ABERFORTH SMALLER COMPANIES TRUST plc
HALF YEARLY REPORT
For the Six Months to 30 June 2008
Aberforth Smaller Companies Trust plc (ASCoT) invests only in small UK quoted
companies and is managed by Aberforth Partners LLP.
The investment objective of ASCoT is to achieve a net asset value total
return (with dividends reinvested) greater than on the Hoare Govett Smaller
Companies Index (Excluding Investment Companies) over the long term.
All data throughout this Half Yearly Report is to, or as at, 30 June 2008 as
applicable.
CHAIRMAN'S STATEMENT
For the six months to 30 June 2008, Aberforth Smaller Companies Trust plc
(ASCoT) recorded a negative total return on its net asset value per share of
12.6%, compared with a negative total return of 14.2% from the Hoare Govett
Smaller Companies Index (Excluding Investment Companies) (HGSC (XIC)), your
Company's investment benchmark. Larger companies, as represented by the FTSE
All-Share Index, registered a negative total return of 11.2%. While it is
always disappointing to report negative returns, ASCoT did out-perform its
benchmark during a period when smaller companies under-performed larger
companies.
Your Managers' Report provides greater insight into ASCoT's performance, as
well as that of small and large companies. However, it seems clear that the
stockmarket is trying to take valuations to levels that price in the impact
of a UK recession on companies' earnings and dividends. Since the end of May
last year (about the peak in stockmarket levels for small companies) the
negative total return from ASCoT's net asset value per share has been 28.1%,
while the trailing P/E valuation of the portfolio (weighted average and
excluding loss makers) has decreased by approximately 40% and its dividend
yield has increased by around 65%. This is a very significant and rapid
adjustment. The issue, of course, is whether these much lower valuations
adequately reflect the risks ahead. Your Board and Managers believe they
probably do and have begun to employ borrowings to gear the portfolio. The
pace of deployment and its amount will depend on many factors but it is
likely that it will be quite slowly increased from its modest current level
of 106%. Experience suggests that stockmarkets largely adjust ahead of
recessions, but also that timing "the bottom" with accuracy is impossible!
Your Board is very pleased to announce a first interim dividend of 6.00p per
share, which represents an increase of 27.7% compared with the equivalent
payment last year. While underlying growth in dividends from ASCoT's
portfolio remains good, Shareholders should not extrapolate this increase as
your Board is seeking to rebalance the relative weight of the first and
second interim dividends to approximately one-third and two-thirds
respectively (though this should not be taken as a forecast). In addition,
the recovery of VAT and associated interest, more of which later in this
Statement, will serve to inflate this year's earnings on a non-recurring
basis.
The first interim dividend will be paid on 21 August 2008 to Shareholders on
the register on 1 August 2008. For Shareholders participating in ASCoT's
Dividend Reinvestment Plan (DRiP), the last date for submission of Forms of
Election is 31 July 2008. Details of the DRiP are available from your
Secretaries on request or from their website www.aberforth.co.uk.
Shareholders will recall from the Annual Report that VAT is no longer imposed
on management fees and that your Board had reached agreement with your
Managers for recovery of all VAT paid by ASCoT since 2001. This amounted to
£4.7m and has been included in ASCoT's net assets since late 2007 as a
receivable. This sum, plus associated interest of £0.5m, was received in
early June and comprises both that recovered by your Managers from HMRC and a
repayment directly from your Managers of VAT previously offset by them. Your
Managers have also been pursuing claims for the recovery of VAT paid in
earlier periods and I am delighted to report that ASCoT received a further
£0.7m in relation to VAT incurred on management fees from 1991 to 1996, plus
associated interest of £0.5m, in late June. In total, therefore, £6.4m has
been received, which, together with the fact that ASCoT no longer suffers VAT
on its management fees, is an excellent outcome for Shareholders.
At the Annual General Meeting held on 4 March 2008, Shareholders passed all
the resolutions. Of particular note were the resolution, proposed every
three years, that ASCoT should continue as an investment trust, and the
resolution renewing the authority to buy-in up to 14.99% of ASCoT's Ordinary
Shares. Since the AGM, that authority has been utilised and 1,909,788 shares
had been bought in to the end of June at a total cost of £11.1m. All shares
bought in have been, and will be, cancelled rather than held in treasury.
Shares bought in to date have enhanced ASCoT's net asset value by
approximately £2.2m by virtue of the weighted average discount on purchases
being 16.2%. Your Board keeps under careful review the circumstances under
which the buy-in authority is used in the context of its overall objective of
seeking to sustain as low a discount as seems possible.
David R Shaw
Chairman
18 July 2008
MANAGERS' REPORT
INVESTMENT BACKGROUND
Over ASCoT's first half, returns from major equity markets were generally
negative, as the implications of the credit crisis for real economic activity
were digested. In the UK, the FTSE All-Share produced a total return of -
11.2%. With sterling having depreciated by 7% against the euro, this
performance ranked amongst the weakest of the major markets on a constant
currency basis. As is common when the appetite for risk dwindles, small
companies performed more poorly, with the HGSC (XIC) down by 14.2% in total
return terms.
By mid March, stockmarkets seemed to have come to terms with the first-order
effects of the credit crunch. Central banks, particularly the Fed, succeeded
in restoring a degree of confidence, through a combination of interest rate
reductions and less conventional measures, including the rescue of Bear
Stearns and Northern Rock. The extreme stress in credit markets during the
fourth quarter of last year has abated, though there is evidence of lingering
caution: the gap between base rates and LIBOR, the rate at which banks lend
to each other, remains significantly above the level that prevailed before
the credit crisis.
With the banks unable or unwilling to increase their lending, economies are
set to endure further de-leveraging, an essentially deflationary process that
has implications for real economic activity. This second-order effect of the
credit crisis started to weigh on equity markets towards the end of the first
half. It is most obvious in the housing markets, with the US leading the
way. According to the S&P Case Shiller index, US house prices are now 18%
below their peaks of two years ago. Meanwhile, in the UK, where the peak was
reached as recently as August last year, prices are already down by almost
10%. The risks of these falls to consumer spending and, by extension, to
overall economic activity in both countries are obvious. Moreover, in a
potentially stagflationary turn of events, this has come at a time when the
room for manoeuvre on the part of monetary authorities is limited by the
stubborn inflationary threat of rapidly rising commodity prices, most notably
the oil price, which has appreciated by 40% since the start of the year.
These price movements were evident in the UK's May inflation release, which
revealed that the year-on-year change in the CPI had moved to 3.3%, thus
triggering another letter from the Governor to the Chancellor. This measure
of inflation excludes oil prices, which leaves a 7.8% rise in food prices
principally to blame. The RPI, which takes oil prices into account, showed
an increase of 4.3%. With short dated gilt yields above long, the yield curve
has inverted, which has traditionally been considered an indicator of imminent
economic slowdown.
INVESTMENT PERFORMANCE
Against this background of mounting concern about the outlook for the real
economy, equities suffered. ASCoT was not immune, recording a total return
of -12.6%. This was, however, ahead of the HGSC (XIC)'s total return of -
14.2%. The following table and subsequent paragraphs explain how this out-
performance was achieved.
Performance Attribution Analysis
For the six months ended 30 June 2008
Basis Points
Stock selection 49
Sector selection 107
-----
Attributable to the portfolio of investments 156
(calculated on a mid-price basis)
Impact of mid-price to bid price 13
Cash/gearing (3)
Purchase of Ordinary Shares 29
Management fee (net of the VAT refund) (28)
Other expenses (2)
-----
Total attribution based on bid prices 165
-----
Note: 100 basis points = 1%. Total attribution is the difference between the
total return of the net asset value and the Benchmark Index(i.e. net asset
value = -12.55%; Benchmark Index = -14.20%; difference is +1.65% being +165 basis
points).
The net effect of ASCoT's sector positioning was favourable. In broad terms,
the portfolio retains its relatively low exposure to sectors reliant on the
domestic economy. These include Real Estate and General Financials, both of
which are close to the epicentre of the credit crunch. Moreover, it has had
very little exposure to housebuilding, recruitment and regional press, areas
of the stockmarket that suffered particularly acutely in the first half. On
the other hand, the portfolio is over-weight in capital goods sectors, such
as Electronics, Engineering and Aerospace & Defence. These tend to generate
their sales and profits overseas and are therefore more insulated from the
problems confronting the domestic economy. Less helpfully, ASCoT retains its
under-weight positions in Oil and Mining sectors. This is not a reflection
of scepticism about the fundamental story of emerging market demand, but is
motivated by the often lofty valuations that the stockmarket is willing to
attribute to constituents of these sectors at the current time.
Stock selection was also favourable. The most significant factor in this
regard was corporate activity. Entering 2008, your Managers thought it
likely that tighter credit conditions would constrain M&A. This has proved
the case in the large company world, where big deals such as Alliance Boots
would appear to be off the agenda for private equity houses. However,
activity further down the size spectrum, generally below the FTSE 250, has
proved pleasantly robust. The portfolio has a relatively high exposure to
this area of the stockmarket, reflecting particularly low valuations on offer
there. Over the first half, ASCoT has seen six bids completed for its
holdings. At the end of June, another five holdings were in talks. Three
more holdings had been approached, though the talks came to nothing. The
buyers, or potential buyers, have been a mix of trade and private equity.
Underlining the gap between the intrinsic values of many businesses and the
valuations currently accorded to them by the stockmarket, the premiums that
they have been prepared to pay have been considerably above the customary
range. In turn, enterprise valuations in relation to operating profits have
held up: the range for the six completed deals was 14x to 19x, which compares
with an average of under 8x historic operating profits for the portfolio at
the end of June.
Somewhat surprisingly given credit conditions, de-equitisation, a term used
to describe the trend over recent years to replace equity with debt
financing, was still in evidence across the UK stockmarket in the first half,
albeit at a reducing rate. A handful of large takeovers and the perennial
share buy-back programmes from BP and Shell have so far offset the banks'
multi billion pound rights issues. This latter phenomenon has clearly been
an issue for the large company world, but if share prices sustain their
current momentum your Managers will have to dust off their banking analyses.
There have also been several rescue rights issues within the HGSC (XIC). The
companies involved have tended to have a domestic focus. ASCoT has a holding
in one of these and participated in the fund raising. Given the gloomier
outlook for the economy, further rights issues and equity funded deals are
inevitable.
Dividend payments are a more prosaic form of de-equitisation but over the
long term are crucial to equity returns. Once again, the dividend experience
of companies within ASCoT's portfolio has been remarkably good. There were 99
holdings at the end of June, a useful cross-section of the small company
universe. Of those companies, it was the policy of 22 not to pay a dividend,
while a further four had been listed for less than two years, preventing
growth calculations. Of the remaining 73, three cut their dividends, six left
them unchanged and 64 reported increases. Of the 73, the median rate of
dividend growth was 13%, though this median does not necessarily reflect
ASCoT's actual receipts, as it is diluted by the other 26 holdings and
because the portfolio is managed actively, with a specific rate of dividend
growth not targeted. Nevertheless, this rate of growth is considerably above
both the rate of inflation and the long term average achieved by equities.
INVESTMENT OUTLOOK
ASCoT and the UK stockmarket as a whole have enjoyed several years of strong
profit and dividend growth. This run has extended into the first half of
2008. Clouds are, however, gathering on the horizon as the credit crunch
begins to exercise its malign influence, through the housing market, on the
domestic economy. If the inflationary pressures of rising commodity prices
do indeed compel the Bank of England to raise interest rates this year, as
the futures markets are expecting, the risk of outright recession would seem
high. The implications of this turn of events for corporate profitability
and dividend growth are clearly not good.
However, the stockmarket, performing its discounting role, has already moved
many share prices lower, with the FTSE All-Share as at 30 June 2008, in capital
only terms, sitting 17% below its peak in October last year. This drop has left
equities on ostensibly attractive valuations in relation to bonds, albeit
running the risk of lower future profits. Small companies have been punished
even more severely than large: the HGSC (XIC) is well into a bear market, now
over 30% below its peak in May last year. On a historic PE of 9.8x, it is
trading on a 6% discount to large companies. Intriguingly, this level of
valuation may already be discounting a severe collapse in small company profits
similar to declines experienced during the last recession in the early 1990s.
Back then, small company profits started to fall sharply in 1991 and did not
trough until the middle of 1993. However, the stockmarket discounted a
recovery in profits and moved the PE of small companies up to over 18x by the
end of 1993. With valuations thus taking the strain, it was possible to make
good absolute returns from small companies in a period that saw profits
decline by over one third.
30 June 30 June
2008 2007
Characteristics ASCoT Benchmark ASCoT Benchmark
Number of Companies 99 484 107 487
Weighted Average Market £321m £536m £500m £627m
Capitalisation
Price Earnings Ratio (Historic) 9.2x 9.8x 16.9x 15.8x
Net Dividend Yield (Historic) 3.7% 3.7% 2.1% 2.0%
Dividend Cover (Historic) 2.9x 2.8x 2.8x 3.2x
Timing a change in the mood of the stockmarket is never easy. At the end of
June, ASCoT's portfolio retained a defensive disposition: almost one third by
value was invested in companies with net cash on their balance sheets and it
still had its relatively high exposure towards businesses with overseas
profit streams. As such, its average historic PE was 9.2x, a modest 6%
discount to the benchmark. So, for now, your Managers prefer to eschew the
opportunity to push that PE downwards aggressively by increasing exposure in
the vulnerable domestically oriented businesses, such as the housebuilders,
many of which are valued on less than 5x historic earnings. However, at some
point it will be right to invest again in these areas of the stockmarket.
That process will not feel comfortable and the chances are high that timing
will not be perfect. But, given how quickly sentiment can turn, the risks of
being `too late' are as great, if not greater, than being `too early'.
In the meantime, the introduction of a modest level of gearing to ASCoT is
influenced by your Managers' contention that small companies are closer to
the end of their de-rating than the beginning. Valuations for the asset
class are attractive in absolute terms, with the historic PE 33% below its
average over ASCoT's lifetime, and in relation to both bonds and large
companies. With the valuation of ASCoT's portfolio even lower, there would
appear an attractive opportunity to use gearing to add more to existing
holdings and, through buying in ASCoT's own shares, to take advantage of a
historically wide discount between the share price and net asset value.
Aberforth Partners LLP
Managers
18 July 2008
INVESTMENT PORTFOLIO
Thirty Largest Investments as at 30 June 2008
Valuation % of
No. Company £'000 Total
1 Hampson Industries 25,098 4.0
2 Greggs 18,304 2.9
3 Interserve 17,934 2.9
4 Shanks Group 16,864 2.7
5 BSS Group 14,543 2.3
6 Phoenix IT Group 14,022 2.3
7 Domino Printing Sciences 13,456 2.2
8 Premier Oil 12,835 2.1
9 Spirax-Sarco Engineering 12,519 2.0
10 Hiscox 12,328 2.0
Top Ten Investments 157,903 25.4
11 Delta 12,302 2.0
12 Spectris 12,125 2.0
13 Robert Wiseman Dairies 11,943 1.9
14 e2v technologies 11,731 1.9
15 Holidaybreak 11,375 1.8
16 Wilmington Group 11,267 1.8
17 UMECO 11,257 1.8
18 Huntsworth 11,029 1.8
19 CSR 10,446 1.7
20 Low & Bonar 10,334 1.7
Top Twenty Investments 271,712 43.8
21 RPC Group 10,269 1.7
22 Wincanton 10,193 1.6
23 Kofax 10,152 1.6
24 Anite 9,947 1.6
25 Senior 9,862 1.6
26 Nord Anglia Education 9,581 1.5
27 RM 8,840 1.4
28 Headlam Group 8,792 1.4
29 Brown (N.) Group 8,746 1.4
30 Beazley Group 8,618 1.4
Top Thirty Investments 366,712 59.0
Other Investments 290,570 46.9
Total Investments 657,282 105.9
Net Liabilities (36,697) (5.9)
Total Net Assets 620,585 100.0
INTERIM MANAGEMENT REPORT
RISKS AND UNCERTAINTIES
A review of the half year and the outlook for the Company can be found in the
Chairman's Statement and the Managers' Report. The Directors have established an
ongoing process for identifying, evaluating and managing the key risks faced by
the Company. The Board believes that the Company has a relatively low risk
profile in the context of the investment trust industry. This belief arises from
the fact that the Company has a simple capital structure; invests only in small
UK quoted companies; has never been exposed to derivatives and does not
presently intend any such exposure; and outsources all the main operational
activities to recognised, well established firms.
As the Company's investments consist of small UK quoted companies, the principal
risks facing the Company are market related and include market price, interest
rate and liquidity risk. Additional risks faced by the Company include
investment objective, investment policy, share price discount, regulatory risk
and operational/financial risk. An explanation of these risks and how they are
managed can be found in the Directors' Report contained within the 2007 Annual
Report. These principal risks and uncertainties have not changed from those
disclosed in the 2007 Annual Report.
DIRECTORS' RESPONSIBILITY STATEMENT
The Directors confirm that, to the best of their knowledge:
(i) the condensed set of financial statements has been prepared in accordance
with the Statement `Half-yearly financial reports' issued by the UK Accounting
Standards Board; and
(ii) the half-yearly report includes a fair review of information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being an indication
of important events during the first six months of the year and their impact
on the financial statements together with a description of the principal risks
and uncertainties for the remaining six months of the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being disclosure of
related party transactions and changes therein.
On behalf of the Board
David R Shaw
Chairman
18 July 2008
The Income Statement, Reconciliation of Movements in Shareholders'
Funds, Balance Sheet and the Cash Flow Statement are set out below:-
INCOME STATEMENT
(unaudited)
For the six months to 30 June 2008
Revenue Capital Total
£ 000 £ 000 £ 000
Realised net gains on sales - 2,699 2,699
Movement in unrealised - (109,932) (109,932)
appreciation
------- -------- --------
-
Net losses on investments - (107,233) (107,233)
Dividend income 12,455 5,047 17,502
Interest income 1,144 - 1,144
Other income 44 - 44
Investment management fee (783) (1,305) (2,088)
Transaction costs - (1,883) (1,883)
Other expenses (287) - (287)
------- -------- --------
Return on ordinary activities 12,573 (105,374) (92,801)
before finance costs and tax
Finance costs (51) (86) (137)
------- -------- --------
Return on ordinary 12,522 (105,460) (92,938)
activities before tax
Tax on ordinary activities (10) - (10)
------- -------- --------
Return attributable to 12,512 (105,460) (92,948)
equity shareholders
======= ======== ========
Returns per Ordinary Share 12.71p (107.12p) (94.41p)
On 18 July 2008, the Board declared a first interim dividend for the
year to 31 December 2008 of 6.00p per Ordinary Share (2007 - 4.70p)
payable on 21 August 2008.
INCOME STATEMENT
(unaudited)
For the six months to 30 June 2007
Revenue Capital Total
£ 000 £ 000 £ 000
Realised net gains on sales - 72,930 72,930
Movement in unrealised - (33,181) (33,181)
appreciation
-------- -------- --------
Net gains on investments - 39,749 39,749
Dividend income 10,516 877 11,393
Interest income 191 - 191
Other income - - -
Investment management fee (1,487) (2,478) (3,965)
Transaction costs - (2,624) (2,624)
Other expenses (220) - (220)
-------- -------- --------
Return on ordinary activities 9,000 35,524 44,524
before finance costs and tax
Finance costs (35) (59) (94)
-------- -------- --------
Return on ordinary 8,965 35,465 44,430
activities before tax
Tax on ordinary activities - - -
-------- -------- --------
Return attributable to 8,965 35,465 44,430
equity shareholders
======== ======== ========
Returns per Ordinary Share 9.07p 35.89p 44.96p
INCOME STATEMENT
(unaudited)
For the year to 31 December 2007
Revenue Capital Total
£ 000 £ 000 £ 000
Realised net gains on sales - 111,634 111,634
Movement in unrealised - (209,320) (209,320)
appreciation
-------- -------- --------
Net losses on investments - (97,686) (97,686)
Dividend income 19,477 877 20,354
Interest income 258 - 258
Other income 15 - 15
Investment management fee (1,094) (1,823) (2,917)
Transaction costs - (4,052) (4,052)
Other expenses (438) - (438)
-------- -------- --------
Return on ordinary activities 18,218 (102,684) (84,466)
before finance costs and tax
Finance costs (60) (99) (159)
-------- -------- --------
Return on ordinary 18,158 (102,783) (84,625)
activities before tax
Tax on ordinary activities - - -
-------- -------- --------
Return attributable to 18,158 (102,783) (84,625)
equity shareholders
======== ======== ========
Returns per Ordinary Share 18.38p (104.03p) (85.65p)
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
(unaudited)
For the six months to 30 June 2008
Capital Capital
Share Special reserve reserve Revenue
capital reserve realised unrealised reserve Total
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
Balance as at 31
December 2007 988 197,305 473,749 30,302 32,677 735,021
Return on
ordinary activities - - 4,472 (109,932) 12,512 (92,948)
after taxation
Equity dividends paid - - - - (10,375) (10,375)
Purchase of (19) (11,094) - - - (11,113)
Ordinary Shares
------ ------ ------- ------- ------ -------
Balance as at 30 969 186,211 478,221 ( 79,630) 34,814 620,585
June 2008 ====== ======= ======= ======= ====== =======
For the six months to 30 June 2007
Capital Capital
Share Special reserve reserve Revenue
capital reserve realised unrealised reserve Total
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
Balance as at 31
December 2006 988 197,305 367,212 239,622 28,204 833,331
Return on
ordinary activities - - 68,646 (33,181) 8,965 44,430
after taxation
Equity dividends paid - - - - (9,041) (9,041)
----- ------- ------- ------- ------ -------
Balance as at 30 988 197,305 435,858 206,441 28,128 868,720
June 2007 ===== ======= ======= ======= ====== =======
For the year to 31 December 2007
Capital Capital
Share Special reserve reserve Revenue
capital reserve realised unrealised reserve Total
£ 000 £ 000 £ 000 £ 000 £ 000 £ 000
Balance as at 31
December 2006 988 197,305 367,212 239,622 28,204 833,331
Return on
ordinary activities - - 106,537 (209,320) 18,158 (84,625)
after taxation
Equity dividends paid - - - - (13,685) (13,685)
----- ------ ------- ------- ------ -------
Balance as at 31
December 2007 988 197,305 473,749 30,302 32,677 735,021
===== ======= ======= ======= ====== =======
BALANCE SHEET
(unaudited)
As at 30 June 2008
30 June 31 December 30 June
2008 2007 2007
£ 000 £ 000 £ 000
Fixed assets: investments
Investments at fair value 657,282 710,966 871,973
through profit or loss
-------- ------- -------
Current assets
Amounts due from brokers 380 - 428
Other debtors 3,466 6,354 2,608
Cash at bank - 18,018 -
-------- ------- -------
3,846 24,372 3,036
-------- ------- -------
Creditors (amounts falling
due within one year)
Bank overdraft (35,885) - (1,185)
Amounts due to brokers (3,812) (239) (5,051)
Other creditors (846) (78) (53)
-------- ------- -------
(40,543) (317) (6,289)
-------- ------- -------
Net current (liabilities)/
assets (36,697) 24,055 (3,253)
-------- ------- -------
Total assets less 620,585 735,021 868,720
liabilities ======== ======= =======
Capital and reserves:
equity interests
Called up share capital 969 988 988
(Ordinary Shares)
Reserves:
Special reserve 186,211 197,305 197,305
Capital reserve-realised 478,221 473,749 435,858
Capital reserve-unrealisd (79,630) 30,302 206,441
Revenue reserve 34,814 32,677 28,128
-------- ------- -------
620,585 735,021 868,720
======== ======= =======
Net Asset Value per Share 640.44p 743.87p 879.18p
Share Price 534.00p 587.00p 745.00p
CASH FLOW STATEMENT
(unaudited)
For the six months to 30 June 2008
Six Six
months to months to Year to
30 June 30 June 31 December
2008 2007 2007
£ 000 £ 000 £ 000
Net cash inflow from 19,187 6,146 12,296
operating activities
Taxation
Taxation paid (10) - -
Returns on investment and (17) (89) (152)
servicing of finance
Capital expenditure and
financial investment
Payments to acquire (166,745) (200,238) (311,732)
investments
Receipts from sales of 114,506 171,483 300,737
investments
Net cash outflow from capital
expenditure and financial (52,239) (28,755) (10,995)
investment
------- ------- --------
(33,079) (22,698) 1,149
Equity dividends paid (10,375) (9,041) (13,685)
------- ------- --------
(43,454) (31,739) (12,536)
Financing
Purchase of Ordinary Shares (10,449) - -
------- ------- -------
Change in cash during the (53,903) (31,739) (12,536)
period
======= ======= =======
Reconciliation of net return before finance
costs and taxation to net cash inflow
from operating activities
Net return before finance (92,801) 44,524 (84,466)
costs and taxation
Losses/(gains)on investments 107,233 (39,749) 97,686
Transaction costs 1,883 2,624 4,052
Decrease/(increase) in debtors 2,888 (1,239) (4,985)
(Decrease)/increase in creditors (16) (14) 9
------- ------- -------
Net cash inflow from 19,187 6,146 12,296
operating activities
======= ======= =======
NOTES TO THE FINANCIAL STATEMENTS
1. ACCOUNTING STANDARDS
The financial statements have been prepared under the historical cost
convention, as modified to include the revaluation of investments and in
accordance with applicable accounting standards and the AIC's Statement of
Recommended Practice "Financial Statements of Investment Trust
Companies" issued in 2005. The total column of the Income Statement is the
profit and loss account of the Company. All revenue and capital items
in the Income Statement are derived from continuing operations. No
operations were acquired or discontinued in the period.
The same accounting policies used for the year ended 31 December 2007 have
been applied.
2. INVESTMENT MANAGEMENT FEE
For the six months to 30 June 2008
Revenue Capital Total
£ 000 £ 000 £ 000
Investment management fee 1,048 1,747 2,795
VAT paid thereon - - -
VAT refund (265) (442) (707)
------ ------ ------
Total for the six months to 30 783 1,305 2,088
June 2008
====== ====== ======
For the six months to 30 June 2007
Revenue Capital Total
£ 000 £ 000 £ 000
Investment management fee 1,265 2,109 3,374
VAT paid thereon 222 369 591
VAT refund - - -
------ ------ ------
Total for the six months to 30 1,487 2,478 3,965
June 2007
====== ====== ======
For the year to 31 December 2007
Revenue Capital Total
£ 000 £ 000 £ 000
Investment management fee 2,516 4,194 6,710
VAT paid thereon 336 560 896
VAT recoverable (1,758) (2,931) (4,689)
------ ------ ------
Total for the year to 31 December 1,094 1,823 2,917
2007
====== ====== ======
The VAT recovered for the six months to 30 June 2008 above represents the
repayment of VAT incurred in respect of management fees paid between 1991
and 1996.
The VAT recoverable recognised during the year to 31 December 2007
above represents the repayment of all VAT paid on investment
management fees since 1 January 2001 (including all VAT previously offset
by the managers).
3.DIVIDENDS
Six months to Six months to Year to
30 June 2008 30 June 2007 31 December 2007
£ 000 £ 000 £ 000
Amounts recognised as distributions to
equity holders in the period:
Final dividend of 9.15p for the year - 9,041 9,041
ended 31 December 2006
First interim dividend of 4.70p for - - 4,644
the year ended 31 December 2007
Second interim dividend of 10.50p 10,375 - -
for year ended 31 December 2007 ------- ------- --------
10,375 9,041 13,685
======= ======= ========
The first interim dividend of 6.0p (2007 - 4.70p) will be paid on 21 August 2008
to shareholders on the register on 1 August 2008.
4. RETURNS PER ORDINARY SHARE
The returns per Ordinary Share are based on:
Six months to Six months to Year to
30 June 2008 30 June 2007 31 December 2007
£ 000 £ 000 £ 000
Returns attributable to Ordinary
Shareholders (92,948) 44,430 (84,625)
Weighted average number of shares in
issue during the period 98,448,535 98,809,788 98,809,788
5. NET ASSET VALUES
The net assets and the net asset value per share attributable to the Ordinary
Shares at each period end are calculated in accordance with their
entitlements in the Articles of Association and were as follows:
30 June 2008 31 December 2007 30 June
£ 000 £ 000 £ 000
Net assets attributable 620,585 735,021 868,720
Pence Pence Pence
Net asset value attributable per
Ordinary Share 640.44 743.87 879.18
As at 30 June 2008, the Company had 96,900,000 Ordinary Shares in issue
(31 December 2007 and 30 June 2007 - 98,809,788). During the six months to
30 June 2008, the Company bought in and cancelled 1,909,788 shares at a
total cost of £11,113,000.
6. FURTHER INFORMATION
The foregoing do not comprise statutory accounts (as defined in
section 434(3) of the Companies Act 2006) of the Company. The statutory
accounts for the year ended 31 December 2007, which contained an
unqualified Report of the Auditors, have been lodged with the Registrar of
Companies and did not contain a statement required under section
237(2) or (3) of the Companies Act 1985 (as amended). All information
shown for the six months to 30 June 2008 is unaudited.
Certain statements in this announcement are forward looking
statements. By their nature, forward looking statements involve a number
of risks, uncertainties or assumptions that could cause actual
results or events to differ materially from those expressed or
implied by those statements. Forward looking statements regarding past
trends or activities should not be taken as representation that such
trends or activities will continue in the future. Accordingly, undue
reliance should not be placed on forward looking statements.
The Half Yearly Report is expected to be posted to shareholders during the
week commencing 21 July 2008. Members of the public may obtain copies from
Aberforth Partners LLP, 14 Melville Street, Edinburgh EH3 7NS or from its
website at www.aberforth.co.uk.
CONTACT: David Ross/Alistair Whyte - Aberforth Partners LLP - 0131 220 0733
Aberforth Partners LLP, Secretaries
18 July 2008
ANNOUNCEMENT ENDS
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