Final Results

RNS Number : 2782T

Personal Assets Trust PLC

17 July 2020

 

To:  RNS

From:  Personal Assets Trust plc

LEI:  213800Z7ABM7RLQ41516

Date:  17 July 2020

Results for the year ended 30 April 2020

The Directors of Personal Assets Trust plc ("PAT") are pleased to announce the Group's results for the year ended 30 April 2020.

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 2020 PAT's net asset value per share ("NAV") rose by 5.3%. This compares to a fall of 19.8% in the FTSE All-Share Index.  PAT's share price rose by £25.00 during the year and at 30 April 2020 was £433.00. An analysis of performance is provided in the Chairman's Statement and Investment Manager's Report below.

· Since PAT became independently managed in 1990 its NAV has increased by 652.4% compared to the FTSE All-Share's 212.8% and the RPI's 133.9%.

Capital returns to 30 April 2020:

	3 Years	5 Years	10 Years	Since 1990
NAV	6.9%	21.9%	48.7%	652.4%
FTSE All-Share	(17.7)%	(13.2)%	13.9%	212.8%
RPI	8.1 %	13.4 %	31.3 %	133.9 %

·   During the year the Company's shares continued to trade close to NAV.

· ​ During the year, PAT continued to maintain a high level of liquidity. At 30 April 2020, liquidity was 55.3%. This included 14.1% in UK T-Bills, UK cash, overseas cash, and net current liabilities and 41.2% in various classes of non-equity risk assets: 31.3% in US TIPS and 9.9% in Gold Bullion. This compared to holdings as at 30 April 2019 of 21.0% in UK T-Bills, UK cash, overseas cash, and net current liabilities and 43.0% in various classes of non-equity risk assets: 27.8% in US TIPS; 3.8% in US Treasuries; 8.1% in Gold Bullion; and 3.3% 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 2020. 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 2021, totalling £5.60 for the year.

The Chairman, Hamish Buchan, said:

As I wrote last year, Personal Assets' objective is simply stated. It is to protect and increase (in that order) the value of shareholders' funds per share (otherwise known as net asset value per share, or "NAV") over the long term. We track this in the Annual Report by examining performance not just over an arbitrary period of five or ten years but going right back to 1990, when the Company began its existence in its present form. Since 1990 the NAV has risen at an annual compound rate of 7.0% compared to 3.9% for the FTSE All-Share Index and 2.9% for the RPI, the two main comparators we currently use. The rise in share price at the higher annual compound rate of 8.3% is because at 30 April 1990 the shares sold at a discount to NAV of 30.3%.

To measure how far Personal Assets succeeds in achieving its objective the Board looks at investment

performance from two angles - the result achieved and, just as important, the degree of risk accepted in achieving it. The results are shown in Key Features on page 1 of the Annual Report while the degree of risk accepted is indicated in the chart at the bottom of page 14. This shows how over the past twenty years Personal Assets has been not only less volatile than equities in general but also less volatile than any of the investment trusts in the AIC Global Sector, in which we were included until December 2015, and the AIC Flexible Sector, in which we have been included since January 2016.

Since the change in the Articles of Association in 2016 to permit the Company to distribute realised capital profit as dividend, the Board has been able to commit to paying the dividend at the present annual rate of £5.60 per share for the foreseeable future without interfering with the balance and composition of our investment portfolio. Nevertheless I am pleased to report that in the year to 30 April 2020 the dividend was more than fully covered by earnings per share of £6.03.

During the year we issued a net 330,728 shares for a total net inflow of £142million. It is the policy of the Board that our shares should at all times be readily realisable or able to be acquired by individual holders at as close as possible to NAV, and it is reassuring to report that since 8 November 1999, "Discount Freedom Day", when investment trusts were empowered to use capital to buy back shares and hence to control the discount to NAV at which their shares sell, Personal Assets' share price has risen more or less exactly in line with shareholders' funds per share while the number of shares outstanding is now well over seven times higher, having grown from 369,121 at 30 April 2000 to 2,723,003 by 30 April 2020.

Robin Angus and I will be retiring as Directors at the AGM. The Board is pleased to announce the appointment of two new Directors, Mandy Clements and Robbie Robertson, with effect from the conclusion of the upcoming AGM as a further strengthening and diversifying of its composition. The COVID-19 pandemic has delayed the commencement of the work of The PAT Foundation, the recently-established charitable foundation of which Robin and I are two of the intended Trustees. It has the twin aims of preserving and extending Personal Assets' legacy of a commitment to financial education and research and making more widely known the benefits for individual investors of investing through investment trusts. Further details are included in the Strategic Report on page 10 of the Annual Report. We look forward with enthusiasm to being able to publish further information by the end of the year.

I end on a happy note with two other corporate matters. On 26 June 2020 we entered into a conditional

agreement, subject to FCA consent, to transfer the ownership of our wholly-owned subsidiary, PATAC, which provides administrative, company secretarial, discount control and other services to a variety of other investment trusts, to The Juniper Companies Limited, a company controlled by Stuart Paul, formerly a Director of Personal Assets. The management team of PATAC are fully supportive of the change in ownership. While the ownership of PATAC may change, the previous high level of service we have received from it we are sure will not and we look forward to continuing to work with the growing PATAC team under the new structure. Lastly, you will see in the Investment Manager's Report on pages 3 and 4 in the Annual Report a statement from Sebastian Lyon concerning Troy Asset Management's appointment as Investment Manager from 1 May 2020. Our relationship with Troy has been an exceptionally happy one since Troy became our Investment Adviser in March 2009 and it is with the greatest possible confidence that I commend Sebastian and his team to you and wish you and them well for the future.

The Investment Manager, Sebastian Lyon, said:

We are pleased to report that over the year to 30 April 2020 the net asset value per share ("NAV") of Personal Assets Trust ("PAT") rose by 5.3% while our traditional comparator, the FTSE All-Share Index ("FTSE"), fell by 19.8%. The UK Retail Price Index ("RPI"), which we also use as a comparator (see the inside front cover of the Annual Report and Key Features and Record 1990-2020 on pages 1 and 12 respectively), rose by 1.5%.

What has proved to be a memorable financial year will be defined by its final quarter, which saw a dramatic sell-off in stockmarkets worldwide as a result of the coronavirus pandemic. This was a tragic "known unknown" from a human health perspective, whilst the response from governments has resulted in a huge economic shock as lockdowns shifted across from East to West. This has led to the most severe recession in modern times but comparisons with previous downturns may prove misleading. The economic cycle was already showing signs of weakness before the pandemic took hold. Global trade fell in 2019 for the first time in a decade and interest rates were already being cut (where this was possible given their existing low levels). GDP growth in the UK and Europe was close to 1% while in the United States, growth, having been buoyed by the fiscal stimulus of 2017/18, was also losing momentum. World debt to GDP levels were already at record levels, leaving the economy extremely vulnerable to an extraneous shock of this nature. As a result, corporate default risk is now very high and bankruptcies have already begun.

We are relieved by the resilience shown by many of PAT's holdings during the sell-off. The trust's equities held up far better than UK and global equity indices. The mundane activities of selling coffee, chocolate, toothpaste and pet food demonstrated the longstanding merits of staples companies like Nestlé, Unilever and Colgate. Elsewhere, technology companies with recurring revenues, like Microsoft, proved suitably defensive, thanks to the need for millions to work from home during lockdown. Franco-Nevada, the gold royalty company, was our best performer. Gold bullion rose, proving its value as a hedge against the dire economic and monetary uncertainty unleashed by the pandemic. Central banks with little room to cut interest rates sufficiently to offset the downturn moved further down their unorthodox monetary playbook, ratcheting up record levels of quantitative easing ("QE") to fight deflation through currency debasement. This helps to explain the rise in the gold price, thanks to gold's status as "the currency that cannot be printed". In some cases central banks have crossed the Rubicon in financing fiscal spending directly, risking an inflationary environment later this decade. This should continue to support the bull market in gold that began almost 20 years ago. However, fixed income as an asset class now offers yields of close to nothing, signalling that the 40-year-old fixed income bull market may be coming to a close. There is certainly little upside without yields turning negative.

Over the first nine months of the year we reduced PAT's equity exposure to c.30%, the lowest in a decade, selling holdings in Imperial Oil and Sage. The former was sold, fortuitously, prior to the collapse in the crude oil price in March. Sage, the UK based accountancy software business, failed to make a seamless transition to "the cloud", thereby in our view weakening its long-term competitive position. We also sold modest holdings in GlaxoSmithKline and BIC. We acquired new holdings in Alphabet, parent to Google, Medtronic, the medical devices company, and Agilent, a life sciences company with recurring revenues in chromatography and mass spectrometry. We also bought a new holding in Visa. All these companies we view as resilient businesses with strong platforms for long-term growth. Visa should benefit from the ongoing shift to e-payments and the fast approaching cashless society, as will our existing holding in American Express. During the stock market

falls of February and March we materially increased our equity exposure by over 10 percentage points, as the risk/reward ratio seemed to us to have improved. There were, however, no bargains yet on offer at rock bottom prices and valuations never touched anywhere near the lows witnessed in 2009.We also increased the duration in US TIPS as real yields spiked higher and we added to our gold holdings near the lows in March.

While many previous downturns have seen the reversal of preceding economic trends, this recession is likely to reinforce many pre-existing secular shifts. The ongoing transition to the cloud, to greater e-commerce and to electronic payments has been accelerated by the current crisis. In the words of Satya Nadella, CEO of Microsoft, "We've seen two years' worth of digital transformation in two months". Many businesses with low margins and those reliant on high street retailing, restaurants and travel may never recover. Given that interest rates are nailed to the floor for the foreseeable future and the yield curve is almost horizontal, banks will also struggle to regain a semblance of profitability as net interest margins are squeezed at a time when the level of bad debts is rising. Environment, Social and Governance ("ESG") trends, already well embedded in many investment approaches, are likely to accelerate. The post COVID-19 economy will entail big government, populism and ballooning public debt. From a social perspective this may be more congenial but from an economic perspective it may lead to significant misallocation of capital. As money supply is pumped up to offset deflationary forces, there will be little if any risk of austerity to follow. In contrast to the last downturn, the lack of a fiscal handbrake means that inflationary risks are likely to rise. Equity investors, who for 30 years have been used to falling interest rates and declining inflation, still seem oblivious of this possible outcome.

A year ago we stated that investors face "an invidious choice of overvalued quality on the one hand and 'cheap' stocks on the other". The cheap stocks did not deliver on their supposed value after all, many of them instead having fallen sharply over the past few months. Their weaknesses are being exposed by the economic downturn and the profitability of many such companies has fallen catastrophically. Yesterday's blue chips have become today's chip paper as Schumpeter's "creative destruction cycle" takes a further turn. Many UK listed businesses were already over-distributing to shareholders. Dividend cuts for the UK stock market are expected to be greater than during the financial crisis of 2008/9. In a world of low interest rates, the temptation to overstretch for income is great. We select our equity holdings on a total return basis and look for companies that are able to grow sustainably. We believe investing for income will only get harder, as many dividends that have been cut or passed will be reinstated at much lower levels and only once a recovery takes hold. Some may never return, making 'value' a treacherous pool in which to fish. We, however, are not tempted to shift the portfolio away from quality companies generating sustainable returns.

Today, markets are responding in a Pavlovian manner to news flow on the reversal of lockdowns and hopes of a vaccine while ignoring the risks of a second wave and the likelihood that the recovery will be slow and fragile, especially in areas like travel and hospitality. We suspect expectations of a sharp 'V'-shape recovery are a function of hope over experience. Resolution of this crisis is likely to be protracted, largely because the economy was so vulnerable before it struck. The Economist's prediction of a "90% economy" may prove an accurate forecast, as some businesses will not be able to return to normal once lockdowns ease. Markets have quickly become detached from economic reality with the advent of huge monetary stimulus but that can easily reverse with a dose of reality.

On 1 May 2020 Troy Asset Management became Investment Manager of PAT. This is part of an evolutionary transition which began eleven years ago with our appointment as Investment Adviser. The way we manage the portfolio will not change, nor will our aims to preserve and grow shareholders' capital over the long term. We remain closely aligned with shareholders because of the team's personal material holdings in the trust. The performance of PAT over the past twelve months demonstrates that we are doing something very different from the UK equity market. Of course, this could cut both ways. While we have succeeded in our aim of preserving capital, shareholders should be aware that we may lag any strong rally driven by weaker, more cyclical companies with higher debt levels. We will not hold equity slivers that double or halve on the whim of investor sentiment. Our approach is proven over time to provide respectable rates of return with relatively modest volatility and below-average drawdowns*. We do not intend to change.

(* measures the weakest investment period from peak to trough)

For further information contact:

Robin Angus

Executive Director

Tel:  [phone]

Sebastian Lyon

Investment Manager

Tel:  [phone]

Carron Dobson

PATAC Limited, 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 2020
	Revenue	Capital
	return	return	Total
	£'000	£'000	£'000
Investment income
Calculated using the effective interest rate method	7,009	-	7,009
Other investment income	14,681	-	14,681
Other operating income	1,649	-	1,649
	23,339	-	23,339
Gains on investments held at fair value through profit or loss	-	68,869	68,869
Foreign exchange losses	-	(16,260)	(16,260)
Total income	23,339	52,609	75,948
Expenses	(5,105)	(4,427)	(9,532)
Return before taxation	18,234	48,182	66,416
Taxation	(2,433)	1,444	(989)
Return for the year	15,801	49,626	65,427
Return per share	£6.03	£18.96	£24.99
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 Group's Income Statement, prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRSs").  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 2,617,987 (2019: 2,299,470) 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	2020		2019
Dividends per share	£5.60		£5.60
Dividends paid	£'000		£'000
First interim dividend of £1.40 per share (2019: £1.40 per share) paid on 12 July 2019	3,406		3,125
Second interim dividend of £1.40 per share (2019: £1.40 per share) paid on 10 October 2019	3,612		3,176
Third interim dividend of £1.40 per share (2019: £1.40 per share) paid on 10 January 2020	3,750		3,232
Fourth interim dividend of £1.40 per share (2019: £1.40 per share) paid on 16 April 2020.	3,871		3,317
	14,639		12,850

Group Income Statement

	Year ended 30 April 2019
	Revenue	Capital
	return	return	Total
	£'000	£'000	£'000
Investment income
Calculated using the effective interest rate method	3,092	-	3,092
Other investment income	13,088	-	13,088
Other operating income	1,112	-	1,112
	17,292	-	17,292
Gains on investments held at fair value through profit or loss	-	63,327	63,327
Foreign exchange losses	-	(20,495)	(20,495)
Total income	17,292	42,832	60,124
Expenses	(4,477)	(3,815)	(8,292)
Return before taxation	12,815	39,017	51,832
Taxation	(1,400)	538	(862)
Return for the year	11,415	39,555	50,970
Return per share	£4.97	£17.20	£22.17

GroupStatement of Financial Position                                                                         

 

			As at 30 April 2020			As at 30 April 2019
			£'000			£'000
Non-current assets
Investments held at fair value though profit or loss			1,100,973			946,459
Property			1,699			-
Total non-current assets			1,102,672			946,459
Current assets
Receivables			3,325			1,801
Cash and cash equivalents			57,179			23,605
Total current assets			60,504			25,406
Total assets			1,163,176			971,865
Current liabilities
Financial liabilities held at fair value though profit or loss			(79)			(1,537)
Payables			(2,131)			(1,749)
Total liabilities			(2,210)			(3,286)
Net assets			1,160,966			968,579
Capital and reserves
Ordinary share capital			34,580			29,904
Share premium			811,635			657,090
Capital redemption reserve			219			219
Special reserve			22,517			22,517
Treasury share reserve			(17,622)			-
Capital reserve unrealised			214,440			177,132
Distributable reserves			95,197			81,717
Total equity			1,160,966			968,579
Shares in issue at year end			2,723,003			2,392,275
Net asset value per Ordinary share			£426.36			£404.88

 

CompanyStatement of Financial Position

				As at 30 April 2020				As at 30 April 2019
				£'000				£'000
Non-current assets
Investments held at fair value through profit or loss				1,100,973				947,242
Property			1,699					-
Total non-current assets			1,102,672					947,242
Current assets
Receivables				3,095				1,748
Cash and cash equivalents				56,091				22,792
				59,186				24,540
Assets classified as held for sale				1,234				-
Total current assets				60,420				24,540
Total assets				1,163,092				971,782
Current liabilities
Financial liabilitiesheld at fair value through profit or loss				(79)				(1,537)
Payables				(2,047)				(1,666)
Total liabilities				(2,126)				(3,203)
Net assets				1,160,966				968,579
Capital and reserves
Ordinary share capital				34,580				29,904
Share premium				811,635				657,090
Capital redemption reserve				219				219
Special reserve				22,517				22,517
Treasury share reserve				(17,622)				-
Capital reserve unrealised				215,074				177,315
Distributable reserves				94,563				81,534
Total equity				1,160,966				968,579
Shares in issue at year end				2,723,003				2,392,275
Net asset value per Ordinary share				£426.36				£404.88

Group and Company Statements of Changes in Equity *

							Distributable reserves
For the year ended 30 April 2020	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 as at 30 April 2019	29,904	657,090	219	22,517	-	177,132	81,534	183	968,579
Return for the year	-	-	-	-	-	37,308	12,318	15,801	65,427
Ordinary dividends paid	-	-	-	-	-	-	-	(14,639)	(14,639)
Issue of Ordinary shares	4,476	154,545	-	-	12,019	-	-	-	171,240
Share buybacks	-	-	-	-	(29,641)	-	-	-	(29,641)
Balance as at 30 April 2020	34,580	811,635	219	22,517	(17,622)	214,440	93,852	1,345	1,160,966
							Distributable reserves
For the year ended 30 April 2019		Ordinary share capital	Share premium	Capital redemption reserve	Special reserve	Capital reserve unrealised	Capital reserve realised	Revenue reserve	Total
		£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 30 April 2018		27,655	587,773	219	22,517	113,830	106,477	422	858,893
Return for the year		-	-	-	-	63,302	(23,747)	11,415	50,970
Ordinary dividends paid		-	-	-	-	-	(1,196)	(11,654)	(12,850)
Issue of Ordinary shares		2,249	69,317	-	-	-	-	-	71,566
Balance as at 30 April 2019		29,904	657,090	219	22,517	177,132	81,534	183	968,579

* The Company's reserves are the same as the Group's other than the capital reserve unrealised, which is £215,074,000 (2019: £177,315,000), and the revenue reserve, which is £711,000 (2019: £nil). The differences relate to the profit generated by the Company's subsidiary.

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, unrealised gains and losses on FTSE 100 Future contracts 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, gains and losses on the realisation of FTSE 100 Future contracts, 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.

 

Group Cash Flow Statement

	Year ended 30 April	Year ended 30 April
	2020	2019
	£'000	£'000
Cash flows from operating activities
Return before taxation	66,416	51,832
Gains on investments including effective yield	(75,878)	(66,419)
Foreign exchange losses	16,260	20,495
Operating cash flows before movements in working capital	6,798	5,908
Increase in accrued income, prepayments and other receivables	(375)	(773)
Increase in other payables	382	130
Net cash from operating activities before taxation	6,805	5,265
Taxation	(1,005)	(274)
Net cash inflow from operating activities	5,800	4,991
Cash flows from investing activities
Purchases of investments - equity shares	(225,871)	(15,641)
Purchases of investments - fixed interest and other investments	(664,977)	(745,568)
Purchase of gold bullion	(6,033)	-
Purchase of freehold property	(1,699)	-
Disposal of investments - equity shares	79,920	43,622
Disposal of investments - fixed interest and other investments	738,278	663,339
Forward foreign exchange losses	(17,412)	(26,384)
Net cash outflow from investing activities	(97,794)	(80,632)
Cash flows from financing activities
Equity dividends paid	(14,639)	(12,850)
Issue of Ordinary shares	170,156	71,566
Share buybacks	(29,641)	-
Net cash inflow from financing activities	125,876	58,716
Increase/(decrease) in cash and cash equivalents	33,882	(16,925)
Cash and cash equivalents at the start of the year	23,605	40,763
Effect of exchange rate changes	(308)	(233)
Cash and cash equivalents at the year end	57,179	23,605
Net cash inflow from operating activities includes the following:
Dividends received	10,431	9,853
Interest received	4,068	3,195

Company Cash Flow Statement

	Year ended 30 April			Year ended 30 April
	2020			2019
	£'000			£'000
Cash flows from operating activities
Return before taxation	65,966			51,786
Gains on investments including effective yield	(75,878)			(66,419)
Foreign exchange losses	16,260			20,495
Operating cash flows before movements in working capital	6,348			5,862
Increase in accrued income, prepayments and other receivables	(198)			(771)
Increase in other payables	380			145
Net cash from operating activities before taxation	6,530			5,236
Taxation	(1,005)			(274)
Net cash inflow from operating activities	5,525			4,962
Cash flows from investing activities
Purchases of investments - equity shares	(225,871)			(15,641)
Purchases of investments - fixed interest and other investments	(664,977)			(745,568)
Purchase of gold bullion	(6,033)			-
Purchase of freehold property	(1,699)			-
Disposal of investments - equity shares	79,920			43,622
Disposal of investments - fixed interest and other investments	738,278			663,339
Forward foreign exchange losses	(17,412)			(26,384)
Net cash outflow from investing activities	(97,794)			(80,632)
Cash flows from financing activities
Equity dividends paid	(14,639)			(12,850)
Issue of Ordinary shares	170,156			71,566
Share buybacks	(29,641)			-
Net cash inflow from financing activities	125,876			58,716
Increase/(decrease) in cash and cash equivalents	33,607			(16,954)
Cash and cash equivalents at the start of the year	22,792			39,979
Effect of exchange rate changes	(308)			(233)
Cash and cash equivalents at the year end	56,091			22,792
Net cash inflow from operating activities includes the following:
Dividends received		10,431	9,853
Interest received		4,068	3,195

Principal Risks and Risk Management

The Board has carried out a careful assessment of the principal risks facing the Company, including the unprecedented situation surrounding the COVID-19 pandemic. The Board acknowledges that there is a number of related emerging risks resulting from the pandemic that may impact the Company. These include investment risks surrounding the companies in the portfolio such as reduced demand, reduced turnover and supply chain breakdowns. The Board continues to work with the Investment Manager, PATAC and its other advisers to manage these risks as far as possible in these uncertain times.

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

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. The emerging risks posed by the COVID-19 pandemic will impact on all the economic risks faced by the Company.

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 in 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 COVID-19 pandemic.

Operational

Risk

The Company is reliant on service providers including Troy as Investment Manager, PATAC 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 could result in losses to the Company.

Mitigation

The Board formally reviews the Company's service providers on an annual basis, including reports on their internal controls where available. The Company's internal controls are described in more detail on page 36 of the Annual Report. Operationally, COVID-19 is affecting each of the Company's key service providers and each has put in place the appropriate arrangements for their staff to work from home. To date these services have continued without disruption and the operational arrangements have proven adequate. The Board will continue to monitor these arrangements.

Regulatory

Risk

Breach of 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.

Mitigation

Compliance with the Company's regulatory obligations is monitored on an ongoing basis by PATAC, the Investment Manager and other professional advisers as required who report to the Board regularly. The Board has been updated on any regulatory changes proposed in respect of the response to the COVID-19 pandemic as required.

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.

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 has been reviewed in the light of the COVID-19 pandemic and to date has continued throughout the period without disruption. 

Statement of Directors' Responsibilities in respect of the Annual Report

In accordance with the Disclosure Guidance and Transparency Rules, each of the Directors confirms that to the best of her or his knowledge:

· the financial statements contained within the Annual Report for the year ended 30 April 2020, of which this statement of results is an extract, have been prepared in accordance with applicable International Financial Reporting Standards as adopted by the European Union, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Group and the undertakings included in the consolidation taken as a whole; and

· the Strategic Report includes a fair review of the development and performance of the business and the position of the Group and the undertakings included in the consolidation taken as a whole together with a description of the principal risks and uncertainties that it faces.

Going Concern

The Directors acknowledge that the situation surrounding the Covid-19 pandemic 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 36 of the Annual Report and bearing in mind the nature of the Group's business and assets, which are considered to be readily realisable if required, that the Group 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.

Related Party Transactions

Investment management services are provided by Troy Asset Management Limited. The fee for the year ended 30 April 2020 was £6,811,000 (2019: £5,869,000). An amount of £1,735,000 was outstanding to the Investment Manager at 30 April 2020 (2019: £1,517,125).

Secretarial and administrative services are provided by the Company's wholly owned subsidiary, PATAC. Costs, net of third party income, amounted to £443,000 (2019: £307,000) in respect of these services in the year to 30 April 2020. An amount of £108,000 was outstanding to PATAC at 30 April 2020 (2019: £nil).

Directors of the Company received fees for their services. An amount of £13,000 was outstanding to the Directors at 30 April 2020 (2019: £13,000). Further details are provided in the Directors' Remuneration Report on pages 31 and 32 of the Annual Report. The Directors' shareholdings are also detailed on pages 27 and 31 of the Annual Report.

Notes:

1.  The financial statements of the Group have been prepared in accordance with the Companies Act 2006, International Financial Reporting Standards (''IFRSs'') and interpretations issued by the International Financial Reporting Standards Interpretations Committee, to the extent that these have been adopted by the European Union.

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 19 and 20 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 October 2019 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.

Changes in accounting policy and disclosures

IFRS 16 'Leases' replaced IAS 17 'Leases' for accounting periods beginning on or after 1 January 2019. The adoption of this standard has not had any material impact on the financial statements as presented.

2.  During the year the Directors issued 374,274 Ordinary shares for proceeds of £158,518,000. During the year the Directors bought back 73,831 Ordinary shares at a cost of £29,641,000 and 30,285 shares were re-issued from Treasury for proceeds of £12,722,000.

3.  At 30 April 2020 the sterling value of the US Treasury stocks and part of the US equities were protected by a forward currency contract.

4.  The Group held the following categories of financial instruments as at 30 April 2020:

	Level 1 £'000	Level 2 £'000	Level 3 £'000	Total £'000
Investments	1,100,973	-	-	1,100,973
Financial liabilities	-	(79)	-	(79)
Total	1,100,973	(79)	-	1,100,894

The above table provides an analysis of investments based on the fair value hierarchy described below and which reflects the reliability and significance of the information used to measure their fair value. The levels are determined by the lowest (that is, the least reliable or least independently observable) level of impact that is significant to the fair value measurement for the individual investment in its entirety as follows:

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. The Company's subsidiary has been included in this level as its valuation is based on its net assets. A reconciliation of Level 3 fair value measurements of financial assets can be found below

                                                                                                                      (Level 3)

                                                                                                                            £'000

Opening book cost	600
Opening unrealised appreciation	183
Opening valuation	783
Movements in the year:
Unrealised profit on the fair value of investments during the year	-
Closing valuation at 30 April 2020	-
Closing book cost	-
Closing unrealised appreciation	-
Closing valuation at 30 April 2020	-

On 8 April 2020 the Company signed Heads of Terms with The Juniper Companies Limited in relation to the proposed sale of the Company's subsidiary, PATAC. As such the Company's subsidiary, which was valued at 30 April 2020 at £1,234,000, is no longer treated as an investment and is shown in the Statements of Financial Position as a current asset classified as held for sale.

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 2020 will be sent to shareholders in July 2020 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 2020 will be lodged with the Registrar of Companies.

 

END

 

 

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