Half-year Report

RNS Number : 1833O

BMO Managed Portfolio Trust - BMPI

28 January 2019

 

To:      RNS

Date:  28 January 2019

From: BMO Managed Portfolio Trust PLC

LEI:    213800ZA6TW45NM9YY31

Interim Results

The Board of BMO Managed Portfolio Trust PLC announces the unaudited interim results of the Company for the six month period to 30 November 2018.

Income shares - financial highlights and performance summary

·      Dividend yield⁽¹⁾ of 4.5% at 30 November 2018, compared to the yield on the FTSE All-Share Index of 4.2%. Dividends are paid quarterly. First two interim dividends increased by 3.8% compared to the prior year.

·      Net asset value total return per Income share of -2.3% for the six months, outperforming the FTSE All-Share Index total return (-7.7%) by +5.4%.

Growth shares - financial highlights and performance summary

·      Net asset value total return per Growth share of -3.5% for the six months, outperforming the FTSE All-Share Index total return (-7.7%) by +4.2%.

·      Growth share price total return of -4.8% for the six months, outperforming the FTSE All-Share Index total return (-7.7%) by +2.9%

Notes:

(1)   Dividend yield - based on dividends at the expected minimum annual rate of 5.85 pence per Income share for the financial year to 31 May 2019 and the Income share price of 129.50p at 30 November 2018.

(2)   Total return - the return to shareholders calculated on a per share basis by adding dividends paid in the period to the increase or decrease in the share price or NAV in the period.

Chairman's Statement

Highlights

·      Net asset value total return for both the Income shares and the Growth shares outperformed the FTSE All-Share Index total return benchmark

·      First two interim dividends increased from 1.30 pence to 1.35 pence per Income share

·      Income share dividend yield of 4.5% at 30 November 2018

Investment performance

For the six months to 30 November 2018, the net asset value (NAV) total return was -2.3% for the Income shares and -3.5% for the Growth shares. The total return for the benchmark index for both portfolios, the FTSE All-Share Index, was -7.7%.

The past six months have been the most challenging for equity markets for some time. While there has not been one single cause behind the market downturn, the policy of the US Federal Reserve to continue to raise interest rates, in response to a strong US economy, was a key catalyst. Although this policy had been well signalled, during the autumn it finally began to take its toll on the previously buoyant US stock market which in turn led global markets lower. With the European Central Bank ending bond purchases at the end of 2018, the policy of Quantitative Easing, which has been so beneficial for financial assets, has drawn to a close. Meantime in the UK, financial markets are right in the middle of "Brexit uncertainty" which has caused some pressure on sterling and has also been a factor in the UK being a relative underperformer when compared to other major equity markets.

Against this difficult background it is encouraging that both portfolios outperformed the FTSE All-Share Index, albeit that they declined in absolute terms. This maintains their long-term record where both portfolios have outperformed the benchmark over one year, three years, five years and from launch to 30 November 2018.

One theme evident amongst the better performers for the Growth portfolio was biotechnology and healthcare exposure. There are signs that key holdings in the Woodford Patient Capital Trust portfolio are, at last, starting to deliver, resulting in this trust being the strongest performer in the Growth portfolio over the past six months with a gain of 20%. In a similar vein Syncona has continued to be an outstanding performer due to its biotechnology holdings. A mention also for BH Macro which is an investment company wholly invested in the Brevan Howard Master Fund, a macro strategy hedge fund. It performs well when there is volatility in bond and foreign exchange markets and also interest rates. After a long period of sideways performance, it gained 15% over the period under review. The laggards were exclusively investment companies exposed to the poorly performing UK equity market, particularly in smaller companies, examples being Henderson Smaller Companies Investment Trust and Miton UK MicroCap Trust.

For the Income portfolio the healthcare theme was also to the fore amongst the better performers with BB Healthcare Trust achieving a 17% share price gain. Otherwise the stronger performers tended to be in the wider Alternatives sector with investment companies that typically had little direct equity exposure. Two examples of notable positive performers were 3i Infrastructure which has been an outstanding long-term performer and The Renewables Infrastructure Group which specialises as an operator of wind and solar farms. As with the Growth portfolio those trusts with UK exposure, especially to UK smaller companies, were laggards, examples being Aberforth Split Level Income Trust and Invesco Perpetual UK Smaller Companies Investment Trust. Encouragingly even in the case of the underperforming trusts, dividends were generally ahead of last year payments.

(All share prices are total return)

Revenue and dividends

The Company's net revenue for the six months was £1.41 million which is equivalent to 3.27p per Income share (compared to 3.36p per Income share for the corresponding period in 2017). Income shares are entitled to all the dividends paid by the Company.

In line with our objective of increasing dividends over time, the Company has declared a first and second interim dividend in respect of the year to 31 May 2019, each of 1.35p per Income share (1.3p per Income share in the corresponding period in the year to 31 May 2018).

In the absence of unforeseen circumstances, the Board intends to pay three interim dividends, each of 1.35p per Income share and the aggregate dividends for the current financial year to 31 May 2019 will be at least 5.85 pence per Income share (2018: 5.7 pence per Income share, excluding the special dividend of 0.8 pence 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 5.85p per Income share represents a yield on the Income share price at 30 November 2018 of 4.5%.

Borrowing

At 30 November 2018 the Income portfolio had total borrowings of £5 million (8.3% 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 2018 the average premium to NAV for the Income shares and for the Growth shares was 1.0% and 1.3% respectively. At 30 November 2018, the Income shares stood at a premium to NAV of 0.9% and the Growth shares at a discount of 0.1% 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. Following shareholder approval at the Annual General Meeting ("AGM") in September 2018, the Company's Articles of Association ("Articles") were amended to enhance the operation of the conversion facility. At the end of October 2018 the conversion proceeded for the first time since launch, for those shareholders who had elected to do so. The ability to convert without incurring capital gains tax should be an attractive facility for shareholders and the next opportunity (subject to minimum and maximum thresholds) will be in October 2019. Details will be provided when the Company's annual report is published in late July 2019.

Continuation vote

Under the terms of the Company's Articles, at the AGM in September 2018, (being the tenth AGM of the Company) the Company was required to propose an ordinary resolution to the effect that the Company should continue as an investment trust. The Board was pleased that shareholders voted overwhelmingly to approve this resolution. The requirement to put such a resolution to shareholders will next occur at the Company's AGM in 2023 and, if that is passed, at every fifth AGM thereafter.

Name change

On 9 November 2018, it was announced that it had been decided to change the Company's name to BMO Managed Portfolio Trust PLC. The Company's Manager, F&C Investment Business Limited, became part of the BMO Financial Group in 2014. BMO was founded over 200 years ago as Bank of Montreal and is now the eighth largest bank by assets in North America. As part of its development plans, BMO decided to rebrand F&C's savings plans to the BMO prefix. Many of the Company's shareholders invest through these savings plans and with the F&C brand changing your Board therefore resolved that continuing to align with the brand of its Manager, as well as the savings plans, avoids unnecessary confusion and ensures the Company maximises the benefits resulting from broader investment by BMO in its brand. The investment policy and process remain unchanged with Peter Hewitt as Fund Manager.

Board changes

As was indicated in the 2018 Annual Report, the Chairman Richard Martin retired from the Board on 31 December 2018. I was honoured to accept the Board's invitation to become Chairman and I would like to thank Richard for his outstanding contribution and commitment to the Company since its launch. Following Richard's retirement I have also become Chairman of the Nomination Committee and I have been succeeded by Alistair Stewart as Chairman of the Audit Committee.

The Board was pleased to announce that, with effect from 1 January 2019, David Warnock was appointed as a non-executive director. David co-founded the investment firm of Aberforth Partners and was a partner for 19 years until his retirement in 2008. He has held non-executive directorships of several public and private companies and we believe that his investment experience and extensive knowledge of the industry will add considerable value to the Board. David's election will be proposed to shareholders for approval at the AGM to be held in September 2019.

Outlook

Uncertainty characterises the outlook for global equity markets as we move into 2019. Quantitative easing, the policy which helped recovery from the financial crash a decade ago and was so good for asset prices, has run its course and monetary tightening has begun in the US. Europe is no longer pursuing monetary easing and, if not for Brexit, interest rates would likely be higher in the UK. Whilst trade wars and Brexit are very important factors for 2019 the key to the future direction for financial markets lies with the Federal Reserve in the US and its policy on interest rates. If they are close to the peak in this cycle and the Federal Reserve can engineer a soft landing then that is positive for risk assets, especially equities. However, should they raise interest rates too far or too fast then recession could eventually result with markets likely to move into a bear phase. The sharp pull back in equity markets over recent months, which illustrates investor uncertainty, has brought valuations back towards long term averages with segments of the UK stock market starting to offer attractive value. With such levels of uncertainty, the next period is likely to be more about preserving capital and so a more cautious investment strategy has been adopted.

Colin S McGill

Chairman

25 January 2019

 

Unaudited Condensed Income Statement

Six months to 30 November 2018

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

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

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

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

Unaudited Condensed Income Statement

Six months to 30 November 2017

	Notes	Revenue	Capital	Total
		£'000	£'000	£'000
Gains on investments Foreign exchange gains		- -	4,384 2	4,384 2
Income	2	1,812	-	1,812
Investment management and performance fees	3	(124)	(620)	(744)
Other expenses		(235)	-	(235)
Return on ordinary activities before finance           costs and tax		1,453	3,766	5,219
Finance costs		(22)	(33)	(55)
Return on ordinary activities before tax		1,431	3,733	5,164
Tax on ordinary activities		(10)	-	(10)
Return attributable to shareholders		1,421	3,733	5,154
Return per Income share (pence)	5	3.36p	(0.67p)	2.69p
Return per Growth share (pence)	5	-	11.65p	11.65p

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

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

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

 

Condensed Income Statement (audited)

Year to 31 May 2018

	Notes	Revenue	Capital	Total
		£'000	£'000	£'000
Gains on investments Foreign exchange losses		- -	6,558 (1)	6,558 (1)
Income	2	3,905	-	3,905
Investment management and performance fees	3	(249)	(849)	(1,098)
Other expenses		(476)	-	(476)
Return on ordinary activities before finance costs and tax		3,180	5,708	8,888
Finance costs		(44)	(66)	(110)
Return on ordinary activities before tax		3,136	5,642	8,778
Tax on ordinary activities		(27)	-	(27)
Return attributable to shareholders		3,109	5,642	8,751
Return per Income share (pence)	5	7.32p	(3.42p)	3.90p
Return per Growth share (pence)	5	-	20.45p	20.45p

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

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

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

 

Unaudited Condensed Balance Sheet

As at 30 November 2018

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

 

Unaudited Condensed Balance Sheet

As at 30 November 2017

	Notes	Income shares	Growth shares	Total
		£'000	£'000	£'000
Fixed assets
Investments		61,877	67,042	128,919
Current assets
Debtors Cash at bank and on deposit		266 982	100 1,895	366 2,877
		1,248	1,995	3,243
Creditors
Amounts falling due within one year		(254)	(413)	(667)
Net current assets		994	1,582	2,576
Creditors
Amounts falling due in more than one year		(5,000)	-	(5,000)
Net assets		57,871	68,624	126,495
Capital and reserves
Called-up share capital		4,254	3,475	7,729
Share premium		21,894	19,626	41,520
Capital redemption reserve		-	182	182
Special reserve		19,163	17,190	36,353
Capital reserves		10,582	28,151	38,733
Revenue reserve		1,978	-	1,978
Shareholders' Funds		57,871	68,624	126,495
Net asset value per share (pence)	8	136.63p	197.47p

 

Condensed Balance Sheet (audited)

As at 31 May 2018

		Income shares	Growth shares	Total
	Notes	£'000	£'000	£'000
Fixed assets
Investments		61,255	69,911	131,166
Current assets
Debtors		260	62	322
Cash at bank and on deposit		1,905	3,197	5,102
		2,165	3,259	5,424
Creditors
Amounts falling due within one year		(170)	(645)	(815)
Net current assets		1,995	2,614	4,609
Creditors
Amounts falling due in more than one year		(5,000)	-	(5,000)
Net assets		58,250	72,525	130,775
Capital and reserves
Called-up share capital		4,306	3,517	7,823
Share premium		22,597	20,408	43,005
Capital redemption reserve		-	182	182
Special reserve		19,371	17,190	36,561
Capital reserves		9,414	31,228	40,642
Revenue reserve		2,562	-	2,562
Shareholders' Funds		58,250	72,525	130,775
Net asset value per share (pence)	8	135.29p	206.23p

 

Unaudited Condensed Statement of Cash Flows

Six months to 30 November 2018

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

 

Unaudited Condensed Statement of Cash Flows

Six months to 30 November 2017

	Notes	Income shares		Growth shares	Total
		£'000		£'000	£'000
Net cash inflow from operating activities	9	848		77	925
Investing activities
Purchases of investments		(5,733)		(4,374)	(10,107)
Sales of investments		6,015		2,714	8,729
Cash flows from investing activities		282		(1,660)	(1,378)
Cash flows before financing activities		1,130		(1,583)	(453)
Financing activities
Equity dividends paid Net proceeds from issuance of new shares		(1,266) -		- 787	(1,266) 787
Sale of shares from treasury		345		-	345
Cash flows from financing activities		(921)		787	(134)
Net movement in cash and cash equivalents		209		(796)	(587)
Cash and cash equivalents at the beginning of the      period Cash and cash equivalents at the end of the     period		773 982		2,691                   1,895	3,464 2,877
Represented by: Cash at bank and short-term deposits		982		1,895	2,877

 

Condensed Statement of Cash Flows (audited)

Year to 31 May 2018

	Notes			Income shares		Growth shares	Total
			£'000			£'000	£'000
Net cash inflow from operating activities	9		2,098		240		2,338
Investing activities
Purchases of investments			(15,258)		(7,307)		(22,565)
Sales of investments			15,354		5,962		21,316
Cash flows from investing activities			96		(1,345)		(1,249)
Cash flows before financing activities			2,194		(1,105)		1,089
Financing activities
Equity dividends paid			(2,370)		-		(2,370)
Net proceeds from issue of new shares Sale of shares from treasury			708 600		1,611 -		2,319 600
Cash flows from financing activities			(1,062)		1,611		549
Net movement in cash and cash equivalents			1,132		506		1,638
Cash and cash equivalents at the beginning of the    period Cash and cash equivalents at the end of the    period			773 1,905		2,691 3,197		3,464 5,102
Represented by: Cash at bank and short-term deposits			1,905		3,197		5,102

Unaudited Condensed Statement of Changes in Equity

Six months to 30 November 2018

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

 

Unaudited Condensed Statement of Changes in Equity

Six months to 30 November 2017

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 2017	4,254	21,839	-	18,873	10,865	1,823	57,654
Shares sold from treasury	-	55	-	290	-	-	345
Transfer of net income from Growth to Income portfolio	-	-	-	-	-	338	338
Transfer of capital from Income to Growth portfolio	-	-	-	-	(338)	-	(338)
Dividends paid	-	-	-	-	-	(1,266)	(1,266)
Return attributable to shareholders	-	-	-	-	55	1,083	1,138
As at 30 November 2017	4,254	21,894	-	19,163	10,582	1,978	57,871
Growth shares
As at 31 May 2017	3,435	18,879	182	17,190	24,135	-	63,821
Increase in share capital in issue, net of share issuance expenses	40	747	-	-	-	-	787
Transfer of net income from Growth to Income portfolio	-	-	-	-	-	(338)	(338)
Transfer of capital from Income to Growth portfolio	-	-	-	-	338	-	338
Return attributable to shareholders	-	-	-	-	3,678	338	4,016
As at 30 November 2017	3,475	19,626	182	17,190	28,151	-	68,624
Total Company
As at 31 May 2017	7,689	40,718	182	36,063	35,000	1,823	121,475
Shares sold from treasury	-	55	-	290	-	-	345
Increase in share capital in issue, net of share issuance expenses	40	747	-	-	-	-	787
Dividends paid	-	-	-	-	-	(1,266)	(1,266)
Return attributable to shareholders	-	-	-	-	3,733	1,421	5,154
As at 30 November 2017	7,729	41,520	182	36,353	38,733	1,978	126,495

 

Condensed Statement of Changes in Equity (audited)

Year to 31 May 2018

Income Shares	Share capital £000	Share premium account £000	Capital redemption reserve £000	Special reserve £000	Capital reserves £000	Revenue reserve £000	Total shareholders' funds £000
As at 31 May 2017	4,254	21,839	-	18,873	10,865	1,823	57,654
Increase in share capital in issue, net of share issuance expenses	52	656	-	-	-	-	708
Shares sold from treasury	-	102	-	498	-	-	600
Transfer of net income from Growth to Income portfolio	-	-	-	-	-	631	631
Transfer of capital from Income to Growth portfolio	-	-	-	-	(631)	-	(631)
Dividends paid	-	-	-	-	-	(2,370)	(2,370)
Return attributable to shareholders	-	-	-	-	(820)	2,478	1,658
As at 31 May 2018	4,306	22,597	-	19,371	9,414	2,562	58,250
Growth Shares
As at 31 May 2017	3,435	18,879	182	17,190	24,135	-	63,821
Increase in share capital in issue, net of share issuance expenses	82	1,529	-	-	-	-	1,611
Transfer of net income from Growth to Income portfolio	-	-	-	-	-	(631)	(631)
Transfer of capital from Income to Growth portfolio	-	-	-	-	631	-	631
Return attributable to shareholders	-	-	-	-	6,462	631	7,093
As at 31 May 2018	3,517	20,408	182	17,190	31,228	-	72,525
Total Company
As at 31 May 2017	7,689	40,718	182	36,063	35,000	1,823	121,475
Increase in share capital in issue, net of share issuance expenses	134	2,185	-	-	-	-	2,319
Shares sold from treasury	-	102	-	498	-	-	600
Dividends paid	-	-	-	-	-	(2,370)	(2,370)
Return attributable to shareholders	-	-	-	-	5,642	3,109	8,751
As at 31 May 2018	7,823	43,005	182	36,561	40,642	2,562	130,775

Statement of Principal Risks and Uncertainties

Most of the Company's principal risks 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 Viability Statement" within the Strategic Report in the Company's 2018 Annual Report.

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

The most important types of risk associated with financial instruments are credit risk, market price risk, liquidity risk, interest rate risk and foreign currency risk.  Other risks faced by the Company include investment, custody and operational risks.

Statement of Directors' Responsibilities in Respect of the Interim Report

We confirm, that to the best of our knowledge:

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

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

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

·      the Chairman's Statement together with the condensed set of financial statements include 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

25 January 2019

 

Notes

1.  Accounting policies

The unaudited interim results 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 unaudited interim results are set out in the Company's annual report for the year ended 31 May 2018.

2.  Income

	Six months to 30 November 2018	Six months to 30 November 2017	Year to 31 May 2018
	£'000	£'000	£'000
UK dividends	1,174	1,100	2,234
Overseas dividends	640	706	1,659
Interest on fixed   interest securities Deposit income	- 8	2 4	2 10
Total income	1,822	1,812	3,905

3.  Investment management and performance fees

    The Company's investment manager, F&C Investment Business Limited, changed its name to BMO Investment Business Limited effective 31 October 2018. There have been no changes to the terms of the management and performance fee arrangements with BMO Investment Business Limited, which are set out in detail in the Annual Report and Accounts to 31 May 2018. 

    During the period, the Company incurred investment management fees of £443,000 (30 November 2017: £419,000; 31 May 2018: £843,000) of which £209,000 was payable to BMO Investment Business Limited at the period end.  

    At 30 November 2018 the adjusted total return of the Income portfolio for the period since 31 May 2016 (being the date a performance fee was last payable) exceeded that of the FTSE All-Share Index and a performance fee of £60,000 was accrued in the Income portfolio at 30 November 2018. At 30 November 2018 the adjusted total return of the Growth portfolio since 31 May 2018 (being the date a performance fee was last payable) exceeded that of the FTSE All-Share Index and a performance fee of £113,000 was accrued in the Growth portfolio at 30 November 2018 (30 November 2017: £85,000 - Income portfolio and £240,000 - Growth portfolio; 31 May 2018: £nil - Income portfolio and £255,000 - Growth portfolio).            

 

4.  Investments

	Income shares Level 1* £'000	Growth shares Level 1* £'000	Total £'000
Cost at 31 May 2018 Gains at 31 May 2018	47,714 13,541	41,538 28,373	89,252 41,914
Valuation at 31 May 2018 Movement in the period: Purchases at cost Sales proceeds Gains on investments sold in the period Losses on investments held at period end	61,255 2,324 (3,110) 152 (2,326)	69,911 5,616 (5,261) 2,357 (4,930)	131,166 7,940 (8,371) 2,509 (7,256)
Valuation of investments held at 30 November 2018	58,295	67,693	125,988

	Income shares Level 1* £'000	Growth shares Level 1* £'000	Total £'000
Cost at 30 November 2018 Gains at 30 November 2018	47,080 11,215	44,250 23,443	91,330 34,658
Valuation at 30 November 2018	58,295	67,693	125,988

* Fair value hierarchy

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

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

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

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

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

5.  Return per share

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

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

 

The return per share for the comparative six months to 30 November 2017 is as follows:

	Income shares			Growth shares
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Return attributable to   portfolios	1,083	55	1,138	338	3,678	4,016
Transfer of net income     from Growth to Income    portfolio	338	-	338	(338)	-	(338)
Transfer of capital from    Income to Growth     portfolio	-	(338)	(338)	-	338	338
Return attributable to   shareholders	1,421	(283)	1,138	-	4,016	4,016
Return per share	3.36p	(0.67p)	2.69p	-	11.65p	11.65p
Weighted average number of shares in issue during the period	42,256,401			34,476,491

The return per share for the comparative year to 31 May 2018 is as follows:

	Income shares			Growth shares
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Return attributable to   portfolios	2,478	(820)	1,658	631	6,462	7,093
Transfer of net income     from Growth to Income    portfolio	631	-	631	(631)	-	(631)
Transfer of capital from    Income to Growth     portfolio	-	(631)	(631)	-	631	631
Return attributable to   shareholders	3,109	(1,451)	1,658	-	7,093	7,093
Return per share	7.32p	(3.42p)	3.90p	-	20.45p	20.45p
Weighted average number of shares in issue during the period	42,451,199			34,687,229

 

6.    Dividends

	Payment	Six months to 30 November 2018	Six months to 30 November 2017	Year to 31 May 2018
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 1.80p (prior period: 1.70p) per share	13 Jul-2018	775	716	716
- special dividend of 0.80p (prior period:  nil) per share	13 Jul 2018	344	-	-
In respect of the period under review:
- first interim of 1.35p (prior period: 1.30p) per share	5 Oct 2018	581	550	550
- second interim (prior period: 1.30p per share)	-	-	-	550
- third interim (prior period: 1.30p per share)	-	-	-	554
		1,700	1,266	2,370

       A second interim dividend in respect of the year to 31 May 2019 of 1.35p per Income share was paid on 11 January 2019 to shareholders on the register on 14 December 2018. This amount has not been accrued in the results for the six months to 30 November 2018.

       For the financial year to 31 May 2018 interim dividends totalled 5.70p per Income share (excluding the special interim dividend of 0.80p 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 of 10p each
Balance at 1 June 2018	43,055,035	4,306	-	-	43,055,035	4,306
Share conversion: -     Income to Growth	(242,448)	(24)	-	-	(242,448)	(24)
-     Growth to Income	58,118	5	-	-	58,118	5
Issued	50,000	5			50,000	5
Balance at 30 November 2018	42,920,705	4,292	-	-	42,920,705	4,292

						Deferred shares - Income
						Number	£'000
Deferred shares - Income
Balance at 1 June 2018						-	-
Issue of 242,448 shares of £0.0237601 each						242,448	6
Balance at 30 November 2018						242,488	6
Total called-up share capital							4,298

During the period, the Company issued 50,000 Income shares from the block listing facilities receiving net proceeds of £64,000. At 30 November 2018, the Company held no Income shares in treasury. 

During the period, valid conversion notices were received to convert 242,448 Income shares. These were converted into 155,064 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 in 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 2018 AGM.

	Listed		Held in treasury		In issue
	Number	£'000	Number	£'000	Number	£'000
Growth shares of 10p each
Balance at 1 June 2018	35,167,037	3,517	-	-	35,167,037	3,517
Share conversion: -     Growth to Income	(37,172)	(3)	-	-	(37,172)	(3)
-     Income to Growth	155,064	15	-	-	155,064	15
Issued	350,000	34			350,000	34
Balance at 30 November 2018	35,634,929	3,563	-	-	35,634,929	3,563

						Deferred shares - Growth
						Number	£'000
Deferred shares - Growth
Balance at 1 June 2018						-	-
Issue of 37,172 shares of £0.0237601 each						37,172	1
Balance at 30 November 2018						37,172	1
Total called-up share capital							3,564

  During the period, the Company issued 350,000 Growth shares from the block listing facilities receiving net proceeds of £746,000. At 30 November 2018, the Company held no Growth shares in treasury. 

  During the period, valid conversion notices were received to convert 37,172 Growth shares. These were converted into 58,118 Income shares in accordance with the Company's Articles and by reference to 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 in 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 2018 AGM.

8.     Net asset value per share

	30 November 2018	30 November 2017	31 May 2018
Income shares
Net asset value per share	128.31p	136.63p	135.29p
Net assets attributable at end of   period - £'000s	55,070	57,871	58,250
Shares in issue at end of period - number	42,920,705	42,355,035	43,055,035
Growth shares
Net asset value per share	199.11p	197.47p	206.23p
Net assets attributable at end of   period - £'000s	70,950	68,624	72,525
Shares in issue at end of period - number	35,634,929	34,752,037	35,167,037

 

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

Six months to 30 November 2018	Income shares £'000		Growth shares £'000	Total £'000
Return on ordinary activities before tax Adjust for returns from non-operating activities:		(1,308)	(2,550)	(3,858)
Losses on investments		2,174	2,573	4,747
Exchange Losses		2	-	2
Return from operating activities		868	23	891
Decrease/(increase) in prepayments and accrued income		6	(23)	(17)
Increase/(decrease) in creditors		53	(135)	(82)
Withholding tax suffered		-	(1)	(1)
Net cash flows from operating activities		927	(136)	791

Six months to 30 November 2017	Income shares £'000		Growth shares £'000	Total £'000
Return on ordinary activities before tax Adjust for returns from non-operating activities:		1,145	4,019	5,164
Gains on investments		(294)	(4,090)	(4,384)
Exchange gains		(2)	-	(2)
Return from operating activities		849	(71)	778
Increase in prepayments and accrued   income		(86)	(51)	(137)
Increase in creditors		83	202	285
Withholding tax suffered		2	(3)	(1)
Net cash flows from operating activities		848	77	925

Year ended 31 May 2018		Income shares £'000	Growth shares £'000	Total £'000
Return on ordinary activities before tax Adjust for returns from non-operating activities:	1,679		7,099	8,778
Losses/(gains) on investments	512		(7,070)	(6,558)
Exchange losses	1		-	1
Return from operating activities	2,192		29	2,221
Increase in prepayments and     accrued income	(56)		(17)	(73)
Increase in creditors	6		236	242
Withholding tax suffered	(44)		(8)	(52)
Net cash flows from operating activities	2,098		240	2,338

10.  Earnings

       Earnings for the six months to 30 November 2018 should not be taken as a guide to the results of the full year to 31 May 2019.

11.   Tax

       The effective revenue tax rate for the period to 30 November 2018 is 0.5% (30 November 2017: 0.7%; 31 May 2018: 0.9%).  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 and a £2 million revolving credit facility agreement ("RCF") with The Royal Bank of Scotland International Limited. £5 million of the fixed term loan was drawn down as at 30 November 2018 at a fixed interest rate of 2.03% per annum. £nil of the RCF was drawn down as at 30 November 2018. The RCF terminates on 10 February 2019 and the Company will not renew this.

13.   Going concern

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

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

       The Directors believe, in light of the controls and review processes and bearing in mind the nature of the Company's business and assets and revenue and expenditure projections, that the Company has adequate resources to continue in operational existence within its stated investment policy for a period of at least twelve months commencing from the date of approval of the accounts. 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 the tenth AGM of the Company and five-yearly thereafter 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.   Results

       The Company's auditor, KPMG LLP, has not audited or reviewed the Interim Report to 30 November 2018 pursuant to the Auditing Practices Board guidance on 'Review of Interim Financial Information'. These are not full statutory accounts in terms of Section 434 of the Companies Act 2006 and are unaudited.  Statutory accounts for the year ended 31 May 2018, 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 2018 are an extract from those accounts.  No full statutory accounts in respect of any period after 31 May 2018 have been reported on by the Company's auditor or delivered to the Registrar of Companies. The Interim Report will be posted to shareholders shortly and is available on the website: www.bmomanagedportfolio.com

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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