REG - Personal Assets Tst. - Annual Results
12/06/2023 07:00
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RNS Number : 3274C Personal Assets Trust PLC 12 June 2023
To: RNS
From: Personal Assets Trust plc
LEI: 213800Z7ABM7RLQ41516
Date: 12 June 2023
Results for the year ended 30 April 2023
The Directors of Personal Assets Trust plc ("PAT") are pleased to announce the
Company's results for the year ended 30 April 2023.
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 2023 PAT's net asset value per share
("NAV") fell by 2.2%. This compares to a rise of 2.4% in the FTSE All-Share
Index. PAT's share price fell by 22.00p(2) during the year and at 30 April
2023 was 481.00p. An analysis of performance is provided in the Chairman's
Statement and Investment Manager's Report below.
· Total returns to 30 April 2023:
Percentage Changes
1 Year 3 years 5 Years 10 Years Since 1990 (1)
Share Price (4.4) 11.1 22.7 34.7 1,117.7
NAV per Share (2.2) 12.9 24.0 36.8 749.4
FTSE All-Share Index 2.4 31.3 3.8 26.4 310.7
Share Price Relative to FTSE All-Share (6.6) (15.4) 18.2 6.6 196.5
Share Price Total Return (3.0) 15.4 31.0 55.4 2,211.0
NAV per Share Total Return (0.9) 17.3 32.4 57.9 1,401.0
Inflation (RPI) 11.4 27.4 33.3 49.4 198.0
FTSE All-Share Total Return 6.0 45.2 24.2 80.7 1,233.3
Share Price Total Return relative to FTSE All-Share Total Return (8.5) (20.5) 5.5 (84.3) 73.3
(1) The Company became self-managed in 1990.
(2) Adjuststed for the 100 for one share split of the Ordinary shares on 1
August 2022.
· During the year the Company's shares continued to trade close to NAV.
The Company issued 23,998,300 Ordinary shares, of which 925,000 Ordinary
shares were re-issued from Treasury, and bought back 2,160,000 Ordinary
shares.
· During the year, PAT continued to maintain a high level of liquidity.
At 30 April 2023, liquidity was 76.0%. This included 17.7% in UK Gilts, UK
cash, overseas cash, and net current assets and 58.2% in various classes of
non-equity risk assets: 33.9% in US TIPS , 14.8% in US Treasuries and 9.5% in
Gold Bullion. This compared to holdings as at 30 April 2022 of 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.
The Chairman, Iain Ferguson, said:
There can be little doubt that history will come to regard the last few years
as a time of huge uncertainty and volatility. We have seen a global pandemic
and are still in the midst of wars in Europe and Africa, growing international
tensions, natural disasters on several continents and governments trying to
adjust to a new world order whilst also seeking to protect their economies and
address climate change. Here in the UK, we have also experienced significant
political uncertainty with four Chancellors and three PrimeMinisters within
the year. This is the challenging context in which we seek to deliver our core
investment proposition, which is to protect and increase (in that order) the
value of shareholders' funds per share (also known as net asset value ("NAV")
per share), over the long term. All the Personal Assets Trust plc ("PAT")
Directors and our Investment Managers at Troy Asset Management Limited
("Troy"), Sebastian Lyon and Charlotte Yonge, are shareholders in PAT. As
such, we are all strongly aligned and are advocates for this proposition. As
PAT Directors, we work closely with the Troy team, bringing our collective
experience to complement, inform, challenge and support their investment
decision-making process.
The Board membership has enjoyed a further year of stability and I am grateful
for the continuing commitment and wise counsel of my colleagues. During 2022
Board Level Partners conducted an independent review of the performance of the
Board and its Committees. Whilst this did not highlight any material
weaknesses or concerns, it did identify some areas for further focus. These
include planning for Board member succession, development of shareholder
communications and closer monitoring of our relationships with our key service
providers, Troy and Juniper Partners Limited ("Juniper Partners"). During 2023
we conducted an internal review, and it is pleasing to record that we have
made significant progress in each of the focus areas. Further detail can be
found on page 34 to 36 of the Annual Report.
We track the performance of the Company from 1990. Since then, the NAV has
grown at an annual compound rate of 6.7% compared to 3.4% for the UK Retail
Price Index and 4.4% for the FTSE All-Share Index and, our two main
comparators. 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 volatility experienced is indicated on
the chart on page 15 of the Annual Report. This shows that over the last 23
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 which were also in existence on 30 April 2000.
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.
At the AGM in July 2022 the shareholders approved that each of the Company's
Ordinary shares should be split on a one hundred-for-one basis. This split was
effected on 1 August 2022 and all figures shown in this report reflect the new
share numbers and values.
The Company aims to pay as consistent 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 5.6p per share in line with this policy. High
levels of inflation during the year, particularly in the United States, mean
that the Company has again this year 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 2023 of 2.10p per share.
This dividend will be paid to shareholders in July 2023 alongside the first
interim dividend of 1.40p per share for the year to 30 April 2024.
During the year we issued 24,923,300 Ordinary shares and bought back 2,160,000
Ordinary shares into treasury under the Company's discount control policy, for
a net inflow of £111.2 million. As at 30 April 2023 we had 391,570,200
Ordinary shares in issue, with 1,235,000 Ordinary shares in Treasury. It is
the policy of the Company to aim to ensure that, in normal market conditions,
its Ordinary shares always trade at or 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 twelve times higher.
As part of our oversight of our key service providers, we introduced a more
formal annual review process with Troy in 2023. The review was led by Mandy
Clements and involved open discussions with all the PAT Directors and several
members of the senior team at Troy.We have all found this to be a positive and
helpful exercise. In summary, our relationship with Troy continues to be
excellent and we are increasingly benefitting from access to the shared
resources and focused support from the wider Troy team.We now hold two Board
meetings each year in the Troy offices in London 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 in 2021. 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 0.65% for the year ended 30 April 2023, having reduced from 0.89% in 2013
and from 0.67% in 2022.
We had adopted a similar annual review process with Juniper Partners in 2022
and we have further developed this in 2023. As with Troy, this process is led
by Mandy Clements. Our relationship with Juniper Partners, which provides our
administrative, company secretarial, AIFM and discount control services,
continues to be excellent with a very open and supportive culture. Juniper
Partners provides 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 very good to note that the Juniper Partners team have
significantly grown their business this year having taken on the Alliance
Trust mandate which has built scale, 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 recently
relaunched website (www.patplc.co.uk), our Quarterlies, our Annual and Interim
Reports and our monthly 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.
Shareholders and friends of Robin Angus will not be surprised to learn that
Robin's book, A Shared Journey, which he completed shortly before he died last
year and which was published in the autumn, was very well received and the
first print run "sold out" quickly.
My colleagues and I were very pleased that we were able to hold our AGM in
person in Edinburgh in July 2022 and welcomed the opportunity to meet and hear
directly from some of our shareholders. We are looking forward to holding the
AGM in person again this year on Thursday 13 July 2023 at The Sheraton Hotel
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, 11 July 2023.
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 2023 the net asset value per share ("NAV") of the
Company fell by 2.2% while our comparators, the UK Retail Price Index ("RPI")
and the FTSE All-Share Index ("FTSE"), rose by 11.4% and by 2.4% respectively
(see the inside front cover of the Annual Report and Key Features and Record
1990-2023 on pages 1 and 13 of the Annual Report respectively). Over the past
five years the NAV total return per share rose by 32.4% compared to the RPI of
total return of +33.3% and FTSE total return of +24.2%. 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.
This was a dull year for returns for your Company; while we would always
prefer to make healthy positive real returns, occasionally we must accept they
are not always readily available. This is especially true over shorter time
frames when starting valuations are high for all asset classes. We are aware
that, after a benign period of inflation, the RPI is catching up with us. Our
mandate remains to preserve capital in real terms over the long run and, as
such, outperforming inflation remains our objective. Over the past eighteen
months the nature of the challenge has intensified, and we expect that
inflation will remain higher and more volatile than it has been in the recent
past. We have positioned the portfolio accordingly, recognising that all asset
prices, including equities, bonds and real estate, along with many
'alternatives' such as private equity, will be much more vulnerable in such an
environment.
The past two years have seen us exit a hall of mirrors. We are now emerging
from a prolonged period of distortion, born of zero (and even negative)
interest rates, combined with quantitative easing. Economies and financial
markets are slowly absorbing the effects of much tighter monetary conditions.
While the dominos have been falling since early 2021, with the peaking-out of
cryptocurrencies and retail investor speculation, the process of unwinding
excess will take time and requires patience. The consequences are the
unravelling of the 'Everything Bubble', which has inflated all assets and is
likely to end with prices falling back down to earth. Despite the market
declines in 2022 in equities and bonds, valuations remain high as investors
are anchored on multiples of the last decade.
We are no longer in a buy-and-hold market, in which valuations expand as lower
yields support higher prices. We expect that inflation has become embedded.
This is the product of several factors, but of particular importance is the
increased bargaining power of labour in the aftermath of the pandemic. Wage
inflation is the most important component in driving higher prices on a more
sustained basis. This is coinciding with slowing globalisation and increased
intervention from governments, often in pursuit of more nationalist agendas.
These factors are inflationary, and they come at a time when central banks
have less room to manoeuvre. We expect that interest rates can only rise so
far without severely injuring indebted economies. This unfamiliar backdrop has
called time on a 40-year bull market in bonds, with all the implications that
brings for investors.
The beneficiaries of four decades of falling yields are less likely to perform
in this new regime.We are looking for companies that will learn to thrive in
the new environment. As Edward Chancellor's excellent book The Price of Time
informs us, the 2010s may look like an aberration, a product of highly unusual
conditions where ultra-low interest rates prevailed. The past environment
rewarded insensitivity to valuation and the purchase of growth at any price.
Such a strategy is less likely to succeed in the 2020s. Higher costs of debt
are only just beginning to be felt. In any normal cycle, there is usually a
lag before Federal Reserve rate rises take effect and the lag may be longer
this time around. This is largely on account of consumer resilience, a product
of transfer payments and consumer savings that were built up during the
pandemic and are still being run down. Those will not last forever, but they
might provide a stay of execution until 2024. In addition to this, much of
today's finance is in the shadows in the form of private equity and leveraged
loans, which have ballooned in a post-financial crisis economy. Private equity
investors find themselves in a Faustian pact with their managers, resisting
the need to mark down their investments. Write-downs may be delayed but not
avoided. In the world of private equity, price discovery is inevitably more
opaque for both the managers and the owners but its effects will ultimately be
felt.
American investor Stanley Druckenmiller said recently, "when we have free
money people do stupid things. When we have free money for a decade people do
very stupid things". These are now being revealed. The collapse of Silicon
Valley Bank inMarch, along with Credit Suisse, Signature Bank and more
recently First Republic, exposes vulnerabilities to the fastest tightening of
interest rates in 40 years. We are beginning to see the unfolding of a
regional banking crisis in the United States. The environment for borrowing
has become a lot tougher, and this will affect consumers and businesses alike.
With inflation elevated, central banks cannot be seen to pivot too early. We
expect that this necessitates a 'hard landing' when it comes to the real
economy, something that is not currently being factored into equity
valuations. Our low equity exposure at c.24%, which is a 10-year low, reflects
this.
We have been hunkering down since 2021 in the knowledge that a prolonged bull
market is likely to be followed by a painful bear market. Our liquidity
remains high, yet sharp-eyed shareholders will notice a very low level of
actual cash. We are at last paid to wait, with short dated UK gilts and US
Treasuries yielding 4 to 5%. 2022 was the year we shifted from TINA (there is
no alternative to equities) to TARA (there is a real alternative). A risk-free
rate substantially above zero is back, for the first time since 2008. Most of
our stocks have been defensive in the past year, with the share price of
companies held in the portfolio appreciating +4% on average in sterling. We
are delighted to see our staples such as Nestlé, Procter & Gamble and
Unilever demonstrating excellent pricing power without sacrificing volumes.
Portfolio activity was higher in the first half of the financial year but
remained modest in the second half of the period.
Gold has performed well and is currently flirting with a new all-time high in
US dollar terms. Performance from bullion, in an environment of weaker
sterling, has been helpful to the Company. Gold, for us, remains essential
portfolio insurance and a diversifier from risk assets. It also provides
valuable protection against the ongoing debasement of fiat currencies. A
recession is likely to unleash more money printing down the line. This will be
positive for the currency that cannot be printed.
After a disappointing year in 2022, we believe that index-linked bonds are now
poised for better returns. We would like shareholders to note the price
decline in "other investments" on page 12 of the Annual Report is partially
offset by income and currency hedge gains that are reported in net asssets. In
the US, index-linked bonds are is trading on positive real yields, and we
believe that their (currently depressed) valuation offers two ways to win. The
first will be if nominal bond yields fall, returning from whence they came.
This will occur if interest rates are cut, as they were in 2008 or 2020, in
response to a struggling economy. Alternatively, inflation expectations rising
will lift 'breakevens' (the inflation rate priced into bond markets) as
investors anticipate inflation to return on a more structural basis. As it
stands, index-linked bonds are pricing in a world where interest rates remain
higher than they have been in over a decade, but where inflation returns to
the Federal Reserve's 2% target. In such a world, real growth needs to be
structurally stronger than it has been. For the reasons alluded to in this
report, namely the continued indebtedness of Western economies and the recent
rise in the cost of capital, we do not believe this to be consistent with the
likely reality.
In light of all of this, investors are talking bearishly. But they are acting
bullishly. It will take time for positioning to shift from the benign
environment of the past decade. Investor focus seems to be on coincident
indicators as opposed to looking forward to the effects of higher interest
rates and tighter lending conditions. These are likely to lead to a recession.
Bond markets, often a more reliable and rational indicator than more emotional
and volatile stock markets, are indicating the most inverted yield curve since
1981. The lower yields in longer duration bonds are a clear warning of a hard
landing. This is currently being ignored. Ayrton Senna said, "You cannot
overtake 15 cars when it's sunny…but you can when it's raining". We know the
companies we want to own should attractive valuation opportunities present
themselves and we are ready to increase our equity exposure, from currently
prudent levels, as conditions become more treacherous.
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.
On the following pages the symbol * denotes the following:
* Adjusted for the 100 for one share split of the Ordinary shares on 1 August
2022.
Income Statement
Year ended 30 April 2023
Revenue Capital
return return Total
£'000 £'000 £'000
Investment income
Calculated using the effective interest rate method 27,819 - 27,819
Other investment income 20,455 - 20,455
Other operating income 1,107 - 1,107
Losses on investments held at fair value - (54,976) (54,976)
through profit or loss
Foreign exchange gains - 9,419 9,419
Total income/(loss) 49,381 (45,557) 3,824
Expenses (5,304) (6,660) (11,964)
Return before taxation 44,077 (52,217) (8,140)
Taxation (7,436) 1,290 (6,146)
Return for the year 36,641 (50,927) (14,286)
Return per share 9.48p (13.18p) (3.70p)
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 (both basic and diluted) is calculated on 386,416,856 (2022:
345,686,800*) 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 2023 2022
Ordinary dividends per share £5.60 £5.60
Dividends paid £'000 £'000
First interim dividend of 1.40p* per share (2022: 1.40p* per share) paid on 22 5,278 4,599
July 2022
Special dividend of 1.40p* (2022: nil) paid on 22 July 2022 5,278 -
Second interim dividend of 1.40p* per share (2022: 1.40p* per share) paid on 7 5,416 4,730
October 2022
Third interim dividend of 1.40p* per share (2022: 1.40p* per share) paid on 11 5,448 4,912
January 2023
Fourth interim dividend of 1.40p* per share (2022: 1.40p* per share) paid on 5,499 5,103
12 April 2023
26,919 19,254
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 8.36p* 22.31p* 30.67p*
Statement of Financial Position
As at As at
30 April 2023 30 April 2022
£'000 £'000
Non-current assets
Investments held at fair value though profit or loss 1,805,933 1,790,814
Property 1,730 2,144
Total non-current assets 1,807,663 1,792,958
Current assets
Receivables 6,159 4,429
Financial assets held at fair value though profit or loss 24,070 -
Cash and cash equivalents 50,014 47,944
Total current assets 80,243 52,373
Total assets 1,887,906 1,845,331
Current liabilities
Financial liabilities held at fair value though profit or loss - (26,585)
Corporation tax payable (692) (1,486)
Other payables (2,862) (2,900)
Total liabilities (3,554) (30,971)
Net assets 1,884,352 1,814,360
Capital and reserves
Ordinary share capital 49,100 46,100
Share premium 1,349,680 1,235,636
Capital redemption reserve 219 219
Special reserve 22,517 22,517
Treasury reserve (5,847) -
Capital reserve unrealised 202,745 324,095
Distributable reserves 265,938 185,793
Total equity 1,884,352 1,814,360
391,570,200 368,806,900*
Shares in issue at year end
481.23p 491.95p*
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 2023 Special reserve
Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
£'000
Balance at 1 May 2022 46,100 1,235,636 219 22,517 324,095 176,137 9,656 1,814,360
-
Return for the year - - - - - (121,350) 70,423 36,641 (14,286)
Ordinary dividends paid - - - - - - (26,919) (26,919)
-
Issue of Ordinary shares 3,000 114,044 - - - - - 121,384
4,340
Share buybacks - - - - (10,187) - - - (10,187)
Balance at 30 April 2023 49,100 1,349,680 219 22,517 202,745 246,560 19,378 1,884,352
(5,847)
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
-
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
2023 2022
£'000 £'000
Cash flows from operating activities
Return before taxation (8,140) 108,630
Income calculated using the effective interest rate method (27,819) (25,942)
Losses/(gains) on investments 54,976 (129,897)
Foreign exchange (gains)/losses (9,419) 49,813
Operating cash flow before movements in working capital 9,598 2,604
Increase in accrued income, prepayments and other receivables (4,792) (222)
(Decrease)/increase in other payables (38) 577
Net cash from operating activities before taxation 4,768 2,959
Taxation (6,914) (1,064)
Net cash (outflow)/inflow from operating activities (2,146) 1,895
Cash flows from investing activities
Purchase of investments - equity shares (15,793) (61,064)
Purchase of investments - fixed interest and other investments (1,251,794) (835,033)
Purchase of gold bullion - (12,312)
Disposal of investments - equity shares 260,144 126,691
Disposal of investments - fixed interest and other investments 965,581 579,399
Settled forward foreign exchange losses (39,670) (23,807)
Net cash outflow from investing activities (81,532) (226,126)
Cash flows from financing activities
Equity dividends paid (26,919) (19,254)
Issue of Ordinary shares 120,090 220,618
Cost of share buybacks (10,187) -
Issue of shares from Treasury 4,340 -
Net cash inflow from financing activities 87,324 201,364
Increase/(decrease) in cash and cash equivalents 3,646 (22,867)
Cash and cash equivalents at the start of the year 47,944 70,907
Effect of exchange rate changes (1,576) (96)
Cash and cash equivalents at the year end 50,014 47,944
Net cash inflow from operating activities includes the following:
Dividends received 10,831 9,474
Interest received 9,974 4,262
Principal Risks and Risk Management
The Board has carried out a careful assessment of the principal risks facing
the Company, including the ongoing current geopolitical risks and the impact
of rising inflation levels. 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.
The arrows denote if the relevant risk has increased, decreased or remained
the same during the year after considering the mitigating actions.
Emerging
Risk
The invasion of Ukraine and the war in Africa continue to bring 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.
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.
→ Risk remains relatively unchanged.
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.
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.
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.
→ Risk remains relatively unchanged.
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.
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.
→ Risk remains relatively unchanged.
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.
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.
→ Risk remains relatively unchanged.
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.
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.
→ Risk remains relatively unchanged.
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 believe, in the light of the controls and review processes
reported in the Report of the Audit and Risk 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 future.
Related Party Transactions
Investment management services are provided by Troy Asset Management Limited.
The fee for the year ended 30 April 2023 was £10,246,000 (2022: £9,684,000).
An amount of £2,610,000 was outstanding to the Investment Manager at 30 April
2023 (2022: £2,520,000).
Directors of the Company received fees for their services. An amount of
£18,000 was outstanding to the Directors at 30 April 2023 (2022: £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 July
2022 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 Company issued 23,998,300 Ordinary shares for
proceeds of 117,044,000 and bought back 2,160,000 Ordinary shares which were
held in Treasury at a cost of £10,187,000.
925,000 Ordinary shares were re-issued from Treasury for proceeds of
£4,340,000.
3. At 30 April 2023 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 2023:
Level 1 Level 2 Level 3 £'000 Total
£'000 £'000 £'000
Investments 1,805,9331,790,814 - - 1,805,933
Financial assets - 24,070 - 24,070
Total 1,805,933 24,070 - 1,830,003
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 2023 will
be sent to shareholders in June 2023 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 2023 will be lodged
with the Registrar of Companies.
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