TIDMINV
RNS Number : 2896B
Investment Company PLC
07 October 2020
THE INVESTMENT COMPANY PLC
ANNUAL FINANCIAL REPORT
ANNOUNCEMENT OF RESULTS
FOR THE YEARED
30 JUNE 2020
SUMMARY OF RESULTS
At 30 June 2020 At 30 June 2019 Change %
---------------------------- --------------- --------------- --------
Equity shareholders' funds 15,037,057 16,620,311 (9.53)
Number of ordinary shares
in issue 4,772,049 4,772,049 -
Net asset value ("NAV") per
ordinary share 315.11p 348.28p (9.53)
Ordinary share price (mid) 276.00p 298.00p (7.38)
Discount to NAV 12.41% 14.44% 2.03
---------------------------- --------------- --------------- --------
At 30 June 2020 At 30 June 2019
---------------------------- --------------- --------------- --------
Total return per ordinary
share* (20.92)p 3.24p
Dividends paid 12.25p 18.20p
---------------------------- --------------- --------------- --------
* The total return per ordinary share is based on total income
after taxation as detailed in the Consolidated Income Statement and
in note 6 to the Financial Statements and is shown to enable
comparison with other investment trust companies.
CHAIRMAN'S STATEMENT
This statement covers the year to 30 June 2020.
Over the 12 months to 30 June 2020 the FTSE All-Share Index
decreased by 15.9%. The Company's NAV reduced by 33.1p a decrease
of 9.5% which can be analysed as follows:
Year to Year to
June 2020 June 2019
% Pence %
Pence per share per share
Opening net assets 348.28 100.00 363.24 100.00
Portfolio outturn (32.15) (9.23) (12.53) (3.45)
Investment income 20.14 5.78 24.19 6.66
Expenses paid (8.91) (2.56) (8.63) (2.37)
Dividends paid (12.25) (3.52) (17.99) (4.95)
------------------------------------------------ -------------- -------------- --------------
Closing net assets 315.11 (9.53) 348.28 (4.12)
------------------------------------------------ -------------- -------------- --------------
The Company's NAV, was particularly impacted by the sharp fall
in the markets in February and March 2020 as a result of the
COVID-19 pandemic as the economic implication of a near global
shutdown were added to the already grave social consequence of the
virus. The Company's NAV per Share fell from 371.48p on 31 January
2020 to 271.48p on 20 March 2020, before recovering to 315.11p at
the period end.
Background
Having seen a 7.6% increase in NAV per Share in the first half
of the year, in January 2020 the Board's confidence in the market
began to ebb as earnings expectations began to come under pressure.
The first concerns about the possible spread of COVID-19 beyond
China became public in late January and once rapid transmission to
Europe and North America became apparent this precipitated the most
rapid collapse in markets since 1929. The UK equity market fell by
over 30% from mid-February before rallying somewhat in late March
to end the year some 16% lower than on 1 July 2019.
The shift from a localised epidemic to a global pandemic,
requiring what amounts to a global shutdown with its consequential
economic implication, has been rapid. The breathtaking stimulus
packages announced by multiple governments and central banks around
the world reflect the devastating impact of the lockdown on
businesses of all sizes.
As we emerge from the first phase of lockdown here in the UK,
domestic and corporate life remain uncertain, but the effects on
our economy, savings, and social wellbeing are going to be
unprecedented. Many UK listed companies have chosen to suspend or
cut their dividends, meaning that dividend income from the UK
equity market in 2020 is forecast to be significantly lower than in
2019.
The Company's own income fell by 17% in the year, but in fact
this is not because of the market. In the first year under Fiske's
management, to June 2019, there was some GBP275,000 of exceptional
income as old arrears were successfully collected: in particular
from the legacy holding in Whitnash. In parallel, although other
portfolio changes cost some GBP78,000 in income the overall income
was still up some 20% in the year to June 2019.
In the year to June 2020, this exceptional income was not
repeated, which in itself would have led to an apparent 24%
decrease in income. Meanwhile, one of our non-yielding legacy
holdings, Liberty, was sold for some GBP375,000 in December 2019
and this capital has been deployed into income producing
assets.
Overall, portfolio changes have more than clawed back the impact
of the prior year portfolio changes, and this is despite some
GBP35,000 of dividends deferred or lost in the COVID-19 environment
of the last quarter. After adjusting for the exceptional nature of
the prior year Whitnash accrual, the company's total income has
actually risen by 9% in the year to June 2020 despite the dividends
deferred or lost due to COVID-19.
Although there has been a gradual move towards holdings of
ordinary equities - with income growth prospects - some 53% of our
income in the year still came from fixed income securities as we
seek to mitigate those risks involved in seeking higher yielding
equities.
Current income projections from the Company's portfolio and
appropriate available investment opportunities anticipate that,
after covering the cost of running the Company, it is unlikely that
that we will be able to continue to cover the cost of the dividends
at previous levels in the mid-term without putting at risk the
preservation of capital. In light of this volatility and the
material uncertainty that surrounds the ability of many listed
companies to maintain their dividend policies your Board has
reviewed closely the current investment mandate, and taking into
account the assets under its control, the likelihood of being able
to maintain the current investment policy for the future.
The Board has, accordingly, considered a range of alternatives
for the future of the Company, including the possibility of merging
the Company with other investment entities. and we have also sought
out the views of our significant shareholders in this regard. Of
the options considered, the Board believes that adopting an
objective of wealth preservation and long term capital growth is
likely to be most attractive to the majority of Shareholders and
will also provide the best opportunities to increase the size of
the Company, so reducing its pro rata costs and improving its long
term viability. Therefore, and as separately being announced today,
your Board is dispatching a circular setting out details of the
proposed new investment objective and policy together with certain
amendments to the Articles and convening the requisite general
meeting to seek the approval of shareholders.
AGM
In light of the current COVID-19 travel, public gathering
restrictions and social distancing requirements, the forthcoming
AGM which is to be held on 4 November 2020 at 11.00am, will be run
as a closed meeting and shareholders will not be able to attend in
person.
Shareholders' views are important and the Board encourages
shareholders to submit their votes via CREST ID rather than
attending the meeting in person. Shareholders may also submit
questions in advance of the AGM to the Board via email to
info@theinvestmentcompanyplc.co.uk or by post to the Company
Secretary at the address set out in the Annual Report.
Finally, your Board is grateful for the continued support of our
shareholder base as we seek a prosperous future for your
Company.
Yours faithfully,
I. R. Dighé
Chairman
6 October 2020
INVESTMENT MANAGER'S REPORT
Performance
During the twelve-month period under review to 30 June 2020 the
NAV fell by 9.9% whilst the share price decreased by
7.4%. Both were ahead of major UK indices with the FTSE All
Share Index down by 15.9% over the corresponding period.
The first half of the year under review, from July to December
2019, was dominated by Boris Johnson being re-elected Prime
Minister with a commanding majority which resulted in the UK
formally leaving the EU on 31 January 2020. The UK equity market
was broadly unchanged during this period although international
stocks performed well during the first eight months of 2019 boosted
by sterling weakness and investors wanting to own non-UK assets.
However, as it became clear that Brexit would finally be delivered,
sterling surged (at one point to 1.35 to the US Dollar) and
attractively valued UK domestic orientated stocks such as
housebuilders, retailers and utilities moved substantially
higher.
As we moved into 2020, Covid-19 dominated everything as the
world and economies were locked down by governments in order to
prevent a widely predicted surge in infections which threatened to
overwhelm national health services. Governments in the first
instance had to protect life and general well-being at the expense
of economic activity. History will judge whether this was the right
course of action.
Equity markets had been in denial that COVID-19 was a disruptive
influence and found it difficult to gauge the economic and market
impact. In essence, no one knew for certain what would happen.
However, the arrival of COVID-19 in Italy was the canary in the
coal mine moment. Investors then realised that COVID-19 was a
significant threat and life was going to be very different. The
world was starting to look very unusual with comparisons being
drawn to the Spanish Flu pandemic of 1918-1920.
When reality finally hit, equity markets and oil nose-dived as
investors panicked, dumping risk assets and scrambling to safe
haven assets such as government bonds and gold. Such was the panic
that even safe haven assets momentarily came under significant
selling pressure. In roughly six weeks, from 12 February to 23
March, the FTSE All Share crashed 35%. We believe this demonstrates
how irrational market participants' behaviour can be. Following
this fall, investors seemed to think that the market had fallen too
far, and the market rose strongly with comprehensive assistance
from the largesse of Central Banks and Governments as the monetary
and fiscal taps were fully turned on. It is highly likely that
extreme market volatility driven by ever increasing levels of
algorithmic trading will be a feature of markets until the pandemic
is brought under some form of control. For patient, long-term
orientated investors - who have undertaken good company-by-company
analysis - this will present good opportunities.
Portfolio
During the first six months the portfolio benefitted from
corporate activity. A bid was received for Aggregated Micro Power
Holdings which was a good outcome for the Company, especially as we
were having difficulty selling the shares in the market and they
were not paying a dividend. In addition, we received a cash bid for
Greene King from CK Asset Holdings Limited in Hong Kong at a
significant premium to our purchase price. As a result, we sold the
position at an attractive profit and reinvested the proceeds into
existing holdings such as Vistry, Polar Capital and Phoenix
Group.
We also had a satisfactory resolution to the two preference
share holdings in Liberty Ltd & Liberty Retail Ltd. These
Liberty preference share issues have not been paying interest for a
number of years and as a result they were a drag on the performance
of the Company. More importantly, we have been able to deploy the
capital received into existing fixed interest and equity holdings
which has provided a significant boost towards covering the
administration costs and paying the dividend.
We sold the holdings in Restaurant Group and BT, the former due
to concerns over debt levels and increasing competition in the
eating out market and the latter due to concerns over the
sustainability of its dividend.
During the year we added new holdings in Real Estate Credit
Investments (RECI), Rio Tinto and Diageo. RECI offered exposure to
an attractive dividend stream delivered from debt securities
secured on commercial and residential properties in the UK and
Europe. Rio Tinto was trading on an undemanding rating and offered
an attractive dividend yield for such a well-regarded global mining
franchise. Both companies provided support in reaching the
Company's income targets.
Whilst Diageo, the global beverage manufacturer and distributor,
did not offer the same sort of scale in terms of dividend it does
have strong and sustainable margins along with a high rate of cash
conversion, combined with a fantastic portfolio of leading brands
with strong brand recognition and customer loyalty. Diageo claim
that a net extra 550 million customers will reach the legal
drinking age by 2030. The current dividend yield is 2.5% which has
compounded by 5.8% over the last five years.
In the fixed interest part of the portfolio, we added new
holdings in General Accident 7.875% preference shares,
Ecclesiastical Insurance Office 8.625% preference shares and
Iceland Bondco 6.75% 2024, all at levels that offered attractive
yields. This was especially the case when re-investing cash
received from redemptions of non-income paying holdings as referred
to above.
We also added to several of our existing holdings such as Bank
of Scotland 7.281%, Punch Taverns Finance 7.75% 2025 and Lloyds
Banking Group 7.625% where prices and available cash allowed.
As mentioned in the interim report we were able to sell the
holding in EI Group 7.5% 2024 at an attractive level prior to its
ultimate call date, whilst the holding in Newcastle Building
Society 3.886% 2019 was redeemed in December as planned. We sold
the holding in Bristol Water 4% at an attractive exit yield. The
holdings in Morgan Advanced Materials 5% & 5.5% preference
shares were sold following the suspension of the dividends as a
result of the COVID-19 pandemic.
Outlook
Due to the Covid-19 pandemic we are in the midst of an
unprecedented period of global economic uncertainty with a deep
recession and a rise in unemployment likely to dominate the
headlines. Covid-19 presents enormous challenges for companies as
they adapt and take the required strategic initiatives to survive
and ultimately thrive in this new environment.
Whilst the current dividend picture remains uncertain, we are
reassured that the portfolio has delivered over 90% of the income
target set by the Company's Board as being sought to meet the
Company's current dividend expectations. There have been a small
number of cancellations, deferments or reductions but relative to
the market as a whole and our peer group in general we are pleased
with the overall outcome. Of the companies impacted, we hope that
the housebuilders will return to dividend payments first as more
clarity emerges around the economy and trading conditions.
There is no doubt we are living in increasingly unpredictable
and volatile times and the future is shrouded in uncertainty. We
note that your Board, in parallel with our endeavours, has been
working to explore how to deliver the long-term sustainable
protection of shareholders' funds. We would certainly agree that
this is a more stable objective than the Company's historic
high-income focus, particularly in today's investment
environment.
Whatever the future may hold, investment in well managed,
financially sound, cash generative, sustainable businesses will
provide the best protection and ultimately returns for patient
shareholders.
M. Foster, J. Harrison & J. Dieppe
Fiske plc
6 October 2020
TWENTY LARGEST INVESTMENTS
At 30 June 2020
Number Book Market % of total
cost or Directors' portfolio
Stock GBP valuation
1. Lloyds Banking GBP
7.625% variable perpetual 600,000 532,175 611,250 4.12%
2. GlaxoSmithKline
Ordinary 25p " 35,200 515,775 575,942 3.89%
3. Punch Taverns
7.75% subordinated notes 30/12/25 550,000 549,698 528,946 3.57%
4. 600 Group
8% loan notes 14/02/22 500,000 500,000 524,030 3.54%
20p Warrants 2,500,000 - - -
----------- ----------------- -------------
500,000 524,030 3.54%
5. Unilever
Ordinary 3.11p " 11,135 448,711 484,929 3.27%
6. Nationwide Building Society
10.25% core capital deferred shares
(variable) 3,100 490,536 483,017 3.26%
7. Phoenix Group
Ordinary 10p " 74,625 521,764 480,585 3.24%
8. The Fishguard & Rosslare Railways
and
Harbours Company
2.45% guaranteed preference stock 790,999 441,810 458,780 3.10%
9. Rio Tinto
Ordinary 10p " 9,720 413,424 442,114 2.98%
10. Standard Life Aberdeen
Ordinary 13.9683p " 164,650 472,153 440,603 2.97%
11. Premier Oil
6.5% 31/05/21 510,000 503,652 433,041 2.92%
12. Iceland Bondco
6.75% 15/07/24 450,000 416,754 426,745 2.88%
13. Amalgamated Metal Corporation
5.4% cum pref GBP1 256,065 144,049 220,216 1.49%
6% cum pref GBP1 213,510 103,844 198,564 1.34%
----------- ----------------- -------------
247,893 418,780 2.83%
14 National Westminster
9% non-cumulative irredeemable preference 300,000 217,752 417,300 2.82%
15 Real Estate Credit Investment
Limited^
Ordinary NPV 328,000 551,745 408,360 2.76%
16 National Grid
Ordinary 11.395p^ 40,900 328,643 404,174 2.73%
17 Strix
Ordinary GBP1^ 208,636 248,629 400,164 2.70%
18 Virgin Money UK
8% variable perpetual 450,000 415,497 390,861 2.64%
19 Persimmon
Ordinary 10p^ 16,935 449,861 387,134 2.61%
20. Polar Capital
Ordinary 2.5p^ 76,300 404,897 383,026 2.58%
--------- --------- ------
8,671,369 9,099,781 61.41%
--------- --------- ------
^ Issues with unrestricted voting rights
The Group has a total of 55 portfolio investments holdings in 49
companies.
CORPORATE SUMMARY
The Company's purpose, values, strategy and culture
The Investment Company plc (the Company) is an investment trust
company that has a premium listing on the London Stock Exchange its
principal activity is portfolio investment. The Company's wholly
owned subsidiaries are Abport Limited, an investment dealing
company and New Centurion Trust Limited, an inactive investment
company (together the Group).
The Company consists of the Board and its shareholders and has
no employees or customers in the traditional sense. The culture of
the Company is embodied in the Board of Directors whose values are
trust and fairness.
Investment Objective
The Company's investment objective is to provide shareholders
with an attractive level of dividends coupled with capital growth
over the long term, through investment in a portfolio of equities,
preference shares, loan stocks, debentures and convertibles.
In seeking to deliver the Company's investment objectives for
shareholders they seek to challenge constructively and in a
respectful way with the Manager and other stakeholders.
Investment Policy
The Company invests in equity and fixed income securities. The
equity portion of the portfolio would principally invest in UK
quoted companies, with a wide range of market capitalisations,
which are anticipated to pay a growing stream of dividends. It is
expected that the fixed income securities would include preference
shares, loan stocks, convertibles and related instruments and be
issued by UK quoted companies with a wide range of market
capitalisations. The conversion rights or equity warrants would
normally convert into the underlying equity of the quoted
company.
Any use of derivatives for investment purposes will be made on
the basis of the same principles of risk spreading and
diversification that apply to the Company's direct investments, as
described below. The Company will not enter into uncovered short
positions.
Risk diversification
Portfolio risk is mitigated by investing in a diversified spread
of investments. Investments in any one company shall not, at the
time of acquisition, exceed 15% of the value of the Company's
investment portfolio. In the long term, it is expected that the
Company's investments will generally be a portfolio of around 75 or
more different securities, most of which will
represent individually no more than 5% of the value of the
Company's total investment portfolio, as at the time of
acquisition.
The Company will not invest more than 10% of its gross assets,
at the time of acquisition, in other listed closed-ended investment
funds, whether managed by the Investment Manager or not, except
that this restriction shall not apply to investments in listed
closed-ended investment funds which themselves have stated
investment policies to invest no more than 15% of their gross
assets in other listed closed-ended investment funds.
Unquoted investments
The Investment Manager may invest in unquoted fixed income
securities from time to time subject to prior Board approval.
Investment strategy
The Company uses a bottom-up investment approach to selecting a
diversified portfolio of equity and fixed income
securities.
The investment approach can be described as active and
universal, as the Company will not seek to replicate any benchmark
and will adopt a multicap investment approach within an overall
diversified portfolio. Potential investments are assessed against
the key criteria, including, yield along with an assessment of the
prospects of underlying corporate growth prospects, market
positions, calibre of management and risk and financial
resilience.
Performance
Details of the Company's performance during the financial year
are provided in the Chairman's Statement above. The Investment
Manager's Report above includes a review of developments during the
year as well as information on investment activity within the
portfolio.
Dividend Policy
Your Board had sought to pay a total dividend of 15p for the
year ending 30 June 2020. Following three quarterly payments
of 3.75p, in August and November 2019 and in February 2020, the
May 2020 payment was restricted to 1p.
Total Assets and Net Asset Value
The Group, had total net assets of GBP15,037,057 and a NAV of
315.11p per ordinary share at 30 June 2020 (2019:
GBP16,620,311 and 348.28p).
Principal Risks and Uncertainties
The management of the business and the execution of the Group's
strategy are subject to a number of risks. A robust assessment of
the principal risks to the Company has been carried out, including
those that would threaten its business model, future performance,
solvency and liquidity.
The recent COVID-19 pandemic and related governmental responses
to restrict the global spread of the virus have caused significant
economic disruption. Political initiatives to mitigate the impact
thereof have included a continued expansion of quantitative easing.
These events are all being closely monitored by the Board and
Investment Manager as are its potential impact on the Company. How
BREXIT actually unfolds also continues to cause some uncertainty
for markets.
These matters apart, the Company's principal risks remain
unchanged since last year and are set out below. An explanation of
how these have been mitigated or managed is also provided, where
appropriate.
A summary of the risk management and internal control processes
can be found in the Corporate Governance Statement in the Annual
Report
The key business risks affecting the Group are:
(i) Investment decisions: the performance of the Group's
portfolio is dependent on a number of factors including, but
not limited to the quality of initial investment decisions and
the strategy and timing of sales;
(ii) Investment valuations: the valuation of the Group's
portfolio and opportunities for realisations depend to some
extent on stock market conditions and interest rates; and
(iii) Macroeconomic environment for preference shares and prior
charge securities: the macroeconomic environment impacts on
liquidity and market prices.
Risk Management
Specific policies for managing risks are summarised below and
have been applied throughout the year:
1. Market price risk
The Investment Manager monitors the prices of financial
instruments held by the Group on a regular basis. In addition, it
is the Board's policy to hold an appropriate spread of investments
in the portfolio in order to reduce risks arising from investment
decisions and investment valuations. The Investment Manager
actively monitors market prices throughout the year and reports to
the Board, which meets regularly in order to review investment
strategy. Most of the equity investments held by the Company are
listed on the London Stock Exchange.
2. Interest rate risk
In addition to the impact of the general investment climate,
interest rate movements may specifically affect the fair value of
investments in fixed interest securities. The Investment Manager
monitors the applicable interest rates and yields associated with
the securities.
3. Liquidity risk
The Group's assets mainly comprise readily realisable quoted
securities that can be sold to meet funding commitments if
necessary. Short-term flexibility is achieved through the use of
overdraft facilities.
Additional risks and uncertainties include:
Credit risk: the failure of a counterparty to a transaction to
discharge its obligations under that transaction that could result
in the Company suffering a loss. Normal delivery versus payment
practice and review of counterparties and custodians by the
Investment Manager mean that this is not a significant risk.
Discount volatility: The Company's shares may trade at a price
which represents a discount to its underlying NA Y
Regulatory risk: The Company operates in an evolving regulatory
environment and faces a number of regulatory risks. A breach of
sections 1158/1159 of the Corporation Tax Act 2010 would result in
the Company being subject to capital gains tax on portfolio
investments. Breaches of other regulations, including the Companies
Act 2006, the UKLA Listing Rules, the UKLA Disclosure Guidance and
Transparency Rules, or the Alternative Investment Fund Managers'
Directive, could lead to a detrimental outcome. Breaches of
controls by service providers to the Company could also lead to
reputational damage or loss. The Board monitors compliance with
regulations, with reports from the Investment Manager and the
Administrator.
Protection of assets: The Company's assets are protected by
using a custodian, Fiske plc. In addition, the Company operates
clear internal controls to safeguard all assets.
These and other risks facing the Company are reviewed regularly
by the Audit Committee.
Key Performance Indicators ("KPIs")
The Board reviews performance by reference to a number of KPIs
and considers that the most relevant KPIs are those that
communicate the financial performance and strength of the Group as
a whole. The Board and Investment Manager monitor the following
KPIs:
- NAV performance relative to the FTSE All-Share Index (total
return)
The NA Y per ordinary share at 30 June 2020 was 315.11p per
share (2019: 348.28p). The total return of the NA Y after
adding back dividends paid was -6.0%. This compares with a total
return on the FTSE All-Share Index of -13.0%.
- (Discount)/premium of share price in relation to NAV
Over the year to 30 June 2020, the Company's share price moved
from trading at a discount of 14.44 % to a discount
of 12.41%.
- Ongoing Charges Ratio
The Ongoing Charges Ratio for the year to 30 June 2020 amounted
to 2.56% (2019: 2.44%).
Viability Statement
The Directors have reviewed the viability of the company as a
vehicle for delivering investment performance to shareholders.
Their analysis is based on the performance and progress of the
Company and its investment portfolio, an assessment of current and
future risks, the appropriateness of the investment strategy and
review of the financial position of the company, and operating
expenses over the next two years. In addition, consultation with
key shareholders as to their perspectives is a key
consideration.
The Directors also consider viability in the context of the
Company being a going concern and it being appropriate that the
accounts are prepared on such a basis. This is elaborated in Note 1
to the financial statements.
The Company is putting forward an ordinary resolution for the
continuation of the Company at the forthcoming AGM, and your
Directors recommend a vote in favour of continuing.
Future Prospects
The future of the Company is dependent upon the success of the
investment strategy. The outlook for the Company is discussed in
the Chairman's Statement above and the Investment Manager's report
above. Further details are also provided in the above Viability
Statement.
Board Diversity
When recruiting a new Director, the Board's policy is to appoint
individuals on merit. The Board believes diversity is important in
bringing an appropriate range of skills, knowledge and experience
to the Board and gives that consideration when recruiting new
Directors. As at 30 June 2020 there were three male Directors on
the Board.
Section 172 Statement
Section 172 of the Companies Act 2006, requires Directors to
take into consideration the interests of stakeholders in their
decision making. The Directors continue to have regard to the
interests of, and the impact of the firm's activities on, the
various stakeholders in the firm and to consider what is most
likely to promote the success of the Company for its members in the
long term.
Whilst the importance of giving due consideration to our
stakeholders is not new, S172 requires that the Board elaborates
how it discharges its duties in this respect. We have categorised
our key stakeholders into three groups. Where appropriate, each
group is considered to include both current and potential
stakeholders:
-- Shareholders
-- Investment manager
-- Administrator and other service providers
Shareholders
Our shareholders are of course the owners of the Company and we
need to act fairly as between members of the Company. The great
majority of our shareholders have been so for a long period. We
have a regular dialogue with our key shareholders - but all are
welcome to be in communication. All shareholders are encouraged to
attend our annual general meetings. (It is acknowledged that this
will be difficult for 2020.)
Investment Manager
The Board recognizes the critical role of the Investment Manager
in the success of the Company. The Investment Manager attends
quarterly Board meetings, to participate in transparent discussions
where constructive challenge is encouraged. The Board and
Investment Manager communicate regularly outside of these meetings
with the aim of maintaining an open and transparent
relationship.
Administrator and other service providers
The Board seeks to maintain constructive liaison with its
service providers so as to optimize the way on why the
Company's
needs are met.
The Company does not have any employees and, as a result, the
Board does not consider it necessary to establish means for
employee engagement with the Board as required by the latest
version of the UK Corporate Governance Code.
Environmental, Human Rights, Employee, Social and Community
Issues
The Board consists entirely of non-executive Directors and
during the year the Company had no employees. Day-to-day management
of the portfolio is delegated to the Investment Manager. The
Company has no direct impact on the community or the environment,
and as such has no environmental, human rights, social or community
policies. In carrying out its investment activities and in
relationships with suppliers, the Company aims to conduct itself
responsibly, ethically and fairly.
Environmental, Social and Governance factors are considered as
part of commercial evaluation of investee companies.
The Strategic Report has been approved by the Board of
Directors.
On behalf of the Board
I. R. Dighé
Chairman
6 October 2020
STATEMENT OF DIRECTORS' RESPONSIBILITIES
We confirm that to the best of our knowledge:
-- the Group and Company financial statements, prepared in
accordance with IFRS as adopted by the European Union, give a true
and fair view of the assets, liabilities, financial position and
profit of the Group;
-- this Annual Report includes a fair review of the development
and performance of the business and the position of the Group
together with a description of the principal risks and
uncertainties that it faces; and
-- the Annual Report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Group's position and
performance, business model and strategy.
On behalf of the Board
I. R. Dighé
Chairman
6 October 2020
CONSOLIDATED INCOME STATEMENT
For the year ended 30 June 2020
Year to 30 June 2020 Year ended 30 June 2019
Notes Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
--------- ----------- ----------- --------- --------- ---------
Losses on investments
at fair value through
profit or loss 11 - (1,533,978) (1,533,978) - (597,122) (597,122)
Exchange gain/(losses)
on capital items - 45 45 - (137) (137)
Investment income 2 960,982 - 960,982 1,154,271 - 1,154,271
Investment management
fee 3 (121,165) - (121,165) (98,697) - (98,697)
Other expenses 4 (303,859) (703) (304,562) (301,825) (646) (302,471)
--------- ----------- ----------- --------- --------- ---------
Return before taxation 535,958 (1,534,636) (998,678) 753,749 (597,905) 155,844
Taxation 5 - - - (1,113) - (1,113)
--------- ----------- ----------- --------- --------- ---------
Total income/(loss)
after taxation 535,958 (1,534,636) (998,678) 752,636 (597,905) 154,731
--------- ----------- ----------- --------- --------- ---------
Revenue Capital Total Revenue Capital Total
p p p p p p
--------- ----------- ----------- --------- --------- ---------
Return on total income
after taxation per
50p ordinary share
- basic & diluted 6 11.23 (32.15) (20.92) 15.77 (12.53) 3.24
--------- ----------- ----------- --------- --------- ---------
The total column of this statement is the Consolidated Income
Statement of the Group prepared in accordance with IFRS. The
supplementary revenue and capital columns are prepared in
accordance with the Statement of Recommended Practice issued by the
Association of Investment Companies.
The Company did not have any income or expenses that was not
included in total income for the year. Accordingly, total income is
also total comprehensive income for the year, as defined by IAS 1
(revised) and no separate Statement of Comprehensive Income has
been presented.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
during the period.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2020
Issued
ordinary Capital Revaluation
share Share redemption Capital Revenue
capital premium reserve reserve reserve reserve Total
GBP GBP GBP GBP GBP GBP GBP
--------------- ------------ ------------- --------------------- ----------- ----------
Balance at 1 July
2019 2,386,025 4,453,903 2,408,820 - 8,629,630 (1,258,067) 16,620,311
Total income
Net return for the
year - - - - (1,534,636) 535,958 (998,678)
Transactions with
shareholders recorded
directly to equity
Ordinary dividends
paid - - - - - (584,576) (584,576)
--------------- ------------ ------------- --------------------- ----------- ----------
Balance at 30 June
2020 2,386,025 4,453,903 2,408,820 - 7,094,994 (1,306,685) 15,037,057
--------------- ------------ ------------- --------------------- ----------- ----------
Balance at 1 July
2018 2,386,025 4,453,903 2,408,820 1,917,418 7,310,117 (1,142,190) 17,334,093
Transition to IFRS
9 - - - (1,917,418) 1,917,418 - -
Total income
Net return for the
year - - - - (597,905) 752,636 154,731
Transactions with
shareholders recorded
directly to equity
Ordinary dividends paid - - - - - (868,513) (868,513)
Balance at 30 June 2019 2,386,025 4,453,903 2,408,820 -
8,629,630 (1,258,067) 16,620,311
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2020
Issued Issued
ordinary preference Capital Revaluation
share share Share redemption Capital Revenue
capital capital premium reserve reserve reserve reserve Total
GBP GBP GBP GBP GBP GBP GBP GBP
------------- ------------ ------------- ------------ ------------------- ----------- ----------
Balance at 1
July
2019 2,386,025 858,783 4,453,903 2,408,820 - 6,084,192 1,223,515 17,415,238
Total income
Net return for
the
year - - - - - (1,534,824) 546,549 (988,275)
Transactions
with
shareholders
recorded
directly to
equity
Ordinary
dividends
paid - - - - - - (584,576) (584,576)
Preference
share
dividends
paid - - - - - - (172) (172)
------------- ------------ ------------- ------------ ------------------- ----------- ----------
Balance at 30
June
2020 2,386,025 858,783 4,453,903 2,408,820 - 4,549,368 1,185,316 15,842,215
------------- ------------ ------------- ------------ ------------------- ----------- ----------
Balance at 1
July
2018 2,386,025 858,783 4,453,903 2,408,820 1,923,762 4,758,355 1,327,945 18,117,593
Transition to
IFRS
9 - - - - (1,923,762) 1,923,762 - -
Total income
Net return for
the
year - - - - - (597,925) 764,255 166,330
Transactions
with
shareholders
recorded
directly to
equity
Ordinary
dividends
paid - - - - - - (868,513) (868,513)
Preference
share
dividends
paid - - - - - - (172) (172)
------------- ------------ ------------- ------------ ------------------- ----------- ----------
Balance at 30
June
2019 2,386,025 858,783 4,453,903 2,408,820 - 6,084,192 1,223,515 17,415,238
------------- ------------ ------------- ------------ ------------------- ----------- ----------
CONSOLIDATED BALANCE SHEET
As at 30 June 2020
Note Group Group
2020 2019
GBP GBP
----------- -----------
Non-current assets
Investments held at fair value through
profit or loss 11 14,818,360 15,777,113
----------- -----------
Current assets
Trade and other receivables 14 87,716 192,958
Cash and cash equivalents 265,052 785,703
----------- -----------
352,768 978,661
----------- -----------
Current liabilities
Trade and other payables 15 (134,071) (135,463)
----------- -----------
(134,071) (135,463)
----------- -----------
Net current assets 218,697 843,198
----------- -----------
Net assets 15,037,057 16,620,311
----------- -----------
Capital and reserves
Ordinary share capital 8 2,386,025 2,386,025
Share premium 4,453,903 4,453,903
Capital redemption reserve 2,408,820 2,408,820
Capital reserve 7,094,994 8,629,630
Revenue reserve (1,306,685) (1,258,067)
----------- -----------
Shareholders' funds 10 15,037,057 16,620,311
----------- -----------
NAV per 50p ordinary share 315.11p 348.28p
----------- -----------
These financial statements were approved by the Board on 6
October 2020 and were signed on its behalf by:
I. R. Dighé
Chairman
Company Number: 4205
COMPANY BALANCE SHEET
As at 30 June 2020
Note Company Company
2020 2019
GBP GBP
---------- ----------
Non-current assets
Investments held at fair value through
profit or loss 11 14,817,179 15,775,016
Investment in subsidiaries 12 862,656 862,656
---------- ----------
15,679,835 16,637,672
Current assets
Trade and other receivables 14 124,631 218,353
Cash and cash equivalents 263,948 785,703
---------- ----------
388,579 1,004,056
---------- ----------
Current liabilities
Trade and other payables 15 (226,199) (226,490)
---------- ----------
(226,199) (226,490)
---------- ----------
Net current assets 162,380 777,566
---------- ----------
Net assets 15,842,215 17,415,238
---------- ----------
Capital and reserves
Ordinary share capital 8 2,386,025 2,386,025
Issued Preference share capital 9 858,783 858,783
Share premium 4,453,903 4,453,903
Capital redemption reserve 2,408,820 2,408,820
Capital reserve 4,549,368 6,084,192
Revenue reserve 1,185,316 1,223,515
Shareholders' funds 15,842,215 17,415,238
As permitted by section 408 of the Companies Act 2006, the
Company has not presented its own Income Statement. The amount of
the Company's return for the financial year dealt with in the
financial statements of the Group is a loss after tax of GBP988,275
(2019: profit of GBP166,330).
These financial statements were approved by the Board on 6
October 2020 and were signed on its behalf by:
I. R. Dighé
Chairman
Company Number: 4205
CONSOLIDATED AND COMPANY CASH FLOW STATEMENTS
For the year ended 30 June 2020
Note Company
Group Year to Year
Year to Year to to
30 June 2020 30 30 June 2020
June 2019 30 June 2019
GBP GBP GBP GBP
---- ------------------------ ------------------------
Cash flows from operating activities
Income received from investments 1,067,425 1,203,692 1,067,425 1,203,692
Interest received 15 - 15 -
Sundry income - - - -
Investment management fees paid (122,170) (95,795) (122,170) (95,795)
Cash paid to and on behalf of
employees - (1,167) - (1,167)
Other cash payments (306,165) (263,981) (294,645) (259,075)
---- ----------- ----------- ----------- -----------
Net cash inflow from operating
activities 639,105 842,749 650,625 847,655
---- ----------- ----------- ----------- -----------
Cash flows from financing activities
Dividends paid on ordinary shares 7 (584,576) (868,513) (584,576) (868,513)
---- ----------- ----------- ----------- -----------
Net cash outflow from financing
activities (584,576) (868,513) (584,576) (868,513)
---- ----------- ----------- ----------- -----------
Cash flows from investing activities
Purchase of investments 11 (6,703,387) (6,497,746) (6,703,387) (6,497,746)
Sale of investments 11 6,128,162 6,465,917 6,127,058 6,465,917
Loans to subsidiaries - - (11,520) (4,906)
---- ----------- ----------- ----------- -----------
Net cash outflow from investing
activities (575,225) (31,829) (587,849) (36,735)
---- ----------- ----------- ----------- -----------
Net decrease in cash and cash
equivalents (520,696) (57,593) (521,800) (57,593)
---- ----------- ----------- ----------- -----------
Reconciliation of net cash flow
to movement in net cash
Decrease in cash (520,696) (57,593) (521,800) (57,593)
Exchange rate movements 45 (137) 45 (137)
---- ----------- ----------- ----------- -----------
Decrease in net cash (520,651) (57,730) (521,755) (57,730)
Net cash at start of period 785,703 843,433 785,703 843,433
---- ----------- ----------- ----------- -----------
Net cash at end of period 265,052 785,703 263,948 785,703
---- ----------- ----------- ----------- -----------
Analysis of net cash
Cash and cash equivalents 265,052 785,703 263,948 785,703
265,052 785,703 263,948 785,703
NOTES TO THE FINANCIAL STATEMENTS
At 30 June 2020
1. Accounting policies
Basis of Preparation
The Company is a public limited company limited by shares and
incorporated and registered in England and Wales. The Company has
been approved as an investment trust within the meaning of sections
1158/1159 of the Corporation Tax Act 2010. The Company's registered
office is Hamilton Centre, Rodney Way, Chelmsford CM1 3BY.
The Group's consolidated financial statements for the year ended
30 June 2020, which comprise the audited results of the Company and
its wholly owned subsidiaries, Abport Limited and New Centurion
Trust Limited (together referred to as the "Group"), have been
prepared in conformity with IFRS as adopted by the European Union,
which comprise standards and interpretations approved by the
International Accounting Standards Board ("IASB"), and as applied
in accordance with the provision of the Companies Act 2006. The
annual financial statements have also been prepared in accordance
with the AIC Statement of Recommended Practice issued in October
2019 ("AIC SORP"), except to any extent where it is not consistent
with the requirements of IFRS.
The revised SORP issued in October 2019 is applicable for
accounting periods beginning on or after 1 January 2019. As a
result, the presentations of gains and losses arising from
disposals of investments and gains and losses on revaluation of
investments have now been combined, as shown in note 11. The result
of this change has no impact on the net asset value or total return
for both the current year and prior year. No other accounting
policies or disclosures have changed as a result of the revised
SORP.
In order to better reflect the activities of an investment trust
company and in accordance with guidance issued by the AIC,
supplementary information which analyses the Income Statement
between items of a revenue and capital nature have been prepared
alongside the Income Statement.
The financial statements are presented in Sterling, which is the
Group's functional currency as the UK is the primary environment in
which it operates.
Going Concern
The Directors have made an assessment of the Group's ability to
continue as a going concern. This has included consideration of
portfolio liquidity, the Group's financial position in respect of
its cash flows and investment commitments (of which there are none
of significance), the working arrangements of the Manager and key
service providers, continued eligibility to be approved as an
investment trust company and the impact of the Covid19 pandemic. In
addition, the Directors are not aware of any material uncertainties
that may cast significant doubt upon the Group's ability to
continue as a going concern.
The Directors are satisfied that the Group has the resources to
continue in business for the foreseeable future being a period of
at least 12 months from the date that these financial statements
were approved. Therefore, the financial statements have been
prepared on the going concern basis.
Basis of Consolidation
IFRS10 stipulates that subsidiaries of Investment Entities are
not consolidated. The Investment Company meets all three
characteristics of Investment Entity as described, however, it is
envisaged that one of the subsidiaries will be a dealing subsidiary
and, therefore consolidated financial statements are presented for
the Group. The financial statements of the subsidiaries are
prepared for the same reporting year as the parent Company, using
consistent accounting policies. All
inter-company balances and transactions, including unrealised
profits arising from them are eliminated.
Segmental Reporting
The Directors are of the opinion that the Group is engaged in a
single segment of business, being investment business.
The Group primarily invests in companies listed in the UK.
Accounting Developments
The following policies were adopted during the financial
year.
International Accounting Standards Effective date
IAS 28 Investments in Associates and Joint Ventures
(long term interests in associates or joint venture) 1 January 2019
IFRIC Interpretations
IFRIC 23 Uncertainty over Income Tax Treatments 1 January
2019
International Financial Reporting Standards
Annual improvements to IFRS 2015-2017 Cycle 1 January 2019
IFRS 16 Leases 1 January 2019
The adoption of these policies has had no material impact on the
Group or the Company.
The following accounting standards and their amendments were in
issue at the period end but will not be in effect until after this
financial year.
International Financial Reporting Standards Effective date*
IFRS 3 Business Combinations (amendment) 1 January 2020**
Annual Improvements to IFRS Standards 2018-2020 1 January
2022**
IAS 1 and IAS 8 Amendments Definition of material 1 January 2020
IAS1 (Amendments) Classification of Liabilities as Current or
Non-Current 1 January 2022**
*Years beginning on or after
**Not yet endorsed for use in the EU
The Directors do not expect that the adoption of the standards
listed above will have a material impact on the financial
statements of the Group or Company in future periods
Critical Accounting Judgments and Key Sources of Estimation
Uncertainty
The preparation of financial statements in conformity with IFRS
requires management to make judgements, estimates and assumptions
that affect the application of policies and the reported amounts in
the Balance Sheet, the Consolidated Income Statement and the
disclosure of contingent assets and liabilities at the date of the
financial statements. The estimates and associated assumptions are
based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results of
which form the basis of making judgements about carrying values of
assets and liabilities that are not readily apparent from other
sources.
The estimates and underlying assumptions are based on historical
experience and other factors that are considered to be relevant.
These are reviewed on an ongoing basis. Actual results may differ
from these estimates. Revisions to accounting estimates are
recognised in the period in which the estimate is revised if the
revision affects only that period or in the period of the revision
and future period if the revision affects both current and future
periods.
The major part of the investment portfolio is valued by
reference to quoted prices. However GBP4,166,493 of the portfolio
comprises fixed interest stocks which are thinly traded; such
stocks are primarily valued by reference to current market price
lists provided by an independent broker, itself a recognised leader
in such preference share and similar fixed interest stocks. The
Directors may overlay such prices with situation specific
adjustments including (a) taking a second independent opinion on a
specific stock, or (ii) reducing the value to a net present value,
to reflect the likely time to be
taken to realise a stock which the Group is actively looking to
sell. The outturn is reflected in the valuations set out in Note 11
to the accounts.
There were no other significant accounting estimates or
significant judgements in the current or previous year.
Investments
As the Group's business is investing in financial assets with a
view to profiting from their total return in the form of income and
capital growth, Investments are classified at fair value through
profit or loss on initial recognition in accordance with IFRS 9.
The portfolio of financial assets is managed and its performance
evaluated on a fair value basis, in accordance with a documented
investment strategy, and information about the portfolio is
provided internally on that basis to the Group's Board of
Directors.
Investments are measured initially, and at subsequent reporting
dates, at fair value, and derecognised at trade date where a
purchase or sale is under a contract whose terms require delivery
within the time-frame of the relevant market. For quoted
investments this is deemed to be bid market prices or closing
prices.
Changes in fair value of investments, realised gains and losses
on disposal are recognised in the Income Statement as capital
items.
The holdings of the investment in subsidiaries are stated at
cost less diminution in value.
All investments for which fair value is measured or disclosed in
the financial statements are categorised within the fair value
hierarchy in note 11.
Foreign Currency
Transactions denominated in foreign currencies are converted to
Sterling at the actual exchange rate as at the date of the
transaction. Items that are denominated in foreign currencies at
the year end are reported at the rate of exchange at the Balance
Sheet date. Any gain or loss arising from a change in exchange rate
subsequent to the date of the transaction is included as an
exchange gain or loss in the capital reserve or the revenue account
depending on whether the gain or loss is of a capital or revenue
nature.
Cash and Cash Equivalents
Cash comprises cash at bank and demand deposits. Cash
equivalents are short-term, highly liquid investments that are
readily convertible to known amounts of cash and which are
subject to insignificant risk of changes in value.
For the purpose of the Statement of Cash Flows, cash and cash
equivalents consist of cash and cash equivalents as defined
above.
Income
Dividends receivable on quoted equity shares are taken to
revenue on an ex-dividend basis. Dividends receivable on equity
shares where no ex-dividend date is quoted are brought into account
when the Company's right to receive payment is established. Fixed
returns on non-equity shares are recognised on a time-apportioned
basis.
Dividends from overseas companies are shown gross of any
non-recoverable withholding taxes which are disclosed separately in
the Income Statement.
Dividend income will only be recognised when there is reasonable
certainty that the issuer has the ability to make the return.
Expenses and Finance Costs
All expenses and finance costs are accounted for on an accruals
basis.
Taxation
The tax expense represents the sum of the tax currently payable.
The tax payable is based on the taxable profit for the
year. Taxable profit differs from net profit as reported in the
Consolidated Income Statement because it excludes items
that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group's
liability for current tax is calculated using tax rates applicable
at the balance sheet date.
No taxation liability arises on gains from sales of fixed asset
investments by the Group by virtue of its investment trust status.
However, the net revenue (excluding UK dividend income) accruing to
the Group is liable to corporation tax at the prevailing rates.
Dividends Payable to Shareholders
Dividends to shareholders are recognised as a liability in the
period in which they are paid or approved in general meetings and
are taken to the Statement of Changes in Equity. Dividends declared
and approved by the Company after the Balance Sheet date have not
been recognised as a liability of the Company at the Balance Sheet
date.
Share Capital
Issued share capital consists of Ordinary shares with voting
rights and issued preference shares which are non-voting. The
Issued preference shares, owned in their entirety by New Centurion
Trust Limited, a wholly-owned subsidiary of the Company, are
entitled to receive a cumulative dividend of 0.01p per share per
annum, and are entitled to receive their nominal value, 50p, on a
distribution of assets or a winding up.
Share Premium
The share premium account represents the accumulated premium
paid for shares issued in previous periods above their normal value
less issue expenses. This is a reserve forming part of
non-distributable reserves. The following items are taken to this
reserve:
-- Costs associated with the issue of equity;
-- Premium on the issue of shares.
Capital Redemption Reserve
The reserve represents the nominal value of the shares bought
back and cancelled. This reserve is not distributable.
Capital Reserve
Capital expenses, gains or losses on realisation of investments
held at fair value through profit or loss and changes in
fair value of investments are transferred to the capital
reserves.
The following are taken to this reserve:
-- Gains and losses on derivatives;
-- Gains and losses on the disposal of investments;
-- Net movement arising from changes in the fair value of
investments held and classified as at "fair value through profit or
loss";
-- Exchange differences of a capital nature; and
-- Expenses together with the related taxation effect, allocated
to this reserve in accordance with the above policies.
Realised gains on investments less expenses, provisions and
unrealised gains may be considered by the Board for distribution.
This reserve is not distributable.
Revenue Reserves
The net revenue for the year is transferred to the revenue
reserve and dividends paid are deducted from the revenue
reserve.
The revenue reserve represents the surplus accumulated profits
and is distributable.
2. Income Year ended
Income from investments: 30 June
Year ended 30 June 2020 2019
GBP GBP
--------------------------------------------------------------- --------------
UK dividends 614,753 848,003
Unfranked dividend income 23,727 46,335
UK fixed interest 322,487 259,933
--------------------------------------------------------------- --------------
960,967 1,154,271
Other income:
Bank deposit interest 15 -
--------------------------------------------------------------- --------------
Total income 960,982 1,154,271
--------------------------------------------------------------- --------------
3. Investment Management Fee
Year ended Year ended
30 June 2020 30 June
2019
GBP GBP
--------------------------------------------------------------- --------------
Investment Management Fee 121,165 98,697
--------------------------------------------------------------- --------------
The management fee payable monthly in arrears by the Company to
the Investment Manager, Fiske plc is calculated at the rate of
one-twelfth of 0.75% per calendar month of the NAV of the Company.
For these purposes, the NAV shall be calculated as at the last
business day of each month.
At 30 June 2020 an amount of GBP9,397 (2019: GBP10,402) was
outstanding and due to the Investment Manager.
4. Other Expenses
Year ended Year ended
30 June 2020 30 June
2019
GBP GBP
-------------------------------------------------------------------
Administration and secretarial services 81,000 81,000
Auditors' remuneration for:
- audit of the Group's financial statements 35,000 35,000
Directors' remuneration (see note 18) 51,250 45,319
Staff costs - 1,167
Pension costs - 233
Other expenses 136,609 139,106
------------------------------------------------ -----------------
Revenue 303,859 301,825
Capital charges 703 646
------------------------------------------------ -----------------
Total 304,562 302,471
------------------------------------------------ -----------------
The audit of the Group's financial the audit of Abport Limited GBP2,000)
statements of GBP3,000 (2019:
includes the cost of
and New Centurion Trust Limited GBP3,000 (2019: GBP2,000), which
are charged to the subsidiaries.
In conjunction with the resignation of former directors in the
prior year, a secretary also retired with the aggregate
remuneration consisting of:
Year ended Year ended
30 June 2020 30 June 2019
GBP GBP
Staff costs
Wages and salaries - 1,167
Social security costs - -
Total - 1,167
Pension costs
Pension payments - 233
Total - 233
There were no employees as at 30 June 2020 or 2019.
The Company does not have a provision (2019: same) in respect of
future pension payments. There are no pension liabilities due to
past employees.
5. Taxation
Year ended 30 June 2020 Year ended 30 June 2019
Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
Current Taxation
Overseas taxation suffered - - - 1,113 - 1,113
- - - 1,113 - 1,113
The current tax charge for the year is lower than (2019: lower
than) the standard rate of corporation tax in the UK of 19% to 30
June 2020 and 30 June 2019. The differences are explained
below:
Year ended 30 June Year ended 30 June
2020 2019
Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
--------------------------- --------- ---------------------- --------- --------------------
Return on ordinary
activities 535,958 (1,534,636) (998,678) 753,749 (597,905) 155,844
Theoretical tax at
UK Corporation tax
rate of 19% (2019:
19%) 101,832 (291,581) (189,749) 143,212 (113,602) 29,610
Effects of:
UK dividends that are
not taxable (116,803) - (116,803) (161,121) - (161,121)
Overseas dividends
that are not taxable - - - (4,422) - (4,422)
Non taxable investment
gains - 291,581 291,581 - 113,602 113,602
Overseas taxation suffered - - - 1,113 - 1,113
Unrelieved expenses 14,971 - 14,971 22,331 - 22,331
--------------------------- --------- ----------- --------- --------- --------- ---------
Actual current tax
charged to the revenue
account - - - 1,113 - 1,113
--------------------------- --------- ----------- --------- --------- --------- ---------
Factors that may affect future tax charges
The Company has excess management expenses of GBP1,777,975
(2019: GBP1,699,180). It is unlikely that the Company will generate
sufficient taxable income in the future to use these expenses to
reduce future tax charges and therefore no deferred tax asset has
been recognised.
Deferred tax is not provided on capital gains and losses arising
on the revaluation or disposal of investments because the Company
meets (and intends to continue for the foreseeable future to meet)
the conditions for approval as an investment trust company under
HMRC rules.
6. Return per Ordinary Share
Year ended 30 June 2020 Year ended 30 June 2019
Revenue Capital Total Revenue Capital Total
Return after taxation
Return attributable to ordinary
shareholders (GBP) 535,958 (1,534,636) (998,678) 752,636
(597,905) 154,731
Weighted average number of
ordinary shares in issue (excluding
shares held in Treasury) - - 4,772,049 4,772,049
Return per ordinary share (pence)
basic and diluted 11.23p (32.15)p (20.92)p 15.77p (12.53)p
3.24p
7. Dividends per Ordinary Share
Year ended Year ended
30 June 2020 30 June 2019
GBP GBP
Declared and paid per Ordinary Share
In respect of the prior period:
Fourth interim dividend 3.75p (2019: 5.70p) 178,952 272,007
In respect of the year under review:
First interim 3.75p (2019: 5.00p) 178,952 238,602
Second interim dividend 3.75p (2019: 3.75p) 178,952 178,952
Third interim dividend 1.00p (2019: 3.75p) 47,720 178,952
584,576 868,513
Declared per Ordinary Share
Dividend declared in respect of the year under review:
Fourth interim dividend 1.00p (2019: 3.75p) 47,720 178,952
8. Ordinary Share Capital
Group and Company Group and Company
2020 2019
Issued, allotted and fully paid: Number GBP Number GBP
Ordinary shares of 50p each 4,772,049 2,386,025 4,772,049
2,386,025
The ordinary shares entitle the holders to receive all ordinary
dividends and all remaining assets on a winding up, after the fixed
rate preference shares have been satisfied in full.
The Company does not hold any ordinary shares in Treasury (2019:
none).
9. Issued Preference Share Capital
Group Company
2020 2019 2020 2019
GBP GBP GBP GBP
Issued preference share capital - - 858,783 858,783
The 1,717,565 fixed rate preference shares of 50p each are
non-voting, entitled to receive a cumulative dividend of 0.01p per
share per annum, and are entitled to receive their nominal value,
50p, on a distribution of assets or a winding up. The whole of the
issue is held by New Centurion Trust Limited, a wholly owned
subsidiary of the Company.
The Directors do not consider the fair values of the issued
preference share capital to be significantly different from the
carrying values.
10. Net Asset Value per Ordinary Share
The NAV per ordinary share is calculated as follows:
2020 2019
GBP GBP
---------- ----------
Net assets 15,037,057 16,620,311
---------- ----------
Ordinary shares in issue 4,772,049 4,772,049
---------- ----------
NAV per ordinary share 315.11p 348.28p
The underlying investments of the wholly owned subsidiary New
Centurion Trust Limited comprise issued preference share capital,
as discussed in note 9, in the Company and, being effectively
eliminated on consolidation, the valuation thereof does not impact
the NAV attributable to ordinary shareholders.
11. Investments
Investments held at fair value
through profit or loss Group Company
2020 2019 2020 2019
GBP GBP GBP GBP
----------- ----------- ----------- -----------
Opening book cost 15,211,950 14,913,072 15,203,979 14,883,235
Opening net investment holding
gains 565,163 1,429,334 571,037 1,457,094
----------- ----------- ----------- -----------
Total investments designated
as held at fair value 15,777,113 16,342,406 15,775,016 16,340,329
Movements in the year:
Purchases at cost 6,703,387 6,497,746 6,703,387 6,497,746
Sales - proceeds (6,128,162) (6,465,917) (6,127,058) (6,465,917)
Losses on investments * ^ (1,533,978) (597,122) (1,534,166) (597,142)
----------- ----------- ----------- -----------
Closing valuation 14,818,360 15,777,113 14,817,179 15,775,016
----------- ----------- ----------- -----------
Closing book cost 16,538,418 15,211,950 16,571,760 15,203,979
Closing net investment holding
(losses)/gains (1,720,058) 565,163 (1,754,581) 571,037
----------- ----------- ----------- -----------
14,818,360 15,777,113 14,817,179 15,775,016
----------- ----------- ----------- -----------
*The Group received GBP6,128,162 (2019: GBP6,465,917) from
investments sold in the year. The book cost of these investments
when they were purchased was GBP5,376,919 (2019: GBP6,198,868).
These investments have been revalued over time and until they were
sold any unrealised gains/losses were included in the fair value of
investments.
^The Company received GBP6,127,058 (2019: GBP6,465,917) from
investments sold in the year. The book cost of these investments
when they were purchased was GBP5,335,606 (2019: GBP6,177,002).
These investments have been revalued over time and until they were
sold any unrealised gains / losses were included in the fair value
of investments.
Group Company
Year ended Year ended
2020 2019 2020 2019
GBP GBP GBP GBP
------- ---------------- ------- ------------
Transaction costs
Costs on acquisitions 30,858 30,438 30,858 30,438
Costs on disposals 7,018 9,165 7,016 9,165
------- ------- ------- ------- ------------
37,876 39,603 37,874 39,603
------- ------- ------- ------- ------------
Group Company
2020 2019 2020 2019
GBP GBP GBP GBP
------- ------- ------- ------- ------------
Analysis of capital gains
Gains on sale of investments 751,243 267,049 791,452 288,915
Movement in investment holding gains (2,285,221) (864,171)
(2,325,618) (886,057)
(1,533,978) (597,122) (1,534,166) (597,142)
Fair Value Hierarchy
The Group is required to classify fair value measurements using
a fair value hierarchy that reflects the subjectivity of the inputs
used in measuring the fair value of each asset. The fair value as
the amount at which the asset could be sold or the liability
transferred in an orderly transaction between market participants,
at the measurement date, other than a forced or liquidation
sale.
Categorisation within the hierarchy has been determined on the
basis of the lowest level input that is significant to the fair
value measurement of the relevant asset as follows:
Level 1 - valued using quoted prices, unadjusted in active
markets for identical assets or liabilities.
Level 2 - valued by reference to valuation techniques using
observable inputs for the asset or liability other than quoted
prices included in level 1.
Level 3 - valued by reference to valuation techniques using
inputs that are not based on observable market data or the asset or
liability.
The table below sets out fair value measurements of financial
instruments by the level in the fair value hierarchy into which the
fair value measurement is categorised.
At 30 June 2020 Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
---------- ------- --------- ----------
Financial assets at fair value
through profit or loss
Equities 8,724,184 257,617 1,670,066 10,651,867
Fixed Interest bearing securities 3,806,493 - 360,000 4,166,493
---------- ------- --------- ----------
12,530,677 257,617 2,030,066 14,818,360
---------- ------- --------- ----------
At 30 June 2019 Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
---------- ------- --------- ----------
Financial assets at fair value
through profit or loss
Equities 8,803,036 300,353 2,250,165 11,353,554
Fixed Interest bearing securities 3,721,476 - 702,083 4,423,559
---------- ------- --------- ----------
12,524,512 300,353 2,952,248 15,777,113
---------- ------- --------- ----------
There were no transfers between levels during the current or
prior year.
The valuation techniques used by the Group are set out in the
Accounting Policies in Note 1.
Valuation process for Level 2 investments
Investments classified within level 2 are valued by reference to
quoted prices but not being actively traded have been
treated as level 2.
Valuation process for Level 3 investments
Investments classified within Level 3 comprise two groups:
a) Those valued by reference to an indicative price list of an
independent third party broker, but the said price list is not
sufficiently definitive or observable/publicly available, so as to
meet the criteria for a level 2 categorisation, and in
addition:
b) There is one genuinely unquoted stock which has been valued
by the directors using recognised valuation methodologies drawing
on reported results and commentary on current trading. The
valuation of this is regularly
reviewed by the Directors. Given this, having no independent
source of pricing, it has been assessed by the Directors as having
the following value attribution: Intercede Group 8% Secured
Convertible Loan notes: discounted par value.
If the value of the level 2 and 3 investments were to increase
or decrease by 10%, while all the other variables remained
constant, the net assets and net profit available to shareholders
would have increased/decreased by GBP228,768 (2019:
GBP325,260).
The table below presents the movement in Level 3 investments
that were accounted for at fair value for the year ending 30 June
2020.
Year ended 30 June 2020 Financial
assets at fair value through
Group and Company profit or loss
GBP
Opening balance 2,952,248
Losses on investments ^^ 44,542
Sales proceeds (966,724)
Closing balance 2,030,066
^^The Group & Company received GBP966,724 from investments
sold in the year. The book cost of these investments when they were
purchased was GBP752,980. These investments have been revalued over
time and until they were sold any unrealised gains / losses were
included in the fair value of investments.
12. Investment in Subsidiaries
Company
2020 2019
GBP GBP
At cost 5,410,552 5,410,552
Provision for diminution in value (4,547,896) (4,547,896)
At cost 862,656 862,656
At 30 June 2020, the Company held interests in the following
subsidiary companies:
Country of % share of % share of
Incorporation capital held voting rights Nature of business
Abport Limited England 100% 100% Investment dealing company
New Centurion Trust Limited England 100% 100%
Investment holding company
The registered office for both companies above is Hamilton
Centre, Rodney Way, Chelmsford, Essex CM1 3BY
13. Substantial Share Interests
The Company has no notified interests in 3% or more of the
voting rights of any companies at 30 June 2020.
14. Trade and Other Receivables
Group Company
2020 2019 2020 2019
GBP GBP GBP GBP
------ ------ ------ -------
Amounts due from subsidiaries - - 36,915 25,395
Accrued income 26,462 35,577 26,462 35,577
Dividends receivable 49,461 146,804 49,461 146,804
Taxation recoverable 9,084 6,064 9,084 6,064
Other receivables 2,709 4,513 2,709 4,513
------ ------- ------- -------
87,716 192,958 124,631 218,353
------ ------- ------- -------
The carrying amount of trade receivables approximates to their
fair value. Trade and other receivables are not past due at 30 June
2020.
15. Trade and Other Payables
Group Company
2020 2019 2020 2019
GBP GBP GBP GBP
---------------------------------- ------- ------- ------- -------
Preference dividends payable
to the Company's wholly owned
subsidiary - - 1,205 1,033
Amount due to subsidiaries - - 101,533 101,533
Investment management fees 9,397 10,402 9,397 10,402
Other trade payables and accruals 124,674 125,061 114,064 113,522
---------------------------------- ------- ------- ------- -------
134,071 135,463 226,199 226,490
---------------------------------- ------- ------- ------- -------
16. Financial Instruments and Associated Risks
The Groups financial instruments comprise securities, cash
balances, receivables and payables. They are classified in the
following categories:
-- those to be measured subsequently at fair value through profit or loss; and
-- those to be measured at amortised cost.
The financial assets held at amortised cost include trade and
other receivables, cash and cash equivalents.
Investment Objective and Policy
The Group's investment objective is to provide shareholders with
an attractive level of dividends coupled with capital
growth over the long-term. The investing activities in pursuit
of its investment objective involve certain inherent risks.
Any use of derivatives for investment purposes will be made on
the basis of the same principles of risk spreading and
diversification that apply to the Group's direct investments, as
described below.
Risks
The risks identified arising from the Group's financial
instruments are market risk (which comprises market price risk and
interest rate risk, liquidity risk and credit and counterparty
risk). The Group may enter into derivative contracts to manage
risk. The Board reviews and agrees policies for managing each of
these risks, which are summarised below.
Market Risk
Market risk arises mainly from uncertainty about future prices
of financial instruments used in the Group's business. It
represents the potential loss the Group might suffer through
holding market positions by way of price movements, interest rate
movements and exchange rate movements. The Group assesses the
exposure to market risk when making each investment decision and
these risks are monitored by the Investment Manager on a regular
basis and the Board at quarterly meetings with the Investment
Manager.
Market price risk
Market price risk (i.e. changes in market prices other than
those arising from currency risk or interest rate risk) may
affect the value of investments.
The Board manages the risks inherent in the investment portfolio
by ensuring full and timely reporting of relevant information from
the Investment Manager. Investment performance and exposure are
reviewed at each Board meeting.
The Group's exposure to changes in market values was
GBP14,818,360 (2019: GBP15,777,113). The direct impact of a 5%
movement in the value of investments amounts to GBP740,918 (2019:
GBP788,856). An equal change in the opposite direction would have
decreased the net assets and net profit available to shareholders
by an equal and opposite amount. The analysis is based on closing
balances only and is not representative of the year as a whole.
2020 2019
GBP GBP
---------- ----------
Securities at fair value through profit
or loss 14,818,360 15,777,113
---------- ----------
Total investment 14,818,360 15,777,113
---------- ----------
Interest Rate Risk
Interest rate movements may affect the level of income
receivable on cash deposits. The Group's financial assets and
liabilities, excluding short-term debtors and creditors, may
include investment in fixed interest securities, such as UK
corporate debt stock, whose fair value may be affected by movements
in interest rates. The majority of the Group's financial assets and
liabilities, however, are non-interest bearing. As a result, the
Group's financial assets and liabilities are not subject to
significant amounts of risk due to fluctuations in the prevailing
levels of market interest rates.
The possible effects on the fair value and cash flows that could
arise as a result of changes in interest rates are taken into
account when making investment decisions. The Board imposes
borrowing limits to ensure gearing levels are appropriate to market
conditions.
Cash flow Cash flow
interest No interest interest No interest
rate risk rate risk Total rate risk rate risk Total
2020 2020 2020 2019 2019 2019
GBP GBP GBP GBP GBP GBP
Investments at fair
value through profit
or loss 4,166,493 10,650,686 14,817,179 3,957,341 11,817,675 15,775,016
Investment in Subsidiary - 1,181 1,181 - 2,097 2,097
Other receivables* - 85,007 85,007 - 188,445 188,445
Cash at bank 265,052 - 265,052 785,703 - 785,703
Current liabilities - (134,071) (134,071) - (135,463) (135,463)
---------- ----------- ----------
4,431,545 10,602,803 15,034,398 4,743,044 11,872,754 16,615,798
* The above table does not include prepayments of GBP2,709
(2019: GBP4,513).
Interest rate movements may affect the level of income
receivable on cash deposits and fixed interest bearing securities.
The impact of a 1% movement in interest rates would move net assets
and net profit available to shareholders by the following
amounts:
2020 2019
GBP GBP
Fixed interest bearing securities 3,225 2,599
Bank interest - -
3,225 2,599
Liquidity Risk
The Group's assets mainly comprise readily realisable quoted and
unquoted securities that can be sold to meet funding
commitments if necessary. Short-term flexibility is achieved
through the ability to liquidate listed securities.The Group's
liquidity risk is managed by the Investment Manager in accordance
with established policies and procedures in place. Cash flow
forecasting is performed in the operating entities of the Group and
aggregated by the Investment Manager. The Investment Manager
monitors the rolling forecasts of the group's liquidity
requirements to ensure it has sufficient cash to meet obligations
as they fall due.
The maturity profile of the Group's financial liabilities
GBP134,071 (2019: GBP135,463) is all due in one year or less.
Credit and Counterparty Risk
Credit risk is the risk of financial loss to the Group if the
contractual party to a financial instrument fails to meet its
contractual obligations.
The maximum exposure to credit risk as at 30 June 2020 was
GBP352,768 (2019: GBP978,661). The calculation is based on the
Group's credit risk exposure as at 30 June 2020 and this may not be
representative for the whole year.
The Group's quoted investments are held on its behalf by Fiske
plc acting as the Group's custodian. Bankruptcy or insolvency of
the custodian may cause the Group's rights with respect to
securities held by the custodian to be delayed.
Where the Investment Manager makes an investment in a bond,
corporate or otherwise, the credit rating of the issuer is taken
into account so as to minimise the risk to the Group of
default.
Investment transactions are carried out with a number of brokers
where creditworthiness is reviewed by the Investment Manager.
Cash is only held at banks that have been identified by the
Board as reputable and of high credit quality.
Foreign Currency Risk
Although the Group's performance is measured in sterling, a
proportion of the Group's assets may be either
denominated in other currencies, investments with currency
exposure or the trading activities of its investee companies.
At 30 June, the Group held GBP1,181 (2019: GBP1,285) of
investments held for sale denominated in Australian Dollars. This
is not material to the Group.
Derivatives
The Investment Manager may use derivative instruments in order
to "hedge" the market risk of part of the portfolio. The Investment
Manager reviews the risks associated with individual investments
and, where they believe it appropriate, may use derivatives to
mitigate the risk of adverse market (or currency) movements. The
Investment Manager discusses regularly the hedging strategy with
the Board.
At the year end, there were no derivative contracts open (2019:
none).
Capital Management Policies
Capital is managed so as to maximise the return to shareholders
while maintaining a capital base to allow the Group to operate
effectively. Capital is managed on a consolidated basis and to
ensure that the Group will be able to continue as a going
concern.
In order to maintain or adjust the capital structure, the Group
may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell securities to
reduce debt.
The Group had no debt during the years to June 2020 or 2019.
17. Related Party Transactions
Details of the relationship between the Company/Group and the
Investment Manager, Fiske plc are disclosed in the
Strategic Report pages 3 to 13 of the Financial Statements.
The amounts paid to the Investment Manager, together with
details of the Investment Management Agreement, are disclosed in
note 3. Investment Management fees for the year amounted to
GBP121,165 (2019: GBP98,697). In addition, GBP8,183 was paid to
Fiske plc pursuant to a custody agreement (2019: GBP6,141).
As at the year end, the following amounts were outstanding
payable to Fiske plc: GBP20,622 (2019: GBP13,670).
Key Management Personnel
The Board consists of three non-executive Directors all of whom,
with the exception of Mr Perrin who is a non-executive Director of
Fiske plc, are considered to be independent by the Board. For the
year ended 30 June 2020 all Directors including, the Chairman,
received an annual fee of GBP15,000 between 1 July 2019 and 31
January 2020. From 1 February 2020 and going forward they have
received a basic fee rate of GBP15,000 p.a. and fees for additional
services at an annualized rate of GBP5,000 making a total of
GBP20,000 p.a. The Directors did not receive any other form of
renumeration.
Controlling Party
The Director's consider that there is no controlling party.
At the year end, there were no outstanding fees payable to
Directors (2019: GBPnil).
Expenses outstanding to Directors at the year end consists of
GBPnil (2019: GBPnil). No interest is charged on the balance and
consists of reimbursement of expenses incurred.
There were no other related party transactions during the
current or previous year.
FURTHER INFORMATION
The Annual General Meeting of the Company will be held on 4
November 2020 at 11.00am at IFC Advisory, Birchin Court, Birchin
Lane, London EC3V 9DU.
In light of the current UK Government measures around the
COVID-19 virus and the desire of the Company to protect the health
and safety of Shareholders, you will understand that the Annual
General Meeting will be convened with the minimum quorum of
Shareholders present in order to conduct the business of the
meeting.
The only attendees who will be permitted entry to the meeting
will be those who will need to be present to form the quorum to
allow the business to be conducted.
Accordingly, Shareholders will be prevented from attending the
Annual General Meeting in person and are instead strongly
encouraged to complete and return the enclosed Form of Proxy in
accordance with the instructions printed thereon. Given the current
restrictions on attendance, Shareholders are strongly encouraged to
appoint the Chairman of the Annual General Meeting to act as their
proxy. Completed Forms of Proxy should be returned to the Company's
Registrar, Equiniti Limited, Aspect House, Spencer Road, Lancing,
West Sussex BN99 6DA, as soon as possible, and in any case so as to
be received by the Registrar by not later than 11.00a.m. on 2
November 2020.
Shareholders wishing to raise any questions at the Annual
General Meeting should do so by email to
info@theinvestmentcompanyplc.co.uk so as to be received no later
than 6.30 p.m. on 2 November 2020.
A copy of the Annual Report will submitted to the National
Storage Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism. This
document will also be available on the Company's website at
https://www.maitlandgroup.com/investment-trusts/the-investment-company-plc/.
Maitland Administration Services Limited
6 October 2020
END
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October 07, 2020 02:00 ET (06:00 GMT)
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