GARTMORE IRISH GROWTH FUND PLC
ANNUAL FINANCIAL REPORT
The Directors present the results of the Company for the year ended 31 March 2008.
OVERVIEW
- NAV down 13.5% to 875.75p over the year to 31 March 2008, compared with falls
of 22.6% in the ISEQ Overall Index and 13.2% in the Davy Mid-Cap Index
- NAV up 804.8% since the launch of the Company in June 1995, a compound annual
growth rate of 18.7%, compared with gains of 213.6% for the ISEQ Overall Index
and 488.9% for the Davy Mid-Cap Index
- Proposed final dividend of 1.06p, an increase of 18% on the previous year
INVESTMENT OBJECTIVE
The Company seeks to provide shareholders with long-term capital growth through
investment in quoted companies which are either incorporated in the Republic of
Ireland or Northern Ireland or, if elsewhere, derive the majority of their
turnover or profits from the Republic of Ireland or Northern Ireland.
INVESTMENT POLICY
It is believed that the Company, through the securities in which it invests,
offers an attractive and relatively direct means of investing in Ireland,
thereby giving exposure to:
- relatively high-growth economic environment; and
- a low corporate taxation economy in the Republic of Ireland which is
attractive to investors into the region.
Asset Allocation:
The Company invests in quoted companies which are either incorporated in the
Republic of Ireland or Northern Ireland or, if elsewhere, derive the majority
of their turnover or profits from the Republic of Ireland or Northern Ireland.
The aim is to provide long-term capital growth. The majority of investments
will be in equities, although other forms of equity-related securities,
including warrants and convertibles, may be held. Cash and derivative
instruments (such as futures and options) may be used for efficient portfolio
management and as part of investment strategy, subject to the prior consent of
the Board.
The Company's investments are not limited by reference to market
capitalisation, sector or weightings within the Republic of Ireland or
elsewhere. However, a sizeable part of the portfolio is usually held in stocks
of companies incorporated in the Republic of Ireland since they represent a
majority of the Company's eligible investment universe.
Risk Diversification:
Portfolio risk is managed by investing in a diversified spread of investments.
There are generally approximately 40 holdings at any one time, and no single
holding will represent more than 15% of the net assets of the Company or more
than 15% of the investee company's issued share capital at the time of
acquisition.
The Company will not invest more than 15% of its gross assets in other listed
investment companies (including investment trusts).
Gearing:
The Manager is authorised to borrow money to make additional investments and a
flexible borrowing facility is available for that purpose. Borrowings fluctuate
between zero and 25% of shareholders' funds, with timing determined on the
basis of market circumstances and investment opportunities. Borrowings are
regularly monitored by the Board. Alternatively, cash can be held when the
Manager has negative views on share prices.
PERFORMANCE
Performance is compared with the Davy Mid-Cap Index, the ISEQ Index, the Hoare
Govett Smaller Companies Index (ex Investment Companies), the FTSE All-Share
Index and the FTSE Europe ex UK Index.
CHAIRMAN'S STATEMENT
In sterling terms, the net asset value ("NAV") of the Company's Ordinary shares
of 875.75p fell by 13.5% over the year to 31 March 2008. This compares with
declines in sterling terms of 22.6% for the ISEQ Overall Index and 13.2% for
the Davy Mid-Cap Index. The UK market held up slightly better, the FTSE
All-Share Index falling by 10.9%, although the Extended Hoare Govett Index
(excluding Investment Companies) fell 20.2% over the year.
In euro terms, the ISEQ fell 34.1% over the 12-month period. However, this fall
was offset in part by a rise of 14.9% in the value of the euro relative to
sterling.
Minimal exposure to financials proved beneficial to performance, as did the
decision to maintain a net cash exposure through most of the year. The cautious
positioning of the portfolio enabled the NAV of the Company to remain, in
sterling terms, little changed in the second half of the year.
The Company has enjoyed some interest income in contrast to the interest
expense of previous years arising from the fact that the portfolio was less
than fully invested over the year. Also, many of the holdings in the portfolio
now have a worthwhile yield. For this reason, the revenue per share increased
from -2.74p last year to 1.05p. The Directors are recommending a final dividend
of 1.06p, an 18% increase on last year, to be paid on 22 September 2008 to
shareholders on the register on 22 August 2008. This rate of increase is in
line with the long-term growth of the NAV.
At the end of the year, the share price was 775p, representing a discount of
11.5% to NAV. Given the uncertain market conditions, the share price of the
Company has been standing at a discount to the underlying NAV throughout the
year. The Company has bought back 1,264,500 shares in the year, continuing its
policy of seeking to enhance the NAV for shareholders, and to provide a degree
of liquidity in the quote. All shares previously held in Treasury have been
cancelled.
Recent economic data suggests that Ireland's economy is continuing to cool and
the strength of the euro versus both sterling and the US dollar represents a
significant challenge to many Irish businesses. However, the Irish economy is
better placed than others for recovery. The OECD noted in its April 2008 Report
that Ireland's "long term growth potential remains high relative to the OECD
average". Banks are not expected to see significant write-downs on US-oriented
financial products and so do not face some of the lending constraints
experienced by certain international peers. The Government's balance sheet also
remains better than most others, with plans for substantial infrastructure
spending, as outlined by the National Development Plan 2007-2013.
Since the commencement of operations on 8 June 1995, the Company's investment
performance has been very strong, with the NAV increasing by 804.8% compared
with gains of 488.9% for the Davy Mid-Cap Index and 213.6% for the ISEQ Overall
Index (all in sterling terms). The Company's record over this period represents
a compound annual growth rate of 18.7%. We congratulate our manager, Gervais
Williams, for his superb performance over such a long period.
Following recent declines, many stocks in the Irish market now offer much
improved value. Importantly, the fundamental long-term attractions of Ireland
remain in place, particularly its attractive demographics, combined with
continuing low corporate taxes. The latter continues to prove advantageous,
with some large UK businesses re-incorporating in Ireland.
In accordance with the Company's Articles of Association, the Directors shall
be proposing at the Annual General Meeting in September 2008 that the Company
should continue for a further three years. In view of the consistency of
performance, the significant opportunity that Irish equities now offer and the
continuing strength of the investment approach employed by the Company's
Manager, your Board recommends that shareholders vote in favour of
continuation.
Harry Sheridan
Chairman
23 June 2008
MANAGER'S REVIEW
Manager
The portfolio has been managed by Gervais Williams since the Company's
inception in 1995. The portfolio has a strong track record of outperformance of
comparative indices, through a range of macro-economic environments, while at
the same time maintaining a conservative risk profile.
The activities and performance of the Company are reviewed and discussed at
regular meetings between the Directors and the Manager. Investment strategy is
determined, inter alia, in the light of prevailing equity market conditions.
Investment Philosophy
The Company typically invests in a limited number of stocks quoted on the Irish
Stock Exchange. However, investment is also permitted in companies that are
incorporated or operate substantial businesses in Ireland but which are quoted
elsewhere, such as on NASDAQ, the London Stock Exchange and AIM.
Investment Strategy
The Manager's investment strategy is to maximise NAV, but with an eye to
absolute risk within the portfolio. In this regard, it is noteworthy that the
Company has no formal benchmarks. The Manager seeks to outperform comparative
indices, such as the ISEQ, the Davy Mid-Cap, the FTSE All-Share, the Hoare
Govett Smaller Companies (ex Investment Companies) and the FTSE Europe ex UK.
Investors should note that the size of the weighting of individual stocks in an
index is not a measure of their absolute risk. Therefore, the investment
process tends to give the index weightings no more than interested
consideration.
Instead, the Manager makes the maximum use of fundamental research from
internal and external sources, (including brokerage contacts), and places
particular emphasis on the value of regular and frequent meetings with the
management of listed companies. These visits form an important part of his
assessment of factors such as the rigour of a company's business plan, the
quality of its management and the strength of companies' franchises. They also
afford the Manager the opportunity to question companies' senior management on
other key investment issues, such as how they plan to deal with competitive
industry pressures, or their plans to capitalise on new opportunities.
Investments have been made across the broad spectrum of the Irish equity
market, although selected cyclical stocks most geared to the robust domestic
economy feature prominently among the Company's holdings. Some of the most
attractive opportunities are found in smaller businesses where the prospects
for the business are seen to be improving after a period of indifferent
performance.
The Manager is willing to take significant risk, but only where the scope for
high absolute return is considered relatively good. We rarely find an
opportunity that justifies an investment that exceeds 10% of the total value of
the portfolio.
Schedule of NAV since launch
Date NAV Since NAV Since
Basic pps Launch % Diluted pps Launch %
07/06/95 96.79 - 97.32 -
31/03/96 116.05 19.90 113.38 16.50
31/03/97 154.11 59.22 145.09 49.09
31/03/98 246.07 154.23 221.73 127.84
31/03/99 207.60 114.48 190.75 96.00
31/03/00 291.86 201.54 273.83 181.37
31/03/01 272.28 181.31 260.68 167.86
31/03/02 253.62 162.03 253.62 160.60
31/03/03 233.26 141.00 233.26 139.68
31/03/04 441.96 356.62 441.96 354.13
31/03/05* 550.24 468.49 550.24 465.39
31/03/06 792.58 718.87 792.58 714.41
31/03/07 1,012.46 946.04 1,012.46 940.34
31/03/08 875.75 804.79 875.75 799.87
* restated for the adoption of International Financial Reporting Standards
("IFRS").
Equity Market Background
Concerns stemming from problems in the US sub-prime mortgage market gradually
spread during the Company's financial year, with fears about the impact of the
developing global credit crunch on economic growth pushing equity prices lower.
Signs emerged during the second half of 2007 that the Irish economy was slowing
after an extended period of strong growth, with the housing market cooling and
unemployment rising slightly, while weaker consumer credit figures hinted that
people were easing back on their spending plans. The European Central Bank
demonstrated its continuing vigilance of inflationary pressures, lifting
interest rates to 4.0% in June 2007 and opting not to follow the lead set by
other central banks in reducing the cost of borrowing during the second half of
the year.
Portfolio
An extremely weak Irish equity market led to widespread falls in values in the
Company's portfolio over the course of the year. Certain stocks fell very
sharply in the period, with UTV, Newcourt and DCC being amongst the most
costly. However, our decision to have minimal exposure to financials during the
year proved beneficial, as banking stocks recorded particularly steep falls. A
further positive factor was our decision to maintain a net cash exposure
through most of the year.
Over the last seven months of the period we gradually acquired a position in
Allied Irish Bank ("AIB"). We took the view that, following an indiscriminate
sell-off in the banking sector, AIB shares had fallen to levels that reflected
an unduly pessimistic view of the bank's prospects. AIB is conservatively
funded, with no off-balance-sheet funding vehicles, and, importantly, has a
substantial deposit base. In the current investment climate, these factors give
AIB a distinct advantage over some of its European competitors struggling with
liquidity issues.
The Company continues to hold a substantial exposure to the food sector, with
IAWS Group having recently joined a portfolio of food-related stocks that
includes Fyffes, Kerry Group and Total Produce. The returns in many of our
food-related holdings reflected the downward slide in the Irish market.
However, we believe that each company is seeing improved opportunity and so
could deliver strong gains as market sentiment improves. Our stake in the dairy
foods specialist, Glanbia, was the most notable success. Glanbia produces
one-third of Ireland's milk and cheese and is capitalising upon a stronger
European dairy market and sharp increases in global food prices. The company
has been unusually successful in identifying opportunities to offset the rising
costs of raw materials such as milk by investing, for example, in
premium-priced organic cheese production capacity in the US. While we have
taken some profits on this position following a period of very good
performance, Glanbia continues to represent one of the Company's larger
investments.
A further success was our long-term holding in ICON, a firm that carries out
and manages clinical trials for pharmaceutical and biotechnology companies.
Sales have been growing rapidly and the company's attractions include the wide
range and excellent quality of its services and the strength of its customer
relationships. Quarterly results announced during the year confirmed ICON's
ongoing progress, with margins increasing despite the company's considerable
investment in improved services. The valuation of the business has moved up
significantly during the year so once again good profits have been taken on a
part of the holding.
Conversely, the performance of our holdings in building-related stocks, which
registered significant falls through the year, was extremely disappointing.
These falls reflected a declining demand for houses in Ireland. However, we
believe that recent declines have left companies such as CRH and Grafton -
together, these accounted for 10.4% of the investment portfolio at the year end
- trading at levels that fail to take account either of the scale of their cash
flows or inherent balance-sheet strengths.
Investor Relations
Promotion of the Company continues to be an important part of the Manager's
activities. During the year Gartmore undertook an intensive programme to
promote the Company and generate interest from stockbrokers, private-client
fund managers, funds of funds and institutions. This programme included:
- a major investor lunch in Dublin attended by 40 stockbrokers, IFAs and
journalists;
- a dinner and presentation held in Dublin by a major broker for 50 of their
high net worth clients;
- one-to-one meetings and presentations with 350 regional stockbrokers, IFAs
and private client fund managers in London, Edinburgh, Glasgow, Dublin and
Belfast;
- a Board and investor lunch in London attended by 12 current and potential
major shareholders; and
- a St Patrick's Day presentation to 12 journalists and investment trust
research analysts.
In addition, the Manager circulated ad-hoc update e-mails to a wide range of
investment trust investors and trade journalists.
Prospects
While the market's performance over recent months has been deeply
disappointing, we maintain our view that Irish equities can deliver good
returns for investors over the medium-term. Our emphasis remains firmly on
stock selection, with our bottom-up selection process continuing to identify a
range of attractive opportunities in the Irish market. We believe that
following recent declines, many stocks across several sectors of the Irish
market now offer much improved value.
Gervais Williams
Gartmore Investment Limited
23 June 2008
SECTOR SPREAD OF PORTFOLIO as at 31 March 2008
Republic
of Ireland UK Total
�'000 % �'000 % �'000 %
Travel & Leisure 3,498 3.0 - - 3,498 3.0
Food Producers & Processors 21,669 18.5 - - 21,669 18.5
Software & Computer Services 5,508 4.7 - - 5,508 4.7
Support Services 18,644 15.9 - - 18,644 15.9
Health Care, Equipment & Services 3,944 3.4 - - 3,944 3.4
Oil & Gas 6,382 5.4 61 0.1 6,443 5.5
Mining 3,926 3.3 - - 3,926 3.3
Food & Drug Retailers 5,025 4.3 - - 5,025 4.3
Beverages 2,121 1.8 - - 2,121 1.8
Banks 19,792 16.9 - - 19,792 16.9
Construction & Building Materials 6,792 5.8 - - 6,792 5.8
General Financial 1,447 1.2 - - 1,447 1.2
Fishing & Farming 3,014 2.5 - - 3,014 2.5
Mobile Telecommunications 727 0.6 - - 727 0.6
Media & Photography 135 0.1 2,275 1.9 2,410 2.0
Pharmaceuticals & Biotechnology 2,408 2.1 - - 2,408 2.1
Electronic & Electrical Equipment 4 0.0 1,221 1.0 1,225 1.0
Household Goods & Textiles 1,481 1.3 - - 1,481 1.3
Cash - - 7,293 6.2 7,293 6.2
Total 106,517 90.8 10,850 9.2 117,367 100.0
PORTFOLIO as at 31 March 2008
Class Market
of
Company % of Portfolio Share Value
Republicof Ireland
1 (8) Allied Irish Banks 13.9 (4.3) Ord 16,308
2 (3) Glanbia 6.9 (6.8) Ord 8,072
3 (19) CRH 5.6 (2.3) Ord 6,614
4 (5) Fyffes 5.3 (5.0) Ord 6,260
5 (9) DCC 5.3 (4.2) Ord 6,246
6 (-) Grafton Group 4.8 (-) Ord 5,679
7 (7) Total Produce 4.3 (4.3) Ord 5,025
8 (-) Experian Group 3.3 (-) Ord 3,882
9 (-) IAWS Group 3.3 (-) Ord 3,881
10 (2) ICON 3.1 (6.9) ADR 3,624
11 (12) Kenmare Resources 3.0 (3.5) Ord 3,513
12 (4) Aer Lingus 3.0 (6.2) Ord 3,498
13 (-) Anglo Irish Bank 3.0 (-) Ord 3,484
14 (6) Kerry Group 2.9 (4.9) 'A' Ord 3,456
15 (-) Dragon Oil 2.8 (-) Ord 3,228
16 (-) Origin Enterprises 2.6 (-) Ord 3,014
17 (13) Datalex 2.5 (3.2) Ord 2,910
18 (15) Newcourt Group 2.4 (3.0) Ord 2,805
19 (22) Horizon Technology 2.2 (1.9) Ord 2,598
20 (16) AGI Therapeutics 2.1 (2.9) Ord 2,408
21 (-) C&C Group 1.8 (-) Ord 2,121
22 (17) Island Oil & Gas 1.5 (2.8) Ord 1,806
23 (18) Qualceram Shires 1.3 (2.3) Ord 1,481
24 (-) TVC Holdings 1.2 (-) Ord 1,446
25 (29) Providence Resources 0.6 (0.3) Ord 743
26 (-) Zamano 0.6 (-) Ord 727
27 (25) Petrel Resources 0.4 (0.8) Ord 457
28 (26) Clearstream Technology 0.3 (0.6) Ord 320
29 (28) Galantas Gold 0.2 (0.5) Ord 238
Corporation
30 (23) Kingspan Group 0.2 (1.2) Ord 178
31 (27) Petroceltic 0.1 (0.6) Ord 148
International
32 (-) Prime Active Capital 0.1 (-) Ord 135
33 (31) Conroy Diamonds 0.1 (0.1) Ord 122
34 (30) Ormonde Mining 0.1 (0.2) Ord 54
35 (-) Agcert 0.0 (-) Ord 32
36 (32) Fortfield Investments 0.0 (0.0) Ord 4
TotalRepublic of Ireland 90.8 106,517
UK
37 (33) UTV 1.9 (3.0) Ord 2,275
38 (34) Andor Technology 1.0 (2.5) Ord 1,221
39 (35) Lansdowne Oil & Gas 0.1 (0.1) Ord 61
Total UK 3.0 3,557
Cash 6.2 7,293
Total 100.0 117,367
Previous year ranking and percentages of portfolio in brackets.
EXTRACTS FROM THE REPORT OF THE DIRECTORS
Business Review
The Business Review has been prepared in accordance with the Accounting
Standards Board Reporting Statement: Operating and Financial Review.
The purpose of the Business Review is to provide a review of the business of
the Company by:
- analysing development and performance using appropriate Key Performance
Indicators ("KPIs");
- outlining the principal risks and uncertainties affecting the Company;
- describing how the Company manages these risks; and
- explaining the future business plans of the Company.
Nature and Status
The Group comprises Gartmore Irish Growth Fund PLC ("the Company") and its
trading Subsidiary, Gartmore Irish Smaller Companies Investment Limited. The
Company is an investment trust company and was incorporated and registered in
England and Wales on 6 March 1995. It is a member of The Association of
Investment Companies ("AIC"). It is registered as a public limited company and
is an investment company as defined by Section 833 of the Companies Act 2006.
Its shares are listed on the London and Irish Stock Exchanges. The Subsidiary
engages in investment dealing.
The Company was approved by HM Revenue & Customs as an investment trust under
Section 842 of the Income and Corporation Taxes Act 1988 ("ICTA") in respect of
the year ended 31 March 2007. This approval is subject to there being no
subsequent enquiry under corporation tax self-assessment. The Company has been
approved as an investment trust for all previous years. Since 31 March 2007,
the Company has directed its affairs so as to be able to continue to qualify
for approval by HM Revenue and Customs as an investment trust, ensuring, inter
alia, that not more than 15% of the Company's eligible investment income (after
expenses) arising in an accounting period is retained by the Company.
Qualifying as an investment trust company confers certain advantages, including
an exemption from the payment of capital gains taxes on profits on investments.
The close company provisions of ICTA do not apply to the Company.
The Company's shares are eligible investments for inclusion in Individual
Savings Accounts and it is the intention of the Directors to manage the affairs
of the Company so that this eligibility will be maintained.
Investment Objective and Policy
The Company's investment objective and policy are set out above and further
details on the Manager's investment strategy can also be found in the Manager's
review above. Information regarding the Company's risk management is shown
below and in note 25 to the financial statements.
Performance
The results for the year and the net revenue are set out in the Consolidated
Income Statement. The Directors are proposing a final dividend of 1.06p per
Ordinary share.
The NAV per Ordinary share at 31 March 2008 was 875.75p compared to 1,012.46p
at 31 March 2007.
The Board reviews performance by reference, inter alia, to a number of key
performance indicators, including:
- asset performance;
- peer group performance;
- discount management;
- financial position;
- total expense ratio; and
- dividend policy.
However, the key measure of success for shareholders is the growth in the NAV
and the share price of the Company. The Directors consider that there is no
single appropriate benchmark of the Company's performance since none is closely
connected with the make-up of the portfolio. However, the movement of the NAV
is reviewed against the movement of the ISEQ Index, the Davy Mid-Cap Index, the
FTSE All-Share Index, the Hoare Govett Smaller Companies Index (ex Investment
Companies) and the FTSE Europe ex UK Index to provide a comprehensive review of
the Company's performance against competitors, as the Board is conscious that
shareholders have alternative markets in which to invest.
The NAV per share fell by 13.5% in the year under review (2007: an increase of
27.7%) compared with a sterling adjusted decrease in the ISEQ Index of 22.6%
(2007: an increase of 13.1%). The mid-market price of the Company's Ordinary
shares fell by 22.2% (2007: rise of 34.7%). Positive contributors to
performance included the Company's investments in Glanbia and ICON which
produced strong returns over the year, in defiance of a generally weak Irish
stock market. Net cash balances, which were held through most of the year and a
minimal exposure to financials during the first half also proved beneficial.
Conversely, investments in UTV, Newcourt and DCC detracted from returns.
It is also relevant to consider performance over a longer period. The Company's
investment policy was varied in 2002 to allow the inclusion in the portfolio of
the largest quoted companies in the investment universe; previously they had
been excluded. In the period since 31 March 2002, the NAV per share has
increased by 245.3% compared with an increase in the ISEQ Index of 55.0%, and
an increase in the Davy Mid-Cap Index of 209.0%. Over the same period, the FTSE
All-Share Index has increased by 14.5%, with the Hoare Govett Smaller Companies
Index up 53.8%, and the FTSE Europe ex UK Index up 42.9%. The mid-market price
of the Company's Ordinary shares increased by 246.8% over the period.
For more information regarding the Company's performance please refer to the
Chairman's Statement and the Manager's Review.
Financial Position
The Company's net assets at 31 March 2008 amounted to �113.7 million, compared
with �144.3 million at 31 March 2007. �10.0 million of this reduction was a
result of the buy-back of shares. All of the Company's investments are listed
on recognised exchanges and are realisable in normal market conditions.
There were no short-term borrowings at 31 March 2008. The Company has a
short-term committed loan facility of Euro33.7 million and an overdraft facility
of Euro1.3 million. The major covenant that applies to the loan facility is that
the Company's investments must exceed the sum drawn by 2.5 times.
Share Capital
At the year end the Company's issued share capital comprised 12,987,542
Ordinary shares, none of which were held in Treasury (2007: 15,012,042 and
760,000 Ordinary shares respectively). At general meetings of the Company, the
holders of the Ordinary shares are entitled to one vote for every share held.
During the year 1,264,500 shares were bought back at prices ranging from 709p
to 910p per share (excluding expenses) at discounts to net asset value ("NAV")
of between 6.12% and 15.29% and representing 8.42% of the shares in issue on 1
April 2007. Of these, 626,000 shares were placed into Treasury and 638,500
shares where bought back for cancellation. On 27 November 2007, the shares
placed into Treasury were cancelled together with the 760,000 shares held in
Treasury at the previous year-end. Since 31 March 2008, a further 158,500
shares have been bought back for cancellation at prices ranging from �7.15 to �
7.70 (excluding expenses), representing discounts to NAV of between 9.71% and
13.53%.
No shares were issued during the year, but the Directors favour increasing the
number of shares in issue if this can be achieved at prices that will not
dilute the interests of existing shareholders. Increasing the size of the
Company could improve the liquidity of its shares in the market and would
dilute the impact of fixed costs.
Discount Management
At the year end, the Company's share price stood at a discount of 11.5% to NAV
compared with a discount of 1.6% a year ago. During the year, the discount
ranged from 1.48% to 17.03%. The Board has been willing to buy stock for
cancellation or to be held in Treasury and has done so in the past. This had
the dual benefits of increasing short-term demand for the Company's shares and
resulting in a modest uplift in the NAV. The Company will continue, as and when
appropriate, to exercise its powers to buy back shares.
Dividends and Total Expense Ratio
The net revenue return for the year, after expenses and taxation, amounted to �
144,000, compared with a net revenue deficit of �391,000 for the previous year.
The Company's total expense ratio to average net assets ("TER") for the year
was 1.5% (2007: 1.2%). The Directors are recommending a dividend for the year
of 1.06p per share. This will be paid, if approved, on 22 September 2008.
Principal Risks and Uncertainties
The principal risks and the Company's policies for managing these risks and the
policy and practice with regard to financial instruments are summarised in note
25 to the financial statements.
The following additional risks and uncertainties have been identified and are
discussed below, with an outline of how the Board recognises and seeks to
control these risks.
Poor Company and Market Performance
Since the Company is an investment company, returns to shareholders depend upon
the performance of the companies and the stock markets in which it invests.
Until recently the trend had been positive for some time, but, as experienced
in recent unsettled markets, this can change over time. Consequently, there is
potential for the Company to suffer periods of low or negative returns.
Investment risk is spread by holding a diversified portfolio of approximately
40 holdings. In accordance with the Listing Rules, the Board, acting in its
capacity as the management engagement committee, reviews performance and the
continuing engagement of the Manager on an ongoing basis. The basis of the
Board's reappointment of the Manager is explained below.
Limited Investment Universe
The scale of the Irish and Northern Irish economies is relatively modest when
compared to those of the Eurozone or the UK. The Company has a limited universe
of stocks within which it can invest, with the largest holdings tending to be
between 3% and 15% of the value of the portfolio. The Company is therefore
subject to the uncertainties relating to a relatively small number of holdings,
including the risks of volatility. Additionally, since the portfolio has no
precise correlation with the various comparator indices, performance can be
expected to deviate significantly from those indices. The focused nature of the
portfolio offers shareholders the prospect of significant capital gain if the
positive trends anticipated deliver good investment returns.
Gearing
As noted above, the Company seeks to enhance returns for shareholders by using
short-term bank borrowings. The use of debt magnifies movements in the asset
value of the Company, be they positive or negative. The potential for this to
have a negative impact is managed by using a short-term (usually weekly)
revolving loan facility, combined with the liquidity of the investments in the
portfolio. It is the Board's current policy to borrow principally in euros,
since most of the portfolio holdings are denominated in that currency.
Third Party Advisers
Like most investment trust companies, the Company has no employees. All of the
Directors are non-executive. The Company relies on services provided by third
parties, including, in particular, the Manager, Gartmore Investment Limited,
Capita Sinclair Henderson Limited, who provide company secretarial and
accounting services and The Northern Trust Company, who act as custodian. The
Company reviews the internal control procedures of its service providers on a
regular basis.
Regulatory Breaches
Relevant legislation and regulations which apply to the Company include the
Companies Act 1985 and the Companies Act 2006 (as enacted) (the "Companies
Acts"), the ICTA and the Listing Rules of the Financial Services Authority
("FSA"). The Company has noted the recommendations of the Combined Code on
Corporate Governance and the AIC Code of Corporate Governance and the relevant
AIC Guide for investment companies. Its statement of compliance appears in the
full Annual Report and Accounts. A breach of ICTA could result in the Company
losing its status as an investment trust company and becoming subject to
capital gains tax, whilst a breach of the Listing Rules might result in censure
by the FSA. At each Board meeting the status of the Company is considered and
discussed, so as to check that all regulations are being adhered to by the
Company and its service providers.
There have been no breaches of laws or regulation during the period under
review and up to the date of this report.
Life of the Company
The Company's Articles of Association contain a requirement for shareholders to
vote on the continuation of the Company every three years. Under this
provision, if that resolution is not passed the Directors will, within three
months thereafter, convene an Extraordinary General Meeting at which a special
resolution for winding up will be proposed. Shareholders voted for the Company
to continue as an investment trust at the Annual General Meeting in 2005. The
next continuation vote will accordingly be put to shareholders at the Annual
General Meeting to be held on 4 September 2008.
Future Trends
While indications of slowing economic growth and euro strength in relation to
both sterling and the US dollar constitute headwinds in the near term, the
persistence of progressive local demographics combined with low corporate taxes
suggest that the investment case for Ireland remains firmly intact. The Irish
government's finances remain generally healthy and substantial infrastructure
spending over the next few years is set to continue. Meanwhile, following a
disappointing year, considerable value has emerged in the Irish stock market,
with many shares now trading at very modest levels when compared with their
expected earnings and dividends. Importantly, Irish banks appear, for the most
part, to have avoided the excesses of the credit crisis, so are probably in
better shape to help drive a further economic expansion than many of their
global peers.
Third Party Advisers
The Company's investments are managed by Gartmore Investment Limited under an
Investment Management Agreement dated 8 July 2002. The notice period to be
given by either party is twelve months. The management fee is calculated
monthly in arrears at the rate of 1.0% per annum on the value of total assets
less current liabilities. No compensation is payable in the event of
termination of the agreement with the requisite notice. However, in the event
that the Company terminates the agreement, the Manager will be entitled to any
fees due up to the date of termination, and compensation would be payable to
the Manager in the event that the Company terminated the agreement without
notice. The Agreement is reviewed by the Board annually.
Under an agreement dated 24 May 1995, company secretarial services and the
general administration of the Group are undertaken by Capita Sinclair Henderson
Limited for an annual fee, which in respect of the year ended 31 March 2008 was
�52,000 (including VAT). This fee is adjusted annually in accordance with the
Retail Price Index and is payable monthly in arrears. The Secretarial and
Administration Services Agreement may be terminated by either party at twelve
months' notice.
Computershare Investor Services plc acts as Registrar to the Company.
The Northern Trust Company provides custody services to the Group.
Continuing Appointment of the Manager and Secretary
In accordance with the Listing Rules published by the FSA, the Board, acting in
its capacity as a management engagement committee, has reviewed the performance
of the Manager in managing the Company's portfolio. The review considered the
Company's investment performance over the financial year as well as the longer
term performance. The Committee also reviewed the appropriateness of the terms
of the Investment Management Agreement, in particular, the length of notice
period, the management fee structure and the Manager's internal control
environment. The quality and adequacy of services provided by Capita Sinclair
Henderson Limited, including company secretarial and accounting, were reviewed
at the same time.
Following review, it is the Directors' opinion that the continuing appointment
of the Manager and the Secretary on the terms agreed is in the best interests
of the Company and its shareholders.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and the financial
statements in accordance with applicable United Kingdom law and those
International Financial Reporting Standards adopted by the European Union.
Company law requires the Directors to prepare financial statements for each
financial year which present fairly the financial position of the Company and
of the Group and the financial performance and cash flows of the Company and of
the Group for that period. In preparing these financial statements, the
Directors are required to:
- select suitable accounting policies and then apply them consistently;
- make judgments and estimates that are reasonable and prudent;
- present information, including accounting policies, in a manner that provides
relevant, reliable, comparable and understandable information;
- state whether applicable International Financial Reporting Standards have
been followed, subject to any material departures disclosed and explained in
the financial statements; and
- provide additional disclosures when compliance with the specific requirements
in IFRS is insufficient to enable users to understand the impact of particular
transactions, other events and conditions on the entity's financial position
and financial performance.
The Directors are responsible for keeping proper accounting records that
disclose with reasonable accuracy, at any time, the financial position of the
Company and of the Group and to enable them to ensure that the financial
statements comply with the Companies Act 1985 and Article 4 of the IAS
Regulations. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors, to the best of their knowledge, state that:
- the financial statements, prepared in accordance with International Financial
Reporting Standards as adopted by the European Union, give a true and fair view
of the assets, liabilities, financial position and profit/(loss) of the Company
and the Group; and
- the Chairman's Statement, Manager's Review and Report of the Directors
include a fair review of the development and performance of the business and
the position of the Company and the Group together with a description of the
principal risks and uncertainties that it faces.
The Directors confirm that, so far as they are each aware, there is no relevant
audit information of which the Company's Auditor is unaware; and each Director
has taken all the steps that ought to have been taken as a Director to make
himself aware of any relevant audit information and to establish that the
Company's Auditor is aware of that information.
The Directors are responsible for the maintenance and integrity of the
corporate and financial information included on the Company's website.
Legislation in the United Kingdom governing the preparation and dissemination
of financial statements may differ from legislation in other jurisdictions.
By order of the Board
Harry Sheridan
Chairman
23 June 2008
CONSOLIDATED INCOME STATEMENT for the year ended 31 March 2008
2008 2007
Revenue Capital Revenue Capital
Return Return Total Return Return Total
Note �'000 �'000 �'000 �'000 �'000 �'000
(Losses)/gains on
investments at fair
value 11 - (19,851) (19,851) - 32,851 32,851
Exchange gains - 1,060 1,060 - 153 153
Net investment result - (18,791) (18,791) - 33,004 33,004
Total income 2 1,868 - 1,868 1,492 - 1,492
Expenses
Investment management
fee* 3 (1,309) - (1,309) (1,431) - (1,431)
Cost of investment
transactions 11 - (1,711) (1,711) - (1,143) (1,143)
Other expenses 4 (358) - (358) (367) - (367)
Total expenses (1,667) (1,711) (3,378) (1,798) (1,143) (2,941)
Net return/(deficit)
before finance costs
and taxation 201 (20,502) (20,301) (306) 31,861 31,555
Finance costs 6 (50) - (50) (138) - (138)
Net return/(deficit)
before taxation 151 (20,502) (20,351) (444) 31,861 31,417
Taxation 7 (7) (44) (51) 53 (33) 20
Net return/(deficit)
after taxation for
the period 144 (20,546) (20,402) (391) 31,828 31,437
pence pence pence pence pence pence
Basic & diluted
return per Ordinary
share 10 1.05 (149.60) (148.55) (2.74) 223.30 220.56
The Total column of this statement represents the Income Statement of the Group
prepared in accordance with International Financing Reporting Standards
("IFRS"). The supplementary Revenue and Capital return columns are both
prepared under guidance published by the Association of Investment Companies.
All items in the above statement derive from continuing operations.
* Includes the associated irrecoverable VAT cost.
The notes form an integral part of these financial statements.
CONSOLIDATED BALANCE SHEET as at 31 March 2008
As at 31 As at 31
March March
2008 2007
Note �'000 �'000
Non-current assets
Investments at fair value through profit or
loss 11 110,074 124,685
Current assets
Trade and other receivables 14 1,172 2,277
Cash and cash equivalents 7,293 17,855
8,465 20,132
Total assets 118,539 144,817
Current liabilities
Trade and other payables 15 (4,749) (521)
(4,749) (521)
Total assets less current liabilities 113,790 144,296
Non-current liabilities
Deferred tax liabilities 16 (51) -
Total liabilities (4,800) (521)
Net assets 113,739 144,296
Capital and reserves
Share capital 17 3,247 3,753
Share premium account 18 1,101 1,101
Special reserve 18 16,645 16,645
Capital redemption reserve 18 2,531 2,025
Capital reserve 18 89,220 123,038
Own shares held 18 - (3,241)
Retained earnings 18 995 975
Total equity 113,739 144,296
Net asset value per Ordinary share 19 875.75p 1012.46p
These financial statements were approved by the Board of Directors and were
authorised for issue on 23 June 2008 and were signed on its behalf by:
Harry Sheridan
Chairman
The notes form an integral part of these financial statements.
COMPANY BALANCE SHEET as at 31 March 2008
As at 31 As at 31
March March
2008 2007
Note �'000 �'000
Non-current assets
Investments at fair value through profit or
loss 11 110,074 124,685
Investment in subsidiary undertaking 13 - -
Current assets
Trade and other receivables 14 1,172 2,277
Cash and cash equivalents 7,293 17,855
8,465 20,132
Total assets 118,539 144,817
Current liabilities
Trade and other payables 15 (4,749) (521)
Amount due to Subsidiary 13 (557) (638)
(5,306) (1,159)
Total assets less current liabilities 113,233 143,658
Non-current liabilities
Deferred tax liabilities 16 (51) -
Total liabilities (5,357) (1,159)
Net assets 113,182 143,658
Capital and reserves
Share capital 17 3,247 3,753
Share premium account 18 1,101 1,101
Special reserve 18 16,645 16,645
Capital redemption reserve 18 2,531 2,025
Capital reserve 18 89,220 123,038
Own shares held 18 - (3,241)
Retained earnings 18 438 337
Total equity 113,182 143,658
These financial statements were approved by the Board of Directors and were
authorised for issue on 23 June 2008 and were signed on its behalf by:
Harry Sheridan
Chairman
The notes form an integral part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2008
Share Capital Own
Share premium Special redemption Capital shares Retained
capital account reserve reserve reserve held earnings Total
�'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
31 March 2007 3,753 1,101 16,645 2,025 123,038 (3,241) 975 144,296
Net return after taxation
for the period - - - - (20,546) - 144 (20,402)
Shares purchased for
Treasury - - - - - (5,319) - (5,319)
Treasury shares cancelled (347) - - 347 (8,560) 8,560 - -
Shares purchased for
cancellation (159) - - 159 (4,712) - - (4,712)
Dividends paid - - - - - - (124) (124)
31 March 2008 3,247 1,101 16,645 2,531 89,220 - 995 113,739
31 March 2006 3,753 1,101 16,645 2,025 91,210 (3,169) 1,473 113,038
Net return after taxation
for the period - - - - 31,828 - (391) 31,437
Shares purchased for
Treasury - - - - - (72) - (72)
Dividends paid - - - - - - (107) (107)
31 March 2007 3,753 1,101 16,645 2,025 123,038 (3,241) 975 144,296
The notes form an integral part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY for the year ended 31 March 2008
Share Capital Own
Share premium Special redemption Capital shares Retained
capital account reserve reserve reserve held earnings Total
�'000 �'000 �'000 �'000 �'000 �'000 �'000 �'000
31 March 2007 3,753 1,101 16,645 2,025 123,038 (3,241) 337 143,658
Net return after taxation
for the period - - - - (20,546) - 225 (20,321)
Shares purchased for
Treasury - - - - - (5,319) - (5,319)
Treasury shares cancelled (347) - - 347 (8,560) 8,560 - -
Shares purchased for
cancellation (159) - - 159 (4,712) - - (4,712)
Dividends paid - - - - - - (124) (124)
31 March 2008 3,247 1,101 16,645 2,531 89,220 - 438 113,182
31 March 2006 3,753 1,101 16,645 2,025 91,210 (3,169) 950 112,515
Net return after taxation
for the period - - - - 31,828 - (506) 31,322
Shares purchased for
Treasury - - - - - (72) - (72)
Dividends paid - - - - - - (107) (107)
31 March 2007 3,753 1,101 16,645 2,025 123,038 (3,241) 337 143,658
The notes form an integral part of these financial statements.
CONSOLIDATED CASH FLOW STATEMENT for the year ended 31 March 2008
Year to Year to
31 March 31 March
2008 2007
Note �'000 �'000
Cash flows from operating activities
Consolidated net (deficit)/return before tax (20,351) 31,417
Adjustments to reconcile net (deficit)/return before
tax to net cash flows from operating activities:
Losses/(gains) on investments 21,562 (31,708)
Exchange gains (1,060) (153)
Finance costs 50 138
(Decrease)/increase in trade and other payables (34) 174
(Increase)/decrease in trade and other receivables (137) 16
Purchases of investments (125,532) (76,377)
Sales of investments 123,369 97,235
Revaluation of foreign currency balances 1,081 159
Net cash flows (used in)/generated from operating
activities (1,052) 20,901
Cash flows from financing activities
Equity dividends paid (124) (107)
Share purchases for Treasury and cancellation (9,346) (72)
Repayment of bank loan - (3,837)
Interest on bank loan and overdraft (40) (133)
Net cash flows used in financing activities (9,510) (4,149)
(Decrease)/increase in cash and cash equivalents 20 (10,562) 16,752
Cash and cash equivalents at 1 April 2007 17,855 1,103
Cash and cash equivalents at 31 March 2008 7,293 17,855
The notes form an integral part of these financial statements.
COMPANY CASH FLOW STATEMENT for the year ended 31 March 2008
Year to Year to
31 March 31 March
2008 2007
Note �'000 �'000
Cash flows from operating activities
Company net (deficit)/return before tax (20,300) 31,280
Adjustments to reconcile net (deficit)/return before
tax to net cash flows from operating activities:
Losses/(gains) on investments 21,562 (31,708)
Exchange gains (1,060) (153)
Finance costs 50 138
(Decrease)/increase in trade and other payables (34) 174
(Increase)/decrease in trade and other receivables (137) 6
Purchases of investments (125,532) (76,377)
Sales of investments 123,369 97,235
Revaluation of foreign currency balances 1,081 159
Net cash flows (used in)/generated from operating
activities (1,001) 20,754
Cash flows from financing activities
Equity dividends paid (124) (107)
Share purchases for Treasury and cancellation (9,346) (72)
Loan (to)/from Subsidiary (51) 147
Repayment of bank loan - (3,837)
Interest on bank loan and overdraft (40) (133)
Net cash flows used in financing activities (9,561) (4,002)
(Decrease)/increase in cash and cash equivalents 20 (10,562) 16,752
Cash and cash equivalents at 1 April 2007 17,855 1,103
Cash and cash equivalents at 31 March 2008 7,293 17,855
The notes form an integral part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
1. Accounting Policies
Gartmore Irish Growth Fund PLC is a Company incorporated in Great Britain and
registered in England and Wales under the Companies Act 1985. The consolidated
Annual Report for the Group for the year ended 31 March 2008 comprises the
results of the Company and its Subsidiary, Gartmore Irish Smaller Companies
Investment Limited (together referred to as the "Group"). The Company is
registered as a public limited company and is an investment company as defined
by Section 833 of the Companies Act 2006. The Subsidiary also engages in
investment activity and underwriting.
Basis of preparation/statement of compliance
The consolidated annual financial statements of the Group have been prepared
under International Financial Reporting Standards ("IFRS"), which comprise
standards and interpretations approved by the International Accounting
Standards Board. The annual financial statements of the Company have been
prepared in accordance with IFRS as adopted by the European Union, and as
applied in accordance with provisions of the Companies Act 1985. The financial
statements have also been prepared in accordance with the Statement of
Recommended Practice ("SORP") (as amended December 2005) for investment trust
companies except to any extent where it conflicts with IFRS.
The accounting policies which follow set out those policies which apply in
preparing the financial statements for the year ended 31 March 2008. There are
no differences between the accounting policies applied to the Group and the
Company.
Convention
The financial statements are presented in sterling, being the currency of the
primary environment in which the Group operates, rounded to the nearest
thousand pounds (�'000), except where otherwise indicated.
The financial statements have been prepared on a going concern basis consistent
with previous years, the validity of which is dependent on the outcome of the
vote on the ordinary resolution the Board will put to the Annual General
Meeting on 4 September 2008, to the effect that the Company continues as an
investment trust. In particular, no provision has been made for the costs of
winding up the Company or of liquidating its investments in the event that the
continuation vote resolution (Resolution 10) is not carried. The value which
would be generated from the realisation of the Company's assets on a winding up
cannot currently be estimated since this would be determined by investment
markets and any reconstruction proposals that the Board might propose to
shareholders at that time.
Investments and derivatives have been measured at fair value and are classified
as fair value through profit or loss.
Basis of consolidation
The Group financial statements consolidate the financial statements of the
Company and its wholly-owned Subsidiary, Gartmore Irish Smaller Companies
Investment Limited, drawn up to 31 March 2008.
The Subsidiary is consolidated from the date of its acquisition, being the date
on which the Group obtains control, and continues to be consolidated until the
date that such control ceases. Control comprises the power to govern the
financial and operating policies of the investee so as to obtain benefit from
its activities and is achieved through direct or indirect ownership of voting
rights. The financial statements of the Subsidiary are prepared for the same
reporting year as the Parent Company, using consistent accounting policies. All
inter-company balances and transactions, including unrealised profits arising
from them, are eliminated.
As permitted by Section 230 of the Companies Act 1985, the Company has not
presented its own Income Statement. The amount of the Company's return for the
financial year dealt with in the accounts of the Group is a deficit of �
20,321,000 (2007 surplus: �31,322,000).
Segmental reporting
The Directors are of the opinion that the Group is engaged in a single segment
of business, being investment business.
Income recognition
Dividends receivable on quoted equity shares are brought into account on the
ex-dividend date.
Dividends receivable on equity shares where no ex-dividend date is quoted are
brought into account when the Group's right to receive payment is established.
All other income is credited to the Consolidated Income Statement on an
accruals basis.
Underwriting commission
Underwriting commission is recognised as income 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, the same proportion of the
commission received is treated as a deduction from the cost of the shares taken
up, with the balance taken to income.
Expenses
All expenses are accounted for on an accruals basis. Expenses have been treated
as revenue costs except as follows:
- expenses which are incidental to the acquisition or disposal of an investment
are treated as capital costs and separately identified and disclosed (see note
11); and
- expenses are treated as capital costs where a connection with the maintenance
or enhancement of the value of the investments can be demonstrated.
Foreign currency transactions
Transactions involving currencies other than sterling are recorded at the
exchange rate ruling on the transaction date.
Investments and foreign currency balances are converted to sterling at the rate
of exchange ruling at the Balance Sheet date. Exchange gains and losses are
taken to the Consolidated Income Statement in the period in which they arise.
Investments at fair value through profit or loss
Investments held as non-current assets are designated upon initial recognition
at 'fair value through profit or loss'. Investments held as current assets are
classified as 'held for trading' and are acquired for sale in the short term.
Purchases of investments are recognised on a trade date basis and sales of
investments are recognised at the trade date of the disposal with proceeds
measured at fair value. Fair value of the investments is generally determined
by reference to stock exchange quoted bid prices as at the close of business at
the year-end, any movements in fair value being taken through the Income
Statement. Interest accrued on fixed-interest rate securities at the date of
purchase or sale is accounted for separately, as accrued income or as an income
receipt, so that the value or purchase price or sale proceeds are shown net of
such items. Unrealised gains and losses are recognised in the Income Statement.
Realised gains and losses arising on the disposal of investments are also taken
to the Income Statement.
Taxation
Deferred tax is recognised in respect of all temporary differences at the
Balance Sheet date where transactions or events have occurred that result in an
obligation to pay more, or the right to pay less tax in the future. This is
subject to deferred tax assets being recognised only if it is considered more
likely than not that there will be suitable profits from which the future
reversal of the temporary differences can be deducted.
The tax effect of different items of income/gain and expenditure/loss is
allocated between capital and revenue on the same basis as the particular item
to which it relates, using the marginal method.
Capital reserve
The following are accounted for in this reserve:
- gains and losses on the realisation of investments;
- transaction costs;
- realised exchange differences of a capital nature.
- increases and decreases in the valuation of investments held at the year-end;
and
- unrealised exchange differences of a capital nature.
Dividends payable to shareholders
No equity dividend is accrued unless the shareholders' right to receive payment
is established in the period. Dividends proposed after the Balance Sheet date
are disclosed in note 8.
Cash and cash equivalents
Cash in hand and at banks and short-term deposits which are held to maturity
are carried at cost. Cash and cash equivalents are defined as cash in hand,
demand deposits and short-term, highly liquid investments readily convertible
to known amounts of cash and subject to insignificant risk of changes in value.
Bank overdrafts repayable on demand, which form an integral part of the Group's
cash management, are included as a component of cash and cash equivalents for
the purpose of the Cash Flow Statements.
Bank loans and borrowings
All bank loans and borrowings are initially recognised at cost, being the fair
value of the consideration received, less direct issue costs where applicable.
After initial recognition, all interest-bearing loans and borrowings are
subsequently measured at amortised cost. Any difference between cost and
redemption value has been recognised in the consolidated Income Statement over
the period of the borrowings on an effective interest basis. Any costs of
borrowing are expensed as incurred.
Financial instruments and hedging
The Company uses financial instruments such as put options to hedge its risks
associated with fluctuations in the investment portfolio. Gains or losses
arising from the changes in fair value on derivatives that do not qualify for
hedge accounting are taken directly to the Income Statement.
New standards and interpretations not applied
IASB and IFRIC have issued the following standards and interpretations which
are not yet effective for the year ended 31 March 2008 and have not been
applied in preparing these financial statements.
Effective
date
International Accounting Standards (IAS/IFRS)
IAS 1
(revised)
Presentation of Financial Statements: a revised 1 January
presentation 2009
Puttable financial instruments and Obligations existing on 1 January
Liquidation 2009
IAS 23 Borrowing Costs 1 January
(revised) 2009
IAS 32 Puttable financial instruments and Obligations existing on 1 January
(revised) Liquidation 2009
IFRS 2 Share based payments: vesting conditions and cancellations 1 January
2009
IFRS 8 Operating Segments 1 January
(revised) 2009
International Financial Reporting Interpretations Committee (IFRIC)
IFRIC 12 Service Concession Arrangements 1 January
2008
IFRIC 14 IAS 19 - The Limit on a Defined Benefit Asset, minimum 1 January
funding requirements and their interaction 2008
The Directors do not anticipate that the initial adoption of the above
standards, amendments and interpretations will have a material impact in the
future periods.
2. Income 2008 2007
�'000 �'000
Income from investments:
UK net dividend income 126 198
Unfranked investment income 1,308 1,047
1,434 1,245
Other income:
Bank interest receivable 321 123
Dealing gains of Subsidiary 94 124
Underwriting commission 19 -
434 247
Total income 1,868 1,492
Total income comprises:
Dividends 1,387 1,245
Interest 368 123
Other income 113 124
1,868 1,492
Income from investments:
Listed UK 173 198
Listed overseas 1,261 1,047
1,434 1,245
3. Investment Management Fee 2008 2007
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Investment management fee 1,229 - 1,229 1,218 - 1,218
Irrecoverable VAT thereon 80 - 80 213 - 213
1,309 - 1,309 1,431 - 1,431
The investment management fee, payable to Gartmore Investment Limited, has been
calculated at 1.0% per annum of the gross asset value (less current
liabilities) of the Group held at each month end. At 31 March 2008, an amount
of �372,000 was outstanding for payment when due (2007: �407,000).
The Company ceased to pay VAT on its management fee from August 2007 as a
result of the AIC/Claverhouse judgement.
4. Other Expenses 2008 2007
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
Secretarial services 52 - 52 50 - 50
Directors' remuneration 100 - 100 89 - 89
Auditor's remuneration for:
- Audit 18 - 18 19 - 19
- Taxation services 6 - 6 6 - 6
Other 182 - 182 203 - 203
358 - 358 367 - 367
The Directors do not consider that the provision of non-audit work to the
Company affects the independence of the Auditor.
5. Directors' Remuneration 2008 2007
�'000 �'000
Total fees 100 89
H P Sheridan (Chairman) 23 23
R A M Baillie 15 15
G R Caldwell 15 15
W R Cotter 15 4
S P Fitzpatrick 15 15
R A Milliken 17 17
There were no employees of the Company other than the Directors and none of the
Directors was in receipt of pension contributions.
6. Finance Costs 2008 2007
�'000 �'000
Interest on bank loan repayable within one year 40 130
On bank overdraft 10 8
50 138
7. Taxation 2008 2007
Revenue Capital Total Revenue Capital Total
�'000 �'000 �'000 �'000 �'000 �'000
a) Analysis of charge in
year:
Corporation tax (credit)/ (44) 44 - (33) 33 -
charge
Total current tax (credit)/
charge for
year (see note 7b) (44) 44 - (33) 33 -
Deferred tax (note 16) 51 - 51 (20) - (20)
Total deferred tax for year 51 - 51 (20) - (20)
Total tax charge/(credit) for 7 44 51 (53) 33 (20)
year
b) Factors affecting current taxation charge:
The tax assessed on the net return of the year is lower than the rate of
corporation tax of 30% (2007: 30%). The differences are explained below:
2008 2007
�'000 �'000
Net return before taxation (20,351) 31,417
Corporation tax 30% (2007: 30%) (6,105) 9,425
Effects of:
Non taxable UK dividends (38) (59)
Expenses not deductible for tax purposes - 6
Accrued income taxable on receipt (51) 4
Current period excess expenses - 165
Small companies relief - (16)
Proceeds from sale of redeemable shares (44) -
Non-taxable items in capital 6,150 (9,525)
Current tax credit for the year (7a) - -
Due to the Company's status as an investment trust, and the intention to
continue meeting the conditions required to obtain approval to retain that
status in the foreseeable future, the Company has not provided deferred tax on
any capital gains and losses arising on the revaluation or disposal of
investments.
The corporation tax charge in the capital account of �44,000 (2007: �33,000)
(see note 18) arises on redemption proceeds taxable as overseas dividends.
2008 2007
�'000 �'000
c) Provision for deferred tax:
Accrued income taxable on receipt (see note 16) 51 -
2008 2007
8. Dividends �'000 �'000
Amounts recognised as distributions to equity holders within the
period
Dividend for the year ended 31 March 2007 of 0.9p (2006: 0.75p) per
share 124 107
The Company purchased for Treasury 488,000 Ordinary shares of 25p each
following the year ended 31 March 2007 and prior to the ex-dividend date of the
final dividend. As no dividend is payable on shares that have been purchased
for Treasury, the dividends due on these shares of �4,000 reverted back to the
Company.
Proposed distribution for the year ended 31 March 2008 is 1.06p per share,
amounting to �138,000.
2008 2007
�'000 �'000
Net return after taxation per Company accounts 225 (506)
Final dividend proposed of 1.06p (2007: 0.9p) per share (138) (128)
Revenue/(deficit) retained for s842 purposes 87 (634)
9. Profit of Parent Company
As permitted by Section 230 of the Companies Act 1985, the Revenue Account of
the Company is not presented as part of these financial statements. The
consolidated net return after taxation for the financial year includes a
deficit of �20,321,000 (2007 surplus: �31,322,000) which is dealt with in the
financial statements of the Company.
10. Return per Ordinary 2008 2007
share
Weighted Weighted
average average
Net Ordinary Per Net Ordinary Per
return shares share return shares share
�'000 pence �'000 pence
Revenue
Basic and diluted 144 13,734,236 1.05 (391) 14,253,467 (2.74)
return per share
Capital
Basic and diluted (20,546) 13,734,236 (149.60) 31,828 14,253,467 223.30
return per share
Total
Basic and diluted (20,402) 13,734,236 (148.55) 31,437 14,253,467 220.56
return per share
11. Listed Investments 2008 2007
�'000 �'000
Group and Company
Investments listed on a recognised investment exchange 110,074 124,685
Opening book cost 97,219 86,863
Opening unrealised appreciation 27,466 28,142
Opening valuation 124,685 115,005
Movements in the year:
Purchases at cost 129,088 76,356
Sales
- proceeds (122,137) (98,384)
- realised gains on sales 11,576 32,384
Unrealised (depreciation)/appreciation of investments (13,609) 21,821
Transfer on disposals of investments (19,529) (22,497)
Closing valuation 110,074 124,685
2008 2007
�'000 �'000
Group and Company
Closing book cost 115,746 97,219
Closing unrealised (depreciation)/appreciation (5,672) 27,466
110,074 124,685
2008 2007
�'000 �'000
Realised gains on sales 11,576 32,384
Unrealised (depreciation)/appreciation of investments (13,609) 21,821
Transfer on disposals of investments (19,529) (22,497)
(Losses)/gains on investments (after deduction of transaction (21,562) 31,708
costs)*
An analysis of the investment portfolio by broad industrial or commercial
sector and a list of the investments by market value are detailed above.
* Transactions costs amounting to �1,711,000 (2007: �1,143,000) have been
deducted from gains on investments being acquisitions �1,450,000 (2007: �
911,000) and disposals �261,000 (2007: �232,000).
12. Significant Interests
The Group and Company have a holding of 3% or more of the voting rights in the
following investments that are material in the context of the financial
statements:
Percentage
Name of Undertaking Class of Share of class held
Andor Technology Ordinary �0.02 10.8
Datalex Ordinary US$0.10 9.6
Qualceram Shires Ordinary Euro0.12 8.4
Island Oil & Gas Ordinary Euro0.01 5.7
Clearstream Technology Ordinary Euro0.125 5.5
Newcourt Group Ordinary Euro0.25 4.7
Conroy Diamonds Ordinary Euro0.03 4.6
AGI Therapeutics Ordinary Euro0.01 3.7
Horizon Technology Ordinary Euro0.07 3.1
Galantas Gold Ordinary Euro0.10 3.0
13. Investment in Subsidiary
The Company owns the whole of the issued ordinary share capital (�1) of
Gartmore Irish Smaller Companies Investment Limited, a dealing company
registered in England and Wales. The Subsidiary has made loans to the Company
amounting to �557,000 (2007: �638,000). The Company received a dividend of �
150,000 from its Subsidiary during the year.
14. Trade and other receivables 2008 2007
Group Company Group Company
�'000 �'000 �'000 �'000
Amounts falling due within one year:
Prepayments and accrued income 28 28 72 72
Sales for future settlement 501 501 1,754 1,754
Dividends receivable 643 643 451 451
1,172 1,172 2,277 2,277
15. Trade and other payables 2008 2007
Group Company Group Company
�'000 �'000 �'000 �'000
Amounts falling due within one year:
Bank loan - - - -
Purchases for future settlement 4,245 4,245 - -
Other payables 504 504 521 521
4,749 4,749 521 521
The Company has loan facilities of Euro33.7 million, (sterling equivalent �26.9
million), together with an overdraft facility of Euro1.3 million (sterling
equivalent �1.0 million), with Ulster Bank Ireland Limited, secured by means of
a lien over the assets of the Company and its Subsidiary. The loan facility is
repayable in full by no later than 30 September 2008, and may be drawn down in
tranches of a minimum of Euro250,000 (sterling equivalent �199,000), unless
otherwise agreed.
16. Deferred Tax 2008 2007
Group Company Group Company
�'000 �'000 �'000 �'000
Deferred taxation comprises:
Taxation on accrued income 51 51 - -
The movement on the provision for deferred taxation is as follows:
Beginning of year - - 20 17
Movement in provision for the year 51 51 (20) (17)
End of year 51 51 - -
17. Share Capital 2008 2007
�'000 �'000
Authorised:
40,000,000 Ordinary shares of 25p each 10,000 10,000
10,000 10,000
Ordinary shares of 25p
each
Number �'000
Allotted, called up and fully paid:
Shares at beginning of year 15,012,042 3,753
Shares held in Treasury at beginning of year (760,000) (190)
subsequently cancelled
Shares purchased for Treasury and subsequently (626,000) (157)
cancelled
Shares purchased for cancellation (638,500) (159)
End of year 12,987,542 3,247
Of the shareholder authority granted at the Annual General Meeting held on 29
August 2007, there remained an unused authority to buy back a further 1,286,729
shares at the year-end.
During the year the Company purchased 626,000 Ordinary shares for Treasury at a
cost of �5,319,000. On 27 November 2007 the Company cancelled all of these
shares together with the 760,000 Ordinary shares held in Treasury at the
previous year-end.
The Company also purchased 638,500 Ordinary shares for cancellation during the
year at a cost of �4,712,000.
Since the year end the Company has purchased 158,500 Ordinary shares for
cancellation at a total cost of �1,186,000.
Duration
The Company had a seven-year life through to the Annual General Meeting in 2002
at which an ordinary resolution was passed that the Company should continue as
an investment trust. In accordance with the Articles of Association a similar
resolution will be proposed at every third subsequent Annual General Meeting.
Accordingly, a resolution that the Company should continue as an investment
trust will be proposed at the forthcoming Annual General Meeting.
The Company does not have any externally imposed capital requirements. The
capital of the Company is managed in accordance with its investment policy in
pursuit of its investment objectives as detailed above.
18. Reserves Capital Capital Capital Own
Share Special redemption reserve reserve shares Retained
premium reserve reserve realised unrealised held earnings
�'000 �'000 �'000 �'000 �'000 �'000 �'000
Group
Beginning of
year 1,101 16,645 2,025 96,112 26,926 (3,241) 975
Net losses
on
realisation
of
investments - - - (7,953) - - -
Transfer on
disposal of
investments - - - 19,529 (19,529) - -
Unrealised
depreciation
of
investments - - - - (13,609) - -
Exchange
gains - - - 16 1,044 - -
Tax charge
on
redemption
proceeds
taxable as
overseas
dividends - - - (44) - - -
Shares
purchased
for Treasury - - - - - (5,319) -
Treasury
shares
cancelled - - 347 (8,560) - 8,560 -
Shares
purchased
for
cancellation - - 159 (4,712) - - -
Dividends
paid - - - - - - (124)
Net surplus
for the year - - - - - - 144
End of year 1,101 16,645 2,531 94,388 (5,168) - 995
Capital Capital Capital Own
Share Special redemption reserve reserve shares Retained
premium reserve reserve realised unrealised held earnings
�'000 �'000 �'000 �'000 �'000 �'000 �'000
Company
Beginning of
year 1,101 16,645 2,025 96,112 26,926 (3,241) 337
Net losses
on
realisation
of
investments - - - (7,953) - - -
Transfer on
disposal of
investments - - - 19,529 (19,529) - -
Unrealised
appreciation
of
investments - - - - (13,609) - -
Exchange
gains - - - 16 1,044 - -
Tax charge
on
redemption
proceeds
taxable as
overseas
dividends - - - (44) - - -
Shares
purchased
for Treasury - - - - - (5,319) -
Treasury
shares
cancelled - - 347 (8,560) - 8,560 -
Shares
purchased
for
cancellation - - 159 (4,712) - - -
Dividends
paid - - - - - - (124)
Net surplus
for the year - - - - - - 225
End of year 1,101 16,645 2,531 94,388 (5,168) - 438
19. Net Asset Value per Ordinary Share
The net asset value per share and the net assets attributable at the year end
calculated in accordance with the Articles of Association were as follows:
Net asset value per Net assets attributable
share attributable
2008 2007 2008 2007
pence pence �'000 �'000
Ordinary shares
- basic and diluted 875.75 1012.46 113,739 144,296
Net asset value per Ordinary share is based on net assets and on 12,987,542
(2007: 14,252,042) Ordinary shares being the number of Ordinary shares in issue
at the year end (excluding nil Ordinary shares being held in Treasury (2007:
760,000)).
20. Reconciliation of Net Cash Flow to 2008 2007
Movement in Cash and Cash Equivalents �'000 �'000
(Decrease)/increase in cash in year (11,622) 16,725
Exchange movement 1,060 27
(10,562) 16,752
Cash and cash equivalents at beginning of year 17,855 1,103
Cash and cash equivalents at end of year 7,293 17,855
21. Analysis of Changes in Cash and At 1 April Cash Exchange At 31 March
Cash Equivalents 2007 Flow movement 2008
�'000 �'000 �'000 �'000
Cash in hand, at bank 17,855 (11,622) 1,060 7,293
22. Capital Commitments and Contingent Liabilities
At 31 March 2008 there were no contingent liabilities in respect of outstanding
underwriting commitments (2007: �nil).
23. Contingent Asset
As a result of the AIC/Claverhouse ruling the Company no longer pays VAT on its
investment management fees. The Company is in discussions with the Manager
regarding a reclaim of VAT previously paid. The amount to be reclaimed is still
to be finalised and is not therefore dealt with in these financial statements.
24. Analysis of Net Assets by Valuation at Net Valuation at
Location of Incorporation 31 March 2007 transactions Depreciation 31 March 2008
�'000 % �'000 �'000 �'000 %
Equities
United Kingdom 6,937 4.8 411 (3,791) 3,557 3.1
Republic of Ireland 117,748 81.6 18,116 (29,347) 106,517 93.7
Total investments 124,685 86.4 18,527 (33,138) 110,074 96.8
Net current assets 19,611 13.6 (15,895) - 3,716 3.3
Deferred tax - - (51) - (51) (0.1)
Net assets 144,296 100.0 2,581 (33,138) 113,739 100.0
25. Analysis of Financial Assets and Liabilities
Background
The investment objective of the Company is to provide shareholders with
long-term capital growth through investment in quoted companies which are
either incorporated in the Republic of Ireland or Northern Ireland or, if
elsewhere, derive the majority of their turnover or profits from the Republic
of Ireland or Northern Ireland.
The Group's assets, excluding short-term debtors, are comprised of financial
instruments, which are largely investments in equity securities and cash
balances.
The Company has multi-currency loan and overdraft facilities totalling in
aggregate Euro35 million, sterling equivalent �27.9 million (2007: Euro35 million, �
23.8 million), with Ulster Bank Ireland Limited, secured by means of a lien
over the assets of the Company and its Subsidiary undertaking. At the year end
an amount of Euronil, sterling equivalent �nil (2007: Euronil, sterling equivalent �
nil), was outstanding under the loan facility.
The Group has little exposure to credit and cash flow risk.
The principal risks which the Group faces in its portfolio management
activities are:
- market price risk, i.e. movements in the value of investment holdings caused
by factors other than interest rate or currency movements;
- foreign currency risk;
- interest rate risk; and
- liquidity constraints.
The Board's policies for managing these risks are summarised below and have
been applied by the Manager throughout the year:
Policy
The Directors monitor financial information on a regular basis at each Board
meeting. The Manager monitors the financial risks on a daily basis.
As required by International Accounting Standard No 32: Financial Instruments:
Disclosure and Presentation, an analysis of financial assets and liabilities,
which identifies the risk to the Group of holding such items, is given below:
(i) Market price risk
Market price risk arises mainly from uncertainty about future prices of
investments held by the Group. It represents the potential loss the Group might
suffer through holding market positions in the face of price movements.
Adherence to the investment objectives and the limits on investment set by the
Company mitigates the risk of excessive exposure to any one particular type of
security or issuer.
If the investment portfolio valuation fell by 5% from the 31 March 2008
valuation with all other variables held constant there would have been a
reduction of �5,504,000 (2007: �6,234,000) in the return before taxationand
equity. An increase of 5% in the investment portfolio valuation would have had
an equal and opposite effect in the return before taxation and equity.
(ii) Foreign currency risk
The Group's portfolio is invested largely in euro-denominated securities and
movements in the euro can significantly affect their sterling value. The Group
does not normally hedge against foreign currency movements affecting the value
of the investment portfolio, but takes account of this risk when making
investment decisions.
The Company's loan facilities are expressed in euros, inter alia, in order to
manage the Company's exposure to foreign currency risk in the eurozone.
The Company's net asset value is published on a daily basis, in sterling, and
currency movements are included in the calculation.
The Company's currency exposure is shown below.
(iii) Interest rate risk
The Group finances its operations principally through its issued share capital,
reserves, a variable rate euro loan and bank borrowings. The Group borrows in
the desired currencies at variable rates to manage the Group's exposure to
interest rate fluctuations. The Group's policy is to keep all of its borrowings
at variable rates of interest. At the year end the Group had borrowings of Euro
nil, sterling equivalent �nil (2007: Euronil, �nil).
If the average bank interest rates as at 31 March 2008 had been 1% lower
throughout the year, with all other variables held constant, income before
taxation and equity would have been lower by �73,000 (2007: �179,000). If
interest rates had been higher throughout the year by 1% there would have been
an equal and opposite effect in the income before taxation and equity. The
calculations are based on funds invested in cash deposits as at 31 March 2008
and are not representative of the year as a whole.
The Company's exposure to interest rate risk is shown below.
(iv) Use of derivatives
No derivative contracts were entered into during the year.
(v) Liquidity constraints
The Group's assets are comprised largely of quoted securities which can be sold
to meet funding commitments if necessary.
Short-term flexibility is achieved through the use of loan and overdraft
facilities.
Financial assets
The majority of the Group's fixed asset investments are listed on the Irish
Stock Exchange and the London Stock Exchange. These assets are discussed in the
Manager's Review and are listed above.
Maturity analysis
The Company does not have any assets or liabilities maturing in more than one
year other than the deferred tax liability which will reverse in 1-2 years.
The interest rate profile of the Group's and Company's financial assets at 31
March 2008 was:
Financial assets on which no Floating rate
Total interest is paid financial assets
�'000 �'000 �'000
Group and
Company
Sterling
Investments 20,796 20,796 -
Current assets 1,886 405 1,481
and cash
22,682 21,201 1,481
Euro
Investments 85,654 85,654 -
Current assets 6,579 767 5,812
and cash
92,233 86,421 5,812
US Dollar
Investments 3,624 3,624 -
Current assets - - -
and cash
3,624 3,624 -
118,539 111,246 7,293
The interest rate risk profile of the Group's and Company's financial assets at
31 March 2007 was:
Financial assets on which no interest Floating rate financial
Total is paid assets
�'000 �'000 �'000
Group and Company
Sterling
Investments 27,605 27,605 -
Current assets and 602 345 257
cash
28,207 27,950 257
Euro
Investments 83,354 83,354 -
Current assets and 18,105 1,928 16,177
cash
101,459 85,282 16,177
US Dollar
Investments 13,726 13,726 -
Current assets and 1,425 4 1,421
cash
15,151 13,730 1,421
144,817 126,962 17,855
Financial liabilities
The Group finances its operations principally through its issued share capital,
reserves and variable rate euro loans. There were no other bank borrowings. The
Company has loan and overdraft facilities as described in note 15. Currency
exposure of the Group's and Company's financial liabilities as at 31 March 2008
was as follows:
Total Sterling Euro US$
�'000 �'000 �'000 �'000
Group
Creditors 4,749 2,522 2,227 -
Total Sterling Euro US$
�'000 �'000 �'000 �'000
Company
Creditors 5,306 3,079 2,227 -
Currency exposure of the Group's and Company's financial liabilities as at 31
March 2007 was as follows:
Total Sterling Euro US$
�'000 �'000 �'000 �'000
Group
Creditors 521 521 - -
Total Sterling Euro US$
�'000 �'000 �'000 �'000
Company
Creditors 1,159 1,159 - -
The interest rate risk profile of the financial liabilities of the Group and
Company at 31 March 2008 was as follows:
Weighted Weighted
Non- average average
interest Fixed interest period for
Total bearing rate rate which rate
�'000 �'000 �'000 % is fixed
Group
Other creditors 4,749 4,749 - - -
4,749 4,749 - - -
Weighted Weighted
Non- average average
interest Fixed interest period for
Total bearing rate rate which rate
�'000 �'000 �'000 % is fixed
Company
Other creditors 5,306 5,306 - - -
5,306 5,306 - - -
The interest rate risk profile of the financial liabilities of the Group and
Company at 31 March 2007 was as follows:
Weighted Weighted
Non- average average
interest Fixed interest period for
Total bearing rate rate which rate
�'000 �'000 �'000 % is fixed
Group
Other creditors 521 521 - - -
521 521 - - -
Weighted Weighted
Non- average average
interest Fixed interest period for
Total bearing rate rate which rate
�'000 �'000 �'000 % is fixed
Company
Other creditors 1,159 1,159 - - -
1,159 1,159 - - -
Fair Values of Financial Assets and Financial Liabilities
All of the financial assets and liabilities of the Group are held at fair
value.
26. Related Party Transactions
Under the terms of an agreement dated 8 July 2002, the Company has appointed
Gartmore Investment Limited to be the Manager. The fee arrangements for these
services are set out in the extract from the Report of the Directors above.
The total of the fees payable under the agreement are set out in note 3.
At 31 March 2008 an amount of �372,000 (2007: �407,000) was outstanding and due
to Gartmore Investment Limited.
In addition to the fees paid under the management agreement the Company also
pays Gartmore Investment Limited up to a maximum of �20,000 per annum for the
services provided in respect of Gartmore SAVEit and Gartmore Investment ISAit.
The fees included in the financial statements to 31 March 2008 were �20,000
(2007: �20,000).
Mr Sheridan, Chairman of Gartmore Irish Growth Fund PLC, was formerly Finance
Director of CRH plc. The Group's investment in CRH plc represents 5.6% of the
Company's portfolio. Mr Fitzpatrick, a Director of the Company, is also
non-executive chairman of Anglo Irish Bank Corporation plc and of Smurfit Kappa
plc and a director of Aer Lingus Group plc. Although Smurfit Kappa was held
during the year, this stock was not held in the Company's portfolio at the year
end. The Group's investment in Aer Lingus represents 3.0% of the portfolio and
Anglo Irish Bank represents 3.0%. The Board has delegated authority for
investment selection to the Manager and the Manager has selected all of these
investments independently in accordance with the investment strategy set out
above. The Board as a whole reviews the investment portfolio on a regular basis
and is satisfied that the investments were selected in an objective manner and
that no conflict of interest has arisen as a result of the selection of these
stocks.
ANNUAL REPORT AND ACCOUNTS
The foregoing represents extracts from the full text of the Annual Report and
Accounts for the year ended 31 March 2008. The full Report is available for
download from the following websites:
www.gartmoreirishgrowthfund.com and www.gartmore.com
Copies will be posted to shareholders shortly.
Capita Sinclair Henderson Limited
23 June 2008
END
Gart.Irish (LSE:GIR)
Historical Stock Chart
Von Jun 2024 bis Jul 2024
Gart.Irish (LSE:GIR)
Historical Stock Chart
Von Jul 2023 bis Jul 2024
