TIDMGGL
GARTMORE GLOBAL TRUST PLC
Final Results for the year to 31 January 2011
The following comprises extracts, in unedited full text, from the Company's
Annual Report and Accounts for the year to 31 January 2011. The full Annual
Report and Accounts will be available to be viewed on or downloaded from the
Company's website at http://www.gartmoreglobaltrust.co.uk from today. Copies
will be mailed to shareholders shortly.
______
Annual Report Page 3:
Performance Highlights
* The NAV (with debt at fair value) increased 18.7% to 368.4p from 310.4p. This
compares with an increase of 15.9% in the Company's composite benchmark index.
* Net Asset Value ("NAV") per Ordinary share, with debt at fair value, has
performed ahead of the benchmark every year since it was adopted in January
2005.
The Company's NAV performance is top quartile over three and five years to 31
January 2011. (Source: AIC)
* 6.7% increase in annual dividend per Ordinary share from 7.5p to 8.0p.
* Mid-market price per Ordinary share increased to 359.5p from 312.25p, an
increase of 15.1%. The discount during the year averaged 1.3%, with prior
charges priced at par value.
* Trading subsidiary contribution of GBP77,000 (2010: GBP142,000).
Investment Highlights
* Managed within firm risk parameters with an average tracking error of 2.9%.
* Maintained overweight positions in the materials, consumer discretionary and
health sectors. The materials exposure in particular accrued significant
benefit from the demand for commodities from emerging markets such as China.
Structural Highlights
* The average discount for the year was 1.3% compared with the AIC Global
Growth sector discount which was 11.4%. (Source: Thomson Reuters Datastream -
ex revenue, debt at par)
* 750,000 new Ordinary shares issued at a modest premium to satisfy demand.
Later in the year 751,990 shares were repurchased as the discount widened and
are held in treasury.
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Annual Report Pages 6 and 7:
Chairman's Statement
It is gratifying to be able to report once again that Gartmore Global Trust PLC
has had a strong year. During the year to 31 January 2011 the Net Asset Value
per Ordinary share (including revenue and with debt at fair value) increased by
18.7% to 368.4p. Over the same period the Company's composite benchmark index
rose by 15.9%, meaning that the Company outperformed its benchmark by 2.4%,
which was achieved with a tracking error of 2.9%. The mid-market price of the
Company's Ordinary shares rose 15.1% to 359.5p.
For the past six years we have set a published performance target for our
Manager of exceeding our composite benchmark index by 2% within a tracking
error of 5% and we have once again succeeded in meeting this target. Over the
six years the dual target policy has been in place our NAV has outperformed our
benchmark by a total of 35.3%, equivalent to an average outperformance of 5.2%
per annum and we have achieved our outperformance objective in five out of
those six years.
The Group revenue return per Ordinary share for the year to 31 January 2011 was
7.87p, a little ahead of last year. Your Board has declared an increased second
interim dividend of 5.6p, making a total for the year of 8.0p, an increase of
6.7%. We currently expect dividend and other receipts to be comparable or
better in the coming year than they were in the year just ended and, bearing in
mind our significant revenue reserves, built up over the years as protection
against difficult times, we expect at least to maintain this level of dividend.
Investor demand for the Company's shares in the first half of the year meant
that the Company did not need to exercise its power to buy back shares in order
to support the discount control mechanism. Rather, the Directors were able to
exercise their power to issue new shares at a modest premium to satisfy demand
and 750,000 shares were issued. However, partly due to contagion from events at
Gartmore in the latter part of the year that were not directly related to the
Company, deteriorating investor sentiment led to a widening of the discount
against NAV and 751,990 shares were repurchased to provide liquidity to the
market and to help to limit the discount. All of the repurchased shares are
held in treasury and we hope to be able to reissue them in due course.
The problems at Gartmore culminated in Henderson Group plc proposing to acquire
Gartmore Group Limited, which was recommended by the Gartmore Group Board and
announced on 12 January 2011. The acquisition was completed on 4 April 2011. We
are impressed with the resources at Henderson and pleased that Gartmore's
Global equity team, and our Manager Brian O'Neill have joined Henderson and
will continue to operate as a distinct unit within the Henderson framework,
with the same level of discretion that it had as part of Gartmore. We are
confident that, with the removal of the uncertainty that surrounded Gartmore,
the market rating of our Company's shares will improve.
As I have reported before, the Board wants to ensure that shareholders do not
suffer from discount volatility so we keep the absolute level of the discount
under regular review and compare it with our peer group of investment trusts.
Consequently, we are seeking to renew the authority to buy back ordinary
shares, which expires at the conclusion of the forthcoming annual general
meeting, to insure against inappropriate widening of the discount and to
maintain liquidity of the shares. We are also seeking renewal of our
authorisation from shareholders to issue new shares to satisfy demand and, as
last year, we are additionally seeking authority to enable any shares bought
into treasury to be reissued at a discount, provided it is narrower than that
at which they were bought in, and in any case at a discount of less than 3 per
cent. I encourage you to support all of these resolutions.
As you will see from the Manager's Review on page 12, our Manager is cautious
about the short-term outlook due mainly to the events in North Africa, the
Middle East and Japan. We continue to hold a modest cash balance that our
Manager can employ to take advantage of investment opportunities as and when
clarity on the outlook improves.
Richard Bernays
Chairman
12 April 2011
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Annual Report Pages 9 to 12:
Manager's Review
The investment policy seeks to achieve capital growth from a concentrated
portfolio of international stocks with a secondary objective of dividend growth
over the longer term.
The core of the portfolio comprises 40 stocks which at 31 January 2011
represented 81% of the portfolio, with the top ten holdings representing 28.5%.
The Company's wholly owned trading subsidiary is used to enhance returns and
during the period made a small profit of GBP77,000.
Economic and Market Background
The twelve months to 31 January 2011 was a volatile but ultimately positive
period for global equities. The Company's composite benchmark index (50% FTSE
All-Share Index and 50% Morgan Stanley Capital World Index ex UK) ended the
financial year up 15.9%, but the ride was far from smooth. Indeed, looking
back, it seems remarkable that equity markets are where they are considering
the challenges they have had to overcome.
The global economy continued to recover in the year under review.
Never-the-less markets were faced with a number of challenges including
financial problems in Europe, the potential slowdown in China and the threat of
a double dip recession in the US.
Stocks got off to a good start, rallying strongly in February and March, but
the optimism faded quickly as concerns in Europe reached almost fever-pitch
levels. Greece teetered on the edge of default and in April formally requested
a bailout. The fear that a Greek default would trigger a domino-effect of
defaults in peripheral Euro zone countries weighed on markets for much of the
year - though, the eventual combination of stress tests, emergency loans and
stabilization facility gradually helped ease fears of contagion.
The spectre of double dip recession in the US was another significant drag as
economic data releases did little to buoy the market - private-sector payroll
numbers were weak, inflation was moderate and manufacturing indicators mostly
failed to impress. The economic ambiguity was perhaps best summed up by Ben
Bernanke, Chairman of the Federal Reserve, who noted that the outlook for the
US economy was "unusually uncertain". Yet despite the uncertainty, corporate
earnings announced in the first half of the year generally proved robust, and
companies with exposure to high-end consumers and emerging markets tended to
impress.
Other significant factors overhanging the market included the threat of
increased financial regulation, and policy tightening and potential slowdown in
China. Both issues continued to niggle throughout the year, though the
Dodd-Frank Wall Street Reform Act provided some clarity on financial regulation
and the effective handling of monetary policy by Chinese authorities instilled
a degree of confidence.
The effect of this uncertainty on stock markets was a significant increase in
correlation in which stock-specific fundamentals were largely ignored. Stocks
traded in synchronization more than at any time in the last 30 years. In the
US, for example, the correlation of stocks with the market (as measured by S&P
500 Index) at one point surpassed 80% - almost three times the average
correlation between 2000 and 2006. The market's preoccupation with macro news
flow meant that economic indicators had a disproportionate impact on market
movements in both directions, as investors traded in and out of stocks
depending on the prevailing sentiment.
The summer period proved to be the markets' inflection point. From lows early
in July to the year-end, major equity markets rallied strongly - as evidenced
by the benchmark index gain of 20.6% from 1 July 2010 to 31 January 2011.
Better-than-expected macro data and a second round of quantitative easing in
the US was a powerful stimulus for markets. Year-end momentum was attributed to
heightened recovery expectations, with investors less worried about European
financial contagion and US recession risk.
The start of 2011 saw a significant rotation out of emerging markets into
developed markets. Europe performed particularly well as sovereign risk fears
declined on signs of collective action from Euro-zone authorities.
Corporate earnings reported in the last couple of months of the financial year
were encouraging. Moreover, unlike the initial period of the recovery, when
cost cutting drove profits, recent results suggest a solid pickup in spending
by businesses and consumers. In the US, for example, for the full year of 2010
the weighted-average sales for S&P 500 Index companies (excluding financials)
were up about 9% from 2009 and earnings were up 17%.
The financial year ended with political unrest in North Africa and the Middle
East. Protests in a number of regionally significant countries unsettled
markets and pushed oil to two-year highs.
The table below shows the performance in sterling terms of the major indices
over the twelve months to 31 January 2011:
FTSE All-Share +14.40%
MSCI World ex UK +17.40%
S&P Composite +19.80%
Topix +11.80%
FTSE World Europe ex UK +11.40%
Nasdaq Composite +25.80%
Source: Thomson Reuters Datastream
The table below shows the 5 best and the 5 worst performing sectors of the MSCI
World Index in sterling terms over the year to 31 January 2011.
Best Performers % Worst Performers %
Industrials +28.3 Health Care +2.1
Consumer Discretionary +27.4 Utilities +3.2
Materials +27.1 Consumer Staples +10.7
Energy +26.6 Financials +11.8
Information Technology +21.0 Telecoms +12.7
Performance Attribution
Over the year to 31 January 2011, the Net Asset Value per Ordinary share, with
prior charges at fair value, increased by 18.7%, compared with an increase of
15.9% in the Benchmark index, representing relative* net asset outperformance
of 2.4%. The following analysis explains factors which contributed to the
Company's relative outperformance:
Portfolio Performance +18.9%
Performance of benchmark +15.9%
--------
Portfolio relative outperformance +2.6%
Other Factors
Revenue return +2.2%
Equity dividends paid -2.1%
Management fee and finance costs allocated -0.4%
to capital
Uplift from share issues and buy-backs +0.1%
-------- -0.2%
--------
Net Asset Value relative outperformance +2.4%
Source: Gartmore
*calculated from the relative period-end positions of the Company and its
benchmark from a base position of 100.
Risk
The Company's benchmark index is a composite comprising 50% FTSE All-Share
Index and 50% MSCI World Index ex UK (in sterling terms). The Manager aims to
outperform the benchmark by at least 2% within a tracking error of not more
than 5%. During the year to 31 January 2011 these targets were met, with NAV
per share outperforming the benchmark index by 2.4%, in relative terms, with an
average tracking error for the year of 2.9%, well within the target range.
We continue to maintain a relatively concentrated portfolio, taking significant
positions in our favoured companies. A measure of the risk within the portfolio
is shown in the table below, which highlights the Company's ten most
significant holdings in terms of active risk.
Active Portfolio Benchmark
Risk Weighting Weighting
% % %
Wharf Holdings 10.4 2.8 0.0
Vale 6.9 2.0 0.0
GKN 6.1 2.5 0.1
Freeport McMoRan Copper & 5.9 3.1 0.1
Gold
Teck Resources 5.6 1.9 0.1
Singapore Telecom 4.7 1.8 0.0
BorgWarner 4.6 2.2 0.0
United Continental Holdings 4.3 2.0 0.0
PetroBras 3.4 1.3 0.0
Suncor Energy 3.4 1.7 0.1
Total 55.3 21.3 0.4
Source: Gartmore
The table above indicates the individual holdings that carried the highest
level of active risk, and hence conviction at 31 January 2011. Active risk
represents the percentage of tracking error contributed by an individual
holding. It can be seen that these ten holdings represented 21.3% of the
Company's portfolio by value, but
represented 55.3% of the active risk.
The information ratio (a measure of the return achieved relative to the risk
taken) has averaged 0.79% over the 3 years to 31 January 2011, which indicates
that the Company has achieved a strong level of return for the risk taken.
Further explanation of the information ratio can be found in the Glossary on
the inside back cover.
Strategy and Performance
We started the year with liquidity of some GBP6.2m (4.5% of gross assets). We
invested part of this cash during the year but took profits towards the
year-end to leave cash of GBP8.7m (5.9% of total assets).
Our largest overweight position in terms of sectors (relative to the benchmark)
is Materials but we remain overweight in both Consumer Discretionary and Health
Care. We remain underweight in Financials but broadly neutral in a number of
other sectors.
We added Navistar, the truck company, to our list of holdings and made other
changes within the portfolio. As a result, our weighting in North America has
increased to marginally overweight, while sales in Europe has reduced our
exposure there to underweight. We remain overweight (relative to the benchmark)
in Emerging Markets.
Two of our holdings in the Materials sector, Freeport McMoran Copper & Gold and
Teck Resources, finished the year up 63% and 64% in sterling terms,
respectively, contributing significantly to performance. Both stocks profited
from robust demand for commodities from fast-growing emerging markets such as
China. Freeport McMoran also benefitted from a rising gold price, which hit a
record high during the year.
Another stock exposed to emerging markets, Wharf (2.8% holding), a Hong Kong
listed property company with significant exposure to the Chinese consumer,
increased 52%, in sterling terms, and so also made a worthwhile contribution to
performance.
In the Consumer sector luxury goods company Burberry performed well, up nearly
75% over the year. The stock's outperformance has been driven by
better-thanexpected earnings growth, fuelled, in part, by robust demand for
high-end goods, a reduction in discounting, and expansion into new product
areas such as childrenswear and leather goods.
In the TMT sector (Technology, Media & Telecommunications), wireless telecoms
giant Vodafone had a better year - the stock up over 30% during the year - as
it became clear that ARPU (average revenue per user) had ceased falling. Our
largest tech holding, Oracle, also performed well, up 39% over the year, as the
company benefitted from recent acquisitions, such as its $7.4bn purchase of Sun
Microsystems, and from the appointment of the highly rated, former Hewlett
Packard CEO, Mark Hurd.
Powertrain component manufacturer BorgWarner performed very well, up 92% over
the period, on accelerating growth in Asia and a faster-than-expected recovery
in operating margins. UK automotive component manufacturer GKN also performed
strongly, up over 75% for the year, as the company reported a return to profit.
GKN has enjoyed a sharp recovery in demand from the automotive industry in
general, but in particular from European premium-car manufacturers such as BMW
and Audi.
In a market which posted a positive rise over the year, the cash we held was a
drag on performance, as were some of our defensive stocks such as Baxter
International, where earnings disappointed, GlaxoSmithKline and Pfizer. Our
weakest holdings during the year were building materials group CRH (since
sold), which suffered from a weak US construction market, and UK defence giant
BAE Systems which was down 3% on fears of cuts in defence spending globally. We
did not use our gearing facility during the year.
Outlook
Recent economic news has been broadly positive for equity markets but is being
outweighed by developments in North Africa and the Middle East and the
consequent rise in the oil price, Brent crude oil reaching a high of US$120 per
barrel. Oil prices of this level, if sustained for any period of time, would
exacerbate inflationary pressures and curb economic growth. As a result of this
and the disaster in Japan, we are somewhat cautious in the short term and would
need greater clarity on the outlook before becoming more positive.
Gartmore Investment Limited
12 April 2011
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Annual Report Page 15:
Principal Equity Investments at 31 January 2011
Percentage
Ranking Geographical Valuation of
Portfolio
2011 2010 Company Principal Activity Area GBP'000 %
1 3 ROYAL DUTCH SHELL Oil & Gas Producers United 5,428 3.8
Kingdom
2 9 FREEPORT-MCMORAN Mining United 4,407 3.1
COPPER & GOLD States
3 6 VODAFONE Mobile United 4,383 3.1
Telecommunications Kingdom
4 10 WHARF HOLDINGS Real Estate Hong Kong 4,004 2.8
5 2 ORACLE Software & Computer United 3,998 2.8
Services States
6 1 BP Oil & Gas Producers United 3,878 2.7
Kingdom
7 4 HSBC Banks United 3,743 2.6
Kingdom
8 7 NESTLE Food Producers Switzerland 3,731 2.6
9 28 GKN Auto Parts United 3,532 2.5
Kingdom
10 8 BG GROUP Oil & Gas Producers United 3,503 2.5
Kingdom
Top Ten Investments 40,607 28.5
11 13 NOVARTIS Pharmaceuticals Switzerland 3,314 2.3
12 37 BORGWARNER Auto Parts United 3,155 2.2
States
13 5 SYNGENTA Chemicals Switzerland 3,031 2.1
14 16 VALE Mining Brazil 2,900 2.0
15 23 UNITED CONTINENTAL Airlines United 2,825 2.0
States
16 12 GLAXOSMITHKLINE Pharmaceuticals United 2,821 2.0
Kingdom
17 17 NEWS CORPORATION Media United 2,813 2.0
States
18 11 BRITISH AMERICAN Tobacco United 2,766 2.0
TOBACCO Kingdom
19 14 BAE SYSTEMS Aerospace & Defence United 2,736 1.9
Kingdom
20 21 NATIONAL GRID Multi-Utilities United 2,705 1.9
Kingdom
Top Twenty Investments 69,673 48.9
21 46 TECK RESOURCES Industrial Metals Canada 2,650 1.9
22 22 ANZ BANKING GROUP Banks Australia 2,648 1.9
23 18 DBS Banks Singapore 2,609 1.8
24 15 ASTRAZENECA Pharmaceuticals United 2,575 1.8
Kingdom
25 35 RIO TINTO Mining United 2,568 1.8
Kingdom
26 20 SINGAPORE TELECOM Fixed Line Singapore 2,540 1.8
Telecommunications
27 24 THOMSON REUTERS Media Canada 2,496 1.8
28 27 SUNCOR ENERGY Oil & Gas Producers Canada 2,458 1.7
29 30 JPMORGAN CHASE Banks United 2,385 1.7
States
30 29 CANON Technology Hardware Japan 2,300 1.6
& Equipment
Top Thirty Investments 94,902 66.7
31 34 AVIVA Life Insurance United 2,214 1.6
Kingdom
32 33 SAGE Software & Computer United 2,213 1.6
Services Kingdom
33 42 MACY'S General Retailers United 2,166 1.5
States
34 36 PHILIP MORRIS Tobacco United 2,073 1.5
INTERNATIONAL States
35 - NAVISTAR Construction & United 2,023 1.4
INTERNSATIONAL Materials States
36 25 PFIZER Pharmaceuticals United 1,991 1.4
States
37 38 LLOYDS BANKING Banks United 1,951 1.4
GROUP Kingdom
38 31 JAPAN TOBACCO Tobacco Japan 1,878 1.3
39 26 PETROBRAS Oil & Gas Producers Brazil 1,867 1.3
40 39 STANDARD CHARTERED Banks United 1,831 1.3
Kingdom
Forty principal equity investments account for 115,109 81.0
Other Listed Investments (31 stocks) 25,776 18.1
Unquoted Investments (12 stocks) 1,253 0.9
Total Investments 142,138 100.0
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Annual Report Page 16:
Sector Analysis at 31 January 2011
Portfolio Benchmark
Sector Valuation Portfolio Index*
GBP'000 % % % %
Energy 13.2 14.3
Energy 18,803 13.2 14.3
Materials 12.8 10.5
Materials 18,139 12.8 10.5
Industrials 7.3 7.6
Capital Goods 4,760 3.3 6.4
Commercial Services & - - -
Supplies
Transportation 5,660 4.0 1.2
Consumer 10.8 10.0
Discretionary
Automobiles & 7,982 5.6 1.5
Components
Consumer Durables & - - 1.7
Apparel
Consumer Services - - 2.1
Media 5,317 3.7 2.6
Retailing 2,166 1.5 2.1
Consumer Staples 10.0 10.4
Food & Staples - - 2.5
Retailing
Food Beverage & 12,585 8.9 6.9
Tobacco
Household & Personal 1,610 1.1 1.0
Products
Health Care 9.7 8.2
Health Care Equipment 1,579 1.1 1.5
& Services
Pharmaceuticals & 12,228 8.6 6.7
Biotechnology
Financials 20.9 22.2
Banks 18,904 13.3 10.4
Diversified Financials 3,250 2.3 5.6
Insurance 2,214 1.6 4.1
Real Estate 5,299 3.7 2.1
Information 6.7 7.7
Technology
Semiconductor & - - 1.1
Semiconductor
Equipment
Software & Services 6,759 4.8 3.4
Technology Hardware & 2,671 1.9 3.2
Equipment
Telecommunication 5.4 5.2
Services
Telecommunication 7,701 5.4 5.2
Services
Utilities 3.2 3.9
Utilities 4,511 3.2 3.9
Total Investments 142,138 100.0 100.0
* Based on 50% FTSE All-Share Index and 50% MSCI World Index ex UK
Analysis of Sector Movements
Valuation at Net Appreciation/ Valuation at
31 January Transactions (Depreciation) 31 January
2010 * 2011
GBP'000 GBP'000 GBP'000 GBP'000
Energy 16,949 157 1,697 18,803
Materials 14,795 (2,299) 5,643 18,139
Industrials 7,655 1,525 1,240 10,420
Consumer 12,663 269 2,533 15,465
Discretionary
Consumer Staples 12,868 (981) 2,308 14,195
Health Care 13,410 404 (7) 13,807
Financials 23,351 (1,422) 7,738 29,667
Information 8,541 (1,262) 2,151 9,430
Technology
Telecommunication 6,418 - 1,283 7,701
Services
Utilities 4,432 469 (390) 4,511
121,082 (3,140) 24,196 142,138
* Includes gains and losses on investments sold
______
Annual Report Page 17:
Financial Highlights
31 January 31 January Change
2011 2010 %
Capital
Net Assets Attributable to Ordinary 150,009 126,300 +18.8
Shareholders (GBP'000)
Net Asset Value per Ordinary share:
with prior charges* at par 367.6p 309.5p +18.8
with prior charges at fair value 368.4p 310.4p +18.7
Mid-Market Price per Ordinary Share 359.5p 312.25p +15.1
Indices**
FTSE All-Share Index 3044.3 2660.5 +14.4
Morgan Stanley Capital International World 816.8 696.1 +17.3
Index ex UK (in Sterling terms)
Benchmark Index*** +15.9
Premium/(Discount)
with prior charges at par (2.2%) 0.9%
with prior charges at fair value (2.4%) 0.6%
average for year| (1.3%) (2.4%)
Gearing
Potential Gearing 14.0% 16.6%
Actual Gearing (net of cash) (5.2%) (3.7%)
Revenue and Dividends
Net Revenue after taxation (GBP'000) 3,224 3,039
Revenue return per Ordinary Share 7.87p 7.51p
Annual dividend per Ordinary share 8.00p 7.50p
Total Return to Equity Shareholders
Revenue return after taxation (GBP'000) 3,224 3,039
Capital return after taxation (GBP'000) 23,611 25,739
26,835 28,778
Total Return per Ordinary share:
Revenue 7.87p 7.51p
Capital 57.63p 63.60p
65.50p 71.11p
Total Expense Ratio (TER) 0.92% 0.96%
Year Highs and Lows|| High Low
Net Asset Values with prior charges at par 373.30p 291.60p
Net Asset Value with prior charges at 374.14p 292.44p
mid-market values
Closing mid-market share price 364.75p 295.75p
Discount with prior charges at par (8.0%) 3.6%
Discount with prior charges at fair value (8.2%) 3.3%
Ordinary share Issues and Repurchases
During the year the company issued 750,000 Ordinary shares and repurchased
751,990 Ordinary shares, which are held in treasury.
*Prior charges comprise the Company's Cumulative Preference Stock.
**Source: Thomson Reuters Datastream.
***Comprising 50% FTSE All-Share Index and 50% MSCI World Index ex UK (in
sterling terms).
| Source: Thomson Reuters Datastream, based on ex-revenue NAV with prior
charges at par value.
||Using published daily net asset values that exclude current year revenue.
______
Annual Report Page 18:
Analysis of Group Net Assets and Shareholders' Funds
Equities Valuation Net Appreciation/ Valuation
at at
31 Transactions (Depreciation) 31
January January
2010 2011
GBP'000 % GBP'000 GBP'000 GBP'000 %
United Kingdom 51,291 40.6 (300) 8,526 59,517 39.7
North America 33,759 26.7 (1,322) 11,190 43,627 29.1
Continental Europe 13,076 10.4 (1,535) 340 11,881 7.9
Pacific Rim 11,692 9.3 416 2,833 14,941 10.0
Japan 6,551 5.2 (249) 470 6,772 4.5
Other Markets 4,713 3.7 (150) 837 5,400 3.6
Total Investments 121,082 95.9 (3,140) 24,196 142,138 94.8
Net Current Assets 6,218 4.9 2,653 - 8,871 5.9
Total Assets less 127,300 100.8 (487) 24,196 151,009 100.7
Current Liabilities
Non-Current Liabilities
Cumulative Preference (1,000) (0.8) - - (1,000) (0.7)
Stock
Net Assets 126,300 100.0 (487) 24,196 150,009 100.0
Attributable to Equity
Shareholders' Funds
Ordinary Shares 126,300 100.0 (3,126)* 26,835** 150,009 100.0
* Share issue proceeds of GBP2,466,000 less the GBP2,517,000 cost of shares
repurchased and GBP3,075,000 of equity dividends paid.
** Total return for the year.
Market Exposure
Net Non- Net Exposure
Market
Current Current at 31 at 31
January January
Equities Assets Liabilities 2010 2010
GBP'000 GBP'000 GBP'000 GBP'000 % %
United Kingdom 59,517 6,752 (1,000) 65,269 43.5 42.9
North America 43,627 1,939 - 45,566 30.4 28.1
Continental Europe 11,881 145 - 12,026 8.0 10.5
Pacific Rim 14,941 - - 14,941 10.0 9.3
Japan 6,772 35 - 6,807 4.5 5.5
Other Markets 5,400 - - 5,400 3.6 3.7
Total 142,138 8,871 (1,000) 150,009 100.0 100.0
Percentage 94.8 5.9 (0.7) 100.0
______
Annual Report Pages 19 to 23:
Report of the Directors
The Directors present their report and the audited accounts for the year ended
31 January 2011. The Corporate Governance Statement on pages 29 to 35 forms
part of the Report of the Directors.
Business Review
The Business Review has been prepared in accordance with the Companies Act 2006
and should be read in conjunction with the Chairman's Statement on pages 6 and
7, the Managers Review on pages 9 to 12 and the analyses on pages 15 to 18.
Nature and Status
The Company is an investment trust company and is a member of The Association
of Investment Companies (AIC). It is registered as a public limited company
(Registration number 237017 England and Wales) and is an investment company as
defined by Section 833 of the Companies Act 2006. The Company's shares are
listed on the Official List of the UK Listing Authority and are traded on the
main market of the London Stock Exchange.
The Company was last approved by HM Revenue & Customs as an investment trust
under Section 1158 of the Corporation Tax Act 2010 in respect of the year ended
31 January 2010. This approval is subject to there being no subsequent enquiry
under corporation tax self-assessment.
Since that date, the Company has directed its affairs so as to be able to
continue to qualify for approval by HM Revenue & Customs as an investment trust
for tax purposes.
The close company provisions of the Corporation Tax Act 2010 do not apply to
the Company.
Investment Objective & Policy
The Company's investment objective and policy are set out on page 2.
Information regarding the Company's risk management is shown on page 21 and
Note 26 to the Accounts on page 60. This information, together with the
discussion of activities in the year in the Manager's Review on pages 9 to 12,
demonstrate how the Group's assets have been invested with a view to spreading
investment risk in accordance with the Group's published investment policy.
Performance
The Directors consider that the key indicator of the Company's performance is
the movement of the net asset value per Ordinary share, with debt at fair
value, compared with the movement in the Company's composite benchmark index.
In particular, the Board monitors performance against the target it has set of
exceeding the composite benchmark performance by at least 2% with a tracking
error of not more than 5%. This target forms part of the Company's investment
policy. Over the year, the net asset value per Ordinary share, with debt at
fair value, increased by 18.7% (2010: 24.1%), compared with an increase in the
composite benchmark of 15.9% (2010: 23.7%). This represents relative
outperformance of 2.4% and so the Board's performance target has been achieved
in the year.
Our investments in the Consumer Discretionary, Materials and Financials sectors
provided the greatest positive contribution to performance in the period and
some examples are provided in the Manager's Review on page 12. The overall
positive performance, particularly from those sectors, was offset to an extent
by our holdings in the defensive Utilities, Energy and Health Care sectors,
which performed less well, and the level of cash held through the period also
detracted.
Since investment in an investment trust company is generally considered to be
for longer-term returns it is also relevant to consider performance over a
longer period. Over the last three, five and ten years the net asset value per
share, with debt at fair value, increased, respectively, by 21.9%, 39.4% and
54.6% compared with movements in the composite benchmark index for those
periods of +6.8%, +7.8% and -29.8%. The mid-market price of the Company's
Ordinary shares increased 32.4%, 50.3% and 71.6% over the same periods.
Financial Position and Finance
Net Assets at 31 January 2011 amounted to GBP150,009,000, compared with GBP
126,300,000 at 31 January 2010. The majority of the Company's investments are
listed on recognised exchanges and are realisable within a short period.
The Group made a net revenue profit in the year, after expenses and taxation,
of GBP3,224,000, compared to GBP3,039,000 for the previous year. The Company's
trading subsidiary, Engandscot Limited, made a modest contribution of GBP77,000
(2010: GBP142,000) to the Group's overall return for the year.
The Company is geared by a very modest amount of long term debt comprising
3.75% Cumulative Preference Stock, although the effect was neutralised in the
year because of the cash balances held. Short term loan facilities up to GBP
20,000,000 were also available but were not drawn during the year.
The Cumulative Preference Stock has no fixed redemption date and is redeemable
at par. Fixed cumulative dividends are payable half yearly and are payable in
priority to Ordinary shareholders. The stockholders have a right to attend and
vote at General Meetings of the
Company. For the purpose of the Group accounts the Cumulative Preference Stock
is recognised as a non-current liability at its par value, which, at 31 January
2011, was GBP1,000,000 (2010: GBP1,000,000). Alternatively, it can be valued at its
market value (fair value) which was GBP685,000 (2010: GBP650,000). At the year-end,
at par value, this instrument represented gearing of 0.7% (2010: 0.8%).
There were no other non-current liabilities at the year-end.
During the past year, the Company had a committed loan facility that could be
drawn up to GBP10 million and an uncommitted loan facility of a further GBP10
million under agreements with The Bank of New York Mellon. The facilities,
which had a covenant that restricted borrowing to 25% of the Group's net
assets, were not drawn upon. Since 21 March 2011 The Bank of New York Mellon
facilities have been replaced with a secured GBP20 million facility from HSBC,
which has a similar covenant restricting borrowing to 25% of the Group's net
assets.
The Company's equity share capital at the year-end comprised 40,805,173 fully
paid up Ordinary shares of 25p each, with full voting rights (2010:
40,807,163).
During the year the Company issued 750,000 new ordinary shares and repurchased
751,990 shares. All of the repurchased shares are held in treasury and do not
carry voting rights.
The Company's ratio of annual expenses to average net assets (TER) for the year
was 0.92% compared to 0.96% for the previous year. The Company's total expense
ratio over the last five years is shown in the chart below. A first interim
dividend of 2.4p was paid to shareholders on 29 October 2010. A second interim
dividend of 5.6p was paid on 1 April 2011, making a total of 8.0p in respect of
the financial year. The left hand chart below shows the Company's annual
dividends over the last five years. Further dividend history information is
provided on page 65.
Socially Responsible Investment
The Company delegated responsibility for making and holding investments to the
Manager, Gartmore lnvestment Limited, on the basis that, subject to an
overriding requirement to pursue the best economic interests of the Company and
its shareholders, the Manager should take account of social, environmental and
ethical factors. Gartmore applies the principles of the UK Stewardship Code for
Institutional Investors that was published by the Financial Reporting Council
in July 2010, as do Henderson. The Henderson Responsible Investment Policy and
further details of Henderson's responsible investment activities can be found
on the Henderson website, www.henderson.com.
Future Trends
Although recent corporate results have been encouraging, the unsettled
situation in North Africa and the Middle East, with consequent pressure on the
oil price, together with the situation in Japan mean that the short-term
outlook is unclear. Accordingly, our stance is cautious.
Principal Risks and Uncertainties
The Board policy on risk management has not changed from last year. As expanded
on pages 33 to 35 the Directors have put in place processes to identify and
manage significant risks to the Company, including internal controls to
minimise operational risks. The main areas of risk, in the opinion of the
Board, are summarised below and are further discussed in Note 26 to the
Accounts on pages 60 to 63.
Market Risk
Since the Company is an investment company its performance is dependent on the
performance of the companies and stock markets in which it invests and will
also be affected by the strength of currencies in the regions in which it
invests, relative to sterling. Although the Manager seeks to maintain a
diversified portfolio, country and sector weightings may diverge significantly
as the portfolio is not modelled on any particular investment index. This point
is clearly demonstrated by the table provided in the Manager's Review on page
11 showing the Company's top 10 risk positions. The
Company does not currently carry out currency hedging.
At their regular meetings, the Directors and the Manager review the Company's
activities and performance, and determine investment strategy. Investment risk
is spread by holding a diversified portfolio of which 80% by value normally
comprises 40 holdings.
Investment risk is further controlled by the target set for the Manager by the
published investment policy that tracking error should not exceed 5%.
Gearing
The Company has the ability under existing covenants to gear up to 25% of the
Group's net assets, but in normal circumstances, gearing would not be expected
to exceed 15% and the borrowing facility currently available from HSBC is
limited to GBP20 million. In the event of a significant or prolonged fall in
equity markets gearing would exacerbate the effect of the falling market on the
Company's net asset value and, consequently, its share price.
Other Financial Risks
The Company minimises its risk associated with a counter party failing to
deliver securities or cash by dealing through organisations that have undergone
rigorous due diligence by the Manager.
The Group holds its liquid funds almost entirely in UK interest bearing bank
accounts or on short term deposit. This, together with the portfolio mainly
comprising investments in large and medium sized companies listed on major
equity markets, mitigates the Company's exposure to liquidity risk.
Internal Control
The Board in conjunction with the Audit Committee regularly reviews the system
of internal controls. These include controls to ensure that the Company's
assets are safeguarded. A summary of the Company's approach to internal
controls and risk can be found in the Corporate Governance section of this
Report, on pages 33 to 35.
Discount Control
Discount control forms part of the Company's investment policy. The Board
actively utilises the Company's buy-back powers to enhance net asset value per
share and limit the risk to shareholders and potential investors of a volatile
discount. The Board sets a discount range that it believes to be an appropriate
level for the prevailing market conditions and buy-backs are administered with
this range in mind.
Over the year to 31 January 2011, the mid-market price of the Company's
Ordinary shares increased by 15.1%, moving from a small premium to NAV of 0.6%
to a modest discount of 2.4% (with debt at fair value).
During the first half of the year the market for the Company's shares was
relatively liquid with strong demand at times that allowed us to issue new
shares at prices slightly higher than the prevailing NAV. However, it became
necessary to provide market liquidity by repurchasing a number shares in the
later part of the year as the rating was tested by uncertainty about Gartmore.
The shares bought back are now held in treasury.
We are seeking to renew the Company's authority to repurchase up to 14.99% of
the Ordinary shares in issue at the forthcoming Annual General Meeting. (See
page 26 and Resolution 10 on page 67).
______
Annual Report Page 28:
Statement under DTR 4.1.12
The Directors, who are listed on pages 4 and 5 of this Report, each confirm to
the best of their knowledge that:
(a) the Group financial statements, prepared in accordance with applicable
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit or loss of the Group; and
(b) this Annual Report includes a fair review of the development and
performance of the business and the position of the Group, together with a
description of the principal risks and uncertainties that it faces.
______
Annual Report Page 38:
Group Statement of Comprehensive Income
for the year ended 31 January 2011
. Year to 31 January 2011
Revenue Capital Total
Notes Return Return Return
GBP'000 GBP'000 GBP'000
Income and Capital Profits
Dividends and other income 2 4,049 - 4,049
Gains on investments held at fair 3 - 24,196 24,196
value
Net exchange loss on currency - 21 21
deposits
Net dealing profit 77 - 77
-------- -------- --------
Total Income 4,126 24,217 28,343
Expenses
Management fees 4 (274) (549) (823)
Other expenses 5 (440) (19) (459)
-------- -------- --------
Operating Expenses before Finance (714) (568) (1,282)
Costs and Taxation
-------- -------- --------
Net Profit before Finance Costs and 3,412 23,649 27,061
Taxation
Finance Costs
Interest payable 6 - - -
Dividends on preference stock 7 (13) (25) (38)
-------- -------- --------
Total Finance Costs (13) (25) (38)
-------- -------- --------
Net Profit before Taxation 3,399 23,624 27,023
Taxation 8 (175) (13) (188)
-------- -------- --------
Profit for the year and Total 3,224 23,611 26,835
Comprehensive Income
======== ======== ========
Earnings per Ordinary share 10 7.87p 57.63p 65.50p
The total return column of this statement represents the Group's Statement of
Comprehensive Income, prepared in accordance with IFRS, as adopted by the
European Union.
The revenue return and capital return columns are supplementary disclosures
provided in accordance with guidance issued by The Association of Investment
Companies.
All items derive from continuing operations. No operations were acquired or
discontinued during the year.
The Notes on pages 46 to 64 form an integral part of these Accounts.
______
Annual Report Page 39:
Group Statement of Comprehensive Income
for the year ended 31 January 2010
. Year to 31 January 2010
Revenue Capital Total
Notes Return Return Return
GBP'000 GBP'000 GBP'000
Income and Capital Profits
Dividends and other income 2 3,698 - 3,698
Gains on investments held at fair 3 - 26,640 26,640
value
Net exchange loss on currency - (349) (349)
deposits
Net dealing profit 142 - 142
-------- -------- --------
Total Income 3,840 26,291 30,131
Expenses
Management fees 4 (228) (456) (684)
Other expenses 5 (398) (72) (470)
-------- -------- --------
Operating Expenses before Finance (626) (528) (1,154)
Costs and Taxation
-------- -------- --------
Net Profit before Finance Costs and 3,214 25,763 28,977
Taxation
Finance Costs
Interest payable 6 (2) - (2)
Dividends on preference stock 7 (38) - (38)
-------- -------- --------
Total Finance Costs (40) - (40)
-------- -------- --------
Net Profit before Taxation 3,174 25,763 28,937
Taxation 8 (135) (24) (159)
-------- -------- --------
Profit for the year and Total 3,039 25,739 28,778
Comprehensive Income
======== ======== ========
Earnings per Ordinary share 10 7.51p 63.60p 71.11p
The total return column of this statement represents the Group's Statement of
Comprehensive Income, prepared in accordance with IFRS, as adopted by the
European Union.
The revenue return and capital return columns are supplementary disclosures
provided in accordance with guidance issued by The Association of Investment
Companies.
All items derive from continuing operations. No operations were acquired or
discontinued during the year.
The Notes on pages 46 to 64 form an integral part of these Accounts.
______
Annual Report Page 42:
Group Balance Sheet
for the year ended 31 January 2011
At 31 January At 31 January
Notes 2011 2010
GBP'000 GBP'000
Non-Current Assets
Investments held at fair value through 11 142,138 121,082
profit or loss
Current Assets
Balances due from brokers - 317
Taxation recoverable 141 236
Other receivables 14 202 208
Cash and cash equivalents 15 8,787 5,699
-------- --------
9,130 6,460
-------- --------
Total Assets 151,268 127,542
Current Liabilities
Other payables 16 (259) (242)
-------- --------
(259) (242)
-------- --------
Total Assets less Current Liabilities 151,009 127,300
Non-Current Liabilities
3.75% Cumulative preference stock 17 (1,000) (1,000)
-------- --------
Net Assets 150,009 126,300
======== ========
Equity Attributable to Equity Holders
Called-up share capital 18 10,389 10,202
Share premium account 19 13,410 11,131
Capital redemption reserve 20 33,966 33,966
Retained earnings: 21
Capital reserve 79,564 58,470
Revenue reserve 12,680 12,531
-------- --------
Total Equity 150,009 126,300
======== ========
Net Asset Value per Ordinary share 22 367.6p 309.5p
Richard Bernays
Chairman
Approved by the Board and authorised for issue on 12 April 2011.
Registered No. 237017 England and Wales.
The Notes on pages 46 to 64 form an integral part of these accounts.
______
Annual Report Page 43:
Company Balance Sheet
for the year ended 31 January 2011
At 31 January At 31 January
Notes 2011 2010
GBP'000 GBP'000
Non-Current Assets
Investments held at fair value through 11 142,138 121,082
profit or loss
Investment in subsidiary 13 834 757
-------- --------
142,972 121,839
Current Assets
Taxation recoverable 141 236
Other receivables 14 202 214
Cash and cash equivalents 15 8,255 5,253
-------- --------
8,598 5,703
-------- --------
Total Assets 151,570 127,542
Current Liabilities
Other payables 16 (561) (242)
-------- --------
(561) (242)
-------- --------
Total Assets less Current Liabilities 151,009 127,300
Non-Current Liabilities
3.75% Cumulative preference stock 17 (1,000) (1,000)
-------- --------
Net Assets 150,009 126,300
======== ========
Equity Attributable to Equity Holders
Called-up share capital 18 10,389 10,202
Share premium account 19 13,410 11,131
Capital redemption reserve 20 33,966 33,966
Retained earnings: 21
Capital reserve 80,388 59,217
Revenue reserve 11,856 11,784
-------- --------
Total Equity 150,009 126,300
======== ========
Net Asset Value per Ordinary share 22 367.6p 309.5p
Richard Bernays
Chairman
Approved by the Board and authorised for issue on 12 April 2011.
Registered No. 237017 England and Wales.
The Notes on pages 46 to 64 form an integral part of these accounts.
______
Annual Report Page 44:
Statement of changes in Equity
for the year ended 31 January 2011
. Year to 31 January 2011
Group and Company Called-up Share Capital
share premium redemption Retained
capital account reserve earnings Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 January 2010 10,202 11,131 33,966 71,001 126,300
Total Comprehensive
Income:
Net Profit for the - - - 26,835 26,835
year to 31 January
2011
Transactions with
owners, recorded
directly to equity:
Equity dividends paid 9 - - - (3,075) (3,075)
Ordinary shares 18 (2,517) (2,517)
purchased and
held in treasury
Ordinary shares 18,19 187 2,279 - - 2,466
issued
-------- -------- -------- -------- --------
At 31 January 2011 10,389 13,410 33,966 92,244 150,009
======== ======== ======== ======== ========
. Year to 31 January 2010
Group and Company Called-up Share Capital
share premium redemption Retained
capital account reserve earnings Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
At 31 January 2009 10,017 9,251 33,966 46,648 99,882
Total Comprehensive
Income:
Net Profit for the - - - 28,778 28,778
year to 31 January
2010
Transactions with
owners, recorded
directly to equity:
Equity dividends paid 9 - - - (4,425) (4,425)
Ordinary shares 18,19 185 1,880 - - 2,065
issued
-------- -------- -------- -------- --------
At 31 January 2010 10,202 11,131 33,966 71,001 126,300
======== ======== ======== ======== ========
The Notes on pages 46 to 64 form an integral part of these accounts.
______
Annual Report Page 45:
Cash Flow Statement
for the year ended 31 January 2011
Group Company Group Company
Year to Year to Year to Year to
31 January 31 January 31 January 31 January
2011 2011 2010 2010
Notes GBP'000 GBP'000 GBP'000 GBP'000
Cash Flows from Operating
Activities
Return before finance costs 27,061 27,061 28,977 28,977
and tax
Adjustments for:
Net increase in investments (21,077) (21,154) (34,459) (34,301)
Decrease/(increase) in 323 12 (187) 29
receivables
Increase/(decrease) in 17 319 (952) (1,739)
payables
Taxation (93) (93) (190) (137)
-------- -------- -------- --------
Net Cash Flows generated 23 6,231 6,145 (6,811) (7,171)
from
Operating Activities
Cash Flows from Financing
Activities
Repurchase of ordinary - - (574) (574)
shares for cancellation
Repurchase of ordinary (2,517) (2,517) - -
shares held in treasury
Shares issued during the 2,466 2,466 2,065 2,065
year
Bank overdraft interest 6 - - (2) (2)
paid
Cumulative preference stock 7 (38) (38) (38) (38)
dividends paid
Equity dividends paid 9 (3,075) (3,075) (4,425) (4,425)
-------- -------- -------- --------
Net Cash used in Financing (3,164) (3,164) (2,974) (2,974)
Activities
-------- -------- -------- --------
Net Increase/(Decrease) in 3,067 2,981 (9,785) (10,145)
Cash and Cash Equivalents
Cash and cash equivalents 5,699 5,253 15,833 15,747
at 1 February
Effect of foreign exchange 21 21 (349) (349)
rate changes
-------- -------- -------- --------
Cash and Cash Equivalents 15 8,787 8,255 5,699 5,253
at 31 January
======== ======== ======== ========
The Notes on pages 46 to 64 form an integral part of these accounts.
______
Annual Report Pages 46 to 64
Notes to the Accounts
1. Accounting Policies
Gartmore Global Trust PLC (the Company) is a company incorporated and domiciled
in the United Kingdom under the Companies Act 2006. The consolidated financial
statements ("accounts") of the Company for the year ended 31 January 2011
comprise the Company and its subsidiary, Engandscot Limited, together referred
to as the "Group". The nature of the Group's operations and its principal
activities are set out in the Report of the Directors on page 19.
Group and Company accounts have been prepared in accordance with International
Financial Reporting Standards (IFRS) and IFRIC guidance, which comprise
standards and interpretations approved by the International Accounting
Standards Board (IASB) and International Accounting Standards Committee (IASC),
as adopted by the European Union (EU) and Companies Act 2006 for companies
reporting under IFRS.
The principal accounting policies followed are set out below:
Basis of Preparation
The Group and Company accounts have been prepared on a going concern basis
under the historical cost convention, as modified by the revaluation of
investments at fair value through profit or loss.
Where presentational guidance set out in the Statement of Recommended Practice
(SORP) for investment trusts issued by The Association of Investment Companies
(AIC) in January 2009 is consistent with the requirements of IFRS, the
directors have prepared the accounts on a basis compliant with the
recommendations of the SORP.
Basis of Consolidation
The Group accounts comprise the audited accounts of the Company and its
subsidiary drawn up to the balance sheet date. The Statement of Comprehensive
Income is only presented in consolidated form, as provided by Section 408 of
the Companies Act 2006.
Presentation of Statement of Comprehensive Income
In order to better reflect the activities of an investment trust company and in
accordance with guidance issued by the AIC, supplementary information which
analyses the Statement of Comprehensive Income between items of a revenue and
capital nature has been presented alongside the Statement of Comprehensive
Income.
In accordance with the Company's status as a UK investment company under
section 833 of the Companies Act 2006, net capital returns may not be
distributed by way of dividend. Additionally, the revenue profit after taxation
is the measure the directors believe to be appropriate in assessing the
Company's compliance with certain requirements set out in section 1159
Corporation Tax Act 2010.
Revenue, Expenses and Finance Costs
Revenue includes dividends from investments quoted ex-dividend on or before the
balance sheet date, with the exception of dividends of a capital nature, which
are credited to the Capital column of the Statement of Comprehensive Income.
Where the Group has elected to receive its dividends in the form of additional
shares rather than cash, the amount of cash dividend foregone is recognised as
income in the Revenue column of the Statement of Comprehensive Income.
Any excess in the value of shares received over the amount of cash dividend
foregone is recognised as a gain in the Capital column of the Statement of
Comprehensive Income. Income on fixed income securities, when held, is
recognised on a time-apportionment basis so as to reflect their effective
yield. Deposit and other interest receivable, expenses and interest payable are
accounted for on an accruals basis.
Underwriting commission is recognised as revenue in so far as it relates to
shares the Company is not required to take up. Where the Company is required to
take up a proportion of the shares underwritten, an equal proportion of the
commission is credited to the Capital column of the Statement of Comprehensive
Income.
Expenses are split and presented partly as capital items where a connection
with the maintenance or enhancement of the value of the investments held can be
demonstrated, and accordingly, management fees and finance costs are allocated
one-third to revenue and two-thirds to capital, in order to reflect the
directors' expected long-term view of the nature of the investment returns of
the Group.
Tax relief in respect of such costs is credited to capital to the extent that
such relief can be utilised in reducing the Company's overall liability to
taxation.
Taxation
The tax expense comprises the sum of current tax and deferred tax.
Current tax is based on taxable profit for the year. Taxable profit differs
from profit before tax as reported in the Statement of Comprehensive Income
because it excludes items of income or expense that are taxable or deductible
in other years and it further excludes items that are never taxable or
deductible. The Group's liability for current tax is calculated using tax rates
that have been enacted or substantively enacted by the balance sheet date.
In line with recommendations of the SORP, the allocation method used to
calculate tax relief on expenses presented in the Capital column of the
Statement of Comprehensive Income is the marginal basis. Under this basis, if
taxable income is capable of being offset entirely by expenses presented in the
Revenue column of the Statement of Comprehensive Income, then no tax relief is
transferred to the Capital column.
Deferred Taxation
Deferred tax is the tax expected to be payable or recoverable on differences
between the carrying amounts of assets and liabilities in the financial
statements and the corresponding tax bases used in the computation of taxable
profit, and is accounted for using the balance sheet liability method. Deferred
tax liabilities are recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is probable that tax
profits will be available against which deductible temporary differences can be
utilised.
No provision for taxation is required in respect of any realised or unrealised
appreciation of the Company's investments as the Company expects to continue to
qualify as an investment trust for tax purposes.
Investment trust companies which have approval under section 1158 Corporation
Tax Act 2010 are not liable for taxation on capital gains.
The carrying amount of deferred tax assets is reviewed at each balance sheet
date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be
recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the
period when the liability is settled or the asset is realised and charged or
credited in the Statement of Comprehensive Income.
Non-Current Asset Investments held at fair value
All investments are classified as held at fair value through profit or loss.
They are further categorised into the following fair value hierarchy:
- Level 1:
Unadjusted prices quoted in active markets for identical assets or liabilities.
- Level 2:
Having inputs other than quoted prices included within Level 1 that are
observable for the asset or liability, either directly (ie as prices) or
indirectly (ie derived from prices).
- Level 3:
Having inputs for the asset or liability that are not based on observable
market data.
All investments are recognised on a trade date basis and are measured at fair
value with gains and losses arising from changes in their fair value being
included in net profit or loss for the year as a capital item. Transaction
costs on acquisition or disposal of the investment are expensed through the
Capital column of the Statement of Comprehensive Income. The fair value of
listed investments is based on their quoted bid market price at the close of
business on the balance sheet date without any deduction for estimated future
selling costs.
Where no bid price is available, the investment is valued at last traded price.
The fair value of unquoted investments is based on the market price at the
close of business on the balance sheet date where an organised market exists,
otherwise, unquoted investments are valued by the Directors at the balance
sheet date based on dealing prices or stockbrokers' valuations where available,
net asset values, or other relevant information.
Investments are de-recognised at the trade date of the disposal. Any gains and
losses realised will be recognised in the Capital column of the Statement of
Comprehensive Income in accordance with the Articles of Association of the
Company, and are not distributable by way of dividend.
No provision for taxation is required in respect of any realised or unrealised
appreciation of the Company's investments which arises, as the Company expects
to continue to qualify as an investment trust for tax purposes.
Current Asset Investments Held for Trading
Current asset investments held for trading are measured at fair value with
gains and losses arising from changes in their fair value being included in the
Statement of Comprehensive Income as a revenue item.
Investment in Subsidiary
The Subsidiary has been stated at its fair value (net asset value) in the
Company Balance Sheet.
Other Receivables
Other receivables do not carry any right to interest and are short-term in
nature. Accordingly they are stated at their nominal value (amortised cost)
reduced by appropriate allowances for estimated irrecoverable amounts.
Cash and Cash Equivalents
Cash comprises cash on hand and demand deposits. Cash equivalents are
short-term, highly liquid investments that are readily convertible to known
amounts of cash.
Long-Term Borrowings
Long-term borrowings are stated at the amount of net proceeds on issue plus
accrued finance costs to date. Finance costs are calculated over the term of
the debt on the effective interest rate basis.
Where debt is issued at a premium, the premium is amortised over the term of
the debt on the effective interest rate basis. The finance costs of servicing
such borrowings, being the difference between the net proceeds of the borrowing
and the total payments that may be required in respect of that borrowing, are
allocated to periods over the term of the debt.
Finance costs are apportioned between revenue and capital in accordance with
the policy set out above under the heading `Revenue, Expenses and Finance
Costs'.
Gains and losses arising from the repurchase or early redemption of debt are
taken to the Capital column of the Statement of Comprehensive Income.
The Company's 3.75% Cumulative Preference Stock is classified as a liability
because the rights of the stockholders to receive dividend payments are not
calculated by reference to the Company's profits.
Other Payables
Other payables are not interest-bearing and are stated at their nominal amount
(amortised cost).
Rates of Exchange
Transactions in foreign currencies are translated into sterling at the rate of
exchange ruling on the date of each transaction. Foreign currency monetary
assets or liabilities at the balance sheet date are translated into sterling at
the rates of exchange ruling on that date. Realised profits or losses on
exchange, together with differences arising on the translation of foreign
currency monetary assets or liabilities, are taken to the Capital column of the
Statement of Comprehensive Income.
These accounts are presented in pounds sterling, as this is the principal
currency in which the Group's transactions are undertaken and is therefore
considered to be the functional currency of the Group.
Dividends Payable
Dividends payable on the cumulative preference stock are recognised in the
Revenue column of the Statement of Comprehensive Income as finance costs.
Dividends payable to Ordinary shareholders are recognised in the financial
statements when they are paid or, in the case of final dividends when they are
approved by shareholders and are dealt with in the Statement of Changes in
Equity.
Repurchase of Ordinary shares (including those held in treasury)
The costs of repurchasing Ordinary shares, including related stamp duty and
transaction costs, are taken directly to equity and reported through the
Statement of Changes in Equity, with the cost of the repurchase being charged
to Capital reserve. Share repurchase transactions are accounted for on a trade
date basis. The nominal value of Ordinary share capital repurchased and
cancelled is transferred out of called-up share capital and into the capital
redemption reserve, in accordance with section 733 Companies Act 2006. Where
shares are repurchased and held in treasury, the transfer to capital redemption
reserve is made if and when such shares are subsequently cancelled.
Reserves
(i) Share Premium Account: A non-distributable reserve, which represents the
amount by which the fair value of the consideration received exceeds the
nominal value of shares issued.
(ii) Capital Redemption Reserve: The Capital Redemption Reserve, which is
non-distributable, holds the amount by which the nominal value of the Company's
issued share capital is diminished when shares are purchased out of the
Company's profits.
(iii) Retained Earnings:
(a) Capital Reserve: The Capital Reserve comprises both gains and losses on
disposals of investments and investment holding gains and losses. Under the
terms of the Company's Articles of Association, sums standing to the credit of
the capital reserve are available for distribution only by way of purchase of
any issue of the Company's own shares. The Company may only distribute in this
way "realised" profits which comprise net gains less losses on the
realisation of investments together with changes in the fair value of
investments that are considered to be readily convertible into cash without
accepting adverse terms.
(b) Revenue Reserve: The Revenue Reserve comprises accumulated undistributed
revenue profits available for distribution as dividends.
Operating Segments
Under IFRS 8, operating segments are considered to be components of an entity
about which separate financial information is available that is evaluated
regularly by the chief operating decision maker (the Manager, with oversight
from the Board) in deciding how to allocate resources and in assessing
performance. The Directors are of the opinion that the Group has two operating
segments, details of which are disclosed in note 25.
In accordance with IFRS 8, additional geographical information has been
disclosed as follows:
* An analysis by country of income from investments is set out in note 2;
* An Analysis of Group Net Assets is provided on page 18 of this Annual Report,
which summarises by geographical area the investments held at the beginning and
end of the year and the net gains and losses on investment and;
* An analysis of the investments by way of country is set out in note 11.
Further analyses of expenses, profit and other assets and liabilities by
country have not been given as either it is not possible to prepare such
information in a meaningful way or the results are not considered to be
significant.
Accounting Standards
(a) Standards, amendments and interpretations becoming effective in the year to
31 January 2011:
* IFRS 1 (Amendment), `First Time Adoption of International Financial Reporting
Standards' simplified the structure of IFRS 1 without making any technical
changes. No impact on the Group's or Company's Financial Statements.
* IFRS 3 (Revised), `Business Combinations' harmonised business combination
accounting with US GAAP. Not currently relevant to the Group or Company and
therefore has no impact on the Financial Statements.
* IFRS 5 (Amendment), `Non-current Assets Held for Sale and Discontinued
Operations' (as part of Improvements to IFRSs issued in 2009). Not currently
relevant to the Group or Company and therefore has no impact on the Financial
Statements.
* IAS 27 (Revised), `Consolidated and Separate Financial Statements' introduced
changes to the accounting for transactions with non-controlling interests in
consolidated financial statements. Adoption did not have any impact on the
Group or Company Financial Statements.
* IAS 32 (Amendment), `Financial Instruments: Presentation' - amendments
relating to classification of rights issues. No impact on the Group's or
Company's Financial Statements.
* IAS 39 (Amendment), `Eligible Hedged Items'. The amendment prohibits
designating inflation as a hedgeable component of a fixed debt, and in a hedge
of a one-sided risk with options, prohibits including time value in the hedged
risk. Not currently relevant to the Group or Company therefore no impact on the
Financial Statements.
* IFRIC 15, `Agreements for Construction of Real Estate'. Not relevant to the
Group or Company.
* IFRIC 16, `Hedges of a Net Investment in a Foreign Operation'. Provides
clarification to net investment hedging issues. Not currently relevant to the
Group or Company therefore no impact on the Financial Statements.
* IFRIC 17, `Distributions of Non Cash Assets to Owners' clarifies how an
entity should measure distributions of assets other than cash made as a
dividend to its owners. Not currently relevant to the Group or Company
therefore no impact on the Financial Statements.
* IFRIC 18 `Transfer of Assets from Customers'. Not relevant to the Group.
* Improvements to IFRS' issued in 2009 comprised numerous other minor
amendments to IFRS, resulting in accounting changes for presentation,
recognition or measurement purposes as well as terminology or editorial
amendments. These amendments had no impact on the Group or Company Financial
Statements.
(b) Standards, amendments and interpretations to existing standards that become
effective in future accounting periods and have not been adopted early by the
Group or Company:
* IAS 24 (revised), `Related Party Disclosures' (effective for financial
periods beginning on or after 1 January 2011, subject to EU endorsement).
Revises definition of related parties. Unlikely to have a significant effect.
* IFRS 9, `Financial Instruments' (effective for financial periods beginning on
or after 1 January 2013).
Replaces IAS 39. Simplifies accounting for financial assets, replacing the
current multiple measurement categories with a single principle-based approach
to classification. All financial assets to be measured at either amortised cost
or fair value. The Group and Company will apply IFRS 9 from 1 February 2013,
subject to endorsement by the EU.
(c) The following standards, amendments and interpretations to existing
standards become effective in future accounting periods, but are not relevant
for the Group's or Company's operations:
* IFRS 1 (amendment), `First-time Adoption of International Financial Reporting
Standards'.
* IFRIC 19, `Extinguishing Financial Liabilities with Equity Instruments'.
* IFRIC 14 (Amendment), `IAS 19 - The Limit on a Defined Benefit Asset, Minimum
Funding Requirements and their Interaction'.
2. Dividends and Other Income 2011 2010
GBP'000 GBP'000
Revenue:
Income from UK listed investments held at fair value
through profit or loss:
Franked dividends 1,930 1,896
Property income dividends 16 20
Stock dividends 26 -
Income from overseas listed investments:
Dividends 2,007 1,699
3,979 3,615
Other income:
Interest on deposits 21 35
Underwriting commission 49 48
4,049 3,698
Segmental Analysis
Income from investments analysed by country:
United Kingdom 1,972 1,916
United States 489 282
Switzerland 305 271
Australia 217 344
Singapore 191 188
Canada 166 114
Japan 153 133
Brazil 137 123
Germany 121 139
Bermuda 115 13
Hong Kong 85 68
Ireland 28 24
3,979 3,615
3. Gains on Investments held at Fair Value 2011 2010
GBP'000 GBP'000
Net gains on disposal of investments based on historic 3,357 1,433
cost
Fair value adjustments in earlier years (2,620) 2,977
Net gains based on carrying values at the previous 737 4,410
balance sheet date
Fair value adjustments arising during the year 23,459 22,230
24,196 26,640
Attributable to:
Listed investments 24,044 26,251
Unquoted investments 152 389
24,196 26,640
2011 2010
GBP'000 GBP'000
Segmental Analysis
The gains on investments were attributable to the
following geographical areas:
United Kingdom 8,526 8,959
North America 11,190 6,899
Continental Europe 340 1,823
Pacific Rim 2,833 6,810
Japan 470 415
Other markets 837 1,734
24,196 26,640
4. Management Fees 2011 2010
GBP'000 GBP'000
Management fees 823 684
823 684
Allocated:
Revenue 274 228
Capital 549 456
823 684
Management fees are paid at an annual rate of 0.6% on the first GBP200 million of
total assets, and 0.35% thereafter.
Management fees are allocated one-third to revenue and two-thirds to capital.
5. Other Expenses 2011 2010
GBP'000 GBP'000
Revenue:
Administration of savings schemes 23 19
AIC fees and charges 13 13
Auditors' remuneration - for audit of the annual 24 23
accounts
- other services relating to taxation - 35
Bank charges and custody fees 22 22
Corporate broker fee 30 29
Directors' fees 113 102
Directors' liability insurance 13 13
Legal and professional fees 4 10
Loan non-utilisation fee 23 20
Printing and postage 13 19
Registrars' fees and expenses 41 41
Secretarial fees 80 -
Stock Exchange and FSA fees 11 15
Sundry expenses 30 37
440 398
Details of fees paid to the Directors are provided in the Directors'
Remuneration Report on pages 36 and 37.
Capital:
Purchase transaction costs on non-current asset 19 72
investments
Sales transaction costs on non-current asset 13 18
investments*
32 90
*In the Statement of Comprehensive Income this is included in gains and losses
on investments held at fair value.
6. Interest Payable 2011 2010
GBP'000 GBP'000
Interest on bank overdraft - 2
- 2
7. Dividends on Preference Stock 2011 2010
GBP'000 GBP'000
Non-equity share dividends:
Half-yearly dividend paid of 1.875p per stock unit 19 19
Half-yearly dividend payable of 1.875p per stock unit 19 19
Total dividends of 3.75p per stock unit 38 38
Allocated:
Revenue 13 38
Capital 25 -
38 38
8. Taxation 2011 2010
GBP'000 GBP'000
Analysis of tax charge for the year:
Overseas taxation 188 159
Total tax for the year 188 159
Allocated:
Tax charge - revenue 175 135
Tax charge - capital 13 24
188 159
Factors affecting tax charge for the year:
The tax assessed for the year is lower than the standard rate of 28% (2010:
28%) of corporation tax in the UK for a medium or large company. The
differences are explained below:
2011 2010
GBP'000 GBP'000
Profit/(loss) before tax 27,023 28,937
.
Tax for the period at the UK corporation tax rate of 7,566 8,102
28% (2010:28%)
Effects of:
Income not subject to taxation (1,045) (762)
Gains on investments that are not taxable (6,780) (7,361)
Expenses and finance costs not deductible for tax 22 36
purposes
Unrelieved current year expenses and deficits 247 12
Overseas tax suffered 188 159
Tax relief on overseas tax suffered (10) (27)
Tax charge for year 188 159
.
There is an unrecognised deferred tax asset
comprising:
Unrelieved management expenses 2,445 2,291
Non-trading loan relationship deficits 5,060 5,247
7,505 7,538
It is unlikely that the Company will generate sufficient taxable profits in the
future to utilise these expenses and deficits and therefore no deferred tax
asset has been recognised.
Due to the Company's tax status as an investment trust and the intention to
continue meeting the conditions required to obtain approval of such status in
the foreseeable future, the Company has not provided deferred tax on any
capital gains arising on the revaluation or disposal of investments.
9. Dividends on the Ordinary Shares 2011 2010
GBP'000 GBP'000
Amounts recognised in these Accounts as distributions
to equity holders in the year:
Second interim dividend of prior year of 5.10p per 2,081 1,843
share paid 1 April 2010 on 40,807,163 shares (3 April
2009: 4.60p on 40,067,163 shares)
Special dividend of 4.00p per share paid 3 April 2009 - 1,603
on 40,067,163 shares in connection with VAT recovery
First interim dividend of 2.40p per share paid on 29 994 979
October 2010 on 40,807,163 (30 October 2009: 2.40p on
41,316,163 shares)
Total dividends of 7.50p (11.00p) per share 3,075 4,425
.
The total dividend payable in respect of the financial
year, which is used to assess compliance with the
requirements of Section 1159 Corporation Tax Act 2010
is set out below:
First interim dividend of 2.40p per share paid 29 994 979
October 2010 on 41,407,163 shares (30 October 2009:
2.40p on 40,807,163 shares)
Second interim dividend of 5.60p per share payable 1 2,285 2,081
April 2011 on 40,805,173 shares (1 April 2010: 5.10p
on 40,807,163 shares)
Total dividends of 8.00p (7.50p) per share 3,279 3,060
The second interim dividend for the year to 31 January 2011, which is in lieu
of a final dividend, has not been included as a liability in these Accounts.
10. Earnings per Ordinary Share
(i) The Earnings per Ordinary share of 65.50p (2010: 71.11p) is calculated on
the earnings to equity shareholders of GBP26,835,000 (2010: GBP28,778,000) and
40,971,721 (2010: 40,469,355) Ordinary shares, being the weighted average
number of shares in issue during the year.
(ii) The Revenue Return of 7.87p (2010: 7.51p) per Ordinary share is calculated
on the revenue return to equity shareholders of GBP3,224,000 (2010: GBP3,039,000)
and the weighted average number of shares in issue as per (i) above.
(iii)The Capital Return of 57.63p (2010: 63.60p) per Ordinary share is
calculated on the capital return to equity shareholders of GBP23,611,000 (2010: GBP
25,739,000) and the weighted average number of shares in issue as per (i)
above.
11. Non-Current Investments held at Fair Value 2011 2010
GBP'000 GBP'000
(i) Movement of investments:
Book-cost brought forward 99,851 90,250
Acquisitions at cost 8,720 25,089
108,571 115,339
Proceeds of disposals (11,860) (16,921)
Net profit realised on disposals 3,357 1,433
Disposals at cost (8,503) (15,488)
Closing book-cost 100,068 99,851
Fair value adjustment 42,070 21,231
Closing valuation of investments - Group and Company 142,138 121,082
(ii) Analysis of investments at fair value:
Listed:
United Kingdom 59,136 50,973
Overseas 81,749 68,763
140,885 119,736
Unquoted:
United Kingdom 381 318
Overseas 872 1,028
1,253 1,346
142,138 121,082
(iii) Classification under fair value hierarchy:
Total Level 1 Level 2 Level 3
Group and Company GBP'000 GBP'000 GBP'000 GBP'000
2011: Equity investments 142,138 140,885 - 1,253
2010: Equity investments 121,082 119,736 - 1,346
Categorisation within the hierarchy has been determined on the basis of the
lowest level of input that is significant to the fair value measurement of the
relevant asset as follows:
Level 1 - valued using quoted prices in active markets for identical assets.
Level 2 - valued by reference to valuation techniques using observable inputs
other than quoted prices included within Level 1.
Level 3 - valued by reference to valuation techniques using inputs that are not
based on observable market data.
The valuation techniques used by the company are explained in the accounting
policies note on page 48.
There have been no transfers during the year between any of the levels. A
reconciliation of fair value measurements in Level 3 is set out below.
(iv) Level 3 investments at fair value through profit 2011 2010
or loss
GBP'000 GBP'000
Opening balance 1,346 1,635
Acquisitions - -
Disposal proceeds (245) (678)
Transfer out of Level 3 - -
Total gains/(losses) included in the Income Statement:
- on assets sold (717) 239
- on assets held at the year-end 869 150
Closing balance 1,253 1,346
(v) Investments analysed by country: 2011 2010
GBP'000 GBP'000
United Kingdom 59,517 51,291
United States 34,353 27,217
Switzerland 10,075 9,716
Canada 9,274 6,542
Japan 6,772 6,551
Singapore 5,149 4,487
Hong Kong and China 4,973 3,107
Australia 4,819 4,098
4,767 4,387
Germany 1,806 2,227
Other 633 1,459
142,138 121,082
The Group's listed investments were registered in the name of nominees of, and
held to the order of, The Bank of New York Mellon, as custodians to the Company
during the year. HSBC Bank plc was appointed as custodian subsequent to the
year-end.
There were outstanding commitments in respect of partly-paid investments
amounting to GBP369,000 (2010: GBP369,000) at the year-end.
12. Significant Interests
At 31 January 2011 the Company had the following interests in unquoted
companies amounting to 3% or more of voting rights:
Valuation Cost %
Company GBP'000 GBP'000 of voting
Motion Analysis 535 346 9.9
Powerstax plc 371 1,517 13.7
13. Investment in Subsidiary
The Company owns all the equity share capital of Engandscot Limited, an
unquoted share dealing company registered in England.
The subsidiary has been stated at its fair value, being its net asset value at
31 January 2011.
2011 2010
Company Company
GBP'000 GBP'000
Book value brought forward 757 915
Profit of subsidiary for the year 77 142
Distributions from subsidiary - (300)
834 757
During the year a dividend of GBPnil (2010: GBP300,000) was paid to Gartmore Global
Trust PLC.
14. Other Receivables 2011 2011 2010 2010
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Amounts receivable within one
year:
Prepaid expenses and other 22 22 16 16
debtors
Accrued income 180 180 192 192
Amount due from subsidiary - - - 6
202 202 208 214
The carrying amounts of other receivables approximate their fair value. None of
the other receivables are past due or impaired.
15. Cash and Cash Equivalents 2011 2011 2010 2010
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Cash at bank 5,947 5,415 3,280 2,834
Short-term deposits 2,840 2,840 2,419 2,419
8,787 8,255 5,699 5,253
The effective interest rate on short-term deposits for the year to 31 January
2011 was 0.8% (2010: 0.5%).
16. Other Payables 2011 2011 2010 2010
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Amounts payable within one
year:
Accrued expenses 240 240 223 223
Amount due to subsidiary - 302 - -
undertaking
Preference dividend payable 19 19 19 19
259 561 242 242
The carrying amounts of other payables approximate their fair value.
17. Non-Current Liabilities (Group and Company) 2011 2010
GBP'000 GBP'000
GBP1,000,000 3.75% Cumulative Preference stock of GBP1 1,000 1,000
1,000 1,000
The fair value of the Cumulative Preference Stock at 31 January 2011 was GBP
685,000 (2010: GBP650,000).
Cumulative Preference stockholders are entitled to receive a fixed cumulative
dividend out of distributable revenue in priority to Ordinary shareholders.
Dividends on the Cumulative Preference stock are payable half-yearly on 31
March and 30 September.
The Cumulative Preference stock is redeemable at par, but has no fixed
redemption date.
Cumulative Preference stockholders have the right to attend and vote at any
General Meeting of the Company and are entitled to one vote for every GBP10 of
nominal capital held.
18. Called-up Share Capital
Shares GBP'000
Ordinary shares of 25p each, allotted, called-up,
issued and fully paid with full voting rights
At 31 January 2010 40,807,163 10,202
Shares issued in the year 750,000 187
Shares repurchased into treasury (751,990) (188)
At 31 January 2011 40,805,173 10,201
Shares GBP'000
Ordinary shares of 25p each held in treasury with no
voting rights
At 31 January 2010 - -
Shares repurchased into treasury 751,990 188
At 31 January 2011 751,990 188
Shares GBP'000
Total Ordinary shares in issue (including shares held
in treasury)
At 31 January 2010 40,807,163 10,202
Shares issued in the year 750,000 187
At 31 January 2011 41,557,163 10,389
During the year to 31 January 2011, the Company issued 750,000 (2010: 740,000)
Ordinary shares for GBP2,466,000 (2010: GBP2,065,000) and repurchased 751,990
(2010: nil) Ordinary shares, to be held in treasury, at a cost of GBP2,517,000
(2010: GBPnil). The Ordinary shares held in treasury have no voting rights and
are not entitled to dividends.
In the event of a winding-up, the Ordinary shareholders are entitled to all
surplus assets of the Company after payments, including any arrears of
dividend, due to holders of the Cumulative Preference stock.
Ordinary shareholders have the right to attend and vote at any General Meeting
of the Company and are entitled to one vote for each GBP2 of nominal capital
held.
19. Share Premium Account 2011 2010
GBP'000 GBP'000
Balance brought forward 11,131 9,251
Arising on the issue of 750,000 (2010: 740,000) 2,279 1,880
Ordinary shares
Balance at 31 January 13,410 11,131
20. Capital Redemption Reserve 2011 2010
GBP'000 GBP'000
Balance brought forward 33,966 33,966
Balance at 31 January 33,966 33,966
The Capital Redemption Reserve holds the amount by which the nominal value of
the Company's issued share capital is diminished when shares are redeemed or
purchased out of the Company's profits.
21. Retained Earnings Capital Revenue Retained
reserve reserve earnings
GBP'000 GBP'000 GBP'000
Group:
At 31 January 2009 32,731 13,917 46,648
Profit for the year to 31 January 2010 25,739 3,039 28,778
Equity dividends paid - (4,425) (4,425)
At 31 January 2010 58,470 12,531 71,001
Profit for the year to 31 January 2011 23,611 3,224 26,835
Equity dividends paid - (3,075) (3,075)
Shares repurchased and held in treasury (2,517) - (2,517)
At 31 January 2011 79,564 12,680 92,244
Company:
At 31 January 2009 33,636 13,012 46,648
Profit for the year to 31 January 2010 25,581* 3,197 28,778
Equity dividends paid - (4,425) (4,425)
At 31 January 2010 59,217 11,784 71,001
Profit for the year to 31 January 2011 23,688* 3,147 26,835
Equity dividends paid - (3,075) (3,075)
Shares repurchased and held in treasury (2,517) - (2,517)
At 31 January 2011 80,388 11,856 92,244
* Includes an increase in the valuation of the subsidiary of GBP77,000 (2010: GBP
158,000 decrease).
Under the terms of the Company's Articles of Association, sums standing to the
credit of capital reserves are available for distribution only by way of
redemption or purchase of any issue of the Company's own shares. The Company
may only distribute accumulated `realised' profits.
In accordance with guidance issued by The Institute of Chartered Accountants in
England and Wales (TECH 01/08) realised capital reserves comprise gains and
losses on realisation of investments together with changes in fair value of
investments which are considered to be readily convertible into cash without
accepting adverse terms.
At the year-end all of the Company's listed investments were considered to be
sufficiently liquid to be regarded as readily convertible into cash, however
the unlisted investments were not.
Accordingly, the split of capital reserve between realised and unrealised in
order to determine distributable realised profits is as follows:
2011 2011 2010 2010
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Capital reserve -
distributable
In respect of investments sold 37,519 38,343 37,239 37,986
In respect of listed 43,837 43,013 23,892 23,145
investments held
Capital reserve - (1,792) (968) (2,661) (1,914)
non-distributable
79,564 80,388 58,470 59,217
22. Net Asset Value per Share
The net asset value per Ordinary share is calculated on net assets of GBP
150,009,000 (2010: GBP126,300,000) and 40,805,173 (2010: 40,807,163) Ordinary
shares in issue at the year-end.
23. Notes to the Cash Flow Statement
Cash and cash equivalents comprise cash at bank and other short-term highly
liquid investments with a maturity of three months or less.
Purchases and sales of investments are considered to be operating activities of
the Group, given its purpose, rather than investing activities. However, the
cash flows associated with these activities are presented below:
2011 2010
GBP'000 GBP'000
Proceeds on disposal of fair value through profit or 12,177 16,699
loss investments
Purchases of fair value through profit or loss (8,720) (26,061)
investments
24. Related Party Transactions
Gartmore Investment Limited (GIL) is the Manager and Company Secretary of the
Company. As such, it is regarded as a related party. During the year, total
management fees of GBP823,000 (2010: GBP684,000) and secretarial fees of GBP80,000
(2010: GBPnil), were payable to GIL for the provision of services to the Company.
The basis of management fees charged is disclosed in the Report of the
Directors. At the Balance Sheet date, management and secretarial fees totalling
GBP150,000 (2010: GBP127,000) and GBP16,000 (2010: GBPnil) respectively, were accrued.
The Company has also financed and been financed by the trading activity of its
subsidiary, Engandscot Limited, during the years to 31 January 2011 and 2010.
During the year to 31 January 2011 the Company provided group relief from tax
to the subsidiary of GBP78,000 (2010: GBP150,000). At 31 January 2011, there was an
outstanding balance of GBP302,000 due to the subsidiary (2010: due from the
subsidiary GBP6,000).
The compensation payable to key management personnel comprised GBP113,000 (2010:
GBP101,500) paid by the Company to the Directors in respect of services to the
Company as shown in the Directors' Remuneration Report on page 37.
25. Operating Segments
The Directors consider that the Group has two operating segments, being the
parent Company, Gartmore Global Trust PLC, which invests in shares and
securities for capital appreciation in accordance with the Company's published
investment objective6 , and its wholly owned subsidiary, Engandscot Limited,
which trades in securities to enhance Group returns. Discrete financial
information for these sectors is reviewed regularly by the Manager and the
Board who allocate resources and assess performance.
2011 2010
Segment financial information: GBP'000 GBP'000
External revenues:
Parent Company 28,266 29,989
Subsidiary 77 142
Total Income 28,343 30,131
Net Profit/(Loss)
Parent Company 26,758 28,636
Subsidiary 77 142
Total Comprehensive Income 26,835 28,778
Total Assets:
Parent Company 150,434 126,779
Subsidiary 834 763
Group Total Assets 151,268 127,542
26. Financial Instruments: Risk Management
The Directors manage investment risk principally through setting an investment
policy (that is approved by shareholders) which incorporates risk parameters
(see page 2), by contracting management of the Group's investments to an
investment manager under a contract which incorporates appropriate duties and
restrictions and by monitoring performance in relation to these. The Board's
relationship with the investment manager is discussed on page 31 of this
Report. Internal control and the Board's approach to risk is discussed on pages
33 to 35. There have been no material changes to the management or nature of
the Group's investment risks from the prior year.
The main risks arising from the Group's pursuit of its investment objective
(see page 2) are market risk, liquidity risk and credit risk. The effects of
these can also be increased by gearing.
Market risk
Market risk comprises three types of risk: market price risk, currency risk and
interest rate risk.
Market price risk:
The Company is an investment company and as such its performance is dependent
on the valuation of its investments. Consequently market price risk is the most
significant risk that the Group is exposed to. The fair value of the
investments in the portfolio is normally their bidmarket price. Market price of
investee companies' shares is subject to their performance, supply and demand
for the shares and investor sentiment regarding the companies, their industry
sectors or countries in which they operate. Although the Company has a focused
portfolio, which tends to increase the risk that performance will be affected
by a price change in an individual stock or group of stocks, the Board seeks to
limit risk relative to the Company's benchmark by setting the Manager a target
tracking error of not more than 5%. Applying the target tracking error maximum
of 5% means that, in two out of every three years, a 10% movement in the
benchmark index could be expected to generate an increase or decrease in the
portfolio value of up to 15%. In the year the tracking error was 2.9% (2010:
4.4%). Changes in the value of the portfolio will also have an effect on the
revenue account since the management fee is calculated on the value of the
assets under management. Higher levels of market price risk may be concentrated
in particular market sectors or geographical areas. Exposures of the portfolio
to different market sectors and geographical areas are shown on pages 16 and 18
and, graphically, on page 22. The Manager's Review on page 11 also includes a
discussion on the concentration of risk in particular stock positions relative
to the benchmark index.
The Company's trading subsidiary, Engandscot Limited, has similar risks in
respect of its trading portfolio which is also valued at bid-market prices.
Engandscot seeks to make returns from short-term positions and the exposure to
market price risk is limited by this short-term nature of the holdings and
because the trading subsidiary portfolio is limited to 15% of Group total
assets with aggregate exposure to any sector limited by the Group's investment
policy to 5% of Group total assets. The maximum value of Engandscot's portfolio
during the year was GBP924,000 (2010: GBP530,000).
At the year-end the Group's assets subject to other price risk were as follows:
2011 2011 2010 2010
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Non-current asset investments 142,138 142,138 121,082 121,082
at fair value through profit
or loss
142,138 142,138 121,082 121,082
To illustrate the Group's sensitivity to market price risk using the Group's
year-end positions, an overall movement in the price of investments equal to
the maximum target tracking error of 5% would cause a corresponding change in
the net asset value of approximately GBP7.1 million (2010: GBP6.1 million) or 4.7%
(2010: 4.8%). The revenue return would not be materially affected. The effect
on capital return would be materially the same as the effect on net assets.
Currency risk:
A significant proportion of the Group's assets are denominated in currencies
other than sterling so the Group's total return and net asset value can be
affected by currency fluctuations. No hedging of the currency exposure is
currently undertaken. Revenue received in currencies other than sterling is
converted into sterling on, or shortly after, the date of receipt. Whilst the
Board and the Manager monitor geographical and currency exposure it is not a
key determinant of investment decisions. At the year-end approximately 56%
(2010: 64%) of the Group's total assets were denominated in currencies other
than sterling, the largest proportion being US dollars at 27% (2010: 36%) of
Group total assets.
The table below shows, by currency, the split of the Group's non-sterling
monetary assets and investments that are priced in currencies other than
sterling.
2011 2011 2010 2010
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Monetary Assets
Cash and short-term
receivables
US dollars 1,939 1,939 1,673 1,595
Euros 80 80 125 125
Swiss francs 65 65 102 102
Japanese yen 35 35 343 26
Singapore dollars - - 47 47
Non-Current Asset investments
held at fair value
US dollars 39,120 39,120 43,721 43,721
Swiss francs 10,076 10,076 9,716 9,716
Canadian dollars 9,274 9,274 3,688 3,688
Australian dollars 7,358 7,358 4,098 4,098
Japanese yen 6,772 6,772 6,551 6,551
Hong Kong dollars 4,973 4,973 3,107 3,107
Singapore dollars 2,609 2,609 4,486 4,486
Euros 2,439 2,439 3,686 3,686
Total 84,740 84,740 81,343 80,948
During the financial year sterling depreciated by 0.1%, 10.9%, 6.2%, 10.9% and
9.7% against the US dollar, Swiss franc, Canadian dollar, Australian dollar and
Japanese yen, respectively (2010: US dollar appreciated by 11.2%, Swiss franc
by 0.9%, Canadian dollar depreciated by 4.5%, Australian dollar by 20.5% and
Japanese yen appreciated by 12.2%).
It is not possible to forecast how much exchange rates might move in the next
year, but based on the movements in the last two years in the five currencies
referenced above to which the Company is most exposed, it appears reasonably
possible that rates could change by 10%. To illustrate the Group's sensitivity
to currency fluctuations using the Group's year-end positions, if sterling were
to appreciate 10% compared with all of the other currencies held the value of
Group net assets would reduce by approximately 5.6% (2010: 6.4%) or GBP8.4
million (2010: GBP8.1 million) and revenue return for the forthcoming financial
year would reduce by approximately GBP189,000 (2010: GBP152,000). Applying the same
10% change in rate to each of the exposures listed above would individually
affect Group net assets and revenue return as follows (the effect on capital
return would be materially the same as the effect on net assets):
2011 2011 2010 2010
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
US dollars 4,106 78 4,539 56
Swiss francs 1,014 30 982 26
Japanese yen 681 15 689 13
Singapore dollars 261 23 453 18
Australian dollars 736 14 410 11
Euros 252 13 381 20
Canadian dollars 927 6 369 2
Hong Kong dollars 497 10 311 6
It should be noted that a number of investee companies derive a proportion of
their profits from markets subject to currencies other than that in which their
shares are denominated so changes in the relevant currency exchange rates
relative to each other are also likely to have an indirect impact. Also, the
above illustration is based on exposures at the year-end. Exposures may be
subject to change during the year as a result of investment decisions.
Interest rate risk
The Group has fixed coupon 3.75% cumulative preference stock in issue and can
draw on flexible loan facilities, the interest rates for which are set at the
time of drawing. Since cash positions are constantly monitored and drawings on
the loan facilities would normally be for short rolling periods the risk of
exposure to excessive interest costs is limited. There have been no drawings on
the flexible loan facilities to the date of this report.
No hedging of the interest rates paid on the Group's financial liabilities is
undertaken.
The Group also earns interest on its cash and short-term deposits. Deposits are
normally placed on a one week rolling basis or are on demand.
At the year-end financial assets subject to interest rate risk were as follows:
(There were no liabilities subject to interest rate risk)
2011 2011 2010 2010
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Financial Assets:
Cash balances 5,947 5,415 3,280 2,834
Short-term deposits 2,840 2,840 2,419 2,419
The average rate of interest earned on short-term deposits during the year was
0.8% (2010: 0.5%). If the Company were to use its flexible loan facilities it
would expect to pay interest on the drawings in the region of 1.5% per annum,
based on rates ruling at the balance sheet date (2010: 1.5%).
Whilst, based on the above year-end balances a change of 0.5% p.a. in the rates
of interest available for deposits would affect Group revenue by GBP44,000 per
annum (2010: GBP28,000), the year-end amounts may not be representative of the
exposure to interest rates in the year ahead since the level of borrowings and/
or cash held during the year will be affected by the strategy being followed in
response to the Board's and Manager's perception of market prospects and the
investment opportunities available at any particular time. The cost of
borrowing compared with the anticipated returns from investment is considered
as part of the investment management process.
Credit risk
Credit risk is the exposure to loss from the failure of a counterparty to
deliver securities or cash for acquisitions or disposals of investments or to
repay deposits. The Company manages credit risk by using brokers from a
database of approved brokers who have undergone rigorous due diligence tests by
the Manager's Risk Management Team and by dealing through Gartmore Investment
Limited with banks approved by the Financial Services Authority. The Board has
set a limit of GBP5 million on the amount that can be placed on deposit with any
one bank. During the year all deposits were placed with banks that had ratings
of A+ or higher.
The maximum exposure to credit risk at 31 January 2011 was GBP9,130,000 (2010: GBP
6,460,000), comprising:
2011 2011 2010 2010
Group Company Group Company
Financial Assets at Amortised GBP'000 GBP'000 GBP'000 GBP'000
Cost:
Balances due from brokers - - 317 -
Prepaid expenses and other 22 22 16 22
debtors
Accrued income 180 180 192 192
Taxation recoverable 141 141 236 236
Cash on deposit 2,840 2,840 2,419 2,419
Cash at bank 5,947 5,415 3,280 2,834
All of the above financial assets are current, their fair values are considered
to be the same as the values shown and the likelihood of a material credit
default is considered to be low.
Liquidity risk
Liquidity risk is the possibility of failure of the Group to realise sufficient
assets to meet its liabilities as and when they fall due. The Group minimises
this risk by mainly investing in securities of large and medium sized companies
listed on major equity markets which are readily realisable. The Group's cash
is held primarily in sterling, almost entirely on interest bearing current
accounts or short-term deposits in the money market. Deposits are rarely fixed
for terms in excess of one month. At the year-end approximately 6% of the
Company's net assets comprised cash and deposits (2010: 4%).
In addition to using shareholders' funds to finance investments the Group can
also invest funds available from the fixed coupon 3.75% cumulative preference
stock and from drawings on its loan facilities (gearing). The Group's has
short-term borrowing facilities of GBP20,000,000 that can be drawn to meet
liquidity requirements arising either from operations or investment strategy.
Cash requirements are monitored constantly. There have been no drawings on the
flexible loan facilities to date.
At 31 January financial liabilities comprised:
2011 2011 2010 2010
Group Company Group Company
GBP'000 GBP'000 GBP'000 GBP'000
Due within 1 month:
Accrued expenses 240 240 223 223
Due after 1 month and within
one year:
Preference dividend payable 19 19 19 19
Due after 1 year:
3.75% Cumulative preference 1,000 1,000 1,000 1,000
stock
The above liabilities due within 1 year are stated at fair value. The fair
values of the liabilities due after 1 year, which are their market values, are
shown in Note 17.
Gearing
Market risks can be amplified by gearing. As discussed above, in addition to
using shareholders' funds to finance investments the Group can also invest
funds available from the 3.75% cumulative preference stock and from drawings on
its loan facilities. See the liquidity risk section above and the Business
Review on page 22 for further information. Such gearing will exaggerate the
effect on net asset value of a change in the value of the portfolio. If the
Group's borrowing facilities were fully extended the gearing would amount to
14.0% of net assets and in those circumstances a change of 10% in the value of
the portfolio would be expected to change the net asset value by approximately
11%.
As noted above in the interest rate risk section, the level of borrowings and/
or cash held during the year will be affected by the strategy being followed in
response to the Board's and Manager's perception of market prospects and the
investment opportunities available at any
particular time.
There was no effective gearing at the year-end, since the Company held net
uninvested cash balances (2010: nil).
27. Capital
The Company's capital, or equity, is represented by its net assets which are
managed to achieve the Group's investment objective set out on page 2.
The main risks to the Company's investments are shown in Note 26. Note 26 also
explains that the company is able to gear and that gearing will amplify the
effect on equity of changes in the value of the investment portfolio.
The Board can also manage the capital structure directly since it has taken the
powers, which it is seeking to renew, to issue and buy-back shares and it also
determines dividend payments.
The Company is subject to externally imposed capital requirements with respect
to the obligation and ability to pay dividends by section 1159 Corporation Tax
Act 2010 and by the Companies Act 2006, respectively, and with respect to the
availability of borrowing facilities, by the covenant imposed by its custodian
(see page 20).
As described on page 22 the Board operates an active share buy-back policy and
regularly monitors, and has complied with, the externally imposed capital
requirements. This is unchanged from the prior year.
Total Equity at 31 January 2011, the composition of which is shown on the
Balance Sheet on page 43, was GBP150,009,000 (2010: GBP126,300,000).
.
Gartmore Investment Limited
Corporate Company Secretary
12 April 2011
END
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