FIDELITY SPECIAL VALUES PLC
ANNUAL FINANCIAL REPORT, PROXY FORM AND ADDITIONAL DISCLOSURES
TO THE PRELIMINARY RESULTS FOR THE YEAR TO 31 AUGUST 2012
Further to the voluntary disclosure of the Company's annual
results for the year ended 31 August
2012 by way of a preliminary announcement dated 7 November 2012, in accordance with the
Disclosure and Transparency Rules ("the Rules") 4.1.3 and 6.3.5(2)
this announcement contains the text of the preliminary announcement
dated 7 November 2012 together with
the additional text in compliance with the Rules.
The Company's annual report and financial statements for the
year ended 31 August 2012 together
with the accompanying proxy form have been submitted to the UK
Listing Authority, and will shortly be available for inspection on
the National Storage Mechanism (NSM):
www.hemscott.com/nsm.do
(Documents will usually be available for inspection within two
business days of this notice being given)
The annual report and financial statements will shortly be
available on the Company's website at
www.fidelity.co.uk/static/pdf/common/investment-trusts/special/specialannual-2012.pdf
Christopher Pirnie, FIL
Investments International, Company Secretary - 01737 837 929
13 November 2012
FIDELITY SPECIAL VALUES PLC
Preliminary Announcement of Audited Results
For the year ended 31 August
2012
Chairman's Statement
RESULTS FOR THE YEAR ENDED
31 AUGUST 2012
NAV: +15.0%
SHARE PRICE: +9.2%
BENCHMARK: +10.2%
DIVIDEND: 13.00p
I have pleasure in presenting the Annual Report for Fidelity
Special Values PLC.
CHANGE OF PORTFOLIO MANAGER
On 9 July 2012, the Board
announced that Alex Wright had been
appointed as Portfolio Manager of the Company, with effect from
1 September 2012. This reflected the
Board's desire to take greater advantage of opportunities for
capital growth available from dynamic smaller and mid-cap
companies, as well as large companies. This is not a change of
policy; it is a broadening of the opportunity set in which to find
special value investments. The Company's performance will continue
to be measured against both cash (over the long term) and the FTSE
All-Share Index. Alex has demonstrated considerable success in
smaller companies and across the broader market.
Alex has managed the Fidelity UK Smaller Companies Fund since
its inception in February 2008, and
since its launch, Alex has been the number one performing fund
manager in his IMA peer group. Alex has also managed a pilot All
Cap fund since May 2010, investing in
large, medium and small cap companies. Since inception and to
31 August 2012 this fund had returned
40.9% versus a return of 23.7% for the FTSE All-Share Index
(net).
Alex has a contrarian investment style, buying out-of-favour
stocks with downside protection and unrecognised growth potential.
This, combined with a search for value across the market
capitalisation spectrum, makes his investment approach an ideal fit
for the Company.
This change allows Sanjeev Shah
to focus exclusively on his open-ended fund and the Board would
like to thank him for his diligent management of the portfolio in
what has been a particularly challenging period in equity markets.
Over his tenure from 1 January 2008
to 31 August 2012, Sanjeev delivered
a return of 13.0% for the NAV of the Company versus 7.9% for the
FTSE All-Share Index (both on a total return basis).
PERFORMANCE
Throughout the Company's financial year, the Company's
investments were managed by Sanjeev
Shah.
The reporting year to 31 August
2012 has seen a marked improvement in the performance of
Fidelity Special Values PLC with a Net Asset Value total return of
+15.0% (compared to a total return of +10.2% from the FTSE
All-Share Index). The five year total return is +9.9%, broadly
matching the FTSE All-Share Index total return of +9.5% for the
same period. Discounts widened over the period, so the share price
return was +9.2% and -0.1% over one and five years
respectively.
Sentiment and market direction during the year to end of
August 2012 was driven by the ongoing
sovereign debt crisis in Europe
and macroeconomic data in China
and the US. UK equities corrected sharply at the beginning of the
Company's financial year as investors became increasingly concerned
over a possible break-up of the Eurozone.
We saw a significant improvement in sentiment at the end of 2011
thanks to improving US economic data and the European Central
Bank's long term refinancing operation ("LTRO") announcement.
Equities continued to rally well into March before correcting
sharply on renewed fears of a Greek exit from the Eurozone and a
slowdown in global growth.
More recently, we witnessed a significant increase in
policymaker commitment to do `whatever it takes' to keep the
Eurozone together, to which markets reacted positively thinking
that the risk of a Eurozone break-up had abated, at least in the
medium term. However, sentiment continues to ebb and flow, so the
outcome remains uncertain.
While the UK equity market continues to be overshadowed by
macroeconomic and political news, we have begun to see a renewed
focus on company fundamentals during the Company's year which was
reflected in the Company's improved performance.
Throughout the year, Sanjeev took advantage of market volatility
to increase exposure to unloved areas of the market which he felt
were undervalued. This included banks, housebuilders and retailers.
The Company benefited from a significant pick-up in merger and
acquisition activity over the period, with corporate buyers
recognising the value Sanjeev identified in Logica and Aegis
amongst others. In addition the turnaround opportunities that
Sanjeev identified across a variety of different sectors have
started to deliver.
Year to 31 August 2012 2011 2010 2009 2008 5 years
NAV and Index total return
%
Fidelity Special Values PLC +15.0 -4.1 +1.3 +9.0 -9.8 +9.9
FTSE All-Share Index +10.2 +7.3 +10.6 -8.2 -8.7 +9.5
Difference +4.8 -11.4 -9.3 +17.2 -1.1 +0.4
OUTLOOK
Recent actions by central banks across the globe initially
contributed to a more positive outlook for equity markets generally
and the future of the Eurozone more specifically. That said, the
Eurozone crisis is clearly far from being solved, concerns remain
over growth in China and the US
fiscal cliff (as a result of the introduction of the terms of the
Budget Control Act 2011 coming into effect at the end of 2012) is
approaching. Markets are likely to remain volatile in the near term
as a result, but such volatility will continue to present
opportunities to identify companies whose value is not fully
appreciated by the market.
OTHER MATTERS
Other relevant matters are detailed below.
Discount
The Board is very mindful of the importance of the level of
discount to our Shareholders and we have conducted a number of
share repurchases during the year to help prevent the discount from
widening further. The Board will continue to monitor this closely
and will consider taking further action where we feel it to be
effective.
Gearing
The Board believes that using Contracts For Difference for
gearing purposes continues to provide more flexibility for the
Company's needs at a much lower cost than traditional bank
debt.
Dividend
The Board has decided to recommend a final dividend of
13.00 pence per share for the year
ended 31 August 2012, an increase of
15.6% over the 11.25 pence paid for
the year ended 31 August 2011. This
dividend will be payable on 17 December
2012 to Shareholders on the register at close of business on
16 November 2012 (ex-dividend date
14 November 2012).
Board of Directors
It is my belief that the Board has the relevant skills and
experience to serve the Company well into the future. In common
with our practice since 2004, all Directors are subject to annual
re-election and their biographical details are included in the
Annual Report to assist Shareholders when considering their
votes.
Retail Distribution Review ("RDR")
With effect from 31 December 2012,
independent financial advisers will be required to offer advice to
investors after considering a full range of investment options.
Commission for advice will not be payable and fees will have to be
agreed with the client rather than commission based payments being
used.
RDR should open up the opportunity to a greater number of
private investors to invest in investment trusts when these have
not been considered previously due in part to lack of commission,
limited availability of investment trusts on fund platforms and
less understanding within the IFA industry.
The Annual General Meeting: Thursday 13
December 2012 at 11.00am
The Annual General Meeting will be held at Fidelity's offices at
25 Cannon Street, London EC4M 5TA
(St Paul's or Mansion House tube
stations) on Thursday 13 December
2012 at 11.00am.
It is the most important meeting that we, the Directors of your
Company, have each year. Alex
Wright, the newly appointed Portfolio Manager, will be
making a presentation to Shareholders. We urge as many of you as
possible to come and join us for this occasion.
Lynn Ruddick
Chairman
6 November 2012
MANAGER'S REVIEW
INTRODUCTION
The Company's performance in financial year 2012 was
encouraging. The stock market environment remained challenging with
equities experiencing heightened volatility, but significant policy
responses in major economies, including the UK, did help to restore
some confidence by the end of the period. Over the same period, I
am pleased to report that the NAV of the Company rose by 15.0%
(total return basis).
I explain the contributors to this and the reasoning
underpinning my portfolio construction in the Portfolio Review
which follows.
MARKET REVIEW
Firstly I will address the UK.
* The UK economy remained weak over the period; GDP fell 0.5% during the
second quarter of 2012, and has been shrinking for three consecutive
quarters, marking the country's second recession in four years.
* Inflation is on a downward trend with the annual CPI figure declining in 9
out of the 12 months as the weak economy pushed prices down; at the end of
August 2012, CPI stood at 2.5%, down from 4.5% at the end of August 2011.
* The Bank of England ("BoE") increased its quantitative easing ("QE")
programme to £375 billion in three steps but kept interest rates unchanged
throughout the year at a level of 0.5%.
* The UK market rose during the 12 month period, as policymakers around the
world announced measures to revive global economic growth. In the Eurozone,
authorities declared their commitment to do `whatever it takes' to resolve
the fallout from the credit crisis, which temporarily helped to ease
growing concerns about the break up of the Eurozone.
The Company's financial year ending on 31
August 2012 was marked by high levels of volatility and
shifts in investor sentiment. After a poor start to the year,
markets rallied sharply into the New Year, before falling sharply
in April and May, and then recovered into the Company's financial
year end.
Equities fell sharply at the start of the period amidst growing
concerns about the global economic outlook as rating agency
Standard & Poor's lowered the US long term credit rating and
kept the country's outlook at "negative". The newsflow from
Europe was also largely negative,
renewing concern that the region's sovereign debt crisis may spread
to its core. These problems brought about a change of leadership in
Greece and Italy, two of Europe's most indebted countries, whilst
efforts to reach a consensus on relief measures seemed still some
way off.
The downbeat sentiment improved after the US Federal Reserve and
other major central banks took coordinated action to ease funding
for European lenders. Eurozone finance ministers agreed to bail out
debt-stricken Greece, and with US
economic data showing improvement and the BoE extending its QE
programme by another £50 billion in February, the benchmark FTSE
All-Share Index was up by 10.3% at the time of the Company's
Half-Yearly report at the end of February
2012. At a broad sector level, industrials, oil & gas
and consumer goods were among the leaders, while financials - led
by banks - started their recovery, helped by the turn in the
liquidity cycle.
In April, Eurozone debt concerns came back into focus as
restructuring plans for Greece hit
political roadblocks. In the UK, a downward revision in GDP growth
for the fourth quarter of 2011 led to renewed worries about the
strength of the economic recovery. These events combined with
weakening global economic data led to heavy selling pressure in
April and May, when the FTSE All-Share Index fell over 7% over
these two months alone. Encouragingly, these concerns were
addressed through significant policy responses from global central
banks, including interest rate cuts in China and Europe, and a further increase of £50 billion
in its QE target by the BoE, which took its total bond purchase
target to £375 billion. In Europe,
worries about a breakup of the Eurozone subsided to a large extent
after authorities approved several measures to recapitalise banking
systems in troubled countries.
Overall, the improving sentiment was reflected at a sector
level, with most recording positive returns. Industrials, consumer
goods and utilities led the way as companies with proven ability to
withstand tough economic conditions as well as those with strong
growth potential emerged as winners. Mining companies lagged the
broader market, as signs of a slowdown in Chinese economy led to a
weak demand outlook.
PORTFOLIO REVIEW
Performance this year has been encouraging, especially in the
context of the previous financial year's returns. The deviation of
performance from that of the benchmark, in both directions, is a
reflection of my long term, contrarian, value driven approach. My
style of investing means that I tend to be underweight those areas
of the market that are both most expensive and most widely-owned by
other fund managers. In calendar year 2011, share prices were
driven by common risk factors, such as the Eurozone crisis, and my
value driven approach underperformed a more growth-orientated
style. While macroeconomic news continues to dominate, there have
been signs in 2012 of a renewed focus on company fundamentals. This
has helped my bottom-up stockpicking approach.
The portfolio has benefited from increased recognition of a
number of "turnaround" situations where a strong underlying
franchise is supported by one or more of: new management;
attractive valuation; a robust balance sheet; and a lack of
interest from other investors. Examples include QinetiQ (defence),
Ladbrokes (gaming) and ITV (media), which have been among the top
contributors to performance this year.
The Company's performance this year has also been supported by a
number of takeover bids, including those for Logica (IT services),
Psion (IT), Cable & Wireless Worldwide (telecoms) and Aegis
(media). It is encouraging that corporate buyers are also
recognising the value that I have identified in a number of
stocks.
I continued to be attracted by selective companies exposed to
the stabilising housing market, where transactions have been low
versus history. As these begin to normalise, I expect higher
volumes and the scope for margin improvement for companies such as
Redrow (home construction), which has also been the subject of
corporate interest and is attractively priced. The position in
Wolseley, a builders' merchant, was a key contributor to
performance as investors recognised its balance sheet strength and
turnaround in the housing market in the US, which has led to a
brighter earnings outlook.
Despite strong performance in calendar year 2012 to date,
several of our key holdings in the financials sector detracted from
performance over the year as a whole. Names such as Lloyds Banking
Group and Royal Bank of Scotland
fell sharply in the first part of the Company's financial year on
concerns over their sovereign debt exposure before rebounding
somewhat
since the turn of the calendar year. I have maintained a strong
preference for retail and corporate banking franchises, where my
analysis suggests fair values are in some cases well above today's
share prices.
I largely avoided consumer staples such as food and tobacco
stocks, which look expensive and over-owned by other investors. In
both of these sectors, as well as chemicals, margins and returns on
equity are at multi year highs. However, the underweight in these
areas did not support relative performance in a highly uncertain
environment as investors largely focused on the defensive nature of
these holdings. Some of my positions in the technology hardware
segment also failed to perform in line with expectations owing to
growth concerns. In particular, wireless network provider Ericsson
declined as increasing competition in Europe and delays in network upgrades in the
US impacted earnings.
Another feature of the market in the past couple of years has
been a convergence of the valuations of high and low quality growth
companies. Where I was able to find growth at a reasonable price, I
increased exposure to shares such as Reed
Elsevier, Pearson and GlaxoSmithKline. Reed Elsevier, for example, has benefited from a
change of management, owns a unique set of assets and is improving
its operating performance. Despite this it trades on an attractive
multiple of just 10 times expected earnings.
During the year I continued to make use of three main derivative
strategies but these remain a small part of the portfolio. Firstly,
I bought long Contracts For Difference ("CFDs") to achieve
additional gearing within the Company as a cheaper alternative to
borrowing additional funds. These operate in the same way as
regular borrowing and serve to increase or 'gear' the performance
of the underlying share prices in both directions. Secondly, I used
short CFDs to take advantage of certain stocks which I believed
were overvalued and were likely to fall in price. Finally, I used
Index option strategies on the FTSE 100 Index to take advantage of
periods where I considered the market as a whole to be over or
undervalued. These strategies added a small amount of positive
return to the Company.
I remain positive on the outlook for equities and expect shares
to continue to climb the wall of worry for the remainder of this
calendar year. As of September, Alex
Wright took over management of the portfolio and I wish him
every success.
Sanjeev Shah
FIL Investments International
6 November 2012
Introduction to the new Portfolio Manager
I joined Fidelity in 2001 as an analyst. After covering a range
of Pan-European sectors, I launched the Fidelity UK Smaller
Companies Fund in February 2008 and
managed a pilot UK all capitalisation fund from May 2010. I took over portfolio management of
Fidelity Special Values PLC from 1 September
2012 and will manage it as an all capitalisation fund.
KEY INVESTMENT PRINCIPLES
I am very much a bottom-up stock picker who believes that the
market inefficiently prices companies going through a period of
change. I also believe that smaller and medium sized companies
generally offer outperformance potential due to the lower level of
analyst coverage on these companies. The Company will have a bias
towards these small and medium sized companies although investment
will be across the market as a whole.
I seek to invest in companies where I believe further downside
is limited. These will usually be companies that have
underperformed, but that have some form of asset or characteristic
that gives their share price downside protection. Typically there
is one or more of five key elements that are assessed to decide the
security of a company's valuation. These include hard assets; for
example, property or other
tangible assets; cash on the balance sheet; franchise
protection; for example, high barriers to entry; low institutional
ownership/ high short interest; and low relative valuations versus
history.
As well as downside protection, I look for companies with growth
options that are unrecognised by the market. If the market begins
to change its perception of the company, its share price will often
move sharply higher. There should be the prospect of an event or
events that materially changes the earnings power of the business
and which is not currently priced into valuations. Examples of such
events include a change in the competitor landscape, a structural
change in market demand, a new product line or expansion into new
business areas.
These elements should combine to create a portfolio with an
asymmetric risk profile and a bias towards value stocks. By
building a portfolio of stocks across different stages of their
recovery process, the intention is to deliver outperformance across
the market cycle
OUTLOOK
Small and very large companies are currently trading at
significant discounts to long term averages. These bargain
valuations reflect the high degree of uncertainty in the current
macroeconomic environment. My contrarian investment approach leads
me to be positive when others are most negative. Cheap valuations
coupled with low and declining broker coverage among medium sized
and smaller companies create an environment where active stock
picking can add value and provide investors with positive
returns.
Additionally, strong balance sheets and record low interest
rates are encouraging large companies to make acquisitions. Weak
economic growth has meant it is harder for companies to grow
organically, so they are more inclined towards acquiring smaller
companies in attractive niches with stronger growth prospects.
The Company is well placed to benefit from this trend and has
significant exposure to potential acquisition targets.
Since my appointment as Portfolio Manager, I have increased the
Company's exposure to medium sized and smaller stocks. Before my
appointment, around 15% of the Company's assets were invested in
companies with a market capitalisation of less than £1 billion.
This is now closer to 35%. I have added a selection of new
positions in medium and smaller companies, including healthcare
outsourcer United Drug, fuel distributor DCC and retailer
Mothercare. In terms of sector weightings, Sanjeev and I will
usually have in common a preference for the most disliked and
undervalued sectors in the market. However, one change at a sector
level is my reduced exposure to banks, where I struggle to find a
good degree of the downside risk protection that underpins my
investment strategy.
Alex Wright
Portfolio Manager
6 November 2012
PRINCIPAL RISKS AND UNCERTAINTIES AND RISK MANAGEMENT
The Board confirms that there is an ongoing process for
identifying, evaluating and managing the principal risks faced by
the Company. The Board, with the assistance of the Manager, has
developed a risk matrix which, as part of the internal controls
process, identifies the key risks that the Company faces. The
matrix has identified strategic, marketing, investment management,
company secretarial and othersupport function risks. The Board
reviews and agrees policies for managing these risks. The process
is regularly reviewed by the Board in accordance with the Financial
Reporting Council's ("FRC's") "Internal Control: Revised Guidance
for Directors". Risks are identified, introduced and graded. This
process, together with the policies and procedures for the
mitigation of risks, is updated and reviewed regularly in the form
of comprehensive internal controls reports considered by the Audit
Committee. The Board also determines the nature and extent of any
risks it is willing to take in order to achieve its strategic
objectives. The Board's approach to risks is embedded in the
Company's investment objectives and investment policy in the Annual
Report.
EXTERNAL RISKS
MARKET RISK
The Company's assets consist mainly of listed securities and the
principal risks are therefore market related such as market
recessions, interest rate movements, deflation/inflation, terrorism
and protectionism.
Risks to which the Company is exposed and which form part of the
market risks category are included in Note 16 to the financial
statements in the Annual Report together with summaries of the
policies for managing these risks. These are: market price risk
(which comprise other price risk, interest rate risk and foreign
currency risk); liquidity risk; counterparty risk; credit risk; and
derivative instruments risk.
Long CFDs are currently used for gearing purposes. In addition a
day-to-day overdraft facility can be used if required. The impact
of limited finance from counterparties has not impacted the Company
to date, however there are alternative suppliers available in the
market place should the need arise.
The Company relies on a number of main service providers, namely
the Manager, Registrar and Custodian. The Manager is the member of
a privately owned group of companies on which a regular report is
provided to the Board. The Manager, Registrar and Custodian are
subject to regular audits by Fidelity's internal audit team and the
counterparties' own internal controls reports are received by the
Board and any concerns investigated.
SHARE PRICE RISK
Although it is usually the case that the longer a share is owned
the less the risk of losing money, share prices are volatile and
for the short term Shareholder, likely to want to sell in the near
future, volatility is a risk. The Board does not regard volatility
as a significant risk for the long term Shareholder.
DISCOUNT RISK
The Board cannot control the discount at which the Company's
share price trades to net asset value. However, it can influence
this through its share repurchase policy and through creating
demand for shares through good performance and an active investor
relations programme.
INTERNAL RISKS
INVESTMENT MANAGEMENT
The Board relies on the Manager's skills and judgement to make
investment decisions based on research and analysis of individual
stocks and sectors. The Board reviews the performance of the asset
value of the portfolio against the Company's benchmark and
competitors and the outlook for the market with the Manager at each
Board meeting. The emphasis is on long term investment performance
and the Board accepts that by targeting long term results the
Company risks volatility in the shorter term.
GOVERNANCE, OPERATIONAL, FINANCIAL, COMPLIANCE, ADMINISTRATION
ETC
While it is believed that the likelihood of poor governance,
compliance and operational administration by other third party
service providers is low, the financial consequences could be
serious, including the associated reputational damage to the
Company. Your Board is responsible for the Company's system of
internal control and for reviewing its effectiveness. Details of
this process are provided in the Corporate Governance Statement
within this Annual Report.
Related Parties
Nicky McCabe is Chief Operating
Officer of Moonray Investors, a division of FIL Limited Group.
Nicky McCabe has waived her
entitlement to Director's fees.
No Director has a contract of service with the Company and no
contracts existed during or at the end of the financial period in
which any Director was materially interested and which were
significant in relation to the Company's business, except as
disclosed in relation to Nicky
McCabe's interests in the Management Agreement. There have
been no other related party transactions requiring disclosure under
Financial Reporting Standard ("FRS") 8.
The interests of the Directors and FIL Limited in the ordinary
shares of the Company as at 31 August
2012 and 31 August 2011 are
shown in the Annual Report.
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations. Company law requires the Directors to prepare
financial statements for each financial year. Under that law they
have elected to prepare the financial statements in accordance with
UK Generally Accepted Accounting Practice.
The financial statements are required by law to give a true and
fair view of the state of affairs of the Company and of the profit
or loss for the period.
In preparing these financial statements, the Directors are
required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and estimates that are reasonable and prudent;
* state whether applicable UK Accounting Standards have been followed,
subject to any material departures disclosed and explained in the financial
statements; and
* prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for ensuring that adequate
accounting records are kept which disclose with reasonable accuracy
at any time the financial position of the Company and to enable
them to ensure that its financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Company and hence for taking reasonable steps for the
prevention and detection of fraud and other irregularities.
Under applicable law and regulations the Directors are also
responsible for preparing a Directors' Report, including a Business
Review, a Directors' Remuneration Report and a Corporate Governance
Statement that comply with that law and those regulations.
The Directors have delegated the responsibility for the
maintenance and integrity of the corporate and financial
information included on the Company's pages of the Manager's
website www.fidelity.co.uk/its to the Manager. Legislation in the
UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
We confirm that to the best of our knowledge: the financial
statements, prepared in accordance with the applicable set of
accounting standards, give a true and fair view of the assets,
liabilities, financial position and profit or loss of the Company;
and the Directors' Report includes a fair review of the development
and performance of the business and the position of the Company
together with a description of the principal risks and
uncertainties it faces.
Approved by the Board on 6 November
2012 and signed on its behalf by
Lynn Ruddick
Chairman
Enquiries:
Susan Platts-Martin - Head of
Investment Trusts, FIL Investments International - 01737 836916
Keren Holland - Corporate
Communications, FIL Investments International - 0207 074 5262
Christopher Pirnie - Company
Secretary, FIL Investment International, - 01737 837929
Income Statement for the year ended 31
August 2012
2012 2011
revenue capital total revenue capital total
£'000 £'000 £'000 £'000 £'000 £'000
Gains/(losses) on - 35,457 35,457 - (17,846) (17,846)
investments designated at
fair value through profit
or loss
Gains/(losses) on long - 557 557 - (6,642) (6,642)
CFDs held at fair value
through profit or loss
Gains on options and short - 36 36 - 5,147 5,147
CFDs held at fair value
through profit or loss
UK dividends 9,513 - 9,513 4,413 - 4,413
UK scrip dividends 908 - 908 5,499 - 5,499
Overseas dividends 857 - 857 178 - 178
Income form REIT 92 - 92 481 - 481
investments
42 - 42 41 - 41
Interest received on short
CFDs 447 - 447 727 - 727
Dividends received on long 66 - 66 57 - 57
CFDs
(341) - (341) (452) - (452)
Deposit interest
(502) - (502) (427) - (427)
Interest paid on long CFDs
Dividends paid on short
CFDs
Investment management fee (3,412) - (3,412) (3,711) - (3,711)
Other expenses (547) - (547) (562) - (562)
Exchange (losses)/gains on - (117) (117) 1 (67) (66)
other net assets
Net return/(loss) on 7,123 35,933 43,056 6,245 (19,408) (13,163)
ordinary activities before
taxation
Taxation on return/(loss) 228 - 228 250 - 250
on ordinary activities(¹)
Net return/(loss) on 7,351 35,933 43,284 6,495 (19,408) (12,913)
ordinary activities after
taxation for the year
Return/(loss) per ordinary 13.25p 64.78p 78.03p 11.43p (34.17p) (22.74p)
share
(¹) This relates to overseas taxation only.
A Statement of Total Recognised Gains and Losses has not been
prepared as there are no gains and losses other than those reported
in this Income Statement.
The total column of the Income Statement is the profit and loss
account of the Company.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
in the year.
Balance Sheet as at 31 August
2012
2012 2011
£'000 £'000
Fixed assets
Investments designated at fair value through profit 326,618 301,931
or loss
Current assets
Derivative assets held at fair value through profit 3,839 1,553
or loss
Debtors 5,247 3,077
Amounts held at futures clearing houses and brokers 1,236 5,359
Cash at bank 8,451 7,716
18,773 17,705
Creditors - amounts falling due within one year
Derivative liabilities held at fair value through (5,115) (4,881)
profit or loss
Other creditors (1,652) (2,234)
(6,767) (7,115)
Net current assets 12,006 10,590
Total net assets 338,624 312,521
Capital and reserves
Share capital 13,594 14,131
Share premium account 95,767 95,767
Capital redemption reserve 3,194 2,657
Other non-distributable reserve 5,152 5,152
Capital reserve 212,058 186,987
Revenue reserve 8,859 7,827
Total equity Shareholders' funds 338,624 312,521
Net asset value per ordinary share 622.71p 552.85p
Reconciliation of Movements in Shareholders' Funds for the year ended 31 August
2012
share capital other non-
share premium redemption distributable capital revenue total
capital account reserve reserve reserve reserve equity
£'000 £'000 £'000 £'000 £'000 £'000 £'000
Opening 14,234 95,767 2,554 5,152 208,765 7,311 333,783
Shareholders'
funds:
1 September 2010
Repurchase of (103) - 103 - (2,370) - (2,370)
ordinary shares
Net (loss)/return - - - - (19,408) 6,495 (12,913)
on ordinary
activities after
taxation for the
year
Dividend paid to - - - - - (5,979) (5,979)
Shareholders
Closing 14,131 95,767 2,657 5,152 186,987 7,827 312,521
Shareholders'
funds:
31 August 2011
Repurchase of (537) - 537 - (10,862) - (10,862)
ordinary shares
Net return on - - - - 35,933 7,351 43,284
ordinary
activities after
taxation for the
year
Dividend paid to - - - - - (6,319) (6,319)
Shareholders
Closing 13,594 95,767 3,194 5,152 212,058 8,859 338,624
Shareholders'
funds:
31 August 2012
Cash Flow Statement for the year ended 31
August 2012
2012 2011
£'000 £'000
Operating activities
Investment income received 10,480 4,093
Net derivative expenses (354) (54)
Deposit interest received 67 57
Investment management fee paid (4,325) (2,790)
Directors' fees paid (160) (121)
Other cash payments (666) (367)
Net cash inflow from operating activities 5,042 818
Taxation
Overseas taxation recovered 249 290
Taxation recovered 249 290
Financial investment
Purchase of investments (147,520) (197,893)
Disposal of investments 157,186 204,937
Net cash inflow from financial investment 9,666 7,044
Derivative activities
Premium paid on options (281) (810)
Premium received on options 263 2,134
Payments on CFDs (1,441) (1,676)
Movements on amounts held at futures clearing 4,123 (2,889)
houses and brokers
Net cash inflow/(outflow) from derivative 2,664 (3,241)
activities
Dividend paid to Shareholders (6,319) (5,979)
Net cash inflow/(outflow) before financing 11,302 (1,068)
Financing
Repurchase of ordinary shares (10,450) (2,370)
Net cash outflow from financing (10,450) (2,370)
Increase/(decrease) in cash 852 (3,438)
The above statements have been prepared on the basis of the
accounting policies as set out in the annual financial statements
to 31 August 2012. This preliminary
statement, which has been agreed with the Auditor, was approved by
the Board on 6 November 2012. It is
not the Company's statutory financial statements. The statutory
financial statements for the financial year ended 31 August 2011 have been delivered to the
Registrar of Companies. The statutory financial statements for the
financial year ended 31 August 2012
have been approved and audited but have not yet been filed. The
statutory financial statements for the financial years ended
31 August 2011 and 31 August 2012 received unqualified audit
reports, did not include a reference to any matters to which the
Auditor drew attention by way of emphasis without qualifying the
report and did not contain statements under section 498(2) and (3)
of the Companies Act 2006. The annual report and financial
statements will be posted to shareholders as soon as is practicable
and in any event no later than 13 November
2012.