TIDMUSPI
Global Special Opportunities Trust PLC
Half-yearly financial report for the six months ended 30 November 2008
Company highlights
for the six months ended 30 November 2008
NAV returns and share prices 30 November 31 May % change
2008 2008
pence pence
Zero Dividend Preference NAV 182.61 182.61 0.00
share
Mid N/A 180.25 N/A
price
Income share NAV 53.13 72.53 (26.75)
Mid 39.50 82.25 (51.98)
price
Capital share NAV - - -
Mid 0.51 4.63 (88.98)
price
Unit (1 Capital and 1 Income NAV 53.13 72.53 (26.75)
share)
Mid 40.00 86.00 (53.49)
price
Revenue return per Income 0.46p 1.40p (67.14)
share
Net dividends declared per nil 3.40p (100.00)
Income share*
* First, second and third interim dividends of 0.8p, 0.8p and 0.8p and a fourth
interim dividend of 1.00p.
Data as at 30 November 2008, all performance figures for the period ended 30
November 2008 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
Shareholder funds GBP13.770 million at 30 November 2008
Market capitalisation GBP10.213 million at 30 November 2008
Revolving credit $5.0 million facility
facility
Zero Dividend 206,037*: Redeeming at 182.608201p on
Preference shares 31 May 2011
Income shares 25,210,008: 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 50,420,016**
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
ended 31 May: declared
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.
* Number of ZDPs as at 30 November 2008. The number of ZDP shares in issue as
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 Articles of Association 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
Year end results September
announced
Annual General Meeting November
Half-year end 30 November
Half-year results January
announced
Interim management April, October
statements
Investment objective and policy
Investment Objective
The 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 for
the portfolio to be managed so as 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 will be to achieve the investment
objective through investment in equity and equity-related instruments which
will be 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 will be 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 will be 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
investments 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 results. 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 2008
Introduction
Shareholders will be aware that the Company's life was extended for a further 3
years beyond the original planned wind up date of 31 May 2008 following a
tender which enabled zero dividend preference (zero) holders to redeem their
shares and income shareholders to tender half of their shareholding at 100p a
share. As a consequence of the tender scheme approximately 70% of shareholders
funds were repaid and the Company's net assets contracted to just over GBP18m.
The purpose of the extension of life was to avoid the necessity of being a
forced seller of the Company's unlisted and more illiquid holdings at a time
when liquidity in these types of assets had already diminished. The investments
remaining in the portfolio after the completion of the tender are dominated by
unquoted and illiquid holdings as the more liquid stocks were sold to provide
the necessary funds to repay shareholders.
Zero tender
The tender scheme provided zero shareholders with the opportunity to redeem all
of their shares at their full entitlement. Most shareholders took this
opportunity but some have remained on the share register after the closing of
the tender. The Company maintained the listing for the zeros for a further two
months so that remaining zero shareholders who missed the tender could sell
their shares back to the Company through the market. All shareholders were
notified of this facility however when the listing was withdrawn on 31 July
2008 there were still 206,037 zero shares in issue. These shares will be
redeemed when the Company winds up on 31 May 2011 with the same entitlement
that they had at 31 May 2008.
Gearing
In order to have increased flexibility in the realisation of funds to meet the
tender, a $5million loan facility was arranged with Allied Irish Bank. This was
drawn shortly before the completion of the tender. Interest on the loan is paid
at a rate of 1.2% over the bank's cost of funds (equivalent to US libor). A
successful sale of a proportion of the company's unlisted investments prior to
the tender date meant that there was sufficient cash resources to meet the
tender and the Company currently has over $3.5m in bank deposits or US
Treasuries which will be invested if suitable opportunities arise. Any new
investment will be made having regard to the liquidity requirements imposed
both by the wind up date in 2011 and the possible need to repay the bank
facility before that date.
Market background
Markets conditions for liquidation of a portfolio had seemed adverse when our
Manager was in the process of raising cash during the first 5 months of 2008.
However, we did not expect the severe deterioration in stock prices, liquidity
and general economic environment that was to follow in the second half of 2008.
In the period from 31 May and the 30 November 2008, the broad measure of the US
stock market, the S&P 500 index total return fell 35.20% and in sterling
16.46%. The Russell 2000 index, a more relevant benchmark for a small company
portfolio, declined by (36.26)% and in sterling (17.84)%. For the UK investor
the saving grace was the weakness of sterling against the dollar. The exchange
rate moved from $1.95 to $1.54 to the pound over the period. The failure of
Lehman Brothers and the growing awareness among politicians and investors that
a severe global recession was in prospect caused a continuing drive for
security and liquidity with poor market conditions further exacerbated by
forced selling from hedge funds and other over-leveraged institutions.
Valuation policy
During the course of the half -year the Board kept under review the valuation
policy with regard to unlisted securities.
In July, the Board agreed to write down the value of the unlisted investment in
e-Original and in Asset Capital Corporation. The unquoted debt instruments of
Integrated Security Systems were written down by 40%. The Board also reviewed
the valuation of unlisted convertible investments and adopted a more
conservative approach in situations where companies were not paying the full
coupon in cash. A more detailed explanation of these changes is given in the
Investment Adviser's report and there is also additional information in note 25
of the 2008 Annual Accounts under the heading "Post balance sheet events".
Performance
With the severe decline in markets and the need to write down the value of some
unlisted investments the dollar value of the portfolio declined sharply.
However, the Company's net asset value which is reported in sterling received a
substantial benefit from the strength of the dollar against sterling as noted
above. The full benefit of the currency movement was experienced by
shareholders as there was no currency hedge in place, other than the natural
hedge arising from the $3.5m dollar loan.
Between 31 May and 30 November 2008 gross assets declined by 23.27% but after
adjusting for the buyback and cancellation of zeros the decline was (20.93)%.
This compares with a sterling decline in the Russell 2000 index over the same
period of (17.84)%. The net asset value of the Income shares declined from
72.53p to 53.13p, a fall of 26.75%.
Portfolio composition
Portfolio composition at 30 November 2008 was as follows:
Listed common stocks 40.8%
Unlisted common stocks 15.2%
Unlisted convertibles (convertible 12.2%
into listed common)
Other unlisted bonds and fixed 10.6%
interest instruments
US Treasury Bills 4.0%
Listed convertibles and fixed 1.4%
interest
Unlisted warrants 2.2%
Cash 13.6%
Outlook
The Investment Adviser's report highlights some of the fundamental attractions
of the stocks in our portfolio and the potential for the portfolio to rebound
from these very depressed levels.
The economic news remains unremittingly gloomy with unemployment rising and not
only the banking sector but, in the US, the car industry, looking to the
government for financial support. However markets look forward and at some
stage we expect that confidence will improve and markets begin to recover.
Duncan Abbot
Chairman
23 January 2009
Investment Adviser's report
for the six months ended 30 November 2008
Portfolio Review
The Company's six month return to 30 November 2008 was (21.33)% in sterling
against the Russell 2000 return of (18.45)% in sterling.
2008 turned out to be one of the most difficult economic periods since the
1930's.
Top Five Holdings
At 30 November 2008, the following top five holdings make up 36.3% of gross
assets and 41.8% of the invested portfolio;
Company Symbol Industry Value USD % of Portfolio
Bovie Medical BVX Medical Devices $2,722,500 12.9%
Integrated IZZI Security $1,669,568 7.9%
Security Products
Pipeline Data, PPDA Business $1,500,000 7.1%
Inc. Software
Global Axcess GAXC Business $1,241,967 5.9%
Services
Hemobiotech HMBT Biotechnology $1,233,539 5.8%
Inc.
Bovie Medical Corporation (AMEX: BVX) engages in the manufacture and marketing
of medical products and the development of related technologies. The company
offers electro surgery products, which include desiccators, generators,
electrodes, electro surgery pencils, and various ancillary disposable products
used in surgery for the cutting and coagulation of tissue; and high frequency
desiccators, which are designed for dermatology and plastic surgery for
removing small skin lesions and growths. The company also offers a specialty
electrosurgical generator for the gastroenterological and niche markets;
battery operated cauteries for precise haemostasis in ophthalmology; and
battery operated medical lighting instruments that are used in ophthalmology,
as well as for general surgery, hip replacement surgery, and for the placement
of end tracheal tubes in emergency and surgical procedures; and nerve locator
stimulator, which is used for identifying motor nerves in hand and facial
reconstructive surgery. The company was founded in 1982 and is based in
Melville, New York.
Integrated Security Systems, Inc. (OTCBB: IZZI) engages in the design,
development, manufacture, distribution, and servicing of security and traffic
control products used in the commercial, industrial, and government sectors. It
offers anti-terrorist crash barriers, bollards, wedges and gates, warning and
crash gates, gate panels, soft-stop gates, high occupancy vehicle lane
changers, navigational lighting, and perimeter security gates and operators.
The company also provides Intelli-Site, an automated security and facility
controls system that allows customers to decouple the selection of software
from hardware. In addition, Integrated Security Systems manufactures card
access control and corrections security hardware and software products, as well
as distributes products relating to the road and bridge industry. The company
was founded in 1991 and is based in Carrollton, Texas.
Pipeline Data, Inc. (OTCBB: PPDA) through its subsidiaries, provides merchant
payment processing services and related software products in the United States.
It delivers credit and debit card-based payment processing solutions primarily
to small to medium-sized merchants that operate in physical `brick and mortar'
business environments, over the Internet, in mobile, or wireless settings
through cellular-based wireless devices. The company provides various services,
including application evaluation/underwriting, merchant set-up and training,
card transaction processing, risk management/detection of fraudulent
transactions, merchant service and support, chargeback service, and merchant
reporting to merchants accepting credit and debit-based payment cards. It also
offers electronic transaction authorization services, data capture and
reporting services, shopping cart technology, and gateway and communication
interfaces, as well as software application products and services. Pipeline
Data sells its products through independent sales organisations, value added
resellers, contractual relationships with financial institutions, and over the
Internet. The company was founded in 1997 and is based in Quincy,
Massachusetts.
Global Axcess Corp. (OTCBB: GAXC) through its subsidiaries, provides automated
teller machine (ATM) services primarily in the United States. The company owns
and operates a network of ATMs primarily located at grocery stores, regional
and national retailers, hotels, shopping malls, airports, colleges, amusement
parks, sports arenas, bars/clubs, theaters, and bowling alleys, as well as
convenience stores, and combination convenience stores and gas stations. It
offers proprietary ATM branding and processing services for approximately 55
financial institutions that have approximately 579 branded sites under contract
with the company nationwide. The company also provides transaction processing
services. As of December 31, 2007, its network included approximately 4,335
ATMs, of which approximately 1,564 are company owned and 2,771 are
merchant-owned. The company was founded in 1984 and is headquartered in
Jacksonville, Florida.
HemoBioTech, Inc. (OTCBB: HMBT) is a biopharmaceutical company focused on
developing and commercialising the first viable human blood substitute
targeting the broad blood use market. The company's core product, HemoTech, is
a bovine-hemoglobin (Hb) based human blood substitute capable of inducing red
blood cell production in the human body. The company's goal is to address an
increasing demand for a safe and inexpensive human blood substitute product in
the United States and around the world through its licensed technology.
New Investments
During the interim period, your Company invested approximately $2.4 million
into four new portfolio companies. Below is a brief description of each.
A-Power Energy Systems, Ltd. (NASDAQ: APWR) designs, constructs, and tests
distributed power generation and micro power grids in the People's Republic of
China. Its target customers include companies operating in various industries,
including steel, chemical, cement, food processing, ethanol and municipal
governments, as well as state-owned Chinese power companies.
China Direct, Inc., (NASDAQ: CDS) engages in the production of pure magnesium
and distribution of basic materials in the People's Republic of China. The
company also makes controlling investments in various Chinese companies and
provides the resources needed to enhance the growth of its portfolio holdings.
SinoHub Electronics Shenzhen, Ltd. (OTCBB: SIHI) provides supply chain
management services for electronic manufacturers and distributors. The company
provides import-export, warehouse and delivery services to the large and
growing electronic component industry.
Wonder Auto Technology, Inc. (NASDAQ: WATG) engages in the design, development,
manufacture, and sale of automotive electrical parts in the People's Republic
of China. It primarily manufactures alternators and starters used in passenger
vehicles.
Disposals and Adjustments
In August Simtek Corporation, a semiconductor company, was acquired by Cypress
Semiconductor for $2.60 per share rendering proceeds of $895,416 and a gain of
$120,594.
Your Company wrote down the value in three of its holdings during the interim
period. Asset Capital Corporation, a real estate management company focused on
the greater metropolitan Washington DC notified us that extremely poor market
conditions would result in a reduced final distribution to shareholders.
Consequently your Board decided to write this holding down from $5.40 per share
to $1.00 per share. eOriginal, Inc. which provides business class software
raised additional equity causing your Company to revalue its holdings from
$13.62 per share to $3.83 per share, the price at which the new funds were
raised. Finally, due to poor market conditions the Board decided to write down
the non-convertible debt of Integrated Security Systems, Inc. by 40 percent.
The Coming Year
We have a number of holdings that are involved in mergers which could
materially change the revenues and earnings for these companies. Two major
holdings announcing mergers are Access Plans USA, Inc. (NASDAQ:AUSA) and BPO
Management, Inc. (OTC:BPOM). These companies are selling at extremely low
valuations.
There are a number of US traded Chinese companies in the portfolio. While the
stocks are down due to market conditions, the companies continue to grow at a
rapid pace. Several are selling near cash per share. We expect China to keep on
growing faster than the rest of the World.
Other holding such as Cover-All Technology (OTC:COVR) and Points International
(TSX:PTS) has been reporting outstanding financial results. When markets
stabilise we expect investors to seek companies that can grow in a low growth
area.
At some point in 2009 the US stock market could change from being thought of as
a market as a whole to being a market of stocks and values beginning to
reassert themselves. Under this scenario, your Company could have a major
rebound.
RENN Capital Group, Inc.
23 January 2009
Responsibility statements
for the six months ended 30 November 2008
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 profit of the Company as required by the 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 interim management report includes 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 report was approved by the Board of Directors on 23 January
2009 and the above responsibility statement was signed on its behalf by the
Chairman.
Financial summary
Capital
30November 31 May Change Premium/
2008 2008 % (discount)
30
November
2008
%
Assets attributable to shareholders 13,770 19,149 (28.09) N/A
(GBP'000)
Gross assets (GBP'000)** 16,051 20,920 (23.27) N/A
Gross assets return (%) ***** N/A N/A (21.33) N/A
Net asset value per Zero Dividend 182.61p 182.61p 0.00 N/A
Preference share***
Mid-market price per Zero Dividend N/A 180.25p N/A N/A
Preference share
Net asset value per Income share*** 53.13p* 72.53p* (26.75) N/A
Mid-market price per Income share 39.50p 82.25p*** (51.98) (25.65)
*
Net asset value per Capital share*** 0.00p 0.00p N/A N/A
Mid-market price per Capital share 0.51p 4.63p (88.98) N/A
Net asset value per Unit*** (1 53.13p* 72.53p* (26.75) N/A
Capital share and 1 Income share)
Mid-market price per Unit 40.00p 86.00p (24.71)
Six months Six months Change
to to
%
30November 30
November
2008
2007
pence
pence
Revenue
Return per Income share 0.46 1.32 (65.15)
Net dividend paid per 0.00 2.40 (100.00)
Income share
* Including current period revenue.
** Total assets less current liabilities (excluding bank loan and net assets
attributable to shareholders).
*** Net asset values calculated in accordance with Articles of Association.
**** These are the pre-tender share prices. The theoretical ex-tender price
would be 64.5p and 69.13p respectively.
***** Adding back zeros purchased for cancellation
Principal investments
as at 30 November 2008
Fair % of assets
Value attributable
to
GBP'000
Shareholders
Company Classification Sector
Bovie Medical Common stock Medical equipment 1,774 12.9
Corporation
Integrated Common stock/Loan notes Security & 1,088 7.9
Security Systems /Convertible debenture protection
services
Pipeline data Warrants /Convertible Data processing 978 7.1
Debentures
Global Axcess Common Stock/Warrants/ Business services 809 5.9
Corporation Debentures
Hemobiotech Common stock Biotechnology 804 5.8
Sinohub Common stock/Warrants Electronic 778 5.6
Component Supplier
Cover-All Common stock/Warrants Application 736 5.3
Technologies software
US T Bill Government Stock Government 652 4.7
Asian Financial Common stock/Warrants Printing equipment 501 3.7
China Greenscape Convertible Preference Business Security 489 3.6
Heyspace Common stock Internet software 489 3.6
Corporation & services
E-Original Common stock/warrants/ Software 466 3.4
Convertible Preference
Caminosoft Common stock/warrants/ Technical & system 465 3.4
Debentures software
Ilinc Common stock/warrants Web conferencing 365 2.7
Communications software
Business Process Common stock/Warrants/ Business services 316 2.3
Outsourcing Convertible Preference
Petrohunter Energy Warrants/Convertible Oil & gas 312 2.3
Debentures exploration
Datapath Common stock Communication 308 2.2
equipment
A-Power Energy Common stock Energy & power 280 2.0
General System systems
Wonder Auto Common stock Automotive parts 245 1.8
Technology designer &
manufacturer
Trans-Lux Loan notes Science & 224 1.6
Corporation technical
instruments
HLS Systems Common stock Automation systems 217 1.6
International
Access Plans Common stock Healthcare 209 1.5
services
Skystar Common stock Pharmaceuticals 192 1.4
Bio-Pharmaceutical
12 Telecom Common stock Alternative 149 1.1
International carriers
Vertical Branding Common stock/Warrants Distributors 147 1.1
Points Common stock Internet software 119 0.9
International & services
Silverleaft Common stock Property 117 0.8
management
Merriman Curhan Common stock Investment banking 84 0.6
Ford Corporation & brokerage
Asset Capital Common stock Real estate 78 0.6
Corporation development
Anchorfree Convertible Preference Communication 72 0.5
services
Aurasound Common stock/Warrants Consumers 65 0.5
electronics
Obsidian Convertible Debentures Conglomerate 59 0.4
Enterprises
Narrowstep Common stock/Warrants Internet software 57 0.4
& services
China Direct Common stock Management & 51 0.4
advisory services
Dyadic Common stock Biotechnology 28 0.2
International
Riptide Worldwide Common stock Application 16 0.1
Inc software
Celsia Common stock/Warrants Electronic 11 0.1
Technologies equipment
manufacturer
Ronco Corporation Convertible Preference Speciality retail 5 0.0
Symbollon Common stock/Warrants Pharmaceuticals 2 0.0
Pharmaceuticals
Advance Nanotech Common stock Technology - 0.0
BPO Management Common stock/Warrants/ Business - 0.0
Services Preference shares processing
outsourcing
Intrusion Warrants Internet security - 0.0
One Link Common Stock Business services - 0.0
Corporation
Terra Nova Warrants Investment banking - 0.0
Financial Group & brokerage
13,757 100.0
As at 30 November 2008, the portfolio consisted of 97 holdings in 44 companies
with a total market value of GBP13,757,000 excluding cash, being 99.91% of assets
attributable to shareholders.
As at 30 November 2008, the Income portfolio consisted of 14 holdings with a
total market value of GBPnil, excluding cash, being nil% of the assets
attributable to shareholders.
Income statement (unaudited)
for the six months ended 30 November 2008
Period 1 June to 30 Period 1 June to 30 Year ended 31 May
November 2008 November 2007 2008
(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 on - (4,600) (4,600) - (2,788) (2,788) - (14,943) (14,943)
investments at
fair value
through profit
or loss
Income 348 - 348 1,496 - 1,496 2,486 1 2,487
Investment (18) (42) (60) (222) (520) (742) (360) (841) (1,201)
management fee
Other expenses (169) - (169) (169) - (169) (544) (15) (559)
Exchange gains - 138 138 - 1,815 1,815 - 58 58
on capital items
Gains on - - - - (417) (417) - 876 876
derivatives at
fair value
through profit
or loss
Net return 161 (4,504) (4,343) 1,105 (1,910) (805) 1,582 (14,864) (13,282)
before finance
costs and
taxation
Finance costs
Interest payable (14) (34) (48) (254) (593) (847) (301) (702) (1,003)
and similar
charges
Tender offer - - - - - - (247) (246) (493)
costs
Appropriations
in respect of:
Zero Dividend - - - - (1,053) (1,053) - (2,148) (2,148)
Preference
shares
Income shares (116) (810) (926) (657) (671) (1,328) (693) (1,351) (2,044)
Capital shares - 5,317 5,317 - 4,036 4,036 - 18,975 18,975
Return on 31 (31) - 194 (191) 3 341 (336) 5
ordinary
activitiesbefore
taxation
Taxation on (31) 31 - (194) 191 (3) (341) 336 (5)
ordinary
activities
- - - - - - - - -
Return per share pence pence pence pence pence pence pence pence pence
(FRS 25basis)
Capital share - (10.63) (10.63) - (8.07) (8.07) - (37.95) (37.95)
Income share 0.46 3.21 3.67 1.32 1.35 2.67 1.40 2.72 4.12
Zero Dividend - - - - 7.63 7.63 - 15.61 15.61
Preference share
Unit (1 Capital, 0.46 (7.42) (6.96) 1.32 (6.72) (5.40) 1.40 (35.23) (33.83)
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 2008
Period Period Year
1 June to 1 June to ended
30 November 30 November 31 May
2008
2008 2007
(audited)
(unaudited) (unaudited)
GBP'000
GBP'000 GBP'000
Net assets attributable to 19,149 84,958 84,958
shareholders at the start of
the period
Appropriations to shareholders
Zero Dividend Preference shares - 1,053 2,148
Income shares 926 1,328 2,044
Capital shares (5,317) (4,036) (18,975)
(4,391) (1,655) (14,783)
Dividends paid to Income (497) (1,192) (1,987)
shareholders
Repurchase of shares (including (491) - (49,039)
related costs)
Net assets attributable to 13,770 82,111 19,149
shareholders at period end
Balance sheet (unaudited)
as at 30 November 2008
30 31 May 30
November November
2008
2008 2007
(audited)
(unaudited) (unaudited)
GBP'000
GBP'000 GBP'000
Fixed assets
Investments at fair value 13,757 16,899 94,539
through profit or loss
Currency swap - - 1,414
Cap and collar cylinder - - 82
Interest rate swap - - 29
13,757 16,899 96,064
Current assets
Debtors 372 2,432 917
Cash at bank 2,048 51,324 6,911
2,420 53,756 7,828
Creditors - amounts falling due
within one year
Creditors 126 49,735 254
Bank loan 2,281 1,771 21,527
Net assets attributable to - - 82,111
shareholders
2,407 51,506 103,892
Net current assets/ 13 2,250 (96,064)
(liabilities)
Total assets less current 13,770 19,149 -
liabilities
Creditors - amount falling due
after more than one year
Net assets attributable to 13,770 19,149 -
shareholders
13,770 19,149 -
- - -
Net asset values per share (FRS pence pence pence
25)
Capital share - - 15.29
Income share 53.13 72.53 101.40
Zero Dividend Preference share 182.61 182.61 174.63
Unit 53.13 72.53 116.69
Statement of cashflows (unaudited)
for the six months ended 30 November 2008
Period Period Year
1 June to 1 June to ended
30 November 30 November 31 May
2008
2008 2007
(audited)
(unaudited) (unaudited)
GBP'000
GBP'000 GBP'000
Operating activities
Investment income received 132 1,155 2,014
Deposit interest received 98 162 436
Investment management fees (152) (808) (1,283)
paid
Secretarial fees paid (47) (46) (92)
Other cash payments (617) (192) (507)
Net cash (outflow)/inflow from (586) 271 568
operating activities
Servicing of finance
Interest paid (47) (841) (989)
Non-equity dividends paid (497) (1,192) (1,987)
(Income shares)
Net cash outflow from (544) (2,033) (2,976)
servicing of finance
Taxation
Corporation tax paid - - -
Income tax recovered - - -
Total taxation paid - - -
Capital expenditure and
financial investment
Purchases of investments (2,685) (113,016) (131,984)
Sales of investments 3,431 127,111 209,617
Net cash inflow from capital
expenditure
and financial investment 746 14,095 77,633
Net cash (outflow)/inflow (384) 12,333 75,225
before financing
Financing
Repayment of loan - (11,789) (32,078)
Revolving credit facility - - 1,771
drawdown
Financing costs (491) - (108)
Tender offer costs (49,038) - (38)
Net cash outflow from (49,529) (11,789) (30,453)
financing
Net cash (outflow)/inflow (49,913) 544 44,772
after financing
(Decrease)/increase in cash (49,913) 544 44,772
Notes to the half yearly financial report
for the six months ended 30 November 2008
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 Standard 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" ("SORP") issued by the
Association of Investment Companies ("AIC") in January 2003 and revised in
December 2005 and in accordance with accounting policies set out in the
statutory accounts for the year ended 31 May 2008.
2. revenue appropriations in respect of income shares
Revenue appropriations in respect of Income shares are split between dividends
paid in the period and the remaining balance of the revenue account for the
year.
Period Period Year
1 June to 1 June to ended
30 November 30 November 31 May
2008 2007
2008
GBP'000 GBP'000
GBP'000
Dividends 497 1,192 1,987
Residual balance of revenue (381) (535) (1,294)
account
Total revenue appropriations in 116 657 693
respect of Income shares
Dividends are comprised as
follows:
Relating to prior period
Third interim paid of nil - 398 397
(2007: 0.80p)
Fourth interim paid of 1.00p 497 397 397
(2007: 0.80p)
497 795 794
Relating to current period
First interim paid of nil - 397 397
(2007: 0.80p)
Second interim paid of nil - - 398
(2007: 0.80p)
Third interim paid of nil - - 398
(2007: 0.80p)
497 1,192 1,987
3. return per share
Period 1 June to Period 1 June to Year ended
30 November 2008 30 November 2007 31 May 2008
Revenue Capital Total Revenue Capital Total Revenue Capital Total
pence Pence pence pence pence pence pence pence pence
Return per share
(FRS 25)
Capital share - (10.63) (10.63) - (8.07) (8.07) - (37.95) (37.95)
Income share 0.46 3.21 3.67 1.32 1.35 2.67 1.40 2.72 4.12
Zero Dividend - - - - 7.63 7.63 - 15.61 15.61
Preference share
Unit (1 Capital, 0.46 (7.42) (6.96) 1.32 (6.72) (5.40) 1.40 (35.23) (33.83)
1 Income)
Capital shares
The return per Capital share is based on appropriations for the period of loss
GBP5,317,000 (period 1 June 2007 to 30 November 2007: loss GBP4,036,000; year ended
31 May 2008: loss GBP18,975,000) and on 50,000,000 (period 1 June 2007 to 30
November 2007: 50,000,000; year ended 31 May 2008: 50,000,000) Capital shares.
Income shares
The revenue return per Income share is based on revenue appropriations of GBP
116,000 (period 1 June 2007 to 30 November 2007: GBP657,000; year ended 31 May
2008: GBP693,000) and on 25,210,008 (period 1 June 2007 to 30 November 2007:
49,670,000; year ended 31 May 2008: 49,603,169) Income shares being the
weighted average number of shares in issue during the period. The capital
return per Income share is based on an annualised redemption yield from 12
April 2001 of approximately 2.79% and on 25,210,008 Income shares.
The redemption yield is contingent on the Company having sufficient assets at
the time of redemption.
Zero Dividend Preference shares
The return per Zero Dividend Preference shares 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 nil (period 1 June 2007 to 30 November
2007: 13,799,000; year ended 31 May 2008: 13,762,590) being the weighted
average number in issue during the period 1 June 2007 to 31 May 2008.
The return per share based on the allocation of available assets in the event
of a return of capital in accordance with the Articles of Association was:
Period 1 June to Period 1 June to Year ended
30 November 2008 30 November 2007 31 May 2008
Revenue Capital Total Revenue Capital Total Revenue Capital Total
pence pence pence pence pence pence pence pence pence
Return per share
(Articles)
Capital shares - - - - (7.74) (7.74) - (22.68) (22.68)
Income shares 0.46 (17.88) (17.42) 1.32 1.12 2.44 1.40 (12.45) (11.05)
Zero Dividend - - - - 7.25 7.25 - 14.81 14.81
Preference
shares
Unit (1 Capital, 0.46 (17.88) (17.42) 1.32 (6.62) (5.30) 1.40 (35.13) (33.73)
1 Income)
4. Net asset values
Total net asset values attributable to shareholders calculated in accordance
with FRS 25 are as follows:
30 31 30
November November
May
2008 2007
2008
GBP'000 GBP'000
GBP'000
For the purposes of
calculating net asset
values:
Total net assets
attributable to:
- Capital shareholders - - 7,646
- Income shareholders 13,394 18,285 50,368
- Zero Dividend Preference 376 864 24,097
shareholders
13,770 19,149 82,111
- Unit holders 13,394 18,285 58,014
pence pence pence
Net asset value per:*
- Capital share - - 15.29
- Income share 53.13 72.53 101.40
- Zero Dividend Preference 182.61 182.61 174.63
share
- Unit 53.13 72.53 116.69
They are represented by:
30 31 May 30
November November
2008
2008 2007
GBP'000
GBP'000 GBP'000
Share capital 75 76 113
Special reserve 11,453 11,944 60,983
Capital redemption reserve 40 39 2
Capital reserve - realised 9,218 11,002 (9,755)
Capital reserve - unrealised (12,971) (9,438) 10,887
Redemption reserve 5,716 4,906 18,502
Revenue reserve 239 620 1,379
Assets attributable to 13,770 19,149 82,111
shareholders
* Net asset values per share calculated on the number of shares in issue of:
30 31 May 30
November November
2008
2008 2007
- Capital share 50,000,000 50,000,000 50,000,000
- Income share 25,210,008 25,210,008 49,670,000
- Zero Dividend 206,037 472,887 13,799,000
Preference share
Total net asset values attributable to shareholders calculated in accordance
with the Company's Articles of Association are as follows:
30 31 May 30
November November
2008
2008 2007
GBP'000
GBP'000 GBP'000
For the purposes of
calculating net asset
values:
Total net assets
attributable to:
- Capital shareholders - - 7,471
- Income shareholders 13,394 18,285 50,485
- Zero Dividend Preference 376 864 24,155
shareholders
13,770 19,149 82,111
- Unit holders 13,394 18,285 57,956
pence pence pence
Net asset value per:*
- Capital share - - 14.94
- Income share 53.13 72.53 101.64
- Zero Dividend Preference 182.61 182.61 175.05
share
- Unit 53.13 72.53 116.58
Amounts attributable to Income shareholders and Zero Dividend Preference
shareholders are increased monthly or compounded at a daily compound rate as
set out in the Company's Articles of Association whereas their entitlements,
calculated under FRS 25, are lower due to adjustments made relating to their
share issue costs.
The net asset values calculated (on both bases above) include unaudited current
period revenue net of dividends paid as at 30 November 2008 and 2007.
* Net asset values per share calculated on the number of shares in issue as
follows:
30 31 May 30
November November
2008
2008 2007
- Capital share 50,000,000 50,000,000 50,000,000
- Income share 25,210,000 25,210,000 49,670,000
- Zero Dividend 206,037 472,887 13,799,000
Preference share
5. movement in assets attributable to shareholders on a winding-up
Capital Special Capital Capital Redemption Revenue
redemption reserve reserve reserve reserve reserve
reserve GBP'000 realised unrealised GBP'000 GBP'000
GBP'000 GBP'000 GBP'000
Balance brought 39 11,944 11,002 (9,438) 4,906 620
forward
1 June 2008
Losses on - - (688) (3,912) - -
investments
Exchange gains/
(losses) on
capital item - - (241) 378 - -
Movements in fair
value of
derivative - - - - - -
instruments
Costs charged to - - (76) - - -
capital
Tax relief on - - 31 - - -
capital costs
Capital
appropriations in
respect of:
Zero Dividend
Preference
shares - - - - - -
Income shares - - (810) - 810 -
Cancellation of 1 (491) - - - -
shares
Net revenue - - - - - (381)
At 30 November 2008 40 11,453 9,218 (12,971) 5,716 239
6. movement in fair value of derivative financial instruments
Period Period Year
1 June to 1 June to ended
30 30 31
November November May
2008 2007 2008
GBP'000 GBP'000 GBP'000
Interest rate swap - (314) (41)
Currency swap - (12) (1,728)
Cap and collar cylinder - (91) (172)
- (417) (1,941)
As at 31 May 2008, changes in the fair value of derivatives amounted to GBP
1,941,000 were debited to the Income Statement. In addition the Company
received premiums totalling GBP2,922,000 on closing the interest rate swap and
adjusting the currency cylinder and paid a premium of GBP105,000 to close out the
currency cylinder.
7. EFFECTIVE TAX RATE
The tax charge for the six months ended 30 November 2008 of GBPnil (period 1 June
2007 to 30 November 2007: GBP3,000; year ended 31 May 2008: GBP5,000) relates to
irrecoverable taxation charged on overseas income.
The Company has an effective tax rate of 0% for the year ending 31 May 2008.
The estimated effective tax rate is 0% as investment gains are exempt from tax
owing to the company status as an Investment Trust and there is expected to be
an excess of management expenses over taxable income.
8. RECONCILIATION OF NET RETURN BEFORE FINANCE COST AND TAXATION TO NET CASH
INFLOW FROM OPERATING ACTIVITIES
30 31May 30
November 2008 November
2008 GBP'000 2007
GBP'000 GBP'000
Net return before finance costs (4,343) (13,282) (805)
and taxation
Losses on investment 4,600 14,943 2,788
Exchange gains on capital items (138) (58) (1,815)
Movement in fair value of - (876) 417
derivative financial instruments
Decrease in creditors (569) (117) (103)
(Increase)/decrease in debtors (38) 75 (151)
Capital dividend - (1) -
Reinvested dividends (98) (110) (57)
Tax deducted on investment income - (6) (3)
Net cash (outflow)/inflow from (586) 568 271
operating activities
9. RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
30 31 May 30
November November
2008
2008 2007
GBP'000
GBP'000 GBP'000
(Decrease)/increase in cash in (49,913) 44,772 544
period
Repayment of loan - 32,078 11,789
Revolving credit drawdowns - (1,771) -
Realised foreign exchange gain on - - 1,681
repayment of bank loan
Amortisation of costs incurred on - (9) (7)
bank loan
Foreign exchange gain/(loss) 127 2,994 (112)
Movement in net debt (49,786) 78,064 13,895
Net debt at start of period 49,553 (28,511) (28,511)
Net debt at end of period (233) 49,553 (14,616)
10. ANALYSIS OF Changes in NET DEBT
30 31 May 30
November November
2008
2008 2007
GBP'000
GBP'000 GBP'000
Cash at bank 2,048 51,324 6,911
Bank loan due within one year (2,281) (1,771) (21,527)
(233) 49,553 (14,616)
11. 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 2008 was GBP60,000 (31 May 2008: GBP1,198,000; 30 November 2007:
GBP739,000). At 30 November 2008 there were amounts outstanding of GBP9,000 (31 May
2008: GBP101,000; 30 November 2007: GBP117,000). 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 2008 the market value of these holdings was
GBPnil (31 May 2008: GBPnil; 30 November 2007: GBP1,020,000).
12. 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 2008 and 30 November 2007 has not been audited.
The information for the year ended 31 May 2008 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 Sections 237(2) or (3) of the
Companies Act 1985.
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.
Investors will not be able to trade their shares or redeem them until the
Company winds up on 31 May 2011.
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. 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. In the event
that smaller companies take a downturn, 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 or low.
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. The Board's current
policy is not to engage in an active programme of hedging the Dollar risk in
the portfolio. However, bearing in mind that the final redemption payment will
be a Sterling payment made to Income shareholders at 31 May 2011, the Board
will look at taking advantage of any future Dollar strength versus Sterling by
hedging some or all of the Dollar exposure into Sterling in those
circumstances.
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 new 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 itself, being a closed-end fund, may trade at a discount to its net
asset value. The magnitude of this discount fluctuates daily and can vary
significantly. Thus, for a given period of time, it is possible that the marketprice 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.
Compliance with Section 842 of the Income and Corporation Taxes Act 1988
If the Company did not comply with the provisions of Section 842, it would lose
its investment trust status. 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 Section 842 on a monthly
basis. On a quarterly basis, compliance with these provisions is discussed in
detail between the Board, 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. Details of how these risks are managed are detailed in the
2008 Annual Report and Accounts under `Internal control process'.
COMPANY INFORMATION
Directors Investment Adviser
Duncan Abbot (Chairman) RENN Capital Group, Inc.
Andrew Pegge Suite 210 LB59
Roderick 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 www.rencapital.com
Limited
Beaufort House
51 New North Road
Exeter EX4 4EP Bankers
Tel: 01392 412122 Lloyds TSB Bank plc
Fax: 01392 253282 71 Lombard Street
London EC3P 3BS
Website
Allied Irish Banks plc
www.premierassetmanagement.co.uk Bankcentre
Ballbridge
Investment Managers Dublin 4
Premier Asset Management Ireland
(Guernsey) Limited
Anson House
Havilland Street Stockbroker
St Peter Port Cenkos Securities Plc
Guernsey GY1 3GS 6.7.8 Tokenhouse Yard
London EC2R 7AS
Premier Fund Managers Limited
Eastgate Court
High Street Registrars
Guildford Equiniti
Surrey GU1 3DE Aspect House
Tel: 01483 306090 Spencer Road
Lancing
West Sussex BN99 6DA
Auditor Tel: 0871 384 2615
Grant Thornton UK LLP www.shareview.co.uk
30 Finsbury Square
London EC2P 2YU
Duncan Abbot
Chairman
23 January 2009
END
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