ABERFORTH SMALLER COMPANIES TRUST plc
HALF YEARLY REPORT
For the Six Months ended 30 June 2009
Aberforth Smaller Companies Trust plc (ASCoT) invests only in small UK quoted
companies and is managed by Aberforth Partners LLP.
The investment objective of ASCoT is to achieve a net asset value total
return (with dividends reinvested) greater than on the Hoare Govett Smaller
Companies Index (Excluding Investment Companies) over the long term.
All data throughout this Half Yearly Report is to, or as at, 30 June 2009 as
applicable, unless otherwise stated.
CHAIRMAN'S STATEMENT
For the six months to 30 June 2009, Aberforth Smaller Companies Trust plc
(ASCoT) achieved a net asset value total return of 20.8%, which compares with a
total return of 27.1% from the Hoare Govett Smaller Companies Index (Excluding
Investment Companies) (HGSC (XIC)), your Company's investment benchmark. The
FTSE All-Share Index, a representative of larger companies, registered a total
return of 0.8%. ASCoT, therefore, underperformed its benchmark during a period
when smaller companies outperformed larger companies.
Your Managers' Report provides greater insight into ASCoT's performance, as well
as that of small and large companies.
Stock markets remained challenging during the first three months of 2009.
Subsequently there has been a discernable return of investor appetite for equity
risk and this has benefitted ASCoT's portfolio in absolute terms. However, the
conservative positioning of the portfolio has resulted in an underperformance
relative to the benchmark index. Gearing at the fund level has been helpful in
partly bridging this shortfall. At 30 June 2009 gearing was 9%.
Shareholders will be aware that the Company's current borrowing facility was due
to expire at the end of October 2009. I am able to report that the Board has now
agreed terms on a new two year committed facility of £75 million with The Royal
Bank of Scotland, replacing the existing facility.
As anticipated in my January report, portfolio dividend income for the six
months to 30 June 2009 is 14% lower than that recognised in the corresponding
period last year. The extent of the impact of the economic downturn on portfolio
company dividends is proving every bit as severe as your Managers predicted.
Their report expands on this topic.
Nevertheless, your Board is pleased to declare a first interim dividend of 6.00
pence per share, which is the same as the corresponding payment last year.
In the past, ASCoT has either held or increased its annual dividend and, during its near
20 year life, it has accumulated significant revenue reserves. At 30 June 2009, and
after accounting for the first interim dividend, these amount to 31.1 pence per
share. As noted in my previous report, the extent of brought forward revenue
reserves gives your Board a degree of flexibility when considering future dividend
levels.
The first interim dividend will be paid on 21 August 2009 to Shareholders on the
register at the close of business on 31 July 2009. The last date for submission
of Forms of Election for those Shareholders wishing to participate in ASCoT's
Dividend Reinvestment Plan (DRiP) is 31 July 2009. Details of the DRiP are
available from Aberforth Partners LLP on request or from their website,
www.aberforth.co.uk.
At the Annual General Meeting on 4 March 2009, all resolutions proposed were
passed, including that which renewed the authority to buy-in up to 14.99% of
ASCoT's Ordinary Shares. No shares were purchased under this authority during
the six months to the end of June 2009.
Your Board is pleased to announce the appointment of David Jeffcoat as a non-
executive director with immediate effect. David retired as group finance
director and company secretary of Ultra Electronics Holdings plc in April 2009
and brings a wealth of commercial and financial experience.
I also wish to inform Shareholders that, having served on the Board for almost
15 years and as Chairman for 4 years, I shall be retiring from the Board at
the Annual General Meeting in March 2010, when Professor Paul Marsh will take
over the role of Chairman.
While the recent rally in small company share prices is welcome, trading
conditions remain challenging and if recovery is indeed underway its foundations
are as yet fragile. The Board is, however, encouraged by the businesses that
your Managers have selected for the portfolio. These are typically well
financed and are at historically attractive valuations, characteristics that the
Board is convinced are in Shareholders' best interests over the medium to long
term and that justify the tactical gearing presently employed by ASCoT.
David R Shaw
Chairman
22 July 2009
MANAGERS' REPORT
Investment Background
It's really not supposed to be like this! Entering 2009, financial markets
remained extraordinarily risk averse, with credit markets still under stress and
much of the developed world in recession. Nevertheless, small UK quoted
companies ended June having recorded their strongest half year relative return
over ASCoT's history: the HGSC (XIC) produced a total return of 27.1%, which
dwarfed the FTSE All-Share's 0.8%. In an international context, the performance
of UK large companies was relatively good, with most major markets down by 10-
15% in sterling terms. Alongside small companies, emerging markets were a
bright spot, with Morgan Stanley's benchmark achieving a 19% capital gain in
sterling terms.
The rally in equity prices reflects a gradual relaxation in the extreme risk
aversion that permeated financial markets in the wake of Lehman's collapse.
This improvement in sentiment was in turn influenced by unprecedented monetary
easing that has taken interest rates in much of the developed world to
generational lows and introduced the reality of quantitative easing to economies
outside Japan. The benefits of this trickled through the credit market and
gradually brought corporate bond and money market spreads back from extended
levels. At the same time, shareholders in highly indebted publicly quoted
companies, faced with the alternative of bankruptcy, proved willing to fund
equity issues. These developments allowed markets to reset their sights from an
imminent descent into Depression and thus breathed life back into those
companies that had been priced to fail.
The first half also witnessed the return of the `decoupling trade', which is
founded upon the notion that emerging economies, China in particular, can take
up the strain of sustaining global demand as the US consumer succumbs to
recession. This was the financial markets' last hope in the early months of
2008, when commodities were the principal beneficiaries, but was caught up in
the all-consuming gloom of the second half. Its revival in 2009, manifest in
the strong performance from emerging markets and the revival in commodities,
reflects optimism that China's $600bn fiscal stimulus package might prove
sufficient to keep its economy growing at close to the targeted 8% rate.
While the risk of a return to the 1930s would appear to have receded,
developments in real economies around the world have hardly made for pleasant
reading. Industry has borne the brunt to date, with industrial production in
the UK down by 12% year-on-year and in Japan by 31%. However, the financial
markets this year have increasingly been focusing on the second derivative: the
year-on-year declines two months earlier had been running at 13% in the UK and
37% in Japan. There is optimism, therefore, that, with the destocking cycle
having played out, manufacturing may be through the worst. However, while these
may indeed prove the `green shoots' of recovery, anecdotal evidence from
companies remains mixed. Moreover, consumer spending, a crucial component of
demand, is being assailed by a combination of falling house prices, rising
unemployment, a resurgent oil price, and the inevitability of higher taxes to
pay for the stimulus packages. With upwards pressure on savings ratios, it is
tough to assess whether the declines in output have yet been sufficient to meet
the adjusted levels of demand.
Performance Analysis
ASCoT's NAV total return over the first half was 20.8%, the third best half year
result over its history. The gearing position, which built up from May last year
and which proved a drag on returns in 2008, made a positive contribution.
Nevertheless, ASCoT under-performed the 27.1% return of the HGSC (XIC). The
following table and paragraphs explain this relative performance.
Performance Attribution Analysis
For the six months ended 30 June 2009
Basis
Points
Stock selection (750)
Sector selection (118)
-----
Attributable to the portfolio of investments (868)
(calculated on a mid-price basis)
Impact of mid-price to bid price 83
Cash/gearing 205
Management fee (net of the VAT refund) (39)
Other expenses (5)
-----
Total attribution based on bid-prices (624)
-----
Note: 100 basis points = 1%. Total attribution is the
difference between the total return of the net asset value
and the Benchmark Index (i.e. net asset value = 20.83%;
Benchmark Index = 27.07%; difference is -6.24% being -624 basis points).
The rally enjoyed by the HGSC (XIC) was unusual not just in terms of its
strength. It was powered by two groups of stocks: the "fallen stars" and the
"100% club".
· The fallen stars are a collection of 40 companies that were relegated to
the HGSC (XIC) on its annual rebalancing on 1 January. Among these companies
are familiar names, such as GKN and Rentokil, that once sat firmly in the FTSE
100. Often with substantial debt loads and large pension deficits, their share
prices suffered horribly in 2008. However, the renewed appetite for risk and
the feasibility of rescue rights issues have resuscitated many of these
companies. In aggregate, the fallen stars accounted for 25% of the total market
capitalisation of the HGSC (XIC) at the start of the year and for 29% of the
benchmark's 27.1% return over the first half.
· The 100% club comprises the 55 companies in the benchmark whose share
prices at least doubled over the first half. Though there is an overlap of
seven, most of these companies are much smaller than the fallen stars. Their
cumulative weight within the HGSC (XIC) at the start of the year was 7%.
However, given their price movements, they accounted for another 33% of the
benchmark's 27.1% return over the first half.
ASCoT's experience of these two groups was mixed. It did well from the 100%
club. Its nine holdings in this category made a significant contribution to the
strong absolute gains over the period, accounting for 44% of ASCoT's return.
However, exposure to the fallen stars was low: the five holdings in this group
were not large weights and together contributed just 9% of ASCoT's return.
Indeed, ASCoT's under-performance against the benchmark can be attributed to its
low weighting in the fallen stars. There are two reasons for this under-weight
position.
· Reflecting the uncertain credit environment and impending recession,
ASCoT's portfolio at the start of the year was still biased towards companies
with strong balance sheets: just under one third of the portfolio by weight was
invested in businesses with net cash. This cautious orientation was
diametrically opposed to that of the fallen stars: their cumulative market
capitalisation at the start of the year was £23bn, whereas their cumulative net
debt was £50bn. Moreover, substantial pension deficits, which your Managers
treat as debt when valuing businesses, are a feature of many fallen stars.
· In ASCoT's annual report, the concept of being `paid to wait' was
emphasised: reasonably high and sustainable dividend yields could provide some
reward to investors for their faith in businesses during a downturn of uncertain
duration. Consistent with this, ASCoT entered 2009 with an average portfolio
yield of 5.3%. While six months is, in any case, too short a period for the
benefits of such a strategy to play out, the stockmarket's focus was very much
elsewhere: 22 of the 40 fallen stars cut their dividends over the past year, but
these cutters actually out-performed the other 18 over the first half.
While over this short period of six months the market has been willing to
overlook dividend cuts, the underlying income experience has not been
propitious. Dividends across the large company universe have been reduced by
16%. The fall across the HGSC (XIC) was 38%, almost one third of which can be
attributed to the fallen stars. These declines compare unfavourably with the
early 1990s recession, when the aggregate dividends of large companies were more
or less unchanged, and small companies endured a drop of roughly 25%, spread
over a three year period. Clearly, those companies that have been caught by
both weaker trading and high gearing have little alternative but to cut their
dividends. However, others have cut for no good reason. Fashion and weak
advice seem to be influencing the thinking of many boards to the detriment of
long term returns to shareholders. ASCoT's portfolio has not escaped unscathed
but has fared relatively well: stripping out the beneficial effect of taking on
gearing, income generated by the portfolio over the twelve months to the end of
June fell by roughly 24% year-on-year. This was not substantially out of line
with your Managers' forecasts. The portfolio's income profile remains
conservative: the top ten contributors account for 31% of this year's income and
an 18% weighting in non dividend payers can still be accommodated.
Over its history, ASCoT has benefited disproportionately from M&A activity. In
this, it has been helped by your Managers' preference for valuation measures
based on enterprise values, which corporate acquirers tend also to use, over the
simple price earnings ratio. This approach has, however, been of limited
assistance so far in 2009 given the dearth of M&A transactions: only seven deals
have been completed within the HGSC (XIC), compared with 42 over the course of
2008. Indeed, the stockmarket has swung decisively from de-equitisation to re-
equitisation, with rights issues, notably among the fallen stars, rather than
acquisitions keeping the investment bankers busy.
Conclusion & Investment Outlook
The first half witnessed one of the strongest ever periods of performance from
small companies. ASCoT participated and secured a good absolute return, which
exceeded that of large companies but lagged its benchmark. With the benefit of
hindsight, the portfolio was too conservatively oriented for the risk rally.
Low exposure to the fallen stars has clearly hampered relative performance so
far this year. With the damage done, the question confronting your Managers is
whether the fundamental developments over the quarter, including the tentative
stabilisation in trading conditions and substantial equity issuance, justify the
revaluations that these companies have enjoyed.
On the whole the fallen stars remain plagued by the structural problems that
originally deterred your Managers. Despite the rescue rights issues, these
companies tend still to be highly indebted at a time of economic uncertainty.
Indeed, in the case of at least one, there is speculation that another equity
issue may be required. Moreover, the often substantial defined benefit pension
schemes remain unaddressed. These factors may nevertheless be out-weighed by
particularly low equity valuations. However, it is not clear that this is the
case. The rally, the extra shares in issue and lower profits exacerbated by
high gearing have combined to move the average PE of the fallen stars for the
current year up to 11x and the average yield down to 2%.
We believe there are more attractive values on offer within the investment
universe, most relevantly within the portfolio, whose average current year PE
and yield are 8.9x and 3.5%. Within this are five holdings among fallen stars,
but the abundance of attractive value opportunities resides further down the
scale of market capitalisation, below the fallen stars and among the `smaller
small' companies. With the FTSE 250 on a historic PE of 10x and the FTSE
SmallCap on 7x, the discount for size within the benchmark is at its most
exaggerated in your Managers' experience. This is reflected in the portfolio's
28% over-weight position in these cheaper `smaller small' companies. A
reversion of this discount to its long run average would, others things being
equal, be positive for ASCoT's relative performance. Your Managers consider
that this approach, rather than a belated pursuit of the fallen stars, is
consistent with how the portfolio has been managed successfully over the long
term. Indeed, relative performance has tended to lag in the initial phase of
recovery but has improved as the initial euphoria abated, which proved the case
most recently in 2003 and 2004.
30 June 2009 31 December 2008 30 June 2008
Characteristics ASCoT Benchmark ASCoT Benchmark ASCoT Benchmark
Number of Companies 92 480 93 495 99 484
Weighted Average £327m £605m £259m £442m £321m £536m
Market Capitalisation
Price Earnings Ratio 7.0x 8.7x 6.0x 6.4x 9.2x 9.8x
(Historic)
Net Dividend Yield 4.3% 3.6% 5.3% 5.9% 3.7% 3.7%
(Historic)
Dividend Cover 3.3x 3.2x 3.1x 2.6x 2.9x 2.8x
(Historic)
As the table shows, the HGSC (XIC) ended June on a historic PE of 8.7x, which is
up from 6.4x at the year end. At play here are both rising share prices and
falling profits. This combination was a feature of the early 1990s recession,
when small companies made strong absolute and relative gains from 1990 to 1993,
despite profits declining in each year. The market is currently flirting with
the notion that recovery is imminent. This is understandable: recovery is
unarguably closer and several indicators are giving cause for some optimism.
However, valuations for some of the main beneficiaries of a cyclical upturn have
already reached levels that discount a relatively prompt return to peak
profitability. This seems less plausible: the credit bubble was an
unsustainable boost to demand and, notwithstanding government stimulus and re-
equitisation, the de-leveraging process will take years to play out.
Accordingly, the portfolio retains its bias towards businesses that have been
temporarily overlooked in the rally, typically those with strong balance sheets
and good dividend yields. The potential for improved relative performance lies
in the valuation advantage that the portfolio presently enjoys, in part a result
of its bias to `smaller small' companies. This valuation opportunity is the
primary motivation for ASCoT to retain its modestly geared position.
Aberforth Partners LLP
Managers
22 July 2009
INVESTMENT PORTFOLIO
Fifty Largest Investments as at 30 June 2009
Valuation % of
No Company £'000 Total Business Activity
1 Greggs 16,730 3.4 Retailer of sandwiches, savouries and other bakery products
2 Robert Wiseman 15,089 3.0 Processing and distribution of milk
Dairies
3 Domino Printing 14,384 2.9 Manufacture of industrial printing equipment
Sciences
4 JD Sports Fashion 13,588 2.8 Retailer of sports and leisurewear
5 Bellway 13,553 2.7 Housebuilder
6 William Hill 12,786 2.6 Bookmaker
7 Beazley 12,535 2.5 Lloyds insurer
8 RPC Group 12,046 2.4 Manufacture of rigid plastic packaging
9 Huntsworth 11,785 2.4 International public relations
10 CSR 10,965 2.2 Fabless semiconductors
Top Ten
Investments 133,461 26.9
11 Evolution Group 10,840 2.2 Stockbroker and private client fund manager
12 Brown (N.) Group 10,573 2.1 Home shopping catalogue retailer
13 Phoenix IT Group 10,172 2.0 IT services
14 Spectris 9,494 1.9 Manufacture of precision
instrumentation and controls
15 Dunelm Group 9,323 1.9 Homewares retailer
16 Halfords Group 9,162 1.8 Retailer of auto, leisure and cycling products
17 Hampson 8,851 1.8 Aerospace and automotive
Industries
18 Collins Stewart 8,724 1.8 Stockbroker and private client fund manager
19 Headlam Group 8,608 1.7 Distributor of floorcoverings
20 Anite 8,516 1.7 Software
Top Twenty
Investments 227,724 45.8
21 BSS Group 8,383 1.7 Distribution of plumbing supplies & tools
22 Wilmington Group 8,219 1.6 B2B information and training
23 Holidaybreak 7,875 1.6 Holiday, travel and educational services
24 Vectura Group 7,748 1.6 Inhaled pharmaceuticals
25 Delta 7,680 1.5 Galvanising, manganese products and industrial supplies
26 Axis-Shield 7,413 1.5 in-vitro diagnostic testing
27 Keller Group 7,392 1.5 Ground and foundation engineer
28 Brewin Dolphin 7,269 1.5 Stockbroker and private client fund manager
Holdings
29 Galliford Try 6,982 1.4 Housebuilding and construction services
30 Pace 6,839 1.4 Design and supply of set top boxes
Top Thirty
Investments 303,524 61.1
31 Intec Telecom 6,820 1.4 Software and related services
Systems
32 Regus 6,807 1.4 Serviced offices
33 Microgen 6,795 1.4 Software and related services
34 Spirax-Sarco 6,555 1.3 Engineering
Engineering
35 Kofax 6,529 1.3 Software and related services
36 RM 6,460 1.3 IT services for schools
37 KCOM Group 6,404 1.3 Telecommunications services
38 Henderson Group 6,352 1.3 Investment manager
39 Venture 6,121 1.2 Oil exploration and development
Production 6,121 1.2
40 Ark Therapeutics 6,085 1.2 Biotechnology
Group
Top Forty
Investments 368,452 74.2
41 Micro Focus 6,074 1.2 Software
International
42 ProStrakan Group 5,917 1.2 Speciality pharmaceutical business
43 Chaucer Holdings 5,866 1.2 Lloyds insurer
44 Biocompatibles 5,665 1.1 Drug-device technology
International
45 Bodycote 5,369 1.1 Industrial heat treatment
46 Castings 5,295 1.1 Engineering
47 RPS Group 5,268 1.0 Consulting
48 office2office 5,186 1.0 Distribution of office products
49 Melrose Resources 5,110 1.0 Oil exploration and development
50 Interserve 4,772 1.0 Facilities, project & equipment services
Top Fifty
Investments 422,974 85.1
Other
Investments(42) 119,086 24.0
Total
Investments 542,060 109.1
Net Liabilities (45,189) (9.1)
------- -----
Total Net Assets 496,871 100.0
INTERIM MANAGEMENT REPORT
Risks and Uncertainties
A review of the half year and the outlook for the Company can be found in the
Chairman's Statement and the Managers' Report. The Directors have established an
ongoing process for identifying, evaluating and managing the key risks faced by
the Company. The Board believes that the Company has a relatively low risk
profile in the context of the investment trust industry. This belief arises from
the fact that the Company has a simple capital structure; invests only in small
UK quoted companies; has never been exposed to derivatives and does not
presently intend any such exposure; and outsources all the main operational
activities to recognised, well established firms.
As the Company's investments consist of small UK quoted companies, the principal
risks facing the Company are market related and include market price, interest
rate, credit and liquidity risk. Additional risks faced by the Company include
investment objective, investment policy, share price discount, regulatory and
operational/financial risk and gearing risk. An explanation of these risks and
how they are managed can be found in the Directors' Report contained within the
2008 Annual Report.
These principal risks and uncertainties have not changed from those disclosed in
the 2008 Annual Report.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that, to the best of their knowledge:
(i) the condensed set of financial statements has been prepared in accordance
with the Statement `Half-yearly financial reports' issued by the UK Accounting
Standards Board; and
(ii) the half-yearly report includes a fair review of information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events during the first six months of the year and their impact
on the financial statements together with a description of the principal risks
and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being disclosure of
related party transactions and changes therein.
On behalf of the Board
David R Shaw
Chairman
22 July 2009
The Income Statement, Reconciliation of Movements in Shareholders'
Funds, Balance Sheet and the Cash Flow Statement are set out below:-
INCOME STATEMENT (unaudited)
For the six months ended 30 June 2009
Revenue Capital Total
£ 000 £ 000 £ 000
Realised net losses on sales - (45,943) (45,943)
Movement in fair value - 123,024 123,024
--------- ---------- ----------
Net gains on investments - 77,081 77,081
Dividend income 10,750 846 11,596
Interest income 1 - 1
Other income 96 - 96
Investment management fee (619) (1,031) (1,650)
(Note 2)
Transaction costs - (1,068) (1,068)
Other expenses (218) - (218)
--------- ---------- ----------
Return on ordinary 10,010 75,828 85,838
activities before finance costs
and tax
Finance costs (182) (303) (485)
--------- ---------- ----------
-
Return on ordinary 9,828 75,525 85,353
activities before tax
Tax on ordinary activities - - -
--------- ---------- ----------
-
Return attributable to 9,828 75,525 85,353
equity shareholders
======== ======== ========
Returns per Ordinary Share 10.14p 77.94p 88.08p
(Note 4)
On 22 July 2009, the Board declared a first interim dividend for the year ended 31 December
2009 of 6.00p per Ordinary Share (2008 - 6.00p)payable on 21 August 2009.
INCOME STATEMENT (unaudited)
For the six months ended 30 June 2008
Revenue Capital Total
£ 000 £ 000 £ 000
Realised net gains on sales - 2,699 2,699
Movement in fair value - (109,932) (109,932)
--------- ---------- ----------
Net losses on investments - (107,233) (107,233)
Dividend income 12,455 5,047 17,502
Interest income 1,144 - 1,144
Other income 44 - 44
Investment management fee (783) (1,305) (2,088)
(Note 2)
Transaction costs - (1,883) (1,883)
Other expenses (287) - (287)
--------- ---------- ----------
Return on ordinary 12,573 (105,374) (92,801)
activities before finance
costs and tax
Finance costs (51) (86) (137)
--------- ---------- ----------
Return on ordinary 12,522 (105,460) (92,938)
activities before tax
Tax on ordinary activities (10) - (10)
--------- ---------- ----------
Return attributable to 12,512 (105,460) (92,948)
equity shareholders ======== ======== ========
Returns per Ordinary Share 12.71p (107.12p) (94.41p)
(Note 4)
INCOME STATEMENT(unaudited)
For the year ended 31
December 2008
Revenue Capital Total
£ 000 £ 000 £ 000
Realised net losses on sales - (9,027) (9,027)
Movement in fair value - (297,703) (297,703)
--------- ---------- ----------
Net losses on investments - (306,730) (306,730)
Dividend income 23,684 7,387 31,071
Interest income 1,152 - 1,152
Other income 54 - 54
Investment management fee (1,636) (2,727) (4,363)
(Note 2)
Transaction costs - (2,880) (2,880)
Other expenses (489) - (489)
--------- ---------- ----------
Return on ordinary 22,765 (304,950) (282,185)
activities before finance
costs and tax
Finance costs (526) (877) (1,403)
--------- ---------- ----------
Return on ordinary 22,239 (305,827) (283,588)
activities before tax
Tax on ordinary activities (16) - (16)
--------- ---------- ----------
Return attributable to 22,223 (305,827) (283,604)
equity shareholders
======== ======== ========
Returns per Ordinary Share 22.75p (313.12p) (290.37p)
(Note 4)
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
(unaudited)
For the six months ended 30 June 2009
Capital
Share Redemption Special Capital Revenue
capital reserve reserve reserve reserve Total
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
Balance as at
31 December 2008 969 19 186,192 198,224 38,711 424,115
Return on ordinary
activities after tax - - - 75,525 9,828 85,353
Equity dividends paid - - - - (12,597) (12,597)
Purchase of - - - - - -
Ordinary Shares
----- ------ ------- ------- ------ -------
Balance as at 969 19 186,192 273,749 35,942 496,871
30 June 2009
===== ====== ======= ======= ====== =======
For the year ended 31 December 2008
Capital
Share Redemption Special Capital Revenue
capital reserve reserve reserve reserve Total
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
Balance as at
31 December 2007 988 - 197,305 504,051 32,677 735,021
Return on ordinary
activities after - - - (305,827) 22,223 (283,604)
taxation
Equity dividends paid - - - - (16,189) (16,189)
Purchase of (19) 19 (11,113) - - (11,113)
Ordinary Shares
----- ------ ------- ------- ------ -------
Balance as at 969 19 186,192 198,224 38,711 424,115
31 December 2008
===== ====== ======= ======= ====== =======
For the six months ended 30 June 2008
Capital
Share Redemption Special Capital Revenue
capital reserve reserve reserve reserve Total
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
Balance as at
31 December 2007 988 - 197,305 504,051 32,677 735,021
Return on ordinary
activities after - - - (105,460) 12,512 (92,948)
taxation
Equity dividends paid - - - - (10,375) (10,375)
Purchase of (19) 19 (11,113) - - (11,113)
Ordinary Shares
----- ------ ------- ------- ------ -------
Balance as at 969 19 186,192 398,591 34,814 620,585
30 June 2008
===== ====== ======= ======= ====== =======
BALANCE SHEET
(unaudited)
As at 30 June 2009
30 June 31 December 30 June
2009 2008 2008
£ 000 £ 000 £ 000
Fixed assets:
Investments at fair value 542,060 464,427 657,282
through profit or loss
---------- --------- ---------
Current assets
Amounts due from brokers 3,745 - 380
Other debtors 3,003 2,278 3,466
---------- --------- ---------
6,748 2,278 3,846
---------- --------- ---------
Creditors (amounts falling
due within one year)
Bank debt facility (50,582) (41,174) (35,885)
Amounts due to brokers (1,279) (1,297) (3,812)
Other creditors (76) (119) (846)
---------- --------- ---------
(51,937) (42,590) (40,543)
---------- --------- ---------
Net current liabilities (45,189) (40,312) (36,697)
---------- --------- ---------
Total net assets 496,871 424,115 620,585
======== ======== ========
Capital and reserves:
equity interests
Called up share capital 969 969 969
(Ordinary Shares)
Reserves:
Capital redemption 19 19 19
reserve
Special reserve 186,192 186,192 186,192
Capital reserve 273,749 198,224 398,591
Revenue reserve 35,942 38,711 34,814
---------- --------- ---------
496,871 424,115 620,585
======== ======== ========
Net Asset Value per Share 512.77p 437.68p 640.44p
Share Price 467.00p 351.25p 534.00p
CASH FLOW STATEMENT
(unaudited)
For the six months ended 30 June 2009
Six Six
months months
ended ended Year ended
30 June 30 June 31 December
2009 2008 2008
£ 000 £ 000 £ 000
Net cash inflow from 9,076 19,187 31,520
operating activities
Taxation
Taxation paid - (10) (16)
Returns on investments and (504) (17) (1,381)
servicing of finance
Capital expenditure and
financial investment
Payments to acquire (89,971) (166,745) (260,020)
investments
Receipts from sales of 84,588 114,506 198,007
investments
--------- --------- -----------
Net cash outflow from capital
expenditure and financial (5,383) (52,239) (62,013)
investment
--------- --------- -----------
3,189 (33,079) (31,890)
Equity dividends paid (12,597) (10,375) (16,189)
--------- --------- -----------
(9,408) (43,454) (48,079)
Financing
Purchase of Ordinary Shares - (10,449) (11,113)
--------- --------- -----------
Change in cash during the (9,408) (53,903) (59,192)
period
======= ======= =======
Reconciliation of net
return before finance costs
and taxation to net cash
inflow from operating
activities
Net return before finance 85,838 (92,801) (282,185)
costs and taxation
(Gains)/losses on (77,081) 107,233 306,730
investments
Transaction costs 1,068 1,883 2,880
(Increase)/decrease in (725) 2,888 4,076
debtors
(Decrease)/increase in (24) (16) 19
creditors
-------- -------- ---------
Net cash inflow from 9,076 19,187 31,520
operating activities
======= ======= =======
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING STANDARDS
The financial statements have been prepared under the historical cost
convention, as modified to include the revaluation of investments and in
accordance with applicable accounting standards and the AIC's Statement of
Recommended Practice "Financial Statements of Investment Trust
Companies and Venture Capital Trusts" issued in 2009. The total column of
the Income Statement is the profit and loss account of the Company. All
revenue and capital items in the Income Statement are derived from
continuing operations. No operations were acquired or discontinued in the
period.
The same accounting policies used for the year ended 31 December 2008 have
been applied.
2. INVESTMENT MANAGEMENT FEE
For the six months ended 30 June Revenue Capital Total
2009
£ 000 £ 000 £ 000
Investment management fee 619 1,031 1,650
VAT refund - - -
------ ------ ------
Total for the six months ended 619 1,031 1,650
30 June 2009
====== ====== ======
For the six months ended 30 June Revenue Capital Total
2008
£ 000 £ 000 £ 000
Investment management fee 1,048 1,748 2,796
VAT refund (265) (443) (708)
------ ------ ------
Total for the six months ended 30 783 1,305 2,088
June 2008
====== ====== ======
For the year ended 31 December Revenue Capital Total
2008
£ 000 £ 000 £ 000
Investment management fee 1,901 3,170 5,071
VAT refund (265) (443) (708)
------ ------ ------
Total for the year ended 1,636 2,727 4,363
31 December 2008
====== ====== ======
The VAT refund for the six months ended 30 June 2008 and year ended 31
December 2008 above represents the repayment of VAT incurred in respect
of management fees paid between 1991 and 1996.
3. DIVIDENDS
Six months ended Six months ended Year ended
30 June 2009 30 June 2008 31 December 2008
£000 £000 £000
Amounts recognised as distributions to
equity holders in the period:
Second interim dividend of 10.5p for
the year ended 31 December 2007 - 10,375 10,375
First interim dividend of 6.0p for the
year ended 31 December 2008 - - 5,814
Second interim dividend of 13.0p for
the year ended 31 December 2008 12,597 - -
--------- ------- --------
12,597 10,375 16,189
======= ======= =======
The first interim dividend of 6.0p (2008 - 6.0p) will be paid on 21
August 2009 to shareholders on the register on 31 July 2009.
4. RETURNS PER ORDINARY SHARE
The returns per Ordinary Share are based on:
Six months ended Six months ended Year ended
30 June 2009 30 June 2008 31 December 2008
£000 £000 £000
Returns attributable to Ordinary
Shareholders 85,353 (92,948) (283,604)
Weighted average number of shares in
issue during the period 96,900,000 98,448,535 97,670,037
5. NET ASSET VALUES
The net assets and the net asset value per share attributable to the Ordinary
Shares at each period end are calculated in accordance with their
entitlements in the Articles of Association and were as follows:
30 June 31 December 30 June
2009 2008 2008
£000 £000 £000
Net assets attributable 496,871 424,115 620,585
Pence Pence Pence
Net asset value attributable per
Ordinary Share 512.77 437.68 640.44
As at 30 June 2009, the Company had 96,900,000 Ordinary Shares in issue
(31 December 2008 and 30 June 2008 - same).
6. FURTHER INFORMATION
The foregoing do not constitute statutory accounts (as defined in
section 434(3) of the Companies Act 2006) of the Company. The statutory
accounts for the year ended 31 December 2008, which contained an
unqualified Report of the Auditors, 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 (as amended). All information
shown for the six months ended 30 June 2009 and 30 June 2008 is unaudited.
Certain statements in this announcement are forward looking
statements. By their nature, forward looking statements involve a number
of risks, uncertainties or assumptions that could cause actual
results or events to differ materially from those expressed or
implied by those statements. Forward looking statements regarding past
trends or activities should not be taken as representation that such
trends or activities will continue in the future. Accordingly, undue
reliance should not be placed on forward looking statements.
The Half Yearly Report is expected to be posted to shareholders during the
week commencing 27 July 2009. Members of the public may obtain copies from
Aberforth Partners LLP, 14 Melville Street, Edinburgh EH3 7NS or from its
website at www.aberforth.co.uk.
CONTACT: David Ross/Alistair Whyte, Aberforth Partners LLP (0131 220 0733)
Aberforth Partners LLP, Secretaries
22 July 2009
ANNOUNCEMENT ENDS