Invesco Perpetual Enhanced Income Limited
Half-Yearly Financial Report for the Six Months to 31 March 2014
KEY FACTS
Invesco Perpetual Enhanced Income Limited is a closed-end investment company
with limited liability incorporated in Jersey. The Company's ordinary shares
are listed on the London Stock Exchange.
Investment Objective of the Company
The Company's principal objective is to provide shareholders with a high level
of income whilst seeking to maximise total return through investing in a
diversified portfolio of high yielding corporate and Government bonds. The
Company may also invest in equities and other instruments that Invesco Asset
Management Limited (the Manager) considers appropriate. The Company seeks to
balance the attraction of high yield securities with the need for protection of
capital and to manage volatility. The Company generally employs gearing in its
Investment Policy.
Full details of the Company's Investment Policy (incorporating the Company's
investment objective, investment policy and risk and investment limits) can be
found on pages 9 and 10 of the Company's 2013 annual financial report.
Performance Statistics
AT AT
31 MAR 30 SEPT %
2014 2013 CHANGE
Capital
Shareholders' funds (£'000) 81,982 79,809 +2.7
Net asset value per ordinary share 73.7p 71.7p +2.7
Mid-market price per ordinary share* 77.1p 67.0p +15.1
Premium/(discount) per ordinary share 4.6% (6.6)%
Gross borrowing 41% 42%
Net borrowing 33% 35%
SIX SIX
MONTHS MONTHS YEAR
ENDED ENDED ENDED
31 MAR 31 MAR 30 SEPT
2014 2013 2013
Total Return
3 month LIBOR rate 0.5% 0.5% 0.5%
Net asset value +6.3% +13.1% +17.8%
Share price* +19.4% +13.2% +21.1%
Revenue
Net revenue return (£'000) 2,851 3,062 6,056
Revenue return per ordinary share 2.6p 2.8p 5.5p
Dividends per ordinary share:
- first interim 1.25p 1.25p 1.25p
- second interim 1.25p 1.25p 1.25p
- third interim - - 1.25p
- fourth interim - - 1.25p
Total 2.50p 2.50p 5.00p
*Source: Thomson Reuters Datastream
.
INTERIM MANAGEMENT REPORT INCORPORATING THE CHAIRMAN'S STATEMENT
CHAIRMAN'S STATEMENT
The Company again delivered a positive capital NAV performance, returning 2.7%
for the period which translates to a total return of 6.3% including the
reinvestment of dividends. While this continuation of the steady recent
progress is welcome, the really pleasing news concerns the share price return.
The Company's shares rose 15.1% over the six months giving a total return
including dividends of 19.4%. The share price moved to a premium to NAV early
in the second quarter and this has been sustained since then. The premium stood
at 4.6% at 31 March 2014 and this continues to be maintained at the time of
writing. The re-rating of the shares is especially gratifying as it has
fulfilled the hopes of the Directors that lay behind the amendment to the
investment policy and associated change of name approved by shareholders in
November 2013.
We are delighted to welcome a significant number of new investors to the share
register over the first half of 2014. The Directors remain confident in the
Managers' ability to identify attractive investments and deliver returns for
shareholders but the current full valuations suggest that income will make up
much the largest component of return in the short to medium term.
Donald Adamson
Chairman
.
MANAGER'S REPORT
Market Background
High yield bonds achieved a strongly positive level of total return over the
six months to the end of March, compared to the wider bond market. Returns were
driven by capital appreciation as well as yield, as credit spreads tightened in
an investment environment distinguished by a very strong demand for income.
Investment grade spreads also tightened but yields were little changed and
total returns were dominated by income. Gilt yields rose, resulting in only
modestly positive total returns.
According to data from Merrill Lynch, European high yield bonds returned 6.5%
(in sterling terms). The aggregate yield of the market fell 106bps to 4.58%.
This return compares to 2.8% for sterling investment grade corporate bonds and
0.8% for Gilts. Within investment grade, financials outperformed
non-financials, but by a more modest margin than in immediately preceding
periods. The Federal Reserve finally began to taper its programme of asset
purchases and is set to wind it down completely over the course of 2014. The
announcement (in December) of this first step towards tighter US monetary
policy had been clearly flagged and came as little surprise to the market.
Bonds have been supported by news on inflation and economic growth. The early
months of 2014 have seen lower-than-expected inflation in the major developed
economies. High yield bonds, typically the most credit-sensitive area of
corporate bonds, have also benefitted from a trend of macroeconomic data that
suggested strengthening recoveries in the US and the UK and the beginnings of
improved growth performance in the economies of the eurozone.
The credit market has been further supported by demand for income, which has
seen many new bond issues heavily over-subscribed, despite some historically
low coupons. Barclays estimate total European high yield supply of £34 billion
across all currencies in the six months to the end of March. According to
Moody's, the European 12 month trailing high yield default rate was 2.7% at the
end of March, compared to 2.1% a year ago.
Portfolio Strategy
We hold a core of high yield corporate bonds, focused on seasoned issuers that
we consider to be default-remote. In addition, we hold significant exposure to
areas of the market which we believe still offer relatively attractive yield.
Approximately one fifth of the portfolio is invested in bank capital,
predominantly in the subordinated debt of large European banks. The valuations
of these instruments have risen strongly but we think that this reflects the
increased creditworthiness of a sector whose fundamentals have continued to
improve. We also have holdings in hybrid capital instruments, across sectors
including telecoms and utilities. We believe the subordination risk of these
more junior debt instruments is attractive in the context of these companies'
relatively strong balance sheets. Many of the securities we hold are in
investment grade names. We continue to seek opportunities to add yield to the
portfolio where we consider that the balance of reward to risk is attractive.
Over the period under review, the Company's NAV rose from 71.7p to 73.7p, an
increase of 2.7%. The total return was 6.3%. The value of the portfolio rose
from £79.8 million to £81.9 million. The portfolio entered the period with
gross borrowing of 42%. This was little changed at 41% by the end of the
period.
While we have continued to buy and sell individual positions over this period,
the outline of the portfolio has remained broadly unchanged. The level of
liquidity in the portfolio has increased slightly. Trading in the portfolio
over this period included adding positions in HSBC 5.25% and HSBC 4.25% (bank)
and ENEL 6.625% and ENEL 5% (utility). We sold our holdings in SSE 5.025%
(utility) and Boparan Finance 9.875% (food).
Outlook
The high yield bond market has continued to deliver strongly positive returns
in recent quarters, despite the weaker conditions we have seen across the wider
bond market. The market is now quite fully valued, in our opinion, and we see
little potential for further capital appreciation from current levels. Yields
and spreads are low by historical standards. We are seeking to provide an
attractive level of income while focusing our portfolio on issuers that we see
as default-remote and on bonds where we think the balance of reward to risk
remains relatively good.
Paul Read & Paul Causer
Portfolio Managers
23 May 2014
.
PRINCIPAL RISKS AND UNCERTAINTIES
The principal risk factors relating to the Company can be summarised as
follows:
- Investment Policy - the adopted investment policy and process may not achieve
the Company's published investment objective.
- Market Risk - a fall in the stock markets and/or a prolonged period of
decline in the stock markets relative to other forms of investments will affect
the performance of the portfolio, as well as the performance of individual
portfolio investments.
- Investment Risk - the investment process employed by the Manager is likely to
result, from time to time, in a more concentrated portfolio than those of other
investment funds.
- Foreign Exchange Risk - the movement of exchange rates may have an
unfavourable or favourable impact on returns as the Company holds non-sterling
denominated investments and cash.
- Shares - share price is affected by market sentiment, supply and demand for
the shares, dividends declared, portfolio performance as well as wider economic
factors and changes in the law. The market value of, and the income derived
from, the Company's ordinary shares can fluctuate and may go down as well as
up.
- Gearing Returns Using Borrowings - borrowing levels may change from time to
time in accordance with the Manager's assessment of risk and reward. As a
consequence, any reduction in the value of the Company's investments may lead
to a correspondingly greater percentage reduction in its NAV (which is likely
to adversely affect the Company's share price). Any reduction in the number of
ordinary shares in issue (for example, as a result of buy backs) will, in the
absence of a corresponding reduction in borrowings, result in an increase in
the Company's gearing, however, net borrowing may not exceed 50% of
shareholders' funds.
- High Yield Corporate Bonds - corporate bonds are subject to credit,
liquidity, duration and interest rate risk. Adverse changes in the financial
position of the issuer of corporate bonds or in general economic conditions may
impair the ability of the issuer to make payments of principal interest or may
cause the liquidation or insolvency of the issuer.
- Derivatives - the Company may enter into derivative transactions for the
purpose of efficient portfolio management. The Company will not enter into
derivative transactions for speculative purposes.
- Reliance on External Service Providers - failure by any service provider to
carry out its obligations to the Company could have a materially detrimental
impact on the operation of the Company and affect the ability of the Company to
successfully pursue its investment policy.
- Regulatory - whilst compliance with rules and regulations is closely
monitored, breaches could affect returns to shareholders.
A detailed explanation of these principal risks and uncertainties can be found
on pages 11 to 15 of the Company's 2013 annual financial report, which is
available on the Manager's website at:
www.invescoperpetual.co.uk/investmenttrusts
In the view of the Board these principal risks and uncertainties are as much
applicable to the remaining six months of the financial year as they were to
the six months under review.
GOING CONCERN
The half-yearly financial report has been prepared on a going concern basis.
The Directors consider that this is the appropriate basis as they have a
reasonable expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. In considering this, the
Directors took into account the Company's investment objective, risk management
policies and capital management policies, the diversified portfolio, the
liquidity of the securities which can be used to meet short-term funding
commitments, and the ability of the Company to meet all of its liabilities,
including its repo financing, and ongoing expenses from its assets.
RELATED PARTY AND TRANSACTIONS WITH THE MANAGER
Note 20 of the 2013 annual financial report gives details of related party
transactions and transactions with the Manager. The basis of these has not
changed for the six months being reported. The 2013 annual financial report, is
available on the Manager's website at www.invescoperpetual.co.uk/
investmenttrusts.
.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
in respect of the preparation of the half-yearly financial report
The Directors are responsible for preparing the half-yearly financial report
using accounting policies consistent with applicable law and International
Financial Reporting Standards.
The Directors confirm that to the best of their knowledge:
- the condensed set of financial statements contained within the half-yearly
financial report have been prepared in accordance with the International
Accounting Standards 34 `Interim Financial Reporting';
- the interim management report includes a fair review of the information
required by DTR 4.2.7R and DTR 4.2.8R of the FCA's Disclosure and Transparency
Rules; and
- the interim management report includes a fair review of the information
required on related party transactions.
The half-yearly financial report has not been audited or reviewed by the
Company's auditor.
Signed on behalf of the Board of Directors.
Donald Adamson
Chairman
23 May 2014
.
BOND RATING ANALYSIS
AT 31 MARCH 2014
Standard and Poor's Ratings, investments grade is BBB- and above
The definitions of these ratings are set out on page 64 of the 2013 annual
financial report.
31 MAR 2014 30 SEPT 2013
% OF CUMULATIVE % OF CUMULATIVE
PORTFOLIO TOTAL % PORTFOLIO TOTAL %
Rating
AAA 2.4 2.4 2.4 2.4
A+ - 2.4 1.7 4.1
A - 2.4 1.6 5.7
A- 2.7 5.1 0.8 6.5
AA- 1.0 6.1 1.0 7.5
BBB+ 5.2 11.3 3.6 11.1
BBB 12.9 24.2 12.0 23.1
BBB- 9.0 33.2 9.1 32.2
BB+ 13.4 46.6 12.2 44.4
BB 15.6 62.2 13.7 58.1
BB- 9.4 71.6 8.9 67.0
B+ 7.5 79.1 9.3 76.3
B 9.4 88.5 10.4 86.7
B- 1.4 89.9 2.4 89.1
CCC+ - 89.9 0.2 89.3
NR(1) 10.1 100.0 10.7 100.0
100.0 100.0
(1) Including any equities warrants and credit default swaps.
.
INVESTMENT PORTFOLIO
AT 31 MARCH 2014
All investments are fixed interest bonds unless otherwise stated; floating rate
notes are depicted by FRN.
Bonds and Equity Investments
AT
MARKET VALUE % OF
ISSUER ISSUE RATING £'000 PORTFOLIO
Euro
UniCredit International Bank 8.125% FRN B1/BB 2,818 2.6
Perpetual
Santos Finance 8.25% FRN 22 Sep NR/BBB 2,804 2.6
2070
UPC 7.625% 15 Jan Ba3/BB 1,776} 2.5
2020
9.5% 15 Mar 2021 B3/B 953}
Abengoa 6.25% Cnv 17 Jan NR/NR 1,479} 2.2
2019
8.5% 31 Mar 2016 B2/B 894}
Rexam 6.75% FRN 29 Jun Ba2/BB 2,116 2.0
2067
Commerzbank 7.75% 16 Mar 2021 Ba2/BB+ 1,959 1.8
Achmea 6% 04 Apr 2043 NR/BBB 1,839 1.7
Lottomatica 8.25% FRN 03 Mar Ba2/BB 1,793 1.7
2066
Origin Energy 7.875% 16 Jun Ba1/BB+ 1,767 1.7
2071
RWE 4.625% FRN Baa3/BBB- 1,694 1.6
Perpetual
Aviva 6.875% FRN 22 May Baa1/BBB 954} 1.5
2038
4.7291% FRN Baa2/BBB 416}
Perpetual
6.125% FRN 05 Jul Baa1/BBB 227}
2043
Telecom Italia 5.25% 17 Mar 2055 Ba1/BB+ 1,506 1.4
Intesa Sanpaolo 8.375% FRN Ba3/BB 1,441 1.3
Perpetual
Vougeot Bidco FRN 18 Jul 2020 B2/B 1,337 1.3
Lloyds Banking Group - LBG 6.385% 12 May Ba1/BBB- 1,314 1.2
Capital No.2 (ECN) 2020
Wind Acquisition Finance 11.75% 15 Jul B3/B+ 956} 1.2
2017
7.375% 15 Feb Ba3/BB 349}
2018
Telefonica Europe 7.625% Perpetual Ba1/BB+ 1,297 1.2
Volkswagen International 4.625% Perpetual Baa2/BBB 1,014 1.0
Finance
Levi Strauss 7.75% 15 May 2018 B1/BB 993 0.9
Algeco Scotsman Global 9% 15 Oct 2018 B1/NR 900 0.8
Finance
Xefin 8% 01 Jun 2018 Ba3/B+ 882 0.8
Iberdrola International 5.75% Perpetual Baa3/BB+ 879 0.8
BPCE 9% FRN Perpetual Ba2/BBB- 876 0.8
Campofrio Food 8.25% 31 Oct 2016 B1/B+ 863 0.8
Matterhorn Mobile FRN 15 May 2019 B1/B+ 838 0.8
Picard FRN 01 Aug 2019 Ba3/BB- 742 0.7
Royal Bank of Scotland FRN 14 Jun 2022 Ba2/BBB- 702 0.7
Telekom Austria 5.625% Perpetual Ba1/BB 700 0.7
CNP Assurances FRN Perpetual NR/A- 644 0.6
TMF 5.599% FRN 03 Dec B1/B 628 0.6
2018
ENEL 5% 15 Jan 2075 Ba1/BB+ 598 0.6
Solvay Finance 4.199% Perpetual Ba1/BBB- 565 0.5
Ono Finance II 11.125% 15 Jul Caa1/B- 462 0.4
2019
Gategroup Finance 6.75% 01 Mar 2019 B1/BB- 445 0.4
ECO-BAT Finance 7.75% 15 Feb 2017 B2/B 430 0.4
Kerneos FRN Mar 2021 NR/B+ 417 0.4
KBC 8% Perpetual Ba2/BBB- 415 0.4
Mobile Challenger 8.75% 15 Mar 2019 NR/B- 342 0.3
Intermediate
Sisal 7.25% 30 Sep 2017 B1/B 340 0.3
BNP Paribas Fortis Cnv FRN Perpetual Ba3/BB 318 0.3
Sanitec FRN 15 May 2018 B1/BB- 293 0.3
KM Germany 8.75% 15 Dec 2020 B2/B- 222 0.2
47,197 44.0
Sterling
Lloyds Banking Group - 7.625% 22 Apr Baa3/BBB 2,430} 3.3
Lloyds Bank 2025
Lloyds Banking Group - LBG 7% 31 Dec NR/BB- 1,080}
Capital No.2 (ECN) Perpetual
Virgin Media Finance 7% 15 Jan 2018 Ba3/BB- 2,071} 3.2
8.875% 15 Oct B2/B 718}
2019
6% 15 Apr 2021 Ba3/BB- 689}
Enterprise Inns 6.5% 06 Dec 2018 NR/BB- 2,630 2.5
(SNR)
ENW Finance 5.875% 21 Jun NR/BB+ 2,514 2.3
2021
Electricite De France 6% Perpetual A3/BBB+ 1,354} 2.3
5.875% Perpetual A3/BBB+ 1,019}
ENEL 7.75% 10 Sep 2075 Ba1/BB+ 1,565} 2.1
6.625% 15 Sep Ba1/BB+ 784}
2076
NGG Finance 5.625% FRN 18 Jun Baa3/BBB 2,236 2.1
2073
Arqiva Broadcast Finance 9.5% 31 Mar 2020 B3/NR 2,230 2.1
Société Genérale 8.875% FRN Ba2/BBB- 1,675 1.6
Perpetual
Aviva 6.125% Perpetual Baa1/BBB 1,558 1.4
DFS Furniture FRN 15 Aug 2018 B2/B 757} 1.2
7.625% 15 Aug B2/B 504}
2018
Telefonica Europe 6.75% Perpetual Ba1/BB+ 1,145 1.1
Orange 5.875% 29 Dec Baa3/BBB- 1,139 1.1
2019
Southern Water (Greensands) 8.5% 15 Apr 2019 NR/BB- 1,089 1.0
Thames Water 7.75% 01 Apr 2019 B1/NR 1,080 1.0
General Electric Capital 5.5% FRN 15 Sep A2/AA- 1,050 1.0
2066
Pipe 9.5% 01 Nov 2015 B3/B 1,046 1.0
Equiniti Newco 2 FRN 15 Dec 2018 B3/B 1,018 0.9
InterGen Services 7.5% 30 Jun 2021 B1/B+ 905 0.8
Scottish Widows 5.5% 16 Jun 2023 Baa2/BBB+ 817 0.8
Pendragon 6.875% 01 May B1/B+ 592 0.6
2020
Koninklijke KPN 6.875% FRN 14 Mar Ba2/BB 588 0.5
2073
Jaguar Land Rover 8.25% 15 Mar 2020 Ba2/BB 567 0.5
Verizon Communications 4.75% 17 Feb 2034 Baa1/BBB+ 547 0.5
UniCredit International Bank 8.5925% FRN B1/BB 537 0.5
Perpetual
Gala Finance 8.875% 01 Sep B2/B+ 535 0.5
2018
AXA 6.6666% FRN Baa1/BBB- 531 0.5
Perpetual
Legal & General 6.385% FRN Baa2/BBB+ 526 0.5
Perpetual
Odeon & UCI Finco 9% 01 Aug 2018 B3/B- 524 0.5
Matalan Finance 8.875% 29 Apr B1/B 513 0.5
2016
Galaxy Bidco FRN 15 Nov 2019 B2/B 505 0.5
Premier Farnell 89.2p Convertible NR/NR 468 0.4
Preference
Care UK Health and Social 9.75% 01 Aug 2017 Caa1/B 398 0.4
Care
Standard Life 5.5% 04 Dec 2042 Baa2/BBB 365 0.3
AA Bond 9.5% 31 Jul 2043 NR/BB 339 0.3
Bupa Care Homes 11.8% 30 Jun 2014 NR/NR 254 0.2
42,892 40.0
US Dollar
General Motors Wts 10 Jul 2019 NR/NR 3,173}
Wts 10 Jul 2016 NR/NR 244} 3.2
Ord NR/NR 19}
US Treasury 2.75% 15 Nov 2042 Aaa/AAA 2,553 2.4
Vedanta Resources 6.75% 07 Jun 2016 Ba3/BB 1,259 1.2
Catlin Insurance 7.249% FRN NR/BBB+ 1,238 1.1
Perpetual
CGG Veritas 7.75% 15 May 2017 Ba3/BB- 1,217 1.1
Standard Chartered 5.7% 26 Mar 2044 A3/A- 1,175 1.1
Stora Enso 7.25% 15 Apr 2036 Ba2/BB 1,135 1.1
Société Genérale 8.75% Perpetual Ba2/BBB- 630} 0.9
7.875% FRN Ba3/BB+ 349}
Perpetual
HSBC 4.25% 14 Mar 2024 A3/A- 383} 0.7
5.25% 14 Mar 2044 A3/A- 369}
CEMEX Espana 9.25% 12 May 2020 NR/B+ 741 0.7
Nara Cable Funding 8.875% 01 Dec B1/B+ 653 0.6
2018 (SNR)
Aperam 7.75% 01 Apr 2018 B3/B+ 630 0.6
BBVA 9% Perpetual NR/NR 390 0.4
Rothschilds Continuation 1% FRN Perpetual NR/NR 369 0.3
Finance
Prudential 6.5% Perpetual Baa1/A- 303 0.3
Peabody Energy 4.75% Cnv 15 Dec NR/NR 240 0.2
2066
Motors Liquidation Units NR/NR 74} 0.1
8.375% 15 Jul NR/NR -}
2033
17,144 16.0
Total investments 107,233 100.0
.
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED
SIX MONTHS TO 31 MARCH SIX MONTHS TO 31 MARCH 30 SEPTEMBER
2014 2013 2013
REVENUE CAPITAL TOTAL REVENUE CAPITAL TOTAL TOTAL
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Profit on - 2,806 2,806 - 9,526 9,526 10,440
investments at fair
value
Exchange - 54 54 - (960) (960) (641)
differences
Profit/(loss) on - 518 518 - (1,564) (1,564) (1,267)
derivative
instruments -
currency hedges
Income
UK bond interest 1,310 - 1,310 1,165 - 1,165 2,531
UK dividends 13 - 13 13 - 13 27
Overseas bond 2,020 - 2,020 2,295 - 2,295 4,342
interest
Deposit interest 2 - 2 3 - 3 5
Investment (207) (207) (414) (197) (197) (394) (794)
management fee -
note 2
Performance fee - - (992) (992) - (259) (259) (1,072)
note 2
Other expenses (190) (3) (193) (140) - (140) (292)
Profit before 2,948 2,176 5,124 3,139 6,546 9,685 13,279
finance costs and
taxation
Finance costs (72) (72) (144) (66) (66) (132) (272)
Profit before tax 2,876 2,104 4,980 3,073 6,480 9,553 13,007
Taxation - note 3 (25) - (25) (11) - (11) (25)
Profit after tax 2,851 2,104 4,955 3,062 6,480 9,542 12,982
Return per ordinary 2.6p 1.9p 4.5p 2.8p 5.8p 8.6p 11.7p
share - note 4
The total column of this statement represents the Company's statement of
comprehensive income, prepared in accordance with International Financial
Reporting Standards. The profit after tax is the total comprehensive income.
The supplementary revenue and capital columns are both prepared in accordance
with the Statement of Recommended Practice issued by the Association of
Investment Companies. All items in the above statement derive from continuing
operations. No operations were acquired or discontinued in the period.
.
CONDENSED BALANCE SHEET
Registered number 75059 AT AT AT
31 MARCH 31 MARCH 30 SEPTEMBER
2014 2013 2013
£'000 £'000 £'000
Non-current assets
Investments held at fair value
through profit or loss 107,233 101,200 106,230
Current assets
Other receivables 2,779 2,683 2,353
Derivative instruments -
unrealised gain 84 510 802
Cash and cash equivalents 6,649 3,901 5,482
9,512 7,094 8,637
Total assets 116,745 108,294 114,867
Current liabilities
Other payables (340) (253) (284)
Performance fee payable - note 2 - - (1,072)
Securities sold under agreements
to repurchase (33,431) (28,631) (33,702)
(33,771) (28,884) (35,058)
Provision for performance
fee - note 2 (992) (259) -
Net assets 81,982 79,151 79,809
Issued capital and reserves
attributable to equity
holders
Share capital 5,565 5,565 5,565
Share premium 113,634 113,634 113,634
Capital reserve (50,209) (52,759) (52,313)
Revenue reserve 12,992 12,711 12,923
Shareholders' funds 81,982 79,151 79,809
Net asset value per ordinary
share - note 6 73.7p 71.1p 71.7p
.
CONDENSED STATEMENT OF CASH FLOW
SIX MONTHS SIX MONTHS YEAR
ENDED ENDED ENDED
31 MARCH 31 MARCH 30 SEPTEMBER
2014 2013 2013
£'000 £'000 £'000
Cash flow from operating
activities
Profit before tax 4,980 9,553 13,007
Taxation (25) (11) (25)
Adjustments for:
Purchases of investments (12,812) (21,180) (36,651)
Sales of investments 14,615 20,924 32,279
1,803 (256) (4,372)
(Decrease)/increase from securities
sold under agreement to
repurchase (271) 859 5,930
Profit on investments (2,806) (9,526) (10,440)
Exchange differences (54) 960 641
Decrease/(increase) in
derivative instruments -
currency hedges 718 (614) (906)
Finance costs 144 132 272
Operating cash flows before
movements in working capital 4,489 1,097 4,107
Increase in receivables (426) (418) (88)
(Decrease)/increase in payables (60) 241 1,082
Net cash flows from operating
activities before and after tax 4,003 920 5,101
Cash flows from financing
activities
Interest paid (108) (145) (282)
Equity dividends paid - note 4 (2,782) (2,782) (5,564)
Net cash used in financing
activities (2,890) (2,927) (5,846)
Net increase/(decrease) in cash
and cash equivalents 1,113 (2,007) (745)
Exchange differences 54 (960) (641)
Cash and cash equivalents at the
beginning of the period 5,482 6,868 6,868
Cash and cash equivalents at
the end of the period 6,649 3,901 5,482
.
CONDENSED STATEMENT OF CHANGES IN EQUITY
SHARE SHARE CAPITAL REVENUE
CAPITAL PREMIUM RESERVE RESERVE TOTAL
£'000 £'000 £'000 £'000 £'000
For the six months ended 31 March 2014
At 1 October 2013 5,565 113,634 (52,313) 12,923 79,809
Total comprehensive income for the - - 2,104 2,851 4,955
period
Dividend paid - note 5 - - - (2,782) (2,782)
At 31 March 2014 5,565 113,634 (50,209) 12,992 81,982
For the six months ended 31 March 2013
At 1 October 2012 5,565 113,634 (59,239) 12,431 72,391
Total comprehensive income for the - - 6,480 3,062 9,542
period
Dividend paid - note 5 - - - (2,782) (2,782)
At 31 March 2013 5,565 113,634 (52,759) 12,711 79,151
For the year ended 30 September 2013
At 1 October 2012 5,565 113,634 (59,239) 12,431 72,391
Total comprehensive income for the year - - 6,926 6,056 12,982
Dividends paid - note 5 - - - (5,564) (5,564)
At 30 September 2013 5,565 113,634 (52,313) 12,923 79,809
.
NOTES TO THE CONDENSED FINANCIAL STATEMENTS
1. Basis of Preparation
The condensed financial statements have been prepared using the same accounting
policies as those adopted in the 2013 annual financial report. They have been
prepared on an historical cost basis, except for the measurements at fair value
of investments and derivatives, and in accordance with the applicable
International Financial Reporting Standards (IFRS) and interpretations issued
by the International Financial Reporting Interpretations Committee as adopted
by the European Union.
Where presentational guidance set out in the Statement of Recommended Practice
(SORP) Financial Statements of Investment Trust Companies and Venture Capital
Trusts' is consistent with the requirements of IFRS, the Directors have
prepared the financial statements on a basis compliant with the recommendations
of the SORP.
2. Management and Performance Fees
Investment management fees and finance costs are allocated equally to revenue
and capital. The management fee rate is 1.0% per annum of net assets. A
performance fee is payable at the end of the Company's financial year if the
Company's total return in a year exceeds the hurdle return for the year and
will equal 20% of the outperformance, adjusted for any changes in share capital
in the year. The hurdle return is the average sterling 3 month LIBOR plus 1%
plus any underperformance in previous years. The performance fee is allocated
wholly to capital.
3. Taxation
The Company is subject to Jersey income tax at the rate of 0% (2013: 0%). The
overseas tax charge consists of irrecoverable withholding tax.
4. Basis of Earnings
SIX MONTHS SIX MONTHS YEAR TO
TO 31 MAR TO 31 MAR 30 SEPT
2014 2013 2013
Profit after tax:
Revenue £2,851,000 £3,062,000 £6,056,000
Capital £2,104,000 £6,480,000 £6,926,000
Total £4,955,000 £9,542,000 £12,982,000
Weighted average number of
shares in issued during
the period 111,292,526 111,292,526 111,292,526
5. Dividends Paid
SIX MONTHS SIX MONTHS YEAR TO
TO 31 MAR TO 31 MAR 30 SEPT
2014 2013 2013
£'000 £'000 £'000
Fourth interim of 1.25p 1,391 1,391 1,391
First interim of 1.25p 1,391 1,391 1,391
Second interim of 1.25p - - 1,391
Third interim of 1.25p - - 1,391
Total paid 2,782 2,782 5,564
The first interim dividend for the quarter ended 31 December 2013 was paid on
31 January 2014 to Shareholders on the register on 10 January 2014. The second
interim dividend for the quarter ended 31 March 2014 was paid on 30 April 2014
to Shareholders on the register on 11 April 2014.
6. Basis of Net Asset Value per Ordinary share
AT AT AT
31 MAR 2014 31 MAR 2013 30 SEPT
2013
Shareholders' funds £81,982,000 £79,151,000 £79,809,000
Ordinary shares in issue at
period end 111,292,526 111,292,526 111,292,526
7. Status of Half-yearly Financial Report
The financial information contained in this half-yearly report, which has not
been reviewed or audited, does not constitute statutory accounts as defined in
Article 104 of Companies (Jersey) Law 1991. The financial information for the
half years ended 31 March 2013 and 2014 have not been audited. The figures and
financial information for the year ended 30 September 2013 are extracted and
abridged from the latest published accounts and do not constitute the statutory
accounts for that year.
By order of the Board
R&H Fund Services (Jersey) Limited
Company Secretary
23 May 2014