REG - British Empire Sec - Annual Financial Report <Origin Href="QuoteRef">BTEM.L</Origin> - Part 3
10/11/2014 09:54
- Part 3: For the preceding part double click ID:nRSJ5283Wb
ended 30 September 2014, the fee calculated in accordance with the Investment Management Agreement amounted to
0.7% (2013: 0.6%) of the net asset value calculated on a quarterly basis.
Details of the Investment Management Agreement and fees paid to the Investment Manager are set out above.
4. Finance costs
2014 2014 2013 2013
Revenue Capital 2014 Revenue Capital 2013
return return Total return return Total
£'000 £'000 £'000 £'000 £'000 £'000
Bank overdraft interest 3 7 10 17 - 17
Interest on other loans 366 853 1,219 1,343 - 1,343
Amortisation of debenture issue expenses* - 8 8 - 7 7
369 868 1,237 1,360 7 1,367
*See note 12.
5. Taxation
2014 2014 2013 2013
Revenue Capital 2014 Revenue Capital 2013
return return Total return return Total
£'000 £'000 £'000 £'000 £'000 £'000
(a) Analysis of charge in year
Corporation tax - - - - - -
Foreign withholding tax 1,027 - 1,027 3,215 - 3,215
Overseas tax reclaimable (503) - (503) (1,239) - (1,239)
Total current tax for year(see note 5(b)) 524 - 524 1,976 - 1,976
Deferred tax - - - - (8) (8)
Total deferred tax for year - - - - (8) (8)
Total tax for year 524 - 524 1,976 (8) 1,968
(b) Factors affecting current tax charge for the period
The tax assessed for the year is lower than the standard rate of corporation tax in the UK for a large company of 22%
(2013: 23.52%).
2014 2014 2013 2013
Revenue Capital 2014 Revenue Capital 2013
return return Total return Return Total
£'000 £'000 £'000 £'000 £'000 £'000
Profit before taxation 14,351 35,381 49,732 23,751 77,135 100,886
Corporation tax at 22%* (2013: 23.52%) 3,157 7,784 10,941 5,586 18,142 23,728
Effects of:
Capital gains not subject to tax - (8,885) (8,885) - (18,971) (18,971)
Revaluation of Equities Index Unsecured Loan Stock 2013 - - - 7 - 7
Non-taxable UK dividends (238) - (238) - - -
Non-taxable overseas dividends (3,131) - (3,131) (6,701) - (6,701)
Overseas tax suffered 524 - 524 1,976 - 1,976
Disallowable management expenses 7 - 7 - - -
Movement in unutilised management expenses 205 1,101 1,306 1,108 829 1,937
Movement in deferred tax - - - - (8) (8)
Total tax charge for the year (note 5 (a)) 524 - 524 1,976 (8) 1,968
*Under the Finance Act 2013, the rate of corporation tax was lowered to 21% from 23% on 1 April 2014. An average rate of
22% is applicable for the year ended 30 September 2014.
(c) Unrecognised tax losses
The Company has a tax loss of £32,589,000 carried forward at the Balance Sheet date which is available indefinitely for
offset against future taxable profits. A potential deferred tax asset of £6,517,800 (based on 20% tax rate) has not been
recognised in respect of this tax loss as there is uncertainty over whether there will be sufficient future taxable profits
against which this tax loss can be offset.
6. Dividends
2014 2013
£'000 £'000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 30 September 2013 of 8.50p (2012: 7.50p) per Ordinary Share 12,885 11,836
Special dividend for the year ended 30 September 2013 of 2.50p (2012: 3.50p) per Ordinary Share 3,790 5,523
Interim dividend for the year ended 30 September 2014 of 2.00p (2013: 2.00p) per Ordinary Share 2,946 3,136
19,621 20,495
Set out below are the interim, final and special dividends paid or proposed on Ordinary Shares in respect of the financial
year, which is the basis on which the requirements of Section 1159 of the Corporation Tax Act 2010 are considered.
Interim dividend for the year ended 30 September 2014 of 2.00p (2013: 2.00p) per Ordinary Share 2,946 3,136
Proposed final dividend for the year ended 30 September 2014 of 8.50p (2013: 8.50p) per Ordinary Share 12,116* 12,924
Proposed special dividend for the year ended 30 September 2014 of nil (2013: 2.50p) per Ordinary Share - 3,801
15,062 19,861
* Based on shares in circulation on 5 November 2014.
7. Earnings per Ordinary Share
2014 2014 2014 2013 2013 2013
Revenue Capital Total Revenue Capital Total
Basic 9.29p 23.76p 33.05p 13.90p 49.24p 63.14p
The total basic earnings per Ordinary Share is based on Group net profit for the financial year of £49,208,000 (2013:
£98,918,000) and on 148,907,851 (2013: 156,665,364) Ordinary Shares, being the weighted average number of Ordinary Shares
in issue (excluding shares in treasury) during the year.
The total basic earnings per Ordinary Share figures detailed above can be further analysed between revenue and capital, as
below.
The basic revenue earnings per Ordinary Share is based on Group revenue after taxation for the financial year of
£13,827,000 (2013: £21,775,000) and on 148,907,851 (2013: 156,665,364) Ordinary Shares, being the weighted average number
of Ordinary Shares in issue (excluding shares in treasury) during the year.
The basic capital earnings per Ordinary Share is based on Group net profit for the financial year of £35,381,000 (2013:
£77,143,000) and on 148,907,851 (2013: 156,665,364) Ordinary Shares, being the weighted average number of Ordinary Shares
in issue (excluding shares in treasury) during the year.
8. Investments held at fair value through profit or loss
Listed investments Unlisted investments Group total investments Investment in subsidiary Company total investments
£'000 £'000 £'000 £'000 £'000
(a) Securities
Opening book cost 768,555 9,530 778,085 250 778,335
Opening investment holding gains/(losses) 71,616 (3,347) 68,269 1,762 70,031
Opening fair value 840,171 6,183 846,354 2,012 848,366
Movement in the year:
Purchases at cost:
Equities 480,270 935 481,205 - 481,205
Bonds 221,125 - 221,125 - 221,125
Sales - proceeds:
Equities (645,942) (196) (646,138) - (646,138)
Bonds (105,358) - (105,358) - (105,358)
- realised gains/(losses) on sales 42,445 (5,100)* 37,345 - 37,345
Movement in investment holding gains/(losses)
- reversal of unrealised (appreciation)/depreciation upon realisation (8,061) 5,235 (2,826) (1,762) (4,588)
- movement in unrealised appreciation/(depreciation) 11,517 (4,441) 7,076 - 7,076
Closing fair value 836,167 2,616 838,783 250 839,033
Closing book cost 761,095 5,169 766,264 250 766,514
Closing investment holding gains/(losses) 75,072 (2,553) 72,519 - 72,519
Closing fair value 836,167 2,616 838,783 250 839,033
* The realisation of the loss relating to the Company's holding in Resaca Exploitation which was included in opening
investment holding losses.
Group Company
£'000 £'000
(b) Gains on investments
Gains on sales of securities based on historical cost 37,345 37,345
Movement in investment holding gains for the year 4,250 2,488
Net gains on investments 41,595 39,833
(c) Transaction costs
Investment transaction costs on purchases and sales of investments during the year to 30 September 2014 amounted to
£1,411,000 and £881,000 respectively (2013: £778,000 and £626,000 respectively).
9. Subsidiary undertaking
The Group consists of the Company and its one subsidiary, BEST Securities Limited.
Name of undertaking Principal activity Country of incorporation and operation Description of shares held Proportion of nominal value of issued shares and voting rights held by:
Company (%) Group (%)
BEST Securities Limited Dealing Subsidiary England Ordinary 100 100
10. Other receivables
Company Group
2014 2013 2014 2013
£'000 £'000 £'000 £'000
Sales for future settlement - 3,305 - 3,305
Overseas tax recoverable* 2,542 2,640 2,542 2,640
Prepayments and accrued income 669 2,403 669 2,403
VAT recoverable 14 1 14 1
3,225 8,349 3,225 8,349
* This relates to withholding tax in a number of countries which is in the process of being reclaimed and which the Company
expects to receive in due course.
No amounts are past due or impaired. The carrying value approximates to fair value.
11. Other payables
Company Group
2014 2013 2014 2013
£'000 £'000 £'000 £'000
Purchases for future settlement 2,080 90 2,080 90
Amounts owed for share buybacks 2,786 870 2,786 870
Amounts owed to subsidiary undertakings 250 2,013 - -
Other creditors 1,197 1,464 1,197 1,467
6,313 4,437 6,063 2,427
The carrying value approximates to fair value.
12. Non-current liabilities
Group & Company
2014 2013
£'000 £'000
8 1/8 per cent Debenture Stock 2023 14,936 14,928
14,936 14,928
The movement on the 8 1/8 per cent Debenture Stock 2023 represents the amortisation of issue expenses. The market value of
the Debenture Stock as at 30 September 2014 was £18.5 million (2013: £18.5 million). The effect on the NAV per share of
deducting the Debenture Stock at market value rather than par is disclosed in note 15.
The mid-market price of the 8 1/8 per cent Debenture Stock 2023 as at 30 September 2014 was 123.50p (2013: 123.50p).
The Debenture Stock is secured by a floating charge over all of the assets of the Company.
Further information on the Debenture Stock is set out in the full Annual Report.
13. Provision for deferred tax
Group & Company
2014 2013
£'000 £'000
Provided
In respect of the origination and reversal of temporary differences - (8)
- 8
The movement in the provision for deferred taxation is as follows:
Opening balance 19 27
Charge to capital account - (8)
Closing balance 19 19
2014 2013
£'000 £'000
The deferred tax provision is made up as follows:
Equities Index Unsecured Loan Stock 2013 19 19
Closing balance 19 19
14. Called-up share capital (Group and Company)
Ordinary Shares of 10p each
Shares Nominal value£'000
Authorised:
Balance throughout the year 245,000,000 24,500
Allotted, called up and fully paid:
Balance at beginning of year 160,014,089 16,001
Cancellation of Ordinary Shares - -
Balance at end of year 160,014,089 16,001
Treasury Shares:
Balance at beginning of year (7,025,201)
Buyback of Ordinary Shares into treasury (9,394,016)
Balance at end of year (16,419,217)
Total Ordinary Share capital excluding Treasury Shares 143,594,872
During the year, 9,394,016 (2013: 5,106,097) Ordinary Shares with a nominal value of £939,401.60 and representing 5.87% of
the issued share capital, were bought back and placed in treasury for an aggregate consideration of £47,058,009 (2013:
£25,192,951). No Ordinary Shares were bought back for cancellation (2013: nil).
15. Net asset value
The net asset value per share and the net asset value attributable to the Ordinary Shares at the year end are calculated in
accordance with their entitlements in the Articles of Association and were as follows:
Net asset value per share attributable
Group and Company
2014 2013
p p
Ordinary Shares (basic) 575.92 551.97
Net asset value attributable
Group and Company
2014 2013
£'000 £'000
Ordinary Shares (basic) 826,984 844,455
The movement during the year of the Group assets attributable to the Ordinary Shares was as follows:
2014 2013
Ordinary Ordinary
Shares Shares
(basic) (basic)
£'000 £'000
Total net assets attributable at beginning of year 844,455 791,225
Ordinary Shares bought back and held in treasury (47,058) (25,193)
Total comprehensive income for the year 49,208 98,918
Dividends appropriated in the year (19,621) (20,495)
826,984 844,455
Basic net asset value per Ordinary Share is based on net assets and on 143,594,872 (2013: 152,988,888) Ordinary Shares,
being the number of Ordinary Shares in issue excluding Treasury Shares at the year end.
At the year end, the net asset value per Ordinary Share adjusted to include the Debenture Stock at market value rather
amortised cost was 573.42p (2013: 549.62p).
16. Analysis of cash and cash equivalents at end of year
At At
30 September Cash Exchange 30 September
2013 flow movement 2014
£'000 £'000 £'000 £'000
Group
Cash at bank and on deposit 7,126 78 (1,210) 5,994
Company
Cash at bank and on deposit 7,124 80 (1,210) 5,994
17. Financial instruments and capital disclosures
Risk management policies and procedures
The investment objective of the Group is to achieve capital growth through a focused portfolio of investments, particularly
in companies whose share prices stand at a discount to estimated underlying net asset value.
The Group's financial instruments comprise equity and fixed interest investments, cash balances and borrowings. The Group
makes use of borrowings to achieve improved performance in rising markets. The risk of borrowings may be reduced by raising
the level of cash balances or fixed interest investments held.
The Group may also enter into derivative transactions which comprise forward foreign exchange contracts (the purpose of
which is to manage currency risk arising from the Group's investing activities) and quoted options on indices appropriate
to sections of the portfolio (the purpose of which is to provide protection against falls in the capital values of the
holdings). The Group has not used derivatives during the current financial year as part of its investment strategy.
The Board sets out its investment policies in the full Annual Report.
The Board and Investment Manager consider and review the risks inherent in managing the Group's assets which are detailed
below.
Currency exposure Sterling Euro CAD$ US$ Other Total
£'000 £'000 £'000 £'000 £'000 £'000
At 30 September 2014
Investments held at fair value through profit or loss that are monetary items 6,041 - - 19,738 - 25,779
Other receivables 46 740 79 352 2,008 3,225
Cash and cash equivalents 5,852 - 141 - 1 5,994
Other payables (3,983) - - (2,080) - (6,063)
8 1/8% Debenture Stock 2023 (14,936) - - - - (14,936)
Provision for deferred tax (19) - - - - (19)
Currency exposure on net monetary items (6,999) 740 220 18,010 2,009 13,980
Investments held at fair value through profit or loss that are equities 116,173 227,409 84,331 194,967 190,124 813,004
Total net currency exposure 109,174 228,149 84,551 212,977 192,133 826,984
This exposure is representative at the Balance Sheet date and may not be representative of the year as a whole.
Sterling Euro CAD$ US$ Other Total
£'000 £'000 £'000 £'000 £'000 £'000
At 30 September 2013
Investments held at fair value through profit or loss that are monetary items 86,865 - - 43,183 - 130,048
Other receivables 1,035 1,085 3,535 309 2,385 8,349
Cash and cash equivalents 6,688 - 1 - 437 7,126
Other payables (2,337) - - (90) - (2,427)
8 1/8% Debenture Stock 2023 (14,928) - - - - (14,928)
Provision for deferred tax (19) - - - - (19)
Currency exposure on net monetary items 77,304 1,085 3,536 43,402 2,822 128,149
Investments held at fair value through profit or loss that are equities 59,762 150,054 107,028 132,920 266,542 716,306
Total net currency exposure 137,066 151,139 110,564 176,322 269,364 844,455
The value of the Group's assets and the total return earned by the Company's shareholders can be significantly affected by
foreign exchange rate movements as some of the Group's assets are denominated in currencies other than Pounds Sterling, the
currency in which the Company's financial statements are prepared. It is not the Group's usual policy to hedge this risk.
Income denominated in foreign currencies is converted to Pounds Sterling upon receipt.
During the year, the Company did not enter into any forward foreign exchange contracts. There were no open forward foreign
exchange contracts as at 30 September 2014.
Over the year, the Pound Sterling strengthened against the Group's principal investing currencies, the US Dollar by 0.11%
(2013: 0.28%), the Canadian Dollar by 8.84% (2013: 4.76%) and the Euro by 7.28% (2013: weakened 4.69%).
A 5% rise or decline of the Pound Sterling against foreign currency denominated (i.e. non Pound Sterling) assets and
liabilities held at the year end would have decreased/increased the total return and net asset value by £35,891,000 (2013:
£35,369,000).
Interest rate risk
Interest rate movements may affect:
• the fair value of investments in fixed-interest rate securities;
• the level of income receivable on cash deposits;
• the interest payable on variable rate borrowings; and
• the fair value of the Company's long term debt.
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into
account when making investment decisions. The Company, generally, does not hold significant cash balances, with short-term
borrowings being used when required.
The Debenture Stock, issued by the Company as a planned level of gearing, pays a fixed rate of interest and is carried in
the Company's Balance Sheet at amortised cost rather than at fair value. Hence, movements in interest rates will not affect
equity but may have an impact on the Company's share price and discount/premium, which is not likely to be material.
Further information on the Debenture Stock is shown in note 12.
The exposure at 30 September of financial assets and financial liabilities to interest rate risk is shown by reference to:
● · floating interest rates
● · fixed interest rates
At 30 September 2014£'000 At 30 September 2013£'000
Exposure to floating interest rates:Cash and cash equivalents 5,994 7,126
If the above level of cash was maintained for a year, a 1% increase/decrease in LIBOR would increase/decrease the revenue
return and net assets by £60,000 (2013: £71,000).
£'000
Exposure to fixed interest rates:Investments held at fair value through profit or loss8 1/8 per cent Debenture Stock 2023 (fair value based on market prices) 25,779 (18,525)
7,254
The impact of holding the Debenture Stock at fair value would be to reduce the Group's net assets by £3,589,000.
The maturity dates and the nominal interest rates on the investments held at fair value through profit or loss are shown in
the Investment Portfolio above. The weighted average effective interest rate on these investments is 0.15% (2013: 0.20%).
The Company's fixed income portfolio at the year end was valued at £25,779,000 (2013: £130,048,000). A 1% increase/decrease
in relevant market interest rates would be expected to decrease/increase the portfolio's value by approximately £58,000
(2013: £378,000), all other factors being equal.
The fair value of the Company's Debenture Stock at the year end was £18,525,000 (2013: £18,525,000). A 1% increase/decrease
in the applicable interest rates would be expected to decrease/increase the fair values of the Debenture Stock by
approximately £1,198,000 (2013: £1,208,000), all other factors being equal.
Market price risk
The management of market price risk is part of the fund management process and is typical of equity investment. The
portfolio is managed with an awareness of the effects of adverse price movements through detailed and continuing analysis
with the objective of maximising overall returns to shareholders. Further information on the Investment Portfolio is set
out above.
If the fair value of the Group's investments at the year end increased or decreased by 10%, then it would have had an
effect on the Group's capital return and equity equal to £83,878,000 (2013: £84,635,000).
Liquidity risk
The Company's assets mainly comprise readily realisable securities which can be easily sold to meet funding commitments, if
necessary. Unlisted investments in the portfolio are subject to liquidity risk. The risk is taken into account by the
Directors when arriving at their valuation of these items.
The remaining contractual payments on the Group's financial liabilities at 30 September, based on the earliest date on
which payment can be required was as follows:
In 1 year or less£'000 In more than 1 year but not more than 2 years £'000 In more than 2 years but not more than 3 years£'000 In more than 3 years but not more than 10 years£'000 Total£'000
At 30 September 2014
81/8% Debenture Stock 2023 (1,219) (1,219) (1,219) (22,007)* (25,664)
Other payables (6.063) - - - (6,063)
Deferred tax (19) - - - (19)
(7,301) (1,219) (1,219) (22,007) (31,746)
In more than In more than In more than
1 year but 2 years but 3 years but
In 1 year not more not more not more
or less£'000 than 2 years£'000 than 3 years£'000 than 11 years£'000 Total£'000
At 30 September 2013
8 1/8 % Debenture Stock 2023 (1,219) (1,219) (1,219) (23,228)* (26,885)
Other payables (2,427) - - - (2,427)
Deferred tax - (19) - - (19)
(3,646) (1,238) (1,219) (23,228) (29,331)
* Comprises the remaining interest payments to 2023, together with the principal to be repaid in 2023.
Credit risk
Credit risk is mitigated by diversifying the counterparties through whom the Investment Manager conducts investment
transactions. The credit standing of all counterparties is reviewed periodically with limits set on amounts due from any
one counterparty.
The total credit exposure of the Group at the year end as shown on the Balance Sheet and Investment Portfolio was
£34,998,000 (2013: £145,522,000).
The total credit exposure represents the carrying value of fixed income, cash and receivable balances and totals
£34,998,000 (2013: £145,522,000), as detailed in the table above.
Fair values of financial assets and financial liabilities
Except for the Group's Debenture Stock measured at amortised cost as shown below, the financial assets and financial
liabilities of the Group are either carried in the Balance Sheet at their fair value (investments), or the Balance Sheet
amount is a reasonable approximation of fair value (due from brokers, dividends receivable, accrued income, cash at bank
and due to brokers).
2014 2013
Book value£'000 Fair value£'000 Book value£'000 Fair value £'000
8 1/8% Debenture Stock 2023 (14,936) (18,525) (14,928) (18,525)
Quoted market prices have been used to determine the fair value of the Group's Debenture Stock.
The fair value of the Group's unquoted investments is measured by the Directors using valuation methodologies in accordance
with IPEVC guidelines.
Valuation of financial instruments
The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used
in making the measurements. Categorisation within the hierarchy has been determined on the basis of the lowest level input
that is significant to the fair value measurement of the relevant assets as follows:
● Level 1 - valued using quoted prices unadjusted in active markets for identical assets or liabilities.
● Level 2 - valued by reference to valuation techniques using observable inputs for the asset or liability other than quoted prices included within Level 1.
● Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data for the asset or liability.
The tables below set out fair value measurements of financial instruments as at the year end, by the level in the fair
value hierarchy into which the fair value measurement is categorised.
Financial assets at fair value through profit or loss at 30 September 2014
Level 1£'000 Level 2£'000 Level 3£'000 Total£'000
Equity investments 810,388 - 2,616 813,004
Fixed interest bearing securities 25,779 - - 25,779
836,167 - 2,616 838,783
Financial assets at fair value through profit or loss at 30 September 2013
Level 1 Level 2 Level 3 Total
£'000 £'000 £'000 £'000
Equity investments 710,123 - 6,183 716,306
Fixed interest bearing securities 130,048 - - 130,048
840,171 - 6,183 846,354
The valuation techniques used by the Company are explained in the accounting policies note. There have been no transfers
during the year between Levels 1 and 2.
A reconciliation of fair value measurements in Level 3 is set out below.
Level 3 financial assets at fair value through profit or loss at 30 September
2014 £'000 2013 £'000
Opening fair value 6,183 4,492
Transfer from Level 1 to Level 3 investment - 5,296
Purchases at cost 935 -
Sales - proceeds (196) -
Total gains/(losses) included in gains on investments in the Consolidated Statement of Comprehensive Income
- on sold assets (5,100) -
Movement in investment holding gains/(losses)
- reversal of unrealised depreciation upon realisation 5,235 -
- movement in unrealised appreciation/(depreciation) (4,441) (3,605)
Closing fair value 2,616 6,183
The closing fair value as at 30 September 2014 comprises an investment in Mitra Energy Limited which is held at Directors'
valuation. The valuation at year-end was based on the proposed exchange ratio for a reverse take-over by Mitra Energy of
Petra Petroleum, a Canadian-listed company.
Capital management policies and procedures
The structure of the Company's capital is described in note 14 and details of the Company's reserves are shown in the
Statement of Changes in Equity.
The Company's capital management objectives are:
● to ensure that it will be able to continue as a going concern; and
● to achieve capital growth through a focused portfolio of investments, particularly in companies whose share prices stand at a discount to estimated underlying net asset value; through an appropriate balance of equity capital and debt.
The Board, with the assistance of the Investment Manager, regularly monitors and reviews the broad structure of the Group's
capital on an ongoing basis. These reviews include:
● the level of gearing, which takes account of the Group's position and the Investment Manager's views on the market; and
● the extent to which revenue in excess of that which is required to be distributed should be retained.
The Group's objectives, policies and processes for managing capital are unchanged from last year.
The Group is subject to externally imposed capital requirements:
a) as a public company, the Company is required to have a minimum share capital of £50,000; and
b) in accordance with the provisions of sections 832 and 833 of the Companies Act 2006, the Company,as an investment company:
i) is only able to make a dividend distribution to the extent that the assets of the Company are equal to at least one and a half times its liabilities after the dividend payment has been made; and
ii) is required to make a dividend distribution each year such that it does not retain more than 15% of the income that it derives from shares and securities.
These requirements are unchanged since last year and the Group has complied with them at all times.
18.Contingencies, guarantees and financial commitments
In June 2007, the European Court of Justice ruled that investment management fees should be exempt from VAT, and in early
November 2007 HM Revenue & Customs decided not to contest that ruling. The Board is taking steps to reclaim such Back VAT
on investment management fees as it can and has recovered £3,603,575 up to the date of this report.
While most of the Back VAT has now been recovered, the Company is taking further steps to recover Back VAT and interest,
but does not anticipate any further significant recovery in the near term.
At 30 September 2014, the Group had no financial commitments (2013: £nil).
At 30 September 2014, the Group had no contingent liability in respect of any investments carrying an obligation for future
subscription or underwriting commitments (2013: £nil).
At 30 September 2014, the Group had a contingent liability pursuant to an Indemnity given to Caledonia Investments plc
('Caledonia') in respect of sums received from Caledonia by way of repayment of VAT (the 'VAT Refund') paid by the Company
between 1991 and 1995 on investment management fees to Caledonia. This Indemnity is against any amounts of VAT (including
any interest or penalties) Caledonia is liable to repay to HM Revenue & Customs in respect of the VAT Refund, together with
all reasonable costs, charges and expenses incurred by Caledonia in enforcing its rights under the Indemnity. The Company's
liability under the Indemnity shall not exceed the amount of the VAT Refund received from Caledonia which amounted to
£619,178 (including simple interest of £263,337).
19. Related party disclosure
The related party transaction pursuant to the Investment Management Agreement with Asset Value Investors Limited is set out
above. Management fees for the year amounted to £5,909,000 (2013: £4,706,000).
As at the year end, the following amounts were outstanding in respect of management fees: £495,000 (2013: £392,000).
Strone Macpherson is Chairman of Close Brothers Group plc, the ultimate parent of Winterflood Securities Limited which acts
as the Company's Corporate Broker which is paid a retainer of £25,000 per annum by the Company, of which £nil was
outstanding at the year end.
20. Post balance sheet events
Since the year end the Company has completed the following transactions in its own shares:
Shares bought back and held in treasury
Date Number of OrdinaryShares Cost£'000
3 October 2014 159,359 817
10 October 2014 343,000 1,747
16 October 2014 88,500 436
17 October 2014 59,000 289
24 October 2014 215,517 1,066
31 October 2014 194,452 986
1,059,528 5,341
There are no further post balance sheet transactions that require disclosure or adjustment in the financial statements.
This information is provided by RNS
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