REG - Personal Assets Tst. - Annual Results
09/06/2022 07:00
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RNS Number : 2151O Personal Assets Trust PLC 09 June 2022
To: RNS
From: Personal Assets Trust plc
LEI: 213800Z7ABM7RLQ41516
Date: 9 June 2022
Results for the year ended 30 April 2022
The Directors of Personal Assets Trust plc ("PAT") are pleased to announce the
Company's results for the year ended 30 April 2022.
The key points are as follows:
· PAT's investment policy is to protect and increase (in that order)
the value of shareholders' funds per share over the long term.
· Over the year to 30 April 2022 PAT's net asset value per share
("NAV") rose by 5.8%. This compares to a rise of 5.1% in the FTSE All-Share
Index. PAT's share price rose by £32.00 during the year and at 30 April
2022 was £503.00. An analysis of performance is provided in the Chairman's
Statement and Investment Manager's Report below.
· Total returns to 30 April 2022:
Percentage Changes
1 Year 3 years 5 Years 10 Years Since 1990 (1)
Share Price 6.8 23.3 35.0 47.6 1,173.4
NAV per Share 5.8 21.5 34.0 46.5 768.1
FTSE All-Share Index 5.1 2.9 22.3 40.2 301.2
Share Price relative to FTSE All-Share
1.6 19.8 10.4 5.3 217.4
Share Price Total Return 8.0 28.0 32.4 70.6 2,281.8
NAV per Share Total Return 7.1 26.3 31.9 69.7 1,414.2
FTSE All-Share Total Return 8.7 14.1 26.6 100.8 1,157.3
Share Price Total Return relative to FTSE All-Share Total Return
(0.6) 12.2 4.6 (15.0) 89.4
Inflation (RPI) 11.1 16.1 23.7 38.0 167.5
(1) The Company became self-managed in 1990.
· During the year the Company's shares continued to trade close to NAV.
The Company issued 455,140 Ordinary shares.
· During the year, PAT continued to maintain a high level of liquidity.
At 30 April 2022, liquidity was 62.2%. This included 16.9% in UK T-Bills, UK
cash, overseas cash, and net current liabilities and 45.2% in various classes
of non-equity risk assets: 35.7% in US TIPS and 9.5% in Gold Bullion. This
compared to holdings as at 30 April 2021 of 12.7% in UK T-Bills, UK cash,
overseas cash, and net current liabilities and 41.5% in various classes of
non-equity risk assets: 32.6% in US TIPS and 8.9% in Gold Bullion.
The Chairman, Iain Ferguson, said:
We were all deeply saddened by the news that Robin Angus died on 4 May 2022.
Robin served as a Director of the Company from 1984 and Executive Director
from 2002 until his retirement in September 2020. Robin together with Ian
Rushbrook was instrumental in establishing the vision for the Company and for
overseeing its success, as reflected in the growth of market capitalisation
from £4.7 million to £1.3 billion during his tenure.
Robin's ability to articulate the Company's investment approach and to
communicate with shareholders more generally through his Quarterlies was
second to none. Indeed, at the time of his death Robin had recently completed
writing a Quarterlies Anthology which will now be published in his memory and
as a record of his wide-ranging commentary, reflections and observations from
his life at the Company.
As a Board we would like to re-iterate our sincere thanks for Robin's
exemplary service and diligent
stewardship of the Company over the years. He will be sorely missed not only
as a colleague but also as a close friend to many associated with the Company
and within the wider investment community. We would also like to offer our
sincere condolences to Robin's wife Lorna and to his family. I first met Robin
in 1973 and since then he has been a true, kind and generous friend, always
curious, always supportive and always guided by his strong Christian faith; I
will miss him greatly.
---- //----
Following the success of the Covid vaccine programme and the gradual
relaxation of restrictions the Board has been pleased to be able to return to
in-person meetings. We have, however, also continued to use the facility of
virtual meetings for Board briefing sessions where appropriate. The Board
membership has been stable throughout the year, and I am grateful for the
continuing commitment and wise counsel of my colleagues. During the year we
appointed Board Level Partners to undertake an independent review of the
performance of the Board and the Committees. The review did not highlight any
material weaknesses or concerns and concluded that the Board and the
Committees oversee the management of the Company effectively. The review did
identify some key areas for future focus including, Board member succession
planning, development of shareholder
communications and monitoring our relationships with our key service
providers, Troy and Juniper Partners. Further detail on this review can be
found in the Corporate Governance section on pages 35 and 36 of the Annual
Report.
All our Directors are also shareholders in PAT. We share a strong alignment
with and are advocates of the core investment proposition which is to protect
and increase (in that order) the value of shareholder funds per share (known
as net asset value ("NAV") per share) over the long term.
We track the performance of the Company from 1990 and since then the NAV has
grown at an annual compound rate of 7.0% compared to 4.4% for the FTSE
All-Share Index and 3.1% for RPI, the two main comparators which we use. We
also track the degree of risk experienced in achieving our financial
performance. The results are tabulated in the Key Features section on page 1
of the Annual Report and the degree of risk experienced is indicated on the
chart on page 15 of the Annual Report. This shows that consistently over the
last 22 years the Company has been less volatile than equities in general and
also less volatile than any of the investment trusts in the AIC Global and AIC
Flexible Investment Sectors. Whilst this combination of above-comparator
financial performance and below-sector volatility is the outcome of a focus on
capital preservation, these metrics are by no means a target. The Investment
Manager's focus remains on the avoidance of permanent capital loss (our
preferred definition of risk) and on growing the real value of the Company's
capital over the long run. In his report on pages 4 and 5 of the Annual
Report, Sebastian Lyon, our Investment Manager, provides further details of
our investment performance and describes the particular challenges of the last
year.
The Company aims to pay as high, secure and sustainable a dividend as is
compatible with protecting and increasing the value of its shareholders' funds
and maintaining its investment flexibility. The Board remains committed to
paying an annual dividend of £5.60 in line with this policy. High levels of
inflation during the year, particularly in the United States, mean that the
Company has earned significantly more income on its holding of US TIPS than in
previous years. Accordingly, in order to meet the investment trust
distribution requirements, the Board has resolved to pay an additional special
dividend for the year to 30 April 2022 of £1.40 per share. This dividend will
be paid to shareholders in July 2022 alongside the first interim dividend of
£1.40 for the year to 30 April 2023.
During the year we issued 455,140 new Ordinary shares, for a net inflow of
£223.9 million, our second highest year on record. As at 30 April 2022 we had
3,688,069 Ordinary shares in issue. It is the policy of the Company to aim to
ensure that its Ordinary shares always trade at close to NAV and this policy
is enshrined in the Articles of Association. It is reassuring to report that
since November 1999, when investment trusts were empowered to use capital to
buy back shares and hence control the discount to NAV at which their shares
trade, the PAT share price has closely tracked the NAV while the number of
shares in issue is now approximately eleven times higher.
Our relationship with Troy has continued to be excellent and we are
increasingly benefitting from access to the shared resources and focused
support from the Troy team. We are now holding two Board meetings each year in
the Troy offices which is helping us to get to know more members of the Troy
team and to deepen our relationship on a broader base. As our shareholder
funds continue to grow above £1.5 billion we are benefitting from the revised
fee structure agreed last year. Details of the fee structure are shown on page
7 of the Annual Report. We also pay particular attention to ensuring the
competitiveness of our ongoing charges ratio, which was 0.67% for the year
ended 30 April 2022, having reduced from 1.18% in 2011 and from 0.73% in 2021.
Our relationship with Juniper Partners, which provides our administrative,
company secretarial and discount control services has also continued to be
excellent. Juniper Partners continues to provide a first-class service to the
Company and works in close association with Troy to provide a seamless service
to the PAT Board and Shareholders. It is encouraging to note that the Juniper
Partners team are continuing to develop their business, building capacity and
resilience, which benefits all their clients.
We recognise the continuing evolution of the Company's shareholder base and
the increasing number of investors holding shares through retail platforms who
may not have direct access to communications with the Company. This is a
challenge which is often discussed by the Board as we seek to improve
communication and interaction with investors. We hope that our updated website
(www.patplc.co.uk), our Quarterlies, our Annual and Interim Reports and our
newly introduced Factsheet are providing investors with easy and effective
access to information about PAT and we will continue to seek innovative ways
of improving our dialogue with shareholders.
In the context of the evolving shareholder base and of our desire to make
investing in the Company as efficient as possible for both existing and future
investors the Board has also reviewed the appropriateness of the Company's
current share price of around £500 per share. After deep consideration, the
Board believe that it is appropriate to seek shareholder approval at the
upcoming Annual General Meeting to split each Ordinary share on a one hundred
for one basis. Under the proposals each existing Ordinary share will be
subdivided into 100 new Ordinary shares. By way of example, if you hold 100
Ordinary shares in the Company prior to the proposed split you will hold
10,000 Ordinary shares following the split and the aggregate value of your
holding immediately pre and post the proposed split will be unchanged. Further
detail can be found on page 10 and page 29 of the Annual Report.
In our Annual Report in 2020, we introduced the PAT Foundation. The objective
of the Foundation is to promote and advance the financial education of younger
people wishing to pursue careers within or related to the investment and
finance industries. Good progress has been made on the establishment of the
charity and the Trustees of the Foundation expect to hold the formal public
launch of the Foundation with further details of their plans in Autumn 2022,
to coincide with the start of the new academic year.
My colleagues and I have greatly missed the opportunity to meet with our
fellow shareholders since our AGM in 2019 as we have had to hold our last two
AGMs in a virtual way. We are, therefore, very much looking forward to being
able to hold the AGM in person this year on Thursday, 14 July 2022 in
Edinburgh. The Investment Manager's presentation will also be made available
on our website following the AGM for those who cannot attend in person. I
would encourage all shareholders to submit any questions for the AGM to our
Company Secretary by email in advance of the meeting at cosec@junipartners.com
by Tuesday, 12 July 2022.
In the meantime, I wish you all good health and thank you for entrusting your
investment to PAT.
The Investment Manager, Sebastian Lyon, said:
Over the year to 30 April 2022 the net asset value per share ("NAV") of
Personal Assets Trust ("PAT") rose by 5.8% while our traditional comparator,
the FTSE All-Share Index ("FTSE"), rose by 5.1%. The UK Retail Price Index
("RPI"), which we also use as a comparator (see the inside front cover of this
Report and Key Features and Record 1990-2022 on pages 1 and 13 of the Annual
Report respectively), rose by 11.1%. Over the past three years the NAV per
share rose by 21.5% compared to FTSE All Share return of +2.9% and RPI +12.2%.
The Company's NAV and share price (thanks to the discount control mechanism)
continued to demonstrate below average volatility compared to peers and the
stock market.
These stable returns for the year under review belie high levels of volatility
for capital markets. With the benefit of hindsight, the liquidity-led stock
market boom, which followed the outbreak of the pandemic, peaked over a year
ago in February 2021, with the start in the fall of 'meme' stocks. Profitless
technology companies reached heights of valuation not witnessed for 20 years.
Over the last five months, this has morphed into a broader bear market for US
equities and bonds, which had previously been buoyed by highly accommodative
monetary policy. Central bankers are now, belatedly, attempting to remove the
punch bowl by raising interest rates from record low levels and beginning
quantitative tightening. This is proving highly problematic for the valuations
of asset prices, which had been predicated on (almost) free money.
Investors are endeavouring to navigate a new regime, with the highest level of
inflation in 40 years. A year ago, we suggested that it would be hard to
predict the sustainability of rising inflationary forces, which were affected
by the pandemic both in terms of demand, thanks to extreme government
stimulus, and supply in relation to interrupted supply chains. Yet the
environment, in which disinflationary forces predominated, had been waning for
some time before the pandemic. While much investor focus has been on the
deflationary effects of technology, other deflationary influences also seem to
be fading. Anti-globalisation sentiment has been growing since the financial
crisis. Events such as Trump's election and his policies on China have begun
to slow four decades of globalisation. The pendulum that swung towards free
trade for so long seems to be swinging
back. It is not only the trade of goods that has contributed to disinflation
but the free movement of people that has kept the price of labour down since
the fall of the Berlin Wall in 1989. People crossing borders had a material
impact on globalisation as much as the movement of goods. Wage growth is now
at a 40-year high in the US; a lot of this is down to labour market tightness
which, beyond the lingering effects of the pandemic, risks being sustained if
nationalism inhibits immigration. Wage growth will be key to whether current
inflationary forces become ingrained. The Governor of the Bank of England,
Andrew Bailey's recent call for wage restraint revealed the weakness of his
hand, as a policy maker, in controlling these pressures.
Supply constraints resulting from the pandemic have been more persistent than
many expected. The recent tragic events in Ukraine present a further unwelcome
geopolitical shock and extend the current inflationary backdrop, aggravating
supply shortages for energy and food, in particular. There is a political
acceptance that more resilient supply chains are needed, and re-shoring may be
part of the solution. We are shifting from a 'just in time' to a 'just in
case' economy. Higher domestic capital expenditure will follow in order to add
resilience to developed economies. The drive to optimise financial returns, so
evident for the past two decades, is likely to recede as companies build in a
buffer for uncertainty.
Does the Federal Reserve (and other central banks) have a strong enough
stomach to tackle inflation head on or will it pivot as it did in 2018? Debt
levels, as a percentage of GDP, are as high as they were during World War II,
making positive real rates, required to check inflation, almost impossible to
achieve without the risk of a deep recession. The chance of a major policy
error is rising. As Stephen King from HSBC points out, the real Fed Funds rate
is the lowest it has been in 70-80 years, which is extraordinary. Up until
recent months, central banks, through talk of inflation's 'transitory' nature
and through their own inaction, had been making a huge bet that inflation
would not last long and has little to do with monetary policy. This now looks
like wishful thinking as evidence picks up that inflationary pressures are not
only affecting food and energy nor are they merely pandemic and
Ukraine-related. Wages and rents are rising, along with goods.
Several commentators point to the high inflation of the 1970s as a guide for
today. These comparisons are too simplistic as today's economy differs
dramatically from 50 years ago. However, there are some similarities. Fiscal
policy lost its anchor during the 1970s, as it has through the pandemic.
Bounce back loans and other support schemes have been replaced by governments
choosing to subsidise wages via transfer payments such as offsetting rising
energy bills. Politicians know that the pernicious effects of inflation fall
on those with middle and low incomes. Social unrest becomes an increased risk
if this fiscal anaesthetic is not provided.
How do we invest amid these febrile conditions? We have been warning for some
time that the barbell 'balanced' portfolio strategy of putting nominal bonds
alongside equities is long past its sell-by-date. The short-term negative
correlation between the two asset classes has been of great value to asset
allocators in diversifying portfolios and producing consistent returns. Bonds
have thrived on the back of low inflation and low growth, whilst equities
performed during periods of improved economic activity. Over the course of
decades however, falling interest rates supported ever-higher valuations for
equities and bonds alike. Today, the short-term negative correlation between
the two asset classes seems to have broken down. In a new regime of higher
inflation, the risk is that bonds and equities fall together. For this reason
we have long preferred index-linked bonds and gold bullion, over conventional
bonds, and they have held up relatively well in the recent bond market sell
off and should thrive in a negative real interest rate environment, also known
as 'financial repression'.
During the year, a majority of our equities made positive contributions to
returns led by core holdings such as Microsoft, American Express, Nestlé,
Diageo and Franco Nevada. The only meaningful detractors were Medtronic and
Unilever. As markets ran up in 2021 we reduced the Company's equity exposure
amid concerns that valuations had gone too far. Having started the financial
year with 46% in equities, we ended the year with a 38% exposure. The Shiller
cyclically adjusted price earnings ratio (CAPE), a long-term valuation
measure, for the US stock market peaked at 38.6x in November 2021, not far off
the level reached in December 1999.
The situation today is different to the tech bubble. In 1999 the overvaluation
was concentrated in a smaller number of stocks (Dotcoms, Cisco, Microsoft, and
Juniper Networks). Value was on offer elsewhere. Thanks to the prevalence of
cheap and plentiful capital over the last decade, the overvaluation is far
more evenly spread today, giving fewer places to hide from a de-rating of
equities. We are sceptical of those who advocate equities as a good defence
against inflation. Historically, stocks love disinflation, not inflation.
Stock market returns in inflationary periods have been volatile and poor in
real terms, despite growing profits - such is the corrosive effect of
inflation. From current starting valuations we suspect returns will be modest
and we await
lower equity valuations before putting shareholders' savings to work.
Investors are warned that 'past performance is no guide to the future'. The
biggest mistake investors can make is to extrapolate historic earnings, share
prices, or valuations. Money illusion, the tendency for people to view their
wealth and income in nominal terms rather than recognise the real value
adjusted for inflation, is hard to resist. This is the mirage between the
nominal and the real and will be the enemy of investors seeking returns ahead
of inflation. We will endeavour to continue to preserve and grow shareholders'
funds in real terms, but we are under no illusion as to the scale of the
challenge ahead.
As the Chairman mentioned in his Statement, Robin Angus will be sorely missed
by all of us involved with Personal Assets. He was the heart and soul of the
Company for over 30 years. I first came across Robin as an aspiring investor
in my late twenties reading his Quarterlies and later met him along with Ian
Rushbrook as a shareholder. Robin introduced me to investing and thinking as a
fiduciary of the sacred savings of others. His reports were not only
beautifully written, but provided objective information for private investors
seeking to protect and grow their assets. His writing offered refreshing
honesty and was peppered with classical witticisms. Shareholders also owe him
a debt of gratitude for the introduction of the discount control mechanism,
which was trailblazing in 1999 but has now been adopted as the gold standard
by many other investment trusts. He was a wonderful, supportive and kind
colleague and for me, he was always the best school master I never had.
For further information contact:
Sebastian Lyon
Investment Manager
Tel: 0207 499 4030
Carron Dobson
Juniper Partners, Company Secretary
Tel: 0131 378 0500
The Company's Income Statement, Statement of Financial Position, Statement of
Changes in Equity and Cash Flow Statement follow.
Income Statement
Year ended 30 April 2022
Revenue Capital
return return Total
£'000 £'000 £'000
Investment income
Calculated using the effective interest rate method 25,942 - 25,942
Other investment income 13,847 - 13,847
Other operating income 68 - 68
Gains on investments held at fair value - 129,897 129,897
through profit or loss
Foreign exchange losses - (49,813) (49,813)
Total income 39,857 80,084 119,941
Expenses (5,016) (6,295) (11,311)
Return before taxation 34,841 73,789 108,630
Taxation (5,931) 3,325 (2,606)
Return for the year 28,910 77,114 106,024
Return per share £8.36 £22.31 £30.67
The "Return for the Year" is also the "Total Comprehensive Income for the
Year", as defined in IAS1 (revised), and no separate Statement of
Comprehensive Income has been presented.
The "Total" column of this statement represents the Company's Income
Statement, prepared in accordance with International Financial Reporting
Standards.
The Revenue and Capital return columns are supplementary to this and are
prepared under guidance published by the Association of Investment Companies.
Return per share is calculated on 3,456,868 (2021: 2,986,288) shares, being
the weighted average number in issue (excluding Treasury shares) during the
year.
All items in the above statement derive from continuing operations.
Dividend Information 2022 2021
Dividends per share £5.60 £5.60
Dividends paid £'000 £'000
First interim dividend of £1.40 per share (2021: £1.40 per share) paid on 16 4,599 3,895
July 2021
Second interim dividend of £1.40 per share (2021: £1.40 per share) paid on 8 4,730 4,068
October 2021
Third interim dividend of £1.40 per share (2021: £1.40 per share) paid on 12 4,912 4,242
January 2022
Fourth interim dividend of £1.40 per share (2021: £1.40 per share) paid on 5,013 4,439
13 April 2022
19,254 16,644
Income Statement
Year ended 30 April 2021
Revenue Capital
return return Total
£'000 £'000 £'000
Investment income
Calculated using the effective interest rate method 3,272 - 3,272
Other investment income 15,733 - 15,733
Gain on disposal of asset held for sale - 1,559 1,559
Gains on investments held at fair value - 80,865 80,865
through profit or loss
Foreign exchange gains - 38,951 38,951
Total income 19,005 121,375 140,380
Expenses (4,423) (5,269) (9,692)
Return before taxation 14,582 116,106 130,688
Taxation (1,045) 482 (563)
Return for the year 13,537 116,588 130,125
Return per share £4.53 £39.04 £43.57
Statement of Financial Position
As at As at
30 April 2022 30 April 2021
£'000 £'000
Non-current assets
Investments held at fair value though profit or loss 1,790,814 1,432,656
Property 2,144 2,144
Total non-current assets 1,792,958 1,434,800
Current assets
Receivables 4,429 1,228
Cash and cash equivalents 47,944 70,907
Total current assets 52,373 72,135
Total assets 1,845,331 1,506,935
Current liabilities
Financial liabilities held at fair value though profit or loss (26,585) (676)
Corporation tax payable (1,486) -
Other payables (2,900) (2,323)
Total liabilities (30,971) (2,999)
Net assets 1,814,360 1,503,936
Capital and reserves
Ordinary share capital 46,100 40,410
Share premium 1,235,636 1,017,672
Capital redemption reserve 219 219
Special reserve 22,517 22,517
Capital reserve unrealised 324,095 285,947
Distributable reserves 185,793 137,171
Total equity 1,814,360 1,503,936
3,688,069 3,232,929
Shares in issue at year end
£491.95 £465.19
Net asset value per Ordinary share
Statement of Changes in Equity
Distributable reserves
For the year ended Ordinary share capital Share premium Capital redemption reserve Treasury share reserve Capital reserve unrealised Capital reserve realised Revenue reserve
30 April 2022 Special reserve
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
£'000
Balance at 1 May 2021 40,410 1,017,672 219 22,517 285,947 137,171 - 1,503,936
-
Return for the year - - - - - 38,148 38,966 28,910 106,024
Ordinary dividends paid - - - - - - (19,254) (19,254)
-
Issue of Ordinary shares 5,690 217,964 - - - - - 223,654
-
Balance at 30 April 2022 46,100 1,235,636 219 22,517 324,095 176,137 9,656 1,814,360
-
Distributable reserves
For the year ended Ordinary share capital Share premium Capital redemption reserve Treasury share reserve Capital reserve unrealised Capital reserve realised Revenue reserve
30 April 2021 Special reserve
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
£'000
Balance at 1 May 2020 34,580 811,635 219 22,517 215,074 93,852 711 1,160,966
(17,622)
Return for the year - - - - - 70,873 45,715 13,537 130,125
Ordinary dividends paid - - - - - (2,396) (14,248) (16,644)
-
Issue of Ordinary shares 5,830 206,037 - - - - - 229,489
17,622
Balance at 30 April 2021 40,410 1,017,672 219 22,517 285,947 137,171 - 1,503,936
-
Share premium. The share premium represents the difference between the nominal
value of new Ordinary shares issued and the consideration the Company receives
for these shares.
Capital redemption reserve. The capital redemption reserve represents the
nominal value of Ordinary shares bought back for cancellation since authority
to do this was first obtained at a General Meeting in April 1999.
Special reserve. The cost of any shares bought back for cancellation is
deducted from the special reserve, which was created from the share premium,
also following a General Meeting in April 1999.
Treasury share reserve. The net cost of any shares bought back and held in
treasury.
Capital reserve unrealised. Increases and decreases in the valuation of
investments held at the year end and unrealised exchange differences of a
capital nature are accounted for in this Reserve.
Capital reserve realised. Gains and losses on the realisation of investments,
realised exchange differences of a capital nature and returns of capital are
accounted for in this Reserve.
Revenue reserve. Any surplus/deficit arising from the revenue return for the
year is taken to/from this Reserve.
Cash Flow Statement
Year ended Year ended
30 April 30 April
2022 2021
£'000 £'000
Cash flows from operating activities
Return before taxation 108,630 130,688
Income calculated using the effective interest rate method (25,942) (3,272)
Gains on investments (129,897) (82,424)
Foreign exchange losses/(gains) 49,813 (38,951)
Operating cash flow before movements in working capital 2,604 6,041
(Increase)/decrease in accrued income, prepayments and other receivables (222) 733
Increase in other payables 577 276
Net cash from operating activities before taxation 2,959 7,050
Taxation (1,064) (563)
Net cash inflow from operating activities 1,895 6,487
Cash flows from investing activities
Purchase of investments - equity shares (61,064) (118,361)
Purchase of investments - fixed interest and other investments (835,033) (613,740)
Purchase of gold bullion (12,312) (25,044)
Purchase of freehold property - (445)
Disposal of investments - equity shares 126,691 59,569
Disposal of investments - fixed interest and other investments 579,399 450,077
Disposal of subsidiary - 2,793
Settled forward foreign exchange (losses)/gains (23,807) 40,230
Net cash outflow from investing activities (226,126) (204,921)
Cash flows from financing activities
Equity dividends paid (19,254) (16,644)
Issue of Ordinary shares 220,618 230,576
Net cash inflow from financing activities 201,364 213,932
(Decrease)/increase in cash and cash equivalents (22,867) 15,498
Cash and cash equivalents at the start of the year 70,907 56,091
Effect of exchange rate changes (96) (682)
Cash and cash equivalents at the year end 47,944 70,907
Net cash inflow from operating activities includes the following:
Dividends received 9,474 12,702
Interest received 4,262 4,133
Principal Risks and Risk Management
The Board has carried out a careful assessment of the principal risks facing
the Company, including the current geopolitical risks following the Russian
invasion of Ukraine and the ongoing impacts of the COVID-19 pandemic. The
Board has established and maintains, with the assistance of the Company
Secretary, a risk matrix which identifies the key risks to the Company. This
register is formally reviewed on a regular basis. Emerging risks that could
impact the Company are considered and discussed at each Board meeting, or on
an ad hoc basis as required, along with any proposed mitigating actions.
The principal risks and uncertainties facing the Company, together with a
summary of the mitigating action the Board takes to manage these risks and how
these risks have changed over the period, are set out below.
Emerging
Risk
The recent invasion of Ukraine brings risk to economic growth and investors'
risk appetites and consequently can impact the valuation of companies in the
portfolio. There is also an increasing awareness of the challenges and
emerging risks posed by climate change. The economic responses to the COVID-19
pandemic may also continue to impact on the Company and its portfolio. The
government support measures put in place during the pandemic may result in
significant levels of inflation in the medium term.
↑ Increased overall emerging risks due to rising inflation and heightened
global political tensions.
Mitigation
The Board seeks to mitigate these emerging risks through maintaining a broadly
diversified global equity portfolio and appropriate asset and geographical
allocation. In respect of climate change risks, the investment process
considers ESG factors, as set out in the Strategic Review of the Annual
Report. Overall the specific potential effects of climate change are
difficult, if not impossible, to predict and the Board and Investment Manager
will continue to monitor developments in this area. The Board is in regular
communication with the Investment Manager on emerging matters which may impact
on the portfolio.
Economic
Risk
The Board believes that the principal risk to shareholders and the Company's
investments are events or developments which can affect the general level of
share prices, including for instance, inflation or deflation, economic
recessions and movement in interest rates and currencies which could cause
losses within the portfolio.
↑ Risk has been heightened by inflationary increases and geopolitical
events, including the invasion of Ukraine.
Mitigation
The Board regularly monitors the investment environment and the management of
the Company's investment portfolio, and applies the principles detailed in the
guidance provided by the Financial Reporting Council. Further details on the
Company's financial risks are contained in the Notes to the Accounts on pages
20 to 26 of the Annual Report.
The Company's strategy is reviewed formally on at least an annual basis
considering investment performance, market developments and shareholder
communication. The Board receives regular updates on the composition of the
Company's portfolio. Investment performance and the portfolio composition has
been monitored specifically in the light of the emerging risks noted above.
Operational
Risk
The Company is reliant on service providers including Troy as Investment
Manager, Juniper Partners as AIFM, Company Secretary, Administrator and
discount and premium control provider, J.P.Morgan as Depositary and Custodian
and Equiniti as Registrar. Failure of the internal control systems of these
parties, including in relation to cybersecurity measures, could result in
losses to the Company.
→ Risk remains relatively unchanged.
Mitigation
The Board formally reviews the Company's service providers on an annual basis,
including reports on their internal controls where available. As part of the
annual review the Board considers the business continuity plans in place
with each of its key suppliers and the measures taken to mitigate cyber
threats. The Company's internal controls are described in more detail on page
37 of the Annual Report.
Legal and Regulatory
Risk
Breach of legal and regulatory rules could lead to the suspension of the
Company's Stock Exchange listing, financial penalties, or a qualified audit
report. Breach of Section 1158 of the Corporation Tax Act 2010 could lead to
the Company being subject to tax on realised capital gains.
→ Risk remains relatively unchanged.
Mitigation
Compliance with the Company's regulatory obligations is monitored on an
ongoing basis by Juniper Partners, the Investment Manager and other
professional advisers as required who report to the Board regularly.
Discount and Premium Control
Risk
The share price could be impacted by a number of external factors which could
cause significant discount and premium fluctuations.
→ Risk remains relatively unchanged.
Mitigation
The Company's discount and premium control policy, which is enshrined in the
Articles of Association, is to ensure that shares always trade at close to net
asset value. The level of share buybacks or issuance under the policy is
reported via an RIS on an ongoing basis. The operation of the discount and
premium control policy was reviewed in the light of the COVID-19 pandemic and
to date has continued throughout the period without disruption.
Directors' Responsibility Statement
The directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulation.
Company law requires the directors to prepare financial statements for each
financial year. Under that law the directors have prepared the financial
statements in accordance with UK-adopted international accounting standards.
Under company law, Directors must not approve the financial statements unless
they are satisfied that they give a true and fair view of the state of affairs
of the Company and of the profit or loss of the company for that period. In
preparing the financial statements, the Directors are required to:
• select suitable accounting policies and then apply them consistently;
• state whether applicable UK-adopted international accounting standards
have been followed, subject to any material departures disclosed and explained
in the financial statements;
• make judgements and accounting estimates that are reasonable and prudent;
and
• prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
Going Concern
The Directors acknowledge that the continuing situation surrounding the
COVID-19 pandemic and heightened geo-political tensions creates risks and
uncertainties which may impact the Company. Nevertheless, the Directors
believe, in the light of the controls and review processes reported in the
Report of the Audit Committee on page 37 of the Annual Report and bearing in
mind the nature of the Company's business and assets, which are considered to
be readily realisable if required, that the Company has adequate resources to
continue operating for at least twelve months from the date of approval of the
financial statements. For this reason, they continue to adopt the going
concern basis in preparing the accounts.
As part of the going concern assessment a sensitivity analysis was performed.
If the market had dropped by 25% and no dividend income became available the
Company would be able to continue operating for the foreseeable.
Related Party Transactions
Investment management services are provided by Troy Asset Management Limited.
The fee for the year ended 30 April 2022 was £9,684,000 (2021: £8,106,000).
An amount of £2,520,000 was outstanding to the Investment Manager at 30 April
2022 (2021: £2,132,000).
Directors of the Company received fees for their services. An amount of
£15,000 was outstanding to the Directors at 30 April 2022 (2021: £15,000).
Further details are provided in the Directors' Remuneration Report on pages 32
and 33 of the Annual Report. The Directors' shareholdings are also detailed on
pages 27 and 32 of the Annual Report.
Notes:
1. The financial statements of the Company have been prepared in
accordance with UK-adopted International Accounting Standards and with the
requirements of the Companies Act 2006 as applicable to companies reporting
under those standards. This change constitutes a change in accounting
framework. However, there is no impact on recognition or disclosure in the
period reported as a result of the change in framework.
The financial statements have been prepared on a going concern basis.
The financial statements are presented in Sterling and all values are rounded
to the nearest thousand pounds (£'000) except where otherwise indicated.
The financial statements have been prepared on the historical cost basis,
modified by revaluation of financial assets and financial liabilities held at
fair value. The principal accounting policies adopted are set out in pages 20
and 21 of the Annual Report. These have been applied consistently, other than
where new policies have been adopted. Where the presentational guidance set
out in the Statement of Recommended Practice (the ''SORP'') for investment
trusts issued by the Association of Investment Companies (the ''AIC'') in
April 2021 is consistent with the requirements of IFRSs, the Directors have
sought to prepare the financial statements on a basis compliant with the
recommendation of the SORP.
2. During the year the Directors issued 455,140 Ordinary shares for
proceeds of £223,946,000.
3. At 30 April 2022 the sterling value of the US Treasury stocks and
part of the US equities were protected by a forward currency contract.
4. The Company held the following categories of financial instruments as
at 30 April 2022:
Level 1 Level 2 Level 3 £'000 Total
£'000 £'000 £'000
Investments 1,790,814 - - 1,790,814
Financial liabilities - (26,585) - (26,585)
Total 1,790,814 (26,585) - 1,764,229
Level 1 reflects financial instruments quoted in an active market. The
Company's investment in Gold Bullion has been included in this level.
Level 2 reflects financial instruments the fair value of which is evidenced by
comparison with other observable current market transactions in the same
instrument or based on a valuation technique the variables of which include
only data from observable markets. The Company's forward currency contract has
been included in this level as fair value is achieved using the foreign
exchange spot rate and forward points which vary depending on the duration of
the contract.
Level 3 reflects financial instruments the fair value of which is determined
in whole or in part using a valuation technique based on assumptions that are
not supported by prices from observable market transactions in the same
instrument and not based on available observable market data.
There have been no changes to valuation technique over the year.
5. These are not statutory accounts in terms of Section 434 of the
Companies Act 2006. Full audited accounts for the year to 30 April 2022 will
be sent to shareholders in June 2022 and will be available for inspection at
28 Walker Street, Edinburgh EH3 7HR, the registered office of the Company. The
full Annual Report will be available on the Company's website www.patplc.co.uk
(http://www.patplc.co.uk) .
6. The audited accounts for the year ended 30 April 2022 will be lodged
with the Registrar of Companies.
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