Interim Results Blue Planet Financials Growth &...

Interim Results For the six months ended 30 September 2004 Blue Planet Financials Growth and Income Investment Trusts plc Blue Planet Financials Growth and Income Investment Trust No 1 plc (Registered Number 162796) Blue Planet Financials Growth and Income Investment Trust No 2 plc (Registered Number 162797) Blue Planet Financials Growth and Income Investment Trust No 3 plc (Registered Number 162798) Blue Planet Financials Growth and Income Investment Trust No 4 plc (Registered Number 162799) Blue Planet Financials Growth and Income Investment Trust No 5 plc (Registered Number 162800) Blue Planet Financials Growth and Income Investment Trust No 6 plc (Registered Number 162801) Blue Planet Financials Growth and Income Investment Trust No 7 plc (Registered Number 162802) Blue Planet Financials Growth and Income Investment Trust No 8 plc (Registered Number 162803) Blue Planet Financials Growth and Income Investment Trust No 9 plc (Registered Number 162804) Blue Planet Financials Growth and Income Investment Trust No 10 plc (Registered Number 162805) Each of the investment trusts is a separate limited company, but otherwise they are to all intents and purposes identical. The information contained in this Interim Report, including the financial statements, applies equally to each of the ten Blue Planet Financials Growth and Income Investment Trusts (the "Trusts"), and reference to the "Company" shall be deemed to be a reference to each of them.. Trading in the shares and warrants of the Trusts The Trusts' shares and warrants can be traded in share or warrant units. Each unit comprises 10 shares or warrants, 1 in each of the 10 trusts. It is generally cheaper for investors to trade in the units rather than the underlying shares or warrants. Officers and Advisors Directors Registrars Philip Court (Chairman) Capita Registrars Victoria W Killay Northern House Dr Michael Shea Woodsome Park Fenay Bridge Investment Manager, Huddersfield HD8 0LA Secretary and Registered Office Shareholder Helpline No. 0870 1623131 Blue Planet Investment e-mail: ssd@capitaregistrars.com Management Ltd www.capitaregistrars.com Greenside House 25 Greenside Place Edinburgh EH1 3AA Bankers Telephone No: +44 131 466 6666 Lloyds TSB Scotland Plc Facsimile No: +44 131 466 6677 Henry Duncan House e-mail: info@blueplanet.eu.com 120 George Street www.blueplanet.eu.com Edinburgh EH2 4LH Auditors Custodians Deloitte & Touche LLP Royal Trust Corporation of Canada Saltire Court 71 Queen Victoria Street 20 Castle Terrace London Edinburgh EH1 2DB EC4V 4DE Stockbroker Panmure Gordon (a division of Lazard & Co., Limited) 50 Stratton Street London W1J 8LL Its Blue Planet Investment Management Ltd is authorised and regulated by the Financial Services Authority. Blue Planet Financials Growth and Income Investment Trust No.1 plc is a member of the Association of Investment Trust Companies. Investment Policy and Objective The objective of the ten Blue Planet Financials Growth and Income Investment Trusts is to provide investors with a high level of income and capital growth and a convenient means by which to obtain an exposure to a professionally managed, diversified and geared portfolio of shares and bonds issued by European financial companies. Financial Record Six months Six months Year ended ended ended 30 September 30 September 31 March 2004 2003 2004 (unaudited) (unaudited) Shareholders' funds 1,786 1,698 1,778 Net asset value per share (p) 132.16 125.01 130.91 Share price (p) 96.75 101.75 100.00 Discount (%) 26.8 18.6 23.6 Gearing (%)* 39.4 42.4 24.1 Revenue available for shareholders (£'000) 25 31 47 Revenue return per share (p) 1.86 2.25 3.48 Dividend per share (p) 1.00 1.25 3.40 Dividend yield on our shares (%) - - 3.40 Dividend yield on FTSE All Share Index (%) 3.15 3.36 3.13 * Net debt as a percentage of shareholders' funds Dividend An interim net dividend of 1.00p per ordinary share has been declared, payable on 14 January 2005, to shareholders on the register as at the close of business on 17 December 2004. The Trusts' shares will be quoted ex-dividend on 15 December 2004. Capital Gains Tax Apportionment for capital gains tax between ordinary shares and warrants based on mid-market prices on the first day (25 April 1996) of dealings in the ordinary shares and the warrants: Each ordinary share 95.24p Each warrant 23.80p Blue Planet Investment Management Corporate Philosophy Blue Planet Investment Management Ltd, which launched and manages the Blue Planet Financials Growth and Income Investment Trusts, is based in Edinburgh and specialises in investments in financial companies. Its corporate philosophy is that consistent out-performance is much more likely to be achieved by specialisation than it is from the generalist approach, which currently prevails across most of the fund management industry. Stock markets comprise of many sectors which are represented in general stock market indices such as the S&P500, FTSE All Share, FTSEUROFIRST 300, Nikkei and so on. Many of these sectors are in economic decline and will produce below average returns to investors in the future. Blue Planet believes that investors should invest in those sectors that have superior long-term economic prospects and, crucially, which are undervalued. It believes that the World's financial sector is one such sector. By concentrating only on those sectors and by using the services of expert fund managers that specialise in those sectors investors should maximize their likelihood of consistent out-performance. By focusing on only one sector Blue Planet believes that it is able to develop a level of expertise and understanding of that sector that generalist fund managers cannot. It believes that this greater expertise and understanding will allow it to produce better, more consistent investment returns for its clients than generalist fund managers. It is widely accepted in most walks of life that specialisation leads to better results than generalisation. Blue Planet ISA and low cost dealing service To take out an ISA which enables investment in trusts managed by Blue Planet Investment Management, call them on 0131 466 6666. Blue Planet Investment Management also offers investors a low cost stock-market dealing service. Full details of these services were given in the last annual report, and are also given on their website www.blueplanet.eu.com. Chairman's Statement Performance In the six months to 30 September 2004, the company's net asset value per share ("NAV") rose 0.95% to 132.16p per ordinary share compared to an increase of 1.98% in our Benchmark Index. The total return earned by the portfolio in the period was 2.65% compared to the total return of the Benchmark Index of 3.27%. The unit price fell 3.25% over the period to £9.675 per ordinary share unit. This had the effect of increasing the discount to NAV at which our shares traded from 23.6% to 26.8%. Our ten largest investments performed, on the whole, well over the six month period as the figures below show. These are calculated on a total return basis taking account of capital gains, currency movements and dividends paid. 1. OTP Bank (Hungary) + 13.37% 2. ABN Amro Holdings (Netherlands) + 9.45% 3. Lloyds TSB (UK) + 7.43% 4. BNP Paribas (France) + 10.37% 5. Societe Generale (France) + 9.11% 6. Bank Austria Creditanstalt (Austria) + 7.41% 7. HBOS (UK) + 2.91% 8. Unicredito Italiano (Italy) + 12.10% 9. Bank Przemyslowo-Handlowy (Poland) + 2.66% 10. Bank Pekao (Poland) - 0.64% Over the period we added several major shareholdings, including OTP, the largest bank in Hungary, this co-incidentally has been our best performing investment over the period generating a total return of 13.37% over the five months since it was purchased. We are determined to build upon our past successes and have been busy repositioning the portfolio to do so. Blue Planet Investment Management has also greatly strengthened the team who manage the fund since the year end in order to increase the likelihood of future out-performance. We have been actively buying shares in banks operating in Central and Eastern Europe ("CEE") in the belief that these offer better long term prospects than those operating in more mature European economies. Figure 1 shows the level of household debt as a percentage of Gross Domestic Product in various European economies and illustrates why we are bullish about the prospects for well managed banks operating in CEE countries over the medium and longer term. Since the year end, we have significantly increased the percentage of the fund invested in CEE and in particular the percentage invested in Poland, Hungary and Austria as Figure 2 illustrates. At the same time we have been reducing our exposure to more mature Western European financial markets which we believe offer less growth prospects. In particular, we have been selling those institutions which have a significant exposure to the UK mortgage market, including Bradford & Bingley and Alliance and Leicester. Figure 1. Household debt as a percentage of GDP UK 84% Germany 72% EU15 65% Spain 64% France 50% Austria 41% Italy 32% Czech Rep. 24% Poland 13% Hungary 12% Source: Eurostat Figure 2. Portfolio Asset Allocation Movements over the Interim Period 31 March 2004 30 September 2004 UK 69.0 28.5 France 16.1 13.7 Netherlands 6.2 7.9 Belgium 0.0 3.7 Germany 4.4 7.9 Eire 4.3 3.5 Poland 0.0 11.7 Hungary 0.0 9.3 Italy 0.0 4.3 Austria 0.0 5.7 Spain 0.0 3.8 Source: Blue Planet Investment Management Ltd Gearing Gearing for the Company is provided by a £750,000 loan facility. The purpose of the loan is to acquire investments in the expectation that the returns from these will exceed the cost of financing the loan. As at the end of the interim period, the loan, net of cash deposits, represented 39.4% of NAV. Operating efficiency The Board regularly reviews with the Investment Manager the operating efficiency of the Companies. This is to see if costs can be reduced in a manner that does not damage the Companies in order that any savings can be passed onto shareholders. In order to minimise costs our share price is now only published in "The Times". Shareholders can however view the Company's share price and other information about it on the websites of Blue Planet Investment Management Limited (www.blueplanet.eu.com) and the London Stock Exchange (www.londonstockexchange.com). To find the Company's share price on the London Stock Exchange's website go to their home page and type "BPFU" in the "Price Search" field. Dividend Last year we informed shareholders that we had been increasing the equity element of the portfolio and reducing the fixed interest element in order to maximise future returns for shareholders. This process continues and we have further increased the percentage of the portfolio invested in equities to 96.1% from 87.6% (excluding cash). Subsequent increases in UK interest rates and equity prices and falls in the value of bonds have fully justified this move. However, as I have indicated in the past, this rebalancing of the portfolio unavoidably reduces our income and our dividend paying capacity in the short term. Nevertheless, we are committed to managing this in such a manner as to minimise its adverse effect on our dividend and an interim dividend of 1.00p per share (10p per unit) will be paid on 14 January 2005 to shareholders on the register on 17 December 2004. This represents a reduction on last year's interim dividend of 1.25p per share (12.5p per unit) and this trend is likely to continue in the short term as the percentage of the portfolio invested in equities is increased to 100%. Once this is done we would expect to see dividends rising again. I am pleased to say that our switch into equities is already paying off with the second half of the year starting well. In the month that has passed since the 30th September 2004 our NAV has risen 4.9% against a rise in our Benchmark Index of 2.3%. Outlook We have an excellent portfolio of high quality, banking stocks managed by a first class and award winning team. We are confident about the future prospects for the banks and other financial businesses in which we are invested. In our opinion, these banks are undervalued by the market and we believe that we will benefit, not just from the rising profitability of those institutions, but also from a future re-rating of the sector, as market conditions improve. At the moment, equity markets continue to be hesitant with concerns about the US Current Account and Balance of Trade deficits, oil issues and Iraq dominating the headlines. We believe that these negative sentiments will give way to a more optimistic assessment of the future for equity markets as oil prices fall, prospects for bond markets diminish and the US deficits recede. The UK banking sector has been the 2nd best performing sector out of 34 sectors over the past 18 years and the European banking and financial services sector is ranked 8th out of 37 sectors over the past 7 years (Source: Bloomberg). The Banking Sector, in particular, has consistently delivered good earnings and dividend growth, and historically is one of the best performing sectors in the stock market. The sector continues to offer considerable growth potential. Our core holdings are sound and set to deliver good returns, whilst we are optimistic that the newer Central Eastern Europe (CEE) element will deliver strong performance in the future. Consequently, we look forward to the future with great confidence. May I thank all shareholders for their support throughout the period. Philip Court Chairman 30 November 2004 Statement of Total Return (incorporating the revenue account) For the six months For the six months For the year ended 31 ended 30 September ended 30 September March 2004 2004 (unaudited) 2003 (unaudited) Revenue Capital Total Revenue Capital Total Revenue Capital Total £ £ £ £ £ £ £ £ £ Capital (losses)/gains on investments - (131,745) (131,745) - 15,808 15,808 - 120,309 120,309 Net realised (losses)/gains Unrealised gains on investments - 144,764 144,764 - 347,289 347,289 - 357,507 357,507 Exchange gains/(losses) - 4,351 4,351 - (3,587) (3,587) - (3,960) (3,960) Net capital gains on investments - 17,370 17,370 - 359,510 359,510 - 473,856 473,856 Income from investments 62,924 - 62,924 68,769 - 68,769 117,669 - 117,669 Bank interest receivable 5,054 - 5,054 851 - 851 2,209 - 2,209 Gross revenue and capital gains 67,978 17,370 85,348 69,620 359,510 429,130 119,878 473,856 593,734 Administrative expenses (23,159) (7,430) (30,589) (24,136) (7,209) (31,345) (49,047) (14,857) (63,904) Net return before interest payable and taxation 44,819 9,940 54,759 45,484 352,301 397,785 70,831 458,999 529,830 Interest payable (11,254) (11,253) (22,507) (11,253) (11,252) (22,505) (22,505) (22,504) (45,009) Return on ordinary activities before taxation 33,565 (1,313) 32,252 34,231 341,049 375,280 48,326 436,495 484,821 Taxation on return on ordinary activities (8,404) 3,509 (4,895) (3,570) 2,690 (880) (1,046) - (1,046) Return on ordinary activities after taxation 25,161 2,196 27,357 30,661 343,739 374,400 47,280 436,495 483,775 Dividends Interim dividend of 1.00p (2004 - 1.25p) per share (13,516) - (13,516) (16,981) - (16,981) (16,981) - (16,981) Final dividend (2004 - 2.15p) per share - - - - - - (29,208) - (29,208) (13,516) - (13,516) (16,981) - (16,981) (46,189) - (46,189)Transfer to reserves 11,645 2,196 13,841 13,680 343,739 357,419 1,091 436,495 437,586 Return per ordinary share - basic and diluted (note 3) 1.86p 0.16p 2.02p 2.25p 25.23p 27.48p 3.48p 32.08p 35.56p The Revenue column of the statement represents the profit & loss account of the Company. All revenue and capital items in the above statement derive from continuing operations. Balance Sheet At 30 At 30 At 31 September September March 2004 2003 2004 (unaudited) (unaudited) £ £ £ Fixed assets Listed investments 2,488,265 2,395,735 2,205,808 Current assets 77,081 84,810 365,657 Creditors: amounts falling due within one year (29,175) (32,298) (43,052) Net current assets 47,906 52,512 322,605 Total assets less current 2,536,171 2,448,247 2,528,413 liabilities Creditors: amounts falling due after more than one year (note5) (750,000) (750,000) (750,000) Net assets 1,786,171 1,698,247 1,778,413 Capital and reserves Called-up share capital 135,850 135,850 136,850 Share premium account 1,168,746 1,168,744 1,168,746 Other reserves Capital reserve - realised 344,859 408,870 491,779 Capital reserve - unrealised 27,067 (131,893) (122,048) Capital redemption reserve 8,450 8,450 8,450 Warrant reserve 63,374 63,375 63,374 Revenue reserve 37,825 44,851 32,262 Equity shareholders' funds 1,786,171 1,698,247 1,778,413 Net asset value per ordinary 132.16p 125.01p 130.91p share - basic Net asset value per ordinary 126.86p 120.91p 125.84p share - diluted Cashflow For the For the For the six months six months year ended ended ended 30 September 2004 30 September 2004 31 March 2004 (unaudited) (unaudited) £ £ £ Operating activities Investment income received 76,391 51,119 101,730 Interest received 5,077 1,435 2,604 Investment management and (16,244) (15,740) (32,432) administration fees paid Cash paid to and on behalf - - (2,923) of directors Other cash payments (18,029) (19,408) (26,376) Net cash inflow from 47,195 17,406 42,603 operating activities Servicing of finance Interest paid (22,384) (22,259) (44,885) Taxation Taxation recovered 599 - 735 Capital expenditure and financial investment Purchase of investments (1,291,805) (553,833) (684,009) Sale of investments 1,022,364 56,499 491,323 Equity dividend paid (29,208) (30,676) (47,657) Financing Purchase of own shares (6,082) (5,181) (5,181) (note 4) Proceeds from share issue - 120 120 Decrease in cash (279,321) (537,924) (246,951) Notes 1. These interim accounts have been prepared under the historical cost convention, modified to include the revaluation of investments, and in accordance with applicable UK Law and Accounting Standards. The Company follows the recommendations of the 2003 Statement of Recommended Practice 'Financial Statements of Investment Trust Companies' (SORP). The interim accounts have also been prepared on the assumption that approval as an investment trust continues to be granted and using the accounting policies applied in the annual accounts. 2. All expenses are charged to the revenue account with the exception of management fees and interest charges on borrowings, one half of which less the appropriate tax, are charged to capital. 3. The return per ordinary share is based upon the following figures: 30 Sept 2004 30 Sept 2003 31 March 2004 Revenue return £25,161 £30,661 £47,280 Capital return £2,196 £343,739 £436,495 Weighted average number of ordinary shares in issue during the period - basic 1,355,546 1,362,109 1,360,304 Weighted average number of ordinary shares in issue during the period - diluted 1,355,546 1,362,109 1,360,304 4.On 15 July 2004 the Company purchased 6,930 of its own shares and holds these as treasury shares in accordance with the resolution passed at the annual general meeting in June 2004. £6,082 being the purchase price of the shares has been charged to revenue reserves. These shares do not rank for dividend and are excluded from the calculation of the net asset value per ordinary share. At 1 April 2004 and 30 September 2004, the Company had 266,280 warrants in issue. Each warrant confers the right, exercisable normally on 31 July in any of the years from 2000 to 2010 inclusive, to subscribe for one new ordinary share at a price of £1.00 per share. The net asset value per ordinary share is calculated on the 1,351,570 ordinary shares in issue at the end of the period. Net asset dilution arises from the potential exercise of outstanding warrants and is assumed only to take place if the net assets exceed the exercise price of £1.00. 5. The sterling loan is subject to a covenant which sets a maximum gearing threshold. Details of the loan outstanding at 30 September 2004 were as follows: Amount (£) Interest Rate (%) Repayment Date Sterling loan 750,000 5.99 23 January 2012 There are no undrawn facilities and no early repayment penalties. 6. The figures and financial information for the year ended 31 March 2004 are extracted from the latest published accounts of the Company and do not constitute statutory accounts for the period. Those accounts have been delivered to the Registrar of Companies and include the report of the auditors which was unqualified and did not contain a statement either under section 237(2) or 237(3) of the Companies Act 1985. Portfolio Information At 30 September 2004 Valuation % of Total £ Portfolio Equities 18,600 OTP Bank 230,461 9.3 15,599 ABN-Amro Holdings 195,828 7.9 45,000 Lloyds TSB 194,175 7.8 5,180 BNP Paribas 184,883 7.4 3,200 Societe Generale 156,494 6.3 3,645 Bank Austria Creditanstalt 142,856 5.7 18,679 HBOS 139,345 5.6 38,350 Unicredit Italiano 106,870 4.3 1,512 Bank Przemyslowo-Handlowy 106,013 4.3 5,502 Bank Pekao 103,794 4.2 2,450 Deutsche Bank 97,114 3.9 17,570 Banco Santander Central Hispano 94,789 3.8 15,000 Schroders 92,925 3.7 9,000 Dexia 92,414 3.7 11,560 Bank of Ireland 86,090 3.5 28,000 Amvescap 83,650 3.3 6,186 Bank Zachodni 80,424 3.2 7,500 Northern Rock 53,250 2.1 5,000 Commerzbank 51,170 2.1 4,600 Bayerische Hypo-Und Vereinsbank 48,560 1.9 37,500 Blue Planet European Financials 19,125 0.8 Investment Trust plc 112,577 Jupiter Financial Trust 18,857 0.8 19,600 Blue Planet Worldwide Financials 12,544 0.5 Investment Trust plc Total Equities 2,391,631 96.1 Debt Securities 80,000 BUPA Finance 10.5% Subordinated 96,634 3.9 Guaranteed Bonds 2018 Total Debt Securities 96,634 3.9 Total 2,488,265 100.0 Geographical Regions UK 710,505 28.5 France 341,377 13.7 Poland 290,231 11.7 Hungary 230,461 9.3 Germany 196,844 7.9 Netherlands 195,828 7.9 Austria 142,856 5.7 Italy 106,870 4.3 Spain 94,789 3.8 Belgium 92,414 3.7 Ireland 86,090 3.5 Total Equities 2,488,265 100.0

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