Interim Report sep 2007 - Ennismore Fund Management: Home IR 09.pdf · 2010. 1. 27. · Fund HSBC...

ENNISMORE SMALLER COMPANIES PLC

ENNISMORE EUROPEANSMALLER COMPANIES FUND

Interim Unaudited Report for the six months ended 30 June 2009

ENNISMORE SMALLER COMPANIES PLCENNISMORE EUROPEAN SMALLER COMPANIES FUND

CONTENTS

Page

Company Details 2

Summary Information 3

Investment Manager’s Report 8

Performance 8Top Ten Long Holdings 9Country, Market Cap and Sector Exposures 9Outlook 10Investment Philosophy and Process 10

Portfolio of Investments 13

Portfolio Changes 19

Profit and Loss Account 20

Statement of Changes in Net Assets Attributable to RedeemableParticipating Shareholders 21

Balance Sheet 22

Notes to the Financial Statements 23

Appendix

Application Form 28

1


COMPANY DETAILS

DIRECTORS REGISTERED OFFICENicholas Durlacher (British)(Chairman)* Guild House, Guild StreetLars Gårdö (Swedish)* International Financial Services CentreMatthew Minch (Irish)* Dublin 1Geoff Oldfield (British) IrelandPaul McNaughton (Irish)** Independent Director

INVESTMENT MANAGER REGISTRAR AND ADMINISTRATOREnnismore Fund Management Limited State Street Fund Services (Ireland) LimitedKensington Cloisters Guild House, Guild Street5 Kensington Church Street International Financial Services CentreLondon W8 4LD Dublin 1United Kingdom Ireland

Telephone: +44 (0)20 7368 4200 Telephone: +353 1 853 8300E-Mail: [email protected]

CUSTODIAN INDEPENDENTAUDITORSState Street Custodial Services (Ireland) Limited Ernst & YoungGuild House, Guild Street Registered AuditorsInternational Financial Services Centre Ernst & Young BuildingDublin 1 Harcourt Centre, Harcourt StreetIreland Dublin 2

Ireland

SECRETARY LEGALADVISORSState Street Fund Services (Ireland) Limited McCann FitzGeraldGuild House, Guild Street Riverside OneInternational Financial Services Centre Sir John Rogerson’s QuayDublin 1 Dublin 2Ireland Ireland

INFORMATION AND PAYING AGENT FOR GERMANYMarcard, Stein & CoBallindamm 3620095 HamburgGermany

Telephone: +49 40 3209 9224

2


SUMMARY INFORMATIONFUND PERFORMANCE

Fund HSBC Fund HSBC MSCI Micropal MicropalYear NAV2 Index3 NAV2 Index3 Index4 Ranking Large RankingGBP% GBP% EUR% EUR% Loc Curr% & Small Cap5 Small Cap5

2009 to date -12.2 12.7 -0.3 26.6 2.2 2621/2754 492/5002008 -5.7 -36.8 -28.3 -51.5 -38.9 47/2087 3/3232007 9.1 3.1 0.1 -5.5 6.0 614/1177 63/2402006 8.4 30.5 10.6 33.2 19.1 1630/1695 299/3072005 30.4 32.6 34.4 36.3 24.9 106/1244 105/2782004 23.5 24.6 22.9 24.4 12.2 66/1310 69/2602003 29.3 48.8 19.6 37.5 19.8 254/1168 206/2352002 6.2 -19.8 -0.3 -24.8 -29.4 11/1258 2/2112001 1.5 -18.3 5.3 -15.6 -16.4 10/1130 1/1642000 35.6 -3.3 34.3 -4.7 -2.2 4/885 1/12419991 49.0 27.2 65.2 42.1 29.8 52/585 40/8719991 to date 344.5 90.3 263.8 55.0 -0.7 2/585 2/97

1 Since inception on 27/1/99 2 Source: Administrator, Net Asset Value, net income reinvested 3 Source: Bloomberg, HSBC Smaller European Total Return Index, 4 Source: Bloomberg, MSCI Europe, localcurrencies, total return 5 Source: Standard and Poors, Pan European funds. All performance figures net of fees.

FUND DETAILSEnnismore Smaller Companies plc (the Company) was established on 8 October 1998, as an umbrella typeinvestment company with variable capital incorporated in Ireland in which different funds may be created fromtime to time. It is authorised in Ireland by the Financial Regulator as an investment company pursuant to theEuropean Communities (Undertakings for Collective Investment in Transferable Securities) (“UCITS’’)Regulations 2003 (as amended). The Company has one sub-fund, the Ennismore European Smaller CompaniesFund (the Fund), which has one share class that is listed on the Official List of the Irish Stock Exchange. TheFund was launched on 27 January 1999.

The Fund is recognised by the Financial Services Authority (FSA) in the UK and authorised for publicdistribution in Germany by the Bundesaufsichtsamt für Finanzdienstleistungsaufsicht.

The Fund has been granted distributor status for 2008. It is intended that the Fund will apply for distributorstatus for 2009.

INVESTMENT OBJECTIVEThe objective of the Fund is to achieve capital growth by investing principally in small capitalisation Europeanequity securities. The Fund aims to achieve positive absolute returns in each calendar year.

BASE CURRENCYThe Fund is based in Pounds Sterling (GBP). The Net Asset Value (NAV) is quoted in both GBP and Euro(EUR).

MINIMUM SUBSCRIPTIONThe minimum initial subscription is GBP5,000. The minimum amount for subsequent subscriptions by existingRedeemable Participating Shareholders (“Shareholders’’) is GBP1,000. Please see, however, the importantnotice on page 4.

3


SUMMARY INFORMATION cont/d...

DEALINGThe dealing procedures should be read in conjunction with the following important notice section below. TheDealing Day is each Business Day. Applications for issue and repurchase of redeemable participating shares(“Shares”) must be received by theAdministrator prior to 5.00pm (Dublin time) on the Business Day precedinga Dealing Day in order to be dealt with on that Dealing Day. Any applications received after 5.00pm (DublinTime) on the Business Day immediately preceding the Dealing Day shall, unless otherwise determined by theAdministrator, be processed on the next following Dealing Day.

New applicants should complete the application form at the back of the report. Existing investors may dealover the telephone by calling State Street Fund Services (Ireland) Limited on +353 1 853 8042, quoting theiraccount details.

Applications should be addressed to the Administrator:

State Street Fund Services (Ireland) LimitedGuild House, Guild StreetInternational Financial Services CentreDublin 1Ireland

Tel: +353 1 853 8042Fax: +353 1 523 3721

IMPORTANT NOTICEThe number of shares being issued by the Fund is being capped but some capacity is currently available. If youwould like to subscribe, please call Jo-Anne Osilade at Ennismore Fund Management Limited on +44 (0)207368 4227. Redemptions can be made through the Administrator in the usual way.

CHARGES PAID BY THE FUND

Investment Management FeesThe Fund pays the Investment Manager a fee of:

2% per annum of the NAV of the Fund payable monthly in arrears.20% per annum performance fee on value added. Any performance fee is paid annually in January forperformance achieved in the previous calendar year. Any underperformance is carried forward indefinitely.

Administration FeesThe Fund pays the Administrator’s fees monthly in arrears:

0.12% per annum on the first GBP50million of the NAV of the Fund0.09% per annum on the NAV of the Fund in excess of GBP50million.

These fees are subject to a minimum of GBP5,000 per month. The Administrator is also entitled to an initialregistration fee of GBP15 per register entry, GBP15 per annum maintenance per account, and a fee of GBP7for each dividend and statement sent to Shareholders.

4



CHARGES PAID BY THE FUND cont/d…

Custody FeesThe Fund pays the Custodian’s fees monthly in arrears:

0.025% per annum of the NAV of the FundA GBP20 fee per transactionReimbursement of all sub-custody fees and charges

CHARGES PAID TO THE FUND

Anti-Dilution LevyUp to 30 October 2008 an anti-dilution levy of 0.8% was payable to the Fund on both subscriptions andredemptions. Since that date an anti-dilution levy of 3.0% is payable to the Fund on redemptions, nil onsubscriptions. This levy is to pay for the cost of the Fund investing or divesting in the underlying markets.

When it is clear that normal liquidity conditions have returned to the markets it is intended to revert to chargingthe anti-dilution levy at 0.8% on both subscriptions and redemptions.

5



DIRECTORS

The Directors of the Company are as follows:

Nicholas Durlacher (British) (Chairman)Mr Durlacher is Chairman of the Balancing and Settlement Code Company, ELEXON, and the Paneloverseeing the British Electricity Transmission and Trading Arrangements in Great Britain. He is alsoChairman of EMX Co Ltd, the electronic messaging platform for unitised financial products within Europe. Hewas formerly Chairman of the Securities and Futures Authority from 1995 to 31 March 2001. Between 1992and 1995, he was Chairman of LIFFE, the world’s second largest derivative exchange, having been elected amember of the LIFFE board in 1984. Between 1986 and 1996, he was Chief Executive and then Chairman ofBZW Futures Limited.

Lars Gårdö (Swedish)Mr Gårdö is a Director and Senior Adviser of 3i (Nordic) plc. From 1993 to 2001, Mr Gårdö was President andChief Executive Officer ofAtleAB, a venture capital company quoted on the Stockholm Stock Exchange. From1985 to 1993, Mr Gårdö was president of Ax Trade AB, a large publicly owned trading conglomerate. Between1979 and 1984, Mr Gårdö was Executive Vice President of Hexagon AB, where he was responsible for financeand acquisitions. Mr Gårdö’s positions prior to this include that of Financial Controller of the AgriculturalFinance Corporation in Nairobi.

Matthew Minch (Irish)Mr Minch has been a Director of Tilman Asset Management Ltd since 1995 where his primary role is that ofPortfolio Manager with additional responsibility for company secretarial, financial administration andcompliance activities. From 1989 to 1995, Mr Minch worked as a management consultant in the area ofcompany restructuring and acquisition advice for a number of Irish companies, particularly in the food sector.Prior to that, he was Managing Director of Minch Norton plc, Ireland’s largest malt manufacturer, now part ofGreencore plc. Mr Minch is a fellow of the Chartered Institute of Management Accountants.

Geoff Oldfield (British)Mr Oldfield is a joint founder of the Investment Manager. He was a Director and Senior Fund Manager atBaring Asset Management where he was responsible for European smaller companies. From 1993 to 1994, heworked at Enskilda Securities in Frankfurt researching and marketing German smaller companies. Prior to this,Mr Oldfield was a European Fund Manager at Gartmore and at Midland Montagu. He is a CFA Charterholderand an Associate of the Chartered Institute of Bankers.

Paul McNaughton (Irish)Mr McNaughton was a Managing Director and former Global Head of Fund Administration and Custody forDeutsche Bank Group. Mr McNaughton was also Chief Executive of Deutsche Bank Group’s fundadministration and custody business in Ireland for ten years. Prior to this, Mr McNaughton held several seniormanagement positions in the financial services industry in Ireland, including General Manager of IFSCoperations with the Investment Bank of Ireland from 1987 to 1991. He is also currently a director of a numberof Irish investment companies.

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SUMMARY INFORMATION cont/d...FUND DEVELOPMENTDate Fund Size NAV No. of Shares in issue

(in millions) per share (in thousands)GBP EUR GBP EUR

30/06/2009 108.6 127.5 43.63 51.23 2,48831/12/2008 146.9 151.9 49.69 51.40 2,95530/06/2008 196.1 247.7 52.84 66.75 3,71131/12/2007 179.3 244.2 52.67 71.71 3,40530/06/2007 186.4 277.0 51.39 76.34 3,62831/12/2006 177.5 263.5 48.28 71.66 3,67730/06/2006 182.3 263.7 47.72 69.03 3,82131/12/2005 170.0 247.5 44.54 64.82 3,81730/06/2005 147.8 218.9 38.43 56.90 3,84731/12/2004 128.7 181.7 34.15 48.24 3,76830/06/2004 114.7 170.9 30.56 45.55 3,75231/12/2003 99.3 140.8 27.65 39.24 3,58930/06/2003 87.1 125.2 24.14 34.69 3,60831/12/2002 68.7 105.3 21.49 32.98 3,19430/06/2002 71.5 110.3 22.34 34.48 3,20031/12/2001 63.7 104.1 20.52 33.54 3,10430/06/2001 62.3 103.8 19.78 32.95 3,14931/12/2000 60.4 95.2 20.21 31.84 2,99030/06/2000 60.5 96.1 20.24 32.19 2,98731/12/1999 35.0 55.8 14.90 23.71 2,35230/06/1999 15.3 23.3 11.35 17.32 1,34627/01/19991 9.9 14.2 10.00 14.35 9891Date of inception

PUBLICATION OF PRICESFinancial Times - under “FT Managed Funds Service”Frankfurter Allgemeine Zeitung - under “Finanzteil-Investment-Fonds”Bloomberg - Ticker: ENNSMCI ID EquityReuters - Ticker: Ennismore European Smaller Companies FundMicropal - “Offshore Funds - Smaller Companies - Europe”Telekurs - No 995895VWD Fondsservice on the Internet - http://www.finanztreff.de/ftreff/index.htm

SECURITY NUMBERSSedol - 0451523WKN - 921181

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INVESTMENT MANAGER’S REPORTfor the six months ended 30 June 2009

PERFORMANCEThe Fund’s Net Asset Value (NAV) per share decreased by 12.2% in the first six months of 20091. Thiscompares to an increase of 12.7% in the HSBC Smaller European Total Return Index and of 2.2% for the MSCIDaily Total Return index (in local currencies)3 . In euros the Fund’s NAV decreased by 0.3% while the HSBCSmaller European Total Return Index rose 26.6%.MONTHLY RETURNS

GBP EURFund NAV1 HSBC Fund NAV1 HSBC MSCI

Fund NAV1 Per Share Index2 Fund NAV1 Per Share Index2 Index3Month Per Share %Change %Change Per Share %Change %Change % ChangeJune 43.63 -2.5 -2.6 51.23 0.5 -0.1 -1.9May 44.77 4.0 4.5 51.00 3.6 6.8 4.4April 43.06 -6.5 19.1 49.23 -1.0 23.1 12.8March 46.06 -2.1 7.3 49.73 -5.9 2.6 3.7February 47.07 -1.6 -7.2 52.83 -1.9 -7.0 -9.1January 47.85 -3.7 -6.5 53.83 4.7 0.9 -6.12009 43.63 -12.2 12.7 51.23 -0.3 26.6 2.2Annualised return* 15.4 6.4 13.2 4.3 -0.1Since launch (27/01/99) 344.5 90.3 263.8 55.0 -0.7

* Since inception to date. Note: All performance figures net of fees.

Comments below on performance refer to NAV per share, exclude cash returns and are prior to expenses.In the first half of 2009, the Fund’s long positions contributed a total of 5.9%. With an average weighting of57% during the period the implied return came to 10.4%.The largest single contribution on the long side came from seismic surveyor TGS Nopec, adding 1.2%. Theshares had fallen heavily in the second half of 2008 as crude oil prices collapsed. Apparent market concernsover a profit warning in relation to fourth quarter earnings failed to materialise and the company issuedrelatively robust 2009 guidance, which they have maintained despite a slow start to the year.Our position in UK property classifieds website Rightmove contributed 0.7%. The rate at which estate agents,their main clients, churned off the site slowed very significantly in the first part of the year suggesting thecompany’s revenues, which are primarily subscription based, have stabilised. Management subsequentlyupgraded their profit guidance for the year.Irish civil engineer Kentz Corp contributed 0.6%. The share price rallied over 50% in the first half as thecompany continued to win contracts and reported strong 2008 results and a large increase in its order backlog,with very few projects cancelled despite its focus on the oil and gas and petrochemical sectors.UK IT consultancy FDM Group announced in June that it was in talks over a possible cash buy out bymanagement. The position added 0.5% to performance in the first half.The main negative contributions on the long side came from classified advertising publisher Trader Media Eastand building products manufacturer Sto, costing the Fund 0.9% and 0.8% respectively. Trader Media Eastreported very weak first quarter results, reflecting the arrival of the financial crisis in Russia. We expect thisquarter will represent the trough in their earnings as cost cuts and an improved FX rate benefit them goingforward, even in the absence of economic recovery.

1Source: Administrator, Net Asset Value per share, net income reinvested2Source: Bloomberg, HSBC Smaller European total return index3Source: Bloomberg, MSCI Europe index, total return

8

9


INVESTMENT MANAGER’S REPORTfor the six months ended 30 June 2009 cont/d...

Sto also had a tough first quarter, with revenue down 12% year on year, as harsh winter weather affectedconstruction activity across much of central Europe. Despite this the company maintained its full year salesguidance and is apparently benefitting from government incentives to upgrade insulation in existing housingstock, particularly in its core German and French markets.The Fund’s short exposure cost 13.1% during the first half. Based on an average short exposure of 42%, thisimplies that the stocks underlying our short exposure increased in value by 31.4%.

TOP TEN LONG HOLDINGS AS AT 30 JUNE 2009*

Company Country Sector % of NAV PerformanceContribution (%)

1 Sto Germany Construction 4.8 (0.8)2 Atlantia Italy Transportation 4.1 0.13 Trader Media East Netherlands Media 3.9 (0.8)4 PubliGroupe Switzerland Media 2.3 0.35 Kentz Corp United Kingdom Engineering 2.1 0.66 JD Wetherspoon United Kingdom Leisure 1.6 0.57 OHB Technology Germany Technology 1.5 (0.1)8 SES Luxembourg Telecoms 1.3 (0.1)9 CPL Resources Ireland Services 1.3 0.210 IG Group United Kingdom Leisure 1.3 0.2

Total 24.2* Note: excludes short exposures

PORTFOLIO ACTIVITYOur ten largest holdings account for 24% of the Fund’s total NAV. Five of the top ten holdings – Trader MediaEast, Sto, Atlantia, OHB Technology and JD Wetherspoon - remain from the end of last year.During the first half we sold our holdings in TGS Nopec, Rightmove and Kingspan. PubliGroupe, Kentz Corpand SES come into the top ten primarily due to the relative strength of their share prices while CPL Resourcesand IG Group are new positions.

EXPOSURE BY COUNTRY, MARKET CAPAND SECTOR AS A PERCENTAGE OF NAVAT 30 JUNE 2009Country Gross % Net % Market Cap Gross % Net % Sector Gross % Net %Denmark 1.3 0.4 >£2bn 15.0 -4.1 Construction 7.4 4.5France 7.4 -7.4 £700m - £2bn 15.6 -12.7 Consumer 4.9 -1.5Germany 17.1 8.5 £200m - £700m 27.0 2.3 Energy 5.3 -0.5Ireland 2.5 2.5 <£200m 40.4 32.7 Food 5.8 -5.1Italy 6.1 3.8 Industrials 5.3 -0.6Japan 2.7 -2.7 Leisure 8.2 0.5Luxembourg 1.3 1.3 Manufacturing 2.8 0.4Netherlands 4.8 4.8 Media 17.1 2.8Norway 4.9 -1.1 Medical 4.9 -2.7Spain 2.0 -2.0 Property 4.6 4.7Sweden 5.3 -0.1 Retail 3.6 2.3Switzerland 5.2 1.6 Services 4.6 3.9UK 26.1 11.9 Technology 10.9 2.7USA 8.1 -4.6 Transport 4.4 4.4Other 3.2 1.3 Other 8.2 2.4The geographic analysis relates to the country of incorporation or listing. This may not represent the underlyingeconomic exposure of the operating business.



PORTFOLIO AS AT 30 JUNE 2009

Longs Shorts Gross Exposure Net Exposure58.1% 39.9% 98.0% 18.2%

The portfolio remains cautiously positioned with a net exposure of 18% compared with 12% at 31 December2008. Long exposure has increased slightly from 55% to 58% and short exposure has been reduced from 44%to 40%.

Long positionsStocks with a current year’s price-earnings ratio of under 10 times: 26% (41%)On single digit price-earnings ratios, these are typically overlooked or out of fashion stocks with gooddefensive properties and scope for a re-rating on strong operating results. In this category we also includeinvestment and property companies that are trading at a discount to net asset value as the price-earnings ratiois not meaningful for these companies.

Stocks with a current year’s price-earnings ratio of 10-15 times: 16% (9%)These stocks typically combine a strong business franchise, high profitability and cash generation with earningsgrowth of 15% plus over the cycle.

Stocks with a current year’s price-earnings ratio of 15-25 times: 8% (2%)These stocks typically combine an exceptionally strong competitive position with significantly higher growth.Stocks with temporarily depressed earnings may also come under this category.

Stocks with a current year’s price-earnings ratio of 25 times plus: 9% (3%)These include stocks with depressed earnings (including loss-making ones) where the valuation is at asignificant discount to the asset base.

Short Positions -40% (-44%)These are stocks that we believe to be fundamentally over-valued.

Cash and money market market instruments 41% (45%)The Fund’s cash position gives us flexibility to pursue opportunities quickly, as well as providing a goodcushion in the current uncertain environment.

OUTLOOKWe do not believe we can forecast markets or economies, either in the short or the medium term. Our focus ison picking individual stocks and our success in doing so will determine how we perform in the future. Asalways, we will stick closely to our investment philosophy and process outlined below. Our business model andinvestment style are the same as they have always been and we therefore expect to continue to perform well inabsolute terms over the long run, as we have done over the past ten years. We look forward to rewarding yourloyalty as shareholders.

INVESTMENT PHILOSOPHYAND PROCESSWe focus our research on European smaller companies because we believe many are mispriced due to the lackof interest from brokers and investors. Banks’ and brokers’ research coverage on small and mid cap stocks islimited by the lower level of fees that they can earn from these companies, which tends to lead to greater pricinginefficiencies in the segment. Even so, relatively few of these stocks meet our stringent selection criteria.

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INVESTMENT PHILOSOPHYAND PROCESS cont/d…

The following list gives some examples of what we are looking for:• Great business franchises - the small cap sector is their likely birthplace. To identify them at an early stageis the most financially rewarding part of our job as small cap investors.

• Highly entrepreneurial, flexible and equity focused management teams - the best small cap managersleave most of their large cap counterparts trailing.

• Domination of market niches - some small companies dominate their market to a degree that is unusualamongst large companies. Their significantly lower unit costs in areas such as product development anddistribution can enable them to sustain high levels of profitability for long periods.

• Strong exposure to a superior, yet under distributed product combined with high entry barriers -investors can often benefit from fast growth whilst the risks are low despite the lack of diversification.

By focusing on strong business franchises and on attractive valuations we expect to generate positive returnsindependent of the fortunes of the asset class.Ennismore has a stock picking approach emphasising detailed in-house fundamental analysis. Our idealinvestments are high quality companies run for shareholders that are under researched, with acceleratingearnings growth and the scope for a re-rating. We are opportunistic – we focus on areas where bargains areeasiest to come by – as well as risk averse. Our investment process has four key features:

1. Focus on inefficienciesAs smaller companies generate low commission volumes for brokers, they are often under researched andmispriced. This makes them an ideal hunting ground. We systematically monitor Initial Public Offerings,underperformers and ‘fallen angels’ (high quality growth stocks that have been de-rated sharply). In order toensure a margin of safety, we insist on significant mispricings that a clearly identifiable catalyst will correctwithin twelve months.

2. Focus on high qualityWe look for companies that are capable of creating high and sustainable returns. Our measure for this is anexpected minimum Return on Net Operating Assets (RONOA) of 10% per annum over a business cycle. Mostcompanies we invest in achieve returns of well over 20%.

What is RONOA?Operating Profit

RONOA = –––––––––––––––––Net Operating Assets

This ratio indicates what return the company’s operating assets (i.e. its machines, stocks, buildings etc.)generate. By focusing on operating rather than pre-tax income, we ignore income from any cash balances andinterest payments on any debt. A high and sustainable RONOA has important financial implications: thecompany generates a strong cash flow, enabling it to finance strong growth, accumulate cash or repay any debtquickly.

3. Focus on risk minimisationIn our fundamental research, we analyse what could go wrong under the headings operational, financial andvaluation risk. A selection of the questions asked are:

Operational risk• Is a high level of profitability sustainable? What stops others from imitating good products or services?Could strongly growing mass markets attract fierce competition from large companies?

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INVESTMENT PHILOSOPHYAND PROCESS cont/d…

• Is the ‘company line’ confirmed by independent sources, e.g. industry associations, customers, suppliers andcompetitors?

• Which costs are fixed and which costs are variable? What is the sensitivity to price and volume changes?• At what stage in its cycle is the industry?• Is the company growing organically or by acquisition?

Financial risk• Is the level of debt comfortable in relation to future cash flows and expansion plans?• Are there potential risks in the balance sheet? Are the accounting policies conservative? Are trade debtorsand stocks moderate in relation to turnover and profits?

Valuation risk• Is there a significant discount to the company’s real value?• Is this an established growth stock where a deteriorating earnings outlook would lead to a sharp de-rating?

Liquidity riskLiquidity risk is an important consideration when deciding stock weightings in the portfolio. Naturally, thehighest weightings are given to those positions that have the largest discount to their target price, but we wouldnormally not purchase more than 10% of the free float.

4. Due diligence and ongoing monitoringDetailed due diligence and ongoing monitoring are important tools in order to safeguard strong returns.Limiting the number of stocks per Fund Manager gives us sufficient time to conduct an in depth analysis ofeach position and to monitor positions on an ongoing basis. Our investment disciplines include the writtendocumentation of all relevant factors, including an assessment of the positive and negative factors affecting acompany’s competitive position and business strategy, possible risks and the major catalyst for the expectedprice movement.

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PORTFOLIO OF INVESTMENTSas at 30 June 2009

COUNTRY NOMINAL SECTOR FAIR VALUE FUNDSecurity GBP %

TRANSFERABLE SECURITIES: 57.7% (2008: 76.2%)

BELGIUM: 0.3% (2008: 0.6%)FOUNTAIN 13,644 Commercial Services & Supplies 161,530 0.2EVS BROADCAST EQUIPMENT 4,998 Technology Hardware & Equipment 152,950 0.1

BERMUDA: 0.0% (2008: 0.3%)LANGBAR INTERNATIONAL 818,348 Diversified Financials 1 0.0

CYPRUS: Nil (2008: 0.8 %)

CZECH REPUBLIC: 0.9% (2008: 0.4%)PHILIP MORRIS 4,682 Food Beverage & Tobacco 960,288 0.9

DENMARK: 0.8% (2008: 0.9%)RELLA HOLDINGS 255,999 Media 890,080 0.8

FRANCE: 0.0% (2008: 2.0%)CARRERE GROUP 32,992 Media 0 0.0

GERMANY: 13.1% (2008: 11.6%)OHB TECHNOLOGYAG 242,891 Capital Goods 1,644,653 1.5WESTAG & GETALIT 20,425 Capital Goods 191,186 0.2WESTAG & GETALIT PREFS 79,281 Capital Goods 709,013 0.7GFK 30,941 Commercial Services & Supplies 391,078 0.4TELEGATE 129,782 Commercial Services & Supplies 817,978 0.8EINHELL 57 Consumer Durables & Apparel 1,097 0.0DEUTSCHE BETEILIGUNGS 15,721 Diversified Financials 163,088 0.2HELIAD EQUITY PARTNERS 68,915 Diversified Financials 197,219 0.2ECKERT & ZIEGLER 56,122 Health Care Equipment and Services 507,159 0.6DESIGN BAU 34,139 Materials 66,877 0.1STO 146,519 Materials 5,141,464 4.8BIOTEST 23,026 Pharmaceuticals & Biotechnology 697,291 0.7GAG IMMOBILIEN 15,251 Real Estate 258,492 0.3VIB VERMOEGEN 266,382 Real Estate 941,561 0.9COMPUGROUP HOLDING 125,365 Software & Services 645,992 0.6UNITED INTERNET 32,100 Software & Services 228,017 0.2AUGUSTA TECHNOLOGIE 164,272 Technology Hardware & Equipment 1,070,337 1.0

GREECE: 1.1% (2008: 0.8%)HELLENIC DUTY FREE SHOPS 117,236 Retailing 708,949 0.7THESSALONIKI PORTAUTHORITY 36,098 Transportation 444,577 0.4

GUERNSEY, CHANNEL ISLANDS: 1.0% (2008: 0.6%)LONDON & STAMFORD 673,429 Real Estate 787,912 0.7PUMA BRANDENBURG 506,350 Real Estate 288,620 0.3

IRELAND: 2.5% (2008: 2.2%)CPL RESOURCES 1,223,120 Commercial Services & Supplies 1,354,279 1.3NORKOM GROUP 1,439,645 Software & Services 1,262,956 1.2

ISLE OFMAN: 1.5% (2008: 1.8%)CARPATHIAN 1,913,024 Real Estate 291,736 0.3DEUTSCHE LAND 417,260 Real Estate 46,942 0.1DRAGON-UKRAINIAN PROPERTIES 1,109,460 Real Estate 427,142 0.4

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PORTFOLIO OF INVESTMENTSas at 30 June 2009 cont/d...


ISLE OFMAN: 1.5% (2008: 1.8%) cont/d...ISHAAN REAL ESTATE 1,602,949 Real Estate 657,209 0.6PACTOLUS 371,045 Real Estate 111,314 0.1

ISRAEL: Nil (2008: 0.2%)

ITALY: 5.0% (2008: 6.1%)GRUPPO COIN 322,748 Retailing 937,375 0.9ATLANTIA 362,463 Transportation 4,436,251 4.1

JERSEY, CHANNEL ISLANDS: 6.0% (2008: 6.9%)KENTZ 1,462,027 Capital Goods 2,222,281 2.1TRADER MEDIA EAST 1,573,166 Media 4,203,134 3.9

LUXEMBOURG: 1.4% (2008: 0.9%)SES 125,233 Media 1,447,419 1.4

NETHERLANDS: 0.9% (2008:0.3%)NIEUWE STEEN INVESTMENTS 70,870 Real Estate 663,974 0.6LYCOS EUROPE 6,121,681 Software & Services 359,762 0.3

NORWAY: 1.8% (2008: 15.8%)EIDESVIK OFFSHORE 564,538 Energy 1,326,128 1.2GANGER ROLF 27,846 Energy 363,836 0.4REMORA 123,738 Energy 233,467 0.2

PANAMA: 0.1% (2008: 1.3%)MARITIME INDUSTRIAL SERVICES 115,833 Energy 71,029 0.1

SWEDEN: 2.5% (2008: 5.2%)OEM INTERNATIONAL 186,730 Capital Goods 513,672 0.5GEVEKO 192,505 Commercial Services & Supplies 931,631 0.9HL DISPLAY 211,282 Commercial Services & Supplies 438,807 0.4STUDSVIK 101,557 Diversified Financials 455,670 0.4ELOS 79,096 Health Care Equipment and Services 210,765 0.2ADDNODE 55,529 Software & Services 88,780 0.0PROACT IT GROUP 33,121 Software & Services 106,946 0.1

SWITZERLAND: 3.5% (2008: 4.2%)ORELL FUESSLI HOLDING 5,222 Commercial Services & Supplies 419,560 0.4VETROPACK HOLDING 286 Materials 251,503 0.2PUBLIGROUPE 54,425 Media 2,479,622 2.3TAMEDIA 19,561 Media 578,847 0.6

TURKEY: 0.0% (2008: 0.0%)DENIZBANK 1 Banks 2 0.00

UNITED KINGDOM: 13.6% (2008: 12.3%)FW THORPE 85,917 Capital Goods 451,923 0.4MOUNT ENGINEERING 492,851 Capital Goods 236,568 0.2SUPERGLASS HOLDINGS 1,140,634 Capital Goods 307,971 0.3EMPRESARIA GROUP 1,959,973 Commercial Services & Supplies 666,391 0.6KELLAN GROUP 23,958 Commercial Services & Supplies 1,617 0.0STYLES & WOOD GROUP 2,999,472 Commercial Services & Supplies 959,831 0.9TENON GROUP 2,191,959 Commercial Services & Supplies 838,424 0.8VITEC GROUP 194,492 Consumer Durables & Apparel 501,789 0.5

14




UNITED KINGDOM: 13.6% (2008: 12.3%) cont/d...CARLUCCIO’S 333,844 Consumer Services 293,783 0.3ESSENDEN 370,644 Consumer Services 168,643 0.1ESSENDEN ZERO COUPON NOTES 370,644 Consumer Services 289,102 0.3RESTAURANT GROUP 597,042 Consumer Services 853,770 0.8UNIVERSE GROUP 10,223,287 Consumer Services 230,024 0.2WETHERSPOON (J.D.) 449,869 Consumer Services 1,742,118 1.6IG GROUP HOLDINGS 486,750 Diversified Financials 1,364,117 1.3SPARK VENTURES 11,718,514 Diversified Financials 791,000 0.7ZETAR 234,691 Food Beverage & Tobacco 352,037 0.3MBL GROUP 105,208 Media 138,875 0.1CELLO GROUP 948,187 Media 350,829 0.3ELECTRIC WORD 2,414,912 Media 96,596 0.1RAVEN RUSSIAWARRANTS 492,087 Real Estate 59,050 0.1RAVEN RUSSIA PREFERENCE SHARES 492,087 Real Estate 433,037 0.4IDEAL SHOPPING DIRECT 1,057,903 Retailing 846,322 0.2JD SPORTS FASHION 136,593 Retailing 652,915 0.6FDM GROUP 1,064,134 Software & Services 1,255,678 1.2IDOX 2,897,620 Software & Services 362,203 0.3DIPLOMA 465,638 Technology Hardware & Equipment 619,299 0.6NOVERA ENERGY 1,010,144 Utilities 454,565 0.4

UNITED STATES: 1.7% (2008: 1.3%)SOMERO ENTERPRISES 4,278,323 Capital Goods 641,748 0.6QUARTO GROUP 1,388,115 Media 1,124,373 1.1

–––––––––– ––––––––TOTALTRANSFERABLE SECURITIES 62,044,046 57.7

–––––––––– ––––––––

DEPOSITS WITH CREDIT INSTITUTIONS: 11.5% (2008: 13.0%)UNITED KINGDOM: 11.5% (2008: 13.0 %)

State Street Bank & Trust TD 0.10% 1-Jul-09 GBP 3,500,000 3,500,000 3.2State Street London 0.15% 1-Jul-09 EUR 10,500,000 8,943,033 8.3

––––––––– ––––––TOTAL DEPOSITS WITH CREDIT INSTITUTIONS 12,443,033 11.5

––––––––– ––––––

MONEYMARKET INSTRUMENTS: 28.4% (2008: Nil)FRANCE: 19.8% (2008: Nil)France (Government of) T-Bill 0.00% 9-Jul-09 EUR 5,000,000 4,257,906 4.0France (Government of) T-Bill 0.00% 23-Jul-09 EUR 5,000,000 4,256,576 4.0France (Government of) T-Bill 0.00% 30-Jul-09 EUR 5,000,000 4,255,822 4.0France (Government of) T-Bill 0.00% 13-Aug-09 EUR 7,500,000 6,382,421 5.9France (Government of) T-Bill 0.00% 20-Aug-09 EUR 2,500,000 2,127,275 1.9

NETHERLANDS: 4.0% (2008: Nil)Netherlands (Kingdom of) T-Bill 0.00% 17-Jul-09 EUR 5,000,000 4,257,211 4.0

UNITED KINGDOM: 4.6% (2008: Nil)United Kingdom (Govt of) T-Bill 0.00% 13-Jul-09 GBP 5,000,000 4,999,466 4.6

––––––––– ––––––TOTALMONEYMARKET INSTRUMENTS 30,536,677 28.4

––––––––– ––––––

15



COUNTRY NOMINAL SECTOR UNREALISED FUNDSecurity GAIN/(LOSS) GBP %

FINANCIAL DERIVATIVE INSTRUMENTS: CONTRACTS FOR DIFFERENCE: -5.7% (2008: - 0.7%)

AUSTRIA: 0.0% (2008: 0.1%)AT001 (29,768) Commercial Services & Supplies 36,902 0.0

BELGIUM: Nil (2008: 0.0%)

BERMUDA: Nil (2008: -0.9%)

CANADA: Nil (2008: 0.0%)

CAYMAN ISLANDS: Nil (2008: 0.1%)

DENMARK: -0.1% (2008: -0.9%)DK004 (14,662) Materials (91,392) (0.1)

FINLAND: -0.1% (2008: 0.0%)FI004 (16,800) Auto Parts & Equipment (2,575) 0.0FI001 (54,585) Consumer Durables & Apparel (67,412) (0.1)

FRANCE: -0.9% (2008: 0.0%)FR004 (164,182) Consumer Durables & Apparel (35,064) 0.0FR005 (19,752) Consumer Durables & Apparel (357,256) (0.3)FR008 (80,556) Consumer Durables & Apparel (6,978) 0.0FR007 (338,872) Media (334,199) (0.3)FR009 (51,687) Pharmaceuticals & Biotechnology (286,863) (0.3)

GERMANY: -0.3% (2008: 0.6%)DE015 (7,518) Auto Parts & Equipment (15,943) 0.0DE003 (2,054,972) Capital Goods (17,503) 0.0DE005 (51,400) Capital Goods 42,903 0.0DE006 (7,704) Capital Goods (17,323) 0.0DE011 (42,615) Capital Goods 3,769 0.0DE013 (38,379) Capital Goods (306,941) (0.3)DE016 (22,905) Capital Goods (5,611) 0.0DE001 (179,524) Diversified Financials 1,564 0.0

GIBRALTAR: -0.5% (2008: -0.2%)GI001 (902,526) Consumer Services (579,927) (0.5)

IRELAND: Nil (2008: 0.1%)

ITALY: 0.4% (2008: 0.1%)IT003 (231,151) Technology Hardware & Equipment 453,263 0.4

JAPAN: -0.9% (2008: Nil)JP001 (1,677,000) Capital Goods (928,757) (0.9)

NETHERLANDS: Nil (2008: 0.0%)

NORWAY: -1.3% (2008: -0.1%)NO008 (110,669) Capital Goods 42,806 0.0NO012 (6,750,740) Food Beverage & Tobacco (1,445,673) (1.3)

SPAIN: 0.1% (2008: 0.0%)ES003 (328,345) Food Beverage & Tobacco 0 0.0ES005 (31,482) Materials 104,978 0.1ES004 (32,715) Pharmaceuticals & Biotechnology (15,102) 0.0

16



COUNTRY NOMINAL SECTOR UNREALISED FUNDSecurity GAIN/(LOSS) GBP %

SWEDEN: -0.2% (2008: 0.1%)SE014 (585,456) Capital Goods 194,011 0.2SE007 (226,242) Consumer Durables & Apparel (51,181) (0.1)SE009 (379,198) Consumer Durables & Apparel (191,415) (0.2)SE016 (41,290) Consumer Services (93,752) (0.1)

SWITZERLAND: -0.1% (2008: 0.0%)CH006 (17,603) Health Care Equipment and Services (125,372) (0.1)

TURKEY: 0.0% (2008: Nil)TK001 (163,791) Materials (39,455) 0.0

UNITED KINGDOM: -1.2% (2008: -0.3%)GB026 (172,494) Consumer Services (43,692) 0.0GB006 (114,234) Diversified Financials (418,668) (0.4)GB020 (1,558,115) Food Beverage & Tobacco (13,009) 0.0GB021 (3,680,201) Food Beverage & Tobacco (247,044) (0.2)GB041 (1,350,000) Media (69,162) 0.0GB002 (129,142) Software & Services (2,583) 0.0GB013 (755,690) Technology Hardware & Equipment (605,421) (0.6)

UNITED STATES: -0.6% (2008: -0.1%)US003 (183,730) Capital Goods (50,204) (0.1)US002 (679,364) Media 151,889 0.2US006 (10,969,314) Media (403,450) (0.4)US012 (26,366) Retailing (32,596) 0.0US013 (208,050) Software & Services (56,295) (0.1)US016 (100,810) Software & Services (266,871) (0.3)US008 (868,644) Telecommunication Services 58,020 0.1

––––––––––––––––––UNREALISED GAIN ON CONTRACTS FOR DIFFERENCE 1,090,105 1.0UNREALISED LOSS ON CONTRACTS FOR DIFFERENCE (7,224,689) (6.7)

––––––––––––––––––NET UNREALISED LOSS ON CONTRACTS FOR DIFFERENCE (6,134,584) (5.7)

––––––––––––––––––

FAIR VALUEGBP FUND%

PORTFOLIO OF INVESTMENTS 98,889,172 91.9

Cash and Bank Balances and Bank Overdraft 8,555,783 8.0Other Current Assets 3,245,506 3.0Creditors (3,116,744) (2.9)

NETASSET VALUE ATTRIBUTABLE TO SHAREHOLDERS ATFAIR VALUE PRICES AS AT 30/06/2009 107,573,717 100.0

17



Analysis of total assets % of % ofTotal TotalAssets Assets30 June 31 Dec2009 2008

Transferable securities and money market instruments admitted to an official stock exchange listing ortraded on a regulated market 78.4 79.1Deposits with credit institutions 10.5 11.2Contracts for difference (unrealised gains) 0.9 1.4Other current assets 10.2 8.3

–––––––– ––––––––100.0 100.0

–––––––– –––––––––––––––– ––––––––

The counterparties for the contracts for difference are Goldman Sachs International, Morgan Stanley and UBS AG.

The cash held with counterparties disclosed on the Balance Sheet is held with Goldman Sachs International, Morgan Stanley and UBSAG.

The names of the equity securities underlying the contracts for difference are not disclosed due to the commercial sensitivity of shortpositions. Details of the underlying securities will be provided to shareholders on request.

Note: 2008 comparative percentages (in brackets) refer to June 2008 Interim percentages.

18


PORTFOLIO CHANGESduring the six months ended 30 June 2009

TOP 20 PURCHASES* VALUE GBPATLANTIA 4,681,702IG GROUP HOLDINGS 1,106,918CPL RESOURCES 1,077,279SSL INTERNATIONAL 1,055,286PUBLIGROUPE AG 1,024,089STYLES & WOOD 723,750NIEUWE STEEN INVESTMENTS 673,028DIPLOMA 611,717BIOTEST AG 610,536TELEGATE AG 537,699NORKOM GROUP 499,707SOMERO ENTERPRISES 497,826COMPUGROUP HOLDING AG 473,837THE VITEC GROUP PLC 434,877GFK SE 395,834KINNEVIK INVAB 357,212KENTZ CORPORATION 326,912EMPRESARIA GROUP 245,075VIB VERMOEGEN AG 236,264EVS BROADCAST EQUIPMENT 223,086

TOP 20 SALES* VALUE GBP

KINGSPAN GROUP 5,142,575TGS NOPEC 4,990,019ATLANTIA 4,469,296RIGHTMOVE PLC 3,548,040WAVEFIELD INSEIS 2,475,445WETHERSPOON (J.D.) 1,340,378KIER GROUP 1,317,220SSL INTERNATIONAL 1,215,324BJORGE GRUPPEN ASA 1,024,039GRUPPO COIN SPA 943,097TESSI 913,612KINNEVIK INVESTMENTAB 794,527GANGER ROLF ASA 752,128TAMEDIA 726,895BIESSE 643,263SEMPERIT HOLDINGS AG 615,769PETROLIA DRILLING 565,851REJLERKONCERNEN AB 508,616PETROMENAAS 500,547AUGUSTA TECHNOLOGIE AG 486,912

* This table is designed to reflect economic changes in our long book and therefore excludes short exposure, CFDs and relatedtransactions.

Copies of all portfolio changes are available, free of charge, from the registered office of the Company.

19


PROFIT AND LOSS ACCOUNTfor the six months ended 30 June 2009

Period ended Year ended Period ended30/06/09 31/12/08 30/06/08

Note GBP GBP GBP

Net realised (losses)/gains oninvestments during the period/year (38,069,601) 50,053,739 24,783,504

Net unrealised gains/(losses) oninvestments during the period/year 23,432,992 (62,530,637) (24,723,719)

––––––––– ––––––––– ––––––––Net (losses)/gains on investmentsduring the period/year (14,636,609) (12,476,898) 59,785

Gross income 1,826,967 6,834,910 4,296,556

Expenses (2,958,604) (6,987,128) (4,234,161)

Net (deficit)/income for the period/year (1,131,637) (152,218) 62,395––––––––– ––––––––– –––––––––

Finance costsInterest paid (1,299,014) (213,777) (74,984)

––––––––– ––––––––– –––––––––(Loss)/gain for the financial period/year (17,067,260) (12,842,893) 47,196

Withholding tax 1(d) (213,620) (393,972) (297,501)––––––––– ––––––––– –––––––––

Net decrease in net assets attributable toredeemable participating shareholdersresulting from operations (17,280,880) (13,236,865) (250,305)

––––––––– ––––––––– –––––––––––––––––– ––––––––– –––––––––

20

ENNISMORE SMALLER COMPANIES PLCENNISMORE EUROPEAN SMALLER COMPANIES FUNDSTATEMENT OF CHANGES IN NETASSETS ATTRIBUTABLETO REDEEMABLE PARTICIPATING SHAREHOLDERS

for the six months ended 30 June 2009

Period ended Year ended Period ended30/06/09 31/12/08 30/06/08

GBP GBP GBP

Net assets attributable to redeemable participatingshareholders at the start of the period/year 145,325,404 177,991,346 177,991,346

––––––––– ––––––––– ––––––––Share Transactions

Amounts received on sale of Shares 3,944,113 42,902,215 37,855,595less: Amounts paid on repurchase of Shares (24,414,920) (62,331,292) (20,692,562)

––––––––– ––––––––– –––––––––(20,470,807) (19,429,077) 17,163,033––––––––– ––––––––– –––––––––

Net decrease in net assets attributable toredeemable participating shareholdersresulting from operations (17,280,880) (13,236,865) (250,305)

––––––––– ––––––––– –––––––––Net assets attributable to redeemable participatingshareholders at the end of the period/year 107,573,717 145,325,404 194,904,074––––––––– ––––––––– –––––––––––––––––– ––––––––– –––––––––

21


BALANCE SHEETas at 30 June 2009

30/06/09 31/12/08 30/06/08Note GBP GBP GBP

Current AssetsFinancial assets at fair value through profit or loss: 1(c)Transferable Securities 62,044,046 80,487,215 148,584,391Money markets instruments 30,536,677 45,743,769 -Unrealised gain on contracts for difference 1,090,105 2,311,649 7,673,122Unrealised gain on spot foreign currency contracts 17,152 59,833 -Deposits with credit institutions 12,443,033 17,886,213 25,312,582

––––––––– ––––––––– –––––––––106,131,013 146,488,679 181,570,095

Debtors 2 3,228,354 4,855,783 5,841,158Cash and bank balances 3 435,540 1,006,990 7,679,541Cash held with counterparties 8,395,669 7,246,256 20,736,675

––––––––– ––––––––– –––––––––118,190,576 159,597,708 215,827,469––––––––– ––––––––– –––––––––

Current LiabilitiesFinancial liabilities at fair value through profit or loss: 1(c)Unrealised loss on contracts for difference (7,224,689) (5,559,486) (9,081,944)Unrealised loss on spot foreign currency contracts - (41) (2,448)

––––––––– ––––––––– –––––––––(7,224,689) (5,559,527) (9,084,392)

Bank overdraft 3 (275,426) (820,865) (338,627)Creditors 4 (3,116,744) (7,891,912) (11,500,376)

––––––––– ––––––––– –––––––––(10,616,859) (14,272,304) (20,923,395)––––––––– ––––––––– –––––––––

Net assets attributable to holders of redeemable participating shares 107,573,717 145,325,404 194,904,074––––––––– ––––––––– –––––––––––––––––– ––––––––– –––––––––

Fair Value Reconciliation30/06/09 31/12/08 30/06/08

Net Asset Value per fair value prices GBP 107,573,717 145,325,404 194,904,074Fair value adjustment GBP 991,057 1,535,251 1,212,139

––––––––– ––––––––– –––––––––Net Asset Value per dealing prices GBP 108,564,774 146,860,655 196,116,213

––––––––– ––––––––– –––––––––Number of redeemable participating shares in issue 2,488,132 2,955,283 3,711,190

Net Asset Value per redeemable participating share,based on dealing prices GBP 43.63 GBP 49.69 GBP 52.84

Net Asset Value per dealing prices is calculated based upon official closing prices of the investments held bythe Fund in accordance with the prospectus.

22


NOTES TO THE FINANCIAL STATEMENTSfor the six months ended 30 June 2009

1. Significant accounting policiesa) Basis of accounting

These condensed interim financial statements have been prepared in accordance with the ASB Statement:Half Yearly Financial Reports, the provisions of the Companies Act 1963 to 2009 and the EuropeanCommunities (Undertakings for Collective Investment in Transferable Securities) regulations 2003 (asamended). The condensed interim financial statements should be read in conjunction with the annualfinancial statements for the year ended 31 December 2008, which have been prepared in accordance withaccounting standards generally accepted in Ireland and with the provisions of the Companies Act 1963 to2006 and the European Communities (Undertakings for Collective Investment in Transferable Securities)regulations 2003 (as amended). Accounting standards generally accepted in Ireland are those published bythe Institute of Chartered Accountants in Ireland and issued by the Accounting Standards Board.

The accounting policies applied are consistent with those of the annual financial statements for the yearended 31 December 2008, as described in those financial statements.

The financial statements are prepared in GBP.

b) Use of estimatesThe preparation of financial statements, in accordance with accounting standards generally accepted inIreland, requires management to make estimates and assumptions that affect the reported amounts ofassets and liabilities and disclosure of contingent assets and liabilities at the date of the financialstatements and the reported amounts of income and expenses during the period. Actual results could differfrom those estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accountingestimates are recognised in the period in which the estimate is revised if the revision affects only thatperiod, or in the period of the revision and future periods if the revision affects both current and futureperiods.

c) Investments at fair value through profit or lossThis category has two sub-categories: financial assets and liabilities held for trading, and those designatedby the Directors at fair value through profit or loss at inception. All instruments on the Fund’s Portfolioof Investments are classified as held for trading. Subsequent to initial recognition, all instrumentsclassified at fair value through profit or loss are measured at fair value with changes in their fair valuerecognised in the Profit and Loss Account.

InvestmentsSecurities, listed on a recognised stock exchange or traded on any other organised market, are valued atthe current bid price on the stock exchange or market which constitutes the principal market for suchsecurities. If for specific assets the current bid prices do not, in the opinion of the Directors, reflect theirfair value or are not available, the price of the most recent transaction provides evidence of the current fairvalue as long as there has not been a significant change in economic circumstances since the time of thetransaction.

Contracts for difference (CFDs) which do not reset are valued at fair value with reference to the close ofbusiness market price of the underlying stock. All other CFDs are valued as the difference between theclose of business market price at period end and the reset price. Margin is paid at each fair value pointto/from the broker thereby determining the new reset price. TheAdministrator may adjust the value of anysuch assets if, in relation to currency, marketability and such other considerations as it deems relevant, itconsiders that such adjustment is required to reflect the fair value thereof with the approval of theCustodian.

23


NOTES TO THE FINANCIAL STATEMENTSfor the six months ended 30 June 2009 cont/d...

1. Significant accounting policies cont/d...

Investments cont/d...Cash and deposits with credit institutions consist principally of short-term investments, which are readilyconvertible into cash and have original maturities of 90 days or less. Deposits with credit institutions,disclosed on the Fund’s Portfolio of Investments, are valued at par, which approximates fair value.

Purchases and sales of investments are recognised on trade date – the date on which the Fund commits topurchase or sell the asset. Investments are initially recognised at fair value, and transaction costs for allfinancial assets and financial liabilities carried at fair value through profit or loss are expensed as incurred.Investments are derecognised when the rights to receive cash flows from the investments have expired orthe Fund has transferred substantially all risks and rewards of ownership.

d) Income and expense recognitionDividends are recognised as income in the Profit and Loss Account on the dates the securities are firstquoted ‘ex dividend’. Bank deposit interest is recognised in the Profit and LossAccount using the accrualsmethod. Income which suffers a deduction of tax at source is shown gross of such withholding tax.Franked investment income (which comprises UK source dividend income) is shown net of the notionaltax credit. Withholding tax is shown separately in the Profit and Loss Account. Expenses are accrued ona daily basis.

e) Realised gains and losses on investmentsRealised gains and losses on sales of investments are calculated based on the average book cost of theinvestment in local currency and are included in Net gains on investment at fair value during the periodin the Profit and Loss Account.

f) Unrealised gains and losses on investmentsUnrealised gains and losses on investments arising during the period are included in Net gains oninvestment at fair value during the period in the Profit and Loss Account.

g) Foreign exchangeThe functional currency of the Fund is British Pounds (GBP). GBP is the currency in which the Fundmeasures its performance and reports its results, as well as the currency in which it receives the majorityof subscriptions from its investors. The financial statements are presented also in GBP, the presentationcurrency of the Fund.

Foreign currency assets and liabilities, including investments at fair value, are translated into GBP at theexchange rate prevailing at the period end. The foreign exchange gain or loss based on the translation ofthe original cost of the transferable securities is included in the net gains or losses on investments at fairvalue in the Profit and Loss Account.

h) Redeemable Participating SharesThe Company provides its shareholders with the right to redeem their interest in the Company at anydealing date for cash equal to their proportionate share of the net asset value of the Company. Under FRS25, this right represents in substance a liability of the Company to shareholders.

24



2. Debtors30/06/09 31/12/08 30/06/08GBP GBP GBP

Accrued income 253,795 104,861 349,568Sale of securities awaiting settlement 2,878,143 1,918,981 5,225,273Amounts receivable on creation of redeemableparticipating shares 23,022 2,828,498 231,918Other debtors 73,394 3,443 34,399

––––––––– ––––––––– –––––––––3,228,354 4,855,783 5,841,158––––––––– ––––––––– –––––––––––––––––– ––––––––– –––––––––

3. Cash and bank balancesCash and bank balances are held with State Street Bank and Trust Company.

4. Creditors30/06/09 31/12/08 30/06/08GBP GBP GBP

Accrued expenses (430,179) (564,321) (742,178)Amounts payable on redemption of redeemableparticipating shares (2,268,494) (31,354) (4,491,071)Purchase of securities awaiting settlement (219,759) (7,280,864) (6,267,127)Other payables (198,312) (15,373) —

––––––––– ––––––––– –––––––––(3,116,744) (7,891,912) (11,500,376)––––––––– ––––––––– –––––––––––––––––– ––––––––– –––––––––

5. Exchange rates

The exchange rates used in the annual report for conversion to GBP at 30/06/09 are:

Canadian Dollar 1.9126 Norwegian Krone 10.6000Czech Koruna 30.5412 Singapore Dollar 2.3836Danish Krone 8.7435 Swedish Krona 12.7595Euro 1.1741 Swiss Franc 1.7910Israeli Shekel 6.4582 US Dollar 1.6468

The exchange rates used in the annual report for conversion to GBP at 31/12/08 were:

Canadian Dollar 1.7749 Norwegian Krone 10.0673Czech Koruna 27.7662 Singapore Dollar 2.0714Danish Krone 7.6987 Swedish Krona 11.3697Euro 1.0343 Swiss Franc 1.5303Israeli Shekel 5.4304 US Dollar 1.4378

25



6. Share capitalThe Company has authorised share capital divided into 300,000,000 Shares of no par value and 30,000Management shares of EUR1.2697 each. The issued Share capital comprises GBP108,564,774 (June2008: GBP196,116,213) represented by 2,488,132 Shares (June 2008: 3,711,190 Shares) of GBP43.63each (June 2008: GBP52.84) and EUR8.8879 represented by 7 Management shares of EUR1.2697 each,which have been issued to the Investment Manager and its nominees and on which EUR2.222, i.e. aquarter, has been paid up.

Management sharesManagement shares do not entitle the holders to any dividend and on a winding up entitle the holder toreceive the amount paid up thereon but not otherwise to participate in the assets of the Company. TheManagement shares do not form part of the net assets attributable to redeemable participatingshareholders. They are thus disclosed by way of this note only. In the opinion of the Directors, thisdisclosure reflects the nature of the Company’s business as an investment fund.

Redeemable Participating SharesThe Redeemable Participating Shares are classified as a liability in accordance with Financial ReportingStandard No. 25 “Financial Instruments: Presentation and Disclosure’’, as they are redeemable at therequest of the holders. These Shares issued by the Company are freely transferable and are entitled toparticipate equally in the profits and dividends of the Company and its assets if it were to be liquidated.

Each Shareholder shall have one vote in relation to any matter relating to the Company which is submittedto Shareholders for a vote by show of hands. Each Share gives the holder one vote in relation to any matterrelating to the Company which is submitted to Shareholders for a vote by poll. All Shares have equalvoting rights.

NAV per redeemable participating sharesThe NAV per Share at which Shareholders may subscribe to or redeem from the Company differs fromthat presented in these financial statements. This is due to the difference in valuation principles adoptedfor the two purposes. The valuation principles, based on official closing prices, are the current valuationprinciples per the Company’s prospectus and adopted in calculating the published NAV price for sharedealing purposes. The valuation principles adopted as disclosed in the significant accounting policies innote 1 to the financial statements, based upon bid prices, are in accordance with the financial reportingstandards issued by the ASB. Please see the fair value reconciliation at the base of the Balance Sheet onpage 22 reconciling the two valuation principles.

7. Soft Commission arrangementsThere were no soft commission arrangements during the period, or prior year, under review.

8. Financial instrumentsThe Fund may hold a number of financial instruments which comprise:1. Equity shares held in accordance with the Fund’s investment objective and policies.2. Cash, liquid resources and short term debtors and creditors that arise directly from its operations.3. Contracts for difference (CFDs) - see page 27 for a full explanation.

All Financial assets and liabilities held at 30 June 2009 have been valued based on quoted market prices.

26

27



9. Use of DerivativesAt the discretion of the Directors, the Fund may use financial derivative instruments including inparticular contracts for difference (CFDs) for investment purposes, to obtain short exposure to equitysecurities that the Investment Manager believes are overvalued or to reduce transaction costs. While theprudent use of such a derivative can be beneficial, derivatives also include risks different from, and incertain cases greater than, the risks presented by more traditional investments. The Fund may enter intofinancial derivative instruments with one or more counterparties for the purposes of efficient portfoliomanagement in accordance with the requirements of the Financial Regulator.Efficient portfolio management for these purposes, means an investment decision involving transactionsthat are entered into for one or more of the following specific reasons:• a reduction of risk;• a reduction of cost; or• the generation of additional capital or income for the Fund with an appropriate level of risk, taking intoaccount the risk profile of the Fund and subject to the conditions and limits as set out in the UCITSNotices and within any further limits laid down by the Financial Regulator from time to time.

The Company may be leveraged through the use of financial derivative instruments which may give it netmarket exposure to equities of up to 120% of its Net Asset Value.The Investment Manager employs a risk management process which enables it to monitor and measurethe risks attached to financial derivative instruments, and details of this process have been provided to theFinancial Regulator. The Investment Manager will not utilise financial derivative instruments which havenot been included in the risk management process until such time as a revised risk management processhas been submitted and approved by the Financial Regulator.

10. Contracts for difference (CFDs)Since 14 August 2006, the Fund has used Contracts for Difference (CFDs) to obtain short exposure.CFDs are agreements between the Company and third parties which allow the Company to acquire anexposure to the price movement of specific securities without actually purchasing the securities. Uponentering into a CFD, the Company is required to deposit with a broker initial cash margin equal to a certainpercentage of the contract amount.Variation margin payments are made or received by the Company depending upon the fluctuation in thevalue of the underlying securities. While the contract or notional amounts reflect the involvement of theCompany in these financial instruments, risks arise from possible adverse movements in foreign exchangerates and the prices of the underlying securities.The total notional amount of CFDs held by the Fund at period end was GBP 43,271,366 (all shortpositions). As at 31 December 2008 the notional amount of CFDs held on the Fund amounted to GBP64,555,032 (all short positions).

11. Distribution PolicyWhere positive income is available for distribution it is proposed that the Company will declare and paya distribution each year in an amount not less than 85 per cent of the Fund’s net income. It is intended thatapplication be made for certification of the Company as a distributing fund within the meaning of theUnited Kingdom Income and Corporation Taxes Act, 1988 in respect of the year ending 31 December2009. A dividend policy will be maintained which ensures that the Company will retain its distributorstatus for UK tax purposes. Any distributions will be applied towards the purchase of further Shares asapplicable.

12. Approval of the financial statementsThe financial statements were approved by the Board of Directors on 24 August 2009.

APPLICATION FORMENNISMORE EUROPEAN SMALLER COMPANIES FUND (the “Fund”)

This form duly completed should be sent to:

Ennismore European Smaller Companies Fundc/o State Street Fund Services (Ireland) LimitedGuild House, Guild Street Tel: 353-1-853 8042International Financial Services Centre Fax: 353-1-523 3721Dublin 1IrelandAttention: Client Services Department

I/We the undersigned having received and read a copy of the Prospectus of the Fund hereby irrevocably apply for

______________________________________________________________________redeemable participating shares;orsuch number of redeemable participating shares as may be subscribed forwith_____________________________________________________________________________ (amount in words)_________________________ (amount in figures)

and undertake to have settled therefore in full by telegraphic transfer, for value by ____________(insert value date) inSterling / Euro / Other (please indicate which other currency. NB - prior agreement must have been reached with theAdministrator to subscribe in such other currency).

Sterling settlement to: Citibank NA, LondonSWIFT CITIGB2LSort Code 18-50-08Account: State Street Fund Services (Ireland) Limited, GBP Client A/CA/C No: 8557462Reference: Ennismore European Smaller Companies Fund

Euro settlement to: Citibank NA, LondonSWIFT CITIGB2LAccount Name State Street Fund Services (Ireland) Limited, EUR Client A/CA/C No: 8557454Please pay EUR without deduction via direct clearing linkage to Citibank NA London (CITIGB2L) for Credit to StateStreet Funds Services (Ireland) Ltd Clients a/c, a/c No. 8557454.

Payment may be made by cheque which must accompany the application form. Cheques should be made payable to theEnnismore European Smaller Companies Fund.

Declaration of residence outside the Republic of IrelandApplicants resident outside the Republic of Ireland are required by the Irish Revenue Commissioners to make thefollowing declaration which is in a format authorised by them, in order to receive payment without deduction of tax. Itis important that this declaration, if it is then still correct, shall apply in respect of any subsequent acquisitions ofredeemable participating shares/units. Terms used in the declaration are defined in the Prospectus.

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Declaration on own behalfI/we declare that I am/we are applying for the shares/units on my own/our own behalf /on behalf of a company* and that I am/we are/the company* isentitled to the shares/units in respect of which this declaration is made and that• I am/we are/the company is* not currently resident or ordinarily resident in the Republic of Ireland, and• should I/we/the company* become resident in the Republic of Ireland I/wewill so inform you, in writing, accordingly.* Delete as appropriate

Declaration as IntermediaryI am/we declare that I am/ we are* applying for shares/units on behalf of persons:• who are beneficially entitled to the shares/units; and• who, to the best of my/our knowledge and belief, are neither resident nor ordinarily resident Ireland.I/we* also declare that:• Unless I/we specifically notify you to the contrary at the time of the application, all applications for shares/units made by me/us*

from the date of the application will be made on behalf of such persons; and• I/we will inform you in writing, if I/we* become aware that any person, on whose behalf I/we holds shares/units, becomes resident

in Ireland.* Delete as appropriate

OR

Notes:1. Non-resident declarations are subject to inspection by the Irish Revenue Commissioners and it is a criminal offence

to make a false declaration.2. To be valid, the application form (incorporating the declaration required by the Irish Revenue Commissioners) must

be signed by the applicant. Where there is more than one applicant, each person must sign. If the application is acompany, it must be signed by the company secretary or another authorised officer.

3. If the application form (incorporating the declaration required by the Irish Revenue Commissioners) is signed underpower of attorney, a copy of the power of attorney must be furnished in support of the signature.

4. Applicants who are Exempt Irish Residents should contact the Administrator for the alternative declarationavailable for Exempt Irish Residents.

5. Applicants who are unable to complete the above Declaration of residence outside the Republic of Ireland or do notfall within the category of Exempt Irish Residents should strike out the above declaration and will be subject to Irishtaxation on the occasion of a chargeable event.

Your personal information will be handled by the Administrator (as Data Processor on behalf of theCompany) in accordance with the Data ProtectionActs 1988 to 2003. Your information will be processedfor the purposes of carrying out the services of Administrator and transfer agent of the Company and tocomply with legal obligations including legal obligations under company law and anti-money launderinglegislation. The Administrator or Company will disclose your information to third parties wherenecessary or for legitimate business interests. This may include disclosure to third parties such asauditors and the Irish Financial Services Regulatory Authority or agents of the Administrator whoprocess the data for anti-money laundering purposes or for compliance with foreign regulatoryrequirements. The Applicant hereby consents to the processing of his/her information and the disclosureof his/her information as outlined above and to the Investment Manager and where necessary or in theCompany’s or the Administrator’s legitimate interests to any company of State Street Corporation oragents of theAdministrator including companies situated in countries outside of the European EconomicArea which may not have the same data protection laws as in Ireland.

Please do/do not* send me any further information on other products and services.*Delete as appropriate

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(COMPLETE IN BLOCK LETTERS PLEASE)

Applicant’s Name(s) (in full) ______________________________________________________________________

Applicant’s Name(s) (in full) ______________________________________________________________________

Address: ________________________________________________________________________________________

Tel No: ____________________ Fax No: __________________ e-mail: __________________________

Applicant’s Bank Account details (for settlement of repurchase of redeemable participating shares):

Bank __________________________________________________________________________________________

Address ________________________________________________________________________________________

SWIFT address __________________________________________________________________________________

Account number ________________________________________________________________________________

Account name __________________________________________________________________________________

Please sign to confirm that you have read the Terms and Conditions and the Notes below.

Applicant’s signature______________________________________________ Date________________________

Applicant’s signature______________________________________________ Date________________________

UNDERLYING INVESTORThe Directors of the Fund and Ennismore Fund Management Limited, the Fund's investment adviser, always like to knowthe identity of the underlying investors in the Fund. If this application form has been completed using a nominee name,please detail below the principal person and company, if any, with which Ennismore Fund Management Limited willliaise in relation to the investment in the Fund.

If you believe it would not be appropriate to do this for confidentiality reasons, kindly request your client's permission todisclose their details here. This will save Ennismore Fund Management considerable time in determining the personbehind the investment.

Underlying Investor’s Name(s)Company: ______________________________________________________________________________________

Address: ________________________________________________________________________________________

Tel No: ____________________ Fax No: __________________ e-mail: __________________________

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TERMS AND CONDITIONSApplications for purchase of shares may be made in written form, by facsimile or by phone applications byphone may only be made by existing Shareholders who should quote their Shareholder number). Applicationsby facsimile or by phone must be confirmed in writing by sending the original application form to theAdministrator. A contract note will be sent by the Administrator to the applicant within 24 hours of receipt ofthe completed application form. A written confirmation as to the entry of the applicant on the register ofShareholders will be sent by the Administrator to the Shareholder within 21 Business Days of receipt of theoriginal application form, payment and any other relevant documentation to the Administrator’s satisfactionand subject to the provisions of the Prospectus.

Applications for repurchase or redemption of shares may be made by phone or by renouncing the desirednumber of shares on the reverse of the ownership confirmation in written form or by facsimile. Applications byfacsimile or by phone must be confirmed in writing by sending the original renounced ownership confirmationto the Administrator. A contract note will be sent by the Administrator to the applicant within 24 hours of therelevant Dealing Day. Settlement for redemptions will normally be made by telegraphic transfer within fiveBusiness Days of the later of the Dealing Day on which the redemption request is dealt with or of receipt bytheAdministrator of the original renounced ownership confirmation together with any relevant renounced sharecertificate (if issued).

The Administrator is hereby authorised and instructed to accept and execute any instructions in relation to theshares to which this application relates given by me/us in written form, by facsimile or by phone. If theinstructions are given by me/us by facsimile or by phone, I/we undertake to confirm them in writing. I/Wehereby agree to indemnify each of the Administrator and the Fund and agree to keep each of them indemnifiedagainst any loss of any nature whatsoever arising to either of them as a result of the Administrator acting uponfacsimile or phone instructions. The Administrator may rely conclusively upon and shall incur no liability inrespect of any action taken upon any notice, consent, request, instruction or other instrument believed in goodfaith to be genuine or to be signed by properly authorised persons.

I am/We are fully empowered and have authority to make this investment whether the investment is on my/ourown behalf or on the behalf of another person or institution.

I/We confirm that I/we have the right and authority to request a redemption or repurchase of shares and confirmthat I/we will comply with the redemption and repurchase procedures set out in the Prospectus.

I/We acknowledge that due to money laundering requirements operating within its jurisdiction theAdministrator may require further identification of the applicant(s) before the application can be processed andthe Administrator shall be held harmless and indemnified against any loss arising as a result of a failure toprocess the application if such information has been requested by the Administrator and has not been providedby me/us. If payment is made by cheque drawn on the applicant’s bank account held in a regulated institutionthen no further identification will normally be required.

I/We confirm that I am/we are 18 years of age or over.

I/We confirm that I/we am not a US Person (as defined in the Prospectus) and am/are neither acquiring shareson behalf of, nor for the benefit of, a US Person nor do I/we intend selling or transferring any shares whichI/we may purchase to any person who is a US Person.

I/We hereby accept such lesser number of shares, if any, than may be specified above in respect of which thisapplication/transfer may be accepted.

I/We, having received and considered a copy of the Prospectus, hereby confirm that this application is basedsolely on the Prospectus for the Fund, and any relevant Supplement(s) thereto, current at the date of thisapplication and the material contracts referred to therein together (where applicable) with the most recentannual report and accounts of the Fund and (if issued after such report and accounts) its most recent unauditedsemi-annual report and I/we confirm that I am/we are not relying on any information or representation otherthan such as may be contained in the Prospectus and any relevant Supplement(s) thereto.

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I/ We agree that the issue and allotment to me/us of shares is subject to the provisions of the Prospectus andthat subscription for shares will be governed and construed in accordance with Irish law.

I/We request that the shares issued pursuant to this application are registered in the name(s) and address set outabove.

I/We hereby agree to indemnify and keep indemnified the Fund and the Administrator against any loss arisingto either of them as a result of any breach of any representation, warranty, covenant or confirmation by me/usin this application form or from my/our failure to disclose any relevant details or provide either of them withall information requested by either of them.

In the case of delay or failure to provide satisfactory information, the Administrator may take such action(including declining to accept an application) as it thinks fit.

I/We agree to notify the Administrator immediately if I/we become aware that any of these confirmations areno longer accurate and complete in all respects and agree immediately either to sell or to tender to theAdministrator for redemption a sufficient number of shares to allow the confirmation to be made.

I/We agree to provide the above confirmations to the Administrator at such times as the Administrator mayrequest, and to provide on request such certifications, documents or other evidence as the Administrator mayreasonably require to substantiate such representations.

I/We understand that the representations and warranties made herein are continuous and all subsequentpurchases of shares shall be governed by them, and I/we agree to notify the Administrator of any changes insuch representations.

(In respect of joint applicants only) We direct that on the death of one of us the shares for which we herebyapply be held in the name of and to the order of the survivor or survivors of us or the executor or administratorof such survivor or survivors.

NOTES:1. This application must be received by the Fund c/o State Street Fund Services (Ireland) Limited, Guild

House, Guild Street, International Financial Services Centre, Dublin 1, Ireland.2. To be valid, application forms must be signed by each applicant .3. In the case of a firm (not a limited company) applications should be in the name(s) of and signed by the

proprietor(s).4. A corporation should complete this form under seal or under the hand of a duly authorised official who

should state his capacity and furnish a certified copy of the authority pursuant to which such official isauthorised.

5. If this application form is signed under the power of attorney, such power of attorney or a duly certifiedcopy thereof must accompany this application form.

6. If this form is not fully completed to the satisfaction of the Administrator, the application may not beaccepted.

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Interim Report sep 2007 - Ennismore Fund Management: Home IR 09.pdf · 2010. 1. 27. · Fund HSBC...

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Transcript of Interim Report sep 2007 - Ennismore Fund Management: Home IR 09.pdf · 2010. 1. 27. · Fund HSBC...