TIDMECIT
RNS Number : 9300S
Eclectic Investment Company PLC
20 September 2010
ECLECTIC INVESTMENT TRUST PLC
Results for the period ended 31 May 2010 (including the period ended 23 November
2009)
and Availability of Report & Accounts
CHAIRMAN'S STATEMENT
Pleasing recovery in shareholder value
As you will be aware, shareholders approved the proposals tabled at the last
Annual General Meeting to become an investing company listed on AIM and this
change was effected on 23 November 2009. Following discussions with the
Company's advisers, it was decided that it would be in shareholders best
interests to shorten the previous accounting reference period from 31 May 2010
to 23 November 2009, the last day the Company was an investment trust listed on
the Main Market of the London Stock Exchange, and prepare separate accounts for
that period. To re-align accounting reference periods back to 31 May this second
set of accounts has been prepared for the period 24 November 2009 to 31 May
2010. We have sought to present the information in this Annual Report on a
comparable basis and I apologise for this complicated arrangement.
I am pleased to be able to report some recovery in the investment and
shareholder values for this year to 31 May 2010 with net asset values per share
increasing by 45.2%, the share price recovering by 84.2%, and the discount to
net assets narrowing to 17.2% from 34.8%. For the period 23 November 2009 to 31
May 2010, net asset values per share increased by 9.8%.
The yield on the Company's benchmark, the 5 to 10 years Government Securities UK
Gilts Index has stayed flat over the period to 31 May 2010 and the FTSE All
Share index has increased by 18.7% in the year to 31 May 2010, reflecting the
pleasing net asset performance of the Company.
Both the revenue and capital accounts showed profits, reflecting the income from
fixed income investments and the profits on disposals of security holdings as
values recovered. The Company is paying an interim dividend of 0.75p per
Ordinary share for the period 1 June 2009 to 23 November 2009. No dividend for
the subsequent period to 31 May 2010 is proposed. The interim dividend will be
payable on 30 September 2010 to shareholders on the register at 3 September 2010
(ex-dividend 1 September 2010).
The development of the portfolio has continued with a significant and promising
new largest investment in Bermuda Commercial Bank and a number of new
investments in the ten largest holdings. Again, the number of holdings has
grown and the concentration in the ten largest holdings reduced.
Proposals for future development
As we have said in previous years, the Board considers that the capital base of
the Company is too small and in current markets it remains difficult to raise
capital. The Board continues to explore ways to address this.
Conditions in investment markets and global economies generally remain difficult
with uncertain outlooks and prospects in the western world. As I stated last
year, our focus on the preservation of value will continue alongside the
continuing development of the portfolio.
Anthony Bushell
Chairman
17 September 2010
INVESTMENT MANAGER'S REPORT
Net asset value per Ordinary share up by 45.2% in the year to 31 May 2010
Major new investments and ongoing developments of the portfolio
The reshaping of the portfolio has continued with a new major investment and
increased focus on fixed interest investments.
The year to 31 May 2010 has shown some pleasing recovery in net asset value, in
part reflecting the fact that some investments had been oversold at the
beginning of that period, with net asset value per share increasing by 45.2% to
105.7p and gross assets increasing by 67.4% to GBP23.5m from GBP14.1m, partly
due to the increase in borrowings of GBP3.7m. For the period 24 November 2009 to
31 May 2010, net asset value per share increased by 9.8%.
Portfolio
The reshaping and rebalancing of the portfolio has continued during this period,
with a new significant investment in Bermuda Commercial Bank and two other new
entrants in the ten largest holdings; Silver Fern Farms and Southbury. The ten
largest investments accounted for 70.5% of gross assets at the period end
compared to 72.6% at 31 May 2009 and the portfolio comprised 42 investments
against 38 at the comparable date. This reflects the continuing strategy to
reduce the concentration in the ten largest holdings and to diversify the
portfolio.
Bermuda Commercial Bank is a major new investment which represents an
opportunity to invest in a conservatively run bank with a strong balance sheet
and no exposure to problem assets and markets at a discount to book asset value.
There are significant opportunities for the strategic development of the Bank
and consequently value growth. Warren McLeland, a director of Eclectic with
substantial banking experience has joined the Board of Bermuda Commercial Bank.
Another feature of the development of the portfolio over this period has been a
move towards fixed income investments which accounted for 14.4% of gross assets
at 31 May 2010 (4.2% at 31 May 2009) reducing the proportion held in equities
and convertible securities. This has been a strategic decision on a macro level
to best position the portfolio in current difficult market conditions.
The investments in Silver Fern Farms and Southbury illustrate this strategy with
those investments being in fixed interest securities at coupons up to 10.43%.
The companies that are no longer in the ten largest holdings are primarily the
Indian banking stocks, South Indian Bank, City Union Bank and Dhanalakshmi Bank
- all of the Indian bank holdings were sold in the period at a total profit over
book cost of GBP1.0m. The holding in Foreign & Colonial bonds was also sold at a
small profit.
The Trust Company remains a key holding and is the second largest holding in the
portfolio. The company performed well in difficult markets and the share price
rose by 16.0% over the year to 31 May 2010.
Resolute Mining continues to develop its operations with the construction phase
at its main asset, Syama in Mali, now complete and production growing. Resolute
is well poised to benefit from the stronger gold market with significant growth
forecast in its production levels.
eBet has performed satisfactorily in difficult market conditions and has now
received regulatory approval for a new contract to distribute poker gaming
machines in New South Wales which is forecast to lead to substantial revenue and
profit growth.
The Bermuda companies, Argus Group and Bank of NT Butterfield have both
experienced difficult years with losses in investments severely impacting their
businesses and investment values. However, both businesses remain sound at the
operating level.
North Atlantic Smaller Companies has shown strong net asset growth but the
shares continue to trade at a significant discount to net assets.
DTI re-entered the ten largest investments following the divestments of the
Indian banking holdings and continues to develop its business in line with
expectations.
The value of the investment portfolio rose by 56.0% over the year, to GBP18.4m.
In the year to 31 May 2010, purchase of investments totalled GBP14.4m and sales
of investments (excluding contracts for difference and derivatives) totalled
GBP13.8m at a profit over book cost of GBP5.2m.
The investment strategy continues to be to seek to balance and diversify the
portfolio and asset allocation, in terms of geography, sectors and types of
instruments will continue to be dependent on a range of factors.
Derivatives and Contract For Differences
The Company may use derivatives to seek to protect the portfolio against market
volatility.
The size of the overall derivatives positions has been reduced further over the
period. Exposures to The Trust Company and eBet are held through contracts for
difference.
Gearing
Following the reduction in gearing in the previous financial year, the gearing
at the balance sheet date increased with bank loans and overdrafts of GBP4.9m,
representing gearing on net assets of 26.3% and cash of GBP0.5m.
Return
The consolidated profit for the period from 24 November 2009 to 31 May 2010 was
GBP1.7m, with a profit on revenue account of GBP0.2m and on capital account of
GBP1.5m (period from 1 June 2009 to 23 November 2009: GBP4.3m, GBP0.2m and
GBP4.1m respectively).
Conclusion
Following the difficult year in the 2009 financial year, this period has shown
recovery in value, continued the rebalancing of the portfolio and a major new
investment has been made. The focus on investment type and focus on fixed income
investments will continue while appropriate for the market conditions and we
will continue to seek to identify investing opportunities in companies offering
value growth and downside protection.
Ingot Capital Management Pty Limited
17 September 2010
CONSOLIDATED INCOME STATEMENT for the period ended 31 May 2010
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| | 24 November | 1 June 2009 to | Year to |
| | 2009 to | | |
+----------------+-----------------------------+-----------------------------+-------------------------------+
| | 31 May 2010 | 23 November | 31 May 2009 |
| | | 2009 | |
+----------------+-----------------------------+-----------------------------+-------------------------------+
| | Revenue | Capital | Total | Revenue | Capital | Total | Revenue | Capital | Total |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 | GBP'000 |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| Income | | | | | | | | | |
| | | | | | | | | | |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| Investment | 514 | - | 514 | 468 | - | 468 | 760 | 1,172 | 1,932 |
| income | | | | | | | | | |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| Other | 5 | - | 5 | 7 | - | 7 | 40 | - | 40 |
| income | | | | | | | | | |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| Gains/(losses) | | | | | | | | | |
| on investments | | | | | | | | | |
| designated at | | | | | | | | | |
| fair value | | | | | | | | | |
| through profit | | | | | | | | | |
| or loss: | | | | | | | | | |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| Non | - | 1,868 | 1,868 | - | 4,125 | 4,125 | - | (15,794) | (15,794) |
| current | | | | | | | | | |
| assets | | | | | | | | | |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| (Losses)/gains | | | | | | | | | |
| on current | | | | | | | | | |
| assets held at | | | | | | | | | |
| fair value | | | | | | | | | |
| through profit | | | | | | | | | |
| or loss: | | | | | | | | | |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| | - | (124) | (124) | - | 570 | 570 | - | (2,939) | (2,939) |
| Derivatives | | | | | | | | | |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| Forward | - | (29) | (29) | - | - | - | - | - | - |
| currency | | | | | | | | | |
| contracts | | | | | | | | | |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| Exchange | - | (114) | (114) | - | (557) | (557) | - | 814 | 814 |
| (losses)/gains | | | | | | | | | |
| on currency | | | | | | | | | |
| balances | | | | | | | | | |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| | 519 | 1,601 | 2,120 | 475 | 4,138 | 4,613 | 800 | (16,747) | (15,947) |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| Expenses | | | | | | | | | |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| Investment | (46) | - | (46) | (35) | - | (35) | (62) | - | (62) |
| management | | | | | | | | | |
| fee | | | | | | | | | |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| Other | (214) | - | (214) | (196) | (76) | (272) | (415) | (6) | (421) |
| expenses | | | | | | | | | |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| Finance | (127) | - | (127) | (51) | - | (51) | (341) | - | (341) |
| costs | | | | | | | | | |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| | (387) | - | (387) | (282) | (76) | (358) | (818) | (6) | (824) |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| Profit/(loss) | 132 | 1,601 | 1,733 | 193 | 4,062 | 4,255 | (18) | (16,753) | (16,771) |
| before tax | | | | | | | | | |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| Taxation | 43 | (120) | (77) | (4) | - | (4) | 124 | (188) | (64) |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| Profit/(loss) | 175 | 1,481 | 1,656 | 189 | 4,062 | 4,251 | 106 | (16,941) | (16,835) |
| for the | | | | | | | | | |
| period | | | | | | | | | |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| | | | | | | | | | |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| Earnings | 0.99p | 8.37p | 9.36p | 1.07p | 22.92p | 23.99p | 0.58p | (93.69)p | (93.11)p |
| per | | | | | | | | | |
| Ordinary | | | | | | | | | |
| share | | | | | | | | | |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
| |
+------------------------------------------------------------------------------------------------------------+
| The Company does not have any income or expense that is not |
| included in profit for the period. Accordingly, the "profit for |
| the period" is also the "Total Comprehensive Income for the |
| period", as defined in IAS1 (revised) and no separate Statement |
| of Comprehensive Income has been presented. |
| |
+------------------------------------------------------------------------------------------------------------+
| The total column of this statement represents the Group's |
| Income Statement, prepared in accordance with IFRS. The revenue |
| and capital columns are supplementary to this and are prepared |
| under the guidance published by the Association of Investment |
| Companies. All items in the above statement derive from |
| continuing operations. |
+----------------+---------+---------+---------+---------+---------+---------+---------+----------+----------+
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY for the period ended 31 May 2010
+---------------+----------+---------+------------+----------+---------+----------+
| Group | Ordinary | Share | Capital | Capital | Revenue | Total |
| | share | premium | | | reserve | GBP'000 |
| Year | capital | GBP'000 | redemption | reserve | GBP'000 | |
| ended | GBP'000 | | | GBP'000 | | |
| 31 May | | | reserve | | | |
| 2009 | | | GBP'000 | | | |
+---------------+----------+---------+------------+----------+---------+----------+
| | | | | | | |
+---------------+----------+---------+------------+----------+---------+----------+
| At 31 May | 4,557 | 7,049 | 500 | 19,918 | (1,946) | 30,078 |
| 2008 | | | | | | |
+---------------+----------+---------+------------+----------+---------+----------+
| Loss/(profit) | - | - | - | (16,941) | 106 | (16,835) |
| for the | | | | | | |
| period | | | | | | |
+---------------+----------+---------+------------+----------+---------+----------+
| Share | (27) | - | 27 | (44) | - | (44) |
| buyback | | | | | | |
| 6 | | | | | | |
| February | | | | | | |
| 2009 | | | | | | |
+---------------+----------+---------+------------+----------+---------+----------+
| Share | (100) | - | 100 | (160) | - | |
| buyback | | | | | | (160) |
| 18 | | | | | | |
| February | | | | | | |
| 2009 | | | | | | |
+---------------+----------+---------+------------+----------+---------+----------+
| Ordinary | - | - | - | - | (137) | (137) |
| dividend | | | | | | |
| paid | | | | | | |
+---------------+----------+---------+------------+----------+---------+----------+
| At 31 May | 4,430 | 7,049 | 627 | 2,773 | (1,977) | 12,902 |
| 2009 | | | | | | |
+---------------+----------+---------+------------+----------+---------+----------+
+-----------+----------+---------+------------+---------+---------+---------+
| Group | Ordinary | Share | Capital | Capital | Revenue | Total |
| | share | premium | | | reserve | GBP'000 |
| Period | capital | GBP'000 | redemption | reserve | GBP'000 | |
| ended | GBP'000 | | | GBP'000 | | |
| 23 | | | reserve | | | |
| November | | | GBP'000 | | | |
| 2009 | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| At 31 May | 4,430 | 7,049 | 627 | 2,773 | (1,977) | 12,902 |
| 2009 | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| Profit | - | - | - | 4,062 | 189 | 4,251 |
| for the | | | | | | |
| period | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| Ordinary | - | - | - | - | (89) | (89) |
| dividend | | | | | | |
| paid | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| At 23 | 4,430 | 7,049 | 627 | 6,835 | (1,877) | 17,064 |
| November | | | | | | |
| 2009 | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
+-----------+----------+---------+------------+---------+---------+---------+
| Group | Ordinary | Share | Capital | Capital | Revenue | Total |
| | share | premium | | | reserve | GBP'000 |
| Period | capital | GBP'000 | redemption | reserve | GBP'000 | |
| ended | GBP'000 | | | GBP'000 | | |
| 31 May | | | reserve | | | |
| 2010 | | | GBP'000 | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| At 23 | 4,430 | 7,049 | 627 | 6,835 | (1,877) | 17,064 |
| November | | | | | | |
| 2009 | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| Profit | - | - | - | 1,481 | 175 | 1,656 |
| for the | | | | | | |
| period | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| Share | - | - | - | (91) | - | (91) |
| buyback | | | | | | |
| held in | | | | | | |
| treasury | | | | | | |
| 25 March | | | | | | |
| 2010 | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| Ordinary | - | - | - | - | - | - |
| dividend | | | | | | |
| paid | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| At 31 May | 4,430 | 7,049 | 627 | 8,225 | (1,702) | 18,629 |
| 2010 | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
COMPANY STATEMENTS OF CHANGES IN EQUITY for the period ended 31 May 2010
+---------------+----------+---------+------------+----------+---------+----------+
| Company | Ordinary | Share | Capital | Capital | Revenue | Total |
| | share | premium | | | reserve | GBP'000 |
| Year | capital | GBP'000 | redemption | reserve | GBP'000 | |
| ended | GBP'000 | | | GBP'000 | | |
| 31 May | | | reserve | | | |
| 2009 | | | GBP'000 | | | |
+---------------+----------+---------+------------+----------+---------+----------+
| | | | | | | |
+---------------+----------+---------+------------+----------+---------+----------+
| At 31 May | 4,557 | 7,049 | 500 | 17,589 | 311 | 30,006 |
| 2008 | | | | | | |
+---------------+----------+---------+------------+----------+---------+----------+
| Loss/(profit) | - | - | - | (16,970) | 135 | (16,835) |
| for the | | | | | | |
| period | | | | | | |
+---------------+----------+---------+------------+----------+---------+----------+
| Share | (27) | - | 27 | (44) | - | (44) |
| buyback | | | | | | |
| 6 | | | | | | |
| February | | | | | | |
| 2009 | | | | | | |
+---------------+----------+---------+------------+----------+---------+----------+
| Share | (100) | - | 100 | (160) | - | (160) |
| buyback | | | | | | |
| 18 | | | | | | |
| February | | | | | | |
| 2009 | | | | | | |
+---------------+----------+---------+------------+----------+---------+----------+
| Ordinary | - | - | - | - | (137) | (137) |
| dividend | | | | | | |
| paid | | | | | | |
+---------------+----------+---------+------------+----------+---------+----------+
| At 31 May | 4,430 | 7,049 | 627 | 415 | 309 | 12,830 |
| 2009 | | | | | | |
+---------------+----------+---------+------------+----------+---------+----------+
+-----------+----------+---------+------------+---------+---------+---------+
| Company | Ordinary | Share | Capital | Capital | Revenue | Total |
| | share | premium | | | reserve | GBP'000 |
| Period | capital | GBP'000 | redemption | reserve | GBP'000 | |
| ended | GBP'000 | | | GBP'000 | | |
| 23 | | | reserve | | | |
| November | | | GBP'000 | | | |
| 2009 | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| At 31 May | 4,430 | 7,049 | 627 | 415 | 309 | 12,830 |
| 2009 | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| Profit | - | - | - | 4,052 | 199 | 4,251 |
| for the | | | | | | |
| period | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| Ordinary | - | - | - | - | (89) | (89) |
| dividend | | | | | | |
| paid | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| At 23 | 4,430 | 7,049 | 627 | 4,467 | 419 | 16,992 |
| November | | | | | | |
| 2009 | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
+-----------+----------+---------+------------+---------+---------+---------+
| Company | Ordinary | Share | Capital | Capital | Revenue | Total |
| | share | premium | | | reserve | GBP'000 |
| Period | capital | GBP'000 | redemption | reserve | GBP'000 | |
| ended | GBP'000 | | | GBP'000 | | |
| 31 May | | | reserve | | | |
| 2010 | | | GBP'000 | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| At 23 | 4,430 | 7,049 | 627 | 4,467 | 419 | 16,992 |
| November | | | | | | |
| 2009 | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| Profit | - | - | - | 1,466 | 190 | 1,656 |
| for the | | | | | | |
| period | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| Share | - | - | - | (91) | - | (91) |
| buyback | | | | | | |
| held in | | | | | | |
| treasury | | | | | | |
| 25 March | | | | | | |
| 2010 | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| Ordinary | - | - | - | - | - | - |
| dividend | | | | | | |
| paid | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
| At 31 May | 4,430 | 7,049 | 627 | 5,842 | 609 | 18,557 |
| 2010 | | | | | | |
+-----------+----------+---------+------------+---------+---------+---------+
CONSOLIDATED BALANCE SHEET as at 31 May 2010
+----------------------------+---------+----------+---------+
| | 31 May | 23 | 31 May |
| | 2010 | November | 2009 |
| | GBP000 | 2009 | GBP000 |
| | | GBP000 | |
+----------------------------+---------+----------+---------+
| Non current assets | | | |
+----------------------------+---------+----------+---------+
| Investments designated at | 18,407 | 15,210 | 11,801 |
| fair value through profit | | | |
| or loss | | | |
+----------------------------+---------+----------+---------+
| | | | |
+----------------------------+---------+----------+---------+
| Current assets | | | |
+----------------------------+---------+----------+---------+
| Investments designated at | 2 | 2 | 2 |
| fair value through profit | | | |
| or loss | | | |
+----------------------------+---------+----------+---------+
| Derivatives held at fair | 1,168 | 105 | 488 |
| value through profit or | | | |
| loss | | | |
+----------------------------+---------+----------+---------+
| Forward currency contracts | 699 | -- | -- |
| held at fair value through | | | |
| profit or loss | | | |
+----------------------------+---------+----------+---------+
| Other receivables | 4,499 | 4,635 | 129 |
+----------------------------+---------+----------+---------+
| Cash and cash equivalents | 484 | 1,151 | 7,241 |
+----------------------------+---------+----------+---------+
| | 6,852 | 5,893 | 7,860 |
+----------------------------+---------+----------+---------+
| Total assets | 25,259 | 21,103 | 19,661 |
+----------------------------+---------+----------+---------+
| | | | |
+----------------------------+---------+----------+---------+
| Current liabilities | | | |
+----------------------------+---------+----------+---------+
| Derivatives held at fair | (746) | (613) | (5,051) |
| value through profit or | | | |
| loss | | | |
+----------------------------+---------+----------+---------+
| Forward currency contracts | (728) | -- | -- |
| held at fair value through | | | |
| profit or loss | | | |
+----------------------------+---------+----------+---------+
| Other payables | (209) | (657) | (549) |
+----------------------------+---------+----------+---------+
| Bank loans and overdrafts | (4,947) | (2,769) | (1,159) |
+----------------------------+---------+----------+---------+
| | (6,630) | (4,039) | (6,759) |
+----------------------------+---------+----------+---------+
| Net assets | 18,629 | 17,064 | 12,902 |
+----------------------------+---------+----------+---------+
| | | | |
+----------------------------+---------+----------+---------+
| Equity attributable to | | | |
| equity shareholders | | | |
+----------------------------+---------+----------+---------+
| Ordinary share capital | 4,430 | 4,430 | 4,430 |
+----------------------------+---------+----------+---------+
| Share premium | 7,049 | 7,049 | 7,049 |
+----------------------------+---------+----------+---------+
| Capital redemption reserve | 627 | 627 | 627 |
+----------------------------+---------+----------+---------+
| Capital reserve | 8,225 | 6,835 | 2,773 |
+----------------------------+---------+----------+---------+
| Revenue reserve | (1,702) | (1,877) | (1,977) |
+----------------------------+---------+----------+---------+
| Total equity | 18,629 | 17,064 | 12,902 |
+----------------------------+---------+----------+---------+
| | | | |
+----------------------------+---------+----------+---------+
| Net asset value per | 105.73p | 96.30p | 72.81p |
| Ordinary share | | | |
+----------------------------+---------+----------+---------+
COMPANY BALANCE SHEET as at 31 May 2010
+----------------------------+---------+----------+---------+
| | 31 May | 23 | 31 May |
| | 2010 | November | 2009 |
| | | 2009 | |
+----------------------------+---------+----------+---------+
| | GBP000 | GBP000 | GBP000 |
+----------------------------+---------+----------+---------+
| Non current assets | | | |
+----------------------------+---------+----------+---------+
| Investments designated at | 18,409 | 15,212 | 11,803 |
| fair value through profit | | | |
| or loss | | | |
+----------------------------+---------+----------+---------+
| | | | |
+----------------------------+---------+----------+---------+
| Current assets | | | |
+----------------------------+---------+----------+---------+
| Derivatives held at fair | 1,168 | 73 | -- |
| value through profit or | | | |
| loss | | | |
+----------------------------+---------+----------+---------+
| Forward currency contracts | 699 | -- | -- |
| held at fair value through | | | |
| profit or loss | | | |
+----------------------------+---------+----------+---------+
| Global Equity Risk | 3 | 50 | 560 |
| Protection Limited 'C | | | |
| designated at fair value | | | |
| through profit or loss | | | |
+----------------------------+---------+----------+---------+
| Other receivables | 4,497 | 4,635 | 129 |
+----------------------------+---------+----------+---------+
| Cash and cash equivalents | 483 | 1,132 | 7,113 |
+----------------------------+---------+----------+---------+
| | 6,850 | 5,890 | 7,802 |
+----------------------------+---------+----------+---------+
| Total assets | 25,259 | 21,102 | 19,605 |
+----------------------------+---------+----------+---------+
| | | | |
+----------------------------+---------+----------+---------+
| Current liabilities | | | |
+----------------------------+---------+----------+---------+
| Derivatives held at fair | (746) | (613) | (5,020) |
| value through profit or | | | |
| loss | | | |
+----------------------------+---------+----------+---------+
| Forward currency contracts | (728) | -- | -- |
| held at fair value through | | | |
| profit or loss | | | |
+----------------------------+---------+----------+---------+
| Other payables | (281) | (728) | (596) |
+----------------------------+---------+----------+---------+
| Bank loans and overdrafts | (4,947) | (2,769) | (1,159) |
+----------------------------+---------+----------+---------+
| | (6,702) | (4,110) | (6,775) |
+----------------------------+---------+----------+---------+
| Net assets | 18,557 | 16,992 | 12,830 |
+----------------------------+---------+----------+---------+
| | | | |
+----------------------------+---------+----------+---------+
| Equity attributable to | | | |
| equity shareholders | | | |
+----------------------------+---------+----------+---------+
| Ordinary share capital | 4,430 | 4,430 | 4,430 |
+----------------------------+---------+----------+---------+
| Share premium | 7,049 | 7,049 | 7,049 |
+----------------------------+---------+----------+---------+
| Capital redemption reserve | 627 | 627 | 627 |
+----------------------------+---------+----------+---------+
| Capital reserve | 5,842 | 4,467 | 415 |
+----------------------------+---------+----------+---------+
| Revenue reserve | 609 | 419 | 309 |
+----------------------------+---------+----------+---------+
| Total equity | 18,557 | 16,992 | 12,830 |
+----------------------------+---------+----------+---------+
CONSOLIDATED CASH FLOW STATEMENTS for the period ended 31 May 2010
+----------------------------+----------+----------+----------+
| | Group | Group | Group |
+----------------------------+----------+----------+----------+
| | 24 | 1 June | Year |
| | November | 2009 | to |
| | to 31 | to 23 | 31 May |
| | May 2010 | November | 2009 |
| | | 2009 | |
+----------------------------+----------+----------+----------+
| | GBP000 | GBP000 | GBP000 |
+----------------------------+----------+----------+----------+
| Cash (outflow)/ inflow | | | |
| from operating activities | | | |
+----------------------------+----------+----------+----------+
| Profit/(loss) before | 1,733 | 4,255 | (16,771) |
| taxation | | | |
+----------------------------+----------+----------+----------+
| (Gains)/losses on | (1,868) | (4,125) | 15,794 |
| investments designated at | | | |
| fair value through profit | | | |
| or loss | | | |
+----------------------------+----------+----------+----------+
| Exchange losses/(gains) on | 114 | 557 | (814) |
| currency balances | | | |
+----------------------------+----------+----------+----------+
| (Increase)/decrease in | (1,843) | (3,762) | 3,645 |
| other debtors | | | |
+----------------------------+----------+----------+----------+
| (Increase)/decrease in | (90) | (53) | 157 |
| accrued income | | | |
+----------------------------+----------+----------+----------+
| Increase/(decrease) in | 886 | (4,447) | 498 |
| creditors | | | |
+----------------------------+----------+----------+----------+
| Taxation | 1 | (4) | (64) |
+----------------------------+----------+----------+----------+
| Net cash (outflow)/inflow | (1,067) | (7,579) | 2,445 |
| from operating activities | | | |
+----------------------------+----------+----------+----------+
| Investing activities | | | |
+----------------------------+----------+----------+----------+
| Purchase of investments | (12,260) | (2,618) | (5,564) |
+----------------------------+----------+----------+----------+
| Sales of investments | 10,687 | 3,143 | 8,640 |
+----------------------------+----------+----------+----------+
| Net cash (outflow)/inflow | (1,573) | 525 | 3,076 |
| from investing activities | | | |
+----------------------------+----------+----------+----------+
| Net cash (outflow)/inflow | (2,640) | (7,054) | 5,521 |
| before financing | | | |
+----------------------------+----------+----------+----------+
| Net cash inflow/(outflow) | 1,670 | 1,517 | (5,302) |
| from financing activities | | | |
+----------------------------+----------+----------+----------+
| (Decrease)/increase in | (970) | (5,537) | 219 |
| cash and cash equivalents | | | |
+----------------------------+----------+----------+----------+
| Exchange movements | 297 | (603) | 486 |
+----------------------------+----------+----------+----------+
| Change in cash and cash | (673) | (6,140) | 705 |
| equivalents | | | |
+----------------------------+----------+----------+----------+
| Cash and cash equivalents | 1,101 | 7,241 | 6,536 |
| at beginning of period | | | |
+----------------------------+----------+----------+----------+
| Cash and cash equivalents | 428 | 1,101 | 7,241 |
| at end of period | | | |
+----------------------------+----------+----------+----------+
COMPANY CASH FLOW STATEMENTS for the period ended 31 May 2010
+-----------------------------------+----------+----------+----------+
| | Company | Company | Company |
+-----------------------------------+----------+----------+----------+
| | 24 | | Year to |
| | November | 1 June | 31 May |
| | to 31 | 2009 to | 2009 |
| | May 2010 | 23 | |
| | | November | |
| | | 2009 | |
+-----------------------------------+----------+----------+----------+
| | GBP'000 | GBP'000 | GBP'000 |
+-----------------------------------+----------+----------+----------+
| Cash (outflow)/ inflow from | | | |
| operating activities | | | |
+-----------------------------------+----------+----------+----------+
| Profit/(loss) before taxation | 1,733 | 4,255 | (16,771) |
+-----------------------------------+----------+----------+----------+
| (Gains)/losses on investments | (1,868) | (4,125) | 15,794 |
| designated at fair value through | | | |
| profit or loss | | | |
+-----------------------------------+----------+----------+----------+
| Exchange losses/(gains) on | 377 | 491 | (571) |
| currency balances | | | |
+-----------------------------------+----------+----------+----------+
| (Increase)/decrease in other | (2,002) | (3,594) | 1,358 |
| debtors | | | |
+-----------------------------------+----------+----------+----------+
| (Increase)/decrease in accrued | (90) | (53) | 157 |
| income | | | |
+-----------------------------------+----------+----------+----------+
| Increase/(decrease) in creditors | 1,063 | (4,506) | 2,661 |
+-----------------------------------+----------+----------+----------+
| Taxation | 1 | (4) | (64) |
+-----------------------------------+----------+----------+----------+
| Net cash (outflow)/inflow from | (786) | (7,536) | 2,564 |
| operating activities | | | |
+-----------------------------------+----------+----------+----------+
| Investing activities | | | |
+-----------------------------------+----------+----------+----------+
| Purchase of investments | (12,260) | (2,618) | (5,564) |
+-----------------------------------+----------+----------+----------+
| Sales of investments | 10,687 | 3,143 | 8,640 |
+-----------------------------------+----------+----------+----------+
| Net cash (outflow)/inflow from | (1,573) | 525 | 3,076 |
| investing activities | | | |
+-----------------------------------+----------+----------+----------+
| Net cash (outflow)/inflow before | (2,359) | (7,011) | 5,640 |
| financing | | | |
+-----------------------------------+----------+----------+----------+
| Net cash inflow/(outflow) from | 1,670 | 1,517 | (5,302) |
| financing activities | | | |
+-----------------------------------+----------+----------+----------+
| (Decrease)/increase in cash and | (689) | (5,494) | 338 |
| cash equivalents | | | |
+-----------------------------------+----------+----------+----------+
| Exchange movements | 34 | (537) | 243 |
+-----------------------------------+----------+----------+----------+
| Change in cash and cash | (655) | (6,031) | 581 |
| equivalents | | | |
+-----------------------------------+----------+----------+----------+
| Cash and cash equivalents at | 1,082 | 7,113 | 6,532 |
| beginning of period | | | |
+-----------------------------------+----------+----------+----------+
| Cash and cash equivalents at end | 427 | 1,082 | 7,113 |
| of period | | | |
+-----------------------------------+----------+----------+----------+
Notes to the Financial Statements
1. Accounting policies
The financial statements of the Group and the Company have been prepared in
accordance with International Financial Reporting Standards ("IFRS"). These
comprise standards and interpretations approved by the International Accounting
Standards Board ("IASB"), together with interpretations of the International
Accounting Standards and Standing Interpretations Committee approved by the
International Accounting Standards Committee ("IASC") that remain in effect, to
the extent that IFRS have been adopted by the European Union.
The functional currency of all the Companies in the Group is pounds Sterling
because this is the currency of the primary economic environment in which the
Companies operate.
(a) Basis of preparation
The financial statements have been prepared on the historical cost basis, except
for the measurement at fair value of certain financial instruments. The
principal accounting policies adopted are set out below. Where presentational
guidance set out in the Statement of Recommended Practice ("the SORP") for
investment trusts issued by the Association of Investment Companies ("the AIC")
in January 2009 is consistent with the requirements of IFRS, the directors have
sought to prepare the financial statements on a basis compliant with the
recommendations of the SORP.
Following discussions with the Company's advisers, it was decided that it would
be in shareholders best interests to shorten the previous accounting reference
period from 31 May 2010 to 23 November 2009, the last day the Company was an
investment trust listed on the Main Market of the London Stock Exchange, and
prepare separate accounts for that period. To re-align accounting reference
periods back to 31 May, this second set of accounts has been prepared for the
period 24 November 2009 to 31 May 2010.
(b) Adoption of new and revised Standards
At the date of authorisation of these financial statements, the following
Standards and Interpretations which have not been applied in these financial
statements were in issue but were not yet effective (and in some cases had not
yet been adopted by the EU):
International Accounting Standards (IAS/IFRS) and Effective date
IAS 23 Borrowing Costs (revised 2007) - 1 January 2009
IAS 24 Related Party Disclosures (revised 2009) - 1 January 2011
IAS 27 Consolidated Financial Statements (revised) - 1 July 2009
IAS 32 Classification of rights issues - 1 February 2010
IFRS 1 Additional exemptions for first time adopters - 1 January 2010
IFRS 2 Group Cash-settled Share-based Payment Transactions - 1 January 2010
IFRS 9 Financial Instruments - 1 January 2013
International Financial Reporting Interpretations
Committee (IFRIC)
IFRIC 9 Extinguishing Financial Liabilities with Equity Instruments - 1 July
2010
IFRIC 14 Prepayments of a Minimum Funding requirement (amended) - 1 January
2011
There are also improvements to IFRSs authorised in 2009 and May 2010 with
various effective dates, the earliest being 1 July 2009 and 1 July 2010
respectively.
The Directors anticipate that the adoption of these Standards and
Interpretations in future periods will have no material impact on the financial
statements of the Group.
(c) Basis of consolidation
The Group accounts consolidate the accounts of the Company, its wholly-owned
subsidiary undertaking, Eclectic Stocks Limited and the "C" shares of Global
Equity Risk Protection Limited.
(d) Presentation of Income Statement
In order to better reflect the activities of an investment company and in
accordance with guidance issued by the AIC, supplementary information which
analyses the Income Statement between items of revenue and capital nature has
been presented alongside the Income Statement. In accordance with the Company's
status as a UK investment company under Section 833 of the Companies Act 2006,
net capital returns may not be distributed by way of dividend.
(e) Income
Dividends receivable on equity shares are recognised as revenue for the period
on an ex-dividend basis. Where no ex-dividend date is available, dividends
receivable on or before the period end are treated as revenue for the period.
Provision is made for any dividends not expected to be received. The fixed
returns on debt securities and non-equity shares are recognised on a time
apportionment basis so as to reflect the effective interest rate on the debt
securities and shares. Interest receivable from cash and short-term deposits is
recognised on an accrual basis. Underwriting commission is recognised as earned.
Special dividends are treated as capital or revenue according to the facts and
circumstances on a case by case basis.
(f) Expenses
Interest is calculated by using the effective interest rate method and is
charged to finance costs in the Income Statement.
All other expenses and interest payable are accounted for on an accruals basis.
Expenses have been treated as revenue except as follows:
- transaction costs incurred on the acquisition or disposal of investments are
taken to the capital column of the Income Statement;
- expenses are presented in the capital column of the Income Statement where a
connection with the maintenance or enhancement of the value of investments can
be demonstrated;
- any performance fees payable are allocated wholly to the capital column of the
Income Statement.
(g) Taxation
The tax charged is based on the taxable profit for the period. Taxable profit
differs from net profit as reported in the Income Statement because it excludes
items of income or expense that are taxable or deductible in other years and it
further excludes items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates that were applicable at
the balance sheet date.
In line with the recommendations of the SORP, the allocation method used to
calculate tax relief on expenses presented against the capital column in the
supplementary information in the Income Statement is the "marginal basis". Under
this basis, if taxable income is capable of being offset entirely by expenses
presented in the revenue column of the Income Statement, then no tax relief is
transferred to the capital column.
Current tax is the tax currently payable based on taxable profit for the period.
Deferred income taxes are calculated using the liability method on temporary
differences. Deferred tax is generally provided on the difference between the
carrying amounts of assets and liabilities and their tax bases. However,
deferred tax is not provided on the initial recognition of an asset or liability
unless the related transaction is a business combination or affects tax or
accounting profit. Deferred tax on taxable temporary differences associated with
shares in subsidiaries is not provided if reversal of these temporary
differences can be controlled by the Group and it is probable that reversal will
not occur in the foreseeable future. In addition, tax losses available to be
carried forward as well as other income tax credits to the Group are assessed
for recognition as deferred tax assets.
Deferred tax liabilities are provided in full, with no discounting. Deferred tax
assets are recognised to the extent that it is probable that the underlying
deductible temporary differences will be able to be offset against future
taxable income. Current and deferred tax assets and liabilities are calculated
at tax rates that are expected to apply to their respective period of
realisation, provided they are enacted or substantively enacted at the balance
sheet date.
Changes in deferred tax assets or liabilities are recognised as a component of
tax expense in the Income Statement, except where they relate to items that are
charged or credited directly to equity in which case the related deferred tax is
also charged or credited directly to equity.
(h) Investments held at fair value through profit or loss
The Company's business is investing in financial assets with a view to profiting
from their total return in the form of income and capital growth. This portfolio
of financial assets is managed and its performance evaluated on a fair value
basis, in accordance with a documented investment strategy, and information
about the portfolio is provided internally on that basis to the Company's Board
of Directors.
When a purchase or sale is made under contract, the terms of which require
delivery within a timeframe of the relevant market, the investments concerned
are recognised or derecognised on the trade date.
All investments are designated by the Company upon initial recognition as held
at fair value through profit or loss. They are included initially at fair value,
which is taken to be their cost (excluding expenses incidental to the
acquisition which are written off in the Income Statement and allocated to
capital at the time of acquisition) and are measured at subsequent reporting
dates at fair value, which is either the bid price or the last traded price,
depending on the convention of the exchange on which the investment is quoted.
Fair values for unquoted investments, or for investments for which there is only
an inactive market, are established by using various valuation methodologies in
accordance with International Private Equity and Venture Capital Valuation
Guidelines. These may include recent arm's length market transactions, the
current fair value of another instrument which is substantially the same,
discounted cash flow analysis and option pricing models. Where there is a
valuation technique commonly used by market participants to price the instrument
and that technique has been demonstrated to provide reliable estimates of prices
obtained in actual market transactions, that technique is utilised.
Investments held by Eclectic Stocks Limited are classified as "held for trading"
and are valued at fair value in accordance with the policies above for listed
and unlisted holdings. Profits or losses on investments "held for trading" are
taken to revenue.
Changes in fair value of all investments held at fair value are recognised in
the Income Statement. On disposal, gains and losses are also recognised in the
Income Statement.
(i) Cash and cash equivalents
Cash comprises cash in hand and in banks and short-term deposits and overdrafts.
Cash equivalents are short-term, highly liquid investments that are readily
convertible to known amounts of cash and are subject to an insignificant risk of
change in value.
(j) Borrowings and loans
All secured borrowings are initially recognised at cost, being the fair value of
the consideration received, less issue costs where applicable. After initial
recognition, all interest-bearing borrowings are subsequently measured at
amortised cost.
(k) Dividends payable
Final dividends are recognised in the period in which they are approved by
shareholders.
(l) Foreign currency translation
Transactions involving foreign currencies are converted at the rate ruling at
the date of the transaction. At each balance sheet date, monetary items and
non-monetary assets and liabilities, which are fair valued and which are
denominated in foreign currencies, are retranslated at the closing rates of
exchange. Such exchange differences are included in the Income Statement and
allocated to capital if of a capital nature or to revenue if of a revenue
nature. Exchange differences allocated to capital are taken to capital reserve.
(m) Derivative financial instruments
The Group's activities expose it primarily to the financial risks of changes in
market prices, foreign currency exchange rates and interest rates. Derivative
transactions which the Group may enter into comprise forward foreign exchange
contracts (the purpose of which is to manage currency risk arising from the
Group's investing activities), contracts for difference to maintain exposure to
certain companies and quoted options on indices appropriate to sections of the
portfolio (the purpose of which is to provide protection against falls in the
capital values of the holdings). The Group does not use derivative financial
instruments for speculative purposes. Any gains/losses from derivative
transactions are recognised as capital within the Income Statement.
The use of financial derivatives is governed by the Group's policies as approved
by the Board.
Derivatives are classified at fair value through profit or loss and further fall
within the classification of held for trading as per the accounting standards.
Changes in the fair value of derivative financial instruments are recognised in
the Income Statement as they arise. If capital in nature, the associated change
in value is presented as a capital item in the Income Statement.
(n) Capital Reserve
Capital reserve - other
The following are taken to this reserve:
- Gains and losses on the disposal of investments;
- Exchange differences of a capital nature;
- Expenses, together with the related taxation effect, allocated to this reserve
in accordance with the
above policies; and
Capital reserve - investment holding gains
The following are taken to this reserve:
- Increase and decrease in the valuation of investments held at the period end.
(o) Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business being investment business. Consequently no business segmental
analysis is provided.
2. Earnings per Ordinary share
+--------------------------------+--------------+--------------+-----------------+
| Total earnings per Ordinary | 24 | 1 June | Year to |
| share | November | 2009 | 31 May |
| | 2009 | to 23 | 2009 |
| | to 31 May | November | |
| | 2010 | 2009 | |
+--------------------------------+--------------+--------------+-----------------+
| | | | |
+--------------------------------+--------------+--------------+-----------------+
| Total return | GBP1,656,000 | GBP4,251,000 | GBP(16,835,000) |
+--------------------------------+--------------+--------------+-----------------+
| Weighted average number of | 17,683,523 | 17,719,502 | 18,081,968 |
| Ordinary shares in issue | | | |
| during the period | | | |
+--------------------------------+--------------+--------------+-----------------+
| Total earnings per Ordinary | 9.36p | 23.99p | (93.11)p |
| share | | | |
+--------------------------------+--------------+--------------+-----------------+
The total earnings per Ordinary share detailed above can be further analysed
between revenue and capital as set out below:
+--------------------------------+------------+------------+------------+
| Revenue earnings per Ordinary | 24 | 1 June | Year to |
| share | November | 2009 | 31 May |
| | 2009 | to 23 | 2009 |
| | to 31 | November | |
| | May 2010 | 2009 | |
+--------------------------------+------------+------------+------------+
| Revenue return | GBP175,000 | GBP189,000 | GBP106,000 |
+--------------------------------+------------+------------+------------+
| Weighted average number of | 17,683,523 | 17,719,502 | 18,081,968 |
| Ordinary shares in issue | | | |
| during the period | | | |
+--------------------------------+------------+------------+------------+
| Revenue earnings per Ordinary | 0.99p | 1.07p | 0.58p |
| share | | | |
+--------------------------------+------------+------------+------------+
| | | | |
+--------------------------------+------------+------------+------------+
+--------------------------------+--------------+--------------+-----------------+
| Capital earnings per Ordinary | 24 | 1 June | Year to |
| share | November | 2009 | 31 May |
| | 2009 | to 23 | 2009 |
| | to 31 | November | |
| | May 2010 | 2009 | |
+--------------------------------+--------------+--------------+-----------------+
| Capital return | GBP1,481,000 | GBP4,062,000 | GBP(16,941,000) |
+--------------------------------+--------------+--------------+-----------------+
| | | | |
+--------------------------------+--------------+--------------+-----------------+
| Weighted average number of | 17,683,523 | 17,719,502 | 18,081,968 |
| Ordinary shares in issue | | | |
| during the period | | | |
+--------------------------------+--------------+--------------+-----------------+
| Capital earnings per Ordinary | 8.37p | 22.92p | (93.69)p |
| share | | | |
+--------------------------------+--------------+--------------+-----------------+
Net profit of the Company
As permitted by Section 408 of the Companies Act 2006, the Company has not
presented its own Income Statement. Net gain after taxation of GBP1,656,000 has
been dealt with in the accounts of the Company (period ended 23 November 2009:
net gain after taxation of GBP4,251,000, year ended 31 May 2009: net loss after
taxation of GBP16,835,000).
3. Net asset value per share
The consolidated net asset value per Ordinary share and the net asset values
attributable to the Ordinary shares at the period end calculated in accordance
with the Articles of Association were as follows:
+----------+----------+----------+----------+----------+-------+---+----------+
| | Net asset value per share | Net asset values attributable |
| | attributable | |
+----------+--------------------------------+---------------------------------+
| | 31 May | 23 | 31 May | 31 May | 23 | 31 May |
| | 2010 | November | 2009 | 2010 | November | 2009 |
| | | 2009 | | | 2009 | |
| | p | p | p | GBP'000 | GBP'000 | GBP'000 |
+----------+----------+----------+----------+----------+-----------+----------+
| Ordinary | 105.73 | 96.30 | 72.81 | 18,629 | 17,064 | 12,902 |
| shares | | | | | | |
| (basic) | | | | | | |
+----------+----------+----------+----------+----------+-----------+----------+
| |
+-----------------------------------------------------------------------------+
| The movements during the period of the Group's assets attributable to the |
| Ordinary shares were as follows: |
+-----------------------------------------------------------------------------+
| | Ordinary |
| | shares |
| | (basic) |
| | GBP'000 |
+--------------------------------------------------------------+--------------+
| Total net assets attributable at beginning of period | GBP17,064 |
+--------------------------------------------------------------+--------------+
| Profit for the period | 1,656 |
+--------------------------------------------------------------+--------------+
| Share buyback held in treasury 25 March 2010 | (91) |
+--------------------------------------------------------------+--------------+
| Dividend paid in the period on Ordinary shares | - |
+--------------------------------------------------------------+--------------+
| Total net assets attributable at end of period | 18,629 |
+--------------------------------------------------------------+--------------+
| | | | | | | | |
+----------+----------+----------+----------+----------+-------+---+----------+
Basic net asset value per Ordinary share is based on Net Assets of GBP18,629,000
(23 November 2009: GBP17,064,000, 31 May 2009: GBP12,902,000) and on 17,619,502
(23 November 2010: 17,719,502, 31 May 2009: 17,719,502) Ordinary shares, being
the number of Ordinary shares in issue at the period end, excluding 100,000
Ordinary shares held in treasury.
4. Financial instruments and capital disclosures
Risk management policies and procedures
The investment objective of the Group and Company is to maximise shareholder
value by investing in a portfolio of securities anywhere in the world. In
pursuit of this objective, the Group and Company may be exposed to various forms
of risk, as described below.
When judged appropriate by the Investment Manager, the Company may use the
multi-currency loan facility provided by The Royal Bank of Scotland
International to the Sterling equivalent of up to GBP5.0 million (2009: GBP3.0
million) at floating rates of interest in order to gear the portfolio. The loan
is secured against the assets of the fund. This facility expires on 31 January
2011.
The Board's investment policies and its policy on gearing (both bank borrowing
and the effect of derivatives) and diversification of investments are shown
above.
The Group and Company also enter into derivative transactions which comprise
forward foreign exchange contracts (the purpose of which is to manage currency
risk arising from the Company's investing activities), quoted options on indices
appropriate to sections of the portfolio (the purpose of which is to provide
protection against falls in the capital values of the holdings), and contracts
for difference to maintain exposure to certain companies.
The Company, itself, does not undertake any trading in financial instruments.
Through its subsidiary, Eclectic Stocks Limited, the Group does undertake
trading in financial instruments but such activities represent less than 10% of
the Group's activities. At the period end Eclectic Stocks Limited held one
investment, in New Cap Reinsurance Corporation.
The value of the Group and Company's assets and the total return earned by the
Company's shareholders can be significantly affected by foreign exchange
movements as some of the Company's assets are denominated in currencies other
than Sterling, the currency in which the Company's accounts are prepared. The
risk is partially offset by the Company's foreign currency borrowings.
Interest rate risk
The Company is only exposed to significant interest rate risk through its
multi-currency loan facility with The Royal Bank of Scotland International and
investments in fixed interest securities.
Other price risk
If the fair value of the Group and parent Company's investments at the period
end increased/decreased by 10% then it would have had an effect on the Group and
Company's capital return equal to GBP1,361,000 or 7.72 per Ordinary share (23
November 2009: GBP1,154,000 or 6.51p per Ordinary share, 31 May 2009: GBP408,000
or 2.71p per Ordinary share).
Liquidity risk
Liquidity risk is generally not significant as the majority of the Group and
Company's investments are listed on recognised stock exchanges and for the most
part readily realisable securities which can be easily sold to meet funding
commitments if necessary. Short-term flexibility is achieved by the use of
overdrafts and the multi-currency loan facility with The Royal Bank of Scotland
International.
Credit risk
Credit risk is mitigated by diversifying the counterparties through whom the
Investment Manager conducts investment transactions. The credit-standing of all
counterparties is reviewed periodically with limits set on amounts due from any
one broker. Derivative transactions are only carried out with investment banks
with strong credit ratings.
Cash is only held at banks and in money market funds that have been identified
by the board as reputable and of high credit quality.
Fair values of financial assets and financial liabilities
The fair value of the Group and Company's financial assets and financial
liabilities are either carried in the balance sheet at their fair value
(investments and derivatives), or the balance sheet amount is a reasonable
approximation of fair value (due from brokers, dividends receivable, accrued
income, cash at bank, due to brokers and multi-currency loans).
The fair value of the Group and Company's unquoted investments is measured by
the Directors using valuation methodologies in accordance with International
Private Equity and Venture Capital Valuation Guidelines.
Valuation of financial instruments
The Group and Company measures fair values using the following fair value
hierarchy that reflects the significance of the inputs used in
making the measurements. Categorisation within the hierarchy has been determined
on the basis of the lowest level input that is
significant to the fair value measurement of the relevant asset as follows:
- Level 1 - valued using quoted prices unadjusted in active markets for
identical assets or liabilities.
- Level 2 - valued by reference to valuation techniques using observable inputs
for the asset or liability other than quoted prices included within Level 1.
- Level 3 - valued by reference to valuation techniques using inputs that are
not based on observable market data for the asset or liability.
Derivative exposure
Derivative instruments such as contracts for difference and options may be used
for purposes of efficient portfolio management to maintain or enhance the value
of the investment portfolio and any gains/losses are recognised as capital
within the Income Statement.
Through its investment in 'C' shares of Global Equity Risk Protection Limited,
the Company has entered into a number of Put and Call Option transactions as
part of its efficient portfolio management to maintain or enhance the value of
the investment portfolio and any gains/losses are recognised as capital within
the Income Statement.
Capital management policies and procedures
The Group and Company's capital management objectives are:
- to ensure that it is able to continue as a going concern; and
- to maximise shareholder value by investing in a portfolio of securities
anywhere in the world through an appropriate balance of equity capital and debt.
The Board, with the assistance of the Investment Manager, regularly monitors and
reviews the broad structure of the Company's capital on an ongoing basis. These
reviews include:
- the level of gearing, which takes account of the Company's position and the
Investment Manager's views on the market; and
- the extent to which revenue in excess of that which is required to be
distributed should be retained.
The Company's objectives, policies and processes for managing capital are
unchanged from last year.
The Company is subject to externally imposed capital requirements:
- as a public company, the Company has a minimum share capital of GBP50,000; and
- in order to be able to pay dividends out of profits available for
distribution, the Company has to be able to meet one of the two capital
restriction tests imposed on investment companies by company law.
These requirements are unchanged since last year and the Company has complied
with them at all times.
The Company has a multi-currency revolving credit ("facility") with The Royal
Bank of Scotland International (the "Bank") pursuant to which the Company is
required to ensure that as at the close of business on any day, the aggregate
value of the Portfolio is more than 100% of the amount drawn down under the
facility which in itself is not more than 25% of the net tangible assets of the
Company. No breaches of the covenants imposed under the facility occurred
during the period under review or have occurred since the end of that period to
the date hereof.
Contingent liabilities
As at 31 May 2010 there were no contingent liabilities or financial commitments
(23 November 2009: none, 31 May 2009: none).
5. Investment Policy and Approach
Eclectic seeks to invest in undervalued investments worldwide
Investment Strategy and Investment Allocation
The Company looks to identify and invest in investments where the underlying
value is not reflected in the market price. This perceived undervaluation may
arise from any number of factors including technological, market motivation,
prospective financial engineering opportunities, competition or shareholder
apathy.
The Company aims to maximise value for shareholders by holding a relatively
concentrated portfolio of securities and by investing in instruments appropriate
to respective investments.
The portfolio is focused on absolute performance.
The Company's investing policy is flexible and permits the Investment Manager to
make investments worldwide across all sectors and in a variety of financial
instruments. Thus the Company may invest in shares, bonds, convertibles and
other types of securities where suitable opportunities arise. It may also invest
in unlisted securities where the attractiveness of the investment justifies the
risks and lower liquidity associated with such investments, subject to unlisted
securities not exceeding in aggregate 30 per cent. of the Company's gross
assets.
The investing policy is not compelled to focus on any country, sector or
industry. The Investment Manager seeks to maintain and enhance diversification
within the portfolio by investing in a range of sectors, markets and instruments
as attractive opportunities arise.
The allocation of assets between sectors, markets and instruments will depend on
market conditions and the judgement of the Investment Manager and the Board of
Directors as to what is in the best interests of the Company and shareholders
and so the proportions of the portfolio invested in individual situations,
sectors or markets will be flexible. As such, not more than 30 per cent. of the
Company's Gross Assets shall be invested in the securities of any one company or
group at the time the investment is made, however this restriction will not
apply in relation to the holding of shares in The Trust Company Limited.
The Company may use bank debt, derivative instruments such as contracts for
difference, financial futures, options and warrants to enhance its investment
performance. It may, from time to time, seek actively to protect the portfolio
and balance sheet from major corrections by the use of foreign currency hedges,
interest rate hedges, stock market put options and similar instruments.
Furthermore, the Company looks to invest in instruments that provide additional
protection such as convertible notes.
The Company has the ability to use bank debt to provide long term structural
gearing which will be restricted to 100 per cent. of its net assets. However the
Board may adopt a lower limit in line with the prevailing level of market risk
and the risk associated with each investment on a case by case basis.
Following discussions with the Company's advisers, it was decided that it would
be in shareholders best interests to shorten the previous accounting reference
period from 31 May 2010 to 23 November 2009, the last day the Company was an
investment trust listed on the Main Market of the London Stock Exchange, and
prepare separate accounts for that period. To re-align accounting reference
periods back to 31 May, this second set of accounts has been prepared for the
period 24 November 2009 to 31 May 2010.
6. Comparative information
This announcement of results, which has been agreed with the auditors, was
approved by the Board on 17 September 2010 but does not constitute the Company's
statutory accounts. The statutory accounts of the Company for the period to 31
May 2010 and the period to 23 November 2009 have received audit reports which
are unqualified, did not include references to any matters to which the auditors
drew attention by way of emphasis without qualifying their reports, nor
contained statements under section 498 (2), (3) or (4) of the Companies Act
2006, and will be delivered to the Registrar of Companies following the
forthcoming Annual General Meeting.
The statutory accounts for the year ended 31 May 2009 have been delivered to the
Registrar of Companies. These accounts received audit reports which were
unqualified, did not include a reference to any matters to which the auditors
drew attention by way of emphasis without qualifying the report, and did not
contain statements under section 498(2), (3) or (4) of the Companies Act 2006.
7. Availability of Report & Accounts
The Company's Report & Accounts for the period to 31 May 2010 (and the period to
23 November 2009) are expected to be viewable and available for downloading from
the Company's website at the following address:
www.eclecticinvest.com from
Tuesday 21 September 2010.
Hard copies of the Report & Accounts for the period ended 31 May 2010 and the
period ended 23 November 2009 will be posted to shareholders on 30 September
2010 and further copies will be available on request from the Registered Office,
c/o Phoenix Administration Services Limited, Springfield Lodge, Colchester Road,
Chelmsford, CM2 5PW.
The Annual General Meeting of the Company will be held on Wednesday 27 October
2010 at 12 noon.
8. Confirmation Statement
The non-executive Directors of the Company (Anthony Bushell (Chairman), Peter
Burrows, Bruce Hervey and Warren McLeland), being the persons responsible,
hereby confirm to the best of their knowledge:
a) that the financial statements have been prepared in accordance with
applicable accounting standards and give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Group; and
b) the Management Report (which comprises the Chairman's Statement and the
Business Review) includes a fair review of the development and performance of
the business and the position of the Group together with a description of the
principal risks and uncertainties that the Group faces.
Phoenix Administration Services Limited
Secretary
17 September 2010
Enquiries:
Duncan Hayes - 01245 398950
Phoenix Administration Services Limited
Hugh Field - 020 70122000
Arbuthnot Securities Limited (NOMAD)
This information is provided by RNS
The company news service from the London Stock Exchange
END
FR KKCDDBBKDACD
Eclectic Inv Co (LSE:ECIT)
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Eclectic Inv Co (LSE:ECIT)
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