INTERIM REPORT
Over the six months to 30 September 2008, the total return on gross
assets of your Company (including income paid out as dividends and before loan
interest) was (3.45%), well ahead of returns of (13.45%) on the FTSE All-Share
Index and (9.46%) on the FTSE 350 Higher Yield Index. A second interim
dividend of 1.45p has been declared by the Directors, payable on 20 November
2008 to shareholders on the register as at 31 October 2008. This follows a
first interim dividend of 1.625p.
Conditions in the six months under review were as trying as any
experienced in financial markets for many decades. A catalogue of events
widely regarded as unthinkable only twelve months ago combined to take market
volatility to extraordinary levels. The nationalisation of the two US mortgage
giants, Fannie Mae and Freddie Mac, the rescue of the giant insurance company
AIG, the bankruptcy of Lehman Bros, the massive injection of liquidity by
financial authorities and then the huge US bail out plan created such fear as
to leave investors wondering how the world's financial system could take the
strain.
Against this background, and bearing in mind the high level of
gearing in the Company's structure, I am glad to be able to report that, so
far, your Trust has weathered the storm with a relatively modest decline in
its overall asset value. The portfolio has benefited greatly from the bespoke
put option purchased in January 2007. This reduced a significant part of the
structural gearing the Trust has through its bank debt and zero dividend
preference shares. Further de-gearing has also been achieved during the period
by a cash position averaging about 10%.
In July we repaid �1m of bank debt and repurchased and cancelled
150,000 zero dividend preference shares. Although this still left us with bank
debt offset by cash, we felt this was a price worth paying to maintain maximum
flexibility. However, this flexibility needed to be considered in conjunction
with the short remaining life of the zero dividend preference shares and
therefore we repaid a further �2.5m of bank debt in October.
The put option's considerable increase in value had a secondary
effect of increasing our exposure to Merrill Lynch as a counterparty. Despite
Merrill's imminent acquisition by Bank of America, our fund managers
instructed Merrill Lynch to collateralise the option agreement. This ensures
that virtually the full value of the option is held by a third party with
adjustments to the collateral being made at the end of each business day.
Our lack of exposure to basic resources benefited the fund as the
paradigm of `global decoupling' finally broke down in March and was replaced
by the more prosaic rules of supply and demand. The UK Basic Resources sector
fell by 34.73% over the six month period.
Despite its smattering of split capital investment trusts and
smaller companies, both of which behaved as would be expected in such a severe
bear market, the overall portfolio was, and remains, defensively positioned.
Pharmaceutical shares in particular have regained their defensive status in
the last few months and other large holdings, such as Unilever and HSBC,
reduced the volatility of the portfolio.
Although the ordinary shares do not have a wind-up date the
substantial reduction in assets following the maturing of the bank debt and
the repayment of the zero dividend preference shares in March 2009 sadly
appears to make a wind-up of your Company the most sensible strategy to adopt.
On that basis our policy will be to maintain a high level of security for the
zero dividend preference shareholders and continued market exposure for the
ordinary shareholders.
James Dawnay
Chairman
21 October 2008
Directors' responsibility statement
The directors confirm that to the best of their knowledge:
- the condensed set of financial statements has been prepared in
accordance with IAS 34 `Interim Financial Reporting' as adopted by the EU;
- the interim management report includes a fair view of the
information required by:
- DTR 4.2.7R of the `Disclosure and Transparency Rules', being an
indication of 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; and
- DTR 4.2.8R of the `Disclosure and Transparency Rules', 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 or 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.
The half yearly financial report was approved by the Board on 21
October 2008 and the above responsibility statement was signed on its behalf
by the Chairman.
Twenty Largest Holdings
as at 30 September 2008
Company Market Value % of
�'000 Portfolio
Merrill Lynch FTSE 100 Ex Top 20 Put Option January 2009 4,821 13.12
Royal Dutch Shell `B' Shares 3,398 9.25
BP 3,042 8.28
HSBC Holdings 2,857 7.77
GlaxoSmithKline 2,810 7.65
Vodafone 2,522 6.86
Unilever 1,864 5.07
AstraZeneca 1,612 4.39
BT 1,154 3.14
Accelerated Return 1,133 3.08
Lloyds TSB 1,119 3.04
Cable & Wireless 8.75% 6/8/12 925 2.52
Wolseley 826 2.25
Signet 725 1.97
Travis Perkins 589 1.60
Aviva 588 1.60
Wetherspoon (J.D.) 587 1.60
Kingfisher 509 1.38
Centrica 485 1.32
Legal & General 416 1.13
31,982 87.02
Consolidated Balance Sheet
as at 30 September 2008
30 September 2008 30 September 2007 31 March 2008
(unaudited) (unaudited) (audited)
�'000 �'000 �'000 �'000 �'000 �'000
Non current assets
Investments held at
fair value through
profit or loss
Derivative 4,821 1,286 2,545
Non-derivative 31,931 49,148 40,689
36,752 50,434 43,234
Interest rate swap - 76 -
asset
36,752 50,510 43,234
Current assets
Other receivables 666 377 368
Cash and cash 2,734 2,103 449
equivalents
Interest rate swap 43 - -
asset
3,443 2,480 817
Total assets 40,195 52,990 44,051
Current liabilities
Other payables (138) (397) (194)
Bank loan (13,600) - (14,600)
Liability attributable (15,510) -
to zero dividend
preference holders (15,142)
Interest rate swap - - (2)
liability
(29,248) (397) (29,938)
Total assets less 52,593
current liabilities
10,947 14,113
Non current liabilities
Bank loan - (14,600) -
Liability attributable - (14,522)
to zero dividend
preference holders -
- (29,122) -
Net assets 10,947 23,471 14,113
Equity attributable to
equity holders
Ordinary share capital 7,000 7,000 7,000
Cash flow hedging 43 76 (2)
reserve
Special reserve 19,740 19,740 19,740
Capital reserve - (11,346) (5,611) (6,925)
realised
Capital reserve - (4,899) 1,609 (6,235)
unrealised
Revenue reserve 409 657 535
10,947 23,471 14,113
Total equity 10,947 23,471 14,113
Net asset value per 39.10p 83.82p 50.40p
ordinary share
Consolidated Income Statement
for the six months to 30 September 2008 (unaudited)
Six months ended Six months ended Year ended
30 September 2008 30 September 2007 31 March 2008
(unaudited) (unaudited) (audited)
Revenue Capital Total Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
Income
Investment income 1,069 - 1,069 1,084 - 1,084 2,200 - 2,200
Other operating income 46 - 46 68 - 68 83 - 83
Total income 1,115 - 1,115 1,152 - 1,152 2,283 - 2,283
Losses on investments
Losses on fair value
through profit or loss
financial assets - (1,981) (1,981) - (1,896) (1,896) - (9,944) (9,944)
1,115 (1,981) (866) 1,152 (1,896) (744) 2,283 (9,944) (7,661)
Expenses
Management fees (48) (112) (160) (73) (171) (244) (127) (295) (422)
Other expenses (147) (29) (176) (134) (38) (172) (284) (79) (363)
Profit/(loss) before
finance costs & tax
920 (2,122) (1,202) 945 (2,105) (1,160) 1,872 (10,318) (8,446)
Finance costs (136) (963) (1,099) (139) (923) (1,062) (278) (1,868) (2,146)
Profit/(loss) before 784 (3,085) (2,301) 806 (3,028) (2,222) 1,594 (12,186) (10,592)
tax
Tax - - - - - - - - -
Profit/(loss) for the 784 (3,085) (2,301) 806 (3,028) (2,222) 1,594 (12,186) (10,592)
period
Return per ordinary
share (basic & diluted)
2.80p (11.02)p (8.22)p 2.88p (10.81)p (7.93)p 5.69p (43.52)p (37.83)p
The total column of this statement represents the Group's Income Statement,
prepared in accordance with IFRS. The supplementary revenue and capital return
columns are both prepared under guidance published by the Association of
Investment Companies.
Consolidated Cash Flow Statement
for the six months ended 30 September 2008
Six months Six months Year ended
ended 30 ended
September 2008 30 September 31 March
(unaudited) 2007 2008
(unaudited) (audited)
�'000 �'000 �'000
Cash flows from operating
expenses
Loss before tax (2,301) (2,222) (10,592)
Adjustments for:
Purchases of investments (3,471) (4,725) (13,245)
Sales of investments 7,978 5,788 13,409
4,507 1,063 164
Losses on investments 1,981 1,896 9,944
Financing costs 1,099 1,062 2,146
Operating cash flows before
movements in working capital
5,286 1,799 1,662
(Increase)/decrease in (298) 124 (34)
receivables
Decrease in payables (56) (12) -
Net cash flows from operating
activities before and after
tax 4,932 1,911 1,628
Cash flow from financing
activities
Interest paid on borrowing (462) (467) (928)
Equity dividends paid (910) (910) (1,820)
Zero dividend preference (275) - -
share buy back
Partial repayment of loan (1,000) - -
Net cash flow from financing (2,647) (1,377) (2,748)
activities
Net change in cash and cash
equivalents
2,285 534 (1,120)
Cash and cash equivalents at
the beginning of the period
449 1,569 1,569
Cash and cash equivalents at
the end of the period
2,734 2,103 449
Cash and cash equivalents (which are presented as a single class of
asset on the balance sheet) comprise cash at bank and other short-term
investments with a maturity of three months or less.
Consolidated Statement of Changes in Equity
for the six months to 30 September 2008 (unaudited)
Cash flow Capital Capital
hedging
Share Special1 reserve reserve Revenue Total
capital reserve reserve realised unrealised reserve equity
�'000 �'000 �'000 �'000 �'000 �'000 �'000
Balance at 31 March 2008 7,000 19,740 (2) (6,925) (6,235) 535 14,113
Profit for the period - - - (4,421) 1,336 784 (2,301)
7,000 19,740 (2) (11,346) (4,899) 1,319 11,812
Gain on effective hedge taken to equity - - 45 - - - 45
Dividends paid to equity shareholders - - - - - (910) (910)
Balance at 30 September 2008 7,000 19,740 43 (11,346) (4,899) 409 10,947
Consolidated Statement of Changes in Equity
for the six months to 30 September 2007 (unaudited)
Cash flow Capital Capital
hedging
Share Special1 reserve reserve Revenue Total
capital reserve reserve realised unrealised reserve equity
�'000 �'000 �'000 �'000 �'000 �'000 �'000
Balance at 31 March 2007 7,000 19,740 93 (5,901) 4,927 761 26,620
Profit for the period - - - 290 (3,318) 806 (2,222)
7,000 19,740 93 (5,611) 1,609 1,567 24,398
Loss on effective hedge taken to equity - - (17) - - - (17)
Dividends paid to equity shareholders - - - - - (910) (910)
Balance at 30 September 2007 7,000 19,740 76 (5,611) 1,609 657 23,471
1 The special reserve was created on the cancellation of the share premium
account on 31 July 2002.
Notes to the accounts
1 Comparative Figures
The financial information contained in this report does not
constitute statutory accounts as defined in section 240 of the Companies Act
1985. The financial information for the six months ended 30 September 2008 and
2007 has not been audited. The information for the year ended 31 March 2008
does not constitute statutory accounts, but has been extracted from the latest
published audited accounts, which have been filed with the registrar of
companies. The report of the auditor on those accounts contained no
qualification or statement under Section 237(2) or (3) of the Companies Act
1985.
2 Publication
This interim report is being sent to shareholders and copies will
be made available to the public at the registered office of the Company.
For further information please contact:
Alastair Mundy
Investec Investment Management Limited 020 7597 2000
Investec H.I.T. (LSE:ICH)
Historical Stock Chart
From Oct 2024 to Nov 2024
Investec H.I.T. (LSE:ICH)
Historical Stock Chart
From Nov 2023 to Nov 2024
