Half-year Report

RNS Number : 9183A

BMO Managed Portfolio Trust PLC

27 January 2020

 

To:      RNS

Date:  27 January 2020

From: BMO Managed Portfolio Trust PLC

LEI:     213800ZA6TW45NM9YY31

Interim Results

The Board of BMO Managed Portfolio Trust PLC announces the unaudited interim results of the Company for the six month period to 30 November 2019.

Income shares - financial highlights and performance summary for the six months

·      Dividend yield⁽¹⁾ of 4.4% at 30 November 2019, compared to the yield on the FTSE All-Share Index of 4.2%. Dividends are paid quarterly. First two interim dividends increased by 3.7% compared to the prior year.

·      Net asset value total return⁽²⁾ per Income share of +6.3% for the six months, outperforming the FTSE All-Share Index total return (+5.8%) by +0.5%.

Growth shares - financial highlights and performance summary for the six months

·      Net asset value total return⁽²⁾ per Growth share of +4.6% for the six months, underperforming the FTSE All-Share Index total return (+5.8%) by -1.2%.

·      NAV total return Compound Annual Growth Rate of +10.3% over 10 years compared with a return of +8.2% from the FTSE All-Share Index.

Notes:

(1)   Dividend yield - See Alternative Performance Measures. Based on dividends at the expected minimum annual rate of 6.1 pence per Income share for the financial year to 31 May 2020 and the Income share price of 137.50p at 30 November 2019.

(2)   NAV total return - See Alternative Performance Measures. The return to shareholders calculated on a per share basis by adding dividends paid in the period to the increase or decrease in the NAV in the period. The dividends are assumed to have been re-invested in the form of net assets on the date on which shares were quoted ex-dividend.

Chairman's Statement

Highlights

•       Net asset value total return of +6.3% for the Income shares and +4.6% for the Growth shares compared to the FTSE All-Share Index total return of +5.8%

•       NAV total return compound annual growth rate over 10 years of +9.8% for the Income shares and +10.3% for the Growth shares compared with a return of +8.2% from the FTSE All-Share Index

•       First two interim dividends increased from 1.35 pence to 1.4 pence per Income share

•       Income share dividend yield of 4.4% at 30 November 2019

Investment performance

For the six months to 30 November 2019, the net asset value (NAV) total return was +6.3% for the Income shares and +4.6% for the Growth shares. The total return for the benchmark index for both portfolios, the FTSE All-Share Index, was +5.8%. The long-term track record continues to show the NAV total return for both portfolios outperforming the benchmark index over 3, 5 and 10 years to 30 November 2019, with NAV total return growth over 10 years achieving a compound annual return of +9.8% for the Income shares and +10.3% for the Growth shares.

In line with our stated objectives we have again been able to increase our interim dividends. At 30 November 2019 the dividend yield of the Income shares was 4.4% (based on the expected minimum annual dividend of 6.1 pence per Income share for the current financial year) as compared to the yield on the FTSE All-Share Index of 4.2%.

The period under review saw a decent positive return from the UK equity market however this masked some significant volatility caused by massive political uncertainty in the UK, particularly in the latter few months. A feature was sterling, which had been weak for a prolonged period, but then began to rise sharply in October as the likelihood of a "no deal Brexit" diminished. It ended the six months gaining 2.6% and 3.7% against the dollar and euro respectively, a marked change of trend for the currency.

Globally, concerns over prospects for growth led to three cuts in interest rates by the US Federal Reserve, a modest return to the policy of Quantitative Easing by the European Central Bank and a further stimulus package from the Bank of Japan.

Equity markets responded positively to these measures, although due to strength of the UK currency the returns from overseas markets were diluted when translated back into sterling. Against this background both portfolios made gains over the period with the Income portfolio slightly ahead and the Growth portfolio slightly behind the total return of the FTSE All-Share Index.

Once again, a theme amongst the top contributors to performance from individual holdings in the Growth portfolio was technology with HgCapital Trust and long-time holding Polar Capital Technology Trust experiencing share price gains of 19% and 16% respectively. The secular growth theme of healthcare saw the best performance with Biotech Growth Trust gaining 20% and Worldwide Healthcare Trust ahead by 17%.

In the Income portfolio the healthcare theme was also evident amongst the best performers with Swiss based HBM Healthcare Investments achieving a 21% rise in share price. Other top contributors were specialist healthcare property REIT Assura which rose 21% and consistent long-term outperformer Invesco Perpetual UK Smaller Companies Investment Trust whose share price gained 18%.

(All share prices are total return)

Revenue and dividends

The Company's net revenue for the six months was £1.50 million which is equivalent to 3.40p per Income share (compared to 3.27p per Income share for the corresponding period in 2018). Income shares are entitled to all the dividends paid by the Company.

In line with our objective of increasing dividends over time, the Company has declared a first and second interim dividend in respect of the year to 31 May 2020, each of 1.4p per Income share (1.35p per Income share in the corresponding period in the year to 31 May 2019).

In the absence of unforeseen circumstances, the Board intends to pay three interim dividends, each of 1.4p per Income share and the aggregate dividends for the current financial year to 31 May 2020 will be at least 6.1p per Income share (2019: 5.95p per Income share). The amount of the fourth interim dividend will be determined when a clearer view of income for the year emerges. A minimum expected annual rate of 6.1p per Income share represents a yield on the Income share price at 30 November 2019 of 4.4%.

Borrowing

At 30 November 2019 the Income portfolio had total borrowings of £5 million (7.6% of gross assets) the investment of which helps to boost net income after allowing for the interest cost. The Growth portfolio had no borrowings.

Discount to NAV and share buy-backs

In normal circumstances we aim to maintain our discount at not more than 5%, by buying back shares from time to time if necessary. In practice over the years the shares have generally traded close to NAV.  During the six months to 30 November 2019 the average premium to NAV for the Income shares and for the Growth shares was 0.9% and 0.0% respectively. At 30 November 2019, the Income shares stood at a premium to NAV of 0.5% and the Growth shares at a discount of 0.8% to NAV.

Share conversion facility

Shareholders have the opportunity to convert their Income shares into Growth shares or their Growth shares into Income shares annually subject to minimum and maximum conversion thresholds which may be reduced or increased at the discretion of the Board. At the start of November 2019 the conversion proceeded, for those shareholders who had elected to do so. The ability to convert without incurring capital gains tax should be an attractive facility for shareholders and the next conversion date (subject to minimum and maximum thresholds) will be in October 2020. Details will be provided when the Company's annual report is published in late July 2020.

Outlook

It appears the actions taken by the US Federal Reserve and other central banks has had the desired effect and prospects for growth in 2020 have modestly improved such that the economic cycle appears likely to be extended and the chances of a recession pushed out until 2021 at the earliest.  Whilst for most developed countries growth remains moderate by historic standards, inflation is subdued and interest rates will remain low. This is an encouraging backdrop for equity markets.  Since the end of the period under review much has changed for the UK and following a decisive general election it appears the uncertainty caused by Brexit is likely to wane. Post the Brexit Referendum in 2016 the UK equity market has been out of favour with global institutions and has underperformed most other major markets. The UK equity market offers very attractive value not only relative to other global equity markets but also in a historical context. In this regard smaller companies or those with mainly domestic revenues could benefit most from a reduction of uncertainty and perhaps slightly better growth from the UK economy. Since the end of the period under review both new and existing holdings which have significant exposure in the areas identified above have either been introduced or increased.

Looking forward there are certain factors which could unsettle markets: China/US trade tensions being unresolved, or an EU/UK trade deal not being concluded. However, should the policy adopted by monetary authorities continue in the same vein, then that provides a positive background for equity markets to make modest progress.

Colin S McGill

Chairman

24 January 2020

Unaudited Condensed Income Statement

Six months to 30 November 2019

		Notes	Revenue	Capital	Total
			£'000	£'000	£'000
Gains on investments			-	5,852	5,852
Foreign exchange losses			-	(1)	(1)
Income		2	1,927	-	1,927
Investment management and performance fees		3	(130)	(342)	(472)
Other expenses			(272)	-	(272)
Return on ordinary activities before   finance costs and tax			1,525	5,509	7,034
Finance costs			(22)	(33)	(55)
Return on ordinary activities before  tax			1,503	5,476	6,979
Tax on ordinary activities			-	-	-
Return attributable to shareholders			1,503	5,476	6,979
Return per Income share		5	3.40p	4.80p	8.20p
Return per Growth share		5	-	9.44p	9.44p

The total column of this statement is the Profit and Loss Account of the Company.

The supplementary revenue and capital columns are prepared under guidance published by The Association of Investment Companies.

All revenue and capital items in the Income Statement derive from continuing operations.

Unaudited Condensed Income Statement

Six months to 30 November 2018

	Notes	Revenue	Capital	Total
		£'000	£'000	£'000
Losses on investments Foreign exchange losses		- -	(4,747) (2)	(4,747) (2)
Income	2	1,822	-	1,822
Investment management and performance fees	3	(124)	(492)	(616)
Other expenses		(260)	-	(260)
Return on ordinary activities before finance           costs and tax		1,438	(5,241)	(3,803)
Finance costs		(22)	(33)	(55)
Return on ordinary activities before tax		1,416	(5,274)	(3,858)
Tax on ordinary activities		(7)	-	(7)
Return attributable to shareholders		1,409	(5,274)	(3,865)
Return per Income share	5	3.27p	(6.32p)	(3.05p)
Return per Growth share	5	-	(7.20p)	(7.20p)

The total column of this statement is the Profit and Loss Account of the Company.

The supplementary revenue and capital columns are prepared under guidance published by The Association of Investment Companies.

All revenue and capital items in the Income Statement derive from continuing operations.

Condensed Income Statement (audited)

Year to 31 May 2019

		Notes	Revenue	Capital	Total
			£'000	£'000	£'000
Losses on investments			-	(880)	(880)
Foreign exchange losses			-	(8)	(8)
Income		2	3,655	-	3,655
Investment management and performance fees		3	(252)	(940)	(1,192)
Other expenses			(495)	-	(495)
Return on ordinary activities before   finance costs and tax			2,908	(1,828)	1,080
Finance costs			(44)	(65)	(109)
Return on ordinary activities before tax			2,864	(1,893)	971
Tax on ordinary activities			(24)	-	(24)
Return attributable to shareholders			2,840	(1,893)	947
Return per Income share		5	6.59p	(3.47p)	3.12p
Return per Growth share		5	-	(1.12p)	(1.12p)

The total column of this statement is the Profit and Loss Account of the Company.

The supplementary revenue and capital columns are prepared under guidance published by The Association of Investment Companies.

All revenue and capital items in the Income Statement derive from continuing activities.

Unaudited Condensed Balance Sheet

As at 30 November 2019

	Notes	Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Fixed assets
Investments	4	64,170	71,939	136,109
Current assets
Debtors		252	81	333
Cash at bank and on deposit		1,860	4,543	6,403
		2,112	4,624	6,736
Creditors: Amounts falling due within one year		(311)	(453)	(764)
Net current assets		1,801	4,171	5,972
Creditors: Amounts falling due in more than one year		(5,000)	-	(5,000)
Net assets		60,971	76,110	137,081
Capital and reserves:
Called-up share capital	7	4,457	3,558	8,015
Share premium		25,082	21,726	46,808
Capital redemption reserve		54	206	260
Special Reserve		18,745	16,435	35,180
Capital reserves		10,040	34,185	44,225
Revenue reserve		2,593	-	2,593
Shareholders' funds		60,971	76,110	137,081
Net asset value per share (pence)	8	136.75p	214.62p

Unaudited Condensed Balance Sheet

As at 30 November 2018

	Notes	Income shares	Growth shares	Total
		£'000	£'000	£'000
Fixed assets
Investments		58,295	67,693	125,988
Current assets
Debtors Cash at bank and on deposit		245 1,750	83 3,481	328 5,231
		1,995	3,564	5,559
Creditors
Amounts falling due within one year		(220)	(307)	(527)
Net current assets		1,775	3,257	5,032
Creditors
Amounts falling due in more than one year		(5,000)	-	(5,000)
Net assets		55,070	70,950	126,020
Capital and reserves
Called-up share capital		4,298	3,564	7,862
Share premium		22,718	21,409	44,127
Capital redemption reserve		24	185	209
Special reserve		19,066	17,117	36,183
Capital reserves		6,693	28,675	35,368
Revenue reserve		2,271	-	2,271
Shareholders' Funds		55,070	70,950	126,020
Net asset value per share (pence)	8	128.31p	199.11p

Condensed Balance Sheet (audited)

As at 31 May 2019

		Income shares	Growth shares	Total
	Notes	£'000	£'000	£'000
Fixed assets
Investments	4	61,321	68,943	130,264
Current assets
Debtors		292	47	339
Cash at bank and on deposit		1,256	4,571	5,827
		1,548	4,618	6,166
Creditors
Amounts falling due within one year		(241)	(191)	(432)
Net current assets		1,307	4,427	5,734
Creditors
Amounts falling due in more than one year		(5,000)	(257)	(5,257)
Net assets		57,628	73,113	130,741
Capital and reserves
Called-up share capital		4,372	3,563	7,935
Share premium		23,703	21,417	45,120
Capital redemption reserve		30	186	216
Special reserve		19,066	17,117	36,183
Capital reserves		7,919	30,830	38,749
Revenue reserve		2,538	-	2,538
Shareholders' Funds		57,628	73,113	130,741
Net asset value per share (pence)	8	131.81p	205.17p

Unaudited Condensed Statement of Cash Flows

Six months to 30 November 2019

	Notes	Income shares	Growth shares	Total
		£'000	£'000	£'000
Net cash outflow from operations before dividends and interest	9	(387)	(388)	(775)
Dividends received		1,431	474	1,905
Interest received		4	12	16
Interest paid		(51)	-	(51)
Net cash inflow from operating activities		997	98	1,095
Investing activities
Purchases of investments		(1,606)	(301)	(1,907)
Sales of investments		1,494	533	2,027
Cash flows from investing activities		(112)	232	120
Cash flows before financing activities		885	330	1,215
Financing activities
Equity dividends paid Net proceeds from issuance of new shares	6	(1,448) 1,081	- -	(1,448) 1,081
Sale of shares from treasury		-	150	150
Shares purchased to be held in treasury		-	(422)	(422)
Share conversion		86	(86)	-
Cash flows from financing activities		(281)	(358)	(639)
Net movement in cash and cash equivalents		604	(28)	576
Cash and cash equivalents at the beginning of the   period		1,256	4,571	5,827
Cash and cash equivalents at the end of the period		1,860	4,543	6,403
Represented by: Cash at bank and short-term deposits		1,860	4,543	6,403

Unaudited Condensed Statement of Cash Flows

Six months to 30 November 2018

	Notes	Income shares		Growth shares	Total
		£'000		£'000	£'000
Net cash outflow from operations before dividends and interest	9	(313)		(634)	(947)
Dividends received		1,289		493	1,782
Interest received		3		5	8
Interest paid		(52)		-	(52)
Net cash inflow/ (outflow) from operating activities		927		(136)	791
Investing activities
Purchases of investments		(2,324)		(5,819)	(8,143)
Sales of investments		3,110		5,261	8,371
Cash flows from investing activities		786		(558)	228
Cash flows before financing activities		1,713		(694)	1,019
Financing activities
Equity dividends paid Net proceeds from issuance of new shares	6	(1,700) 64		- 746	(1,700) 810
Share conversion		(232)		232	-
Cash flows from financing activities		(1,868)		978	(890)
Net movement in cash and cash equivalents		(155)		284	129
Cash and cash equivalents at the beginning of the   period		1,905		3,197	5,102
Cash and cash equivalents at the end of the     period		1,750		3,481	5,231
Represented by: Cash at bank and short-term deposits		1,750		3,481	5,231

Condensed Statement of Cash Flows (audited)

Year to 31 May 2019

	Notes		Income shares		Growth shares	Total
			£'000		£'000	£'000
Net cash outflow from operations before dividends and interest	9		(624)	(984)		(1,608)
Dividends received			2,574	1,002		3,576
Interest received			9	20		29
Interest paid			(102)	-		(102)
Net cash inflow from operating activities			1,857	38		1,895
Investing activities
Purchases of investments			(5,607)	(7,408)		(13,015)
Sales of investments			5,068	7,758		12,826
Cash flows from investing activities			(539)	350		(189)
Cash flows before financing activities			1,318	388		1,706
Financing activities
Equity dividends paid		6	(2,864)	-		(2,864)
Net proceeds from issue of new shares Sale of shares from treasury			1,129 -	746 157		1,875 157
Shares purchased to be held in treasury			-		(149)	(149)
Share conversion			(232)		232	-
Cash flows from financing activities			(1,967)	986		(981)
Net movement in cash and cash equivalents			(649)	1,374		725
Cash and cash equivalents at the beginning of the    year			1,905	3,197		5,102
Cash and cash equivalents at the end of the year			1,256	4,571		5,827
Represented by: Cash at bank and short-term deposits			1,256	4,571		5,827

Unaudited Condensed Statement of Changes in Equity

Six months to 30 November 2019

Income shares	Share capital £000	Share premium account £000	Capital redemption reserve £000	Special reserve £000	Capital reserves £000	Revenue reserve £000	Total shareholders' funds £000
As at 31 May 2019	4,372	23,703	30	19,066	7,919	2,538	57,628
Increase in share capital in issue, net of share issuance expenses	80	1,001	-	-	-	-	1,081
Share conversion	5	378	24	(321)	-	-	86
Transfer of net income from Growth to Income portfolio	-	-	-	-	-	321	321
Transfer of capital from Income to Growth portfolio	-	-	-	-	(321)	-	(321)
Dividends paid	-	-	-	-	-	(1,448)	(1,448)
Return attributable to shareholders	-	-	-	-	2,442	1,182	3,624
As at 30 November 2019	4,457	25,082	54	18,745	10,040	2,593	60,971
Growth shares
As at 31 May 2019	3,563	21,417	186	17,117	30,830	-	73,113
Shares sold from treasury	-	3	-	147	-	-	150
Shares purchased for treasury	-	-	-	(422)	-	-	(422)
Share conversion	(5)	306	20	(407)	-	-	(86)
Transfer of net income from Growth to Income portfolio	-	-	-	-	-	(321)	(321)
Transfer of capital from Income to Growth portfolio	-	-	-	-	321	-	321
Return attributable to shareholders	-	-	-	-	3,034	321	3,355
As at 30 November 2019	3,558	21,726	206	16,435	34,185	-	76,110
Total Company
As at 31 May 2019	7,935	45,120	216	36,183	38,749	2,538	130,741
Increase in share capital in issue, net of share issuance expenses	80	1,001	-	-	-	-	1,081
Shares sold from treasury	-	3	-	147	-	-	150
Shares purchased for treasury	-	-	-	(422)	-	-	(422)
Share conversion	-	684	44	(728)	-	-	-
Dividends paid	-	-	-	-	-	(1,448)	(1,448)
Return attributable to shareholders	-	-	-	-	5,476	1,503	6,979
Total Company as at 30 November 2019	8,015	46,808	260	35,180	44,225	2,593	137,081

Unaudited Condensed Statement of Changes in Equity

Six months to 30 November 2018

Income shares	Share capital £000	Share premium account £000	Capital redemption reserve £000	Special reserve £000	Capital reserves £000	Revenue reserve £000	Total shareholders' funds £000
As at 31 May 2018	4,306	22,597	-	19,371	9,414	2,562	58,250
Increase in share capital in issue, net of issuance expenses	5	59	-	-	-	-	64
Share conversion	(13)	62	24	(305)	-	-	(232)
Transfer of net income from Growth to Income portfolio	-	-	-	-	-	333	333
Transfer of capital from Income to Growth portfolio	-	-	-	-	(333)	-	(333)
Dividends paid	-	-	-	-	-	(1,700)	(1,700)
Return attributable to shareholders	-	-	-	-	(2,388)	1,076	(1,312)
As at 30 November 2018	4,298	22,718	24	19,066	6,693	2,271	55,070
Growth shares
As at 31 May 2018	3,517	20,408	182	17,190	31,228	-	72,525
Increase in share capital in issue, net of share issuance expenses	34	, 712	-	-	-	-	746
Share conversion	13	289	3	(73)	-	-	232
Transfer of net income from Growth to Income portfolio	-	-	-	-	-	(333)	(333)
Transfer of capital from Income to Growth portfolio	-	-	-	-	333	-	333
Return attributable to shareholders	-	-	-	-	(2,886)	333	(2,553)
As at 30 November 2018	3,564	21,409	185	17,117	28,675	-	70,950
Total Company
As at 31 May 2018	7,823	43,005	182	36,561	40,642	2,562	130,775
Share conversion	-	351	27	(378)	-	-	-
Increase in share capital in issue, net of share issuance expenses	39	771	-	-	-	-	810
Dividends paid	-	-	-	-	-	(1,700)	(1,700)
Return attributable to shareholders	-	-	-	-	(5,274)	1,409	(3,865)
Total Company as at 30 November 2018	7,862	44,127	209	36,183	35,368	2,271	126,020

Condensed Statement of Changes in Equity (audited)

Year to 31 May 2019

Income Shares	Share capital £000	Share premium account £000	Capital redemption reserve £000	Special reserve £000	Capital reserves £000	Revenue reserve £000	Total shareholders' funds £000
As at 31 May 2018	4,306	22,597	-	19,371	9,414	2,562	58,250
Increase in share capital in issue, net of share issuance expenses	85	1,044	-	-	-	-	1,129
Share conversion	(13)	62	24	(305)	-	-	(232)
Cancellation of deferred shares	(6)	-	6	-	-	-	-
Transfer of net income from Growth to Income portfolio	-	-	-	-	-	646	646
Transfer of capital from Income to Growth portfolio	-	-	-	-	(646)	-	(646)
Dividends paid	-	-	-	-	-	(2,864)	(2,864)
Return attributable to shareholders	-	-	-	-	(849)	2,194	1,345
As at 31 May 2019	4,372	23,703	30	19,066	7,919	2,538	57,628
Growth Shares
As at 31 May 2018	3,517	20,408	182	17,190	31,228	-	72,525
Increase in share capital in issue, net of share issuance expenses	34	712	-	-	-	-	746
Shares sold from treasury	-	8	-	149	-	-	157
Shares purchased for treasury	-	-	-	(149)	-	-	(149)
Share conversion	13	289	3	(73)	-	-	232
Cancellation of deferred shares	(1)	-	1	-	-	-	-
Transfer of net income from Growth to Income portfolio	-	-	-	-	-	(646)	(646)
Transfer of capital from Income to Growth portfolio	-	-	-	-	646	-	646
Return attributable to shareholders	-	-	-	-	(1,044)	646	(398)
As at 31 May 2019	3,563	21,417	186	17,117	30,830	-	73,113
Total Company
As at 31 May 2018	7,823	43,005	182	36,561	40,642	2,562	130,775
Increase in share capital in issue, net of share issuance expenses	119	1,756	-	-	-	-	1,875
Shares sold from treasury	-	8	-	149	-	-	157
Shares purchased for treasury	-	-	-	(149)	-	-	(149)
Share conversion	-	351	27	(378)	-	-	-
Cancellation of deferred shares	(7)	-	7	-	-	-	-
Dividends paid	-	-	-	-	-	(2,864)	(2,864)
Return attributable to shareholders	-	-	-	-	(1,893)	2,840	947
Total Company as at 31 May 2019	7,935	45,120	216	36,183	38,749	2,538	130,741

Statement of Principal Risks and Uncertainties

Most of the Company's principal risks and uncertainties that could threaten the achievement of its objective; strategy, future performance, liquidity and solvency are market related and comparable to those of other investment trusts investing primarily in listed securities.

These risks, and the way in which they are managed, are described in more detail under the heading "Principal Risks and Uncertainties and Viability Statement" within the Strategic Report in the Company's 2019 Annual Report.

The Company's principal risks and uncertainties have not changed materially since the date of that report and are not expected to change materially for the remainder of the Company's financial year.

The most important types of risk associated with financial instruments are credit risk, market price risk, liquidity risk, interest rate risk and foreign currency risk.  Other risks faced by the Company include investment, custody and operational risks. These include risks in relation to failures at service providers or loss or sabotage of data through cyber threats or business continuity failure.

Statement of Directors' Responsibilities in Respect of the Interim Report

We confirm, that to the best of our knowledge:

·      the condensed set of financial statements have been prepared in accordance with applicable UK Accounting Standards on a going concern basis and give a true and fair view of the assets, liabilities, financial position and return of the Company;

·      the Chairman's Statement and the Statement of Principal Risks and Uncertainties (together constituting the Interim Management Report) include a fair review of the information required by the Disclosure Guidance and Transparency Rules ('DTR') 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the financial statements;

·      the Statement of Principal Risks and Uncertainties shown above is a fair review of the principal risks and uncertainties for the remainder of the financial year; and

·      the Interim Report includes a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during the period, and any changes in the related party transactions described in the last Annual Report that could do so.

On behalf of the Board

Colin S McGill

Director

24 January 2020

Notes

1.  Accounting policies

The condensed financial statements have been prepared on a going concern basis in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority, FRS 102, FRS 104 Interim Financial Reporting and the Statement of Recommended Practice ("SORP") "Financial Statements of Investment Trust Companies and Venture Capital Trusts" issued by The Association of Investment Companies ("AIC").

The accounting policies applied for the condensed financial statements are set out in the Company's annual report for the year ended 31 May 2019.

2.  Income

	Six months to 30 November 2019	Six months to 30 November 2018	Year to 31 May 2019
	£'000	£'000	£'000
UK dividends	1,285	1,174	2,401
Overseas dividends	626	640	1,225
Deposit income	16	8	29
Total income	1,927	1,822	3,655

3.  Investment management and performance fees

    During the period, the Company incurred investment management fees of £447,000 (30 November 2018: £443,000; 31 May 2019: £862,000) of which £222,000 was payable to BMO Investment Business Limited at the period end.  

At 30 November 2019 the adjusted total return of the Income portfolio for the period since 31 May 2019 (being the date a performance fee was last payable) exceeded that of the FTSE All-Share Index and a performance fee of £25,000 was accrued in the Income portfolio at 30 November 2019 (30 November 2018: £60,000; 31 May 2019: £73,000).

At 30 November 2019 the adjusted total return of the Growth portfolio since 31 May 2019 (being the date a performance fee was last recognised) did not exceed that of the FTSE All-Share Index and no performance fee has been recognised (30 November 2018: £113,000; 31 May 2019: £257,000).

As the NAV per Growth share at 31 May 2019 was less than the Watermark NAV at 31 May 2018 (the date a performance fee was last payable in the Growth portfolio) payment of the performance fee of £257,000 which was accrued in the Growth portfolio at 31 May 2019 is deferred until the end of the next financial year when the NAV per share for the Growth portfolio is in excess of the Watermark NAV. If the Watermark NAV is not reached by the end of the fourth financial year subsequently, it will no longer be payable.

4.  Investments

	Income shares Level 1* £'000	Growth shares Level 1* £'000	Total £'000
Cost at 31 May 2019 Gains at 31 May 2019	48,418 12,903	44,584 24,359	93,002 37,262
Valuation at 31 May 2019 Movement in the period: Purchases at cost Sales proceeds Gains on investments sold in the period Gains on investments held at period end	61,321 1,720 (1,494) 133 2,490	68,943 301 (533) 227 3,001	130,264 2,021 (2,027) 360 5,491
Valuation of investments held at 30 November 2019	64,170	71,939	136,109

	Income shares Level 1* £'000	Growth shares Level 1* £'000	Total £'000
Cost at 30 November 2019 Gains at 30 November 2019	48,777 15,393	44,579 27,360	93,356 42,753
Valuation at 30 November 2019	64,170	71,939	136,109

* Fair value hierarchy

The Company's investments as disclosed in the balance sheet are valued at fair value. The fair value as at the reporting date has been estimated using the following fair value hierarchy:

·      Level 1 - quoted prices (unadjusted) in active markets for identical assets;

·      Level 2 - investments whose value is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique whose variables includes only data from observable markets; and

·      Level 3 - investments whose value is not based on observable market data.

There were no investments held which are valued in accordance with levels 2 or 3.

5.  Return per share

     The return per share for the six months to 30 November 2019 is as follows:

	Income shares			Growth shares
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Return attributable to portfolios	1,182	2,442	3,624	321	3,034	3,355
Transfer of net income from Growth to Income portfolio	321	-	321	(321)	-	(321)
Transfer of capital from Income to Growth portfolio	-	(321)	(321)	-	321	321
Return attributable to shareholders	1,503	2,121	3,624	-	3,355	3,355
Return per share	3.40p	4.80p	8.20p	-	9.44p	9.44p
Weighted average number of shares in issue during the period	44,164,590			35,522,627

The return per share for the comparative six months to 30 November 2018 is as follows:

	Income shares			Growth shares
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Return attributable to portfolios	1,076	(2,388)	(1,312)	333	(2,886)	(2,553)
Transfer of net income from Growth to Income   portfolio	333	-	333	(333)	-	(333)
Transfer of capital from Income to Growth portfolio	-	(333)	(333)	-	333	333
Return attributable to shareholders	1,409	(2,721)	(1,312)	-	(2,553)	(2,553)
Return per share	3.27p	(6.32p)	(3.05p)	-	(7.20p)	(7.20p)
Weighted average number of shares in issue during the period	43,025,637			35,465,599

The return per share for the comparative year to 31 May 2019 is as follows:

	Income shares			Growth shares
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Return attributable to portfolios	2,194	(849)	1,345	646	(1,044)	(398)
Transfer of net income from Growth to Income  portfolio	646	-	646	(646)	-	(646)
Transfer of capital from Income to Growth portfolio	-	(646)	(646)	-	646	646
Return attributable to shareholders	2,840	(1,495)	1,345	-	(398)	(398)
Return per share	6.59p	(3.47p)	3.12p	-	(1.12p)	(1.12p)
Weighted average number of shares in issue during the period	43,089,136			35,541,265

6.    Dividends

	Payment	Six months to 30 November 2019	Six months to 30 November 2018	Year to 31 May 2019
Dividends on Income shares	Date	£'000	£'000	£'000
Amounts recognised as distributions during the period:
In respect of the previous financial year:
- fourth interim of 1.90p (prior period: 1.80p) per share	12 Jul-2019	831	775	775
- special dividend of nil (prior period:  0.8p) per share		-	344	344
In respect of the period under review:
- first interim of 1.40p (prior period: 1.35p) per share	11 Oct 2019	617	581	581
- second interim (prior period: 1.35p per share)	-	-	-	580
- third interim (prior period: 1.35p per share)	-	-	-	584
		1,448	1,700	2,864

       A second interim dividend in respect of the year to 31 May 2020 of 1.4p per Income share was paid on 10 January 2020 to shareholders on the register on 20 December 2019. This amount has not been accrued in the results for the six months to 30 November 2019.

       For the financial year to 31 May 2019 interim dividends totalled 5.95p per Income share.      

       The Growth shares do not carry an entitlement to receive dividends.

7.    Share capital

	Listed		Held in treasury		In issue
	Number	£'000	Number	£'000	Number	£'000
Income shares
Balance at 1 June 2019 of   10p each	43,720,705	4,372	-	-	43,720,705	4,372
Issued	800,000	80	-	-	800,000	80
Share conversion:
-  Income to Growth	(240,482)	(24)	-	-	(240,482)	(24)
-  Growth to Income	305,314	29	-	-	305,314	29
-  Change in nominal value^	-	(222)	-	-	-	(222)
Balance at 30 November 2019^	44,585,537	4,235	-	-	44,585,537	4,235

	Deferred shares - Income
	Number	£'000
Deferred shares - Income
Balance at 1 June 2019	-	-
Issue of 44,280,223 shares*	44,280,223	222
Balance at 30 November 2019	44,280,223	222
Total called-up share capital		4,457

^ As part of the conversion process, which was carried out during the period in accordance with the Company's   

   Articles, the nominal value of each Income share changed from £0.1 to £0.094976101 per Income share.

* The nominal value of a deferred share is £0.005023899 per share.

During the period, the Company issued 800,000 Income shares from the block listing facilities receiving net proceeds of £1,081,000. At 30 November 2019, the Company held no Income shares in treasury.

During the period, valid conversion notices were received to convert 240,482 Income shares (which represented a value of £321,000). These were converted into 154,747 Growth shares in accordance with the Company's Articles and by reference to the ratio of the relative underlying net asset values of the Growth shares and Income shares on the conversion date.

The Company's Articles allow for Deferred shares to be allotted as part of the share conversion to

ensure that the conversion does not result in a reduction of the aggregate par value of the Company's issued share capital. The Deferred shares issued as part of the share conversion in the current period are set out above. The Deferred shares will be repurchased by the Company from time to time as authorised by shareholders at the September 2019 AGM.

	Listed		Held in treasury		In issue
	Number	£'000	Number	£'000	Number	£'000
Growth shares
Balance at 1 June 2019 of    10p each	35,634,929	3,563	-	-	35,634,929	3,563
Purchased for treasury	-	-	(200,000)	(20)	(200,000)	(20)
Resold from treasury	-	-	70,000	7	70,000	7
Share conversion:
-  Income to Growth	(196,466)	(20)	-	-	(196,466)	(20)
-  Growth to Income	154,747	15	-	-	154,747	15
-  Change in nominal value^	-	(178)	-	1	-	(177)
Balance at 30 November 2019^	35,593,210	3,380	(130,000)	(12)	35,463,210	3,368

	Deferred shares -
		Growth
	Number	£'000
Deferred shares - Growth
Balance at 1 June 2019	-	-
Issue of 35,438,463 shares*	35,438,463	178
Balance at 30 November 2019	35,438,463	178
Total called-up share capital		3,558

^ As part of the conversion process, which was carried out during the period in accordance with the Company's  

   Articles, the nominal value of each Growth share changed from £0.1 to £0.094976101 per Growth share.

* The nominal value of a deferred share is £0.005023899 per share.

During the period the Company bought back 200,000 (30 November 2018: nil; 31 May 2019: 75,000)

Growth shares to be held in treasury and resold out of treasury 70,000 (30 November 2018: nil; 31 May 2019: 75,000) Growth shares. At 30 November 2019, the Company held 130,000 Growth shares in treasury.

During the period, valid conversions were received to convert 196,466 Growth shares (which represented a value of £407,000). These were converted into 305,314 Income shares in accordance with the Company's Articles and by reference to the ratio of the relative underlying net asset values of the Growth shares and Income shares on the conversion date.

The Company's Articles allow for Deferred shares to be allotted as part of the share conversion to

ensure that the conversion does not result in a reduction of the aggregate par value of the Company's issued share capital. The Deferred shares issued as part of the share conversion in the current period are set out above. The Deferred shares will be repurchased by the Company from time to time as authorised by shareholders at the September 2019 AGM.

8.     Net asset value per share

	30 November 2019	30 November 2018	31 May 2019
Income shares
Net asset value per share - pence	136.75p	128.31p	131.81p
Net assets attributable at end of   period - £'000s	60,971	55,070	57,628
Shares in issue at end of period - number	44,585,537	42,920,705	43,720,705
Growth shares
Net asset value per share - pence	214.62p	199.11p	205.17p
Net assets attributable at end of   period - £'000s	76,110	70,950	73,113
Shares in issue at end of period - number	35,463,210	35,634,929	35,634,929

9.    Reconciliation of return on ordinary activities before tax to net cash flows from operating activities

Six months to 30 November 2019	Income shares £'000		Growth shares £'000	Total £'000
Return on ordinary activities before tax Adjust for returns from non-operating activities:		3,624	3,355	6,979
Gains on investments		(2,624)	(3,228)	(5,852)
Exchange losses		1	-	1
Return from operating activities		1,001	127	1,128
Increase in prepayments		-	(4)	(4)
(Decrease)/increase in creditors		(45)	5	(40)
Withholding tax recovered		13	-	13
Dividend income		(1,407)	(504)	(1,911)
Interest income		(4)	(12)	(16)
Interest expense		55	-	55
Net cash outflow from operations before dividends and interest		(387)	(388)	(775)

Six months to 30 November 2018	Income shares £'000		Growth shares £'000	Total £'000
Return on ordinary activities before tax Adjust for returns from non-operating activities:		(1,308)	(2,550)	(3,858)
Losses on investments		2,174	2,573	4,747
Exchange losses		2	-	2
Return from operating activities		868	23	891
Decrease in prepayments		6	10	16
Increase/(decrease) in creditors		48	(135)	(87)
Withholding tax recovered/(suffered)		3	(3)	-
Dividend income		(1,290)	(524)	(1,814)
Interest income		(3)	(5)	(8)
Interest expense		55	-	55
Net cash outflow from operations before dividends and interest		(313)	(634)	(947)

Year to 31 May 2019		Income shares £'000	Growth shares £'000	Total £'000
Return on ordinary activities before tax Adjust for returns from non-operating activities:	1,366		(395)	971
Losses on investments	465		415	880
Exchange losses	8		-	8
Return from operating activities	1,839		20	1,859
Decrease in prepayments	9		13	22
Increase in creditors	71		6	77
Withholding tax suffered	(17)		(3)	(20)
Dividend income	(2,626)		(1,000)	(3,626)
Interest income	(9)		(20)	(29)
Interest expense	109		-	109
Net cash outflow from operations before dividends and interest	(624)		(984)	(1,608)

10.  Earnings

       Earnings for the six months to 30 November 2019 should not be taken as a guide to the results of the full year to 31 May 2020.

11.   Tax

       The effective revenue tax rate for the period to 30 November 2019 is nil % (30 November 2018: 0.5%; 31 May 2019: 0.8%).  This is lower than the rate of corporation tax for small companies due to the level of non-taxable dividend income.

12.   Bank borrowing

       The Company has a £5 million fixed term loan to 10 February 2022 with The Royal Bank of Scotland International Limited. £5 million of the fixed term loan was drawn down as at 30 November 2019 at a fixed interest rate of 2.03% per annum.

13.   Going concern

       In assessing the going concern basis of accounting, the Directors have had regard to the guidance issued by the Financial Reporting Council and have undertaken a rigorous review of the Company's ability to continue as a going concern. As part of that review, the Board considered a range of Brexit scenarios and their probable implications for the Company's two investment portfolios.

The Company's investment objective and policy, which is subject to regular Board monitoring processes, is designed to ensure that the Company is invested principally in listed securities. The Company retains title to all assets held by its custodian and has an agreement relating to its borrowing facility with which it has complied. Cash is only held with banks approved and regularly reviewed by the Manager.

       The Directors believe, in light of the controls and review processes and bearing in mind the nature of the Company's business and assets and revenue and expenditure projections, that the Company has adequate resources to continue in operational existence within its stated investment policy for a period of at least twelve months commencing from the date of approval of the financial statements. Accordingly, the financial statements have been drawn up on the basis that the Company is a going concern.

       The Company does not have a fixed life, however, the Company's Articles of Association require the Board to put a resolution to shareholders at every fifth AGM to continue the Company. An ordinary resolution to approve the continuation of the Company was passed at the AGM held on 19 September 2018 and will next be put to shareholders at the AGM in 2023.

14.   Related party transactions

       The Directors of the Company are considered a related party.  There have been no transactions with related parties during the first six months of the current financial year that have materially affected the financial position or performance of the Company during the period and there have been no changes in the related party transactions described in the last Annual Report that could do so.

15.   Results

       The Company's auditor, KPMG LLP, has not audited or reviewed the Interim Report to 30 November 2019 pursuant to the Auditing Practices Board guidance on 'Review of Interim Financial Information'. These are not full statutory financial statements in terms of Section 434 of the Companies Act 2006 and are unaudited.  Statutory financial statements for the year ended 31 May 2019, which received an unqualified audit report, and which did not contain a statement under Section 498 of the Companies Act 2006, have been lodged with the Registrar of Companies.  The abridged financial statements included for the year ended 31 May 2019 are an extract from those financial statements.  No full statutory financial statements in respect of any period after 31 May 2019 have been reported on by the Company's auditor or delivered to the Registrar of Companies. The Interim Report will be posted to shareholders shortly and is available on the website: www.bmomanagedportfolio.com  

Alternative Performance Measures ("APMs")

The Company uses the following APMs:

Discount/premium - the share price of an investment company is derived from buyers and sellers trading their shares on the stock market. This price is not identical to the net asset value (NAV) per share of the underlying assets less liabilities of the Company. If the share price is lower than the NAV per share, the shares are trading at a discount. This usually indicates that there are more sellers of shares than buyers. Shares trading at a price above NAV per share are deemed to be at a premium usually indicating there are more buyers of shares than sellers.

		30 November 2019		31 May 2019
		Income shares	Growth shares	Income shares	Growth shares
Net asset value per share	(a)	136.75p	214.62p	131.81p	205.17p
Share price	(b)	137.50p	213.00p	134.50p	206.00p
+Premium/-discount (c=(b-a)/(a))	(c)	+0.5%	-0.8%	+2.0%	+0.4%

Total return - the return to shareholders calculated on a per share basis by adding dividends paid in the period to the increase or decrease in the share price or NAV in the period. The dividends are assumed to have been re-invested in the form of shares or net assets, respectively, on the date on which the shares were quoted ex-dividend.

The effect of reinvesting these dividends on the respective ex-dividend dates and the share price total returns and NAV total returns are shown below.

	Six months to		Year to
	30 November 2019		31 May 2019
	Income shares	Growth shares	Income shares	Growth shares
NAV per share at start of financial period/year	131.81p	205.17p	135.29p	206.23p
NAV per share at end of financial period/year	136.75p	214.62p	131.81p	205.17p
Change in the period/year	3.7%	4.6%	-2.6%	-0.5%
Impact of dividend reinvestment (1)	2.6%	n/a	5.1%	n/a
NAV total return for the period/year	6.3%	4.6%	2.5%	-0.5%

 ⁽¹⁾ During the six months to 30 November 2019 dividends totalling 3.30p went ex dividend with respect to the Income shares. During the year to 31 May 2019 the equivalent figure was 6.65p.

	Six months to 30 November 2019		Year to 31 May 2019
	Income shares	Growth shares	Income shares	Growth shares
Share price per share at start of financial period/year	134.5p	206.0p	138.0p	209.0p
Share price per share at end of financial period/year	137.5p	213.0p	134.5p	206.0p
Change in the period/year	2.2%	3.4%	-2.5%	-1.4%
Impact of dividend reinvestment (1)	2.5%	n/a	5.0%	n/a
Share price total return for the period/year	4.7%	3.4%	2.5%	-1.4%

⁽¹⁾ During the six months to 30 November 2019 dividends totalling 3.3p went ex dividend with respect   

   to the Income shares.  During the year to 31 May 2019 the equivalent figure was 6.65p.

Yield - the total annual dividend expressed as a percentage of the period-end share price.

		30 November 2019	31 May 2019
Annual dividend	(a)	6.10p(1)	5.95p
Income share price	(b)	137.5p	134.5p
Yield (c=a/b)	(c)	4.4%	4.4%

⁽¹⁾  Based on dividends at the expected minimum annual rate of 6.10 pence per Income share for the

    financial year to 31 May 2020.

For further information, please contact:

Peter Hewitt, BMO Investment Business Limited              0131 718 1244

Ian Ridge, BMO Investment Business Limited                 0131 718 1010

 

END

 

 

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