TIDMUSPI
Global Special Opportunities Trust PLC
Half-yearly financial report for the six months ended 30 November 2010
Company highlights
for the six months ended 30 November 2010
NAV returns and share prices 30 November 31 May % change
2010 2010
pence pence
Zero Dividend Preference NAV 182.61p 182.61p n/a
share
Mid n/a n/a n/a
price
Income share NAV 39.62p 47.34p (16.31)
Mid 32.25p 50.00p (35.50)
price
Capital share NAV 0.00p 0.00p -
Mid 0.26p 0.51p (49.02)
price
Unit (1 Capital and 1 Income NAV 39.62p 47.34p (16.31)
share)
Mid 32.00p 50.00p (36.00)
price
Revenue Six months Six months %
to to change
30 November 30 November
2010 2009
Revenue return per Income (0.55p) (0.09) (511.11)
share
Net dividends declared per nil nil -
Income share
Data as at 30 November 2010, all performance figures for the period ended 30
November 2010 unless otherwise stated. Past performance and dividends paid are
not a guarantee of future returns. Figures sourced from Premier Fund Managers
Ltd and Bloomberg.
Company summary
Launch date 12 April 2001
Wind-up date 31 May 2011
Domiciled United Kingdom
Shareholders funds GBP10.29 million at 30 November 2010
Market capitalisation GBP8.20 million at 30 November 2010
Revolving credit $0.5 million facility
facility
Zero Dividend 206,037*: Redeeming at 182.608201p on
Preference shares 31 May 2011
Income shares 25,035,008: Aiming to redeem at
120.82p on 31 May 2011 should growth
in value of underlying portfolio
allow
Capital shares 50,000,000
Total voting rights 50,070,016**
Units One Income share and one Capital
share may be held together and traded
as a Unit
Dividends Paid on Income shares and Units
Dividend history In respect of year Total dividends
declared
ended 31 May:
2010 None
2009 None
2008 3.40p
2007 3.20p
2006 2.80p
2005 2.10p
2004 1.40p
2003 2.09p
2002 7.05p***
Investment Managers Premier Asset Management (Guernsey)
Limited
Premier Fund Managers Limited
Investment Adviser RENN Capital Group, Inc.
Management fee With effect from 1 June 2008, 0.75%
per annum, plus performance fee. This
is charged 70% to capital and 30% to
revenue.
AIC Global Special Opportunities Trust
PLC is a member of the Association of
Investment Companies.
* The number of ZDP shares in issue as at 30 November 2010 and at the date of
this report is 206,037. ZDP shares were delisted on 31 July 2008.
** Each Income share has a voting right on a poll equal to one vote per share.
Under the Constitutional Documents each Capital share has a voting right equal
to the number of Income shares in issue divided by the number of Capital shares
in issue.
*** Included one initial dividend and four interim dividends.
Financial calendar
Year end 31 May
General Meeting 31 May 2011
Half-year end 30 November
Half-year results January
announced
Interim Management April, October
Statements
Investment objective and policy
Investment Objective
The investment objective is for the portfolio to be managed to provide the
Shareholders with capital growth, for the Income Shareholders to be repaid
their final adjusted capital entitlement on 31 May 2011 of 120.82p per Income
Share and to provide the Capital Shareholders with a cash return on or shortly
after 31 May 2011. The Directors will seek to distribute substantially all of
the net revenue to Income Shareholders by way of dividend, although this is not
expected to be a material amount.
Investment Policy
Asset allocation
The investment policy of the Company is to achieve the investment objective
through investment in equity and equity-related instruments which are
predominantly securities domiciled, listed, quoted or traded in North America
(some of these securities may however have an underlying business that is not
in North America), but with the ability to invest up to 25% of the gross assets
of the Company (at the time of investment) opportunistically in listed or
unlisted equity or debt securities issued by issuers situated anywhere in the
world.
The portfolio is managed on the basis that the Company is fully invested in
equity and equity-related instruments to the extent practicable for the
remainder of its life (subject to the recommendation of the Investment Managers
and the Investment Adviser who may wish to increase the cash holding due to
market conditions). Liquidity is managed so that the costs of realising the
portfolio (including market impact costs) are reduced to the extent practicable
as the end of the life of the Company approaches. It is expected that
liquidation of investments will take place in the last three months of the life
of the Company, so that a mixture of liquid securities and cash are handed to
the liquidator.
Up to 40% of the gross assets of the Company (measured at the time of
investment) may be invested in unquoted securities. "Unquoted securities" for
these purposes means those investments which are not listed or quoted or traded
on a recognised stock exchange or another exchange available and used by
professional investors, nor convertible into securities listed, quoted or
traded on such exchanges.
The Company may invest in bonds, warrants, contracts for difference, other
forms of derivative investment (for the purpose of efficient portfolio
management), bank debt or other debt securities, although this will not amount
to more than 20% of the gross assets of the Company at the time of investment.
Risk diversification
The investment policy provides the Company with a global mandate, albeit with a
particular emphasis on North America. The Company is managed with a view to
maintaining an adequate spread of investment risk in terms of the concentration
and in terms of size of its investments. Except in the case of cash deposits
awaiting investment or pending any winding-up of the Company, the Company will
not lend to any one company or group, or invest in the securities of any one
company or group, more than 20% of the value of its gross assets (at the time
the loan or investment is made).
The Company will not invest more than 10% in aggregate of the value of its
gross assets at the time of a new investment, in other investment companies or
investment trusts which are listed on the Official List (except to the extent
that those investment companies or investment trusts have stated policies to
invest no more than 15% of their gross assets in other investment companies or
investment trusts which are listed on the Official List).
Borrowings
The Company may use gearing and the Directors reserve the right to borrow up to
a maximum of 25% of the gross assets (at the time of drawdown).
Interim management report
Listed companies are required by the FSA's Disclosure and Transparency Rules to
include an interim management report within their half-yearly financial report.
The Company's interim management report is comprised of the information
contained in the Chairman's statement and the Investment Adviser's report. The
interim management report and the financial statements have not been reviewed
or audited by the Company's Auditor.
Chairman's statement
for the six months ended 30 November 2010
Market background.
Over the six months to 30 November 2010 the US stock market continued its
recovery with the benchmark Russell 2000 (Total Return ) index of smaller US
companies rising 10.6% . Sterling however strengthened against the dollar over
the period reducing the sterling return to 3.1%. The more broadly based S&P 500
index (Total Return) rose 9.5% in dollars and 2.1% in sterling.
Portfolio Changes and performance.
During the period the focus was on reducing exposure to the more illiquid
investments in the portfolio. As realisations were made re-investment was
directed towards exchange traded funds (ETFs) so as to maintain market
exposure, in accordance with the Company's investment policy, but at the same
time ensure that any new investments had good liquidity given the Company's
planned wind-up at the end of May 2011. At the start of the period, with 12
months to wind-up, the Manager was instructed to realise the illiquid
investments and at the same time the Board reviewed the valuation of these
investments. A number of listed stocks with very low turnover were written down
to reflect the difficulty experienced in selling these stocks at the market
price. A block of illiquid stocks was sold to another investment trust advised
by RENN capital. The Board were closely involved in setting the terms on which
the transaction was completed. This transaction, together with other sales made
through the market or privately negotiated, meant that by the half year end the
assets which the Board consider to constitute less liquid investments were
approximately 6% of Shareholder Funds. Over the period the NAV of the income
shares fell from 47.34p to 39.62p, a decrease of 16.31%. The share price of the
income shares fell from 50.00p to 32.25p over the six months.
Portfolio composition at 30 November 2010.
The only unlisted securities in the portfolio at the period end were
AnchorFree, Business Process Outsourcing and the unlisted convertible debenture
in iLinc Communications, Inc.(which has subsequently been sold at approximately
half its carrying value) representing 3.4% of Shareholders' Funds. Of the
listed securities AuraSound and Hemobiotech, Inc. are highly illiquid and have
been written down to zero value. Global Axcess is also included in the less
liquid category although steady progress is being made in reducing this holding
through the market. At the period end it represented 2.6% of Shareholders'
Funds. At 30 November 2010, 39.5% of Shareholders' Funds were invested in ETFs
linked to US small company indices but providing good secondary market
liquidity. The balance of the portfolio (54.5% of Shareholders Funds) was
invested in listed securities that the Board considered to have sufficient
liquidity so as not to impede liquidation of the portfolio by 31 May 2011.
Dividends.
Earnings per income share were -0.55p (30 November 2009: -0.09p) and no
dividends were paid during the period. The Company's objective is one of
capital growth.
Bank facility.
The Company's bank facility of $500,000 was repaid during the period.
Share buy back.
No shares were bought back during the period.
Outlook.
With only a few months before the Company is scheduled to wind up on 31 May
2011 any view taken on outlook is necessarily short term. Equities generally do
not appear overvalued by most conventional valuation metrics and it is the
Board's intention to maintain the Company's investment policy and remain
exposed to the market through exchange traded funds as individual stock
positions are sold. The Directors monitor the dollar sterling exchange rate but
currently have taken no action to hedge the Company's dollar exposure.
Duncan Abbot
Chairman
31 January 2011
Investment Adviser's report
for the six months ended 30 November 2010
Top Five Holdings
At 30 November 2010, the following top five holdings made up 51.0% of
Shareholders' Funds. A description of each of the top five holdings is below:
Company Symbol Industry Value USD % of
Shareholders'
Funds
iShares Russell IWM Stock Index 2,437,125 15.2
2000 Index Fund
Vanguard VB Stock Index 2,384,550 14.9
Small-Cap ETF
PowerShares QQQ QQQQ Stock Index 1,510,465 9.4
Trust
SinoHub, Inc. SIHI Electronics 938,597 5.9
Hollysys HOLI Electronic equipment 905,065 5.6
Automation
Technologies,
Ltd (previously
HLS Systems
International)
iShares Russell 2000 Index Fund (ARCA:IWM) is an exchange traded equity index
fund that seeks to replicate the performance of the Russell 2000 Index. The
fund invests in stocks of companies listed on the Russell 2000 Index in
proportion to their weighting in the index.
Vanguard Small-Cap ETF (ARCA:VB) is an exchange traded equity index fund that
seeks to track the performance of the MSCI US Small Cap 1750 index, which
measures the investment return of small capitalisation stocks.
PowerShares QQQ Trust (NASDAQ:QQQQ) is an exchange traded fund that seeks to
track the NASDAQ-100 Index. The NASDAQ-100 index consists of the 100 largest
non-financial companies that trade on the NASDAQ stock market.
SinoHub, Inc. (AMEX: SIHI) is a rapidly growing electronics company in the
People's Republic of China (PRC) currently operating in three business units:
electronic component sales, electronics product manufacturing and sales, and
electronic component supply chain management (SCM) services. The Company's
electronic component sales unit includes procurement-fulfillment and spot
electronic component sales to manufacturers and design houses. The Company's
product manufacturing and sales unit is currently focused on providing custom,
private label mobile phones to developing countries. SinoHub's SCM business
includes warehousing, delivery and import/export services incorporating the
Company's proprietary web-based SCM software platform that gives its customers
total transparency in their supply chains.
For the three months ended September revenues were up 54% to $55.8 million and
net income was up 55% to $5.5 million against the same period last year. The
outlook remains strong demonstrated by the company increasing its prior
calendar year revenue guidance from $180 million to $192 million.
Hollysys Automation Technologies, Ltd (NASDAQ: HOLI) provides automation and
control technology and applications in the People's Republic of China. The
company offers Distributed Control Systems, which are networks of controllers,
sensors, actuators and other devices that can be programmed. It sells its
products and services to various industries, including power generating,
computer controlled manufacturing, chemical, petrochemical, pharmaceutical, and
railway transportation industries. For the three months ended September
revenues were up 59% and net income was up 57% against the same period last
year. The outlook is favourable demonstrated by a record-breaking 36% increase
in backlog of $255M against $187M for the same period last year.
Disposals, adjustments & new investments
Since the end of May 2010, we made complete sales of Access Plans, China
Greenscape, CMSF Corporation, Cover-All Technologies, Inc., Duoyuan Printing,
Geos Communications, Inc., Integrated Security Systems, Inc., Merriman Curhan
Ford Group, and Pipeline Data, Inc. Partial sales were made in PetroHunter
Energy Corporation, Global Axcess Corporation, Hollysys Automation
Technologies, Ltd, SinoHub, Inc., and YAYI International, Inc.
In preparation for the wind-up, the only new purchases were in three index
funds, iShares Russell 2000 Index Fund, Vanguard Small-Cap ETF, and PowerShares
QQQ Trust. These are highly liquid ETF funds that can be sold on early notice.
Liquidity progress
At 30 November 2010 your Company holds two unquoted companies, AnchorFree, Inc.
and Business Process Outsourcing, and the convertible debenture, iLinc
Communications, Inc. Together these three holdings represented 3.4% of
Shareholders' Funds at 30 November 2010, post period end iLinc Communications
Inc. was sold. We continue to work towards liquidating these companies in a
timely manner. The portfolio also holds two companies (representing 3.7% of
Shareholders' Funds), Global Axcess Corporation and YAYI International, Inc.
which would require 17 days and 13 days respectively of average daily volume to
liquidate. Subsequent to the November month end, we have begun selling both of
these positions. We expect that the balance of the portfolio can be liquidated
within a short time.
RENN Capital Group, Inc.
31 January 2011
Responsibility statement
for the six months ended 30 November 2010
The Directors confirm that to the best of their knowledge:
(a) the condensed set of financial statements, which has been prepared in
accordance with applicable accounting standards in the United Kingdom,
gives a true and fair view of the assets, liabilities, financial position
and loss of the Company as required by Disclosure and Transparency Rule
("DTR") 4.2.4R,
(b) the interim management report includes a fair review of the information
required by DTR 4.2.7R, being an indication of the important events that
have occurred during the first six months of the financial year and their
impact on the condensed set of financial statements, and a description of
the principal risks and uncertainties for the remaining six months of the
year,
(c) the notes to the half-yearly financial report include a fair review of the
information required by DTR 4.2.8R, being related party transactions that
have taken place in the first six months of the current financial year and
that have materially affected the financial position and performance of
the entity during that period, and any changes in the related party
transactions described in the last annual report that could do so.
This half-yearly financial report was approved by the Board of Directors on 31
January 2011 and the above responsibility statement was signed on its behalf by
the Chairman.
Financial summary
Capital
30 November 31 May Change
2010 2010 %
Shareholders Funds (GBP'000) 10,294 12,228 (15.82)
Gross assets (GBP'000)* 10,294 12,572 (18.12)
Net asset value per Zero Dividend 182.61p 182.61p n/a
Preference share**
Mid-market price per Zero Dividend n/a n/a n/a
Preference share
Net asset value per Income share** 39.62p 47.34p (16.31)
Mid-market price per Income share 32.25p 50.00p (35.50)
(Discount)/premium to mid-market (18.60%) 5.62% (24.22)
price per Income share
Net asset value per Capital share* 0.00p 0.00p -
*
Mid-market price per Capital share 0.26p 0.51p (49.02)
Net asset value per Unit** (1 39.62p 47.34p (16.31)
Capital share and 1 Income share)
Mid-market price per Unit 32.00p 50.00p (36.00)
(Discount)/premium to mid-market (19.23%) 5.62% (24.85)
price per Unit
Six months Six months
to to
30 November 30 November
2010 2009 Change
pence pence %
Revenue
Return per Income share (0.55) (0.09) (511.11)
Net dividend paid per Income share nil nil -
* Total assets less current liabilities (excluding bank loan and net assets
attributable to shareholders).
** Net asset values calculated in accordance with the Articles of Association
and including current period revenue.
Principal investments
as at 30 November 2010
Fair % of
Value Shareholders
Funds
GBP'000
Company Classification Industrial
classification
iShares Russell 2000 Stock Index Stock Index 1,565 15.2
Index Fund funds
Vanguard Small Cap ETF Stock Index Stock Index 1,531 14.9
funds
PowerShares QQQ Trust Stock Index Stock Index 970 9.4
funds
SinoHub, Inc. Common stock/ Electronics 603 5.9
Warrants
Hollysys Automation Common stock Electronic 581 5.6
Technologies Ltd equipment
Bovie Medical Common stock Healthcare 550 5.3
Corporation services
Skystar Common stock Pharmaceuticals & 548 5.3
Bio-Pharmaceutical Biotechnology
Wonder Auto Technology Common stock Financial services 535 5.2
Bio-star Pharmaceuticals Common stock Pharmaceuticals & 435 4.2
Biotechnology
American Lorain Common stock Food manufacturers 397 3.9
Corporation
ZST Digital Networks Common stock Network equipment 302 2.9
manufacturers
Global Axcess Common stock Consumer finance 266 2.6
Corporation
iLinc Communications, Convertible Technology 225 2.2
Inc. Debenture services
Search Media Holdings Common stock Media 224 2.2
Points International Common stock Internet software 211 2.0
Silverleaf Resorts Common stock Travel & Leisure 141 1.4
YAYI International, Inc. Common stock Food manufacturers 114 1.1
AnchorFree, Inc. Convertible Wireless 71 0.7
Preference communications
Business Process Common stock Business services 51 0.5
Outsourcing
PetroHunter Energy Warrants Oil & gas 49 0.5
Corporation exploration
Douyuan Printing Warrants Industrial 28 0.3
machinery
BPO Management Services Series B Pharmaceuticals & - -
Preferred Biotechnology
Hemobiotech, Inc Common stock Biotechnology - -
AuraSound Common stock Technology - -
9,397 91.3
As at 30 November 2010, the portfolio consisted of 28 holdings in 24 companies
with a total market value of GBP9,397,000 excluding cash and warrants at nil
value, being 91.3% of Shareholders' Funds.
Income statement (unaudited)
for the six months ended 30 November 2010
Period 1 June to Period 1 June to Year ended 31 May
30 November 2010 30 November 2009 2010
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
(Losses)/gains - (1,706) (1,706) - 2,426 2,426 - (523) (523)
on investments
at fair value
through profit
or loss
Income 15 - 15 148 - 148 216 - 216
Investment (12) (27) (39) (17) (40) (57) (35) (80) (115)
management fee
VAT recovered - - - - - - 2 5 7
on Investment
Management fee
Other expenses (135) - (135) (152) - (152) (315) - (315)
Liquidation (2) (3) (5) - - - (25) (25) (50)
costs
Exchange - (56) (56) - (33) (33) - 31 31
(losses)/
gains on
capital items
Net return (134) (1,792) (1,926) (21) 2,353 2,332 (157) (592) (749)
before finance
costs and
taxation
Finance costs
Interest (1) (4) (5) (1) (4) (5) (3) (8) (11)
payable and
similar
charges
Appropriations
in respect of:
Income shares 138 1,796 1,934 22 (2,349) (2,327) 160 600 760
Return on 3 - 3 - - - - - -
ordinary
activities
before
taxation
Taxation on (3) - (3) - - - - - -
ordinary
activities
- - - - - - - - -
Return per pence pence pence pence pence pence pence pence pence
share
Capital share - - - - - - - - -
Income share (0.55) (7.17) (7.72) (0.09) 9.33 9.24 (0.64) (2.39) (3.03)
Zero Dividend - - - - - - - - -
Preference
share
Unit (1 (0.55) (7.17) (7.72) (0.09) 9.33 9.24 (0.64) (2.39) (3.03)
Capital, 1
Income)
The total column of this statement is the profit and loss account of the
Company. The supplementary revenue return and capital return columns have been
prepared in accordance with the AIC's SORP. Revenue and capital return per
share figures shown are also supplementary information.
All revenue and capital items in the above statement derive from continuing
operations. There are no recognised gains or losses other than those passing
though the Income statement.
Statement of movements in net assets attributable
to shareholders (unaudited)
for the six months ended 30 November 2010
Period Period Year
1 June to 1 June to ended
30 November 30 November 31 May
2010 2009 2010
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Net assets attributable to 12,228 13,065 13,065
Shareholders at the start of
the period
Appropriations to Shareholders
Income shares (1,934) 2,327 (760)
(1,934) 2,327 (760)
Repurchase of shares (including - (77) (77)
related costs)
Net assets attributable to 10,294 15,315 12,228
Shareholders at the end of the
period (Shareholders' Funds)
Balance sheet (unaudited)
as at 30 November 2010
30 November 30 November 31 May
2010 2009 2010
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Fixed assets
Investments at fair value through 9,397 14,206 11,801
profit or loss
9,397 14,206 11,801
Current assets
Debtors 91 391 36
Cash at bank 912 1,108 876
1,003 1,499 912
Creditors - amounts falling due
within one year
Creditors 106 85 141
Bank loan - 305 344
Net assets attributable to 10,294 - 12,228
Shareholders
10,400 390 12,713
Net current (liabilities)/assets (9,397) 1,109 (11,801)
Total assets less current - 15,315 -
liabilities
Creditors - amount falling due
after more than one year
Net assets attributable to - 15,315 -
Shareholders
- 15,315 -
- - -
Net asset values per share pence pence pence
Capital share - - -
Income share 39.62 59.67 47.34
Zero Dividend Preference share 182.61 182.61 182.61
Unit 39.62 59.67 47.34
Statement of cashflows (unaudited)
for the six months ended 30 November 2010
Period Period Year
1 June to 1 June to ended
30 November 30 November 31 May
2010 2009 2010
(unaudited) (unaudited) (audited)
GBP'000 GBP'000 GBP'000
Operating activities
Investment income received 16 139 256
Deposit interest received 1 2 4
VAT refunded in respect of - - 7
Investment Managers' fees
Investment management fees paid (28) (46) (115)
Secretarial fees paid (61) (58) (115)
Other cash payments (139) (150) (224)
Net cash outflow from operating (211) (113) (187)
activities
Servicing of finance
Interest paid (4) (10) (15)
Net cash outflow from servicing (4) (10) (15)
of finance
Capital expenditure and
financial investment
Purchases of investments (4,649) (2,128) (4,275)
Sales of investments 5,300 2,488 4,379
Net cash inflow from capital
expenditure
and financial investment 651 360 104
Net cash inflow/(outflow) before 436 237 (98)
financing
Financing
Repayment of credit facility (317) - -
drawdown
Buyback of shares for - (77) (77)
cancellation
Net cash outflow from financing (317) (77) (77)
Net cash inflow/(outflow) after 119 160 (175)
financing
Increase/(decrease) in cash 119 160 (175)
Notes to the half yearly financial report
for the six months ended 30 November 2010
1. Basis of Preparation
This financial information has been prepared under the historical cost
convention as modified by the revaluation of certain investments and in
accordance with the Accounting Standards Board's ("ASB") Statement on
Half-Yearly Financial Reports, applicable law and Accounting Standards in the
United Kingdom ("UK GAAP") and with the Statement of Recommended Practice
"Financial Statements of Investment Trust Companies and Venture Capital Trusts"
("SORP") issued by the Association of Investment Companies ("AIC") in January
2009 and in accordance with accounting policies set out in the statutory
accounts for the year ended 31 May 2010.
The Company is due to wind-up on 31 May 2011 and as a result the accounts have
been prepared on a wind-up (break-up) basis rather than on a going concern
basis as it is certain that the wind-up will occur and there is no option for
the Company to continue after this date. The comparatives for the period to 30
November 2009 are prepared on a going concern basis.
2. Return per Share
Period 1 June to Period 1 June to Year ended
30 November 2010 30 November 2009 31 May 2010
Revenue Capital Total Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence pence pence pence
Return per share
Capital share - - - - - - - - -
Income share (0.55) (7.17) (7.72) (0.09) 9.33 9.24 (0.64) (2.39) (3.03)
Zero Dividend - - - - - - - - -
Preference share
Unit (1 Capital, (0.55) (7.17) (7.72) (0.09) 9.33 9.24 (0.64) (2.39) (3.03)
1 Income)
Capital shares
The return per Capital share is based on appropriations for the period of GBPnil;
(period 1 June 2009 to 30 November 2009: GBPnil; year ended 31 May 2010: GBPnil)
and on 50,000,000 (period 1 June 2009 to 30 November 2009: 50,000,000; year
ended 31 May 2010: 50,000,000) Capital shares.
Income shares
The revenue return per Income share is based on revenue losses of GBP138,000
(period 1 June 2009 to 30 November 2009: losses GBP22,000; year ended 31 May
2010: losses GBP160,000) and on 25,035,008 (period 1 June 2009 to 30 November
2009: 25,176,538; year ended 31 May 2010: 25,105,967) Income shares being the
weighted average number of shares in issue during the period.
The capital return per Income share is based on capital appropriations of (GBP
1,796,000) (period 1 June 2009 to 30 November 2009: GBP2,349,000; year ended 31
May 2010: (GBP600,000)) and on 25,035,008 (period 1 June 2009 to 30 November
2009: 25,176,538; year ended 31 May 2010: 25,105,967) Income shares being the
weighted average number of shares in issue during the period.
Zero Dividend Preference shares
The return per Zero Dividend Preference share is based on an annualised
redemption yield from 12 April 2001 to 31 May 2008, (at which point no further
appropriations will be made) and on 206,037 (period 1 June 2009 to 30 November
2009: 206,037; year ended 31 May 2010: 206,037) Zero Dividend Preference shares
being the weighted average number in issue during the period.
The redemption yield is contingent on the Company having sufficient assets at
the time of redemption.
3. Net Asset Values
Total net asset values attributable to Shareholders calculated in accordance
with FRS 25 are as follows:
30 November 31 May 30 November
2010 2010 2009
GBP'000 GBP'000 GBP'000
For the purposes of
calculating net asset values:
Total net assets attributable
to:
- Capital Shareholders - - -
- Income Shareholders 9,918 11,852 14,939
- Zero Dividend Preference 376 376 376
Shareholders
10,294 12,228 15,315
- Unit holders 9,918 11,852 14,939
pence pence pence
Net asset value per:*
- Capital share - - -
- Income share 39.62 47.34 59.67
- Zero Dividend Preference 182.61 182.61 182.61
share
- Unit 39.62 47.34 59.67
They are represented by:
30 November 31 May 30 November
2010 2010 2009
GBP'000 GBP'000 GBP'000
Share capital 75 75 75
Special reserve 11,376 11,376 11,376
Capital redemption reserve 40 40 40
Capital reserve (5,993) (4,197) (1,248)
Redemption reserve 4,906 4,906 4,906
Revenue reserve (110) 28 166
Assets attributable to 10,294 12,228 15,315
Shareholders
* Net asset values per share calculated on the number of shares in issue of:
30 November 31 May 30 November
2010 2010 2009
- Capital share 50,000,000 50,000,000 50,000,000
- Income share 25,035,008 25,035,008 25,035,008
- Zero Dividend Preference 206,037 206,037 206,037
share
The net asset values calculated include unaudited current period revenue net of
dividends paid as at 30 November 2010 and 2009.
4. Movement in Assets Attributable to Shareholders
Capital
redemption Special Capital Redemption Revenue
reserve reserve reserve reserve reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Balance brought
forward at
1 June 2010 40 11,376 (4,197) 4,906 28
Losses on
realisation of
investments - - (8,968) - -
Exchange losses on
capital items - - (56) - -
Movement in
investment holding
losses - - 7,262 - -
Costs charged to - - (34) - -
capital
Net revenue - - - - (138)
At 30 November 2010 40 11,376 (5,993) 4,906 (110)
5. EFFECTIVE TAX RATE
The tax charge for the six months ended 30 November 2010 is GBPnil (period 1 June
2009 to 30 November 2009: GBPnil; year ended 31 May 2010: GBPnil).
The Company has an effective tax rate of 0% for the year ending 31 May 2011.
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.
6. Reconciliation of Net Return Before Finance Cost and Taxation to Net Cash
Outflow From Operating Activities
30 November 30 November 31 May
2010 2009 2010
GBP'000 GBP'000 GBP'000
Net return before finance (1,926) 2,332 (749)
costs and taxation
Losses/(gains) on 1,706 (2,426) 523
investment
Exchange losses/(gains) on 56 33 (31)
capital items
(Decrease)/increase in (35) (30) 26
creditors
(Increase)/decrease in (11) 20 89
debtors
Reinvested dividends - (42) (45)
Tax deducted on investment (1) - -
income
Net cash outflow from (211) (113) (187)
operating activities
7. Reconciliation of Net Cash Flow to Movement in Net Funds
30 November 30 November 31 May
2010 2009 2010
GBP'000 GBP'000 GBP'000
Increase/(decrease) in cash 119 160 (175)
in period
Revolving credit repayments 317 - -
Foreign exchange (losses)/ (56) (33) 31
gains
Movement in funds 380 127 (144)
Net funds at start of 532 676 676
period
Net funds at end of period 912 803 532
8. Analysis of Changes in Net Funds
30 November 30 November 31 May
2010 2009 2010
GBP'000 GBP'000 GBP'000
Cash at bank 912 1,108 876
Bank loan due within one - (305) (344)
year
912 803 532
9. Related Party Transactions
The Investment Managers, Premier Asset Management (Guernsey) Limited and
Premier Fund Managers Limited, are regarded as related parties to the Company.
The amount paid to the Managers for Investment Management fees for the period
ended 30 November 2010 was GBP39,000 (31 May 2010: GBP115,000; 30 November 2009: GBP
57,000). At 30 November 2010 there were amounts outstanding of GBP18,000 (31 May
2010: GBP8,000; 30 November 2009: GBP19,000). The Investment Management fee is
based on the Company's gross assets less current liabilities which are reduced
by the value of investments held in the companies where Premier are the
Investment Manager. At 30 November 2010 the market value of these holdings was
GBPnil (31 May 2010: GBPnil; 30 November 2009: GBPnil).
Mr Cleveland of RENN Capital Group, Inc., the Investment Adviser is a director
of Access Plans, Cover-All Technologies, Integrated Securities Systems, BPO
Management Services and CaminoSoft, being companies held within the portfolio
during the period under review. Of these companies, Mr Cleveland received fees
of US$43,000 per annum in respect of Cover-All Technologies. Other officers of
RENN Capital Group Inc. also sit on the boards of certain companies held as
investments within the portfolio. The total directors' remuneration received by
RENN Capital Group Inc. for representation of the Company and its other clients
and affiliates, and attendance at meetings of the boards of companies in which
the Company had a interest in the year to date and during the year ended 31 May
2010 was US$12,375 per annum. During the period the Company sold their
interests in CaminoSoft, Integrated Security Systems and Cover-All Technologies
to another investment trust advised by RENN Capital on which Mr Cleveland is a
director, the Board of Global Special Opportunities Trust PLC were closely
involved in the setting of the terms on which the transaction was completed.
10. Financial Information
The financial information contained in this half-yearly financial report does
not constitute full statutory accounts as defined in Section 434 of the
Companies Act 2006. The financial information for the six months ended 30
November 2010 and 30 November 2009 has not been audited.
The information for the year ended 31 May 2010 has been extracted from the
latest published audited accounts. Those accounts have been filed with the
Registrar of Companies and included the report of the auditors which was
unqualified and did not contain a statement under Section 498(2) or (3) of the
Companies Act 2006.
RISK FACTORS
Principal risks associated with the Company
General
The market price of the shares may not fully reflect their underlying net asset
values. If stock market prices fall the potential returns available to
Shareholders may decline. There can be no guarantee that the Company's
investment objectives will be achieved.
Zero Dividend Preference shares
Although the Zero Dividend Preference shares rank ahead of the Income shares
and the Capital shares for participation in a distribution of assets on the
winding-up of the Company, they rank behind the Company's liabilities. The Zero
Dividend Preference Shares were delisted on 31 July 2008. There is no secondary
market in which these shares can be traded.
Income shares
The Income shares rank for repayment after the Zero Dividend Preference shares.
Capital shares
The Capital shares rank for repayment after the other two classes of shares.
Due to the substantial gearing provided by the prior capital entitlements of
the Income shares, the Zero Dividend Preference shares and by any debt
financing, the market value of the Capital shares can be expected to be
volatile and particularly sensitive to changes in the value of the Company's
gross assets. The Capital shares' NAV remained zero throughout the period.
Accordingly, the Capital shares should be considered to be a high risk
investment.
Smaller companies
The Company invests directly in smaller companies. As smaller companies do not
generally have the financial strength, diversity and resources of large
companies they may find it more difficult to overcome periods of economic
slowdown or recession. In addition, the relatively small market capitalisation
of such companies may make the market in their shares less liquid, therefore
impacting on the Company's ability to realise value before its liquidation
date. In the event that smaller companies under perform, this may affect the
performance of US smaller companies in which the Company is invested.
Unlisted securities
The Company may invest in unlisted securities, or other securities, in which
there is no active market. In such cases it may be difficult to determine the
value of such securities and/or to realise the investment or to do so on
acceptable terms. There may be no certainty that a listing or trading facility
will be obtained for such securities. Holders of such securities may not have
the benefit of market rules designed for the protection of holders of listed or
public traded securities. This may include the absence of publicly available
information on such securities or their issuers.
Derivative risk
The Company's investment policy allows it to enter into derivative transactions
where the Investment Managers consider that it is prudent to do so in order to
protect the value of the Company's portfolio and is in the best interests of
the Company. Markets in derivatives can be highly volatile and such investments
carry a high risk of loss. In the case of certain derivatives a relatively
small adverse market movement may result not only in the loss of the original
investment but also in unquantifiable further loss exceeding any margin
deposited. Any such loss suffered by the Company may adversely affect the
Company's ability to meet the capital and income returns to Shareholders.
Dividend levels
Dividends paid on the Company's Income shares rely on receipt of interest
payments and dividends from the securities in which the Company invests and
therefore dividend levels are likely to vary. The Board expects dividend
levels, if any, to be negligible.
Currency risk
The portfolio invests in US securities and its assets are therefore subject to
fluctuations in the US dollar/ sterling exchange rate and the sterling value of
its assets, plus declines in US equity markets as a whole. Bearing in mind that
the final redemption payment will be a sterling payment made to the holders of
Income shares 31 May 2011, the Board may look at taking advantage of any future
dollar strength versus sterling by hedging some or all of the dollar exposure
into sterling.
Liquidity risk
A significant proportion of the portfolio is held in smaller and unlisted
companies. Such companies are inherently higher in risk and lower in liquidity
than, for example, blue-chip equities. Unlisted companies have the additional
risk of not benefiting from market rules designed to protect investors. Some of
the investments are in unlisted convertible bonds or preference shares, which
may at any time be converted into a listed common stock, giving an effective
level of liquidity equal to the liquidity in the common stock. Other unlisted
investments do not have the option of converting into a listed stock. This
issue is particularly relevant regarding the 31 May 2011 wind-up date of the
Company.
Credit risk
The portfolio may contain some fixed income securities. However, many of these
are convertible into common stock (equity). The benefit of a convertible
debenture is that, if a portfolio company becomes troubled, the Company is
protected through its position as a creditor. If the underlying portfolio
company performs well, the Company can participate in the upside by converting
into common stock. However, it is possible that such investee companies might
default on these debentures or wind-up prior to their repayment.
Market price risk
Since the Company invests in financial instruments, market price risk is
inherent in these investments.
Discount volatility
The Company's shares may trade at a discount to its net asset value being a
closed end fund. The magnitude of this discount fluctuates daily and can vary
significantly. Thus, for a given period of time, it is possible that the market
price could decrease despite an increase in the Company's net asset value. The
Company obtained the authority to purchase Income and Capital shares for
cancellation from Shareholders at its last AGM. The Directors will consider
using share buybacks to control the Company's discount levels when in the
interest of all Shareholders and the Company as a whole.
Regulatory risk
If the Company did not comply with the provisions of Section 1158 and 1159 of
the Corporation Taxes Act 2010 (formerly contained in Section s842 of the
Income and Corporation Taxes Act 1988), it would lose its investment trust
status and could be liable to pay taxes on investment gains. A breach of the
Listing Rules may result in censure by the Financial Services Authority ("FSA")
and/or the Company's suspension from Listing. In order to minimise this risk,
the Directors, the Investment Managers, the Investment Adviser and the Company
Secretary monitor the Company's compliance with the key criteria of Sections
1158 and 1159 on a monthly basis and an ongoing review of compliance with the
FSA Listing Rules. On a quarterly basis, compliance with these provisions is
discussed in detail between the Board, the Company Secretary, the Investment
Managers and the Investment Adviser.
Risks associated with the engagement of third parties
There are a number of potential operational risks associated with the fact that
third parties undertake the Company's administration and custody of assets.
Most seriously, there is the risk that third parties could fail to ensure that
statutory requirements, such as the Companies Act and the FSA's Listing Rules,
are complied with. There is also the risk associated with the directorships
held by the Investment Advisors employees on investee companies, which may
prohibit them from dealing in those company's shares during prohibited period
throughout the year, this could result in the inability to wholly liquidate the
Company's portfolio by 31 May 2011. Details of how these risks are managed are
detailed in the 2010 Annual Report and Accounts under `Internal control
process.'
During the period there were no qualifying third party indemnity provisions in
force.
Risk diversification
The Company's investment policy provides it with a global mandate, albeit with
a particular emphasis to invest primarily in equities and equity related
instruments issued by companies domiciled, listed, quoted or traded in North
America. The Company is managed with a view to maintaining an adequate spread
of investment risk in terms of the concentration and size of its investments.
There is the risk that the Company's portfolio may become more concentrated as
investments are realised in the three months leading up to the Company's
liquidation. The Company will continue to re-invest in liquid assets that are
easily realisable before 31 May 2011.
COMPANY INFORMATION
Directors Investment Adviser
Duncan Abbot (Chairman) RENN Capital Group, Inc.
Andrew Pegge Suite 210 LB59
Rory Macleod 8080 North Central
Expressway
Stephen White Dallas, Texas 75206-1857
USA
Tel: 001 214 891 8294
Secretary and Registered Office Fax: 001 214 891 8291
Capita Sinclair Henderson
Limited
(trading as Capita Financial
Group - Specialist Fund
Services)
Beaufort House
51 New North Road Bankers
Exeter EX4 4EP Lloyds TSB Bank plc
Tel: 01392 412122 71 Lombard Street
Fax: 01392 253282 London EC3P 3BS
Website Allied Irish Banks plc
Bankcentre
www.premierassetmanagement.co.uk Ballbridge
Dublin 4
Investment Managers Ireland
Premier Asset Management
(Guernsey) Limited
PO Box 405 Stockbrokers
Anson Place Cenkos Securities Plc
Mill Court 6.7.8 Tokenhouse Yard
La Charroterie London EC2R 7AS
St Peter Port
Guernsey GY1 3GF
Premier Fund Managers Limited Registrars
Eastgate Court Equiniti Limited
High Street Aspect House
Guildford Spencer Road
Surrey GU1 3DE Lancing
Tel: 01483 306090 West Sussex BN99 6DA
Tel: 0871 384 2030
Auditors
Grant Thornton UK LLP
30 Finsbury Square
London EC2P 2YU
END
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