PNL Personal Assets Trust Plc

To:                          RNS

From:                    Personal Assets Trust plc

LEI:                         213800Z7ABM7RLQ41516

Date:                     19 June 2024

Results for the year ended 30 April 2024

The Directors of Personal Assets Trust plc ("PAT" or "the Company") are pleased to announce the Company's results for the year ended 30 April 2024.

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 2024 PAT's net asset value per share ("NAV") rose by 1.2%. This compares to a rise of 3.4% in the FTSE All-Share Index.  PAT's share price rose by 2.00p during the year and at 30 April 2024 was 483.00p. An analysis of performance is provided in the Chairman's Statement and Investment Manager's Report below.

·    Percentage changes to 30 April 2024:

(1)   The Company became self-managed in 1990.

(2)   Alternative Performance Measure. Please see pages 64 and 65 of the Annual Report for a glossary of terms and definitions.

·    During the year the Company's shares continued to trade close to NAV. The Company did not issue any Ordinary shares and bought back 49,244,828 Ordinary shares during the year.

·    During the year, PAT continued to maintain a high level of liquidity. At 30 April 2024, liquidity was 72.5%. This included 11.8% in UK Gilts, UK index-linked bonds, UK cash, overseas cash, and net current assets and 60.6% in various classes of non-equity risk assets: 36.5% in US TIPS, 11.6% in US Treasuries and 12.5% in Gold Bullion. This compared to holdings as at 30 April 2023 of 17.7% in UK Gilts, UK cash, overseas cash, and net current liabilities 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.

The Chairman, Iain Ferguson, said:

We continue to live in a world of great uncertainty and increasing volatility with little expectation for improvement in the immediate future. We still have a war raging in Europe, particularly poignant as we commemorate the 80th anniversary of 'D-Day', and we now have a very intractable conflict in the Middle East. There are obvious growing international tensions across the globe and the outcome of the election in the United States will have literally 'world changing' ramifications. In the UK we are now in the General Election process and by the time of our AGM in July we will know the outcome. Most pundits are predicting a change of government. 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. The Directors and our Investment Managers at Troy Asset Management Limited ('Troy'), Sebastian Lyon and Charlotte Yonge, are shareholders in the Company. As such, we are all strongly aligned and are advocates for this investment proposition. As Directors, we work closely with the Troy team, bringing our collective experience to complement, inform, challenge and support. This close but independent relationship is particularly important when we are seeking to navigate uncertain and turbulent markets together.

We track the performance of the Company from 1990. Since then, the NAV has grown at an annual compound rate of +6.5% compared to +3.4% for the UK Retail Price Index and +4.3% for the FTSE All-Share Index, 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 2 of the Annual Report and the volatility experienced is indicated on the chart on page 11 of the Annual Report. This shows that over the last 24 years the Company has been less volatile than equities in general and also less volatile than the AIC Flexible Investment Sector. 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 6 and 7 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 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 5.60p 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 2024 of 1.60p per share. This dividend will be paid to shareholders in July 2024 alongside the first interim dividend of 1.40p per share for the year to 30 April 2025.

During the year we bought back 49,244,828 Ordinary shares into Treasury under the Company's discount control policy, for a net outflow of £232 million. As at 30 April 2024 we had 342,325,372 Ordinary shares in issue, with 50,479,828 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 Company's share price has closely tracked the NAV both through periods of significant issuance and as demonstrated in the last year through a period of sustained buy back. Given the persistence of discounts for investment trusts generally, buyback activity throughout the year has been pronounced across the industry more widely. For the Company, the year ending 30 April 2024 will be the first since 2007 when the number of shares in issue has declined year on year.

The Board membership has enjoyed a further year of stability and I am grateful for the continuing commitment and wise counsel of my colleagues. We appointed Jennifer Thomas to the Board with effect from 1 May 2024. She brings more than 25 years of experience in leading communications in several international companies and we look forward to her contribution to our work. 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'). During 2023 and 2024 we conducted internal reviews, 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 29 of the Annual Report.

As part of our oversight of our key service providers, we introduced a more formal annual review process with Troy in 2023 and this has been repeated in 2024. The review process is led by Mandy Clements and includes open discussions with all the 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 be above £1.5 billion, we are benefitting from the revised fee structure agreed in 2021. Details of the fee structure are shown on page 15 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 2024, having reduced from 0.89% in 2013 and remains in line with last year's figure.

We had adopted a similar annual review process with Juniper in 2022 and have now completed our third review cycle. As with Troy, this process is led by Mandy Clements. Our relationship with Juniper, which provides our administrative, company secretarial, AIFM and discount control services, continues to be excellent with a very open and supportive culture. Juniper 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.

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 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 and with potential shareholders.

We are looking forward to holding the AGM on Friday 19 July 2024 at The Kimpton Charlotte Square 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, 16 July 2024. In the meantime, I wish you all good health and thank you for entrusting your investment to PAT.

Iain Ferguson CBE

Chariman

18 June 2024

The Investment Manager, Sebastian Lyon, said:

Over the year to 30 April 2024, the net asset value per share ('NAV') of Personal Assets Trust (the 'Company') rose by 1.2% while our traditional comparator, the FTSE All-Share Index rose by 3.4%. 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 1990-2024 on pages 2 and 3 of the Annual Report respectively), rose by 3.3%. Over the past five years the NAV (total return) per share rose by 28.7% compared to FTSE All-Share return which rose by 30.1% and RPI which rose by 33.6%. The Company's NAV and share price (thanks to the discount control policy) continued to demonstrate below average volatility compared to peers and the stock market.

A year ago, we wrote about the burgeoning effects of rising interest rates and our expectation of slower economic growth combined with the risks of a recession. Signs of stress in the banking sector abated following the collapse of Silicon Valley Bank and Credit Suisse. The sting of tighter monetary policy has, thus far, largely been offset by aggressive fiscal stimulus, especially in the United States. Nevertheless, monetary policy always works with a lag, usually of 12 to 24 months, so with interest rates having peaked as recently as the summer of 2023, we are unlikely to have experienced their full effect. In the meantime, equity markets have been buoyed by the excitement surrounding generative Artificial Intelligence ('AI') and large language models such as ChatGPT-4. We have been taken aback by investors' willingness to speculate so soon after the profitless tech boom of 2020/21, which quickly turned to bust. Whether history will repeat itself is open to question. However, the scale of investment in capacity is reminiscent of the investment made in fibre during the dotcom boom. How sustainable this is, and whether such investment ultimately earns an economic return, remains to be seen but benefits are likely to accrue to more sustainable and recurring business models, such as Microsoft and Alphabet, which the Company continues to have exposure to.

Despite renewed speculation in some parts of the equity market, bond markets have continued to disappoint. The secular bear market in bonds, which began in 2020 when yields troughed during the pandemic, has continued with rising yields (and falling prices). It is becoming clear that we have entered a new era of upward yield pressure and a commensurate rising cost of capital. While western bond markets have performed poorly, this may take time to be reflected in equity valuations, which remain high by historic levels. This new regime is the reverse of the 2010s, when benign inflation and low growth meant rate hike expectations were continuously dashed and bond yields ground ever lower. At the beginning of 2024, the consensus forecast was for no less than six interest rate cuts over the coming year from the US Federal Reserve and the Bank of England. Yet four months on, interest rate cuts have not been forthcoming. Fewer cuts, when they eventually arrive, may imply interest rates bottom at a higher level than many expect, with further implications for long-dated bonds and equities. As a result, we continue to keep duration risk low, which served us well in 2022 where we avoided material drawdowns from rising yields. We suspect there is a need to acclimatise to this new environment. Despite easy comparisons from price levels of a year ago, inflation has remained stickier than expected with core levels still stubbornly above targets in the US and the UK. This plays into our preference for holding inflation-linked bonds, which offer positive real yields.

Our equity selection made a positive contribution to returns despite our modest exposure. Alphabet, American Express, Microsoft and Visa performed well. In contrast, consumer staples Diageo and Nestlé detracted. We continue to have confidence in the long-term prospects for these companies, which have a track record of providing strong returns to their shareholders over time. Portfolio activity was relatively modest, as is our natural proclivity, but we did add to the Company's holdings in Diageo, following its profit warning in November.

During the year we acquired a new holding in Heineken. Heineken's shares have been weak, and the valuation now sits around the same level as its 2020 low. This follows difficult macroeconomic conditions in some of the company's emerging markets, particularly Vietnam. We have been following Heineken for several years and are enthusiastic about its prospects. Heineken operates in the growing premium segment of the attractive beer category, with a strong portfolio of brands distributed over a diversified range of geographic exposures. Around 70% of its profits come from fast-growing emerging markets. Current management are still in the early stages of their tenure and are bringing renewed dynamism to the company's productivity, pricing and digitisation efforts. This combines with the company's long-term approach to capital allocation, supported by an ongoing history of family ownership, and should lead to attractive value creation over the long run.

Since 2017, the Company has been invested in Franco-Nevada, a gold-focused royalty and streaming company. Franco-Nevada had an excellent track record in allocating capital to mining projects without the complexity, or capital, required to run the mining operation, providing its shareholders with geared exposure to the price of gold. This model worked well when Franco-Nevada was smaller but as the company has grown it has become harder to find investments that 'move the needle'. This has resulted in increased concentration across a handful of larger investments, most notably in the Panamanian gold and copper mine Cobre Panama, which comprises just under 20% of Franco-Nevada's assets. Growing social pressures in Panama led the government to question the constitutionality of the mine's concession agreement and to suspend its operations. We reduced our holding in December 2022 when these pressures first reared their head. After an apparent resolution in early 2023, the issue resurfaced, and we sold the remainder of our shares in November 2023. Franco-Nevada generated good returns and provided helpful diversification for the Company over the life of the investment. We sold the shares at an average price of $130, versus an average entry price of $65 in 2017. Its sale from the portfolio reflects a change in the facts and highlights our approach to managing stock-specific risk.

Despite the sale of Franco-Nevada, gold remains essential portfolio insurance and provides diversification for the Company. During the financial year, the price of the yellow metal rose by +15% to $2,295oz. (+16% in Sterling). This strength has caught many investors by surprise as higher interest rates implied a higher opportunity cost for holding a zero-yielding asset like gold. Yet gold has outperformed the S&P 500 US equity index this century, demonstrating its substance and scarcity in an increasingly febrile and financialised world. Heightened geopolitical tensions and the gradual reversal of globalisation explain the continued attraction of an asset that is no one's liability, as well as sustained demand from central banks seeking to diversify their reserve assets away from western currencies, a process described as 'de-dollarisation'. Savers may also be seeking protection from sticky and stubborn inflation. Those with long memories will recall that higher interest rates and bond yields did not stop the price of gold rising in the 1970s. With ballooning deficits, in a post-Covid world, politicians have long forgotten fiscal rectitude. The US government debt situation no longer looks sustainable and yet warnings are being ignored by both presidential candidates. It is not entirely surprising that international investors are seeking to diversify into the longest standing reserve asset.

The Chairman's Statement highlights the continued share buybacks, which began in March 2023, following a prolonged period of share issuance. We retain an intentionally liquid portfolio, which we can liquidate in a few days in normal market conditions. During a difficult period for the investment trust sector, which has witnessed a material widening of trust discounts to net asset values (NAV), our shareholders continue to be protected from PAT's discount widening.

The Company's cautious asset allocation has not rewarded shareholders over the last year, but ample liquidity and the portfolio's defensive positioning provide a solid platform if we enter more challenging times. Grounds for caution remain. There is evidence of retail investor speculation including participation in cryptocurrencies and 'meme' stocks. Meanwhile the most recent Bank of America global fund manager survey highlights that fund managers are at their most bullish since the last equity market peak in November 2021. This is a time for patience and prudence, not ebullience.

Sebastian Lyon

Investment Manager, Troy Asset Management

18 June 2024

For further information, please contact:

Sebastian Lyon

Investment Manager

Tel:  0207 499 4030

Carron Dobson

Juniper Partners, Company Secretary

Tel:  0131 378 0500

Income Statement

Income Statement

 Statement of Financial Position

Statement of Changes in Equity

*On 24 April 2024 the Court of Session in Scotland (the 'Court') approved the reduction of the Company's share premium account and the crediting of an equivalent amount to the Company's distributable reserves. The Order of the Court approving the reduction became effective on 26 April 2024 when it was registered with the Registrar of Companies.

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, following General Meetings in April 1999 and in January 2024 and the subsequent Court approvals.

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

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 ongoing impacts of inflation levels and heightened interest rates. 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 conflicts in Ukraine and the Middle East 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 as well as the impact and pace of technological developments on the companies in the investment universe.

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. Overall the specific potential effects of climate change and developing technology 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.

↑ Increased risk

Economic

Risk

The Board believes that the principal risk to shareholders and the Company's investments are events or developments, including the emerging risks noted above, which can affect the general level of share prices and other securities within the portfolio. These include for instance, inflation or deflation, economic recessions and movement in interest rates and currencies which could cause losses within the portfolio.

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 47 to 59 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.

↑ Increased risk

Operational

Risk

The Company is reliant on service providers including Troy as Investment Manager, Juniper 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 pages 33 and 34 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 the AIFM, 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 pages 33 and 34 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 2024 was £9,603,000 (2023: £10,246,000). An amount of £2,359,000 was outstanding to the Investment Manager at 30 April 2024 (2023: £2,610,000).

Directors of the Company received fees for their services. An amount of £19,000 was outstanding to the Directors at 30 April 2024 (2023: £18,000). Further details are provided in the Directors' Remuneration Report on pages 30 to 32 of the Annual Report. The Directors' shareholdings are also detailed on pages 12, 13 and 26 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 material accounting policies adopted are set out in pages 47 to 49 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 bought back 49,244,828 Ordinary shares which were held in Treasury at a cost of £232,467,000.

3.    At 30 April 2024 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 2024:

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 2024 will be sent to shareholders in June 2024 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 2024 will be lodged with the Registrar of Companies.