Final Results

RNS Number : 4164P

Personal Assets Trust PLC

05 June 2015

 

To:                   RNS

From:              Personal Assets Trust plc

Date:               5 June 2015

Results for the year ended 30 April 2015

The Directors of Personal Assets Trust ("PAT") are pleased to announce the Group's results for the year ended 30 April 2015.

The key points are as follows:

·      PAT is run expressly for private investors. Its investment policy is to protect and increase (in that order) the value of shareholders' funds per share over the long term.

·      Over the year to 30 April 2015 PAT's net asset value per share ("NAV") rose by 4.8%.  This compares to a rise of 3.9% in the Company's comparator, the FTSE All-Share Index.  PAT's share price rose by £18.80 during the year and at 30 April 2015 was £350.70.  An analysis of performance is provided in the Chairman's Statement and Investment Adviser's Report below.

·     Since PAT became independently managed in 1990 its NAV has increased by 517.3% compared to the FTSE All-Share's 260.4% and the RPI's 106.2%.

Capital returns to 30 April 2015:

	3 Years	5 Years	10 Years	Since 1990
NAV	4.2%	22.0%	58.1%	517.3%
FTSE All-Share	26.0%	31.3%	56.9%	260.4%
RPI	6.4%	15.8%	34.7%	106.2%

·     The Company has continued to experience demand for its shares. During the year the Company reissued 35,609 Ordinary shares from Treasury and purchased 10,100 Ordinary shares to be held in Treasury.

·      During the year, PAT continued to maintain a high level of liquidity. At 30 April 2015, liquidity was 59.9%. This included 22.1% in UK cash and cash equivalents and 37.8% in various classes of non-equity risk assets: 17.0% in US TIPS; 10.1% in Gold Bullion; 6.1% in overseas cash and cash equivalents; and 4.6% in UK Index-Linked Gilts. This compared to holdings as at 30 April 2014 of 19.2% in UK cash and cash equivalents and 36.8% in various classes of non-equity risk assets: 16.6% in US TIPS; 10.7% in Gold Bullion; 4.9% in overseas cash and cash equivalents; and 4.6% in UK Index-Linked Gilts.

·      Dividends are paid in July, October, January and April of each year. The first interim dividend of £1.40 per Ordinary share will be paid to shareholders on 16 July 2015. Barring unforeseen circumstances, three further interim dividends of £1.40 per Ordinary share are expected to be paid to shareholders in the year ending 30 April 2016, totalling £5.60 for the year.

The Chairman, Hamish Buchan, said:

"Sebastian Lyon, our Investment Adviser, has noted in his Report in the Annual Report and Accounts that over the year to 30 April 2015 our net asset value per share ("NAV") rose by 4.8% compared to the increase of 3.9% in our comparator, the FTSE All-Share Index ("All-Share"), and in price terms we rose by 5.7% as we turned the 0.6% discount to NAV at which we sold on 30 April 2014 into an 0.2% premium. This was in keeping with the Board's undertaking, enshrined in our Articles of Association, that our shares will always trade at close to NAV through a combination of share buybacks at a small discount to NAV and the issue of new or Treasury shares at a small premium to NAV where demand exceeds supply. During the year the Company created no new shares but bought back 10,100 shares to be held in Treasury for a total consideration of £3.4 million and reissued 35,609 shares from Treasury for net proceeds of £12.3 million.

Our success over the past year in modestly outperforming the All-Share made a welcome change from the previous year, in which we not only underperformed the All-Share but also, uncharacteristically and to our chagrin, lost money in absolute terms. Over the three years and five years to 30 April 2015 our comparator performed strongly, up by 26.0% and 31.3% respectively. To those used to Personal Assets' typical underperformance of rising markets and outperformance of falling ones it will come as no surprise that while we made money over both three years and five years our share price gains of 2.9% and 21.1% respectively lagged our comparator, our three-year figures in particular (which suffered from the disappointing year to 30 April 2014 just referred to) helping us to understand how the Labour Party in Scotland must have felt on the morning after the General Election.

On a brighter note, our annual capital return over the 10 years to 30 April 2015, at 4.5% in price terms and 4.7% in NAV terms, has been little different from that of our comparator, at 4.6%, but was achieved in exchange for much lower volatility - the same destination reached by calmer and less stressful means. This accords with our objective, which I mentioned last year, of seeking to avoid capital loss and of taking on a level of risk which will usually be less than that of our comparator. The bottom chart on page 10 of the Annual Report & Accounts shows how over the 15 years since 30 April 2000 Personal Assets succeeded in outperforming the All-Share while being not only much less volatile than its comparator but also the least volatile of all the trusts in its peer group, the AIC Global Sector.

Last year we made a number of changes to the Annual Report & Accounts and this year we have made further radical alterations with the aim of clearing away clutter and making our published statements more accessible, intelligible and useful. Robin discusses the changes in detail in the accompanying Quarterly No. 76, but I can't resist mentioning here that we have succeeded in reducing the size of the Annual Report & Accounts from 50 pages to 33 without, we believe, sacrificing anything of interest or value.

At a General Meeting on 15 April 2015 shareholders voted to amend the Company's Articles of Association to permit the Company to distribute realised capital profits as dividend. The Board intends to use this new power to maintain the dividend at the present annual rate of £5.60 per share for the foreseeable future, thereby keeping faith with income-conscious shareholders without disadvantaging shareholders in general by restricting our investment flexibility or lowering portfolio quality and hence putting at risk capital protection and capital growth.

The Company's Zero Charge Investment Plan, established in 1991 as a service to shareholders, has been partly instrumental in the Company's growth over the years and by 30 April 2015 accounted for 24.6% of the Company's issued share capital with a total value of £150 million. We believe that ISAs will be of increasing importance to individuals' financial planning in future years and so we have lowered the minimum subscription for Personal Assets ISAs to £5,000 annually, or £500 per month - the same as for the Single Investment Option and Monthly Investment Option within our Investment Plan. A spouse's ISA fund is now transferable on death to the remaining spouse and in the 2015 Budget the ISA maximum was increased to £15,240, which means that a married couple can now save £30,480 a year into a fund which will be wholly free of tax on income and capital gains."

The Investment Adviser, Sebastian Lyon, said:

"Over the year to 30 April 2015 the net asset value per share of Personal Assets rose by 4.8%, while our comparator, the FTSE All-Share Index ("All-Share"), rose by 3.9%. In a benign year for markets we kept pace with their modest rise as equities held on to their strong gains of recent years, buoyed on an ever-rising tide of liquidity. But after six years of the devil's brew of zero interest rates and quantitative easing there is evidence that bubbles are forming.

William McChesney Martin, Chairman of the Federal Reserve 1951-70, famously said that his job was 'to take away the punchbowl just as the party gets going'. In contrast to this, his successor between 1987 and 2006, Alan Greenspan, has asserted that central banks should concern themselves only with clearing up after crashes rather than trying to identify bubbles in advance. It is therefore ironic that his central bank successors have themselves arguably created the third bubble in 15 years following the dot com boom in 2000 and the housing boom in 2007. Like Greenspan, they are in no mood to identify it - but even if they were they would be as helpless as the Sorcerer's Apprentice to mop up the flood, since the enchanted broom labelled 'interest rates' has lost all its bristles.

Today's bubbles are occurring both in risky assets, like Chinese equities, and in perceived 'safe' assets, like German government bonds. Shanghai-listed stocks are up over 100% during the past year, boosted by retail investors as margin financing has almost quadrupled from the equivalent of $64bn to $280bn in less than twelve months. Beijing Baofing Technology, for instance, an online audio and video entertainment business, has risen 4,000% since it came to the market only two months ago. We have not seen such flights of fancy since 1999. But flights to safety look just as fanciful. Since 2010 conventional wisdom has held that we are on a path towards normalised interest rates, yet in Europe over the past year some official interest rates have even fallen below zero. In Switzerland and Denmark people are paid to take out mortgages and banks charge you to hold your cash. Savers looking to escape this Alice in Wonderland world may start hiding their notes under the mattress.

Our goal at Personal Assets is to avoid bubbles and preferably to ignore them. In one of the first conversations I had with Ian Rushbrook soon after the dot com bust back in 2003 he spoke of a fund manager whose investment trust had risen almost fivefold in the eight months to March 2000. Ian urged him to 'bank it!', such gains being by nature ephemeral. Alas! the trust subsequently fell by over 90% from its peak and was wound up, locking in a permanent capital loss for its shareholders.

Our practice when investing is always to try to cut the weeds and water the flowers, and over the year our equity turnover was low at 7%. We uprooted two serial disappointers, Newmont Mining and Newcrest Mining, while bedding out some more Diageo, Philip Morris and Sage during lulls in their share prices. When picking stocks we like our holdings to pay us to own them and not vice versa, and we expect the three last named companies to continue to do just that. We took advantage of a dramatic improvement in trading to sell the Company's longstanding holding in Greggs, given the increasingly competitive nature of the food-on-the-go market.

The immediate outlook for risk-averse investors is very challenging. Prices today are predicated on interest rates staying permanently low (which cannot happen) while correlations between asset classes have moved closer to one, so diversification gives less protection. In the Bible (Ecclesiastes 11:2) Ecclesiastes the Preacher warns us, 'Divide your investments among many places, for you do not know what risks might lie ahead.' Excellent advice as far as it goes, but the Preacher probably never encountered investments as closely correlated as they are today.

If interest rates stay close to zero, as seems likely in the near term, low absolute returns are also likely. Conversely, if interest rates start to rise then markets will be extremely vulnerable to a rising cost of capital. Personal Assets is in a strong position to exploit market falls as and when they emerge. We do not, however, propose to be lured down a path of decreasing quality. Instead, we will avoid the seductive trap pointed out by Benjamin Graham, 'Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of good business conditions. The purchasers view the good current earnings as equivalent to "earning power" and assume that prosperity is equivalent to safety.'"

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 Statements of Financial Position, Group and Company Statements of Changes in Equity and Group and Company Cash Flow Statements follow.

Group Income Statement

	Year ended 30 April 2015
	Revenue	Capital
	return	return	Total
	£'000	£'000	£'000
Income
Investment income	9,278	-	9,278
Other operating income	530	-	530
	9,808	-	9,808
Gains on investments held at fair value through profit or loss	-	45,838	45,838
Foreign exchange losses	-	(12,313)	(12,313)
Total income	9,808	33,525	43,333
Expenses	(2,892)	(2,626)	(5,518)
Profit before taxation	6,916	30,899	37,815
Taxation	(575)	-	(575)
Profit for the year	6,341	30,899	37,240
Return per share	£3.65	£17.79	£21.44
The "Profit/(loss) for the Year" is also the "Total Comprehensive Income for the Year", as defined in IAS1 (revised) and no separate Statement of Comprehensive Income has been presented. The "Total" column of this statement represents the Group's Income Statement, prepared in accordance with International Financial Reporting Standards ("IFRSs").  The Revenue and Capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. Return per share is calculated on 1,736,658 (2014: 1,727,421) shares, being the weighted average number in issue during the year. All items in the above statement derive from continuing operations.
Dividend Information	2015		2014
Dividends per share	£5.60		£5.60
Dividends paid	£'000		£'000
First interim dividend of £1.40 per share (2014: £1.40 per share)	2,392		2,403
Second interim dividend of £1.40 per share (2014: £1.40 per share)	2,413		2,439
Third interim dividend of £1.40 per share (2014: £1.40 per share)	2,419		2,444
Fourth interim dividend of £1.40 per share (2014: £1.40 per share)	2,440		2,393
	9,664		9,679

Group Income Statement

	Year ended 30 April 2014
	Revenue	Capital
	return	return	Total
	£'000	£'000	£'000
Income
Investment income	11,194	-	11,194
Other operating income	376	-	376
	11,570	-	11,570
Losses on investments held at fair value through profit or loss	-	(40,827)	(40,827)
Foreign exchange gains	-	13,076	13,076
Total income	11,570	(27,751)	(16,181)
Expenses	(2,725)	(2,539)	(5,264)
Loss before taxation	8,845	(30,290)	(21,445)
Taxation	(594)	-	(594)
Loss for the year	8,251	(30,290)	(22,039)
Return per share	£4.78	(£17.54)	(£12.76)

Group Statement of Financial Position

			As at 30 April 2015			As at 30 April 2014
			£'000			£'000
Non-current assets
Investments held at fair value though profit or loss			593,945			541,151
Current assets
Financial assets			6,743			2,273
Receivables			1,585			1,500
Cash and cash equivalents			15,844			45,068
Total Assets			618,117			589,992
Current liabilities
Payables			(8,372)			(16,755)
Total liabilities			(8,372)			(16,755)
Net assets			609,745			573,237
Capital and reserves
Ordinary share capital			21,845			21,845
Share premium			404,762			404,089
Capital redemption reserve			219			219
Special reserve			22,517			22,517
Treasury share reserve			(1,511)			(9,770)
Capital reserve			161,177			130,278
Revenue reserve			736			4,059
Total equity			609,745			573,237
Shares in issue at year end			1,742,956			1,717,447
Net asset value per Ordinary share			£349.83			£333.77

Company Statement of Financial Position

			As at 30 April 2015			As at 30 April 2014
			£'000			£'000
Non-current assets
Investments held at fair value through profit or loss			594,326			541,186
Current assets
Financial assets			6,743			2,273
Receivables			1,559			1,450
Cash and cash equivalents			15,457			45,045
Total Assets			618,085			589,954
Current liabilities
Payables			(8,340)			(16,717)
Total liabilities			(8,340)			(16,717)
Net assets			609,745			573,237
Capital and reserves
Ordinary share capital			21,845			21,845
Share premium			404,762			404,089
Capital redemption reserve			219			219
Special reserve			22,517			22,517
Treasury share reserve			(1,511)			(9,770)
Capital reserve			161,207			130,303
Revenue reserve			706			4,034
Total equity			609,745			573,237
Shares in issue at year end			1,742,956			1,717,447
Net asset value per Ordinary share			£349.83			£333.77

 

Group and Company Statement of Changes in Equity *

For the year ended 30 April 2015	Ordinary share capital	Share premium	Capital redemption reserve	Special reserve	Treasury share reserve	Capital reserve‡	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 30 April 2014	21,845	404,089	219	22,517	(9,770)	130,278	4,059	573,237
Profit for the year	-	-	-	-	-	30,899	6,341	37,240
Ordinary dividends paid	-	-	-	-	-	-	(9,664)	(9,664)
Reissue of Ordinary shares	-	673	-	-	11,633	-	-	12,306
Buybacks of Ordinary shares	-	-	-	-	(3,374)	-	-	(3,374)
Balance as at 30 April 2015	21,845	404,762	219	22,517	(1,511)	161,177	736	609,745
For the year ended 30 April 2014	Ordinary share capital	Share premium	Capital redemption reserve	Special reserve	Treasury share reserve	Capital reserve	Revenue reserve	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance as at 30 April 2013	21,074	383,380	219	22,517	-	160,568	5,487	593,245
Loss for the year	-	-	-	-	-	(30,290)	8,251	(22,039)
Ordinary dividends paid	-	-	-	-	-	-	(9,679)	(9,679)
Issue and reissue of Ordinary shares	771	20,709	-	-	2,547	-	-	24,027
Buybacks of Ordinary shares	-	-	-	-	(12,317)	-	-	(12,317)
Balance as at 30 April 2014	21,845	404,089	219	22,517	(9,770)	130,278	4,059	573,237

* The Company's reserves are the same as the Group's other than the Capital Reserve, which is £161,207,000 (2014: £130,303,000), and the Revenue Reserve, which is £706,000 (2014: £4,034,000). The differences relates to the profit generated by the Company's subsidiary.

‡ The Group and Company Capital reserve at 30 April 2015 includes realised capital reserves of £64,416,000 (2014: £81,947,000).

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

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

Special reserve. The cost of any shares bought back for cancellation is deducted from the Special Reserve, which is a distributable reserve and was created from the Share Premium Account, also following a General Meeting in April 1999.

Treasury share reserve. The net cost of any shares bought back to be held in Treasury.

Capital reserve. Gains and losses on the realisation of investments, gains and losses on the realisation of FTSE 100 Future contracts, realised exchange differences of a capital nature and returns of capital are accounted for in this Reserve. Increases and decreases in the valuation of investments held at the year end, unrealised gains and losses on FTSE 100 Future contracts and unrealised exchange differences of a capital nature are also accounted for in this Reserve.

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

Group Cash Flow Statement

	Year Ended 30 April	Year Ended 30 April
	2015	2014
	£'000	£'000
Cash flows from operating activities
Profit/(loss) before taxation	37,815	(21,445)
(Gains)/losses on investments	(46,462)	38,759
Foreign exchange differences at fair value through profit or loss	12,313	(13,076)
Operating cash flows before movements in working capital	3,666	4,238
(Increase)/decrease in other receivables	(69)	(10)
Increase/(decrease) in other payables	85	(25)
Net cash from operating activities before taxation	3,682	4,203
Taxation	(591)	(745)
Net cash inflow from operating activities	3,091	3,458
Investing activities
Purchases of investments - equity shares	(19,564)	(30,382)
Purchases of investments - fixed interest and other investments	(463,877)	(434,797)
Disposal of investments - equity shares	60,754	35,447
Disposal of investments - fixed interest and other investments	407,887	442,159
Net cash (outflow)/inflow from investing activities	(14,800)	12,427
Financing activities
Equity dividends paid	(9,664)	(9,679)
Issue of Ordinary shares	-	22,012
Cost of issue of Ordinary shares	-	(1)
Cost of share buybacks	(3,374)	(12,317)
Re-issue of Ordinary shares from Treasury	12,306	2,633
Net cash (outflow)/inflow from financing activities	(732)	2,648
(Decrease)/increase in cash and cash equivalents	(12,441)	18,533
Cash and cash equivalents at the start of the year	45,068	9,306
Effect of foreign exchange rate changes	(16,783)	17,229
Cash and cash equivalents at the end of the year	15,844	45,068

Company Cash Flow Statement

	Year Ended 30 April	Year Ended 30 April
	2015	2014
	£'000	£'000
Cash flows from operating activities
Profit/(loss) before taxation	37,809	(21,449)
(Gains)/losses on investments	(46,462)	38,759
Foreign exchange differences at fair value through profit or loss	12,313	(13,076)
Operating cash flows before movements in working capital	3,660	4,234
(Increase)/decrease in other receivables	(93)	31
Increase/(decrease) in other payables	91	(25)
Net cash from operating activities before taxation	3,658	4,240
Taxation	(591)	(745)
Net cash inflow from operating activities	3,067	3,495
Investing activities
Purchases of investments - equity shares	(19,904)	(30,382)
Purchases of investments - fixed interest and other investments	(463,877)	(434,797)
Disposal of investments - equity shares	60,754	35,447
Disposal of investments - fixed interest and other investments	407,887	442,159
Net cash (outflow)/inflow from investing activities	(15,140)	12,427
Financing activities
Equity dividends paid	(9,664)	(9,679)
Issue of Ordinary shares	-	22,012
Cost of issue of Ordinary shares	-	(1)
Cost of share buybacks	(3,374)	(12,317)
Reissue of Ordinary shares from Treasury	12,306	2,633
Net cash (outflow)/inflow from financing activities	(732)	2,648
(Decrease)/increase in cash and cash equivalents	(12,805)	18,570
Cash and cash equivalents at the start of the year	45,045	9,246
Effect of foreign exchange rate changes	(16,783)	17,229
Cash and cash equivalents at the end of the year	15,457	45,045

 

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 and currencies.

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 1158 of the Corporation Tax 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 2015, 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 have been prepared in accordance with International Financial Reporting Standards (''IFRSs''). 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.

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

The principal accounting policies adopted are set out below. 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 November 2014 is consistent with the requirements of IFRSs, the Directors have sought to prepare the financial statements on a basis compliant with the recommendation of the SORP.

A number of new standards, including IFRS 9 Financial Instruments, have been issued but are not effective for this accounting period. These have not been adopted early and the Group does not consider that the future adoption of any new standards, in the form currently available, will have any material impact on the financial statements as presented.

2.         During the year the Directors reissued 35,609 Ordinary shares from Treasury for net proceeds of £12,306,000. The Company also purchased 10,100 Ordinary shares to be held in Treasury for a total consideration of £3,374,000.

3.         At 30 April 2015 the sterling value of the US Treasury stocks and part of the US equities were protected by a forward currency contract.

4.         These are not statutory accounts in terms of Section 434 of the Companies Act 2006.  Full audited accounts for the year to 30 April 2015 will be sent to shareholders in June 2015 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.

5.         The audited accounts for the year ended 30 April 2015 will be lodged with the Registrar of Companies.

 

END

 

 

FR SSFFLIFISESM