Half-year Report

RNS Number : 1268N

BMO Managed Portfolio Trust PLC

28 January 2021

 

To:  RNS

Date:  28 January 2021

From: BMO Managed Portfolio Trust PLC

LEI:   213800ZA6TW45NM9YY31

Unaudited 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 2020.

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

· Dividend yield⁽¹⁾ of 4.8% at 30 November 2020, compared to the yield on the FTSE All-Share Index of 3.7%. Dividends are paid quarterly. First two interim dividends were maintained at the same level as the prior year.

· Net asset value total return⁽¹⁾ per Income share of +13.0% for the six months, outperforming the FTSE All-Share Index total return of +6.9% by +6.1%.

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

· Net asset value total return⁽¹⁾ per Growth share of +20.0% for the six months, outperforming the FTSE All-Share Index total return of +6.9% by +13.1%.

· NAV total return compound annual growth rate⁽¹⁾ of +10.0% over 10 years compared with a return of +5.9% from the FTSE All-Share Index.

Notes:

(1)  Yield, total return and compound annual growth rate - See Alternative Performance Measures.

Chairman's Statement

Highlights

· Net asset value ("NAV") total return for the six months of +13.0% for the Income shares and +20.0% for the Growth shares, both classes outperforming the FTSE All-Share Index total return of +6.9%

· NAV total return compound annual growth rate over 10 years of +7.8% for the Income shares and +10.0% for the Growth shares compared with a return of +5.9% from the FTSE All-Share Index.

· Income share dividend yield of 4.8% at 30 November 2020

Investment performance

For the six months to 30 November 2020, the NAV total return was +13.0% for the Income shares and +20.0% for the Growth shares. The total return for the benchmark index for both share classes, the FTSE All-Share Index, was +6.9%. The long-term track record continues to show the NAV total return for both share classes outperforming the benchmark index over 3 years, 5 years and 10 years

to 30 November 2020, with the NAV total return over 10 years achieving a compound annual growth

rate of +7.8% for the Income shares and +10.0% for the Growth shares compared with a return of +5.9% from the benchmark index.

Given the level of market uncertainty the rate for the first two interim dividends has been maintained at that paid in the prior year and the yield on the Income shares of 4.8% remains higher than the yield of 3.7% on the FTSE All-Share Index as at 30 November 2020.

The period under review witnessed markets operating under the spectre of the COVID-19 pandemic. As a result of strict lockdowns, the European and US economies went into a sharp and deep recession during the second calendar quarter of 2020. Restrictions were gradually eased, only to be tightened again as a second wave of the pandemic became apparent. The UK equity market was particularly hard hit and for most of the period continued to move lower until the announcement of the first vaccine in early November. Equity markets globally rallied strongly, especially in Europe and the UK as investors looked ahead to an opening up of economies and a return to a degree of normality.

The Growth portfolio performed strongly over the period as a number of investment companies with

significant exposure to the wider technology sector performed well. This trend was led by Scottish Mortgage Investment Trust (the largest listed investment company) which rose over 50%. The trust benefitted from the extraordinary rise in the share price of its largest holding electric vehicle manufacturer Tesla. Its next biggest holding Amazon also performed well as demand for its online shopping was very strong. The next two best performers were UK equity trusts which had both experienced, for long periods, a difficult time in terms of performance. However, following the vaccine announcement in November they enjoyed substantial gains. Over the six months under review, Artemis Alpha Trust rose by 42% and Henderson Opportunities Trust appreciated by 41%; however, in both cases the majority of the share price rises happened following the vaccine announcement.

Due to the requirement for yield it is challenging for the Income portfolio to gain exposure to the secular growth opportunities offered by investment trusts in the technology sector where the underlying companies often pay no or very low dividends. It is nonetheless encouraging that the Income portfolio outperformed its benchmark. The leading contributor with a 41% gain was Princess Private Equity Holding which specialises in mid-sized private companies primarily in the US and Europe with a focus on software, education, and digital platforms in a variety of different sectors. Long-time holding JPMorgan Global Emerging Markets Income Trust was ahead by 29% in a better environment for companies in emerging markets and Law Debenture Corporation gained 27% as UK equities rallied strongly following the vaccine announcement.

The Trust's excellent performance was recognised when the Growth portfolio once again won the 2020 Investment Week Investment Trust of the Year Award for the Flexible Investment sector.

(All share prices are total return).

Revenue and dividends

The Company's net revenue for the six months was £1.67 million which is equivalent to 3.57p per Income share (compared to 3.40p per Income share for the corresponding period in 2019). Income shares are entitled to all the dividends paid by the Company. One benefit of the closed-end investment trust structure is the ability to utilise revenue reserves, built up in previous years, to sustain dividend payments during periods when there is a significant reduction in dividend income from underlying holdings. That was the case in the interim period to 30 November 2020 and enabled many of our holdings to sustain or, in some cases, grow their dividend payments.

While the net revenue per Income share has increased in the current period by approximately 5%, given the continuing level of market uncertainty, the Company maintained the dividend rate when it declared a first and second interim dividend in respect of the year to 31 May 2021, each of 1.4p per Income share (1.4p per Income share in the corresponding period in the year to 31 May 2020).

In the absence of unforeseen circumstances, the Board intends to pay three interim dividends, each of 1.4p per Income share, and aggregate dividends for the current financial year to 31 May 2021 will be at least 6.1p per Income share (2020: 6.1p 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 2020 of 4.8%.

Borrowing

At 30 November 2020 the Income portfolio had total borrowings of £5 million (7.8% 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 2020 the average discount to NAV for the Income shares and for the Growth shares was 0.2% and 0.4% respectively. At 30 November 2020, the Income shares stood at a discount to NAV of 0.1% and the Growth shares at a premium of 0.4% 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. On 5 November 2020 the conversion proceeded, for those shareholders who had elected to do so. The net result of those conversions was a decrease of 115,747 Income shares and an increase of 58,343 Growth shares in issue. 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 2021. Details will be provided when the Company's annual report is published in late July 2021.

Outlook

After the experience of 2020 where the pandemic caused an unprecedented sharp and deep recession the news of a number of effective vaccines has brought the hope that by the second half of this calendar year economies will be moving towards normalisation. Financial markets are assuming this will be the case. In the meantime, massive monetary and fiscal stimulation from various governments and Central Banks is being undertaken to ensure recovery will be robust as the year unfolds. Valuations of many equity markets (particularly the US) are at high levels, however the expectation is that economic recovery will be accompanied by a rapid and substantial recovery in corporate earnings in 2021.

Since the Brexit referendum in 2016 UK equities have been a persistent underperformer relative to most other major equity markets. This has left the UK very attractively valued when compared to other global equity markets. Conclusion of the post-Brexit trade agreement and the removal of the accompanying prolonged uncertainty should help to clear the way for a revival in the relative performance of the UK equity market. Although current lockdowns may delay the recovery, there is confidence that widespread vaccination will eventually bring about a concerted move towards normality.

Colin S McGill

Chairman

27 January 2021

 

Unaudited Condensed Income Statement

Six months to 30 November 2020

		Notes	Revenue	Capital	Total
			£'000	£'000	£'000
Gains on investments			-	20,873	20,873
Foreign exchange losses			-	(13)	(13)
Income		2	2,109	-	2,109
Investment management and performance fees		3	(138)	(619)	(757)
Other expenses			(281)	-	(281)
Return on ordinary activities before   finance costs and tax			1,690	20,241	21,931
Finance costs			(22)	(33)	(55)
Return on ordinary activities before tax			1,668	20,208	21,876
Tax on ordinary activities			-	-	-
Return attributable to shareholders			1,668	20,208	21,876
Return per Income share		5	3.57p	11.12p	14.69p
Return per Growth share		5	-	41.58p	41.58p

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.

Return attributable to shareholders represents the profit/(loss) for the period and also total comprehensive income.

Unaudited Condensed Income Statement

Six months to 30 November 2019

	Notes	Revenue	Capital	Total
		£'000	£'000	£'000
Gains on investments Foreign exchange losses		- -	5,852 (1)	5,852 (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.

Return attributable to shareholders represents the profit/(loss) for the period and also total comprehensive income.

 

Condensed Income Statement (audited)

Year to 31 May 2020

		Notes	Revenue	Capital	Total
			£'000	£'000	£'000
Losses on investments			-	(5,376)	(5,376)
Foreign exchange losses			-	(13)	(13)
Income		2	3,851	-	3,851
Investment management and performance fees		3	(257)	(1,093)	(1,350)
Other expenses			(537)	-	(537)
Return on ordinary activities before   finance costs and tax			3,057	(6,482)	(3,425)
Finance costs			(44)	(66)	(110)
Return on ordinary activities before tax			3,013	(6,548)	(3,535)
Tax on ordinary activities			(13)	-	(13)
Return attributable to shareholders			3,000	(6,548)	(3,548)
Return per Income share		5	6.69p	(17.13p)	(10.44p)
Return per Growth share		5	-	3.18p	3.18p

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.

Return attributable to shareholders represents the profit/(loss) for the year and also total comprehensive income.

 

Unaudited Condensed Balance Sheet

As at 30 November 2020

	Notes	Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Fixed assets
Investments	4	63,466	88,159	151,625
Current assets
Debtors		230	77	307
Cash at bank and on deposit		1,237	3,127	4,364
		1,467	3,204	4,671
Creditors: Amounts falling due within one year		(491)	(393)	(884)
Net current assets		976	2,811	3,787
Creditors: Amounts falling due in more than one year	12	(5,000)	-	(5,000)
Net assets		59,442	90,970	150,412
Capital and reserves:
Called-up share capital	7	4,446	3,458	7,904
Share premium		27,359	23,019	50,378
Capital redemption reserve		252	364	616
Special Reserve		18,990	17,162	36,152
Capital reserves		5,442	46,967	52,409
Revenue reserve		2,953	-	2,953
Shareholders' funds		59,442	90,970	150,412
Net asset value per share (pence)	8	127.16p	249.94p

 

Unaudited Condensed Balance Sheet

As at 30 November 2019

	Notes	Income shares	Growth shares	Total
		£'000	£'000	£'000
Fixed assets
Investments		64,170	71,939	136,109
Current assets
Debtors Cash at bank and on deposit		252 1,860	81 4,543	333 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		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

 

Condensed Balance Sheet (audited)

As at 31 May 2020

	Notes	Income shares	Growth shares	Total
		£'000	£'000	£'000
Fixed assets
Investments	4	57,887	72,356	130,243
Current assets
Debtors		219	79	298
Cash at bank and on deposit		1,061	3,071	4,132
		1,280	3,150	4,430
Creditors
Amounts falling due within one year		(173)	(733)	(906)
Net current assets		1,107	2,417	3,524
Creditors
Amounts falling due in more than one year		(5,206)	-	(5,206)
Net assets		53,788	74,773	128,561
Capital and reserves
Called-up share capital		4,415	3,408	7,823
Share premium		26,909	22,006	48,915
Capital redemption reserve		252	364	616
Special reserve		19,147	17,034	36,181
Capital reserves		240	31,961	32,201
Revenue reserve		2,825	-	2,825
Shareholders' Funds		53,788	74,773	128,561
Net asset value per share (pence)	8	115.71p	208.35p

 

Unaudited Condensed Statement of Cash Flows

Six months to 30 November 2020

	Notes	Income shares	Growth shares	Total
		£'000	£'000	£'000
Net cash outflow from operations before dividends   and interest	9	(277)	(942)	(1,219)
Dividends received		1,519	531	2,050
Interest received		-	-	-
Interest paid		(52)	-	(52)
Net cash inflow/(outflow) from operating activities		1,190	(411)	779
Investing activities
Purchases of investments		(1,327)	(2,777)	(4,104)
Sales of investments		1,529	2,053	3,582
Cash flows from investing activities		202	(724)	(522)
Cash flows before financing activities		1,392	(1,135)	257
Financing activities
Equity dividends paid Net proceeds from issuance of new shares	6	(1,540) 488	- 1,056	(1,540) 1,544
Sale of shares from treasury		-	-	-
Shares purchased to be held in treasury		(29)	-	(29)
Share conversion		(135)	135	-
Cash flows from financing activities		(1,216)	1,191	(25)
Net movement in cash and cash equivalents		176	56	232
Cash and cash equivalents at the beginning of the period		1,061	3,071	4,132
Cash and cash equivalents at the end of the period		1,237	3,127	4,364
Represented by: Cash at bank and short-term deposits		1,237	3,127	4,364

 

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 Sale of shares from treasury Shares purchased to be held in treasury	6	(1,448) 1,081 - -		- - 150 (422)	(1,448) 1,081 150 (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

 

Condensed Statement of Cash Flows (audited)

Year to 31 May 2020

	Notes	Income shares		Growth shares	Total
		£'000		£'000	£'000
Net cash outflow from operations before dividends   and interest	9	(720)	(758)		(1,478)
Dividends received		2,829	1,028		3,857
Interest received		10	18		28
Interest paid		(102)	-		(102)
Net cash inflow from operating activities		2,017	288		2,305
Investing activities
Purchases of investments		(6,668)	(3,428)		(10,096)
Sales of investments		3,617	1,111		4,728
Cash flows from investing activities		(3,051)	(2,317)		(5,368)
Cash flows before financing activities		(1,034)	(2,029)		(3,063)
Financing activities
Equity dividends paid	6	(2,713)	-		(2,713)
Net proceeds from issue of new shares Sale of shares from treasury		3,466 -	594 443		4,060 443
Shares purchased to be held in treasury		-		(422)	(422)
Share conversion		86		(86)	-
Cash flows from financing activities		839	529		1,368
Net movement in cash and cash equivalents		(195)	(1,500)		(1,695)
Cash and cash equivalents at the beginning of the year		1,256	4,571		5,827
Cash and cash equivalents at the end of the year		1,061	3,071		4,132
Represented by: Cash at bank and short-term deposits		1,061	3,071		4,132

 

Unaudited Condensed Statement of Changes in Equity

Six months to 30 November 2020

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 2020	4,415	26,909	252	19,147	240	2,825	53,788
Increase in share capital in issue, net of share issuance expenses	38	450	-	-	-	-	488
Shares purchased for treasury	-	-	-	(29)	-	-	(29)
Share conversion	(7)	-	-	(128)	-	-	(135)
Transfer of net income from Growth to Income portfolio	-	-	-	-	-	310	310
Transfer of capital from Income to Growth portfolio	-	-	-	-	(310)	-	(310)
Dividends paid	-	-	-	-	-	(1,540)	(1,540)
Return attributable to shareholders	-	-	-	-	5,512	1,358	6,870
As at 30 November 2020	4,446	27,359	252	18,990	5,442	2,953	59,442
Growth shares
As at 31 May 2020	3,408	22,006	364	17,034	31,961	-	74,773
Increase in share capital in issue, net of issuance expenses	43	1,013	-	-	-	-	1,056
Share conversion	7	-	-	128	-	-	135
Transfer of net income from Growth to Income portfolio	-	-	-	-	-	(310)	(310)
Transfer of capital from Income to Growth portfolio	-	-	-	-	310	-	310
Return attributable to shareholders	-	-	-	-	14,696	310	15,006
As at 30 November 2020	3,458	23,019	364	17,162	46,967	-	90,970
Total Company
As at 31 May 2020	7,823	48,915	616	36,181	32,201	2,825	128,561
Increase in share capital in issue, net of share issuance expenses	81	1,463	-	-	-	-	1,544
Shares purchased for treasury	-	-	-	(29)	-	-	(29)
Share conversion	-	-	-	-	-	-	-
Dividends paid	-	-	-	-	-	(1,540)	(1,540)
Return attributable to shareholders	-	-	-	-	20,208	1,668	21,876
Total Company as at 30 November 2020	7,904	50,378	616	36,152	52,409	2,953	150,412

 

Unaudited CondensedStatement 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 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

 

CondensedStatement of Changes in Equity (audited)

Year to 31 May 2020

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	260	3,206	-	-	-	-	3,466
Share conversion	5	-	-	81	-	-	86
Cancellation of deferred shares	(222)	-	222	-	-	-	-
Transfer of net income from Growth to Income portfolio	-	-	-	-	-	680	680
Transfer of capital from Income to Growth portfolio	-	-	-	-	(680)	-	(680)
Dividends paid	-	-	-	-	-	(2,713)	(2,713)
Return attributable to shareholders	-	-	-	-	(6,999)	2,320	(4,679)
As at 31 May 2020	4,415	26,909	252	19,147	240	2,825	53,788
Growth Shares
As at 31 May 2019	3,563	21,417	186	17,117	30,830	-	73,113
Increase in share capital in issue, net of share issuance expenses	28	566	-	-	-	-	594
Shares sold from treasury	-	23	-	420	-	-	443
Shares purchased for treasury	-	-	-	(422)	-	-	(422)
Share conversion	(5)	-	-	(81)	-	-	(86)
Cancellation of deferred shares	(178)	-	178	-	-	-	-
Transfer of net income from Growth to Income portfolio	-	-	-	-	-	(680)	(680)
Transfer of capital from Income to Growth portfolio	-	-	-	-	680	-	680
Return attributable to shareholders	-	-	-	-	451	680	1,131
As at 31 May 2020	3,408	22,006	364	17,034	31,961	-	74,773
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	288	3,772	-	-	-	-	4,060
Shares sold from treasury	-	23	-	420	-	-	443
Shares purchased for treasury	-	-	-	(422)	-	-	(422)
Share conversion	-	-	-	-	-	-	-
Cancellation of deferred shares	(400)	-	400	-	-	-	-
Dividends paid	-	-	-	-	-	(2,713)	(2,713)
Return attributable to shareholders	-	-	-	-	(6,548)	3,000	(3,548)
Total Company as at 31 May 2020	7,823	48,915	616	36,181	32,201	2,825	128,561

 

Notes

1.  Accounting policies

These 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 2020.

2.  Income

	Six months to 30 November 2020	Six months to 30 November 2019	Year to 31 May 2020
	£'000	£'000	£'000
UK dividends	1,579	1,285	2,679
Overseas dividends	530	626	1,144
Deposit income	-	16	28
Total income	2,109	1,927	3,851

3.  Investment management and performance fees

  During the period, the Company incurred investment management fees of £483,000 (30 November 2019: £447,000; 31 May 2020: £881,000) of which £250,000 was payable to BMO Investment Business Limited at the period end.  

At 30 November 2020 the adjusted total return of the Income portfolio for the period since 31 May 2020 (being the date a performance fee was last accrued) exceeded that of the FTSE All-Share Index and a performance fee of £114,000 was accrued in the Income portfolio at 30 November 2020 (30 November 2019: £25,000; 31 May 2020: £206,000).

At 30 November 2020 the adjusted total return of the Growth portfolio since 31 May 2020 (being the date a performance fee was last payable) exceeded that of the FTSE All-Share Index and a performance fee of £160,000 was accrued in the Growth portfolio at 30 November 2020 (30 November 2019: £nil; 31 May 2020: £263,000).

As the NAV per Income share at 31 May 2020 was less than the Watermark NAV at 31 May 2019 (the date a performance fee was last payable in the Income portfolio) payment of the performance fee of £206,000 which was accrued in the Income portfolio at 31 May 2020 is deferred until the end of the next financial year when the NAV per share for the Income 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 2020 Gains at 31 May 2020	51,603 6,284	46,858 25,498	98,461 31,782
Valuation at 31 May 2020 Movement in the period: Purchases at cost Sales proceeds (Losses)/gains on investments sold in the period Gains on investments held at period end	57,887 1,314 (1,529) (575) 6,369	72,356 2,777 (2,053) 178 14,901	130,243 4,091 (3,582) (397) 21,270
Valuation of investments held at 30 November 2020	63,466	88,159	151,625

	Income shares Level 1* £'000	Growth shares Level 1* £'000	Total £'000
Cost at 30 November 2020 Gains at 30 November 2020	50,813 12,653	47,760 40,399	98,573 53,052
Valuation at 30 November 2020	63,466	88,159	151,625

* Fair value hierarchy

Gains on investments	Income shares £'000	Growth shares £'000	Total £'000
(Losses)/gains on investments sold in the period Gains on investments held at period end	(575) 6,369	178 14,901	(397) 21,270
Valuation at 30 November 2020	5,794	15,079	20,873

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 2020 is as follows:

	Income shares			Growth shares
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Return attributable to portfolios	1,358	5,512	6,870	310	14,696	15,006
Transfer of net income from Growth to Income portfolio	310	-	310	(310)	-	(310)
Transfer of capital from Income to Growth portfolio	-	(310)	(310)	-	310	310
Return attributable to shareholders	1,668	5,202	6,870	-	15,006	15,006
Return per share	3.57p	11.12p	14.69p	-	41.58p	41.58p
Weighted average number of shares in issue during the period	46,766,360			36,089,942

  The return per share for the comparative 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 year to 31 May 2020 is as follows:

	Income shares			Growth shares
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Return attributable to portfolios	2,320	(6,999)	(4,679)	680	451	1,131
Transfer of net income from Growth to Income  portfolio	680	-	680	(680)	-	(680)
Transfer of capital from Income to Growth portfolio	-	(680)	(680)	-	680	680
Return attributable to shareholders	3,000	(7,679)	(4,679)	-	1,131	1,131
Return per share	6.69p	(17.13p)	(10.44p)	-	3.18p	3.18p
Weighted average number of shares in issue during the period	44,837,359			35,573,520

 

6.  Dividends

	Payment	Six months to 30 November 2020	Six months to 30 November 2019	Year to 31 May 2020
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 1.9p (prior period: 1.9p) per Income share	10 Jul 2020	883	831	831
In respect of the period under review:
- first interim of 1.4p (prior period: 1.4p) per Income share	9 Oct 2020	657	617	617
- second interim (prior period: 1.4p per Income share)	-	-	-	628
- third interim (prior period: 1.4p per Income share)	-	-	-	637
		1,540	1,448	2,713

  A second interim dividend in respect of the year to 31 May 2021 of 1.4p per Income share was paid on 8 January 2021 to shareholders on the register on 18 December 2020. This amount has not been accrued in the results for the six months to 30 November 2020.

  For the financial year to 31 May 2020 interim dividends totalled 6.1p 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 2020^	46,485,537	4,415	-	-	46,485,537	4,415
Issued	400,000	38	-	-	400,000	38
Share conversion:
-  Income to Growth	(258,490)	(25)	-	-	(258,490)	(25)
-  Growth to Income	142,743	14	-	-	142,743	14
Purchased for treasury	-	-	(25,000)	(2)	(25,000)	(2)
Balance at 30 November 2020^	46,769,790	4,442	(25,000)	(2)	46,744,790	4,440

	Deferred shares - Income
	Number	£'000
Deferred shares - Income
Balance at 1 June 2020	-	-
Issue of 258,490 shares*	258,490	4
Balance at 30 November 2020	258,490	4
Total called-up share capital		4,446

^ The nominal value of each Income share is £0.094976101 per Income share.

* The nominal value of a Deferred share is £0.0164991878 per share.

During the period, the Company issued 400,000 Income shares (30 November 2019: 800,000; 31 May 2020: 2,700,000) from the block listing facilities receiving net proceeds of £488,000 (30 November 2019: £1,081,000; 31 May 2020: £3,466,000) and purchased for treasury 25,000 Income shares at a cost of £29,000.  At 30 November 2020, the Company held 25,000 Income shares in treasury (30 November 2019: nil; 31 May 2020: nil).

During the period, valid conversion notices were received to convert 258,490 Income shares (which represented a value of £301,000). These were converted into 130,294 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 2020 AGM.

	Listed		Held in treasury		In issue
	Number	£'000	Number	£'000	Number	£'000
Growth shares
Balance at 1 June 2020^	35,888,210	3,408	-	-	35,888,210	3,408
Issued	450,000	43	-	-	450,000	43
Share conversion:
-  Growth to Income	(71,951)	(6)	-	-	(71,951)	(6)
-  Income to Growth	130,294	12	-	-	130,294	12
Balance at 30 November 2020^	36,396,553	3,457	-	-	36,396,553	3,457

	Deferred shares -
		Growth
	Number	£'000
Deferred shares - Growth
Balance at 1 June 2020	-	-
Issue of 71,951 shares*	71,951	1
Balance at 30 November 2020	71,951	1
Total called-up share capital		3,458

^ The nominal value of each Growth share is £0.094976101 per Growth share.

* The nominal value of a Deferred share is £0.0164991878 per share.

During the period, the Company issued 450,000 Growth shares (30 November 2019: nil; 31 May 2020: 295,000) from the block listing facilities receiving net proceeds of £1,056,000 (30 November 2019: £nil; 31 May 2020: £594,000).  At 30 November 2020, the Company held nil Growth shares in treasury (30 November 2019: 130,000; 31 May 2020: nil).

During the period, valid conversions were received to convert 71,951 Growth shares (which represented a value of £166,000). These were converted into 142,743 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 2020 AGM.

 

8.  Net asset value per share

	30 November 2020	30 November 2019	31 May 2020
Income shares
Net asset value per share - pence	127.16p	136.75p	115.71p
Net assets attributable at end of   period - £'000	59,442	60,971	53,788
Shares in issue at end of period - number	46,744,790	44,585,537	46,485,537
Growth shares
Net asset value per share - pence	249.94p	214.62p	208.35p
Net assets attributable at end of   period - £'000	90,970	76,110	74,773
Shares in issue at end of period - number	36,396,553	35,463,210	35,888,210

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

Six months to 30 November 2020	Income shares £'000		Growth shares £'000	Total £'000
Return on ordinary activities before tax Adjust for returns from non-operating activities:		6,870	15,006	21,876
Gains on investments		(5,794)	(15,079)	(20,873)
Exchange losses		13	-	13
Return from operating activities		1,089	(73)	1,016
Decrease in prepayments		5	5	10
Increase/(decrease) in creditors		112	(340)	(228)
Withholding tax recovered		37	-	37
Dividend income		(1,575)	(534)	(2,109)
Interest expense		55	-	55
Net cash outflow from operations before dividends and interest		(277)	(942)	(1,219)

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)

Year to 31 May 2020		Income shares £'000	Growth shares £'000	Total £'000
Return on ordinary activities before tax Adjust for returns from non-operating activities:	(4,666)		1,131	(3,535)
Losses/(gains) on investments	6,472		(1,096)	5,376
Exchange losses	13		-	13
Return from operating activities	1,819		35	1,854
Decrease in prepayments	(3)		(6)	(9)
Increase in creditors	138		285	423
Withholding tax suffered	(5)		-	(5)
Dividend income	(2,769)		(1,054)	(3,823)
Interest income	(10)		(18)	(28)
Interest expense	110		-	110
Net cash outflow from operations before dividends and interest	(720)		(758)	(1,478)

10.  Earnings

  Earnings for the six months to 30 November 2020 should not be taken as a guide to the results for the full year to 31 May 2021.

11.  Tax

  The effective revenue tax rate for the period to 30 November 2020 is nil% (30 November 2019: nil%; 31 May 2020: 0.4%).  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 2020 at a fixed interest rate of 2.03% per annum.

During the period there were no changes in the amount borrowed and therefore no change in

liabilities arising from financing activities.

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 (including that related to COVID-19) and have undertaken a rigorous review of the Company's ability to continue as a going concern and specifically in the context of the COVID-19 pandemic .

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 value of these investments exceeds the Company's liabilities by a significant margin.

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, having assessed the principal risks and other matters, including the COVID-19 pandemic and 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 2020 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 2020, 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 2020 are an extract from those financial statements.  No full statutory financial statements in respect of any period after 31 May 2020 have been reported on by the Company's auditor or delivered to the Registrar of Companies.

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 Annual Report for the year ended 31 May 2020.

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 principal risks identified in the Annual Report were:

· Market Risk. The Company's assets consist mainly of listed closed-end investment companies and its principal financial risks are therefore market related and include market risk (comprising currency risk, interest rate risk and other price risk), liquidity risk and credit risk

· Investment Risk

· Custody Risk

· Operational Risk

These include risks in relation to failures at service providers or loss or sabotage of data through

cyber threats or business continuity failure.

The Board has also considered the impact of Coronavirus (COVID-19) which has

increased uncertainty and volatility in markets and has impacted the value of investments. In

addition the operational resilience of the Manager and the Company's other third party service providers has been considered. This is included within financial risk and operational risk.

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 Rule ('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 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

27 January 2021

 

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 2020		31 May 2020
		Income shares	Growth shares	Income shares	Growth shares
Net asset value per share	(a)	127.16p	249.94p	115.71p	208.35p
Share price	(b)	127.00p	251.00p	117.50p	212.00p
-Discount/+premium (c=(b-a)/(a))	(c)	-0.1%	+0.4%	+1.5%	+1.8%

Total return - the return to shareholders calculated on a per share basis taking into account both any 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 2020		31 May 2020
	Income shares	Growth shares	Income shares	Growth shares
NAV per share at start of financial period/year	115.71p	208.35p	131.81p	205.17p
NAV per share at end of financial period/year	127.16p	249.94p	115.71p	208.35p
Change in the period/year	9.9%	20.0%	-12.2%	1.5%
Impact of dividend reinvestment (1)	3.1%	n/a	4.9%	n/a
NAV total return for the period/year	13.0%	20.0%	-7.3%	1.5%

 ⁽¹⁾ During the six months to 30 November 2020 dividends totalling 3.3p went ex-dividend with respect to the Income shares. During the year to 31 May 2020 the equivalent figure was 6.1p.

	Six months to 30 November 2020		Year to 31 May 2020
	Income shares	Growth shares	Income shares	Growth shares
Share price per share at start of financial period/year	117.5p	212.0p	134.5p	206.0p
Share price per share at end of financial period/year	127.0p	251.0p	117.5p	212.0p
Change in the period/year	8.1%	18.4%	-12.6%	2.9%
Impact of dividend reinvestment (1)	3.0%	n/a	4.3%	n/a
Share price total return for the period/year	11.1%	18.4%	-8.3%	2.9%

⁽¹⁾ During the six months to 30 November 2020 dividends totalling 3.3p went ex-dividend with respect  

  to the Income shares.  During the year to 31 May 2020 the equivalent figure was 6.1p.

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

		30 November 2020	31 May 2020
Annual dividend	(a)	6.1p(1)	6.1p
Income share price	(b)	127.0p	117.5p
Yield (c=a/b)	(c)	4.8%	5.2%

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

  financial year to 31 May 2021.

Net gearing/net cash - this is the ratio of the borrowings of the Company to its net assets. If the Company has cash assets, these may be assumed to net off against borrowings giving a "net" gearing percentage. Where cash assets exceed borrowings, the Company is described as having "net cash".

	30 November 2020		31 May 2020
	Income shares	Growth shares	Income shares	Growth shares
	£'000	£'000	£'000	£'000
Borrowing	(5,000)	-	(5,000)	-
Cash	1,237	3,127	1,061	3,071
	(3,763)	3,127	(3,939)	3,071
Net assets	59,442	90,970	53,788	74,773
-Net gearing/ +net cash	-6.3%	+3.4%	-7.3%	+4.1%

Compound annual growth rate - converts the NAV total return over a period of more than one year to a constant annual rate of return applied to the compounded value at the start of each year.

30 November 2020
		Income shares	Growth shares
Indexed NAV total return at 30 November 2010		100.0	100.0
Indexed NAV total return at 30 November 2020		212.2	259.5
Period (years)		10.0	10.0
Compound annual growth rate		7.8%	10.0%

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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