27 Mar 2008 10:56
The Zero Preference Growth Trust PLC (The Company)
The Half Yearly Report of the Company for the six months ended 31 January 2008 is presented as follows:
Investment objective and policy
As stated in the original listing particulars, the Company's investment objective is to achieve capital growth from a portfolio substantially invested in zero dividend preference shares (`zeros'). The Company seeks to enhance capital returns for shareholders by utilising gearing in the form of a flexible revolving credit bank facility. The Directors intend to manage gearing actively in response to market conditions.
From time to time the Company may hold a proportion of its assets in gilts or other fixed income securities if the Board and Manager consider it appropriate to do so. Furthermore, the Board is aware that since the Company was launched a number of other listed investment vehicles have been designed to provide similar growth and risk characteristics to zeros. The Board considers that such investments may meet the investment objective of the Company and may authorise a proportion of the Company's assets to be held in such structured products where appropriate.
In selecting investments for the portfolio, the Manager looks for a combination of a high return and acceptable cover, having regard to the underlying investment policy of the issuer and the life of the zero concerned. The Group may participate in new issues of zeros as well as making purchases of existing zeros. The Manager manages the portfolio actively for capital growth.
The Company was granted a waiver by the UK Listing Authority from the requirements under Listing Rules 15.6.2(1), which came into effect on 28 September 2007, to publish in its Annual Report and Accounts the full text of the Company's investment policy and a statement explaining how the Company has spread investment risk in accordance with that published policy.
To comply with the new Listing Rules the Company's investment policy is detailed above and this should be read in conjunction with the Interim management report and portfolio analysis contained herein.
Company highlights
for the six months ended 31 January 2008
% change Capital return performance Total assets less current liabilities (adjusted for +1.38 change in bank debt and before deduction of loan interest) FD/AIC Investment Trust Zero Dividend Preference Share +1.65 Index Share price and NAV returns Discount/ (premium) at 31 31 July % 31 January January 2007 change 2008 2008 Zero Dividend Preference share NAV 70.50p 66.43p +6.13 Mid 70.50p 68.50p +2.92 - price Growth share NAV 4.64p 6.22p -25.40 Mid 3.75p 4.50p -16.67 19.18% price Ordinary unit NAV 75.14p 72.65p +3.43 (1 Zero Dividend Preference and Mid 73.50p 73.25p +0.34 2.18%1 Growth share) price Company summaryLaunch date 10 August 1999Wind-up date 9 August 2008Domiciled UKYear end 31 July
Shareholder funds ‚£11.411 million
Market capitalisation ‚£11.143 million
Bank loan ‚£1.320 million
The Company has a Revolving Credit Facility of up to ‚£4 million with the Bank of Scotland. This facility expires on 31 July 2008.
Zero Dividend Preference shares 14,209,498: the maximum entitlement at wind-up date is 75p.
Growth shares 30,000,000
Ordinary units One Zero Dividend Preference share and one Growth share can be held and traded as one Ordinary unit.
Investment Manager Premier Asset Management (Guernsey) Limited
Investment Adviser Premier Fund Managers Limited
Investment management fee 0.25% per annum of the total assets less current liabilities, plus a performance fee (of 0.15% of total assets less current liabilities if total assets have increased by more than 5.5% during the year) and a terminal payment (of 12% of final net asset value after repayment of bank debt and capital entitlement of ZDP shares). The investment management fee is charged 100% to revenue and the performance fee and terminal payment provision (if due) are charged 100% to capital.
AIC The Zero Preference Growth Trust PLC is a member of the Association of Investment Companies.
Financial calendarYear end 31 July
Annual results announced October
Annual General Meeting November
Half-year end 31 January
Half-year results announced March
Interim Management Statements June and December
Wind-up date 9 August 2008Chairman's reportDear Shareholder,
Shareholders will appreciate the enormous efforts made by our Investment Managers in an extraordinarily difficult period for markets. I am very pleased to be able to report that the net assets attributable to shareholders increased by 0.93 per cent. net of all expenses over the period under review, only modestly below the 1.65 per cent. increase in the FD/AIC Investment Trust Zero Dividend Preference Share Index. The net asset value (`NAV') of the Zero Dividend Preference Shares increased from 66.43p to 70.50p; that of the Units from 72.65p to 75.14p; because of the very demanding accrual rate, the NAV of the Growth Shares fell from 6.22p to 4.64p. The mid-market prices moved +2.92 per cent., +0.34 per cent. and -16.67 per cent. respectively.
Shareholders will be pleased to know that the Company remained fully compliant with its banking covenants and at the end of January borrowing stood at ‚£ 1,320,000. The period under review coincided with the deepening problems of world credit, and the distress being felt in the inter-bank market reported in July became worryingly more acute. The unprecedented divergence between the Base Rate of the Bank of England and the rates applying in the market is fully illustrated by the Sterling 3 month LIBOR rate which reached over 6.90 per cent. when Bank Rate was 5.75 per cent.. It was therefore appropriate for the Company to reduce its borrowings and ‚£1,800,000 was repaid without penalty when funds were available.
The Board is mindful of its responsibilities to the holders of all classes of share, and whilst considering the implications of winding up the Company on 9 August 2008, is also continuing to review a number of other possibilities in conjunction with the Investment Manager and its advisors. No suitable alternatives have yet been identified but the Board will keep shareholders informed of any relevant developments.
Robert Ottley (Chairman)27March2008Interim management report
for the six months ended 31 January 2008
Market Background
World financial markets suffered their weakest period since 2003 as a number of unprecedented events undermined investor confidence and caused a widespread re-pricing of risk. The credit crunch was precipitated by US sub-prime mortgage losses, resulting in a widespread loss of faith in the banking system and indirectly resulting in the Bank of England being required to support Northern Rock. The turmoil caused money markets to seize up, equity markets to fall and credit spreads to widen significantly.
The Zero Dividend Preference share (`Zero') market was, once again, largely inert to the economic and market backdrop although this environment was not congruent with significant price appreciation. The FD/AIC Zero Dividend Preference Share Index gained 1.65 per cent. over the period. Unusually the Zero market saw a number of negative returns over the period, M&G High Income Investment Company, Utilico Finance 2016 and Real Estate Opportunities all declined in value by 2.7, 3.0 and 4.4 per cent. respectively. The decline in Real Estate Opportunities is discussed later and the Company has only a small exposure to Utilico Finance 2016 and no exposure to M&G High Income Investment Company.
Portfolio Analysis
The portfolio remains balanced in both diversity terms and in respect to the investments risk/return profiles. At 31 January, the portfolio contained 32 holdings, an unchanged quantity from the previous year end. The Company holds a significant proportion of issues within the Zero universe and adds additional diversity though investing in other listed vehicles and structured products which have similar growth and risk profiles to traditional Zeros. The top ten Zero holdings represent just under 70 per cent. of the portfolio, a level felt appropriate to give meaningful conviction to our favoured positions whilst maintaining suitable prudence. The portfolio contains large holdings in Royal London UK Equity & Income Trust and JZ Equity Partners. Each represent slightly over 12 per cent. of the portfolio and both have substantial cover for the Zero's full entitlement, given their respective asset classes. Both made a significant positive contribution to the Company's performance returning 3.7 and 3.3 per cent. respectively.
The Company's third largest holding is Real Estate Opportunities (8.6 per cent. of the portfolio). Disappointingly the Zero declined 4.4 per cent. in price terms, somewhat surprising considering there were a number of positive corporate events impacting on them, specifically, a simplification of the Company's capital structure, an increase in the equity subordinate to the Zeros, a cap on the dividend to ordinary shareholders and the transfer of the Zero issue into a subsidiary company thus giving Zero holders a potential claim to the company's substantial revenue reserve. We remain confident in the prospects for the holding despite anticipated commercial and residential property declines. Weakness in the share price was used to acquire further shares.
The best performer in the Zero market was Bear Stearns Private Equity (Guernsey). At the beginning of the period the Company held a small position, approximately 2.2 per cent. of the portfolio. The Zero fell 7.5 per cent. from its May price, despite no change in the fundamental value. Bear Stearns Private Equity (Guernsey) also went to unusual lengths in issuing a statement distancing itself from collapsing hedge funds and derivatives of the US subprime mortgage market. The opportunity was used to double the holding. Pleasingly, rationality returned and the stock was "rerated" appreciating almost 12 per cent. from the August low.
Close European Accelerated Return Fund was weak over the period. The Company's 11th largest holding declined 12.2 per cent. caused by a decline in the Dow Jones EuroStoxx Index, increased implied volatility on index derivatives and a general increased risk adversity. The security would return in excess of 15 per cent. per annum if it pays its full entitlement which remains marginally covered.
The Zero holding in Invesco Perpetual Recovery was sold at a 5.3 per cent. profit on July's valuation. The holding in Jupiter Dividend & Growth Trust Zeros was also sold at a profit as its valuation appeared expensive in comparison to its peers. The small Gilt holdings were sold at a profit as their yields were compressed as investors sought the safe haven of government securities. Holdings in Premier Absolute Growth & Income Trust Securities, Recovery Trust and New Star Financial Opportunities Trust were all redeemed during the period returning good annualised rates of return from their July valuations.
Holdings in US Special Opportunities Trust, M&G Recovery Investment Company, Investec High Income Securities and Advanced Development Capital 2012 Zeros were all increased over the period. Significant new positions include Alternative Asset Opportunities, Investec Capital Accumulator Trust, Life Offices Opportunities Trust as well as autocallable securities issued by Citigroup and Sociĩtĩ Gĩnĩrale.
The portfolio is well positioned to provide reasonable growth without requiring significant equity market strength. Further, even in weaker market conditions the portfolio should deliver comparably strong returns. The portfolio benefits from diversity across asset classes and positions in unique opportunities that have the ability to realise value irrespective of equity markets.
Risks and uncertainties
The main risks arising from the Group's financial instruments are market price risk, interest rate risk, maturity risk and liquidity risk. The Board reviews and agrees policies for managing each of these risks and they are summarised below.
The Company finances its operations through a bank loan and the issue of shares.
It is not the Group's policy to enter into derivative contracts.
Market price risk
Market price risk arises mainly from uncertainty about future prices of financial instruments used in the Group's business. It represents the potential loss the Group might suffer through holding market positions by way of price movements and movements in exchange rates. These risks are monitored by the Investment Manager on a regular basis and the Board at quarterly meetings with the Investment Manager.
Interest rate risk
The Company invests mainly in zero dividend preference securities and fixed interest rate securities. Hence any changes to the prevailing interest rates or changes in expectations for future yields may result in an increase or decrease in the value of the securities held. In general, a rise in interest rates will increase the potential return for new investors but will reduce the capital value of the Company for existing investors. A decline in interest rates will have the opposite effect.
The Company also invests in floating interest rate securities, which are exposed to cash flow interest rates.
The Group has cash and also has a variable rate bank loan facility. These assets and liabilities will be subject to fluctuations in current and future interest rates. This flexible facility enables the Company to repay partially or increase the loan on a regular basis thus enabling the Company to control, with flexibility, its exposure to the market and the underlying interest rate risk.
Maturity risk
Maturity risk is the risk that there will be insufficient assets available to repay the Zero Dividend Preference shares held in full on maturity. In general, the relative risk of a zero can be measured by analysing the hurdle rate of each security, the structure of the trust that issues it and the underlying value of securities in the trust.
The Zero Dividend Preference shares, one of the Group's classes of share capital in issue, gives holders the right to a repayment entitlement which accrues at a fixed compounding rate up to 9 August 2008. The full repayment of the Zero Dividend Preference shares of 75p per share is, however, subject to sufficient growth in the value of the Company's portfolio being generated by the repayment date. At the period end, total assets were sufficient for the Zero Dividend Preference shares to be repaid in full on the winding-up date of 9 August 2008 and the shares had cover of 1.05 times.
Liquidity risk
The Company is wholly invested in quoted securities which, in an orderly market, can be sold to meet funding commitments if necessary.
Foreign currency risk
All the Group's assets and liabilities are in sterling and accordingly the only currency exposure the Group has is through the investment activities of the companies in which it is invested. Although there is some currency risk, the underlying assets of the Company's current investments are predominantly denominated in sterling.
Paul SmithHoward CrossenPremier Fund Managers LtdPremier Asset Management (Guernsey) Limited27 March 2008
Responsibility statement
for the six months ended 31 January 2008
The Directors confirm that to the best of their knowledge:
(a) the condensed set of financial statements has been prepared in accordance with the Accounting Standard Board's statement `Half-Yearly Financial Reports';
(b) the review of the period includes a fair review of the information required by DTR 4.2.7R; and
(c) the review of the period includes a fair review of the information requiredby DTR 4.2.8R.Investment portfolioas at 31 January 2008% of Year of Rating* Fair portfolio maturity value ‚£'000 Zero Dividend Preference shares Royal London UK Equity & Income Trust 2008 A5 1,533 12.6 JZ Equity Partners 2009 AAA0 1,478 12.1 Real Estate Opportunities 2011 AA7 1,055 8.6 M&G Income Investment Company 2008 AAA1 958 7.8 M&G Recovery Investment Company 2009 AAA2 808 6.6 Bear Stearns Private Equity (Guernsey) 2013 AAA0 728 6.0 EPIC Securities 2011 AAA0 613 5.0 US Special Opportunities Trust 2008 AA1 437 3.6 Jupiter Second Split Trust 2009 AAA0 422 3.5 Investec High Income Securities 2009 C3 381 3.1 Jupiter Second Enhanced Income Trust 2009 AAA0 348 2.9
Advanced Development Capital Zeros Units 2012 N/A 215 1.8
Advanced Development Capital Zeros 2012 AAA0 196 1.6 Utilico Finance 2014 AAA2 129 1.0 Utilico Finance 2016 AAA2 122 1.0 Advanced Development Capital Zeros 2010 AAA0 59 0.5
JP Morgan Income & Capital Investment Trust 2008 AAA0 20 0.2
BFS Managed Properties 2011 N/A 1 0.0 Total Zero Dividend Preference shares 9,503 77.9Investment portfolioas at 31 January 2008 Year of Rating* Fair % of maturity value portfolio ‚£'000 Preference shares Alternative Asset Opportunities N/A 198 1.6 Citigroup Symphony Defensive Euro N/A 196 1.6Autocall
Japanese Accelerated Performance Fund 2009 N/A 150 1.3
HBOS 6.0884% 2015/49 N/A 89 0.7 Total preference shares 633 5.2 Fixed interest
Barclays Bank EuroStoxx 50 Ladder Bond 2010 N/A 456 3.7
Sociĩtĩ Gĩnĩrale Double Opportunity Autocallable FTSE 100 Warrant N/A 280 2.3 Northern Rock Perpetual Sub Notes N/A 23 0.2 Total fixed interest 759 6.2 Ordinary shares
Close European Accelerated Return Fund 2011 AAA 404 3.3
Accelerated Return Fund 2008 AAA 306 2.5 Life Offices Opportunities Trust N/A 189 1.5 Investec Capital Accumulator Trust AAA0 184 1.5
Economic Lifestyle Property Investment 2015 AAA0 130 1.1 Company
Defined Capital Return Fund N/A 89 0.7 City Merchants High Yield Trust N/A 7 0.1 Total ordinary shares 1,309 10.7 Total investments 12,204 100.0
The above portfolio excludes 1 stock held at nil value.
*Key to trust ratings:-
AAA = 0% in splits and high yield funds
AA = up to 5% in splits and high yield funds
A = 5% - 10% in splits and high yield funds
BB = 10% - 15% in splits and high yield funds
B = 15% - 25% in splits and high yield funds
C = 25%+ in splits and high yield funds
Other = Non-splitsDebt0 = No debt
1 = up to 10% of assets represented by debt
2 = up to 20% of assets represented by debt
3 = up to 30% of assets represented by debt
4 = up to 40% of assets represented by debt
5 = up to 50% of assets represented by debt
6 = up to 60% of assets represented by debt
7 = up to 70% of assets represented by debt
8 = up to 80% of assets represented by debt
9 = greater than 80% of assets represented by debt
Sourced from Premier Fund Managers (data relating to 31 January 2008).
Investment portfolioas at 31 January 2008
Allocation of total portfolio by rating as at 31 January 2008
Fair % of value portfolio ‚£'000 Rating AAA 6,905 56.6 AA 1,492 12.2 A 1,533 12.6 C 381 3.1 Other Listed Investments 1,893 15.5 Total portfolio 12,204 100.0 Company detailsHistory
The Company was launched on 10 August 1999, raising ‚£30 million before expenses, by a placing of 30,000,000 Ordinary units each comprising 1 Zero Dividend Preference share and 1 Growth share. The Company had an initial wind-up date of 9 August 2004.
At an Extraordinary General Meeting of the Company held on 2 August 2004 and at separate class meetings of the holders of Growth shares and Zero Dividend Preference shares held on the same date approval was given for the life of the Company to be extended to 9 August 2008.
Approval was also given to a tender offer to the holders of Zero Dividend Preference shares under which the Company subsequently purchased and cancelled 15,790,502 Zero Dividend Preference shares on 6 August 2004.
Zero Dividend Preference shares - 14,209,498 in issue
Dividends
No dividends are paid on the Zero Dividend Preference shares.
Capital
The Zero Dividend Preference shares were issued in August 1999 with an initial capital entitlement of 50p increasing to a final capital entitlement of 69.3p per share on 9 August 2004.
Following the extension of the Company's life the final capital entitlement of the Zero Dividend Preference shares will now be 75.0p on 9 August 2008, subject to sufficient assets being available.
Voting
The Zero Dividend Preference shareholders will not normally have the right to attend and vote at any general meeting unless a resolution either to wind-up the Company or vary the rights of Zero Dividend Preference shares is proposed.
Growth shares - 30,000,000 in issue
Dividends
Holders of Growth shares are entitled to the revenue profits of the Company available for distribution by way of interim and final dividend at such times as the Directors may determine.
Capital
On a winding-up of the Company, subject to sufficient assets being available, Growth shareholders will be entitled to all surplus assets of the Company available after paying in full the entitlement of the Zero Dividend Preference shares and a potential 12% terminal payment to the Investment Manager (see note 4).
Voting
Each holder will have the right to attend any general meeting of the Company and on a show of hands will have one vote and on a poll will have one vote for each Growth share held.
ordinary units
Growth shares and Zero Dividend Preference shares may also be traded as Ordinary units, each comprising one Growth share and one Zero Dividend Preference share. Holders of Ordinary units are entitled to the rights attaching to the underlying Growth and Zero Dividend Preference shares.
Bank loan
At 31 January 2008, the Company had drawn down ‚£1,320,000 of the ‚£4 million Revolving Credit Facility with the Bank of Scotland. Since the period end, the Company has not changed the total amount drawn down under the facility.
risk factors
The capital structure of the Company includes gearing through bank debt and, in respect to Growth shares, through the capital attributable to Zero Dividend Preference shares. This gearing means that for any movement - up or down - in the Company's gross assets there will (in most circumstances) be a greater percentage movement in the net asset value (`NAV') of the Growth shares. This in turn may be reflected in greater volatility in the share price of the Growth shares and adds to the risk associated with this investment. If the final capital entitlement of the Zero Dividend Preference shares is uncovered, the movement of the NAV of the Zero Dividend Preference shares will also be geared in the same way. This adds to the risk associated with this investment. If on a wind-up the gross assets of the Company are insufficient to cover the bank loan, the payment of other creditors and the capital entitlements of the Zero Dividend Preference shares, the terminal asset value of any of the Growth shares could be nil and shareholders could lose all of their capital invested in those shares.
The Zero Dividend Preference shares rank after the repayment of bank debt and the payment of other creditors but ahead of the Growth shares for repayment of capital on a winding-up of the Company and hence can be regarded as lower risk than the Growth shares in respect of capital entitlement. An insufficient increase in the gross assets of the Company could result in the Zero Dividend Preference shares failing to receive their full redemption value on wind-up and if gross assets were equal to or less than the amount required to repay the bank loan and other liquidation costs shareholders would lose all of their capital invested in the Zero Dividend Preference shares.
Financial summary 31 31 July % Discount/ January 2007 change (premium) 2008 at 31 January 2008 Capital
Total assets less current liabilities 12,727 14,419 (11.73) (excluding bank loans) (‚£'000)
Total assets less current liabilities 1.38 (adjusted for change in bank debt and before deduction of loan interest) FD/AIC Investment Trust Zero Dividend 173.10 170.29 1.65 Preference Share Index Net asset value Zero Dividend Preference 70.50p 66.43p 6.13 share Mid-market price Zero Dividend 70.50p 68.50p 2.92 -Preference share Net asset value Growth share 4.64p 6.22p (25.40) Mid-market price Growth share 3.75p 4.50p (16.67) 19.18% Net asset value Ordinary unit 75.14p 72.65p 3.43 Mid-market price Ordinary unit 73.50p 73.25p 0.34 2.18% 6 months Year ended ended 31 July 31 January 2007 2008 Total Return
Total return on assets attributable to shareholders 1.38% 5.96%
Total return FTSE All-Share Index 7.51% 12.95% Total return Zero Dividend Preference share 2.92% 8.73% Total return Growth share (16.67)% 5.88% Total return Ordinary unit 0.34% 10.57% Total expense ratio 0.92% 2.08% As at 31 January 2008 Zero Dividend Preference shares Asset cover ratio 1.05:1 Hurdle rate to redemption price -7.9paConsolidated income statementfor the six months ended 31 January 2008 Six months ended 31 Six months ended 31 January 2008 January 2007 (unaudited) (unaudited) Revenue Capital Total Revenue Capital Total ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Gains on investments Gains on investments at fair - 303 303 - 888 888 value Net investment result - 303 303 - 888 888 Dividends and interest 24 - 24 27 - 27 Expenses Investment management fee (17) - (17) (19) - (19) Terminal payment provision (note - (15) (15) - (76) (76)4) Other expenses (94) - (94) (97) - (97) (111) (15) (126) (116) (76) (192) (Loss)/profit before finance (87) 288 201 (89) 812 723 costs and taxation Finance costs Bank interest payable (96) - (96) (164) - (164) (Loss)/profit before and after (183) 288 105 (253) 812 559 taxation for the period but before finance (costs)/gains allocated in respect of shareholders Finance (costs)/gains in respect of:
Zero Dividend Preference shares - (579) (579) - (515) (515)
Growth shares 183 291 474 253 (297) (44) - - - - - - Return per share (IAS 33 and Articles ofAssociation basis) (note 2): pence pence pence pence pence pence Zero Dividend - 4.07 4.07 - 3.63 3.63 Preference share Growth share (0.61) (0.97) (1.58) (0.84) 0.98 0.14 Ordinary unit (0.61) 3.10 2.49 (0.84) 4.61 3.77
The total column of this statement represents the Group's income statement, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies (`AIC').
All items in the above statement derive from continuing operations.
Consolidated income statementfor the six months ended 31 January 2008 Yearended 31 July2007 (audited) Revenue Capital Total ‚£'000 ‚£'000 ‚£'000 Gains on investments Gains on investments at fair value - 1,176 1,176 - 1,176 1,176 Net investment result 50 - 50 Dividends and interest (37) - (37) Expenses Investment management fee - (88) (88) Terminal payment provision (note 4) (192) - (192) Other expenses (229) (88) (317) (Loss)/profit before finance (179) 1,088 909 costs and taxation Finance costs (273) - (273) Bank interest payable (452) 1,088 636 (Loss)/profit before and after taxation for the year but before finance (costs)/ gains allocated in respect of shareholders Finance (costs)/gains in respect of: - (1,052) (1,052) Zero Dividend Preference shares 452 (36) 416 Growth shares - - - Return per share (IAS 33 and Articles of Association basis) (note 2): pence pence pence - 7.41 7.41 Zero Dividend Preference share (1.51) 0.12 (1.39) Growth share (1.51) 7.53 6.02 Ordinary unit
The total column of this statement represents the Group's income statement, prepared in accordance with IFRS. The supplementary revenue return and capital return columns are both prepared under guidance published by the Association of Investment Companies (`AIC').
All items in the above statement derive from continuing operations.
Consolidated balance sheetas at 31 January 2008 31 January 31 July 31 January 2008 2007 2007 (unaudited) (audited) (unaudited) ‚£'000 ‚£'000 ‚£'000 Non current assets Investments at fair value 12,204 13,952 14,547 Current assets Trade and other receivables 20 22 33 Cash and cash equivalents 777 594 52 797 616 85 Total assets 13,001 14,568 14,632 Current liabilities Trade and other payables (274) (149) (143) Bank loans (1,316) (3,113) - (1,590) (3,262) (143) Total assets less current liabilities 11,411 11,306 14,489 Non current liabilities Bank loans - - (3,260)
Assets attributable to shareholders (note 3) 11,411 11,306 11,229
Liabilities due to shareholders
Zero Dividend Preference share entitlement (10,018) (9,439) (8,902)
Growth share entitlement (1,393) (1,867) (2,327) (11,411) (11,306) (11,229) - - - Net asset value per share (note 3): pence pence pence Zero Dividend Preference share 70.50 66.43 62.65 Growth share 4.64 6.22 7.75 Ordinary unit 75.14 72.65 70.40
Consolidated statement of cash flows
for the six months ended 31 January 2008
Six months Six months ended 31 ended 31 Year January January ended 2008 2007 31 July (unaudited) (unaudited) 2007 ‚£'000 ‚£'000 (audited) ‚£'000 Cash flows from operating activities Investment income received 16 20 37 Bank deposit interest received 13 7 15 Investment Manager's fees paid (18) (43) (61) Secretarial fees paid (26) (21) (49) Other cash payments (83) (80) (143) Cash expended from operations (note 7) (98) (117) (201) Bank interest paid (97) (162) (269)
Net cash outflow from operating activities (195) (279) (470)
Cash flows from investing activities Purchases of investments (2,076) (2,901) (6,919) Sales of investments 4,254 5,190 10,091
Net cash inflow from investing activities 2,178 2,289 3,172
Cash flows from financing activities Advances of bank loan 500 750 2,150 Repayments of bank loan (2,300) (2,800) (4,350)
Net cash outflow from financing activities (1,800) (2,050) (2,200)
Increase/(decrease) in cash and cash 183 (40) 502 equivalents for the period
Cash and cash equivalents at the start of the 594 92 92 period
Cash and cash equivalents at the end of the 777 52 594 period
Notes to the accounts
for the six months ended 31 January 2008
1 ACCOUNTING POLICIES
The financial information contained in this Half Yearly Financial Report does not constitute statutory financial statements as defined in Section 240 of the Companies Act 1985. The statutory financial statements for the year ended 31 July 2007, which contained an unqualified auditors' report, 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. These statutory financial statements were prepared under International Financial Reporting Standards (`IFRS') and in accordance with the Accounting Standard Board's ('ASB') Statement on Half Yearly Financial Reports and the Statement of Recommended Practice: Financial Statements of Investment Trust Companies, revised December 2005. The financial statements have been prepared using the accounting policies adopted in the audited financial statements for the year ended 31 July 2007.
The Group financial statements consolidate the financial statements of the Company and its wholly owned subsidiary undertaking, ZPGT Trading Limited, for the six months ended 31 January 2008.
These financial statements have been prepared in accordance with International Financial Reporting Standards (`IFRS') for interim financial statements; IAS 34 Interim Financial Reporting. They do not include all the financial information required for full annual financial statements.
The financial statements are presented in sterling rounded to the nearest thousand.
2 Return per share
IAS 33 and Articles of Association basis
Returns per share shown have been calculated based on the following returns attributable to each class of share;
Six months Six months Year ended ended ended 31 July 2007 31 January 31 January 2008 2007 (audited) (unaudited) (unaudited) Revenue Capital Total Revenue Capital Total Revenue Capital Total ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 ‚£'000 Zero Dividend - 579 579 - 515 515 - 1,052 1,052 Preference share Growth share (183) (291) (474) (253) 297 44 (452) 36 (416) (183) 288 105 (253) 812 559 (452) 1,088 636
The weighted average number of Zero Dividend Preference shares in issue was 14,209,498 (six months ended 31 January 2007 and year ended 31 July 2007: 14,209,498) and the weighted average number of Growth shares in issue was 30,000,000 (six months ended 31 January 2007 and year ended 31 July 2007: 30,000,000).
There are no dilutive elements within the Group and hence no diluted return per share calculations are presented.
3 Net asset value
The net asset value per Zero Dividend Preference share is calculated using assets attributable of ‚£10,018,000 (31 January 2007: ‚£9,439,000, 31 July 2007: ‚£8,902,000) and 14,209,498 Zero Dividend Preference shares in issue at the end of the period.
The net asset value per Growth share is calculated using assets attributable of ‚£1,393,000 (31 January 2007: ‚£1,867,000, 31 July 2007: ‚£2,327,000) and 30,000,000 Growth shares in issue at the end of the period.
The net asset values stated include current period revenue.
A reconciliation of movements in assets attributable during the period is shownbelow: Zero Dividend Preference Growth Total shares shares ‚£'000 ‚£'000 ‚£'000 Assets attributable At 1 August 2007 9,439 1,867 11,306 Profit after taxation for the year but before - 105 105finance (costs)/gains allocated in respect of shareholders Zero Dividend Preference shares appropriation 579 (579) - At 31 January 2008 10,018 1,393 11,4114 Investment management fees
Under the terms of the investment management agreement, the Investment Manager is entitled to an annual fee at the rate of 0.25% per annum of the total assets less current liabilities (other than borrowing incurred for investment purposes) of the Group before deducting any prior charges on the last business day of that quarter, plus a performance fee, payable annually in arrears, at the rate of 0.15% of total assets less current liabilities if total assets have increased by more than 5.5% during the year. In the six months ended 31 January 2008, no performance fee is deemed to be due as the assets have not increased sufficiently (six months ended 31 January 2007 and year ended 31 July 2007: nil). However, because the performance fee is based on performance to 31 July 2008, the actual fee payable (if any) can only be determined at that time.
In addition, the Investment Manager is entitled to a terminal payment calculated as 12% of the assets attributable for distribution to Growth shareholders, after repayment of bank debt and full satisfaction of the final capital entitlement of the Zero Dividend Preference shares on 9 August 2008. At 31 January 2008, such assets available were ‚£858,000, making the overall provision of ‚£103,000 (six months ended 31 January 2007: ‚£76,000, year ended 31 July 2007: ‚£88,000). Therefore, the movement in the total provision of ‚£15,000 has been included in the consolidated income statement for the six months ended 31 January 2008. However, because the terminal payment is only payable on 9 August 2008, the actual fee payable (if any) can only be determined at that time.
Fees paid to the Investment Adviser are the responsibility of the Investment Manager.
5 Dividends Paid
No dividends have been paid and the Directors do not recommend the payment of a dividend in respect of the six months ended 31 January 2008 (six months ended 31 January 2007 and year ended 31 July 2007: nil).
6 Taxation
The tax charge for the six months ended 31 January 2008 is nil (six months ended 31 January 2007 and year ended 31 July 2007: nil).
The Company has an effective tax rate of 0% for the year ending 31 July 2008. The estimated effective tax rate is 0% as investment gains are exempt from tax owing to the company status as an Investment Trust and there is expected to be an excess of management expenses over taxable income.
7 Reconciliation of net profit after finance costs and taxation to cashexpended from operations Six months Six months Year ended ended ended 31 July 31 January 31 January 2007 2008 2007 (audited) (unaudited) (unaudited) ‚£'000 ‚£'000 ‚£'000
Net profit after finance costs and taxation 105 559 636
Gains on investment (303) (888) (1,176) Bank interest payable 96 164 273 Decrease/(increase) in trade and other 2 (8) 3 receivables Increase in trade and other payables 2 56 63 Cash expended from operations (98) (117) (201)8 Related party transactions
The Investment Manager, Premier Asset Management (Guernsey) Limited, is regarded as a related party of the Company. The amounts payable to the Manager as at 31 January 2008 are ‚£9,000 (31 January 2007: ‚£9,000, 31 July 2007: ‚£ 9,000). Premier Asset Management (Guernsey) Limited is a subsidiary company of Premier Asset Management Limited.
Shareholder informationFinancial calendarYear end 31 July
Annual results announced October
Annual General Meeting November
Half-year end 31 January
Half-year results announced March
Interim Management Statements June and December
Wind-up date 9 August 2008
share price and performance information
The Company's Zero Dividend Preference shares, Growth shares and Ordinary units are listed on the London Stock Exchange. The mid-market prices are quoted daily in the Financial Times under `Investment Companies'. The net asset values are announced weekly to the London Stock Exchange and published monthly via the Association of Investment Companies.
Information about the Company, factsheets and daily prices can be obtained on the Investment Manager's website at www.premierassetmanagement.co.uk or at www.splitsonline.co.uk. Any enquiries can also be e-mailed to premier@premierfunds.co.uk, or telephoned to 01483 400400.
share dealing
Information on the Premier PEP and ISA products can be obtained by contacting Premier on 01483 400400.
share register enquiries
The register for the Zero Dividend Preference shares, Growth shares and Ordinary units is maintained by Equiniti Registrars. In the event of queries regarding your holding, please contact the Registrar on 0870 600 3964. Changes of name and/or address must be notified in writing to the Registrar.
Premier Asset Management Limited
Other investment companies managed by Premier Asset Management Limited are: Acorn Income Fund Limited US Special Opportunities Trust PLC Premier Utilities Trust PLC Premier Renewable Energy Fund Limited
Further details of these funds can be obtained from www.premierassetmanagement.co.uk or by calling Premier on 01483 400400. Email premier@premierfunds.co.uk
ZERO PREFERENCE GROWTH TRUST PLC