Annual Financial Report
TROY INCOME & GROWTH TRUST PLC
LEI: 213800HLNMQ1R6VBLU75
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2021
1. CHAIRMAN'S STATEMENT
The objective of the Company is to provide an attractive income yield and the prospect of income and capital growth through investing in a portfolio of predominantly UK equities.
Performance
The Company delivered a Net Asset Value (NAV) total return of +10.2% and share price total return of +9.6% for the year ended 30 September 2021. Over the same period, the FTSE All-Share Index produced a total return of +27.9%. Following the positive vaccine news last November, more economically sensitive areas of the market such as energy, metals & mining, and banks have undergone a sustained period of strong performance. This reflects positive sentiment on economic reopening, along with widespread commodity inflation and expectations of interest rate rises that have dominated markets this year. These conditions have been to the detriment of defensive/quality companies' share prices, which had generally performed strongly in the prior 12 months. Given the Company's overwhelming exposure to the latter category of companies, relative performance has been poor.
It is worth noting that almost all of the relative under-performance took place in the first six months of the financial year. The more recent, second, six-month period was much less difficult, which hopefully gives encouragement of tangible improvement.
The Board remains predominantly interested in long-term performance. Although the impact of this year's relative underperformance is that over three and five years the Company's performance now lags behind the market, over ten years the Company's NAV remains marginally ahead of the FTSE All-Share Index.
A fourth quarterly dividend payment of 0.49p was announced in September. The dividend for the year totalled 1.96p, representing a yield of 2.6% on the year end share price.
Economic and Stock Market Background
My opening statement last year reflected on the extraordinary uncertainty impacting our lives on a global scale, a state of being that had been firmly in favour of the Company's investment style up to that point. Only a month later, news of viable vaccines broke and markets leapt at the promise of some certainty and a path back to normality. Last November was the best month for the UK equity market in over 30 years. Much of the past year has remained supportive of this dynamic, including the eventual signing of a Brexit deal in December - a subject that amidst a pandemic had become something of a secondary headline. Since February, we have witnessed widespread commodity inflation and many eyes are now fixed on central bankers and the timescale of interest rate rises. This backdrop has been highly supportive for more economically sensitive parts of the UK market, including commodity-linked businesses such as mining and oil & gas, as well as those highly sensitive to interest rates, such as banks. Given the Company's typical aversion to these areas of the market, it has significantly lagged the wider market.
The Managers provide discussion on performance in their review, as well as detailing portfolio changes. It will not surprise you to hear that their investment process and policy is unwavering. Short-term trends remain carefully weighted against longer term, structural forces in their thinking. Over the course of the year, several holdings have been divested and new ones begun, all with the aim of underpinning sustainable, attractive returns in capital and income for years to come.
The Managers' Review and the Strategic Report both contain details of the Company's perspective on ESG matters. These are serious and topical issues and brief summaries do not do them justice. The Board encourages Shareholders to review the detail contained in the Annual Report.
Discount Control Mechanism
The Discount Control Mechanism ('DCM'), which has been in place since January 2010, ensures that investors can purchase and sell the Company's shares at a time of their choosing and at a price very close to net asset value. The DCM continues to enhance the NAV per share by consistently issuing shares at a small premium and buying-in shares at a small discount. This is a key differentiating feature of the Company, providing liquidity for both buyers and sellers of the Company's shares and protecting investors from the negative effects of excessive discount volatility. During the year, the Company issued 0.6m shares and bought-in 27.4m shares through the DCM.
Dividends
As announced in last year's Annual Report, the Board set a new and reduced quarterly dividend rate of 0.49p per share for the year to 30 September 2021, recognising both the structural impact of the pandemic on the UK equity dividend landscape and the portfolio changes made by the Managers. The latter involved prioritising lower yield companies with better dividend growth prospects over higher yielding alternatives. A small number of portfolio companies are yet to recommence dividend payments.
As a result of this disruption to the portfolio's income, the Board decided to pay the third interim dividend from the Company's distributable capital reserve for a second year, enabling the Company to continue to bridge the revenue deficit. The Board intends, barring unforeseen circumstances, to at least maintain the quarterly dividend rate of 0.49p per share for the year to 30 September 2022.
Gearing
The Company had a £20 million gearing facility with ING that expired in April 2021. The facility had not been utilised, reflecting the Managers' conservative investment style and the desire to keep the volatility of returns relatively low. The Board and Managers will keep under review the possibility of a new gearing facility but meantime the Company will save the cost of maintaining such a facility.
Board Changes
Jann Brown will be retiring at the AGM in January after nine years of service as a Director and Chair of the Audit Committee. The Board would like to convey its sincere thanks to Jann for the significant contribution she has made to the smooth running of the Company and for her excellent leadership of the Audit Committee.
On 1 August 2021, the Board welcomed Brigid Sutcliffe as a new Director. Brigid is a Chartered Accountant with wide and varied experience. She stands for election at the AGM and the Board is very much looking forward to working with her. Brigid will take over from Jann as Chair of the Audit Committee in January and has been working with Jann on this year's Annual Report and audit, to ensure a smooth hand over of responsibilities.
In accordance with the Board's policy of a maximum of twelve years tenure for the Chair, I plan to retire on or before the AGM in January 2023. The recruitment of a new Director and discussions around the replacement of the Chair position are in progress.
Management Team and Company Secretary Changes
As flagged in the Interim Report, Francis Brooke will be relinquishing his fund management responsibilities on 31 December 2021 to take on a new role as executive Vice-Chairman of Troy Asset Management. Hugo Ure and Blake Hutchins will continue to co-manage the Company after Francis steps back. The Board has been aware and supportive of the succession plans for some time and believes the transition has been well-managed by Troy.
The Board is very grateful to Francis for his strong and consistent stewardship of the Company's portfolio since Troy became Manager in 2009 and wishes him well in his new role.
The Company Secretary had a change of ownership in 2020 and has changed its name from PATAC Limited to Juniper Partners Limited. There has been no change to the team at Juniper Partners and it continues to provide the Company with excellent service, including company secretarial, administration and discount control services and to act as the Alternative Investment Fund Manager.
Annual General Meeting
As at previous AGMs, the Board will again ask Shareholders to approve resolutions it believes are vital to the effective management of the DCM. Specifically, the Board is seeking permission to allow the Company to issue shares on a non pre-emptive basis equivalent to 20% of its equity and to buy-in up to 14.99%. There are two separate resolutions concerning the issue of shares. The first resolution seeks permission to issue 10%, and the second (extra) resolution seeks permission to issue up to a further 10% solely in connection with the DCM; for an aggregate of 20%.
The Board believes this approach to seeking non pre-emption authorities is shareholder friendly. It gives any Shareholder who may be unhappy that the aggregate authority sought is higher than that recommended by corporate governance guidelines the ability to express their concern via the second resolution, whilst still allowing their approval for the first and more conventional resolution dealing with 10% issuance. While the Board appreciates some Shareholders' reticence about non pre-emption authorities, it strongly believes that in the circumstances of the NAV enhancing impact of the DCM's operations, the overall 20% authority sought is in the best interests of Shareholders, and so is continuing to seek such authority at the upcoming AGM.
Outlook
With good reason, the UK market has been more sanguine and certain over the past year. But looking ahead, it remains a noisy and unusual investment backdrop, with many measures and dynamics distorted by the unprecedented events of the past 19 months or so. The interplay of inflation, interest rates, and global debt burdens will play a central role in markets over the coming months, as will the ongoing disequilibrium in supply chains and commodities, especially energy.
It can often seem that an investment process emphasising resilience and lower cyclicality requires a pessimistic outlook. But conversely, the Managers are natural optimists; more than anything they are looking for companies capable of sustainable growth and durable competitive advantage over an indefinite timeframe - something that truly requires a positive perspective. Despite a challenging period for the Company, the Board similarly sees scope for optimism and believes that the investment process and philosophy being pursued by the Managers remains capable of delivering attractive returns through these unusual times and beyond.
David Warnock
Chairman
15 November 2021
2. MANAGERS' REVIEW
Investment Background
Over the course of the year, the UK stock market sentiment has swung from one extreme to the other. 2020 witnessed negative WTI oil prices and the BOE stress-testing the UK economy for negative interest rates that ultimately did not materialise. We end the Company's current financial year with oil at $86 a barrel, inflation expectations rising and Andrew Bailey signalling imminent interest rate hikes. The FTSE All-Share Index is up 27.9% over a year, back within touching distance of historic highs, whilst 10-year UK government bond yields have rallied to over 1% having been barely above 0% a year prior. Economies are re-opening at differing speeds, such is the divergence in vaccination rates across the world. This is causing supply bottlenecks and shortages of various goods and services. Given these distortions, and the base effect of annualising against a year of such muted activity, inflation, as measured by CPI, is currently higher than it has been in almost 10 years.
Given this backdrop, and in direct contrast to much of 2020, markets have firmly favoured more cyclical assets this past year. Energy, and to a lesser extent bank stocks, have led the equity market higher. On the other hand, less economically sensitive stocks have struggled by comparison. Given the defensive-growth bias of the portfolio, the rebound in sentiment has left the Company significantly lagging the return of the UK market. The extent to which current distortions prove structural rather than cyclical remains to be seen and will be crucial in determining the shape of future returns. In spite of short-term inflationary pressures, the bond market remains relatively sanguine to date. Nominal bond yields remain low, and in most cases negative in real terms, with curves relatively flat all along the 30-year maturity scale in both the UK and the US.
Moving on from the current economic backdrop, two fundamental societal shifts continue to grow in importance; technological advancement and environmental risks. Both trends have material implications for future value creation and will lead to the disruption of old industries and the formation of new ones. The Managers are hugely cognisant of remaining on the right side of these powerful trends.
Performance
The Company delivered a Net Asset Value (NAV) total return of 10.2% and a share price total return of 9.6% over the year. This compares with the FTSE All-Share Index return of 27.9%. The difference between the share price and NAV performances generated by the Company represents a move from a 0.8% discount to a 1.4% discount. This performance places the Company 22nd out of its 22-strong AIC UK equity income peer group when ranked by NAV performance and 21st by share price.
On an absolute basis, Consumer Discretionary was the largest positive contributor, with the share prices of WH Smith, Compass, and Next rising strongly in the wake of vaccine news and the subsequent rebound in economic activity. Several Financials holdings benefitted similarly from the rapid shift in sentiment, with both St James's Place and American Express rising >60% over the period. Large, quality, technology-focussed companies such as RELX and Paychex, who potentially face enhanced demand in a post-pandemic world, have also contributed strongly. In aggregate, Consumer Staples had a modest negative impact on performance, however, there were divergent fortunes within the sector; Diageo was the single largest positive contributor to the portfolio, rising 39% as the market anticipated a return in recreational activity and thus alcohol demand. Meanwhile Unilever and Reckitt were the largest drags on performance. The rapid shift in performance for Reckitt is particularly notable; earlier in the pandemic it had been among the 'COVID winners' with its disinfectant brands, but vaccine news reversed sentiment rapidly. The company has also suffered from a very mild flu season in the face of global lockdowns, greatly reducing demand for their cold and flu remedies.
Despite generating a c.10% return over the year, the portfolio significantly lagged the market over the 12-month period. On a relative basis (compared to the FTSE All-Share), the largest detractors by sector were the Company's differing Financials exposure, overweight position in Consumer Staples, and differing Industrials exposure. As noted, the dominant theme was a lack of exposure to companies most dependent on the economic cycle. The UK market is for instance heavily exposed to large mining, energy and resource stocks. Companies in these industries account for c.25% of the FTSE All-Share's total market cap. The Managers do not typically invest in these sectors, preferring less cyclical and capital-intensive companies. As such, the portfolio has generally struggled to match the returns of the market in periods in which stocks in these sectors strongly outperform. The past year perfectly reflects one such period.
Portfolio Changes
Last year we wrote that the pandemic had sharpened our focus on quality and sustainability of returns, with a desire to invest only where we had high confidence the companies could grow for many years while maintaining competitive advantage. The extent of portfolio change over the past 12 months has been less than last year, with turnover of 13%. We believe all changes have enhanced the prospective capital and income returns of the Company.
There were five new additions during the year.
We continue to believe the UK industrial sector is home to several world-class businesses. In the first half of the year we initiated a position in Diploma, a distributor of numerous relatively low-cost but vital items such as rubber seals and gaskets to a huge range of industrial and some medical markets. A focus on niche end-markets, and value-add activities such as technical advice and the manufacturing of custom parts/kits, leads the company to consistently earn attractive margins, well above the typical profile for a distribution business. And by selling cheap but crucial products, Diploma has much lower cyclicality than many of its underlying industrial customers. We believe the growth opportunity for Diploma is enormous, and the company comfortably generates the excess cash to both reinvest and fund a growing dividend.
There was one new addition to the portfolio's overseas holdings: CME Group, the US-listed derivatives exchange. CME is the world's leading futures exchange, as reflected in their ownership of the five most liquid futures contracts globally, such as those for trading the S&P 500, US 10-Year Treasuries, or WTI crude oil. Trading volume is the key driver of growth, and this is supported by improving economic activity, the potential for increased interest rate volatility, and the longer-term structural trend towards exchange-traded derivative contracts. Exchanges are capital-light businesses, and CME comfortably funds a dividend. As well as being a worthy income growth stock, CME's sensitivity to market volatility and interest rates provides a differentiated growth driver to the portfolio.
The Company also initiated a holding in Admiral, the UK motor insurer. Admiral is a name well-known to most British consumers. In a competitive, commoditised market Admiral has carved true competitive advantage, with superior underwriting and operations giving rise to leading scale and cost advantages, resulting in an estimated >20% share of the UK consumer motor market. Admiral's uniquely strong position gives rise to returns on its capital far in excess of the rest of the industry. We part-funded the purchase through a reduction in Lancashire Holdings, reflecting our relative attraction towards Admiral's prospects and competitive advantages.
The Company has longstanding holdings in Real Estate Investment Trusts (REITs). Recognising the divergent fortunes within the sector, we have always been highly selective in the choice of property exposure. In the period we began an investment in Big Yellow Group, the self-storage company, believing the subsector boasts a number of attractive characteristics. Alongside strong structural growth drivers around ecommerce and other social behaviours, the industry benefits from a very attractive relationship between relatively high rents per square foot and very modest maintenance capex requirements. Meanwhile limited space availability in large urban centres and growing demand supports positive like-for-like rental growth for the dominant incumbents like Big Yellow. The purchase was partially funded by the sale of Secure Income REIT, with the switch indicative of our stronger conviction in the self-storage space.
We also initiated a holding in AVEVA, the industrial software company, in the final month of the reporting period.
In addition to the sale of Secure Income REIT noted above, five further companies were exited over the period.
We completed the sale of two consumer product companies - AB Foods and Imperial Brands - following reductions last year. Consumer products have always featured heavily in the Company, with the enduring nature of strong brands an attractive quality. But evolution is still necessary, and we recognise that the best brands and categories for investment can change over time. These sales have funded additions elsewhere, including Diageo and InterContinental Hotels, whose products and brands we believe to be superior and facing far rosier long-term growth prospects.
The Company exited Equiniti Group following a successful takeover bid from private equity, and SSE, where our long-term conviction had waned. Finally, we exited the online derivatives trading company IG Group. On the back of strong trading and share price performance, the company's management team made a move to acquire 'tastytrade', a US options brokerage platform aimed at retail investors. On analysis, we found this large deal to be too high risk and the asset of insufficient quality to justify the heady price offered. We took the opportunity to lock in gains made over recent years.
Income
There are two factors that have dampened the Company's income in this year; i) annualisation of changes that were made to the portfolio in 2020 that prioritised lower yielding, dividend growers over higher yielding alternatives, and ii) a handful of companies impacted by the pandemic lockdowns have yet to return to paying dividends. Both factors are gradually receding; many of the portfolio changes have now been in place for 12 months and more companies are restarting dividends, leaving only three holdings still with suspensions. Longer term, the free cash flow and dividend growth embedded within the individual holdings bodes well for the potential income growth of the Company itself.
Responsible Investment
We at Troy have always prioritised the avoidance of permanent capital loss, investing for the long term and emphasising quality within our investment process. It has become increasingly clear to us that companies that do not prioritise a strong corporate governance culture and which are not proactively managing their social impact and environmental footprint, will suffer from greater regulation combined with declining support from customers and shareholders. This is why we integrate the fundamental analysis of ESG factors and stewardship within our investment process. ESG research and our stewardship activity is conducted by members of the investment team. At Troy, we consider ESG risks and opportunities in the context of the wider investment thesis and therefore believe that the investment team is best placed to conduct this research and integrate it into decisions related to the construction of the Company's portfolio. Troy has been a signatory to the United Nations' Principles for Responsible Investment since 2016 and has scored "A+" in the most recent assessment for Listed Equity - Incorporation and "A" for Listed Equity - Active Ownership. Troy's Chief Investment Officer in conjunction with our Head of Responsible Investment are responsible for the development and integration of the Responsible Investment & Stewardship Policy, further details of which can be found in the Annual Report.
Investment Outlook
The short-term economic outlook is particularly challenging to read, such is the distorted nature of the global economy as it re-emerges from the pandemic. Whilst a more persistent inflationary backdrop cannot be ruled out, there is also a reasonable likelihood that once supply shocks are worked through, inflationary pressures will settle. We are wary about over-extrapolating current data too far into the future.
The coming year could well see the few companies in the portfolio that still have suspended dividends resume payouts. We continue to favour companies capable of sustainable dividend growth over those with high yields. We are confident that this will in time translate to resilient, real dividend growth for share owners of the Company.
Returns over the past year have been disappointing, particularly relative to the highly charged returns achieved elsewhere. However, as Troy, we have been here before. Our investment style tends to lag highly buoyant markets but has better preserved capital and income in more challenging conditions. Given the sharp repricing of risk assets, with recent UK stock market returns concentrated in the most cyclical sectors, we think it is reasonable to expect a broadening of returns going forward, which should be to the Company's benefit.
There are plenty of challenges that companies will face over the medium term, including growth and inflation uncertainties, technological disruption and environmental risks. We favour businesses that will be resilient through the market cycle; able to cope with inflationary spikes or deflationary dips and ultimately grow in a competitive environment. We invest for the long-term in companies capable of real cashflow and dividend growth. We avoid companies with leverage, high cyclicality and heavy capital intensity. We align ourselves to winning businesses with strong management teams. And we pay prices that are reasonable and commensurate for the quality and growth that a business offers. We are confident that the portfolio companies held by the Company will be more valuable in the future and are well placed to deliver resilient dividend growth.
Troy Asset Management Limited
15 November 2021
3. RESULTS & DIVIDENDS
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Financial Highlights |
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|
2021 |
|
Net asset value total return |
|
+10.2% |
|
Share price total return |
|
+9.6% |
|
FTSE All-Share Index total return |
|
+27.9% |
|
Decrease in dividends per share |
|
-29.5% |
|
Dividend yield* |
|
2.6% |
|
Dividends per share+ |
|
1.96p |
|
Ongoing Charges |
|
0.92% |
|
* Dividends per share as a percentage of share price at 30 September 2021 +Dividends per share reflect the years in which they were earned
|
||
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Performance - total return (for the periods to 30 September 2021) |
||||
|
|
One Year |
Three Years |
Five Years |
Ten Years |
|
Share price |
+9.6% |
+8.2% |
+17.6% |
+117.5% |
|
Net asset value per share |
+10.2% |
+8.8% |
+20.1% |
+119.7% |
|
FTSE All-Share Index |
+27.9% |
+9.5% |
+29.8% |
+119.2% |
|
Distribution of Assets and Liabilities |
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|
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|
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Valuation at |
|
|
|
Valuation at |
||
|
|
30 September |
|
|
Appreciation/ |
30 September |
||
|
|
2020 |
Purchases |
Sales |
(depreciation) |
2021 |
||
|
|
£'000 |
% |
£'000 |
£'000 |
£'000 |
£'000 |
% |
|
Listed investments |
|
|
|
|
|
|
|
|
Ordinary shares |
242,316 |
96.3 |
31,274 |
(48,684) |
19,608 |
244,514 |
98.4 |
|
|
______ |
_____ |
________ |
_______ |
________ |
______ |
_____ |
|
Current assets |
9,891 |
3.9 |
|
|
|
5,081 |
2.0 |
|
Current liabilities |
(521) |
(0.2) |
|
|
|
(974) |
(0.4) |
|
|
______ |
_____ |
|
|
|
______ |
_____ |
|
Net assets |
251,686 |
100.0 |
|
|
|
248,621 |
100.0 |
|
|
______ |
_____ |
|
|
|
______ |
_____ |
|
Net asset value per share |
72.60p |
|
|
|
|
77.72p |
|
|
|
______ |
|
|
|
|
______ |
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4. STRATEGIC & DIRECTORS' REPORT EXTRACTS
Performance and Future Development
A review of the business performance, market background, investment activity and portfolio during the year under review, together with the investment outlook, is provided in the Chairman's Statement and the Managers' Review.
Risk Management
The Directors are responsible for supervising the overall management of the Company, whilst the day-to-day management of the Company's assets has been delegated to the Manager. Portfolio exposure has been limited by the guidelines which are detailed within the Investment Strategy section of the Annual Report.
The Board can confirm that the principal risks of the Company, including those which would threaten its business model, future performance, solvency or liquidity, have been robustly assessed for the year ended 30 September 2021. A description of the principal risks and how they are managed is set out below. The risks have not changed during the course of the year.
The COVID-19 pandemic continues to increase the risks faced by the Company in both the investment and operational side of the business. Specific mitigation actions in relation to the impact of COVID-19 are addressed in the relevant categories below.
• Performance risk - The Board is responsible for deciding the investment strategy to fulfil the Company's objective and monitoring the performance of the Manager. An inappropriate strategy or poor execution of strategy might lead to long-term underperformance against the comparator index and the Company's peer group. To manage this risk the Manager provides an explanation of significant stock selection decisions and the rationale for the composition of the investment portfolio. The Board also receives and reviews regular reports showing an analysis of the Company's performance against the FTSE All-Share Index (total return) and its peer group. The impact of the COVID-19 pandemic on the investment strategy has been kept under regular review by the Board.
• Market risk - Market risk arises from uncertainty about the future prices of the Company's investments. The Board monitors and maintains an adequate spread of investments in order to minimise the risks or factors specific to a particular investment or sector, based on the diversification requirements inherent in the Company's investment policy. The guidelines which limit the portfolio exposure are set out in the Investment Strategy in the Annual Report. The underlying risks and potential increased volatility associated with the COVID-19 pandemic, and with global political disruptions, are considered within market risk.
• Resource and operational risk - Like most other investment trusts, the Company has no employees. The Company therefore relies on services provided by third parties and their control systems. Disruption to, or failure of, systems and controls, including cyber-attacks, at the Company's service providers could result in financial and reputational damage to the Company. The Board reviews the performance of its service providers, their internal controls and their compliance with agreements on a regular basis. The operations of the Company's service providers have been subject to rigorous testing during the COVID-19 pandemic, where increased use of out of office working and online communications have been required. To date the operational arrangements have proven robust.
• Regulatory risk - Breach of regulatory rules could lead to the suspension of the Company's London Stock Exchange listing, financial penalties or a qualified audit report. Breach of sections 1158 and 1159 of the Corporation Tax Act 2010 could lead to the Company being subject to tax on capital gains. The Company Secretary monitors the Company's compliance with all relevant regulations and compliance with the principal rules is reviewed by the Directors at each Board meeting.
The Board have considered the Company's solvency and liquidity risk and full disclosure of this is made in note 15 and the viability statement below.
Results and Dividends
The financial statements for the year ended 30 September 2021 appear below. Dividends in respect of the year amounted to 1.96p per share (2020 - 2.78p). The fourth interim dividend of 0.49p per share announced on 16 September 2021 (2020 - fourth interim 0.695p) will be accounted for in the financial year ending on 30 September 2022.
Share Capital
The issued share capital at 30 September 2021 consisted of 319,888,987 Ordinary shares of 25p each and there were 27,623,000 Ordinary shares held in treasury. As at the date of this report the issued share capital consisted of 315,902,487 Ordinary shares of 25p each and there were 31,609,500 Ordinary shares held in treasury. Each holder of Ordinary shares, excluding treasury shares, is entitled to one vote on a show of hands and, on a poll, to one vote for every Ordinary share held.
Management Arrangements
The Company appointed Juniper Partners Limited (previously called PATAC Limited), as its Alternative Investment Fund Manager ('AIFM') on 22 July 2014. With effect from that date, the AIFM delegated the portfolio management activities relating to the Company back to Troy Asset Management Limited ('Troy' or the 'Manager') pursuant to a delegation agreement and Troy continues to provide portfolio management services to the Company. These arrangements are fully compliant with the AIFMD.
The AIFM services are provided to the Company by Juniper for a fee of 0.015% of the Company's net assets per annum, subject to a minimum fee of £60,000 per annum. Troy reduce their investment management fee by an equal amount so that there is no overall change to the basis of the management fee incurred by the Company.
The other terms of the AIFM's appointment are similar to those applying to Troy under the investment management delegation agreement detailed below.
Investment Management Delegation Agreement
Investment management services have been provided to the Company by Troy since 1 August 2009. The current fee is at an annual rate of 0.65% of the Company's net assets.
Company Secretary
Juniper Partners Limited provides company secretarial, accounting and administration services to the Company. Juniper Partners receives a fee for these services of £100,000 per annum plus an amount equal to 0.1% of the Company's net assets between £50 million and £100 million, 0.03% of the Company's net assets between £100 million and £250 million and 0.02% of the Company's net assets between £250 million up to and including £1,000 million. The fixed fee element of the fee is adjusted annually by the increase in the Consumer Price Index.
Depositary
J.P. Morgan Europe Ltd is the Company's Depositary, with responsibilities including cash monitoring, safe keeping of the Company's financial instruments and monitoring the Company's compliance with investment limits and leverage requirements. The Depositary has delegated the custody function to J.P. Morgan Chase Bank N.A.
Borrowings
The Company had a £20 million unsecured floating rate revolving credit facility with ING Luxembourg S.A that expired on 24 April 2021. The facility was not utilised in the period up to expiry.
Independent Auditors
Following a tender process in 2015, PricewaterhouseCoopers LLP were appointed the Company's Auditors in 2016.
Going Concern
The Directors have undertaken a rigorous review of the Company's ability to continue as a going concern. This review included consideration of the Company's investment objective, its principal risks, including those relating to COVID-19, the nature and liquidity of the portfolio, current liabilities and expenditure forecasts.
The Company's investments consist mainly of readily realisable securities which can be sold to maintain adequate cash balances to meet expected cash flows. In assessing the Company's ability to meet its liabilities as they fall due, the Directors took into account the uncertain economic outlook caused by the ongoing COVID-19 pandemic and reviewed sensitivities around this. The Directors also considered ongoing investor interest in the continuation of the Company, looking specifically at feedback from meetings and conversations with Shareholders by the Company's advisers, and the operation of the DCM, which the Directors believe enhances the Company's appeal to investors.
Based on their assessment and considerations, the Directors believe it is appropriate to continue to adopt the going concern basis in preparing the financial statements and the Company has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operation for at least twelve months from the date of this report.
Viability Statement
The Directors have assessed the viability of the Company over a three-year period from the date that the Annual Report is due to be approved by Shareholders.
The Directors have identified the following factors as potential contributors to ongoing viability:
· The principal risks and uncertainties detailed above and the mitigating controls in place, including the ongoing impact of COVID-19 and the Company's operational resilience;
· The ongoing relevance of the Company's investment objective in the current environment;
· The level of current and historic ongoing charges incurred by the Company;
· The utilisation quantum of the discount control mechanism;
· The level of income generated by the Company; and,
· The liquidity of the Company's portfolio.
The Company is fully invested in liquid assets, either in listed securities or cash. The nature of these mean that even in a severe market downturn the Company would be able to convert, in a relatively short period of time, the portfolio into cash sufficient to meet the Company's operating costs which run at approximately 1% per annum of net assets. This includes both fixed and variable costs, the largest single element of which is the variable management fee which is based on the net asset value of the Company. In addition, the Company currently has no gearing. Based on these facts the Board have concluded that even in exceptionally stressed operating conditions, the Company would easily be able to meet its ongoing operating costs as they fall due.
The Directors have determined that a three-year period is an appropriate period over which to provide its viability statement. They consider that three years is a reasonable time horizon to assess the continuing viability of the Company and a suitable period over which to measure the performance of the Company. This three-year period remains consistent with the planning horizon used by the Company in managing its activities.
Based on the foregoing, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the three-year period to the AGM in 2025.
Discount Policy
The Company's discount policy is to ensure that the Ordinary shares trade at close to net asset value through a combination of share buy-backs and the issue of new Ordinary shares at a premium to net asset value where demand exceeds supply.
This discount control mechanism is operated by Juniper Partners. The fee for this service is £30,000 per annum plus the lower of (i) a charge of £250 per transaction; and (ii) a commission of 0.1% of the aggregate proceeds of any transaction undertaken in accordance with the discount control mechanism. The fixed fee element of the fee is adjusted annually by the increase in the Consumer Price Index. The fee is charged to the share premium account.
The Directors will continue to seek the renewal of the Company's authority to buy-back Ordinary shares annually and at other times should this prove necessary. From the authority granted at the January 2021 AGM, the Company, at 30 September 2021, had the remaining authority to buy-back 28,195,885 Ordinary shares. Any buy-back of Ordinary shares will be made subject to the Companies Act 2006 and within guidelines established from time to time by the Board and the making and timing of any buy-backs will be at the absolute discretion of the Board. The Directors will be authorised to cancel any Ordinary shares purchased under such authority or to hold them in treasury. Purchases of Ordinary shares will only be made through the market for cash at prices below the prevailing net asset value of the Ordinary shares. Such purchases will also be made only in accordance with the rules of the Financial Conduct Authority which provide that the price to be paid must not be less than the nominal value of an Ordinary share nor more than the higher of (a) 5% above the average of the middle market quotations for the Ordinary shares for the five business days before the purchase is made and (b) the higher of the price of the last independent trade and the highest current independent bid relating to an Ordinary share on the trading venue where the purchase is carried out.
It is the intention of the Directors that the share buy-back authority is used to purchase Ordinary shares if the middle market price for an Ordinary share is below the net asset value per Ordinary share of the Company (taking into account any rights to which the Ordinary shares are trading ''ex''). However, nothing in this discount policy will require the Directors to take any steps that would require the Company to make a tender offer for its shares or to publish a prospectus. Notwithstanding this discount policy, there is no guarantee that the Ordinary shares will trade at close to the net asset value per Ordinary share. Shareholders should note that this discount policy could lead to a reduction in the size of the Company over time.
By Order of the Board
Juniper Partners Limited
Secretary
15 November 2021
5. STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and 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 international accounting standards in conformity with the requirements of the Companies Act 2006.
Under company law, the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of 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 international accounting standards in conformity with the requirements of the Companies Act 2006 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.
The Directors consider that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable, and provide the information necessary for Shareholders to assess the Company's position and performance, business model and strategy. In reaching this conclusion the Directors have assumed that the reader of the Annual Report and Financial Statements would have a reasonable level of knowledge of the investment industry and of investment trusts in particular.
The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report, a Directors' Report, a Corporate Governance Statement and a Directors' Remuneration Report that comply with that law and those regulations.
The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
Directors' confirmations
Each of the Directors confirm that, to the best of their knowledge:
• the Company's financial statements, which have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006, give a true and fair view of the assets, liabilities, financial position and profit of the Company; and
• the Strategic Report and the Directors' Report include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.
For and on behalf of Troy Income & Growth Trust plc
Jann Brown
Chair of the Audit Committee
15 November 2021
TROY INCOME & GROWTH TRUST PLC
STATEMENT OF COMPREHENSIVE INCOME
|
|
|
Year ended 30 September 2021 |
Year ended 30 September 2020 |
||||
|
|
|
Revenue |
Capital |
|
Revenue |
Capital |
|
|
|
Note |
return |
return |
Total |
return |
return |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Capital |
|
|
|
|
|
|
|
|
Gains/(losses) on investments held at fair value |
9 |
- |
19,651 |
19,651 |
- |
(32,210) |
(32,210) |
|
Net foreign currency (losses)/gains |
|
- |
(11) |
(11) |
- |
10 |
10 |
|
Revenue |
2 |
|
|
|
|
|
|
|
Income from listed investments |
|
6,969 |
- |
6,969 |
8,212 |
- |
8,212 |
|
Other income |
|
- |
- |
- |
2 |
- |
2 |
|
|
|
______ |
_______ |
______ |
______ |
_______ |
______ |
|
|
|
6,969 |
19,640 |
26,609 |
8,214 |
(32,200) |
(23,986) |
|
|
|
______ |
_______ |
______ |
______ |
_______ |
______ |
|
Expenses |
|
|
|
|
|
|
|
|
Investment management fees |
3 |
(564) |
(1,047) |
(1,611) |
(574) |
(1,066) |
(1,640) |
|
Other administrative expenses |
4 |
(649) |
- |
(649) |
(554) |
- |
(554) |
|
Finance costs of borrowing |
5 |
(10) |
(18) |
(28) |
(18) |
(32) |
(50) |
|
|
|
______ |
_______ |
______ |
______ |
_______ |
______ |
|
Profit/(loss) before taxation |
|
5,746 |
18,575 |
24,321 |
7,068 |
(33,298) |
(26,230) |
|
Taxation |
6 |
(114) |
- |
(114) |
(53) |
- |
(53) |
|
|
|
______ |
_______ |
______ |
______ |
_______ |
______ |
|
Total comprehensive income/(expense) |
|
5,632 |
18,575 |
24,207 |
7,015 |
(33,298) |
(26,283) |
|
|
|
______ |
_______ |
______ |
______ |
_______ |
______ |
|
Earnings per Ordinary share (pence) |
8 |
1.68 |
5.54 |
7.22 |
2.11 |
(10.04) |
(7.93) |
|
|
|
______ |
_______ |
______ |
______ |
_______ |
______ |
The total column of this statement represents the Statement of Comprehensive Income, prepared in accordance with international accounting standard in conformity with the requirements of the Companies Act 2006. The supplementary revenue return and capital return columns are both prepared as explained in the accounting policies. All items in the above statement derive from continuing operations.
No operations were acquired or discontinued during the year.
The Directors are of the opinion that the Company is engaged in a single segment of business, being investment in predominantly UK equities.
The accompanying notes are an integral part of these financial statements.
TROY INCOME & GROWTH TRUST PLC
STATEMENT OF FINANCIAL POSITION
|
|
|
|||||
|
|
|
|
|
As at |
As at |
|
|
|
|
|
|
30 September |
30 September |
|
|
|
|
|
|
2021 |
2020 |
|
|
|
Note |
|
|
£'000 |
£'000 |
|
|
Non-current assets |
|
|
|
|
|
|
|
Investments in ordinary shares |
|
|
|
244,514 |
242,316 |
|
|
|
|
|
|
______ |
______ |
|
|
Investments held at fair value through profit or loss |
9 |
|
|
244,514 |
242,316 |
|
|
|
|
|
|
______ |
______ |
|
|
Current assets |
|
|
|
|
|
|
|
Accrued income and prepayments |
|
|
|
968 |
861 |
|
|
Trade and other receivables |
|
|
|
162 |
474 |
|
|
Cash and cash equivalents |
|
|
|
3,951 |
8,556 |
|
|
|
|
|
|
______ |
______ |
|
|
Total current assets |
|
|
|
5,081 |
9,891 |
|
|
|
|
|
|
______ |
______ |
|
|
Total assets |
|
|
|
249,595 |
252,207 |
|
|
Current liabilities |
|
|
|
|
|
|
|
Trade and other payables |
|
|
|
(974) |
(521) |
|
|
|
|
|
|
______ |
______ |
|
|
Total current liabilities |
|
|
|
(974) |
(521) |
|
|
|
|
|
|
______ |
______ |
|
|
Net assets |
|
|
|
248,621 |
251,686 |
|
|
|
|
|
|
______ |
______ |
|
|
Issued capital and reserves attributable to equity holders |
||||||
|
Called-up share capital |
10 |
|
|
86,878 |
86,878 |
|
|
Share premium account |
11 |
|
|
53,909 |
53,960 |
|
|
Special reserves |
12 |
|
|
38,890 |
60,366 |
|
|
Capital reserve - unrealised |
13 |
|
|
54,428 |
41,678 |
|
|
Capital reserve - realised |
13 |
|
|
8,424 |
2,599 |
|
|
Revenue reserve |
14 |
|
|
6,092 |
6,205 |
|
|
|
|
|
|
______ |
______ |
|
|
Total equity |
|
|
|
248,621 |
251,686 |
|
|
|
|
|
|
______ |
______ |
|
|
Net asset value per Ordinary share (pence) |
8 |
|
|
77.72 |
72.60 |
|
|
|
|
|
|
______ |
______ |
|
TROY INCOME & GROWTH TRUST PLC
STATEMENT OF CHANGES IN EQUITY
|
|
|
||||||||||||||
|
For year ended 30 September 2021 |
|
|
|
|
|
|
|||||||||
|
|
Called-up share |
Share premium |
Special |
Capital reserve- |
Capital reserve- |
Revenue |
Total |
|
|||||||
|
|
capital |
account |
reserves |
unrealised |
realised |
reserve |
equity |
|
|||||||
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|||||||
|
Balance at 1 October 2020 |
86,878 |
53,960 |
60,366 |
41,678 |
2,599 |
6,205 |
251,686 |
|
|||||||
|
Profit and total comprehensive income for the year |
- |
- |
- |
12,750 |
5,825 |
5,632 |
24,207 |
|
|||||||
|
Equity dividends (note 7) |
- |
- |
(1,598) |
- |
- |
(5,745) |
(7,343) |
|
|||||||
|
Shares bought back into treasury |
- |
- |
(20,315) |
- |
- |
- |
(20,315) |
|
|||||||
|
Shares issued from treasury |
- |
- |
437 |
- |
- |
- |
437 |
|
|||||||
|
Discount control costs |
- |
(51) |
- |
- |
- |
- |
(51) |
|
|||||||
|
|
______ |
______ |
______ |
______ |
______ |
______ |
______ |
|
|||||||
|
Balance at 30 September 2021 |
86,878 |
53,909 |
38,890 |
54,428 |
8,424 |
6,092 |
248,621 |
|
|||||||
|
|
______ |
______ |
______ |
______ |
______ |
______ |
______ |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|||||||
|
Balance at 1 October 2019 |
73,495 |
25,166 |
63,397 |
60,217 |
17,358 |
5,828 |
245,461 |
|
|||||||
|
(Loss)/profit and total comprehensive income for the year |
- |
- |
- |
(18,539) |
(14,759) |
7,015 |
(26,283) |
|
|||||||
|
Equity dividends (note 7) |
- |
- |
(2,411) |
- |
- |
(6,638) |
(9,049) |
|
|||||||
|
Shares bought back into treasury |
- |
- |
(620) |
- |
- |
- |
(620) |
|
|||||||
|
New shares issued |
13,383 |
28,854 |
- |
- |
- |
- |
42,237 |
|
|||||||
|
Discount control costs |
- |
(60) |
- |
- |
- |
- |
(60) |
|
|||||||
|
|
______ |
______ |
______ |
______ |
______ |
______ |
______ |
|
|||||||
|
Balance at 30 September 2020 |
86,878 |
53,960 |
60,366 |
41,678 |
2,599 |
6,205 |
251,686 |
|
|||||||
|
|
______ |
______ |
______ |
______ |
______ |
______ |
______ |
|
|||||||
The revenue reserve, special reserves and capital reserve - realised are distributable. The full amount of each of these reserves is available for distribution.
The capital reserve has been split between realised and unrealised on the Statement of Financial Position and the Statement of Changes in Equity to distinguish between the element of the reserve that is distributable (realised) and the element of the reserve that is not distributable (unrealised).
TROY INCOME & GROWTH TRUST PLC
CASH FLOW STATEMENT
|
|
Year ended |
Year ended |
||
|
|
30 September 2021 |
30 September 2020 |
||
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Cash flows from operating activities |
|
|
|
|
|
Investment income received |
6,858 |
|
8,157 |
|
|
Administrative expenses paid |
(2,264) |
|
(2,226) |
|
|
|
________ |
|
________ |
|
|
Cash generated from operations (note 19 (a)) |
|
4,594 |
|
5,931 |
|
Finance costs paid |
|
(28) |
|
(50) |
|
Taxation |
|
(116) |
|
(33) |
|
|
|
________ |
|
________ |
|
Net cash inflows from operating activities |
|
4,450 |
|
5,848 |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
Purchases of investments |
(31,177) |
|
(87,855) |
|
|
Sales of investments |
48,995 |
|
53,856 |
|
|
Capital distributions |
43 |
|
- |
|
|
|
________ |
|
________ |
|
|
Net cash inflow/(outflow) from investing activities |
|
17,861 |
|
(33,999) |
|
|
|
________ |
|
________ |
|
Net cash inflow/(outflow) before financing |
|
22,311 |
|
(28,151) |
|
Cash flows from financing activities |
|
|
|
|
|
Proceeds of issue of shares |
437 |
|
42,339 |
|
|
Cost of share buy backs |
(19,948) |
|
(617) |
|
|
Dividends paid |
(7,343) |
|
(9,049) |
|
|
Costs incurred on issue of shares |
(51) |
|
(160) |
|
|
|
________ |
|
________ |
|
|
Net cash (outflow)/inflow from financing activities |
|
(26,905) |
|
32,513 |
|
|
|
________ |
|
________ |
|
Net (decrease)/increase in cash and short term deposits (note 19(b)) |
|
(4,594) |
|
4,362 |
|
Cash and cash equivalents at the start of the year |
|
8,556 |
|
4,184 |
|
Effect of foreign exchange rate changes |
|
(11) |
|
10 |
|
|
|
________ |
|
________ |
|
Cash and cash equivalents at the end of the year |
|
3,951 |
|
8,556 |
|
|
|
________ |
|
________ |
TROY INCOME & GROWTH TRUST PLC
YEAR ENDED 30 SEPTEMBER 2021
|
1. |
Accounting Policies |
|
|
|
|
(a) |
Basis of accounting |
|
|
|
|
The financial statements of the Company have been prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The financial statements have been prepared on a going concern basis and under the historical cost convention, as modified by the revaluation of financial assets and financial liabilities held at fair value through profit and loss. The financial statements are presented in Sterling which is regarded as the functional currency and all values are rounded to the nearest thousand pounds (£'000) except where otherwise indicated. The principal accounting policies adopted are set out below. These policies have been applied consistently throughout the current and prior year. Where presentational guidance set out in the Statement of Recommended Practice ('SORP') 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (issued in April 2021) is consistent with the requirements of IFRS, the Directors have sought to prepare the financial statements on a basis compliant with the recommendations of the SORP. In order better to reflect the activities of an investment trust company and in accordance with guidance issued by the AIC, supplementary information which analyses the Statement of Comprehensive Income between items of a revenue and capital nature has been presented alongside the Statement of Comprehensive Income. Additionally, the net revenue of the Company is the measure the Directors believe appropriate in assessing the Company's compliance with certain requirements set out in sections 1158 and 1159 of the Corporation Tax Act 2010. The Directors confirm that none of the following new standards or amendments to existing standards, effective for accounting periods beginning on or after 1 January 2020, have materially affected the Company's financial statements:
|
|
|
|
|
- Amendments to References to the Conceptual Framework in IFRS Standards. - Amendments to IFRS 7, IFRS 9 and IAS 39 - Financial Instruments. - Amendments to IAS 1 and IAS 8, regarding the definition of materiality. |
|
|
|
|
The Directors do not anticipate the adoption of the following standards or amendments to existing standards, effective for accounting periods beginning on or after 1 January 2021 and thereafter, will have a material effect on the Company's financial statements: |
|
|
|
|
- Amendments to IAS 1, regarding classification of liabilities and disclosure of accounting policies. - Amendments to IAS 8, regarding definition of accounting estimates. - Amendments to IAS 39, IFRS 4,7,9 and 16, regarding Interest Rate Benchmark Reform. - Amendments to IFRS 3 regarding reference to the Conceptual Framework. - Amendments to IFRS 4 regarding extension of IFRS 9 deferral. |
|
|
|
|
The Company early adopted the amendment to IFRS 3 - Business Combinations in the year ended 30 September 2020. The amendment adds an optional concentration test that permits a simplified assessment of whether an acquired set of activities and assets is not a business. During the year ended 30 September 2020, the concentration test was applied to the merger with Cameron Investors Trust plc, which was deemed to be an asset acquisition rather than a business combination.
|
|
|
|
(b) |
Investments - Securities held at Fair Value |
|
|
|
|
Investments are recognised or derecognised on the trade date where a purchase or sale is under a contract whose terms require delivery within the timeframe established by the market concerned, and are initially measured at fair value. |
|
|
|
|
As the Company's business is investing in financial assets with a view to profiting from their total return in the form of interest, dividends or increases in fair value, listed equities and fixed interest securities are designated as fair value through profit or loss on initial recognition. All investments designated upon initial recognition as held at fair value through profit or loss are measured at subsequent reporting dates at their fair value, which is the bid price as at close of business on the Balance Sheet date. |
|
|
|
|
Gains and losses arising from the changes in fair value are included in net profit or loss for the period as a capital item. Expenses which are incidental to the acquisition and disposal of investments are treated as capital costs. |
|
|
|
(c) |
Income |
|
|
|
|
Dividend income from equity investments including preference shares which have a discretionary dividend is recognised when the Shareholders' rights to receive payment has been established, normally the ex-dividend date. Underwriting commission is taken to revenue on a receipts basis. |
|
|
|
(d) |
Expenses |
|
|
|
|
All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the Statement of Comprehensive Income, all expenses have been presented as revenue items except those where a connection with the maintenance or enhancement of the value of the investments held can be demonstrated. Accordingly the investment management fee and finance costs have been allocated 35% to revenue and 65% to capital. |
|
|
|
(e) |
Bank borrowings |
|
|
|
|
Interest-bearing bank loans and overdrafts are initially recognised at cost, being the fair value of the consideration received, net of any issue expenses. After initial recognition, all interest bearing loans and overdrafts are subsequently measured at amortised cost using the effective interest rate method. Amortised cost is calculated by taking into account any arrangement costs and any discount or premium on settlement. |
|
|
|
(f) |
Taxation |
|
|
|
|
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the Balance Sheet date. |
|
|
|
|
The allocation method used to calculate tax relief on expenses presented against capital returns is the 'marginal basis'. Under this basis if taxable income is not capable of being offset entirely by expenses presented in revenue then unutilised expenses arising in capital will be set against income with an amount based on current tax rates charged against income and credited to capital. |
|
|
|
|
Deferred tax is provided in full on temporary differences which result in an obligation at the Balance Sheet date to pay more tax, or a right to pay less tax, at a future date at rates expected to apply when they crystallise, based on current tax rates and law. Temporary differences arise from the inclusion of items of income and expenditure in taxation computations in periods different from those in which they are included in financial statements. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that they will be recovered. |
|
|
|
(g) |
Foreign currency |
|
|
|
|
Transactions denominated in foreign currencies are recorded at the actual exchange rate as at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the year end are reported at fair value by using the rate of exchange prevailing at the year end. The currencies to which the Company was exposed were Swiss Francs and US Dollars. |
|
|
|
|
Forward currency contracts are classified as investments held at fair value through profit or loss and are reported at fair value at the year end by using the forward rate of exchange prevailing at the year end. |
|
|
|
|
Any gain or loss arising from a movement in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in the Statement of Comprehensive Income as a revenue or capital item depending on the nature of the gain or loss. |
|
|
|
(h) |
Cash and cash equivalents |
|
|
|
|
Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments within three months of maturity that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value.
|
|
|
|
(i) |
Use of judgements and estimates |
|
|
|
|
The preparation of financial statements require the Company to make judgements, estimates and assumptions that affect items reported in the Statement of Financial Position and Statement of Comprehensive Income and the disclosure of contingent assets and liabilities at the date of the financial statements. Although these judgements and estimates are based on the Directors' best knowledge of current facts, circumstances and, to some extent, future events and actions, the Company's actual results may ultimately differ from those estimates. There were no material accounting judgements or estimates in the current year. |
|
|
|
(j) |
Issue and repurchase of Ordinary shares and associated costs |
|
|
|
|
The proceeds from the issue of new Ordinary shares (including those relating to the sale of shares out of treasury) and the aggregate cost of repurchasing Ordinary shares (including those to be held in treasury) are taken directly to equity and dealt with in the Statement of Changes in Equity. Issue costs incurred in respect of shares sold out of treasury are offset against the proceeds received and dealt with in the special reserves. Share issues and repurchase transactions are accounted for on a trade date basis. |
|
|
|
|
2021 |
2020 |
|
2. |
Revenue |
£'000 |
£'000 |
|
|
Income from listed investments |
|
|
|
|
UK dividend income |
6,168 |
7,325 |
|
|
Income from overseas investments |
801 |
887 |
|
|
|
________ |
________ |
|
|
|
6,969 |
8,212 |
|
|
|
________ |
________ |
|
|
Other income |
|
|
|
|
Deposit Interest |
- |
2 |
|
|
|
________ |
________ |
|
|
Total income |
6,969 |
8,214 |
|
|
|
________ |
________ |
|
|
The Company received a capital special dividend of £43,000 from Admiral Group in the year ended 30 September 2021 (2020 - £nil).
|
||
|
3. |
Investment management fees |
|
|||||||
|
|
Troy Asset Management Limited ('Troy') was appointed as the Manager on 31 July 2009. The investment management fee is paid at an annual rate of 0.65% of the Company's net assets. The fee is calculated monthly and paid quarterly. Juniper Partners Limited (previously PATAC Limited) was appointed as the Company's AIFM with effect on 22 July 2014. The AIFM fee is 0.015% of the Company's net assets per annum, subject to a minimum fee of £60,000 per annum. From the same date, the portfolio management activities were delegated to Troy. The commercial terms of the delegation agreement are the same as the previous investment management agreement except that the investment management fee paid to Troy is reduced by the fees incurred for the services of the AIFM. The fee is allocated 35% to revenue and 65% to capital. |
|
|||||||
|
|
|
2021 |
2020 |
||||||
|
|
|
Revenue |
Capital |
Revenue |
Revenue |
Capital |
|
||
|
|
|
return |
return |
return |
return |
return |
Total |
||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||
|
|
Investment management fees paid to Troy |
543 |
1,008 |
1,551 |
553 |
1,027 |
1,580 |
||
|
|
AIFM fee paid to Juniper |
21 |
39 |
60 |
21 |
39 |
60 |
||
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
||
|
|
Total investment management fee |
564 |
1,047 |
1,611 |
574 |
1,066 |
1,640 |
||
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
||
|
|
|
2021 |
2020 |
|
4. |
Other administrative expenses |
£'000 |
£'000 |
|
|
Directors' remuneration - fees as Directors |
117 |
112 |
|
|
Secretarial fees |
178 |
152 |
|
|
Fees payable to auditors |
|
|
|
|
- fees payable to the Company's auditors for the audit of the annual financial statements {a} |
41 |
35 |
|
|
Other management expenses |
313 |
255 |
|
|
|
_______ |
_______ |
|
|
|
649 |
554 |
|
|
|
_______ |
_______ |
|
|
{a} Includes irrecoverable VAT of £7,000 (2020 - £6,000). |
||
|
|
The Company had no employees during the year (2020 - nil). No pension contributions were paid for Directors (2020 - £nil). |
||
|
|
|
2021 |
2020 |
|||||||||||
|
|
|
Revenue |
Capital |
|
Revenue |
Capital |
|
|||||||
|
|
|
return |
return |
Total |
return |
return |
Total |
|||||||
|
5. |
Finance costs of borrowing |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||||||
|
|
Bank revolving credit facility |
10 |
18 |
28 |
18 |
32 |
50 |
|||||||
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|||||||
|
|
The Company had a two year revolving credit facility with ING Luxembourg S.A. which expired on 24 April 2021. The facility was not drawn down at any point during the two years to 24 April 2021.
|
|||||||||||||
|
|
|
|
|
|
|
|
|
|||||||
|
|
|
2021 |
2020 |
|||||||||||
|
|
|
Revenue |
Capital |
|
Revenue |
Capital |
|
|||||||
|
|
|
return |
return |
Total |
return |
return |
Total |
|||||||
|
6. |
Taxation |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||||||
|
|
Irrecoverable overseas tax |
114 |
- |
114 |
53 |
- |
53 |
|||||||
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|||||||
|
|
The following table is a reconciliation of the total taxation charge to the charges or credits which would arise if all ordinary activities were taxed at the standard UK corporation tax rate of 19.0% (2020 - 19.0%):
|
|||||||||||||
|
|
|
2021 |
2020 |
|||||||||||
|
|
|
Revenue |
Capital |
|
Revenue |
Capital |
|
|||||||
|
|
|
return |
return |
Total |
return |
return |
Total |
|||||||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|||||||
|
|
Profit/(loss) on ordinary activities before taxation |
5,746 |
18,575 |
24,321 |
7,068 |
(33,298) |
(26,230) |
|||||||
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|||||||
|
|
Taxation of return on ordinary activities at the standard rate of corporation tax |
1,092 |
3,529 |
4,621 |
1,343 |
(6,327) |
(4,984) |
|||||||
|
|
Effects of: |
|
|
|
|
|
|
|||||||
|
|
UK dividend income not liable to further tax |
(1,071) |
- |
(1,071) |
(1,275) |
- |
(1,275) |
|||||||
|
|
Overseas dividend income not liable to further tax |
(152) |
- |
(152) |
(168) |
- |
(168) |
|||||||
|
|
Capital (profits)/losses not taxable |
- |
(3,732) |
(3,732) |
- |
6,118 |
6,118 |
|||||||
|
|
Excess management expenses and loan relationships |
131 |
203 |
334 |
100 |
209 |
309 |
|||||||
|
|
Overseas withholding tax suffered |
114 |
- |
114 |
53 |
- |
53 |
|||||||
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|||||||
|
|
Total taxation charge for the year |
114 |
- |
114 |
53 |
- |
53 |
|||||||
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|||||||
|
|
At 30 September 2021, the Company had surplus management expenses and unutilised non-trade relationship deficits of £15,431,000 (2020 - £13,676,000) with a tax value of £2,932,000 (2020 - £2,598,000) to carry forward. No deferred tax asset has been recognised in the current or prior year because it is considered too uncertain that there will be suitable taxable profits from which the future reversal of the deferred tax asset could be deducted.
|
|||||||||||||
|
|
|
|
|
|
||||||||||
|
|
|
2021 |
2020 |
|
||||||||||
|
7. |
Dividends on equity shares |
£'000 |
£'000 |
|
||||||||||
|
|
Paid from revenue: |
|
|
|
||||||||||
|
|
Fourth interim dividend for the year ended 30 September 2019 of 0.695p per share |
- |
2,065 |
|
||||||||||
|
|
Fourth interim dividend for the year ended 30 September 2020 of 0.695p per share |
2,409 |
- |
|
||||||||||
|
|
First and second interim dividends for the year ended 30 September 2021 totalling 0.98p (2020 - 1.39p) per share |
3,336 |
4,573 |
|
||||||||||
|
|
|
________ |
________ |
|
||||||||||
|
|
Total paid from revenue |
5,745 |
6,638 |
|
||||||||||
|
|
|
|
|
|
||||||||||
|
|
Paid from distributable capital reserves: |
|
|
|
||||||||||
|
|
Third interim dividend for year ended 30 September 2021 of 0.49p (2020 - 0.695p) |
1,598 |
2,411 |
|
||||||||||
|
|
|
________ |
________ |
|
||||||||||
|
|
Total |
7,343 |
9,049 |
|
||||||||||
|
|
|
________ |
________ |
|
||||||||||
|
|
The fourth interim dividend of 0.49p per share, declared on 16 September 2021 and paid on 22 October 2021, has not been included as a liability in these financial statements. |
|
||||||||||||
|
|
|
|
||||||||||||
|
|
We also set out below the total dividend payable in respect of the financial year, which is the basis on which the requirements of Section 1159 of the Corporation Tax Act 2010 are considered.
|
|
||||||||||||
|
|
|
2021 |
2020 |
|
||||||||||
|
|
|
£'000 |
£'000 |
|
||||||||||
|
|
Paid and payable from revenue: |
|
|
|
||||||||||
|
|
First and second interim dividend for the year ended 30 September 2021 totalling 0.98p (2020 - 1.39p) per share |
3,336 |
4,573 |
|
||||||||||
|
|
Fourth interim dividend for the year ended 30 September 2021 of 0.49p (2020 - 0.695p) per share |
1,565 |
2,409 |
|
||||||||||
|
|
|
________ |
________ |
|
||||||||||
|
|
Total paid and payable from revenue |
4,901 |
6,982 |
|
||||||||||
|
|
|
|
|
|
||||||||||
|
|
Paid from distributable capital reserves: |
|
|
|
||||||||||
|
|
Third interim dividend for the year ended 30 September 2021 of 0.49p (2020 - 0.695p) |
1,598 |
2,411 |
|
||||||||||
|
|
|
________ |
________ |
|
||||||||||
|
|
Total |
6,499 |
9,393 |
|
||||||||||
|
|
|
________ |
________ |
|
||||||||||
|
|
|
2021 |
2020 |
|
||||||||||
|
8. |
Return and net asset value per share |
£'000 |
£'000 |
|
||||||||||
|
|
The returns per share are based on the following figures: |
|
|
|
||||||||||
|
|
Revenue return |
5,632 |
7,015 |
|
||||||||||
|
|
Capital return |
18,575 |
(33,298) |
|
||||||||||
|
|
|
________ |
________ |
|
||||||||||
|
|
Total |
24,207 |
(26,283) |
|
||||||||||
|
|
|
________ |
________ |
|
||||||||||
|
|
Weighted average number of Ordinary shares |
335,250,510 |
331,616,651 |
|
||||||||||
|
|
|
__________ |
__________ |
|
||||||||||
|
|
The net asset value per share is based on net assets attributable to shareholders of £248,621,000 (2020 - £251,686,000) and on 319,888,987 (2020 - 346,652,987) Ordinary shares in issue at the year end. |
|
||||||||||||
|
|
|
|
|
|
|
|
2021 |
2020 |
|
9. |
Investments held at fair value through profit or loss |
£'000 |
£'000 |
|
|
Listed on recognised stock exchanges: |
|
|
|
|
United Kingdom |
203,387 |
206,598 |
|
|
Overseas |
41,127 |
35,718 |
|
|
|
________ |
________ |
|
|
Total investments |
244,514 |
242,316 |
|
|
|
________ |
________ |
|
|
|
2021 |
2020 |
|
|
|
£'000 |
£'000 |
|
|
Opening book cost |
200,638 |
180,784 |
|
|
Opening fair value gains on investments held |
41,678 |
60,217 |
|
|
|
________ |
________ |
|
|
Opening fair value |
242,316 |
241,001 |
|
|
Purchases |
31,274 |
87,855 |
|
|
Sales - proceeds |
(48,684) |
(54,330) |
|
|
Sales - net gains/(losses) on sales |
6,858 |
(13,671) |
|
|
Movement in fair value during the year |
12,750 |
(18,539) |
|
|
|
________ |
________ |
|
|
Closing fair value |
244,514 |
242,316 |
|
|
|
________ |
________ |
|
|
Closing book cost |
190,086 |
200,638 |
|
|
Closing fair value gains on investments held |
54,428 |
41,678 |
|
|
|
________ |
________ |
|
|
Closing fair value |
244,514 |
242,316 |
|
|
|
________ |
________ |
|
|
All investments are categorised as held at fair value through profit or loss, and were designated as such upon initial recognition. |
||
|
|
The total transaction costs on purchases was £132,000 (2020 - £266,000) and on sales £17,000 (2020 - £18,000). |
||
|
|
|
|
|
|
|
|
2021 |
2020 |
|
|
Gains/(losses) on investments held at fair value |
£'000 |
£'000 |
|
|
Net gains/(losses) on sales |
6,858 |
(13,671) |
|
|
Movement in fair value in investment holdings Capital distributions |
12,750 43 |
(18,539) - |
|
|
|
________ |
________ |
|
|
|
19,651 |
(32,210) |
|
|
|
________ |
________ |
|
|
|
Ordinary shares of 25p each |
|
|
10. |
Called-up share capital |
Number |
£'000 |
|
|
Allotted, called up and fully paid |
|
|
|
|
At 30 September 2021 |
319,888,987 |
79,972 |
|
|
Held in treasury |
27,623,000 |
6,906 |
|
|
|
__________ |
__________ |
|
|
|
347,511,987 |
86,878 |
|
|
|
__________ |
__________ |
|
|
Allotted, called up and fully paid |
|
|
|
|
At 30 September 2020 |
346,652,987 |
86,663 |
|
|
Held in treasury |
859,000 |
215 |
|
|
|
__________ |
__________ |
|
|
|
347,511,987 |
86,878 |
|
|
|
__________ |
__________ |
|
|
During the year to 30 September 2021 no new Ordinary shares of 25p each were issued.
During the year to 30 September 2020 the Company issued 53,532,942 new Ordinary shares of 25p each for proceeds of £42,237,000. Included in this is 13,647,942 new Ordinary shares issued in respect of the merger with Cameron Investors Trust plc ('CIT'). On 18 November 2019, the effective date of the merger, the Company received assets of £13,956,000 from CIT and, following the cancellation of the Company's own investment in CIT, this resulted in an increase to the Company's net assets of £11,304,000.
During the year to 30 September 2021 there were 27,364,000 Ordinary shares of 25p each repurchased by the Company (being 7.9% of the Company's issued share capital at the start of the year), at a total cost of £20,315,000 and placed in treasury.
During the year to 30 September 2020 there were 859,000 Ordinary shares of 25p each repurchased by the Company (being 0.3% of the Company's issued share capital at the start of the year), at a total cost of £620,000 and placed in treasury.
During the year to 30 September 2021 600,000 shares were re-issued from treasury for proceeds of £437,000.
During the year to 30 September 2020 no shares were re-issued from treasury.
No shares were purchased for cancellation during the year (2020 - nil) and at the year end 27,623,000 shares were held in treasury (2020 - 859,000).
The costs of the operation of the discount control mechanism of £51,000 (2020: £60,000) have been charged against the premium on shares issued.
|
||
|
|
|
|
|
|
|
|
2021 |
2020 |
|
11. |
Share premium account |
£'000 |
£'000 |
|
|
At 1 October |
53,960 |
25,166 |
|
|
Premium on issue of shares |
- |
28,854 |
|
|
Discount control costs (note 10) |
(51) |
(60) |
|
|
|
________ |
________ |
|
|
At 30 September |
53,909 |
53,960 |
|
|
|
________ |
________ |
|
12. |
Special reserves |
Distributable |
|
Total |
Total |
||||
|
|
|
Capital |
Special |
Special |
Special |
||||
|
|
|
Reserve |
Reserve |
Reserves |
Reserves |
||||
|
|
|
2021 |
2021 |
2021 |
2020 |
||||
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
||||
|
|
At 1 October |
2,932 |
57,434 |
60,366 |
63,397 |
||||
|
|
Shares bought back during the year into treasury |
- |
(20,315) |
(20,315) |
(620) |
||||
|
|
Dividends |
(1,598) |
- |
(1,598) |
(2,411) |
||||
|
|
Shares issued during the year from treasury |
- |
437 |
437 |
- |
||||
|
|
|
________ |
________ |
________ |
________ |
||||
|
|
At 30 September |
1,334 |
37,556 |
38,890 |
60,366 |
||||
|
|
|
________ |
________ |
________ |
________ |
||||
|
|
On 29 August 2014, the Court of Session in Scotland approved the cancellation of the Share Premium Account and the creation of a Distributable Capital Reserve from the balance of the Share Premium Account. The Special Reserve was created on 1 October 2010 by a similar court process. The purpose of the Distributable Capital Reserve and the Special Reserve are to fund market purchases by the Company of its own shares, to make bonus issues of shares and to make distributions in accordance with the Companies Act 2006. |
||||||||
|
|
|
|
|||||||
|
|
|
2021 |
2020 |
||||||
|
13. |
Capital reserve |
£'000 |
£'000 |
||||||
|
|
|
|
|
||||||
|
|
Capital reserve - realised |
|
|
||||||
|
|
At 1 October |
2,599 |
17,358 |
||||||
|
|
Net gains/(losses) on sales of investments during the year |
6,858 |
(13,671) |
||||||
|
|
Investment management fee |
(1,047) |
(1,066) |
||||||
|
|
Net foreign currency (losses)/gains |
(11) |
10 |
||||||
|
|
Finance costs of borrowing Capital distribution received |
(18) 43 |
(32) - |
||||||
|
|
|
________ |
________ |
||||||
|
|
At 30 September |
8,424 |
2,599 |
||||||
|
|
|
________ |
________ |
||||||
|
|
|
|
|
||||||
|
|
Capital reserve - unrealised |
|
|
||||||
|
|
At 1 October |
41,678 |
60,217 |
||||||
|
|
Investment gains/(losses) |
12,750 |
(18,539) |
||||||
|
|
|
________ |
________ |
||||||
|
|
At 30 September |
54,428 |
41,678 |
||||||
|
|
|
________ |
________ |
||||||
|
|
|
|
|
||||||
|
|
|
|
|
2021 |
2020 |
||||
|
14. |
Revenue reserve |
|
|
£'000 |
£'000 |
||||
|
|
At 1 October |
|
|
6,205 |
5,828 |
||||
|
|
Transfer (from)/to revenue account net of dividends |
|
|
(113) |
377 |
||||
|
|
|
|
|
______ |
______ |
||||
|
|
At 30 September |
|
|
6,092 |
6,205 |
||||
|
|
|
|
|
______ |
______ |
||||
|
15. |
Risk management, financial assets and liabilities |
|||||||||||||||||||||
|
|
Risk management |
|||||||||||||||||||||
|
|
The Company's objective is to provide Shareholders with an attractive income yield and the prospect of income and capital growth through investing in a portfolio of predominately UK equities. |
|||||||||||||||||||||
|
|
In pursuit of the Company's objective, the Company's investment policy is to invest in a portfolio of predominately UK equities. Equities are selected for their inclusion within the portfolio solely on the basis of the strength of the investment case with the focus being on long term income growth along with capital preservation. |
|||||||||||||||||||||
|
|
Asset classes other than equities will be purchased from time to time, will vary as opportunities are identified and will include convertibles, preference shares, fixed income securities and corporate bonds. Such investments will be made when prospective returns appear to be superior to those from equity markets or are considered likely to exceed the Company's borrowing costs. However, non-equity securities will not constitute the majority of the portfolio. The Company may also use derivatives for the purpose of efficient portfolio management (including reducing, transferring or eliminating investment risk in its investments and protection against currency risk), to exploit an investment opportunity and to achieve capital growth. |
|||||||||||||||||||||
|
|
The management of the portfolio is conducted according to investment guidelines, established by the Board after discussion with the Manager, which specify the limits within which the Manager is authorised to act. |
|||||||||||||||||||||
|
|
Financial assets and liabilities |
|||||||||||||||||||||
|
|
The Company's financial assets include investments, cash at bank and short-term debtors. Financial liabilities consist of short-term creditors and bank overdrafts. |
|||||||||||||||||||||
|
|
The main risks the Company faces from its financial instruments are (i) market risk (comprising interest rate risk, foreign currency risk and other price risk), (ii) liquidity risk and (iii) credit risk. |
|||||||||||||||||||||
|
|
(i) |
Market risk |
|
|
|
|
|
|
||||||||||||||
|
|
|
The fair value or future cash flows of a financial instrument held by the Company may fluctuate because of changes in market prices. This market risk comprises three elements - interest rate risk, foreign currency risk and other price risk. |
||||||||||||||||||||
|
|
|
Interest rate risk |
|
|
|
|
|
|
||||||||||||||
|
|
|
The Company is subject to interest rate risk because the value of fixed interest rate securities is linked to underlying bank rates or equivalents, and its short-term borrowings and cash resources carry interest at floating rates. The interest rate profile is managed as part of the overall investment strategy of the Company. |
||||||||||||||||||||
|
|
|
Interest rate movements may affect: |
||||||||||||||||||||
|
|
|
- |
the fair value of the investments in fixed interest rate securities; |
|||||||||||||||||||
|
|
|
- |
the level of income receivable on cash deposits; and |
|||||||||||||||||||
|
|
|
- |
interest payable on the Company's variable rate borrowings.
|
|||||||||||||||||||
|
|
|
The possible effects on fair value and cash flows that could arise as a result of changes in interest rates are taken into account when making investment and borrowing decisions. |
||||||||||||||||||||
|
|
|
Interest rate profile |
||||||||||||||||||||
|
|
|
The interest rate risk profile of the portfolio of financial assets at the date of the Statement of Financial Position was as follows (there were no interest bearing financial securities and liabilities at the dates of the Statement of Financial Position): |
||||||||||||||||||||
|
|
|
|
|
|
Weighted |
|
|
|||||||||||||||
|
|
|
|
|
|
average |
|
|
|||||||||||||||
|
|
|
|
|
|
interest |
Fixed |
Floating |
|||||||||||||||
|
|
|
|
|
|
rate |
rate |
rate |
|||||||||||||||
|
|
|
As at 30 September 2021 |
|
|
% |
£'000 |
£'000 |
|||||||||||||||
|
|
|
Assets |
|
|
|
|
|
|||||||||||||||
|
|
|
Cash |
|
|
- |
- |
3,951 |
|||||||||||||||
|
|
|
|
|
|
________ |
______ |
________ |
|||||||||||||||
|
|
|
Total assets |
|
|
- |
- |
3,951 |
|||||||||||||||
|
|
|
|
|
|
________ |
______ |
________ |
|||||||||||||||
|
|
|
|
|
|
Weighted |
|
|
|||||||||||||||
|
|
|
|
|
|
average |
|
|
|||||||||||||||
|
|
|
|
|
|
interest |
Fixed |
Floating |
|||||||||||||||
|
|
|
|
|
|
rate |
rate |
Rate |
|||||||||||||||
|
|
|
As at 30 September 2020 |
|
|
% |
£'000 |
£'000 |
|||||||||||||||
|
|
|
Assets |
|
|
|
|
|
|||||||||||||||
|
|
|
Cash |
|
|
- |
- |
8,556 |
|||||||||||||||
|
|
|
|
|
|
________ |
______ |
________ |
|||||||||||||||
|
|
|
Total assets |
|
|
- |
- |
8,556 |
|||||||||||||||
|
|
|
|
|
|
________ |
______ |
________ |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
The weighted average interest rate is based on the current yield of each asset, weighted by its market value. The cash assets consist of cash deposits on call earning interest at prevailing market rates. Short-term debtors and creditors have been excluded from the above tables. |
||||||||||||||||||||
|
|
|
Maturity profile |
|
|
|
|
|
|
||||||||||||||
|
|
|
The maturity profile of the Company's financial assets and liabilities at the date of the Statement of Financial Position was as follows: |
||||||||||||||||||||
|
|
|
|
|
|
|
Within |
Within |
|||||||||||||||
|
|
|
|
|
|
|
3 Months or less |
3 Months or less |
|||||||||||||||
|
|
|
|
|
|
|
2021 |
2020 |
|||||||||||||||
|
|
|
|
|
|
|
£'000 |
£'000 |
|||||||||||||||
|
|
|
Floating rate |
|
|
|
|
|
|||||||||||||||
|
|
|
Cash |
|
|
|
3,951 |
8,556 |
|||||||||||||||
|
|
|
|
|
|
|
________ |
________ |
|||||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||||
|
|
|
Interest rate sensitivity |
||||||||||||||||||||
|
|
|
The sensitivity analysis below has been determined based on the exposure to interest rates at the date of the Statement of Financial Position and the stipulated change taking place at the beginning of the financial year and held constant throughout the reporting period in the case of instruments that have floating rates. |
||||||||||||||||||||
|
|
|
If interest rates had been 50 basis points higher or lower and all other variables were held constant, the Company's profit before tax for the year ended 30 September 2021 and net assets would increase/decrease by £20,000 (2020 - increase/decrease by £43,000). This is mainly attributable to the Company's exposure to interest rates on its floating rate cash balances. These figures have been calculated based on cash positions at each year end. |
||||||||||||||||||||
|
|
|
In the opinion of the Directors, the above sensitivity analyses are not representative of the year as a whole, since the level of exposure changes frequently as part of the interest rate risk management process used to meet the Company's objectives. The risk parameters used will also fluctuate depending on the current market perception. |
||||||||||||||||||||
|
|
|
Foreign currency risk |
|
|
|
|
|
|||||||||||||||
|
|
|
A proportion of the Company's investment portfolio is invested in overseas securities and the income and capital value can be affected by movements in exchange rates. Exchange gains or losses may arise as a result of the movement in the exchange rate between the date of the transaction denominated in a currency other than Sterling and its settlement. |
||||||||||||||||||||
|
|
|
An analysis of the Company's gross currency exposure is detailed below: |
||||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||||
|
|
|
|
30 September 2021 |
30 September 2020 |
||||||||||||||||||
|
|
|
|
|
Net |
|
Net |
||||||||||||||||
|
|
|
|
Overseas |
monetary |
Overseas |
monetary |
||||||||||||||||
|
|
|
|
investments |
assets |
investments |
assets |
||||||||||||||||
|
|
|
|
'000 |
'000 |
'000 |
'000 |
||||||||||||||||
|
|
|
US Dollar |
33,191 |
- |
26,045 |
- |
||||||||||||||||
|
|
|
Swiss Franc |
7,936 |
- |
9,673 |
- |
||||||||||||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||||||||||||
|
|
|
Total |
41,127 |
- |
35,718 |
- |
||||||||||||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
||||||||||||||||||||
|
|
|
Foreign currency sensitivity |
||||||||||||||||||||
|
|
|
There is no sensitivity analysis included as the Company's significant foreign currency financial instruments are in the form of equity investments which have been included within the other price risk sensitivity analysis so as to show the overall level of exposure. |
||||||||||||||||||||
|
|
|
Other price risk |
||||||||||||||||||||
|
|
|
Other price risks (i.e. changes in market prices other than those arising from interest rate risk) may affect the value of the quoted investments.
|
||||||||||||||||||||
|
|
|
It is the Board's policy to hold an appropriate spread of investments in the portfolio in order to reduce the risk arising from factors specific to a particular sector. The allocation of assets to specific sectors and the stock selection process both act to reduce market risk. The Manager actively monitors market prices throughout the year and reports to the Board, which meets regularly in order to review investment strategy. The investments held by the Company are all listed on recognised investment exchanges. |
||||||||||||||||||||
|
|
|
Other price sensitivity |
||||||||||||||||||||
|
|
|
If market prices at the year end date had been 10% higher or lower on a Sterling basis while all other variables remained constant, the return attributable to Ordinary shareholders and equity reserves for the year ended 30 September 2021 would have increased/decreased by £24,451,000 (2020 - increase/decrease of £24,232,000). This is based on the Company's equity portfolio held at each year end. |
||||||||||||||||||||
|
|
(ii) |
Liquidity risk |
||||||||||||||||||||
|
|
|
This is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities. |
||||||||||||||||||||
|
|
|
Liquidity risk is not considered to be significant as the Company's assets comprise mainly readily realisable securities, which can be sold to meet funding commitments if necessary. Short-term flexibility is achieved through the use of overdraft facilities. Liabilities at the date of the Statement of Financial Position are payable within three months. |
||||||||||||||||||||
|
|
(iii) |
Credit risk |
||||||||||||||||||||
|
|
|
This is failure of the counterparty to a transaction to discharge its obligations under that transaction that could result in the Company suffering a loss. |
||||||||||||||||||||
|
|
|
The risk is not significant, and is managed as follows: |
||||||||||||||||||||
|
|
|
- |
investment transactions are carried out with a large number of brokers, whose credit-standing is reviewed periodically by the Manager, and limits are set on the amount that may be due from any one broker. Transactions are ordinarily undertaken on a delivery versus payment basis whereby the Company's custodian bank ensures that the counterparty to any transaction entered into by the Company has delivered on its obligations before any transfer of cash or securities away from the Company is completed; |
|||||||||||||||||||
|
|
|
- |
the risk of counterparty exposure due to failed trades causing a loss to the Company is mitigated by the review of failed trade reports on a monthly basis. In addition, the Administrator carries out a stock reconciliation to the Custodian's records on a monthly basis to ensure discrepancies are picked up on a timely basis; |
|||||||||||||||||||
|
|
|
- |
cash is held only with reputable banks and financial institutions with high quality external credit ratings. None of the Company's financial assets are secured by collateral or other credit enhancements. |
|||||||||||||||||||
|
|
|
Credit risk exposure |
||||||||||||||||||||
|
|
|
In summary, compared to the amounts in the Statement of Financial Position, the maximum exposure to credit risk at 30 September was as follows:
|
||||||||||||||||||||
|
|
|
|
2021 |
2020 |
||||||||||||||||||
|
|
|
|
Statement of |
|
Statement of |
|
||||||||||||||||
|
|
|
|
Financial Position |
Maximum exposure |
Financial Position |
Maximum exposure |
||||||||||||||||
|
|
|
|
£'000 |
'000 |
'000 |
'000 |
||||||||||||||||
|
|
|
|
|
|
|
|
||||||||||||||||
|
|
|
Current assets |
|
|
|
|
||||||||||||||||
|
|
|
Accrued income and prepayments |
968 |
936 |
861 |
825 |
||||||||||||||||
|
|
|
Trade and other receivables |
162 |
162 |
474 |
474 |
||||||||||||||||
|
|
|
Cash and short term deposits |
3,951 |
3,951 |
8,556 |
8,556 |
||||||||||||||||
|
|
|
|
________ |
________ |
________ |
________ |
||||||||||||||||
|
|
|
|
5,081 |
5,049 |
9,891 |
9,855 |
||||||||||||||||
|
|
|
|
________ |
________ |
________ |
________ |
||||||||||||||||
|
|
|
None of the Company's financial assets is past due or impaired. |
||||||||||||||||||||
|
|
||||||||||||||||||||||
|
Fair value of financial assets and liabilities |
||||||||||||||||||||||
|
The book value of cash at bank included in these financial statements approximates to fair value because of the short-term maturity. The carrying value of fixed asset investments are stated at their fair values, which have been determined with reference to quoted market prices. For all other short-term debtors and creditors, their book values approximate to fair value because of their short-term maturity. |
||||||||||||||||||||||
|
Gearing |
||||||||||||||||||||||
|
The Company is able to gear by obtaining short-term credit facilities. |
||||||||||||||||||||||
|
The Company did not have a facility in place, or any outstanding gearing, at the year end. The profile of financing costs is managed as part of overall investment strategy. The employment of gearing magnifies the impact on net assets of both positive and negative changes in the value of the Company's portfolio of investments. |
||||||||||||||||||||||
|
16. |
Capital management policies and procedures |
||||
|
|
The Company's capital management objectives are: |
||||
|
|
- |
to ensure that the Company will be able to continue as a going concern; and |
|||
|
|
- |
to maximise the income and capital return to its equity Shareholders through an appropriate balance of equity capital and debt. |
|||
|
|
The Company's capital at 30 September comprised: |
||||
|
|
|
2021 |
2020 |
||
|
|
|
£'000 |
£'000 |
||
|
|
Called-up share capital |
86,878 |
86,878 |
||
|
|
Retained earnings and other reserves |
161,743 |
164,808 |
||
|
|
|
________ |
________ |
||
|
|
|
248,621 |
251,686 |
||
|
|
|
________ |
________ |
||
|
|
The Board, with the assistance of the Manager and the AIFM, monitors and reviews the broad structure of the Company's capital on an ongoing basis. This review includes: |
||||
|
|
- |
the planned level of gearing, which takes account of the Manager's views on the market; |
|||
|
|
- |
the need to buy back equity shares for cancellation or to hold in treasury, which takes account of the difference between the net asset value per share and the share price (i.e. the level of share price discount or premium); |
|||
|
|
- |
the need for new issues of equity shares; and |
|||
|
|
- |
the extent to which revenue in excess of that which is required to be distributed should be retained. |
|||
|
|
The Company's objectives, policies and processes for managing capital are unchanged from the preceding accounting period.
|
||||
|
|
The Company had no gearing at the year end (2020 - nil). |
||||
|
17. |
Commitments and contingencies |
||||||||
|
|
At 30 September 2021 there were no contingent liabilities in respect of outstanding underwriting commitments or uncalled capital (2020 - £nil). |
||||||||
|
18. |
Financial instruments measured at Fair Value |
||||||||
|
|
|
|
|
|
2021 |
|
|
|
2020 |
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Financial assets at fair value through profit or loss
|
|
|
|
|
|
|
|
|
|
|
Investments |
244,514 |
- |
- |
244,514 |
242,316 |
- |
- |
242,316 |
|
|
|
______ |
_____ |
______ |
______ |
______ |
_____ |
______ |
______ |
|
|
|
244,514 |
- |
- |
244,514 |
242,316 |
- |
- |
242,316 |
|
|
|
______ |
_____ |
______ |
______ |
______ |
_____ |
______ |
______ |
|
|
Level 1 reflects financial instruments quoted in an active market. |
||||||||
|
|
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 whose variables includes only data from observable markets. |
||||||||
|
|
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 were no transfers of investments between levels during the year ended 30 September 2021 (2020 - none). |
||||||||
|
19. |
Notes to the Cash Flow Statement |
||||
|
|
(a) Reconciliation of operating profit/(loss) to operating cash flows |
||||
|
|
|
2021 |
2020 |
||
|
|
|
£'000 |
£'000 |
||
|
|
Profit/(loss) before taxation |
24,321 |
(26,230) |
||
|
|
Add interest payable |
28 |
50 |
||
|
|
Adjustments for: |
|
|
||
|
|
(Gains)/losses on investments |
(19,651) |
32,210 |
||
|
|
Currency losses/(gains) |
11 |
(10) |
||
|
|
Increase in accrued income and prepayments |
(106) |
(71) |
||
|
|
Decrease in trade and other payables |
(9) |
(18) |
||
|
|
|
________ |
________ |
||
|
|
|
4,594 |
5,931 |
||
|
|
|
________ |
________ |
||
|
|
(b) Analysis of changes in net funds |
||||
|
|
|
30 September |
Cash |
Exchange |
30 September |
|
|
|
2020 |
Flow |
Movements |
2021 |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Cash at bank |
8,556 |
(4,594) |
(11) |
3,951 |
|
|
|
________ |
________ |
________ |
________ |
|
|
|
|
|
||
|
20. |
Related party transactions |
|
|
The following are considered to be related parties: |
|
|
- The Directors of the Company. |
|
|
All material related party transactions, as set out in International Accounting Standard 24, Related Party Disclosures, have been disclosed in the Strategic and Directors Report extracts and in note 4 above. |
|
21. |
Alternative Investment Fund Managers Directive (AIFMD) |
|
||||
|
|
In accordance with the AIFMD, information in relation to the Company's leverage and the remuneration of the Company's AIFM, Juniper Partners, is required to be made available to investors. In accordance with the Directive, the AIFM's remuneration policy and the numerical remuneration disclosures in respect of the AIFM's relevant reporting period (year ending 30 April 2021) are available from Juniper Partners on request. |
|
||||
|
|
The Company's maximum and actual leverage levels at 30 September 2021 are as follows: |
|
||||
|
|
|
|
|
Gross |
Commitment |
|
|
|
|
|
|
Method |
Method |
|
|
|
Maximum limit |
|
|
200% |
200% |
|
|
|
Actual |
|
|
98% |
100% |
|
|
|
|
|
|
|
|
|
|
|
The Company's investor disclosure document and all additional periodic disclosures required in accordance with the requirements of the FCA Rules implementing the AIFMD in the UK are made available on the Company's website (www.tigt.co.uk). |
|
||||
|
Additional Notes to the Annual Financial Report
This Annual Financial Report announcement is not the Company's statutory accounts for the year ended 30 September 2021. The statutory accounts for the year ended 30 September 2020 received an audit report which was unqualified.
The statutory accounts for the financial year ended 30 September 2021 were approved by the Directors on 15 November 2021 but will not be filed with the Registrar of Companies until after the Company's Annual General Meeting which is to be held at 10.00 am on 19 January 2022 at 28 Walker Street, Edinburgh, EH3 7HR.
The Annual Report will be posted to Shareholders in November 2021 and will be available in due course by download from the Company's website ( www.tigt.co.uk ).
Please note that past performance is not necessarily a guide to the future and that the value of investments and the income from them may fall as well as rise. Investors may not get back the amount they originally invested.
For Troy Income & Growth Trust plc Juniper Partners Limited 15 November 2021 Enquiries: 0131 378 0500 |
||||||
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