Annual Results

RNS Number : 2151O

Personal Assets Trust PLC

09 June 2022

 

To:  RNS

From:  Personal Assets Trust plc

LEI:    213800Z7ABM7RLQ41516

Date:  9 June 2022

Results for the year ended 30 April 2022

The Directors of Personal Assets Trust plc ("PAT") are pleased to announce the Company's results for the year ended 30 April 2022.

The key points are as follows:

· PAT's 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 2022 PAT's net asset value per share ("NAV") rose by 5.8%. This compares to a rise of 5.1% in the FTSE All-Share Index.  PAT's share price rose by £32.00 during the year and at 30 April 2022 was £503.00. An analysis of performance is provided in the Chairman's Statement and Investment Manager's Report below.

· Total returns to 30 April 2022:

	Percentage Changes
	1 Year	3 years	5 Years	10 Years	Since 1990 (1)
Share Price	6.8	23.3	35.0	47.6	1,173.4
NAV per Share	5.8	21.5	34.0	46.5	768.1
FTSE All-Share Index	5.1	2.9	22.3	40.2	301.2
Share Price relative to FTSE All-Share	1.6	19.8	10.4	5.3	217.4
Share Price Total Return	8.0	28.0	32.4	70.6	2,281.8
NAV per Share Total Return	7.1	26.3	31.9	69.7	1,414.2
FTSE All-Share Total Return	8.7	14.1	26.6	100.8	1,157.3
Share Price Total Return relative to FTSE All-Share Total Return	(0.6)	12.2	4.6	(15.0)	89.4
Inflation (RPI)	11.1	16.1	23.7	38.0	167.5

(1)  The Company became self-managed in 1990.

· During the year the Company's shares continued to trade close to NAV. The Company issued 455,140 Ordinary shares.

· During the year, PAT continued to maintain a high level of liquidity. At 30 April 2022, liquidity was 62.2%. This included 16.9% in UK T-Bills, UK cash, overseas cash, and net current liabilities and 45.2% in various classes of non-equity risk assets: 35.7% in US TIPS and 9.5% in Gold Bullion. This compared to holdings as at 30 April 2021 of 12.7% in UK T-Bills, UK cash, overseas cash, and net current liabilities and 41.5% in various classes of non-equity risk assets: 32.6% in US TIPS and 8.9% in Gold Bullion.

The Chairman, Iain Ferguson, said:

We were all deeply saddened by the news that Robin Angus died on 4 May 2022. Robin served as a Director of the Company from 1984 and Executive Director from 2002 until his retirement in September 2020.  Robin together with Ian Rushbrook was instrumental in establishing the vision for the Company and for overseeing its success, as reflected in the growth of market capitalisation from £4.7 million to £1.3 billion during his tenure.

Robin's ability to articulate the Company's investment approach and to communicate with shareholders more generally through his Quarterlies was second to none. Indeed, at the time of his death Robin had recently completed writing a Quarterlies Anthology which will now be published in his memory and as a record of his wide-ranging commentary, reflections and observations from his life at the Company.

As a Board we would like to re-iterate our sincere thanks for Robin's exemplary service and diligent

stewardship of the Company over the years. He will be sorely missed not only as a colleague but also as a close friend to many associated with the Company and within the wider investment community. We would also like to offer our sincere condolences to Robin's wife Lorna and to his family. I first met Robin in 1973 and since then he has been a true, kind and generous friend, always curious, always supportive and always guided by his strong Christian faith; I will miss him greatly.

---- //----

Following the success of the Covid vaccine programme and the gradual relaxation of restrictions the Board has been pleased to be able to return to in-person meetings. We have, however, also continued to use the facility of virtual meetings for Board briefing sessions where appropriate. The Board membership has been stable throughout the year, and I am grateful for the continuing commitment and wise counsel of my colleagues. During the year we appointed Board Level Partners to undertake an independent review of the performance of the Board and the Committees. The review did not highlight any material weaknesses or concerns and concluded that the Board and the Committees oversee the management of the Company effectively. The review did identify some key areas for future focus including, Board member succession planning, development of shareholder

communications and monitoring our relationships with our key service providers, Troy and Juniper Partners. Further detail on this review can be found in the Corporate Governance section on pages 35 and 36 of the Annual Report.

All our Directors are also shareholders in PAT. We share a strong alignment with and are advocates of the core investment proposition which is to protect and increase (in that order) the value of shareholder funds per share (known as net asset value ("NAV") per share) over the long term.

We track the performance of the Company from 1990 and since then the NAV has grown at an annual compound rate of 7.0% compared to 4.4% for the FTSE All-Share Index and 3.1% for RPI, the two main comparators which we use. We also track the degree of risk experienced in achieving our financial performance. The results are tabulated in the Key Features section on page 1 of the Annual Report and the degree of risk experienced is indicated on the chart on page 15 of the Annual Report. This shows that consistently over the last 22 years the Company has been less volatile than equities in general and also less volatile than any of the investment trusts in the AIC Global and AIC Flexible Investment Sectors. Whilst this combination of above-comparator financial performance and below-sector volatility is the outcome of a focus on capital preservation, these metrics are by no means a target. The Investment Manager's focus remains on the avoidance of permanent capital loss (our preferred definition of risk) and on growing the real value of the Company's capital over the long run. In his report on pages 4 and 5 of the Annual Report, Sebastian Lyon, our Investment Manager, provides further details of our investment performance and describes the particular challenges of the last year.

The Company aims to pay as high, secure and sustainable a dividend as is compatible with protecting and increasing the value of its shareholders' funds and maintaining its investment flexibility. The Board remains committed to paying an annual dividend of £5.60 in line with this policy. High levels of inflation during the year, particularly in the United States, mean that the Company has earned significantly more income on its holding of US TIPS than in previous years. Accordingly, in order to meet the investment trust distribution requirements, the Board has resolved to pay an additional special dividend for the year to 30 April 2022 of £1.40 per share. This dividend will be paid to shareholders in July 2022 alongside the first interim dividend of £1.40 for the year to 30 April 2023.

During the year we issued 455,140 new Ordinary shares, for a net inflow of £223.9 million, our second highest year on record. As at 30 April 2022 we had 3,688,069 Ordinary shares in issue. It is the policy of the Company to aim to ensure that its Ordinary shares always trade at close to NAV and this policy is enshrined in the Articles of Association. It is reassuring to report that since November 1999, when investment trusts were empowered to use capital to buy back shares and hence control the discount to NAV at which their shares trade, the PAT share price has closely tracked the NAV while the number of shares in issue is now approximately eleven times higher.

Our relationship with Troy has continued to be excellent and we are increasingly benefitting from access to the shared resources and focused support from the Troy team. We are now holding two Board meetings each year in the Troy offices which is helping us to get to know more members of the Troy team and to deepen our relationship on a broader base. As our shareholder funds continue to grow above £1.5 billion we are benefitting from the revised fee structure agreed last year. Details of the fee structure are shown on page 7 of the Annual Report. We also pay particular attention to ensuring the competitiveness of our ongoing charges ratio, which was 0.67% for the year ended 30 April 2022, having reduced from 1.18% in 2011 and from 0.73% in 2021.

Our relationship with Juniper Partners, which provides our administrative, company secretarial and discount control services has also continued to be excellent. Juniper Partners continues to provide a first-class service to the Company and works in close association with Troy to provide a seamless service to the PAT Board and Shareholders. It is encouraging to note that the Juniper Partners team are continuing to develop their business, building capacity and resilience, which benefits all their clients.

We recognise the continuing evolution of the Company's shareholder base and the increasing number of investors holding shares through retail platforms who may not have direct access to communications with the Company. This is a challenge which is often discussed by the Board as we seek to improve communication and interaction with investors. We hope that our updated website (www.patplc.co.uk), our Quarterlies, our Annual and Interim Reports and our newly introduced Factsheet are providing investors with easy and effective access to information about PAT and we will continue to seek innovative ways of improving our dialogue with shareholders.

In the context of the evolving shareholder base and of our desire to make investing in the Company as efficient as possible for both existing and future investors the Board has also reviewed the appropriateness of the Company's current share price of around £500 per share. After deep consideration, the Board believe that it is appropriate to seek shareholder approval at the upcoming Annual General Meeting to split each Ordinary share on a one hundred for one basis. Under the proposals each existing Ordinary share will be subdivided into 100 new Ordinary shares. By way of example, if you hold 100 Ordinary shares in the Company prior to the proposed split you will hold 10,000 Ordinary shares following the split and the aggregate value of your holding immediately pre and post the proposed split will be unchanged. Further detail can be found on page 10 and page 29 of the Annual Report.

In our Annual Report in 2020, we introduced the PAT Foundation. The objective of the Foundation is to promote and advance the financial education of younger people wishing to pursue careers within or related to the investment and finance industries. Good progress has been made on the establishment of the charity and the Trustees of the Foundation expect to hold the formal public launch of the Foundation with further details of their plans in Autumn 2022, to coincide with the start of the new academic year.

My colleagues and I have greatly missed the opportunity to meet with our fellow shareholders since our AGM in 2019 as we have had to hold our last two AGMs in a virtual way. We are, therefore, very much looking forward to being able to hold the AGM in person this year on Thursday, 14 July 2022 in Edinburgh. The Investment Manager's presentation will also be made available on our website following the AGM for those who cannot attend in person. I would encourage all shareholders to submit any questions for the AGM to our Company Secretary by email in advance of the meeting at [e-mail] by Tuesday, 12 July 2022.

In the meantime, I wish you all good health and thank you for entrusting your investment to PAT.

The Investment Manager, Sebastian Lyon, said:

Over the year to 30 April 2022 the net asset value per share ("NAV") of Personal Assets Trust ("PAT") rose by 5.8% while our traditional comparator, the FTSE All-Share Index ("FTSE"), rose by 5.1%. The UK Retail Price Index ("RPI"), which we also use as a comparator (see the inside front cover of this Report and Key Features and Record 1990-2022 on pages 1 and 13 of the Annual Report respectively), rose by 11.1%. Over the past three years the NAV per share rose by 21.5% compared to FTSE All Share return of +2.9% and RPI +12.2%. The Company's NAV and share price (thanks to the discount control mechanism) continued to demonstrate below average volatility compared to peers and the stock market.

These stable returns for the year under review belie high levels of volatility for capital markets. With the benefit of hindsight, the liquidity-led stock market boom, which followed the outbreak of the pandemic, peaked over a year ago in February 2021, with the start in the fall of 'meme' stocks. Profitless technology companies reached heights of valuation not witnessed for 20 years. Over the last five months, this has morphed into a broader bear market for US equities and bonds, which had previously been buoyed by highly accommodative monetary policy. Central bankers are now, belatedly, attempting to remove the punch bowl by raising interest rates from record low levels and beginning quantitative tightening. This is proving highly problematic for the valuations of asset prices, which had been predicated on (almost) free money.

Investors are endeavouring to navigate a new regime, with the highest level of inflation in 40 years. A year ago, we suggested that it would be hard to predict the sustainability of rising inflationary forces, which were affected by the pandemic both in terms of demand, thanks to extreme government stimulus, and supply in relation to interrupted supply chains. Yet the environment, in which disinflationary forces predominated, had been waning for some time before the pandemic. While much investor focus has been on the deflationary effects of technology, other deflationary influences also seem to be fading. Anti-globalisation sentiment has been growing since the financial crisis. Events such as Trump's election and his policies on China have begun to slow four decades of globalisation. The pendulum that swung towards free trade for so long seems to be swinging

back. It is not only the trade of goods that has contributed to disinflation but the free movement of people that has kept the price of labour down since the fall of the Berlin Wall in 1989. People crossing borders had a material impact on globalisation as much as the movement of goods. Wage growth is now at a 40-year high in the US; a lot of this is down to labour market tightness which, beyond the lingering effects of the pandemic, risks being sustained if nationalism inhibits immigration. Wage growth will be key to whether current inflationary forces become ingrained. The Governor of the Bank of England, Andrew Bailey's recent call for wage restraint revealed the weakness of his hand, as a policy maker, in controlling these pressures.

Supply constraints resulting from the pandemic have been more persistent than many expected. The recent tragic events in Ukraine present a further unwelcome geopolitical shock and extend the current inflationary backdrop, aggravating supply shortages for energy and food, in particular. There is a political acceptance that more resilient supply chains are needed, and re-shoring may be part of the solution. We are shifting from a 'just in time' to a 'just in case' economy. Higher domestic capital expenditure will follow in order to add resilience to developed economies. The drive to optimise financial returns, so evident for the past two decades, is likely to recede as companies build in a buffer for uncertainty.

Does the Federal Reserve (and other central banks) have a strong enough stomach to tackle inflation head on or will it pivot as it did in 2018? Debt levels, as a percentage of GDP, are as high as they were during World War II, making positive real rates, required to check inflation, almost impossible to achieve without the risk of a deep recession. The chance of a major policy error is rising. As Stephen King from HSBC points out, the real Fed Funds rate is the lowest it has been in 70-80 years, which is extraordinary. Up until recent months, central banks, through talk of inflation's 'transitory' nature and through their own inaction, had been making a huge bet that inflation would not last long and has little to do with monetary policy. This now looks like wishful thinking as evidence picks up that inflationary pressures are not only affecting food and energy nor are they merely pandemic and Ukraine-related. Wages and rents are rising, along with goods.

Several commentators point to the high inflation of the 1970s as a guide for today. These comparisons are too simplistic as today's economy differs dramatically from 50 years ago. However, there are some similarities. Fiscal policy lost its anchor during the 1970s, as it has through the pandemic. Bounce back loans and other support schemes have been replaced by governments choosing to subsidise wages via transfer payments such as offsetting rising energy bills. Politicians know that the pernicious effects of inflation fall on those with middle and low incomes. Social unrest becomes an increased risk if this fiscal anaesthetic is not provided.

How do we invest amid these febrile conditions? We have been warning for some time that the barbell 'balanced' portfolio strategy of putting nominal bonds alongside equities is long past its sell-by-date. The short-term negative correlation between the two asset classes has been of great value to asset allocators in diversifying portfolios and producing consistent returns. Bonds have thrived on the back of low inflation and low growth, whilst equities performed during periods of improved economic activity. Over the course of decades however, falling interest rates supported ever-higher valuations for equities and bonds alike. Today, the short-term negative correlation between the two asset classes seems to have broken down. In a new regime of higher inflation, the risk is that bonds and equities fall together. For this reason we have long preferred index-linked bonds and gold bullion, over conventional bonds, and they have held up relatively well in the recent bond market sell off and should thrive in a negative real interest rate environment, also known as 'financial repression'.

During the year, a majority of our equities made positive contributions to returns led by core holdings such as Microsoft, American Express, Nestlé, Diageo and Franco Nevada. The only meaningful detractors were Medtronic and Unilever. As markets ran up in 2021 we reduced the Company's equity exposure amid concerns that valuations had gone too far. Having started the financial year with 46% in equities, we ended the year with a 38% exposure. The Shiller cyclically adjusted price earnings ratio (CAPE), a long-term valuation measure, for the US stock market peaked at 38.6x in November 2021, not far off the level reached in December 1999.

The situation today is different to the tech bubble. In 1999 the overvaluation was concentrated in a smaller number of stocks (Dotcoms, Cisco, Microsoft, and Juniper Networks). Value was on offer elsewhere. Thanks to the prevalence of cheap and plentiful capital over the last decade, the overvaluation is far more evenly spread today, giving fewer places to hide from a de-rating of equities. We are sceptical of those who advocate equities as a good defence against inflation. Historically, stocks love disinflation, not inflation. Stock market returns in inflationary periods have been volatile and poor in real terms, despite growing profits - such is the corrosive effect of inflation. From current starting valuations we suspect returns will be modest and we await

lower equity valuations before putting shareholders' savings to work.

Investors are warned that 'past performance is no guide to the future'. The biggest mistake investors can make is to extrapolate historic earnings, share prices, or valuations. Money illusion, the tendency for people to view their wealth and income in nominal terms rather than recognise the real value adjusted for inflation, is hard to resist. This is the mirage between the nominal and the real and will be the enemy of investors seeking returns ahead of inflation. We will endeavour to continue to preserve and grow shareholders' funds in real terms, but we are under no illusion as to the scale of the challenge ahead.

As the Chairman mentioned in his Statement, Robin Angus will be sorely missed by all of us involved with Personal Assets. He was the heart and soul of the Company for over 30 years. I first came across Robin as an aspiring investor in my late twenties reading his Quarterlies and later met him along with Ian Rushbrook as a shareholder. Robin introduced me to investing and thinking as a fiduciary of the sacred savings of others. His reports were not only beautifully written, but provided objective information for private investors seeking to protect and grow their assets. His writing offered refreshing honesty and was peppered with classical witticisms. Shareholders also owe him a debt of gratitude for the introduction of the discount control mechanism, which was trailblazing in 1999 but has now been adopted as the gold standard by many other investment trusts. He was a wonderful, supportive and kind colleague and for me, he was always the best school master I never had.

For further information contact:

Sebastian Lyon

Investment Manager

Tel:  [phone]

Carron Dobson

Juniper Partners, Company Secretary

Tel:  [phone]

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

Income Statement

	Year ended 30 April 2022
	Revenue	Capital
	return	return	Total
	£'000	£'000	£'000
Investment income
Calculated using the effective interest rate method	25,942	-	25,942
Other investment income	13,847	-	13,847
Other operating income	68	-	68
Gains on investments held at fair value through profit or loss	-	129,897	129,897
Foreign exchange losses	-	(49,813)	(49,813)
Total income	39,857	80,084	119,941
Expenses	(5,016)	(6,295)	(11,311)
Return before taxation	34,841	73,789	108,630
Taxation	(5,931)	3,325	(2,606)
Return for the year	28,910	77,114	106,024
Return per share	£8.36	£22.31	£30.67
The "Return 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 Company's Income Statement, prepared in accordance with International Financial Reporting Standards. The Revenue and Capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. Return per share is calculated on 3,456,868 (2021: 2,986,288) shares, being the weighted average number in issue (excluding Treasury shares) during the year. All items in the above statement derive from continuing operations.

Dividend Information	2022		2021
Dividends per share	£5.60		£5.60
Dividends paid	£'000		£'000
First interim dividend of £1.40 per share (2021: £1.40 per share) paid on 16 July 2021	4,599		3,895
Second interim dividend of £1.40 per share (2021: £1.40 per share) paid on 8 October 2021	4,730		4,068
Third interim dividend of £1.40 per share (2021: £1.40 per share) paid on 12 January 2022	4,912		4,242
Fourth interim dividend of £1.40 per share (2021: £1.40 per share) paid on 13 April 2022	5,013		4,439
	19,254		16,644

Income Statement

	Year ended 30 April 2021
	Revenue	Capital
	return	return	Total
	£'000	£'000	£'000
Investment income
Calculated using the effective interest rate method	3,272	-	3,272
Other investment income	15,733	-	15,733
Gain on disposal of asset held for sale	-	1,559	1,559
Gains on investments held at fair value through profit or loss	-	80,865	80,865
Foreign exchange gains	-	38,951	38,951
Total income	19,005	121,375	140,380
Expenses	(4,423)	(5,269)	(9,692)
Return before taxation	14,582	116,106	130,688
Taxation	(1,045)	482	(563)
Return for the year	13,537	116,588	130,125
Return per share	£4.53	£39.04	£43.57

 Statement of Financial Position

			As at 30 April 2022			As at 30 April 2021
			£'000			£'000
Non-current assets
Investments held at fair value though profit or loss			1,790,814			1,432,656
Property			2,144			2,144
Total non-current assets			1,792,958			1,434,800
Current assets
Receivables			4,429			1,228
Cash and cash equivalents			47,944			70,907
Total current assets			52,373			72,135
Total assets			1,845,331			1,506,935
Current liabilities
Financial liabilities held at fair value though profit or loss			(26,585)			(676)
Corporation tax payable			(1,486)			-
Other payables			(2,900)			(2,323)
Total liabilities			(30,971)			(2,999)
Net assets			1,814,360			1,503,936
Capital and reserves
Ordinary share capital			46,100			40,410
Share premium			1,235,636			1,017,672
Capital redemption reserve			219			219
Special reserve			22,517			22,517
Capital reserve unrealised			324,095			285,947
Distributable reserves			185,793			137,171
Total equity			1,814,360			1,503,936
Shares in issue at year end			3,688,069			3,232,929
Net asset value per Ordinary share			£491.95			£465.19

Statement of Changes in Equity

							Distributable reserves
For the year ended 30 April 2022	Ordinary share capital	Share premium	Capital redemption reserve	Special reserve	Treasury share reserve	Capital reserve unrealised	Capital reserve realised	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 May 2021	40,410	1,017,672	219	22,517	-	285,947	137,171	-	1,503,936
Return for the year	-	-	-	-	-	38,148	38,966	28,910	106,024
Ordinary dividends paid	-	-	-	-	-	-	-	(19,254)	(19,254)
Issue of Ordinary shares	5,690	217,964	-	-	-	-	-	-	223,654
Balance at 30 April 2022	46,100	1,235,636	219	22,517	-	324,095	176,137	9,656	1,814,360
							Distributable reserves
For the year ended 30 April 2021	Ordinary share capital	Share premium	Capital redemption reserve	Special reserve	Treasury share reserve	Capital reserve unrealised	Capital reserve realised	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 May 2020	34,580	811,635	219	22,517	(17,622)	215,074	93,852	711	1,160,966
Return for the year	-	-	-	-	-	70,873	45,715	13,537	130,125
Ordinary dividends paid	-	-	-	-	-	-	(2,396)	(14,248)	(16,644)
Issue of Ordinary shares	5,830	206,037	-	-	17,622	-	-	-	229,489
Balance at 30 April 2021	40,410	1,017,672	219	22,517	-	285,947	137,171	-	1,503,936

Share premium . The share premium represents the difference between the nominal value of new Ordinary shares issued and the consideration the Company receives for these shares.

Capital redemption reserve . The capital redemption reserve represents the nominal value of Ordinary shares bought back for cancellation since authority to do this was first obtained at a General Meeting in April 1999.

Special reserve . The cost of any shares bought back for cancellation is deducted from the special reserve, which was created from the share premium, also following a General Meeting in April 1999.

Treasury share reserve .  The net cost of any shares bought back and held in treasury.

Capital reserve unrealised. Increases and decreases in the valuation of investments held at the year end and unrealised exchange differences of a capital nature are accounted for in this Reserve.

Capital reserve realised. Gains and losses on the realisation of investments, realised exchange differences of a capital nature and returns of capital are accounted for in this Reserve.

Revenue reserve . Any surplus/deficit arising from the revenue return for the year is taken to/from this Reserve.

 Cash Flow Statement

	Year ended 30 April	Year ended 30 April
	2022	2021
	£'000	£'000
Cash flows from operating activities
Return before taxation	108,630	130,688
Income calculated using the effective interest rate method	(25,942)	(3,272)
Gains on investments	(129,897)	(82,424)
Foreign exchange losses/(gains)	49,813	(38,951)
Operating cash flow before movements in working capital	2,604	6,041
(Increase)/decrease in accrued income, prepayments and other receivables	(222)	733
Increase in other payables	577	276
Net cash from operating activities before taxation	2,959	7,050
Taxation	(1,064)	(563)
Net cash inflow from operating activities	1,895	6,487
Cash flows from investing activities
Purchase of investments - equity shares	(61,064)	(118,361)
Purchase of investments - fixed interest and other investments	(835,033)	(613,740)
Purchase of gold bullion	(12,312)	(25,044)
Purchase of freehold property	-	(445)
Disposal of investments - equity shares	126,691	59,569
Disposal of investments - fixed interest and other investments	579,399	450,077
Disposal of subsidiary	-	2,793
Settled forward foreign exchange (losses)/gains	(23,807)	40,230
Net cash outflow from investing activities	(226,126)	(204,921)
Cash flows from financing activities
Equity dividends paid	(19,254)	(16,644)
Issue of Ordinary shares	220,618	230,576
Net cash inflow from financing activities	201,364	213,932
(Decrease)/increase in cash and cash equivalents	(22,867)	15,498
Cash and cash equivalents at the start of the year	70,907	56,091
Effect of exchange rate changes	(96)	(682)
Cash and cash equivalents at the year end	47,944	70,907
Net cash inflow from operating activities includes the following:
Dividends received	9,474	12,702
Interest received	4,262	4,133

Principal Risks and Risk Management

The Board has carried out a careful assessment of the principal risks facing the Company, including the current geopolitical risks following the Russian invasion of Ukraine and the ongoing impacts of the COVID-19 pandemic. The Board has established and maintains, with the assistance of the Company Secretary, a risk matrix which identifies the key risks to the Company. This register is formally reviewed on a regular basis. Emerging risks that could impact the Company are considered and discussed at each Board meeting, or on an ad hoc basis as required, along with any proposed mitigating actions.

The principal risks and uncertainties facing the Company, together with a summary of the mitigating action the Board takes to manage these risks and how these risks have changed over the period, are set out below.

Emerging

Risk

The recent invasion of Ukraine brings risk to economic growth and investors' risk appetites and consequently can impact the valuation of companies in the portfolio. There is also an increasing awareness of the challenges and emerging risks posed by climate change. The economic responses to the COVID-19 pandemic may also continue to impact on the Company and its portfolio. The government support measures put in place during the pandemic may result in significant levels of inflation in the medium term.

↑ Increased overall emerging risks due to rising inflation and heightened global political tensions.

Mitigation

The Board seeks to mitigate these emerging risks through maintaining a broadly diversified global equity portfolio and appropriate asset and geographical allocation. In respect of climate change risks, the investment process considers ESG factors, as set out in the Strategic Review of the Annual Report. Overall the specific potential effects of climate change are difficult, if not impossible, to predict and the Board and Investment Manager will continue to monitor developments in this area. The Board is in regular communication with the Investment Manager on emerging matters which may impact on the portfolio.

Economic

Risk

The Board believes that the principal risk to shareholders and the Company's investments are events or developments which can affect the general level of share prices, including for instance, inflation or deflation, economic recessions and movement in interest rates and currencies which could cause losses within the portfolio.

↑ Risk has been heightened by inflationary increases and geopolitical events, including the invasion of Ukraine.

Mitigation

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. Further details on the Company's financial risks are contained in the Notes to the Accounts on pages 20 to 26 of the Annual Report.

The Company's strategy is reviewed formally on at least an annual basis considering investment performance, market developments and shareholder communication. The Board receives regular updates on the composition of the Company's portfolio. Investment performance and the portfolio composition has been monitored specifically in the light of the emerging risks noted above.

Operational

Risk

The Company is reliant on service providers including Troy as Investment Manager, Juniper Partners as AIFM, Company Secretary, Administrator and discount and premium control provider, J.P.Morgan as Depositary and Custodian and Equiniti as Registrar. Failure of the internal control systems of these parties, including in relation to cybersecurity measures, could result in losses to the Company.

→ Risk remains relatively unchanged.

Mitigation

The Board formally reviews the Company's service providers on an annual basis, including reports on their internal controls where available. As part of the annual review the Board considers the  business continuity plans in place with each of its key suppliers and the measures taken to mitigate cyber threats. The Company's internal controls are described in more detail on page 37 of the Annual Report.

Legal and Regulatory

Risk

Breach of legal and regulatory rules could lead to the suspension of the Company's Stock Exchange listing, financial penalties, or a qualified audit report. Breach of Section 1158 of the Corporation Tax Act 2010 could lead to the Company being subject to tax on realised capital gains.

→ Risk remains relatively unchanged.

Mitigation

Compliance with the Company's regulatory obligations is monitored on an ongoing basis by Juniper Partners, the Investment Manager and other professional advisers as required who report to the Board regularly.

Discount and Premium Control

Risk

The share price could be impacted by a number of external factors which could cause significant discount and premium fluctuations.

→ Risk remains relatively unchanged.

Mitigation

The Company's discount and premium control policy, which is enshrined in the Articles of Association, is to ensure that shares always trade at close to net asset value. The level of share buybacks or issuance under the policy is reported via an RIS on an ongoing basis. The operation of the discount and premium control policy was reviewed in the light of the COVID-19 pandemic and to date has continued throughout the period without disruption.

Directors' Responsibility Statement

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

Company law requires the directors to prepare financial statements for each financial year. Under that law the directors have prepared the financial statements in accordance with UK-adopted international accounting standards.

Under company law, Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the company for that period. In preparing the financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;

• state whether applicable UK-adopted international accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements;

• make judgements and accounting estimates that are reasonable and prudent; and

• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

Going Concern

The Directors acknowledge that the continuing situation surrounding the COVID-19 pandemic and heightened geo-political tensions creates risks and uncertainties which may impact the Company. Nevertheless, the Directors believe, in the light of the controls and review processes reported in the Report of the Audit Committee on page 37 of the Annual Report and bearing in mind the nature of the Company's business and assets, which are considered to be readily realisable if required, that the Company has adequate resources to continue operating for at least twelve months from the date of approval of the financial statements. For this reason, they continue to adopt the going concern basis in preparing the accounts.

As part of the going concern assessment a sensitivity analysis was performed. If the market had dropped by 25% and no dividend income became available the Company would be able to continue operating for the foreseeable.

Related Party Transactions

Investment management services are provided by Troy Asset Management Limited. The fee for the year ended 30 April 2022 was £9,684,000 (2021: £8,106,000). An amount of £2,520,000 was outstanding to the Investment Manager at 30 April 2022 (2021: £2,132,000).

Directors of the Company received fees for their services. An amount of £15,000 was outstanding to the Directors at 30 April 2022 (2021: £15,000). Further details are provided in the Directors' Remuneration Report on pages 32 and 33 of the Annual Report. The Directors' shareholdings are also detailed on pages 27 and 32 of the Annual Report.

Notes:

1.  The financial statements of the Company have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. This change constitutes a change in accounting framework.  However, there is no impact on recognition or disclosure in the period reported as a result of the change in framework.

The financial statements have been prepared on a going concern basis.

The financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£'000) except where otherwise indicated.

The financial statements have been prepared on the historical cost basis, modified by revaluation of financial assets and financial liabilities held at fair value. The principal accounting policies adopted are set out in pages 20 and 21 of the Annual Report. These have been applied consistently, other than where new policies have been adopted. 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 April 2021 is consistent with the requirements of IFRSs, the Directors have sought to prepare the financial statements on a basis compliant with the recommendation of the SORP.

2.  During the year the Directors issued 455,140 Ordinary shares for proceeds of £223,946,000.

3.  At 30 April 2022 the sterling value of the US Treasury stocks and part of the US equities were protected by a forward currency contract.

4.  The Company held the following categories of financial instruments as at 30 April 2022:

	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Investments	1,790,814	-	-	1,790,814
Financial liabilities	-	(26,585)	-	(26,585)
Total	1,790,814	(26,585)	-	1,764,229

Level 1 reflects financial instruments quoted in an active market. The Company's investment in Gold Bullion has been included in this level.

Level 2 reflects financial instruments the fair value of which is evidenced by comparison with other observable current market transactions in the same instrument or based on a valuation technique the variables of which include only data from observable markets. The Company's forward currency contract has been included in this level as fair value is achieved using the foreign exchange spot rate and forward points which vary depending on the duration of the contract.

Level 3 reflects financial instruments the fair value of which is determined in whole or in part using a valuation technique based on assumptions that are not supported by prices from observable market transactions in the same instrument and not based on available observable market data.

There have been no changes to valuation technique over the year.

5.  These are not statutory accounts in terms of Section 434 of the Companies Act 2006.  Full audited accounts for the year to 30 April 2022 will be sent to shareholders in June 2022 and will be available for inspection at 28 Walker Street, Edinburgh EH3 7HR, the registered office of the Company. The full Annual Report will be available on the Company's website www.patplc.co.uk .

6.  The audited accounts for the year ended 30 April 2022 will be lodged with the Registrar of Companies.

 

END

 

 

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