RNS Number : 7799L
Investment Company PLC
15 September 2021
THE INVESTMENT COMPANY PLC
Annual Results Announcement for the year ended 30 June 2021
LEI: 2138004PBWN5WM2XST62
SUMMARY OF RESULTS
At 30 June 2021
At 30 June 2020
Change %
Equity Shareholders' funds
16,281,804
15,037,057
8.28
Number of ordinary shares in issue
4,772,049
4,772,049
-
Net asset value ("NAV") per ordinary share
341.19p
315.11p
8.28
Ordinary share price (mid)
309.00p
276.00p
11.96
Discount to NAV
9.43%
12.41%
2.98
At 30 June 2021
At 30 June 2020
Total return per ordinary share*
29.08p
(20.92)p
Dividends paid per ordinary share
3.00p
12.25p
* The total return per ordinary share is based on total income after taxation as detailed in the Consolidated Income Statement and in note 6.
CHAIRMAN'S STATEMENT
The Investment Company plc has been through many iterations since its incorporation in November 1868 and has survived innumerable challenges in its 153-year history. This would not have been possible except for Shareholders' willingness to adapt the Company over the years to changing times and radically different circumstances. In November 2020, Shareholders again voted in favour of such a change, with the Company reverting to being self-managed with a fresh investment policy and new purpose.
The Company's objective is to protect the purchasing power of its capital in real terms, and to participate in enduring economic activities which lend themselves to genuine capital accumulation and wealth creation. This means, quite simply, that we will treat the Company's capital as an irreplaceable part of our Shareholders' savings and that we will treat those savings with respect and care. As a Board we encourage Shareholders to consider our guiding principles which are set out on page 3 of the Annual Report.
Tom Cleverly and Michael Weeks joined the board in November 2020 and their contribution to the Company has been significant. Although by no means a unique structure, the Board collectively are responsible for the governance of the Company and its investment decisions, with few delegated responsibilities. Nevertheless, Martin Perrin continues to Chair the Audit Committee, and Tim Metcalfe remains as the Senior Independent Director. The Board has also established an Investment Committee, consisting of Ian Dighé, Tom Cleverly, and Michael Weeks, to ensure an efficient process for the executing of the Company's investment decisions. However, all the Directors take a collective interest in the investment proposals made by the Committee and are intimately involved in the decisions made.
During the year the Board appointed ISCA as the Company's Administrator and Company Secretary. The Board is of the view that ISCA's levels of service represent good value for our Shareholders and ISCA's professionalism further allows the Board to prioritise its attention on strategic and investment related matters, over and above day-to-day administrative matters.
Investments
Following the Shareholder vote in favour of the change in investment policy in November 2020, the legacy portfolio of over 70 holdings has been transitioned into a significantly reduced number of participations.
The Company's holdings are now composed of 20 equity participations with a fair value of £10.8 million (66.7% of net assets), fixed income and legacy holdings of £0.7 million (4.0%), and gold and cash reserves of £4.8 million (29.3%). The Company's holdings as at 30 June 2021 are set out in full below. Starting in November 2020 we began to completely rebuild the portfolio in order to meet our new objective. Because of this wholesale change, we limit our remarks below to investment activity in the second six months of the year.
During this six-month period from 1 January 2021 to 30 June 2021:
• We, amongst others, took new positions in Cembre (a manufacturer and distributor of electrical connectors), Nedap (which develops radio-frequency identification ("RFID") based commercial software across many industries), and Fromageries Bel (a global branded cheese producer). These are the kinds of little business gems that we hope to own many years from now. However, this is not always possible. The family controlling Fromageries Bel announced they will take the company private later this year with a forced buyout of minority shareholders. Though a small boon to the net asset value, looking ahead ten years we would rather have held the shares.
• We rebalanced our precious metals holdings by selling some shares in Franco Nevada and a few kilos of gold held through ETCs to increase our position in Barrick Gold and adding a new position in an intermediate gold producer, Alamos Gold. This increased our exposure to precious metals miners and royalties to 7.9% of net assets.
• We increased our presence in oil production by adding a new position in Lukoil. Together with our stake in Imperial Oil this brings our combined oil holding to 6.6% of net assets. These two companies share many traits which make them valuable to us: they have little to no debt, enduring and integrated businesses, proven reserves which are measured in decades, and a record of sensible capital decisions over many years. At different times in the past year they have also represented some of the lowest-priced oil reserves available in the market.
• We increased our holdings in Tonnellerie Francois Freres, British American Tobacco, and ForFarmers. We made a partial sale of Bakkafrost and Rio Tinto, and we sold out entirely of Diageo to concentrate our portfolio elsewhere.
• Of the fixed income and legacy holdings, we sold the Six Hundred Group bonds early in the second half and our Intercede notes were redeemed at par. What remains in this category are two substantial preference shares (3.5% of assets) and several smaller fixed income securities (0.5% of assets). All these holdings are illiquid, but we are working to sell them as opportunity allows and they are marked at conservative valuations.
The pace of investment activity slowed markedly during the second half as the portfolio transition ran its course. While there are still a few legacy assets we hope to sell, this transition is effectively complete and we expect our level of investment activity to be much more limited in the current year compared to the period just ended.
Liquidity and Reserves
We continue to hold substantial reserves totalling £4.8 million (29.3% of net assets). This consists of gold bullion valued at £4.1 million (25.2%) and cash and other net assets valued at £0.7 million (4.1%). While we hold our gold bullion indirectly through different ETFs, we view this collectively as a single investment of 100 kilos of gold. We sold a small amount of gold during the second half, about 5 kilos worth, but our gold holding remains largely unchanged from six months ago.
We are willing to hold substantial reserves because we consider them a necessary part of the pursuit of capital preservation. We see our reserves as a purposeful component of our portfolio and not some dial to be constantly fiddled with as financial conditions become slightly more or less 'bullish'. It is not a matter of market timing but of identifying and acquiring a collection of businesses that we'd love to own ten years from now. Our reserves will vary in time, but we do not consider ourselves 'underinvested' because we hold more reserves than others may do.
Shareholders
As set out in the list of significant Shareholders on page 16 of the Annual Report, we were pleased to welcome Edelweiss Holdings plc as a significant Shareholder in March 2021, who are holding their shares for investment purposes. We look forward to welcoming further new Shareholders as the investment policy of the Company becomes more widely known. As a Board we are mindful of the Company's modest size, and in due course look forward to broadening our capital base with likeminded individuals and families. We also recognise that it is appropriate to offer Shareholders the opportunity to formally opine on the success of the Company, whilst recognising the long-term nature of the Company's investment policy and its participations. To this end a vote on the continuation of the Company will be proposed at the AGM in 2025.
Income and Expenses
Our income and expenses for the year ending 30 June 2021 are set out on pages 45 and 46 of the Annual Report. During the year under review expenses increased by £206,921. However, one-off items, including legal fees and the overlap in Investment Management and Administration fees, amounted to £238,684. If these items, that are not expected to be repeated in future periods, are excluded, overall expenses decreased by £31,763. It is anticipated that expenses will continue at this reduced level in future periods, thereby improving the total return to Shareholders.
AGM
We are hopeful of a return to some form of normality in terms of public and statutory meetings and look forward to welcoming you to our 155th AGM on 27 October 2021. Details are set out on pages 58 to 62 of the Annual Report together with the resolutions to be put to Shareholders at the AGM. We encourage all Shareholders to vote and as many as possible to attend the AGM in person. It will be a pleasure to meet with Shareholders again, and we welcome those who are interested to learn more of our endeavours. We will of course have in place alternative arrangements should COVID restrictions return.
Outlook
We are experiencing increasingly fragile and unpredictable economic times with valuations that often defy any form of interpretation. The Board looks forward to working with Shareholders in ensuring the Company holds fast to its guiding principles and develops a purpose that will endure generationally.
I. R. Dighé
Chairman
14 September 2021
Portfolio Summary
Asset Exposure by Trading Currency
At 30 June 2021
Currency
Equities
Fixed income & preference shares
Gold
Cash & other net assets
Total
GBP
14.6%
4.0%
-
3.4%
22.0%
CAD
7.3%
-
-
(0.5)%
6.8%
CHF
6.0%
-
-
-
6.0%
EUR
27.2%
-
-
-
27.2%
NOK
4.4%
-
-
-
4.4%
USD
7.2%
-
25.2%
1.2%
33.6%
Total
66.7%
4.0%
25.2%
4.1%
100.0%
Equity Participations - Regional Economic Exposure*
At 30 June 2021
Region
% of equity participations
Europe
42.5%
North America
26.0%
South America
8.4%
Asia, Africa, Other
23.1%
Total
100.0%
Equity Participations - By Sector
At 30 June 2021
Sector
% of equity participations
Consumer Goods
41.0%
Industrials
33.5%
Basic Materials
15.6%
Oil & Gas
9.9%
Total
100.0%
*Directors' estimates. Regional Economic Exposure represents where in the world the underlying business activity of the equity participations takes place.
Portfolio and Assets
At 30 June 2021
Security
Country
Holding
Fair value £
% of total portfolio
Hal Trust
Netherlands
11,173
1,423,239
8.7%
British American Tobacco
UK
27,000
756,000
4.7%
Tonnellerie François Frères Group
France
32,000
749,872
4.6%
Bakkafrost
Faroe Islands
12,000
717,698
4.4%
Barrick Gold
Canada
45,000
673,422
4.1%
Strix Group
UK
208,636
658,247
4.0%
Imperial Oil
Canada
26,000
574,031
3.5%
Unilever
UK
13,300
562,656
3.5%
Emmi
Switzerland
700
520,122
3.2%
Lukoil ADR
Russia
7,500
502,677
3.1%
Lucas Bols
Netherlands
55,000
497,596
3.1%
Bucher Industries
Switzerland
1,200
454,556
2.8%
Rio Tinto
UK
6,700
398,583
2.5%
Nedap
Netherlands
7,590
378,522
2.3%
Franco-Nevada
Canada
3,600
378,450
2.3%
Cembre
Italy
18,000
355,364
2.2%
Safilo Group
Italy
300,000
345,064
2.1%
ForFarmers
Netherlands
80,000
341,974
2.1%
Fromageries Bel
France
876
326,337
2.0%
Alamos Gold
Canada
43,000
237,967
1.5%
Total equity participations
10,852,377
66.7%
Renold 6% Preference Shares
UK
422,109
384,119
2.4%
Redde Northgate 5% Preference Shares
UK
532,763
186,467
1.1%
Other legacy holdings
Various
86,764
0.5%
Total fixed income and legacy holdings
657,350
4.0%
Invesco Physical Gold ETC
UK
15,000
1,854,185
11.4%
WisdomTree Physical Gold ETC
UK
9,500
1,147,781
7.0%
WisdomTree Physical Swiss Gold ETC
Switzerland
9,000
1,107,171
6.8%
Total gold
4,109,137
25.2%
Sterling cash
540,800
3.3%
Other assets net of other liabilities
122,140
0.8%
Total cash and other net current assets
662,940
4.1%
Total net assets
16,281,804
100.0%
CORPORATE SUMMARY
The Company's purpose, values, strategy and culture
The Investment Company plc (the Company) is an investment trust company that has a premium listing on the London Stock Exchange, its principal activity is portfolio investment. The Company's wholly owned subsidiaries are Abport Limited, an investment dealing company and New Centurion Trust Limited, an inactive investment company (together the Group).
The Company consists of the Board and its Shareholders and has no employees or customers in the traditional sense. The culture of the Company is embodied in the Board of Directors whose values are trust and fairness and in the guiding principles as shown on page 3 of the Annual Report.
Investment Objective
At the Annual General Meeting on 4 November 2020, Shareholders voted to amend the Company's Investment Objective and Policy to that shown below.
The Company's investment objective is to protect the purchasing power of its capital in real terms, and to participate in enduring economic activities which lend themselves to genuine capital accumulation and wealth creation.
Investment Policy
The Company will seek to acquire and hold, with no predetermined investment time horizon, a collection of assets which, in the Directors' judgement, are well-suited to the avoidance of a permanent loss of capital. These assets will be comprised of minority participations in the equity, debt or convertible securities of quoted businesses which the Directors believe are led by responsible and like-minded managers and suitable for the long-term compounding of earnings. In addition, to protect its capital as well as to maintain liquidity for future investments, the Company will keep reserves in (a) liquid debt instruments such as cash in banks or securities issued by governments and/or (b) liquid, non-debt, tangible assets such as gold bullion, whether held indirectly or in physical form.
The Company has no predetermined maximum or minimum levels of exposure to asset classes, currencies or geographies, and has the ability to invest globally. These exposures will be monitored by the Board in order to ensure an adequate spreading of risks. No holding in an individual company or debt instrument will represent more than 15 per cent. by value of the Company's total assets at the time of acquisition (such restriction does not, however, apply to gold bullion or cash balances). The Company's holdings of gold bullion may be as high as 35 per cent. of total assets at the time of investment.
Given the Company's investment objective, asset mix and time horizon, the portfolio will not seek to track any benchmark or index. The Company will not invest more than 10 per cent. of its total assets in other listed closed-ended investment funds. The Company will not use derivative instruments for speculative purposes, nor will it use currency hedges to manage returns in any currency.
The Company's gearing will not exceed 20 per cent. of net assets at the time of drawdown.
No material change will be made to the investment policy without the approval of Shareholders by ordinary resolution.
Principal Risks and Uncertainties
The management of the business and the execution of the Group's strategy are subject to a number of risks. A robust assessment of the principal risks to the Company has been carried out, including those that would threaten its business model, future performance, solvency and liquidity.
The Covid-19 pandemic continues to have an effect on both global and domestic economies. Political initiatives to mitigate the impact thereof have included a continued expansion of quantitative easing. These events are all being closely monitored by the Board as are its potential impact on the Company. The Board is also monitoring how BREXIT continues to unfold.
These matters apart, the Group's principal risks are set out below. An explanation of how these have been mitigated or managed is also provided, where appropriate.
The key business risks affecting the Group are:
Risk
Mitigation
Business risk
The profitability, market positioning and outlook for companies in which the Company is invested may decline or fail to make expected progress. This may be because of internal factors at the investee company or external factors such as competitive pressures, economic downturns or political events.
The Company looks to invest in businesses that can demonstrate resilient characteristics and a shared philosophy around long term creation of value.
Concentration risk
25.2% of the Company's portfolio is invested in gold ETCs and a further 7.9% is invested in gold royalty and mining businesses.
At the time of acquisition, investments in any one company shall not exceed 15% and investments in gold bullion shall not exceed 35% of the Company's total assets.
Monetary risk
The widespread use of quantitative easing and other monetary policies poses a risk to the real value of the Company's assets.
The Company looks to own a portfolio of assets that possess an enduring real value whether from the value of the underlying assets in an investment, or in the investee's ability to create an enduring profit stream.
Operational risk
The Company is reliant on service providers including, ISCA Administration Services Limited as Administrator and Company Secretary, and Fiske plc as Custodian. Failure of the internal control systems of these parties could result in losses to the Company.
The Board formally reviews the Company's service providers on an annual basis.
There are other risks that may materially impact the Company; however the likelihood thereof is considered small.
Foreign currency risk
Under the revised investment policy the Company has increasingly invested in stocks in overseas markets dominated in foreign currencies thus increasing the foreign currency risk. As shown above approximately 78.0% is invested in foreign currency stocks.
Regulatory risk
The Company operates in an evolving regulatory environment and faces a number of regulatory risks. A breach of sections 1158/1159 of the Corporation Tax Act 2010 would result in the Company being subject to capital gains tax on portfolio investments. Breaches of other regulations, including the Companies Act 2006, the UKLA Listing Rules, the UKLA Disclosure Guidance and Transparency Rules, or the Alternative Investment Fund Managers' Directive, could lead to a detrimental outcome. Breaches of controls by service providers to the Company could also lead to reputational damage or loss. The Board monitors compliance with regulations, with reports from the Administrator.
Discount Volatility
The Company's shares may trade at a price which represents a discount to its underlying NAV.
Market price risk
The Board monitors the prices of financial instruments held by the Company on a regular basis. In addition, it is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce risks arising from investment decisions and investment valuations. The Board actively monitors market prices throughout the year and meets regularly in order to review investment strategy. Most of the equity investments held by the Company are listed on a recognised Stock Exchange.
Liquidity risk
The Group's assets mainly comprise readily realisable quoted securities that can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of overdraft facilities.
Credit risk
The failure of a counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss. Normal delivery versus payment practice and review of counterparties and custodians by the Board mean that this is not a significant risk.
Interest rate risk
Given the changes in the portfolio resulting from the change of Investment Objective and Policy this is not considered a significant risk.
Performance
Details of the Company's performance during the financial year are provided in the Chairman's Statement and in the financial statements below.
Key Performance Indicators ("KPIs")
The Board reviews performance by reference to a number of KPIs and considers that the most relevant KPIs are those that communicate the financial performance and strength of the Group as a whole. The Board and Investment Manager monitor the following KPIs:
- NAV performance
The NAV per ordinary share at 30 June 2021 was 341.19p per share (2020: 315.11p). The total return of the NAV after adding back dividends paid was 9.2%.
- (Discount)/premium of share price in relation to NAV
Over the year to 30 June 2021, the Company's share price moved from trading at a discount of 12.41 % to a discount of 9.43%.
- Ongoing Charges Ratio
The Ongoing Charges Ratio for the year to 30 June 2021 amounted to 2.24% (2020: 2.56%).
Going Concern
In accordance with the Financial Reporting Council's guidance on going concern, including its Covid-19 guidance, the Directors have undertaken a review of the Company's ability to continue as a going concern and specifically in the context of the ongoing Covid-19 pandemic.
The Directors believe that the Company is well placed to manage its business risks and that the assets of the Group consist mainly of securities which are readily realisable. The Directors are of the opinion that the Group has adequate resources to continue in operational existence for the foreseeable future and that it is therefore appropriate to adopt the going concern basis in preparing the financial statements. In arriving at this conclusion, the Directors have considered the liquidity of the portfolio and reviewed cash flow forecasts showing the ability of the Company to meet obligations as they fall due for a period of at least 12 months from the date that these financial statements were approved.
In addition, the Directors have regard to ongoing investor interest in the sustainability of the Company's business model and in the continuation of the Company, specifically being interested in feedback from meetings and conversations with Shareholders.
In addition to considering the principal risks shown above and the financial position of the Company as described above, the Board has also considered the following further factors:
• the Board continues to adopt a long-term view when making investments;
• regulation will not increase to a level that makes the running of the Company uneconomical; and
• the performance of the Company will be satisfactory and should performance be less than the Board deem acceptable it has the powers to take appropriate action.
Viability Statement
Over the Company's life it has experienced a number of significant social and economic events impacting world history. The recent, and ongoing Covid pandemic is the latest event, impacting not just this Company but all commercial entities. The Board is pleased that through its systems and the support of its advisors it has continued to offer attractive investment opportunities to investors. The change in Investment Policy and the decision as supported by Shareholders during the past year to become self-managed by the Board demonstrates the viability of the Company as a vehicle for delivering investment performance to Shareholders. The Board's analysis is based on the performance and progress of the Company and its investment portfolio, an assessment of current and future risks, the appropriateness of the investment strategy and review of the financial position of the Company, and operating expenses over the next two years. In addition, consultation with key Shareholders as to their perspectives is a key consideration.
The Directors also consider viability in the context of the Company being a going concern and it being appropriate that the accounts are prepared on such a basis. This is elaborated in Note 1 to the financial statements.
Future Prospects
The future of the Company is dependent upon the success of the investment strategy. The outlook for the Company is discussed in the Chairman's Statement above.
Board Diversity
When recruiting a new Director, the Board's policy is to appoint individuals on merit matched against the skill requirements identified by the Board. The Board believes diversity is important in bringing an appropriate range of skills, knowledge and experience to the Board and gives that consideration when recruiting new Directors and has also noted the Parker Report on increasing the diversity on boards of public companies. As at 30 June 2021, there were five male Directors on the Board. When making appointments in the future the Board will continue to operate an open-minded approach to recruitment without restrictions against any perceived group or individual.
The Company does not have any employees other than Directors and, as a result, the Board does not consider it necessary to establish means for employee engagement with the Board as required by the latest version of the UK Corporate Governance Code.
Section 172(i) Statement
Section 172(i) of the Companies Act 2006, requires Directors to take into consideration the interests of stakeholders in their decision making. The Directors continue to have regard to the interests of, and the impact of the firm's activities on, the various stakeholders in the firm and to consider what is most likely to promote the success of the Company for its members in the long term.
Whilst the importance of giving due consideration to our stakeholders is not new, S172 requires that the Board elaborates how it discharges its duties in this respect. We have categorised our key stakeholders into three groups. Where appropriate, each group is considered to include both current and potential stakeholders:
· Shareholders
· Administrator and other service providers
Shareholders
Our Shareholders are of course the owners of the Company and we need to act fairly as between members of the Company. The great majority of our Shareholders have been so for a long period.
During the year, the Company has undergone considerable change. One of these - the change of dividend policy has, as anticipated, led to some changes to our Shareholder base. Nevertheless, these changes were undertaken with the active support of Shareholders as being in the best interests of the Company as a whole.
We have a regular dialogue with our key Shareholders - but all are welcome to be in communication. All Shareholders are encouraged to attend our Annual General Meeting. (It is acknowledged that this may still be difficult for 2021.)
Administrator and other service providers
The Board seeks to maintain constructive liaison with its service providers so as to optimise the way in which the Company's needs are met.
Environmental, Human Rights, Employee, Social and Community Issues
The Board consists entirely of Non-Executive Directors and during the year the Company had no employees. As such the Company has no direct impact on the community or the environment, and as such has no environmental, human rights, social or community policies. In carrying out its investment activities and in relationships with suppliers, the Company aims to conduct itself responsibly, ethically and fairly.
Environmental, Social and Governance factors are considered as part of commercial evaluation of investee companies.
The Strategic Report has been approved by the Board of Directors.
On behalf of the Board
I. R. Dighé
Chairman
14 September 2021
STATEMENT OF DIRECTORS' RESPONSIBILITIES
We confirm that to the best of our knowledge:
· the Group and Company financial statements, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and, for the Group, international financial reporting standards adopted pursuant to Regulation (EC) No. 1606/2002 as it applies in the United Kingdom, give a true and fair view of the assets, liabilities, financial position and profit of the Group and Company;
· the Annual Report includes a fair review of the development and performance of the business and the position of the Group and Company together with a description of the principal risks and uncertainties faced by the Group and Company; and
· the Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for Shareholders to assess the position and performance, business model and strategy of the Group and Company.
On behalf of the Board
I. R. Dighé
Chairman
14 September 2021
CONSOLIDATED INCOME STATEMENT
For the year ended 30 June 2021
Year ended 30 June 2021
Year ended 30 June 2020
Notes
Revenue £
Capital £
Total £
Revenue £
Capital £
Total £
Gains /(losses) on investments at fair value through profit or loss
8
-
1,315,694
1,315,694
-
(1,533,978)
(1,533,978)
Exchange (losses)/gains on capital items
-
(88)
(88)
-
45
45
Investment income
2
724,585
-
724,585
960,982
-
960,982
Investment management fee
3
(96,825)
-
(96,825)
(121,165)
-
(121,165)
Other expenses
4
(535,120)
-
(535,120)
(303,859)
(703)
(304,562)
Return before taxation
92,640
1,315,606
1,408,246
535,958
(1,534,636)
(998,678)
Taxation
5
(20,338)
-
(20,338)
-
-
-
Total income/(loss) after taxation
72,302
1,315,606
1,387,908
535,958
(1,534,636)
(998,678)
Revenue pence
Capital pence
Total pence
Revenue pence
Capital pence
Total pence
Return on total income after taxation per 50p ordinary share - basic & diluted
6
1.51
27.57
29.08
11.23
(32.15)
(20.92)
The total column of this statement is the Income Statement of the Group prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The supplementary revenue and capital columns are prepared in accordance with the Statement of Recommended Practice ("AIC SORP") issued in October 2019 by the Association of Investment Companies.
The Group did not have any income or expenses that was not included in total income for the year. Accordingly, total income is also total comprehensive income for the year, as defined by IAS 1 (revised) and no separate Statement of Comprehensive Income has been presented.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year.
The notes below form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2021
Ordinary share capital £
Share premium £
Capital redemption reserve £
Capital reserve £
Revenue reserve £
Total £
Balance at 1 July 2020
2,386,025
4,453,903
2,408,820
7,094,994
(1,306,685)
15,037,057
Total comprehensive income
Net return for the year
-
-
-
1,315,606
72,302
1,387,908
Transactions with Shareholders recorded directly to equity
Ordinary dividends paid (note 7)
-
-
-
-
(143,161)
(143,161)
Balance at 30 June 2021
2,386,025
4,453,903
2,408,820
8,410,600
(1,377,544)
16,281,804
Balance at 1 July 2019
2,386,025
4,453,903
2,408,820
8,629,630
(1,258,067)
16,620,311
Total comprehensive income
Net return for the year
-
-
-
(1,534,636)
535,958
(998,678)
Transactions with Shareholders recorded directly to equity
Ordinary dividends paid (note 7)
-
-
-
-
(584,576)
(584,576)
Balance at 30 June 2020
2,386,025
4,453,903
2,408,820
7,094,994
(1,306,685)
15,037,057
The notes below form part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2021
Ordinary share capital £
Preference share capital £
Share premium £
Capital redemption reserve £
Capital reserve £
Revenue reserve £
Total £
Balance at 1 July 2020
2,386,025
858,783
4,453,903
2,408,820
4,549,368
1,185,316
15,842,215
Total comprehensive income
Net return for the year
-
-
-
-
1,302,632
80,344
1,382,976
Transactions with Shareholders recorded directly to equity
Ordinary dividends paid (note 7)
-
-
-
-
-
(143,161)
(143,161)
Preference share dividends paid
-
-
-
-
-
(172)
(172)
Balance at 30 June 2021
2,386,025
858,783
4,453,903
2,408,820
5,852,000
1,122,327
17,081,858
Balance at 1 July 2019
2,386,025
858,783
4,453,903
2,408,820
6,084,192
1,223,515
17,415,238
Total comprehensive income
Net return for the year
-
-
-
-
(1,534,824)
546,549
(988,275)
Transactions with Shareholders recorded directly to equity
Ordinary dividends paid (note 7)
-
-
-
-
-
(584,576)
(584,576)
Preference share dividends paid
-
-
-
-
-
(172)
(172)
Balance at 30 June 2020
2,386,025
858,783
4,453,903
2,408,820
4,549,368
1,185,316
15,842,215
The notes below form part of these financial statements.
CONSOLIDATED BALANCE SHEET
As at 30 June 2021
Notes
30 June 2021 £
30 June 2020 £
Non-current assets
Investments held at fair value through profit or loss
8
15,618,864
14,818,360
Current assets
Trade and other receivables
11
389,029
87,716
Cash and cash equivalents
540,800
265,052
929,829
352,768
Current liabilities
Trade and other payables
12
(266,889)
(134,071)
(266,889)
(134,071)
Net current assets
662,940
218,697
Net assets
16,281,804
15,037,057
Capital and reserves
Ordinary share capital
13
2,386,025
2,386,025
Share premium
4,453,903
4,453,903
Capital redemption reserve
2,408,820
2,408,820
Capital reserve
8,410,600
7,094,994
Revenue reserve
(1,377,544)
(1,306,685)
Shareholders' funds
16,281,804
15,037,057
NAV per 50p ordinary share
15
341.19p
315.11p
These financial statements were approved by the Board on 14 September 2021 and were signed on its behalf by:
I. R. Dighé
Chairman
Company Number: 0004205
The notes below form part of these financial statements.
COMPANY BALANCE SHEET
As at 30 June 2021
Notes
30 June 2021 £
30 June 2020 £
Non-current assets
Investments held at fair value through profit or loss
8
15,618,334
14,817,179
Investment in subsidiaries
9
862,656
862,656
16,480,990
15,679,835
Current assets
Trade and other receivables
11
435,180
124,631
Cash and cash equivalents
526,071
263,948
961,251
388,579
Current liabilities
Trade and other payables
12
(360,383)
(226,199)
(360,383)
(226,199)
Net current assets
600,868
162,380
Net assets
17,081,858
15,842,215
Capital and reserves
Ordinary share capital
13
2,386,025
2,386,025
Preference share capital
14
858,783
858,783
Share premium
4,453,903
4,453,903
Capital redemption reserve
2,408,820
2,408,820
Capital reserve
5,852,000
4,549,368
Revenue reserve
1,122,327
1,185,316
Shareholders' funds
17,081,858
15,842,215
As permitted by section 408 of the Companies Act 2006, the Company has not presented its own Income Statement. The amount of the Company's return for the financial year dealt with in the financial statements of the Group is a profit after tax of £1,382,976 (2020: loss of £988,275).
These financial statements were approved by the Board on 14 September 2021 and were signed on its behalf by:
I. R. Dighé
Chairman
Company Number: 0004205
The notes below form part of these financial statements.
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS
For the year ended 30 June 2021
Net cash generated from/(used in) investing activities
319,922
(575,225)
297,061
(587,849)
Net increase/(decrease) in cash and cash equivalents
275,732
(520,696)
262,107
(521,800)
Reconciliation of net cash flow to movement in net cash
Increase/(decrease) in cash
275,732
(520,696)
262,107
(521,800)
Exchange rate movements
16
45
16
45
Increase/(decrease) in net cash
275,748
(520,651)
262,123
(521,755)
Net cash at start of period
265,052
785,703
263,948
785,703
Net cash at end of period
540,800
265,052
526,071
263,948
Analysis of net cash
Cash and cash equivalents
540,800
265,052
526,071
263,948
540,800
265,052
526,071
263,948
The notes below form part of these financial statements.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 June 2021
1. Accounting policies
Basis of Preparation
The Company is a public limited company limited by shares and incorporated and registered in England and Wales. The Company has been approved as an investment trust within the meaning of sections 1158/1159 of the Corporation Tax Act 2010.
The Company's registered office is Suite 8, Bridge House, Courtenay Street, Newton Abbot, Devon TQ12 2QS.
The Group's consolidated financial statements for the year ended 30 June 2021, which comprise the audited results of the Company and its wholly owned subsidiaries, Abport Limited and New Centurion Trust Limited (together referred to as the "Group"), have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and in accordance with the requirements of the Companies Act 2006. The annual financial statements have also been prepared in accordance with the AIC Statement of Recommended Practice issued in October 2019 ("AIC SORP"), except to any extent where it is not consistent with the requirements of IFRS.
In order to better reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Income Statement between items of a revenue and capital nature have been prepared alongside the Income Statement.
The financial statements are presented in Sterling, which is the Group's functional currency as the UK is the primary environment in which it operates.
Going Concern
The Directors have made an assessment of the Group's ability to continue as a going concern. This has included consideration of portfolio liquidity, the Group's financial position in respect of its cash flows and investment commitments (of which there are none of significance), the working arrangements of key service providers, continued eligibility to be approved as an investment trust company and the impact of the Covid-19 pandemic. In addition, the Directors are not aware of any material uncertainties that may cast significant doubt upon the Group's ability to continue as a going concern.
The Directors are satisfied that the Group has the resources to continue in business for the foreseeable future being a period of at least 12 months from the date that these financial statements were approved. Therefore, the financial statements have been prepared on the going concern basis.
Basis of Consolidation
IFRS10 stipulates that subsidiaries of Investment Entities are not consolidated. The Investment Company meets all three characteristics of Investment Entity as described, however, it is envisaged that one of the subsidiaries will be a dealing subsidiary and, therefore consolidated financial statements are presented for the Group. The financial statements of the subsidiaries are prepared for the same reporting year as the parent Company, using consistent accounting policies. All inter-company balances and transactions, including unrealised profits arising from them are eliminated.
Segmental Reporting
The Directors are of the opinion that the Group is engaged in a single segment of business, being investment business.
The Group primarily invests in companies listed in the UK, Continental Europe and North America.
Accounting Developments
The following accounting standards and their amendments were adopted during the financial year.
Amendments to References to the Conceptual Framework in IFRS Standards
International Accounting Standards Effective date
IAS 39 Financial Instruments: Recognition and Measurement
(amendment) 1 January 2020
IAS 1 and 8 Definition of Material (amendments to IAS 1 and 8) 1 January 2020
Various Amendments to references to conceptual framework 1 January 2020
International Financial Reporting Standards
IFRS 3 Business Combinations (amendment) 1 January 2020
The adoption of these policies has had no material impact on the Group or the Company.
The following accounting standards and their amendments were in issue at the year end but will not be in effect until after this financial year.
International Accounting Standards Effective date*
IAS 1 (Amendments) Presentation of Financial Statements 1 January 2023
regarding classification of liabilities
IAS 1 (Amendments) Presentation of Financial Statements 1 January 2023
regarding the amendments of disclosure of accounting policies
IAS 8 (Amendments) Accounting Policies, Changes in Accounting
Estimates and Error to distinguish between accounting policies
and accounting estimates 1 January 2023
IAS 37 (Amendments) Provisions, Contingent Liabilities and Contingent
Assets outlines the accounting for provisions, with contingent
assets and contingent liabilities 1 January 2022
IFRS 2018-20 Annual Improvements to IFRS Standards 2018-2020 1 January 2022
*Years beginning on or after
The Directors do not expect that the adoption of the standards listed above will have a material impact on the financial statements of the Group or Company in future periods
Critical Accounting Judgments and Key Sources of Estimation Uncertainty
The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of policies and the reported amounts in the Balance Sheet, the Consolidated Income Statement and the disclosure of contingent assets and liabilities at the date of the financial statements. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making judgements about carrying values of assets and liabilities that are not readily apparent from other sources.
The estimates and underlying assumptions are based on historical experience and other factors that are considered to be relevant. These are reviewed on an ongoing basis. Actual results may differ from these estimates. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future period if the revision affects both current and future periods.
The major part of the investment portfolio is valued by reference to quoted prices. However, £594,320 of the portfolio comprises fixed interest stocks which are thinly traded; such stocks are primarily valued by reference to current market price lists provided by an independent broker, itself a recognised leader in such preference share and similar fixed interest stocks. The Directors may overlay such prices with situation specific adjustments including (a) taking a second independent opinion on a specific stock, or (b) reducing the value to a net present value, to reflect the likely time to be taken to realise a stock which the Group is actively looking to sell. The outturn is reflected in the valuations set out in note 8 to the accounts.
There were no other significant accounting estimates or significant judgements in the current or previous year.
Investments
As the Group's business is investing in financial assets with a view to profiting from their total return in the form of income and capital growth, Investments are classified at fair value through profit or loss on initial recognition in accordance with IFRS 9. The portfolio of financial assets is managed and its performance evaluated on a fair value basis, in accordance with a documented investment strategy, and information about the portfolio is provided internally on that basis to the Group's Board of Directors.
Investments are measured initially, and at subsequent reporting dates, at fair value, and derecognised at trade date where a purchase or sale is under a contract whose terms require delivery within the time-frame of the relevant market. For quoted investments this is deemed to be bid market prices or closing prices.
Changes in fair value of investments and realised gains and losses on disposal are recognised in the Income Statement as capital items. The holdings of the investment in subsidiaries are stated at cost less diminution in value. All investments for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy in note 8.
Foreign Currency
Transactions denominated in foreign currencies are converted to Sterling at the actual exchange rate as at the date of the transaction. Items that are denominated in foreign currencies at the year end are reported at the rate of exchange at the Balance Sheet date. Any gain or loss arising from a change in exchange rate subsequent to the date of the transaction is included as an exchange gain or loss in the capital reserve or the revenue account depending on whether the gain or loss is of a capital or revenue nature.
Cash and Cash Equivalents
Cash comprises cash at bank and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.
For the purpose of the Statement of Cash Flows, cash and cash equivalents consist of cash and cash equivalents as defined above.
Income
Dividends receivable on quoted equity shares are taken to revenue on an ex-dividend basis. Dividends receivable on equity shares where no ex-dividend date is quoted are brought into account when the Company's right to receive payment is established. Fixed returns on non-equity shares are recognised on a time-apportioned basis.
Dividends from overseas companies are shown gross of any non-recoverable withholding taxes which are disclosed separately in the Income Statement.
Dividend income will only be recognised when there is reasonable certainty that the issuer has the ability to make the return.
Expenses and Finance Costs
All expenses and finance costs are accounted for on an accruals basis.
Taxation
The tax expense represents the sum of the tax currently payable. The tax payable is based on the taxable profit for the year. Taxable profit differs from net profit as reported in the Consolidated Income Statement because it excludes items that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates applicable at the balance sheet date.
No taxation liability arises on gains from sales of fixed asset investments by the Group by virtue of its investment trust status. However, the net revenue (excluding UK dividend income) accruing to the Group is liable to corporation tax at the prevailing rates.
Dividends Payable to Shareholders
Dividends to shareholders are recognised as a liability in the period in which they are paid or approved in general meetings and are taken to the Statement of Changes in Equity. Dividends declared and approved by the Company after the Balance Sheet date have not been recognised as a liability of the Company at the Balance Sheet date.
Share Capital
Issued share capital consists of Ordinary shares with voting rights and issued preference shares which are non-voting. The Issued preference shares, owned in their entirety by New Centurion Trust Limited, a wholly-owned subsidiary of the Company, are entitled to receive a cumulative dividend of 0.01p per share per annum, and are entitled to receive their nominal value, 50p, on a distribution of assets or a winding up.
Share Premium
The share premium account represents the accumulated premium paid for shares issued in previous periods above their normal value less issue expenses. This is a reserve forming part of non-distributable reserves. The following items are taken to this reserve:
· costs associated with the issue of equity; and
· premium on the issue of shares.
Capital Redemption Reserve
The reserve represents the nominal value of the shares bought back and cancelled. This reserve is not distributable.
Capital Reserve
Capital expenses, gains or losses on realisation of investments held at fair value through profit or loss and changes in fair value of investments are transferred to the capital reserves.
The following are taken to this reserve:
· gains and losses on the disposal of investments;
· net movement arising from changes in the fair value of investments held and classified as at "fair value through profit or loss";
· exchange differences of a capital nature; and
· expenses together with the related taxation effect, allocated to this reserve in accordance with the above policies.
Realised gains on investments less expenses, provisions and unrealised gains may be considered by the Board for distribution. This reserve is not distributable.
Revenue Reserves
The net revenue for the year is transferred to the revenue reserve and dividends paid are deducted from the revenue reserve.
The revenue reserve represents the surplus accumulated profits and is distributable.
2. Income
Year ended 30 June 2021
Year ended 30 June 2020
£
£
Income from investments:
UK dividends
438,996
614,753
Unfranked dividend income:
132,143
23,727
UK fixed interest
143,654
322,487
714,793
960,967
Other income
Bank deposit and other interest
9,792
15
Total income
724,585
960,982
3. Investment management fee
Year ended 30 June 2021 £
Year ended 30 June 2020 £
Investment management fee
96,825
121,165
Pursuant to the changes to the Company's Investment Objective and Policy, and the Company becoming self-managed on 4 November 2020, the Investment Management Agreement with Fiske plc came to an end on 5 May 2021. The management fee payable monthly in arrears by the Company to the Investment Manager was calculated at the rate of one-twelfth of 0.75% of the NAV as at the last business day of each calendar month.
At 30 June 2021, an amount of £1,678 (2020: £9,397) was outstanding and due to the Investment Manager.
4. Other expenses
Year ended 30 June 2021 £
Year ended 30 June 2020 £
Administration and secretarial services - recurring
81,236
81,000
non-recurring
36,500
-
Auditors' remuneration for:
- Audit of the Group's financial statements
37,250
35,000
Directors' remuneration (see note 18)
86,292
51,250
Transaction costs in relation to the change of investment policy
152,285
-
Other expenses
141,557
136,609
535,120
303,859
Capital charges
-
703
Total income
535,120
304,562
The audit of the Group's financial statements includes the cost of the audit of Abport Limited of £3,150 (2020: £3,000) and New Centurion Trust Limited £3,150 (2020: £3,000), which are charged to the subsidiaries.
The Directors were the Group and Company's only employees in the current and comparative period.
5. Taxation
Year ended 30 June 2021
Year ended 30 June 2020
Revenue £
Capital £
Total £
Revenue £
Capital £
Total £
Current Taxation
-
-
-
-
-
-
Overseas taxation suffered
20,338
-
20,338
-
-
-
20,338
-
20,338
-
-
-
The current tax charge for the year is lower than (2020: higher than) the standard rate of corporation tax in the UK of 19%. The differences are explained below:
Year ended 30 June 2021
Year ended 30 June 2020
Revenue £
Capital £
Total £
Revenue £
Capital £
Total £
Return on ordinary activities
92,640
1,315,606
1,408,246
535,958
(1,534,636)
(998,678)
Tax at UK Corporation tax rate of 19% (2020:19%)
17,602
249,965
267,567
101,832
(291,581)
(189,749)
Effects of:
UK dividends that are not taxable
(83,409)
-
(83,409)
(116,803)
-
(116,803)
Overseas dividends that are not taxable
(8,386)
-
(8,386)
-
-
-
Non-taxable investment (gains)/losses
-
(249,965)
(249,965)
-
291,581
291,581
Overseas taxation suffered
20,338
-
20,338
-
-
-
Unrelieved expenses
74,193
-
74,193
(14,971)
-
(14,971)
Actual current tax charged to the revenue account
20,338
-
20,338
-
-
-
Factors that may affect future tax charges
The Company has excess management expenses of £2,156,636 (2020: £1,766,147). It is unlikely that the Company will generate sufficient taxable income in the future to use these expenses to reduce future tax charges and therefore no deferred tax asset has been recognised.
Deferred tax is not provided on capital gains and losses arising on the revaluation or disposal of investments because the Company meets (and intends to continue for the foreseeable future to meet) the conditions for approval as an investment trust company under HMRC rules.
6. Return per Ordinary Share
Returns per share are based on the weighted average number of shares in issue during the year. Normal and diluted returns per share are the same as there are no dilutive elements on share capital.
Year ended 30 June 2021
Year ended 30 June 2020
Revenue
Capital
Total
Revenue
Capital
Total
Return after taxation attributable to ordinary Shareholders (£)
72,302
1,315,606
1,387,908
535,958
(1,534,636)
(998,678)
Weighted average number of ordinary shares in issue (excluding shares held in Treasury)
4,772,049
4,772,049
Return per ordinary share basic and diluted (pence)
1.51
27.57
29.08
11.23
(32.15)
(20.92)
7. Dividends per Ordinary Share
Amounts recognised as distributions to equity holders in the year.
Year ended 30 June 2021 £
Year ended 30 June 2020 £
Paid per Ordinary share in respect of the prior period:
Fourth interim dividend of 1.00p (2020: 3.75p) paid on 7 September 2020
47,720
178,952
In respect of the year under review:
First interim dividend of 1.00p (2020: 3.75p) paid on 4 December 2020
47,720
178,952
Second interim dividend of 1.00p (2020: 3.75p) paid on 26 February 2021
47,721
178,952
Third interim dividend of nil (2020: 1.00p)
-
47,720
Total
143,161
584,576
No further dividend will be declared in respect of the year under review.
8. Investments
Group
Company
2021 £
2020 £
2021 £
2020 £
Opening book cost
16,538,418
15,211,950
16,571,760
15,203,979
Opening net investment holding (losses)/gains
(1,720,058)
565,163
(1,754,581)
571,037
Opening valuation
14,818,360
15,777,113
14,817,179
15,775,016
Movements in the year:
Purchases at cost
13,607,771
6,703,387
13,607,771
6,703,387
Sales proceeds
(14,122,961)
(6,128,162)
(14,109,336)
(6,127,058)
Realised(losses)/gains on sales
(668,405)
751,243
(695,080)
791,452
Unrealised gains/(losses) in the year
1,984,099
(2,285,221)
1,997,800
(2,325,618)
Closing valuation
15,618,864
14,818,360
15,618,334
14,817,179
Being:
Book cost
15,354,823
16,538,418
15,375,115
16,571,760
Net investment holding gains/(losses)
264,041
(1,720,058)
243,219
(1,754,581)
15,618,864
14,818,360
15,618,334
14,817,179
Group
Company
Summary of capital gains/(losses)
2021 £
2020 £
2021 £
2020 £
Realised (losses)/gains on sales
(668,405)
751,243
(695,080)
791,452
Unrealised gains /(losses) in the year
1,984,099
(2,285,221)
1,997,800
(2,325,618)
1,315,694
(1,533,978)
1,302,720
(1,534,166)
Transaction costs
Group
Company
2021 £
2020 £
2021 £
2020 £
Costs on purchases
24,721
30,858
24,721
30,858
Costs on sales
20,698
7,018
20,698
7,016
45,419
37,876
45,419
37,874
Fair Value Hierarchy
Fair value is the amount at which an asset could be sold in an ordinary transaction between market participants at the measurement date, other than a forced or liquidation sale. The Group measures fair values using the following 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 asset as follows:
Level 1 - valued using quoted prices, unadjusted in active markets for identical assets and liabilities.
Level 2 - valued by reference to valuation techniques using observable inputs for the asset or liability other than quoted prices included in Level 1.
Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data or the asset or liability.
The table below sets out fair value measurement of financial instruments as at 30 June 2021, by the level in the fair value hierarchy into which the fair value measurement is categorised.
Group
At 30 June 2021
Level 1 £
Level 2 £
Level 3 £
Total £
Financial assets at fair value through profit or loss:
Equities
14,962,044
-
594,320
15,556,364
Fixed interest-bearing securities
62,500
-
-
62,500
15,024,544
-
594,320
15,618,864
Group
At 30 June 2020
Level 1 £
Level 2 £
Level 3 £
Total £
Financial assets at fair value through profit or loss:
Equities
8,724,184
257,617
1,670,066
10,651,867
Fixed interest-bearing securities
3,806,493
-
360,000
4,166,493
12,530,677
257,617
2,030,066
14,818,360
There were no transfers between levels during the current or prior year.
The valuation techniques used by the Group are set out in the Accounting Policies in Note 1.
Valuation process for Level 2 investments
Investments classified within level 2 are valued by reference to quoted prices but not being actively traded have been treated as level 2.
Valuation process for Level 3 investments
Investments classified within Level 3 comprise two groups:
a) Those valued by reference to an indicative price list of an independent third-party broker, but the said price list is not sufficiently definitive or observable/publicly available, so as to meet the criteria for a level 2 categorisation; and
b) At 30 June 2020, there was one genuinely unquoted stock which had been valued by the Directors using recognised valuation methodologies drawing on reported results and commentary on current trading. Intercede Group 8% Secured Convertible Loan notes was valued at discounted par value and was redeemed during the year.
If the value of the level 2 and level 3 investments were to increase or decrease by 10%, while all the other variables remained constant, the net assets and net profit available to Shareholders would have increased/decreased by £59,432 (2020: £228,768).
Reconciliation of Level 3 investments
The following table summarises Level 3 investments that were accounted for at fair value for the year ending 30 June 2021.
Group and Company
Financial assets at fair value through profit or loss £
Opening fair value
2,030,066
Purchases
-
Sales proceeds
(1,545,167)
Total gains/(losses) included in gains on investments in the Consolidated income statement
- on assets sold
234,740
- on assets held at the year end
(125,319)
Closing balance
594,320
9. Investment in Subsidiaries
Company
Company
30 June 2021 £
30 June 2020 £
At cost
5,410,552
5,410,552
Provision for diminution in value
(4,547,896)
(4,547,896)
Net value
862,656
862,656
At 30 June 2021, the Company held interests in the following subsidiary companies:
Country of Incorporation
% share of capital held
% share of voting rights
Nature of business
Abport Limited
England
100%
100%
Investment dealing company
New Centurion Trust Limited
England
100%
100%
Investment dealing company
10. Substantial Share Interests
The Company has no notified interests in 3% or more of the voting rights of any companies at 30 June 2021 (30 June 2020: Nil).
11. Trade and Other Receivables
Group
Company
2021 £
2020 £
2021 £
2020 £
Amounts due from subsidiaries
-
-
46,151
36,915
Accrued income
8,814
26,462
8,814
26,462
Dividends receivable
4,602
49,461
4,602
49,461
Taxation recoverable
8,978
9,084
8,978
9,084
Amounts due from brokers
360,797
-
360,797
-
Other receivables
5,838
2,709
5,838
2,709
389,029
87,716
435,180
124,631
The carrying amount of such receivables approximates to their fair value. Trade and other receivables are not past due at 30 June 2021.
12. Trade and Other Payables
Group
Company
2021 £
2020 £
2021 £
2020 £
Preference dividends payable to the Company's wholly owned subsidiary
-
-
1,377
1,205
Amounts due to subsidiaries
-
-
101,533
101,533
Investment management fees
1,678
9,397
1,678
9,397
Amounts due to brokers
165,529
-
165,529
-
Trade payables and accruals
99,682
124,674
90,266
114,064
266,889
134,071
360,383
226,199
13. Ordinary Share Capital
Group and Company
Group and Company
2021
Issued allotted and fully paid:
Number
£
Number
£
Ordinary shares of 50p each
4,772,049
2,386,025
4,772,049
2,386,025
The ordinary shares entitle the holders to receive all ordinary dividends and all remaining assets on a winding up, after the fixed rate preference shares have been satisfied in full.
The Company does not hold any ordinary shares in Treasury (2020: None).
14. Issued Preference Share Capital
Group
Company
2021
2020
2021
2020
£
£
£
£
Issued preference share of 50p each
-
-
858,783
858,783
The 1,717,565 fixed rate preference shares are non-voting, entitled to receive a cumulative dividend of 0.01p per share per annum, and are entitled to receive their nominal value of 50p, on a distribution of assets or a winding up. The whole of the issue is held by New Centurion Trust Limited, a wholly owned subsidiary of the Company.
The Directors do not consider the fair values of the issued preference share capital to be significantly different from the carrying values.
15. Net Asset Value per Ordinary Share
The NAV per ordinary share is calculated as follows:
2021 £
2020 £
Net Assets
16,281,804
15,037,057
Ordinary shares in issue
4,772,049
4,772,049
NAV per ordinary share
341.19p
315.11p
The underlying investments of the wholly owned subsidiary New Centurion Trust Limited comprise issued preference share capital, as discussed in Note 14, in the Company and, being effectively eliminated on consolidation, the valuation thereof does not impact the NAV attributable to ordinary Shareholders.
16. Financial Instruments and Associated Risks
Investment Objective and Policy
At the Annual General Meeting on 4 November 2020, Shareholders voted to amend the Company's Investment Objective and Policy to that shown below.
The Company's investment objective is to protect the purchasing power of its capital in real terms, and to participate in enduring economic activities which lend themselves to genuine capital accumulation and wealth creation.
Risks
The Group's financial risk management can be found in the strategic report on pages 9 and 10 of the Annual Report.
The Group's financial instruments comprise securities, cash balances, receivables and payables. They are classified in the following categories:
• those to be measured subsequently at fair value through profit or loss; and
• those to be measured at amortised cost.
The financial assets held at amortised cost include trade and other receivables, cash and cash equivalents.
The main risks identified arising from the Group's financial instruments are:
a) market price risk, including currency risk, interest rate risk and other price risk;
b) liquidity risk; and
c) credit risk.
The Board reviews and agrees policies for managing each of these risks, which are summarised below.
Market Price Risk
Market risk arises mainly from uncertainty about future prices of financial instruments used in the Group's business. It represents the potential loss the Group might suffer through holding market positions by way of price movements, interest rate movements and exchange rate movements. The Board assesses the exposure to market price risk when making each investment decision and monitor these risks on the whole of the investment portfolio on an ongoing basis.
Currency risk
The Group's total return and net assets can be materially affected by currency translation movements as a significant proportion of the Company's assets are denominated in currencies other than Sterling, which is the Group's functional currency. It is not the Group's policy to hedge this currency risk.
The revenue account is subject to currency fluctuation arising on overseas income. The Group does not hedge this currency risk.
Foreign currency exposure by currency of denomination at the Balance Sheet date:
Group
Group
30 June 2021
30 June 2020
Overseas investments
Other net assets/(liabilities)
Total
Overseas investments
Other net assets/(liabilities)
Total
£
£
£
£
£
£
Australian Dollar
530
-
530
1,181
-
1,181
Canadian Dollar
1,190,448
(87,454)
1,102,994
-
-
-
Euro
4,417,968
1,770
4,419,738
-
-
-
Norwegian Krone
717,698
-
717,698
-
-
-
Swiss Franc
974,678
-
974,678
-
-
-
US Dollar
5,285,236
192,535
5,477,771
-
-
-
12,586,558
106,851
12,693,409
1,181
-
1,181
Interest rate risk
The Group's financial assets and liabilities, include cash, equity shares, preference shares and fixed interest stocks. As the majority of the Group's financial assets and liabilities are non-interest bearing the direct exposure to interest rates is not material.
The impact of movements would not significantly affect the net assets attributable to ordinary Shareholders or the total profit.
Other price risk
Other price risk arises from changes in market prices other than those arising from currency risk or interest rate risk.
The Board manages the risks inherent in the investment portfolio by maintaining a spread of investments across different sectors and monitoring market prices throughout the year. The Board meets regularly in order to review investment performance and its investment strategy.
Liquidity Risk
This is the risk that that the Group will encounter difficulty in meeting its obligations associated with financial liabilities.
All liabilities are due within one year.
The Group invests in a spread of investments, including physical gold, which are traded on recognised stock markets and which can be readily realised for cash.
Credit Risk
The Group does not have any significant exposure to credit risk arising from one individual party. Credit risk is spread across a number of counterparties, each having an immaterial effect on the Group's cash flows should a default happen. The Group assesses its debtors from time to time to ensure they are neither past due or impaired.
The maximum exposure of financial assets to credit risk at the Balance Sheet date was as follows:
Financial assets neither past due or impaired
Group
Company
2021
2020
2021
2020
£
£
£
£
Fixed interest securities
62,500
4,166,493
62,500
4,166,493
Preference shares
594,320
2,897,094
594,320
2,897,094
Accrued income and other debtors
389,029
87,716
435,180
124,631
Cash and cash equivalents
540,800
265,052
526,071
263,948
1,586,649
7,416,355
1,618,071
7,452,166
Sensitivity Analysis
The Board believes that the Group's assets are mainly exposed to market price risk and currency risk.
The table below shows the impact on profit and net assets if overall shares prices rose or fell by 5% at the Balance Sheet date with all other variables held constant:
Group
2021
2020
Profit and net assets
Profit and net assets
increase
(decrease)
increase
(decrease)
If overall prices rose/fell by 5%:
- on share prices (£)
575,486
(575,486)
740,918
(740,918)
- on ETCs
205,457
(205,457)
-
-
- on earnings and net assets (£)
780,943
(780,943)
740,918
(740,918)
- in earnings net asset value per Ordinary share (pence)
16.36
(16.36)
15.53
(15.53)
The table below shows the impact on profit and net assets if Sterling had moved by 5% against all currencies at the Balance Sheet date with all other variables held constant:
Group
30 June 2021
30 June 2020
Profit and net assets
Profit and net assets
5%
5%
5%
5%
weakening
(strengthening)
weakening
(strengthening)
If Sterling had moved by 5%:
£
£
£
£
Euro
232,618
(210,464)
-
-
Swiss Franc
51,299
(46,413)
-
-
Norwegian Krone
37,774
(34,176)
-
-
Australian Dollar
28
(25)
62
(56)
Canadian Dollar
58,052
(52,524)
-
-
US Dollar
288,304
(260,846)
-
-
- on earnings and net assets
668,075
(604,448)
62
(56)
- on earnings and net asset value per Ordinary share (pence)
14.00
(12.67)
-
-
Assets excluding ETCs
451,804
(408,775)
-
-
ETCs
216,271
(195,673)
-
-
17. Capital Management Policies
Capital is managed so as to maximise the return to Shareholders while maintaining a capital base to allow the Group to operate effectively. Capital is managed on a consolidated basis and to ensure that the Group will be able to continue as a going concern.
In order to maintain or adjust the capital structure, the Group may pay dividends to Shareholders, return capital to Shareholders, issue new shares or sell securities to reduce debt.
The Group had no debt during the years to June 2021 or 30 June 2020.
18. Related Party Transactions
Fiske plc, was paid a fee in respect of the Investment Management services provided to the Company until the termination of the contract on 5 May 2021.
The amount s paid to the Investment Manager, together with the Investment Management Agreement, are disclosed in note 3. Investment Management fees for the year amounted to £96,825 (2020: £121,165). In addition, £5,459 (2020: £8,183) was paid to Fiske plc pursuant to a custody agreement.
As at the year end, £3,745 (2020: £20,622) was payable to Fiske plc.
Key Management Personnel
The Board consists of five non-executive Directors all of whom, with the exception of Mr Perrin who is a non-executive Director of Fiske plc, the Company's custodian and until 4 November 2020 the investment manager Messrs Dighé, Cleverly and Weeks hold directorships or positions of senior management within Edelweiss Holdings plc ("Edelweiss"), who became a significant Shareholder in the Company during the year. For the year ended 30 June 2021, all Directors, including the Chairman, received an annual fee of £20,000. Further information can be found within the Directors' Remuneration Report on page 26 of the Annual Report.
The Directors did not receive any other form of renumeration and at the year end, there were no outstanding fees payable to Directors (2020: £nil).
There were no other related party transactions during the current or previous year.
19. Post Balance Sheet Events
There were no post balance sheet events requiring disclosure.
20. Ultimate controlling party
The Directors consider that there is no overall controlling party.
SHAREHOLDER INFORMATION
Fraud warning
Fraudsters use persuasive and high-pressure tactics to lure investors into scams and we are aware of entities from time to time purporting to be The Investment Company plc. They may offer to sell shares that turn out to be worthless or non-existent, or to buy shares at an inflated price in return for an upfront payment. While high profits are promised, if you buy or sell shares in this way you will probably lose your money. Detailed advice on how to avoid and report potential investment scams is available on the FCA website: www.fca.org.uk/scamsmart.
The Company has also been made aware of attempts to issue documentation in the Company's name which is not legitimate. Anyone wishing to verify the authenticity of any documentation should contact the Company Secretary on 01392 487056 or tic@iscaadmin.co.uk.
The Company has also been made aware of a website purporting to be the Company's website which is not legitimate. Anyone wishing to verify the authenticity of the website should contact the Company Secretary on 01392 487056 or tic@iscaadmin.co.uk.
FURTHER INFORMATION
The Annual General Meeting of the Company will be held on 27 October 2021 at 11.00am at the City of London Club, Old Broad Street, London EC2N 1DS.
Please note that if Government advice concerning public meetings and gatherings were to change the arrangements for the AGM may be altered or changed, details of any changes will be posted to the Company's website.
A copy of the Annual Report will submitted to the National Storage Mechanism and will shortly be available for inspection at https://data.fca.org.uk/#/nsm/nationalstoragemechanism . This document will also be available on the Company's website at https://theinvestmentcompanyplc.co.uk/ .
ISCA Administration Services Limited
14 September 2021
END
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