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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Establishment Investment Trust Plc | LSE:ET. | London | Ordinary Share | GB0031336919 | ORD 25P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 217.00 | 212.00 | 222.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From May 2019 to May 2024
TIDMET.
RNS Number : 3124H
Establishment Inv. Trust PLC (The)
06 June 2017
THE ESTABLISHMENT INVESTMENT TRUST PLC
Announcement of Financial Results for the year ended 31 March 2017
Objective of the Company
The investment objective of the Company is to achieve long-term capital growth from a managed international portfolio of securities. The preservation of capital is of primary importance to the investment objective.
The Company aims to achieve absolute returns and is not managed by reference to any equity or bond index or benchmark.
Investment Policy
-- To invest primarily in equities issued by companies listed on regulated markets. With the prior approval of the Board, the Company may invest in unlisted securities.
-- Up to 30% of net assets may be invested in investment products managed by the Company's Investment Manager. The Company may also hold positions in investment products managed by third parties.
-- Up to a maximum of 15% of net assets (at cost at the date of investment) may be invested in any one security.
-- The Company may borrow up to a maximum of 50% of net assets.
Financial Highlights for the Year
Performance for the year ended 31 March 2017
Hot Features
Premium
At 31 March Total return
2017
Share price 200.25p +36.9%
Net asset value per share 263.16p +27.9%
FTSE UK Private Investor
Balanced Index * +19.5%
MSCI UK Equity * +23.5%
MSCI AC World Equity * +32.0%
MSCI AC Asia ex Japan Equity
* +34.8%
* The above percentages are total returns in sterling
Dividends per share payable
Year ended Year ended Change
31 March 31 March
2016 2017
Interim and final 5.1p 5.7p +11.8%
Special dividend 3.9p 4.3p +10.3%
Chairman's Statement
Performance
I am pleased to present the Annual Report and Accounts for the year ended 31 March 2017. The share price and net asset value ("NAV") measured by total return for the financial year increased by 36.9% and 27.9% respectively. Our mandate is global but with the majority of assets invested throughout Asia. Performance was boosted by the weakness of sterling which fell 13% against the US dollar during the year notably after the result of the UK's referendum vote in June 2016.
Asian equities recovered strongly in 2016 after an exceptionally weak 2015. We underperformed some Asian indices over the year (the MSCI Asia ex Japan index rose by 35% in sterling terms) mainly because we had no exposure to cyclicals or commodities. The portfolio is largely invested in companies which offer strong sustainable as opposed to cyclical growth and is designed to capture endemic, secular trends in Asia. This strategy should continue to deliver solid total returns to shareholders with less market volatility. It should also be noted that corporate governance appears to be improving throughout the region. Better treatment of minority shareholders, more judicial capital management and fairer distribution of profits through more realistic dividend policies will hopefully lead to improved regional stock valuations.
Outlook
After eight years of unparalleled money creation by the world's central banks through Quantitative Easing (QE) programmes, there appears to be some germination of recovery in the world economy. Global trade has been picking up. Markets have rallied strongly since Trump's election in November 2016 on US reflationary expectations although China probably remains a more important engine of global growth. We saw growing confidence in a resurgence in the Chinese economy during 2016 reflecting the success of government policy in clamping down on corruption, implementing supply side reforms, containing acute credit problems, stabilising the currency and providing continuing support for infrastructure and investment. The outlook for corporate earnings has improved dramatically not only in China but also across Asia. India promises strong structural growth on the back of government reform while infrastructure spending plans throughout ASEAN countries are an augury of underlying consumption trends. Regional valuations are hardly stretched at a large discount to developed markets. It is perhaps not surprising that, after a long period of relative underperformance, Asian equities are at last rebounding. In this context, the portfolio appears well positioned.
Less rosy is the elevation of geopolitical uncertainties with Trump taking a much more robust stance on US foreign policy than his predecessor leading to new tensions with Moscow and Beijing. In North Korea, Mr Kim's brinkmanship is a dangerous game. Fears of trade protectionism are perhaps less pronounced than during Trump's election campaign as he wrestles with Congress to implement domestic policies and tax reforms. Protectionism simmers elsewhere as result of populism in Europe and the possibility of an acrimonious Brexit deal for Britain.
Aggregate global government debt acts as a powerful deflator, implying a benign outlook for inflation and a positive climate for equities. Despite the Federal Reserve Open Markets Committee ( FOMC) forecasting three interest rate increases this year ( it was four last year), the economic recovery in the USA still appears some way short of "escape velocity" and the more dovish recent tone from Governor Yellen implies little prospect of a move towards normalisation of US interest rates in the near term. US interest rates and the performance of the US dollar still remain important barometers for emerging markets and Asia, where, irrespective of US monetary policy, there are no shortage of investment opportunities.
Change of corporate adviser
On 19th December 2016, we announced the appointment of Stockdale Securities Ltd (" Stockdale") as our sole corporate broker. The Board believe that Stockdale are ideally placed to provide competitive sales and market making to the smaller investment trust. Indeed, they have introduced a significantly tighter dealing spread improving the marketability of the Company's shares. I would, however, like to place on record the Board's appreciation of JP Morgan Cazenove's efforts on behalf of the Company since our listing back in March 2002, particularly the sound advice of William Simmonds and his advisory team.
Change of Investment Sector classification
On 2nd December 2016 , we announced the change of the Company's Association of Investment Companies ("AIC)" classification from "Global Growth" to the "Flexible Investment Sector" . In practice, there is no change to the Company's mandate or investment policy where the objective remains "to achieve long term capital growth from a managed international portfolio". The new sector classification is a better fit, given our dividend policy and the manager's potential flexibility over asset allocation, although there is no current intention to change the Asian focus.
Dividend
The Board proposes an unchanged final dividend of 3.2p per share which, together with the increase in the interim dividend from 1.9p to 2.5p, lifts the total dividend to 5.7p for the financial year. This represents an 11.8% increase over the previous year consistent with our progressive dividend policy. Last year, a Special Dividend was paid out of capital and I stated that the Board had set the payment at a level "that could be repeated while still allowing the Company to grow over time".
The Board now proposes paying a Special Dividend of 4.3p per share from capital for this year (2016: 3.9p). This represents a total 7.5p final dividend lifting the total cash distribution to shareholders to 10.0p for the financial year, an increase of 11.1% on last year.
Summary
Since listing, shareholders have been rewarded with a compound annual growth rate in the NAV on a total return basis of nearly 9% per annum. This year's dividend represents a yield of 5% on the year end share price. The Board together with our new brokers, Stockdale, are keen to improve the profile of the Company given that the wide discount to NAV offers an exceptional opportunity for investors looking for long term capital growth.
Harry Wells
Chairman
6 June 2017
Investment Manager's Report
For the financial year as a whole the share price rose by 30.0% whilst the net asset value increased by 23.0%. Including dividends of 9.6p paid during the year, the total returns of the share price and net asset value were 36.9% and 27.9% respectively. For comparative purposes, the FTSE UK Private Investor Balanced Index rose 19.5%, the FTSE100 gained 23.4%, the MSCI AC World Index climbed 34.8% while the MSCI AC Asia ex Japan Index advanced 34.8%. The discount stood at a 23.9% at year end.
During the second half of the financial year the share price advanced by 10.0% whilst the net asset value rose by 6.3%. An interim dividend of 2.5p was paid to shareholders during the period, increasing the total return on the share price and the net asset value to 11.4% and 7.3% respectively. This compares to the 6.8% increase in the FTSE WMA Stock Market Balanced Portfolio Index in sterling terms.
Global Trade
The tentative recovery in global trade, following a sustained four year downturn, which we mentioned in the interim report to Shareholders has broadened and strengthened in recent months. The recovery of the Chinese domestic economy and the stabilisation of commodity prices have been key elements to this development. Importantly, the recovery in trade can be measured in volume terms and not just in value terms, which can be heavily influenced by changes in commodity prices. In the three months to February 2017 global trade volumes rose 3.2% compared to the comparable period in the previous year. Needless to say Asian trade volumes, rising nearly 5%, led the way.
Actions over the past year provide evidence that the Chinese authorities remain very much in control. The planned closure of 800mt of coal production and 140mt of steel capacity over the next few years has not only had a dramatic and positive impact on the profit margins of corporates within these sectors but, by extension, has lifted the pressure on the banking sector which had extended substantial loans to them. Elsewhere the crackdown on capital outflows has been successful with foreign exchange reserves now stable at around US$3 trillion while the One Belt One Road ("OBOR") initiative rolls on with infrastructure projects underway around the region. Domestic consumption remains strong and, while the days of 10% GDP growth are over, the outlook for stable, if slower, growth appears good.
Turning to India, the remarkable victory of the BJP party in the recent Uttar Pradesh State election, and its consequences, cannot be understated. The BJP and allies took 325, or over 80%, of the seats while the Congress Party, which has ruled almost exclusively since independence, managed just 13%. Prime Minister Modi has a clear mandate to continue with his reform programme. The continued roll out of Aadhaar, the biometric identity card programme, admittedly initiated by the Congress Party in 2009 and last year's demonetisation continue to bring "financial inclusion" to the broader population. The introduction of GST (general sales tax) later this year will do much to break down inefficient State levies that impede interstate commerce. Long overshadowed by China, the outlook for growth in India has never been better.
Elsewhere export orientated Korea and Taiwan are benefitting from the recovery in global trade while infrastructure initiatives across the ASEAN region are likely to underpin growth prospects for the foreseeable future. We continue, therefore, to favour consumer stocks in China and India and property and infrastructure companies across ASEAN. We expect that these investments will continue to generate competitive returns over time. The United Kingdom holdings, accounting for a little under 20% of assets, continues to generate solid returns and a dependable income stream for the Company. The outlook for sterling remains uncertain and this is reflected in our portfolio selections.
Financial Results
The portfolio generated gross income of GBP1,442,000 during the year, a modest increase from the GBP1,400,000 generated in the preceding period. Excluding fees payable to the investment manager, expenses amounted to GBP282,000, an increase of 4.8% relative to the previous year. The total fees payable to the investment manager rose 7.8% to GBP302,000 (of which 80% are charged to capital). In consequence, the Company recorded a net revenue return of GBP1,050,000, representing a 5.6% increase on the previous financial year.
Blackfriars Asset Management Limited
Investment Manager
6 June 2017
Other Information
Results and dividend
The revenue return for the financial year ended 31 March 2017 after taxation amounted to GBP1,050,000 (2016: GBP994,000). The Company made a capital return after tax for the financial year ended 31 March 2017 of GBP10,711,000 (2016: capital loss of GBP3,147,000). Therefore the net return after tax for the Company for the financial year ended 31 March 2017 was GBP11,761,000 (2016: loss of GBP2,153,000).
An interim dividend of 2.5p per Ordinary Share was paid on 22 December 2016 to shareholders on the register at the close of business on 2 December 2016.
The Board proposes the following dividends in respect of the year ended 31 March 2017:
(i) A final dividend of 3.2p (2016: 3.2p) per Ordinary Share.
(ii) A special dividend of 4.3p (2016: 3.9p) per Ordinary Share.
Subject to approval by shareholders, the above dividends will be paid on 11 August 2017 to shareholders whose names appear on the register at the close of business on 14 July 2017.
Risks and uncertainties
The review of the year and commentary on the future outlook are presented in the Chairman's Statement, the Investment Manager's Report and the financial instruments disclosures set out in note 16 to the Financial Statements in the Annual Report which, together with the information below, provide details of the principal risks and uncertainties facing the Company.
Investment risk
The Company is predominantly a vehicle for overseas equity investment with the attendant risks applicable to any international or regional equity portfolio relating to strategy, country, industrial sector and stock selection.
The prime risks of investing in the Company are a fall in equity prices and adverse movements in foreign currency exchange rates as currency movements can have a significant impact on capital values. Whilst foreign currency exposures against sterling are reviewed on a regular basis, these are inherent in investing in overseas securities and at present the Company has no currency hedging contracts in place nor plans to arrange them. The Investment Manager will take into account the possibility of currency gain or loss when evaluating investments for the Company.
Risk Management
There are inherent risks involved in stock selection. The Manager is experienced and employs its expertise in selecting the stocks in which the Company invests. The Manager spreads the investment risk over a wide portfolio of investments.
Counterparty risk
The Company bears the risk of settlement default by clearing houses and exchanges and the risk of delayed repossession or disputed title of the Company's assets in the event of failure of the Custodian, together with operational and regulatory risks, and the risk of errors and omissions.
Risk Management
The Investment Manager undertakes transactions only with brokers pre-approved by the Manager and on the basis of delivery against payment.
Market disruption risk
The Company's investments could be adversely affected in the event of war, major natural disaster or cyber attack.
Risk Management
The Board monitors geopolitical events and the Company's Manager and Administrator have cyber security defence policies and procedures in place.
Role of the Board
The Board monitors the critical risks and uncertainties faced by the Company through regular review of a matrix of risks, key controls and mitigating factors.
As part of the review of operational risks, the Board satisfies itself that the Investment Manager has processes in place to ensure that limits are not breached. Performance and risk controls are the focus of Boardroom discussion with the Investment Manager. The Board reviews the management of the portfolio and monitors the Manager's adherence to the investment mandate. This is achieved by comparing the absolute return generated by the portfolio, the breakdown of the portfolio into equities, investment funds, bonds and cash and the level of concentration within the equity portfolio by sector and geography.
The Board seeks to assess and contain risk by understanding and monitoring the Investment Manager's investment style, investment process and long-term performance record. Stock specific risk is reduced through adequate diversification and the Investment Manager is required to ask the Board for approval prior to the purchase of any other products managed by the Investment Manager which are anyway limited to 30% of the portfolio.
The Board reviews the performance of certain equity indices to evaluate further whether the Investment Manager is generating competitive returns in differing market conditions. In assessing performance, the Board in its regular meetings looks for a clear, consistent expression of strategy.
As the Company's objective is to achieve long-term capital growth whilst preserving capital, performance is not measured against any specific equity or bond index but on the absolute return achieved. The Company shows its performance against the FTSE UK Private Investor Balanced Index in the Annual Report.
The Board also discusses the extent to which the Company might gear up its portfolio with debt or increase liquidity in difficult markets. Strategic decisions, such as the level of borrowing, can have a significant impact on performance. The Company's policy is to limit gearing to a maximum of 50% of net assets, but currently no gearing of the Company's portfolio has been implemented. Ultimately, the positioning of the portfolio is decided by the Investment Manager, which operates within the investment guidelines established by the Board.
Income Statement
For the year ended 31 March
2017 2016
---------------------- ------- ------- ------- ------- -------- --------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains/(losses)
on investments - 10,358 10,358 - (2,926) (2,926)
Exchange gains
on
currency balances - 595 595 - 3 3
Income 1,442 - 1,442 1,400 - 1,400
Investment management
fees (60) (242) (302) (56) (224) (280)
Other expenses (282) - (282) (269) - (269)
Return before
tax 1,100 10,711 11,811 1,075 (3,147) (2,072)
Tax on return
for the year (50) - (50) (81) - (81)
Return for the
financial year 1,050 10,711 11,761 994 (3,147) (2,153)
Return per Ordinary
Share 5.25p 53.56p 58.81p 4.97p (15.74)p (10.77)p
---------------------- ------- ------- ------- ------- -------- --------
All revenue and capital items in the above statement derive from continuing operations.
The total columns in this statement represent the Income Statement of the Company. The revenue and capital columns are supplementary to this and are prepared under the guidance published by the Association of Investment Companies.
As all the gains and losses of the Company have been reflected in the above statement, the return for the financial year is also the total comprehensive income for the year.
Statement of Financial Position
At 31 March
2017 2016
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ -------- -------- -------- --------
Fixed assets
Investments held at fair
value through profit or
loss 50,077 40,739
Current assets
Debtors 813 214
Cash at bank 3,183 1,924
------------------------------ -------- -------- -------- --------
3,996 2,138
Creditors: amounts falling
due within one year (1,441) (86)
------------------------------ -------- -------- -------- --------
Net current assets 2,555 2,052
Net assets 52,632 42,791
------------------------------ -------- -------- -------- --------
Capital and reserves
Called up share capital 5,000 5,000
Share premium 14,701 14,701
------------------------------ -------- -------- -------- --------
19,701 19,701
Capital reserve 32,027 22,096
Revenue reserve 904 994
------------------------------ -------- -------- -------- --------
Equity shareholders' funds 52,632 42,791
------------------------------ -------- -------- -------- --------
Net asset value per Ordinary
Share 263.16p 213.96p
Statement of Changes in Equity
For the year ended 31 March 2017
Share Share Capital Revenue
capital premium reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------- -------- -------- -------- --------
At 31 March 2016 5,000 14,701 22,096 994 42,791
Return for the
financial year - - 10,711 1,050 11,761
Dividends paid
(see note 5) - - (780) (1,140) (1,920)
------------------ -------- -------- -------- -------- --------
At 31 March 2017 5,000 14,701 32,027 904 52,632
------------------ -------- -------- -------- -------- --------
For the year ended 31 March 2016
Share Share Capital Revenue
capital premium reserve reserve Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ -------- -------- -------- -------- --------
At 31 March 2015 5,000 14,701 25,463 760 45,924
Return for the
financial year - - (3,147) 994 (2,153)
Dividends paid
(see note 5) - - (220) (760) (980)
------------------ -------- -------- -------- -------- --------
At 31 March 2016 5,000 14,701 22,096 994 42,791
------------------ -------- -------- -------- -------- --------
Statement of Cash Flows
For the year ended 31 March
2017 2016
GBP'000 GBP'000
----------------------------------- ------------- ----------------
Cash flows from operating
activities
Return for the financial year 11,761 (2,153)
Adjustments for:
Taxation 50 81
(Gains)/losses on investments
held at fair value (10,358) 2,926
Gains on exchange movements (595) (3)
Decrease in trade debtors 36 12
Increase in trade creditors 11 1
----------------------------------- ------------- ----------------
Cash from operations 905 864
Taxation (50) (81)
----------------------------------- ------------- ----------------
Net cash generated from operating
activities 855 783
----------------------------------- ------------- ----------------
Cash flows from investing
activities
Purchase of investments (17,263) (10,251)
Sale of investments 18,992 9,280
----------------------------------- ------------- ----------------
Net cash generated from investing
activities 1,729 (971)
----------------------------------- ------------- ----------------
Cash flows from financing
activities
Equity dividends paid (1,920) (980)
----------------------------------- ------------- ----------------
Net cash generated from financing
activities (1,920) (980)
----------------------------------- ------------- ----------------
Net increase/(decrease) in
cash and cash equivalents 664 (1,168)
Foreign exchange movements 595 6
Cash and cash equivalents
at beginning of year 1,924 3,086
----------------------------------- ------------- ----------------
Cash and cash equivalents
at end of year 3,183 1,924
----------------------------------- ------------- ----------------
Notes to the Financial Statements
1. Accounting policies
The Company is incorporated in England and is an investment company within the meaning of Section 833 of the Companies Act 2006. The Company's registered office is Mermaid House, 2 Puddle Dock, London, EC4V 3DB.
A summary of the principal accounting policies, all of which have been applied consistently throughout the year, is set out below:
(a) Basis of accounting
The accounts are prepared on the historical cost basis of accounting, except for the measurement at fair value of investments. The Financial Statements have been prepared in accordance with applicable United Kingdom accounting practices, including Financial Reporting Standard 102 - 'The Financial Reporting Standard applicable in the United Kingdom and Republic of Ireland' ('FRS 102') and with the AIC Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' issued in November 2014.
All of the Company's operations are of a continuing nature.
(b) Valuation of investments
Sections 11 and 12 of the Financial Reporting Standard 102 have been adopted in preparation of these Financial Statements.
When a purchase or sale is made under a contract, the terms of which require delivery within the time frame of the relevant market, the investments concerned are recognised or derecognised on the trade date.
The Company's investments are recognised on the trade date and are initially measured at fair value. Investments are measured at subsequent reporting dates at fair value, and changes in fair value are included in the Income Statement as a capital item. For listed investments, fair value is deemed to be either the bid price or the last traded price, depending on the convention of the exchange on which the investment is quoted.
Unquoted investments are valued by the Directors at fair value. The Company held no unquoted investments at the year end.
(c) Reporting currency
The accounts are presented in Sterling which is the functional currency of the Company. Sterling is the reference currency for this UK registered and listed company.
(d) Income
Dividends are credited to the revenue account on an ex-dividend basis or, if later, as soon as entitlement has been established. The Company owns no fixed interest investments. The fixed return on a debt security would be recognised and accrued on a time apportionment basis so as to reflect the effective interest rate on the debt security.
Bank and deposit interest is accounted for on an accruals basis.
(e) Dividends
Dividends paid by the Company are accounted for in the Financial Statements in respect of the period in which they are paid, in the case of interim dividends, or when they are approved by shareholders for final dividends.
(f) Expenses
All expenses are accounted for on an accruals basis. Expenses are recognised through the Income Statement as revenue items except as follows:
- the investment management fee has been allocated 80% to capital reserve and 20% to the revenue account within the Income Statement reflecting the Board's expected long-term split of returns in the form of capital gains and income respectively from the investment portfolio;
- any investment management performance fees are allocated to the capital reserve within the
Income Statement;
- expenses which are incidental to the sale of an investment are deducted from the proceeds of the sale of that investment;
- any other expenses incurred in connection with the acquisition or disposal of an investment are allocated to capital reserve - through the Income Statement;
- finance costs are accounted for on an accruals basis using the effective interest method; and
- finance costs of debt in so far as they relate to the financing of the Company's investments have been allocated 80% to the capital reserve and 20% to the revenue account within the Income Statement.
(g) Taxation
Deferred taxation is provided on all differences which have originated but not reversed by the Statement of Financial Position date, calculated at the rate at which it is anticipated the timing differences will reverse. Deferred tax assets are recognised only when, on the basis of available evidence, it is more likely than not that there will be taxable profits in the future against which the deferred tax asset can be offset.
(h) Foreign currency
Transactions and investment income denominated in foreign currencies are recorded in Sterling at actual exchange rates at the date of the transaction or receipt. Monetary assets and liabilities denominated in foreign currencies at the year end are recorded in Sterling at the rates of exchange prevailing at the year end. Any gain or loss arising from a change in exchange rates, subsequent to the date of the transaction, is included as an exchange gain or loss in the capital or revenue column of the Income Statement, depending on whether the gain or loss is of a capital or revenue nature respectively.
The value of investments in foreign currencies is expressed in Sterling at the rates of exchange prevailing at the year end. Surpluses and deficits arising from conversion at this rate of exchange are included as an exchange gain or loss in the capital column of the Income Statement and taken to the capital reserve.
(i) Capital reserve
The following are taken to this reserve:
Investment holding gains:
- Increase and decrease in the valuation of investments held at the year end
Other:
- Gains and losses on the disposal of investments;
- Exchange differences of a capital nature;
- Expenses, together with the related taxation effect, allocated to this reserve in accordance with the above policies.
(j) Distributable reserves
Distributable reserves comprise revenue reserves and the capital reserve.
(k) Going concern
The Financial Statements have been prepared on a going concern basis. The majority of the net assets of the Company are securities which are traded on recognised stock exchanges. After considering the Company's current financial resources, the Directors are satisfied that its resources are adequate for continuing in business for the foreseeable future.
(j) Estimates and assumptions
The preparation of the Financial Statements requires the directors to make estimates and assumptions that affect items reported in the Statement of Financial Position and Income Statement. Although these estimates are based on management's best knowledge of current facts, circumstances and, to some extent, future events and actions, the Company's actual results may ultimately differ from those estimates, possibly significantly.
2. Income
2017 2016
GBP'000 GBP'000
-------------------------- -------- --------
Income from investments:
Overseas dividends 1,055 1,162
UK dividends 387 238
-------------------------- -------- --------
1,442 1,400
-------------------------- -------- --------
3. Investment management fees
2017 2016
-------- -------- -------- -------- -------- --------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- -------- -------- -------- -------- -------- --------
Investment management
fees 72 289 361 66 263 329
Less attributable
management fees
waivered (12) (47) (59) (10) (39) (49)
----------------------- -------- -------- -------- -------- -------- --------
Total 60 242 302 56 224 280
----------------------- -------- -------- -------- -------- -------- --------
To avoid the double charging investment management fees, the Investment Manager has agreed to rebate any periodic management fee that it receives from the Company by the amount of fees receivable from Blackfriars Asset Management Limited managed products ("Blackfriars products") in respect of the Company's investments in those funds. The Investment Manager has agreed that any performance fees that it earns from Blackfriars products in respect of the Company's investment in those funds will be rebated to the Company.
As at 31 March 2017 the Company had investments in the following Blackfriars products:
400,000 shares in Blackfriars Oriental Focus Fund 'B' at a total cost of GBP4,785,000 and a valuation at 31 March 2017 of GBP7,492,000.
Details of the Investment Management Agreement are disclosed in the Annual Report.
4. Other expenses
2017 2016
GBP'000 GBP'000
------------------------------------ -------- -----------------------
Administration fees 61 60
Directors' fees 68 69
Directors' national insurance 5 5
Auditor's remuneration for:
- audit of the Company's accounts 24 24
- taxation compliance services* 8 8
Overseas tax compliance services** 17 24
Custodian fees 25 25
Other expenses 74 54
------------------------------------ -------- -----------------------
282 269
------------------------------------ -------- -----------------------
* These services were provided by the Company's Auditor for the year ended 31 March 2016 and will be provided by Grant Thornton UK LLP for the year ended 31 March 2017 once they have retired as Auditor to the Company.
** These services are not provided by the Company's Auditor.
5. Dividends
(i) Paid during the financial year
2017 2016
GBP'000 GBP'000
----------------------------------- -------- --------
Final dividend for the year
ended 31 March 2016
of 3.2p per Ordinary Share (2015:
3.0p) 640 600
Interim dividend for the year
ended 31 March 2017
of 2.5p per Ordinary Share (2016:
1.9p) 500 380
Special dividend for the year
ended 31 March 2016
of 3.9p per Ordinary Share (2015: 780 -
nil)
1,920 980
----------------------------------- -------- --------
(ii) Payable during the financial year
The total dividends payable in respect of the financial year, which form the basis for complying with section 1159 of the Corporation Tax Act 2010 are set out below:
2017 2016
-------- -------- -------- -------- -------- --------
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- -------- -------- -------- -------- -------- --------
Interim dividend
for the year ended
31 March 2017 of
2.5p per Ordinary
Share (2016: 1.9p) 500 - 500 160 220 380
Proposed final dividend
for the year
ended 31 March 2017
of 3.2p per Ordinary
Share (2016: 3.2p) 640 - 640 640 - 640
Proposed special
dividend for the
year ended 31 March
2017 of 4.3p per
Ordinary Share (2016:
3.9p) - 860 860 - 780 780
1,140 860 2,000 800 1,000 1,800
------------------------- -------- -------- -------- -------- -------- --------
6. Return per Ordinary Share
2017 2016
--------------------- ------------- -------------- -------------- ----------- --------------- ---------------
Revenue Capital Total Revenue Capital Total
Return after GBP1,050,000 GBP10,711,000 GBP11,761,000 GBP994,000 GBP(3,147,000) GBP(2,153,000)
tax
Weighted average
number
of shares in
issue 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000 20,000,000
--------------------- ------------- -------------- -------------- ----------- --------------- ---------------
Return per Ordinary
Share 5.25p 53.56p 58.81p 4.97p (15.74)p (10.77)p
--------------------- ------------- -------------- -------------- ----------- --------------- ---------------
7. Net asset value per share
The net asset value per Ordinary Share and the net asset value at the year end were as follows:
Net asset
Net asset value per share value
2017 2016 2017 2016
pence pence GBP'000 GBP'000
263.16 213.96 52,632 42,791
------------- ------------ ------- -------
The movements during the year of the assets attributable to the Ordinary Shares were as follows:
GBP'000
Total net assets attributable
at beginning of year 42,791
Total gain for the year 11,761
Dividends paid during the
year (1,920)
-------------------------------- --------
Total net assets attributable
at end of year 52,632
-------------------------------- --------
The net asset value per Ordinary Share is based on net assets of GBP52,632,000 (2016: GBP42,791,000) and on 20,000,000 Ordinary Shares (2016: 20,000,000) being the number of Ordinary Shares in issue at the financial year end.
8. Financial instruments and capital disclosures
Risk management policies and procedures
The investment objective of the Company is to achieve long-term capital growth from a managed international portfolio of securities. The preservation of capital is of primary importance to the investment objective. In pursuit of this objective, the Company may be exposed to various forms of risk, as described below.
The Board has policies on diversification of investment, gearing (bank borrowing), dividends and risk management, which it reviews in accordance with prevailing market conditions. Current policies are set out in the Strategic Report. The Company's assets are managed so as to diversify both the market risk (including price risk) and liquidity risk that occurs in any equity portfolio and the Board monitors this process (see Strategic Report).
The Board and its Investment Manager consider and review the risks inherent in managing the Company's assets which are detailed below:
Currency exposure at 31 March 2017
US HK Indian Korean Taiwan Philippine Thai
Dollar Dollar Sterling Rupee Won Dollar Peso Baht Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Debtors - - 813 - - - - - - 813
Cash at bank 2,386 - 87 - - 710 - - - 3,183
Creditors - - (1,441) - - - - - - (1,441)
Foreign currency
exposure
on net monetary
items 2,386 - (541) - - 710 - - - 2,555
Equities held
at fair value
through profit
or loss 9,101 9,596 9,633 5,796 5,036 3,848 2,412 2,303 2,352 50,077
------------------ ------- ------- -------- ------- ------- ------- ---------- ------- ------- -------
Total net
foreign currency
exposure 11,487 9,596 9,092 5,796 5,036 4,558 2,412 2,303 2,352 52,632
------------------ ------- ------- -------- ------- ------- ------- ---------- ------- ------- -------
Currency exposure at 31 March 2016
US HK Thai Korean Indian Taiwan Japanese
Sterling Dollar Dollar Baht Won Rupee Dollar Yen Other Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Debtors 214 - - - - - - - - 214
Cash at bank 112 1,067 - - - - 745 - - 1,924
Creditors (86) - - - - - - - - (86)
Foreign
currency
exposure
on net
monetary
items 240 1,067 - - - - 745 - - 2,052
Equities held
at fair value
through profit
or loss 8,594 5,833 5,834 3,615 3,367 3,664 2,235 2,663 4,934 40,739
-------------- -------- ----------------- ------- ------- ------- ------- ------- -------- ------- -------
Total net
foreign
currency
exposure 8,834 6,900 5,834 3,615 3,367 3,664 2,980 2,663 4,934 42,791
-------------- -------- ----------------- ------- ------- ------- ------- ------- -------- ------- -------
Over the year Sterling weakened against the US Dollar by 12.60% (2016: weakened 3.03%), weakened against the Hong Kong Dollar by 12.46% (2016: weakened 2.99%) and strengthened against the Thai Baht by 14.56% (2016: strengthened 4.61%).
A 5% rise or decline of Sterling against foreign currency denominated (i.e. non-Sterling) assets held at the year end would have decreased/increased the net asset value by GBP2,177,000 or 4.14% of net asset value (2016: GBP1,698,000 or 3.97% of net asset value). It is not practical to estimate the impact on the income statement since the profit and loss is the net result of all the transactions in the portfolio throughout the year.
Interest rate risk
The Company is exposed to a very low level of interest rate risk through its cash deposits with The Northern Trust Company. The Company had no borrowings at the year end (2016: nil) and therefore sensitivity analysis to changes in LIBOR are not applicable.
Equity price risk
If the fair value of the Company's investments at the year end increased/decreased by 10% then it would have the effect of GBP5,008,000 or 25.04 pence per Ordinary Share (2016: GBP4,074,000 or 20.37 pence per Ordinary Share) on the capital return.
Liquidity risk
Liquidity risk is generally not significant in normal market conditions as the majority of the Company's investments are listed on recognised stock exchanges and for the most part readily realisable securities which can be sold easily to meet funding commitments if necessary. Short-term flexibility may be achieved by the use of bank overdrafts.
Credit risk
Credit risk is mitigated by diversifying the counterparties through whom the Investment Manager conducts investment transactions. The credit-standing of all counterparties is reviewed periodically with limits set on amounts due from any one broker.
Cash is only held at banks and in money market funds that have been identified by the Board as reputable and of high credit quality. Northern Trust has a short-term deposit rating of P-1 with Moody's and A-1+ with S&P. No cash was held in money market funds during the years ended 31 March 2017 and 31 March 2016.
The total credit exposure (representing current assets) of the Company at the year end as shown on the Statement of Financial Position was GBP3,996,000 (2016: GBP2,138,000)
Valuation of financial instruments
FRS 102 requires that the classification of financial instruments be valued by reference to the source of inputs used to derive the fair value. The Company has early adopted the fair value hierarchy disclosures as set out in the March 2016 amendment to FRS 102 classifications and their descriptions are below:
Level 1
The unadjusted quoted price in an active market for identical assets or liabilities that the entity can access at the measurement date.
Level 2
Inputs other than quoted prices included within Level 1 that are observable (i.e. developed using market data) for the asset or liability, either directly or indirectly.
Level 3
Inputs are unobservable (i.e. for which market data is unavailable) for the asset or liability.
The classification of the Company's investments held at fair value is detailed in the table below:
31 March 2017 31 March 2016
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------- -------- -------- -------- -------- -------- -------- --------
Investments 48,806 836 435 50,077 40,739 - - 40,739
-------- -------- -------- -------- -------- -------- -------- --------
The investment classified as Level 2 is the Company's holding in Singer Sri Lanka, which was held via a broker participatory note. The investment classified as Level 3 is the holding in Silver Heritage, whose shares are currently suspended.
The valuation techniques used by the Company are explained in the accounting policies note 1(b) in the Annual Report.
Capital management policies and procedures
The capital managed by the Company represents only the Equity shareholders' funds of GBP52,632,000 (2016: GBP42,791,000).
The Company currently has no borrowings.
The Company's objectives, policies and procedures for managing capital are set out in the share capital section of the Directors' Report in the Annual Report.
Statement of Directors' Responsibilities in respect of the Annual Report, the Directors' Remuneration Report and Financial Statements
The Directors are responsible for preparing the Annual Report, the Directors' Remuneration Policy and Implementation Reports and the Financial Statements in accordance with applicable law and regulations. Company law requires the Directors to prepare Financial Statements for each financial year. Under the law, the Directors have elected to prepare Financial Statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). Under company law, the Directors must not approve the Financial Statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the net return of the Company for that period. In preparing these Financial Statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgements and accounting estimates that are reasonable and prudent;
-- state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the Financial Statements; and
-- prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable the Directors to ensure that the Financial Statements and Directors' Remuneration Report comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The Financial Statements are published on www.blackfriarsam.com, which is a website maintained by the Company's Investment Manager. The Directors are responsible for the integrity of the Company's information displayed on the Blackfriars' website. Blackfriars is responsible for the management of the website. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of the website and accordingly the Auditor accepts no responsibility for any changes that have occurred to the Annual Report and Financial Statements since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of the Financial Statements may differ from legislation in other jurisdictions.
Directors' confirmation statement
Each of the Directors, (Harry Wells (Chairman), Jim Ryall, Gregory Shenkman, Susan Thornton and Tom Waring), confirms that, to the best of the knowledge of that Director:
-- the Financial Statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law), give a true and fair view of the assets, liabilities, financial position and net return of the Company; and
-- the Annual Report, including the Strategic Report, includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
Having taken advice from the Audit Committee, the Directors consider that the Annual Report and Financial Statements taken as a whole are fair, balanced and understandable and provide information necessary for shareholders to assess the Company's position and performance, business model and strategy.
Financial Information
This announcement does not constitute the Company's statutory accounts. The financial information for 2017 is derived from the statutory accounts for 2017, which will be delivered to the registrar of companies following the Company's Annual General Meeting. The statutory accounts for 2016 have been delivered to the registrar of companies. The auditors have reported on the 2017 and 2016 accounts; their reports were unqualified and did not include a statement under Section 498(2) or (3) of the Companies Act 2006.
Printed copies of the Annual Report and Financial Statements for the year ended 31 March 2017 will be posted to shareholders in due course and can be requested from the Registered Office of the Company. A pdf copy can be viewed or downloaded from the Investment Manager's website www.blackfriarsam.com. Neither the contents of the Investment Manager's website nor the contents of any website accessible from hyperlinks on the Investment Manager's website (or any other website) is incorporated into or forms part of this announcement.
The Annual Report will be submitted to the National Storage Mechanism and will shortly be available for inspection at: http://www.morningstar.co.uk/uk/NSM
Annual General Meeting
The Annual General Meeting of the Company will be held at the offices of Blackfriars Asset Management Limited, 9 Cloak Lane, London, EC4R 2RU on 6 July 2017 at 12 noon. The notice of AGM is contained in the Annual Report for the year ended 31 March 2017.
6 June 2017
Secretary and registered office:
PraxisIFM Fund Services (UK) Limited
Mermaid House,
2 Puddle Dock,
London EC4V 3DB
For further information contact:
Anthony Lee / Ciara McKillop
PraxisIFM Fund Services (UK) Limited
Tel: 020 7653 9690
END
This information is provided by RNS
The company news service from the London Stock Exchange
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June 06, 2017 10:14 ET (14:14 GMT)
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