Final Results

RNS Number : 1217N

Personal Assets Trust PLC

04 June 2010

 

To:                   RNS

From:              Personal Assets Trust plc

Date:               4 June 2010

Results for the year ended 30 April 2010

The Directors of Personal Assets Trust ("PAT") are pleased to announce the Group's results for the year ended 30 April 2010.

The key points are as follows:

·      PAT is run expressly for private investors. Its investment policy is to protect and increase (in that order) the value of shareholders' funds per share over the long term and to earn as high a total return as is compatible with a risk equivalent to that of the FTSE All-Share Index.

·      Over the year to 30 April 2010 PAT's net asset value per share ("NAV") rose by 24.9%.  This compares to a rise of 31.8% in the Company's comparator, the FTSE All-Share Index.  PAT's share price rose by £56.50 during the year and at 30 April 2010 was £289.50.  An analysis of performance is provided in the Chairman's Statement and Investment Adviser's Report below.

·     Since PAT became independently managed in 1990 the Board has chosen to measure PAT's performance over rolling three-year periods.  Over the three years to 30 April 2010 the net asset value total return per share rose by 14.8% compared to the FTSE All-Share Index's fall of 4.4%, an outperformance of 20.1%.

·     The Company has experienced a strong demand for its shares.  During the year the Company issued 70,050 Ordinary shares, raising £18.6 million before issue costs of £44,000.

·      During the year, PAT continued to maintain a high level of effective liquidity (30 April 2010: 34.5% (includes 9.7% in Gold Bullion), 30 April 2009: 29.9% (includes 5.8% in Gold Bullion)).

·     The Directors intend PAT's annual dividend rate to grow at least in line with inflation over the long term. Two interim dividends have been declared and paid during the year, totalling £5.20 per ordinary share.  Together these represent an increase of 4.0% over the corresponding payments for the previous year, compared to inflation (RPI) of 5.3%. Over the three years to 30 April 2010 the dividend has grown by 26.8% compared to the RPI's 8.5%.

·      The Board's policy is never to cut the dividend rate, so that shareholders know that each half-yearly payment will at least equal the previous one.  Therefore, the first interim dividend for the year ended 30 April 2011, expected to be paid in October 2010, will be at least £2.65 per share and total dividends for the year will be not less than £5.30 per share.

The Chairman, Hamish Buchan, said:

 "This is my first Chairman's Statement since taking office after the Annual General Meeting (''AGM'') last year and I want to begin by paying tribute to Bobby White, my predecessor. When he became Chairman in 1994 Personal Assets (''PAT'') was a £13 million company with a share price of £87, paying an annual dividend of £2 per share. At our 30 April 2010 year end PAT was a £236 million company with a share price of £289 ½, paying dividends at an annual rate of £5.30 per share. Such progress speaks for itself and we owe Bobby a great deal, not only for his sure hand and lightness of touch over a happy and highly successful fifteen years in office but also for his dedicated and skilful leadership following Ian Rushbrook's untimely death in October 2008, when during a turbulent and sometimes terrifying period for world stock markets he co-ordinated the running of the Company on a day to day basis while guiding our search for a new Investment Adviser. It is also my pleasure to follow Bobby in his last Statement in welcoming two new Directors, Frank Rushbrook and Stuart Paul, who joined the Board immediately after the AGM last July and have already proved invaluable as colleagues.

Sebastian Lyon of Troy Asset Management (''Troy''), our Investment Adviser, discusses our performance in detail in his report below. To avoid repetition I shall content myself with recording here (in keeping with our practice for the last two decades of measuring our performance not over single years but over rolling three year periods) that over the three years to 30 April 2010, while the FTSE All-Share Index (the ''All-Share'') fell by 14.7%, our share price and NAV rose by 8.8% and 8.3% respectively, an outperformance in share price terms of 27.5%, or the equivalent of 8.4% annually. The Board is grateful both to the late Ian Rushbrook, who managed the portfolio for the first half of the period until his death on 12 October 2008, and to Sebastian and Troy for what we believe to be a very satisfactory result.

You will notice some modest changes to the Company's Report & Accounts this year. One of these is that we pay greater attention to total return in the performance charts and tables. In the past we tended to look at capital return and dividend growth in isolation, but the Board felt that shareholders would get a clearer picture of our overall progress if we considered total return as well. This does, of course, raise the performance hurdle for us. We have been used to looking principally at capital return, overlooking the fact that the UK equity market yields, at the time of writing, roughly twice what PAT does. I am pleased to be able to report, therefore, that over the three years to 30 April 2010 we have still outperformed the All-Share by a healthy amount, our share price total return being 15.2% compared to the All-Share's loss of 4.4%. This is a 20.5% outperformance over the three year period, equivalent to an annual rate of 6.4%.

The other element of total return is income. Our dividend rose during the year from £5.00 to £5.20, an increase of 4.0%, and there are two points to which I should like to draw your attention here. The first is that, for the first time since 1991, our earnings per share were lower than our dividend (£4.61 compared to £5.20). The shortfall reflected the non income bearing nature of our gold bullion holdings, the unprecedentedly low rates of interest on cash and deposits, the effect of our 9.4% increase in equity capital through the issue of new shares at different times during the year, and the one-off effect of bringing in house our secretarial and administration services. In subsequent years I would expect our dividends to be increasingly covered by earnings and we also intend to re-examine our policy of charging all our investment advisory fees to revenue rather than apportioning them between revenue and capital, as was our practice prior to 2006. We therefore did not hesitate in this transitional year to make a transfer of £0.63 per share from revenue reserve, which, following the transfer, still stood at the healthy figure of £3.96 per share, or 75% of a full year's dividend at the current annual rate of £5.30 per share (twice the last half-yearly dividend of £2.65 per share paid on 16 April 2010).

The second point concerns this year's rate of increase in the dividend. As stated on page 12 of the Annual Report, in the section headed Dividend Policy in the Business Review for the Year to 30 April 2010, it is the Directors' intention that the dividend paid by the Company will continue to grow in real terms relative to both the Retail Price Index (''RPI'') and the Consumer Price Index (''CPI''). As you will see from Key Features in the Annual Report on page 2, PAT's dividend for the year to 30 April 2010 rose by only 4.0% compared to the RPI's 5.3%. The RPI's dismaying April figure was announced after our dividend had been declared and paid, but even had it been announced before this we would not have thought it either necessary or prudent to declare an increase of 5.3% for the year.

Our aim is to increase the dividend at a rate higher than the RPI and the CPI not necessarily in each individual year but over rolling three year periods, as we do when measuring capital growth and total return. Over the three years to 30 April 2010 our dividend has grown by 26.8% compared to the RPI's 8.5% and the CPI's 9.3%, and while it is unlikely that our dividend will continue to outstrip inflation at this rate it is our intention, barring extreme circumstances, to continue to increase the real value of the dividend over the long term.

This has been the first full year of working with our new Investment Adviser and it has proved a happy and productive experience. When he spoke at PAT's Annual General Meeting (''AGM'') in July 2009, Sebastian stressed that in trying to follow in Ian Rushbrook's footsteps his approach, with the Board's encouragement, would be 'evolution, not revolution'. This is what we have seen in practice over the past twelve months. We have restated our investment policy in order to make it clearer and more succinct (see the section headed Investment Policy on pages 11 and 12 of the Annual Report in the Business Review for the Year to 30 April 2010) but what we wrote in previous years about our investment approach still holds true. Our equity portfolio is usually concentrated in a short list of stocks and turnover tends to be low. In managing PAT we concentrate on decisions that will have an appreciable effect on our NAV. First in order of importance come decisions about the attractiveness or otherwise (relative to cash) of the markets in which we invest and about the sectors we favour within equity markets. Stock selection complements these decisions.

Compared to recent years you will notice this year an increased emphasis on individual stocks rather than on investment through the use of FTSE 100 Futures. This represents something of a return to PAT's roots following a tumultuous decade for world markets and the world financial system during which the Board thought it necessary to concentrate on macro economic factors and on movements in markets as a whole. While we intend to continue to use FTSE 100 Futures to vary our percentage equity exposure from time to time, we have been building a solid core portfolio of equities which will not only offer scope for steady capital appreciation but also produce a growing stream of income.

From time to time we review Directors' fees, taking external advice where appropriate, and details are shown in the Directors' Remuneration Report on page 19 of the Annual Report. Resolution 9 at the AGM, which is explained in the Directors' Report on page 16 of the Annual Report, provides for what we believe to be a necessary increase in the maximum aggregate sum the Directors are entitled to receive as remuneration.

Discussions are still taking place on the European Union's (''EU'') proposed Alternative Investment Fund Managers (''AIFM'') Directive, which is likely to have adverse implications for investment trusts in a number of ways referred to in Quarterly 55 (November 2009). Some form of AIFM Directive is a political certainty and the inevitable consequence of this for the UK investment trust sector will be increased cost and red tape. A decision from the EU on the Directive is expected later in the year, but much will then depend on how the UK authorities decide to implement it. We support the Association of Investment Companies (''AIC'') as it continues to work to try to ensure that the adverse effects of the Directive on UK investment trusts are kept to a minimum.

Here in Britain we have the first peacetime coalition government since 1931 at a time when the public finances are in a deplorable condition. In his report below Sebastian comments in detail on the economic, political and fiscal outlook, which is very far from favourable. It is sad to think that the apology from the retiring Chief Secretary to the Treasury to his successor that ''there's no money left'' is unsurpassed among recent political pronouncements for its frankness and truthfulness.

I referred earlier to change. One thing we shall not change is our practice of holding our AGM in Edinburgh, which we believe to be appropriate given both our history and the fact that we are a Scottish-registered company. In order to try to get the best of both worlds, however, in January this year we for the first time held a meeting for shareholders in London. This drew an attendance of nearly 200 and proved so popular that we have decided to make it an annual event. Details of next year's will be announced on PAT's website, www.patplc.co.uk."

The Investment Adviser, Sebastian Lyon, said:

"Given that our investment policy is to protect and increase (in that order) the value of shareholders' funds per share over the long term, Personal Assets Trust (''PAT'') had the sort of year one would expect when markets rise strongly and (we believe) unjustifiably. Over the year to 30 April 2010 our share price and net asset value per share (''NAV'') increased by 24.2% and 24.9% respectively (because of our discount and premium control policy they will always move in lock step), but they lagged well behind the 31.8% rise in our comparator, the FTSE All-Share Index (the ''All-Share''). Our NAV total return was 27.2% compared to the All-Share's 36.6%.

The contrast with our performance over the year to 30 April 2009, when markets fell and our share price and NAV dropped by only 9.8% and 10.8% respectively compared to the All-Share's 29.9%, is revealing. As a general rule, PAT will tend to outperform during sharply falling markets and underperform during sharply rising ones. This sometimes brings short term disappointments but the long term soundness of our approach is demonstrated by the ten years from30 April 2000,when stock markets peaked and the secular bear market began. Over that period PAT's NAV is up by 43.5% against our comparator's fall of 4.6%, an outperformance of 50.4%, and in NAV total return terms we rose by 69.7% over ten years compared to the All-Share's 32.3%, an outperformance of 28.3% (equivalent to an annual rate of 2.5%).

The rally in equities over the past year was based on financial illusion. It was fuelled not by a strong rebound in profits or the economy but by concerted and aggressive state intervention. This took the form of the creation of free money through central banks' zero interest rate policy combined with blatant printing of still more money (euphemistically labelled 'Quantitative Easing'). The UK and the US started this policy in early 2009 and the European Central Bank has become their partner in folly. Investors now find themselves in a 'phoney world' in which the compass no longer works and all asset prices are distorted, whether bonds, stocks, property or commodities. Savers are being strangled by derisory returns on cash and are effectively being coerced into taking more risk in order to generate any level of income at all. Money, as a store of value, is losing its meaning.

Since 2007, the world has lurched from one financial crisis to the next. However, no-one in authority has yet been prepared publicly to acknowledge and then tackle the common factor - too much debt. Governments are trying to solve the problem with even more debt, but doping up the addict with ever more potent drugs is unlikely to have a happy ending. It is clear that the dope is having an ever diminishing effect even as a palliative, while nothing whatsoever is being done to tackle the underlying disease.

A year ago we highlighted the unprecedented fiscal stimulus being applied to the global economy to try to keep it moving. In the case of the UK, the boost has resulted in a recovery so anaemic as to be pitiful. The response of governments to the credit crisis of 2008 was to transfer debts from the private sector to the state. This has set the course for the next stage of the credit bust - within the government bond markets. Greece may be an economic basket case after its prolonged borrowing spree and eccentric approach to probity in its public finances, but it is unlikely to be the last sovereign debt crisis. Countries that can print their currencies, like Britain or the United States, will make the choice of inflation over technical default. Greece and other European peripheral countries such as Portugal, Spain and Italy which are part of the Euro have no such option and face years of harsh austerity. The recent problems in Athens are merely a warning rumble of the thunderstorms to come. Financial crises are still ahead of us and will play havoc with markets in the coming years. Official interventions mask the reality but cannot be sustained. One cannot pay off one's overdraft by writing the bank cheque after cheque on the overdrawn account.

The UK government is spending £4 for every £3 raised in tax, while the United States spends almost $5 for every $3 raised. With debt to GDP threatening to reach 90% in the coming years, these economies face the prospect of a prolonged period of low growth and the possibility of higher inflation ― what in the sordid 1970s was known as 'stagflation'. This, to put it mildly, is not a good combination for those seeking to preserve real wealth. In their book, 'This Time is Different: A Panoramic View of Eight Centuries of Financial Crises', Princeton University Press, 2009, Carmen M Reinhart and Kenneth S Rogoff highlight that government debt at 60―90% of GDP is a tipping point. At that level, more state spending actually reduces growth. It will therefore be a challenge for the western economies to grow their way out of trouble. As debts increase, the struggle will feel like running up a down escalator.

The ambiguous election result in the UK highlights the growth of the dependency culture in western economies. Labour's surprise recovery in the polls is a sad indication that the electorate demands a high standard of living without recognising that the productive part of the economy, which pays for it, is shrinking. People have got used to getting money from the state without realising that the state is not a benign third party with a bottomless purse but is merely the aggregate of the people themselves. One cannot go on stealing from oneself, or from one's children and grandchildren, indefinitely. Public spending is now running at 48% of GDP and public sector jobs account for 21% of total employment. The election result shows there is no consensus for the cuts to the bone required in public spending. Pressure is likely to remain on Sterling as a result. Over the year, we have increased PAT's overseas exposure and part of this is unhedged. It is also worth noting that the UK equity market is in itself much more diversified than most other equity markets, the companies in the FTSE 100 deriving a considerable percentage of their profits from overseas. Even if we held only FTSE 100 stocks in our portfolio, therefore, we would still be substantially diversified internationally.

It is unnerving to see so many investors justifying buying stocks on their relative value compared to returns available on cash when there are no returns available on cash. Ultimately, stocks are priced in relation not to cash but to long-dated bonds. Government bonds, traditionally low risk assets, nowadays look anything but safe. Higher yields, whether driven by inflation or default, are coming. As a result, we have steadily reduced our equity exposure through the year. It is easy for rising share prices to go to one's head, but with higher valuations comes greater risk. Equity markets have a tendency to rise steadily and fall sharply, often with no warning. Liquidity driven markets have an ability to run far further than fundamentals justify but they are always unsustainable. Mindful of our mandate 'to protect first', we will always manage PAT with preservation of capital as our guiding principle.

During the period we increased PAT's exposure to gold bullion. In a world of monetary irresponsibility the yellow metal should be a cornerstone of a portfolio. During the recent Greek crisis, gold has performed quite differently from the way in which it performed in response to the fall of Lehman Brothers in 2008. Back then, gold fell along with other commodities and resources. This time it behaved more like a currency - like money that cannot be printed ― and that is essentially what it is. While the Dollar has been appreciating this year, a US administration which has a policy of trying to expand exports and support jobs will want to see the Dollar depreciate. With Sterling and the Euro under pressure and the new socialist government in Japan wanting a weaker Yen, gold will be the ultimate winner in this ugly competition of leapfrog devaluations. Since PAT first purchased gold a year ago, the holding has played its historic rôle of preserving real wealth in a crisis.

Within this hostile environment, PAT has a bias towards high quality, cash generative companies with robust balance sheets, which will be able to pass on higher prices if and when inflation returns; and we continue to steer away from financials where solvency remains in doubt. Our portfolio as at 30 April 2010 is shown in full on page 8 of the Annual Report. Many of the companies held in the portfolio have broad international earnings and are not reliant on a robust global economy. Strong brands, critical in maintaining a competitive position, were highly desired by investors in the late 1990s. Yet blue chip companies such as Coca Cola, Colgate Palmolive, Johnson & Johnson and Nestlé are no longer rated at a premium. This has provided us with the chance to purchase exposure to their resilient earnings at valuations not seen for twenty years. These companies also have outstanding track records of returning cash to shareholders via dividends and share buybacks. In addition to our holdings of equities we intend to retain material levels of liquidity in US Treasury Inflation-Protected Securities (''TIPS'') and gold bullion.

Once over the painful hurdle of sovereign crises, we will be able to continue our strategy of investing for the long term in stocks at attractive valuations with greater confidence of outstanding returns. Such aspirations are neatly summed up by Gerald Loeb, the famed American banker, investment commentator and contrarian once described in Forbes magazine as the most quoted man on Wall Street:

''Profits can be made safely only when the opportunity is available and not just because they happen to be desired or needed. . . Willingness and ability to hold funds uninvested while awaiting real opportunities is a key to success in the battle for investment survival."

For further information contact:

Robin Angus

Executive Director

Tel:  [phone]

Sebastian Lyon

Investment Adviser

Tel:  [phone]

Steven Davidson

Company Secretary

Tel:  [phone]

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

Group Income Statement

	Year ended 30 April 2010
	Revenue	Capital	Total
	£'000	£'000	£'000
Income
Investment income	6,181	-	6,181
Other operating income	73	-	73
	6,254	-	6,254
Gains on investments held at fair value	-	31,279	31,279
Gains on derivatives held at fair value	-	10,946	10,946
Foreign exchange gains	-	2,342	2,342
Total income	6,254	44,567	50,821
Expenses	(2,413)	-	(2,413)
Profit before tax	3,841	44,567	48,408
Tax	(241)	-	(241)
Profit for the year	3,600	44,567	48,167
Earnings per share	£4.61	£57.12	£61.73
The Group does not have any income or expense that is not included in the profit for the year. Accordingly, the "Profit for the Year" is also the "Total Comprehensive Income for the Year", as defined in IAS1 (revised) and no separate Statement of Comprehensive Income has been presented. The 'Total' column of this statement represents the Group's Income Statement, prepared in accordance with IFRS.  The supplementary revenue and capital return columns are both prepared under guidance published by the Association of Investment Companies. All items in the above statement derive from continuing operations.
Dividend Information
Dividends per share	£5.20
Dividends paid	£'000
First interim dividend of £2.55 per share	1,964
Second interim dividend of £2.65 per share	2,150
	4,114

Group Income Statement

	Year ended 30 April 2009
	Revenue	Capital	Total
	£'000	£'000	£'000
Income
Investment income	5,164	-	5,164
Other operating income	491	-	491
	5,655	-	5,655
Gains on investments held at fair value	-	3,728	3,728
Gains on derivatives held at fair value	-	1,911	1,911
Foreign exchange losses	-	(26,359)	(26,359)
Total income	5,655	(20,720)	(15,065)
Expenses	(1,759)	-	(1,759)
Profit/(loss) before tax	3,896	(20,720)	(16,824)
Tax	-	-	-
Profit/(loss) for the year	3,896	(20,720)	(16,824)
Earnings per share	£5.34	(£28.43)	(£23.09)

Group Balance Sheet

			As at 30 April 2010			As at 30 April 2009
			£'000			£'000
Non current assets
Investments held at fair value			225,773			158,183
Current assets Financial assets			-			3,418
Other receivables			2,849			1,621
Cash and cash equivalents			6,391			8,202
			9,240			13,241
Total Assets			235,013			171,424
Current liabilities Financial liabilities			(639)			-
Other payables			(589)			(292)
Total liabilities			(1,228)			(292)
Net assets			233,785			171,132
Capital and reserves
Ordinary share capital			10,191			9,386
Share premium account			103,607			87,224
Capital redemption reserve			219			219
Special reserve			22,517			22,517
Treasury share reserve			-			(1,346)
Other Capital reserves			94,024			49,457
Revenue reserve			3,227			3,675
Total equity			233,785			171,132
Net asset value per share			£286.75			£229.64

Company Balance Sheet

			As at 30 April 2010			As at 30 April 2009
			£'000			£'000
Non current assets
Investments held at fair value			225,788			158,183
Current assets Financial assets			-			3,418
Other receivables			2,849			1,621
Cash and cash equivalents			6,381			8,202
			9,230			13,241
Total Assets			235,018			171,424
Current liabilities Financial liabilities			(639)			-
Other payables			(594)			(292)
Total liabilities			(1,233)			(292)
Net assets			233,785			171,132
Capital and reserves
Ordinary share capital			10,191			9,386
Share premium account			103,607			87,224
Capital redemption reserve			219			219
Special reserve			22,517			22,517
Treasury share reserve			-			(1,346)
Other Capital reserves			94,029			49,457
Revenue reserve			3,222			3,675
Total equity			233,785			171,132
Net asset value per share			£286.75			£229.64

Group Statement of Changes in Equity

For the year ended 30 April 2010	Share Capital	Share Premium Account	Capital Redemption Reserve	Special Reserve	Treasury Reserve	Other Capital Reserves	Revenue Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 30 April 2009	9,386	87,224	219	22,517	(1,346)	49,457	3,675	171,132
Profit for the year	-	-	-	-	-	44,567	3,600	48,167
Issue of ordinary shares
from Treasury	-	3	-	-	1,346	-	-	1,349
Issue of new ordinary shares	805	16,446	-	-	-	-	-	17,251
Dividends paid	-	-	-	-	-	-	(4,114)	(4,114)
Balance as at 30 April 2010	10,191	103,673	219	22,517	-	94,024	3,161	233,785
For the year ended 30 April 2009	Share Capital	Share Premium Account	Capital Redemption Reserve	Special Reserve	Treasury Reserve	Other Capital Reserves	Revenue Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 30 April 2008	9,386	87,582	219	22,517	(4,669)	70,177	3,452	188,664
Loss for the year	-	-	-	-	-	(20,720)	3,896	(16,824)
Issue of ordinary shares
from Treasury	-	(358)	-	-	12,926	-	-	12,568
Buy-back of ordinary shares	-	-	-	-	(9,603)	-	-	(9,603)
Dividends paid	-	-	-	-	-	-	(3,673)	(3,673)
Balance as at 30 April 2009	9,386	87,224	219	22,517	(1,346)	49,457	3,675	171,132

Company Statement of Changes in Equity

For the year ended 30 April 2010	Share Capital	Share Premium Account	Capital Redemption Reserve	Special Reserve	Treasury Reserve	Other Capital Reserves	Revenue Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 30 April 2009	9,386	87,224	219	22,517	(1,346)	49,457	3,675	171,132
Profit for the year	-	-	-	-	-	44,572	3,595	48,167
Issue of ordinary shares
from Treasury	-	3	-	-	1,346	-	-	1,349
Issue of new ordinary shares	805	16,446	-	-	-	-	-	17,251
Dividends paid	-	-	-	-	-	-	(4,114)	(4,114)
Balance as at 30 April 2010	10,191	103,673	219	22,517	-	94,029	3,156	233,785
For the year ended 30 April 2009	Share Capital	Share Premium Account	Capital Redemption Reserve	Special Reserve	Treasury Reserve	Other Capital Reserves	Revenue Reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 30 April 2008	9,386	87,582	219	22,517	(4,669)	70,177	3,452	188,664
Loss for the year	-	-	-	-	-	(20,720)	3,896	(16,824)
Issue of ordinary shares
from Treasury	-	(358)	-	-	12,926	-	-	12,568
Buy-back of ordinary shares	-	-	-	-	(9,603)	-	-	(9,603)
Dividends paid	-	-	-	-	-	-	(3,673)	(3,673)
Balance as at 30 April 2009	9,386	87,224	219	22,517	(1,346)	49,457	3,675	171,132

Group Cash Flow Statement

	Year Ended 30 April	Year Ended 30 April
	2010	2009
	£'000	£'000
Operating activities
Profit/(loss) before taxation	48,408	(16,824)
Gains on investments	(43,011)	(6,036)
Foreign exchange differences at fair value through the profit or loss	(2,342)	26,359
Operating cash flows before movements in working capital	3,055	3,499
Increase/(decrease) in other receivables	(291)	111
Increase in other payables	297	184
Net cash from operating activities before taxation	3,061	3,794
Taxation	(241)	(51)
Net cash inflow from operating activities	2,820	3,743
Investing activities
Purchases of investments	(75,934)	(401,890)
Sales of investments	55,402	418,441
Net cash (outflow)/inflow from investing activities	(20,532)	16,551
Financing activities
Equity dividends paid	(4,114)	(3,673)
Issue of ordinary shares	18,661	12,568
Buy-back of ordinary shares	-	(9,603)
Net cash inflow/(outflow) from financing activities	14,547	(708)
Net (decrease)/increase in cash and cash equivalents	(3,165)	19,586
Cash and cash equivalents at the start of the year	8,202	14,660
Effect of foreign exchange rates	1,354	(26,044)
Cash and cash equivalents at the end of the year	6,391	8,202

Company Cash Flow Statement

	Year Ended 30 April	Year Ended 30 April
	2010	2009
	£'000	£'000
Operating activities
Profit/(loss) before taxation	48,413	(16,824)
Gains on investments	(43,016)	(6,036)
Foreign exchange differences at fair value through the profit or loss	(2,342)	26,359
Operating cash flows before movements in working capital	3,055	3,499
Increase/(decrease) in other receivables	(291)	111
Increase in other payables	297	184
Net cash from operating activities before taxation	3,061	3,794
Taxation	(241)	(51)
Net cash inflow from operating activities	2,820	3,743
Investing activities
Purchases of investments	(75,944)	(401,890)
Sales of investments	55,402	418,441
Net cash (outflow)/inflow from investing activities	(20,542)	16,551
Financing activities
Equity dividends paid	(4,114)	(3,673)
Issue of ordinary shares	18,661	12,568
Buy-back of ordinary shares	-	(9,603)
Net cash inflow/(outflow) from financing activities	14,547	(708)
Net (decrease)/increase in cash and cash equivalents	(3,175)	19,586
Cash and cash equivalents at the start of the year	8,202	14,660
Effect of foreign exchange rates	1,354	(26,044)
Cash and cash equivalents at the end of the year	6,381	8,202

Principal Risks and Risk Management

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

Other risks faced by the Company include breach of regulatory rules which could lead to suspension of the Company's Stock Exchange listing, financial penalties, or a qualified audit report. Breach of Section 1159 of the Corporation Taxes Act 2010 could lead to the Company being subject to tax on capital gains.

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

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

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

·      The financial statements contained within the Annual Report for the year ended 30 April 2010, of which this statement of results is an extract, have been prepared in accordance with applicable International Financial Reporting Standards, on a going concern basis, and give a true and fair view of the assets, liabilities, financial position and return of the Company and the undertakings included in the consolidation taken as a whole;

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

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

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

Notes:

1.         The financial statements of the Group, which are the responsibility of, and were approved by, the Board on 4 June 2010, have been prepared in accordance with International Financial Reporting Standards ("IFRS"). These comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), together with such interpretations by the International Accounting Standards and Standing Interpretations Committee as have been approved by the IASB and still remain in effect, to the extent that these have been adopted by the European Union.

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

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

2.         Return per ordinary share is based on a weighted average of 780,184 ordinary shares in issue during the year (2009 - 728,778).

3.         Net asset value per ordinary share is based on the 815,281 ordinary shares in issue as at 30 April 2010 (2009 - 745,231).

4.         During the year the Directors allotted 5,645 ordinary shares from Treasury for proceeds of £1,349,000 and 64,405 ordinary shares from its block listings for proceeds of £17,295,000 before issue costs of £44,000. At the year end the Company held no ordinary shares in Treasury.

5.         At 30 April 2010 the sterling value of the US Treasury stocks was protected by a forward currency contract.

6.         Financial Instruments

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

The fair value of the financial assets and liabilities of the Group at 30 April 2010 is not different from their carrying value in the financial statements.

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

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

Credit Risk

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

The Group's principal financial assets are investments, cash balances and other receivables, which represent the Group's maximum exposure to credit risk in relation to financial assets. The Group did not have any exposure to any financial assets which were passed due or impaired at the year end.

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

All of the assets of the Group, other than cash deposits and the exposure to the FTSE 100 Future, are held by JPMorgan Chase Bank, the Group's custodian. Bankruptcy or insolvency of the custodian might cause the Group's rights with respect to the securities held by the custodian to be delayed or limited. The Board monitors the Group's risk by reviewing the custodian's internal control reports on a regular basis.

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

Market Price Risk

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

The Company continued to use derivatives during the year. These contracts were entered into to manage the Company's effective liquidity.

Liquidity Risk

Liquidity risk is the risk that the Group will encounter in realising assets or otherwise raising funds to meet financial commitments. The risk of the Group not having sufficient liquidity at any time is not considered by the Board to be significant, given the liquid nature of the portfolio of investments and the level of cash and cash equivalents ordinarily held. Cash balances are held with reputable banks with a credit rating of AA or higher, usually on overnight deposit. The Investment Adviser reviews liquidity at the time of each investment decision. The Board reviews liquidity exposure at each meeting.

All of the Company's financial liabilities at 30 April 2010 have a maturity period of less than three months.

Interest Rate Risk

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

Floating Rate

When the Group holds cash balances, such balances are held on overnight deposit accounts and call deposit accounts. The benchmark rate which determines the interest payments received on cash balances is the bank base rate, which at 30 April 2010 was 0.50% in the UK (2009: 0.50%).

Foreign Currency Risk

The Company invests in overseas securities.

	2010	2009
Currency exposure at 30 April:	£'000	£'000
Australian Dollars Swiss Francs US Dollars	4,696 12,096 139,236	- 3,320 88,334

At 30 April 2010 the Sterling cost of the US Treasury exposure was protected by a forward currency contract. The gain of £1,742,000 (2009: gain of £754,000) on the US$120,000,000 (2009: US$ 122,100,000) sold forward against £80,160,000 (2009: £83,154,000) is included in other receivables (2009: other receivables). All foreign exchange contracts in place at 30 April 2010 are due to mature within two months.

7.         These are not statutory accounts in terms of Section 434 of the Companies Act 2006.  Full audited accounts for the year to 30 April 2010 will be sent to shareholders in June 2010 and will be available for inspection at 10 St Colme Street, Edinburgh, the registered office of the Company. The full annual report and accounts will be available on the Company's website www.patplc.co.uk.

8.         The audited accounts for the year ended 30 April 2010 will be lodged with the Registrar of Companies following the Annual General Meeting to be held on 22 July 2010.

 

END

 

 

FR SSWFLLFSSEIM