Half Yearly Report

RNS Number : 1477S

Personal Assets Trust PLC

28 November 2012

 

To:              RNS                                                                    

From:         Personal Assets Trust plc

Date:          28 November 2012

Personal Assets Trust plc

Interim Report for the Six months ended 31 October 2012 (Unaudited)

Financial Summary

•	Personal Assets Trust plc ("PAT") is an independent investment trust run expressly for private investors.
•	The Company's investment policy is to protect and increase (in that order) the value of shareholders' funds per share over the long term.
•	Over the six months to 31 October 2012 PAT's net asset value per share ("NAV") rose by 2.7% to £344.67 compared to a rise of 1.3% in our comparator, the FTSE All-Share Index. PAT's share price rose by £9.30 to £350.00 over the same period, being a premium of 1.5% to the Company's NAV at that date.
•	Over the three years to 31 October 2012 the NAV rose by 32.2% compared to the FTSE All-Share Index's rise of 17.0%. This outperformance of 13.0% is equivalent to 4.2% per annum over the three year period.
•	We continue to believe that in present circumstances it is appropriate to maintain a substantial margin of liquidity. At 31 October 2012 PAT had effective liquidity of 36.9% of shareholders' funds (50.8% including the holding of 13.9% in gold bullion, which the Board regards as being part of PAT's liquidity).
•	Over the six months PAT's shares continued to trade close to NAV. We issued 180,327 Ordinary shares (adding £62.7 million of new capital) at a small premium to satisfy continuing demand for the Company's shares. During the period, the Company's shareholders' funds exceeded £500 million for the first time.
•	Dividends are paid in July, October, January and April of each year. The first interim dividend of £1.40 per Ordinary share was paid to shareholders on 20 July 2012 and the second interim dividend of £1.40 was paid on 19 October 2012. A third interim dividend of £1.40 per Ordinary share and a fourth interim dividend of £1.40 per Ordinary share will be paid in January and April 2013 respectively, making a total for the year of £5.60 per Ordinary share. Thereafter, the Board will review the level of the dividend.

Key Features

	As at 31 October 2012	As at 31 October 2011	As at 30 April 2012
Market Capitalisation	£546.3m	£393.4m	£470.4m
Shareholders' Funds	£538.0m	£383.9m	£463.5m
Shares Outstanding	1,560,986	1,168,186	1,380,659
Effective Liquidity	50.8% (1)	50.4% (2)	50.0% (3)
Share Price	£350.00	£336.80	£340.70
NAV per Share	£344.67	£328.67	£335.69
FTSE All-Share Index	3,024.40	2,860.86	2,984.67
Premium to NAV	1.5%	2.5%	1.5%
Earnings per Share	£2.00	£2.22	£5.32
Dividend per Share	£2.80	£2.75	£5.55
Effective liquidity includes holding in physical gold bullion of: (1) 13.9%; (2) 12.9%; and (3) 12.4%.

Portfolio as at 31 October 2012

					Shareholders'
			Equity	Valuation	Funds
Holding	Country		Sector	£'000	%
US TIPS	USA		-	110,729	20.6
Gold Bullion	-		-	74,867	13.9
Singapore Treasury Bills	Singapore		-	43,442	8.1
UK Treasury Bills	UK		-	23,988	4.5
Microsoft	USA		Software	22,572	4.2
British American Tobacco	UK		Tobacco	21,655	4.0
Nestlé	Switzerland		Food Producer	18,605	3.5
Newmont Mining	USA		Mining	16,912	3.1
Centrica	UK		Utility	16,762	3.1
Coca-Cola	USA		Beverages	14,850	2.8
UK Index-linked Gilt	UK		-	14,562	2.7
Becton Dickinson	USA		Health Care Supplies	14,310	2.7
Imperial Oil	Canada		Oil & Gas	14,277	2.6
Diageo	UK		Beverages	13,925	2.6
Philip Morris International	USA		Tobacco	13,354	2.5
Sage Group	UK		Software	13,045	2.4
GlaxoSmithKline	UK		Pharmaceuticals	10,464	1.9
Altria	USA		Tobacco	10,197	1.9
Johnson & Johnson	USA		Pharmaceuticals	9,815	1.8
Colgate Palmolive	USA		Personal Products	9,209	1.7
Unilever	UK		Personal Products	8,990	1.7
Newcrest Mining	Australia		Mining	8,903	1.7
Vodafone	UK		Telecommunication	8,390	1.6
Berkshire Hathaway	USA		Insurance	7,704	1.4
Agnico Eagle Mines	Canada		Mining	6,638	1.2
Greggs	UK		Food	4,211	0.8
Total investments				532,376	99.0
Net current assets				5,641	1.0
Shareholders' funds				538,017	100.0

	Geographic Analysis of Equity Investments as at 31 October 2012
						Equity
					Valuation	Investments
					£'000	%
USA equities					118,923	44.9
UK equities					97,442	36.8
Canadian equities					20,915	7.9
Swiss equities					18,605	7.0
Australian equities					8,903	3.4
Total equity investments					264,788	100.0

Interim Management Report

Economic momentum has slowed throughout 2012. GDP forecasts have drifted downwards and the burden of lifting the Western world out of its financial morass has fallen on the US and Germany, despite their growing at well below their historic rates. Our caution on the UK has been justified and of the major developed nations only Italy and Spain are expected to fare worse in 2013. With falling GDP forecasts come reductions in earnings estimates, but stock markets have been driven up as income-starved investors have piled in, with the result that many of the defensive blue chips we favour are now looking fully priced or even expensive. While we are convinced that the most obvious bull market at the moment - the one in central bank balance sheets - must ultimately lead to inflation, a 'Little Ice Age' of deflation may still come first. Since timing asset allocation for these outcomes is impossible, we have tried to prepare for both by building the portfolio on four 'pillars': blue chip equities, index-linked bonds, gold bullion (including gold mining shares) and cash.

In September, the Federal Reserve announced a third round of quantitative easing (''QE'', or 'credit easing' as Dr Bernanke prefers to call it). The announcement was not a surprise, but the Fed's decision to go 'open-ended' very much was. It is a significant change in policy. Sadly, Dr Bernanke has abandoned the principles of former Fed Chairman (and Presbyterian), William McChesney Martin, who said the job of the Fed was to 'take away the punchbowl just as the party gets going'. Today, Ben the Barman is not calling 'Time!' but an extended Happy Hour.

The US, however, has merely followed where the UK has led. In the same month of September the Bank of England confirmed it would 'continue with its programme of asset purchases totalling £375 billion, financed by the issuance of central bank reserves' and the Bank of Japan joined in the game of currency debasement leapfrog by announcing its own new round of QE. This, however, was modest by historical standards. Since 2008 (base of 100) the UK monetary base has grown to 399, the US stands at 310 while Japan is just 137 (Singapore has barely increased at all). No wonder the Yen has strengthened.

Does QE work? We very much doubt it. The UK has been suffering from a double dip recession and private demand for debt remains subdued. Should it increase, or concerns over the credibility of the currency rise, the Bank of England (or the Fed) will need to mop up excess liquidity quickly by putting QE into reverse, which would put upward pressure on yields just as the economy was recovering. Share prices may be buoyed up temporarily by liquidity, but ultimately they must be justified by earnings and dividends. Dr Bernanke undoubtedly wants to see stock market valuations re-rated upwards, but this will not happen unless investors see an improving economic picture. Given that the US stock market now trades above 100% of GDP for only the third time since 1970, we are not being paid to take risk.

During the six months under review we remained cautious. Our liquidity increased from 50% at our 30 April year end to 51% as we added to our existing holdings in gold bullion, Singapore Treasury Bills, and US Treasury Inflation Protected Securities ("TIPS") and took a new holding in UK Index Linked. Within the equity portfolio we made no sales but added to holdings in selected areas: Altria and BAT (tobacco), Becton Dickinson (healthcare), Newcrest Mining and Newmont Mining (mining), Imperial Oil (our most favoured stock in the oil sector) and Microsoft and Sage (business software and services).

In this report we are required to describe risks and uncertainties for the remaining six months of the year. To the extent that the Company is 49% invested in equities it is at risk of loss from adverse movements in share prices. While the holding of US TIPS is fully hedged, the 22% of total assets in US equities is only partly hedged and the Company therefore has overall US Dollar exposure of 12% of total assets. In addition, the Company has exposure the Australian Dollar, the Canadian Dollar, the Singapore Dollar and the Swiss Franc; adverse exchange rate movements may therefore affect us. A fall in the gold price (in Sterling terms) is a further risk. The Board considers that there is a negligible risk of default by its bankers. The Company's largest investment is in US TIPS. The Board considers there to be a negligible risk that the US government will default on its obligations and believes that the risk of a lack of liquidity in the market for US Treasury securities does not arise.

Sebastian Lyon, Investment Adviser

On behalf of the Board,

Robin J Angus, Executive Director

28 November 2012

Condensed Group Income Statement

For the six months ended 31 October 2012

	(Unaudited)
	Six months ended
	31 October 2012
	Revenue		Capital
	Return		Return	Total
	£'000		£'000	£'000
Investment income	4,212		-	4,212
Other operating income	179		-	179
Gains on investments held at fair value through profit or loss	-		14,888	14,888
Foreign exchange losses	-		(730)	(730)
Total income	4,391		14,158	18,549
Expenses	(1,236)		(1,162)	(2,398)
Profit before taxation	3,155		12,996	16,151
Taxation	(220)		-	(220)
Profit for the period	2,935		12,996	15,931
Earnings per share	£2.00		£8.84	£10.84

The column of this statement headed 'Total' represents the Group's Income Statement, prepared in accordance with International Financial Reporting Standards. The revenue return 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.

The Group does not have any income or expense that is not included in the profit for the period, and therefore the 'profit for the period' is also the 'total comprehensive income for the period'.

1.    The condensed financial statements have been prepared in accordance with IAS 34 Interim Financial Reporting and the accounting policies set out in the statutory accounts of the Group for the year ended 30 April 2012. The condensed financial statements do not include all of the information required for full annual financial statements and should be read in conjunction with the financial statements of the Group for the year ended 30 April 2012, which were prepared under full IFRS requirements, to the extent that they have been adopted by the European Union.

Condensed Group Income Statement

For the six months ended 31 October 2011

	(Unaudited)
	Six months ended
	31 October 2011
	Revenue	Capital
	Return	Return	Total
	£'000	£'000	£'000
Investment income	3,264	-	3,264
Other operating income	97	-	97
Gains on investments held at fair value through profit or loss	-	18,334	18,334
Foreign exchange losses	-	(3,061)	(3,061)
Total income	3,361	15,273	18,634
Expenses	(947)	(773)	(1,720)
Profit before taxation	2,414	14,500	16,914
Taxation	(75)	-	(75)
Profit for the period	2,339	14,500	16,839
Earnings per share	£2.22	£13.79	£16.01

2.    The return per Ordinary share figure is based on the net profit for the six months of £15,931,000 (six months ended 31 October 2011: net profit of £16,839,000; year ended 30 April 2012: net profit of £27,903,000) and on 1,469,780 (six months ended 31 October 2011: 1,051,450; year ended 30 April 2012: 1,171,099) Ordinary shares, being the weighted average number of Ordinary shares in issue during the respective periods.

3.   In respect of the year ending 30 April 2013 the Board has declared a first interim dividend of £1.40 per Ordinary share, which was paid on 20 July 2012, and a second interim dividend of £1.40 per Ordinary share, which was paid on 19 October 2012. In respect of the year ended 30 April 2012 the Board declared an interim dividend of £1.35 per Ordinary share and three interim dividends of £1.40 per Ordinary share. This gave a total dividend for the year ended 30 April 2012 of £5.55 per Ordinary share.

4.   At 31 October 2012 there were 1,560,986 Ordinary shares in issue (31 October 2011: 1,168,186; 30 April 2012: 1,380,659). During the six months ended 31 October 2012 the Company issued 180,327 Ordinary shares.

Condensed Group Income Statement

For the year ended 30 April 2012

	(Audited)
	Year ended
	30 April 2012

	Revenue	Capital
	return	return	Total
	£’000	£’000	£’000
Investment income	8,448	-	8,448
Other operating income	247	-	247
Gains on investments held at fair value through profit or loss	-	24,980	24,980
Foreign exchange losses	-	(1,543)	(1,543)
Total income	8,695	23,437	32,132
Expenses	(2,129)	(1,762)	(3,891)
Profit before tax	6,566	21,675	28,241
Taxation	(338)	-	(338)
Profit for the period	6,228	21,675	27,903
Earnings per share	£5.32	£18.51	£23.83

5.   These are not full statutory accounts in terms of Section 434 of the Companies Act 2006 and are unaudited. Statutory accounts for the year ended 30 April 2012, which received an unqualified audit report and which did not contain a statement under Section 498 of the Companies Act 2006, have been lodged with the Registrar of Companies. No full statutory accounts in respect of any period after 30 April 2012 have been reported on by the Company's auditors or delivered to the Registrar of Companies.

Condensed Group Balance Sheet

As at 31 October 2012

	(Unaudited)	(Unaudited)	(Audited)
	31 October	31 October	30 April
	2012	2011	2012
	£'000	£'000	£'000
Non current assets
Investments held at fair value through profit or loss	532,376	374,675	451,826
Net current assets	5,641	9,273	11,647
Net assets	538,017	383,948	463,473
Total equity	538,017	383,948	463,473
Net asset value per Ordinary share	£344.67	£328.67	£335.69

Condensed Group Statement of Changes in Equity

For the six months ended 31 October 2012

		(Unaudited)	(Unaudited)	(Audited)
		Six months	Six months	Year
		ended	ended	ended
		31 October	31 October	30 April
		2012	2011	2012
		£'000	£'000	£'000
Opening equity shareholders' funds		463,473	310,000	310,000
Profit for the period		15,931	16,839	27,903
Ordinary dividends paid		(4,107)	(2,903)	(6,470)
Issue of Ordinary shares		62,720	60,012	132,040
Closing equity shareholders' funds		538,017	383,948	463,473

Condensed Group Cash Flow Statement

For the six months ended 31 October 2012

			(Unaudited)	(Unaudited)	(Audited)
			Six months	Six months	Year
			ended	ended	ended
			31 October	31 October	30 April
			2012	2011	2012
			£'000	£'000	£'000
Net cash inflow from operating activities			2,577	2,179	4,000
Net cash outflow from investing activities			(63,172)	(64,429)	(134,671)
Net cash outflow before financing
activities			(60,595)	(62,250)	(130,671)
Net cash inflow from financing activities			58,473	57,728	127,150
Net decrease in cash and
cash equivalents			(2,122)	(4,522)	(3,521)
Cash and cash equivalents at the start of
the period			5,535	11,399	11,399
Realised gains/(losses) on foreign currency			3,923	(1,474)	(2,343)
Cash and cash equivalents at the end of
the period			7,336	5,403	5,535

Statement of Principal Risks and Uncertainties

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, and the way in which they are managed, are described in more detail under the heading Principal Risks and Risk Management within the Business Review in the Company's Annual Report for the year ended 30 April 2012.

The Company's principal risks and uncertainties have not changed since the date of the Annual Report and are not expected to change for the remaining six months of the Company's financial year.

Related Party Transactions

During the period the Company paid £15,000 for the rental of the Executive Office to Rushbrook & Co LLP, of which Frank Rushbrook is a partner. The notice period on the lease is six months.

Directors' Responsibility Statement in Respect of the Interim Report

We confirm that to the best of our knowledge:

·   the condensed set of financial statements has been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the EU;

·   the Interim Management Report includes a fair review of the information required by the Disclosure and Transparency Rules ("DTR") 4.2.7R, being an indication of important events that have occurred during the first six months of the financial year and their impact on the condensed set of financial statements;

·   the Statement of Principal Risks and Uncertainties shown above is a fair review of the information required by DTR 4.2.7R; and

·   the condensed financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the current financial year and that have materially affected the financial position or performance of the Company during the period, and any changes in the related party transactions described in the last Annual Report that could do so.

On behalf of the Board,

Hamish N Buchan, Chairman

28November 2012

For further information contact:

Sebastian Lyon                      

Investment Adviser

Tel: [phone]

Robin Angus

Executive Director

Tel: [phone]

Steven Budge

Executive Office

Tel: [phone]

 

END

 

 

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