RNS Number:2347N
Charter European Trust plc
04 February 2008
For immediate release 4th February 2008
CHARTER EUROPEAN TRUST PLC
ANNOUNCEMENT OF UNAUDITED PRELIMINARY RESULTS
For the year ended 30th November 2007
Highlights
* Net Asset Value per share for the year under review up by 18.2%, compared
with a composite benchmark return of 14.4%
* Top performing investment trust in AIC Europe sector for year ended 30th
November 2007 (Source: AIC)
Net Asset Value
The Net Asset Value per Ordinary Share at 30th November 2007 was 260.2p, a rise
of 18.2% since 30th November 2006, compared to an increase in a composite of the
Company's current benchmark, the FTSE World Europe (ex UK) Index from 9th
January 2007, and its previous benchmark index, the FTSE World Europe Index (�),
of 14.4%.
Dividend
The Board recommends a final ordinary dividend of 2.00p per Ordinary Share,
payable on 4th April 2008 to shareholders on the Register at 29th February 2008,
making a total dividend for the year to 30th November 2007 of 3.20p per Ordinary
Share (2006: 3.00p), an increase of 6.7%.
Chairman's Statement
I am delighted to report that in the year of the 100th anniversary of the
incorporation of the original Charter Trust and Agency - the predecessor company
to Charter European Trust - your trust achieved excellent returns: in absolute
terms, relative to our benchmark, and relative to the competition. It has also
been a year in which it has been encouraging to see the fruition of a number of
initiatives adopted in recent years, in particular our move to a more
concentrated portfolio and the adoption of a flexible stock-picking strategy
based around our new benchmark of the FTSE World Europe (ex UK) Index (�) in
January of last year.
The net asset value per share during the year increased from 220.1p to 260.2p, a
rise of 18.2%. This was well ahead of our benchmark (the FTSE World Europe
Index (�) to 8th January 2007 and thereafter, the FTSE World Europe (ex UK)
Index (�)), to 30th November 2007 of 14.4%. Additionally, this placed Charter
as the best performing trust within its peer group (the AIC European sector) for
the year ended 30th November 2007.
The adoption of the new benchmark in January 2007, as expected, reduced our
earnings for the financial year, as a result of the switch to a greater
proportion of continental European stocks, where dividend yields were generally
lower. However, we have been able to increase our total dividend payments for
the year (excluding special dividends) to 3.20p.
During the course of the year we bought back 2,075,871 shares for cancellation,
and since the year end we have purchased a further 487,500 shares for
cancellation and 273,000 shares for treasury. Our buyback policy has continued
to reduce the volatility of the discount to asset value, and modestly enhanced
the net asset value per share during the period.
As set out in the Interim Report, Nigel Simon was appointed a Director on 21st
March 2007 and offers himself for election along with all the other Directors
who are standing for annual re-election. Elizabeth Vallance, having served as a
Director now for nine years, will stand down as Senior Independent Director and
Chairman of the Management Engagement Committee at the Annual General Meeting.
Richard Bernays will take over as Senior Independent Director and Vicky
Hastings as Chairman of the Management Engagement Committee.
On your behalf, I would like to thank the Investment Managers, RCM, represented
by Mark Lovett, for their performance this year. Their astute anticipation of
the dominant themes in 2007 has been a major contribution to the outperformance.
During the course of the year, your Board visited RCM's operations in
Frankfurt and were impressed by their significant research resources, backed up
by their proprietary Grassroots(R) market research, which RCM can bring to the
selection of a portfolio of attractive European shares on your behalf.
We have maintained our flexible approach to gearing, which is in the form of a
multi-currency revolving credit facility with Bank of Ireland. This year we
have borrowed in sterling, so as to increase our exposure to the euro, which has
been the stronger currency in recent months. Given the recent uncertainty in
global credit markets the Manager eliminated gearing towards the end of the
financial year and the Trust currently has no borrowings.
On 29th February 2008 RCM will be transferring its PEP and ISA and Share Plan
wrappers to Alliance Trust Savings. As a Board, we are committed to maintaining
good lines of communication with all our shareholders and have, therefore,
decided to adopt the Alliance Trust's shareholder enfranchisement service which
ensures the distribution of all Report and Accounts and other shareholder
communication to holders of their wrapper products.
During the course of the year, JP Morgan Claverhouse were successful in their
case against HM Revenue and Customs and, in the future, VAT will no longer be
payable on management fees to RCM. An amount of VAT payable in respect of prior
years will be repayable but the exact amount is not yet possible to quantify,
given the continuing uncertainty about the methodology to be followed. This is
likely to have a modest beneficial impact on the NAV and income .
The full impact of last summer's credit crisis, and its continuing aftershocks,
is still unclear. Many more forecasters are now predicting that the United
States will enter a recession - two quarters of negative economic growth - in
2008. In Europe, whose major economies depend upon exports, the likely slowdown
in growth brought about by any contraction of the US economy may well be
significant. Survey data is already indicating a deterioration in confidence.
The strength of the Euro in 2007, and the impact of housing weakness in Spain,
Ireland and the United Kingdom, add to the nervousness. Careful stock selection
will remain key in 2008 and the emphasis on quality growth shares, which served
us so well last year, will be maintained in the near term. Although at the time
of writing markets remain volatile, valuations in many sectors are now
discounting much bad news and the likely policy response to further
deterioration - cuts in interest rates - could well provide support for markets
this year, as investors look beyond the immediate difficulties into the renewal
of more robust growth.
Manager's Review
Volatility returned to markets in 2007, and the financial year also witnessed
much greater spread of returns than in previous years.
The nature of Charter's portfolio during 2007 was determined by our views on a
number of key themes which, in the event, were to prove very important during
the year. First, we believed that emerging market economies, and in particular
China and India, would continue to grow fast, and remain hungry for resources,
as well as luxury goods and capital equipment. Second, we took a view that
valuations for commercial property and private housing in a number of the
developed markets were very extended, and that difficulties in these sectors
would have knock-on effects for financial institutions. Third, we considered
that margins in the telecoms sector were in structural decline and intense
competition would prevent profits' growth.
For the most part, these themes played out as we had hoped and the trust
benefited from the resulting share movements. When we moved in January from a
pan European Index, i.e. one including the UK, to a continental European Index,
we retained our exposure to a number of our favoured UK resource companies. Our
view, supported by the Board and approved by shareholders, is that the trust
should pursue a flexible, 'bottom-up' stock picking mandate - whereby we would
seek to generate returns from a concentrated portfolio of the best European
companies. In this approach, the place of listing is secondary to the
underlying prospects of the company. In the shift to a continental European
benchmark, the flexibility to invest up to 20% of the portfolio in shares which
are not constituents of the benchmark index was retained, and this has proved to
be a valuable facility this year.
Three of our top ten performers - Rio Tinto, Xstrata and BG Group - have been in
the resources sector, an area which is not well represented in the continental
European stock exchanges. Less positively, we missed the spectacular recovery
of Nokia as the handset manufacturer turned round its lacklustre performance
with new products' success and improving financial performance. In the telecoms
sector. We also missed the upturn in Telefonica, where the Latin American
exposure helped performance, as investors saw security of profit stream as an
attractive route to capture rapid economic growth in South America. Our
emphasis on luxury goods, based on the belief that emerging market demand would
sustain sales and high margins, continued in 2007 and Swatch Group, the luxury
Swiss watch manufacturer, rose 28% in the period under review.
Our caution on financial stocks proved well founded as the year progressed, and
the low exposure to banks and the financial sectors contributed over 2% to our
outperformance in the period. The problems of the US sub-prime mortgage market,
which over the second half of the year spread to the asset-backed commercial
paper and structured products' market, caused significant anxiety and
dislocation, first in the summer and then more recently at the turn of the year
2007/8. Early in the financial year we sold the outstanding position in UBS,
ensuring that the fund had negligible exposure to investment banking earnings
and a significant underweight to the banks sector. While we did not anticipate
the scale of the credit crisis that developed, we were conscious that business
activity levels were unsustainable and risk appetite elevated. During the
liquidity crisis of the second half, it became clear that European banks,
including UBS, were exposed to many of the affected markets, requiring write
downs, recapitalisations, and dividend cuts.
Annual General Meeting
The sixth Annual General Meeting of the Company will be held at the City Club,
19 Old Broad Street, London EC2N 1DS on 18th March 2008 at 12.30pm.
Share Buy Backs
During the year under review the Company repurchased 2,075,871 Ordinary Shares
for cancellation, enhancing the Company's Net Asset Value by 1.3p. In the
period from the year end to date, a further 487,500 Ordinary Shares have been
repurchased for cancellation and a further 273,000 Ordinary Shares repurchased
into treasury. The Board has decided to recommend to shareholders that the
Company takes renewed powers to buy back up to 14.99% of its Ordinary Shares.
155 Bishopsgate By Order of the Board
London EC2M 3AD P W I Ingram
1st February 2008 Secretary
For further information, please contact:-
Simon White
Head of Investment Trusts, RCM (UK) Limited
Tel: 020 7065 1539
Unaudited preliminary results for the year ended 30th November 2007 were
approved for immediate release as undernoted:-
INCOME STATEMENT
for the year to 30th November 2007
�'000s �'000s �'000s
Revenue Capital Total Return
(Note 2)
Net gains on investments at fair value - 11,287 11,287
Net losses on foreign currency loan - (88) (88)
Other capital charges - (4) (4)
Income 1,918 - 1,918
Investment management fee (152) (705) (857)
Administration expenses (285) - (285)
Net return before finance costs and taxation
1,481 10,490 11,971
Finance costs: interest payable and similar charges
(84) (246) (330)
Net return on ordinary activities before taxation
1,397 10,244 11,641
Taxation (377) 165 (212)
Net return attributable to Ordinary Shareholders 1,020 10,409 11,429
Return per Ordinary Share (Note 1) 3.77p 38.47p 42.24p
(basic and diluted)
BALANCE SHEET
as at 30th November 2007
2007
�'000s
Investments held at fair value through profit or loss 64,735
Net Current Assets 3,042
Total Assets less Current Liabilities 67,777
Creditors: Amounts falling due after more than one year -
Total Net Assets 67,777
Called up Share Capital 275
Capital Redemption Reserve 261
Special Reserve 39,827
Capital Reserves: Realised 16,395
Unrealised 9,508
Revenue Reserve 1,511
Shareholders' Funds (all equity interests) 67,777
Net asset value per Ordinary Share 260.2p
The net asset value is based on 26,050,817 Ordinary Shares in issue.
The financial information for the year ended 30th November 2006 is derived from
the statutory accounts for that year, which have been delivered to the Registrar
of Companies, and on which the auditors gave an unqualified report.
INCOME STATEMENT
for the year to 30th November 2006
�'000s �'000s �'000s
Revenue Capital Total Return
(Note 2)
Net gains on investments at fair value - 8,021 8,021
Net gains on foreign currency loan - 68 68
Other capital charges - (3) (3)
Income 1,958 1,958
-
Investment management fee (160) (476) (636)
Administration expenses (240) - (240)
Net return before finance costs and taxation 1,558 7,610 9,168
Finance costs: interest payable and similar charges (49) (140) (189)
Net return on ordinary activities before taxation 1,509 7,470 8,979
Taxation (245) 83
(162)
Net return attributable to Ordinary Shareholders 1,264 7,553 8,817
Return per Ordinary Share (Note 1) 4.23p 25.29p 29.52p
(basic and diluted)
BALANCE SHEET
as at 30 November 2006
2006
�'000s
Investments held at fair value through profit or loss 61,027
Net Current Assets 3,918
Total Assets less Current Liabilities 64,945
Creditors: Amounts falling due after more than one year (3,033)
Total Net Assets 61,912
Called up Share Capital 296
Capital Redemption Reserve 240
Special Reserve 44,439
Capital Reserves: Realised 1,925
Unrealised 13,569
Revenue Reserve 1,443
Shareholders' Funds (all equity interests) 61,912
Net asset value per Ordinary Share 220.1p
The net asset value is based on 28,126,688 Ordinary Shares in issue.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the years ended 30th November 2006 and 30th November 2007
Called up Capital Capital Capital
Share Redemption Special Reserve Reserve Revenue
Capital Reserve Reserve Realised Unrealised Reserve Total
�'000s �'000s �'000s �'000s �'000s �'000s �'000s
Net Assets at 30th November 2005 336 200 54,697 (2,597) 10,538 1,044 64,218
Revenue Return - - - - - 1,264 1,264
Shares repurchased during the year (40) 40 (10,258) - - - (10,258)
Dividends on Ordinary Shares - - - - - (865) (865)
Capital Return - - - 4,522 3,031 - 7,553
Net Assets at 30th November 2006 296 240 44,439 1,925 13,569 1,443 61,912
Net Assets at 30th November 2006 296 240 44,439 1,925 13,569 1,443 61,912
Revenue Return - - - - - 1,020 1,020
Shares repurchased during the year (21) 21 (4,612) - - - (4,612)
Dividends on Ordinary Shares - - - - - (952) (952)
Capital Return - - - 14,470 (4,061) - 10,409
Net Assets at 30th November 2007 275 261 39,827 16,395 9,508 1,511 67,777
CASH FLOW STATEMENT
for the year ended 30th November 2007
2007 2007 2006
�'000s �'000s �'000s
Net cash inflow from operating activities 473 1,099
Servicing of finance
Interest paid (337) (186)
Capital expenditure and financial investment
Purchase of fixed asset investments (44,421) (15,428)
Sale of fixed asset investments 53,180 30,559
Net cash inflow from capital expenditure and financial investment 8,759 15,131
Equity dividends paid (952) (865)
Net cash inflow before financing 7,942 15,179
Financing
Purchase of Ordinary Shares for cancellation and held in treasury (4,613) (10,258)
Drawdown of Euro loan 3,214 3,392
Repayment of Euro loan (6,335) (3,017)
Net cash outflow from financing (7,734) (9,883)
Increase in cash 208 5,296
TOP 20 HOLDINGS as at 30th November 2007
Valuation % of
30th November 2007 Net
�'000s Assets Principal Activities
E.ON 4,920 7.3 Gas, Water and Multiutilities
Novartis 3,784 5.6 Pharmaceuticals and Biotechnology
Total 3,235 4.8 Oil and Gas Producers
Syngenta 2,517 3.7 Chemicals
Umicore 2,510 3.7 Chemicals
Dassault Systemes 2,195 3.3 Software and Computer Services
Vinci 2,177 3.2 Construction and Materials
BG Group 2,163 3.2 Oil and Gas Producers
Heineken 2,141 3.2 Beverages
Veolia Environnement 2,118 3.1 Gas, Water and Multiutilities
Swatch Group 2,088 3.1 Personal Goods
Fresenius Medical Care 2,054 3.0 Healthcare Equipment and Services
Informa 2,026 3.0 Media
Bayerische Motoren Werke 2,012 3.0 Automobiles and Parts
Groupe Danone 1,918 2.8 Food Producers
Enel 1,760 2.6 Electricity
Statoil 1,745 2.6 Oil and Gas Producers
Man Group 1,692 2.5 General Financial
AXA 1,638 2.4 Non-Life Insurance
Societe Generale 1,636 2.4 Banks
46,329 68.5
Note 1
The Returns per Ordinary Share have been calculated using a weighted average
number of shares in issue during the period of 27,055,002 shares (2006 -
29,862,958 shares).
Note 2
The total return column of this statement is the profit and loss account of the
Company.
All revenue and capital items derive from continuing operations. No operations
were acquired or discontinued in the year.
A Statement of Total Recognised Gains and Losses is not required as all gains
and losses of the Company have been reflected in the Income Statement.
Included in the costs of investments are transaction costs on purchases
amounting to �83,371 (2006 - �67,293) and transaction costs on sales amounting
to �47,687 (2006 - �57,200).
Note 3
Investments are designated as held at fair value through profit or loss in
accordance with FRS 26 'Financial Instruments: Recognition and Measurement'.
Listed investments are valued at bid market prices.
Note 4
In accordance with FRS 21 'Events after the Balance Sheet Date' the final
dividend payable on Ordinary Shares is recognised as a liability when approved
by shareholders. Interim dividends are recognised only when paid.
Dividends paid on Ordinary Shares in respect of earnings for each period are as
follows:
Year to Year to
30th November 2007 30th November 2006
�'000s �'000s
Final dividend 1.80p paid 5th April 2007 (2006 - 1.70p) 495 514
Special dividend 0.50p paid 5th April 2007 (2006-Nil) 138 -
Interim dividend 1.20p paid 23rd August 2007 (2006 -
1.20p) 319 351
952 865
The above dividends are after adjusting for dividends proposed but not paid due
to share buybacks.
Dividends payable at the year end are not recognised as a liability under FRS 21
'Events after the Balance Sheet Date'. Details of these dividends are set out
below.
Year to Year to
30th November 2007 30th November 2006
�'000s �'000s
Final dividend 2.00p payable 4th April 2008 (2007 - 1.80p) 521 506
Special dividend Nil 2008 (2007-0.50p) - 141
521 647
The proposed final dividend above is based on the number of shares in issue at
the period end. However, the dividend payable will be based on the number of
shares in issue on the record date and will reflect any purchases or
cancellations of shares by the Company settled subsequent to the period end.
Note 5
The financial information set out in this announcement does not constitute the
Company's statutory accounts for the period ended 30th November 2007. The
statutory accounts for the period ended 30th November 2007 will be finalised on
the basis of the financial information presented by the directors in this
preliminary announcement and will be delivered to the Registrar of Companies
following the Company's Annual General Meeting. The audit report on the full
financial statements has yet to be signed.
The announcement is prepared on the basis of the accounting policies as stated
in the previous year's financial statements. The financial information set out
in this announcement does not constitute the Company's statutory accounts for
the years ended 30th November 2006 or 30th November 2007. The financial
information for the year ended 30th November 2006 has been extracted from the
statutory accounts for that year, which were filed with the Registrar of
Companies on 21st March 2007. The auditors' report on those accounts was
unqualified, did not include a reference to any matters to which the auditors
drew attention by way of emphasis without qualifying the report, and did not
contain a statement under either section 237(2) or (3) of the Companies Act
1985.
Note 6
The annual report will be sent to shareholders in late February 2008 and will be
available to members of the public from the Company's registered office at 155
Bishopsgate, London EC2M 3AD.
Note 7
The Preliminary Results for the year to 30th November 2007 have been produced in
accordance with the Statement of Recommended Practice for the Financial
Statements of Investment Trust Companies issued in 2003 and revised in 2005.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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