Annual Financial Report

RNS Number : 1989F

AVI Global Trust PLC

13 November 2020

 

AVI GLOBAL TRUST PLC

('AGT' or the 'Company')

LEI: 213800QUODCLWWRVI968

Annual Financial Report for the year ended 30 September 2020

A copy of the Company's Annual Report for the year ended 30 September 2020 will shortly be available to view and download from the Company's website, https://www.aviglobal.co.uk. Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

Copies of the Annual Report will be sent to shareholders shortly. Additional copies may be obtained from the Corporate Secretary, Link Company Matters Limited, on 01392 477500. 

The Annual General Meeting ('AGM') of the Company will be held on 17 December 2020 at 10.00am.  

The Directors have proposed the payment of a final dividend of 10.50p per Ordinary Share which, if approved by shareholders at the forthcoming AGM, will be payable on 4 January 2021 to shareholders whose names appear on the register at the close of business on 4 December 2020(ex-dividend 3 December 2020).

The following text is copied from the Annual Report and Accounts:

STRATEGIC REPORT

COMPANY PURPOSE

The Company is an investment trust. Its investment objective is to achieve capital growth through a focused portfolio of mainly listed investments, particularly in companies whose shares stand at a discount to estimated underlying net asset value.

BUSINESS MODEL

Strategy

Our strategy is to seek out-of-favour companies whose assets are misunderstood by the market or under-researched, and which trade significantly below their intrinsic value. Often, we engage actively with management in order to provide suggestions for improvements that we believe could help narrow the discount or improve operations, thus releasing value for shareholders.

Investment Approach

As an investment trust, the Company's most important relationship is with the Investment Manager.

The Company's assets are managed by Asset Value Investors Limited ('AVI'). AVI aims to deliver superior returns and specialises in finding companies that for a number of reasons may be selling on anomalous valuations.

The Investment Manager has the flexibility to invest around the world and is not constrained by any fixed geographic or sector weightings. No more than 10% of the Company's investments may be in unlisted securities.

KEY PERFORMANCE INDICATORS ('KPIs')

The Company uses KPIs as an effective measurement of the development, performance or position of the Company's business, in order to set and measure performance reliably. These are net asset value total return, discount to net asset value and ongoing .

NAV TOTAL RETURNS TO 30 SEPTEMBER 2020*

1 Year	10 Years (Annualised)
0.0%	6.9%

DISCOUNT*

30 September 2020	30 September 2019
9.3%	10.9%

ONGOING EXPENSES RATIO*

2020	2019
0.89%	0.85%

TOP TEN INVESTMENTS REPRESENT

52.4%

of portfolio*

ESTIMATED PERCENTAGE ADDED TO NET ASSET VALUE PER SHARE FROM BUYBACKS

2020	2019
0.5%	0.1%

* For definitions, see Glossary below.

COMPANY PERFORMANCE

Financial Highlights

- Net asset value ('NAV') per share on a total return basis was flat at  0.0%

- Final dividend of 10.5. p and total dividend maintained at 16.5p

- Share price total return of 2.0%

Performance Summary

	30 September  2020	30 September  2019
Net asset value per share (total return) for the year1*	0.0%		2.1%
Share price total return for the year*	2.0%%		-0.4%
Discount*
Share Price Discount (difference between share price and net asset value)2	-9.3%		-10.9%

	Year to  30 September  2020	Year to  30 September  2019
Earnings and Dividends
Investment income	£15.16m	£26.21m
Revenue earnings per share	9.36p	19.08p
Capital earnings per share	(11.18)p	2.82p
Total earnings per share	(1.82)p	21.90p
Ordinary dividends per share	16.50p	16.50p
Ongoing Expenses Ratio*
Management, marketing and other expenses (as a percentage of average shareholders' funds)	0.89%	0.85%
Comparator Benchmark†*
MSCI All Country World ex-US Index (£ adjusted total return*)	-1.8%	4.5%
2020 Year's Highs/Lows	High	Low
Net asset value per share	894.83p	580.10p
Net asset value per share (debt at fair value)	884.36p	564.39p
Share price (mid market)	802.00p	497.50p

¹ As per guidelines issued by the AIC, performance is calculated using net asset values per share inclusive of accrued income and debt marked to fair value.

² As per guidelines issued by the AIC, the discount is calculated using the net asset value per share inclusive of accrued income and debt marked to fair value.

Buybacks

During the year, the Company purchased 4,573,938   Ordinary Shares, all of which were placed into treasury, at a cost of £31.1m.

* Alternative Performance Measures

For all Alternative Performance Measures included in this Strategic Report, please see definitions in the Glossary below.

^† The Company uses the net version of the MSCI All Country World ex-US Index, which accounts for withholding taxes incurred. If the gross version of the Index had been used, the comparative figures for the years ending 30 September 2020 and 30 September 2019 would have been 0.4% and 0.5% higher, respectively.

CHAIRMAN'S STATEMENT

Overview of the Year

Having reported at the half year stage a reduction in value of almost a quarter, I am pleased to be able to report that in the second half of our accounting year all of that fall was recovered and we ended the year with a virtually flat NAV total return. The return over the year outperformed our comparator benchmark index, whose total return was -1.8%. It may seem odd to present in such positive terms a year in which no overall gain was made, but in the circumstances the Board believes that the Investment Manager has performed well. As described in the Performance Review, gearing was reduced in the period leading up to the market sell off in reaction to the COVID-19 pandemic and this, along with some well executed portfolio sales, allowed us to buy some attractive companies at depressed prices. The recovery in asset value in the second half of the year is encouraging, as is the quality of the portfolio.

Income and Dividend

AGT's revenue account was particularly hard hit by the effects of the COVID-19 pandemic. Most of our dividend income is typically received in April and May, a time at which many companies naturally sought to retain cash to deal with the effects of the pandemic. Our net revenue per share was much reduced at 9.36p per share, compared with 19.08p last year.

In last year's Annual Report I noted that it was the Board's intention to rebalance the dividend payments by increasing the interim dividend and potentially decreasing the final dividend and we duly increased the interim dividend, which was paid on 3 July, to 6.0p per share. We have also previously stated an intention either to maintain or to increase the total annual dividend each year. As we reported at the half year stage in May, the Board discussed the effects of the COVID-19 pandemic in depth, including specifically the effect on our dividend receipts in the current accounting year. We recognise the importance of dividend income for many shareholders and, despite the current challenges, have decided to continue as previously announced. We are therefore proposing a final dividend of 10.5p per share, bringing the total dividends for the year to 16.5p, which is the same as last year.

The combination of the interim dividend already paid and the proposed final dividend for the year will not be covered by net revenue earnings and the Company will use revenue reserves, which have been built up over many years with the intention of providing a buffer in times of stress. The Board continues to monitor the revenue account but I emphasise that we do not set a revenue target for our Investment Manager. Our current intention is to use revenue reserves, and if necessary capital reserves, to maintain the annual dividend at current levels. The Company is operating in an unprecedented environment and therefore our dividend policy will therefore remain under careful and regular review

Gearing

On 5 March 2020 we announced that the borrowing limit on the Company's Japanese Yen revolving credit facility with Scotiabank Europe PLC had increased from Yen 4 billion to Yen 9 billion, equivalent to circa £65 million at exchange rates at the time. Further, up to half of the facility may now be drawn down in Pounds Sterling, US Dollars and/or Euros.

This facility allows a flexible approach to part of the Company's gearing. At the time of increasing the facility limit, the COVID-19 outbreak appeared to be under control but events moved quickly thereafter. Gearing was reduced in the period leading up to the COVID-19-related market sell off. Any increase or decrease in cash and gearing levels is driven primarily by views on the prices of shares in our investment universe and not by views on market direction.

Discount, Shares Buybacks and Share Issuance

The shares ended the financial year trading at a discount of 9.3%, which was narrower than the discount at the same time last year.

Your Board continues to believe that it is in the best interests of shareholders to use share buybacks with the intention of limiting any volatility in the discount. During the accounting year under review, some 4.6 million shares were bought back. We intervened when the Board believed that the discount was unnaturally wide and intend to continue to follow this approach.

Shares are bought back when the discount is wide, with the intention of limiting volatility in the discount. Because we only buy back shares at a discount to the prevailing net asset value per share, continuing shareholders benefit from share buybacks due to a marginal increase in the NAV per share.

Each year, we take powers to issue new shares. These powers would only be used if shares could be issued at, or above, the prevailing NAV per share. Again, the primary purpose of the ability to issue new shares is with a view to containing the volatility of the discount and any new issue would only be made if it were demonstrably beneficial to existing shareholders.

We also seek to stimulate demand for the shares. The Company has a marketing budget which is administered by the Investment Manager to promote the Company and its shares. We promote the Company to a variety of investors and potential investors, from private individuals to professional fund managers and through a variety of traditional and modern media. For more information please visit our website www.aviglobal.co.uk

Management Fees

Fees paid to the Investment Manager have been set at 0.7% ofnet assets for some years. The Board is aware that the Investment Manager's approach requires a lot of resources and that the InvestmenManager meets all third party research costs. Nevertheless, with effect from 1 October 2020 the fee rate will reduce to an annual rate of 0.60% for that proportion of net assets in excess of £1 billion.

The notice period for termination of the investment management agreement has been reduced from twelve months to six months. This change was to bring the notice period into line with other comparable investment trusts and does not indicate any change in the Board's level of support for our Investment Manager.

Management Arrangements

As I reported at the half year stage, when the COVID-19 pandemic developed in the UK our investment Managers implemented their business continuity plan, which had been thoroughly tested in recent years. I am pleased to report that communications by telephone, video and email have remained robust. Communication with investee companies is usually by a mixture of telephone calls and email correspondence, with occasional face to face meetings. While face to face meetings have not been possible in recent months, our investment managers have been able to make full use of video

conferencing and this has proven to be efficient and effective.

I am also pleased to report that the service provided by our Company Secretary and fund administrators at Link was, from our perspective, uninterrupted. I would like to record the Board's thanks to all of our third party service suppliers for maintaining business as usual in these difficult times.

The Board has carefully monitored our key service providers and in particular remains alert to any issues as the amount of time spent working remotely extends well beyond the period that we had initially expected.

Directors

I joined the Board in March 2012 as did Nigel Rich and so March 2021 will be the ninth anniversary of our appointments. The Board has agreed that it would be advisable not to have two Directors retire in the same year and that it would be appropriate to have an orderly succession plan. Nigel Rich will retire from the Board in 2021 an I will retire from the Board in 2022. It is the Company's normal practice that directors retire at an AGM and so Nigel will retire at next year's AGM and I plan to retire at the AGM in 2022. The Nomination Committee will be responsible for the search for suitable replacement Directors.

Reporting and Section 172 of the Companies Act

Regular readers of our annual reports will note that the structure of the Strategic Report and Directors' Report has changed this year, as we are required to make additional disclosures under Section 172 of the Companies Act. I hope that shareholders find these new reports useful in providing an insight into how the Company is managed. I would like to emphasise that despite the different presentation our approach to managing the Company has not changed. All involved are challenged to perform to the best of their abilities and we believe that this is best achieved by working in a culture which is collegiate and supportive.

Annual General Meeting

At the time of writing this Annual Report and meetings in the UK are subject to strict regulations, which could potentially change at short notice. The Board would normally welcome the Annual General Meeting (AGM) as an opportunity to present to you on the Company's strategy and performance and listen and respond to your questions in person.

However, the health of the Company's shareholders, as well as of staff who would normally attend the meeting, is of paramount importance, as is complying with regulations in light of the current situation, the Board has decided that this year's AGM will be a closed meeting, with only essential staff in attendance and all voting by proxy.

Recognising that the AGM is an important forum for shareholders to hear from the Board and the Investment Manager and to ask questions, this year we have made the following arrangements:

• On 27 November 2020 an audio / visual presentation will be made available on our website www.aviglobal.co.uk

• If you have any questions about the Annual Report, the investment portfolio or any other matter relevant to the Company, please write to us either via email at [e-mail] or by post to AVI Global Trust PLC, 65 Gresham Street, London, EC2V 7NQ

• We will post on our website on 14 December 2020 a list of questions received and our replies to your questions. Please note that to protect your personal information the parties asking questions will not be identified on the website.

I urge you to submit your proxy votes in good time for the meeting, following the instructions enclosed with the proxy form.

As well as setting up a forum to ask questions that you might normally raise at the AGM I remain available at any time to answer any questions from shareholders and you can write to me via the independent Company Secretary, whose address is on the inside back cover of the Annual Report and Accounts.

We hope to see shareholders in person at next year's AGM.

Articles of Association

In order to provide the Board with greater flexibility going forward and to ensure shareholder participation in future AGMs, the Company is proposing that amended Articles of Association are adopted

at the AGM this year. The principal amendments being proposed to the Articles of Association are to enable the Company to hold shareholder meetings using electronic means (as well as physical shareholder meetings or hybrid meetings). Although the new Articles would permit shareholder meetings to be conducted by electronic means, the Directors have no present intention of holding a virtualonly meeting unless Government restrictions require them to do so.

Outlook

Our investment performance in the second half of the year under review was very strong and our Investment Manager sets out in their report the view that there remains a high level of unrealised value in the portfolio which provides grounds for optimism. On a more cautious note, though, some stock markets have been very strong in recent months, assisted by large amounts of cash in the system as governments around the world seek to stimulate demand to limit the damage caused by the COVID-19 pandemic. While we always emphasise that our investment mandate is to seek total returns with no income target, the fact that many companies are reviewing or have already cut their dividends is a cause for concern and it is obvious that it will take the world some considerable time to recover from the effects of the measures taken to curb the spread of COVID-19.

We remain encouraged by the Investment Manager's continued focus on unrealised value and their ability to continue to find interesting and, we trust, rewarding investments.

Susan Noble

Chairman

12 November 2020

KEY PERFORMANCE INDICATORS

The Company's Board of Directors meets regularly and at each meeting reviews performance against a number of key measures.

In selecting these measures, the Directors considered the key objectives and expectations of typical investors in an investment trust such as the Company.

NAV total return*

Company	1 Year	10 Years (Annualised)
	0.0%	6.9%

The Directors regard the Company's NAV total return as being the overall measure of value delivered to shareholders over the long term. Total return reflects both the net asset value growth of the Company and also dividends paid to shareholders. The Investment Manager's investment style is such that performance is likely to deviate materially from that of any broadly based equity index. The Board considers the most useful comparator to be the MSCI All Country World ex-US Index. Over the year under review, the benchmark decreased by 1.8% on a total return basis and over ten years it has increased by 6.1% on an annualised total return basis.

A full description of performance and the investment portfolio is contained in the Investment Review, in this Annual Report.

Discount*

Year end	30 September 2020	30 September 2019
	9.3%	10.9%
High for the year	13.3%	11.2%
Low for the year	5.6%	7.2%

The Board believes that an important driver of an investment trust's discount or premium over the long term is investment performance. However, there can be volatility in the discount or premium. Therefore, the Board seeks shareholder approval each year to buy back and issue shares with a view to limiting the volatility of the share price discount or premium.

During the year under review, no new shares were issued and 4.6m shares were bought back and placed into treasury, adding an estimated 0.5% to net asset value per share to the benefit of continuing shareholders. The shares were bought back at a weighted average discount of 10.5%.

Ongoing expenses ratio*

Year ended 30 September 2020	Year ended 30 September 2019
0.89%	0.85%

The Board continues to be conscious of expenses and aims to maintain a sensible balance between good service and costs.

In reviewing charges, the Board's Management Engagement Committee reviews in detail each year the costs incurred and ongoing commercial arrangements with each of the Company's key suppliers. The majority of the ongoing expenses ratio is the cost of the fees paid to the Investment Manager. This fee is reviewed annually. Further information is contained in the Chairman's Statement above.

For the year ended 30 September 2020, the ongoing expenses ratio was 0.89%, up slightly from the previous year.

The Board notes that the UK investment management industry uses various metrics to analyse the ratios of expenses to assets. In analysing the Company's performance, the Board considers an Ongoing Expenses Ratio which compares the Company's own running costs with its assets. In this analysis the costs of servicing debt and certain non-recurring costs are excluded, as these are accounted for in NAV Total Return and so form part of that KPI. Further, in calculating a KPI the Board does not consider it relevant to consider the management fees of any investment company which the Company invests in, as the Company is not a fund of funds and to include management costs of some investee companies but not of others may create a perverse incentive for the Investment Manager to favour those companies which do not have explicit management fees. The Board has therefore chosen not to quote an Ongoing Charges Ratio per the AIC's guidance as part of its KPIs but has disclosed an Ongoing Charges Ratio in the Glossary below.

* For definitions, see Glossary below.

Principal Risks

When considering the total return of the investments, the Board must also take account of the risk which has been taken in order to achieve that return. There are many ways of measuring investment risk, and the Board takes the view that understanding and managing risk appropriately is much more important than setting any numerical target.

In running an investment trust we face different types of risk and some are more "acceptable" than others. The Board believes that shareholders should understand that, by investing in a portfolio of equity investments invested internationally and with some gearing, they accept that there may be some loss in value, particularly in the short term. That loss in value may come from market movements and/or from movements in the value of the particular investments in our portfolio. We aim to keep the risk of loss under this particular heading within sensible limits, as described below. On the contrary, we have no tolerance for the risk of loss due to theft or fraud.

The Board looks at risk from many different angles, an overview of which is set out below. The Directors carry out robust and regular assessments of the principal risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity, and did so during the year under review. The approach to monitoring and controlling risk is not rigid. The Board aims to think not only about the risks that it is aware of and has documented, but also of emerging and evolving risks. The Board does not believe that managing risk is solely the job of someone assigned to the task but that of everyone involved in the management of the Company: the Board, the Investment Manager, the Administrators and other service providers all have a role in thinking about risk,challenging perceptions and to be alert to emerging risks. The objective of these assessments is not to be prescriptive, but to understand levels of risk and how they have changed over time. The purpose of this focus is to ensure that the returns earned are commensurate with the risks assumed.

The Board has assessed the risks which the Company faces under a number of headings. A summary of the key risks and mitigating actions is set out in the table below. Shareholders should be aware that no assessment of this nature can be guaranteed to predict all possible risks; the objective is to assess the risks and determine mitigating actions. This statement is particularly apposite for the year under review; when the last Annual Report was written few people had heard of the COVID-19 virus.

Principal and Emerging Risks	Risk Tolerance and Mitigating Actions
Pandemic The novel COVID-19 virus was first identified in China in late 2019 and, despite efforts to contain the spread of COVID-19, outbreaks occurred around the world in the first quarter of 2020. A pandemic such as this affects both (i) the management and operations of the Company and (ii) the Company's investments.	In seeking reassurance on the continuing operation of the Company, the Board worked closely with the Investment Manager and the various external suppliers to ensure that the portfolio could continue to be managed effectively and the Company could continue to operate despite restrictive measures on movement imposed to contain the outbreak. The Investment Manager focused its attention on the likely effects of the outbreak on investee companies in the first quarter of 2020. The Board notes that the Investment Manager was able to execute purchases and sales as usual at the height of the pandemic and was reassured by the Investment Manager's ability to continue to operate "business as usual". The existing risk management mechanism was used to good effect and in particular the detailed risk matrix which the Audit Committee maintains was effective in identifying areas of the Company's operations which may be affected by measures implemented to contain the pandemic. While the Company and its suppliers have dealt well so far with the effects of the pandemic, the Board remains alert to the continuing risks and to the possibility of further issues caused by prolonged restrictions on movement. The Board will continue to monitor the situation closely and will take action if and when necessary .
Loss of value in the portfolio The market or the Company's portfolio could suffer a prolonged downturn in performance. There will be periods when the investment strategy underperforms in comparison to its benchmark and its peer group and, potentially, when it results in a decline in value. The net asset value will be affected by general market conditions which in turn can be affected by extraneous events such as the COVID-19 pandemic, the US-China trade war, the protests in Hong Kong and Brexit.	The Board accepts that there is a risk of loss of value by investing in listed equities, particularly in the short term. The Board monitors performance at each Board meeting, and reviews the investment process thoroughly at least annually. The Investment Manager has a clear investment strategy, as set out below. Conventional wisdom holds that the most effective way of reducing risk is to hold a diversified portfolio of assets. The Company typically holds 25-35 core positions. It is important to note that, in line with its investment objective, the Company's holdings are mostly in stocks which are themselves owners of multiple underlying businesses. Thus, the portfolio is much more diversified on a look-through basis than if it were invested in companies with a single line of business. This diversification is evident at country, sector and currency levels. A key element of the Investment Manager's approach is to consider the way in which the portfolio is balanced and to ensure that it does not become overly dependent on one business area, country or investment theme. During the year under review the Investment Manager paid careful attention to the possible effects of the developing COVID-19 pandemic and a description of their actions is contained in the Investment Manager's review below. The Company, through the Investment Manager's compliance function and the Administrator's independent checks, has a robust system for ensuring compliance with the investment mandate.
Gearing While potentially enhancing returns over the long term, the use of gearing makes investment returns more volatile and exacerbates the effect of any fall in portfolio value. There are covenants attached to the Loan Notes and bank debt; in extreme market conditions, these could be breached and require early repayment, which could be expensive.	The Board decided to take on borrowing because it believes that the Investment Manager will produce investment returns which are higher than the cost of debt over the medium to long term, and, therefore, that shareholders will benefit from gearing. In taking on debt, we recognise that higher levels of gearing produce higher risk. While gearing should enhance investment performance over the long term, it will exacerbate any decline in asset value in the short term. It is possible (but, on the basis of past returns, it is considered unlikely) that the investment returns will not match the borrowing cost over time, and therefore the gearing will be dilutive. The Board manages this risk by setting its gearing at a prudent level. The covenants are set at levels with substantial headroom. In common with other investment trusts, we also mark the value of debt to its estimated fair value for the purpose of measuring investment performance as part of the Key Performance Indicators, which makes the value ascribed to the debt subject to changes in interest rates and so makes our published NAV per share more volatile than would otherwise be the case. However, if we continue with the debt to maturity, it will be repaid at its par value, notwithstanding any changes in fair value over its life. The value of the Euro tranche of the Loan Notes and the Japanese Yen loan will fluctuate with currency movements and, if the exchange rate of those currencies relative to Sterling increases, then in isolation this will have the effect of reducing NAV per share. However, we also have assets denominated in Euros and Japanese Yen which will increase in value in Sterling terms if the exchange rates increase and so this should offset ("naturally hedge") the debt position.
Foreign exchange The portfolio has investments in a number of countries and there is a risk that the value of local currencies may decline in value relative to Sterling.	Foreign exchange risk is an integral part of a portfolio which is invested across a range of currencies. This risk is managed by the Investment Manager mainly by way of portfolio diversification, but the Investment Manager may, with Board approval, hedge currency risk. The Company did not engage in any currency hedging during the year under review and has not done so in recent years. However, as described above, borrowing in foreign currencies provides a natural hedge against currency risk in situations where the Company holds investments denominated in the borrowed currency. As at 30 September 2020, the Company had EUR50m of borrowing and investments denominated in Euros whose value exceeded that of this borrowing. Furthermore, the Company had JPY4,000m of borrowing and investments denominated in Japanese Yen whose value exceeded that of this borrowing.
Liquidity of investments While the investment portfolio is made up predominantly of liquid investments, there is a possibility that individual investments may prove difficult to sell at short notice.	The Investment Manager takes account of liquidity when making investments and monitors the liquidity of holdings as part of its continuing management of the portfolio. The liquidity of holdings is monitored and reported at regular Board meetings. It is important to note that the potential for the return of capital from investee companies by means of special dividends and the partial or full redemption of shares is a key element of the Investment Manager's strategy, and so trading on a stock exchange is not the only source of liquidity in the portfolio.
Key staff Management of the Company's investment portfolio and other support functions rely on a small number of key staff.	The Investment Manager and key suppliers have staff retention policies and contingency plans. The Board's Management Engagement Committee reviews all of its key suppliers at least once per year.
Discount rating The shares of investment trusts frequently trade at a discount to their published net asset value. The value of the Company's shares will additionally be subject to the interaction of supply and demand, prevailing net asset values and the general perceptions of investors. The share price will accordingly be subject to unpredictable fluctuations and the Company cannot guarantee that the share price will appreciate in value. The Company may become unattractive to investors, leading to pressure on the share price and discount. This may be due to any of a variety of factors, including investment performance or regulatory change.	Any company's share price is affected by supply and demand for its shares and fluctuations in share price are a risk inherent in investing in the Company. In seeking to mitigate the discount, the Board looks at both supply and demand for the Company's shares. The Board seeks to manage the risk of any widening of the discount by regularly reviewing the level of discount at which the Company's shares trade. If necessary and appropriate, the Board may seek to limit any significant widening through measured buybacks of shares. The Investment Manager has a comprehensive marketing, investor relations and public relations programme which seeks to inform both existing and potential investors of the attractions of the Company and the investment approach. We have a marketing budget to meet third party costs in marketing our shares.
Outsourcing The Company outsources all of its key functions to third parties, in particular the Investment Manager, and any control failures or gaps in the systems and services provided by third parties could result in a financial loss or damage to the Company.	The Board insists that all of its suppliers (and, in particular, the Investment Manager, the Custodian, the Depositary, the Company Secretary, the Administrator and the Registrar) have effective control systems which are regularly reviewed. During the year under review, close attention was paid to the ability of all suppliers to maintain a good level of service while dealing with the changes to operations necessitated by the COVID-19 pandemic. The Board assesses thoroughly the risks inherent in any change of supplier, including the internal controls of any new supplier.
Brexit In the second half of 2020 it became increasingly likely that the UK may come to the end of the post-Brexit transition phase without a comprehensive trade agreement with the EU.	As the vast majority of the underlying assets of investee companies are either based outside the UK or derive most or all of their profits outside the UK, the economic damage which Brexit may cause to the UK is not expected directly to affect the value of the Company's assets to any great extent. However, a "no-deal" scenario is likely to affect the exchange rate between sterling and foreign currencies, which would lead to volatility in the Company's net asset value. Foreign exchange risk is discussed above
Climate change As evidence of the effects of climate change grows, there is increasing focus on investment companies' role in influencing investee companies' approach to climate change.	The Board maintains a strategic overview of the portfolio, including ESG criteria. Management of the portfolio, including the integration of ESG considerations into portfolio construction is delegated to AVI, the Investment Manager. As a responsible steward of assets, AVI fully supports policies and actions implemented by its portfolio companies to support a sustainable environment. AVI engages actively with its portfolio companies, and looks to understand how each company approaches stewardship of the environment, as well as seeking to identify any unacceptable practices that are detrimental to the environment or climate.

The principal financial risks are examined in more detail in note14   to the financial statements.

Environmental, Social and Governance ('ESG') Issues

Both the Board and AVI recognise that social, human rights, community, governance and environmental issues have an effect on its investee companies.

The Board supports AVI in its belief that good corporate governance will help to deliver sustainable long-term shareholder value. AVI is an investment management firm that invests on behalf of its clients and its primary duty is to produce returns for its clients. AVI seeks to exercise the rights and responsibilities attached to owning equity securities in line with its investment strategy. A key component of AVI's investment strategy is to understand and engage with the management of public companies. AVI's Environmental, Social and Governance Policy, which is summarised on our website, recognises that shareholder value can be enhanced and sustained through the good stewardship of executives and Boards. It therefore follows that in pursuing shareholder value AVI will implement its investment strategy through proxy voting and active engagement with management and Boards.

The Company is an investment trust and so its own direct environmental impact is minimal. The Company has no greenhouse gas emissions to report from its operations, nor does it have responsibility for any other emissions-producing sources under the Companies Act 2006 (Strategic Report and Directors' Reports) Regulations 2013.

The Company has no employees. The Directors are satisfied that, to the best of their knowledge, the Company's principal suppliers comply with the provisions of the UK Modern Slavery Act 2015.

The Directors do not have service contracts. There are five Directors, three male and two female. Further information on the Board's policy on recruitment of new Directors is contained in the full Annual Report .

AVI's full ESG Policy can be found at www.aviglobal.co.uk/how-to-invest/investor-information/esg.policy/

Future Strategy

The Board and the Investment Manager have long believed in their focus on investment in high-quality undervalued assets and that, over time, this style of investment has been well rewarded.

The Company's overall future performance will, inter alia, be affected by: the Investment Manager's decisions; investee companies' earnings, corporate activity, dividends and asset values; and by stock market movements globally. Stock markets are themselves affected by a number of factors, including: economic conditions; central bank and other policymakers' decisions; political and regulatory issues; and currency movements.

The Company's performance relative to its peer group and benchmark will depend on the Investment Manager's ability to allocate the Company's assets effectively, and manage its liquidity or gearing appropriately. More specifically, the Company's performance will be affected by the movements in the share prices of its investee companies in comparison to their own net asset values.

The overall strategy remains unchanged.

Approval of Strategic Report

The Strategic Report has been approved by the Board and is signed on its behalf by:

Susan Noble

Chairman

12 November 2020

TEN LARGEST EQUITY INVESTMENTS

The top ten equity investments make up 52.4% of the portfolio*, with underlying businesses spread across a diverse range of sectors and regions.

All discounts are estimated by AVI at 30 September 2020, based on AVI's estimate of each company's net asset value.

* For definitions, see Glossary below.

1.  PERSHING SQUARE HOLDINGS

Classification: Closed-end Fund

Valuation: £85.2m

% of portfolio: 8.9%

Discount: -30%

A Euronext-listed closed-end fund managed by a high-profile activist manager. The fund owns a concentrated portfolio of quality US companies. Pershing trades on a 30% discount to NAV, which we regard as unsustainably wide for a portfolio of large-cap, liquid securities, particularly given the manager's activist strategy.

2.  OAKLEY CAPITAL INVESTMENTS

Classification: Closed-end Fund

Valuation : £71.4m

% of portfolio: 7.4%

Discount : -29%

A London-listed fund which invests in the private   funds run by Oakley Capital, a UK-based private   equity firm. Oakley owns a portfolio of fast - growing   businesses in the consumer, education and   TMT sectors. Its process focuses on less intermediated markets complex   deals (e.g. carve-outs), which avoids the auction   process, sourced by a network of entrepreneurs   who believe in the Oakley philosophy. We believe the discount will narrow as Oakley continues to generate NAV outperformance, and adopts improved standards of corporate governance.

3.  SOFTBANK GROUP

Classification: Japan

Valuation: £66.9m

% of portfolio: 7.0%

Discount: -56%

A Tokyo-listed holding company run by the well-known entrepreneur, Masayoshi Son. Key assets include SoftBank Corp (a telecoms business), Alibaba, T-Mobile US and Arm Holdings. SoftBank's wide discount to NAV appears excessive given recently announced plans to dispose of a large amount of assets and deploy the proceeds to reduce gearing and conduct a NAV-accretive buyback.

4.  SONY CORP

Classification: Japan

Valuation : £52.2m

% of portfolio: 5.5%

Discount : -40%

A Tokyo-listed company with four "crown jewel" businesses: Gaming, Music, Pictures and Images & Sensors. Despite these attractive businesses, Sony trades on a discount of 40% to our estimate of NAV. We believe this reflects the complexity of the conglomerate structure, which obscures the value on offer and creates misconceptions. There are several ways to unlock this value and tighten the discount to NAV.

5.  FONDUL PROPREITATEA

Classification: Closed-end Fund

Valuation : £45.4m

% of portfolio: 4.7%

Discount : -19%

A Bucharest- and London-listed closed-end fund originally set up to provide restitution to Romanian citizens whose property was seized by the Romanian Communist government. Fondul provides exposure to some of Romania's most attractive utility and infrastructure assets, including Hidroelectrica, ENEL's Romanian distribution subsidiaries, Bucharest Airport and OMV Petrom. The fund's investment policy is to distribute all excess cash and realisation proceeds to shareholders via dividends and buybacks, and offers the potential for several corporate events to unlock value and help narrow the 19% discount

6.  KINNEVIK

Classification: Holding Company

Valuation: £42.0m

% of portfolio: 4.4%

Discount: -6%

The Stockholm-listed holding company of the Stenbeck family. Kinnevik's increased focus on early-stage investments in digitally enabled businesses has positioned it attractively for the future. Kinnevik's stated policy of distributing excess capital argues for a structurally tighter discount, in our view. We believe that outsized returns can be earned by investing capital alongside a long-term oriented family with a history of value creation.

7.  THIRD POINT INVESTORS

Classification: Closed-end Fund

Valuation: £41.3m

% of portfolio: 4.3%

Discount: -23%

A London-listed closed-end fund run by a high-profile activist manager. The fund invests in both long and short equity and credit, with a long equity bias. The fund trades on a discount of 23%, which we view as unsustainably wide given Loeb's reputation as an activist investor.

8.  KKR

Classification: Holding Company

Valuation: £ 35.3 m

% of portfolio: 3.7 %

Discount: -29%

A US-listed alternative asset manager with c. USD290 billion of assets under management. KKR is one of the largest companies in an industry with appealing structural characteristics, underpinned by a "lower-for-longer" interest rate environment which is driving increased institutional demand for alternative assets.

9.  EXOR

Classification: Holding Company

Valuation: £ 31.4 m

% of portfolio: 3.3 %

Discount: -43%

EXOR is an Italian-listed holding company run by the Agnelli family, which traces its roots back to the formation of FIAT in 1899. It has exposure to four main assets, three of which are listed: Fiat Chrysler Automobile, Ferrari and CNH Industrial, and one unlisted: PartnerRe. The Agnelli family has a strong history of value creation and, by aligning investors capital with theirs, believe there is a good prospect of achieving outsized returns .

10.  PROSUS

Classification: Holding Company

Valuation: £31.1m

% of portfolio: 3.2%

Discount: -34%

Euronext-listed holding company whose key asset is a 31% in stake in Tencent, the Chinese technology conglomerate best known for its ubiquitous (in China) WeChat app, and Fortnite, the highly successful video game developed by Epic Games. Tencent operates across several attractive areas, including digital advertising, video game publishing, mobile payments, media streaming, and e-commerce.

INVESTMENT PORTFOLIO

AT 30 SEPTEMBER 2020

Company	Portfolio of classification	% of  investee  company	IRR  (%, GBP)1	ROI  (%, GBP)2	Cost  £'0003	Valuation £'000	% of  assets less   current   liabilities#
Pershing Square Holdings	Closed-end Fund	1.0%	20.6%	34.4%	62,551	85,232	8.9%
Oakley Capital Investments	Closed-end Fund	14.9%	20.8%	47.4%	50,155	71,354	7.4%
SoftBank Group	Japan	0.1%	54.5%	28.7%	52,056	66,906	7.0%
Sony Corp	Japan	0.1%	29.2%	34.6%	37,959	52,188	5.5%
Fondul Proprietatea	Closed-end Fund	2.9%	19.2%	75.6%	28,299	45,444	4.7%
Kinnevik	Holding Company	0.6%	64.6%	82.5%	20,365	42,027	4.4%
Third Point Investors	Closed-end Fund	5.1%	3.5%	10.0%	38,330	41,315	4.3%
KKR and Co	Holding Company	0.2%	95.4%	33.2%	26,723	35,312	3.7%
EXOR	Holding Company	0.3%	6.2%	17.7%	29,953	31,395	3.3%
Prosus	Holding Company	0.0%	25.4%	8.5%	28,687	31,080	3.2%
Top ten investments					375,078	502,253	52.4%
Investor AB 'A'	Holding Company	0.2%	14.1%	119.1%	6,662	28,529	3.0%
Jardine Strategic	Holding Company	0.2%	-14.2%	-19.0%	48,539	27,793	2.9%
Fujitec*	Japan	1.7%	24.8%	43.7%	16,449	25,450	2.7%
Godrej Industries	Holding Company	1.7%	-13.0%	-14.9%	29,770	25,350	2.6%
VNV Global	Holding Company	3.9%	93.7%	18.0%	21,604	25,125	2.6%
Christian Dior	Holding Company	0.0%	4.0%	1.5%	23,874	24,124	2.5%
Tetragon Financial	Closed-end Fund	2.6%	0.7%	2.2%	32,878	23,730	2.5%
doValue	Closed-end Fund	3.5%	3.1%	2.8%	27,551	21,783	2.3%
Aker ASA	Holding Company	0.8%	17.3%	113.0%	18,343	20,287	2.1%
Swire Pacific 'B'	Holding Company	1.0%	-10.9%	-28.9%	40,329	20,035	2.1%
Top twenty investments					641,077	744,459	77.7%
JPEL Private Equity	Closed-end Fund	18.4%	17.8%	73.0%	11,816	19,103	2.0%
Pasona Group*	Japan	3.8%	11.1%	19.3%	16,067	18,433	1.9%
Symphony International Holdings	Closed-end Fund	15.7%	2.4%	8.6%	26,636	17,168	1.8%
SK Kaken*	Japan	1.8%	-10.4%	-16.3%	19,056	15,464	1.6%
Kanaden*	Japan	4.2%	8.2%	20.5%	11,280	13,070	1.3%
Toshiba*	Japan	0.1%	n/a	n/a	11,944	10,341	1.1%
NS Solutions*	Japan	0.5%	32.1%	13.2%	9,097	10,274	1.1%
Hipgnosis Songs Fund 'C'	Closed-end Fund	1.2%	10.2%	1.7%	10,000	10,200	1.1%
Daiwa Industries*	Japan	2.8%	-6.3%	-14.9%	12,394	9,913	1.0%
Konishi*	Japan	2.1%	1.2%	1.6%	9,759	9,674	1.0%
Top thirty investments					779,126	878,099	91.6%
Teikoku Sen-I*	Japan	1.8%	16.5%	33.9%	7,077	9,438	1.0%
DTS*	Japan	1.1%	-2.6%	-1.4%	9,489	9,280	1.0%
Toagosei*	Japan	0.8%	1.1%	1.7%	9,161	8,951	0.9%
Digital Garage*	Japan	0.7%	23.1%	24.0%	7,175	8,530	0.9%
Naspers	Holding Company	0.0%	-8.1%	-3.2%	8,535	8,234	0.8%
Kato Sangyo*	Japan	0.7%	4.8%	12.5%	6,821	7,593	0.8%
GP Investments	Closed-end Fund	16.5%	-16.8%	-54.4%	16,162	7,353	0.8%
Sekisui Jushi*	Japan	1.0%	9.2%	16.1%	6,631	6,821	0.7%
Vietnam Phoenix Fund 'C'	Closed-end Fund	16.0%	19.5%	62.9%	5,775	5,602	0.6%
Bank of Kyoto*	Japan	0.1%	n/a	n/a	3,052	3,467	0.4%
Top forty investments					859,004	953,368	99.5%
Hipgnosis Songs Fund 'Ords'	Closed-end Fund	1.2%	10.2%	1.7%	3,000	3,026	0.3%
Better Capital (2009)	Closed-end Fund	2.1%	23.8%	46.6%	1,962	2,616	0.3%
Ashmore Global Opportunities - GBP	Closed-end Fund	8.5%	1.4%	2.4%	701	394	0.0%
Eurocastle Investment	Closed-end Fund	3.2%	3.1%	2.8%	380	305	0.0%
Total net equity exposure					865,047	959,709	100.1%
Net current assets and liabilities						(1,040)	-0.1%
Total assets less current liabilities						958,669	100.0%

* Constituent of Japanese Special Situations basket.

¹ Internal Rate of Return. Calculated from inception of AVI Global's investment. Refer to Glossary below.

² Return on investment. Calculated from inception of AVI Global's investment. Refer to Glossary below.

³ Cost (refer to Glossary below) plus notional cost of long and short swap positions.

^# Refer to Glossary below

.

INVESTMENT MANAGER'S REVIEW

ABOUT ASSET VALUE INVESTORS

Our Edge

Asset Value Investors specialises in finding companies which have been overlooked or under-researched by other investors. Investments that for one reason or another are priced below their true value but can be made into profitable performers. AVI believes its strategy and investment style differentiate it from other managers in the market because of the following:

1.  35 years' experience of long-term outperformance following our distinctive investment style (annualised NAV total returns of 11.3% since 1985*).

2.  AVI actively looks for the catalyst within a company which will narrow the discount.

3.  AVI promotes active involvement to improve corporate governance and to unlock potential shareholder value.

* Refer to Glossary below

The aim of AVI is to deliver superior investment returns. AVI specialises in investing in securities that for a number of reasons may be selling on anomalous valuations.

Our focus on buying high-quality businesses trading at wide discounts to their net asset value has served us well over the long term. There are periods of time, however, when our style is out of favour and the types of companies in which we invest are ignored by the broader market. This requires us to be patient and to remain true to our style, so that when other investors begin to appreciate the value in those companies, we are well placed to benefit. In the short term, this means that there could be some volatility in our returns. However, we are confident that we own high-quality businesses, which are trading on cheap valuations.

Members of the investment team at AVI invest their own money in funds which they manage. As at 30 September 2020, AVI's investment team owned 223,534 shares in AVI Global Trust plc.

OVERVIEW OF AVI'S INVESTMENT PHILOSOPHY

Introduction to the strategy

Asset Value   Investors invests in overlooked and under-researched companies, which own quality assets, and trade at discounts to NAV. This philosophy leads us to invest in family-controlled holding companies, closed-end funds and special situations which, currently, we find in the theme of Japanese cash-rich operating companies.

Our research process involves conducting detailed fundamental research in order to: (a) understand the drivers of NAV growth; and (b) assess the catalysts for a narrowing discount. We often engage actively with management in order to provide suggestions for improvements that we believe could help narrow the discount or improve operations .

Holding companies

When we consider a holding company as an investment, we seek several characteristics. The first is a high-quality portfolio of listed and/or unlisted businesses with the potential for sustained, above-average, long-term growth. Many of the underlying companies that we have exposure to are world-famous brands, and include: Ferrari, EQT, AstraZeneca, Mandarin Oriental, Zalando, Alibaba, Tencent, LVMH, Livongo and many more.

Secondly, we look for the presence of a controlling family or shareholder with a strong track record of capital allocation and returns in excess of broader equity markets. Long-term shareholders provide strategic vision; many of our holding companies have been family-controlled for generations. This combination of attractive, quality assets managed by long-term capital allocators creates the potential for superior NAV growth.

Finally, we invest at a discount to NAV, preferably with a catalyst in place to narrow the discount. This provides an additional source of returns. We estimate that historically about three-quarters of our returns from holding company investments have come from NAV growth and one-quarter from discount tightening.

Closed-end funds

The universe of listed closed-end funds is a rich and diverse one, with almost 300 investable funds in London alone, of which approximately 200 are trading at a discount.

Similar to holding companies, we look for certain qualities when we consider a closed-end fund investment. Most importantly, we look for portfolios of high-quality assets (both listed and unlisted) with good growth potential. Our portfolio of closed-end funds gives us exposure to many quality companies, such as Chipotle Mexican Grill, Starbucks, Hilton Worldwide, Minor International, Prudential, WebPros, Career Partner, Babylon and BlaBlaCar.

We also focus to a great extent on the discount to NAV at which the closed-end fund trades. In a nuanced distinction from holding companies, we usually insist on a high probability of the discount narrowing or vanishing entirely before we will consider making an investment. In accordance with this, our stakes in closed-end funds are larger, and we engage with management, Boards and other shareholders to enact policies to help narrow discounts and boost shareholder returns. Historically, our portfolio of closed-end funds has generated half of its returns from discount narrowing.

Japanese cash-rich operating companies

This portion of the portfolio is currently invested in 15 Japanese operating companies which have, on average, 92% of their market value in cash and listed securities.

Japanese companies have a reputation for overcapitalised balance sheets, but we believe that the winds of change are blowing in Japan. The Japanese government has been championing efforts to improve corporate governance and enhance balance-sheet efficiency, and this programme is beginning to have an effect. Major pension funds have signed up to a new Stewardship Code, Boards of Directors are guided by the principles of an updated Corporate Governance Code, and there is an identifiable uptick in the presence of activist investors on Japanese share registers.

We can see evidence of this change in increasing payout ratios, buybacks, and more independent directors. We believe that this basket of stocks stands to benefit from this powerful trend, and that the market will assign a much higher multiple to these companies if it reassesses the probability of the excess cash and securities being returned to shareholders. We are active in pursuing this outcome, and engage continuously with the Boards and management of our holdings to argue for a satisfactory outcome for all stakeholders.

The focus is on quality, cash-generative businesses with low valuations (our current portfolio trades on just 5x EV/EBIT). These are the sorts of businesses that one should be happy to own; as such, we can afford to take a long-term view on our holdings as we engage with Boards and management to create value for all stakeholders.

Summary

Our strategy centres upon investing in companies which own diversified portfolios of high-quality assets. In each case, we have sought to invest in companies where the market has misunderstood or overlooked the value on offer, and where our analysis shows that there is a reasonable prospect of this being corrected.

The historic returns from this strategy have been strong and came from a combination of discount narrowing and NAV growth.

PERFORMANCE REVIEW

It has been a year of two halves - or, perhaps more accurately, a play in three acts. Of course, the COVID-19 pandemic took centre stage, but there was no shortage of supporting roles, including the US-China trade negotiations, China's enactment of a national security law in Hong Kong, the OPEC+ dispute and subsequent oil price decline, and Brexit.

The first part of the financial year was characterised by low volatility and the steady upward march of markets. The second act, lasting from mid-February to mid-March, began when investors' view of COVID-19 and its implications turned rapidly and deeply negative. Markets plummeted by approximately one-third during this four-week period; the pace and severity of the sell-off was breath-taking, exceeding even that of the global financial crisis. One would need to look back over thirty years to find declines of similar magnitude in such a short space of time. Finally, almost as quickly as it started, the rout ended, and markets began to recover, as the extraordinary efforts of governments and central banks underwrote the worst of the economic consequences. A strong rebound ensued, and by the end of the financial year, the MSCI ACWI ex-USA Index was down just -1.8% in GBP terms.

Your Company experienced a difficult first half, with a widening portfolio discount compounding NAV declines, leading to underperformance. This behaviour is in line with how we expect the portfolio to act during times of market stress. As we noted in AGT's half-year report, the wider portfolio discount has in the past been a deferred store of outperformance. It was pleasing that, in such a short space of time, this proved correct: as markets rebounded, a tightening of the portfolio discount in the latter half of the year provided a powerful tailwind to performance. By the year end, your Company had registered a flat NAV (+0.01%) in total return terms, versus -1.8% from the MSCI ACWI ex-USA Total Return Index. Nonetheless, while discount tightening has been helpful, the portfolio discount, at 35%, remains elevated relative to history and higher than the 33% at the start of the year.

Unprecedented times - crises - are the seeds of opportunity. We are pleased to report that we did not let the (market) crisis go to waste. In the run-up to the COVID-19 selloff, the portfolio's gearing had been lowered which, together with capital raised from reducing or exiting positions, provided us with significant resources to initiate or increase positions in high-quality names trading at knock-down prices. New or significantly increased investment in companies in the portfolio include Kinnevik, Prosus, KKR, Christian Dior, SoftBank Group, and VNV Global. Many of these businesses are very high quality, and boast resilient, growing earnings streams. Overall, the effect has been to tilt your Company's portfolio towards higher quality, more liquid stocks, and decrease exposure to cyclical or economically sensitive ones. Portfolio turnover for the year was c. 39%, versus 27% for the prior year, reflecting this tilt in the portfolio.

This increased emphasis on quality has been rewarding to date, as we estimate that the changes have added c. 6% to returns versus the pre-selloff portfolio.

Active management can prove its worth in market environments such as the one that we have gone through. The ability to seize an opportunity and exploit distressed asset prices can lead to valuable outperformance for investors.

Pivoting to the other side of the portfolio, several of our largest detractors - such as Riverstone Energy and Wendel - have been fully exited. The proceeds from these exits have been used in part to fund the investments discussed in the preceding paragraphs.

Other stocks which detracted this year - such as EXOR, Jardine Strategic, Swire Pacific, and Symphony International - remain in the portfolio. Each owns a portfolio of high-quality companies which have suffered as a result of the pandemic and/or are exposed to out-of-favour sectors including travel & hospitality, automobiles, and Hong Kong property. Looking at your Company as a whole, we believe that the portfolio remains balanced, with multiple potential drivers of performance. In 2020, the two "firing cylinders" driving performance have been discount narrowing and the tilt towards higher-quality companies.

Thinking about future performance, we believe that there are several other cylinders that could drive returns. For example, holdings with exposure to beaten-down assets and sectors - such as the ones discussed in the preceding paragraph. While these assets are not popular now, they retain the potential to deliver significant performance in the future as economies and corporate profitability recover, leading investors to re-assess their prospects.

This balance is, in our view, a sensible approach to portfolio construction when the investing backdrop remains uncertain and unpredictable. Whilst high-growth, digitally-focused businesses have led the rally this year - and your Company has, in part, benefited from this trend - we hope that when economic activity recovers more broadly, the pessimistically priced areas of the stock market will recover and strongly contribute to your Company's returns.

Another cylinder to drive performance is the Japan Special Situations basket where, despite strong recent returns, there remains significant value locked up on company balance sheets. The pace of change in corporate Japan is gathering steam, and we are seeing significant improvements in terms of both balance sheet efficiency and corporate governance. Within AGT's own portfolio, we recorded two significant victories in the acquisition by Toshiba Corp of holdings NuFlare Technology and Toshiba Plant Systems & Services at premiums of 46% and 28%. We continue to engage actively with companies in the basket, and launched two public campaigns this year, targeting Fujitec and Teikoku Sen-I. These four companies were the most important contributors to the Japan Special Situations basket strong performance over the year.

We initiated the Japan Special Situations basket in June 2017, since when the strategy has generated returns of +30%. Despite this strong performance, and the significant progress that we are seeing in Japan, valuations in the basket remain extremely low - the EV/EBIT is just 4.9x, and, on average, net cash and listed securities represents 92% of market value. We believe that as the market begins to accept that changes in corporate Japan's practices are here to stay, and not another false dawn, it will reappraise the value on offer. The Japan Special Situations basket remains poised to generate very attractive risk-adjusted returns from here.

Below we provide more detail on key investments, as well as detailed analyses of the key contributors and detractors to performance over the past 12 months.

Equity Portfolio Value By Market Capitalisation

	2020	2019
	%	%
<£1 billion	35	46
>£1 billion - <£5 billion	26	29
>£5 billion - <£10 billion	14	6
>£10 billion	25	19

PORTFOLIO REVIEW

TOP 20 LOOK-THROUGH COMPANIES

AVI Global Trust invests in holding companies and closed-end funds that in turn invest in listed and unlisted companies. We show below the top 20 holdings on a 'look-through basis', i.e. the underlying companies to which we have exposure. For example, AVI Global Trust owns a stake in SoftBank Group, a Tokyo-listed holding company, that accounts for 7.0% of AVI Global Trust's portfolio (and 7.6% of its NAV). SoftBank's largest holding is Alibaba, a Chinese internet retailer, which accounts for 72% of SoftBank's own NAV. This translates to AVI Global Trust having an effective exposure to Alibaba of 5.5% of AVI Global Trust's NAV. (Please note that AGT's full look-through exposure to Alibaba is 5.7% of NAV as Alibaba is also held by another company in AGT's portfolio.) The table below is an indication of the degree of diversification of the portfolio.

Look-through companies	Parent company	Underlying look-through weight	Look-through holding sector
Alibaba	SoftBank	5.7%	Internet and Direct Marketing Retail
Tencent	Prosus/Nasper's	3.8%	Interactive Media and Services
Fujitec	Fujitec	2.9%	Industrial Machinery
LVMH	Christian Dior SE	2.8%	Apparel, Accessories and Luxury Goods
Hidroelectrica	Fondul Proprietatea	2.4%	Electric Utilities
Sony Technologies	Sony	2.0%	Semiconductors
Zalando	Kinnevik	2.0%	Internet and Direct Marketing Retail
Benefit One	Pasona	1.8%	Human Resource and Employment Services
SK Kaken	SK Kaken	1.8%	Specialty Chemicals
Sony PlayStation	Sony	1.8%	Interactive Home Entertainment
Lowe's	Pershing Square Holdings	1.7%	Home Improvement Retail
Swire Properties	Swire Pacific B	1.7%	Real Estate Operating Companies
Godrej Consumer Products	Godrej Industries	1.5%	Personal Products
Kanaden	Kanaden	1.5%	Trading Companies and Distributors
Restaurant Brands	Pershing Square Holdings	1.5%	Restaurants
Aker BP	Aker	1.5%	Oil and Gas Exploration and Production
Chipotle Mexican Grill	Pershing Square Holdings	1.5%	Restaurants
Ferrari	EXOR	1.3%	Automobile Manufacturers
Agilent	Pershing Square Holdings	1.3%	Life Sciences Tools and Services
Hilton	Pershing Square Holdings	1.2%	Hotels, Resorts and Cruise Lines

PERSHING SQUARE HOLDINGS: HOW THE LOOK-THROUGH ANALYSIS WORKS
Pershing Square Holdings is a Euronext- and London-listed closed-end fund in which AVI Global Trust invests. Although Pershing Square Holdings is just one fund, it has investments in multiple different listed companies, providing your Company's portfolio with exposure to a diversified collection of businesses.
Company Name	Estimated % of Pershing Square Holdings' portfolio	Geography	Sector
Lowe's	20%	United States	Home Improvement Retail
Restaurant Brands	17%	North America	Restaurants
Chipotle Mexican Grill	16%	United States	Restaurants
Agilent	14%	Global	Life Sciences Tools and Services
Hilton Worldwide	14%	Global	Hotels, Resorts and Cruise Lines
Starbucks	10%	Global	Restaurants
Howard Hughes	4%	United States	Real Estate Development
Fannie Mae	3%	United States	Thrifts and Mortgage Finance
Freddie Mac	2%	United States	Thrifts and Mortgage Finance

CONTRIBUTORS

KINNEVIK

Classification: Holding Company

% of porfolio¹: 4.4%

Discount: -6%

% of investee company: 0.6%

Total return on position FY20 (local)²: 38.6%

Total return on position FY20 (GBP): 43.3%

Contribution (GBP)³:313bps

ROI since date of initial purchase⁴: 82.5%

Kinnevik was the most significant contributor to your Company's returns over the past financial year - contributing 313bps. We wrote in last year's Annual Report that, just as it had done many times in the past, Kinnevik was transforming itself once again, into a smaller, more specialist early stage growth investor, and that we had added to the position as the market took its time digesting this evolution. In what was the inaugural year of this "new" Kinnevik, the shares returned an impressive +85% as the NAV grew by +47% on a total return basis, and the discount narrowed from 22% to 6%. AGT added to its position materially during the sell off, subsequently trimming the position on strength.

Kinnevik is exposed to digitally enabled businesses that have benefited immensely from the pull forward in digital adoption due to COVID-19. This is true no more so than in e-commerce and healthcare, with Zalando (43% of NAV) returning +91%, and Livongo (15%) +703%.

Zalando, the online fashion retailer, which, enjoyed +27% sales growth in the second quarter of 2020, benefited from newly introduced social distancing measures which accelerated the adoption of e-commerce, highlighted by the company's addition of more than three million new customers (+20% year on year), the most in a single quarter since 2013. As well as the heightened demand, the current environment incentivises brands to establish partnerships with Zalando, whose management team has been proactive in using its rock-solid balance sheet to extend attractive terms to prospective partners. The beauty in these partnerships is that the more brands that join, the more extensive the platform offering, thereby attracting more customers, which in turn attracts more brands. This flywheel-effect is hugely powerful and helps establish Zalando as the starting point for fashion in Europe. We see a long runway for future growth as e-commerce penetration continues to increase and Zalando pushes into new markets.

The pandemic has also - unsurprisingly - had ramifications for the healthcare sector. The environment has served as a lightning rod for increased adoption of virtual medical services and digital health solutions. This is an area to which Kinnevik has considerable exposure, most notably through Livongo, the US-based chronic disease management company. In August it was announced that Livongo is to merge with Teladoc, the leading US telehealth company. The combined entity will have an unparalleled breadth as a holistic care platform, creating a strong client proposition and producing ample cross-selling opportunities. From Kinnevik's perspective, this deal allows it to crystallise a portion of the 12.5x multiple of invested capital made on Livongo (the deal is comprised of both stock and cash), as well as making it easier to monetise more of its stake in the future. Kinnevik has a total of 20% of its NAV invested in digital health, with Village MD (value-based care), Cedar (billing) and Babylon Health (AI-enabled healthcare), three of the other most exciting future prospects. Indeed, AGT has built a separate position in Swedish holding company VNV Global - another of Babylon's investors - so as to gain more direct exposure.

AGT has also benefited significantly from a narrowing of Kinnevik's discount to single digit levels versus 22% a year ago. Cognisant of the risks of discount widening, and having added to the position during the sell off, we sold approximately one-third of our stake at a sub-10% discount over the summer. With that said, we note that Kinnevik has a stated policy of distributing excess capital, and has distributed 26% of its market cap to shareholders over the last year. As such, a case can be made that Kinnevik warrants a tighter discount than it has traded on historically. Over the coming years it seems quite plausible that Kinnevik could make further large distributions, in the form of Tele2 or Zalando shares. Coupling this with Kinnevik's growing track record for value creation in its unlisted assets, we see continued upside in the shares.

PERSHING SQUARE HOLDINGS

Classification: Closed-end Fund

% of porfolio¹: 8.9%

Discount: -30%

% of investee company: 1.0%

Total return on position FY20 (local)²: 23.8%

Total return on position FY20 (GBP): 20.3%

Contribution (GBP)³: 267bps

ROI since date of initial purchase⁴: 34.4%

Pershing Square Holdings (PSH) was the second-largest contributor, adding 267bps to AGT's returns during the year. The fund generated excellent NAV total returns of +51%, although a widening of the discount from 27% to 30% restricted the share price total return to +45%.

As the COVID-19-induced selloff sent markets into a tailspin, PSH's portfolio materially underperformed the S&P 500 as a result of its higher exposure to lockdown-affected consumer-focused stocks. However, despite this, PSH's NAV performed resiliently led by an extraordinarily successful hedging programme. PSH's manager, foreseeing the economic damage of efforts to "flatten the curve", purchased credit default swaps covering large notional amounts (in excess of $70bn) of European and US predominantly investment grade credits. In a matter of weeks, as the selloff intensified and credit spreads widened, the value of the hedge jumped. Once unwound, a gain of USD2.6 billion was realised across Pershing's funds, a return of c. 100x the premium and commissions paid. This successful hedging endeavour was termed by one analyst as "arguably the greatest trade the UK closed-end industry has ever witnessed", and left PSH in the enviable position of having an enormous amount of capital to deploy into its portfolio of stocks at depressed valuations. Many of PSH's underlying holdings have now reported quarterly earnings, allowing us to assess the impact of lockdowns on their businesses. On the whole, revenues have declined, as might be expected in the current environment - with the notable exception of Lowe's, a beneficiary of greater time spent at home and the subsequent increased demand for DIY home improvements. Earlier in the commentary, we advanced the view that crises sow the seeds of opportunity. This way of thinking has been useful in judging company performance over the past several months. We believe that what will matter most in 2020 is not the quarterly vicissitude of earnings, but rather how businesses dealt with the crisis.

With that in mind, Chipotle (one of PSH's holdings)'s actions during the crisis can serve as an instructive example. Chipotle introduced a number of initiatives during the past six months, including: (1) the introduction of free delivery through the Chipotle app to drive increased use; (2) introducing some "digital only" menu items to encourage customers to convert to ordering online; and (3) availing of real estate that has become available as competitors re-trench, accelerating new store launches with drive-through "Chipotlanes" to capitalise on changing dining habits. We like management's opportunistic mindset and believe that Chipotle's actions have turned a dismal economic environment into a strategic advantage.

PSH ended the year on a 30% discount, which appears anomalous given the quality of the portfolio; strong performance over the past two years; the manager's actions during the crisis, showing that the fund can offer downside protection, countering the criticism that investors are paying hedge fund-like fees for a long-only portfolio; and the NAV-accretive buyback programme (although, disappointingly, this has not been active of late).

The possibility of PSH's inclusion in the FTSE 100 index provides another potential catalyst for a tighter discount, as a result of the passive buying that such an event would trigger. PSH's discount tightened in August in the run-up to its potential inclusion in the index in the September quarterly review. Although PSH missed out this time round (and gave up its gains from discount tightening in response), it is likely a case of "when" rather than "if" it will enter the index should its strong performance continue.

JAPAN SPECIAL SITUATIONS*

Classification: Japan

% of porfolio¹: 17.4%

Discount: -39%

% of investee company: n/a

Total return on position FY20 (local)²: 13.1%

Total return on position FY20 (GBP): 10.2%

Contribution (GBP)³: 196bps

ROI since date of initial purchase⁴: 30.1%

Our Japan Special Situations basket was formed in 2017 composed of a selection of high-quality, over-capitalised small-cap Japanese companies. Continued improvements in corporate governance were a boon to the basket's performance over the year, which returned +10% vs +2% for the MSCI Japan Small Cap Index (in GBP terms) and contributed 199bps to returns.

Within the basket the key contributors were Fujitec (AVI public activist campaign), Teikoku Sen-I (AVI public activist campaign), Toshiba Plant and NuFlare Technology (both taken private by their parent company).

Fujitec, the largest holding in the Japan Special Situations basket and a 2.6% weight in AGT, contributed 126bps to returns over the year, making it the fifth-largest contributor in its own right. At the beginning of May, AVI launched a public campaign highlighting a multitude of issues at Fujitec. Fujitec manufactures, installs and maintains elevators and escalators (E&E), primarily in Asia - it is the maintenance part of Fujitec's business that is most appealing.

Regulations mandate the regular maintenance of E&E installations and, given that the original manufacturer knows the product intimately, this usually means that it is awarded a multi-decade maintenance contract - a veritable cash-cow, providing highly visible, high-margin revenues spread over many years. Over half of Fujitec's profits relate to this maintenance work and it is no surprise that many of Fujitec's peers, which benefit from similar dynamics, trade at EV/EBIT ratios of over 20x, and as high as 30x in Kone's case. What is surprising, however, is that Fujitec trades on an EV/EBIT of just 12x (albeit up from the 6x where it started the year). This discounted valuation stems from a myriad of factors, including poor corporate strategy, a lack of sell-side coverage, poor governance, and poor capital allocation. We initiated our campaign to raise awareness about these issues, with a specific focus on three key areas - operational efficiency, capital structure and corporate governance. Our presentation has so far been well received by other shareholders who share our concerns that the company is being run in a less-than-optimal manner. Most pleasingly, the company has responded to our suggestions with a notable improvement in its shareholder communications (in both English and Japanese) and a commitment to establishing a new strategic direction by the end of this calendar year.

Earlier in January we initiated a similar public campaign at Teikoku Sen-I, including a public presentation and two shareholder proposals. Our aim: to highlight the inefficiency of Teikoku Sen-I's balance sheet, which is replete with cash and investment securities, accounting for 52% of market value. AGT has been a shareholder of Teikoku since March 2018, and we have engaged with management consistently over the past two years to highlight changing corporate governance practices and suggest ways to improve capital allocation. Despite this, Teikoku's management has been recalcitrant and unaccepting of criticism, instead relying on a network of "group" shareholders to defeat AGM proposals aimed at releasing excess capital and rationalising the balance sheet. While, unsurprisingly, our two shareholder proposals did not pass, they received respectable support ratios of 25% and 22%, with the backing of a number of domestic Japanese institutions. During our campaign Teikoku announced a JPY4.2 billion CAPEX programme (c.20% of cash) to utilise its excess cash and expand its production facilities which the market viewed favourably. Teikoku Sen-I contributed 52bps to your Company's returns over the period.

Toshiba Plant (48bps contribution) and NuFlare (34bps contribution) both benefited from the simultaneous takeover by their parent, Toshiba Corp. Both bids came at a significant premium to the prevailing share prices of 27% and 45% respectively, yielding IRRs of 26% and 89% over the life of our investment. We have been attracted to the "parent-child" subsidiary theme for some time, believing that listed subsidiaries would either be sold off or bought in by the parent company. We have argued, along with others, that listed subsidiaries trade at depressed prices because of the lack of consideration towards minority shareholders and should be collapsed. With criticism of the arrangements by the Abe administration, and Toshiba Corp's recently refreshed board, it felt like simply a matter of time before the company would acquire or sell off its stakes in NuFlare and Toshiba Plant.

The actions of Toshiba Corp add to the weight of evidence that our overarching theme of improving corporate governance in Japan is valid. With pressure coming from the government, and increasingly shareholder-conscious institutional investors, Japan Inc. is shifting - slowly, but surely - towards a more efficient, fairer system of governance. The Toshiba Corp offer is but one example of this; we see further evidence in the form of rising share buybacks; higher payout ratios; increasing returns on equity; reductions in cross-shareholdings; and increasingly independent Boards.

With the basket trading on an EV/EBIT multiple of 4.9x and listed securities and net cash covering 92% of the aggregate market cap, we remain convinced of the merits of our large allocation to the Japan Special Situations basket.

SOFTBANK GROUP

Classification: Japan

% of porfolio¹: 7.0%

Discount: -56%

% of investee company: 0.1%

Total return on position FY20 (local)²: 25.5%

Total return on position FY19 (GBP): 28.7%

Contribution (GBP)³: 170bps

ROI since date of initial purchase⁴: 28.7%

SoftBank Group was the fourth-largest contributor to returns over the period, adding 170bps. We initiated a position in SoftBank - a GBP90 billion Japanese holding company whose key assets include stakes in Alibaba, SoftBank Corp (a Japanese telecommunications company), the Vision Fund, Arm Holdings, and T-Mobile US - in February 2020. During our short ownership we have made a return on investment of +26% and an IRR of +48%, in JPY.

SoftBank is a well-known name, plagued by negative headlines - surrounding the Vision Fund in general and the failed WeWork investment in particular. We felt that the publicity around these issues belied the fact that SoftBank's investment in the Vision Fund was simply not very material in terms of its economic impact, and was far outweighed by the value of the stakes in Alibaba (currently in excess of 70% of NAV) and, to a lesser extent, its telecoms holdings: Japan-listed SoftBank Corp and US-listed T-Mobile; and had created an opportunity in terms of a widening discount to NAV at SoftBank.

Despite knowing the company well and notwithstanding the discount opportunity, our view was that there was a lack of meaningful catalysts that could prompt a re-rating of SoftBank's depressed share price. This changed when, in February, news broke that deep-pocketed activist Elliott Advisors had taken a large stake in the company and was seeking sizable buybacks, improved transparency, and better governance.

Having acquired our initial position at what we believed was a very wide discount to NAV, we then saw the discount push out even wider over the COVID-19-inspired market sell off, and we continued to increase our position over this period at discounts approaching 70% and at prices a third lower than where our first purchases were made.

A combination of the pressure from shareholders (we also wrote to the company outlining our recommended course of action) and from the sell-off led to Masa Son, SoftBank's CEO and founder, announcing some unambiguously shareholder-friendly measures: SoftBank announced a JPY500 billion buyback (an estimated 6% of market cap at the time of the announcement) followed by a thumping commitment to realise JPY4.3 trillion of assets and buy back a further JPY2.0 trillion of shares (26% of market cap, or 32% in total) in addition to reducing debt. Alongside this, SoftBank announced the appointment of new independent directors to its Board and has improved transparency around the Vision Fund. This was welcome news for investors and, from the nadir in March, the share price has bounced back by +141%, and ended the period +13% above the pre-COVID price at which we initially purchased shares.

We believe that, despite the strong gains, SoftBank still represents exceptional value, a claim which we buttress with two observations. Firstly, the average discount of 40-50% that the market has applied to SoftBank in the past is likely no longer appropriate, given that it has shown itself willing to reduce leverage, improve capital allocation and tentatively embrace higher standards of corporate governance. There is, therefore, significant upside to the 56% discount at which SoftBank ended the period. Secondly, ongoing share buybacks generate risk free, immediate, and certain NAV accretion for remaining shareholders. As such, we continue to see significant upside in SoftBank's shares, and think the ultimate end game may well be a creeping management buyout via further aggressive share buyback programmes.

SONY

Classification: Japan

% of porfolio¹: 5.5%

Discount: -40%

% of investee company: 0.1%

Total return on position FY20 (local)²: 23.9%

Total return on position FY20 (GBP): 21.1%

Contribution (GBP)³: 114bps

ROI since date of initial purchase⁴: 34.6%

Sony was the fifth-largest contributor to returns this year, adding 114bps. Its share price rose +29%, behind NAV at +38%, as the discount widened from 36% to 40%.

Whilst Sony is well known to many as a consumer electronics manufacturer, our investment case is predicated on Sony's attractive four "crown jewel" businesses: Gaming, Music, Pictures, and Semiconductors. Together, these four businesses account for 81% of operating profits, and have posted 16% annual operating profit growth over the past two years. Despite this, Sony trades on a 40% discount, which we believe can be explained in part by the complexity of the conglomerate structure, which packages businesses with unique characteristics into a single entity. Pervasive, hard-to-dispel misperceptions about Sony's businesses can also obscure value. Such misconceptions include the idea that the Semiconductor business is exposed to growth in smartphones, or that the mobile communications business will be indefinitely lossmaking. Our research indicates, however, that the Semiconductor segment manufactures genuinely differentiated products and will benefit from the increasing use of cameras in smartphones and automobiles; and, with a focus on cost cutting, we expect the mobile business to return to profitability.

Perhaps the most pervasive misconception surrounds Sony's Gaming division, which accounts for 24% of sales and 28% of operating profits. Historically, Sony's gaming business suffered from earnings cyclicality, driven by its legacy business model which relied heavily on hardware sales. With 37% of PS4 owners subscribing to PS Plus, Sony's gaming subscription service, we feel that this indicates that the gaming business is moving away from cyclical hardware to a subscription-based digital model, as further highlighted by the introduction of the disk-less PS5. Over the lifecycle of the PlayStation 4, Sony has improved its subscription service offering, introducing microtransactions, platform fees, and a streaming service, allowing Sony to generate recurring revenue streams and reduce reliance on hardware sales. These new recurring revenues are prized by investors, as they are stable, sticky, and high margin - lending greater visibility to the Gaming division's future earnings. COVID has accelerated the shift to digital, with consumers switching away from physical games, and traditional retail stores, to purchasing content directly on their consoles. With the launch of the PS5 in the 2020 holiday period, Sony is well-positioned to capitalise on further digitalisation, with Sony's PS Now and PS Plus subscriptions giving the business a powerful embedded user base that remains tied to Sony's platforms driven by high-quality first-party titles. Overall, the prospects for future growth, and the conversion from hardware-dependent revenues to a recurring-revenue model are highly exciting and we believe that the Gaming division will be one of Sony's top performers in the future.

Much attention has been drawn to Sony's conglomerate structure, largely from a public activist campaign by Third Point. While we are encouraged by actions that Sony has taken to improve the structure, including the sale of its listed stake in Olympus and a ramp-up in the buyback programme, it is clear that the structure is here to stay. In May Sony announced that they will change their name from 'Sony Corp' to 'Sony Group', and form separate executive teams at each business line.

We would have preferred that certain assets within the structure were spun-off, but we always saw that as a free option on top of the appeal of Sony's high-quality assets operating in secular growth industries. However, we take some solace in Sony's decision to create a decentralised holding structure with management accountability at each business line, which we think will ultimately lead to higher margins and growth. Furthermore, since we first invested, management have demonstrated some advantages to having music, pictures, and gaming under one entertainment holding company - with cross-collaboration between divisions creating unique and differentiated content.

As we have said on previous occasions, Sony is a classic AGT investment - quality, growing assets that are misunderstood and overlooked by the market due to a complex holding structure, and multiple levers to pull to create and unlock value. We continue to see Sony as a highly attractive investment.

.KKR

Classification: Holding Company

% of portfolio¹: 3.7%

Discount: -29%

% of investee company: 0.2%

Total return on position FY20 (local)²: 40.3%

Total return on position FY20 (GBP): 33.2%

Contribution (GBP)³: 94bps

ROI since date of initial purchase⁴: 33.2%

We initiated a position in KKR, the US-listed alternative asset manager, in March 2020, accumulating a stake at an average estimated discount of 45-50%. The shares have returned +39% on the weighted-average buy price, adding 94bps to returns.

We have liked the alternative asset managers for some time, and this year's selloff allowed us to establish a position at a steep discount to our estimate of intrinsic value. We believe that KKR has multiple secular tailwinds favouring it, many of which are misunderstood by the market:

• KKR operates in a highly attractive industry, with secular growth driven by increasing institutional investments in alternative assets, underpinned by a "lower-for-longer" interest rate environment.

• Its full suite of alternative strategies - private equity, credit, real assets - allows it to cross-sell to its investors, and benefit from institutional investors looking to consolidate their asset manager relationships.

• Investments in developing new strategies over the last ten years should start to see increasing performance fees as these mature and scale. Up-front investment in these areas has stifled margins, which we expect to increase from here.

• KKR is unique in having a capital markets business that, by sourcing and syndicating loans, handling refinancings, conducting IPOs, etc., can extract more value from each unit of activity relative to its peers. KKR also does capital markets work for third parties, adding another income stream.

• One of KKR's differentiating factors is its very large balance sheet consisting of investments in, and co-investments alongside, its own investment funds. As well as generating attractive returns in its own right in a fee-free manner for shareholders, the balance sheet also allows for potentially higher growth than peers given that it can be used to support/seed new investment strategies.

• The long-duration nature of the capital managed by alternative asset managers results in stable and highly visible revenues, with carried interest (performance fees) consistently undervalued as an income stream by the market.

In July of this year, KKR announced that it would be acquiring a controlling stake in Global Atlantic, a provider of fixed and fixed-indexed annuities, at a valuation in excess of USD4 billion. Global Atlantic is one of the top players in its industry with an excellent track record, having grown earnings and book value by double-digit figures over the past several years. In our view, it is a high-quality business with the potential for significant growth in the future as low interest rates compel the insurance industry to consolidate and seek out managers of capital who can earn returns on assets in excess of the rates owing on their liabilities.

In addition to Global Atlantic's value as a business per se, we also think that the acquisition is transformational for KKR as an asset manager, as it will manage 100% of Global Atlantic's assets, providing it with an additional USD71 billion of assets under management (AUM) on which fee income can be earned. This additional AUM is permanent in nature, thus increasing the visibility and quality of KKR's fee-related earnings. We estimate that the deal will increase KKR's AUM by one-third, and that permanent capital as a percentage of AUM will increase from 9% to 33%.

There are multiple avenues for KKR to pursue that can increase this earnings stream further, including: (a) deploying some of Global Atlantic's capital into KKR's own funds on which it can earn fees; (b) earning fees on co-investors that KKR brings into Global Atlantic; and (c) fees on "sidecar" funds, essentially large pools of committed capital that Global Atlantic can draw down in order to complete large deals.

When we initiated the position in KKR, we viewed it as a high-quality business in a growth sector. The acquisition of Global Atlantic has, in our opinion, further enhanced the quality of the business and its growth prospects. In this light, the 29% discount at which KKR trades (to our estimate of intrinsic value) appears anomalous, and we remain enthusiastic about the prospect of strong returns from here.

OAKLEY CAPITAL INVESTMENTS

Classification: Closed-end Fund

% of porfolio¹: 7.4%

Discount: -29%

% of investee company: 14.9%

Total return on position FY20 (local)²: 13.7%

Total return on position FY20 (GBP): 13.7%

Contribution (GBP)³: 93bps

ROI since date of initial purchase⁴: 47.4%

Oakley Capital Investments (OCI) is, for the third year running, one of the largest contributors to your Company's returns. This year, growth came from OCI's NAV (+13% in total return terms), with the discount remaining static at 29%. In total, OCI contributed 93bps.

OCI posted a +4% NAV total return for the six months to June 2020, despite the negative impact of the COVID-19 pandemic on some parts of its portfolio. Returns in the main were driven by the realisation of Inspired, the global network of private K-12 schools, at a +25% uplift to carrying value, and strong growth from Career Partner, a private German university benefiting from an increase in student numbers as often happens during a recession. Following the realisation of Inspired and WebPros, and several refinancings, OCI now holds approximately 40% of its NAV in cash. This gives it significant flexibility to fund its commitments to Fund IV and the recently established Origins fund, support its existing portfolio companies, and fund a NAV-accretive buyback programme.

Helpfully, OCI breaks out its portfolio into separate segments, based on how COVID-19 has affected it. Approximately 23% of the portfolio is invested in companies that have either been unimpacted or benefited from lockdowns. Another 27% has seen some short-term disruption but is already recovering, although the potential for further lockdowns could dampen this progress.

Names such as Career Partner, WebPros, Seven Miles, Ocean Technologies, and Contabo - active in sectors including tertiary education, web hosting software, gift cards and maritime e-education - have seen increased or unimpacted revenues and profitability over the past six months. Interestingly, four of these five companies were acquired in the last 12 months, meaning that they are held at cost in the portfolio. That is to say, these investments have not been revalued, despite strong performance; we expect this performance to be seen in the next valuation of the portfolio (December 2020).

Turning to the other parts of the portfolio, c. 28% of NAV is invested in companies that have been significantly disrupted. This includes names such as Time Out and North Sails, both of which have a significant physical presence in the form of Time Out Markets and North Sails Apparel stores. Time Out was recapitalised in May (to which OCI and Oakley contributed), de-gearing its balance sheet and leaving it with sufficient cash to fund operations for the next year. With five out of six Time Out Market locations now re-opened and demand for advertising space increasing again, we are confident that the group can recover from here.

As readers will be aware, OCI has traded at a significant discount to NAV for some time - primarily the result of poor corporate governance in the past, including significantly dilutive share issuances. At the time of writing, the discount remains at a wide 29%.

Our investment thesis is founded in part on the belief that OCI has turned a corner, and is serious about becoming a best-in-class operator from a corporate governance perspective. We note significant improvements which affirm this view: (a) a commitment, enshrined in recently amended bye-laws, not to issue shares at a discount; (b) an ongoing share buyback programme which to date has bought back 7% of outstanding shares at a discount to NAV; (c) a re-listing from the AIM to the SFS, and a voluntary commitment to comply with a large proportion of the requirements of the FCA's premium listing rules; and (d) improved transparency and communication.

Over the past five years, OCI has been one of the top performers among UK listed private equity funds. When we consider this strong growth, and the corporate governance improvements we are witnessing, we believe that it can only be a matter of time before the market begins to appreciate the value on offer and award a substantially higher valuation to OCI.

INVESTOR AB

Classification: Holding Company

% of porfolio¹: 3.0%

Discount: -17%

% of investee company: 0.2%

Total return on position FY20 (local)²: 25.5%

Total return on position FY20 (GBP): 31.4%

Contribution (GBP)³: 74bps

ROI since date of initial purchase⁴: 119.1%

Investor AB - the Wallenberg-controlled family holding company - was also a significant contributor to returns. The shares returned +26%, benefiting from strong NAV growth of +23%, as well a slight narrowing of the discount from 19% to 17%.

Investor's portfolio is split between listed securities (76% of NAV) and unlisted Patricia Industries investments (29%), both of which contributed to NAV growth. Starting with the listed, Atlas Copco (16% of NAV) returned +44% over a period in which it reported record orders and sales for its 2019 results. Copco's shares have rallied off the March lows to new record highs. Investors appreciated the relative defensiveness of its services and its cyclically-resilient after-sales offering, as well as the nature of many of its products, which are often mission critical but make up a low fraction of a user's cost base. Investor has continued to add to its position in ABB (11% of NAV) - now increased by 14% over the last two years. Despite its exposure to the attractive trends of automation and electrification, ABB has been a serial underperformer over the last decade. Investor were instrumental in the appointment of Björn Rosengren as CEO earlier in the year, who will seek to simplify what has become a complex structure; drive operational and margin improvement; and return nearly USD8 billion to shareholders in the form of buybacks following the sale of the Grids division.

During the year, white goods manufacturer Electrolux spun off its Professional arm as a separate listed business: Electrolux Professional. The Professional business, which manufactures equipment for restaurant and hotel kitchens as well as laundry services, is a market leader in a structurally more attractive market, warranting a higher multiple than the rather commoditised legacy home appliance business. This is a further example of the active approach Investor takes to ownership, which in recent years has included the spin-off of Epiroc from Atlas Copco, the sale of ABB's Power Grids division and the IPO of EQT. We note that Investor's running costs have totalled little more than 10bps over the last 12 months - a fee rate that we do not see available from many "activist" investors.

Turning to Patricia Industries, Mölnlycke - Investor's unlisted jewel - has generally performed well, notwithstanding a more recent headwind from delays to elective surgeries in light of COVID. 2019 sales grew by +4% organically, with strong cash generation allowing Mölnlycke to distribute EUR425 million up to Patricia. Peer multiples have also expanded, supporting an increase in valuation. Elsewhere, Investor has been actively supporting its less mature unlisted businesses, with medical equipment provider Laborie (2% of NAV) acquiring US-based Clinical Solutions. Just before year-end Patricia made a new investment for the global leader in analytical osmolality, Advanced Instruments.

AGT has held shares in Investor since 2002. Just as then, we believe the opportunity to align capital with such thoughtful long-term active stewards of capital is an attractive one. We remain excited about the prospect of future returns.

FOUNDUL PROPRIETATEA

Classification: Closed-end Fund

% of porfolio¹: 4.7%

Discount: -19%

% of investee company: 2.9%

Total return on position FY19 (local)²: 23.8%

Total return on position FY19 (GBP): 20.3%

Contribution (GBP)³: 64bps

ROI since date of initial purchase⁴: 75.6%

Fondul Proprietatea (FP) added 64bps to AGT's returns. Growth was driven by a combination of NAV growth (+12% in USD terms - driven in discount from 25% to 19%. Overall, shareholders earned total returns of +21%.

We wrote last year that FP had had a turbulent year, after the Romanian government's Emergency Ordinance, targeting companies in the electricity and gas sectors, seemed likely to significantly impair value for FP shareholders.

This year has been a better one. The Emergency Ordinance has been almost entirely repealed, thus eliminating the impact on FP's holdings. In October of 2019, the ruling PSD party lost a vote of no confidence, leaving a caretaker government in place until the country can hold its general election in December 2020.

Looking to the future, we believe that the key catalysts that we have previously identified for unlocking value within FP remain intact. The IPO of Hidroelectrica (47% of NAV) is particularly exciting, as its valuation within FP is significantly lower than the multiples at which similar peers trade. Hidroelectrica's listing would make it the only pure-play hydropower company in the world, which we think could attract significant attention from institutional investors interested in renewable, infrastructure, and ESG-compliant assets.

Other significant catalysts could include: (1) a future IPO of Bucharest Airports (7% of NAV) once air travel returns; (2) the reduction of the stake in OMV Petrom (13%), with the proceeds being used to fund NAV-accretive buybacks and tender offers; and (3) the sale of FP's stakes in Enel's Romanian distribution subsidiaries (7%).

While the timing of these events has been thrown into uncertainty as a result of the pandemic, we believe that they are nonetheless likely over the medium term, and hold out the promise of generating significant value for shareholders. In the meantime, we are happy to hold a high-quality, cheaply-valued portfolio at a 19% discount while being paid a 5% dividend, and the company continues to conduct NAV-accretive tender offers and buybacks.

COSAN LTD

Classification: Holding Company

% of porfolio¹: n/a

Discount: n/a

% of investee company: n/a

Total return on position FY20 (local)²: 19.8%

Total return on position FY20 (GBP): 15.9%

Contribution (GBP)³: 57bps

ROI since date of initial purchase⁴: 69.6%

Having been the largest contributor in the last financial year, Cosan Ltd (CZZ) - the NYSE listed holding company of two further Brazilian listed holding companies - contributed again to this year's performance, as AGT exited its highly successful investment. Over the course of a threeyear holding period, CZZ achieved a GBP total return of +70% versus

+2% for the MSCI ACWI ex-US index.

As a reminder, AGT's investment in CZZ was predicated on both the enormous amount of value that was trapped in the overly complex double holding company structure, as well as the attractive nature of the underlying holdings.

As we wrote in last year's Annual Report, "CZZ has consistently communicated its intention to simplify the holding structure". In 2020 this came to fruition, as Cosan SA - one of the aforementioned Brazilian holding companies - announced the intention to become the sole group holding company: CZZ shareholders would receive shares in Cosan SA, whilst Cosan Logistica, the holding company structure through which rail-operator Rumo is controlled, was also to be collapsed. In response to this the look-through discount tightened to a low-teen level, compared to the near 60% at which we first started buying. As such, the decision was made to exit the investment on valuation grounds.

Over the life of the investment, on a look-through basis, the bulk of our returns was generated by discount narrowing, from a weighted average 57% on the buys to 40% on the sells - a +41% return. Impressive local look-through NAV returns of +46% were pared back to +14% in USD terms, as the depreciation of the Real hurt dollar-denominated CZZ.

All in all, CZZ serves as a prime example of AGT's approach to finding high-quality misunderstood assets, with catalysts in place to unlock their value.

Detractors

WENDEL

Classification: Holding Company

% of porfolio¹: n/a

Discount: n/a

% of investee company: n/a

Total return on position FY20 (local)²: -39.2%

Total return on position FY20 (GBP): -40.0%

Contribution (GBP)³: -117bps

ROI since date of initial purchase⁴: 27.7%

French family-controlled holding company Wendel was the fifth-largest detractor from the Company's returns. During the period we exited the position.

While AGT's investment in Wendel was by no means a terrible one, neither was it a roaring success. Over six years, Wendel achieved a total return of +11% (in EUR terms), versus +19% for the MSCI ACWI ex-US. The depreciation of sterling meant that AGT experienced a +27% total return in GBP. Returns were driven entirely by NAV growth, with the discount stubbornly wide at c. 31% across our buys and sells.

The investment in Wendel was built on the attractive nature of the assets, Wendel's sizeable investments in unlisted businesses, and the possibility of monetising these at uplifts to what seemed a conservative NAV, coupled with the potential for discount narrowing as the impact - both in terms of balance sheet strain and investor sentiment - of the poorly timed 2007 acquisition of Saint Gobain waned.

Starting with the latter, management, particularly under André François- Poncet, did a good job of reducing leverage and indeed exited Saint Gobain in full. Where the disappointment lay was in a lack of events. Whilst Allied Universal was successfully exited, an unfavourable operating environment saw the possible IPO of IHS delayed; neither Constantia nor Stahl were monetised, and Stahl in particular suffered worsening conditions in its key end markets. Events can serve as means through which valuations are proven, and management's ability to create value is certified. A lack of events can leave investors questioning why they should own Wendel, where such a large portion of NAV is held in one listed entity, Bureau Veritas.

Finding a happy medium between patience and decisiveness is one of fund management's great balancing acts. In the case of Wendel, with few catalysts on the horizon and reduced conviction in the NAV, the decision was made to exit the investment in the spring. Doing so gave us valuable capital which we were able to reinvest into more attractive opportunities, all with greater prospects for outperformance.

RIVERSTONE ENERGY

Classification: Closed-end Fund

% of porfolio¹: n/a

Discount: n/a

% of investee company: n/a

Total return on position FY20 (local)²: -61.1%

Total return on position FY20 (GBP): -61.1%

Contribution (GBP)³: -156bps

ROI since date of initial purchase⁴: -75.0%

Riverstone Energy (RSE) detracted -156bps from returns, as the combination of a declining NAV and widening discount drove the share price significantly lower. A breakdown in relations between the OPEC+ group of nations impacted the supply of oil, while the impact of lockdowns was felt in a sharp drop in demand. Together, these factors drove precipitate declines in the price of West Texas Intermediate (WTI) oil. The extent of the dislocation in the oil markets was observed in late April when the May-20 WTI futures contract went briefly negative - a historical first - over concerns about storage bottlenecks, meaning that buyers would be paid for taking delivery of oil.

It was against this backdrop that we took the difficult decision to sell our entire position back to the company as part of a share repurchase programme announced along with the first quarter valuations. The sale crystallised a material loss over our holding period of -75%. While the headline discount at the sale price was wide and the valuation to some extent was supported by cash on the balance sheet and by non-E&P investments, we were mindful of: (1) the likelihood of further write-downs at the E&P investments in higher cost basins such as the Bakken, notwithstanding hedging programmes; (2) the limited time opportunity to exit presented by the buyback if other large shareholders were to also sell; (3) the material increase in the stake held by the Manager and cornerstone investors were they not to participate in the buyback, compounded by the shareholder-unfriendly company structure which makes effecting change and capturing the discount far from straightforward; and (4) other higher conviction investment opportunities within our universe into which to deploy the capital.

On reflection, our original thesis for RSE focused to too great an extent on our assessment of the undervaluation of certain of the assets and growth prospects versus publicly-listed peers at the time of our investment, at the expense of a more rounded view on other risks in the investment.

SWIRE PACIFIC 'B'

Classification: Holding Company

% of porfolio¹: 2.1%

Discount: -64%

% of investee company: 1.0%

Total return on position FY20 (local)²: -39.9%

Total return on position FY20 (GBP): -41.9%

Contribution (GBP)³: -165bps

ROI since date of initial purchase⁴: -28.9%

Swire Pacific 'B' reduced NAV by 165bps with the discount ballooning out from 47% to 64% which, on a NAV falling by -16%, drove a total return of -41% in HKD.

Swire Pacific is dominated by Swire Properties with it now accounting for over 72% of NAV, with the remainder of the portfolio (Swire Coca Cola, Cathay Pacific and HAECO) still given a negative valuation by the market. While Swire Properties may dominate the NAV, Cathay Pacific (11% of NAV) has certainly once again dominated the headlines as it required a sizeable capital injection to save the business. Passenger numbers fell dramatically on Cathay's routes - as few as 500 passengers a day were flying - as COVID halted travel in the first quarter with little recovery in international travel since. As one could imagine, any period with passengers reduced to effectively zero was not sustainable and shareholders and the Hong Kong government stepped in to provide HKD39 billion of capital through a mixture of preference shares and a bridge loan from the Hong Kong government, as well as a rights issue for existing shareholders. This capital provides a runway for international travel to return, and we estimate that the company has enough cash now on hand to manage the current cash burn rate until early 2022. However, this assumes that travel numbers stay at depressed levels. We believe that the upcoming strategic review which should be announced by the end of the year is key to resetting Cathay's cost base and strategy going forward.

Swire Properties was obviously impacted greatly by extradition law protests in 2019 as retailers in its prime shopping centres were shuttered. This appeared to be easing as we entered 2020; however, COVID, the introduction of the national security law, and the worsening US-China trade war have hit Hong Kong sentiment greatly. While Swire Properties' office portfolio has performed well, with occupancy remaining high and still reversionary, sentiment is poor as people are concerned about the longer-term future for Hong Kong as the financial centre of Asia. It is expected that vacancies on Hong Kong Island will increase as international companies move space to other centres in Asia, while the impact of COVID has delayed the expansion of mainland Chinese companies into Hong Kong. While this has a short-term impact we believe that there will not be a widespread exodus of international companies from Hong Kong.

Hong Kong still provides a gateway to a huge growth market for many international companies and is therefore a required base for many companies looking to expand into China. In addition, due to the US-China trade war, the Hong Kong Stock Exchange as a destination for Chinese companies to list is becoming more attractive and we have seen many already list in Hong Kong, either as a primary listing in new IPOs or secondary listings. This will create office demand in Hong Kong for those companies listing and the ancillary services which support listed companies. Swire Properties is particularly geared to the latter with its Hong Kong Island East portfolio which targets back office type tenants who require/desire cheaper rents than those available in Central.

While Swire Pacific has been a particularly painful investment over the last two years we believe the current valuation, a 65% discount to NAV with Swire Properties at share price, or an even more egregious 80% discount to NAV with Swire Properties at NAV, is not sustainable. While this has been our position for some time now, we nonetheless maintain that it is correct to hold at this time due to the significant headwinds encountered and navigated so far.

JARDINE STRATEGIC

Classification: Holding Company

% of porfolio¹: 2.9%

Discount: -49%

% of investee company: 0.2%

Total return on position FY20 (local)²: -32.3%

Total return on position FY20 (GBP): -33.8%

Contribution (GBP)³: -213bps

ROI since date of initial purchase⁴: -19.0%

Unfortunately, Jardine Strategic (JS)'s poor performance continued as the company detracted 213bps from NAV over the year. This return was driven by both a falling NAV (-22%) and widening discount from 40% to 49% as the share price fell by 34%.

Last year JS was navigating the stormy waters of extradition law protests in Hong Kong, which had a large impact on its portfolio companies. Going into this financial year, protests continued up until the end of 2019, however as we entered 2020 there was a sense that the protests were petering out and that some normality might return to daily life in HK. While painful, the protests were localised problems only impacting part of JS's portfolio. Then 2020 began and more intense storms began to bluster, with Hong Kong providing no safe harbour. As we now know the COVID outbreak in early 2020 has had a profound impact on JS's investee companies across all geographies, with explicit exposure to retail properties (Hongkong Land), retailers (Dairy Farm), commodities and commodity-related economies (Jardine Cycle & Carriage) and the tourism industry (Mandarin Oriental).

While dealing with COVID, in April it was reported that the Chinese government was going to introduce a national security law, which was duly passed in June. The passing of this law has created much direct fall out with the US removing Hong Kong's "special status", and it also further worsened US-China relations in general causing much debate about the long-term future of HK as the financial centre of Asia.

With all the above, as you can imagine few parts of the portfolio emerged unscathed. Dairy Farm and Jardine Cycle & Carriage, accounting for 36% of NAV, were the worst performers in the portfolio. Dairy Farm, while benefiting from stay at home policies in its grocery retail portfolio, suffered from its health & beauty and convenience store networks which in large parts were closed. Despite this the company remained profitable during the period, due to the strong performance from the grocery retail division which saw a 471% increase in operating profit on revenue growth and margin expansion.

Jardine Cycle & Carriage is highly geared to the commodity cycle through its exposure to the mining industry (through their holding in Astra International) and their auto-distribution businesses. With the shut down of large parts of the global economy, commodity prices have seen sharp selloffs and demand has not returned fully as yet. This resulted in poor mining operations and lower sales of heavy equipment at United Tractors (60% owned by Astra International). The lockdown measures in place impacted JCC's auto-distribution businesses (both via Astra and directly held) as show rooms were closed and production was halted. Fourwheel and two-wheel auto sales have fallen by c. 40-50% in their target markets, with lower margins further impacting net income. In addition, financial services saw increased loan loss provisioning and deferred payments have been offered to customers.

While large parts of the portfolio were impacted, two holdings, Mandarin Oriental and Zhongsheng, were bright spots in the portfolio. Mandarin Oriental, while obviously suffering from a lack of travel across the globe, is nonetheless up by 15% over the year. While it is hard to pinpoint the exact reason, given its exposure to international travel, we believe that the value in the Excelsior Hotel development site in Hong Kong, which is being converted into a mixed-use office-led building, is becoming apparent. This site alone is valued in excess of the market cap of Mandarin Oriental. It could be argued that this development does not belong in Mandarin's portfolio in the long term so we could see this property sold at some point in the future.

Jardine Strategic has had a torrid two years, with both NAV declines and discount widening creating a double-whammy headwind. While this has been painful, the company has been active in managing its portfolio and now sits with over USD2.3 billion of cash on the balance sheet to deploy into markets where it sees opportunity.

SYMPHONY INTERNATIONAL

Classification: Closed-end Fund

% of porfolio¹: 1.8%

Discount: -57%

% of investee company: 15.7%

Total return on position FY20 (local)²: -54.7%

Total return on position FY20 (GBP): -56.9%

Contribution (GBP)³: -240bps

ROI since date of initial purchase⁴: 8.6%

Symphony International was your Company's largest detractor during the year, reducing returns by 240bps. Both a falling NAV (-35%) and a widening discount contributed to total share price returns of -55%.

Key holding Minor International (30% of NAV) fell sharply over the year as a result of the COVID-19 lockdowns, which saw the large majority of both its hotels and restaurants temporarily closed, with the exception of some regions including Australia, New Zealand, Africa and (more recently) China. With a fall in earnings and cash flows, concerns grew over Minor's ability to service its debt - the burden of which had increased following Minor's acquisition of NH Hotels. We were confident that these fears were exaggerated, given a number of factors: (1) Minor's strong asset-backing, opening the option to conduct sale-and-leasebacks; (2) undemanding covenants on its debt; (3) the extension of the NH Hotel bridging loans; and (4) gross cash and undrawn facilities equating to two-thirds of market cap. Nonetheless, Minor's management prudently decided to issue USD600 million of perpetual bonds and equity (c. 20% of market cap) in order to shore up the balance sheet.

Looking to the future of Minor, the immediate environment is murky. Leisure travel has declined precipitously and likely will take some time to recover. However, this is not Minor's first crisis: the 2003 SARS outbreak, 2004 tsunami, 2010 Icelandic ash cloud, and multiple bouts of domestic political strife have all loomed threateningly at times. Minor's management team has in the past steered it deftly through these crises, a testament to its skill. Furthermore, the quality and wide reach of Minor's brands suggest that it will participate in any eventual global economic recovery, while the strong rebound of its Chinese operations provides optimism for its global business once COVID-19 is behind us.

Symphony International's very wide discount (57%) is, we believe, primarily a function of poor governance, misalignment of interests of the Board/Manager with shareholders, and the illiquidity of the shares. We continue to engage with the Board and management regarding solutions to its persistently wide discount. We note in this regard the recent announcement that Symphony would reduce the minimum management fee from USD8 to USD6 million annually, which is welcome albeit barely even a start on addressing our concerns. All said, there is considerable value to be unlocked at the company and we remain focused on achieving a successful outcome in this respect.

¹ For definitions, see Glossary below

² Weighted returns adjusted for buys and sells over the year.

³ Figure is an estimate by the managers and sum of contributions will not equal quoted total return over the financial year.

⁴ Figure quoted in GBP terms. Refer to Glossary below

Outlook

The spread of COVID-19 around the globe has had an unprecedented and severe impact on national economies. The scientific community is only starting to get to grips with the heretofore little-studied virus; this, coupled with the fluidity and speed of the pandemic's development, renders any 'outlook' discussion almost obsolete before the ink even dries.

Nonetheless, there are some reasons to be hopeful. The introduction of a vaccination programme would pave the way for economies to normalise and return to full capacity; as such, national governments have an increasingly clear map by which to navigate out of the forest. However, we are by no means out of the woods yet, with the timing of any vaccination programme being uncertain and fears of a 'second wave' stalking Western economies.

If or when economies return to some form of normality, we expect high-quality companies with solid balance sheets and reasonable valuations to thrive, especially against a backdrop of ultra-low interest rates. We believe that your Company's portfolio is well positioned to benefit from this eventuality, which should drive strong performance in the future.

All of us at Asset Value Investors thank shareholders for their continued support.

Joe Bauernfreund

Chief Executive Officer

Asset Value Investors Limited

12 November 2020

DIRECTORS

Susan Noble - Independent Non-Executive Chairman

Nigel Rich CBE, FCA - Senior Independent Non-Executive Director

Calum Thomson FCA - Independent Non-Executive Director. Chairman of the Audit Committee

Anja Balfour - Independent Non-Executive Director

Graham Kitchen - Independent Non-Executive Director

All Directors are non-executive and independent of the Investment Manager.

EXTRACTS FROM THE REPORT OF THE DIRECTORS

Investment Objective, Policy and Restrictions

The objective of the Company is to achieve capital growth through a focused portfolio of investments, particularly in companies whose shares stand at a discount to estimated underlying net asset value.

Investments are principally in companies listed on recognised stock exchanges in the UK and/or overseas, which may include investment holding companies, investment trusts and other companies, the share prices of which are assessed to be below their estimated net asset value or intrinsic worth.

Although listed assets make up the bulk of the portfolio, the Company may also invest in unlisted assets with the prior approval of the Board.

The Company generally invests on a long-only basis but may hedge exposures through the use of derivative instruments and may also hedge its foreign currency exposures.

There are no geographic limits on exposure, as the Company invests wherever it considers that there are opportunities for capital growth. Risk is spread by investing in a number of holdings, many of which themselves are diversified companies.

The Company will not invest in any holding that would represent more than 15% of the value of its total investments at the time of investment.

Gearing Levels

The Company's Investment Policy, as disclosed above, permits a significant level of gearing, as do the Company's Articles of Association and the limits set under AIFMD (see the Company's website https://www.aviglobal.co.uk).

Under normal market conditions, it is expected that the portfolio will be fully invested, although net gearing levels may fluctuate depending on the value of the Company's assets and short-term movements in liquidity.

The Company's debt as a percentage of total equity as at 30 September 2020 was 12.9%. Long-term debt comprised three tranches of Loan Notes, £30m, €30m and €20m, and shorter-term debt a JPY4.0bn unsecured revolving credit facility.

Results and Dividends

The Company loss for the year was £1,970,000, which included a profit of £10,134,000 attributable to revenue (2019: profit of £24,303,000, which included a profit of £21,169,000 attributable to revenue). The profit for the year attributable to revenue has been applied as follows:

	£'000
Current year revenue available for dividends	10,134
Interim dividend of 6.0p per Ordinary Share paid on 3 July 2020	6,439
Recommended final dividend payable on 4 January 2021 to shareholders on the register as at 4 December 2020 (ex-dividend 3 December 2020):
- Final dividend of 10.5p per Ordinary Share	11,041*
	17,480

* Based on shares in circulation on 10 November 2020.

Management Arrangements

AVI, the Investment Manager, is the Company's appointed AIFM, and is engaged under the terms of an Investment Management Agreement ('IMA') dated 17 July 2014. The IMA is terminable by one year's notice from either party, other than for "cause". Following a review carried out during the year, it was agreed that this notice period will reduce to six months with effect from 1 October 2020.

During the year under review, the Investment Manager was entitled to an annual management fee of 0.70% of the net assets of the Company, calculated quarterly by reference to the net assets at the preceding quarter end and paid monthly. As set out in the Chairman's Statement, with effect from 1 October 2020 the fee rate will reduce to an annual rate of 0.60% for that proportion of net assets in excess of £1 billion.

J.P. Morgan Europe Limited was appointed as Depositary under an agreement with the Company and AVI dated 2 July 2014, and is paid a fee on a sliding scale between 0.5 basis points and 4 basis points based on the assets of the Company. The Depositary Agreement is terminable on 90 calendar days' notice from either party.

JPMorgan Chase Bank, National Association, London Branch, has been appointed as the Company's Custodian under an agreement dated 2 July 2014. The agreement will continue for so long as the Depositary Agreement is in effect and will terminate automatically upon termination of the Depositary Agreement, unless the parties agree otherwise.

Link Company Matters Limited was appointed as corporate Company Secretary on 1 April 2014. The current annual fee is £71,369, which is subject to an annual RPI increase. The Agreement may be terminated by either party on six months' written notice.

With the Board's consent, AVI has sub-contracted certain fund administration services to Link Asset Services. The cost of these sub-contracted services is borne by AVI from its own resources and not by the Company.

Going Concern

The financial statements have been prepared on a going concern basis and on the basis that approval as an investment trust company will continue to be met.

The Directors have made an assessment of the Company's ability to continue as a going concern and are satisfied that the Company has adequate resources to continue in operational existence for a period of at least 12 months from the date when these financial statements were approved.

In making the assessment, the Directors have considered the likely impacts of the current COVID-19 pandemic on the Company, operations and the investment portfolio.

The Directors noted that the Company, with the current cash balance and holding a portfolio of liquid listed investments, is able to meet the obligations of the Company as they fall due. The surplus cash plus borrowing facilities enables the Company to meet any funding requirements and finance future additional investments. The Company is a closed end fund, where assets are not required to be liquidated to meet day to day redemptions.

The Directors have completed stress tests assessing the impact of changes in market value and income with associated cashflows. In making this assessment, they have considered plausible downside scenarios. These tests were driven by the possible effects of continuation of the COVID-19 pandemic but, as an arithmetic exercise, apply equally to any other set of circumstances in which asset value and income are significantly impaired. The conclusion was that in a plausible downside scenario the Company could continue to meet its liabilities. Whilst the economic future is uncertain, and the Directors believe that it is possible the Company could experience further reductions in income and/or market value, the opinion of the Directors is that this should not be to a level which would threaten the Company's ability to continue as a going concern.

The Directors, the Manager and other service providers have put in place contingency plans to minimise disruption. Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt on the Company's ability to continue as a going concern, having taken into account the liquidity of the Company's investment portfolio and the Company'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.

Viability

The Directors consider viability as part of their continuing programme of monitoring risk. The Directors have made a robust assessment of the principal and emerging risks. The Directors believe five years to be a reasonable time horizon to consider the continuing viability of the Company, reflecting a balance between a longer-term investment horizon and the inherent shorter-term uncertainties within equity markets, although they do have due regard to viability over the longer term and particularly to key points outside this time frame, such as the due dates for the repayment of long-term debt. The Company is an investment trust whose portfolio is invested in readily realisable listed securities and with some short-term cash deposits. The following facts support the Directors' view of the viability of the Company:

· In the year under review, expenses (including finance costs and taxation) were adequately covered by investment income.

· The Company has a liquid investment portfolio.

· The Company has long-term debt of £30m and €30m which both fall due for repayment in 2036 and €20m which falls due for repayment in 2037. This debt was covered over 8 times as at the end of September 2020 by the Company's total assets. The Directors are of the view that, subject to unforeseen circumstances, the Company will have sufficient resources to meet the costs of annual interest and eventual repayment of principal on this debt.

· The Company has short-term debt of JPY4,000m and £10m via an unsecured revolving credit facility.

The Company has a large margin of safety over the covenants on its debt. The Company's viability depends on the global economy and markets continuing to function. The Directors also consider the possibility of a wide-ranging collapse in corporate earnings and/or the market value of listed securities. To the latter point, it should be borne in mind that a significant proportion of the Company's expenses are in ad valorem investment management fees, which would reduce if the market value of the Company's assets were to fall.

In arriving at its conclusion, the Board has taken account of the potential effects of the COVID-19 pandemic on the value of the Company's assets, income from those assets and the ability of the Company's key suppliers to maintain effective and efficient operations. As set out in the Going Concern statement above, in assessing the potential effects of the COVID-19 pandemic the Directors have completed stress tests which included plausible downside scenarios.

In order to maintain viability, the Company has a robust risk control framework which, following guidelines from the FRC, has the objectives of reducing the likelihood and impact of: poor judgement in decision-making; risk-taking that exceeds the levels agreed by the Board; human error; or control processes being deliberately circumvented.

Taking the above into account, and the potential impact of the principal risks as set out above, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due for a period of five years from the date of approval of this Annual Report.

Statement of Directors' Responsibilitiesin respect of the Annual Report and the financial statements

The directors are responsible for preparing the Annual Report and financial statements in accordance with applicable United Kingdom law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law they are required to prepare financial statements in accordance with International Financial Reporting Standards as adopted by the European Union (IFRS as adopted by the EU) and applicable law.

Under company law, the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of its profit and loss for that period.

In preparing the financial statements the Directors are required to:

· select suitable accounting policies and apply them consistently;

· make judgements and estimates which are reasonable, relevant and reliable;

· state whether they have been prepared in accordance with IFRSs, as adopted by the EU;

· assess the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

· use the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect 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 complies with that law and those regulations.

The financial statements of the Company are published on the Company's website at https://www.aviglobal.co.uk. The Directors are responsible for the maintenance and integrity of the corporate and financial included on  the Company website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Responsibility statement of the directors in respect of the annual financial report

We confirm that to the best of our knowledge:

• the financial statements, prepared in accordance with the applicable set of accounting standards, give a true and fair view of the assets, liabilities, financial position and profit or loss of the company; and

• the strategic report includes a fair review of the development and performance of the business and the position of the issuer, together with a description of the principal risks and uncertainties that they face.

We consider the annual report and accounts, taken as a whole, is fair,balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

Susan Noble

Chairman

12 November 2020

STATEMENT OF COMPREHENSIVE INCOME

for the year ended 30 September 2020

		2020  Revenue  return	2020  Capital  return	2020  Total	2019 Revenue return	2019  Capital  return	2019  Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
Income
Investment income	2	15,157	-	15,157	26,209	-	26,209
(Losses)/gains on financial assets and financial liabilities held at fair value	8	-	(3,073)	(3,073)	-	15,916	15,916
Exchange losses on currency balances		-	(1,594)	(1,594)	-	(1,572)	(1,572)
		15,157	(4,667)	10,490	26,209	14,344	40,553
Expenses
Investment management fee	3	(1,789)	(4,173)	(5,962)	(1,887)	(4,404)	(6,291)
Other expenses (including irrecoverable VAT)	3	(1,630)	-	(1,630)	(1,403)	(66)	(1,469)
Profit/(loss) before finance costs and taxation		11,738	(8,840)	2,898	22,919	9,874	32,793
Finance costs	4	(913)	(2,150)	(3,063)	(1,087)	(7,028)	(8,115)
Exchange (losses)/gains on loan revaluation	4	-	(1,114)	(1,114)	-	288	288
Profit/(loss) before taxation		10,825	(12,104)	(1,279)	21,832	3,134	24,966
Taxation	5	(691)	-	(691)	(663)	-	(663)
Profit/(loss) for the year		10,134	(12,104)	(1,970)	21,169	3,134	24,303
Earnings per Ordinary Share	7	9.36p	(11.18p)	(1.82p)	19.08p	2.82p	21.90p

The total column of this statement is the Income Statement of the Company prepared in accordance with IFRS, as adopted by the European Union. The supplementary revenue and capital columns are presented in accordance with the Statement of Recommended Practice issued by the Association of Investment Companies ('AIC SORP').

All revenue and capital items in the above statement derive from continuing operations. No operations were acquired or discontinued during the year.

There is no other comprehensive income, and therefore the profit for the year after tax is also the total comprehensive income.

The accompanying notes are an integral part of these financial statements.

STATEMENT OF CHANGES IN EQUITY

for the year ended 30 September 2020

	Ordinary  share  capital	Capital redemption reserve	Share premium	Capital  reserve*	Merger reserve	Revenue  reserve**	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000
For the year ended 30 September 2020
Balance as at 30 September 2019	11,600	7,335	28,078	807,421	41,406	43,101	938,941
Ordinary Shares bought back and held in treasury	-	-	-	(31,072)	-	-	(31,072)
Total comprehensive income for the year	-	-	-	(12,104)	-	21,169	24,303
Ordinary dividends paid (see note 6)	-	-	-	-	-	(14,439)	(14,439)
Balance as at 30 September 2020	11,600	7,335	28,078	764,245	41,406	30,941	883,605
For the year ended 30 September 2019
Balance as at 30 September 2018	12,953	5,982	28,078	816,890	41,406	36,371	941,680
Ordinary Shares bought back and held in treasury	-	-	-	(12,603)	-	-	(12,603)
Cancellation of shares held in treasury	(1,353)	1,353	-	-	-	-	-
Total comprehensive income for the year	-	-	-	3,134	-	21,169	24,303
Ordinary dividends paid (see note 6)	-	-	-	-	-	(14,439)	(14,439)
Balance as at 30 September 2019	11,600	7,335	28,078	807,421	41,406	43,101	938,941

* Within the balance of the capital reserve, £675,997,000 relates to realised gains (2019: £692,232,000 ) which under the Articles of Association is distributable by way of dividend. The remaining £88,247,000 elates to unrealised gains and losses on financial instruments (2019: £115,189,000 ) and is non-distributable.

** Revenue reserve is fully distributable by way of dividend.

The accompanying notes are an integral part of these financial statements.

BALANCE SHEET

as at 30 September 2020

		2020	2019
	Notes	£'000	£'000
Non-current assets
Investments held at fair value through profit or loss	8	959,709	972,824
		959,709	972,824
Current assets
Total return swap assets	15	-	4,784
Other receivables	9	8,775	6,418
Cash and cash equivalents		31,596	64,725
		40,371	75,927
Total assets		1,000,080	1,048,751
Current liabilities
Total return swap liabilities	15	-	(3,979)
Revolving credit facility	10	(39,314)	(30,037)
Other payables	10	(2,097)	(1,865)
		(41,411)	(35,881)
Total assets less current liabilities		958,669	1,012,870
Non-current liabilities
4.184% Series A Sterling Unsecured Loan Notes 2036	11	(29,899)	(29,892)
3.249% Series B Euro Unsecured Loan Notes 2036	11	(27,140)	(26,466)
2.93% Euro Senior Unsecured Loan Notes 2037	11	(18,025)	(17,571)
		(75,064)	(73,929)
Net assets		883,605	938,941
Equity attributable to equity Shareholders
Ordinary share capital	12	11,600	11,600
Capital redemption reserve		7,335	7,335
Share premium		28,078	28,078
Capital reserve		764,245	807,421
Merger reserve		41,406	41,406
Revenue reserve		30,941	43,101
Total equity		883,605	938,941
Net asset value per Ordinary Share	13	837,13p	852.61p

The financial statements were approved and authorised for issue by the Board of AVI Global Trust plc on 12 November 2020 and were signed on its behalf by:

Susan Noble

Chairman

The accompanying notes are an integral part of these financial statements.

Registered in England & Wales No. 28203

STATEMENT OF CASH FLOWS

for the year ended 30 September 2020

	2020  £'000	2019  £'000
Reconciliation of (loss)/profit before taxation to net cash inflow from operating activities
(Loss)/profit before taxation	(1,279)	24,966
Losses/(gains) on investments held at fair value through profit or loss	3,073	(15,916)
Early redemption premium of Debenture Stock	-	4,436
Decrease/(increase) in other receivables	1,441	(389)
Decrease/(increase) in other payables	(158)	452
Taxation (paid)/received	(685)	2,168
Exchange losses on Loan Notes and revolving credit facility	391	1,974
Amortisation of Debenture and loan issue expenses	20	55
Net cash inflow from operating activities	2,803	15,772
Investing activities
Purchases of investments	(424,934)	(256,192)
Sales of investments	431,936	286,018
Cash inflow from investing activities	7,002	29,826
Financing activities
Dividends paid	(22,294)	(14,439)
Payments for Ordinary Shares bought back and placed in treasury	(30,633)	(13,001)
Repayment of Debenture Stock	-	(19,436)
Draw down of revolving credit facility	10,000	27,775
Cash outflow from financing activities	(42,927)	(19,101)
(Decrease)/increase in cash and cash equivalents	(33,122)	28,471
Reconciliation of net cash flow movement in funds:*
Cash and cash equivalents at beginning of year	64,725	36,251
Exchange rate movements	(7)	3
Decrease/(increase) in cash and cash equivalents	(33,122)	28,471
Decrease/(increase) in net cash	(33,122)	28,474
Cash and cash equivalents at end of year	31,596	64,725

* Includes movements in money market funds.

The accompanying notes are an integral part of these financial statements.

NOTES TO THE FINANCIAL STATEMENTS

1.  General information and accounting policies

AVI Global Trust plc is a company incorporated and registered in England and Wales. The principal activity of the Company is that of an investment trust company within the meaning of Sections 1158/1159 of the Corporation Tax Act 2010 and its investment approach is detailed in the Strategic Report.

The financial statements of the Company have been prepared in accordance 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 provisions of the Companies Act 2006. The annual financial statements have also been prepared in accordance with the AIC SORP for the financial statements of investment trust companies and venture capital trusts, except to any extent where it is not consistent with the requirements of IFRS.

Basis of preparation

The functional currency of the Company is Pounds Sterling because this is the currency of the primary economic environment in which the Company operates. The financial statements are also presented in Pounds Sterling rounded to the nearest thousand, except where otherwise indicated.

Going concern

The financial statements have been prepared on a going concern basis and on the basis that approval as an investment trust company will continue to be met.

The Directors have made an assessment of the Company's ability to continue as a going concern and are satisfied that the Company has adequate resources to continue in operational existence for a period of at least 12 months from the date when these financial statements were approved.

In making the assessment, the Directors have considered the likely impacts of the current COVID-19 pandemic on the Company, operations and the investment portfolio.

The Directors noted that the Company, with the current cash balance and holding a portfolio of liquid listed investments, is able to meet the obligations of the Company as they fall due. The current cash balance plus available additional borrowing, through the revolving credit facility, enables the Company to meet any funding requirements and finance future additional investments. The Company is a closed-end fund, where assets are not required to be liquidated to meet day to day redemptions.

The Directors have completed stress tests assessing the impact of changes in market value and income with associated cash flows, this has included plausible downside scenarios. These tests were driven by the possible effects of continuation of the COVID-19 pandemic but, as an arithmetic exercise, apply equally to any other set of circumstances in which asset value and income are significantly impaired. The conclusion was that in a plausible downside scenario the Company could continue to meet its liabilities. Whilst the economic future is uncertain, and the Directors believe that it is possible the Company could experience further reductions in income and/or market value, the opinion of the Directors is that this should not be to a level which would threaten the Company's ability to continue as a going concern.

The Directors, the Manager and other service providers have put in place contingency plans to minimise disruption. Furthermore, the Directors are not aware of any material uncertainties that may cast significant doubt on the Company's ability to continue as a going concern, having taken into account the liquidity of the Company's investment portfolio and the Company'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.

Segmental reporting

The Directors are of the opinion that the Company is engaged in a single segment of business, being investment business. The Company primarily invests in companies listed in the UK and other recognised international exchanges.

Accounting developments

In the year under review, the Company has applied a number of amendments to IFRS issued by the IASB. These include annual improvements to IFRS, changes in standards, legislative and regulatory amendments, changes in disclosure and presentation requirements. The adoption of the changes to accounting standards has had no material impact on these or prior years' financial statements.

There are amendments to IAS/IFRS that will apply from 1 October 2020 as follows:

· IFRS 8 Accounting Policies, Changes in Accounting Estimates and Errors.

The Directors do not anticipate that the adoption of the above standard will have a material impact on the financial statements as presented.

Critical accounting judgements 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. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. 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. There are no significant judgements or estimates in these financial statements.

Investments

The Company's business is investing in financial assets with a view to capital growth. This portfolio of financial assets is managed and its performance evaluated on a fair value basis in accordance with the documented investment strategy and information is provided internally on that basis to the Company's Board of Directors.

The investments held by the Company are designated 'at fair value through profit or loss'. All gains and losses are allocated to the capital return within the Statement of Comprehensive Income as 'Gains or losses on investments held at fair value through profit or loss'. Also included within this heading are transaction costs in relation to the purchase or sale of investments. When a purchase or sale is made under a contract, the terms of which require delivery within the timeframe of the relevant market, the investments concerned are recognised or derecognised on the trade date.

All investments are designated upon initial recognition as held at fair value through profit or loss, and are measured at subsequent reporting dates at fair value, which is either the bid price or closing price for Stock Exchange Electronic Trading Service - quotes and crosses ('SETSqx'). The Company derecognises a financial asset only when the contractual rights to the cash flows from the asset expire, or when it transfers the financial asset and substantially all the risks and rewards of ownership of the asset to another entity. On derecognition of a financial asset, the difference between the asset's carrying amount and the sum of the consideration received and receivable and the cumulative gain or loss that had been accumulated is recognised in profit or loss.

Fair values for unquoted investments, or for investments for which the market is inactive, are established by using various valuation techniques in accordance with the International Private Equity and Venture Capital (the 'IPEV') guidelines. These may include recent arm's length market transactions, the current fair value of another instrument that is substantially the same, discounted cash flow analysis, option pricing models and reference to similar quoted companies. Where there is a valuation technique commonly used by market participants to price the instrument and that technique has been demonstrated to provide reliable estimates of prices obtained in actual market transactions, that technique is utilised. Where no reliable fair value can be estimated for such instruments, they are carried at cost, subject to any provision for impairment. These are constantly monitored for value and impairment. The values and impairment, if any, are approved by the Board.

All investments for which a fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy levels in note 14. A transfer between levels may result from the date of an event or a change in circumstances.

The Company held no leases during the current or prior years.

Foreign currency

Transactions denominated in currencies other than Pounds Sterling are recorded at the rates of exchange prevailing on the date of the transaction. Items which are denominated in foreign currencies are translated at the rates prevailing on 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 capital or revenue in nature.

Cash and cash equivalents

Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments and money market funds, that are readily convertible to known amounts of cash and which are subject to insignificant risk of changes in value.

For the purposes 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.

Other receivables and payables

Trade receivables, trade payables and short-term borrowings are measured at amortised cost and balances revalued for exchange rate movements.

Revolving credit facility

The revolving credit facility is recognised at amortised cost and revalued for exchange rate movements.

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 withholding taxes which are disclosed separately in the Statement of Comprehensive Income.

Special dividends are taken to the 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.

All other income is accounted on a time-apportioned accruals basis and is recognised in the Statement of Comprehensive Income.

Expenses and finance costs

All expenses are accounted on an accruals basis. On the basis of the Board's expected long-term split of total returns in the form of capital and revenue returns of 70% and 30% respectively, the Company charges 70% of its management fee and finance costs to capital.

Expenses incurred directly in relation to arranging debt finance are amortised over the term of the finance.

Expenses incurred in buybacks of shares to be held in treasury are charged to the capital reserve through the Statement of Changes in Equity.

Taxation

The charge for taxation is based on the net revenue for the year and takes into account taxation deferred or accelerated because of temporary differences between the treatment of certain items for accounting and taxation purposes.

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 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.

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.

Non-current liabilities: Loan Notes

The non-current liabilities are valued at amortised cost. Costs in relation to arranging the debt finance have been capitalised and are amortised over the term of the finance. Hence, amortised cost is the par value less the amortised costs of issue.

The Euro Loan Notes are shown at amortised cost with the exchange difference on the principal amounts to be repaid reflected. Any gain or loss arising from changes in the exchange rate between Euro and Sterling is included in the capital reserves and shown in the capital column of the Statement of Comprehensive Income.

Further details of the non-current liabilities are set out in note 11.

Capital redemption reserve

The capital redemption reserve represents non-distributable reserves that arise from the purchase and cancellation of shares.

Share premium

The share premium account represents the accumulated premium paid for shares issued in previous periods above their nominal value less issue expenses. This is a reserve forming part of the non-distributable reserves. The following items are taken to this reserve:

· costs associated with the issue of equity; and

· premium on the issue of shares.

Capital reserve

The following are taken to the capital reserve through the capital column in the Statement of Comprehensive Income:

Capital reserve - other , forming part of the distribution reserves:

· gains and losses on the disposal of investments;

· amortisation of issue expenses of Loan Notes;

· costs of share buybacks;

· costs of Debenture Stock redemption;

· exchange differences of a capital nature; and

· expenses, together with the related taxation effect, allocated to this reserve in accordance with the above policies.

Capital reserve - investment holding gains , not distributable:

· increase and decrease in the valuation of investments held at the year end.

Merger reserve

The merger reserve represents the share premium on shares issued on the acquisition of Selective Assets Trust plc on 13 October 1995 and is not distributable.

Revenue reserve

The revenue reserve represents the surplus of accumulated profits and is distributable by way of dividends.

2. Income

	2020  £'000	2019  £'000
Income from investments
Listed investments	14,598	25,983
Total return swap dividends*	369	(92)
	14,967	25,891
Other income
Deposit interest	264	479
Total return swap interest*	(481)	(435)
Underwriting commission	426	-
Interest on French withholding tax received	1	25
Exchange gains on receipt of income**	(20)	249
	190	318
Total income	15,157	26,209

* Net income (paid)/received on underlying holdings in total return swaps.

** Exchange movements arise from ex-dividend date to payment date.

3. Investment management fee and other expenses

	2020	2020		2019	2019
	Revenue	Capital	2020	Revenue	Capital	2019
	return	return	Total	return	return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Management fee	1,789	4,173	5,962	1,887	4,404	6,291
Other expenses
Directors' emoluments - fees	169	-	169	157	-	157
Auditor's remuneration - audit	35	-	35	28	-	28
Auditor's remuneration - interim review	-	-	-	7	-	7
Marketing	459	-	459	310	-	310
Printing and postage costs	65	-	65	63	-	63
Registrar fees	80	-	80	86	-	86
Custodian fees	185	-	185	144	-	144
Depositary fees	120	-	120	121	-	121
Advisory and professional fees	249	-	249	208	66†	274
Costs associated with dividend receipts	60	-	60	95	-	95
Irrecoverable VAT	85	-	85	84	-	84
Regulatory fees	72	-	72	68	-	68
Directors' insurances and other expenses	51	-	51	32	-	32
	1,630	-	1,630	1,403	66	1,469

*

^† Capitalised costs associated with the total return swap.

For the year ended 30 September 2020, the fee calculated in accordance with the IMA amounted to 0.7% (2019: 0.7%) of the net asset value calculated on a quarterly basis.

Details of the IMA and fees paid to the Investment Manager are set out in the Report of the Directors.

4. Finance costs

	2020	2020		2019	2019
	Revenue	Capital	2020	Revenue	Capital	2019
	return	return	Total	return	return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Loan, debenture and revolving credit facility interest
8⅛ % Debenture Stock 2023*	-	-	-	246	573	819
4.184% Series A Sterling Unsecured Loan Notes 2036	376	879	1,255	376	879	1,255
3.249% Series B Euro Unsecured Loan Notes 2036	259	604	863	263	613	876
2.93% Euro Senior Unsecured Loan Notes 2037	154	359	513	152	354	506
Revolving credit facility	93	217	310	37	87	124
	882	2,059	2,941	1,074	2,506	3,580
Amortisation
8⅛ % Debenture Stock 2023*	-	-	-	-	36	36
4.184% Series A Sterling Unsecured Loan Notes 2036	-	7	7	-	7	7
3.249% Series B Euro Unsecured Loan Notes 2036	-	5	5	-	5	5
2.93% Euro Senior Unsecured Loan Notes 2037	-	7	7	-	7	7
JPY revolving credit facility**	31	72	103	13	31	44
	31	91	122	13	86	99
Early redemption
8⅛% Debenture Stock 2023*	-	-	-	-	4,436	4,436
Total	913	2,150	3,063	1,087	7,028	8,115
Exchange gains/(losses) on Loan Notes***	-	(1,114)	(1,114)	-	288	288

 * The 8⅛% Debenture Stock 2023 was redeemed on 3 June 2019

** Revaluation of Euro Loan Notes.

5. Taxation

	Year ended 30 September 2020			Year ended 30 September 2019
	Revenue  return	Capital return	Total	Revenue  return	Capital return	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Analysis of charge for the year
Overseas tax not recoverable*	691	-	691	1,096	-	1,096
Overseas tax recovered - previously expensed**	-	-	-	(433)	-	(433)
Tax cost for the year	691	-	-	663	-	663

* Tax deducted on payment of overseas dividends by local tax authorities.

** Receipts from the recovery of French withholding tax from prior years.

The tax charge for the year is higher (2019: lower) than the standard rate of corporation tax in the United Kingdom of 19%. The differences are explained below:

	Year ended 30 September 2020			Year ended 30 September 2019
	Revenue  return	Capital   return	Total	Revenue  return	Capital  return	Total
	'000	'000	'000	'000	'000	'000
Profit/(loss) before taxation	10,825	(12,104)	(1,279)	21,832	3,134	24,966
UK corporation tax rate of 19%	2,057	(2,300)	(243)	4,148	596	4,743
Effects of the non-taxable items:
- Tax-exempt overseas investment income	(2,770)	-	(2,770)	(4,967)	-	(4,967)
- Gains/(losses) on investments, exchange gains on capital items and movement of fair value or derivative financial instruments	-	1,098	1,098	-	(1,925)	(1,925)
- Excess management expenses carried forward	540	1,202	1,742	513	1,329	1,842
- Corporate interest restriction	173	-	173	306	-	306
- Overseas tax not recoverable	691	-	691	1,096	-	1,096
- Overseas tax recovered previously expensed	-	-	-	(433)	-	(433)
	691	-	691	663	-	663

At 30 September 20 20 , the Company had unrelieved management expenses of £ 87,852,000 (30 September 201 9 : £78,686,000 ) that are available to offset future taxable revenue. A deferred tax asset of £1 6 , 692 ,000 has not been recognised because the Company is not expected to generate sufficient taxable income in future periods in excess of the available deductible expenses and accordingly, the Company is unlikely to be able to reduce future tax liabilities through the use of existing surplus losses.

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.

6. Dividends

	2020	2019
	£'000	£'000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 30 September 2019 of 14.50p (2018: 11.00p) per Ordinary Share	15,855	12,221
Interim dividend for the year ended 30 September 2020 of 6.00p (2019: 2.00p) per Ordinary Share	6,439	2,218
	22,294	14,439

Set out below are the interim and final dividends paid or proposed on Ordinary Shares in respect of the financial year, which is the basis on which the requirements of Section 1159 of the Corporation Tax Act 2010 are considered.

	2020	2019
	£'000	£'000
Interim dividend for the year ended 30 September 2020 of 6.00p (2019: 2.00p) per Ordinary Share	6,439	2,218
Proposed final dividend for the year ended 30 September 2020 of 10.5p (2019: 14.50p) per Ordinary Share	11,041*	15,855
	17,480	18,073

* Based on shares in circulation on 10 November 2020.

7. Earnings per Ordinary Share

The earnings per Ordinary Share is based on Company net profit after tax of £1,970,000 (2019: £24,303,000 ) and on 108,222,102 (2019: 110,956,131) Ordinary Shares, being the weighted average number of Ordinary Shares in issue (excluding shares in treasury) during the year.

The earnings per Ordinary Share detailed above can be further analysed between revenue and capital as follows:

	2020			2019
Basic and diluted	Revenue	Capital	Total	Revenue	Capital	Total
Profit for the year (£'000)	10,134	(12,104)	(1,970)	21,169	3,134	24,303
Weighted average number of Ordinary Shares			108,222,102			110,956,131
Earnings per Ordinary Share	9.36p	(11,18)p	(1.82)p	19.08p	2.82p	21.90p

There are no dilutive instruments issued by the Company (2019: none).

8. Investments held at fair value through profit or loss

	30 September	30 September
	2020	2019
	£'000	£'000
Financial assets held at fair value
Opening book cost	852,421	826,405
Opening investment holding gains	121,208	163,860
Opening fair value	973,629	990,265
Movement in the year:
Purchases at cost:
Equities	424,886	255,779
Sales/Close - proceeds:
Equities and total return swaps	(435,733)	(288,331)
- realised gains on equity sales and close of total return swaps	23,473	58,568
Decrease in investment holding gains	(26,546)	(42,652)
Closing fair value	959,709	973,629
Closing book cost	865,047	852,421
Closing investment holding gains	94,662	121,208
Closing fair value	959,709	973,629
Financial assets held at fair value
Equities	959,709	972,824
Total return swaps	-	805
	959,709	973,629

	Year ended	Year ended
	30 September	30 September
	2020	2019
	£'000	£'000
Transaction costs
Cost on acquisition	251	241
Cost on disposals	243	276
	494	517

Analysis of capital gains
Gains on sales/close out of financial assets based on historical cost	23,473	58,568
Movement in investment holding gains for the year	(26,546)	(42,652)
Net gains on financial assets and financial liabilities held at fair value	(3,073)	15,916

The Company received £435,733,000 (2019: £288,331,000) from investments sold in the year. The book cost of these investments when they were   purchased was £412,260,000 (2019: £229,763,000). These investments have been revalued over time and until they were sold any unrealised gains   or losses were included in the fair value of the investments.

9. Other receivables

	2020	2019
	£'000	£'000
Sales for future settlement	6,515	2,711
Overseas tax recoverable	650	655
Prepayments and accrued income	1,585	3,036
VAT recoverable	25	16
	8.775	6,418

Overseas tax recoverable relates to withholding tax in a number of countries, some of which is past due, but is in the process of being reclaimed by the Custodian through local tax authorities and which the Company expects to receive in due course.

No other receivables are past due or impaired.

10. Current liabilities

	2020	2019
	£'000	£'000
Total return swap	-	3,979
Revolving credit facility	39,314	30,037
Other payables
Purchases for future settlement	-	48
Amounts owed for share buybacks	443	4
Management fees	488	542
Interest payable	797	787
Other payables	369	484
Total other payables	2,097	1,865
Total current liabilities	41,411	35,881

Revolving credit facility

On 29 April 2019, the Company entered into an agreement with Scotiabank Europe Plc for a JPY4.0bn (£27,700,000) unsecured revolving credit facility (the 'facility') for a period of three years.

The facility was increased to JPY9.0bn and converted to a multi currency facility with drawings available in Japanese Yen, Pounds Sterling, US Dollars and Euros on 5 March 2020 and a further £10,000,000 was drawn down as at 30 September 2020. As at the year end a total of JPY4.0bn and £10,000,000 remained drawn down.

The facility bears interest at the rate of 0.75% over LIBOR on any drawn balance. Undrawn balances below JPY2.0bn are charged at 0.35% and any undrawn portion above this is charged at 0.30%. Under the terms of the facility, the net assets shall not be less than £300m and the adjusted net asset coverage to borrowings shall not be less than 4:1.

The facility is shown at amortised cost and revalued for exchange rate movements. Any gain or loss arising from changes in exchange rates is included in the capital reserves and shown in the capital column of the Statement of Comprehensive Income. Interest costs are charged to capital and revenue in accordance with the Company's accounting policies.

11. Non-current liabilities

	2020	2019
	£'000	£'000
4.184% Series A Sterling Unsecured Loan Notes 2036	29,889	29,892
3.249% Series B Euro Unsecured Loan Notes 2036	27,140	26,466
2.93% Euro Senior Unsecured Loan Notes 2037	18,085	17,571
Total	75,064	73,929

The amortised costs of issue expenses are set out in note 4.

The fair values of the Loan Notes are set out in note 14.

The Company issued two Loan Notes on 15 January 2016:

£30,000,000  4.184% Series A Sterling Unsecured Loan Notes due 15 January 2036

€30,000,000  3.249% Series B Euro Unsecured Loan Notes due 15 January 2036

The Company issued further Loan Notes on 1 November 2017:

€20,000,000  2.93% Euro Senior Unsecured Loan Notes due 1 November 2037

Under the terms of the Loan Notes, the net assets of the Company shall not be less than £300,000,000 and total indebtedness shall not exceed 40% of net assets.

Further information on the Loan Notes is set out above.

12. Called-up share capital

	Ordinary Shares of 10p each
	Number of   shares	Nominal value £'000
Allotted, called up and fully paid:	116,003,133	11,600
Treasury Shares:
Balance at beginning of year	5,877,465
Buyback of Ordinary Shares into treasury	4,573,938
Balance at end of year	10,451,403
Total Ordinary Share capital excluding Treasury Shares	105,551,730

During the year, 4,573,938    (2019: 1,718,823 ) Ordinary Shares with a nominal value of £457,000 (2019: £172,000 ) and representing 3.94% of the issued share capital, were bought back and placed in treasury for an aggregate consideration of £31,072,000 (2019: £12,603,000 ). No Ordinary Shares were bought back for cancellation (2019: nil). No Ordinary Shares were cancelled from treasury during the year (2019: 13,523,032).

The allotted, called up and fully paid shares at 30 September 2020 consisted of 116,003,133 Ordinary Shares.

13. Net asset value

The net asset value per share and the net asset value attributable to the Ordinary Shares at the year-end are calculated in accordance with their entitlements in the Articles of Association and were as follows:

	Net asset value per share attributable
	2020	2019
Ordinary Shares	837.13p	852.61p
	Net asset value attributable
	2020	2019
	£'000	£'000
Ordinary Shares	883,605	938,941

Basic net asset value per Ordinary Share is based on net assets and on 105,551,730 Ordinary Shares (2019: 110,125,668 ), being the number of Ordinary Shares in issue excluding Treasury Shares at the year end.

14.  Financial instruments and capital disclosures

Investment objective and policy

The investment objective of the Company is to achieve capital growth through a focused portfolio of investments, particularly in companies whose share prices stand at a discount to estimated underlying net asset value.

The Company's investment objective and policy are detailed above.

The Company's financial instruments comprise equity and fixed-interest investments, cash balances, receivables, payables and borrowings. The Company makes use of borrowings to achieve improved performance in rising markets. The risk of borrowings may be reduced by raising the level of cash balances or fixed-interest investments held.

Risks

The risks identified arising from the financial instruments are market risk (which comprises market price risk, interest rate risk and foreign currency risk), liquidity risk and credit and counterparty risk. The Company may also enter into derivative transactions to manage risk.

The Board and Investment Manager consider and review the risks inherent in managing the Company's assets which are detailed below.

Market risk

Market risk arises mainly from uncertainty about future prices of financial instruments used in the Company's business. It represents the potential loss which the Company might suffer through holding market positions by way of price movements, interest rate movements and exchange rate movements. The Investment Manager 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 portfolio is managed with an awareness of the effects of adverse price movements through detailed and continuing analysis with the objective of maximising overall returns to shareholders. If the fair value of the Company's investments at the year-end increased or decreased by 10%, then it would have had an impact on the Company's capital return and equity of £191,941,000 (2019: £194,564,000).

Foreign currency

The value of the Company's assets and the total return earned by the Company's shareholders can be significantly affected by foreign exchange rate movements as most of the Company's assets are denominated in currencies other than Pounds Sterling, the currency in which the Company's financial statements are prepared. Income denominated in foreign currencies is converted to Pounds Sterling upon receipt.

A 5% rise or decline of Sterling against foreign currency denominated (i.e. non Pounds Sterling) assets and liabilities held at the year-end would have increased/decreased the net asset value by £40,307,000 (2019: £41,813,000 ).

The currency exposure is as follows:

Currency risk
	GBP	EUR	USD	SEK	JPY	NOK	CHF	HKD	Other	Total
	'000	'000	'000	'000	'000	'000	£'000	£'000	'000	'000
At 30 September 2020
Other receivables	102	168	147	-	7,439	197	285	437	-	8,775
Cash and cash equivalents	31,596	-	-	-	-	-	-	-	-	31,596
Other payables	(1,534)	(406)	-	-	(157)	-	-	-	-	(2,097)
4.184% Series A Sterling Unsecured Loan Notes 2036	(29,899)	-	-	-	-	-	-	-	-	(29,889)
3.249% Series B Euro Unsecured Loan Notes 2036	-	(27,140)	-	-	-	-	-	-	-	(27,140)
2.93% Euro Senior Unsecured Loan Notes 2037	-	(18,025)	-	-	-	-	-	-	-	(18,025)
Revolving credit facility	(10,000)	-	-	-	(29,314)	-	-	-	-	(39,314)
Currency exposure on net monetary items	(9,735)	(45,403)	147	-	(22,032)	197	285	437	-	(76,104)
Investments held at fair value through profit or loss - equities	87,196	108,687	301,093	95,681	285,793	20,287	-	20,035	40,937	959,709
Total net currency exposure	77,461	63,284	301,240	95,681	263,761	20,484	285	20,472	40,937	883,605

This exposure is representative at the Balance Sheet date and may not be representative of the year as a whole. The balances are of the holding investment and may not represent the actual exposure of the subsequent underlying investment. 

	GBP	EUR	USD	SEK	JPY	NOK	CHF	HKD	Other	Total
	'000	'000	'000	'000	'000	'000	£'000	£'000	'000	'000
At 30 September 2019
Other receivables	698	167	2,813	-	1,378	213	275	874	-	6,418
Cash and cash equivalents	50,725	-	14,000	-	-	-	-	-	-	64,725
Other payables	(1,294)	(399)	-	-	(172)	-	-	-	-	(1,865)
Total return swaps	-	-	805	-	-	-	-	-	-	805
4.184% Series A Sterling Unsecured Loan Notes 2036	(29,892)	-	-	-	-	-	-	-	-	(29,892)
3.249% Series B Euro Unsecured Loan Notes 2036	-	(26,466)	-	-	-	-	-	-	-	(26,466)
2.93% Euro Senior Unsecured Loan Notes 2037	-	(17,571)	-	-	-	-	-	-	-	(17,571)
Revolving credit facility	-	-	-	-	(30,037)	-	-	-	-	(30,037)
Currency exposure on net monetary items	20,237	(44,269)	17,618	-	(28,831)	213	275	874	-	(33,883)
Investments held at fair value through profit or loss - equities	82,446	116,529	354,554	56,352	254,008	15,924	27,539	36,909	28,563	972,824
Total net currency exposure	102,683	72,260	372,172	56,352	225,177	16,137	27,814	37,783	28,563	938,941

Interest rate risk

Interest rate movements may affect:

• the fair value of investments in fixed-interest rate securities;

• the level of income receivable on cash deposits;

• the interest payable on variable rate borrowings; and

• the fair value of the Company's long-term debt.

The possible effects on 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 Loan Notes issued by the Company pay a fixed rate of interest and are carried in the Company's Balance Sheet at amortised cost rather than at fair value. Hence, movements in interest rates will not affect net asset values, as reported under the Company's accounting policies, but may have an impact on the Company's share price and discount/premium. The fair value of the debt and its effect on the Company's assets is set out below.

The exposure at 30 September of financial assets and financial liabilities to interest rate risk is shown by reference to floating interest rates.

	At  30 September 2020  £'000	At  30 September 2019  £'000
Exposure to floating interest rates: Cash and cash equivalents	31,596	64,725
JPY revolving credit facility	(39,314)	(30,037)

If the above level of cash was maintained for a year, a 1% increase in interest rates would increase the revenue return and net assets by £77,000 (2019: increase by £347,000). Management proactively manages cash balances. If there was a fall of 1% in interest rates, it would potentially impact the Company by turning positive interest to negative interest. The total effect would be a revenue reduction/cost increase of £77,000 (2019: revenue increase/cost decrease of £347,000).

	At 30 September 2020		At 30 September 2019
	Book cost £'000	Fair value £'000	Book cost £'000	Fair value £'000
4.184% Series A Sterling Unsecured Loan Notes 2036	29,899	38,677	29,892	35,596
3.249% Series B Euro Unsecured Loan Notes 2036	27,140	34,826	26,466	32,756
2.93% Euro Senior Unsecured Loan Notes 2037	18,025	22,779	17,571	21,348
Total	75,064	96,282	73,929	89,700

The impact of holding the Loan Notes at fair value would be to reduce the Company's net assets by £21,218,000.

The fair value of the Company's Loan Notes at the year-end was £96,282,000 (2019: £89,700,000). The interest rates of the non-current liabilities (Loan Notes) are fixed. A 1% increase in market interest rates would be expected to decrease the fair value of the non-current liabilities by approximately £11.2m (2019: £10.9m), all other factors being equal. A 1% decrease would increase the fair values by £13.0m (2019: £4.1m).

Liquidity risk

The Company's assets mainly comprise readily realisable securities which can be easily sold to meet funding commitments, if necessary. Unlisted investments, if any, in the portfolio are subject to liquidity risk. The risk is taken into account by the Directors when arriving at their valuation of these items.

Liquidity risk is mitigated by the fact that the Company has £31,596,000 (2019: £64,725,000) cash at bank, the assets are readily realisable and further short-term flexibility is available through the use of bank borrowings. The Company is a closed-end fund, assets do not need to be liquidated to meet redemptions, and sufficient liquidity is maintained to meet obligations as they fall due.

The remaining contractual payments on the Company's financial liabilities at 30 September, based on the earliest date at which payment can be required and current exchange rates at the Balance Sheet date, were as follows:

	In 1 year  or less	In more than 1  year but not  more than  2 years	In more than 2  years but not  more than  3 years	In more than 3  years but not  more than   10 years	In more than 10 years	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 30 September 2020
4.184% Series A Sterling Unsecured Loan Notes 2036	(1,255)	(1,255)	(1,255)	(8,786)	(17,348)	(29,899)
3.249% Series B Euro Unsecured Loan Notes 2036	(884)	(884)	(844)	(6,910)	(18,298)	(27,140)
2.93% Euro Senior Unsecured Loan Notes 2037	(532)	(532)	(532)	(3,721)	(12,708)	(18,025)
Revolving credit facility	(39,314)	-	-	-	-
Other payables	(2,097)	‑	-	-	-
	(44,082)	(2,671)	(2,671)	(18,697)	(48,354)	(116,475)

	In 1 year  or less	In more than 1  year but not  more than   2 years	In more than 2  years but not  more than  3 years	In more than 3  years but not  more than   10 years	In more than 10 years	Total
	£'000	£'000	£'000	£'000	£'000	£'000
At 30 September 2019
4.184% Series A Sterling Unsecured Loan Notes 2036	(1,255)	(1,255)	(1,255)	(8,786)	(17,341)	(29,892)
3.249% Series B Euro Unsecured Loan Notes 2036	(863)	(863)	(863)	(6,038)	(17,839)	(26,466)
2.93% Euro Senior Unsecured Loan Notes 2037	(519)	(519)	(519)	(3,630)	(12,384)	(17,571)
Revolving credit facility	(30,037)	-	-	-	-	(30,307)
Total return swap liabilities	(3,979)	-		-	-	(3,979)
Other payables	(1,865)	-	-	-	-	(1,865)
	(38,518)	(2,637)	(2,637)	(18,454)	(47,564)	(109,810)

Credit risk

Credit risk is mitigated by diversifying the counterparties through which the Investment Manager conducts investment transactions. The credit standing of all counterparties is reviewed periodically, with limits set on amounts due from any one counterparty.

The total credit exposure represents the carrying value of fixed-income investments, cash and receivable balances and totals £40,371,000 (2018: £75,927,000).

Fair values of financial assets and financial liabilities

Valuation of financial instruments

The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements. 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 assets 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 within Level 1.

· Level 3 - valued by reference to valuation techniques using inputs that are not based on observable market data for the asset or liabilit

The tables below set out fair value measurements of financial instruments as at the year end, by the level in the fair value hierarchy into which the fair value measurement is categorised.

Financial assets at fair value through profit or loss at 30 September 2020

	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Equity investments	951,491	5,602	2,616	959,709
	951,491	5,602	2,616	959,709

Financial assets at fair value through profit or loss at 30 September 2019

	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Equity investments	957,334	15,490	-	972,824
Total return swap assets	-	4,784	-	4,784
	957,334	20,274	-	977,608

The valuation of Level 2 equity investments is determined using the average of independent broker traded prices available in the market. The valuation techniques used by the Company are explained in the accounting policies note above.

The fair value of the total return swaps is derived by using the market price of the underlying instruments and exchange rates and therefore would be categorised as Level 2.

Fair Value of Level 3 investments

	30 September 2020	30 September 2019
	£'000	£'000
Opening fair value of investments	-	-
Transfer of Level 3 from Level 1 in the year	2,616	-
Movement in unrealised investment holding gains	-	-
Closing fair value of investments	2,616	-

The fair value of the Level 3 investment is derived from the net asset value less the average discount prior to delisting.

Financial liabilities

Valuation of Loan Notes

The Company's Loan Notes are measured at amortised cost, with the fair values set out below. Other financial assets and liabilities of the Company are carried in the Balance Sheet at an approximation to their fair value.

	At 30 September 2020		At 30 September 2019
	Book value	Fair value	Book value	Fair value
	£'000	£'000	£'000	£'000
4.184% Series A Sterling Unsecured Loan Notes 2036	(29,899)	(38,677)	(29,892)	(35,596)
3.249% Series B Euro Unsecured Loan Notes 2036	(27,140)	(34,826)	(26,466)	(32,756)
2.93% Euro Senior Unsecured Loan Notes 2037	(18,025)	(22,779)	(17,571)	(21,348)
Total	(75,064)	(96,282)	(73,929)	(89,700)

There is no publicly available price for the Company's Loan Notes. Their fair market value has been derived by calculating the relative premium (or discount) of the loan versus the publicly available market price of relevant reference market instruments and exchange rates. As this price is derived by a model, using observable inputs, it would be categorised as Level 2 under the fair value hierarchy. The fair value of the total return swaps is derived using the market price of the underlying instruments and exchange rates and therefore would be categorised as Level 2.

The financial liabilities in the table below are shown at their fair value, being the amount at which the liability may be transferred in an orderly transaction between market participants. The costs of early redemption of the Loan Notes are set in the Glossary.

Financial liabilities at 30 September 2020

	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Loan Notes	-	(96,282)	-	(96,282)
	-	(96,282)	-	(96,282)

Financial liabilities at 30 September 2019

	Level 1	Level 2	Level 3	Total
	£'000	£'000	£'000	£'000
Loan Notes	-	(89,700)	-	(89,700)
Total return swap liabilities	-	(3,979)	-	(3,979)
	-	(93,679)	-	(93,679)

Capital management policies and procedures

The structure of the Company's capital is described in the Annual Report and details of the Company's reserves are shown in the Statement of Changes in Equity.

The Company's capital management objectives are:

· to ensure that it will be able to continue as a going concern;

· to achieve capital growth through a focused portfolio of investments, particularly in companies whose share prices stand at a discount to estimated underlying net asset value, through an appropriate balance of equity capital and debt; and

· to maximise the return to shareholders while maintaining a capital base to allow the Company to operate effectively and meet obligations as they fall due.

The Board, with the assistance of the Investment Manager, regularly monitors and reviews the broad structure of the Company's capital on an ongoing basis. These reviews include:

· the level of gearing, which takes account of the Company's position and the Investment Manager's views on the market; and

· the extent to which revenue in excess of that which is required to be distributed should be retained.

The Company's objectives, policies and processes for managing capital are unchanged from last year.

The Company is subject to externally imposed capital requirements:

a)  as a public company, the Company is required to have a minimum share capital of £50,000; and

b)  in accordance with the provisions of Sections 832 and 833 of the Companies Act 2006, the Company, as an investment company:

i)  is only able to make a dividend distribution to the extent that the assets of the Company are equal to at least one and a half times its liabilities after the dividend payment has been made; and

ii)  is required to make a dividend distribution each year such that it does not retain more than 15% of the income that it derives from shares and securities in that year.

These requirements are unchanged since last year and the Company has complied with them at all times.

15. Derivatives

The Company may use a variety of derivative contracts, including total return swaps to enable it to gain long and short exposure to individual securities. Derivatives are valued by reference to the underlying market value of the corresponding security.

	At  30 September 2020  £'000	At  30 September 2019  £'000
Total return swaps
Current assets	-	4,784
Current liabilities	-	(3,979)
Net value of derivatives	-	805

The gross positive exposure on total return swaps as at 30 September 2020 was £nil (30 September 2019: £37,377,000) and the total negative exposure of total return swaps was £nil (30 September 2019: £29,034,000). The liabilities are secured against assets held with Jefferies Hoare Govett (the "prime broker"). The collateral held as at 30 September 2020 was £nil (30 September 2019: £14,000,000), which is included in cash and cash equivalents in the Balance Sheet.

16. Contingencies, guarantees and financial commitments

At 30 September 2020, the Company had £nil financial commitments (2019: £nil).

At 30 September 2020, the Company had £nil contingent liability in respect of any investments carrying an obligation for future subscription or underwriting commitments (2019: £nil).

17. Related party transactions and transactions with the Investment Manager

Fees paid to the Company's Directors are disclosed in the Report on Remuneration Implementation in the full Annual Report. At the year end, £nil was outstanding due to Directors (2019: £nil).

The transaction pursuant to the IMA with AVI is set out in the Report of the Directors. Management fees for the year amounted to £5,962,000 (2019: £6,291,000 ).

As at the year end, the following amounts were outstanding in respect of management fees: £488,000 (2019: £542,000).

18. Post balance sheet events

Since the year end, the Company has bought back 403,348 Ordinary Shares with a nominal value of £ 40,335 at a total cost of £ 3,056,000 , which have been placed in treasury.

On 6 October 2020 the Company repaid the £10,000,000 which was drawn down on the revolving credit facility on 23 September 2020. An additional breakage cost of £3,000 was incurred. The amount drawn down as at 10 November 2020 is JPY4.0bn of the JPY9.0bn facility

GLOSSARY

AIFM

The AIFM, or Alternative Investment Fund Manager, is Asset Value Investors, which manages the portfolio on behalf of AGT shareholders. The current approach to investment used by Asset Value Investors was adopted in June 1985.

NAV total return since inception of strategy in June 1985 (annualised)

Closing NAV per share (p) - 30 September 2020	817.03	a
Dividends paid out (p)	191.48	b
Benefits from re-investing dividends (p)	305.63	c
Adjusted NAV per share (p)	1,314.14	d = a + b + c
Opening NAV per share (p) - June 1985	29.72	e
Annualised NAV total return (%)	11.3%	((d/e) ^ (1/35.25)) - 1

Alternative Performance Measure ('APM')

An APM is a numerical measure of the Company's current, historical or future financial performance, financial position or cash flows, other than a financial measure defined or specified in the applicable financial framework. In selecting these Alternative Performance Measures, the Directors considered the key objectives and expectations of typical investors in an investment trust such as the Company.

Comparator Benchmark

The Company's Comparator Benchmark is the MSCI All Country World ex-US Total Return Index, expressed in Sterling terms. The benchmark is an index which measures the performance of global equity markets, both developed and emerging. The weighting of index constituents is based on their market capitalisation.

Dividends paid by index constituents are assumed to be reinvested in the relevant securities at the prevailing market price. The Investment Manager's investment decisions are not influenced by whether a particular company's shares are, or are not, included in the benchmark. The benchmark is used only as a yard stick to compare investment performance.

Cost

The book cost of each investment is the total acquisition value, including transaction costs, less the value of any disposals or capitalised distributions allocated on a weighted average cost basis.

Currency
GBP	EUR	USD	SEK	JPY	NOK	CHF	HKD	BRL	RON
Pounds Sterling	Euro	US Dollar	Swedish Krona	Japanese Yen	Norwegian Krone	Swiss Franc	Hong Kong Dollar	Brazilian Real	Romanian Lei

Discount/Premium (APM)

If the share price is lower than the NAV per share, it is said to be trading at a discount. The size of the Company's discount is calculated by subtracting the share price of 741.00p (2019: 747.00p) from the NAV per share (with debt at fair value) of 817.03p  (2019: 838.29p) and is usually expressed as a percentage of the NAV per share, 9.3% (2019: 10.9%). If the share price is higher than the NAV per share, this situation is called a premium.

Earnings before Interest and Tax ('EBIT')

A standard measure of operating profits and, therefore, the profits that are available to be distributed to both debt and equity investors. It is often compared with Enterprise Value in the 'EV/EBIT Ratio', similar to the price-to-earnings ratio.

Earnings before Interest, Tax, Depreciation and Amortisation ('EBITDA')

A proxy for the cash flow generated by a business - it is most commonly used for businesses that do not (yet) generate operating or shareholder profits.

Enterprise Value ('EV')

Enterprise value is the sum of a company's market value plus debt less cash.

Free Cash Flow Yield ('FCF')

Free cash flow is the amount of cash profits that a business generates, adjusted for the minimum level of capital expenditure required to maintain the company in a steady state. It measures how much a business could pay out to equity investors without impairing the core business. When free cash flow is divided by the market value, we obtain the free cash flow yield.

Gearing (APM)

Gearing refers to the ratio of the Company's debt to its equity capital. The Company may borrow money to invest in additional investments for its portfolio. If the Company's assets grow, the shareholders' assets grow proportionately more because the debt remains the same. But if the value of the Company's assets falls, the situation is reversed. Gearing can therefore enhance performance in rising markets but can adversely impact performance in falling markets.

Using debt at par value, the gross gearing of 12.9% (2019: 11.1%) represents borrowings of £ 114,378,000   (2019: £103,966,000) expressed as a percentage of shareholders' funds of £ 883,605,000 (2019: £938,941,000 ).Using debt at fair value, gross gearing is 15.7% (2019: 13.0%).

Net gearing, which accounts for cash balances and uses debt at par value, is 8.6% (2019: 3.6%). Using debt at fair value, net gearing is 11.3% (2019: 5.4%).

The current values of the Loan Notes and revolving credit facility consist of the following:

	30 September 2020
	2036  GBP loan  £'000	2036  EUR Loan  £'000	2037  EUR Loan  £'000	JPY revolving credit facility £'000	Total  £'000
Value of issue	30,000	22,962	17,526	27,775	108,263
Unamortised issue costs	(101)	(77)	(119)	-	(297)
Exchange movement	-	4,255	618	1,539	6,412
Amortised book cost	29,899	27,140	18,025	39,314	114,378
Fair value	38,677	34,826	22,779	39,314	135,596
Redemption value	46,013	42,950	28,690	39,314	156,967

	30 September 2019
	Debenture  £'000	2036  GBP loan  £'000	2036  EUR Loan  £'000	2037  EUR Loan  £'000	Total  £'000
Value of issue	30,000	22,962	17,526	27,775	98,263
Unamortised issue costs	(108)	(83)	(127)	-	(318)
Exchange movement	-	3,587	172	2,262	6,021
Amortised book cost	29,892	26,466	17,571	30,037	103,966
Fair value	35,596	32,756	21,348	30,037	119,737
Redemption value	45,577	42,959	28,599	30,037	147,172

The fair values of the Loan Notes are calculated using net present values of future cash flows and the yields, taking account of exchange rates. The redemption value includes the penalty payable on early redemption.

Internal Rate of Return ('IRR')

The IRR is the annualised rate of return earned by an investment, adjusted for dividends, purchases and sales, since the holding was first purchased.

Japan Special Situations Basket

A basket of Japanese operating companies which have large amounts of net cash and securities (surplus to operating requirements) on the balance sheet. There are currently 15 stocks in the basket. For further information, see the case study above.

Net Asset Value ('NAV')

The NAV is shareholders' funds expressed as an amount per individual share. Shareholders' funds are the total value of all the Company's assets, at a current market value, having deducted all liabilities and prior charges at their par value (or at their asset value). The total NAV per share is calculated by dividing shareholders' funds of £ 883,605,000   (2019: £938,941,000 ) by the number of Ordinary Shares in issue excluding Treasury Shares of 105,551,730   (2019: 110,125,668 ) at the year end.

Net Financial Value ('NFV')

The NFV is cash plus investment securities plus treasury shares less total debt less net pension liabilities. It measures the amount of net surplus cash and securities that a company carries on its balance sheet.

Ongoing Expenses Ratio (APM) / Ongoing Charges Ratio (APM)

As recommended by the AIC in its current guidance, the Company's Ongoing Charges Ratio is the sum of: (a) its Ongoing Expenses   Ratio; and (b) the Ongoing Charges   R atios incurred at the underlying funds in which the Company has investments, weighted for the value of the investment in each underlying   fund as a percentage of the Company's NAV. For a detailed discussion of the Ongoin g Expenses Ratio, please see the discussion of Key Performance   Indicators on page 8 of the Annual Report.

The Company's Ongoing Expenses Ratio is its annualised expenses (excluding finance costs and certain non-recurring items) of £7,592,000   (2019: £7,693,000) (being investment management fees of £5,962,000 (2019: £6,291,000) and other expenses of £1,630,000 (2019: £1,403,000)   (see note 3)) expressed as a percentage of the average month-end net assets of £853,625,000 (2019: £903,924,000) during the year as disclosed   to the London Stock Exchange.

A reconciliation of the Ongoing Charges to the Ongoing Expenses Ratio is provided below:

		2020	2019
Ongoing Expenses Ratio (a Key Performance Indicator)	a	0.89%	0.85%
Underlying Charges Ratio	b	1.42%	1.88%
Ongoing Charges Ratio	=a+b	2.31%	2.73%

% of investee company

AGT's economic exposure to each investee company, as estimated by AVI.

Portfolio

Portfolio is defined as being Total Assets less Current Liabilities. For the year ended September 20 20 , this is £ 958,669,000 (year ended September 201 9 : £1,012,870,000 ).

Return on Investment ('ROI')

The ROI is the total profits earned to date on an investment divided by the total cost of the investment.

Shares Bought Back and Held in Treasury

The Company may repurchase its own shares and these are then held in treasury, reducing the freely traded shares ranking for dividends and enhancing returns and earnings per Ordinary Share to the remaining shareholders. When the Company repurchases its shares, it does so at a total cost below the prevailing NAV per share.

The estimated percentage added to NAV per share from buybacks of 0.5% (2019: 0.1%) is derived from the repurchase of shares in the market at a discount to the prevailing NAV at the point of repurchase. The shares were bought back at a weighted average discount of 10.5% (2019: 9.7%).

	30 September	30 September
	2020	2019
Weighted average discount of buybacks	10.5%	9.7%	a
Percentage of shares bought back	4.2%	1.3%	b
NAV accretion from buyback	0.5%	0.1%	(a*b)/(1-b)

Total Assets

Total assets include investments, cash, current assets and all other assets. An asset is an economic resource, being anything tangible or intangible that can be owned or controlled to produce positive economic value. The total assets less all liabilities will be equivalent to total shareholders' funds.

Total Assets less Current Liabilities

Total assets less current liabilities is used as the basis for the measurement of equity exposure (being total assets of £959,709,000 (2019: £972,824,000)   less current liabilities of £41,411,000 (2019: 35,881,000)).

Total Return (APM)

Total return statistics enable the investor to make performance comparisons between investment trusts with different dividend policies. The total return measures the combined effect of any dividends paid, together with the rise or fall in the share price or NAV. This is calculated by the movement in the NAV or share price plus dividend income reinvested by the Company at the prevailing NAV or share price.

NAV Total Return (APM)

NAV total return is calculated by assuming that dividends paid out are re-invested into the NAV on the ex-dividend date. This is accounted for in the "benefits from re-investing dividends" line. The NAV used here includes debt marked to fair value and is inclusive of accumulated income.

Where an "annualised" figure is quoted, this means that the performance figure quoted is not a standard one-year figure, and therefore has been converted into an annual return figure in order to ease comparability. For example, if AGT's NAV increased by +100% over a ten-year period, this would become an annualised NAV return of 7.2%.

NAV total return over 1 year		30 September  2020	30 September  2019
Closing NAV per share (p)		817.03	838.29	a
Dividends paid out (p)		20.50	13.00	b
Benefits from re-investing dividends (p)		0.80	1.09	c
Adjusted NAV per share (p)		838.33	852.38	d=a+b+c
Opening NAV per share (p)		838.29	834.58	e
NAV total return (%)		0.0%	2.1%	=(d/e)-1

 NAV total return over 10 years (annualised)

Closing NAV per share (p) - 30 September 2020	817.03	a
Dividends paid out (p)	126.40	b
Benefits from re-investing dividends (p)	57.73	c
Adjusted NAV per share (p)	1,001,16	d = a + b + c
Opening NAV per share (p) - September 2009	514.56	e
Annualised NAV total return (%)	6.9%	((d/e) ^ (1/10)) - 1

Share Price Total Return (APM)

Share price total return is calculated by assuming that dividends paid out are re-invested into new shares on the ex-dividend date. This is accounted for in the "benefits from re-investing dividends" line.

Share price total return over 1 year		30 September  2020	30 September  2019
Closing price per share (p)		741.00	747.00	a
Dividends paid out (p)		20.50	13.00	b
Benefits from re-investing dividends (p)		0.55	0.82	c
Adjusted price per share (p)		762.05	760.82	d=a+b+c
Opening price per share (p)		747.00	764.00	e
Share price total return (%)		2.0%	-0.4%	=(d/e)-1

Weight

Weight is defined as being each position's value as a percentage of total assets less current liabilities.

Weighted-average Discount (APM)

The weighted-average discount is calculated as being the sum of the products of each holding's weight in AGT's portfolio times its discount. AVI calculates an estimated sum-of-the-parts NAV per share for each holding in AGT's portfolio. This NAV is compared with the share price of the holding in order to calculate a discount.

NATIONAL STORAGE MECHANISM

A copy of the Annual Report and Accounts will be submitted shortly to the National Storage Mechanism ('NSM') and will be available for inspection at the NSM, which is situated at: www.morningstar.co.uk/uk/nsm  

 

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