Half-yearly Report

20 July 2010 THE THROGMORTON TRUST PLC Half yearly announcement of results in respect of the six months ended 31 May 2010 The Company's objective is to provide Shareholders with capital growth and an attractive total return from investment predominantly in UK smaller companies which are listed on the Official List and admitted to trading on the main market of the London Stock Exchange or are traded on AIM. Key Features - Investment in small/midcap portfolio - Approximately 30% of net assets may be invested in a Contracts for Difference portfolio - Benchmarked against the Hoare Govett Smaller Companies plus AIM (excluding investment companies) Index - Progressive dividend policy - Currently exposed to companies with significant revenues from Asia Pacific, the Americas and Emerging Markets Six months Six months ended ended 31 May 31 May 2010 2009 Change (unaudited) (unaudited) % Attributable to shareholders Assets Net assets (Â£'000) 116,842 106,917 9.3 Undiluted net asset value per ordinary share 157.54p 144.26p 9.2 - with income reinvested 12.3 Diluted net asset value per ordinary share 155.63p 144.26p 7.9 Ordinary share price (mid-market) 134.75p 115.75p 16.4 - with income reinvested 20.5 Subscription share price (mid-market) 8.05p 8.00p 0.6 Hoare Govett Smaller Companies plus AIM (excluding Investment Companies) Index 6,102.64 5,689.35 7.3 Six months Six months ended ended 31 May 31 May 2010 2009 Change (unaudited) (unaudited) % Revenue Net return after taxation (Â£'000) 1,013 2,389 -57.6 Return per ordinary share 1.37p 2.90p -52.8 Return per ordinary share (adjusted for VAT on management fees and interest thereon)* 1.37p 1.10p 24.5 Dividends per ordinary share Interim 0.58p 0.55p 5.5 * calculated on the weighted average number of shares. The Chairman's Report Performance For much of the six month period to 31 May 2010 markets continued to rise although latterly we have been experiencing a much more volatile climate, with May being a poor month for equities. The Company has performed positively during this six month period in both absolute and relative terms. The undiluted net asset value ("NAV") has increased by 12.3% with the share price rising 20.5%, outperforming the Company's benchmark, the Hoare Govett Smaller Companies plus AIM (excluding investment companies) Index which increased by 7.3%. (All percentages in sterling terms with income reinvested). The long only portfolio and the CFD portfolio both contributed to this outperformance generating total returns of Â£11.4million and Â£3.2million respectively. Since the period end, the Company's undiluted NAV has increased by 5.31% and the share price has remained static (with income reinvested). Further information on performance is included in the Investment Manager's Report. Revenue return and dividends Revenue return in the period amounted to 1.37 pence per share and the Board is pleased to declare an interim dividend of 0.58 pence per share (2009: 0.55 pence per share) payable on 31 August 2010 to shareholders on the register on 30 July 2010 (ex dividend date is 28 July 2010). This represents an increase of 5.5% over the previous interim dividend reflecting the Board's progressive dividend policy. The underlying increase in earnings per share amounted to 24.5% after adjusting for the interest on VAT refunded on management fees. Tender offer On 1 July 2010 the Company held a general meeting at which shareholders approved proposals, which are designed to: - provide for a tender offer for up to 25% of the ordinary shares in issue on 12 April 2010, the record date (excluding ordinary shares held in treasury) with a 9% exit charge and associated costs; - authorise the Directors to make subsequent repurchases of up to 14.99% of the ordinary shares in issue on the record date; - remove the obligation of the Board to consider tender offers on a twice-yearly basis; and - cancel the Company's share premium account to provide additional distributable reserves which may be required to allow the Company to undertake the purchase of ordinary shares. The results of the tender offer were announced on 29 June 2010. In total, 21.3% of the Company's ordinary shares will be repurchased under the tender offer. As the tender offer was undersubscribed the Company will not be implementing the subsequent repurchase of up to 14.99% of the ordinary shares in issue. Share capital During the six month period the Company has issued 48,367 ordinary shares following the conversion of subscription shares into ordinary shares. Total proceeds amounted to Â£71,000. Following the tender offer referred to above the Company now has 58,355,792 ordinary shares in the continuing pool (excluding 7,400,000 ordinary shares held in treasury and 15,808,683 ordinary shares in the exiting pools) and 14,774,534 subscription shares in issue. Following completion of the tender process the Company will have 58,355,792 ordinary shares in issue (excluding 7,400,000 ordinary shares held in treasury). The NAV and share price performance over the last 12 months have been strong and the Board believes that the Company is an attractive investment opportunity. Long term shareholders have expressed a desire for the Company to grow its market capitalisation and the Board will therefore focus on increasing the size of the Company for the benefit of all shareholders. Prospects The outlook for developed economies is one of sluggish progress in the face of headwinds. The Company's portfolio includes significant holdings in UK companies with notable exposure to emerging market economies where prospects are generally better than in developed markets. The Board and the Manager believe that there are some attractive opportunities for both the long only and the CFD portfolios. Richard Bernays Chairman 20 July 2010 Interim Management Report and Responsibility Statement The Chairman's statement and the Investment Managers' Report give details of important events which have occurred during the period and their impact on the financial statements. Principal risks and uncertainties The principal risks faced by the Company can be divided into various areas as follows: - Performance; - Income/dividend; - Regulatory; - Operational; and - Financial. The Board reported on the principal risks and uncertainties faced by the Company in the Annual Report and Financial Statements for the year ended 30 November 2008. A detailed explanation can be found on pages 14 and 15 of the Annual Report and Financial Statements which is available on the website maintained by the Investment Manager, BlackRock Investment Management (UK) Limited, at www.blackrock.co.uk/its. In the view of the Board, there have not been any changes to the fundamental nature of these risks since the previous report and these principal risks and uncertainties are equally applicable to the remaining six months of the financial year as they were to the six months under review. The Company may utilise both exchange traded and over-the-counter derivatives, including but not limited to CFDs, as part of its investment policy. These instruments can be highly volatile and potentially expose investors to a high risk of loss. Further details of the risk factors associated with the use of such derivatives can be found on page 49 of the Annual Report and Financial Statements. Related party transactions The Investment Manager is regarded as a related party and details of the management fees payable are set out in note 4. Directors' responsibility statement The Disclosure and Transparency Rules ("DTR") of the UK Listing Authority require the Directors to confirm their responsibilities in relation to the preparation and publication of the Interim Management Report and Financial Statements. The Directors confirm to the best of their knowledge that: - the condensed set of financial statements contained within the half yearly financial report has been prepared in accordance with the International Accounting Standard 34 "Interim Financial Reporting" ("IAS 34"); and - the interim management report, together with the Chairman's Statement and Investment Manager's Report, include a fair review of the information required by 4.2.7R and 4.2.8R of the FSA's Disclosure and Transparency Rules. The half yearly financial report has been reviewed by the Company's Auditors. The half yearly financial report was approved by the Board on 20 July 2010 and the above Responsibility Statement was signed on its behalf by the Chairman. Investment Manager's Report Market review and overall investment performance The Company's undiluted NAV per share increased by 12.3% over the six month period, ahead of the benchmark which increased by 7.3%. Outperformance has been driven by both the long only portfolio and the CFD portfolio. The long only portfolio increased in value 1.7% ahead of the benchmark. Additionally the CFD portfolio performed well, adding Â£3.2 million. This continues the record of the CFD portfolio adding value since the change of Investment Manager in July 2008. Cumulative gains in the CFD portfolio since inception amount to in excess of Â£6.9 million. For much of the period markets continued to rise, but from late April we have seen a return to more volatile markets caused by a number of areas of uncertainty. The main concerns have been the excessive borrowing of some Southern European countries and the exposure of European banks to these countries, worries about economic overheating in China and whether a slowdown can be managed effectively, the effect of cuts in public spending by the UK government and the strength and sustainability of the US economic recovery. These have been good enough reasons for the market to give back some of the gains made in prior months. Portfolio performance Our outperformance compared to the benchmark index was primarily driven by being invested in good quality stocks. In the long only portfolio we were helped by being overweight in well financed, producing mining companies, high quality industrial products companies, relatively defensive international businesses with high levels of predictable or recurring revenues, and companies subject to bids. Amongst the miners, Western Coal and Eastern Platinum were our best performers. Western Coal benefitted from substantially higher coal prices. Eastern Platinum's Crocodile River platinum mine is a relatively low cost and shallow mine in South Africa. It has benefited from the higher level of platinum group metal prices seen this year. A number of industrial companies contributed strongly to performance notably Domino Printing Sciences, Senior, Spirax-Sarco and Victrex. These are all core holdings run by management teams we regard highly. All supply international markets with products which are highly differentiated and in many cases customer specified. All remain well set and confident about future prospects. Amongst the more defensive businesses the best contributors included Abcam, Fidessa and Hutchison China Meditech. All have exceeded expectations during the period and have revenues which are very predictable. Abcam's revenues are highly predictable because its customers, research biochemists around the world, need regular supplies of Abcam's antibodies year after year for the life of their research programs. We see this as a very defensive high gross margin holding which has experienced strong growth and which we expect to continue. About 80% of Fidessa's revenues are of a recurring nature, most are software related. Hutchison China Meditech supplies traditional Chinese medicines into China. These vary from over the counter cold remedies to prescription cardiovascular drugs. A number of these are included on the Chinese government's essential medicines list, giving a high level of comfort about future sales levels. We have seen a notable increase in mergers and acquisitions activity in recent months. Rensburg Sheppards announced an all share offer from 47% shareholder Investec; this was pitched at a premium of approaching 50%. Care UK was acquired by private equity. Chloride announced an approach from US competitor Emerson, later trumped by ABB. BSS Group announced a bid approach from Travis Perkins; the combination of the two companies would undoubtedly make a good fit. We expect more portfolio holdings to receive bid approaches as the year progresses. On the negative side, BATM Advanced Communications and Intec Telecom Systems disappointed. BATM is principally a supplier of latest generation telecom hardware. One of their key customers has lost market share mainly, we believe, to Chinese competitors. Intec, a leading supplier of telecoms billing solutions, warned that a number of software licences under negotiation, mainly in the EMEA region, had slipped. Sector allocation in the long only portfolio was also generally good. Our overweight sector positions in software, electronics and electrical equipment were beneficial, as were our underweight positions in general retailers and real estate. Our large underweight position in travel and leisure was not so successful, mainly due to the bid for bus company Arriva, which we did not own but which was in our benchmark. The CFD portfolio performed well adding Â£3.2 million of value during the period and has remained net long throughout. Gains have come from long positions, which included holdings in both Chloride and BSS Group, and from short positions. It is encouraging that we have made money on both long CFD positions, mainly quality growth companies, and short positions, mainly businesses we see as flawed. With the market becoming less strongly directional, we are finding increasingly that both long and short positions can be profitable on any particular day or month. We see this as a good indication that the market is taking a more fundamental approach to investing, which suits us. Portfolio Activity We sold our holdings in Premier Oil, Petropavlovsk and Charter. None of these stocks are currently in our benchmark and there are other smaller companies in their sectors which we prefer at present. We also sold our holdings in Rensburg Sheppards and Care UK following the bid approaches. We bought several new holdings, generally looking for companies which had been overlooked and were good value and with attractive, preferably international franchises. In most cases we have put 0.5% of net assets into each new holding. We invested in retailer Supergroup, an IPO which was well received and is best known for its Superdry brand. We also took holdings in Yule Catto, Mecom, F&C Asset Management, Galliford Try and Impax Asset Management. Smaller purchases included Impax Asset Management, Blinkx and Faroe Petroleum. Portfolio positioning The portfolio is built around good quality growth companies; companies which we know well, run by management we regard highly, which are truly differentiated and have the ability to maintain organic growth and margins, generate cash and which have strong balance sheets; these are our core holdings. We particularly like companies with high levels of overseas earnings, especially from the Asia Pacific region, these include Rotork and Hutchison China Meditech. We estimate that just over 50% of the revenues of the portfolio derive from Asia-Pacific, Emerging Markets and North America. We also like companies with good revenue usability or predictability, for instance Abcam and ITE Group. A key part of our strategy is to invest in companies with high levels of intellectual property or strong brands, examples include Fidessa and Mothercare; these are protected by strong, sustainable barriers to entry and have real pricing power. We prefer companies which have their own products, rather than service companies; these tend to be able to scale more quickly. Outlook We have seen a continuation of the volatility which began late in April. There continues to be a number of areas of uncertainty, the most immediate ones seem to be handling the excessive borrowing of some Southern European countries, worries about economic overheating in China and whether a slowdown can be managed effectively and the effect of cuts in public spending by the new UK Government. However data from the US has also been less consistently supportive of a recovery. We are fortunate in that our universe of stocks is wide and we can find well run, market leading engineering, software and other industrial companies which generate a major part of their revenues and profits in the Asia Pacific region and in Emerging Markets where growth looks assured. We do not have much exposure to UK consumer and UK government. Over the last eighteen months most of the companies in which we invest have implemented efficiency savings and reduced their cost bases; they have also typically gained market share at the expense of weaker competitors. They are well placed to grow earnings attractively as recovery gains momentum. There are clear signs of this happening as increasing numbers of our holdings are seeing significant earnings upgrades. We continue to believe that a carefully chosen portfolio of small and midcap companies has the potential to continue to outperform larger companies as the global economy gradually recovers. Mike Prentis and Richard Plackett BlackRock Investment Management (UK) Limited 20 July 2010 Market % of value total Company Â£'000 portfolio Business activity Fidessa group 3,057 2.5 Development and marketing of financial trading connectivity software Abcam* 2,971 2.4 Production and distribution of research grade antibodies and associated products Aveva Group 2,768 2.2 Development and marketing of engineering computer software Domino 2,655 2.2 Manufacture of inkjet Printing and laser commercial Sciences printers Spirax-Sarco 2,525 2.1 Design and manufacture Engineering of steam management systems Brewin 2,261 1.8 Fund management and Dolphin stockbroking Holdings Victrex 2,126 1.7 Manufacture and supply of PEEK thermoplastic products Rotork 2,110 1.7 Engineering, manufacturing and design of valve actuators Western Coal* 1,910 1.6 Metallurgical and thermal coal production ITE Group 1,759 1.4 Organisation of trade exhibitions in Russia and other FSU countries Hutchison 1,695 1.4 Development and supply China Meditech* of traditional Chinese medicines to the Chinese market City of 1,667 1.4 Management of London investment funds Investment primarily invested in Group* emerging markets Eastern 1,648 1.3 Exploration, Platinum* development and production of platinum group metals Rathbone 1,471 1.2 Private client fund Brothers management Senior 1,463 1.2 Manufacture and supply of components for the aerospace and automotive sectors Gulfsands 1,415 1.1 Exploration and Petroleum* production of oil in Syria, other Middle Eastern countries and North Africa Avocet Mining 1,374 1.1 Gold exploration and * production Spectris 1,350 1.1 Development and Group marketing of productivity-enhancing instrumentation and controls Renishaw 1,348 1.1 Design and manufacture of instruments used for calibration purposes Keller Group 1,313 1.1 Provision of ground engineering solutions ------- ----- 20 largest investments 38,886 31.6 ------- ----- Remaining investments 78,665 63.9 CFD Portfolio 5,493 4.5 ------- ----- Total investments 123,044 100.0 ------- ----- * Traded on the Alternative Investment Market of the London Stock Exchange Distribution of Investments as at 31 May 2010 Sector % NAV Oil & Gas Producers Long 7.9 CFD Long 0.5 ----- 8.4 Oil Equipment, Services & 1.0 Distribution Long CFD Short -0.3 ----- 0.7 ----- Oil & Gas 9.1 ----- Mining Long 10.9 CFD Long 0.4 ----- 11.3 Chemicals Long 2.8 CFD Long 0.9 ----- 3.7 Industrial Metals Long 1.1 ----- 1.1 ----- Basic Materials 16.1 ----- Electronic & Electrical Equipment Long 7.1 CFD Long 3.2 CFD Short -0.1 ----- 10.2 Industrial Engineering Long 7.2 CFD Long 2.2 ----- 9.4 Support Services Long 6.3 CFD Long 1.7 CFD Short -3.6 ----- 4.4 Construction & Materials Long 2.2 CFD Long 0.5 CFD Short -0.3 ----- 2.4 Aerospace & Defence Long 1.5 CFD Long 1.5 CFD Short -0.6 ----- 2.4 General Industrials Long 0.4 ----- 0.4 Industrial Transportation Long 0.4 ----- 0.4 ----- Total Industrials 29.6 ----- Beverages Long 2.5 CFD Long 1.1 CFD Short -0.2 ----- 3.4 Food Producers CFD Short -1.3 ----- -1.3 Household Goods & Home Construction Long 1.1 CFD Long 1.3 CFD Short -0.2 ----- 2.2 Personal Goods Long 0.1 ----- 0.1 ----- Consumer Goods 4.4 ----- Pharmaceuticals & Biotechnology Long 2.4 CFD Short -0.4 ----- 2.0 Health Care Equipment & Services Long 1.8 CFD Long 0.3 CFD Short -0.5 ----- 1.6 Food & Drug Retailers Long 0.6 CFD Long 0.5 ----- 1.1 ----- Health Care 4.7 ----- Media Long 4.2 CFD Long 0.2 CFD Short -0.2 ----- 4.2 General Retailers Long 4.0 CFD Long 0.5 CFD Short -1.1 ----- 3.4 Travel & Leisure Long 0.9 CFD Long 0.4 CFD Short -0.2 ----- 1.1 ----- Consumer Services 8.7 ----- Fixed Line Telecommunications Long 0.6 ----- 0.6 ----- Telecommunications 0.6 ----- Electricity Long 0.7 ----- 0.7 ----- Utilities 0.7 ----- Non-life Insurance Long 1.6 ----- 1.6 Real Estate Holding & Development Long 2.6 CFD Long 0.4 ----- 3.0 Real Estate Investment Trusts Long 3.0 CFD Long 0.3 ----- 3.3 Financial Services Long 8.5 CFD Long 0.7 CFD Short -0.2 ----- 9.0 Equity Investments Long 0.2 ----- 0.2 ----- Financials 17.1 ----- Software & Computer Services Long 11.4 CFD Long 3.5 CFD Short -1.1 ----- 13.8 Technology Hardware & Equipment Long 5.6 CFD Long 0.9 ----- 6.5 ----- Technology 20.3 ----- Total with net CFD exposure 111.3 ----- Total with gross CFD exposure 131.9 ----- Analysis of the UK listed and AIM traded long only portfolio as at 31 May 2010 FTSE 250 43.3% AIM 37.7% FTSE Small Cap 18.5% Fledgling 0.5% Investment Size as at 31 May 2010 (long only portfolio) <Â£1m Â£1m to Â£2m >Â£2m Grand Total Number of Investments 139 21 8 168 % of portfolio 58.1 24.5 17.4 100 Market capitalisation as at 31 May 2010 (long only portfolio) >Â£1bn Â£400m to Â£1bn Â£100m to Â£400m <Â£100m Total % of portfolio 6.9 32.5 40.3 20.3 100.0 CONSOLIDATED AND COMPANY INCOME STATEMENT Six months Six months Year Six months Six months Year Six months Six months Year ended ended ended ended ended ended ended ended ended 31.05.10 31.05.09 30.11.09 31.05.10 31.05.09 30.11.09 31.05.10 31.05.09 30.11.09 revenue revenue revenue capital capital capital total total total (unaudited) (unaudited) (audited) (unaudited) (unaudited) (audited) (unaudited) (unaudited(audited) Notes Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Gains on investments held at fair value through profit or loss - - - 10,102 19,800 39,899 10,102 19,800 39,899 Net return on contracts for difference 80 68 142 3,079 (1,845) 1,305 3,159 (1,777) 1,447 Income from investments held at fair value through profit and loss 3 1,262 1,190 2,551 - - - 1,262 1,190 2,551 Other income 3 4 23 39 - - - 4 23 39 Interest on write back of prior years' VAT 3 - 2,469 2,469 - - - - 2,469 2,469 Investment management and performance fee 4 (127) (95) (210) (1,512) (286) (981) (1,639) (381) (1,191) Operating expenses 5 (203) (258) (563) 285 262 532 82 4 (31) ----- ----- ----- ------ ------ ------ ------ ------ -----Net return before finance costs and taxation 1,016 3,397 4,428 11,954 17,931 40,755 12,970 21,328 45,183 Finance costs (1) (2) (11) - - - (1) (2) (11) Costs on redemption of debenture stocks - - - - (30) (30) - (30) (30) Change in tender offer provision - (1,006) (1,010) - 1,105 1,111 - 99 101 ----- ----- ----- ------ ------ ------ ------ ------ ------ Return on ordinary activities before taxation 1,015 2,389 3,407 11,954 19,006 41,836 12,969 21,395 45,243 Taxation on ordinary activities (2) - (4) - - - (2) - (4) ----- ----- ----- ------ ------ ------ ------ ------ ------Return on ordinary activities after taxation 7 1,013 2,389 3,403 11,954 19,006 41,836 12,967 21,395 45,239 ----- ----- ----- ------ ------ ------ ------ ------ ------Return per ordinary share - basic 7 1.37p 2.90p 4.24p 16.12p 23.08p 52.07p 17.49p 25.98p 56.31p ----- ----- ----- ------ ------ ------ ------ ------ ------ Return per ordinary share - diluted 7 1.37p 2.90p 4.24p 16.12p 23.08p 52.07p 17.49p 25.98p 56.31p ----- ----- ----- ------ ------ ------ ------ ------ ------ The total column of this statement represents the Income Statement of the Group for the six months ended 31 May 2010. For the six months ended 31 May 2009 and the year ended 30 November 2009, the total column of this statement represents the Income Statement of the Company. The supplementary revenue and capital columns are both prepared under guidance published by the AIC. The Group and Company had no recognised gains or losses other than those disclosed in the Income Statement and the Statement of Changes in Equity. All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period. A statement of Comprehensive Income has not been prepared as there is no other comprehensive income. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Share Capital Share premium redemption Capital Revenue capital account reserve reserves reserve Total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 For the six months ended 31 May 2010 (unaudited) At 30 November 2009 (Company only) 4,224 35,272 11,114 50,432 5,875 106,917 Adjustment to reserves on consolidation - - - (1,478) 1,478 - ----- ------ ------ ------ ------ ------- At 30 November 2009 (consolidation) 4,224 35,272 11,114 48,954 7,353 106,917 Return for the period - - - 11,954 1,013 12,967 Subscription shares exercised 2 69 - - - 71 Dividends paid and declared* - - - - (3,113) (3,113) ----- ------ ------ ------ ----- ------- At 31 May 2010 4,226 35,341 11,114 60,908 5,253 116,842 ----- ------ ------ ------ ----- ------- For the six months ended 31 May 2009 (unaudited) At 30 November 2008 (Company only) 6,863 35,272 8,327 19,648 6,919 77,029 Return for the period - - - 19,006 2,386 21,395 Tender offer shares cancelled (2,335) - 2,335 - - - Dividends paid and declared** - - - - (3,994) (3,994) ----- ------ ------ ------ ----- ------- At 31 May 2009 4,528 35,272 10,662 38,654 5,314 94,430 ----- ------ ------ ------ ----- ------- For the year ended 30 November 2009 (audited) At 30 November 2008 (Company only) 6,863 35,272 8,327 19,648 6,919 77,029 Return for the year - - - 41,836 3,403 45,239 Issue of subscription shares 148 - - (148) - - Share issue costs - - - (265) - (265) Transfer of assets to tender pool - - - (10,639) - (10,639) Shares purchased and cancelled (2,787) - 2,787 - - - Dividends paid and declared*** - - - - (4,447) (4,447) ----- ------ ------ ------ ----- ------- At 30 November 2009 4,224 35,272 11,114 50,432 5,875 106,917 ----- ------ ------ ------ ----- ------- * Final dividend of 2.20p per share and special dividend of 2.00p per share for the year ended 30 November 2009, declared on 29 January 2010 and paid on 26 March 2010. ** Final dividend of 1.85p per share and special dividend of 3.00p per share for the year ended 30 November 2008, declared on 1 April 2009 and paid on 1 May 2009. *** Final dividend of 1.85p per share and special dividend of 3.00p per share for the year ended 30 November 2008, declared on 1 April 2009 and paid on 1 May 2009 and Interim dividend of 0.55p per share for the six months ended 31 May 2009, declared on 27 July 2009 and paid on 17 August 2009. CONSOLIDATED BALANCE SHEET as at 31 May 2010 31 May 31 May 30 November 2010 2009 2009 Â£'000 Â£'000 Â£'000 Notes (unaudited) (unaudited) (audited) Non current assets Investments held at fair value through profit or loss 117,551 96,416 107,553 ------- ------ ------- Current assets Debtors 854 3,008 350 Contracts for difference 5,609 - 2,784 Cash 950 282 17 ------- ------ ------- 7,413 3,290 3,151 ------- ------ ------- Creditors - amounts falling due within one year Other creditors (3,004) (4,325) (3,005) Bank overdraft - - (40) Collateral pledged in respect of contracts for difference (5,002) - - Amounts due in respect of contracts for difference (116) (951) (742) ------- ------ ------- (8,122) (5,276) (3,787) ------- ------ ------- Net current liabilities (709) (1,986) (636) ------- ------ ------- Net assets 116,842 94,430 106,917 ======= ====== ======= Capital and reserves Share capital 8 4,226 4,528 4,224 Share premium account 35,341 35,272 35,272 Capital redemption reserve 11,114 10,662 11,114 Capital reserves 60,908 38,654 50,432 Revenue reserve 5,253 5,314 5,875 ------- ------ ------- Total equity shareholders' funds 116,842 94,430 106,917 ====== ====== ======= Net asset value per ordinary share - basic 7 157.54p 114.67p 144.26p ======= ======= ======= Net asset value per ordinary share - diluted 7 155.63p 114,67p 144.26p ======= ======= ======= CONSOLIDATED CASH FLOW STATEMENT for the six months ended 31 May 2010 Six months Six months Year ended ended ended 30 31 May 31 May November 2010 2009 2009 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Net cash (outflow)/inflow from operating activities before financing (1,760) 18,283 28,969 Financing activities Proceeds from exercise & subscription shares 71 - - Subscription share issue expenses paid (241) - - Distributions to tender shareholders - (17,768) (28,306) Redemption of debenture stock - (30) (30) Dividends paid (3,113) (3,994) (4,447) ----- ------ ------ Net cash outflow from financing (3,283) (21,792) (32,783) ----- ------ ------ Decrease in cash and cash equivalents (5,043) (3,509) (3,814) Effect of foreign exchange rate changes (1) 1 1 ----- ------ ------ Change in cash and cash equivalents (5,044) (3,508) (3,813) Cash and cash equivalents at start of period (23) 3,790 3,790 Subsidiary cash balances at the start of the period 1,015 - - ----- ------ ------ Cash and cash equivalents at the end of the period (4,052) 282 (23) Cash and cash equivalents at the end of the period comprised of: Cash 950 282 17 Collateral pledged in respect of contracts for difference (5,002) - - Bank overdraft - - (40) ----- ------ ------ (4,052) 282 (23) ====== ====== ====== RECONCILIATION OF NET INCOME BEFORE TAXATION TO NET CASH FLOW FROM OPERATING ACTIVITIES Six months Six months Year ended ended ended 30 31 May 31 May November 2010 2009 2009 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Operating activities Profit before taxation 12,969 21,395 45,243 Add back interest paid 85 2 303 Gains on investments held at fair value through profit or loss including transaction costs (13,265) (17,956) (41,508) Net movement on foreign exchange (1) 1 1 Sales of investments held at fair value through profit or loss 31,394 61,584 116,922 Purchases of investments held at fair value through profit or loss (33,360) (45,022) (91,155) (Increase)/decrease in other receivables (11) (163) 458 (Increase)/decrease in amounts due from brokers (478) (1,444) 595 (Decrease)/increase in amounts due to brokers (33) 838 (167) Increase/(decrease) in other payables 1,045 (931) (1,405) Scrip dividends included in investment income (14) (5) (5) ------- ------ ------ Net cash (outflow)/inflow from operating activities before interest and taxation (1,669) 18,299 29,282 ------- ------ ------ Interest paid (85) (2) (303) Tax on overseas income (6) (14) (10) ------- ------ ------ Net cash (outflow)/inflow from operating activities (1,760) 18,283 28,969 ====== ====== ====== Notes to the financial statements 1. Principal activity The principal activity of the Company is that of an investment trust company within the meaning of sub-sections 1158-1165 of the Corporation Tax Act 2010. The Company has two subsidiaries, The Third Throgmorton Trust Limited the principal activity of which was dealing in stocks, shares and other investments and T.T. Finance PLC which acted as a financing subsidiary undertaking. 2. Basis of preparation The financial statements of the Group have been prepared in accordance with International Financial Reporting Standards (`IFRS') and the Statement of Recommended Practice (`SORP') for investment trusts issued by the Association of Investment Companies (`AIC') in January 2009. These comprise standards and interpretations of the International Accounting Standards and Standing Interpretations Committee as approved by the International Accounting Standards Committee that remain in effect, to the extent that IFRS have been adopted by the European Union. These are the first interim financial statements prepared in accordance with IAS 34. Previously, the financial statements were prepared in accordance with UK Generally Accepted Accounting Practice (`UK GAAP'). The principal accounting policies adopted are set out in the Company's audited report and financial statements as at 30 November 2009. The financial statements of the Group for the year ending 30 November 2010 will be prepared on the same basis in accordance with IFRS. The functional currency of the Group is UK pounds sterling as this is the currency of the primary economic environment in which the Group operates. Accordingly, the financial statements are presented in UK pounds sterling. The financial information for the year ended 30 November 2009 included in this report has been taken from the Company's full accounts, which for the year to 30 November 2009 contained an unqualified audit report and did not include statements under Section 498(2) or (3) of the Companies Act 2006 and which have been filed with the Registrar of Companies. Those statutory accounts were prepared under UK GAAP and in accordance with the SORP. Restatement of opening balances relating to equity values, assets and liabilities and profits and losses of the Group between UK GAAP as previously reported, and under IFRS as restated, have not been prepared as there have been no changes to these reported accounts. Therefore, restatement tables have not been prepared for any of the primary statements. Basis of consolidation The consolidated financial statements incorporate the financial statements of the Company and its subsidiaries, T.T. Finance PLC and The Third Throgmorton Trust Limited, made up to 31 May 2010. As permitted by section 408 of the Companies Act 2006, no Company Income Statement has been prepared. 3. Income Six months Six months Year ended ended ended 31 May 31 May 30 November 2010 2009 2009 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Investment income: UK dividends 1,145 997 2,282 Overseas dividends 117 193 269 ----- ----- ----- 1,262 1,190 2,551 ----- ----- ----- Other income: Deposit interest 1 11 6 Underwriting commission 3 7 33 Sundry income - 5 - ----- ----- ----- 4 23 39 ----- ----- ----- Interest on write back of prior years' VAT - 2,469 2,469 ----- ----- ----- Total 1,266 3,682 5,059 ----- ----- ----- 4. Investment management and performance fees year year year ended ended ended Six months Six months Six months Six months Six months Six months 30 30 30 ended 31 ended 31 ended 31 ended 31 ended 31 ended 31 November November November May 2010 May 2010 May 2010 May 2009 May 2009 May 2009 2009 2009 2009 revenue capital total revenue capital total revenue capital total Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 Â£'000 (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (audited) (audited) (audited) Investment management fee 127 381 508 95 286 381 210 628 838 Performance fee - 1,131 1,131 - - - - 353 353 --- ----- ----- --- --- --- --- --- ----- Total 127 1,512 1,639 95 286 381 210 981 1,191 --- ----- ----- --- --- --- --- --- ----- The terms of the investment management agreement with BlackRock provide for a basic management fee, payable quarterly in arrears, of 0.7% per annum on the gross asset value of the Company's long only portfolio plus the gross value of the underlying equities, long and short, to which the Company is exposed to derivatives through its CFD portfolio. In addition, BlackRock is entitled to a performance fee of 12.5% of any NAV (total return) outperformance against the Hoare Govett Small Companies plus AIM (ex Investment Companies) Index. The performance fee is subject to a high watermark such that, if in a performance period the Company underperforms the Index, in a future performance period a performance fee is only payable on the NAV return that represents the net outperformance. In addition, the performance fee in any performance period will be capped at 4.99% of the average value of the Company's assets. The investment management fee is allocated 75% to the capital reserves and 25% to the revenue reserve. A performance fee of Â£1,131,000 has been accrued for the six months ended 31 May 2010 (six months ended 31 May 2009: nil; year ended 30 November 2009: Â£353,000). The performance fee is allocated in full to the capital reserves, as performance has been predominantly generated through the capital returns from the investment portfolio. BlackRock has agreed to waive the management fee payable by the Company up to the level of transition and restructuring costs of Â£1,068,000. This fee waiver benefit has been amortised over the initial period of the management contract of 24 months. A credit of Â£265,000 has been applied to the capital column of the Consolidated Income Statement. 5. Operating expenses Six months Six months Year ended ended ended 31 May 31 May 30 November 2010 2009 2009 (unaudited) (unaudited) (audited) Â£'000 Â£'000 Â£'000 Auditors' remuneration - audit services 14 16 28 - other services* 11 18 25 Registrar's fee 32 19 41 Directors' remuneration 50 55 106 Other administration costs 96 150 363 --- --- --- 203 258 563 --- --- --- *other services for the six months ended 31 May 2010 relates to the review of the half yearly financial statements and the review of IFRS convergence. In the year ended 30 November 2009 this balance related to the provision of taxation compliance services. 6. Dividend The Board has declared an interim dividend of 0.58p per share (2009: 0.55p) payable on 31 August 2010 to shareholders on the register at close of business on 30 July 2010. 7. Return and net asset value per ordinary share 30 31 May 31 May November 2010 2009 2009 (unaudited) (unaudited) (audited) Net revenue return attributable to ordinary shareholders (Â£'000) 1,013 2,389 3,403 Net capital return attributable to ordinary shareholders (Â£'000) 11,954 19,006 41,836 ------- ------ ------- Total return (Â£'000) 12,967 21,395 45,239 ------- ------ ------- Equity shareholders' funds (Â£'000) 116,842 94,430 106,917 ------- ------ ------- Ordinary shares The weighted average number of ordinary shares in issue during the period, on which the return per ordinary share was calculated, was: 74,128,494 82,351,197 80,343,189 The actual number of ordinary shares in issue at the end of each period, on which the net undiluted asset value was calculated, was: 74,164,475 82,351,197 74,116,108 Number of subscription shares in issue at the end of the period, was; 14,774,534 - 14,822,901 Undiluted Revenue earnings per share 1.37p 2.90p 4.24p Capital earnings per share 16.12p 23.08p 52.07p ======= ======= ======= Total earnings per share 17.49p 25.98p 56.31p ======= ======= ======= Net asset value per share 157.54p 114.67p 144.26p ======= ======= ======= Diluted Revenue earnings per share 1.37p 2.90p 4.24p Capital earnings per share 16.12p 23.08p 52.07p ======= ======= ======= Total earnings per share 17.49p 25.98p 56.31p ======= ======= ======= Net asset value per share 155.63p 114.67p 144.26p ======= ======= ======= Ordinary share price 134.75p 98.00p 115.75p Subscription share price 8.05p n/a 8.00p ======= ======= ======= The diluted net asset value per share at 31 May 2010 is calculated by adjusting equity shareholders' funds for consideration receivable on the exercise of 14,774,534 subscription shares, at the exercise price of 146p per share, and dividing by the total number of shares that would have been in issue at 31 May 2010 had all the subscription shares been exercised. 8. Share capital and shares held in treasury Ordinary Treasury Subscription Total Nominal shares shares shares shares value number number number number Â£'000 Authorised share capital comprised: Ordinary shares of 5p each 460,000,000 - - 460,000,000 23,000 ----------- --------- ---------- ----------- ------ At 30 November 2009 74,116,108 7,400,000 14,822,901 96,339,009 4,224 Ordinary shares issued 48,367 - - 48,367 2 Subscription shares exercised - - (48,367) (48,367) - ----------- --------- ---------- ----------- ------ At 31 May 2010 74,164,475 7,400,000 14,774,534 96,339,009 4,226 ----------- --------- ---------- ----------- ------ The subscription shares were issued as a bonus issue to ordinary shareholders on 1 October 2009, on the basis of one subscription share for every five ordinary shares. Each subscription share confers the right (but not the obligation) to subscribe for one ordinary share, exercisable quarterly on 31 January, 30 April, 31 July and 31 October between 31 January 2010 and 31 October 2011 (both dates inclusive) when rights under the subscription shares will lapse. The conversation price is 146p per share. At the date of this report, the Company has issued 74,164,475 ordinary shares and 14,774,534 subscription shares. 9. Related party disclosure The fees due to the Investment Manager for the six months ended 31 May 2010 amounted to Â£1,639,000 (six months ended 31 May 2009: Â£381,000 and the year ended 30 November 2009: Â£1,191,000). At the period end, an amount of Â£802,000 was outstanding in respect of these fees (six months ended 31 May 2009: Â£746,000 and the year ended 30 November 2009: Â£905,000). 10. Publication of non statutory accounts The financial information contained in this half yearly financial report does not constitute statutory accounts as defined in section 435 of the Companies Act 2006. The financial information for the six months ended 31 May 2010 and 31 May 2009 has not been audited. The information for the year ended 30 November 2009 has been extracted from the latest published audited financial statements, which have been filed with the Registrar of Companies. The report of the auditors on those financial statements contained no qualification or statement under sections 498(2) or (3) of the Companies Act 2006. 11. Annual Results The Board expects to announce the annual results for the year ending 30 November 2010, as prepared under IFRS in mid January 2011. Copies of the results announcement can be obtained from the Secretary on 020 7743 3000. The annual report should be available at the beginning of February 2011, with the Annual General Meeting being held in March 2011. Copies of the half yearly financial report will be posted to shareholders by 31 July 2010. Copies will also be available to the public from the Company's registered office at 33 King William Street, London EC4R 9AS, and on BlackRock's website at www.blackrock.co.uk/its. 20 July 2010 33 King William Street London EC4R 9AS Independent Review Report Introduction We have been engaged by the Company to review the condensed set of financial statements in the half yearly financial report for the six month period ended 31 May 2010 which comprises the Consolidated Income Statement, Consolidated Statement of Changes in Equity, Consolidated Balance Sheet, Consolidated Cash Flow Statement, Reconciliation of Net Income before Taxation to Net Cash Flow from Operating Activities, and the related notes. We have read the other information contained in the half yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the condensed set of financial statements. This report is made solely to the Company in accordance with guidance contained in International Standard on Review Engagements 2410 (UK and Ireland) "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company, for our work, for this report, or for the conclusions we have formed. Directors' responsibilities The half yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half yearly financial report in accordance with the Listing Rules of the Financial Services Authority. As disclosed in note 1, the annual financial statements of the Company are prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted by the European Union and as applied in accordance with the provisions of the Companies Act 2006. The condensed set of financial statements included in this half yearly financial report has been prepared in accordance with the Accounting Standards Board Statement "Half Yearly Financial Reports". Our responsibility Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half yearly financial report based on our review. Scope of review We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, "Review of Interim Financial Information Performed by the Independent Auditor of the Entity" issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Conclusion Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half yearly financial report for the six month period ended 31 May 2010 is not prepared, in all material respects, in accordance with the Accounting Standards Board Statement "Half Yearly Financial Reports" and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority. Ernst & Young LLP London 20 July 2010 For further information please contact: Jonathan Ruck Keene, Managing Director Investment Companies - 020 7743 2178 Mike Prentis, Fund Manager - 020 7743 2312 Emma Phillips, Media & Communications - 020 7743 2922 BlackRock Investment Management (UK) Limited Or William Clutterbuck - 020 7379 5151 The Maitland Consultancy END

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