RNS Number:8578S
BarclaysGlbl Inv Endowment Fd II Ld
22 April 2008
22 April 2008
Barclays Global Investors Endowment Fund II Limited
Interim Results for the six months ended 29 February 2008
Barclays Global Investors Endowment Fund II Limited (BGIEF II), launched in
December 1996, is a Jersey-registered closed-ended investment company, which
invests in a range of traded with-profits endowment policies. The policies,
which are written by a variety of life offices, have a diverse range of policy
terms and maturity dates, thereby seeking to achieve for shareholders a
strategic objective of an attractive level of capital growth coupled with low
investment risk. It is the Company's policy not to invest in other UK listed
investment companies. It is the intention of the Directors to redeem one half of
the remaining share capital in 2008 and to wind up the Company at any time after
1 September 2009.
Financial results for the six months ended 29 February 2008 include:
*Rise in net asset value of 3.5% from 130.42p to 135.04p per share
*Return per ordinary share of 2.41p (8.54p for the six months to 28/2/07)
*Change in net asset value, including effect of share redemption, of 4.62p
(9.36p for the six months to 28/2/07)
*Share price rose 0.4% from 119.5p to 120.0p per share compared to a fall
of 7.6% in the FTSE All Share Index
Commenting on the results, Peter Bailey, Chairman, said:
"The economic and stock market outlook has further deteriorated since we last
reported in October 2007, and there seems to be little expectation of an early
recovery. Despite this the TEP market is relatively buoyant, and the Company's
net asset value continues to grow, although at a slower pace, with bonus rates
changed little, if at all."
"After borrowing �4.3m at the beginning of the period to part finance the last
redemption of capital, debt peaked at �7.87m, and we repaid �5.7m during the
period. We have since repaid a further �1.1m, and expect to repay borrowings in
full in the near future before re-borrowing to part finance the intended fourth
redemption payment later this year."
"Despite the current economic and market downturn, we anticipate that the 2008
payment will be in excess of 126p per share paid in 2007."
-Ends-
For further information please contact:
Barclays Global Investors Endowment Fund II Limited
Peter Bailey 01534 855908
Barclays Global Investors Limited
Glenn Houchell 0207 668 8089
Weber Shandwick Financial
Alex Brown / Laura Vaughan 0207 067 0700
Chairman's Statement
Overview
The economic and stock market outlook has further deteriorated since we last
reported in October 2007, and there seems to be little expectation of an early
recovery. Despite this the TEP market is relatively buoyant, and the Company's
net asset value continues to grow, although at a slower pace, with bonus rates
changed little, if at all.
Economies and markets
Over the last six months the worldwide outlook for growth has weakened
considerably as the international credit crisis has deepened and extended its
impact into the wider economies, while the continued high level of demand for
many foods and raw materials is pushing up inflation rates. UK policymakers are
dealing on the one hand with tighter credit and a housing-led downturn that call
for lower interest rates, and on the other hand tackling buoyant inflation that
calls for increased interest rates. The net result is that the UK equity market
stands well below the level at which it did a year ago, while government stock
prices have been boosted by cash coming out of equities.
Many TEP investors clearly value the defensive qualities of the with-profits
policy, and particularly so in the current environment. Buyers appear to have
absorbed easily sales of policies into the secondary market by original owners
who might have been faced with increased levels of personal debt. The fact is
that Continental European investors continue to provide the main demand for
TEPs, and the exceptionally low levels of Pricing Discount Rates (PDRs)
established last year have been exceeded in the last few months, reaching record
lows of just 1.5% to 3.0% in shorter dated maturities, perhaps suggesting a
certain level of optimism on future bonus levels. Since it is unclear how
reliable reported prices are, we have continued to value the portfolio on a PDR
of 4.5%, unchanged from the rate used at the 31 August 2007 year end.
Shareholder returns
The Company's net asset value (NAV) increased by 3.5% from 130.42p to 135.04p
per share in the six months to 29 February 2008. The latest available NAV,
calculated as at 31 March 2008, is 135.14p per share. Over the same six month
period the share price rose by 0.4% from 119.5p to 120p and stands today at
123.5p. In comparison, the FTSE All Share Index fell over the period by 7.6%,
while the FTSE Actuaries British Government 5-15 Year Index, rose by 3.6%.
After borrowing �4.3m at the beginning of the period to part finance the last
redemption of capital, debt peaked at �7.87m, and we repaid �5.7m during the
period. We have since repaid a further �1.1m, and expect to repay borrowings in
full in the near future before re-borrowing to part finance the intended fourth
redemption payment later this year.
Interest on outstanding loans varied between 6.1% and 7.0%, reflecting the
slightly higher rates of interest that have prevailed since the previous half
year. By comparison, the interest rates on loans secured for the Company in the
year to 31 August 2007 were arranged at 5.4% to 6.4% p.a. During the half year
period 311 polices matured at full term, realising a total of �7.504m for the
Company, while there were no reported deaths of lives assured.
The life assurance industry
The business experience reported by life offices over the six-month period has
been more than usually varied, with a wide range of results in new business
sales, operating profits, life and non-life business, whether in the UK or
overseas, though most figures have been positive. This is also a sector where
the patterns of product mix vary greatly between the groups, where corporate
deals and interactions in recent years have made meaningful comparisons between
groups rather difficult, and where a marked business success or failure reported
last year probably makes an average performance reported this year look
exceptional by comparison.
The UK life sector continues to rationalise, although perhaps at a slower pace.
Life offices still seek ways to reduce costs by outsourcing administrative
activities, or selling off divisions considered peripheral to their main
businesses. At the same time, the larger offices are pursuing sales growth,
mainly overseas, through joint projects with local businesses in the developing
world where growth rates still exceed those in the UK. Meanwhile, some of the
merger and acquisition proposals under consideration last year remain
unresolved.
Investment returns and bonuses
Despite annual bonuses being generally under tight constraint in recent years,
the good returns generated in with-profits funds since 2002 gave a more positive
outlook for policyholders in 2006 and 2007, and offered some real hope that the
corner might be turning. Indeed, some of the stronger life offices had begun to
reflect this in bigger terminal bonuses even while bearing more onerous
regulatory and investment requirements.
However, this year with-profit funds have generally announced returns for 2007
of about 5 to 7%, well down on the typical 10 to 12% achieved in 2006, or the 17
to 18 % in 2005. Regrettably, the recent stock market turmoil and a poorer
outlook for economic growth have now ensured that some of the larger offices
have this year declared cuts in payouts on longer dated policies. For the most
part offices this year have changed bonus rates very little, and it is likely
that the day when they might increase both annual and final bonuses has been
further postponed. Significantly, a number of life offices currently make the
point that they are maintaining payout levels despite sharp equity market falls,
thus proving the enduring value of with-profit policies that invest in a wide
range of assets, and permit insurers to use cash held back in good years to
prevent cuts in maturity payouts in poor years.
Capital redemption
Included with this report is a letter that concerns the fourth annual redemption
of the Company's shares, due to be made in September this year. A significantly
improved economic and stock market climate in 2006 and a healthier state of life
office balance sheets enabled us to make a redemption payment in September 2007
that was well above that of the previous year. Despite the current economic and
market downturn, we anticipate that the 2008 payment will be in excess of 126p
per share paid in 2007.
Outlook
As in previous years we have used the proceeds of maturing policies to reduce
the level of the Company's outstanding loan at intervals during the six-month
period. We intend to redraw in September a sufficient sum of money under our
borrowing facility to make a capital redemption payment to shareholders in
accordance with our long term plan.
In recent months most commentators have become more pessimistic in their
expectations for growth in the UK and major overseas economies. It seems likely
that valuations of life fund assets will remain subdued for an extended period,
leaving limited scope for increases in maturity payouts over the remaining life
of the Company.
Peter Bailey, Chairman
16 April 2008
INCOME STATEMENT (UNAUDITED)
For the six months ended 29 February 2008
--------------------------------------------------------------------------------
6 months to 6 months to 12 months to
29.02.08 28.02.07 31.08.07
� 000 � 000 � 000
--------------------------------------------------------------------------------
Capital
Realised gains on investments 2,513 798 3,313
Movement in unrealised gains on
investments (1,930) 1,004 (472)
--------------------------------------------------------------------------------
583 1,802 2,841
--------------------------------------------------------------------------------
Revenue
Interest income 28 7 52
Administrative expenses (195) (228) (473)
--------------------------------------------------------------------------------
(167) (221) (421)
--------------------------------------------------------------------------------
Net return before finance costs 416 1,581 2,420
Interest payable (175) (300) (526)
--------------------------------------------------------------------------------
Return on ordinary activities for
the period 241 1,281 1,894
--------------------------------------------------------------------------------
Return per redeemable ordinary
share 2.41p 8.54p 12.63p
Redemption of redeemable ordinary
shares 2.21p 0.82p 0.82p
--------------------------------------------------------------------------------
Change in net asset value 4.62p 9.36p 13.45p
Dividend per redeemable ordinary
share Nil Nil Nil
--------------------------------------------------------------------------------
Net assets
Attributable to redeemable ordinary
shareholders 13,504 18,950 19,563
Per redeemable ordinary share 135.04p 126.33p 130.42p
--------------------------------------------------------------------------------
All revenue and capital items in the above statement derive from continuing
activities.
BALANCE SHEET (UNAUDITED)
As at 29 February 2008
29.02.08 28.02.07 31.08.07
� 000 � 000 � 000
--------------------------------------------------------------------------------
Fixed assets
Financial assets at fair value through profit
or loss 4,296 13,742 7,465
--------------------------------------------------------------------------------
Current assets
Cash at bank 346 209 209
Debtors 504 349 562
Investments 11,164 14,938 15,296
--------------------------------------------------------------------------------
12,014 15,496 16,067
Current Liabilities
Creditors: Amounts falling due within one
year (332) (285) (326)
--------------------------------------------------------------------------------
Net current assets 11,682 15,211 15,741
--------------------------------------------------------------------------------
Total Assets less Current Liabilities 15,978 28,953 23,206
Creditors: Amounts falling due after more
than one year (2,324) (9,903) (3,543)
--------------------------------------------------------------------------------
Total 13,654 19,050 19,663
--------------------------------------------------------------------------------
Represented by:
Net assets attributable to holders of
Redeemable ordinary shares 13,504 18,950 19,563
Preference shares 150 100 100
--------------------------------------------------------------------------------
Total 13,654 19,050 19,663
--------------------------------------------------------------------------------
CASH FLOW STATEMENT (UNAUDITED)
For the six months ended 29 February 2008
--------------------------------------------------------------------------------
6 months to 6 months to 12 months to
29.02.08 28.02.07 31.08.07
� 000 � 000 � 000
--------------------------------------------------------------------------------
Net cash outflow from operating
activities (70) (244) (738)
--------------------------------------------------------------------------------
Capital expenditure and financial
investment
Payments of premiums (187) (393) (703)
Cash received from policies ceasing
on maturity 7,504 2,976 11,080
Cash received from policies ceasing
on death - - 320
--------------------------------------------------------------------------------
Net cash inflow from capital
expenditure and financial investment 7,317 2,583 10,697
--------------------------------------------------------------------------------
Net cash inflow before management
of liquid reserves and financing 7,247 2,339 9,959
--------------------------------------------------------------------------------
Management of liquid resources
Net cash invested in liquidity
fund units 590 (130) (1,080)
Financing
Increase/(decrease) in loan (1,400) 3,300 (3,300)
Net cash outflow from share
redemptions (6,300) (5,725) (5,796)
--------------------------------------------------------------------------------
Net cash outflow from financing (7,700) (2,425) (9,096)
--------------------------------------------------------------------------------
Increase/(decrease) in cash in the
period 137 (216) (217)
--------------------------------------------------------------------------------
Notes to the financial statements
1. Accounting policies
The Directors confirm that, to the best of their knowledge, this condensed set
of financial statements has been prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (UK GAAP) and applicable Jersey law.
The financial information for each of the six month periods ended 29 February
2008 and 28 February 2007 comprise non-statutory financial statements whilst the
financial information for the year ended 31 August 2007, which has been
summarised in these financial statements, received an unqualified auditors'
report and has been delivered to the UK Financial Services Authority and the
Jersey Financial Services Commission.
The Directors consider it appropriate to adopt the going concern basis in
preparing the condensed financial statements for the period to 29 February 2008.
2. Return per redeemable ordinary share
The return for the 6 months to 29 February 2008 is based on 9,999,995 ordinary
shares in issue following the redemption of 4,999,953 shares on 5 September
2007, which was unchanged for the remainder of the period. The effect of this
redemption at 126.0p per share was to increase the net asset value of the
remaining shares by 2.21p per share.
3. Called up share capital
On 5 September 2007 the Company redeemed one third of its ordinary shares
(4,999,953) at 126.0p per share leaving 9,999,995 shares in issue, which was
unchanged for the remainder of the period. The redemption proceeds repaid share
capital and premium of �6,299,941 to shareholders. The nominal amount of 1p per
ordinary share redeemed was funded from a fresh issue of preference shares to
the Company's Administrator.
4. Reconciliation of movements in shareholders' funds
6 months to 6 months to Year to
29.02.08 28.02.07 31.08.07
� 000 � 000 � 000
Revenue deficit for
the period (342) (521) (947)
Recognised capital gains
for the period 583 1,802 2,841
Capital redemption
during period (6,300) (5,725) (5,725)
Issue of preference
shares 50 50 50
--------------------------------------------------------------------------------
Net decrease in
shareholder funds (6,009) (4,394) (3,781)
Opening shareholders'
funds 19,663 23,444 23,444
--------------------------------------------------------------------------------
Closing shareholders'
funds 13,654 19,050 19,663
--------------------------------------------------------------------------------
Shareholders' funds attributable to each class of share
6 months to 6 months to Year to
29.02.08 28.02.07 31.08.07
� 000 � 000 � 000
Equity shares 13,504 18,950 19,563
Non-equity shares 150 100 100
--------------------------------------------------------------------------------
13,654 19,050 19,663
--------------------------------------------------------------------------------
DISTRIBUTION OF POLICIES
Distribution by value of policies held on 29 February 2008
Policies held by maturity date %
Up to 31 August 2008 42.9
1 September 2008 to 31 August 2009 40.1
1 September 2009 onwards 7.6
Total holdings of policies 90.6
BGI Sterling First Liquidity Fund 4.2
Current assets 5.2
Total 100.0
Life office %
Aegon: Scottish Equitable 3.2
Aviva: Commercial Union 0.9
General Accident 1.9
Norwich Union 10.1
Provident Mutual 1.4
AXA: Equity & Law 0.5
Sun Life 0.5
Cooperative: 1.0
Friends Provident: Friends Provident 1.9
National Mutual Life of Australasia 0.1
UK Provident 1.7
HBOS: Clerical Medical 3.8
Legal & General: 9.5
Lloyds TSB: Scottish Widows 5.0
NFU Mutual: 0.1
Pearl: London Life 0.6
Pearl 2.4
Prudential: Prudential 3.4
Scottish Amicable 13.7
Resolution Life: Britannia 0.1
Royal 1.2
Scottish Mutual 0.5
Scottish Provident 0.8
Sun Alliance 1.8
Royal London: Refuge 0.3
Royal London 0.2
Scottish Life 1.0
Standard Life: 16.5
Sun Life of Canada: 3.5
Swiss Re: National Mutual 0.3
Windsor: Gresham 0.4
Winterthur: Colonial 0.2
Provident Life 0.6
Zurich: Eagle Star 1.5
Total holdings of policies 90.6
Other assets
BGI Sterling First Liquidity Fund 4.2
Current assets 5.2
Total assets 100.0
Number of policies held 594
Total value of policies �14,781,169
Total assets �16,309,973
The majority of policies have original terms of between 20 and 25 years.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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