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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Investment Company Plc | LSE:INV | London | Ordinary Share | GB0004658257 | ORD 50P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 314.00 | 308.00 | 320.00 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Investors, Nec | 1.18M | 739k | 0.4022 | 7.81 | 5.77M |
From Apr 2019 to Apr 2024
TIDMINV
RNS Number : 7794F
Investment Company PLC
31 October 2018
The Investment Company Plc
Annual Results Announcement
for the year ended 30 June 2018
SUMMARY OF RESULTS
Hot Features
Premium
At 30 June 2018 At 30 June 2017 Change
Equity shareholders' funds 17,334,093 17,736,777 (2.27)%
------------------------- -------------------------- ---------------
Number of ordinary shares
in issue 4,772,049 4,772,049 -
------------------------- -------------------------- ---------------
Net asset value ("NAV") per
ordinary share 363.24p 371.68p (2.27)%
------------------------- -------------------------- ---------------
Ordinary share price (mid) 331.00p 325.00p 1.85%
------------------------- -------------------------- ---------------
(Discount)/premium to NAV (8.88)% (12.56)% -
------------------------- -------------------------- ---------------
At 30 June 2018 At 30 June 2017
Total return per ordinary
share* 12.27p 36.31p -
-------------------------- --------------------------
Return after taxation per
ordinary share 25.69p 24.64p -
-------------------------- --------------------------
Dividends paid/declared per
ordinary share 20.70p 20.70p -
-------------------------- --------------------------
* The total return per ordinary share is based on total comprehensive income after taxation as detailed in the Consolidated Statement of Comprehensive
Income and in note 6 and is shown to enable comparison with other investment trust companies.
CHAIRMAN'S STATEMENT
This statement covers the year to 30 June 2018.
Introduction
Between 30 June 2017 and 30 June 2018 the FTSE All Share Index rose by 5.0%. The FTSE Actuaries UK Conventional Gilts All Stocks Index fell by 0.72% during the same period. The Company's NAV, which has a portfolio invested in both fixed income and equities, was 2.27 % lower within that period. Four dividends amounting to 20.7p per share were declared during the year.
Board Changes
Following earlier undertakings to refresh the Board, a number of changes were made on 6 July 2018. Sir David Thompson, Stephen Cockburn and Peter Allen, who had served on the Board for 13, 27 and 22 years respectively, retired and the Board, on behalf of all Shareholders, takes this opportunity to thank them for their long service. I was appointed, together with Tim Metcalfe, on 6 July 2018. We are both grateful for the continuity, support and expertise that Martin Perrin continues to bring to the Board.
Administrative and Portfolio Changes
As highlighted in the interim report, and following shareholder approval of the continuation vote at the last Annual General Meeting, the Board announced a change of Investment Manager to Fiske plc on 1 February 2018. The Board made a number of other administrative changes with the aim of significantly reducing the Company's ongoing annual expenses. However, the current regulatory environment and your Board's commitment to meet appropriate standards of governance mean that costs will always be subject to upward pressure.
Since the change of Investment Manager there have been a number of changes to the portfolio which are set out more fully in the Investment Manager's Report. You will also see there have been a number of changes to the Twenty Largest Investments.
Auditor
Saffery Champness have served the Company loyally for many years, for which we are grateful. We are now faced with their tenure becoming time-expired. We are pleased to report that we have asked PKF Littlejohn to become the Company's auditor and a resolution to that effect will be proposed at the Annual General Meeting.
Changes to Portfolio
Your new Board asked the Investment Manager to review the portfolio and the assess the Company's ability to meet the current mandate's yield expectations, whilst also carefully appraising the attendant risks in doing so. In order to put the Company on a more sustainable footing, and to give your new Investment Manager the opportunity to grow the assets of the Company, thereby giving your Board the opportunity to grow the size of the Company, we believe that some portfolio repositioning is necessary.
Dividend
In previous years, a relatively sizeable proportion of the dividend has been paid out of capital. Your new Board believes that this is not sustainable in the long term and that the Company must move towards ensuring that any dividend paid to shareholders is covered by the income produced by the assets, after allowing for the fixed costs, in order to give the Company a chance to grow in size. As a result of this change in approach, along with the change in the portfolio yield expectations, it is expected that a lower dividend totalling some 15p1 is likely to be declared throughout the forthcoming year. This will still require a proportion of the dividend to be paid out of capital; however, this will be much lower than in previous years.
The Investment Manager will now seek to invest in equities and loan stocks to achieve a portfolio yield of approximately
5% where this can be achieved without compromising total return.
Portfolio Valuation Changes
As a result of the Board and the Investment Manager's review of the portfolio, a number of changes have been made to the carrying value of those investments which have no market price. This has a resulted in a GBP234,000 (1.4%) decrease in their valuation, which represents a decrease of 4.9p to the NAV of the Company. The Investment Manager, together with the Company's auditors, believe that these changes to carrying valuations are appropriate as a result of its review of the existing investments.
The Investment Manager's review of the portfolio is set out fully in the Investment Manager's Report.
Continuation
The Company has put forward an ordinary resolution for the continuation of the Company, with the vote taking place at the Annual General Meeting to be held on 29 November 2018.
Your Board is aware that the Company is too small relative to its fixed cost base, and its viability is dependent not just upon performance but also its ability to grow by attracting further capital. Your new Board is wholly committed to exploring all appropriate opportunities that are likely to enhance Shareholder returns and firmly believes that continuation would be in the best interests of all Shareholders as it will enable your new Board to continue with the implementation of the existing changes and to explore new options for the growth of the Company.
1 This is a target and should not be interpreted as a profit or dividend forecast.
Outlook and Recommendation
Your Board believes that Shareholders benefit from the diversification provided by the combination of fixed income and equity investments, as well as from the quarterly dividends paid by the Company. When combined with the measures adopted during the last six months and the Board's commitment to growing the size of the Company meaningfully, the Board believes that the Company has the potential to be an attractive investment proposition.
Accordingly, your Directors recommend that members vote in favour of continuation. Yours faithfully,
I. R. Dighé
Chairman
30 October 2018
INVESTMENT MANAGER'S REPORT
Performance
During the 12 month period to 30 June 2018, the NAV of the Company fell by 2.27% whilst the share price rose by 1.85%. During the year Fiske was appointed investment manager on 1 February 2018 and took responsibility for the portfolio on 1 April 2018. Between 1 April and 30 June 2018 the NAV rose by 0.83% and the discount narrowed from 13.61% to 8.88%.
Investment Commentary
The UK is experiencing moderate GDP growth. The inflationary impact of sterling's depreciation following the EU referendum is unwinding but the anticipated boost to disposable incomes is being partially offset by a rise in energy costs. While business investment remains subdued, exports are strong, job vacancies are high and unemployment is low. Wage growth is not accelerating as anticipated by the Bank of England but that did not prevent the Monetary Policy Committee
- by unanimous vote - from raising rates to 0.75% in early August 2018.
Equity markets dislike uncertainty and the combination of Brexit and global trade wars are a growing investment risk. However, once there is clarity over the post-Brexit regulatory and political environment the UK could start to look even more attractive especially to those investors who are not currently allocating to the UK.
Portfolio
After taking over the responsibility for the portfolio on 1 April 2018, a number of existing holdings were either sold or reduced whilst new holdings were introduced.
In the fixed income part of the portfolio, holdings were reduced or sold in order to protect the capital value of the portfolio in the light of generally rising market interest rates. One of the securities sold was Phoenix Life 7.25% perpetual notes. This bond has a call date in March 2021 which we believe the issuer is likely to use in order to re-finance this debt on better terms.
In the equity segment of the portfolio, we have sold a number of holdings where liquidity was constrained and either the companies had performed well and this was reflected in the current market valuation or we perceived the current value was vulnerable to weakening sales growth, softening margins or to an overly leveraged balance sheet.
Future Prospects
The majority of the portfolio has historically been invested in fixed income securities including corporate bonds, preference shares and convertibles. As at 31 March 2018 the weighting of fixed interest securities was approximately 60%. During the three-month period to 30 June 2018 a number of fixed interest securities were sold, bringing the weighting down to approximately 50%.
Fundamentally, growth in capital value is driven by sustained growth in revenues and stable margins resulting in free cashflows available to re-invest in the business and provide for growth in dividends over time. We believe that share prices ultimately track long-term earnings and cashflows. As a result, our investment approach is to invest for the long term with a "buy and manage" approach.
Over time we will re-focus the portfolio in order to deliver long-term total returns from a blend of capital and income growth from a high conviction/low turnover portfolio. We will be investing with a multi-cap approach focusing on companies listed in the UK and seeking to preserve capital over the business cycle.
This is likely to lead to further reductions in the fixed interest exposure of the portfolio and an increase in the equity component. The process will take time, as a number of the holdings are relatively illiquid and will need to be sold carefully to preserve capital value.
M. Foster, J. P. Q. Harrison and J. Dieppe
Fiske plc
30 October 2018
TWENTY LARGEST INVESTMENTS
At 30 June 2018
Market
or Directors'
Issue Book cost valuation % of total
Stock Number % GBP GBP portfolio
1. Lloyds Banking Group
7.625% perpetual notes (LBG
Capital) 478,000 0.03 204,360 522,301 3.20
---------- ---------------- ------------ --------------- --------------
7.281% perpetual notes (Bank
of Scotland) 400,000 0.27 315,331 474,204 2.90
---------- ---------------- ------------ --------------- --------------
7.875% perpetual notes (LBG
Capital) 362,000 0.05 245,997 419,721 2.57
---------- ---------------- ------------ --------------- --------------
765,688 1,416,226 8.67
---------- ---------------- ------------ --------------- --------------
2. Royal Bank of Scotland
Group
9% series 'A' non-cum pref
(Natwest) 500,000 0.36 362,920 770,000 4.71
---------- ---------------- ------------ --------------- --------------
3. Randall & Quilter Investment
Holdings
Ordinary 2p ^ 401,884 0.32 401,544 655,071 4.01
---------- ---------------- ------------ --------------- --------------
4. Charles Taylor
Ordinary 1p ^ 192,198 0.25 334,592 595,814 3.65
---------- ---------------- ------------ --------------- --------------
5. Newcastle Building Society
3.849% sub notes 23/12/19
(variable) 600,000 2.40 405,438 583,002 3.57
---------- ---------------- ------------ --------------- --------------
6. 600 Group
8% conv loan notes 14/02/20 500,000 - 500,000 531,120 3.25
---------- ---------------- ------------ --------------- --------------
7. Aggregated Micro Power
8% conv loan notes 31/03/21 500,000 2.50 500,000 525,000 3.21
---------- ---------------- ------------ --------------- --------------
8. The Fishguard & Rosslare
Railways and
Harbours Company
2.45% guaranteed preference
stock 790,999 63.91 441,810 498,329 3.05
---------- ---------------- ------------ --------------- --------------
9. Nationwide Building Society
10.25% core capital deferred
shares (variable) 3,100 4.49 490,536 471,448 2.89
---------- ---------------- ------------ --------------- --------------
10. Intercede Group
8% conv loan notes 29/12/21 400,000 8.99 450,000 450,000 2.75
---------- ---------------- ------------ --------------- --------------
^ Issues with unrestricted voting rights.
Market
or Directors'
Number Issue Book cost valuation % of total
Stock % GBP GBP portfolio
11. Vodafone Group
Ordinary $0.2095 ^ 242,000 - 501,387 444,796 2.72
------------ ------------- ------------- --------------- ---------------
12. GlaxoSmithKline
Ordinary 11.395p ^ 28,250 - 398,185 432,169 2.64
------------ ------------- ------------- --------------- ---------------
13. National Grid
Ordinary 11.395p ^ 50,400 - 403,032 422,554 2.59
------------ ------------- ------------- --------------- ---------------
14. Royal Mail
Ordinary 1p ^ 82,000 0.01 456,549 414,428 2.54
------------ ------------- ------------- --------------- ---------------
15. Polar Capital
Ordinary 2.5p ^ 56,500 0.06 303,980 405,670 2.48
------------ ------------- ------------- --------------- ---------------
16. Amalgamated Metal Corporation
5.4% Cum Pref GBP1 256,065 18.21 144,049 204,852 1.25
------------ ------------- ------------- --------------- ---------------
6% Cum Pref GBP1 213,510 23.72 103,844 192,159 1.18
------------ ------------- ------------- --------------- ---------------
247,893 397,011 2.43
------------ ------------- ------------- --------------- ---------------
17. Investec Investment Trust
3.5% Cum Pref GBP1 461,508 35.50 271,938 299,980 1.84
------------ ------------- ------------- --------------- ---------------
5% Cum Pref GBP1 104,043 30.12 92,858 93,639 0.57
------------ ------------- ------------- --------------- ---------------
364,796 393,619 2.41
------------ ------------- ------------- --------------- ---------------
18. Severn Trent
Ordinary 97.89p ^ 20,000 0.01 399,179 395,900 2.42
------------ ------------- ------------- --------------- ---------------
19. British American Tobacco
Ordinary 25p ^ 10,250 - 402,094 392,524 2.40
------------ ------------- ------------- --------------- ---------------
20. Direct Line Insurance
Group
Ordinary 10.9091p ^ 105,621 0.01 354,049 362,174 2.22
------------ ------------- ------------- --------------- ---------------
8,483,672 10,556,855 64.61
------------ ------------- ------------- --------------- ---------------
^ Issues with unrestricted voting rights.
The Company has a total of 69 portfolio investment holdings in 57 companies.
CORPORATE SUMMARY
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.
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.
Dividend Policy
Pursuant to the changes, your Board intends to pay a total dividend of 15p1 per share during the year ending 30 July 2019. Any growth in net income in future years will be taken into account in assessing dividend levels with a view to gradually growing it going forward.
1 This is a target and should not be interpreted as a profit or dividend forecast.
Capital Structure
As at 30 June 2018 and the date of this Annual Report, the Company's share capital consists of 4,772,049 ordinary shares of 50p each. The Company holds no shares in treasury. At general meetings of the Company, holders of ordinary shares are entitled to one vote on a show of hands and on a poll, to one vote for every share held.
In addition, there are 1,717,565 fixed rate preference shares of 50p in issue, all of which are held by New Centurian Trust Limited a wholly owned subsidiary of the Company. The fixed rate preference shares are non-voting, 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 winding up. Preference shares are disclosed as equity in accordance with IAS 32.
Total Assets and Net Asset Value
The Company and its wholly owned subsidiaries, Abport Limited and New Centurion Trust Limited, had total net assets of GBP17,334,093 and a NAV of 363.24p per ordinary share at 30 June 2018 (2017: GBP17,736,777 and 371.68p).
Business Model
The principal activity of the Company is investment in equity securities of quoted UK companies with a wide range of market capitalisations, preference shares and prior charge securities with a view to achieving a high rate of income and capital growth over the medium term. The Company has been granted approval from HM Revenue & Customs ("HMRC") as an investment trust under sections 1158 and 1159 of the Corporation Tax Act 2010 ("ss1158/1159") and will continue to be treated as an investment trust company, subject to continuing to meet the conditions for approval.
The Directors are of the opinion that the Company has conducted its affairs for the year ended 30 June 2018 so as to be able to continue to qualify as an investment trust.
The Company's status as an investment trust allows it to obtain an exemption from paying taxes on the profits made from the sale of its investments and all other net capital gains. Investment trusts offer a number of advantages for investors, including access to investment opportunities that might not be open to private investors and to professional stock selection skills at lower cost.
The Company owns Abport Limited, an investment dealing company, and New Centurion Trust Limited, an inactive investment company (the "Subsidiaries"). The Company and its wholly owned Subsidiaries together compromise a group (the "Group").
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. A summary of the risk management and internal control processes can be found in the Corporate Governance Statement . 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 environment for issuing of new preference shares and prior charge securities determines whether new issues become available, thus affecting the choice and scope of investment opportunities for the Group.
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 NAV.
Regulatory risk: The Company operates in an evolving regulatory environment and faces a number of regulatory risks. A breach of section 1158/1159 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 the using its 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 NAV per ordinary share at 30 June 2018 was 363.24p per share (2017: 371.68p). The total return of the NAV
after adding back dividends paid was 3.3%. This compares with a total return on the FTSE All-Share Index of 8.98%.
- (Discount)/premium of share price in relation to NAV
Over the year to 30 June 2018, the Company's share price moved from trading at a discount of 12.56% to a discount of 8.88%.
- Ongoing Charges Ratio
The Ongoing Charges Ratio for the year to 30 June 2018 amounted to 2.6%.
Management
During the year the Company's investments were managed by Miton Asset Management Limited ("Miton") until 31 March
2018. On 1 April 2018 Fiske plc ("Fiske") took over responsibility as the Investment Manager. Further detail on Fiske is set out below:
-- Fiske is an independent investment management company whose principal activities are the provision of private client investment management, asset management and private client and institutional stockbroking.
-- Fiske is distinctive from a number of investment managers in that many of its portfolios do not use traditional benchmarks as they can bring unintentional risks that can impede the day-to-day investment manager's ability to maximise absolute returns for clients.
-- Fiske is focused on delivering positive investment outcomes combined with a high level of service for its clients.
-- Fiske is authorised and regulated by the Financial Conduct Authority, is a member of the London Stock Exchange and is quoted on AIM.
-- Fiske is capitalised with equity capital, it has no debt and does not use financial instruments except its intra-day
Crest cap facility.
Details of the Investment Manager
Fiske has a team of investment managers researching a broad range of quoted UK stocks. The day-to-day management of the portfolio is carried out by Michael Foster, James Harrison and Julian Dieppe.
Michael Foster
Michael joined Fiske in June 2017 to work on the launch of a UCITS fund for Fiske. In May 2018 the Ocean UK Equity Fund was launched with Michael as Lead Portfolio Manager. He holds the Investment Management Certificate and has managed extensive private investments since 2011.
James Harrison
James joined Fiske in 1996 and has over 20 years of industry experience. He is a Chartered Fellow of the Securities Institute and is Chief Executive Officer of Fiske plc. He manages a number of multi-asset private client portfolios and is also a co-manager of the Ocean UK Equity Fund.
Julian Dieppe
Julian joined Fiske in 2010 and has more than eight years of industry experience. He is a Member of the Securities Institute and manages a significant number of multi-asset private client portfolios at Fiske. He is also a co-manager of the Ocean UK Equity Fund.
Management Arrangements
Miton ceased to be the Company's Investment Manager on 31 March 2018. Up to that point, Miton had received GBP65,759 in management fees in respect of the year ended 30 June 2018.
On 1 February 2018, the Company announced that it was changing Investment Manager, and was appointing Fiske with effect from 1 April 2018. Fiske has been appointed as the Investment Manager under an agreement dated 1 February 2018.
Under the terms of the Investment Management Agreement, the Investment Manager has discretion to buy, sell, retain, exchange or otherwise deal in investment assets for the account of the Company.
The Investment Manager is entitled to receive from the Company, or any member of its subsidiaries in respect of its services provided under the Investment Management Agreement, a management fee payable monthly in arrears calculated at the rate of one-twelfth of 0.75% per calendar month of the NAV for its services under the Investment Management Agreement. This fee has been capped in respect of the first 12 months of Fiske's appointment, at GBP90,000.
The Investment Management Agreement is terminable by either the Investment Manager or the Company giving to the other not less than six months' written notice. The Investment Management Agreement may be terminated earlier by the Company with immediate effect on the occurrence of certain events, including the liquidation of the Investment Manager or appointment of a receiver or administrative receiver over the whole or any substantial part of the assets or undertaking
of the Investment Manager, or a material breach by the Investment Manager of the Investment Management Agreement which is not remedied. The Company may also terminate the Investment Management Agreement if a continuation vote is not passed.
Having considered the terms of the Investment Management Agreement the Board considers that the current fee structure is appropriate.
It is the opinion of the Board that the continuing appointment of Fiske as Investment Manager on the terms disclosed is in the interests of shareholders as a whole.
As an investment company, managed and marketed in the UK, the Company is an Alternative Investment Fund ("AIF")
under the provisions of the Alternative Investment Fund Manager's Directive ("AIFM").
The Company does not currently use gearing, makes sufficient risk disclosure within the report, and there have been no material changes to the investment policy or objectives. Therefore, it is considered that separate disclosures are not required.
Environmental, Human Rights, Employee, Social and Community Issues
The Board consists entirely of non-executive Directors and during the year the Company had one employee. Day-to-day management of the business 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 the investment process as misjudgments on these matters can incur additional costs to the portfolio holdings, as well as undermining their equity return through reputational damage. The Investment Manager questions the corporate management on a variety of topics to ensure that investee companies are adhering to best practice. These questions can be wide ranging.
The Board's policy on diversity is to take this into account during the recruitment and appointment process. However, members of the Board are appointed on merit, against an objective criteria set by the Board acting as the Nomination Committee therefore there are no set targets against which to report.
The Strategic Report has been approved by the Board of Directors. On behalf of the Board
I. R. Dighé
Chairman
30 October 2018
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing this Annual Report and the financial statements in accordance with applicable United Kingdom law and regulations and those International Financial Reporting Standards ("IFRS") adopted by the European Union and Article 4 of the International Accounting Standards. Company law requires the Directors to prepare financial statements for each financial period which present fairly the financial position of the Group and the financial performance and cash flows of the Group for that period.
In preparing those financial statements, the Directors are required to:
-- select suitable accounting policies and then apply them consistently; -- make judgements and estimates that are reasonable and prudent;
-- present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
-- state whether applicable IFRS have been followed, subject to any material departures disclosed and explained in the financial statements;
-- prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business; and
-- provide additional disclosures when compliance with the specific requirements in IFRSs are insufficient to enable users to understand the impact of particular transactions, other events and conditions on the entity's financial position and financial performance.
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 Group and enable them to ensure that the Group financial statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, Directors' Report, Directors' Remuneration Report and Corporate Governance Statement that comply with that law and those regulations, and for ensuring that the Annual Report includes information required by the Listing Rules of the Financial Conduct Authority.
The financial statements are available on the Administrator's website, www.maitlandgroup.com. The work carried out by the Auditor does not involve consideration of the maintenance and integrity of this website and, accordingly, the Auditor accepts no responsibility for any changes that have occurred to the financial statements since they were initially presented on the website. Visitors to the website need to be aware that legislation in the United Kingdom covering the preparation and dissemination of the financial statements may differ from legislation in their jurisdiction.
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 Company's position and performance, business model and strategy.
On behalf of the Board
I. R. Dighé
Chairman
30 October 2018
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended 30 June 2018
Year to 30 June 2018 Year to 30 June 2017
Notes Revenue Capita Total Revenue Capita Total
GBP GBPl GBP GBP GBPl GBP
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Realised
gains/(losses)
on investments 11 - 79,185 79,185 - (659,326) (659,326)
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Unrealised
gains
on investments
held at fair
value
through
profit or loss 11 - 732,429 732,429 - 1,018,729 1,018,729
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Movement in
impairment
provision on
investments
held
as available
for
sale - (3,745) (3,745) - 339,395 339,395
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Exchange losses
on capital
items - (3,050) (3,050) - (8,892) (8,892)
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Losses on
derivative
contracts 12 - (63,640) (63,640) - (276,213) (276,213)
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Investment
income 2 956,273 - 956,273 1,199,285 - 1,199,285
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Investment
management
fee 3 (88,259) - (88,259) (160,723) - (160,723)
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Other expenses 4 (378,089) (123) (378,212) (279,629) - (279,629)
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Return before
finance
costs
and taxation 489,925 741,056 1,230,981 758,933 413,693 1,172,626
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Finance costs
Bank debit
interest - - - (9) (9)
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Return before
taxation 489,925 741,056 1,230,981 758,924 413,693 1,172,617
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Taxation 5 (5,329) - (5,329) 3,241 3,241
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Return after
taxation 484,596 741,056 1,225,652 762,165 413,693 1,175,858
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Other
comprehensive
income
Movement in
unrealised
appreciation on
investments
held as
available
for sale
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Recognised in
equity - 30,134 30,134 - 575,730 575,730
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Recognised in
return
after taxation - (670,657) (670,657) - (18,637) (18,637)
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Other
comprehensive
(expense)/
income
after
taxation - (640,523) (640,523) - 557,093 557,093
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Total
comprehensive
income
after taxation 484,596 100,533 585,129 762,165 970,786 1,732,951
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Return after
taxation
per 50p
ordinary share
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Basic and
diluted 6 10.16p 15.53p 25.69p 15.97p 8.67p 24.64p
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Return on total
comprehensive
income after
taxation
per 50p
ordinary share
------ ------------ ------------ ---------------- ---------------- --------------- ------------
Basic and
diluted 6 10.16p 2.11p 12.27p 15.97p 20.34p 36.31p
------ ------------ ------------ ---------------- ---------------- --------------- ------------
The total column of this statement is the Consolidated Statement of Comprehensive Income 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.
All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the period.
The notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2018
Issued
ordinary Capital
share Share redemption Revaluation Capital Revenue
capital premium reserve reserve reserve account Total
GBP GBP GBP GBP GBP GBP GBP
Balance at
1 July 2017 2,386,025 4,453,903 2,408,820 2,557,941 6,569,061 (638,973) 17,736,777
---------- ----------- ------------- ------------- ------------- ------------ ------------
Total comprehensive
income
Net return
for the year - - - - 741,056 484,596 1,225,652
---------- ----------- ------------- ------------- ------------- ------------ ------------
Movement in
unrealized
appreciation
on investments
held as available
for sale:
* Recognised in equity - - - 30,134 - - 30,134
---------- ----------- ------------- ------------- ------------- ------------ ------------
* Recognised in return after taxation - - - (670,657) - - (670,657)
---------- ----------- ------------- ------------- ------------- ------------ ------------
Transactions
with shareholders
recorded directly
to equity
Ordinary dividends
paid - - - - - (987,813) (987,813)
---------- ----------- ------------- ------------- ------------- ------------ ------------
Balance at
30 June 2018 2,386,025 4,453,903 2,408,820 1,917,418 7,310,117 (1,142,190) 17,334,093
---------- ----------- ------------- ------------- ------------- ------------ ------------
Balance at
1 July 2016 2,386,025 4,453,903 2,408,820 2,000,848 6,155,368 (413,325) 16,991,639
Total
comprehensive
income
Net return
for the year - - - - 413,693 762,165 1,175,858
---------- ----------- ------------ ------------ ------------ -------------- ---------------
Movement in
unrealized
appreciation
on investments
held as
available
for sale:
- Recognised
in equity - - - 575,730 - - 575,730
---------- ----------- ------------ ------------ ------------ -------------- ---------------
- Recognised
in return after
taxation - - - (18,637) - - (18,637)
---------- ----------- ------------ ------------ ------------ -------------- ---------------
Transactions
with
shareholders
recorded
directly
to equity
Ordinary
dividends
paid - - - - - (987,813) (987,813)
---------- ----------- ------------ ------------ ------------ -------------- ---------------
Balance at
30 June 2017 2,386,025 4,453,903 2,408,820 2,557,941 6,569,061 (638,973) 17,736,777
---------- ----------- ------------ ------------ ------------ -------------- ---------------
The notes form part of these financial statements
COMPANY STATEMENT OF CHANGES IN EQUITY
For the year ended 30 June 2018
Issued Issued
ordinary preference Capital
share share Share redemption Revaluation Capital Revenue
capital capital premium reserve reserve reserve account Total
GBP GBP GBP GBP GBP GBP GBP GBP
Balance at 1
July 2017 2,386,025 858,783 4,453,903 2,408,820 2,556,323 4,025,262 1,827,740 18,516,856
---------- -------------- ----------- --------------- ------------- ---------- ------------ ------------
Total
comprehensive
income
Net return
for
the year - - - - - 733,093 488,190 1,221,283
---------- -------------- ----------- --------------- ------------- ---------- ------------ ------------
Movement in
unrealized
appreciation
on
investments
held as
available
for sale:
- Recognised
in equity - - - - 41,318 - - 41,318
---------- -------------- ----------- --------------- ------------- ---------- ------------ ------------
- Recognised
in return
after
taxation - - - - (673,879) - - (673,879)
---------- -------------- ----------- --------------- ------------- ---------- ------------ ------------
Transactions
with
shareholders
recorded
directly
to equity
Ordinary
dividends
paid - - - - - - (987,813) (987,813)
---------- -------------- ----------- --------------- ------------- ---------- ------------ ------------
Preference
share
dividends
paid - - - - - - (172) (172)
---------- -------------- ----------- --------------- ------------- ---------- ------------ ------------
Balance at 30
June 2018 2,386,025 858,783 4,453,903 2,408,820 1,923,762 4,758,355 1,327,945 18,117,593
---------- -------------- ----------- --------------- ------------- ---------- ------------ ------------
Balance at 1
July 2016 2,386,025 858,783 4,453,903 2,408,820 1,989,576 3,621,223 2,064,612 17,782,942
Total
comprehensive
income
Net return for
the year - - - - - 404,039 751,113 1,155,152
---------- -------- ---------- ---------- ----------- ---------- ------------ ------------
Movement in
unrealised
appreciation
on investments
held as available
for sale:
- Recognised
in equity - - - - 585,384 - - 585,384
---------- -------- ---------- ---------- ----------- ---------- ------------ ------------
- Recognised
in return after
taxation - - - - (18,637) - - (18,637)
---------- -------- ---------- ---------- ----------- ---------- ------------ ------------
Transactions
with shareholders
recorded directly
to equity
Ordinary
dividends
paid - - - - - - (987,813) (987,813)
---------- -------- ---------- ---------- ----------- ---------- ------------ ------------
Preference share
dividends paid - - - - - - (172) (172)
---------- -------- ---------- ---------- ----------- ---------- ------------ ------------
Balance at 30
June 2017 2,386,025 858,783 4,453,903 2,408,820 2,556,323 4,025,262 1,827,740 18,516,856
---------- -------- ---------- ---------- ----------- ---------- ------------ ------------
CONSOLIDATED BALANCE SHEET
As at 30 June 2018
Group Group
Note 2018 2017
GBP GBP
Non-current assets
Investments 11 16,340,329 16,289,129
------- ------------- -------------
Current assets
Derivative financial instruments 12 - 63,640
------- ------------- -------------
Trade and other receivables 15 265,341 211,300
------- ------------- -------------
Investments available for sale 2,077 2,265
------- ------------- -------------
Cash and bank balances 843,433 1,267,244
------- ------------- -------------
1,110,851 1,544,449
------- ------------- -------------
Current liabilities
Trade and other payables 16 (117,087) (96,801)
------- ------------- -------------
(117,087) (96,801)
------- ------------- -------------
Net current assets 993,764 1,447,648
------- ------------- -------------
Net assets 17,334,093 17,736,777
------- ------------- -------------
Capital and reserves
Issued 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
------- ------------- -------------
Revaluation reserve 1,917,418 2,557,941
------- ------------- -------------
Capital reserve 7,310,117 6,569,061
------- ------------- -------------
Revenue reserve (1,142,190) (638,973)
------- ------------- -------------
Shareholders' funds 10 17,334,093 17,736,777
------- ------------- -------------
NAV per 50p ordinary share 363.24p 371.68p
------- ------------- -------------
These financial statements were approved by the Board on 30 October 2018 and were signed on its behalf by:
I. R. Dighé
Chairman
Company Number: 4205
The notes form part of these financial statements
COMPANY BALANCE SHEET
As at 30 June 2018
Company Company
Note 2018 2017
GBP GBP
Non-current assets
Investments 11 16,340,329 16,289,129
------- ------------- -------------
Investment in subsidiaries 13 862,656 862,656
------- ------------- -------------
17,202,985 17,151,785
------- ------------- -------------
Current assets
Derivative financial instruments 12 - 63,640
------- ------------- -------------
Trade and other receivables 15 285,830 227,059
------- ------------- -------------
Cash and bank balances 843,433 1,265,397
------- ------------- -------------
1,129,263 1,556,096
------- ------------- -------------
Current liabilities
Trade and other payables 16 (214,655) (191,025)
------- ------------- -------------
(214,655) (191,025)
------- ------------- -------------
Net current assets 914,608 1,365,071
------- ------------- -------------
Net assets 18,117,593 18,516,856
------- ------------- -------------
Capital and reserves
Issued 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
------- ------------- -------------
Revaluation reserve 1,923,762 2,556,323
------- ------------- -------------
Capital reserve 4,758,355 4,025,262
------- ------------- -------------
Revenue reserve 1,327,945 1,827,740
------- ------------- -------------
Shareholders' funds 18,117,593 18,516,856
------- ------------- -------------
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 profit after tax of GBP1,221,283 (2017: GBP1,155,152).
These financial statements were approved by the Board on 30 October 2018 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 2018
Group Company
Year to Year to Year to Year to
30 June 2018 30 June 30 June 30 June
GBP 2017 2018 2017
GBP GBP GBP
-------------- -------------- -------------- --------------
Cash flows from operating activities
Cash received from investments 920,760 1,179,839 914,479 1,158,373
-------------- -------------- -------------- --------------
Interest received 86 312 86 312
-------------- -------------- -------------- --------------
Sundry income 1,300 2,520 1,300 2,520
-------------- -------------- -------------- --------------
Investment management fees paid (88,043) (160,694) (88,043) (160,694)
-------------- -------------- -------------- --------------
Cash paid to and on behalf of
employees (14,000) (26,939) (14,000) (26,939)
-------------- -------------- -------------- --------------
Other cash payments (369,197) (328,439) (359,643) (317,701)
-------------- -------------- -------------- --------------
Net cash inflow from operating
activities 450,906 666,599 454,179 655,871
-------------- -------------- -------------- --------------
Cash flows from financing activities
Sale of Treasury shares - 117,384 - 117,384
-------------- -------------- -------------- --------------
Dividends paid on ordinary shares (987,813) (987,813) (987,813) (987,813)
-------------- -------------- -------------- --------------
Net cash outflow from financing
activities (987,813) (870,429) (987,813) (870,429)
-------------- -------------- -------------- --------------
Cash flows from investing activities
Purchase of investments (5,655,702) (2,216,355) (5,655,702) (2,216,355)
-------------- -------------- -------------- --------------
Sale of investments 5,771,848 3,361,689 5,771,848 3,361,689
-------------- -------------- -------------- --------------
Purchase of derivative contracts - (339,853) - (339,853)
-------------- -------------- -------------- --------------
Loans from subsidiaries - - - 151,780
-------------- -------------- -------------- --------------
Loans to subsidiaries - - (1,426) -
-------------- -------------- -------------- --------------
Net cash inflow from investing
activities 116,146 805,481 114,720 957,261
-------------- -------------- -------------- --------------
Net (decrease)/increase in cash
and cash equivalents (420,761) 601,651 (418,914) 742,703
-------------- -------------- -------------- --------------
Reconciliation of net cash flow
to movement in net cash
(Decrease)/increase in cash (420,761) 601,651 (418,914) 742,703
-------------- -------------- -------------- --------------
Exchange rate movements (3,050) 734 (3,050) 734
-------------- -------------- -------------- --------------
(Decrease)/increase in net cash (423,811) 602,385 (421,964) 743,437
-------------- -------------- -------------- --------------
Net cash at start of period 1,267,244 664,859 1,265,397 521,960
-------------- -------------- -------------- --------------
Net cash at end of period 843,433 1,267,244 843,433 1,265,397
-------------- -------------- -------------- --------------
Cash and bank balances 843,433 1,267,244 843,433 1,265,397
-------------- -------------- -------------- --------------
843,433 1,267,244 843,433 1,265,397
-------------- -------------- -------------- --------------
NOTES TO THE FINANCIAL STATEMENTS
At 30 June 2018
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 section 1158/1159 of the Corporation Tax Act 2010.
The Group's consolidated financial statements for the year ended 30 June 2018, 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 November 2014 and updated in February 2018 with consequential amendments ("AIC SORP"), except to any extent where it is not consistent with the requirements of IFRS.
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 financial statements have been prepared on a going concern basis, being a period of at least 12 months from the date that these financial statements were approved, and on the basis that approval as an investment trust company will continue to be met.
The Directors have made an assessment of the Group's ability to continue as a going concern and are satisfied that the Group has the resources to continue in business for the foreseeable future. Furthermore, 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, having taken into account the liquidity of the Group's investment portfolio and the Group's financial position in respect of its cash flows, borrowing facilities and investment commitments (of which there are none of significance). Therefore, the financial statements have been prepared on the going concern basis.
Basis of Consolidation
The subsidiaries are consolidated from the date of their acquisition, being the date on which control is obtained, and will continue to be consolidated until the date that such control ceases. Control comprises being exposed, or having rights, to variable returns through its power over the investee. 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 accounting policies adopted are consistent with those of the previous financial year. 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 1 First-time Adoption of International
Financial Reporting Standards 1 January
(amendment) 2018
------------------------------------------- --------------
IFRS 3 Business Combinations (amendment) 1 January
2019
------------------------------------------- --------------
IFRS 9 Financial Instruments 1 January
2018
------------------------------------------- --------------
IFRS 11 Joint Arrangements (amendment) 1 January
2019
------------------------------------------- --------------
IFRS 15 Revenue from Contracts with Customers 1 January
2018
------------------------------------------- --------------
IFRS 16 Leases 1 January
2019
------------------------------------------- --------------
International Accounting Standards
IAS 12 Income Taxes (amendment) 1 January
2019
------------------------------------------- --------------
IAS 23 Borrowing Costs (amendment) 1 January
2019
------------------------------------------- --------------
IAS 28 Investments in Associates and
Joint Ventures (measuring an associate 1 January
or joint venture at fair value) 2018
------------------------------------------- --------------
IAS 28 Investments in Associates and
Joint Ventures 1 January
(long term interests in associates 2019
or joint venture)
------------------------------------------- --------------
IFRIC Interpretations
IFRIC 23 Uncertainty over Income Tax Treatments 1 January
2019
--------------------------------------------- --------------
*Years beginning on or after
The Directors are considering the impact of the standards upon the financial statements. With regards to IFRS 9, the Directors have determined that any assets currently disclosed as Investments held for sale will need to be reclassified to investments held at fair value through profit or loss. This will change the presentation of investments and the related allocation of income within the financial statements of the Group. There should be no impact on the returns of the Group.
The new impairment model will also apply to the Group's other financial assets including trade and other receivables and cash and cash equivalents. The Directors expect to apply the simplified approach to recognise lifetime expected credit losses for these current assets. The adoption of IFRS 9 for these assets is not expected by the Directors to have any material impact on the reported Net Asset Value, but there will be presentational differences.
There will be no change in the accounting for financial liabilities.
In summary, on adoption of IFRS 9 for the first period commencing 1 January 2018, the Directors consider that IFRS
9 will not have a material impact on the financial position or performance of the Group.
The Directors do not expect that the adoption of other standards listed above will have a material impact on the financial statements of the Group 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 Statement of Comprehensive Income 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 a significant part of the portfolio comprises fixed interest stocks which are thinly traded; such stocks are best 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 Company 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 Company 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 year.
Investments
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. 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 listed investments this is deemed to be bid market prices or closing prices for Stock Exchange Electronic Trading Service - quotes and crosses ("SETSqx").
Changes in fair value of investments, realised gains and losses on disposal are also recognised in the Income Statement as capital items.
-- All investments held that have been purchased by the Group since obtaining approval as an investment trust from
1 July 2013 are classified as at "fair value through profit or loss". Changes in fair value of investments are recognised in the Consolidated Income Statement as a capital item. On disposal, realised gains and losses are also recognised in the Consolidated Income Statement as capital items.
-- Investments held at 30 June 2018 which were purchased prior to 1 July 2013 are classified as "assets available for sale". These investments have not been reclassified as at "fair value through profit or loss" in accordance with IAS
39 Financial Instruments: Recognition and Measurement. Realised gains and losses and movement in impairment provision on investments classified as "assets available for sale" are recognised in the Consolidated Income Statement and allocated to the Capital reserve. Movement in unrealised appreciation on investments classified as "assets available for sale" is recognised in the Revaluation reserve.
-- Investments held as current assets by the subsidiary undertaking are classified as 'held for trading', and are at fair value. Profits or losses on investments held for trading are taken to revenue in the Income Statement.
-- 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.
Derivative Financial Instruments
Derivatives, including Index Put options, which are listed investments are classified as financial instruments being assets or liabilities held for trading. They are initially recorded at cost (being the premium paid to purchase the option) and are subsequently valued at fair value at the close of business at the year-end and included in fixed assets or current assets/liabilities depending on their maturity date.
Changes in the fair value of derivative instruments are recognised as they arise in the capital column of the Income Statement.
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 in hand, overdrafts 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, net of outstanding bank overdrafts when applicable.
Trade Receivables, Trade Payables and Short-term Borrowings
Trade receivables, trade payables and short-term borrowings are measured at amortised cost.
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 described separately in the Income Statement.
Special dividends are taken to revenue or capital account depending on their nature. In deciding whether a dividend should be regarded as a capital or revenue receipt, the Board reviews all relevant information as to the reasons for the sources of the dividend on a case-by-case basis.
When the Company has elected to receive scrip dividends in the form of additional shares rather than in cash, the amount of the cash dividend forgone is recognised as income. Any excess in the value of the cash dividend is recognised in the capital column.
Where, before recognition of dividend income is due, there is any reasonable doubt that a return will actually be received, for example as a consequence of the investee company lacking distributable reserves, the recognition of the return is deferred until the doubt is removed.
All other income is accounted for on a time-apportioned accruals basis using the effective interest rate method and is recognised in the Income Statement.
Expenses and Finance Costs
All expenses and finance costs are accounted for on an accruals basis.
Taxation
Deferred tax is provided using the liability method on temporary differences between the tax bases of assets and liabilities and their carrying amount for financial reporting purposes at the reporting date. 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 timing differences can be deducted. In line with the recommendations of the AIC SORP, the allocation method used to calculate the tax relief on expenses charged to capital is the "marginal" basis. Under this basis, if taxable income is capable of being offset entirely by expenses charged through the revenue account, then no tax relief is transferred to the capital account.
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 shares bought back and cancelled. This reserve is not distributable.
Revaluation Reserve
Movement in unrealised appreciation on investments classified as "assets available for sale" is recognised in the Revaluation reserve and is not distributable.
Capital Reserve
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 difference 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 revenue reserve represents the surplus accumulated profits and is distributable.
2. Income
Year ended Year ended
30 June 30 June
2018 2017
GBP GBP
Income from investments:
UK dividends 505,852 536,956
----------- -----------
Un-franked dividend income 96,066 230,447
----------- -----------
UK fixed interest 346,877 407,272
----------- -----------
948,795 1,174,675
----------- -----------
Other income:
Bank deposit interest 85 312
----------- -----------
Underwriting commission 1,300 2,520
----------- -----------
Net dealing gains of subsidiaries 6,093 21,778
----------- -----------
Total income 956,273 1,199,285
----------- -----------
3. Investment Management Fee
Year ended Year ended
30 June 30 June
2018 2017
GBP GBP
Investment Management Fee 88,259 160,723
----------- -----------
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, capped at GBP90,000 for the first twelve months. For these purposes, the NAV shall be calculated as at the last business day of each month.
At 30 June 2018 an amount of GBP7,500 (2017: GBP7,284) was outstanding and due to the Investment Manager.
4. Other Expenses
Year ended Year ended
30 June 30 June
2018 2017
GBP GBP
Administration and secretarial services 121,229 126,849
----------- -----------
Auditors' remuneration for:
- audit of the Group's financial statements 33,950 28,450
----------- -----------
Directors' remuneration (see below) 60,000 60,000
----------- -----------
Staff costs 14,000 14,000
----------- -----------
Pension costs 280 (57,546)
----------- -----------
Other expenses 148,630 107,876
----------- -----------
378,089 279,629
----------- -----------
The audit of the Group's financial statements includes the cost of the audit of Abport Limited of GBP2,000 (2017: GBP1,950) and New Centurion Trust Limited GBP2,000 (2017: GBP1,950), which are charged to the subsidiaries
Year ended Year ended
30 June 30 June
2018 2017
GBP GBP
Directors' remuneration:
Sir David Thomson 15,000 15,000
----------- -----------
Peter Allen 15,000 15,000
----------- -----------
Stephen Cockburn 15,000 15,000
----------- -----------
Martin Perrin 15,000 15,000
----------- -----------
60,000 60,000
----------- -----------
The average number of employees as at 30 June 2018 was one (2017: one) with the aggregate remuneration consisting of:
Year ended Year ended
30 June 30 June
2018 2017
GBP GBP
Staff costs
Wages and salaries 14,000 14,000
----------- -----------
Social security costs 1,579 -
----------- -----------
Total 15,579 14,000
----------- -----------
Pension costs
Pension payments 280 11,274
----------- -----------
Pension provision release - (70,000)
----------- -----------
Workplace pension costs - 1,180
----------- -----------
Total 280 (57,546)
----------- -----------
The Company does not have a provision (2017: same) in respect of future pension payments. There are no pension liabilities due to past employees.
5. Taxation
Year ended 30 June Year ended 30 June
2018 2017
Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
------------ ---------- ------ ---------- -------- ----------
Overseas taxation suffered 5,329 - 5,329 - - -
------------ ---------- ------ ---------- -------- ----------
Overseas taxation -
reversal of priors
year tax - - - (3,241) - (3,241)
------------ ---------- ------ ---------- -------- ----------
5,329 - 5,329 (3,241) - (3,241)
------------ ---------- ------ ---------- -------- ----------
The current tax charge for the year is lower than the standard rate of corporation tax in the UK of 19% to 30 June 2018 and 19.75% to 30 June 2017. The differences are explained below:
Year ended 30 June Year ended 30 June
2018 2017
Revenue Capital Total Revenue Capital Total
GBP GBP GBP GBP GBP GBP
--------------- ------------ ------------ ------------ ---------- ------------
Return on ordinary
activities 489,925 741,056 1,230,981 758,924 413,693 1,172,617
--------------- ------------ ------------ ------------ ---------- ------------
Theoretical tax at
UK Corporation tax
rate of 19% (2017:
19.75%) 93,086 140,801 233,886 149,887 81,704 231,591
--------------- ------------ ------------ ------------ ---------- ------------
Effects of:
UK dividends that are
not taxable (96,112) - (96,112) (106,049) - (106,049)
--------------- ------------ ------------ ------------ ---------- ------------
Overseas dividends
that are not taxable (18,253) - (18,253) (45,513) - (45,513)
--------------- ------------ ------------ ------------ ---------- ------------
Non taxable investment
gains - (140,801) (140,801) - (81,704) (81,704)
--------------- ------------ ------------ ------------ ---------- ------------
Overseas taxation suffered 5,329 - 5,329 - - -
--------------- ------------ ------------ ------------ ---------- ------------
Reversal priors year's
tax - - - (3,241) - (3,241)
--------------- ------------ ------------ ------------ ---------- ------------
Unrelieved expenses 21,279 - 21,279 1,675 - 1,675
--------------- ------------ ------------ ------------ ---------- ------------
Actual current tax
charged to the revenue
account 5,329 - 5,329 (3,241) - (3,241)
--------------- ------------ ------------ ------------ ---------- ------------
Factors that may affect future tax charges
The Company has excess management expenses of GBP1,596,643 (2017: GBP1,484,651). 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 Year ended 30 June
2018 2017
Revenue Capital Total Revenue Capital Total
------------ ---------- ------------ ---------- ---------- ------------
Return after taxation
Return attributable
to ordinary shareholders
(GBP) 484,596 741,056 1,225,652 762,165 413,693 1,175,858
------------ ---------- ------------ ---------- ---------- ------------
Weighted average number
of ordinary shares in
issue (excluding shares
held in Treasury) 4,772,049 4,772,049
------------ ---------- ------------ ---------- ---------- ------------
Return per ordinary
share (pence) 10.16p 15.53p 25.69p 15.97p 8.67p 24.64p
------------ ---------- ------------ ---------- ---------- ------------
The return on total comprehensive income per ordinary share has been calculated to enable comparison of the returns per share shown in the annual reports of other investment trust companies. A reconciliation is shown below:
Return on total comprehensive income
Year ended 30 June 2018 Year ended 30 June
2017
Revenue Capital Total Revenue Capital Total
-------- ---------- ---------- -------- --------- ----------
Return on total comprehensive
income
-------- ---------- ---------- -------- --------- ----------
Return attributable
to ordinary
shareholders (GBP) 484,596 741,056 1,225,652 762,165 413,693 1,175,858
-------- ---------- ---------- -------- --------- ----------
Add other comprehensive
income recognised
in equity - 30,134 30,134 - 575,730 575,730
-------- ---------- ---------- -------- --------- ----------
Add other comprehensive
income recognised
in profit and loss - (670,657) (670,657) - (18,637) (18,637)
-------- ---------- ---------- -------- --------- ----------
Return attributable
to ordinary shareholders
(GBP) 484,596 100,533 585,129 762,165 970,786 1,732,951
-------- ---------- ---------- -------- --------- ----------
Weighted average
number of ordinary
shares in issue (excluding
shares held in Treasury) 4,772,049 4,772,049
-------- ---------- ---------- -------- --------- ----------
Return per ordinary
share (pence) 10.16p 2.11 12.27p 15.97p 20.34p 36.31p
-------- ---------- ---------- -------- --------- ----------
7. Dividends per Ordinary Share
Year Year
ended ended
30 June 30 June
2018 2017
GBP GBP
Declared and paid per Ordinary Share
In respect of the prior period:
--------- ---------
Fourth interim dividend 5.70p (2017: 5.70p) 272,007 272,007
--------- ---------
In respect of the year under review:
--------- ---------
First interim 5.00p (2017: 5.00p) 238,602 238,602
--------- ---------
Second interim dividend 5.00p (2017: 5.00p) 238,602 238,602
--------- ---------
Third interim dividend 5.00p (2017: 5.00p) 238,602 238,602
--------- ---------
987,813 987,813
--------- ---------
Declared per Ordinary Share
Dividend declared in respect of the year
under review:
Fourth interim dividend 5.70p (2017: 5.70p) 272,007 272,007
--------- ---------
The Directors have declared a first interim dividend in respect of the year ending 30 June 2019 of 5.00p per ordinary share payable on 17 November 2018 to all shareholders on the register at close of business on 27 October 2018. The ex-dividend date was 26 October 2018.
8. Ordinary Share Capital
Group and Company 2018 Group and Company 2017
Issued, allotted Number GBP Number GBP
and fully paid:
------------ ----------- ------------ -----------
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 (2017: none).
9. Issued Preference Share Capital
Group Company
2018 2017 2018 2017
------ ------ -------- --------
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: 2018 2017
GBP GBP
Net assets 17,334,093 17,736,777
Ordinary shares in issue, excluding own
shares held in Treasury 4,772,049 4,772,049
NAV per ordinary share 363.24p 371.68p
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
Group Company
2018 2017 2018 2017
GBP GBP GBP GBP
Available for sale 6,592,447 8,588,507 6,592,447 8,588,507
At fair value through profit
and loss 9,747,882 7,700,622 9,747,882 7,700,622
Total investments designated
at fair value 16,340,329 16,289,129 16,340,329 16,289,129
Investments available for sale
Group Company
2018 2017 2018 2017
GBP GBP GBP GBP
Opening book cost 6,562,916 6,926,993 6,618,535 6,982,611
Opening net investment holding
gains 2,025,591 1,129,103 1,969,972 1,073,485
Total investments designated
as available for sale 8,588,507 8,056,096 8,588,507 8,056,096
Movements in the year:
Purchases at cost - - - -
Sales - proceeds (1,923,800) (136,055) (1,923,800) (136,055)
- gains/(losses) on sales 572,008 (228,022) 572,008 (228,022)
(Decrease)/increase in
investment
holding gains (644,268) 896,488 (644,268) 896,488
Closing valuation 6,592,447 8,588,507 6,592,447 8,588,507
Closing book cost 5,211,124 6,562,916 5,266,743 6,618,534
Closing net investment holding
gains 1,381,322 2,025,591 1,325,704 1,969,973
6,592,447 8,588,507 6,592,447 8,588,507
Analysis of changed in investment
holding gains
Movement in impairment provision (3,745) 339,395 (11,707) 329,741
Recognised in equity 30,134 575,730 41,318 585,384
Recognised in return after taxation (670,657) (18,637) (673,879) (18,637)
Losses on investments (644,268) 896,488 (644,268) 896,488
Investments held at fair value
through profit or loss
Group Company
2018 2017 2018 2017
GBP GBP GBP GBP
Opening book cost 8,301,661 9,973,717 8,301,661 9,973,717
Opening net investment holding
losses (601,039) (1,619,768) (601,039) (1,619,768)
Total investments designated
as available for sale 7,700,622 8,353,949 7,700,622 8,353,949
Movements in the year:
Purchases at cost 5,655,702 1,877,185 5,655,702 1,877,185
Sales - proceeds (3,848,048) (3,117,937) (3,848,048) (3,117,937)
- losses on sales (492,823) (431,304) (492,823) (431,304)
Decrease in investment holding
losses 732,429 1,018,729 732,429 1,018,729
Closing valuation 9,747,882 7,700,622 9,747,882 7,700,622
Closing book cost 9,616,492 8,301,661 9,616,492 8,301,661
Closing net investment holding
gains/(losses) 131,390 (601,039) 131,390 (601,039)
9,747,882 7,700,622 9,747,882 7,700,622
Transaction costs
Group Company
Year ended Year ended
2018 2017 2018 2017
GBP GBP GBP GBP
Costs on acquisitions 28,265 1,880 28,265 1,880
Costs on disposals 8,020 4,543 8,020 4,543
6,423 36,285 6,423 36,285
Analysis of capital gains
Group Company
Year ended Year ended
------------------ ------------------
2018 2017 2018 2017
GBP GBP GBP GBP
-------- -------- -------- --------
Gains/(losses) on sale of investments 79,185 79,185 79,185 79,185
-------- -------- -------- --------
Movement in investment holding
gains 88,161 88,161 88,161 88,161
-------- -------- -------- --------
167,346 167,346 167,346 167,346
-------- -------- -------- --------
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 as at 30 June 2018, by the level in the fair value hierarchy into which the fair value measurement is categorised.
At 30 June 2018 Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets at fair value
through profit or loss
Equities 7,770,314 - - 7,770,314
Fixed Interest bearing securities 471,448 - 1,506,120 1,977,568
Derivative financial instruments - - - -
Financial assets available
for sale
Equities 800,000 413,559 2,889,789 4,103,348
Fixed Interest bearing securities 2,061,228 - 427,871 2,489,099
Current asset investments held
by a trading subsidiary 2,077 - - 2,077
11,105,067 413,559 4,823,780 16,342,406
At 30 June 2017 Level 1 Level 2 Level 3 Total
GBP GBP GBP GBP
Financial assets at fair value
through profit or loss
Equities 6,036,337 - - 6,036,337
Fixed Interest bearing securities - - 1,664,286 1,664,286
Derivative financial instruments 63,640 - - 63,640
Financial assets available
for sale
Equities 1,184,018 415,248 3,127,681 4,726,947
Fixed Interest bearing securities 3,172,258 - 689,301 3,861,559
Current asset investments held
by a trading subsidiary 2,176 89 - 2,265
10,458,429 415,337 5,481,268 16,355,034
There were no transfers between level 1 and 2 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
The valuations are provided by an independent third party broker. The values are determined using observable inputs including prevailing interest rates, the maturity and redemption dates of the investment. The equity securities of the issuing company of the investments held are or have been publicly listed. The information includes reported results, commentary on current trading and, third party research.
Valuation process for Level 3 investments
Investments classified within Level 3 have significant unobservable inputs. Level 3 investments can typically include unlisted equity and corporate debt securities. As observable prices are not available for these securities, the Group has used valuation techniques to derive the fair value using recognised valuation methodologies, in accordance with International Private Equity and Venture Capital ("IPEVC" valuation Guidelines including discounted cash flow modelling where relevant.
The Level 3 investments held by the Company currently consist of fixed interest bearing securities and certain equity securities. These are valued by the Investment Manager with valuation confirmations provided to the Board on a regular basis. The equity securities of the issuing company of the Level 3 investments held have been formerly listed and, therefore, detailed public information is available to substantiate the future prospects of the issuing company. The fixed interest bearing securities anticipated future cash returns and cash-flows. This information includes reported results, commentary on current trading, and third party research.
The Group uses a variety of methods and makes assumptions that are based on market conditions existing at each reporting date. Valuation techniques used include the use of comparable recent arm's length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis, option pricing models and other valuation techniques commonly used by market participants making the maximum use of market inputs and relying as little as possible on entity specific inputs.
Unobservable inputs are not provided by the Company but provided by a third party pricing vendor, these prices that are provided by the pricing vendor are not adjusted.
The Company does not have any other reasonably available information on this and relies on the third party vendor's knowledge and expertise.
The following stocks are valued at nil due to no source, 600 Group Warrants, Gable Holdings 7.35% Loan Note and Whitnash 6.5% 2nd Preference shares.
The following stock are delisted and subsequently valued at nil, Fairpoint Group and Gable Holdings.
Aggregated Micro Power Holdings 8% Convertible Bond is valued by using the quoted price on the Channel Islands securities exchange.
Intercede Group 8% Secured Convertible Loan notes are valued at par as no other information is available.
London County 3% Perpetual is valued by the Board on the understanding that the former London County Council will buy this stock at this price.
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 GBP523,734 (2017: GBP589,650).
The table below presents the movement in Level 3 investments that were accounted for at fair value for the year ending 30 June 2018.
Year ended 30 June 2018 Financial
assets at
fair value Available
Group through profit for sale Total
or loss GBP GBP
GBP
Opening balance 1,664,286 3,816,982 5,481,268
Movement in impairment provision on
investments available for sale - (99,952) (99,952)
Movement in unrealised appreciation
on investments available for sale
recognised in equity - (20,156) (20,156)
Movement in unrealised appreciation
on investments available for sale
recognised in return after taxation - 3,865 3,865
Purchases at cost - - -
Movement in unrealised gains/(losses)
on investments at fair value
through profit or loss (158,165) - (158,165)
Realised loss - 16,930 16,930
Sales proceeds - (400,010) (400,010)
Closing balance 1,506,121 3,317,659 4,823,780
Financial
assets at
fair value Available
Company through profit for sale Total
or loss GBP GBP
GBP
Opening balance 1,664,286 3,816,982 5,481,268
Movement in impairment provision on
investments available for sale - (105,215) (105,215)
Movement in unrealised appreciation
on investments available for sale
recognised in equity - (18,115) (18,115)
Movement in unrealised appreciation
on investments available for sale
recognised in return after taxation - 7,087 7,087
Purchases at cost - - -
Movement in unrealised gains/(losses)
on investments at fair value
through profit or loss (158,165) - (158,165)
Realised loss - 16,930 16,930
Sales proceeds - (400,010) (400,010)
Closing balance 1,506,121 3,317,659 4,823,780
Year ended 30 June 2017 Financial
assets at
fair value Available
Group through profit for sale Total
or loss GBP GBP
GBP
Opening balance 1,121,062 3,584,063 4,705,125
Movement in impairment provision on
investments available for sale - 379,611 379,611
Movement in unrealised appreciation
on investments available for sale recognised
in equity - 140,645 140,645
Movement in unrealised appreciation - - -
on investments available for sale recognised
in return after taxation
Purchases at cost 450,000 - 450,000
Movement in unrealised gains/(losses)
on investments at fair value through
profit or loss 402,989 - 402,989
Realised loss - (266,693) (266,693)
Sales proceeds (309,765) (20,644) (330,409)
Closing balance 1,664,286 3,816,982 5,481,268
Financial
assets at
fair value Available
Company through profit for sale Total
or loss GBP GBP
GBP
Opening balance 1,121,062 3,584,063 4,705,125
Movement in impairment provision on
investments available for sale - 365,057 365,057
Movement in unrealised appreciation
on investments available for sale recognised
in equity - 155,199 155,199
Movement in unrealised appreciation
on investments available for sale recognised
in return after taxation - - -
Purchases at cost 450,000 - 450,000
Movement in unrealised gains/(losses)
on investments at fair value through
profit or loss 402,989 - 402,989
Realised loss - (266,693) (266,693)
Sales proceeds (309,765) (20,644) (330,409)
Closing balance 1,664,286 3,816,982 5,481,268
During the year, two stocks were written down. Aggregated Power 8% conv loan notes 31/03/2021 was written down by GBP189,000, moving the market value from GBP714,000 to GBP525,000.
The valuation of Aggregated Micro Power 8% convertible loan note 30/03/2021 variable was previously carried at a level assuming the ultimate conversion of the loan note into the ordinary equity shares of the company. On review by the Investment Manager and directors it was decided that a more prudent basis for the carrying valuation should be the price quoted on the Channel Islands securities exchange. Should a conversion event take place in the future the notional uplift in value can be reviewed.
Liberty 6% Preference Shares was written down by GBP120,000, moving the market value from GBP123,000 to GBP3,000.
During the year there were two significant
disposals:
Stock Proceeds Cost Valuation
@ 30.06.2017
GBP GBP GBP
Tate & Lyle 6.5% Preference 100,009 84,826 91,913
Rea Finance 300,000 298,254 297,000
12. Derivative Contracts
The derivative contracts serve as components of the Company's investment strategy and are utilised primarily to structure and hedge investments, to enhance performance and reduce risk to the Group (the Company does not designate any derivative as a hedging instrument for hedge accounting purposes). The derivative contracts that the Company may hold from time to time or issue include: index-linked notes, contracts for differences, covered options and other equity-related derivative instruments.
These instruments can involve a high degree of leverage and are very volatile. A relatively small movement in the underlying value of a derivative contract may have a significant impact on the profit and loss and net assets of the Group. The Company's investment objective sets limits on investments in derivatives with a high risk profile. The Investment Manager is instructed to closely monitor the Company's exposure under derivative contracts and any use of the 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. The Company will not enter into uncovered short positions.
As at 30 June 2018, the Group had no positions in the following type of derivative:
Options
Options are contractual agreements that convey the right, but not the obligation, for the purchaser either to buy or sell a specific amount of a financial instrument at a fixed price, either at a fixed future date or at any time within a specified period.
The Company purchases either Put or Call options through regulated exchanges and OTC markets. Options purchased by the Company provide the Company with the opportunity to purchase (Call options) or sell (Put options) the underlying asset at an agreed-upon value either on or before the expiration of the option. The Company is exposed to credit risk on purchased options only to the extent of their carrying value, which is their fair value.
During the year, the FTSE 100 March 2018 6,000 Put option expired.
Group Company
Year ended Year ended
2018 2017 2018 2017
GBP GBP GBP GBP
Movements in the period:
Opening valuation 63,640 - 63,640 -
Purchases at cost - 339,853 - 339,853
Sales proceeds - - - -
Losses on sales (339,853) - (339,853) -
Movements in unrealised loss 276,213 276,213 276,213 276,213
Closing valuation - 63,640 - 63,640
Closing bookcost - 339,853 - 339,853
Closing unrealised loss - 276,213 - 276,213
- 63,640 - 63,640
Group Company
Year ended Year ended
2018 2017 2018 2017
GBP GBP GBP GBP
Analysis of capital gains
Losses on sale of investments 339,853) - (339,853) -
Movement in investment holding
losses 276,213 (276,213) 276,213
(63,640) (276,213) (63,640) (276,213)
13. Investment in Subsidiaries
Company
Year ended
2018 2017
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 2018, the Company held interests in the following subsidiary companies:
Country of % share % share of
of
Incorporation capital voting rights Nature of business
held
Investment dealing
Abport Limited England 100% 100% company
New Centurion Trust Investment holding
Limited England 100% 100% company
The registered office for both companies above is:
Springfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW
14. Substantial Share Interests
The Company has notified interests in 3% or more of the voting rights of the following companies:
Company % share
of
voting
rights
Associated British Engineering 4.88
Coral Products 3.03
15. Trade and Other Receivables
Group Company
2018 2017 2018 2017
GBP GBP GBP GBP
Amounts due from subsidiaries - - 20,489 15,759
Accrued income 15,998 79,158 15,998 79,158
Due from brokers - - - -
Dividends receivable 215,804 118,329 215,804 118,329
Taxation recoverable 3,182 6,284 3,182 6,284
Other receivables 30,357 7,529 30,357 7,529
265,341 211,300 285,830 227,059
The carrying amount of trade receivables approximates to their fair value. Trade and other receivables are not past due at 30 June 2018.
16. Trade and Other Payables
Group Company
2018 2017 2018 2017
GBP GBP GBP GBP
Preference dividends payable to
the Company's wholly owned subsidiary - - 861 689
Amount due to subsidiaries - - 101,533 98,228
Due to brokers - - - -
Investment management fees 7,500 7,284 7,500 7,284
Other trade payables and accruals 109,587 89,517 104,761 84,824
117,087 96,801 214,655 191,025
17 Analysis of Financial Assets and Liabilities
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. The Group's financial instruments can comprise the following held in accordance with the Company's investment objectives and policies:
-- Shares and debt securities; -- Derivative instruments for efficient portfolio management, gearing and investment purposes; -- Current asset investments held by its subsidiary;
-- Cash, liquid resources and short-term debtors and creditors that arise from its operations; and
-- Conversion rights or equity warrants.
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.
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 FTSE 100 March 2018 put option held at the beginning of the year expired on 16 March 2018. 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 GBP16,340,329 (2017: GBP16,355,034). The direct impact of a 5% movement in the value of the portfolio investments and current asset investments amounts to GBP817,016 (2017: GBP817,752). 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. The market value of the option may move in a different direction to Securities.
2018 2017
GBP GBP
Securities available for sale 6,592,447 8,590,772
Securities at fair value through profit
and loss 9,747,882 7,700,622
Derivative financial instruments - 63,640
Total investment 16,340,329 16,355,034
2018 2017
GBP GBP
Securities available for sale 329,622 429,539
Securities at fair value through profit
and loss 487,394 385,031
Derivative financial instruments - 3,182
Effect on post-tax profit for the year
and on equity 817,016 817,752
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
2018 2018 2018 2017 2017 2017
GBP GBP GBP GBP GBP GBP
Investments available
for sale 2,489,099 4,103,348 6,592,447 3,861,559 4,726,948 8,588,507
Investments at fair
value through profit
and loss 1,506,120 8,241,762 9,747,882 1,664,286 6,036,336 7,700,622
Investment in Subsidiary - 2,077 2,077 - 2,265 2,265
Derivative financial
investments - - - - 63,640 63,640
Other receivables* - 234,984 234,984 - 203,771 203,771
Cash at bank 843,433 - 843,433 1,267,244 - 1,267,244
Current liabilities - (117,087) (117,087) - (96,801) (96,801)
4,838,652 12,465,084 17,303,736 6,793,089 10,936,159 17,729,248
* The above table doesn't include prepayments of GBP30,357 (2017: GBP7,529).
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:
2018 2017
GBP GBP
Fixed interest bearing securities 3,469 4,073
Bank interest 1 3
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 GBP117,087 (2017: GBP96,801) are 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 2018 was GBP1,110,851 (2016: GBP1,544,449). The calculation is based on the Group's credit risk exposure as at 30 June 2018 and this may not be representative for the whole year.
The Group's quoted investments are held on its behalf by Bank of New York Mellon 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 Company's performance is measured in sterling, a proportion of the Company'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 GBP1,502 (2017: GBP1,340) of investments held for sale denominated in Australian Dollars. This is not material to the fund.
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 (2017: one).
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 it 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 Board, with the assistance of the Investment Manager, monitors and reviews the capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings' as shown in the consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as "equity" as shown in the consolidated balance sheet plus net debt. The gearing ratios at 30 June 2018 and 2017 were as follows:
2018 2017
GBP GBP
Cash and bank balances 843,433 1,267,244
Net cash 843,433 1,267,244
Ordinary shareholders' funds 17,568,224 17,736,777
Gearing (net debt/ordinary shareholders' nil nil
funds)
18. Transactions with the Investment Manager and Related Parties
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 GBP88,259 (2017: GBP160,723).
During the year Miton ceased to be the Investment Manager as of the 1 April 2018. The fees paid to Miton during the year were GBP65,759.
On the 1 April 2018 Fiske plc took over responsibility as Investment Manager. The fees paid to Fiske during the year were GBP22,500. As at the year end, the following amounts were outstanding in respect of management fees: GBP7,500 (2017: GBP7,284).
The Board consists of three non-executive Directors all of whom, with the exception of Mr Perrin who is a non-executive Director of the Investment Manager, are considered to be independent by the Board. For the year ended 30 June 2018 all Directors including, the Chairman, received an annual fee of GBP15,000.
At the year end, there were no outstanding fees payable to Directors (2017: nil).
Expenses outstanding to Directors at the year end consists of GBPnil (2017: GBP1,957). No interest is charged on the balance and consists of reimbursement of expenses incurred.
There were no other identifiable related parties at the year end.
PUBLICATION OF NON-STATUTORY ACCOUNTS
The financial information contained in this announcement does not constitute statutory accounts as defined in the Companies Act 2006. The 2018 Annual Report and Financial Statements will be filed with the Registrar of Companies shortly.
The report of the auditor for the year ended 30 June 2018 contained no qualification or statement under Section 498(2) or (3) of the Companies Act 2006.
This announcement was approved by the Board of Directors on 30 October 2018.
Copies of the Annual Report and Financial Statements will be sent to members shortly and will be available from the registered office c/o The Company Secretary.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.
END
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