TIDMPNL
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 GBP111.2 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 GBP1.5 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
GBP'000 GBP'000 GBP'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
through profit or loss - (54,976) (54,976)
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 GBP5.60 GBP5.60
-------- --------
Dividends paid GBP'000 GBP'000
First interim dividend of 1.40p* per
share (2022: 1.40p* per share) paid on
22 July 2022 5,278 4,599
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 October 2022 5,416 4,730
Third interim dividend of 1.40p* per
share (2022: 1.40p* per share) paid on
11 January 2023 5,448 4,912
Fourth interim dividend of 1.40p* per
share (2022: 1.40p* per share) paid on
12 April 2023 5,499 5,103
-------- --------
26,919 19,254
-------- --------
Income Statement
Year ended 30 April 2022
Revenue Capital
return return Total
GBP'000 GBP'000 GBP'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
through profit or loss - 129,897 129,897
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
30 April As at
2023 30 April 2022
GBP'000 GBP'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
============ ===============
Shares in issue at year
end 391,570,200 368,806,900*
Net asset value per Ordinary
share 481.23p 491.95p*
============ ===============
Statement of Changes in Equity
Distributable
reserves *
For the Treasury
year ended Ordinary Capital share Capital Capital
30 April share Share redemption Special reserve reserve reserve Revenue
2023 capital premium reserve reserve unrealised realised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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 - - 4,340 - - - 121,384
Share
buybacks - - - - (10,187) - - - (10,187)
Balance
at 30
April
2023 49,100 1,349,680 219 22,517 (5,847) 202,745 246,560 19,378 1,884,352
========= ========== =========== ========= ========== =========== ========== ========= ==========
Distributable
reserves *
For the Treasury
year ended Ordinary Capital share Capital Capital
30 April share Share redemption Special reserve reserve reserve Revenue
2022 capital premium reserve reserve unrealised realised reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'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
GBP'000 GBP'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
GBP10,246,000 (2022: GBP9,684,000). An amount of GBP2,610,000 was
outstanding to the Investment Manager at 30 April 2023 (2022:
GBP2,520,000).
Directors of the Company received fees for their services. An
amount of GBP18,000 was outstanding to the Directors at 30 April
2023 (2022: GBP15,000). 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 (GBP'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 GBP10,187,000.
925,000 Ordinary shares were re-issued from Treasury for
proceeds of GBP4,340,000.
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 GBP'000 Total
GBP'000 GBP'000 GBP'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 .
6. The audited accounts for the year ended 30 April 2023 will be
lodged with the Registrar of Companies.
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