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Securities Tst Scot STS Half Yearly Report



  Securities Tst Scot (STS) - Half Yearly Report

RNS Number : 7999Q
Securities Trust of Scotland PLC
09 November 2012
 



                       Securities Trust of Scotland plc

 

Half-yearly financial report

Six months to 30 September 2012

 

A copy of the half yearly financial report has been submitted to the National
Storage Mechanism and will shortly be available for inspection at:
www.Hemscott.com/nsm.do

 

A copy of this half-yearly financial report can shortly be downloaded at
www.securitiestrust.com

 

FINANCIAL SUMMARY

                                                           

Key data                                          As at         As at % change

                                      30 September 2012 31 March 2012
Net asset value per share (cum                  123.02p       119.75p     +2.7
income)  
Net asset value per share (ex income)           121.45p       118.00p     +2.9
 
MSCI World High Dividend Yield Index             564.00        556.70     +1.3
Share price                                     127.50p       122.00p     +4.5
Premium                                           3.64%         1.88%         

 

 

Total returns‡              Six months ended  Six months ended

                           30 September 2012 30 September 2011
Net asset value per share*              5.1%            (6.0%)
Benchmark**                             4.2%            (5.4%)
Share price                             6.6%            (1.7%)

 

 

Income                    Six months ended  Six months ended

                         30 September 2012 30 September 2011
Revenue return per share             2.77p             3.17p

 

                                                           
                                                                             

Ongoing charges#                      Six months ended  Six months ended

                                     30 September 2012 30 September 2011
Ongoing charges                                   0.9%              0.8%
Performance fee                                      -              0.3%
Ongoing charges plus performance fee              0.9%              1.1%

 

 

 

 

 

 

 

 

 

Source: Martin Currie Investment Management Limited

 

‡ The combined effect of any dividend paid, together with the rise or fall  in 
the share price, net asset value or index.

 

* The net asset value is exclusive of income with dividends re-invested.

 

** Prior to  1 August  2011, the company's  benchmark was  the FTSE  All-Share 
index and the MSCI World High Dividend Yield index thereafter.

 

# Ongoing charges have replaced the  total expense ratio. They are  calculated 
using average net assets over the period.  The ongoing charges figure has been
calculated with the AIC's recommended methodology.            

 

Annual total returns with dividends reinvested over 12 month periods to 30
September

 

Annual total returns‡                           2012  2011 2010  2009  2008
Securities Trust of Scotland share price        27.7% 9.4% 15.8% 6.9%  (30.4%)
Benchmark***                                    15.7% 2.6% 12.5% 10.8% (22.3%)

 
Securities Trust of Scotland net asset value    18.3% 3.3% 14.6% 6.6%  (28.8%)
per share

 

Source: Martin Currie Investment Management Limited

 

‡ The combined effect of any dividends paid, together with the rise or fall in
the share price, net asset value or benchmark.

 

*** Prior to 1 August 2011, the Trust's benchmark was the FTSE All-Share index
and the MSCI World High Dividend Yield index thereafter.

 

INTERIM MANAGEMENT REPORT

 

Chairman's statement

 

Over the  six  months to  30  September  2012, Securities  Trust  of  Scotland 
continued to build upon the positive momentum that has been growing since  the 
company moved to a global equity income portfolio on 1 August 2011.

 

I am pleased to report that over the period, investment returns were ahead  of 
benchmark. The  net  asset value  total  return  was 5.1%  compared  with  the 
benchmark's return of 4.2%. The share price total return was 6.6%,  reflecting 
a continued and increased premium for the company.

 

The company's  strong progress  has also  been recognised  externally, with  a 
nomination in the International Income  category at the Investment Company  of 
the Year awards later this month. This follows on from being awarded the  Best 
Growth & Income  Trust award from  Investment Trusts magazine  earlier in  the 
year.

 

The manager's  review outlines  how despite  their positive  returns over  the 
period, global markets remain volatile with much continuing uncertainty.

 

Revenues and dividends

The revenue return per share for the  six months to 30 September was 2.77p,  a 
fall of  12.6%  compared with  the  six months  to  30 September  2011.   This 
primarily reflects the absence of  the one-off additional revenue return  from 
the transitional impact of  the change in mandate  last year (as disclosed  in 
the annual report). A  first interim dividend payment  of 1.15p per share  for 
the financial year to 31  March 2013 has already been  declared and paid on  3 
September to shareholders  who were on  the register on  17 August 2012.  Your 
board has also  declared a second  interim dividend of  1.15p per share,  also 
unchanged year-on-year. This will be paid on 13 December 2012 to  shareholders 
who were on the register  on 23 November 2012.  At 30 September the  company's 
shares offered a net yield of 3.7%. 

 

Borrowing

The loan facility was increased by £3million to £14million in September  2012, 
reflecting the investment appreciation and  share issuance. The loan  facility 
has been fully  drawn down  during the  6 months  to 30  September 2012.   The 
company maintained the level of gearing  between 8% and 9% during the  period. 
This allowed the manager to enhance returns for shareholders over the period.

 

 

 

 

Share issues

As I reported in the annual report, demand for shares in the company has  been 
extremely strong since  the move  to a  global equity  income mandate.  During 
2012, the  company has  consistently traded  at  a premium,  which, as  at  30 
September 2012, was 3.6% on a cum-income basis.

 

To help meet the demand for shares the company has the ability to issue up  to 
10 million  new  shares  prior  to  the  2013  AGM.  The  company  has  issued 
3.25million shares between June and September 2012.

 

Outlook

With the  uncertainty in  global markets  set to  continue, the  company  will 
continue to focus  on good  quality stocks  in which  the manager  has a  high 
degree of conviction. Your board will  continue to remain focused on  ensuring 
that shareholders continue to benefit over the longer term.

 

Neil Donaldson

Chairman

9 November 2012

 

Risk and mitigation

With assistance from the manager, the board has drawn up a risk matrix,  which 
identifies the key risks  to the company. These  key risks fall broadly  under 
the  following  categories  and  the  implementation  of  specific  mitigating 
measures and procedures has taken place in order to reduce the probability and
impact of each risk to the greatest extent possible.

The board considers the key ongoing risks to be:

 

·      Regulatory change                    ·       Failure   to  manage   the 
                                            discount
·      Maintaining market liquidity         ·      Investment underperformance
·      Loss of s1158-1159 status            ·      Gearing/interest rate risk
·      Operational disruption at the        ·      Foreign exchange risk
manager's premises
·      Regulatory, accounting/internal      ·           Counterparty       and 
control breach                              operational risk
·      Loss of investment team or portfolio
manager

 

Further details of these risks and how the board manages them can be found  in 
the 2012 annual report and on the company's website www.securitiestrust.com

 

Directors' responsibility

In accordance with Chapter 4 of the Disclosure and Transparency Rules, and  to 
the best of their  knowledge, each director of  Securities Trust of  Scotland, 
confirms that the financial statements  have been prepared in accordance  with 
the applicable set of accounting  standards and give a  true and fair view  of 
the assets, liabilities,  financial position  and net return  of the  company. 
Furthermore, each  director  certifies  that  the  interim  management  report 
includes an indication of important events that have occurred during the first
six  months  of  the  financial  year,  and  their  impact  on  the  financial 
statements,  together  with   a  description  of   the  principal  risks   and 
uncertainties that the company faces. In addition, each director of Securities
Trust of Scotland  confirms that,  with the  exception of  the management  and 
secretarial fees, there have been no related party transactions during the six
months to 30 September 2012.

 

By order of the board

Neil Donaldson, Chairman

Edinburgh 9 November 2012

Manager's Review

 

Global equity markets continue to follow  a volatile but rising trend. In  the 
first half,  we witnessed  markets fall  in April  and May  before  recovering 
through  to  the  end  of  September.  High  dividend  yielding  stocks   have 
outperformed over the period  as a whole,  but struggled to  keep up with  the 
broader market in  August and September.  The MSCI World  High Dividend  Yield 
index, the  benchmark,  rose  by  4.2%  over  the  first  half,  as  telecoms, 
healthcare  and  consumer  staples  stocks  outperformed  at  the  expense  of 
industrial and material stocks.

 

As I said in the last annual report, the key driver of these market swings  is 
investor confidence. This confidence, or lack of, is being fuelled in turn  by 
the big macroeconomic concerns of the day - the eurozone crisis, the  strength 
of the US recovery, and  slowing growth in China  - and how policymakers  deal 
with each of these issues.  A taster of future  US policy direction came  from 
the 1 August  Federal Open  Market Committee (FOMC)  meeting statement,  which 
highlighted decelerating growth in the first half of 2012 and the  Committee's 
pledge to  'provide additional  accommodation as  needed'. This  language  was 
echoed in the Federal Reserve chairman's  speech at the Jackson Hole  Economic 
Symposium at the end of August. Then,  in mid-September, we saw the launch  of 
'QE3' (the third round of quantitative  easing), with the FOMC announcing  its 
intention to purchase  an additional US$40  billion of agency  mortgage-backed 
securities per month. The Federal Reserve said it will continue this programme
until it  sees substantial  improvement in  the labour  market. Meanwhile,  in 
Europe, European  Central  Bank  (ECB) President  Mario  Draghi  unveiled  the 
details of  a new  sovereign-debt-purchase programme,  in which  the ECB  will 
purchase short-dated bonds of  any country, with no  limit as long as  certain 
conditions are met. Japan's central bank  followed suit by announcing that  it 
would boost the  size and  duration of  its government-bond-buying  programme, 
which is designed to  encourage borrowing and spending.  So the major  central 
banks have, in effect, offered concerted largesse to buy time for economies to
return to growth.

 

The most important  conclusion to draw  from these actions  is that they  will 
create a scarcity  of income. Interest  rates and asset  yields are likely  to 
remain lower for longer, which means that the attractiveness of equity  yields 
increases. The  company is  focused  on investing  in quality  franchises,  at 
attractive  valuations,   that  exhibit   growth.  We   also  focus   on   the 
higher-yielding areas of the market - the aforementioned policy actions should
ensure that these areas remain attractive for the foreseeable future.

 

Portfolio review

 

Performance

For the first half  of the year, the  portfolio outperformed its benchmark  by 
just under 1.0%. By region, the range of relative performance was narrow.  The 
portfolio outperformed  Europe by  1.2% and  underperformed North  America  by 
1.0%; the other regions were within this range. By sector, the range was  also 
narrow. Energy and staples  outperformed by 0.5%  and 0.4%, respectively,  and 
telecoms and  financials underperformed  by 0.4%  and 0.3%.  Meanwhile,  seven 
individual stocks  had an  impact of  over  0.2%. On  the positive  side,  the 
largest contributors  were Lawson,  the Japanese  convenience-store  operator, 
Inmarsat, the global mobile-satellite-service provider, and Total, the  global 
energy company. Lawson and Inmarsat have delivered good results this year, and
Total was a  well-timed purchase, having  been bought after  the Elgin  spill. 
Meanwhile, not holding AT&T and Verizon  was a negative for the portfolio,  as 
both performed  strongly on  a return  of  pricing power  to the  US  telecoms 
providers. We have been repurchasing AT&T on the back of this positive change.
Elsewhere, MAN Group and Intel - stocks we have now sold - were weak.

 

Activity

 

We purchased Total, the  French integrated oil  company, for several  reasons, 
including its volume growth after a lacklustre few years, driven by  deepwater 
West Africa, then  LNG and oil  sands; strong earnings  and cashflow  momentum 
helped by the higher-margin new projects; and a portfolio transition driven by
focusing on exploration.

Key sales over  the period included  Seadrill and Dupont.  Both companies  are 
high-quality cyclicals where  we felt that  valuations looked stretched  after 
strong performances. At Seadrill, the Norwegian rig-operating company, we  had 
seen day rates hit record highs and  were skeptical as to how long this  could 
continue. In the case of Dupont, the US chemicals giant, we felt that after  a 
strong performance there were better opportunities elsewhere.

 

The portfolio  is  positioned  with  a  neutral  stance.  This  means  we  are 
underweight in  the most  defensive areas  of the  market, but  also the  most 
cyclical areas. Our main exposure is  to companies where we expect  consistent 
and persistent dividend growth in  the mid-single digits. Quality remains  our 
focus, followed by  growth and value.  We expect the  underlying portfolio  to 
have dividend  growth  around the  mid-single-digit  level over  the  next  12 
months.

 

Outlook

We remain confident in  our neutral stance on  markets. The biggest driver  is 
the economic  backdrop  which, although  showing  some signs  of  improvement, 
remains largely negative. Company margins are high, and cashflow generation is
strong, but confidence is low. This  is a positive for market dividend  growth 
in the short term, but we are  looking for rising capital expenditure and  M&A 
activity to signal a return of confidence in corporate boardrooms.  Valuations 
remain neutral  for  markets after  their  rally  this year,  while  the  most 
positive supports for equities are  the attractiveness of dividend yields  and 
the high levels of cash  that many investors appear to  be holding. We aim  to 
capitalise on both of these by  being fully invested and focused on  companies 
that offer growing dividends.

 

Alan Porter

9 November 2012

 

PORTFOLIO SUMMARY

 

Portfolio distribution

 
By region                                       As at         As at

(excluding cash and fixed interest) 30 September 2012 31 March 2012
                                                  (%)           (%)
Developed Europe                                   47            45
North America                                      43            43
Developed Asia Pacific ex Japan                     7             8
Japan                                               3             3
Global emerging markets                             -             1
                                                  100           100

 

By sector                                       As at             As at

(excluding cash and fixed interest) 30 September 2012     31 March 2012
                                                  (%)               (%)
Healthcare                                         20                18
Financials                                         14                15
Consumer goods                                     14                11
Oil & gas                                          13                10
Consumer services                                  11                12
Industrials                                        11                11
Telecommunications                                 11                 9
Utilities                                           2                 6
Basic materials                                     2                 5
Technology                                          2                 3
                                                  100               100

 

By asset class              As at         As at

                30 September 2012 31 March 2012
                              (%)           (%)
Equities                      111           109
Less borrowings              (11)           (9)
                              100           100

 

Largest holdings        30 September                         31
                                           As at 30             As at 31 March
                                2012 September 2012  March 2012           2012
                        Market value     % of total      Market     % of total
                                                          value
                                £000      portfolio        £000      portfolio
Pfizer                         6,359            4.6       5,441            4.2
Chevron                        6,163            4.4       4,406            3.4
Royal Dutch Shell ('B'                             
Shares)                                                                    4.0
                               5,296            3.8       5,186
Vodafone Group                 5,034            3.6       4,365            3.3
Abbott Laboratories            4,919            3.5       4,213            3.2
Nestlé                         4,866            3.5           -              -
Philip Morris                                   3.4                        3.6
International                  4,795                      4,675
Sanofi                         4,748            3.4       3,641            2.8
Total                          4,607            3.3           -              -
Novartis                       4,387            3.1       3,913            3.0

 

 

 

 

 

UNAUDITED INCOME STATEMENT

                                     Six months to          Six months to

                                   30 September 2012      30 September 2011
                                 Revenue Capital Total Revenue Capital Total
                            Note £000    £000    £000  £000    £000    £000

                             
Gains/(losses) on              6       -   3,525 3,525       - (8,655) (8,655)
investments
Currency (losses)/gains                1   (286) (285)      19      73      92
Income                         3   3,445       - 3,445   3,663       -   3,663
Investment management fee          (125)   (233) (358)    (50)    (93)   (143)
Performance fee                        -       -     -       -   (372)   (372)
Other expenses                     (200)       - (200)   (286)       -   (286)
Net return before finance          3,121   3,006 6,127   3,346 (9,047) (5,701)
costs and taxation
Finance costs                       (45)    (89) (134)    (68)   (127)   (195)
Net return on ordinary             3,076   2,917 5,993   3,278 (9,174) (5,896)
activities before taxation
Taxation on ordinary           5   (275)       - (275)    (95)       -    (95)
activities
Return attributable to
ordinary redeemable                2,801   2,917 5,718   3,183 (9,174) (5,991)
shareholders
Return per ordinary
redeemable share               2   2.77p   2.88p 5.65p   3.17p (9.15p) (5.98p)

 

 

                                                               (Audited)
                                                                Year to
                                                             31 March 2012
                                                         Revenue Capital Total
                                                    Note    £000    £000  £000
Gains/(losses) on investments                          6       -   2,738 2,738
Currency (losses)/gains                                     (17)   (135) (152)
Income                                                 3   6,353       - 6,353
Investment management fee                                  (102)   (189) (291)
Performance fee                                                -   (372) (372)
Other expenses                                             (541)       - (541)
Net return before finance costs and taxation               5,693   2,042 7,735
Finance costs                                              (109)   (202) (311)
Net return on ordinary activities before taxation          5,584   1,840 7,424
Taxation on ordinary activities                        5   (354)       - (354)
Return attributable to ordinary redeemable                 5,230   1,840 7,070
shareholders
Return per ordinary redeemable share                   2   5.22p   1.83p 7.05p

 

The total columns of this  statement are the profit  and loss accounts of  the 
company. 

The revenue and capital items are presented in accordance with the Association
of Investment Companies (AIC) SORP.

All revenue and capital  items in the above  statement derive from  continuing 
operations.

No operations were acquired or discontinued in the period.

A Statement of Total Recognised Gains and Losses is not required as all  gains 
and losses of the company have been reflected in the above statement.

 

 

UNAUDITED BALANCE SHEET

 

 

 

                                     As at             As at         (Audited)

                         30 September 2012 30 September 2011             As at

                                                                 31 March 2012
                    Note     £000     £000      £000    £000     £000     £000
Non-current assets
Investments at fair
value through
profit or loss
Listed on Exchanges                 36,285            34,987            38,538
in the UK
Listed on Exchanges                103,457            80,514            92,088
abroad
                       6           139,742           115,501           130,626
  Current assets
Loans and              7      525                726              718
receivables
Cash at bank                4,179              4,330                -
                            4,704              5,056              718
     Creditors
Amounts falling due    8 (17,107)           (11,250)         (11,282)
within one year
Net current                       (12,403)
liabilities                                          (6,194)          (10,564)
                                          
Net assets                         127,339           109,307           120,062
    Capital and
     reserves
Called up ordinary                   1,035             1,003             1,003
share capital
Capital redemption                      78                78                78
reserve
Special
distributable                      113,364           109,411           109,411
capital reserve
Capital reserve                      9,630           (4,301)             6,713
Revenue reserve                      3,232             3,116             2,857
                                   127,339           109,307           120,062
Net asset value per
ordinary redeemable    2           123.02p           109.02p           119.75p
share  

 

 

 

 

 

 

UNAUDITED STATEMENT OF CASH FLOW

                                                                    (Audited)

                            Six months to      Six months to         Year to 
                          30 September 2012  30 September 2011    31 March 2012
 

                    Note     £000       £000     £000      £000      £000     £000
Net cash inflow
from operating         9               2,616              2,663              4,278
activities
Servicing of
finance
Finance costs                          (155)              (232)              (370)
Taxation
Overseas
withholding tax                            -               (95)                  -
suffered
Taxation recovered                      (62)                  -               (28)
Capital expenditure
and financial
investment
Payments to acquire      (23,768)            (90,929)           (122,790)
investments
Receipts from
disposal of                21,029              98,345             126,674
investments
Net cash
(outflow)/inflow                     (2,739)              7,416              3,884
from investing
activities
Equity dividends       4             (2,426)            (2,356)            (4,662)
paid
Net cash
(outflow)/inflow
                                           (2,766)              7,396        3,102
before use of
liquid resources
and financing
Financing
Repurchase of
ordinary share                  -                   -                (76)
capital
Issue of ordinary           3,985                   -                   -
share capital
Net movement in
short-term                  3,000             (3,200)             (3,240)
borrowings
Net cash
inflow/(outflow)                       6,985            (3,200)            (3,316)
from financing
Increase/(decrease)
in cash for the                        4,219              4,196              (214)
period
Reconciliation of
net cash flow to
movements in net
debt
Increase/(decrease)         4,219               4,196               (214)
in cash as above
Net movement in
short-term                (3,000)               3,200               3,240
borrowings
Change in net debt
resulting from cash                    1,219              7,396              3,026
flows
Opening net debt
                                    (11,040)           (14,066)           (14,066)
 
Closing net debt
                                     (9,821)            (6,670)           (11,040)
 

                                       

UNAUDITED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

 

                      Called     Capital       Special     Capital     Revenue     Total
                          up  redemption distributable     reserve     reserve
                    ordinary     reserve       capital                                    
                       share                   reserve
                     capital
For the six    Note     £000        £000          £000        £000        £000      £000
months to 30
September 2012                                                                            

 
As at 31 March
2012                   1,003          78       109,411       6,713       2,857   120,062  

 
Return
attributable
to                         -           -             -       2,917       2,801     5,718  
shareholders

 
Ordinary
shares issued
during the                32           -         3,953           -           -     3,985  
year

 
Dividends paid    4        -           -             -           -     (2,426)   (2,426)  
                                                                                          
Balance at 30
September 2012         1,035          78       113,364       9,630       3,232   127,339  

 
For the six
months to 30
September 2011

 
As at 31 March
2011                   1,003                78    109,411        4,873       2,289 117,654

 
Return
attributable
to                         -                 -          -      (9,174)       3,183 (5,991)
shareholders

 
Dividends paid    4        -                 -          -            -     (2,356) (2,356)
Balance at 30
September 2011         1,003                78    109,411      (4,301)       3,116 109,307

 
For the year
ended 31 March
2012 (Audited)                                                                          

 
As at 31 March
2011                   1,003     78        109,411      4,873        2,289     117,654  

 
Return
attributable
to                         -      -              -      1,840        5,230       7,070  
shareholders

 
Dividends paid    4        -      -              -          -      (4,662)     (4,662)  
                                                                                        
Balance at 31
March 2012             1,003     78        109,411      6,713        2,857     120,062  

 

 

The revenue reserve represents the amount of the company's reserves
distributable by way of dividend.

 

NOTES TO THE FINANCIAL STATEMENTS

 

1 Accounting policies

(a)  The financial statements have been prepared on a going concern basis  and 
in accordance with UK Generally Accepted Accounting Practice (UK GAAP) and the
Statement of Recommended Practice for Financial Statements of Investment Trust
Companies and Venture Capital Trusts' (SORP), issued in January 2009.

 

Dividends - In accordance with FRS 21: 'Events after the balance sheet  date', 
dividends are included in the financial statements in the period in which they
are paid.

 

Functional currency - In  accordance with FRS 23:  'The effects of changes  in 
foreign currency', the company is required to nominate a functional  currency, 
being the currency in which the company predominately operates. The board  has 
determined that sterling is the  company's functional currency, which is  also 
the currency in which the financial statements are prepared.

 

(b)  Income from  equity investments is  determined on the  date on which  the 
investments are quoted ex-dividend,  or where no  ex-dividend date is  quoted, 
when the company's right to receive payment is established. Income from  fixed 
interest securities is recognised  on an effective  yield basis. UK  dividends 
received are accounted for at the amount receivable and are not grossed up for
any tax credit. Other income includes any taxes deducted at source. Gains  and 
losses  arising  from  the  translation  of  income  denominated  in   foreign 
currencies are recognised in the revenue reserve. Scrip dividends are  treated 
as unfranked investment income;  any excess in value  of shares received  over 
the amount of the cash dividend is recognised in capital reserves. Income from
underwriting commission and traded options is recognised as earned.

 

(c)  Interest receivable and payable and management expenses are treated on an
accruals basis.

 

(d)  The management fee  and interest costs are  allocated 65% to capital  and 
35% to revenue  in accordance  with the  board's expected  long-term split  of 
returns in the form of capital gains and income, respectively. The performance
fee is wholly allocated to capital.   All other expenses are wholly  allocated 
to capital.

 

(e)  Gains and losses  on realisation of investments  and changes in the  fair 
value of investments which are readily convertible to cash, without  accepting 
adverse terms, together with exchange  adjustments to overseas currencies  are 
taken to capital reserve.

 

(f)   Foreign currencies are translated at the rates of exchange ruling on the
balance sheet date. Investments are recognised initially as at the trade  date 
of a  transaction.  Subsequent to  this,  the  disposal of  an  investment  is 
accounted for once again as at the trade date of a transaction.

 

(g)  Revenue received and interest paid in foreign currencies is translated at
the rates of exchange ruling on the transaction date. Any exchange differences
relating to revenue items are taken to the revenue account.

 

 

(h)  The company's  investments are  classified as 'financial  assets at  fair 
value through profit or loss' and are therefore valued at bid price. Gains and
losses arising from changes in fair  value are included in the capital  return 
for the period.

 

(i)   All financial  assets and  liabilities are recognised  in the  financial 
statements.

 

(j)   Deferred tax is recorded in accordance with Financial Reporting Standard
19 (Deferred Tax).  Deferred tax is  provided on all  timing differences  that 
have originated but  not reversed by  the balance sheet  date. A deferred  tax 
asset is only recognised to the extent that it is regarded as recoverable. Due
to the company's status as an  investment trust company, and the intention  to 
continue meeting the conditions required to obtain approval in the foreseeable
future, the company has not provided for deferred tax on any capital gains and
losses arising on the revaluation or disposal of investments.

 

(k)  Transaction costs incurred  on the purchase  and disposal of  investments 
are recognised as a capital item in the income statement.

 

(l)   Share buybacks are funded through the capital reserve.

 

(m) The  company  can use  derivative  financial instruments  to  manage  risk 
associated with foreign  currency fluctuations arising  on the investments  in 
currencies other than sterling. This is achieved by the use of forward foreign
currency contracts. Derivative financial instruments are recognised  initially 
at fair value  on the contract  date and subsequently  remeasured to the  fair 
value at each  reporting date.  The resulting gain  or loss  is recognised  as 
revenue or capital in the income statement depending on the nature and  motive 
of each derivative transaction.  The fair values  of the derivative  financial 
instruments are included within non-current assets or within current assets or
current liabilities  depending on  the nature  and motive  of each  derivative 
transaction.

 

 

2.  Revenue returns and net asset value

 

                                 Six months to     Six months to       Year to

                             30 September 2012 30 September 2011 31 March 2012
Revenue Return

 
Revenue return attributable
to ordinary redeemable
shareholders                        £2,801,000        £3,183,000    £5,230,000

 
Average number of shares in
issue during the period            101,300,482       100,259,771   100,259,771

 
Revenue return per ordinary
redeemable share                         2.77p             3.17p         5.22p

 
  Capital return

 
Capital return attributable
to ordinary redeemable
shareholders                        £2,917,000      (£9,174,000)    £1,840,000

 
Average number of shares in
issue during the period            101,300,482       100,229,771   100,229,771

 
Capital return per ordinary
redeemable share                         2.88p           (9.15p)         1.83p

 
  Total return

 
Total return per ordinary                5.65p           (5.98p)         7.05p
redeemable share

 

Net asset value per share
Net assets attributable to shareholders
                                        £127,338,939 £109,307,000 £120,062,000
 
Number of shares in issue at period end
                                         103,509,771  100,259,771  100,259,771
 
Net asset value per share including
income                                       123.02p      109.02p      119.75p

 

 

 

 

3. Income from listed investments

 

                                 Six months to     Six months to       Year to

                             30 September 2012 30 September 2011 31 March 2012

                                          £000              £000          £000
Franked income - equities                  972             2,523         3,551
Franked income - fixed                      62                93            62
interest and convertibles
Unranked income - equities               2,408             1,034         2,721
Unfranked income - fixed                     -                10            10
interest and convertibles
                                         3,442             3,660         6,344
    Other income
Interest on deposits                         3                 3             9
                                         3,445             3,663         6,353

 

 

 

4. Dividends

 

                                 Six months to     Six months to       Year to

                             30 September 2012 30 September 2011 31 March 2012

                                          £000              £000          £000
Year ended 31 March 2011 -
fourth interim dividend of                   -             1,203         1,203
1.20p
Year ended 31 March 2012 -
first interim dividend of                    -             1,153         1,153
1.15p
 

 
Year ended 31 March 2012 -
second interim dividend of                   -                 -         1,153
1.15p
Year ended 31 March 2012 -
third interim dividend of                    -                 -         1,153
1.15p
Year ended 31 March 2012 -
fourth interim dividend of               1,253                 -             -
1.25p
Year ended 31 March 2013 -
first interim dividend of                1,173                 -             -
1.15p
                                         2,426             2,356         4,662

 

 

 

5. Taxation on ordinary activities

 

                Six months to     Six months to       Year to

            30 September 2011 30 September 2010 31 March 2011

                         £000              £000          £000
Foreign tax               275                95           354

 

 

 

 

 

6. Investments

 

                                              As at        As at         As at

                                       30 September 30 September 31 March 2012
                                               2012         2011
                                                                          £000
                                               £000         £000
Fair value through profit or loss
Opening valuation                           130,626      131,289       131,289
Opening investment holding gains                                              

                                           (11,914)     (20,145)      (20,145)
                                                                              

Opening cost                                118,712      111,144       111,144
Add: additions at cost                       26,479       90,856       122,790
Less: disposal proceeds received           (20,888)     (97,989)     (126,177)
Less: net gain on disposal of                 (827)       12,952        10,955
investments
                                                                              

Closing cost                                123,476      116,963       118,712
Closing investment holding                   16,266      (1,462)        11,914
gains/(losses)
                                                                              

Closing valuation                           139,742      115,501       130,626
 

 

 

 

 

 

 
Gains/(losses) on investments
Net (losses)/gains on disposal of             (827)       12,952        10,955
investments
Movement in investment holdings               4,352     (21,607)       (8,231)
unrealised gains/(losses)
Capital distribution                              -            -            14
                                              3,525      (8,655)         2,738

 

 

    Transaction costs

During the  period  expenses  were  incurred  in  acquiring  or  disposing  of 
investments classified as fair value through profit or loss.  These have  been 
expensed  through  capital  and  are  included  within  gains  and  losses  on 
investments in the income statement.  The total costs were as follows:

 

                 Six months to     Six months to       Year to

             30 September 2012 30 September 2011 31 March 2012

                          £000              £000          £000
Acquisitions                69                79           158
Disposals                   39                56           103
                           108               135           261

 

 

 

7. Loans and receivables

 

                                                   As at        As at    As at

                                            30 September 30 September 31 March
                                                    2012         2011     2012

                                                    £000         £000     £000
Dividends receivable                                 354          555      632
Special dividends to capital receivable                -            -        -
Interest accrued                                       -            1        -
Due from brokers                                       -          141        -
VAT receivable                                        33            -        -
Tax recoverable                                       70            8       35
Financial assets held for trading
derivatives that are not designated in
hedge accounting relationships:
Forward foreign currency contracts                     -            8        3
Prepayments and other debtors                         68           13       34
                                                     525          726      718

 

 

8. Creditors - amounts falling due within one year

 

 

                                                   As at        As at    As at

                                            30 September 30 September 31 March
                                                    2012         2011     2012

                                                    £000         £000     £000
Interest accrued                                       1           22        -
Due to brokers                                     2,711            -        -
Sterling bank revolving loan                      14,000       11,000   11,000
Bank overdraft                                         -            -       40
Financial liabilities held for trading
derivatives that are not designated in
hedge accounting relationships:
Forward foreign currency contracts                     -            -        5
Other creditors                                      395          228      237
                                                  17,017       11,250   11,282

 

 

The company has an £14,000,000 revolving loan facility with State Street  Bank 
and Trust Company  which expires on  28 September 2013.  Under this  agreement 
£14,000,000 was  drawn at  28 September  2012 at  a rate  of 1.75375%  with  a 
maturity date of 27 December 2012.

 

The fair  value of  the sterling  loan is  not materially  different from  its 
carrying value. The interest rate is set at each roll-over date at LIBOR  plus 
a margin.

 

 

9. Reconciliation of net return before finance costs and taxation to net cash
inflow from operating activities

 

                                          Six months to Six months to  Year to

                                           30 September  30 September 31 March
                                                   2012          2011     2012

                                                   £000          £000     £000
Net return before finance costs                   6,127       (5,701)    7,735
Decrease in accrued income and other                122           198      106
debtors
Increase/(decrease) in creditors                    167         (488)    (471)
Net (losses)/gains on investments               (3,525)         8,655  (2,738)
Taxation withheld from income on                  (275)           (1)    (354)
investments
Net cash inflow from operating activities         2,616         2,663    4,278

 

 

10.  Analysis of net debt

 

                                             As at Cash flow 30 September 2012

                                     31 March 2012                        £000

                                              £000      £000
Cash at bank                                     -    4,179              4,179
Bank overdraft                                (40)       40                  -
Bank borrowings - sterling revolving      (11,000)  (3,000)           (14,000)
loan
Net debt                                  (11,040)    1,219            (9,821)

 

 

11. Interim report

 

The financial information contained in  the half-yearly financial report  does 
not constitute statutory accounts  as defined in s434  - 436 of the  Companies 
Act 2006. The financial information for the six months ended 30 September 2012
and 30 September 2011 has not been audited.

 

The information for the year ended 31  March 2012 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 accounts contained
no qualification or statement under s498 (2), (3) or (4) of the Companies  Act 
2006.

 

                     This information is provided by RNS
           The company news service from the London Stock Exchange
 
END
 
 
IR FMMGMDLZGZZM -0- Nov/09/2012 14:34 GMT
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