860 5,192 272,514
(Loss)/return for - - - (27,479) 1,488 (25,991)
the period
Shares purchased and (140) - 140 (3,771) - (3,771)
cancelled
Dividends paid** - - - - (2,367) (2,367)
----- ------ ----- ------ ----- ------
At 31 May 2008 6,863 35,272 8,327 185,610 4,313 240,385
----- ------ ----- ------ ----- ------
For the year ended 30 November 2008 (audited)
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 purchased and (140) - 140 (3,771) - (3,771)
cancelled
Proceeds from shares
sold through mix and
match facility - - - 1,453 - 1,453
Dividends paid*** - - - - (3,121) (3,121)
----- ------ ----- ------ ----- ------
At 30 November 2008 6,863 35,272 8,327 19,648 6,919 77,029
----- ------ ----- ------ ----- ------
* Final dividend of 1.85p per share and special dividend of 3.00p per share for
the year end 30 November 2008, declared on 1 April 2009 and paid on 1 May 2009.
** Final dividend of 1.70p per share for the year end 30 November 2007,
declared on 12 February 2008 and paid on 27 March 2008.
*** Final dividend of 1.70p per share for the year end 30 November 2007,
declared on 12 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 16 July 2008
and paid on 12 September 2008.
BALANCE SHEET
as at 31 May 2009
31 31 30
May May November
2009 2008 2008
(unaudited) (unaudited) (audited)
Note £'000 £'000 £'000
Non current assets
Investments held at fair value
through profit or loss 96,416 249,001 93,042
------- ------- ------
Current assets
Debtors 3,008 2,382 1,457
Contracts for differences - - 3,893
Cash 282 24,077 3,790
------- ------- ------
3,290 26,459 9,140
------- ------- ------
Creditors - amounts falling due
within one year
Other creditors (4,325) (2,906) (22,126)
Amounts due in respect of
contracts for differences (951) - (3,027)
------- ------- ------
(5,276) (2,906) (25,153)
------- ------- ------
Net current (liabilities)/assets (1,986) 23,553 (16,013)
------- ------- ------
Total assets less current
liabilities 94,430 272,554 77,029
Provision for liabilities and
charges - (32,169) -
------- ------- ------
Net assets 94,430 240,385 77,029
======= ======= ======
Capital and reserves
Share capital 4,528 6,863 6,863
Share premium account 35,272 35,272 35,272
Capital redemption reserve 10,662 8,327 8,327
Capital reserves 38,654 185,610 19,648
Revenue reserve 5,314 4,313 6,919
------- ------- ------
Total equity shareholders' funds 94,430 240,385 77,029
======= ======= ======
Net asset value per ordinary
share 8 114.67p 175.14p 93.54p
======= ======= ======
SUMMARISED CASH FLOW STATEMENT
for the six months ended 31 May 2009
Six months Six months Year
ended ended ended
31 31 30
May May November
2009 2008 2008
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Net cash inflow from operating
activities 2,259 1,564 8,171
Returns on investment and servicing
of finance (2) (1,905) (3,061)
------- ------ -------
Capital expenditure and financial
investment
Purchase of investments (44,184) (23,185) (155,456)
Proceeds from sale of investments 60,210 42,801 233,127
------- ------ -------
Net cash inflow from capital
expenditure and financial investment 16,026 19,616 77,671
------- ------ -------
Equity dividends paid (3,994) (2,367) (3,121)
------- ------ -------
Net cash inflow before financing 14,289 16,908 79,660
------- ------ -------
Financing
Repurchase of ordinary shares - (4,135) (2,683)
Distributions to tender shareholders (17,768) - (42,020)
Debenture stock redemption costs (30) - (42,466)
------- ------ -------
Net cash outflow from financing (17,798) (4,135) (87,169)
------- ------ -------
(Decrease)/increase in cash (3,509) 12,773 (7,509)
======= ====== =======
RECONCILIATION OF NET RETURN BEFORE FINANCE COSTS AND TAXATION TO NET CASH FLOW
FROM OPERATING ACTIVITIES
Six months Six months Year
ended ended ended
31 31 30
May May November
2009 2008 2008
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Net gain/(loss) before finance costs
and taxation 21,328 (24,048) (116,226)
(Gains)/losses on investments held at
fair value (17,931) 26,050 122,938
Decrease in accrued income 99 - 241
(Increase)/decrease in debtors (262) 277 (321)
(Decrease)/increase in creditors (932) - 1,328
Expenses charged to capital (24) (714) (3,039)
VAT write back to capital - - 3,254
Scrip dividends included in
investment income (5) - -
Overseas taxation suffered (14) (1) (4)
------ ------ ------
Net cash inflow from operating
activities 2,259 1,564 8,171
====== ====== ======
Notes to the financial statements
1. Principal activity
The principal activity of the Company is that of an investment trust company
within the meaning of section 842 of the Income and Corporation Taxes Act 1988.
2. Basis of preparation
The half yearly financial statements have been prepared on the basis of the
accounting policies set out in the Company's report and and financial
statements for the year ended 30 November 2008.
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" dated January 2005 and revised in December 2005 and January 2009).
3. Income
Six months Six months Year
ended ended ended
31 31 30
May May November
2009 2009 2008
(unaudited) (unaudited) (audited)
£'000 £'000 £'000
Investment income:
UK dividends 997 2,040 4,217
Overseas dividends 193 39 348
----- ----- -----
1,190 2,079 4,565
----- ----- -----
Other income:
Deposit interest 11 326 614
Interest on write back of prior
years' VAT 2,469 - -
Underwriting commission 7 - 65
Sundry income 5 56 -
----- ----- -----
2,492 382 679
----- ----- -----
Total 3,682 2,461 5,244
----- ----- -----
4. Investment management and performance fees
Six months Six months Six months Six months Six months Six months Year Year Year
ended ended ended ended ended ended ended ended ended
31 31 31 31 31 31 30 30 30
May May May May May May November November November
2009 2009 2009 2008 2008 2008 2008 2008 2008
revenue capital total revenue capial total revenue capital total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
(unaudited) (unaudited)(unaudited) (unaudited) (unaudited) (unaudited) (audited) (audited) (audited)
Investment
management fees
- AXA - - - 256 768 1,024 294 883 1,177
- BlackRock 95 286 381 - - - 128 380 508
Performance fees - - - - - - - 377 377
VAT written back - - - (54) (54) (108) (2,284) (3,254) (5,538)
--- --- --- --- --- ----- ----- ----- -----
Total 95 286 381 202 714 916 (1,862) (1,614) (3,476)
--- --- --- --- --- ----- ----- ----- -----
The investment management fee is levied quarterly, based on the value of the
market capitalisation of the Company on the last day of each month. The
investment management fee is allocated 75% to the capital reserves and 25% to
the revenue reserve. No performance fee was accrued for the six months ended 31
May 2009 (six months ended 31 May 2008: nil; year ended 30 November 2008: £
377,000). The performance fee accrued for the year ended 30 November 2008 was
calculated based on the outperformance of the Company's net asset value
relative to the HGSC + AIM (excluding Investment Companies) Index (total
return). The performance fee for the year ended 30 November 2008 was allocated
100% to the capital reserves, as performance was predominantly generated
through capital returns of the investment portfolio.
5. Operating expenses
Six months Six months Year
ended ended ended
31 May 31 May 30 November
2009 2008 2008
(unaudited) (unaudited) (audited)
Auditors' remuneration 16 11 40
Registrar's fee 19 16 40
Directors' remuneration 55 64 117
Other administration costs 168 166 231
--- --- ---
258 257 428
--- --- ---
6. Movement in tender offer provision
The debit of £1,006,000 to the revenue account in relation to the tender offer
provision reflects an increase in the value of the tender portfolio attributable
to revenue items for the period from 30 November 2008 to the date of the final
tender payment. The majority of the increase relates to interest received from
HMRC in respect of VAT on management fees overpaid in prior periods. Of the
total interest of £2,469,000, approximately 40% (£967,000) was attributable to
tender shareholders and was factored into the value of the final tender
distribution. The balance of the increase relates to income arising in the tender
portfolio for the period since the year end, mainly bank interest and interest
income from the BlackRock Institutional Cash fund. Offsetting the increase in
revenue attributable to tendering shareholders, there was a decrease of £1,105,000
in the value of capital items, mainly due to a decrease in value of tender portfolio
investments between the year end and the date of the final tender payment. The
overall change in value attributable to tendering shareholders amounted to a small
decrease of £99,000.
7. Dividend
The Board has declared an interim dividend of 0.55p per share (2008: 0.55p)
payable on 27 August 2009 to shareholders on the register at close of business
on 31 July 2009.
8. Return and net asset value per ordinary share
Six months Six months Year
ended ended ended
31 May 31 May 30 November
2009 2008 2008
(unaudited) (unaudited) (audited)
Net revenue return attributable to
ordinary shareholders (£'000) 2,389 1,488 4,848
Net capital return attributable to
ordinary shareholders (£'000) 19,006 (27,479) (120,455)
------ ------- -------
Net total return (£'000) 21,395 (25,991) (115,607)
------ ------- -------
Equity shareholders' funds (£'000) 94,430 240,385 77,029
------ ------- -------
Continuing Shares
The weighted average number of
ordinary shares in issue during the
period, on which the return per
ordinary share was calculated, was: 82,351,197 138,443,057 125,966,485
The actual number of ordinary shares
in issue at the end of each period,
on which the net asset value was
calculated, was: 82,351,197 137,251,872 82,351,197
---------- --------- ---------
Net asset value per share 114.67p 175.14p 93.54p
---------- --------- ---------
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
---------- --------- ---------
Return per share
Calculated on weighted average shares:
Revenue return 2.90p 1.07p 3.85p
Capital return 23.08p (19.85p) (95.63p)
====== ====== ======
Total 25.98p (18.78p) (91.78p)
====== ====== ======
9. Ordinary share capital and shares held in treasury
Number of Number of Number of Total Nominal
continuing Tender treasury value
shares in shares shares in £'000
issue issue
Authorised share
capital
comprised:
Ordinary shares
of 5p each 460,000,000 - - 460,000,000 23,000
----------- ---------- --------- ----------- ------
At 30 November
2008 82,351,197 54,900,675 - 137,251,872 6,863
Shares cancelled
pursuant to
tender offer - (46,700,675) - (46,700,675) (2,335)
Shares
transferred into
treasury
pursuant to
tender offer on
27 March 2009 - (8,200,000) 8,200,000 - -
----------- ---------- --------- ----------- ------
At 31 May 2009 82,351,197 - 8,200,000 90,551,197 4,528
----------- ---------- --------- ----------- ------
10. Publication of non statutory accounts
The financial information contained in this half yearly financial report does
not constitute statutory accounts as defined in section 435 of the Companies
Act 2006. The financial information for the six months ended 31 May 2009 and 31
May 2008 has not been audited.
The information for the year ended 30 November 2008 has been extracted from the
latest published audited financial statements, which have been filed with the
Registrar of Companies. The report of the auditors on those financial statements
contained no qualification or statement under sections 498(2) or (3) of the
Companies Act 2006.
11. Results
The Board expects to announce the annual results for the year ended 30 November
2009, as prepared under UK Generally Accepted Accounting Practice in mid
January 2010. Copies of the preliminary announcement can be obtained from the
Secretary on 020 7743 3000. The annual report should be available at the
beginning of February 2010, with the Annual General Meeting being held in March
2010.
Copies of the half yearly financial report will be posted to shareholders
by 27 July 2009. Copies will also be available to the public from the Company's
registered office at 33 King William Street, London EC4R 9AS, and on BlackRock
Investment Management's website at www.blackrock.co.uk/its.
21 July 2009
33 King William Street
London EC4R 9AS
For further information please contact:
Jonathan Ruck Keene, Managing - 020 7743 2178
Director Investment Companies
Mike Prentis, Fund Manager - 020 7743 2312
Emma Phillips, Media & Communications - 020 7743 2922
BlackRock Investment Management (UK) Limited
Or
William Clutterbuck
The Maitland Consultancy - 020 7379 5151