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RNS
Athelney Trust PLC   -  ATY   

Annual Financial Report

Released 08:29 05-Mar-2019

RNS Number : 8673R
Athelney Trust PLC
05 March 2019
 

Legal Entity Identifier:

213800ON67TJC7F4DL05

NON- STATUTORY ACCOUNTS

The financial information set out below does not constitute the Company's statutory accounts for the years ended 31 December 2018 and 2017 but is derived from those accounts. Statutory accounts for 2017 have been delivered to the Registrar of Companies, and those for 2018 will be delivered in due course. The auditors have reported on those accounts; their report was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under Section 498 (2) or (3) of the Companies Act 2006. The text of the Auditor's report can be found in the Company's full Annual Report and Accounts on the Company website: www.athelneytrust.co.uk

Chairman's Statement

Stabilise the Company in readiness for Growth

 

·    Investment performance as measured by Net Asset Value (NAV) total return, which is the change in NAV plus the dividend paid, was minus 17.6% (2017: plus 16.8%)

·    Audited NAV was 225.9p per share (2017: 284.8p) - a decline of 20.7%

·    Revenue return per ordinary share was 9.9p (2017: 9.6p), an increase of 3.1%

·    Board/major shareholder disagreements led to approximately £90,000 extra cost (£40,000 pre year end and £50,000 post year end), ongoing distraction for the Board and general shareholder uncertainty - more of this would be unsustainable, especially for a fund of this size

·    Recommended final dividend of 9.1p per share (2017: 8.9p) an increase of 2.2%

·    The Fund Manager (and then Managing Director), Dr Manny Pohl volunteered in December 2018 to reduce his salary by 0.25% to 0.75% starting from January 2019

·    Long term performance represented by the 10 year Total Shareholder Return lags both FTSE SmallCap Index and AIM All-Share Index (see graph on page 37)

·    Myself, Frank Ashton - Executive Chairman

·    Helen Sachdev - Non-Executive Director, Chair of Audit Committee

·    David Lawman - Non-Executive Director



o the best of my knowledge, like Helen Sachdev, I have no current or prior connection with any major shareholder of the Company and maintain I am an independent Chairman. 

 

I am also Executive Chairman.  Both roles being undertaken by one person is not compliant with the UK Corporate Governance Code. However after full consideration by the Board it is deemed appropriate at this critical time for the Company. A detailed explanation of the non-compliant position is available in the Corporate Governance section.

 

 

 

The Board is pleased to recommend an increased annual dividend of 9.1p per ordinary share (2017: 8.9p). This represents an increase of 2.2 %over the previous year. Subject to shareholder approval at the Annual General Meeting on 3 April 2019, the dividend will be paid on 18 April 2019 to shareholders on the register on 21 March 2019.

·    As Chairman, I am pleased that we now have an independent board in place to set up and oversee the transition to growth - creating shareholder value for all, managing costs and risk.  We are now in a period of stability, which is essential as a precursor to growth

·    We believe the optimum size for the fund will be between £50m and £150m.  At this size we will have:

-     Sufficient fund management capacity and skills to uncover and maximise potential opportunities

-     The ability to consistently deliver superior performance, driven by the right targets and measures

-     Reduced risk of breaching the Chapter 3 regulation (five shareholders owning more than 50% of the Company) that would result in temporarily losing Investment Trust and tax exempt status

-     An opportunity to reduce the Ongoing Charge percentage to match or better our peer group

·    We are in the process of confirming a Fund Management team that in our judgement, will have the necessary skills and processes in place to identify and realise value-enhancing investment opportunities, at lower relative risk

·    We will continue to balance the need to manage costs and also ensure the Company and fund are supported with appropriate resources now and in the longer term

 

Figure 1 - The Board's Plan to Stabilise and Grow the Company and Fund

1.   A carefully reviewed and confirmed mandate, with continued focus in the small/mid-cap territory

2.   A Fund Management team capable of delivering significant benefits realised from an optimal size (around £100m total assets)

3.   A fund which is large enough to attract further investors and reduce the risks of accidentally losing investment trust status

4.   Realising a larger fund allows us to reduce the Ongoing Charge percentage as well as attract, retain the best resources

·    More investment management capacity from existing, proven skills and experience in UK small- and mid-cap companies - not just from Robin Boyle who would be a consultant to Gresham House but also Investment Manager Laurence Hulse, his manager Ken Wotton and the wider team of Gresham House.  These UK-based segments are where the undervalued companies are and this team has the capacity to find and realise value for shareholders, now and in the future when the fund has grown

·    More due diligence face-face with the management team - which often produces invaluable insights otherwise not available at any price.  In my own experience of due diligence and work with management teams of all sizes, personal visits always give a clearer view of management, their processes, culture and aspirations that aids making better investment management decisions.  'In person due diligence' has always been central to Robin Boyle's process and this is also true of Gresham House

·    A route for Robin Boyle's knowledge, insights and investment process to be teamed with Gresham House's compatible value-based structure and conviction scoring.  This teamwork and parallel working can be co-located in Gresham House's London office, allowing the most effective transition and succession plan for Robin Boyle's knowledge over time.  Robin would work closely with Laurence Hulse, Investment Manager at Gresham House, from the start; they already speak highly of each other from their work to date

·    A great opportunity to use Gresham House's proven ability to grow in the UK market, as well as select from a choice of mandates, used successfully by them - the existing Gresham House culture, management style and portfolio structure fits well with our Company

Fund Manager's Report

 

I.    Forensic Research: Considerable factors need to line up before I invest in a business.  For example, a sound business strategy that is contextually relevant to the markets they operate.  A durable business model with a Sustainable Competitive Advantage (SCA) that management has previously demonstrated a strong competency of execution.

II.  Understanding Potential, not just Performance: I believe it's important to understand both the narrative of an investment and the numbers that support it. Investing on the narrative alone ignores reality; and investing in numbers alone, ignores potential.  I marry the two together so that we can best capture the long-term potential while ensuring that we pay a fair price.

 

IV. As a result, I only have time for our best ideas, and we continue to monitor and assess these through collaborative and discursive practices.

I.    Organic Sales Growth: Quality franchises organically growing sales above GDP and can do so (sustainably) because they have a large, growing market opportunity and compelling competitive advantage which will drive ongoing market share gains.

II.  A Proven Track Record: This encompasses both the management's capability and the strength of the business' model. Generally, a firm that delivers a ROE > 15% (consistently) indicates a Quality Franchise. Our investment philosophy is built on the belief that a stock's long-term return to shareholders is driven by the return on capital of the underlying business. Our view is that long-term investors are backing a management team and a business model. Management are the key decision-makers regarding the company's strategy and its competitive position in the marketplace.

III. Company's future profits: It is critical that I have confidence in their ability to execute even in a tough environment like the current Brexit conundrum.

IV. Low Leverage: I require investments to operate with low levels of debt, which ensure that they have sufficient resources to execute on its strategy. For me, an Interest Coverage above 4x provides sufficient bandwidth in times of economic trouble. As a long-term investor, capital preservation is my highest priority. There is nothing that changes a management team's focus toward the short term quicker than an upcoming debt refinance when market conditions suddenly change. We need to be comfortable that this will not happen and that the company has a strong enough balance sheet so that it will retain optionality and can easily execute its strategy over the long-term.

 

 

Business Model and Other Statutory Information

Business Model

Strategy

Stabilising the Company

New Board appointed, process in place to appoint long term Fund Manager

Growing the Fund

We believe the optimum size for the fund will be between £50m and £150m.  At this size we will have:

Reduce Cost

Growing whilst keeping a tight control of costs will allow us to reduce the Ongoing Charge percentage to be in line with or better than the peer group

 

Investment Approach - the Board

 

The Board of Directors is responsible for the overall stewardship of the Company, including investment and dividend policies, corporate and gearing strategy, corporate governance procedures and risk management. Biographical details of the three Directors, can be found on page 2 and details of other Directors during the year can be found on page 31.

 

The Company had one male employee during the year (2017: one male employee).

 

Investment Objective

 

The investment objective of the Trust is to provide shareholders with prospects of long-term capital growth with the risks inherent in small cap. investment minimised through a wide spread of holdings over various industries and sectors. The Board also considers that it is important to maintain a progressive dividend record.

 

Investment Policy

 

The assets of the Trust are allocated predominantly to companies with either a full listing on the London Stock Exchange or a trading facility on AIM or ISDX. The assets of the Trust have been allocated in two main ways: first, to the shares of those companies which have grown steadily over the years in terms of profits and dividends but, despite this progress, the market rating is favourable when compared to future earnings and dividends; second, to those companies whose shares are standing at a favourable level compared with the value of land, buildings or cash in the balance sheet.


Investment Strategy

 

The investment strategy employed by the Fund Manager in meeting the investment objective focuses on active stock selection. The selection of individual holdings is based on analysis of, amongst other things, market positioning, competitive advantage, financial strength and cash flows. The weighting of individual investments reflects the Fund Manager's conviction in those holdings and his views on asset allocation, including between UK and overseas equities, corporate bonds, cash and gearing.


Investment of Assets

 

At each Board meeting, the Board considers compliance with the Company's investment policy and other investment restrictions during the reporting period. An analysis of the portfolio on 31 December 2018 can be found on pages 13 to 14 of the annual report.

 

Responsible Ownership

 

The Fund Manager takes a particular interest in corporate governance and social responsible investment policy. As stated within the Corporate Governance Statement on pages 20 to 29, the Fund Manager's current policy is available on its website www.athelneytrust.co.uk. The Board supports the Fund Manager on his voting policy and his stance towards environmental, social and governance issues.

 

Review of Performance and Outlook

 

Reviews of the Company's returns during the financial year, the position of the Company at the year end, and the outlook for the coming year are contained in the Chairman's Statement on pages 3 to 8 which forms part of the Strategic Report.

 

Principal Risks and Uncertainties and Risk Management

 

As stated within the Corporate Governance Statement on pages 20 to 29, the Board applies the principles detailed in the internal control guidance issued by the Financial Reporting Council, and has established a continuing process designed to meet the particular needs of the Company in managing the risks and uncertainties to which it is exposed.

 

The principal risks and uncertainties faced by the Company are described below and in note 12 which provides detailed explanations of the risks associated with the Company's financial instruments.

 

• Market - the Company's fixed assets consist almost entirely of listed securities and it is therefore exposed to movements in the prices of individual securities and the market generally.

 

• Investment and strategic - incorrect investment strategy, asset allocation, stock selection and the use of gearing could all lead to poor returns for shareholders.

 

• Regulatory - relevant legislation and regulations which apply to the Company include the Companies Act 2006, the Corporation Tax Act 2010 ("CTA") and the Listing Rules of the Financial Conduct Authority ("FCA"). The Company has noted the recommendations of the UK Corporate Governance Code and its statement of compliance appears on pages 20 to 29. A breach of the CTA could result in the Company losing its status as an investment company and becoming subject to capital gains tax, whilst a breach of the Listing Rules might result in censure by the FCA. At each Board meeting the status of the Company is considered and discussed, so as to ensure that all regulations are being adhered to by the Company and its service providers.

 

On the 3 January 2018 MiFIDll and KID came into force with the introduction of the Key Information Document (KID). The Company has complied with the legislation and the deadlines to ensure that shares in the Company were still able to be traded. A copy of the Company's KID can be found on the website www.athelneytrust.co.uk. The reports are updated on a yearly basis.

 

The Board is not aware of any breaches of laws or regulations during the period under review and up to the date of this report.

 

• Operational - failure of the accounting systems or disruption to its business, or that of other third party service providers, could lead to an inability to provide accurate reporting and monitoring, leading to a loss of shareholders' confidence.

 

• Financial - inadequate controls by the Fund Manager or other third party service providers could lead to misappropriation of assets. Inappropriate accounting policies or failure to comply with accounting standards could lead to misreporting or breaches of regulations.

 

• Liquidity - the Company may have difficulty in meeting obligations associated with financial liabilities. 

 

 The Board seeks to mitigate and manage these risks through continual review, policy setting and enforcement of contractual obligations. It also regularly monitors the investment environment and the management of the Company's investment portfolio. Investment risk is spread through holding a wide range of securities in different industrial sectors.

 

Statement Regarding Annual Report and Financial Statements

 

Following a detailed review of the Annual Report and Financial Statements by the Audit Committee, the Directors consider that taken as a whole it is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

 

Environment Emissions

 

The Company does not have any physical assets, property, or operations of its own and as such does not generate any greenhouse gas or other emissions.

 

Social, Community and Human Rights Issues

 

The Company has one employee (2017: one employee) and, as far as the Board is aware, no issues exist in respect of social, community or human rights issues.

 

Alternative Investment Fund Manager's Directive ("AIFMD")

 

The Company is registered as its own AIFM with the FCA under the AIFMD and confirms that all required returns have been completed and filed.

 

 

                                                                    BY ORDER OF THE BOARD

 

J. Girdlestone

Secretary

 

4 March 2019

 

 

Income Statement












For the Year Ended 31 December 2018


For the Year Ended 31 December

 2017











Note

Revenue


Capital

Total


Revenue

Capital

Total


£


£

£


£

£

£

(Losses)/gains on investments held at fair value

8

-


(1,135,313))

(1,135,313)


-

835,709

835,709

Income from investments

2

251,990


-

251,990


238,832

-

238,832

Investment Management expenses

3

(5,412)


(51,068)

(56,480)


(6,128)

(56,042)

(62,170)

Other expenses

3

(33,480)


(106,537)

(140,017)


(26,527)

(73,817)

(100,344)










Net return on ordinary









activities before taxation

213,098


(1,292,918)

(1,079,820)


206,177

705,850

912,027










Taxation

5

-


-

-


-

                  -

                   -



















Net return on ordinary activities after taxation         6

213,098


(1,292,918)

(1,079,820)


206,177

705,850

912,027










Net return per ordinary share

6

9.9p


(59.9)p

(50.0)p


9.6p

32.7p

42.3p



















Dividend per ordinary share paid during the year              7

8.9p





8.6p



 

 

 

The total column of this statement is the profit and loss account for the Company.

All revenue and capital items in the above statement derive from continuing operations.

No operations were acquired or discontinued during the above financial years.

A statement of movements of reserves is given overleaf.

A Statement of Comprehensive Income is not required as all gains and losses of the Company have been reflected in the above Statement.

 

 

 

Statement of Changes in Equity for the Year Ended

31 December 2018

 

 


Called-up


Capital

Capital


Total


Share

Share

reserve

reserve

Revenue

Shareholders'


Capital

Premium

realised

unrealised

reserve

Funds


£

£

£

£

£

£

Balance brought forward at 1 January 2017

539,470

881,087

1747,083

1852,759

398,134

5,418,533

Net profits on realisation







   of investments

-

-

296,629

-

-

296,629

Increase in unrealised







   Appreciation

-

-

-

539,080

-

539,080

Expenses allocated to







   Capital

-

-

(129,859)

-

-

(129,859)

Profit for the year

-

-

-

-

206,177

206,177

Dividend paid in year

-

-

-

-

(185,036)

(185,036)








Shareholders' Funds at 31 December 2017

539,470

881,087

1,913,853

2,391,839

419,275

6,145,524

 

Balance brought forward at 1 January 2018

539,470

881,087

1,913,853

2,391,839

419,275

6,145,524

Net profits on realisation







   of investments

-

-

98,840

-

-

98,840

Decrease in unrealised







   Appreciation

-

-

-

(1,234,153)

-

(1,234,153)

Expenses allocated to







   Capital

-

-

(157,605)

-

-

(157,605)

Profit for the year

-

-

-

-

213,098

213,098

Dividend paid in year

-

-

-

-

(192,051)

(192,051)








Shareholders' Funds at 31 December 2018

539,470

881,087

1,855,088

1,157,686

440,322

4,873,653

 

 

Statement of the Financial Position as at

31 December 2018

Company Number: 02933559

 

                                                                       Note 


2018


2017










£


£

Fixed assets






Investments held at fair value through profit and loss

8


4,648,238


5,966,679







Current assets






Debtors

9


213,435


156,798

Cash at bank and in hand



35,520


45,289




248,955


202,087







Creditors: amounts falling due within one year

10


(23,540)


(23,242)






Net current assets


225,415


178,845






Total assets less current liabilities

4,873,653


6,145,524





Provisions for liabilities and charges



-    


-






Net assets


4,873,653


6,145,524











Capital and reserves





Called up share capital

11


539,470


539,470

Share premium account



881,087


881,087

Other reserves (non distributable)





            Capital reserve - realised



1,855,088


1,913,853

            Capital reserve - unrealised



1,157,686


2,391,839

Revenue reserve (distributable)



440,322


419,275






Shareholders' funds - all equity



4,873,653


6,145,524






Net Asset Value per share

13


225.9p


284.8p

 

 

     Approved and authorised for issue by the Board of Directors on 4 March 2019.

 

 

N. F. Ashton

Director

 

 

Statement of Cash flows for the Year Ended

31 December 2018




2018


2017




£


£







Cash flows from operating activities






Net revenue return



213,098


 206,177

Adjustment for:






Expenses charged to capital


   

(157,605)


(129,859)

Increase in creditors



299


8,410

(Increase)/decrease in debtors



(56,638)


100,166







Cash (used)/from operations



(846)


184,894







Cash flows from investing activities






Purchase of investments



(581,051)


(674,520)

Proceeds from sales of investments



764,179


660,818

Net cash used in investing activities



183,128


(13,702)













Equity dividends paid



(192,051)


(185,036)







Net decrease in cash



(9,769)


(13,844)







Cash at the beginning of the year



45,289


59,133

 

Cash at the end of the year



35,520


45,289

 

 

                                                                Notes to the Financial Statements

For the Year Ended 31 December 2018

1.  Accounting Policies

 

1.1   Statement of Compliance and Basis of Preparation of Financial Statements

 

The financial statements are prepared in accordance with applicable United Kingdom accounting standards, including Financial Reporting Standard 102 ("FRS 102"), the Companies Act 2006 and with the AIC Statement of Recommended Practice ("SORP") issued in November 2014 (amended January 2017), regarding the Financial Statements of Investment Trust Companies and Venture Capital Trusts. All the Company's activities are continuing.

 

1.2  Income

 

Income from investments including taxes deducted at source is recognised when the right to the return is established (normally the ex-dividend date).  UK dividend income is reported net of tax credits in accordance with FRS 102 "Income Tax".  Interest is dealt with on an accruals basis.

 

1.3  Investment Management Expenses

 

All three Directors are involved in investment management, 10% of their salaries or fees have been charged to revenue and the other 90% to capital.  All other investment management expenses have been charged to capital.  The Board propose continuing this basis for future years.

 

1.4  Other Expenses

 

Expenses (including VAT) and interest payable are dealt with on an accruals basis and charged through the Revenue and Capital Accounts in an allocation that the Board consider to be a fair distribution of the costs incurred.

 

1.5  Investments

 

Listed investments comprise those listed on the Official List of the London Stock Exchange. Unlisted investments are traded on AIM. Profits or losses on sales of investments are taken to realised capital reserve. Any unrealised appreciation or depreciation is taken to unrealised capital reserve.

 

Investments have been classified as "fair value through profit and loss" upon initial recognition.

 

Subsequent to initial recognition, investments are measured at fair value with changes in fair value recognised in the Income Statement.

 

Securities of companies quoted on a recognised stock exchange are valued by reference to their quoted bid prices at the close of the year, similarly, AIM-traded investments are valued using the closing bid price on 31 December.

 

1.6  Taxation

 

The tax effect of different items of income and expenses is allocated between capital and revenue on the same basis as the particular item to which it relates, using the Company's effective rate of tax for the year.

 

1.7  Judgements and estimates

 

The Directors confirm that no judgements or significant estimates have been made in the process of applying the Company's accounting policies.

1.8  Deferred Taxation

 

Deferred tax is recognised in respect of all timing differences that have originated but not reversed by the balance sheet date. Deferred tax liabilities are recognised for all taxable timing differences but deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax assets and liabilities are calculated at the tax rates expected to be effective at the time the timing differences are expected to reverse. Deferred tax assets and liabilities are not discounted.

                                 

1.9  Capital Reserves

 

Capital Reserve - Realised

Gains and losses on realisation of fixed asset investments are dealt with in this reserve.

 

Capital Reserve - Unrealised

Increases and decreases in the valuations of fixed asset investments are dealt with in this reserve. Unrealised capital reserves cannot be distributed by way of dividends or similar.

 

1.10 Dividends

 

In accordance with FRS 102 "Events after the end of the Reporting Period", dividends are included in the financial statements in the year in which they go ex-div.      

 

1.11 Share Issue Expenses

 

The costs associated with issuing shares are written off against any premium arising on the issue of Share Capital.

 

1.12        Financial Instruments

 

Short term debtors and creditors are held at cost.

2. Income

 

Income from investments





2018


2017


£


£





UK dividend income

183,833


154,547

Foreign dividend income

30,496


43,876

UK Property REITs

37,653


40,334

Bank interest

8


75





Total income

251,990


238,832

 

 

UK dividend income





2018


2017


£


£





UK Main Market listed investments

145,370


101,879

UK AIM-traded shares

38,463


52,668






183,833


154,547

3. Return on Ordinary Activities before Taxation


2018


2017


£


£

The following amounts (inclusive of VAT) are included




within investment management and other expenses:








Directors' remuneration:




  -  Services as a director

21,000


21,000

  -  Otherwise in connection with management

51,163


57,474

Auditors' remuneration:




  -  Audit Services - Statutory audit

10,930


10,500

Miscellaneous expenses:




 -   Other wages and salaries

2,400


4,134

 -   Management services

32,472


30,996

 -   PR and communications

2,958


3,891

 -   Stock exchange subscription

8,760


7,920

 -   Sundry investment management and other expenses

24,255


26,599

-   Legal fees

42,559


-


196,497


162,514

 

On 1 April 2016 the Company entered into a contract with GW & Co to provide management services at an annual cost of £24,600 plus VAT. An increase of 10% was agreed in July 2017 making the annual fee £27,060 plus VAT.

 

4. Employees and Directors' Remuneration


2018


2017


£


£

Costs in respect of Directors:




Non-executive directors' fees

21,000

            

21,000

     Wages and salaries

51,163


57,474

     Social security costs

2,400


4,134






74,563


82,608

 

Average number of employees:




     Chairman

-


-

     Investment

1


1

    Administration

-


-


1


1

 

5. Taxation

 

(i)  On the basis of these financial statements no provision has been made for corporation tax (2017: Nil).

(ii) Factors affecting the tax charge for the year.

 

The tax charge for the period is lower than (2017: lower than) the average small company rate of corporation tax in the UK of 19 per cent. The differences are explained below:


 




    2018



2017

 




       £



£

 








 

Total return on ordinary activities before tax


(1,079,820)



912,027








Total return on ordinary activities multiplied by the average small company rate of corporation tax 19% (2017: 19.25%)

(205,166)



175,565








Effects of:







UK dividend income not taxable



(34,945)



(29,750)

Revaluation of shares not taxable



233,746



(103,773)

Capital gains not taxable



(18,037)



(57,101)

Unrelieved management expenses



24,402



15,059








Current tax charge for the year



-



-

 

The Company has unrelieved excess revenue management expenses of £214,415 at 31 December 2018 (2017: £127,914) and £102,597 (2017: £102,597) of capital losses for Corporation Tax purposes and which are available to be carried forward to future years. It is unlikely that the Company will generate sufficient taxable profits in the future to utilise these expenses and therefore no deferred tax asset has been recognised.

 

For the year ended 31 December 2017, the Company received approval from HM Revenue and Customs under Section 1158 of the Corporation Tax Act 2010, therefore the Company was not liable to Corporation Tax on any realised investment gains for 2017.  The Directors intend to continue to meet the conditions required to obtain approval and therefore no deferred tax has been provided on any capital gains or losses arising on the revaluation or disposal of investments.

 

6. Return per Ordinary Share

 

The calculation of earnings per share has been performed in accordance with FRS 102.


2018


2017


£

£

£


£

£

£


Revenue

Capital

Total


Revenue

Capital

Total

Attributable return on








ordinary activities after taxation

213,098

(1,292,918)

(1,079,820)


206,177

705,850

912,027









Weighted average number of shares

2,157,881


2,157,881









Return per ordinary share

9.9p

(59.9)p

(50.0)p


9.6p

32.7p

42.3p

 

 

7. Dividend

 



2018


2017



£


£






Final dividend in respect of 2017 of 8.9p (2017: a final dividend of 8.6p was paid in respect of 2016) per share


192,051


185,036

 

 

Set out below is the total dividend payable in respect of the financial year, which is the basis on which the requirements of Section 1158 of the Corporation Tax Act 2010 are considered.  

 

It is recommended that a final dividend of 9.1p (2017: 8.9p) per ordinary share be paid out of revenue profits amounting to a total of £196,367 For the year 2017, a final dividend of 8.9p was paid on 6 April 2018 amounting to a total of £192,051.

 



2018


2017



£


£






Revenue available for distribution


213,098


206,177

Final dividend in respect of financial year ended

  31 December 2018


(196,367)


(192,051)






Undistributed Revenue Reserve


16,731


14,126

 

8. Investments

 




2018



2017




£



£

Movements in year







Valuation at beginning of year


5,966,679



5,117,268

Purchases at cost



581,051



674,520

Sales - proceeds



(764,179)



(660,818)

         - realised gains on sales


98,840



296,629

(Decrease)/increase in unrealised appreciation

(1,234,153)



539,080








Valuation at end of year



4,648,238



5,966,679








Book cost at end of year



3,490,551



3,574,834

Unrealised appreciation at the end of the year

1,157,687



2,391,845











4,648,238



5,966,679








 

 

UK Main Market listed investments



3,530,985



4,618,263

UK AIM-traded shares



1,117,253



1,348,416











4,648,238



5,966,679

 

 

Gains on investments










2018



2017




£



£

Realised gains on sales



    98,840



296,629

(Decrease)/Increase in unrealised appreciation

   (1,234,153)



539,080











    (1,135,313)



835,709

 

The purchase costs and sales proceeds above include transaction costs of £4,290 (2017: £5,711) and £3,308 (2017: £2,401) respectively.

 

9. Debtors



2018


2017



£


£

Investment transaction debtors


201,627


148,483

Other debtors


11,808


8,315








213,435


156,798

 

10. Creditors: amounts falling due within one year



2018


2017



£


£

Social security and other taxes


524


2,959

Other creditors


2,961


8,628

Accruals and deferred income


20,055


11,655








23,540


23,242

 

11. Called Up Share Capital

 



2018


2017



£


£

Authorised




10,000,000 Ordinary Shares of 25p

2,500,000


2,500,000





Allotted, called up and fully paid




2,157,881 Ordinary Shares of 25p

539,470


539,470

(2016: 2,157,881 Ordinary Shares of 25p)




 

12. Financial Instruments

 

The Company's financial instruments comprise equity investments, cash balances and debtors and creditors that arise directly from its operations, for example, in respect of sales and purchases awaiting settlement.

 

The major risks associated with the Company are market, credit and liquidity risk. The Company has established a framework for managing these risks. The Directors have guidelines for the management of investments and financial instruments.

 

Market Risk

 

Market price risk arises mainly from uncertainty about future prices of financial investments used in the Company's business. It represents the potential loss the Company might suffer through holding market positions by way of price movements other than movements in exchange rates and interest rates.

 

The Company's investment portfolio is exposed to market price fluctuations which are monitored by the Fund Manager who gives timely reports of relevant information to the Directors.

 

Adherence to the investment objectives and the internal controls on investments set by the Company mitigates the risk of excessive exposure to any one particular type of security or issuer.

 

The Company's exposure to other changes in market prices at 31 December on its investments is as follows:

 

A 20% decrease in the market value of investments at 31 December 2018 would have decreased net assets attributable to shareholders by 43 pence per share (2017: 55.3 pence per share). An increase of the same percentage would have an equal but opposite effect on net assets available to shareholders.

 


2018

2017


£

£

Fair value through profit or loss investments

4,648,238

5,966,679

 

 

Market risk also arises from changes in interest rates and exchange risk.  All of the Company's assets are in sterling and accordingly the Company has limited currency exposure.  The majority of the Company's financial assets are non-interest bearing, as a result the Company's financial assets are not subject to significant risk due to fluctuations in the prevailing levels of market interest rates.

 

The carrying amounts of financial assets best represent the maximum credit risk exposure at the balance sheet date. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held with the custodian to be delayed.

 

Liquidity Risk

Liquidity Risk is the risk that the Company may have difficulty in meeting obligations associated with financial liabilities.  The Company is able to reposition its investment portfolio when required so as to accommodate liquidity needs.  However it may be difficult to realise its investment portfolio in adverse market conditions.

 

Maturity Analysis of Financial Liabilities

The Company's financial liabilities consist of creditors as disclosed in note 10. All items are due within one year.

 

Capital management policies and procedures

The Company's capital management objectives are:

 

·           to ensure the Company's ability to continue as a going concern;

 

·           to provide an adequate return to shareholders;

 

·           to support the Company's stability and growth;

 

·           to provide capital for the purpose of further investments.

 

The Company actively and regularly reviews and manages its capital structure to ensure an optimal capital structure, taking into consideration the future capital requirements of the Company and capital efficiency, projected operating cash flows and projected strategic investment opportunities. The management regards capital as total equity and reserves, for capital management purposes.

 

Fair values of financial assets and financial liabilities

Fixed asset investments (see note 8) are valued at market bid price where available which equates to their fair values. The fair values of all other assets and liabilities are represented by their carrying values in the balance sheet.

 

Financial instruments by category

The financial instruments of the Company fall into the following categories

 

31 December 2018

At Amortised Cost

£

Assets at fair value through profit or loss

£

Total

£

 

Assets as per the balance sheet




 

Investments

-

4,648,238

4,648,238

 

Debtors

213,435

-

213,435

 

Cash at bank

35,520

-

35,520

 

Total

248,955

4,648,238

4,897,193

 





 

Liabilities as per the balance sheet




 

Creditors

23,540

-

23,540

 

Total

23,540

-

23,540

 





31 December 2017

At Amortised Cost

£

Assets at fair value through profit or loss

£

Total

£

Assets as per the balance sheet




Investments

-

5,966,679

5,966,679

Debtors

156,798

-

156,798

Cash at bank

45,289

-

45,289

Total

202,087

5,966,679

6,168,766





Liabilities as per the balance sheet




Creditors

23,242

-

23,242

                Total

23,242

-

23,242

 

Fair value hierarchy

In accordance with FRS 102, the Company must disclose the fair value hierarchy of financial instruments.

 

The fair value hierarchy consists of the following three classifications:

 

Classification A - Quoted prices in active markets for identical assets or liabilities.

Quoted in an active market in this context means quoted prices are readily and regularly available and those prices represent actual and regularly occurring market transactions on an arm's length basis.

 

Classification B - The price of a recent transaction for an identical asset, where quoted prices are unavailable.

 

The price of a recent transaction for an identical asset provides evidence of fair value as long as there has not been a significant change in economic circumstances or a significant lapse of time since the transaction took place. If it can be demonstrated that the last transaction price is not a good estimate of fair value (e.g. because it reflects the amount that an entity would receive or pay in a forced transaction, involuntary liquidation or distress sale), that price is adjusted.

 

Classification C - Inputs for the asset or liability that are based on observable market data and unobservable market data, to estimate what the transaction price would have been on the measurement data in an arm's length exchange motivated by normal business considerations.

 

The Company only holds classification A investments (2017: classification A investments only).

 

 

13. Net Asset Value per Share

 

The net asset value per share is based on net assets of £4,873,653 (2017: £6,145,524) divided by 2,157,881 (2017: 2,157,881) ordinary shares in issue at the year end.

 



2018


2017






Net asset value per share


225.9p


284.8p

 

14. Dividends paid to Directors

 

During the year the following dividends were paid to the Directors of the Company as a result of their total shareholding:

 

Mr Robin Boyle

£39,966²

Dr. Manny Pohl

£31,118¹

Mr Simon Moore

£2,848

 

Notes:

1.     Dr Manny Pohl's relationship with Global Masters Fund Limited is described in Note 1 to the table of Directors' interests on page 38. During the year a dividend of £31,118 was paid to Global Masters Fund Limited.

2.    This figure includes £34,852 paid to Trehellas House Limited. Mr Robin Boyle's interest in Trehellas House Limited is described in Note 2 to the table of Directors' interests on page 38.

                                                                                                                                                                               

 


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Annual Financial Report - RNS