Half-yearly Report
Blue Planet Financials Growth & Income Investment Trusts No 1-10 Plc
Half Yearly Report and Accounts
For the six months ended 30 September 2010
Blue Planet
Financials Growth and Income Investment Trusts plc
Blue Planet Financials Growth and Income Investment Trust No 1 plc
(Registered Number 162796)
Blue Planet Financials Growth and Income Investment Trust No 2 plc
(Registered Number 162797)
Blue Planet Financials Growth and Income Investment Trust No 3 plc
(Registered Number 162798)
Blue Planet Financials Growth and Income Investment Trust No 4 plc
(Registered Number 162799)
Blue Planet Financials Growth and Income Investment Trust No 5 plc
(Registered Number 162800)
Blue Planet Financials Growth and Income Investment Trust No 6 plc
(Registered Number 162801)
Blue Planet Financials Growth and Income Investment Trust No 7 plc
(Registered Number 162802)
Blue Planet Financials Growth and Income Investment Trust No 8 plc
(Registered Number 162803)
Blue Planet Financials Growth and Income Investment Trust No 9 plc
(Registered Number 162804)
Blue Planet Financials Growth and Income Investment Trust No 10 plc
(Registered Number 162805)
Each of the investment trusts is a separate limited company, but otherwise they
are to all intents and purposes identical. The information contained in this
Half Yearly Report and Accounts, including the financial statements, applies
equally to each of the ten Blue Planet Financials Growth and Income Investment
Trusts (the "Trusts"), and reference to the "Company" shall be deemed to be a
reference to each of them.
Trading in the shares of the Trusts
The Trusts' shares can be traded in share units on the London Stock Exchange,
under code "BPFU". Each unit comprises 10 shares, 1 in each of the 10 trusts.
It is generally cheaper for investors to trade in the units rather than the
underlying shares.
Officers and Advisors
Directors Investment Manager
Victoria W Killay (Non-Executive Blue Planet Investment Management Ltd
Chairman)
Glenn Cooper (Non-Executive) 18A Locker Street
Kenneth Murray (Non-Executive) - Sliema
Resigned on
7th September 2010 Malta SLM 3124
Dean Bucknell (Non-Executive) - Telephone No: +356 2131 5219
Appointed on
7th September 2010 Facsimile No: + 356 2131 5219
Local call rate from UK: 0845 527
7588
e-mail: info@blueplanet.eu
www.blueplanet.eu
Administrator, Secretary and Registrars
Registered Office
Blue Planet Investment Advisers Ltd Capita Registrars
Greenside House Northern House
25 Greenside Place Woodsome Park
Edinburgh EH1 3AA Fenay Bridge
Telephone No: +44 131 466 6666 Huddersfield HD8 0GA
Facsimile No: + 44 131 466 6677 Shareholder Helpline No: 0871 664
0300 (calls cost 10p per minute plus
e-mail: info@bpia.eu network extras, lines are open 8:30am
- 5:30pm Mon - Fri)
www.bpia.eu
From overseas: +44 208 639 3399
e-mail: ssd@capitaregistrars.com
www.capitaregistrars.com
Auditors Bankers
Deloitte LLP Lloyds TSB Bank Plc
Saltire Court 1st Floor
20 Castle Terrace 48 Chiswell Street
Edinburgh EH1 2DB London EC1Y 4XX
Stockbroker Custodians
Fairfax Plc RBC Dexia Investor Services Trust
46 Berkeley Square, Mayfair 71 Queen Victoria Street
London WIJ 5AT London EC4V 4DE
Blue Planet Investment Management Ltd is authorised and regulated by the
Malta Financial Services Authority.
Blue Planet Investment Advisers Ltd is authorised and regulated by the
Financial Services Authority
Blue Planet Financials Growth and Income Investment Trusts No.1-10 plc are
members of the Association of Investment Companies.
Investment Policy and Objectives
The investment policy of the Company is to invest in securities (as defined by
the Financial Services & Markets Act 2000) including equities and debt issued
by quoted financial companies located anywhere in the world with the objective
of providing investors with a high rate of total return. Not more than 15% of
the Company's portfolio may be invested in any one entity at the time the
investment is made. The maximum gearing that will be employed is set by the
Directors from time to time and is currently 50% of shareholders funds (the
Company's Articles permit a maximum gearing of 50%). The Company's benchmark
index is the Bloomberg World Financial index and there is no restriction on the
amount that may be invested in any one country. The actual number of investment
holdings, the level of gearing and country allocations will depend on market
conditions and the judgement of the Board of what is in the best interest of
Shareholders.
Financial Record Six months Six months Year ended
ended ended
30 September 30 September 31 March
2010 2009 2010
(unaudited) (unaudited) (audited)
Shareholders' funds (£'000) 1,179 2,193 1,781
Net asset value per share (p) 8.62 16.05 13.03
Share price (p) (Bid) 6.20 10.20 8.70
Discount (%) 28.1 36.4 33.20
Gearing (%)* 48.4 47.6 -
Return available for shareholders (4) (21) (53)
(£'000)
Revenue return per share (p) (0.03) (0.15) (0.38)
Total return per share (p) (4.41) 8.96 5.95
Dividend per share (p) - - -
Dividend yield on our shares (%) - - -
Dividend yield on Benchmark Index 2.44 2.55 2.03
(%)
* Net debt as a percentage of Shareholders' Funds
Dividend
No interim dividend has been declared.
The Investment Manager
Blue Planet Investment Management Ltd is a Malta based investment management
company. It is a totally independent, well respected and innovative firm which
specialises in managing investments in financial companies. Its corporate
philosophy is that consistent out-performance is more likely to be achieved by
specialisation than it is from the generalist approach, which currently
prevails across most of the fund management industry.
Stock markets comprise of many sectors and at any point in time a number of
these sectors will be in economic decline and will produce below average
returns to investors. The financial sector is not immune to these cycles.
However, financial companies, and in particular banks, play a crucial and
central role in free market economies. Money transmission is perhaps the single
most important function performed in any free market economy and it is the
banks' dominance of this function that gives them tremendous economic muscle.
This role will ensure that banks endure whilst other sectors come and go. Blue
Planet believes that investors should only invest in those sectors that have
superior long-term economic prospects and, crucially, which are undervalued.
It believes that the world's financial sector is one such sector.
By focusing on only one sector Blue Planet believes that it is able to develop
a level of expertise and understanding of that sector that generalist fund
managers cannot.
Blue Planet Investment Management Ltd (a company registered in Malta) (BPIM) is
appointed as the Investment Manager of the Company and receives an annual fee
of 1.50% per annum of the total assets of the Company which is paid monthly. Mr
Dean Bucknell is a Director of BPIM which is owned by an Employee Trust for the
benefit of its employees. Blue Planet Investment Advisers Ltd provides
administration and secretarial services to the Company at an annual fee of £
10,000 per annum. Blue Planet Investment Advisers Ltd also provides an
investment advisory service to Blue Planet Investment Management Ltd. The
investment management, administration and secretarial services agreements may
only be terminated on receipt of two years' notice.
In addition to Blue Planet Financials Growth & Income Investment Trusts Nos
1-10 plc, Blue Planet Investment Management Ltd also manages the Blue Planet
European Financials Investment Trust plc, the Blue Planet Worldwide Financials
Investment Trust plc and the Blue Planet Global Financials Fund. Details of the
Blue Planet Saving Scheme, investment trusts and other products can be obtained
from the fund administrator and company secretary Blue Planet Investment
Advisers Ltd, Greenside House, 25 Greenside Place, Edinburgh, EH1 3AA (Tel no:
+44 131 466 6666), email: info@bpia.eu, website: http://www.bpia.eu.
Website Information
Please take the time to visit our website:
www.blueplanet.eu
If you wish to receive a monthly fact sheet on the trusts please visit:
http://www.blueplanet.eu/blueplanet_downloads.136.html
To download historical Annual and Interim reports and past monthly fund fact
sheets:
http://www.blueplanet.eu/blueplanet_downloads.124.html
To view stock market RNS announcements:
http://www.blueplanet.eu/blueplanet_news.8.html
Interim Management Report
Performance
The 33.8% negative return of the Net Asset Value ("NAV") per share over the
last six months has been very disappointing. Particularly when this is compared
to the -8.1% fall in the Fund's benchmark index, the Bloomberg World Financial
Index, or -6.5% total return of the index. The NAV started the period at 13.03p
per share, or 130.3p per Share Unit and fell to 8.62p per share or 86.2p per
Share Unit by the 30 September 2010. The Trust's share price has fallen 28.7%
since the year end.
In the full year accounts we were able to report a 75.4% return in the Fund's
NAV as the Fund benefitted from the rally in equities that began in March 2009.
However, the last six months have been an uncomfortable period for the Fund.
The rally in equities lost steam towards the end of 2009 as the economic data,
which had been recovering sharply, began to lose momentum. From the start of
2010 we began to reduce our exposure to equities, in particular to less liquid
holdings. Markets fell sharply in February due to the Greek sovereign debt
crisis and subsequent heightened concerns over the more over-leveraged
countries in the Euro area. Once this fall had happened the market took comfort
from the strength of the Asian and emerging market economies, some strong
economic numbers from the US and, in particular, excellent first quarter 2010
results from US financial companies, that showed credit pressure had moderated
and revenues were resilient. On this basis we re-entered the equity market in
April, investing primarily in US and Asian stocks. We had not anticipated that
the continuing fiscal crisis in a modestly sized economy like Greece would have
a further major impact on the market, as we considered the Euro area concerns
were overdone. However it did. Along with some softening in the US economic
data, it caused a further significant destabilisation of the markets and
equities fell sharply towards the end of April and throughout May. With the
Fund's equity positioning, the Fund experienced sharp falls in its NAV in both
April and May 2010. From June through to September the Fund returned to a far
more cautious stance
The details of the current portfolio are described below. It ended the interim
period positioned quite cautiously as the economic data continued to be mixed,
and risks to the downside remained. These risks include that of a double dip
recession in some of the advanced economies and a rising cost of borrowing for
heavily indebted governments. For banks, the announcements on Basel 3 minimum
capital requirements were supportive, when details were released in September
2010. The new rules will increase the amount of capital that banks will be
mandated to hold, to bring the minimum core Tier 1 ratio to 7%. These
requirements were not as stringent as had been feared, and the timescale for
complying with them was longer than anticipated, with banks having until 2019
to fully comply. The heightened levels of investor pessimism mean that
supportive economic data or announcements have at times induced a sharp
turnaround in the markets. Whilst this volatility and erratic market movements
are likely to continue in the short-term, in time normality will return, as
investor confidence is restored.
Portfolio
Corporate bonds were reintroduced to the portfolio in the middle of 2010. The
previous corporate bonds in the portfolio had been redeemed or sold during the
first quarter of 2009 in order to reinvest the money into equities to take
advantage of the sharp recovery in equity markets. As this recovery stalled and
volatility increased sharply during the first half of 2010, a number of
investments were made in short-dated, higher-yielding corporate bonds in June
2010, in preference to holding cash. These bonds are issued by banks in a
number of different countries, but the majority are denominated in sterling.
The level of investments in equities is higher than six months ago and consists
of investments in a number of well-capitalised financial companies with good
dividend yields, profitable banks in growing economies and recovery stocks.
Figure 1: Portfolio movements - by security type
Security Type Sept-2010 Mar-2010
% %
Equities 64.3 46.8
Bonds 23.8 -
Cash 11.9 53.2
Figure 2: Portfolio movements - by geography
Country Sept-2010 Mar-2010
% %
UK 26.1 38.7
USA 21.4 0.0
Eire 18.4 14.8
Other Countries 9.3 0.0
India 5.2 0.0
Russia 4.6 0.0
Finland 3.9 0.0
Norway 3.2 0.0
Indonesia 3.1 6.7
France 2.8 0.0
Switzerland 2.0 3.5
Australia 0.0 15.3
Canada 0.0 14.5
Turkey 0.0 6.5
The UK was our largest geographic location for assets at the end of the interim
period. The Fund has held very limited investments in the UK over the past year
as we have remained very concerned about the economic and fiscal outlook for
the country. The government stimulus packages and reduced tax receipts in the
UK economy have led to the country having one of the largest fiscal deficits of
the 33 industrialised nations. In the UK consumers are very overstretched,
there are high levels of unemployment and house prices are weak. The UK's move
out of recession at the end of 2009 was very tentative with a growth of 0.4%
for the final quarter of 2009. The fiscal problems facing the UK, and the lack
of actions to address the issues led us to steer away from investments in the
UK. The UK election outcome in May 2010, led to a coalition government which
has put deficit reduction at the top of its agenda for this parliament and have
undertaken a very broad based spending review to meet its fiscal goals. This
has already started to have an impact on the size of the UK deficit. This has
reduced the risk factors in the UK, although concerns remain. We have increased
our holdings in UK equities to a select list of insurers and other financial
companies that have a high dividend yield and are attractively valued.
The Fund has purchased a number of short-dated higher-yielding corporate bonds
issued by UK banks. Many of the corporate bonds in the portfolio are sterling
denominated, and nearly 12% of the portfolio was in cash, in sterling, at the
end of the Fund's interim period.
The Fund was invested in US financial stocks very profitably through much of
2009, but in 2010 investments in US financials have been less successful, as
the timing of the investments were poor and equities purchased in both January
and April 2010 were not retained in the portfolio. We invested in US bonds is
June 2010 and reinvested in equities in September 2010. We believe the timing
of our equity investments is far better this time, as the valuations of US
banks have fallen sharply. Furthermore, as a result of the higher
capitalisation levels within banks and a steady improvement in loan quality,
the scene appears to be set for bank lending to start to rise. Current US
exposure consists of four equity holdings and four corporate bond holdings, all
of which are in large US financial institutions.
The Republic of Ireland is our third largest investment location. This consists
of two investments. The first is a holding in Blue Planet's Global Financials
Fund, listed in Dublin. This fund is invested predominantly in equities but
also includes fixed income and has been making use of hedging to smooth returns
in this volatile market. Your Company is also invested in Bank of Ireland. The
global economic crisis has had a tremendous impact on Ireland, which has seen a
house price collapse after many years of boom, rising unemployment, as well as
a downgrade in its long-term sovereign credit rating. As a result, Irish banks
saw their share prices drop to record lows, as investors questioned their
solvency and feared the banks would be nationalised. Since then, the Irish
Government has restructured and recapitalised the banks in Ireland. The
government has created the National Asset Management Agency (NAMA), to which
banks have transferred significant numbers of impaired property-related loans,
with the aim that the banks will be in a position to once again resume lending,
and more importantly, avoid further steps towards nationalisation. Bank of
Ireland has passed the worst case EU stress tests, it is well capitalised and
says that its bad loan impairments have peaked. Whilst still making losses, the
bank is back on track. It is the bank best placed to benefit from a recovery in
the Irish economy and is attractively valued.
The Fund has been invested in India since 2007 and Indian banks share prices
have made good gains. At the start of the year the Indian economy was causing
some concern with its high budget deficit, backlog of debt issuance and sharply
rising inflation. As a result we sold our Indian bank holdings in February
2010. Since that time the government has been reining in its previous highly
accommodative fiscal stance to bring its economy back on track, and in August
2010 we began to reinvest in Indian banks. India has reported GDP growth of
8.8% year-on-year in the most recently reported quarter, to June 2010, and
although inflation remains high, the country has plenty of room for growth in
its under-penetrated banking market and the valuations of the banks remain low
compared to many other Asian countries. The Fund ended the interim period with
investments in Dena Bank, Union Bank of India and Bank of Baroda. Subsequent to
the end of the interim period Indian investments have been increased.
After a sharp contraction in its economy in 2009, Russia has been recovering
well in 2010. GDP is expected to grow by over 4% in 2010 and at a similar level
in 2011. Inflation is high, but has been driven by food price inflation
following the exceptionally hot summer weather that significantly reduced food
production. The banks in Russia have suffered from very high levels of bad
loans, which have meant onerous provisioning. The signs are now that bad loans
have peaked and lower provisions or indeed provisioning releases will follow in
2011. Demand for loans is clearly returning and is on course to end this year
at between 8% or 9% and forecasters are predicting loan growth of 15% in 2011.
These factors will allow Russian banks to grow their profitability again. The
Fund invested in Sberbank and VTB. These holdings have been added to following
the end of the interim period.
Investments in Indonesia ended the interim period at a lower level than at the
year end, as Bank Rakyat was the Fund's only investment in Indonesia.
Indonesia's GDP was growing at a rate of 6.2% in the 3 months to the end of
June 2010 and is expected to maintain this level of growth through 2010. The
country has very low levels of banking penetration and loan growth up to the
end of August 2010 is running at 19.4% year-on-year growth. The country's banks
are well capitalised with strong provisioning in place and highly profitable.
Subsequent to the end of the interim period investments in Indonesia have been
increased.
Exposure to the Euro area has been very low since the start of 2010 as the
fiscal crisis in Greece emerged through the winter. The lingering uncertainty
over Greece's ability to work its way out from under its fiscal deficit caused
markets and the euro currency to weaken and the spotlight began to turn on
other EU countries with weak fiscal positions, such as Portugal, Spain, Italy
and Ireland. The fears of an imminent collapse in the EU's single currency the
Euro, have now calmed as the area's largest economy, Germany, powers ahead and
as both the European Union members and the International Monetary Fund have
committed to supporting the Euro area. As in the UK, the Fund has invested in
high yielding insurance stocks that trade on very modest valuations and
higher-yielding bonds issued by European banks. For both the UK and the
European stocks, we believe that the yield they provide will provide support to
their share prices in this very low interest rate environment.
Warrants
The warrants expired at the end of July 2010. This year was the final year in
which the warrants were exercisable. This means the warrants are no longer
valid, and if they were not exercised or sold, on or prior to this date, no
longer have any value attached to them. On 31 July 2010 a total of 560 warrants
were exercised and 5,600 ordinary shares were issued.
This means that the Fund will no longer have a "fully diluted" and an
"undiluted" NAV reported for it, as there is no longer any dilution to be
accounted for.
Borrowings, Gearing and liquidity
Gearing has been higher in the last three months of the interim period, as
equity investments have been increased. At the end of the interim period
gearing stood at 48.5%. The gearing level in the Fund is monitored closely and
gearing can be significantly reduced if weak market conditions are anticipated.
The Fund has access to an unsecured, sterling, fixed loan of £750k per trust (£
7.5m across all ten trusts) and a multi-currency unsecured revolving facility
of £1.75m per trust (or £17.5m across all ten trusts) until 2012. Only the
sterling loan, which is a fixed loan and would incur breakage charges if
repaid, was drawn down at the end of the interim period.
Dividend
No interim dividend has been declared for the first half of the year.
Investment income is above the level received for the first half of 2009 and
administrative expenses have been lower. However the return per ordinary share
remains negative. Low interest rates have reduced returns on cash holdings and
many banks suspended their dividends in 2009.
The outlook for revenue for the remainder of the Fund's financial year remains
moderate in the current low interest rate environment, but will be boosted by
the income from bonds, and good yields from the holdings in insurers. However
it remains in question if sufficient income will be available to resume paying
a dividend in 2010. The Directors appreciate the importance of dividends to
many shareholders and plan to resume dividend payouts when it is possible to do
so.
Risk
Your Company is exposed to a number of risks which are detailed in full in the
Annual Report. The key market risk arises from the uncertainty regarding the
future price performance of the equities held by your Company. If gearing is
employed this risk is magnified. The Company is invested in a single industry
sector. Being invested in a single sector exposes the Fund to the risk that the
Financial Sector will under perform relative to other sectors of the market.
Nevertheless, the financials sector remains a large part of the market and
constitutes over 22% of the Bloomberg World Index. Banks play a crucial and
central role in free market economies, as the response of governments and
central banks to the recent crisis has shown; a role that will ensure the
prosperity of the banking sector as a whole over time. The prices of the
individual securities in the portfolio are monitored on a daily basis and the
Board, that meets quarterly, imposes borrowing limits to ensure gearing levels
are appropriate to market conditions. When gearing is employed the potential
impact of changes to interest rates is taken into consideration. The securities
dealt in are all listed on recognised exchanges and are readily realisable.
The Fund is exposed to currency risk, due to the range of currencies in which
investments are held. The majority of the Company's assets are held in
securities denominated in foreign currencies and movements in these currencies
can significantly affect the total return and net assets. The Company currently
has a multi-currency loan facility and our borrowings can be used as a
"natural" hedge against investments in the matching currency. The fund manager
tracks currency movements on a regular basis and hedging is considered on a
case-by-case basis.
Where investments are made in emerging markets there is a risk of higher
volatility in the price performance of these equities and their associated
currencies. Political risk and adverse economic circumstances are more likely
to arise, putting the value of the investment at a higher risk. The
registration and settlement arrangements in emerging markets may be less
developed than in more mature markets so operational risks of investing are
higher.
Going Concern
The Company's business activities, together with the risk factors likely to
affect its future position are set out in this report. The Directors consider
that the Company has adequate financial resources in the form of readily
realisable listed securities, including cash and loan facilities to continue in
operational existence for the foreseeable future. For this reason they continue
to use the going concern basis in preparing the accounts.
Blue Planet Services and Price Information Sources
Shareholders can view the Company's share price and additional information
about the Fund on the website of Blue Planet Investment Management Ltd
(www.blueplanet.eu) and the London Stock Exchange (www.londonstockexchange.com
). To find the Company's share unit price on the London Stock Exchange website
go to the Home page and type "BPFU" in the "Price Search" field.
Blue Planet Investment Advisers Ltd offers a Blue Planet Investment Trust
Savings Scheme via Equiniti Financial Services Limited (on behalf of Lloyds
TSB) to enable lump sum investments or regular savings. A request form for the
savings scheme application pack is enclosed with these accounts.
Board Changes
The Board is delighted to welcome Dean Bucknell as a new Non-Executive
Director. Dean Bucknell is Chief Executive of Blue Planet Investment Management
Ltd, the investment manager to the Company. He is also a Director of Blue
Planet European Financials Investment Trust plc, Blue Planet Holdings Ltd, Blue
Planet Global Financials Master Fund & Blue Planet Global Financials Fund. He
replaces Kenneth Murray who resigned due to a desire to reduce his work
commitments. Both changes took effect in September 2010.
Outlook
The long and widespread economic boom through to 2007 was fuelled by low
interest rates and accommodative monetary policy, which led to years of high
risk lending by developed countries' banks and fuelled elevated levels of both
private and public expenditure. When this boom turned to bust, sparked by the
sub-prime mortgage debacle in the US, at a point when individuals and
corporates were significantly over-leveraged, the governments stepped in. Their
huge fiscal stimulus packages returned the global economies to growth. However
this was at a price. It is now the public purses in many countries that are
over-leveraged. These governments and central banks need to implement exit
strategies from their emergency fiscal stimulus measures and ultra-low interest
rate environments to restore their countries finances to an even keel. Many
have started, but there is a long way to go and there are many major economies
that are very overstretched and the UK, the EU and the US, remain at risk of a
double-dip recession. Although economic indicators are still pointing to a pull
away from the recession, when the economic data, such as employment and housing
data, disappoints, or a country such as Greece suffers a fiscal shock, these
events highlight that many countries remain in the danger zone. Governments
cannot endlessly spend money to resuscitate their economies. If confidence in a
country wanes, then that country will experience a very sharp, and
unsustainable, spike in borrowing costs, as Greece has found to its cost.
Following the concentration of concerns on the euro countries at the start of
2010, attention has now shifted to the US, which has yet to begin the
government deleveraging process and is in fact contemplating further
quantitative easing, as the rate of GDP growth has started to stall, as
government incentives cease. This all heightens the risk of further steep falls
in the equity markets.
However the markets are, and have been, extremely risk averse. This has seen
money flood into government bonds. So far in 2010 mutual funds have seen net
inflows of $61.5bn into government bonds and outflows of $14.1bn from equities.
If confidence in the economic recovery can be sustained through the onset of
the deficit reduction programmes being introduced in Europe and the
quantitative easing in the US makes government bonds less attractive, this
caution will reverse; money will be switched from "risk free" assets
(government bonds) to equities. This could pave the way to a significant equity
rally. We may have to patient, but is probably a question of when, rather than
whether this will happen.
There is an ever widening gap between the emerging markets which are returning
to strong growth and those developed markets which are hindered by high levels
of taxation and crippling levels of government debt, where the recovery is
slow. The state of balance sheets in these different economies is key. Emerging
markets were less leveraged, and their financial institutions did not come
under the same stresses in the financial crisis.
In the last couple of months we have been returning to our fundamental economic
research approach and are placing our emphasis on investing in strong banks in
the better managed economies that have under-leveraged banking sectors. This
strategy served the Fund very well in 2006 and 2007 and we hope that it will do
so again. We also intend to focus on selected recovery stocks and high dividend
yielding stocks. Equity investments were increased during September and
continued to be added to through October replacing the debt holdings as they
started to mature, or were sold. We remain vigilant for economic data signs
that could significantly affect market confidence and may trigger either a
significant rise, or significant fall in equities in these volatile markets and
intend to modify our level of equity holdings when we feel the timing is
appropriate.
I would like to thank all shareholders for your continuing support, and we as a
Board look forward to a return to better returns in the second half of the
financial year.
Victoria Killay
Chairman
24 November 2010
Income Statement
For the six months ended 30 For the six months ended 30 For the year ended 31 March
September 2010 September 2009 2010
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£ £ £ £ £ £ £ £ £
Capital (losses) /
gains on investment
Net realised (losses) - (299,833) (299,833) - 30,373 30,373 - (436,453) (436,453)
/ gains
Unrealised (losses) / - (110,205) (110,205) - 1,220,986 1,220,986 - 1,262,350 1,262,350
gains
Exchange (losses) / - (165,422) (165,422) - 15,854 15,854 - 86,059 86,059
gains
Net capital (losses) / - (575,460) (575,460) - 1,267,213 1,267,213 - 911,956 911,956
gains on investment
Realised gain on - 59,713 59,713 - - - - - -
lapsed warrants (note
5) 32,659 - 32,659 22,924 - 22,924 31,514 - 31,514
Income from
investments
Bank interest 811 - 811 112 - 112 2,623 - 2,623
receivable
Gross revenue and 33,470 (515,747) (482,277) 23,036 1,267,213 1,290,249 34,137 911,956 946,093
capital (losses) /
gains
Administrative (24,870) (10,617) (35,487) (30,579) (10,731) (41,310) (60,436) (23,007) (83,443)
expenses
Net return before 8,600 (526,364) (517,764) (7,543) 1,256,482 1,248,939 (26,299) 888,949 862,650
interest payable and
taxation
Interest payable (13,015) (13,015) (26,030) (11,750) (11,750) (23,500) (24,323) (24,323) (48,646)
Return on ordinary (4,415) (539,379) (543,794) (19,293) 1,244,732 1,225,439 (50,622) 864,626 814,004
activities before
taxation
Taxation on ordinary 853 - 853 (1,412) - (1,412) (1,891) - (1,891)
activities (note 3)
Return on ordinary (3,562) (539,379) (542,941) (20,705) 1,244,732 1,224,027 (52,513) 864,626 812,113
activities after
taxation
Return per ordinary (0.03)p (3.95)p (3.98)p (0.15)p 9.11p 8.96p (0.38)p 6.33p 5.95p
share (note 4)
The Total column of the income statement represents the profit & loss account
of the Company.
All revenue and capital items in the above statement derive from continuing
operations.
There were no recognised gains and losses other than those disclosed above.
Accordingly a statement of total recognised gains and losses is not required.
Balance Sheet
At 30 At 30 At 31 March
September September
2010 2009 2010
£ £ £
(unaudited) (unaudited) (audited)
Fixed assets
Listed equity investments 1,241,303 3,279,031 1,219,051
Listed non - equity investments 459,951 - -
1,701,254 3,279,031 1,219,051
Current assets
Debtors 165,854 86,632 93,910
Cash at Bank and in hand 228,889 77,870 1,385,259
Creditors: amounts falling due within (117,417) (66,672) (106,546)
one year
Net current assets 277,326 97,830 1,372,623
Total assets less current liabilities 1,978,580 3,376,861 2,591,674
Creditors: amounts falling due (800,000) (1,184,273) (811,000)
after more than one year (note 7)
Net assets 1,178,580 2,192,588 1,780,674
Capital and reserves
Called-up share capital 136,677 136,621 136,621
Share premium account 1,180,248 1,179,611 1,179,611
Other reserves
Capital reserve - realised 125,082 976,002 552,835
Capital reserve - investment holding (278,855) (210,290) (167,229)
losses
Capital redemption reserve 8,450 8,450 8,450
Warrant reserve - 59,846 59,846
Revenue reserve 6,978 42,348 10,540
Shareholders' funds 1,178,580 2,192,588 1,780,674
Net asset value per ordinary share 8.62p 16.05p 13.03p
(note 4)
Statement of Directors' responsibilities
The Directors confirm that this set of condensed financial statements has been
prepared in accordance with the ASB's Statement " Half Yearly Financial
Reports" and that the interim management report herein includes a fair review
of the information required by DTR 4.2.7 and DTR 4.2.8
On behalf of the Board
Victoria W Killay
Chairman
24 November 2010
Cash Flow Statement
For the six
months For the six For the year
ended months ended ended
30 September 30 September 31 March
2010 2009 2010
£ £ £
(unaudited) (unaudited) (audited)
Operating activities
Investment income received 20,706 64,651 75,622
Interest received 810 113 2,623
Investment management and (26,986) (24,454) (54,937)
administration fees paid
Cash paid to and on behalf of directors (2,071) (2,060) (4,237)
Other cash payments (13,741) (17,744) (23,409)
Exchange differences on foreign (165,422) - 56,522
currency cash balances
Net cash (outflow)/inflow from (186,704) 20,506 52,184
operating activities (note 6)
Servicing of finance
Interest paid (25,837) (23,369) (48,769)
Taxation
Taxation recovered 2,723 - 208
Capital expenditure and financial
investment
Purchase of investments (7,576,097) (8,721,748) (16,117,880)
Sale of investments 6,628,986 7,837,341 16,892,844
Cash (outflow) / inflow before financ (1,156,929) (887,270) 778,587
ing
Equity dividend paid (note 5) - (103,823) (103,823)
Management of liquid resources
Cash withdrawn from deposit - - 27,769
Financing
Proceeds from share issue 560 - 120
(Repayment)/advance of loan - 275,983 (96,290)
(Decrease) / increase in cash (1,156,369) (715,110) 606,363
Reconciliation of Movements in Shareholders' Funds
Share Share Capital Capital Capital Warrant Revenue Total
capital premium redemption reserve-realised reserve- reserve reserve shareholders'
reserve investment funds
holding
losses
£ £ £ £ £ £ £ £
For the six months ended 30 September 2010 (unaudited)
Shareholders' funds at 136,621 1,179,611 8,450 552,835 (167,229) 59,846 10,540 1,780,674
1 April 2010
Proceeds of share issue 56 504 - - - - - 560
Transfer from warrant - 133 - - - (133) - -
reserve
Realised gain on lapsed - - - 59,713 - (59,713) - -
warrants
Return on ordinary - - - (487,466) (111,626) - (3,562) (602,654)
activities after
taxation
Shareholders' funds at 136,677 1,180,248 8,450 125,082 (278,855) - 6,978 1,178,580
30 September 2010
For the six months ended 30 September 2009 (unaudited)
Shareholders' funds 136,609 1,179,474 8,450 955,504 (1,434,524) 59,875 166,876 1,072,264
at 1 April 2009
Proceeds of share 12 108 - - - - - 120
issue
Transfer from - 29 - - - (29) - -
warrant reserve
Return on ordinary - - - 20,498 1,224,234 - (20,705) 1,224,027
activities after
taxation
Dividend paid - - - - - - (103,823) (103,823)
during the period
Shareholders' funds 136,621 1,179,611 8,450 976,002 (210,290) 59,846 42,348 2,192,588
at 30 September
2009
For the year ended 31 March 2010 (audited)
Shareholders' funds 136,609 1,179,474 8,450 955,504 (1,434,524) 59,875 166,876 1,072,264
at 1 April 2009
Proceeds of share 12 108 - - - - - 120
issue
Transfer from - 29 - - - (29) - -
warrant reserve
Return on ordinary - - - (402,669) 1,267,295 - (52,513) 812,113
activities after
taxation
Dividend paid - - - - - - (103,823) (103,823)
during the period
Shareholders' funds 136,621 1,179,611 8,450 552,835 (167,229) 59,846 10,540 1,780,674
at 31 March 2010
Notes
1. The financial statements for the six months to 30 September 2010 have been
prepared on the basis of the accounting policies set out in the Company's
Annual Reports and Accounts as at 31 March 2010 and in accordance with the
statement on half year financial reports issued by the ASB and applicable
UK law and accounting standards.
2. All expenses are charged to the revenue account with the exception of
management fees and interest charges on borrowings, one half of which less
the appropriate tax relief is charged to capital.
3. The taxation charge arises wholly from overseas withholding tax on
investment income.
4. The return per ordinary share is based upon the following figures:
30 Sept 2010 30 Sep 2009 31 Mar 2010
(unaudited) (unaudited) (audited)
Revenue return (£) (3,562) (20,705) (52,513)
Capital return (£) (599,092) 1,244,732 864,626
Weighted average number of ordinary shares 13,663,977 13,661,621 13,661,701
in issue
during the period
At 1 April 2010 the Company had 251,540 warrants in issue. Each warrant
conferred the right, exercisable on 31 July 2010, or, if later, 30 days after
the distribution of the Annual Report and Accounts, to subscribe for 10 new
ordinary shares at a price of £0.10 per share. On 31 July 2010 560 warrants
were exercised and 5,600 ordinary shares were issued; the remaining warrants
have lapsed and can no longer be exercised.
The net asset value per ordinary share is calculated on the 13,667,700 ordinary
shares in issue at the end of the period.
5. No interim dividend is proposed.
6. Cash Flow Statement
Reconciliation of net revenue return to net 30 Sept 30 Sept 31 Mar
cash (outflow) / inflow from operating 2010 2009 2010
activities
£ £ £
(unaudited) (unaudited) (audited)
Net return before interest payable and 8,600 (7,543) (26,299)
taxation
Administrative expenses charged to capital (10,617) (10,731) (23,007)
(Increase)/ decrease in other debtors (13,925) 38,829 46,135
(Decrease)/ increase in other creditors (2,439) 1,467 852
Tax suffered on investment income (2,901) (1,516) (2,019)
Exchange differences on foreign currency (165,422) - 56,522
cash balances
Net cash (outflow) / inflow from operating (186,704) 20,506 52,184
activities
Reconciliation of net cash flow to movement 30 Sept 30 Sept 31 Mar
in net (debt)/funds 2010 2009 2010
£ £ £
(unaudited) (unaudited) (audited)
(Decrease) / increase in cash balances (1,156,369) (715,110) 606,363
Decrease in cash on deposit - - (27,769)
Loan (advanced)/repaid - (275,983) 96,290
Changes in net (debt)/funds resulting from (1,156,369) (991,093) 674,884
cash flows
Exchange differences - 15,854 29,537
Movement in net (debt) / funds in the period (1,156,369) (975,239) 704,421
7. Creditors falling due after more than one year include bank loans which are
subject to a covenant which sets a maximum gearing threshold. Details of the
loans outstanding at 30 September 2010 were as follows:
Amount (£) Interest Rate Repayment Date
(%)
Sterling loan 750,000 5.99 23 January 2012
8. At 30 September 2010 the Company had authority to buy back 2,049,000 of its
own shares in accordance with the authority granted at the Annual General
Meeting on 5 August 2010. No shares were bought back during the period under
review
9. The figures and financial information for the year ended 31 March 2010 are
extracted from the latest published accounts of the Company and do not
constitute statutory accounts for the period as defined in section 434 of the
Companies Act 2006. Those accounts have been delivered to the Registrar of
Companies and include the report of the auditors which was unqualified and did
not contain a statement either under section 498(2) or 498(3) of the Companies
Act 2006.
Portfolio Information
As at 30 September 2010 Country Valuation % of
Name Portfolio
(£)
Equities
89,660 BP Global Financials-A Class Eire 316,607 16.4
3,530 Sampo Oyj Finland 74,673 3.9
171,810 Aviva plc United 68,518 3.6
Kingdom
343,390 Sberbank Russia 61,250 3.2
860,500 PT Bank Rakyat Indonesia Indonesia 60,529 3.1
35,660 SCOR SE France 54,117 2.8
414,680 RSA Insurance Group plc United 54,074 2.8
Kingdom
190,790 Citigroup Inc United 47,430 2.5
States
18,730 Capital One Financial Corp United 47,027 2.4
States
28,920 Wells Fargo & Co United 46,171 2.4
States
302,700 Dena Bank - IPC India 45,798 2.4
54,410 Bank of America Corp United 45,319 2.3
States
32,730 U.S. Bancorp United 44,950 2.3
States
429,930 Legal & General Group plc United 44,455 2.3
Kingdom
191,400 Standard Life plc United 44,252 2.3
Kingdom
77,780 Union Bank India Ltd - IPC India 42,772 2.2
2,580 Zurich Financial Services AG Switzerland 38,499 2.0
710,680 Bank Of Ireland Eire 38,094 2.0
152,280,000 VTB Bank Russia 27,734 1.4
79,120 Aberdeen Asset Management plc United 12,683 0.7
Kingdom
10,150 Bank of Baroda - IPC India 12,527 0.6
219,000 Blue Planet Worldwide Financials United 9,636 0.5
Investment Trust plc Kingdom
123,180 Blue Planet European Financials United 4,188 0.2
Investment Trust plc Kingdom
1,241,303 64.3
Debt
Securities
1,600,000 Kommunalbanken AS 05/12 10.0% Norway 61,049 3.2
640,000 Goldman Sachs Group Inc 02/13 United 56,394 2.9
3.75% States
500,000 Morgan Stanley 04/11 7.5% United 51,397 2.7
States
500,000 Citigroup Inc 06/11 5.25% United 51,027 2.6
States
500,000 Abu Dhabi Commercial Bank 11/11 United Arab 50,931 2.6
5.625% Emirates
350,000 AMP UK Finance Services 11/10 United 35,049 1.8
6.375% Kingdom
340,000 Unicredit Bank Austria AG 07/11 Austria 34,915 1.8
5.625%
250,000 Santander Central Hispano Cayman 25,149 1.3
Issuances Limited 11/10 6.8% Islands
250,000 ING Bank NV 10/10 7% Netherlands 25,000 1.3
250,000 Swedbank AB 06/16 5.25% Sweden 24,726 1.3
250,000 Merrill Lynch & Co 02/12 0.88% United 24,506 1.3
States
200,000 BBVA Senior Finance SA 11/11 Spain 19,808 1.0
0.7725%
459,951 23.8
Listed 1,701,254 88.1
Investments
Cash 228,889 11.9
Total 1,930,143 100.0
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