The Zero Preference Growth Trust PLC (The Company)
The Half Yearly Report of the Company for the six months ended 31 January 2008
is presented as follows:
Investment objective and policy
As stated in the original listing particulars, the Company's investment
objective is to achieve capital growth from a portfolio substantially invested
in zero dividend preference shares (`zeros'). The Company seeks to enhance
capital returns for shareholders by utilising gearing in the form of a flexible
revolving credit bank facility. The Directors intend to manage gearing actively
in response to market conditions.
From time to time the Company may hold a proportion of its assets in gilts or
other fixed income securities if the Board and Manager consider it appropriate
to do so. Furthermore, the Board is aware that since the Company was launched a
number of other listed investment vehicles have been designed to provide
similar growth and risk characteristics to zeros. The Board considers that such
investments may meet the investment objective of the Company and may authorise
a proportion of the Company's assets to be held in such structured products
where appropriate.
In selecting investments for the portfolio, the Manager looks for a combination
of a high return and acceptable cover, having regard to the underlying
investment policy of the issuer and the life of the zero concerned. The Group
may participate in new issues of zeros as well as making purchases of existing
zeros. The Manager manages the portfolio actively for capital growth.
The Company was granted a waiver by the UK Listing Authority from the
requirements under Listing Rules 15.6.2(1), which came into effect on 28
September 2007, to publish in its Annual Report and Accounts the full text of
the Company's investment policy and a statement explaining how the Company has
spread investment risk in accordance with that published policy.
To comply with the new Listing Rules the Company's investment policy is
detailed above and this should be read in conjunction with the Interim
management report and portfolio analysis contained herein.
Company highlights
for the six months ended 31 January 2008
% change
Capital return performance
Total assets less current liabilities (adjusted for +1.38
change in bank debt and before deduction of loan
interest)
FD/AIC Investment Trust Zero Dividend Preference Share +1.65
Index
Share price and NAV returns Discount/
(premium) at
31 31 July % 31 January
January 2007 change 2008
2008
Zero Dividend Preference share NAV 70.50p 66.43p +6.13
Mid 70.50p 68.50p +2.92 -
price
Growth share NAV 4.64p 6.22p -25.40
Mid 3.75p 4.50p -16.67 19.18%
price
Ordinary unit NAV 75.14p 72.65p +3.43
(1 Zero Dividend Preference and Mid 73.50p 73.25p +0.34 2.18%
1 Growth share) price
Company summary
Launch date 10 August 1999
Wind-up date 9 August 2008
Domiciled UK
Year end 31 July
Shareholder funds £11.411 million
Market capitalisation £11.143 million
Bank loan £1.320 million
The Company has a Revolving Credit Facility of up to £4 million with the Bank
of Scotland. This facility expires on 31 July 2008.
Zero Dividend Preference shares 14,209,498: the maximum entitlement at wind-up
date is 75p.
Growth shares 30,000,000
Ordinary units One Zero Dividend Preference share and one Growth share can be
held and traded as one Ordinary unit.
Investment Manager Premier Asset Management (Guernsey) Limited
Investment Adviser Premier Fund Managers Limited
Investment management fee 0.25% per annum of the total assets less current
liabilities, plus a performance fee (of 0.15% of total assets less current
liabilities if total assets have increased by more than 5.5% during the year)
and a terminal payment (of 12% of final net asset value after repayment of bank
debt and capital entitlement of ZDP shares). The investment management fee is
charged 100% to revenue and the performance fee and terminal payment provision
(if due) are charged 100% to capital.
AIC The Zero Preference Growth Trust PLC is a member of the Association of
Investment Companies.
Financial calendar
Year end 31 July
Annual results announced October
Annual General Meeting November
Half-year end 31 January
Half-year results announced March
Interim Management Statements June and December
Wind-up date 9 August 2008
Chairman's report
Dear Shareholder,
Shareholders will appreciate the enormous efforts made by our Investment
Managers in an extraordinarily difficult period for markets. I am very pleased
to be able to report that the net assets attributable to shareholders increased
by 0.93 per cent. net of all expenses over the period under review, only
modestly below the 1.65 per cent. increase in the FD/AIC Investment Trust Zero
Dividend Preference Share Index. The net asset value (`NAV') of the Zero
Dividend Preference Shares increased from 66.43p to 70.50p; that of the Units
from 72.65p to 75.14p; because of the very demanding accrual rate, the NAV of
the Growth Shares fell from 6.22p to 4.64p. The mid-market prices moved +2.92
per cent., +0.34 per cent. and -16.67 per cent. respectively.
Shareholders will be pleased to know that the Company remained fully compliant
with its banking covenants and at the end of January borrowing stood at £
1,320,000. The period under review coincided with the deepening problems of
world credit, and the distress being felt in the inter-bank market reported in
July became worryingly more acute. The unprecedented divergence between the
Base Rate of the Bank of England and the rates applying in the market is fully
illustrated by the Sterling 3 month LIBOR rate which reached over 6.90 per
cent. when Bank Rate was 5.75 per cent.. It was therefore appropriate for the
Company to reduce its borrowings and £1,800,000 was repaid without penalty when
funds were available.
The Board is mindful of its responsibilities to the holders of all classes of
share, and whilst considering the implications of winding up the Company on 9
August 2008, is also continuing to review a number of other possibilities in
conjunction with the Investment Manager and its advisors. No suitable
alternatives have yet been identified but the Board will keep shareholders
informed of any relevant developments.
Robert Ottley (Chairman)
27March2008
Interim management report
for the six months ended 31 January 2008
Market Background
World financial markets suffered their weakest period since 2003 as a number of
unprecedented events undermined investor confidence and caused a widespread
re-pricing of risk. The credit crunch was precipitated by US sub-prime mortgage
losses, resulting in a widespread loss of faith in the banking system and
indirectly resulting in the Bank of England being required to support Northern
Rock. The turmoil caused money markets to seize up, equity markets to fall and
credit spreads to widen significantly.
The Zero Dividend Preference share (`Zero') market was, once again, largely
inert to the economic and market backdrop although this environment was not
congruent with significant price appreciation. The FD/AIC Zero Dividend
Preference Share Index gained 1.65 per cent. over the period. Unusually the
Zero market saw a number of negative returns over the period, M&G High Income
Investment Company, Utilico Finance 2016 and Real Estate Opportunities all
declined in value by 2.7, 3.0 and 4.4 per cent. respectively. The decline in
Real Estate Opportunities is discussed later and the Company has only a small
exposure to Utilico Finance 2016 and no exposure to M&G High Income Investment
Company.
Portfolio Analysis
The portfolio remains balanced in both diversity terms and in respect to the
investments risk/return profiles. At 31 January, the portfolio contained 32
holdings, an unchanged quantity from the previous year end. The Company holds a
significant proportion of issues within the Zero universe and adds additional
diversity though investing in other listed vehicles and structured products
which have similar growth and risk profiles to traditional Zeros. The top ten
Zero holdings represent just under 70 per cent. of the portfolio, a level felt
appropriate to give meaningful conviction to our favoured positions whilst
maintaining suitable prudence. The portfolio contains large holdings in Royal
London UK Equity & Income Trust and JZ Equity Partners. Each represent slightly
over 12 per cent. of the portfolio and both have substantial cover for the
Zero's full entitlement, given their respective asset classes. Both made a
significant positive contribution to the Company's performance returning 3.7
and 3.3 per cent. respectively.
The Company's third largest holding is Real Estate Opportunities (8.6 per cent.
of the portfolio). Disappointingly the Zero declined 4.4 per cent. in price
terms, somewhat surprising considering there were a number of positive
corporate events impacting on them, specifically, a simplification of the
Company's capital structure, an increase in the equity subordinate to the
Zeros, a cap on the dividend to ordinary shareholders and the transfer of the
Zero issue into a subsidiary company thus giving Zero holders a potential claim
to the company's substantial revenue reserve. We remain confident in the
prospects for the holding despite anticipated commercial and residential
property declines. Weakness in the share price was used to acquire further
shares.
The best performer in the Zero market was Bear Stearns Private Equity
(Guernsey). At the beginning of the period the Company held a small position,
approximately 2.2 per cent. of the portfolio. The Zero fell 7.5 per cent. from
its May price, despite no change in the fundamental value. Bear Stearns Private
Equity (Guernsey) also went to unusual lengths in issuing a statement
distancing itself from collapsing hedge funds and derivatives of the US
subprime mortgage market. The opportunity was used to double the holding.
Pleasingly, rationality returned and the stock was "rerated" appreciating
almost 12 per cent. from the August low.
Close European Accelerated Return Fund was weak over the period. The Company's
11th largest holding declined 12.2 per cent. caused by a decline in the Dow
Jones EuroStoxx Index, increased implied volatility on index derivatives and a
general increased risk adversity. The security would return in excess of 15 per
cent. per annum if it pays its full entitlement which remains marginally
covered.
The Zero holding in Invesco Perpetual Recovery was sold at a 5.3 per cent.
profit on July's valuation. The holding in Jupiter Dividend & Growth Trust
Zeros was also sold at a profit as its valuation appeared expensive in
comparison to its peers. The small Gilt holdings were sold at a profit as their
yields were compressed as investors sought the safe haven of government
securities. Holdings in Premier Absolute Growth & Income Trust Securities,
Recovery Trust and New Star Financial Opportunities Trust were all redeemed
during the period returning good annualised rates of return from their July
valuations.
Holdings in US Special Opportunities Trust, M&G Recovery Investment Company,
Investec High Income Securities and Advanced Development Capital 2012 Zeros
were all increased over the period. Significant new positions include
Alternative Asset Opportunities, Investec Capital Accumulator Trust, Life
Offices Opportunities Trust as well as autocallable securities issued by
Citigroup and Société Générale.
The portfolio is well positioned to provide reasonable growth without requiring
significant equity market strength. Further, even in weaker market conditions
the portfolio should deliver comparably strong returns. The portfolio benefits
from diversity across asset classes and positions in unique opportunities that
have the ability to realise value irrespective of equity markets.
Risks and uncertainties
The main risks arising from the Group's financial instruments are market price
risk, interest rate risk, maturity risk and liquidity risk. The Board reviews
and agrees policies for managing each of these risks and they are summarised
below.
The Company finances its operations through a bank loan and the issue of
shares.
It is not the Group's policy to enter into derivative contracts.
Market price risk
Market price risk arises mainly from uncertainty about future prices of
financial instruments used in the Group's business. It represents the potential
loss the Group might suffer through holding market positions by way of price
movements and movements in exchange rates. These risks are monitored by the
Investment Manager on a regular basis and the Board at quarterly meetings with
the Investment Manager.
Interest rate risk
The Company invests mainly in zero dividend preference securities and fixed
interest rate securities. Hence any changes to the prevailing interest rates or
changes in expectations for future yields may result in an increase or decrease
in the value of the securities held. In general, a rise in interest rates will
increase the potential return for new investors but will reduce the capital
value of the Company for existing investors. A decline in interest rates will
have the opposite effect.
The Company also invests in floating interest rate securities, which are
exposed to cash flow interest rates.
The Group has cash and also has a variable rate bank loan facility. These
assets and liabilities will be subject to fluctuations in current and future
interest rates. This flexible facility enables the Company to repay partially
or increase the loan on a regular basis thus enabling the Company to control,
with flexibility, its exposure to the market and the underlying interest rate
risk.
Maturity risk
Maturity risk is the risk that there will be insufficient assets available to
repay the Zero Dividend Preference shares held in full on maturity. In general,
the relative risk of a zero can be measured by analysing the hurdle rate of
each security, the structure of the trust that issues it and the underlying
value of securities in the trust.
The Zero Dividend Preference shares, one of the Group's classes of share
capital in issue, gives holders the right to a repayment entitlement which
accrues at a fixed compounding rate up to 9 August 2008. The full repayment of
the Zero Dividend Preference shares of 75p per share is, however, subject to
sufficient growth in the value of the Company's portfolio being generated by
the repayment date. At the period end, total assets were sufficient for the
Zero Dividend Preference shares to be repaid in full on the winding-up date of
9 August 2008 and the shares had cover of 1.05 times.
Liquidity risk
The Company is wholly invested in quoted securities which, in an orderly
market, can be sold to meet funding commitments if necessary.
Foreign currency risk
All the Group's assets and liabilities are in sterling and accordingly the only
currency exposure the Group has is through the investment activities of the
companies in which it is invested. Although there is some currency risk, the
underlying assets of the Company's current investments are predominantly
denominated in sterling.
Paul Smith
Howard Crossen
Premier Fund Managers Ltd
Premier Asset Management (Guernsey) Limited
27 March 2008
Responsibility statement
for the six months ended 31 January 2008
The Directors confirm that to the best of their knowledge:
(a) the condensed set of financial statements has been prepared in accordance
with the Accounting Standard Board's statement `Half-Yearly Financial Reports';
(b) the review of the period includes a fair review of the information required
by DTR 4.2.7R; and
(c) the review of the period includes a fair review of the information required
by DTR 4.2.8R.
Investment portfolio
as at 31 January 2008
% of
Year of Rating* Fair portfolio
maturity value
£'000
Zero Dividend Preference shares
Royal London UK Equity & Income Trust 2008 A5 1,533 12.6
JZ Equity Partners 2009 AAA0 1,478 12.1
Real Estate Opportunities 2011 AA7 1,055 8.6
M&G Income Investment Company 2008 AAA1 958 7.8
M&G Recovery Investment Company 2009 AAA2 808 6.6
Bear Stearns Private Equity (Guernsey) 2013 AAA0 728 6.0
EPIC Securities 2011 AAA0 613 5.0
US Special Opportunities Trust 2008 AA1 437 3.6
Jupiter Second Split Trust 2009 AAA0 422 3.5
Investec High Income Securities 2009 C3 381 3.1
Jupiter Second Enhanced Income Trust 2009 AAA0 348 2.9
Advanced Development Capital Zeros Units 2012 N/A 215 1.8
Advanced Development Capital Zeros 2012 AAA0 196 1.6
Utilico Finance 2014 AAA2 129 1.0
Utilico Finance 2016 AAA2 122 1.0
Advanced Development Capital Zeros 2010 AAA0 59 0.5
JP Morgan Income & Capital Investment Trust 2008 AAA0 20 0.2
BFS Managed Properties 2011 N/A 1 0.0
Total Zero Dividend Preference shares 9,503 77.9
Investment portfolio
as at 31 January 2008
Year of Rating* Fair % of
maturity value portfolio
£'000
Preference shares
Alternative Asset Opportunities N/A 198 1.6
Citigroup Symphony Defensive Euro N/A 196 1.6
Autocall
Japanese Accelerated Performance Fund 2009 N/A 150 1.3
HBOS 6.0884% 2015/49 N/A 89 0.7
Total preference shares 633 5.2
Fixed interest
Barclays Bank EuroStoxx 50 Ladder Bond 2010 N/A 456 3.7
Société Générale Double Opportunity
Autocallable
FTSE 100 Warrant N/A 280 2.3
Northern Rock Perpetual Sub Notes N/A 23 0.2
Total fixed interest 759 6.2
Ordinary shares
Close European Accelerated Return Fund 2011 AAA 404 3.3
Accelerated Return Fund 2008 AAA 306 2.5
Life Offices Opportunities Trust N/A 189 1.5
Investec Capital Accumulator Trust AAA0 184 1.5
Economic Lifestyle Property Investment 2015 AAA0 130 1.1
Company
Defined Capital Return Fund N/A 89 0.7
City Merchants High Yield Trust N/A 7 0.1
Total ordinary shares 1,309 10.7
Total investments 12,204 100.0
The above portfolio excludes 1 stock held at nil value.
*Key to trust ratings:-
AAA = 0% in splits and high yield funds
AA = up to 5% in splits and high yield funds
A = 5% - 10% in splits and high yield funds
BB = 10% - 15% in splits and high yield funds
B = 15% - 25% in splits and high yield funds
C = 25%+ in splits and high yield funds
Other = Non-splits
Debt
0 = No debt
1 = up to 10% of assets represented by debt
2 = up to 20% of assets represented by debt
3 = up to 30% of assets represented by debt
4 = up to 40% of assets represented by debt
5 = up to 50% of assets represented by debt
6 = up to 60% of assets represented by debt
7 = up to 70% of assets represented by debt
8 = up to 80% of assets represented by debt
9 = greater than 80% of assets represented by debt
Sourced from Premier Fund Managers (data relating to 31 January 2008).
Investment portfolio
as at 31 January 2008
Allocation of total portfolio by rating as at 31 January 2008
Fair % of
value portfolio
£'000
Rating
AAA 6,905 56.6
AA 1,492 12.2
A 1,533 12.6
C 381 3.1
Other Listed Investments 1,893 15.5
Total portfolio 12,204 100.0
Company details
History
The Company was launched on 10 August 1999, raising £30 million before
expenses, by a placing of 30,000,000 Ordinary units each comprising 1 Zero
Dividend Preference share and 1 Growth share. The Company had an initial
wind-up date of 9 August 2004.
At an Extraordinary General Meeting of the Company held on 2 August 2004 and at
separate class meetings of the holders of Growth shares and Zero Dividend
Preference shares held on the same date approval was given for the life of the
Company to be extended to 9 August 2008.
Approval was also given to a tender offer to the holders of Zero Dividend
Preference shares under which the Company subsequently purchased and cancelled
15,790,502 Zero Dividend Preference shares on 6 August 2004.
Zero Dividend Preference shares - 14,209,498 in issue
Dividends
No dividends are paid on the Zero Dividend Preference shares.
Capital
The Zero Dividend Preference shares were issued in August 1999 with an initial
capital entitlement of 50p increasing to a final capital entitlement of 69.3p
per share on 9 August 2004.
Following the extension of the Company's life the final capital entitlement of
the Zero Dividend Preference shares will now be 75.0p on 9 August 2008, subject
to sufficient assets being available.
Voting
The Zero Dividend Preference shareholders will not normally have the right to
attend and vote at any general meeting unless a resolution either to wind-up
the Company or vary the rights of Zero Dividend Preference shares is proposed.
Growth shares - 30,000,000 in issue
Dividends
Holders of Growth shares are entitled to the revenue profits of the Company
available for distribution by way of interim and final dividend at such times
as the Directors may determine.
Capital
On a winding-up of the Company, subject to sufficient assets being available,
Growth shareholders will be entitled to all surplus assets of the Company
available after paying in full the entitlement of the Zero Dividend Preference
shares and a potential 12% terminal payment to the Investment Manager (see note
4).
Voting
Each holder will have the right to attend any general meeting of the Company
and on a show of hands will have one vote and on a poll will have one vote for
each Growth share held.
ordinary units
Growth shares and Zero Dividend Preference shares may also be traded as
Ordinary units, each comprising one Growth share and one Zero Dividend
Preference share. Holders of Ordinary units are entitled to the rights
attaching to the underlying Growth and Zero Dividend Preference shares.
Bank loan
At 31 January 2008, the Company had drawn down £1,320,000 of the £4 million
Revolving Credit Facility with the Bank of Scotland. Since the period end, the
Company has not changed the total amount drawn down under the facility.
risk factors
The capital structure of the Company includes gearing through bank debt and, in
respect to Growth shares, through the capital attributable to Zero Dividend
Preference shares. This gearing means that for any movement - up or down - in
the Company's gross assets there will (in most circumstances) be a greater
percentage movement in the net asset value (`NAV') of the Growth shares. This
in turn may be reflected in greater volatility in the share price of the Growth
shares and adds to the risk associated with this investment. If the final
capital entitlement of the Zero Dividend Preference shares is uncovered, the
movement of the NAV of the Zero Dividend Preference shares will also be geared
in the same way. This adds to the risk associated with this investment. If on a
wind-up the gross assets of the Company are insufficient to cover the bank
loan, the payment of other creditors and the capital entitlements of the Zero
Dividend Preference shares, the terminal asset value of any of the Growth
shares could be nil and shareholders could lose all of their capital invested
in those shares.
The Zero Dividend Preference shares rank after the repayment of bank debt and
the payment of other creditors but ahead of the Growth shares for repayment of
capital on a winding-up of the Company and hence can be regarded as lower risk
than the Growth shares in respect of capital entitlement. An insufficient
increase in the gross assets of the Company could result in the Zero Dividend
Preference shares failing to receive their full redemption value on wind-up and
if gross assets were equal to or less than the amount required to repay the
bank loan and other liquidation costs shareholders would lose all of their
capital invested in the Zero Dividend Preference shares.
Financial summary
31 31 July % Discount/
January
2007 change (premium)
2008 at
31
January
2008
Capital
Total assets less current liabilities 12,727 14,419 (11.73)
(excluding bank loans) (£'000)
Total assets less current liabilities 1.38
(adjusted for change in bank
debt and before deduction of loan
interest)
FD/AIC Investment Trust Zero Dividend 173.10 170.29 1.65
Preference Share Index
Net asset value Zero Dividend Preference 70.50p 66.43p 6.13
share
Mid-market price Zero Dividend 70.50p 68.50p 2.92 -
Preference share
Net asset value Growth share 4.64p 6.22p (25.40)
Mid-market price Growth share 3.75p 4.50p (16.67) 19.18%
Net asset value Ordinary unit 75.14p 72.65p 3.43
Mid-market price Ordinary unit 73.50p 73.25p 0.34 2.18%
6 months Year ended
ended 31 July
31 January 2007
2008
Total Return
Total return on assets attributable to shareholders 1.38% 5.96%
Total return FTSE All-Share Index 7.51% 12.95%
Total return Zero Dividend Preference share 2.92% 8.73%
Total return Growth share (16.67)% 5.88%
Total return Ordinary unit 0.34% 10.57%
Total expense ratio 0.92% 2.08%
As at
31 January
2008
Zero Dividend Preference shares
Asset cover ratio 1.05:1
Hurdle rate to redemption price -7.9pa
Consolidated income statement
for the six months ended 31 January 2008
Six months ended 31 Six months ended 31
January 2008 January 2007
(unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains on investments
Gains on investments at fair - 303 303 - 888 888
value
Net investment result - 303 303 - 888 888
Dividends and interest 24 - 24 27 - 27
Expenses
Investment management fee (17) - (17) (19) - (19)
Terminal payment provision (note - (15) (15) - (76) (76)
4)
Other expenses (94) - (94) (97) - (97)
(111) (15) (126) (116) (76) (192)
(Loss)/profit before finance (87) 288 201 (89) 812 723
costs and taxation
Finance costs
Bank interest payable (96) - (96) (164) - (164)
(Loss)/profit before and after (183) 288 105 (253) 812 559
taxation for the period but
before finance (costs)/gains
allocated in respect of
shareholders
Finance (costs)/gains in respect
of:
Zero Dividend Preference shares - (579) (579) - (515) (515)
Growth shares 183 291 474 253 (297) (44)
- - - - - -
Return per share (IAS 33 and Articles of
Association basis) (note 2):
pence pence pence pence pence pence
Zero Dividend - 4.07 4.07 - 3.63 3.63
Preference share
Growth share (0.61) (0.97) (1.58) (0.84) 0.98 0.14
Ordinary unit (0.61) 3.10 2.49 (0.84) 4.61 3.77
The total column of this statement represents the Group's income statement,
prepared in accordance with IFRS. The supplementary revenue return and capital
return columns are both prepared under guidance published by the Association of
Investment Companies (`AIC').
All items in the above statement derive from continuing operations.
Consolidated income statement
for the six months ended 31 January 2008
Yearended 31 July2007
(audited)
Revenue Capital Total
£'000 £'000 £'000 Gains on investments
Gains on investments at fair
value
- 1,176 1,176
- 1,176 1,176 Net investment result
50 - 50 Dividends and interest
(37) - (37) Expenses
Investment management fee
- (88) (88) Terminal payment provision
(note 4)
(192) - (192) Other expenses
(229) (88) (317)
(Loss)/profit before finance
(179) 1,088 909 costs and taxation
Finance costs
(273) - (273) Bank interest payable
(452) 1,088 636 (Loss)/profit before and
after taxation for the year
but before finance (costs)/
gains allocated in respect
of shareholders
Finance (costs)/gains in
respect of:
- (1,052) (1,052) Zero Dividend Preference
shares
452 (36) 416 Growth shares
- - -
Return per share (IAS 33 and
Articles of Association
basis) (note 2):
pence pence pence
- 7.41 7.41 Zero Dividend Preference
share
(1.51) 0.12 (1.39) Growth share
(1.51) 7.53 6.02 Ordinary unit
The total column of this statement represents the Group's income statement,
prepared in accordance with IFRS. The supplementary revenue return and capital
return columns are both prepared under guidance published by the Association of
Investment Companies (`AIC').
All items in the above statement derive from continuing operations.
Consolidated balance sheet
as at 31 January 2008
31 January 31 July 31 January
2008 2007 2007
(unaudited) (audited) (unaudited)
£'000 £'000 £'000
Non current assets
Investments at fair value 12,204 13,952 14,547
Current assets
Trade and other receivables 20 22 33
Cash and cash equivalents 777 594 52
797 616 85
Total assets 13,001 14,568 14,632
Current liabilities
Trade and other payables (274) (149) (143)
Bank loans (1,316) (3,113) -
(1,590) (3,262) (143)
Total assets less current liabilities 11,411 11,306 14,489
Non current liabilities
Bank loans - - (3,260)
Assets attributable to shareholders (note 3) 11,411 11,306 11,229
Liabilities due to shareholders
Zero Dividend Preference share entitlement (10,018) (9,439) (8,902)
Growth share entitlement (1,393) (1,867) (2,327)
(11,411) (11,306) (11,229)
- - -
Net asset value per share (note 3): pence pence pence
Zero Dividend Preference share 70.50 66.43 62.65
Growth share 4.64 6.22 7.75
Ordinary unit 75.14 72.65 70.40
Consolidated statement of cash flows
for the six months ended 31 January 2008
Six months Six months
ended 31 ended 31 Year
January January ended
2008 2007 31 July
(unaudited) (unaudited) 2007
£'000 £'000 (audited)
£'000
Cash flows from operating activities
Investment income received 16 20 37
Bank deposit interest received 13 7 15
Investment Manager's fees paid (18) (43) (61)
Secretarial fees paid (26) (21) (49)
Other cash payments (83) (80) (143)
Cash expended from operations (note 7) (98) (117) (201)
Bank interest paid (97) (162) (269)
Net cash outflow from operating activities (195) (279) (470)
Cash flows from investing activities
Purchases of investments (2,076) (2,901) (6,919)
Sales of investments 4,254 5,190 10,091
Net cash inflow from investing activities 2,178 2,289 3,172
Cash flows from financing activities
Advances of bank loan 500 750 2,150
Repayments of bank loan (2,300) (2,800) (4,350)
Net cash outflow from financing activities (1,800) (2,050) (2,200)
Increase/(decrease) in cash and cash 183 (40) 502
equivalents for the period
Cash and cash equivalents at the start of the 594 92 92
period
Cash and cash equivalents at the end of the 777 52 594
period
Notes to the accounts
for the six months ended 31 January 2008
1 ACCOUNTING POLICIES
The financial information contained in this Half Yearly Financial Report does
not constitute statutory financial statements as defined in Section 240 of the
Companies Act 1985. The statutory financial statements for the year ended 31
July 2007, which contained an unqualified auditors' report, have been lodged
with the Registrar of Companies and did not contain a statement required under
Section 237(2) or (3) of the Companies Act 1985. These statutory financial
statements were prepared under International Financial Reporting Standards
(`IFRS') and in accordance with the Accounting Standard Board's ('ASB')
Statement on Half Yearly Financial Reports and the Statement of Recommended
Practice: Financial Statements of Investment Trust Companies, revised December
2005. The financial statements have been prepared using the accounting policies
adopted in the audited financial statements for the year ended 31 July 2007.
The Group financial statements consolidate the financial statements of the
Company and its wholly owned subsidiary undertaking, ZPGT Trading Limited, for
the six months ended 31 January 2008.
These financial statements have been prepared in accordance with International
Financial Reporting Standards (`IFRS') for interim financial statements; IAS 34
Interim Financial Reporting. They do not include all the financial information
required for full annual financial statements.
The financial statements are presented in sterling rounded to the nearest
thousand.
2 Return per share
IAS 33 and Articles of Association basis
Returns per share shown have been calculated based on the following returns
attributable to each class of share;
Six months Six months Year ended
ended ended
31 July 2007
31 January 31 January
2008 2007 (audited)
(unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Zero Dividend - 579 579 - 515 515 - 1,052 1,052
Preference
share
Growth share (183) (291) (474) (253) 297 44 (452) 36 (416)
(183) 288 105 (253) 812 559 (452) 1,088 636
The weighted average number of Zero Dividend Preference shares in issue was
14,209,498 (six months ended 31 January 2007 and year ended
31 July 2007: 14,209,498) and the weighted average number of Growth shares in
issue was 30,000,000 (six months ended 31 January 2007 and year ended 31 July
2007: 30,000,000).
There are no dilutive elements within the Group and hence no diluted return per
share calculations are presented.
3 Net asset value
The net asset value per Zero Dividend Preference share is calculated using
assets attributable of £10,018,000 (31 January 2007: £9,439,000, 31 July 2007:
£8,902,000) and 14,209,498 Zero Dividend Preference shares in issue at the end
of the period.
The net asset value per Growth share is calculated using assets attributable of
£1,393,000 (31 January 2007: £1,867,000, 31 July 2007: £2,327,000) and
30,000,000 Growth shares in issue at the end of the period.
The net asset values stated include current period revenue.
A reconciliation of movements in assets attributable during the period is shown
below:
Zero
Dividend
Preference Growth Total
shares shares £'000
£'000 £'000
Assets attributable
At 1 August 2007 9,439 1,867 11,306
Profit after taxation for the year but before - 105 105
finance (costs)/gains allocated in respect of
shareholders
Zero Dividend Preference shares appropriation 579 (579) -
At 31 January 2008 10,018 1,393 11,411
4 Investment management fees
Under the terms of the investment management agreement, the Investment Manager
is entitled to an annual fee at the rate of 0.25% per annum of the total assets
less current liabilities (other than borrowing incurred for investment
purposes) of the Group before deducting any prior charges on the last business
day of that quarter, plus a performance fee, payable annually in arrears, at
the rate of 0.15% of total assets less current liabilities if total assets have
increased by more than 5.5% during the year. In the six months ended 31 January
2008, no performance fee is deemed to be due as the assets have not increased
sufficiently (six months ended 31 January 2007 and year ended 31 July 2007:
nil). However, because the performance fee is based on performance to 31 July
2008, the actual fee payable (if any) can only be determined at that time.
In addition, the Investment Manager is entitled to a terminal payment
calculated as 12% of the assets attributable for distribution to Growth
shareholders, after repayment of bank debt and full satisfaction of the final
capital entitlement of the Zero Dividend Preference shares on 9 August 2008. At
31 January 2008, such assets available were £858,000, making the overall
provision of £103,000 (six months ended 31 January 2007: £76,000, year ended 31
July 2007: £88,000). Therefore, the movement in the total provision of £15,000
has been included in the consolidated income statement for the six months ended
31 January 2008. However, because the terminal payment is only payable on 9
August 2008, the actual fee payable (if any) can only be determined at that
time.
Fees paid to the Investment Adviser are the responsibility of the Investment
Manager.
5 Dividends Paid
No dividends have been paid and the Directors do not recommend the payment of a
dividend in respect of the six months ended 31 January 2008 (six months ended
31 January 2007 and year ended 31 July 2007: nil).
6 Taxation
The tax charge for the six months ended 31 January 2008 is nil (six months
ended 31 January 2007 and year ended 31 July 2007: nil).
The Company has an effective tax rate of 0% for the year ending 31 July 2008.
The estimated effective tax rate is 0% as investment gains are exempt from tax
owing to the company status as an Investment Trust and there is expected to be
an excess of management expenses over taxable income.
7 Reconciliation of net profit after finance costs and taxation to cash
expended from operations
Six months Six months
Year ended ended ended
31 July 31 January 31 January
2007 2008 2007
(audited) (unaudited) (unaudited)
£'000 £'000 £'000
Net profit after finance costs and taxation 105 559 636
Gains on investment (303) (888) (1,176)
Bank interest payable 96 164 273
Decrease/(increase) in trade and other 2 (8) 3
receivables
Increase in trade and other payables 2 56 63
Cash expended from operations (98) (117) (201)
8 Related party transactions
The Investment Manager, Premier Asset Management (Guernsey) Limited, is
regarded as a related party of the Company. The amounts payable to the Manager
as at 31 January 2008 are £9,000 (31 January 2007: £9,000, 31 July 2007: £
9,000). Premier Asset Management (Guernsey) Limited is a subsidiary company of
Premier Asset Management Limited.
Shareholder information
Financial calendar
Year end 31 July
Annual results announced October
Annual General Meeting November
Half-year end 31 January
Half-year results announced March
Interim Management Statements June and December
Wind-up date 9 August 2008
share price and performance information
The Company's Zero Dividend Preference shares, Growth shares and Ordinary units
are listed on the London Stock Exchange. The mid-market prices are quoted daily
in the Financial Times under `Investment Companies'. The net asset values are
announced weekly to the London Stock Exchange and published monthly via the
Association of Investment Companies.
Information about the Company, factsheets and daily prices can be obtained on
the Investment Manager's website at www.premierassetmanagement.co.uk or at
www.splitsonline.co.uk. Any enquiries can also be e-mailed to
premier@premierfunds.co.uk, or telephoned to 01483 400400.
share dealing
Information on the Premier PEP and ISA products can be obtained by contacting
Premier on 01483 400400.
share register enquiries
The register for the Zero Dividend Preference shares, Growth shares and
Ordinary units is maintained by Equiniti Registrars. In the event of queries
regarding your holding, please contact the Registrar on 0870 600 3964. Changes
of name and/or address must be notified in writing to the Registrar.
Premier Asset Management Limited
Other investment companies managed by Premier Asset Management Limited are:
Acorn Income Fund Limited US Special Opportunities Trust PLC
Premier Utilities Trust PLC Premier Renewable Energy Fund Limited
Further details of these funds can be obtained from
www.premierassetmanagement.co.uk or by calling Premier on 01483 400400.
Email premier@premierfunds.co.uk