Interim / Quarterly Report • Mar 23, 2020
Interim / Quarterly Report
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FINANCIAL HIGHLIGHTS
The Company's objective is to achieve long-termcapital growth.
| 31stDecember2019 | 30th June | % | |
|---|---|---|---|
| 2019 | Change | ||
| P ERFORMANCE | |||
| Netassets (£ '000) | 117,559 | 113,971 | 3.1 |
| Netasset value per Ordinary share | 165.52p | 160.47p | 3.1 |
| Mid-market price per Ordinary share | 117.00p | 111.00p | 5.4 |
| Discount of price to netasset value | 29.31% | 30.83% | n/a |
| Sixmonths ended | Sixmonths ended | ||
| 31stDecember2019 | 31stDecember2018 | ||
| Total Return* | 4.02% | -4.63% | n/a |
| IA Mixed Investment40-85%S hares (total return) | 4.41% | -6.62% | n/a |
| MSCI AC World Index(total return, sterling adjusted) | 4.89% | -5.47% | n/a |
| MSCI UK Index(total return) | 3.03% | -10.04% | n/a |
| Sixmonths ended | Sixmonths ended | ||
| 31stDecember | 31stDecember | |
|---|---|---|
| 2019 | 2018 | |
| REVENUE | ||
| Return (£'000) | 792 | 607 |
| Return per Ordinary share | 1.1p | 0.85p |
| Proposed dividend per Ordinary share | - | - |
| Dividend paid per Ordinary share | 1.40p | 1.00p |
| TOTALRETURN | ||
| Return (£'000) | 4,582 | (5,154) |
| Netassets | 3.1% | -5.3% |
| Netassets (dividend added back) | 4.0% | -4.6% |
* The totalreturn figure for the Group represents the revenue and capitalreturn shown in the consolidated statement of comprehensive income plus dividends paid (the alternative performance measure).
Your Company generated a positive total return of 4.02% over the six months to 31st December 2019, taking the net asset value (NAV) per ordinary share to 165.52p. By comparison, the Investment Association's Mixed Investment40-85% Shares Indexrose 4.41%. The MSCI AC World Total Return Indexrose 4.89% while the MSCI UK Total Return Index rose 3.03%. Over the same period, UK government bonds returned 2.05%. Further information is provided in the investment manager's report.
Your Company made a revenue profit for the sixmonths of£792,000(2018:£607,000).
Your Company has no borrowings and ended the period under reviewwith cash representing 14.28% of its NAV. Your Company has small retained revenue reserves and your Directors do not recommend the payment of an interim dividend (2018: nil). Your Company paid a dividend of 1.4p per share (2018: 1.0p) in November2019in respect of the previous financial year.
During the period, your Company's shares continued to trade ata significant discount to their NAV. The Board keeps this issue under review.
In November 2019, your Company announced that the current performance fee arrangement was not appropriate in a low interest rate environment. The current performance fee arrangements ceased from 1 January 2020. A performance fee of £622,000 (2018: £nil) was payable in respect of the period under review.
Risky assets fell sharply in the early spring of 2020 as the Covid-19 virus spread. Equity markets bore the brunt but corporate bonds and property also registered declines. Central Banks have responded with unprecedented interest rate reductions, increased quantitative easing and measures to stimulate lending.
Monetary policy alone, however, is unlikely to be sufficient to address the downturn because the virus impact is a supply-side shock, causing work place
closures and supply chain disruption. As a result, governments have moved to alleviate the impact on businesses and families to shield the economy from serious long-term harm.
Risky assets are likely to remain weak and volatile until the Covid-19 outbreakmoderates. Your Company, however,entered this difficult periodwith substantial cash holdings. Over the coming weeks, your Company's defensive assets may provide some capital protection. There should also be opportunities for your Company to deploy cash in investments with aGractive long-term potential, including in equity markets.
Your Company's unauditedNAV per share at29th February 2020 was 156.62p. Your Company's unauditedNAV per share at19thMarch 2020 was 136.12p.
Geoffrey Howard-Spink Chairman 20thMarch 2020
Globalequities rose 4.89% and bonds fell2.77% in sterling over the six months to 31st December 2019 as central banks maintained policies of monetary easing. Returns in overseas stockmarkets were stronger but sterling investors were adversely affected as the pound rose against the euro, yen and dollar by 5.60%, 4.99%and 4.09%respectively.
The Federal Reserve reduced interest rates by three-quarters of a percentage point to 1.5-1.75%. J obs data were strong but inflation remained below its 2% target. The European Central Bank increased further its negative interest rate by 10 basis points to -0.5%, said interest rates would not rise until inflation was closer to 2% and resumed asset purchases. The Bank of England left its bank rate unchanged. UK government and sterling corporate bonds rose 2.05% and 3.52% respectively over the period. Gold and gold securities rose 3.07% and 10.92% respectively in sterling as the opportunity cost of holding this nil-yielding asset remained low.
The Conservatives won December's UK election, averting a shift to the left. UK stocks rose 3.03% but smaller companies, typically more sensitive to domestic conditions, outperformed, rising 13.28%. Sterling briefly rose above \$1.35 but retreated as investors decided the risk of a "no deal" Brexit had not disappeared, with the government legislating that a trade deal had to be agreed during 2020, seGing a demanding timetable. UK assets are likely to prove sensitive to news about the talks.
Progress in Sino-US trade talks was confirmed when an interim deal was signed in January 2020. Equities in emerging markets and Asia excluding Japan benefited from end-of-year optimism but still lagged, up 3.11%and 2.74%respectively in sterling. Under the deal, China will increase purchases of US goods and improve the protection of intellectual property. In return, December's planned tariff increases were cancelled. The thornier issues of national security and technology are outside the deal's scope andmay never be resolved. Protectionism is likely to remain a feature of US trade policy.
US equities outperformed, rising 6.56% in sterling, with technology stocks, up 13.57%, leading the way. Steady US jobs data supported consumer spending but business investment and exports were weak. The Sino-US agreement may, however, provide a fillip to exports in the longer term. China's economy expanded 6%year-on-year during the period, the lowest growth rate since 1992.
Your Company's total return over the period under review was 4.56% before performance fees and 4.02% after performance fees. By comparison, the Investment Association's Mixed Investment 40-85% Shares sector, comprising a peer group of multi-asset funds that typically invest 40-85% of their assets in globalequities, rose 4.41%. The MSCI AC World Total Return Indexrose 4.89% in sterling while the MSCI UK Total Return Indexrose 3.03%. Your Company benefited from investments in funds invested in UK smaller companies, gold securities and technology stocks. The high allocation to dollar cash, however, hurt performance as sterling strengthened.
The Aberforth Split Level Income investment trust was the portfolio's best performer, rising 26.09%, partly as a result of the leverage provided by its zerodividend preference shares. The manager takes a value-oriented approach to investing in UK smaller companies. Such companies performed strongly as the Tories' election victory reduced domestic political risk and strengthened the government's hand in its EU trade negotiations. Chelverton UK Equity Income, which also invests in smaller companies, rose 14.67%. Your Company's holding was increased in November. The Aberforth and Chelverton funds have aboveaverage dividend yields and their income is derived from a broad range of sectors in contrast to the income from the FTSE 100 Index, which is dominated by financial and resources stocks. Man GLG UK Income and MI Brompton UK Recovery outperformed, benefiGing from gains among small and medium-sized companies. Trojan Income and Schroder Income focus on larger companies but both outperformed, gaining 7.79%and 5.32%respectively.
BlackRock Gold & General gained 6.24%, beating the return from physical gold but lagging the returns from gold miners. A minimum of 70% of the portfolio is held in miners of precious metals. Miners typically offer a geared return on gold because gold price changes are magnified in their share prices as a result of operational gearing and financial leverage. The sector consolidated in 2019through mergers that will generate operationalefficiencies and scale benefits on top ofany rise in the gold price. At the period end, BlackRockGold & General's two largest holdings were Barrick andNewmont, which each represented about10% of the portfolio as a result of mergers. Regulatory reasons prevent the fund manager from increasing these holdings yet these businesses account for a larger proportion of the sector. This may at times lead the fund's performance to diverge from the sector.
During the period, your Company had no direct investments in US equity funds. This hurt performance because US equities outperformed, driven by the technology sector. Within your Company's global holdings, Polar Capital Global Technology rose 9.73%, benefiGing from its holdings in US technology companies such as Microsoft, Alphabet, Apple and Facebook. Fundsmith Equity underperformed, however, rising 2.79%.
Amongst your Company's emerging market equity holdings, the HSBC Russia Capped exchange-traded fund did best, rising 11.68% in line with the gain from Russian stocks. Stewart Investors Indian Subcontinent was, however, the weakest holding, falling 3.22% as Indian stocks fell 4.04% in sterling in response to slower economic growth. Emerging market debt outperformed global bonds over the period. Franklin Templeton Emerging Markets Bond lagged, however, down 5.24%as a result of its holdings in Argentine bonds, which fellas politics shifted to the left.
Bond market weakness held back returns within EF Brompton Global Conservative, which returned 3.37%, while the Aquilus Inflection hedge fund returned 0.61%.
The valuation of your Company's unquoted portfolio rose 13.59% to £8.39 million over the period. This was solely due to a revaluation of the shareholding in the largest unquoted holding, Embark, to the price paid by newexternal investors in a £45 million fundraising in November. Embark has continued to growits assets underadministration aggressively, both organically and through acquisition.
Risky assets fell sharply across the world in the early spring of 2020 as the Covid-19 virus spread outside China. Equity markets bore the brunt of the falls but other asset classes including corporate bonds and commercial property also registered significant declines. Major Central Banks across the developed world
and in emerging markets have responded to the economic shockwith sweeping measures. These included unprecedented interest rate reductions in the US and the UK, as official rates were cut to near zero. Other initiatives included increased quantitative easing and measures designed to stimulate bank lending. Monetary policy alone, however, is unlikely to be sufficient to address the global downturn because the virus impact is a supply-side shock, with work places closing and supply chains disrupted. Government measures targeted at alleviating the economic impact on businesses and families are, therefore, likely to be critical in ensuring the economy emerges strongly once this temporary shock subsides. In the meantime, equities and other risky assets are likely to remain weak and volatile until the numbers of newcoronavirus cases moderate across the world. This may take some months.
Your Company entered this period of turmoil with substantial investments in cash, in particular in dollars. Some of the defensive assets in your Company's portfolio such as gold and lower-riskmulti-asset funds may provide some capital protection over the coming weeks. There should also be opportunities for longterm investors such as your Company to deploy its cash in investments with aGractive long-term potential, in particular in equity markets.
DIRECTORS' REPORT
In the six months to 31st December 2019 the total return per Ordinary share was 4.0% (2018: negative 4.6%) and the NAV per ordinary share increased to 165.52p, whilst the share price increased by 5.4%to 117.00p. This compares to an increase of4.4%in the IA Mixed Investment40-85%Shares Index.
The Company's investment objective is to achieve long-term capital growth.
The Company's investment policy is to allocate assets to global investment opportunities through investment in equity, bond, commodity, realestate, currency and other markets. The Company's assets may have significant weightings to any one asset class or market, including cash.
The Company will invest in pooled investment vehicles, exchange traded funds, futures, options, limited partnerships and direct investments in relevant markets. The Company may invest up to 15%of its netassets in direct investments in relevant markets.
The Company will not followany index with reference to asset classes, countries, sectors or stocks. Aggregate asset class exposure to any one of the United States, the United Kingdom, Europe ex UK, Asia ex Japan, Japan or Emerging Markets and to any individual industry sector will be limited to 50% of the Company's net assets, such values being assessed at the time of investment and for funds by reference to their published investment policy or, where appropriate, their underlying investmentexposure.
The Company may invest up to 20% of its net asset value in unlisted securities (excluding unquoted pooled investment vehicles) such values being assessed at the time of investment. The Company will not invest more than 15% of its net assets in any single investment, such values being assessed at the time of investment.
Derivative instruments and forward foreign exchange contracts may be used for the purposes of efficient portfolio management and currency hedging. Derivatives may also be used outside of efficient portfolio management to meet the Company's investment objective. The Company may take outright short positions in relation to up to 30% of its net assets, with a limit on short sales of individual stocks of up to 5% of its net assets, such values being assessed at the time of investment. The Company may borrow up to 30% of net assets for short-term funding or long-term investment purposes. No more than 10%, in aggregate, of the value of the Company's total assets may be invested in other closed-ended investment funds except where such funds have themselves published investment policies to invest no more than 15%of their totalassets in other listed closed-ended investment funds.
The Company's share capital comprises 305,000,000 Ordinary shares of 1p each, of which 71,023,695 (2018: 71,023,695) have been issued and fully paid. No Ordinary shares are held in treasury,and none were bought back or issued during the sixmonths to 31st December2019.
The principalrisks identified by the Board,and the steps the Board takes to mitigate them,are as follows:
Investment strategy: Inappropriate long-term strategy, asset allocation andfund selection could lead to underperformance. The Board discusses investment performance ateach of its meetings and the Directors receive reports detailing assetallocation, investment selection and performance.
Business conditions and general economy: The Company's future performance is heavily dependent on the performance of different equity and currency markets. The Board cannot mitigate the risks arising from adverse market movements. However, diversification within the portfolio will reduce the impact. Further information is given in portfolio risks below.
Portfolio risks - market price, foreign currency and interest rate risks: The twenty largest investments are listed above. Investment returns will be influenced by interest rates, inflation, investor sentiment, availability/cost of credit and generaleconomic conditions in the UK and globally. A proportion of the portfolio is in investments denominated in foreign currencies andmovements in exchange rates could significantly affect their sterling value. The InvestmentManager takes all these factors into account when making investment decisions but the Company does not normally hedge against foreign currency movements. The Board's policy is to hold a spread of investments in order to reduce the impact of the risks arising from the above factors by investing in a spread of asset classes and geographic regions.
Net asset value discount: The discount in the price at which the Company's shares trade to net asset value means that shareholders cannot realise the real underlying value of their investment. For a number of years the Company's share price has been at a significant discount to the Company's net asset value. The Directors reviewregularly the level of discount, however given the investor base of the Company, the Board is very restricted in its ability to influence the discount to netasset value.
Investment Manager: The quality of the team employed by the Investment Manager is an important factor in delivering good performance and the loss of key staff could adversely affect returns. A representative of the Investment Manager aGends each Boardmeeting and the Board is informed if any changes to the investment team employed by the InvestmentManagerare proposed.
Tax and regulatory risks: A breach of The Investment Trust (Approved Company) (Tax) Regulations 2011 (the 'Regulations') could lead to capital gains realised within the portfolio becoming subject to UK capital gains tax. A breach of the UKLA Listing Rules could result in suspension of the Company's shares, while a breach of company law could lead to criminal proceedings, financial and/or reputational damage. The Board employs Brompton Asset Management LLP as Investment Manager, and Maitland Administration Services Limited as Secretary and Administrator, to help manage the Company's legal and regulatory obligations.
Operational: Disruption to, or failure of, the Investment Manager's or Administrator's accounting, dealing or payment systems or the Custodian's records could
prevent the accurate reporting andmonitoring of the Company's financial position. The Company is also exposed to the operational risk that one or more of its suppliers may not provide the required level of service. The Company receives regular reports from its contracted third parties.
In common withmost investment trusts the Company does not have any executive directors or employees. The day-to-day managementand administration of the Company, including investment management, accounting and company secretarial maGers, and custodian arrangements are delegated to specialist third party service providers.
Details of related party transactions are contained in the Annual Report. There have been no unusualmaterial transactions with related parties during the periodwhich have had a significant impact on the performance of the Company.
The Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the accounts as the assets of the Company consist mainly of securities that are readily realisable or cash and it has no significant liabilities. Investment income exceeds annualexpenditure and current liquid net assets cover current annualexpenses for many years. Accordingly, the Company is of the opinion that it has adequate financial resources to continue in operational existence for the foreseeable future which is considered to be in excess of five years. Five years is considered a reasonable time for investors when making their investment decisions. In reaching this viewthe Directors reviewed the anticipated level ofannualexpenditure against the cash and liquid assets within the portfolio. The Directors have also considered the risks the Company faces.
The half year financial report has been reviewed, but not audited, by Ernst & Young LLP pursuant to the Auditing Practices Board guidance on the Reviewof Interim Financial Information.
The Directors confirm that to the best of their knowledge:
The financialstatements containedwithin the half year financial report to 31st December 2019 has been prepared in accordance with International Accounting Standard 34'Interim Financial Reporting';
The Chairman's statement, Directors' report or the Investment Manager's report include a fair reviewof important events that have occurred during the first sixmonths of the financial yearand their impact on the financialstatements;
The Chairman's statement, Directors' report or the Investment Manager's report include a fair review of the potential risks and uncertainties for the remaining sixmonths of the year;and
The Director's report and note 8to the half year financial report include a fair reviewof the information concerning transactions with the investment manager and changes since the lastannualreport.
MaitlandAdministration Services Limited,20thMarch 2020 SCHEDULE OF TOP TWENTY INVESTMENTS at 31st December2019
| Holding | Investment Type | Bid-market Value | %ofNet Assets |
|---|---|---|---|
| £ '000 | |||
| Fundsmith Equity Fund | Investment Fund | 7,952 | 6.76 |
| Embark Group | Unquoted Investment | 6,990 | 5.95 |
| Polar Capital -Global Technology Fund | Investment Fund | 5,728 | 4.87 |
| FP Crux European S pecialSituations Fund | Investment Fund | 5,267 | 4.48 |
| Schroder Income Fund | Investment Fund | 4,945 | 4.21 |
| Aberforth S plit Level Income Trust | Investment Company | 4,506 | 3.83 |
| MI ChelvertonUK Equity Income Fund | Investment Fund | 4,405 | 3.75 |
| EF BromptonGlobal Conservative Fund | Investment Fund | 4,355 | 3.70 |
| BlackRock Continental European Income Fund Investment Fund | 3,926 | 3.34 | |
| Artemis Global Income Fund | Investment Fund | 3,925 | 3.34 |
| BlackRock Gold& General Fund | Investment Fund | 3,735 | 3.18 |
| Aquilus Inflection Fund | Investment Fund | 3,721 | 3.17 |
| Lindsell Train Japanese Equity Fund | Investment Fund | 3,364 | 2.86 |
| EF BromptonGlobal Equity Fund | Investment Fund | 2,981 | 2.53 |
| ManGLG UK Income Fund | Investment Fund | 2,973 | 2.53 |
| EF BromptonGlobal Opportunities Fund | Investment Fund | 2,962 | 2.52 |
| MI BromptonUK Recovery Unit Trust | Investment Fund | 2,851 | 2.42 |
| EF BromptonGlobal Growth Fund | Investment Fund | 2,830 | 2.41 |
| LiontrustAsiaIncome Fund | Investment Fund | 2,758 | 2.35 |
| FirstState Indian S ubcontinent Fund | Investment Fund | 2,628 | 2.23 |
| 82,802 | 70.43 | ||
| Balance held in 21 investments | 18,716 | 15.92 | |
| Total investments (excluding cash) | 101,518 | 86.35 | |
| Netcurrentassets (including cash) | 16,041 | 13.65 | |
| NetAssets | 117,559 | 100.00 |
The investment portfolio, excluding cash, can be furtheranalysed as follows:
| £'000 | |
|---|---|
| Investment funds | 84,023 |
| Unquoted investments | 8,390 |
| Investmentcompanies and exchange traded funds | 8,086 |
| Other quoted investments | 1,019 |
| 101,518 |
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME forthe six months ended 31st December2019(unaudited)
Sixmonths ended 31stDecember2019 (unaudited) Revenue Return Capital Return Total
| £ '000 | £ '000 | Return | ||
|---|---|---|---|---|
| Notes | £ '000 | |||
| INCOME | ||||
| Investment income | 1,127 | - | 1,127 | |
| Other operating income | 167 | - | 167 | |
| Total income GAINS ANDLOSSES ON INVESTMENTS |
2 | 1,294 | - | 1,294 |
| Losses on investments at fair value through profit or loss | 5 | - | 5,022 | 5,022 |
| Otherexchange losses | - | (612) | (612) | |
| Trail rebates | - | 2 | 2 | |
| 1,294 | 4,412 | 5,706 | ||
| EXP ENSES | ||||
| Managementand performance fees | 3 | (364) | (622) | (986) |
| Otherexpenses | (138) | - | (138) | |
| (502) | (622) | (1,124) | ||
| PROFIT /LOSS)BEFORE TAX | 792 | 3,790 | 4,582 | |
| Tax | - | - | - | |
| PROFIT /(LOSS) FORTHE P ERIOD | 792 | 3,790 | 4,582 | |
| EARNINGS P ERSHARE | ||||
| Ordinary shares (pence) | 4 | 1.11p | 5.34p | 6.45p |
The total return column of this statement represents the Group's profit and loss account, prepared in accordance with I FRS. The supplementary Revenue Return and Capital Return columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period.
All income is aGributable to the equity holders of the parent company. There are no minority interests.
forthe six months ended 31st December2018andthe yearended30thJune 2019
| Sixmonthsended 31st December2018 (unaudited) |
Yearended 30th June 2019 (audited) |
||||||
|---|---|---|---|---|---|---|---|
| Notes | Revenue Return | Capital Return | Total Return | Revenue Return | Capital Return | Total Return | |
| INCOME | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | |
| Investment income | 930 | - | 930 | 1,890 | - | 1,890 | |
| Otheroperating income | 147 | - | 147 | 349 | - | 349 | |
| Total income | 2 | 1,077 | - | 1,077 | 2,239 | - | 2,239 |
| GAINS AND LOSSES ON INVESTMENTS | |||||||
| Gainson investmentsat fairvalue throughprofit orloss | |||||||
| 5 | - | (6,168) | (6,168) | - | 1,992 | 1,992 | |
| Otherexchange losses | - | 405 | 405 | - | 443 | 443 | |
| Trail rebates | - | 2 | 2 | - | 5 | 5 | |
| 1,077 | (5,761) | (4,684) | 2,239 | 2,440 | 4,679 | ||
| EXPENSES | |||||||
| Managementandperformance fees | 3 | (339) | - | (339) | (668) | (410) | (1,098) |
| Otherexpenses | (131) | - | (131) | (266) | - | (266) | |
| (470) | - | (470) | (954) | (410) | (1,364) | ||
| PROFIT BEFORE TAX | 607 | (5,761) | (5,154) | 1,285 | 2,030 | 3,315 | |
| Tax | - | - | - | - | - | - | |
| PROFIT FOR THE PERIOD | 607 | (5,761) | (5,154) | 1,285 | 2,030 | 3,315 | |
| EARNINGS PER SHARE | |||||||
| Ordinary shares(pence) | 4 | 0.85p | (8.11)p | (7.26)p | 1.81p | 2.86p | 4.67p |
The total return column of this statement represents the Group's profit and loss account, prepared in accordance with I FRS. The supplementary Revenue Return and Capital Return columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations. No operations were acquired or discontinued during the periods.
All income is aGributable to the equity holders of the parent company. There are no minority interests.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY forthe six months ended 31st December2019(unaudited)
| S hare capital £ '000 |
S hare premium £ '000 |
S pecial reserve £ '000 |
Retained earnings £ '000 |
Total £ '000 |
|
|---|---|---|---|---|---|
| At30th JUNE 2019 | 710 | 21,573 | 56,908 | 34,780 113,971 | |
| Totalcomprehensive income for the period | - | - | - | 4,582 | 4,582 |
| Dividend paid | - | - | - | (994) | (994) |
| At31stDECEMBER2019 | 710 | 21,573 | 56,908 | 38,368 117,559 |
| S hare capital £ '000 |
S hare premium £ '000 |
S pecial reserve £ '000 |
Retained earnings £ '000 |
Total £ '000 |
|
|---|---|---|---|---|---|
| At30th JUNE 2018 Totalcomprehensive income for the period Dividend paid At31stDECEMBER2018 |
710 - - 710 |
21,573 - - 21,573 |
56,908 - - 56,908 |
(5,154) (710) |
32,175 111,366 (5,154) (710) 26,311 105,502 |
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY forthe yearended30th June 2019(audited)
| capital | £ '000 | £ '000 | £ '000 | Total | |
|---|---|---|---|---|---|
| £ '000 | £ '000 | ||||
| At30th JUNE 2018 | 710 | 21,573 | 56,908 | 32,175 111,366 | |
| Totalcomprehensive income for the year | - | - | - | 3,315 | 3,315 |
| Dividend paid | - | - | - | (710) | (710) |
| At30th JUNE 2019 | 710 | 21,573 | 56,908 | 34,780 113,971 |
CONSOLIDATED BALANCE SHEET at 31st December2019
| Notes | 31stDecember 2019 (unaudited) £ '000 |
31stDecember 2018 (unaudited) £ '000 |
30th June 2019 (audited) £ '000 |
|
|---|---|---|---|---|
| NON-CURRENT ASSETS | ||||
| Investments at fair value through profit or loss | ||||
| 5 | 101,518 | 83,561 | 93,782 | |
| CURRENT ASSETS | ||||
| Other receivables | 100 | 213 | 220 | |
| Cash and cash equivalents | 16,786 | 21,938 | 20,605 | |
| 16,886 | 22,151 | 20,825 | ||
| TOTALASSETS | 118,404 | 105,712 | 114,607 | |
| CURRENT LIABILITIES | ||||
| Other payables | (845) | (210) | (636) | |
| TOTALASSETS LESS CURRENT LIABILITIES | ||||
| 117,559 | 105,502 | 113,971 | ||
| NET ASSETS | 117,559 | 105,502 | 113,971 | |
| EQUITY ATTRIBUTABLE TO EQUITYHOLDERS | ||||
| Called-up share capital | 710 | 710 | 710 | |
| S hare premium | 21,573 | 21,573 | 21,573 | |
| S pecial reserve | 56,908 | 56,908 | 56,908 | |
| Retained earnings | 6 | 38,368 | 26,311 | 34,780 |
| TOTAL EQUITY | 117,559 | 105,502 | 113,971 | |
| NET ASSET VALUE P ERORDINARY SHARE (P ENCE) | 7 | 165.52p | 148.54p | 160.47p |
The interim report was approved and authorised for issue by the Board on 20thMarch 2020.
CONSOLIDATED CASH FLOW STATEMENT forthe six months ended31st December2019
| Sixmonths | Sixmonths | Year | |
|---|---|---|---|
| ended | ended | ended | |
| 31st | 31st | 30th | |
| December | December | June | |
| 2019 | 2018 | 2019 | |
| (unaudited) | (unaudited) | (audited) | |
| £ '000 | £ '000 | £ '000 | |
| NET CASH INFLOWFROMOP ERATING ACTIVITIES | 501 | 644 | 1,334 |
| INVESTING ACTIVITIES | |||
| Purchase of investments | (2,722) | (2,023) | (4,340) |
| Sale of investments | 8 | 8,595 | 8,851 |
| NET CASH INFLOW/(OUTFLOW) FROMINVESTING ACTIVITIES | |||
| FINANCING | (2,714) | 6,572 | 4,511 |
| Equity dividend paid | (994) | (710) | (710) |
| NET CASH INFLOW/(OUTFLOW)AFTERFINANCING | (3,207) | 6,506 | 5,135 |
| INCREASE /(DECREASE)IN CASH | (3,207) | 6,506 | 5,135 |
| RECONCILIATION OF NET CASH FLOWTO MOVEMENT IN NET FUNDS | |||
| Increase/(Decrease) in cash resulting fromcash flows | (3,207) | 6,506 | 5,135 |
| Exchange movements | (612) | 405 | 443 |
| Movement in net funds | (3,819) | 6,911 | 5,578 |
| Net funds atstart of period/year | 20,605 | 15,027 | 15,027 |
| NET FUNDS AT ENDOF P ERIOD/YEAR | 16,786 | 21,938 | 20,605 |
| RECONCILIATION OF (LOSS)/PROFIT BEFORE FINANCECOSTS ANDTAXATION TO NET CASH FLOWFROMOP ERATING ACTIVITIES |
|||
| Profit/( Loss) before finance costs and taxation * | 4,582 | (5,154) | 3,315 |
| (Gains)/Loss on investments | (5,022) | 6,168 | (1,992) |
| Exchange differences | 612 | (405) | (443) |
| Management fee rebates | (2) | (2) | (5) |
| Revenue profit before finance costs and taxation | 170 | 607 | 875 |
| Decrease in debtors | 120 | 59 | 43 |
| Increase/(Decrease) in creditors | 209 | (24) | 402 |
| Taxation | - | - | 9 |
| Management fee rebates | 2 | 2 | 5 |
| NET CASH INFLOWFROMOP ERATING ACTIVITIES | 501 | 644 | 1,334 |
* Includesdividendsreceivedin cash of£1,013,000(30th June 2019:£1,599,000) (2018:£788,000),accumulation income of£222,000(30th June 2019:£278,000) (2018:£255,000)andinterest income of£167,000(30th June 2019:£408,000) (2018:£84,000)
The condensed consolidated interim financial statements comprise the unaudited results of the Company and its subsidiary, JIT Securities Limited (together "the Group"), for the six months to 31st December2019. The comparative information for the six months to 31st December 2018 and the year to 30th June 2019 are a condensed set of accounts and do not constitute statutory accounts under the Companies Act2006. Full statutory accounts for the year to 30th June 2019 included an unqualified audit report, did not contain any statements under section 498 of the Companies Act 2006, and have been filed with the Registrar of Companies.
The half year financial statements have been prepared in accordance with International Accounting Standard 34 'Interim Financial Reporting',and are presented in pounds sterling,as this is the Group's functionalcurrency.
The same accounting policies have been followed in the interim financial statements as applied to the accounts for the year ended 30th June 2019, which were prepared in accordance with I FRSs as adopted by the European Union.
No segmentalreporting is provided as the Group is engaged in a single segment.
| Sixmonths ended 31stDecember2019 | £'000 | Sixmonths ended 31stDecember2018 | £'000 | Yearended 30th June | 2019 | |
|---|---|---|---|---|---|---|
| £'000 | ||||||
| Income fromInvestments UK net dividend income Unfranked investment income |
1,045 82 1,127 |
792 138 930 |
1,691 1,890 |
199 | ||
| Other Income Bank interestreceivable Loan interest income |
167 - 167 |
140 7 147 |
336 13 349 |
|||
| Sixmonths ended 31stDecember2019 | £'000 | Sixmonths ended 31stDecember2018 £'000 |
Yearended 30th June 2019 |
|||
| £'000 | ||||||
| Total income comprises Dividends Other income |
1,127 167 1,294 |
930 147 1,077 |
1,890 349 2,239 |
| Sixmonths ended 31stDecember2019 £'000 |
Sixmonths ended 31stDecember2018 £'000 |
Yearended 30th June 2019 |
|
|---|---|---|---|
| Investmentmanagement fee Performance fee |
364 622 |
339 - |
£'000 688 410 |
| 986 | 339 | 1,098 |
The Investment Manager receives a management fee, payable quarterly in arrears, equivalent to an annual0.75 per cent of totalassets after the deduction of the value of any investments managed by the Investment Manager or its associates (as defined in the investment management agreement). The Investment Manager was also entitled to a performance fee of 15% of the growth in net assets over a hurdle of 3-month Sterling LIBOR plus 1% per annum, payable six monthly in arrears, subject to a high water mark. The aggregate of the Company's management fee and any performance fee is subject to a cap of4.99% of net assets in any financial year (with any performance fee in excess of this cap capable of being earned in subsequent periods). The performance fee will be charged 100% to capital, in accordance with the Board's expectation of howany out-performance will be generated. A performance fee of £622,000 was payable in respect of the period.
The Company has agreedwith the Investment Manager that the existing performance fee was notappropriate in a lowinterest rate environment. Accordingly the current performance fee agreement ceasedwith effect from 1st January 2020.
| Sixmonths ended 31stDecember2019 | Sixmonths ended 31stDecember2018 | Yearended 30th June | |
|---|---|---|---|
| £'000 | £'000 | 2019 | |
| £'000 | |||
| Revenue return | 792 | 607 | 1,285 |
| Capital return | 3,790 | (5,761) | 2,030 |
| Total return | 4,582 | (5,154) | 3,315 |
| Weighted average number ofOrdinary shares | 71,023,695 | 71,023,695 | 71,023,695 |
| Revenue return per Ordinary share | 1.11p | 0.85p | 1.81p |
| Capital return per Ordinary share | 5.34p | (8.11)p | 2.86p |
| Total return per Ordinary share | 6.45p | (7.26)p | 4.67p |
| At 31stDecember2019 £'000 |
At 31stDecember2018 £'000 |
At 30th June 2019 £'000 |
|
|---|---|---|---|
| GROUP ANDCOMPANY | 101,518 | 83,561 | 93,782 |
| Listed* (level1 and 2) £'000 |
Unlisted** (level3) £'000 |
Total £'000 |
|
|---|---|---|---|
| Opening book cost Opening investment holding gains/(losses) Opening valuation |
60,372 26,024 86,396 |
8,448 (1,062) 7,386 |
68,820 24,962 93,782 |
| Movement in period: Purchase atcost Sales |
2,722 | - | 2,722 |
| - Proceeds - Realised gains on sales |
(8) 8 |
- - |
(8) 8 |
| Movement in investment holding gains/(losses) | 4,010 | 1,004 | 5,014 |
| Closing valuation at31 December2019 | 93,128 | 8,390 | 101,518 |
| Closing book cost | 63,094 | 8,448 | 71,542 |
| Closing investment holding gains/(losses) | 30,034 | (58) | 29,976 |
| Closing valuation | 93,128 | 8,390 | 101,518 |
* Listedinvestmentsinclude unit trustandOEIC fundswhich are valuedat quotedprices.IncludedwithinListedInvestmentsisone monthly valuedinvestment of£3,721,000(30th June 2019:£3,698,000) (2018:£3,562,000).
** The Unlistedinvestments,representing just over7%of the Company'sNAV, have been valuedin accordance with IPEVC valuation guidelines. The largest unquotedinvestmentamounting to £6,990,000(30th June 2019: £5,942,000) (2018:£3,268,000)wasvaluedat the latest transactionprice. The secondlargest investment hasbeen valuedbasedon costandisin itsdevelopment phase. A 10%increase ordecrease in the earningsof the largest investmentwouldnot have amaterial impact on the valuation of the investment. Thisinvestment hasnotreachedmaturity andisnot valuedon the basisof itscurrentearnings.
There were no reclassificationsforassetsbetweenLevel1,2and3.
| ANALYSIS OF CAP ITALGAINS ANDLOSSES | Sixmonths ended 31stDecember2019 £'000 |
Sixmonths ended 31stDecember2018 £'000 |
Year ended 30th June 2019 £'000 |
|---|---|---|---|
| Realised gains on sales of investments | 8 | 4,168 | 4,175 |
| Increase in investment holding gains/( losses) | 5,014 | (10,336) | (2,183) |
| 5,022 | (6,168) | 1,992 |
| At | At | At | |
|---|---|---|---|
| 31stDecember2019 | 31stDecember2018 | 30th June | |
| £'000 | £'000 | 2019 | |
| £'000 | |||
| Capital reserve -realised | 6,769 | 8,339 | 7,977 |
| Capital reserve -revaluation | 29,959 | 16,809 | 24,962 |
| Revenue reserve | 1,640 | 1,163 | 1,841 |
| 38,368 | 26,311 | 34,780 |
| 31stDecember2019 £'000 |
31stDecember2018 £'000 |
30th June 2019 £'000 |
|
|---|---|---|---|
| Netassets aGributable to Ordinary shareholders | 117,559 | 105,502 | 113,971 |
| Ordinary shares in issue atend of period | 71,023,695 | 71,023,695 71,023,695 | |
| Netasset value per Ordinary share | 165.52p | 148.54p | 160.47p |
8. TRANSACTIONS WITH THE INVESTMENT MANAGER
During the period there have been no newrelated party transactions that have affected the financial position or performance of the Group.
Since 1st January 2010 Brompton has acted as Investment Manager to the Company. This relationship is governed by an agreement dated 23rd December 2009.
Mr Duffield is the senior partner of Brompton Asset Management Group LLP the ultimate parent of Brompton. Mr Duffield owns a majority (59.14%) of the shares in the Company.
Mr Gamble has an immaterial holding in Brompton AssetManagement Group Limited LLP.
The total investment management fee payable to Brompton for the half year ended 31st December 2019 was £364,000 (30th June 2019: £688,000) (2018: £339,000) and at the half year £183,000 (30th June 2019: £177,000) (2018: £164,000) was accrued. The performance fee payable in respect of the six months ended 31st December2019 was £622,000(30th June 2019:£410,000) (2018:£nil). The existing performance fee arrangements ceasedwith effect from 1January 2020.
The Group's investments include seven funds managed by Brompton or its associates valued at £20,551,000 (30th June 2019: £19,680,000) (2018: £18,001,000). No investment management fees were payable directly by the Company in respect of these investments.
Coronavirus and the current pandemic has resulted in a significant fall in the market and introduced significant market volatility. Further details are provided in the Chairman's Statementand InvestmentManager's Reportabove.
The Company's unauditedNAV per share was 136.12p and the share price was 95p at close of business on 19thMarch 2020.
TIDM: NSI OAM Categories:1.2. Half yearly financial reports and audit reports/limited reviews Sequence No.: 53855 EQS News ID: 1003555
End ofAnnouncementEQS News Service
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