TIDMSGEM
From: ScotGems plc
LEI: 549300GQHCPU9P1NYM13
Date: 4 August 2021
Results for the six months ended 30 June 2021
The Directors of ScotGems plc ("the Company") are pleased to announce the
Company's interim results for the six months ended 30 June 2021.
* The Company's objective is to provide long-term capital growth by investing
in a diversified portfolio of small cap companies that are incorporated or
listed in emerging markets or listed on developed market exchanges where a
majority of their activities take place in emerging markets.
* The Company was 96.6% invested in equities at 30 June 2021.
* During the interim period the net asset value rose by 9.4% to 93.9p per
share while the share price rose by 6.2% to 77.0p.
Top Ten Investments as at 30 June 2021
S/holders'
Funds
Company Country Industry %
Quiñenco Chile Industrial Conglomerate 5.9
Tata Consumer Products India Food Products 4.3
Integrated Diagnostics United Kingdom Healthcare Providers & 4.1
Services
Reunert South Africa Industrial Conglomerate 4.1
Haw Par Singapore Holding Company 4.0
Bank OCBC Nisp Indonesia Banks 4.0
Philippine Seven Philippines Foods & Staples 3.9
Retailing
Youngone Holdings Korea Textiles, Apparel & 3.8
Luxury Goods
Fragua Mexico Foods & Staples 3.7
Retailing
Grupo Herdez Mexico Food Products 3.4
Top Ten Investments 41.2
Chairman's Statement
During the six months to 30 June 2021, the net asset value ("NAV") of your
Company rose by 9.4% to 93.9p per share while the share price rose by 6.2% to
77.0p. This compares to rises in the Company's comparator indices: the MSCI
Emerging Markets Small Cap Index, the MSCI Emerging Markets ex Asia Index and
the MSCI Emerging Markets Index of 14.0%, 10.1% and 5.4% respectively. These
indices are only for comparison purposes and our portfolio is not managed by
reference to any particular Index, but according to principles which the
Investment Manager has set out in the past and which you will be able to read
more about in the report which follows.
I intend to review our performance since inception in the Annual Report at the
end of this year, but the positive absolute return achieved over the last year
is encouraging. Your Investment Manager's style and principles mean that in
periods when companies without earnings, and whose current valuation is based
on the promise of very significant future growth, our portfolio will
underperform the comparator indices. Our Investment Manager has provided a
comprehensive report with these accounts including a detailed look at the
portfolio which I hope Shareholders will find interesting and useful. They
include a contribution analysis, detail on companies bought and sold, as well
as their own perspective on the events influencing valuations in the Small Cap
sector in Emerging Markets.
During the period under review the Company's discount widened from 15.6% to
18.0%. Shareholders will be aware that it is not the Board's policy to buy back
shares, for reasons that I've set out previously. The Board and Investment
Manager continue to be aligned with the body of shareholders through their own
investment in the Company. In the first six months of the year the Investment
Management Team have increased their shareholding by 489,201 shares, and now
own 2,176,982 Ordinary shares. This brings the total holding by employees of
Stewart Investors to 8,463,092 Ordinary shares (this includes the shareholding
by the Stewart Investors Employee Benefit Trust which remains unchanged at
5,000,000 Ordinary shares). The Directors shareholding of 4,790,096 Ordinary
shares (including persons closely associated with them) remained unchanged
during the period. The combined holdings of the Board and Investment Manager
now represent 24.8% of the issued Ordinary share capital of the Company.
At the AGM held on 6 May 2021, over 90% of votes were cast in favour of all the
resolutions. Your Company relies both on our Investment Manager and our Company
Secretary and Administrator. We are grateful to the people of both
organisations for the way that they adapted their operations to work in a
virtual way and have been able to maintain their usual high standards of
service. During the period, PATAC Limited changed its name to Juniper Partners
Limited and I'm pleased to say there has been a continuity of personnel as well
as the high level of service we've been accustomed to receiving.
Investment Manager's Report
In last year's Interim Report we discussed the gulf in valuation between Global
Emerging Markets ("GEM") companies wearing the label "value" and those wearing
the label "growth". One year later, there has been a modest narrowing in the
large disconnect between the "real world" (often analogous we feel to the "jam
today" of stocks labelled value) and the "world of finance" (analogous with the
"jam tomorrow" of often more speculative stocks labelled or even rewarded by
financial types with the label of growth). One possible reason for the modest
change are concerns around inflation, interest rates, and so forth - discussed
below. But, more for governance-obsessed types such as ourselves, what has been
more interesting are signs of increasing corporate misconduct and decreasing
predictability of government behaviour in GEM. In order for profits in 2040 or
2050 to be worth anything today, you have to believe that company management is
on your side, and that the relevant government does not become your enemy.
Plucking discount rates out of the air is the easy bit in GEM.
On the topic of corporate misconduct, 51 Hong Kong listed companies failed to
meet the exchange's deadline at the end of March for publishing audited 2020
financials. At the time of writing, a number of these companies remain
suspended. The first of these to discuss is GCL Poly - notable because it was
the largest constituent of the MSCI Emerging Market Small Cap Index for most of
the reporting period. It is a supplier of polysilicon to the solar power
industry in China. This description ticks a number of popular boxes amongst
investors including interest in technology, renewables and 'China'. The
company's auditor has resigned over a dispute related to the commercial
rationale for a payment to a contractor. The company is also going through a
restructure following a default on its debt. Those who study financial history
make the observation that the frequency of fraud increases in boom times, so
the company's place at the heart of three popular themes appears to us as more
than just a coincidence. At the point of its suspension, the market
capitalisation of the company was approximately $6bn - size and scrutiny do not
always correlate.
A second interesting example comes from state owned Huarong Asset Management
and Chinese tech behemoth, Alibaba. Huarong was set up by the Chinese
government in 1999, following the Asian Financial Crisis, in order to help
manage bad debt, however recent events suggest that it may now have bad debt of
its own. For an example of the complex pressures on the business and the
government's innovative ways of bailing it out, Huarong was recently "gifted" a
part of Ant Group (a financial business incubated by Alibaba which in turn had
by some interpretations seized it from other shareholders). This was part of a
"rectification" deal between Ant Group and regulators, designed to tackle
systemic financial risks. Huarong is another company which has been unable to
file financial statements and whose shares remain suspended. The company
insists that it can make the payments on its debt and says that the delayed
accounts will allow it to complete a mysterious "transaction". Its former chair
Lai Xiaomin was executed for corruption in January. Huarong and its issues
aside, we have strong views on the governance arrangements at Alibaba and the
risks its monopoly characteristics present. Suffice to say that government
interest in the business and the "retirement" of its founder ought not to have
surprised any investor. Shareholders may wonder what connects behemoths such as
Alibaba with our universe of smaller companies. Firstly - the scraps from the
table of the huge companies feed a huge ecosystem of smaller businesses - fewer
scraps, lower growth. Secondly, the behemoths are keen investors in the smaller
companies - this equity investment has been a lifeline for often loss-making
capital-hungry smaller companies. If this tap turns off, some small and medium
sized companies will find life very tricky; others whose share prices have been
bid up by the general expectation of equity investment sloshing around, may
disappoint their shareholders.
As for inflation and its possible effects - we have little to add to our view
that after twenty years of encouraging asset inflation, the likelihood that
central banks voluntarily change their ways seems remote. Even inflation in the
world of prices and wages has been termed "transitory" - a decision by the
powers that be that erring on the side of yet more cheap money is preferable to
conscientiously deflating bubbles. As such, valuations remain extremely
stretched.
As a final not especially cheerful point, we also note how weak many GEM
sovereign balance sheets are. Two decades of easy money followed by a pandemic
is a potent combination. Ultimately this has a cost, often involving weaker GEM
currencies. We have always enjoyed owning hard currency businesses including
exporters and feel that they have an important part to play in preserving
capital over the coming years.
Portfolio
The portfolio consists of shares in 39 companies. The ten largest names
represent 41.2% of the portfolio at the end of June. This is a small reduction
from 42.7% at the end of 2020 and 46.4% at the end of 2019 when a shareholder
resolution was passed to allow a slightly longer list of companies. Cash
started the period at 3.3% and ended at 2.6%.
The average market cap (weighted by position size) is $1.33 billion. Our
process of looking back at the choices made by people behind each business can
make very small listed companies hard to analyse when this track record may be
too short, but we were pleased to add the Indonesian healthcare company Prodia
Widyahusada to the portfolio. It is discussed in detail later but is an example
of a high quality small cap at the smaller end of the portfolio's market cap
range. It could only be owned responsibly in a closed ended company - a
strength of the investment trust structure we are keen to harness.
Additions
During the period we bought shares in four new companies. Below is a list shown
in descending order of size in the portfolio at the end of the period.
Anadolu Efes is a Turkish listed brewer. It is controlled by the founding
Özilhan and Yaz?c? families, and the global brewer ABI has a stake inherited
from its merger with SAB Miller. We like the combination of committed family
and multinational oversight. In 2018, ABI and Efes pooled their Russian beer
businesses into a 50/50 JV which is the most valuable part of Efes today - it
is the joint market leader with approximately 30% market share. Efes also owns
a stake in a Coke bottler operating across several CIS states and in Pakistan
where it is growing rapidly. Although Turkish listed, sales of beer and Coke in
Turkey are barely a quarter of the overall value of the business. Over the last
five years, the company has rapidly repaid debt meaning it offers a high single
digit dividend yield earned from a steadily growing business.
Bladex (full name Banco Latinoamericano de Exportaciones) is a bank which
facilitates the transactions of international trade. It is listed on the New
York Stock Exchange, is headquartered in Panama and operates across Latin
America and the Caribbean. The central banks of the countries in these regions
own shares and have the opportunity to elect board members. It plays an
important role in the economic development and integration of the region
through its reputation as a supportive lender. This reputation comes from its
historic lending in periods when other international banks avoid the region,
normally in periods of crisis. Its loan book is in US Dollars, it is very
affordably valued and is well positioned to enjoy an economic recovery.
Jumbo is a Greek listed retailer operating in Greece, Cyprus, Bulgaria and
Romania. It is controlled and managed by the Vakakis family. It sells small
baskets of everyday cheap items in a model which is comparable to Dollar
General in the USA. This has so far made it less vulnerable to online retail
than other formats such as the department store model. We are impressed by the
company's ability to grow through past periods of economic stress in Greece and
by its growth in new markets. It is conservatively financed and has pre-paid
for much of its inventory historically in order to improve pricing.
Prodia Widyahusada is an Indonesian listed medical diagnostics business with a
$230m market cap at time of purchase and a free float which represents 25% of
shares outstanding. It is controlled by the founding family and is
conservatively financed after its IPO in 2016. It is the largest private sector
diagnostics business in Indonesia and comes with an excellent record for
quality. One piece of evidence of this is the fact that they are the only
Indonesian diagnostics chain with a College of American Pathologist
accreditation. Its track record demonstrates that the model benefits from large
economies of scale - it can drive down costs as it grows allowing it to reduce
pricing which in turn allows it to continue to gain market share. The business
model has proved successful many times across GEM including Integrated
Diagnostics Holdings operating primarily in Egypt, and whose shares are also
held in the portfolio. The model deserves a strong social license given that
early diagnosis allows early treatment and should therefore lead to higher
survival rates.
Disposals
During the period we sold all of the shares held in two companies.
Voltronic Power is a Taiwanese business manufacturing and selling
uninterruptable power supplies. We first discussed reducing this in the 2020
Annual Report but have now sold all of our shares. It is an excellent company
but we are uncomfortable with the current valuation.
Dis-Chem Pharmacies is a pharmacy chain in South Africa. It is a strong
franchise but following recent engagements with the company we have concerns
that stewardship might not be as strong as we had previously thought. This was
demonstrated in part by recent poor disclosure of a related party transaction.
Reduced
The three most significant reductions were in businesses listed in India.
Cyient is an engineering outsourcing business with global clients in industries
such as aerospace and transportation. We made a small reduction on valuation.
Sundaram Finance is a finance company with a focus on commercial vehicles. We
made a small reduction on valuation.
Tata Consumer Products is a food and beverages company with a focus on tea and
coffee. We reported reductions in the last two Annual Reports and the last two
Interim Reports. As discussed previously we believe that the original
investment case remains intact, namely the importance of a recent management
transition and a renewed focus on India under Tata Group stewardship, but that
the company's transformation will take a long time. Valuations currently
provide limited room for error.
Country Breakdown* Region Breakdown*
Country % Region %
India 15.0 Asia 46.8
Mexico 9.9 Latin America 18.4
South Africa 9.0 Africa Sub-Sahara 13.8
Chile 8.0 Europe 9.8
Philippines 5.9 Middle East 5.7
Indonesia 5.7 North America 2.1
United Arab Emirates 5.7 Other net assets 3.4
United Kingdom 5.3
Nigeria 4.8
Korea 4.6
Bangladesh 4.5
Singapore 4.0
Hong Kong 3.2
Turkey 2.5
United States 2.1
Greece 2.0
Pakistan 1.8
Vietnam 1.2
Sri Lanka 0.9
Peru 0.5
Other net assets 3.4
* Country of listing.
Contribution Analysis
The Trust has made a decent start to 2021, with NAV rising by just over 9%. The
strong gains of the second half of 2020, partly a result of the hoped for
vaccine miracles, means gains over twelve months are a little over 24% in
Sterling. NAV has lagged the tech-dominated Emerging Markets Smaller Cap index
but performed better compared to the slightly less tech-dominated broader
Emerging Markets index. This is especially in the past six months as enthusiasm
of other investors appears to fade for Chinese companies given the governance
and government issues they face.
The Indian holdings have, collectively, contributed very significantly to fund
performance. The Chilean conglomerate Quiñenco, and the South African
mini-conglomerate Reunert have also been good to us. The strong rise in markets
over the past twelve months means only a handful of companies have detracted
significantly from performance - our retailer in the Philippines continues to
find Covid-19 tough, and our Chilean water utility has suffered from concerns
that future regulation may be less generous.
The top and bottom contributors are discussed below. In discussing the 12
months to 30 June it is worth pointing out that this period is unusual in that
it follows the market's initial reaction to the Covid-19 pandemic.
Positive
Top Ten Contributors - 12 months ended 30 June 2021
Company Country of Contribution to
Listing Return (%)
Cyient India 4.68
Tata Consumer Products India 3.20
Reunert South Africa 2.90
Indiamart India 2.87
Quiñenco Chile 2.25
Sundaram Finance India 1.91
Fragua Mexico 1.71
Consorcio Ara Mexico 1.61
Grupo Herdez Mexico 1.39
Brac Bank Bangladesh 1.38
Cyient is an Indian research and development provider with global clients in
industries such as aerospace and transportation. We discussed it in the last
Interim Report as a detractor after a period in which its aerospace customers
had struggled. Twelve months later, its share price has recovered and the
company appears as a top contributor. Nonetheless throughout this period our
investment case has not changed - we continue to back it on account of its high
quality franchise, continued founder involvement, hard currency earnings and
strong net cash balance sheet. We made a small reduction, as discussed earlier
in the report.
Tata Consumer Products is an Indian incorporated food and beverages company
with a focus on tea and coffee. A recent management transition and a renewed
focus on India sets the company on a strong trajectory to improve its
profitability. We believe that the company has an exceptional opportunity to
leverage the Tata brand, known for excellence, to become a diversified
world-class consumer products company. We have made a modest reduction, as
discussed earlier.
Reunert is a South African conglomerate made up of three businesses, a cables
business, an office equipment leasing business and an electrical engineering
business. It reported strong results and a useful dividend despite still being
adversely affected by reduced economic activity associated with the pandemic.
Indiamart is India's largest business-to-business classified website business.
It has been a strong contributor despite only being added relatively recently.
As discussed previously it has benefitted from the overall popularity of all
things online and tech, but has also reported strong results, is profitable on
an accounting basis, and is cashflow positive.
Quinenco is a Chilean holding company with its largest asset being a stake in
Banco de Chile. It is 82% owned by the Luksic family which has been both a
conservative and growth oriented steward over a long period of time. The
conglomerate also owns businesses in brewing, global shipping and a Latin
American ports business.
Negative
Top Ten Detractors - 12 months ended 30 June 2021
Company Country of Listing Contribution to Return
(%)
Philippine Seven Philippines -2.05
IAM Chile Chile -1.40
Unilever Nigeria Nigeria -0.89
Hochschild Mining** UK -0.73
Vinda International Hong Kong -0.71
Chemical and Allied Nigeria -0.53
Products (CAP)
Bank OCBC Nisp Indonesia -0.39
Mynews* Malaysia -0.17
Orascom Construction United Arab Emirates -0.10
Anadolu Efes Turkey -0.01
* Not held at end of period
** Not held at start of period
Philippine Seven is a 7-Eleven convenience franchise in the Philippines. The
company has been a detractor in this period in contrast to its longer term
track record, both since launch of the Trust and before. Convenience retail has
been particularly affected versus other retail models by the prolonged lockdown
in the country given that many outlets are located close to places of work. We
do not have longer term concerns with the business.
IAM Chile is a holding company with a 50% stake in Aguas Andinas, Chile's
largest water utility. Over the long term the company has attractive defensive
qualities, providing an inflation protected dividend yield. The company also
exhibits a strong social purpose given that it delivers potable water to one of
Latin America's largest metropolitan areas. In the shorter term it is likely
that it has been affected by investor concerns following a vote to rewrite the
country's constitution, possibly due partly to a low turnout and as a rejection
of the established political parties. Whilst uncertainty in this constitutional
process remains, we are more sanguine than the market consensus given that most
citizens own assets in some form or another so have something to lose from any
proposed undermining of property rights.
Unilever Nigeria is a local subsidiary of Unilever Plc. We discussed this
detractor in the Annual Report but despite what we would have hoped was a high
level of oversight from the parent, local management underperformed last year
and results have been poor. Fortunately, Unilever Plc does not lack experienced
country heads and we believe the management problem has been rectified and that
financial improvement should follow. On a sales per capita metric, this company
has more potential than possibly any other held in the Trust - though we
recognise that Nigeria is about as tough an operational jurisdiction as GEM has
to offer.
Hochschild Mining is a gold and silver mining company with mines in Peru and
Argentina, listed on the London Stock Exchange and controlled by the Hochschild
family. It enjoys a strong cost position and a long term owner.
Vinda International manufactures tissue paper products and personal care
products in China and Asia Pacific. It enjoyed a significant increase in demand
during the height of the Covid-19 pandemic, showing as a contributor last year,
but has been less profitable lately as it continues to invest in its personal
hygiene business. Longer term this investment 'today' for a deferred reward
'tomorrow' is part of our original investment case. We are backing the company
to move away from tissue paper to become a dominant player in China's feminine
hygiene and incontinence markets. Success here would allow Vinda to earn more
attractive returns and provide structural long-term growth from exposure to
sectors that are significantly underpenetrated relative to developed markets.
Stewart Investors
Investment Manager
Tel: 0131 473 2900
Juniper Partners Limited
Company Secretary
Tel: 0131 378 0500
The Statement of Comprehensive Income, Statement of Financial Position,
Statement of Changes in Equity and Cash Flow Statement follow.
Statement of Comprehensive Income
for the six months ended 30 June 2021
Unaudited
Six months ended Six months ended
30 June 2021 30 June 2020
(unaudited) (unaudited)
Revenue Capital Total Revenue Capital Total
return return £'000 return return £'000
£'000 £'000 £'000 £'000
Investment income 1,111 - 1,111 437 - 437
Gains/(losses) on - 3,948 3,948 - (6,298) (6,298)
investments held at
fair value through
profit or loss
Foreign exchange - (33) (33) - 150 150
(losses)/gains
Total income 1,111 3,915 5,026 437 (6,148) (5,711)
Expenses (361) - (361) (313) - (313)
Profit/(loss) before 750 3,915 4,665 124 (6,148) (6,024)
taxation
Taxation (135) (221) (356) (41) - (41)
Profit/(loss) 615 3,694 4,309 83 (6,148) (6,065)
for the period
Return per share 1.15p 6.90p 8.05p 0.16p (11.48)p (11.32)p
The Total column of this statement represents the Statement of Comprehensive
Income of the Company. The Revenue return and Capital return columns are
supplementary to this and are prepared under guidance issued by the Association
of Investment Companies.
All revenue and capital items in the above statement derive from continuing
operations.
Year ended
31 December 2020
(audited)
Revenue Capital Total
return return £'000
£'000 £'000
Investment income 872 - 872
Losses on investments held at fair - (424) (424)
value through profit or loss
Foreign exchange gains - 8 8
Total loss 872 (416) 456
Expenses (624) - (624)
Loss before taxation 248 (416) (168)
Taxation (70) (380) (450)
Loss for the year 178 (796) (618)
Return per share 0.33p (1.49)p (1.16)p
Statement of Comprehensive Income
for the year ended 31 December 2020
Audited
The Total column of this statement represents the Statement of Comprehensive
Income of the Company. The Revenue return and Capital return columns are
supplementary to this and are prepared under guidance issued by the Association
of Investment Companies.
All revenue and capital items in the above statement derive from continuing
operations.
Statement of Financial Position
As at 30 June 2021
(Unaudited) (Unaudited) (Audited)
As at As at As at
30 June 30 June 31 December
2021 2020 2020
£'000 £'000 £'000
Non-current assets
Investments held at fair value through 48,549 37,055 44,720
profit or loss
Current assets
Receivables 1,026 722 271
Cash and cash equivalents 1,299 3,222 1,504
2,325 3,944 1,775
Current liabilities
Payables (208) (482) (205)
Net current assets 2,117 3,462 1,570
Non-current liabilities
Deferred tax on liability on Indian (393) - (326)
capital gains
Net assets 50,273 40,517 45,964
Capital and reserves
Ordinary share capital 535 535 535
Share premium 3,133 3,133 3,133
Special reserve 49,315 49,315 49,315
Capital reserve (3,240) (12,286) (6,934)
Revenue reserve 530 (180) (85)
Total equity 50,273 40,517 45,964
Ordinary shares in issue at period end 53,533,770 53,533,770 53,533,770
Net asset value per Ordinary share 93.91p 75.69p 85.86p
The notes form an integral part of these Interim financial statements.
Statement of Changes in Equity
for the six months ended 30 June 2021
For the six months ended Ordinary Share Special Capital Revenue Total
30 June 2021 (unaudited) share premium reserve reserve reserve £'000
capital £'000 £'000 £'000 £'000
£'000
Balance at 31 December 2020 535 3,133 49,315 (6,934) (85) 45,964
Profit for the period - - - 3,694 615 4,309
Balance at 30 June 2021 535 3,133 49,315 (3,240) 530 50,273
For the six months ended 30
June 2020 (unaudited)
Balance at 31 December 2019 535 3,133 49,315 (6,138) (263) 46,582
Loss for the period - - - (6,148) 83 (6,065)
Balance at 30 June 2020 535 3,133 49,315 (12,286) (180) 40,517
For the year ended 31
December 2020 (audited)
Balance at 31 December 2019 535 3,133 49,315 (6,138) (263) 46,582
Loss for the year - - - (796) 178 (618)
Balance at 31 December 2020 535 3,133 49,315 (6,934) (85) 45,964
The notes form an integral part of these Interim financial statements.
Cash Flow Statement
for the six months ended 30 June 2021
(Unaudited) (Unaudited)
Six months Six months (Audited)
ended ended Year ended
Note 30 June 2021 30 June 2020 31 December
£'000 £'000 2020
£'000
Net cash outflow from operations (240) (468) (679)
before dividends, interest,
purchases and sales 7
Dividends received from 1,075 345 859
investments
Interest from deposits - 1 1
Purchases of investments (7,623) (7,724) (14,823)
Sales of investments 6,905 6,763 12,074
Cash inflow/(outflow) from 117 (1,083) (2,568)
operations
Taxation (289) (33) (124)
Net cash outflow from operating (172) (1,116) (2,692)
activities
Decrease in cash and cash (172) (1,116) (2,692)
equivalents
Cash and cash equivalents at start 1,504 4,188 4,188
of period
Effect of currency (losses)/gains (33) 150 8
Cash and cash equivalents at the 1,299 3,222 1,504
end of the period*
*Cash and cash equivalents represent cash at bank.
1. The condensed Financial Statements for the six months to 30 June 2021
comprise the Statement of Comprehensive Income, Statement of Financial
Position, Statement of Changes in Equity and Cash Flow Statement, together
with the notes set out below. They have been prepared in accordance with
FRS 104 'Interim Financial Reporting' and the AIC's Statement of
Recommended Practice issued in October 2019.
2. The position as at 31 December 2020 on page 12 of the Interim Report is the
same as that contained in the Annual Report and Accounts, which received an
unquali?ed audit report and which have been ?led with the Registrar of
Companies. This Interim Report has been prepared under the same accounting
policies adopted for the year to 31 December 2020.
3. Expenses include the fee paid to the Company's investment manager - Stewart
Investors who received a management fee equal to 1% of the net asset value
of the Company less any reduction owing to the cap on expenses set at 1.5%
of net assets. In the six month period to 30 June 2021 the management fee
was £245,000 but was reduced to £113,000 owing to the cap (six month period
to 30 June 2020 - management fee was £193,000, but was reduced to £59,000
owing to the cap; year to 31 December 2020 - management fee was £411,000
but reduced to £162,000 owing to the cap).
4. The return per ordinary share figure is based on the net profit for the six
months ended 30 June 2021 of £4,309,000 (six months ended 30 June 2020: net
loss of £6,065,000; year ended 31 December 2020: net loss of £618,000) and
on 53,533,770 (six months ended 30 June 2020: 53,533,770; year ended 31
December 2020: 53,533,770) Ordinary shares, being the weighted average
number of Ordinary shares in issue during the periods.
5. At 30 June 2021 there were 53,533,770 Ordinary shares in issue (30 June
2020: 53,533,770; 31 December 2020: 53,533,770).
6. Investments in securities are ?nancial assets designated at fair value
through pro?t or loss on initial recognition. In accordance with FRS 102
and FRS 104, these investments are analysed using the fair value hierarchy
described below. Short term balances are excluded as their carrying value
at the reporting date approximates to their fair value.
The levels are determined by the lowest (that is, the least reliable or least
independently observable) level of input that is signi?cant to the fair value
measurement for the individual investment in its entirety as follows:
Level 1 - Investments with prices quoted in an active market;
Level 2 - Investments whose fair value is based directly on observable current
market prices or is indirectly being derived from market prices; and
Level 3 - Investments whose fair value is determined using a valuation
technique based on assumptions that are not supported by observable current
market prices or are not based on observable market data.
At 30 June 2021 £46,180,000 of the Company's investments were listed as Level
1, the remaining £2,369,000 were listed as Level 2 (30 June 2020: £34,158,000
listed as Level 1, £2,897,000 listed as Level 2; 31 December 2020: £42,307,000
listed as Level 1, £2,413,000 listed as Level 2). Level 2 investments represent
the Company's investments in Nigeria. These have been categorised as Level 2
owing to uncertainty relating to the Nigerian Naira exchange rate.
1. Cash Flow Statement
2021
£'000
Reconciliation of net loss before taxation to net
cash outflow before dividends, interest, purchases
and sales
Net profit on activities before finance cost and 4,665
taxation
Net gains on investments (3,948)
Currency losses 33
Investment income (1,111)
Increase in other payables 2
Decrease in prepayments and other receivables 119
Total (240)
Statement of Principal Risks and Uncertainties
The Board believes that the principal risks to shareholders, which it seeks to
mitigate through continual review of its investments and through shareholder
communication, are events or developments which can affect the general level of
share prices, including, for instance, inflation or deflation, economic
recessions and movements in interest rates and currencies.
Other risks faced, and the way in which they are managed, are described in more
detail under the heading Principal Risks and Risk Management within the
Strategic Report in the Company's Annual Report for the year ended 31 December
2020.
The Company's principal risks and uncertainties have not changed since the date
of the Annual Report and are not expected to change for the remaining six
months of the Company's financial year.
Going Concern
The Directors believe, in the light of the controls and review processes noted
above and bearing in mind the nature of the Company's business and assets,
which are considered readily realisable if required, that the Company has
adequate resources to continue operating for the foreseeable future. For this
reason, they continue to adopt the going concern basis in preparing the
accounts.
Related Party Transactions
Details of related party transactions are contained in the Annual Report for
the year ended 31 December 2020. There have been no material changes in the
nature and type of the related party transactions as stated within the Annual
Report.
Directors' Responsibility Statement in Respect of the Interim Report
We confirm that to the best of our knowledge:
* the condensed set of financial statements has been prepared in accordance
with FRS 104 'Interim Financial Reporting';
* the Chairman's Statement and Investment Manager's Report include a fair
review of the information required by the Disclosure Guidance and
Transparency Rules ("DTR") 4.2.7R, being an indication of important events
that have occurred during the first six months of the financial year and
their impact on the condensed set of financial statements;
* the Statement of Principal Risks and Uncertainties shown above is a fair
review of the information required by DTR 4.2.7R; and
* the condensed financial statements include a fair review of the information
required by DTR 4.2.8R, being related party transactions that have taken
place in the first six months of the current financial year and that have
materially affected the financial position or performance of the Company
during the period, and any changes in the related party transactions
described in the last Annual Report that could do so.
On behalf of the Board,
William Salomon, Chairman
4 August 2021
END
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