TIDMGMF
GARTMORE FLEDGLING TRUST PLC
Unaudited Results for the six months to 28 February 2011
Interim Report Page 1:
Overview of the period to 28 February 2011
* Net Asset Value total return of 24.4%* over the six-month period to 28
February 2011, compared with a total return of 24.7% from the FTSE Fledgling
(ex. Investment Companies) Index.
* Over the same period, the broader UK equity market, as measured by the FTSE
All-Share Index, produced a total return of 16.5%.
* During the six-month period, the Net Asset Value (excluding current year
revenue) and mid-market price per Ordinary share reached all-time highs of
572.0 pence and 480.0 pence respectively.
* Over the ten year to 28 February 2011, the Company has achieved a compound
annual total return of 11.6% in Net Asset Value, compared with a compound
annual total return of 4.2% from the FTSE All-Share Index.
* The Company's Net Asset Value performance ranked 1st in The Association of
Investment Companies UK Smaller Companies sector over the ten years to 28
February 2011, having achieved a Net Asset Value total return of 199.0%,
compared with a sector average return of 89.7%.
* Interim dividend increased from 3.5 pence to 4.0 pence per Ordinary share, a
rise of 14.3%.
* On a mid-market basis to give the fairest comparison
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Interim Report Page 2:
Chairman's Statement
I am pleased to present the half-yearly financial report of Gartmore Fledgling
Trust plc for the six months to 28 February 2011.
Performance
Over the six-month period the performance of Fledgling companies was strong and
well ahead of the broader UK equity market. The Company's assets achieved a net
asset value total return of 24.4%, compared with a total return of 24.7% from
the Fledgling Index and 16.5% from the FTSE All-Share Index. During the period,
the Company's net asset value (ex. current year revenue) and Ordinary share
price reached all-time highs of 572.0 pence and 480.0 pence respectively. The
Company's broadly in line performance relative to the benchmark is attributable
to the Manager's active overlay of favoured stocks which largely mitigated the
costs of rebalancing the portfolio.
The strength of UK equities over the six-month period was boosted by momentum
attributed to heightened recovery expectations. Investors' concerns about
European sovereign debt contagion lessened, while improving US economic data
helped the FTSE 100 Index break the psychologically important 6000 level for
the first time since the collapse of Lehman Brothers. This momentum is
highlighted by the unusually strong performance of the Fledgling Index which,
in December increased by 10.6%, with the Company's net asset value rising by
11.2%.
The Fledgling Index performed well ahead of the FTSE All-Share Index,
delivering an additional 8.2% over the review period. Fledgling companies'
returns were positive in five out of the six months. The dominant theme driving
markets higher has been the substantial rise in most commodity prices. This
proved to be a particularly strong fillip for smaller companies, where new
issuance for the resources sector has been strong.
Over the one-year and three-year periods, the Company has outperformed its
benchmark, delivering additional returns of 0.8% and 7.5% respectively. The
Company's net asset value performance ranked first in The Association of
Investment Companies UK Smaller Companies sector over the ten-year period to 28
February 2011. It also ranked third in its peer group over the three-year
period and successfully maintains its 4-star Morningstar rating.
Over the ten years to 28 February 2011, the Fledgling asset class has
outperformed the FTSE 100, FTSE Mid 250, FTSE Small Cap and FTSE AIM indices.
The performance of the Fledgling Index remains ahead of the FTSE All- Share
Index, having delivered a total return of 212.6%, representing a
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Interim Report Page 3:
compound annual return of 12.1%, compared with a total return of 51.3% and
compound annual return of 4.2% from the FTSE All-Share Index. The Company was
formed to capture the long-term outperformance of the Fledgling asset class and
in this it remains successful.
Discount and Share Buybacks
Over the six months to 28 February 2011, the Company repurchased 1,635,500
Ordinary shares, 8.8% of Ordinary shares in issue at 31 August 2010, at an
average price of 416.7 pence per share and a weighted average discount of
13.8%. These purchases added approximately 3.5 pence to the net asset value per
Ordinary share. Over the period, the share price discount was extremely
volatile, with the Ordinary shares trading at discount levels ranging between
9.6% and 18.8%, compared with the UK Smaller Companies sector average range of
between 12.7% and 17.5%.
Since 28 February 2011, a further 200,000 Ordinary shares have been repurchased
at an average price of 462.3 pence per share and a weighted average discount of
17.3%. The Ordinary shares are currently trading at a discount of around 14% to
net asset value.
The Board continues to monitor the level of the Company's discount with that of
its peer group and will continue to use the Company's share buyback powers when
appropriate.
Revenue and Dividends
The revenue return for the six months to 28 February 2011 was 3.65 pence per
Ordinary share. This compares with 2.88 pence for the six-month period to 31
December 2009, as previously reported, rather than 28 February 2010 due to a
change in the Company's year-end (from 30 June to 31 August).
Your Board has declared an increased interim dividend of 4.0 pence per Ordinary
share which will be paid on 27 May 2011 to shareholders on the register at the
close of business on 6 May 2011.
The Manager
On 12 January 2011, the boards of Henderson Group plc and Gartmore Group
Limited announced that agreement had been reached on the terms of a recommended
acquisition by Henderson of Gartmore. The acquisition was completed on 4 April
2011. The Board is pleased that Gartmore's UK Smaller Companies team, and our
co-managers, Harmesh Suniara and Adam McConkey, have joined Henderson. We are
confident that the Company will continue to prosper under Henderson's
management.
Board Changes
I am delighted to welcome Tom Bartlam, who was appointed a Director on 18 April
2011. Tom's wealth of investment experience and knowledge will add a new
dimension and perspective to the Board's deliberations.
As a consequence of Henderson's acquisition of Gartmore, Robert Jeens who is a
non-executive director of Henderson Group plc, resigned as a Director of
Gartmore Fledgling on 18 April 2011. I thank him on behalf of the Board for his
valuable contribution during his short tenure. Mr Rod Birkett succeeds Robert
as Chairman of the Audit Committee.
Proposed Change of Name
To reflect the change of management group, the Board proposes to change the
Company's name to Henderson Fledgling Trust plc.
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Interim Report Page 4:
Outlook
Fledgling companies have enjoyed a long period of returns which are
significantly ahead of other UK indices on a total return basis. However,
despite this strong relative performance, Fledgling companies remain more
attractive than their larger counterparts on a number of valuation measures.
Gartmore Fledgling Trust continues to provide investors with access to a unique
portfolio of companies that offer compelling value and substantial recovery
potential.
Jimmy West
Chairman
28 April 2011
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Interim Report Page 5:
Manager's Review
Investment Policy
The Company is managed using a hybrid investment style. For the most part, a
policy of broad indexation of the Fledgling Index is adopted. An active overlay
is then applied to up to a maximum of 35% of the portfolio. However, the
Directors intend that no more than 30% of the Company's assets would normally
be allocated to the active overlay. This overlay takes the form of
overweighting holdings in:
* Fledgling Index companies;
* AIM-traded companies which were formerly admitted to trading on the Official
List and which meet the Fledgling Index market capitalisation criteria (as at
the time of investment); and/or
* Non-index companies which were formerly admitted to trading on the Official
List and which meet the Fledgling Index market capitalisation criteria (as at
the time of investment) but which are not included in the Fledgling Index due
to lack of liquidity
that are strongly favoured by Gartmore's investment process, and/or where
directors have recently purchased shares in their companies. The Company will
not invest more than 20% of the Company's assets (as at the time of investment)
in AIM-traded stocks which were formerly admitted to trading on the Official
List. However, it is the Directors' intention that no more than 15% of the
Company's assets (as at the time of investment) would normally be invested in
such stocks.
Conversely, companies which meet the investment criteria above but which are
not highly-rated by the Manager or which are considered unlikely to remain
solvent on a one-year view will be excluded from the portfolio.
Performance
The following table shows the total return performance of the Company's
portfolio relative to its benchmark over various periods, based upon mid-market
priced portfolio valuations to give the fairest comparison. Over the six months
to 28 February 2011, the portfolio underperformed the Fledgling Index by 0.2%
on a total return basis.
Period Gartmore Fledgling Benchmark Relative
Trust: Net Assets
Total Return Performance*
per share
% %
Total Return
%
Year to 30 June 2006 +7.0 +7.4 -0.4
Year to 30 June 2007 +30.2 +34.3 -3.0
Year to 30 June 2008 -34.0 -33.8 -0.3
Year to 30 June 2009 +11.2 +12.3 -1.0
Fourteen months to 31 August +24.3 +19.1 +4.3
2010
Six months to 28 February 2011 +24.4 +24.7 -0.2
Year to 28 February 2011 +28.0 +27.2 +0.6
Three years to 28 February +14.9 p.a. +13.0 p.a. +1.9 p.a.
2011 #
Five years to 28 February 2011 +6.2 p.a. +6.4 p.a. -0.3 p.a.
#
Ten years to 28 February 2011 +11.6 p.a. +12.1 p.a. -0.5 p.a.
#
Sources: Gartmore, Thomson Datastream.
* Relative performances are calculated as compound relatives and are based on
more decimal places than shown.
# Annualised.
Over the reporting period, net asset value performance benefited from our
overweighting of selected stocks in the industrial, financial and energy
sectors. Detractors from performance were holdings in the consumer
discretionary,
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Interim Report Page 6:
information technology and health care sectors. December was the strongest
month for the Fledgling Index (+10.6%), with January being the weakest (-0.4%)
following an unexpected contraction in UK GDP in the final quarter of 2010.
Over the very long term, the Fledgling segment of the market has significantly
outperformed the FTSE All-Share Index. The period from 1 January 1955 to 31
December 2010 saw the market's smallest capitalised stocks, as represented by
the MicroCap and Fledgling indices, deliver an annualised rate of return of
19.5%, whilst the FTSE All-Share Index produced an annualised return of 12.0%.
Retail price inflation was 5.7% per annum over the same period, implying a real
return of nearly 14% per annum for the Fledgling sector.
Performance versus Competitor Companies
Over the six-month period to 28 February 2011, the FTSE Fledgling Index
outperformed all other UK equity indices, except the FTSE AIM All-Share Index
which benefited from a strong performance in commodity stocks. Although the
Company performed broadly in line with the FTSE Fledgling Index, the Company's
performance lagged that of its peer group over the six-month period, largely
due to competitor companies having greater exposure to the commodities, mining
and capital goods sectors, which rose significantly over the period and which
are more heavily represented in both the FTSE AIM All-Share and FTSE 250
Indices.
Over the three-year period, the Company ranked third in the AIC UK Smaller
Companies universe. Longer term outperformance is even more pronounced over the
ten-year period as the Company ranked first amongst its peers, delivering
returns of 109.3% more than the sector average.
Periods to Gartmore AIC UK Smaller Ranking
28 February 2011 Fledgling Trust Companies Sector in Sector
NAV Size Weighted
Total Return Average Return
% %
One year +28.0 +42.3 10/11
Three years +52.4 +33.2 3/11
Five years +35.0 +36.6 6/11
Ten years +199.0 +89.7 1/10
Source: Fundamental Data Limited on behalf of the Association of Investment
Companies.
All returns shown on unannualised bid-to-bid NAV total return (including
income) basis.
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Interim Report Page 7:
Rebalancing
The nature of the Fledgling Index is that its constituent companies are smaller
than those of the FTSE All-Share Index, with no gap between, or overlap in, the
two indices' constituents. The FTSE Actuaries Equity Indices Committee
undertakes a full annual review in June (previously December), when a
`threshold' market capitalisation is set to divide the two indices. This was
set at approximately GBP53 million in June 2010, compared with GBP35 million in
December 2008. A partial rebalancing of the Fledgling Index is undertaken
during the final month of each other quarter.
The quarterly rebalancing in September and December 2010 resulted in turnover
of approximately 9% by value of the composition of the Fledgling Index. A
similar level of turnover was also required within the Company's portfolio,
given the objective to broadly match the composition of the Index. Such a large
proportion of turnover leads inevitably to the dealing costs that the active
overlay policy is designed to mitigate.
Portfolio Construction
(a) Summary Risk Statistics
The number of individual investments held in the portfolio decreased over the
six-month period, from 104 as at 31 August 2010 to 99 as at 28 February 2011.
Over the same period, the number of companies in the Fledgling Index fell from
103 to 98. The portfolio remains widely diversified over the Fledgling area of
the market, with an overlap between the investment portfolio and the index of
95 companies.
The following table summarises the risk characteristics of the portfolio. The
key summary statistic is the tracking error of 3.7% against the Fledgling
Index. The tracking error estimates the typical range in performance around the
index that might be expected in two out of three years. This number is higher
than the 3.1% recorded at 31 August 2010, but we consider it remains at a
reasonable level, particularly given the greater active component of the
portfolio and the relative illiquidity of the Fledgling market.
Gartmore FTSE Fledgling
Fledgling (ex. Investment Portfolio &
Trust Companies) Index Index Overlap
Number of Companies 99 (104) 98 (103) 95 (96)
Tracking Error 3.7% (3.1%)
Beta 1.1 (1.0) 1.0 (1.0)
Source: Barra
Comparative statistics as at 31 August 2010 are shown in brackets.
(b) Sector Weightings
The portfolio's sector positions are broadly similar to those of the benchmark
as befits a predominantly index tracking approach. The table on page 15 shows
the portfolio's weightings against the benchmark index as at 28 February 2011.
Characteristics of the FTSE Fledgling (ex. Investment Companies) Index
The Fledgling Index differs from larger company indices such as the FTSE
All-Share Index or the FTSE 100 Index. In particular, the Fledgling Index has a
significantly different industry distribution and different style biases.
(a) Distribution by Market Capitalisation
The Fledgling Index represents the smallest listed companies on the London
Stock Exchange that are not included in the FTSE All-Share (ex. Investment
Companies) Index. The following chart shows the distribution of the
constituents of the Fledgling Index by market capitalisation as at 28 February
2011.
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Interim Report Page 8:
(b) Sector Distribution
The Fledgling Index has significantly different sector weightings, compared
with the FTSE All-Share Index. In particular, industrials (particularly support
services) and technology are strongly represented. Conversely, the Fledgling
Index has no exposure to telecommunications and is underweight oil & gas and
financials (notably banks).
(c) Valuation
The constituent companies of the Fledgling Index continue to be valued
significantly more cheaply than those of the FTSE All-Share Index using the
price-to-sales and price-to-book value measures. For example, Fledgling
companies, on average, are valued at a 33% discount to FTSE All-Share Index
companies using the price-to-book value measure. In terms of the price/earnings
ratio, the Fledgling Index increased over the six-month period and remains
higher than the FTSE All-Share Index, highlighting the potential for earnings
to recover and grow in the Fledgling sector.
A combination of factors led to a fall in the dividend yield of the Fledgling
Index over the six-month period. Although the drop was caused primarily by
higher-yielding stocks leaving the index at the quarterly rebalancing, it has
also been impacted by the significant rise in the index.
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Interim Report Page 9:
Valuation Measures FTSE Fledgling FTSE Relative
at 28 February 2011 (ex. Investment All-Share
Companies) Index Index
Price/Sales Ratio 0.4x (0.4x) 1.4x (1.3x) 0.26 (0.28)
Price/Book Value Ratio 1.4x (1.0x) 2.1x (1.7x) 0.66 (0.59)
Price/Earnings Ratio 14.8x (14.0x) 10.5x (9.3x) 1.41 (1.51)
Historic Dividend Yield 3.1% (4.1%) 3.5% (3.4%) 0.89 (1.22)
Dividend Cover 2.2x (2.2x) 2.7x (2.6x)
Notes: Price/Sales Ratio is calculated as Enterprise Value (market
capitalisation plus net debt) to Sales. (Source: UBS)
Price/Book Value Ratio excludes negative earners. (Source: UBS)
Price/Earnings Ratio shown is 2010 forecast and excludes negative earners.
(Source: UBS)
Dividend Yield is shown net. (Source: Thomson Datastream)
Dividend Cover is only in respect of companies actually paying a dividend.
(Source: UBS)
Comparative valuation measures as at 31 August 2011 are shown in brackets.
(d) Growth, Financing and Profitability
Growth
Currently, consensus forecasts for dividend growth of larger UK companies
exceed those for Fledgling companies. However, earnings growth among Fledgling
companies is anticipated to substantially exceed that of larger companies.
Financing
Fledgling companies continue to carry lower levels of debt than their larger
counterparts, a fact that has been true at all times since the autumn of 2001.
A number of Fledgling companies have raised new equity capital, which has
further strengthened their balance sheets, enabling them to increase capital
expenditure or product development and leaving them in a stronger position to
capitalise on growth opportunities.
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Interim Report Page 10:
Characteristics Debt/Equity
at 28 February 2011 Ratio %
FTSE Fledgling (ex. Investment Companies) 25 (25)
FTSE All-Share 42 (47)
Source: UBS.
Comparatives as at 31 August 2010 are shown in brackets.
Profitability
Average returns on equity remain significantly lower at the Fledgling end of
the market. This indicates the inefficient use of capital within Fledgling
companies which we would expect to improve over time.
As a result of rebalancing, the proportion of Fledgling company sales
originating from overseas markets increased over the six-month period to 28
February 2011. We consider the continuing rise in Fledgling company overseas
sales in recent years as a positive development, as increased sales to overseas
markets, particularly high growth emerging markets, will offset potentially
depressed domestic demand.
(e) Takeover Activity
During the six months to 28 February 2011, Nestor Healthcare was the only
Fledgling company subject to a takeover. The Company's holding in Nestor
represented around GBP5.4 million or 5.6% of the Fund. Overall, corporate
activity in 2010 was a disappointingly low 9.9% of the Fund. Nevertheless, we
remain confident that the rate of takeovers of Fledgling companies will
increase this year, as they are not only attractively valued but also, with
sales to overseas markets having increased, they are attractive acquisition
targets for larger companies seeking to grow their revenues in a weak domestic
environment.
Period to 31 December Takeovers as Number of
Proportion of Takeovers
the Portfolio
%
2003 10.8 30
2004 10.3 24
2005 8.7 15
2006 11.9 17
2007 15.5 13
2008 14.7 12
2009 9.2 6
2010 9.9 3
Gartmore Investment Limited
Manager
28 April 2011
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Interim Report Page 11:
Interim Management Report
The Chairman's Statement on pages 2 to 4 and the Manager's Review on pages 5 to
10 give details of the important events which occurred during the first six
months of the Company's financial year and their impact on the financial
statements.
Principal Risks and Uncertainties
The Board reported on the principal risks and uncertainties associated with the
Company's business in the Annual Report and Accounts for the period ended 31
August 2010. The main areas of financial risk are summarised on pages 23 and 24
of the Annual Report and Accounts which is available at
www.gartmorefledglingtrust.co.uk and is also accessible at
www.hendersoninvestmenttrusts.com, which is a website maintained by Henderson
Group plc and its subsidiaries.
In the opinion of the Board, there have been no changes to the fundamental
nature of these risks since the previous report and these principal risks and
uncertainties are equally applicable to the remainder of the financial year as
they were to the six months under review.
Related Party Transactions
Details of related party transactions are contained in the Annual Report and
Accounts. During the first six months of the current financial year there were
no transactions with related parties which materially affected the financial
position or the performance of the Company.
Directors' Responsibility Statement
The Directors are responsible for preparing the half-yearly financial report in
accordance with applicable law and regulations. The Directors of the Company,
whose names are shown on the inside front cover of this Report, each confirm to
the best of their knowledge that:
* the condensed set of financial statements for the six months to 28 February
2011 has been prepared in accordance with International Accounting Standard
34 "Interim Financial Reporting", as adopted by the European Union; and
* the Chairman's Statement, Manager's Review and Interim Management Report
include a fair review of the information required by the UKLA Disclosure
and Transparency Rules DTR 4.2.7R and DTR 4.2.8R.
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Interim Report Page 12:
Financial Highlights
At At Change
28 31 August %
February
2010
2011
Total Return
Net Asset Value per Ordinary share +24.4
FTSE Fledgling (ex. Investment Companies) +24.7
Index
Capital
Net Assets (GBP'000) 95,426 84,996 +12.3 *
Net Assets ex. undistributed revenue (GBP'000) 93,962 83,454 +12.6
FTSE Fledgling (ex. Investment Companies) 5883.2 4783.8 +23.0
Index
Market Capitalisation of Ordinary shares in 78,436 70,845 +10.7
issue (GBP'000)
Ordinary Shares
Net Asset Value ** 562.7p 457.1p +23.1
Middle Market Price 462.5p 381.0p +21.4
Discount 17.8% 16.6%
* During the six-month period, the Company's assets were reduced by GBP6,849,000
utilised in the repurchase and cancellation of 1,635,500 Ordinary shares,
representing 8.8% of the number of Ordinary shares in issue at 31 August 2011.
In broad terms, this reduction reflects the difference between the increase of
12.3% in Net Assets and the increase of 23.1% in Net Asset Value per Ordinary
share.
** Based on investments at bid-market value including undistributed revenue.
Revenue and Dividend Six months to Six months to
28 February 31 December 2009
2011
Net revenue after taxation (GBP'000) 629 542
Revenue return per Ordinary share 3.65p 2.88p
Dividends per Ordinary share 4.00p 3.50p
Total Return to Equity Shareholders (GBP
'000)
Revenue return after taxation 629 542
Capital return after taxation 17,357 14,857
Total return 17,986 15,399
Total Return per Ordinary share |
Revenue 3.65p 2.88p
Capital 100.75p 78.88p
Total 104.40p 81.76p
| Based on the weighted average number of shares in issue during the period.
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Interim Report Page 13:
Analysis of Net Assets and Equity Shareholders' Funds
Valuation at Net Appreciation/ Valuation at
31 August 2010 Transactions (Depreciation) 28 February 2011
GBP'000 % GBP'000 GBP'000 GBP'000 %
Investments
UK Equities 88,702 104.4 (2,045) 17,514 104,171 109.2
Net Current (3,706) (4.4) (5,039) - (8,745) (9.2)
Liabilities
______ _____ ______ ______ ______ _____
Net Assets 84,996 100.0 (7,084) 17,514 95,426 100.0
=== === ==== ==== ==== ===
Equity
Shareholders'
Funds 84,996 100.0 (6,849)1 17,279 2 95,426 100.0
=== === ==== ==== ==== ===
1 Represents the cost of 1,635,500 Ordinary shares repurchased for
cancellation.
2 Comprises the total return for the six-month period, less the cost of the
equity dividends paid in the period.
Performance Attribution
Over the six months to 28 February 2011, the Net Asset Value per Ordinary share
(including undistributed revenue) increased by 23.1%, compared with an increase
of 23.0% in the Benchmark index. The following analysis summarises the factors
which contributed to the Company's relative performance.
Portfolio Performance (bid basis) +22.4%
Performance of the Benchmark (mid basis) +23.0%
_---_____
Portfolio relative underperformance - 0.5%
Other Factors
Share buybacks +0.7%
Revenue return +0.6%
Equity dividend paid - 0.7%
______
+0.6%
______
Net Asset Value relative outperformance +0.1%
===
Dividend Calendar
Ordinary Shares Rate XD Date Record Date Pay Date
Interim dividend 4.0p 4.5.11 6.5.11 27.5.11
Final dividend November November December
Interim Report Page 14:
Principal Investments
At 28 February 2011
Company Sector Valuation Percentage of
GBP'000 Portfolio %
Anglesey Mining Mining 4,415 4.2
French Connection General Retailers 3,922 3.8
Acal Support Services 3,599 3.5
Future Media 3,569 3.4
Cadogan Petroleum Oil & Gas Producers 3,539 3.4
AEA Technology Support Services 3,117 3.0
Norcros Construction & Materials 2,899 2.8
Avon Rubber General Industrials 2,833 2.7
Creston Media 2,736 2.6
STV Media 2,584 2.5
______ _____
Top Ten Investments 33,213 31.9
4Imprint Group Media 2,504 2.5
HiWave Technologies Leisure Goods 2,239 2.1
AXA Property Trust Real Estate Investment & 2,223 2.1
Services
Carr's Milling Food Producers 2,194 2.1
Industries
Tamar European
Industrial Fund Real Estate Investment & 2,110 2.0
Services
Vernalis Pharmaceuticals & 2,093 2.0
Biotechnology
Air Partner Travel & Leisure 2,011 1.9
Zotefoams Chemicals 1,857 1.8
Dee Valley Group Gas, Water & Multiutilities 1,749 1.7
Communisis Support Services 1,747 1.7
______ _____
Top Twenty Investments 53,940 51.8
Phytopharm Pharmaceuticals & 1,727 1.7
Biotechnology
Harvey Nash Group Support Services 1,688 1.6
Local Shopping REIT Real Estate Investment Trusts 1,653 1.6
Office2office Support Services 1,613 1.5
Porvair Chemicals 1,591 1.5
Filtronic Technology Hardware & 1,523 1.5
Equipment
Alpha Pyrenees Trust Real Estate Investment & 1,522 1.5
Services
Jersey Electricity Electricity 1,474 1.4
Alexon Group General Retailers 1,416 1.4
Trifast Industrial Engineering 1,407 1.3
______ _____
Top Thirty Investments 69,554 66.8
Other equity investments (69 stocks) 34,617 33.2
______ _____
Total Equity Investments at Fair Value 104,171 100.0
==== ===
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Interim Report Page 15:
Sector Classification and Weightings
at 28 February 2011
Sector Gartmore FTSE Fledgling Overweight/
Fledgling (ex. Investment
Trust plc Companies) Underweight
Index
% %
%
Oil & Gas 4.9 4.6 +0.3
Oil & Gas Producers 3.4 2.7 +0.7
Alternative Energy 1.5 1.9 -0.4
Basic Materials 8.7 8.2 +0.5
Chemicals 2.9 2.9 0.0
Mining 5.8 5.3 +0.5
Industrials 26.7 29.6 -2.9
Construction & Materials 4.9 8.3 -3.4
Electronic & Electrical 0.0 0.1 -0.1
Equipment
General Industrials 4.7 2.0 +2.7
Aerospace & Defence 0.0 2.8 -2.8
Industrial Engineering 4.2 3.7 +0.5
Support Services 12.9 12.7 +0.2
Consumer Goods 7.9 5.6 +2.3
Automobiles & Parts 1.0 1.3 -0.3
Food Producers 3.2 2.9 +0.3
Household Goods 0.5 0.5 0.0
Leisure Goods 2.8 0.7 +2.1
Personal Goods 0.4 0.2 +0.2
Health Care 9.3 8.5 +0.8
Health Care Equipment & Services 2.1 3.2 -1.1
Pharmaceuticals & Biotechnology 7.2 5.3 +1.9
Consumer Services 23.8 21.1 +2.7
General Retailers 9.7 7.5 +2.2
Media 11.5 11.1 +0.4
Travel & Leisure 2.6 2.5 +0.1
Utilities 3.1 3.4 -0.3
Electricity 1.4 1.6 -0.2
Gas, Water & Multiutilities 1.7 1.8 -0.1
Financials 11.4 14.8 -3.4
Real Estate Investment & 7.4 3.2 +4.2
Services
Real Estate Investment Trusts 2.0 8.4 -6.4
Financial Services 2.0 3.2 -1.2
Technology 4.2 4.2 0.0
Software & Computer Services 1.5 1.6 -0.1
Technology Hardware & Equipment 2.7 2.6 +0.1
Total Investments 100.0 100.0
=---------
Interim Report Page 16:
Group Statement of Comprehensive Income Six months to 28 February
(Unaudited) 2011
Revenue Capital Total
Return Return Return
Note GBP'000 GBP'000 GBP'000
Income and Capital Profits
Gains on investments held at fair value - 17,513 17,513
through profit or loss
Dividends and other income 2 1,150 - 1,150
Net exchange loss - ( 8 ) ( 8 )
Net dealing gain 35 - 35
Total Income 1,185 17,505 18,690
Expenses
Management fees 3 ( 339 ) - ( 339 )
Other fees and expenses ( 176 ) ( 148 ) ( 324 )
Operating Expenses before Finance Costs and ( 515 ) ( 148 ) ( 663 )
Taxation
Net Profit before Finance Costs and Taxation 670 17,357 18,027
Finance Costs
Interest payable ( 34 ) - ( 34 )
Net Profit before Taxation 636 17,357 17,993
Tax charge ( 7 ) - ( 7 )
Profit for the period and Total Comprehensive 629 17,357 17,986
Income
Earnings per Ordinary share 4 3.65p 100.75p 104.40p
The total column of this statement represents the Group's Statement of
Comprehensive Income, prepared in accordance with International Financial
Reporting Standards, as adopted by the European Union.
The revenue return and capital return columns are supplementary disclosures
provided in accordance with guidance issued by The Association of Investment
Companies.
All items derive from continuing activities. No operations were acquired or
discontinued during the period.
The Notes on pages 21 to 25 form part of these Accounts.
=---------
Interim Report Page 17:
Group Statement of Comprehensive Income Six months to 31 December
(Unaudited) 2009
Revenue Capital Total
Return Return Return
Note GBP'000 GBP'000 GBP'000
Income and Capital Profits
Gains on investments held at fair value - 14,979 14,979
through profit or loss
Dividends and other income 2 1,015 - 1,015
Net exchange loss - ( 3 ) ( 3 )
Net dealing gain - - -
Total Income 1,015 14,976 15,991
Expenses
Management fees 3 ( 318 ) - ( 318 )
Other fees and expenses ( 147 ) ( 119 ) ( 266 )
Operating Expenses before Finance Costs and ( 465 ) ( 119 ) ( 584 )
Taxation
Net Profit before Finance Costs and Taxation 550 14,857 15,407
Finance Costs
Interest payable ( 6 ) - ( 6 )
Net Profit before Taxation 544 14,857 15,401
Tax charge ( 2 ) - ( 2 )
Profit for the period and Total Comprehensive 542 14,857 15,399
Income
Earnings per Ordinary share 4 2.88p 78.88p 81.76p
The total column of this statement represents the Group's Statement of
Comprehensive Income, prepared in accordance with International Financial
Reporting Standards, as adopted by the European Union.
The revenue return and capital return columns are supplementary disclosures
provided in accordance with guidance issued by The Association of Investment
Companies.
All items derive from continuing activities. No operations were acquired or
discontinued during the period.
The Notes on pages 21 to 25 form part of these Accounts.
=---------
Interim Report Page 18:
Six months to 28 February 2011
Group Statement of Capital
Changes
In Equity (Unaudited) Share redemption Capital Revenue
capital reserve reserve reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 August 2010 4,649 5,649 73,156 1,542 84,996
Total Comprehensive
Income:
Net profit for the period
to
28 February 2011 - - 17,357 629 17,986
Transactions with owners,
recorded directly to
equity:
Equity dividends paid - - - ( 707 ) ( 707 )
Repurchase and
cancellation
of Ordinary shares ( 409 ) 409 ( 6,849 - ( 6,849
) )
At 28 February 2011 4,240 6,058 83,664 1,464 95,426
Six months to 31 December 2009
Capital
Share redemption Capital Revenue
capital reserve reserve reserve* Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 30 June 2009 4,729 5,569 58,840 2,126 71,264
Total Comprehensive
Income:
Net profit for the period
to
31 December 2009 - - 14,857 542 15,399
Transactions with owners,
recorded directly to
equity:
Equity dividends paid - - - ( 1,243 ( 1,243 )
)
Repurchase and
cancellation
of Ordinary shares ( 22 ) 22 ( 314 ) - ( 314 )
At 31 December 2009 4,707 5,591 73,383 1,425 85,106
* The revenue reserve represents the amount of the Company's reserves
distributable by way of dividend.
The Notes on pages 21 to 25 form part of these Accounts.
=---------
Interim Report Page 19:
Group Balance Sheet (Unaudited) At At
at 28 February 2011 28 February 31 August
2011 2010
Note GBP'000 GBP'000
Fixed Assets
Investments held at fair value through 6 104,171 88,702
profit or loss
Current Assets
Investments held for trading 110 -
Balances due from brokers 169 73
Other receivables 170 189
Cash and cash equivalents 36 117
485 379
Total Assets 104,656 89,081
Current Liabilities
Balances due to brokers (208) (212)
Other payables (9,022) (3,873)
(9,230) (4,085)
Total Assets less Current Liabilities 95,426 84,996
Net Assets 95,426 84,996
Equity Attributable to Equity Shareholders
Called-up share capital 7 4,240 4,649
Capital redemption reserve 6,058 5,649
Retained earnings:
Capital reserve 83,664 73,156
Revenue reserve 1,464 1,542
Total Equity 95,426 84,996
Net Asset Value per Ordinary share 8 562.7p 457.1p
Approved by the Board and authorised for issue on 28 April 2011
Jimmy West
Chairman
Registered No. 2974633 England and Wales
The Notes on pages 21 to 25 form part of these Accounts.
=---------
Interim Report Page 20:
Cash Flow Statement (Unaudited) Six months to Six months
to
to 28 February 2011 28 February 31 December
2011 2009
GBP'000 GBP'000
Cash Flows from Operating Activities
Net profit before finance costs and tax 18,027 15,407
Adjustment for non-cash items:
Foreign exchange losses 8 3
18,035 15,410
Adjustments for:
Increase in investments (15,579) (16,127)
(Increase)/decrease in receivables (77) 1,578
Decrease in payables (28) (701)
Taxation (7) (2)
Net Cash Flows from Operating Activities 2,344 158
Cash Flows from Financing Activities
Repurchase of Ordinary shares for (6,849) (314)
cancellation
Increase in bank overdraft 5,165 401
Bank overdraft interest paid (26) (6)
Equity dividends paid (707) (1,243)
Net Cash used on Financing Activities (2,417) (1,162)
Net decrease in Cash and Cash Equivalents (73) (1,004)
Cash and cash equivalents at start of 117 1,185
period
Effect of foreign exchange rate changes (8) (3)
Cash and Cash Equivalents at end of period 36 178
The Notes on pages 21 to 25 form part of these Accounts.
=---------
Interim Report Page 21:
Notes to the Accounts
1. Accounting Policies
The consolidated accounts on pages 16 to 20 comprise the unaudited results of
the Company and its subsidiary, GFT Dealing Limited, for the six months to 28
February 2011. These accounts do not constitute statutory accounts under the
Companies Act 2006 nor do the comparative figures for the financial period
ended 31 August 2010 constitute the Company's statutory accounts for that
financial period. Those accounts have been reported on by the Company's auditor
and filed with the Registrar of Companies. The report of the auditor was (i)
unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report, and
(iii) did not contain a statement under section 498(2) or (3) of the Companies
Act 2006.
The comparative six-month period is for the period to 31 December 2009, as
previously reported, rather than 28 February 2010 due to a change in the
Company's year-end (from 30 June to 31 August). The figures for the six-month
period to 28 February 2010 have not been provided as it is considered
impracticable to do so.
The accounts have been prepared on a going concern basis, in accordance with
International Financial Reporting Standards (`IFRS') as adopted by the European
Union and are presented in pounds sterling, as this is the principal currency
in which the Group's transactions are undertaken.
These are the Company's first accounts prepared in accordance with IFRS.
Previous accounts were prepared in accordance with UK Generally Accepted
Accounting Principles (UK GAAP) including the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture Capital Trusts"
issued in January 2009 by The Association of Investment Companies. The Company
is required to determine its IFRS accounting policies and apply them
retrospectively to establish its opening position. The date of transition for
the Company is 1 July 2009. The accounting policies now applied under IFRS
remain unchanged from those applied under UK GAAP, with the exception of the
following:
Basis of Consolidation
The Group Accounts comprise the audited Accounts of the Company and its
subsidiary drawn up to the balance sheet date. The Statement of Comprehensive
Income is only presented in consolidated form, as provided by Section 408 of
the Companies Act 2006.
As required by IFRS 1 "First-Time Adoption of International Accounting
Standards" reconciliations showing the effects of the changes are set out in
note 12.
=---------
Interim Report Page 22:
2. Dividends and Other Income
Six months to Six months to
28 February 31 December
2011 2009
GBP'000 GBP'000
Income from UK listed
investments:
Franked dividends 844 771
Unfranked dividends 269 220
_____ _____
1,113 991
==== ====
Other income:
Underwriting commission 37 22
Interest on deposits - 2
____ _____
37 24
==== ====
1,150 1,015
==== ====
3. Management Fees
The management fee is calculated monthly in arrear at 0.8% per annum on the
value of the Company's total assets, less current liabilities up to GBP75
million, and at 0.5% per annum thereafter.
4. Earnings per Ordinary Share
Six months to Six months to
28 February 2011 31 December 2009
GBP'000 Per share GBP'000 Per
share
Revenue return after 629 3.65p 542 2.88p
taxation
Capital return after 17,357 100.75p 14,857 78.88p
taxation
______ _______ ______ ______
Total return after 17,986 104.40p 15,399 81.76p
taxation
====== ====== ====== ======
Weighted average
number of shares in 17,227,829 18,835,401
issue
5. Dividend on the Ordinary Shares
The Board has declared an interim dividend of 4.0p (2009: 3.5p) per share on
16,759,080 (2009: 18,796,080) Ordinary shares for the year to 31 August 2011.
The cost of the interim dividend is GBP670,000 (2009: GBP658,000). The Ordinary
shares will be marked ex-dividend on 4 May 2011 and the dividend will be paid
on 6 May 2011 to shareholders on the Register on 27 May 2011.
6. Investments held at Fair Value through Profit or Loss
At At
28 February 31 August
2011 2010
GBP'000 GBP'000
Analysis of investments by place of
listing:
London Stock Exchange (Official List) 102,755 87,303
Alternative Investment Market (AIM) 1,416 1,399
______ ______
Valuation of Investments 104,171 88,702
====== ======
7. Called-up Share Capital
During the six-month period to 28 February 2011, the Company repurchased and
cancelled 1,635,500 Ordinary shares at a cost of GBP6,849,000, which reduced the
number of Ordinary shares in issue to 16,959,080, from 18,594,580.
8. Net Asset Value per Ordinary Share
The Net Asset Value per Ordinary share and Net Assets attributable to the
Ordinary shares at the period end were as follows:
At At
28 February 31 August
2011 2010
Net Assets attributable to Ordinary GBP95,426,000 GBP84,996,000
shareholders
Ordinary shares in issue 16,959,080 18,594,580
Net Asset Value per Ordinary share 562.7p 457.1p
9. Investment in Subsidiary
The Company owns the whole of the issued ordinary share capital (GBP1) of GFT
Dealing Limited, a dealing company incorporated and registered in England and
Wales on 20 October 2009. The subsidiary commenced trading on 22 October 2010.
10. Related Party Transactions
Gartmore Investment Limited (GIL) is the Manager of the Company. As such it is
regarded as a related party. During the period, GBP339,000 (6 months to 31
December 2009: GBP318,000), was payable to GIL for the provision of services to
the Company. The Company has also financed and been financed by the trading
activity of its subsidiary, GFT Dealing Limited, since it commenced trading on
22 October 2010.
11. Operating Segments
The Directors consider that the Group has two operating segments, being the
parent Company, Gartmore Fledgling Trust plc, which invests in shares and
securities for capital appreciation in accordance with the Company's published
investment objective, and its wholly owned subsidiary, GFT Dealing Limited,
which trades in securities to enhance Group returns. Discrete financial
information for these sectors is reviewed regularly by the Manager and the
Board who allocate resources and assess performance.
Segment financial information:
Six months to Six months
to
28 February 31 December
2011 2009
GBP'000 GBP'000
External Revenues:
Parent Company 18,655 15,991
Subsidiary 35 -
______ _____
Total Income 18,690 15,991
===== =====
Net Profit:
Parent Company 17,951 15,399
Subsidiary 35 -
_____ _____
Total Comprehensive Income 17,986 15,399
===== =====
At At
28 February 31 August
2011 2010
GBP'000 GBP'000
Total Assets:
Parent Company 104,621 89,081
Subsidiary 35 -
_____ _____
Group Total Assets 104,656 89,081
===== =====
12. Transition from UK GAAP to IFRS
This is the first period that the Company has presented its accounts under
IFRS. IFRS 1 requires certain reconciliations to be presented to explain how
the transition from previous UK GAAP to IFRS affected the Company's reported
financial position, financial performance and cash flows:
(a) Reconciliation of equity at 1 July 2009 being the date of transition from
UK GAAP to IFRS (beginning of comparative period):
There is no change to the equity at 1 July 2009 as a result of the transition
to IFRS.
(b) Reconciliation of equity at 31 August 2010 being the date of last audited
financial statements:
There is no change to the equity at 31 August 2010 as a result of the
transition to IFRS.
(c) Reconciliation of Income Statement to the Statement of Comprehensive Income
for the period to 31 August 2010 and six months to 31 December 2009:
There is no change to the total return for the period to 31 August 2010 and six
months to 31 December 2009 as a result of the transition to IFRS.
(d) Reconciliation of the Cash Flow Statement for the year to 31 August 2010
Previously Effect of Adjusted
Reported transition cash flows
UK GAAP to IFRS at 31
August
at 31 August at 31
August 2010
2010
2010
GBP'000 GBP'000 GBP'000
Company:
Net cash inflow/(outflow) 1 1,507 (3,072) (1,565)
from operating activities
Net cash outflow from servicing 2 (24) 24 -
of finance
Equity dividends paid 3 (1,901) 1,901 -
Net cash outflow from investment 1 (3,072) 3,072 -
activities
Net cash outflow from financing 2,3,4 (1,176) 1,675 499
activities
Decrease in cash 4 (4,666) 3,600 (1,066)
Notes to the reconciliation of the Cash Flow Statement for the period to 31
August 2010
1. Purchases and sales of investments and taxation paid are considered to be
operating activities.
2. Servicing of finance are now analysed within financing activities.
3. Equity dividends paid are included within financing activities.
4. Short-term borrowings are no longer aggregated with cash balances for
reporting cash flow movements.
(e) Reconciliation of the Cash Flow Statement for the six months to 31 December
2009
Previously Effect of Adjusted
reported transition cash flows
at
UK GAAP at to IFRS at
31 December
31 December 31 December
2009
2009 2009
GBP'000 GBP'000 GBP'000
Company:
Net cash inflow from operating 1 565 (407) 158
activities
Net cash outflow from servicing 2 (6) 6 -
of finance
Equity dividends paid 3 (1,243) 1,243 -
Net cash outflow from investment 1 (407) 407 -
activities
Net cash outflow from financing 2,3,4 (314) (848) (1,162)
activities
Decrease in cash 4 (1,405) 401 (1,004)
Notes to the reconciliation of the Cash Flow Statement for the six months to 31
December 2009
1. Purchases and sales of investments and taxation paid are considered to be
operating activities.
2. Servicing of finance are now analysed within financing activities.
3. Equity dividends paid are included within financing activities.
4. Short-term borrowings are no longer aggregated with cash balances for
reporting cash flow movements.
=---------
Interim Report - Inside Front Cover:
The Company
Directors
Jimmy West (Chairman of the Board)
John Hancox (Senior Independent Director)
Rod Birkett (Chairman of the Audit Committee)
Tom Bartlam
Peter Dicks
Investment Objective
Gartmore Fledgling Trust plc (the Company) seeks long-term growth in capital
and dividends from investment predominantly in the constituents of the FTSE
Fledgling (ex. Investment Companies) Index (the Fledgling Index).
Investment Policy
The Company is managed using a hybrid investment style. At least 65% of the
portfolio passively replicates the FTSE Fledgling (ex. Investment Companies)
Index. An active overlay is then applied to up to 35% of portfolio value,
including a maximum of 20% invested in AIM listed companies that meet the
Fledgling Index market capitalisation criteria and which were formerly traded
on the Official List. The active overlay takes the form of overweighting
holdings in those Fledgling and AIM companies that are strongly favoured by the
Manager's investment process, and/or where directors have recently purchased
their own shares. Conversely, constituents of the Fledgling Index which are not
highly-rated by the Manager or which are considered unlikely to remain solvent
on a one-year view are excluded from the portfolio.
This dual approach is seen as the most practicable way of obtaining exposure to
the anticipated long-term outperformance of the Fledgling Index. It offers a
widely diversified portfolio, similar in structure to that of the Fledgling
Index. The active overlay is intended to help the Company to perform
approximately in line with its benchmark over longer periods, by adding value
to try to offset the sometimes significant quarterly rebalancing costs.
Benchmark Index
The Company's benchmark is the FTSE Fledgling (ex. Investment Companies) Index.
The Fledgling Index was established by the FTSE Actuaries UK Indices Committee
as part of their range of indices measuring the performance of UK equities.
As at 28 February 2011, the Fledgling Index comprised 98 companies listed on
the London Stock Exchange. Together, these companies represented the smallest
0.14% of the UK equity market by market capitalisation. The Index is fully
rebalanced annually during June, and partially during the final month of each
other quarter. At the date of the index's last full rebalancing in June 2010,
the cut-off between the FTSE All-Share Index and FTSE Fledgling (ex. Investment
Companies) Index was approximately GBP53 million, implying exits to the FTSE
All-Share at approximately GBP61 million and new entrants at around GBP45 million.
Capital Structure and Voting Rights
The Company is an investment trust company with an issued share capital at 28
February 2011 comprising 16,959,080 Ordinary shares of 25p each. On a poll at a
general meeting, Ordinary shareholders are entitled to one vote in respect of
each share held.
Continuation Vote
An Ordinary Resolution will be proposed at each Annual General Meeting of the
Company that the Company shall continue to operate as an investment trust
company. If such resolution is not passed and alternative proposals for the
unitisation or the reconstruction of the Company are not approved, the Company
will be wound-up.
=-----
The foregoing represents the full text of the Half-Yearly Report for the six
months to 28 February 2011, which will be mailed to shareholders shortly. The
Report will also be available for download from
www.gartmorefledglingtrust.co.uk
Gartmore Investment Limited
Company Secretary
28 April 2011
END
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