Final Results

RNS Number : 9798I

Personal Assets Trust PLC

05 June 2014

 

To:                   RNS

From:              Personal Assets Trust plc

Date:               5 June 2014

Results for the year ended 30 April 2014

The Directors of Personal Assets Trust ("PAT") are pleased to announce the Group's results for the year ended 30 April 2014.

The key points are as follows:

·      PAT is run expressly for private investors. Its investment policy is to protect and increase (in that order) the value of shareholders' funds per share over the long term.

·      Over the year to 30 April 2014 PAT's net asset value per share ("NAV") fell by 5.1%.  This compares to a rise of 6.8% in the Company's comparator, the FTSE All-Share Index.  PAT's share price fell by £25.10 during the year and at 30 April 2014 was £331.90.  An analysis of performance is provided in the Chairman's Statement and Investment Adviser's Report below.

·     Since PAT became independently managed in 1990 its NAV has increased by 489.0% compared to the FTSE All-Share's 247.0% and the RPI's 104.4%.

Capital returns to 30 April 2014:

	3 Years	5 Years	10 Years	Since 1990
NAV	6.0%	45.3%	58.8%	489.0%
FTSE All-Share	14.7%	66.6%	61.8%	247.0%
RPI	9.1%	20.9%	37.7%	104.4%

·     The Company has continued to experience demand for its shares. During the year the Company issued 61,683 Ordinary shares, purchased 37,992 Ordinary shares to be held in Treasury then re-issued 7,855 of these shares, raising £11.7 million of net new capital.

·      During the year, PAT continued to maintain a high level of liquidity. At 30 April 2014, liquidity was 56.0%. This included 19.2% in UK cash and cash equivalents and 36.8% in various classes of non-equity risk assets: 16.6% in US TIPS; 10.7% in Gold; 4.9% in overseas cash and cash equivalents; and 4.6% in UK Index-linked Gilts. This compared to holdings as at 30 April 2013 of 10.1% in UK cash and cash equivalents and 46.4% in various classes of non-equity risk assets: 21.4% in US TIPS; 12.2% in Gold; 8.0% in overseas cash and cash equivalents; and 4.8% in UK Index-linked Gilts.

·      Dividends are paid in July, October, January and April of each year. The first interim dividend of £1.40 per Ordinary share will be paid to shareholders on 17 July 2014. Barring unforeseen circumstances, three further interim dividends of £1.40 per Ordinary share are expected to be paid to shareholders in the year ending 30 April 2015, totalling £5.60 for the year.

The Chairman, Hamish Buchan, said:

 "The last three years (our traditional timespan for measuring performance) were a switchback ride. During the first two years we were well ahead of our comparator, the FTSE All-Share Index ("All-Share"), our share price being up by 12.3% compared to the All-Share's 7.5%. However, for reasons explained by Sebastian Lyon, our Investment Adviser, in his report on the page opposite, our share price in the year to 30 April 2014 not only underperformed the All-Share by 12.9% but also (even more distressingly, since our primary aim is capital protection) recorded an absolute loss of 7.0%.

While last year we outperformed the All-Share over three, five and ten years, this year we underperformed over each of those periods. We have made a number of changes to the Annual Report to make it more informative about the workings of our investment philosophy and style, and at the forefront is a greater emphasis on our relative lack of share price volatility. For instance, while the Key Features page shows us lagging slightly behind the All-Share over the last ten years thanks to our disappointing 2013-2014, the second chart on page 5 shows that our increase in share price has typically been achieved in return for much less volatility than that of the All-Share. Volatility is the other side to price performance and the two new charts on page 5 demonstrate how much less volatile (i.e. steadier) we have been compared to most trusts in the AIC Global Sector. This accords with our objectives of seeking to avoid capital loss and of taking on a level of risk which will usually be less than that of our comparator. Other changes to the Key Features make it easier to see how the different constituents of the portfolio have varied in relative importance over a range of time periods, and the Portfolio table (page 8) now also gives information about purchases and sales during the year.

At the General Meeting in December 2012 shareholders voted to break the link between the dividend and inflation, leaving the Board better equipped to take any steps necessary to achieve our primary objective of capital protection. However, although we no longer have an income requirement we retain an income awareness, and are pleased to report that without compromising the way we invest we were able to maintain the dividend at £5.60 per share for the year to 30 April 2014.We also hope, barring unforeseen circumstances, to be able to maintain it at this rate in the current year.

For those shareholders who wish to draw a regular cash amount from their investment in Personal Assets, our Cash Withdrawal Option within our Investment Plan allows a quarterly sum of £500 or more to be withdrawn through topping up dividends with the proceeds of the sale of shares. This facility is also available to holders of Personal Assets ISAs, and in the 2014 Budget the ISA maximum was increased to £15,000. This means that a married couple can now save £30,000 a year into a fund which will be tax efficient on income and wholly free of tax on capital gains. Issuing or buying back shares is cyclical in response to demand. During the year the Company issued 61,683 new shares for net proceeds of £21.4 million and bought back 37,992 shares to be held in Treasury for a total consideration of £12.3 million. 7,855 of these were subsequently reissued from Treasury for proceeds of £2.6 million.

18 September 2014 sees the referendum on Scottish independence. The Board, like many other Boards of Scottish-registered companies, is of the opinion that no action can usefully be taken before the result of the referendum is known. However, it is important to note that we will not be affected by any short term market uncertainty in the period before the referendum, in that we at present have no Scottish-registered companies in our portfolio, our discount control policy is enshrined in our Articles of Association and the Company is and will continue to be listed on the London Stock Exchange and quoted in Sterling.

Our subsidiary, Personal Assets Trust Administration Company ("PATAC"), continues to see its business develop and its contribution has helped our Ongoing Charges Ratio (formerly known as the Total Expense Ratio) to fall to 0.86% compared to last year's 0.89%. PATAC will during the current year become the Company's Alternative Investment Fund Manager ("AIFM") in terms of an unsought European Directive on investment funds such as ours. This exercise will cost you a little money and provide you, regrettably in our view, with no discernible benefits of any kind."

The Investment Adviser, Sebastian Lyon, said:

"Over the year to 30 April 2014 the net asset value per share of Personal Assets Trust ("PAT") fell by 5.1%, while our comparator, the All-Share, rose by 6.8%. Last year we said that 'our investment style tends to lead us to outperform in falling markets and lag in sharply rising markets'. To underperform a rising index is one thing, but actually to lose money (albeit, we believe, only temporarily) is another, and calls for a full explanation.

Taking our equity holdings first, our preference is for 'compounders'-companies that can generate high and sustainable returns on invested capital, preferably rewarding us with a rising income stream. But such stocks are often ignored when there are spicier opportunities on offer, and the year just past was no exception. A year in which Greek government bonds rose by 50% and International Airlines Group (formerly British Airways) was one of the best performing shares in the FTSE 100 Index was never likely to be a vintage one for PAT. Some of our equity holdings made good progress, especially the software companies Microsoft and Sage (we reduced both holdings during the year after strong share price performance). Others, such as Coca-Cola and Diageo, suffered from their currency mix and from slower demand from emerging markets. Ian Rushbrook, the founder of Personal Assets, used to describe such stock price movements as 'corks bobbing up and down in the water'. They do not distract us and occasionally they present us with the opportunity to add to our favoured holdings at attractive valuations, as we did with GlaxoSmithKline, Coca-Cola and Philip Morris.

We made a couple of additions to the portfolio. In keeping with our aim of investing in strong, sustainable franchises, both of the businesses we invested in have been around for well over a century. The first was Dr Pepper Snapple, which owns the Dr Pepper trademark (first registered in 1885, the year before Coca-Cola). This soft drinks business is an attractively valued franchise with an outstanding track record in rewarding its shareholders with its free cash flow via dividends and buybacks - perhaps dull, but very worthy. The second was American Express, established as an express mail business in 1850 and benefiting today from sustained strong growth in electronic payments. Cards in issue and card transactions have grown significantly faster than expenses and the company is also an inflation hedge with transaction values increasing in line with prices.

Overall, the performance of our equity holdings was unexciting. But where did we actually lose money? Ben Bernanke's hint last June that he would 'taper' quantitative easing ("QE") hurt all asset classes except cash. Our index-linked bonds fell in sympathy with conventional bonds, while gold became a four letter word, suffering its biggest sell off since the crisis in 2008 as it fell by 12% in US dollars (19% in sterling terms). Miners, to which we have a more modest exposure, also fell sharply. We are not 'gold bugs', committed to holding bullion for ever. But we believe that the preconditions for a secular bull market in gold remain in place. Negative real interest rates in all major currencies are likely to prevail for many years to come and the only prospect of positive real interest rates is from a spell of deflation, which the Federal Reserve is determined to avoid.

We are in the midst of an extraordinary and unprecedented monetary experiment which is unlikely to end well. More than five years after the financial crisis, interest rates remain at emergency levels (in the case of the UK, at a 300 year low) and there is little sign of an appreciable increase any time soon. Stock markets are back at their all-time highs (in nominal terms, at least), but valuations are overstretched and vulnerable, and we have yet to see the negative consequences of the US's tapering of QE on markets which have grown addicted to this sweet poison. Money printing has failed to secure the desired 'escape velocity' for western economies and corporate earnings have stagnated over the past two years. The disconnect between the economy and the stock market has become ever wider. Those piling into equities today may well be locking in very low prospective returns with commensurate high volatility and downside risk. Prudence will not always be punished. It is reckless behaviour that is ultimately penalised with permanent losses. Stock market bubbles make investors look foolish either before or after the peak. The last year gives no doubt as to where we stand."

For further information contact:

Robin Angus

Executive Director

Tel:  [phone]

Sebastian Lyon

Investment Adviser

Tel:  [phone]

Steven Davidson

Company Secretary

Tel:  [phone]

The Group's Income Statement, Group and Company Statements of Financial Position, Group and Company Statements of Changes in Equity and Group and Company Cash Flow Statements follow.

Group Income Statement

	Year ended 30 April 2014
	Revenue	Capital
	return	return	Total
	£'000	£'000	£'000
Income
Investment income	11,194	-	11,194
Other operating income	376	-	376
	11,570	-	11,570
Losses on investments held at fair value through profit or loss	-	(40,827)	(40,827)
Foreign exchange gains	-	13,076	13,076
Total income	11,570	(27,751)	(16,181)
Expenses	(2,725)	(2,539)	(5,264)
Loss before taxation	8,845	(30,290)	(21,445)
Taxation	(594)	-	(594)
Loss for the year	8,251	(30,290)	(22,039)
Return per share	£4.78	(£17.54)	(£12.76)
The Group does not have any income or expenses that are not included in the (loss)/profit for the year other than expenses of £2,000 (2013: £43,000) charged directly to the Share Premium account in respect of the issue of the Company's shares. Accordingly, the "(Loss)/profit for the Year" is also the "Total Comprehensive Income for the Year", as defined in IAS1 (revised) and no separate Statement of Comprehensive Income has been presented. The "Total" column of this statement represents the Group's Income Statement, prepared in accordance with International Financial Reporting Standards ("IFRSs").  The revenue and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations.
Dividend Information	2014		2013
Dividends per share	£5.60		£5.60
Dividends paid	£'000		£'000
First interim dividend of £1.40 per share (2013: £1.40 per share)	2,403		1,994
Second interim dividend of £1.40 per share (2013: £1.40 per share)	2,439		2,113
Third interim dividend of £1.40 per share (2013: £1.40 per share)	2,444		2,228
Fourth interim dividend of £1.40 per share (2013: £1.40 per share)	2,393		2,296
	9,679		8,631

Group Income Statement

	Year ended 30 April 2013
	Revenue	Capital
	return	return	Total
	£'000	£'000	£'000
Income
Investment income	11,695	-	11,695
Other operating income	309	-	309
	12,004	-	12,004
Gains on investments held at fair value through profit or loss	-	31,804	31,804
Foreign exchange losses	-	(6,629)	(6,629)
Total income	12,004	25,175	37,179
Expenses	(2,612)	(2,448)	(5,060)
Profit before taxation	9,392	22,727	32,119
Taxation	(590)	-	(590)
Profit for the year	8,802	22,727	31,529
Return per share	£5.69	£14.70	£20.39

Group Statement of Financial Position

			As at 30 April 2014			As at 30 April 2013
			£'000			£'000
Non-current assets
Investments held at fair value though profit or loss			541,151			576,744
Current assets
Financial assets			2,273			6,426
Receivables			1,500			1,956
Cash and cash equivalents			45,068			9,306
Total Assets			589,992			594,432
Current liabilities
Payables			(16,755)			(1,187)
Total liabilities			(16,755)			(1,187)
Net assets			573,237			593,245
Capital and reserves
Ordinary share capital			21,845			21,074
Share premium			404,089			383,380
Capital redemption reserve			219			219
Special reserve			22,517			22,517
Treasury share reserve			(9,770)			-
Capital reserve			130,278			160,568
Revenue reserve			4,059			5,487
Total equity			573,237			593,245
Net asset value per Ordinary share			£333.77			£351.89

Company Statement of Financial Position

			As at 30 April 2014			As at 30 April 2013
			£'000			£'000
Non-current assets
Investments held at fair value through profit or loss			541,186			576,775
Current assets
Financial assets			2,273			6,426
Receivables			1,450			1,947
Cash and cash equivalents			45,045			9,246
Total Assets			589,954			594,394
Current liabilities
Payables			(16,717)			(1,149)
Total liabilities			(16,717)			(1,149)
Net assets			573,237			593,245
Capital and reserves
Ordinary share capital			21,845			21,074
Share premium			404,089			383,380
Capital redemption reserve			219			219
Special reserve			22,517			22,517
Treasury share reserve			(9,770)			-
Capital reserve			130,303			160,589
Revenue reserve			4,034			5,466
Total equity			573,237			593,245
Net asset value per Ordinary share			£333.77			£351.89

Group Statement of Changes in Equity

For the year ended 30 April 2014	Ordinary Share Capital	Share Premium	Capital Redemption Reserve	Special Reserve	Treasury share reserve	Capital Reserve	Revenue Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 30 April 2013	21,074	383,380	219	22,517	-	160,568	5,487	593,245
Loss for the year	-	-	-	-	-	(30,290)	8,251	(22,039)
Ordinary dividends paid	-	-	-	-	-	-	(9,679)	(9,679)
Issue of new Ordinary shares	771	20,709	-	-	2,547	-	-	24,027
Buy-backs of Ordinary shares	-	-	-	-	(12,317)	-	-	(12,317)
Balance as at 30 April 2014	21,845	404,089	219	22,517	(9,770)	130,278	4,059	573,237
For the year ended 30 April 2013	Ordinary Share Capital	Share Premium	Capital Redemption Reserve	Special Reserve	Treasury share Reserve	Capital Reserve	Revenue Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 30 April 2012	17,258	280,322	219	22,517	-	137,841	5,316	463,473
Profit for the year	-	-	-	-	-	22,727	8,802	31,529
Ordinary dividends paid	-	-	-	-	-	-	(8,631)	(8,631)
Issue of new Ordinary shares	3,816	103,058	-	-	-	-	-	106,874
Balance as at 30 April 2013	21,074	383,380	219	22,517	-	160,568	5,487	593,245

Company Statement of Changes in Equity

For the year ended 30 April 2014	Ordinary Share Capital	Share Premium	Capital Redemption Reserve	Special Reserve	Treasury share Reserve	Capital Reserve	Revenue Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 30 April 2013	21,074	383,380	219	22,517	-	160,589	5,466	593,245
Loss for the year	-	-	-	-	-	(30,286)	8,247	(22,039)
Ordinary dividends paid	-	-	-	-	-	-	(9,679)	(9,679)
Issue of new Ordinary shares	771	20,709	-	-	2,547	-	-	24,027
Buy-backs of Ordinary shares	-	-	-	-	(12,317)	-	-	(12,317)
Balance as at 30 April 2014	21,845	404,089	219	22,517	(9,770)	130,303	4,034	573,237
For the year ended 30 April 2013	Share Capital	Share Premium	Capital Redemption Reserve	Special Reserve	Treasury share Reserve	Capital Reserve	Revenue Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 30 April 2012	17,258	280,322	219	22,517	-	137,855	5,302	463,473
Profit for the year	-	-	-	-	-	22,734	8,795	31,529
Ordinary dividends paid	-	-	-	-	-	-	(8,631)	(8,631)
Issue of new Ordinary shares	3,816	103,058	-	-	-	-	-	106,874
Balance as at 30 April 2013	21,074	383,380	219	22,517	-	160,589	5,466	593,245

Group Cash Flow Statement

	Year Ended 30 April	Year Ended 30 April
	2014	2013
	£'000	£'000
Cash flows from operating activities
(Loss)/profit before taxation	(21,445)	32,119
(Losses)/gains on investments	38,759	(34,474)
Foreign exchange differences at fair value through profit or loss	(13,076)	6,629
Operating cash flows before movements in working capital	4,238	4,274
(Increase)/decrease in other receivables	(10)	416
(Decrease)/increase in other payables	(25)	243
Net cash from operating activities before taxation	4,203	4,933
Taxation	(745)	(600)
Net cash inflow from operating activities	3,458	4,333
Investing activities
Purchases of investments - equity shares	(30,382)	(33,629)
Purchases of investments - fixed interest and other investments	(434,797)	(706,938)
Disposal of investments - equity shares	35,447	34,536
Disposal of investments - fixed interest and other investments	442,159	615,587
Net cash inflow/(outflow) from investing activities	12,427	(90,444)
Financing activities
Equity dividends paid	(9,679)	(8,631)
Issue of Ordinary shares	22,012	106,768
Cost of issue of Ordinary shares	(1)	(151)
Cost of share buy-backs	(12,317)	-
Re-issue of Ordinary shares from Treasury	2,633	-
Net cash inflow from financing activities	2,648	97,986
Increase in cash and cash equivalents	18,533	11,875
Cash and cash equivalents at the start of the year	9,306	5,535
Effect of foreign exchange rate changes	17,229	(8,104)
Cash and cash equivalents at the end of the year	45,068	9,306

Company Cash Flow Statement

	Year Ended 30 April	Year Ended 30 April
	2014	2013
	£'000	£'000
Cash flows from operating activities
(Loss)/profit before taxation	(21,449)	32,112
(Losses)/gains on investments	38,759	(34,474)
Foreign exchange differences at fair value through profit or loss	(13,076)	6,629
Operating cash flows before movements in working capital	4,234	4,267
(Increase)/decrease in other receivables	31	420
(Decrease)/increase in other payables	(25)	225
Net cash from operating activities before taxation	4,240	4,912
Taxation	(745)	(600)
Net cash inflow from operating activities	3,495	4,312
Investing activities
Purchases of investments - equity shares	(30,382)	(33,629)
Purchases of investments - fixed interest and other investments	(434,797)	(706,938)
Disposal of investments - equity shares	35,447	34,536
Disposal of investments - fixed interest and other investments	442,159	615,587
Net cash inflow/(outflow) from investing activities	12,427	(90,444)
Financing activities
Equity dividends paid	(9,679)	(8,631)
Issue of Ordinary shares	22,012	106,768
Cost of issue of Ordinary shares	(1)	(151)
Cost of share buy-backs	(12,317)	-
Re-issue of Ordinary shares from Treasury	2,633	-
Net cash inflow from financing activities	2,648	97,986
Increase in cash and cash equivalents	18,570	11,854
Cash and cash equivalents at the start of the year	9,246	5,496
Effect of foreign exchange rate changes	17,229	(8,104)
Cash and cash equivalents at the end of the year	45,045	9,246

Principal Risks and Risk Management

The Board believes that the principal risks to shareholders, which it seeks to mitigate through continual review of its investments and through shareholder communication, are events or developments which can affect the general level of share prices, including, for instance, inflation or deflation, economic recessions and movements in interest rates and currencies.

Other risks faced by the Company include breach of regulatory rules which could lead to suspension of the Company's Stock Exchange listing, financial penalties, or a qualified audit report. Breach of Section 1158 of the Corporation Taxes Act 2010 could lead to the Company being subject to tax on capital gains.

In the mitigation and management of these risks, the Board regularly monitors the investment environment and the management of the Company's investment portfolio, and applies the principles detailed in the guidance provided by the Financial Reporting Council.

Statement of Directors' Responsibilities in Respect of the Annual Financial Report

In accordance with the Disclosure and Transparency Rules, we confirm that to the best of our knowledge:

·      The financial statements contained within the Annual Report for the year ended 30 April 2014, of which this statement of results is an extract, have been prepared in accordance with applicable International Financial Reporting Standards, on a going concern basis, and give a true and fair view of the assets, liabilities, financial position and return of the Company and the undertakings included in the consolidation taken as a whole;

·      The Chairman's Statement and Investment Adviser's Report include a fair review of the important events that have occurred during the financial year and their impact on the financial statements;

·      'Principal Risks and Risk Management' includes a description of the Company's principal risks and uncertainties; and

·      The Annual Report includes details of related party transactions, if any, that have taken place during the financial year.

Notes:

1.         The financial statements of the Group, which are the responsibility of, and were approved by, the Board on 5 June 2014, have been prepared in accordance with International Financial Reporting Standards ("IFRSs"). These comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), together with such interpretations by the International Accounting Standards and Standing Interpretations Committee as have been approved by the IASB and still remain in effect, to the extent that these have been adopted by the European Union.

Where the presentational guidance set out in the Statement of Recommended Practice (the "SORP") for investment trusts issued by the Association of Investment Companies (the "AIC") in January 2009 is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendation of the SORP.

The consolidated financial statements incorporate the financial statements of the Company and the entities controlled by the Company (its subsidiaries) made up to 30 April each year. Control is achieved where the Company has the power to govern the financial and operating policies of an investee entity so as to obtain benefits from its activities. All intra-group transactions, balances, income and expenses are eliminated on consolidation.

A number of new standards have been issued but are not effective for this accounting period. These have not been adopted early and the Group does not consider that the future adoption of any new standards, in the form currently available, will have any material impact on the financial statements as presented.

2.         Return per ordinary share is based on a weighted average of 1,727,421 ordinary shares in issue during the year (2013 - 1,546,313).

3.         Net asset value per ordinary share is based on the 1,717,447 ordinary shares in issue as at 30 April 2014 (2013 - 1,685,901).

4.         During the year the Directors issued 61,683 Ordinary shares for net proceeds of £21,395,000. The Company also purchased 37,992 Ordinary shares to be held in Treasury for a total consideration of £12,317,000, then re-issued 7,855 of these shares for proceeds of £2,632,000.

5.         At 30 April 2014 the sterling value of the US Treasury stocks and part of the US equities were protected by a forward currency contract.

6.         Financial Instruments

The Group holds investments in listed companies and fixed interest securities, holds cash balances and has receivables and payables. It may from time to time also invest in FTSE 100 Futures and enter into forward currency contracts. Cash balances are held for future investment and forward currency contracts are used to manage the exchange risk of holding foreign investments.

The fair value of the financial assets and liabilities of the Group at 30 April 2014 is not different from their carrying value in the financial statements.

The Group is exposed to various types of risk that are associated with financial instruments. The most important types are credit risk, liquidity risk, interest rate risk, market price risk and foreign currency risk.

The Board reviews and agrees policies for managing its risk exposures. These policies are summarised below and have remained unchanged for the year under review.

Credit Risk

Credit risk is the risk that an issuer or counterparty will be unable or unwilling to meet a commitment that it has entered into with the Group.

The Group's principal financial assets are investments, cash balances and other receivables, which represent the Group's maximum exposure to credit risk in relation to financial assets. The Group did not have any exposure to any financial assets which were passed due or impaired at the year end (2013: none).

The Group is exposed to potential failure by counterparties to deliver securities for which the Group has paid, or to pay for securities which the Group has delivered. A list of pre-approved counterparties used in such transactions is maintained, and regularly reviewed by the Group, and transactions must be settled on a basis of delivery against payment. Broker counterparties are selected based on a combination of criteria, including credit rating, balance sheet strength and membership of a relevant regulatory body. Risk relating to unsettled transactions is considered to be small because of the short settlement period involved and the credit quality of the brokers used.

All of the assets of the Group, other than cash deposits and receivables, are held by JPMorgan Chase Bank, the Group's custodian. Bankruptcy or insolvency of the custodian might cause the Group's rights with respect to the securities held by the custodian to be delayed or limited. The Board monitors the Group's risk by reviewing the custodian's internal control reports on a regular basis.

The credit risk on liquid funds and derivative financial instruments is limited because the counterparties are banks with high credit ratings, rated A or higher, assigned by international credit rating agencies. Bankruptcy or insolvency of such financial institution might cause the Group's ability to access cash placed on deposit to be delayed or limited. The Group has no concentration of credit risk and exposure is spread between counterparties.

Market Price Risk

The fair value of equity and other financial securities held in the Company's portfolio fluctuates with changes in market prices. Prices are themselves affected by movements in currencies and interest rates and by other financial issues including the market perception of future risks. The Board sets policies for managing this risk and meets regularly to review full, timely and relevant information on investment performance and financial results. The management of market price risk is part of the fund management process and is fundamental to equity investment. The portfolio is managed with an awareness of the effects of adverse price movements in equity markets with an objective of maximising overall returns to shareholders.

The Company continued to use forward currency contracts during the year.

Liquidity Risk

Liquidity risk is the risk that the Group will encounter in realising assets or otherwise raising funds to meet financial commitments. The risk of the Group not having sufficient liquidity at any time is not considered by the Board to be significant, given the liquid nature of the portfolio of investments and the level of cash and cash equivalents ordinarily held. The Board reviews liquidity exposure at each meeting.

All of the Company's financial liabilities at 30 April 2014 had a maturity period of less than three months and were repayable at the date shown on the Balance Sheet.

Interest Rate Risk

Some of the financial instruments held by the Group are interest bearing. As such, the Group is exposed to interest rate risk due to fluctuations in the prevailing market rate.

Floating Rate

When the Group holds cash balances, such balances are held on overnight deposit accounts and call deposit accounts. The benchmark rate which determines the interest payments received on cash balances is the bank base rate, which at 30 April 2014 was 0.50% in the UK (2013: 0.50%).

Foreign Currency Risk

The Company invests in overseas securities.

	2014	2013
Currency exposure at 30 April:	£'000	£'000
Australian Dollars Canadian Dollars Singapore Dollars Swiss Francs US Dollars (1)	3,684 22,272 28,256 21,622 283,123	7,781 20,725 47,548 21,749 335,886

(1)  At 30 April 2014 the Sterling cost of a portion of the US Dollar denominated assets (including the US Treasury Inflation Protected Securities ("TIPS") and US equities) was protected by a forward currency contract. The fair value of £2,273,000 (2013: fair value of £6,426,000) on the US$229,700,000 (2013: US$252,000,000) sold forward against £138,483,000 (2013: £168,731,000) is included in other receivables (2013: other receivables). All foreign exchange contracts in place at 30 April 2014 were due to mature within two months. The exposure to US Dollars as shown above also includes Gold Bullion. At 30 April 2014 the net exposure to US Dollars was £146,913,000 (2013: £173,581,000) including Gold Bullion and £85,726,000 (2013: £101,089,000) excluding Gold Bullion.

7.         These are not statutory accounts in terms of Section 434 of the Companies Act 2006.  Full audited accounts for the year to 30 April 2014 will be sent to shareholders in June 2014 and will be available for inspection at 10 St Colme Street, Edinburgh, the registered office of the Company. The full annual report and accounts will be available on the Company's website www.patplc.co.uk.

8.         The audited accounts for the year ended 30 April 2014 will be lodged with the Registrar of Companies.

 

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