Annual Financial Report
TROY INCOME & GROWTH TRUST PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 SEPTEMBER 2012
1. CHAIRMAN'S STATEMENT
The Company has made good progress in the year under review, especially in terms of its investment performance and in growing its size. The NAV per share total return of +15.5% compares with the FTSE All-Share total return of +17.2%. In a year of relatively high investment returns, this is a satisfactory outcome given the Manager's cautious bias and in the absence of any gearing. Of greater relevance is the longer term perspective and for the 38 months since Troy Asset Management became manager, the Trust's compound annual NAV per share total return is +15.7% which compares favourably with the equivalent from the FTSE All-Share Index of +11.8%. Another key objective is to grow the dividend over time and this year's growth was 5.6%.
When Troy Asset Management was appointed in 2009, the Board recognised that net assets of approximately £50m and ongoing charges of 1.63% meant that the trust needed to grow to become economically competitive. I am pleased to say that the number of shares in issue grew by 78% over the year, the net assets reached £125m and ongoing charges fell to 1.27%. The Board anticipates that based on the current size of the Company, the ratio of ongoing charges should continue to decline.
Regular issuance of shares at a small premium to meet market demand accounted for over 40% of the new shares with the remainder issued as a result of two corporate transactions.
In early August the Trust was offered as a roll over option to Grampian Investment Trust shareholders as part of the reconstruction and winding up of that vehicle. This resulted in the issuance of over 18m new shares. Later that month 73% of the shareholders in Albany Investment Trust, which was being wound up, also voted to roll their shareholdings into Troy Income & Growth Trust shares rather than take the cash alternative. This second transaction led to the issuance of over 38m new shares. I would like to emphasise that the Net Asset Values per share for existing shareholders were not diluted as no new shares were issued below net asset value. The Board expects to see further consolidation in the investment trust sector and would like your Company to play a continuing role in that process.
One of the Board's objectives is to continue to grow the Trust and to reduce further the percentage level of ongoing charges. Our belief is that this can be achieved through strong investment performance linked to a philosophy of investing in a low volatility, high quality portfolio and an active discount control policy.
Management Fee
The Board has negotiated a change to the management fee arrangement with Troy Asset Management. The current fee of 0.75% of all net assets will now fall to 0.65% on amounts over £175m. This will also help to lower the ongoing charges as the Trust continues to grow. The new arrangement became effective from 1 October 2012.
Economic Background
This remains uncertain and 2012 has been a year in which growth forecasts in the UK have been consistently lowered as the headwinds of deleveraging and the Eurozone crisis have continued to hamper economic recovery. Quantitative easing has fallen victim to the law of diminishing returns and it is not clear what further tools the authorities can deploy in order to stimulate growth. The European crisis has eased to some extent, resulting in some convergence of sovereign bond yields within the Eurozone, but the critical question of solvency, both of nations and the European banking system as a whole, has yet to be resolved. It is far too early to say that the crisis has passed and we fully expect there to be further bouts of market volatility.
Discount Control
The discount control mechanism put in place in January 2010 continues to work effectively. No shares have been repurchased in the year under review and the shares have consistently traded at a premium to net asset value. The provision of liquidity to both buyers and sellers in the market is essential if investment trusts are to have a future as long term savings vehicles. With the Retail Distribution Review coming into force in 2013 we would like Independent Financial Advisers to see Troy Income & Growth Trust as an investment trust which satisfies their key requirements of liquidity, good investment performance and low discount volatility.
Dividend
The combined fourth and fifth interim dividends totalled 0.525p which represented a 5% increase on the quarterly dividend of 0.5p paid for the first nine months of the financial year. The full year dividend totalled 2.025p and represented a 5.6% increase over the previous year. The Board intends, barring unforeseen circumstances, to pay a dividend of at least 0.525p per quarter in the current financial year.
Board Changes
Ian Boyd, after more than 20 years service, has decided to retire from the board. He will not seek re-election at the AGM .Ian has made an immense contribution to the Company over these many years for which we are very grateful. On a personal note, I have appreciated his wise counsel, his painstaking dedication and commitment and his lively contribution to our deliberations. We wish him well.
The Board is in the process of finalising a new appointment.
Award
I am pleased to report that at the recent Investment Week's Investment Company of the Year Awards, the Trust won in the category of Best Shareholder Value. The citation highlighted discount control and strong investment performance over the past three years.
Conclusion
In the last year good progress has been made in enlarging the net assets, growing the dividend and maintaining a strong record of investment performance. The investment outlook remains uncertain.
While maintaining caution the Manager will continue to review the portfolio against new opportunities as they arise.
R G Hanna
Chairman
30 November 2012
2. MANAGER'S REVIEW
Background
The FTSE All-Share Index returned +17.2% over the year. In isolation this figure would suggest that the macro-economic environment improved over the course of this period, but the full picture is somewhat different. In early October 2011 the UK equity market was trading at lows not seen since the previous summer. A resurgence of concerns centred on the US debt ceiling, depressed GDP growth and the Eurozone crisis, this time focused largely on Spain and Italy, had materially damaged market sentiment. Today the FTSE 100 is nearly 1,000 points higher and investors' nerves have been soothed. The European Central Bank announced the new, but as yet untested, plan to buy distressed government debt under the Outright Monetary Transactions (OMT) mechanism, Greece remains in the euro and new quantitative easing programmes have been launched by central bankers across the globe. But in our view these initiatives have served only to placate the bond vigilantes and the equity market bears temporarily. Many of the southern European sovereign borrowers remain insolvent, the US budget deficit continues to be a ticking time bomb yet to be defused, and austerity is proving even more unpalatable and difficult to implement than the politicians had expected. Little has actually improved.
Performance & Investment Strategy
Your Company delivered a Net Asset Value (NAV) total return of +15.5% and a share price total return of +18.0% over the year, this compares with the FTSE All-Share return of +17.2%. This return was again delivered with significantly lower volatility than that of both the broader market and the peer group.
We are sometimes asked by investors what returns we expect the Troy Income & Growth Trust to generate in the coming year. This is not a question we would pretend to be able to answer explicitly, but we do think it crucial to explain to investors how the Trust's investment strategy has behaved historically and in different market environments. We emphasise that our defensive strategy could potentially lead us to underperform in ebullient markets. Given this assertion it seems important to explain how the Trust has generated such robust absolute returns over the period under review. The most important thing to emphasise is that we have not abandoned our strategy of investing in high quality income producing stocks and thrown caution to the wind in an effort to keep up with the pack. In fact, we would go so far as to say that the reverse is true. Many of the stocks that the Trust owns have appreciated as additional investors have sought out quality franchises and strong balance sheets. The theory that higher risk equates to higher return is increasingly being challenged and the chart on page 6 of the Annual Report provides empirical support to our long held view that high quality stocks deliver better long term returns.
With the returns currently available on cash deposits nearly non-existent, investors have also become hungrier for income. By way of example Diageo's yield has compressed from above 3.2% to below 2.5% over the last 12 months and its share price has appreciated over 40%. The result of this move is that many high quality stocks are no longer cheap but rather at, or close to, fair value. From such starting valuations long term real returns have historically been modest, but positive. However, when compared to the returns anticipated from the over-bought bond market, or the more volatile returns expected from lower quality equities, such real returns suddenly seem more attractive. What is more, if economic instability and geopolitical risks continue to escalate, high quality income producing stocks could be pushed to much higher valuations yet.
Dividend Growth
However it is not enough for us that dividends are attractively priced on a yield basis. To deliver the returns we require and to support the Trust's growing dividend the underlying investments must themselves deliver a growing stream of income. That growth must be real rather than nominal. The chart on page 7 of the Annual Report shows the distribution of 12 month dividend growth for the equity investments held in the Trust at the end of September 2012.
78% of the stocks held in the portfolio grew their dividends by more than 5% and none cut their 12 month payout in the period. A growth profile such as this should continue to support the Trust's own dividend growth.
Portfolio Changes
The Trust's strategy and asset allocation have remained constant and the portfolio of investments has remained largely unchanged over the year. Some changes were made but most of the activity related to the investment of new cash as the Company has grown.
In early October 2011 the Trust's holding in BP was significantly increased at a price well below £4. The recent news that BP has managed to exit its stake in the Russian TNK-BP venture is the latest in a string of restructuring and simplification measures that we believe will lead to a more efficient, more focused group. A new holding in Compass Group was purchased on a 3.7% historic yield at a similar time. This contract catering group completed its own period of self-improvement some time ago and is now also seeing the benefits of that process. Later in the quarter a holding in Microsoft was purchased. On a yield of 3% and a price earnings multiple of 10x this presented an outstanding buying opportunity in the shares of one of the world's leading companies. We also increased the holding in London & Stamford when a tranche of shares was placed at a substantial discount to net asset value.
In February the Trust bought a holding in the US listed gold extractor Newmont Mining. We have long believed that gold, held as a form of non-printable currency, provides investors with the best protection against currency debasement and inflation. Gold stocks currently trade at a discount to the metal and as such provide a way of gaining exposure to this particular safe haven at a discount. Newmont shares, unlike the metal, also pay a modest dividend that is linked to the gold price. At a similar time we also sold the Trust's small holding in Balfour Beatty convertible preference shares, which have served investors well and had been held within the portfolio since prior to Troy's appointment.
During the summer we bought a holding in the credit services company Experian. This company enjoys near monopoly status in many of its growing markets and is well positioned to deliver a high return on equity. A 12% fall in the price in May gave us the opportunity we had been patiently waiting for. The third quarter also saw us sell Tesco, where we feel that there will be further margin pressure in the UK business as it attempts to stimulate a volume recovery, and Smiths Group where a substantial profit was realised since having purchased the shares last August, and where limited upside remained.
In the final quarter the Trust bought a holding in Polar Capital. This boutique asset manager focuses on providing an environment in which talented fund managers can thrive. The stock was bought on a yield of over 4.8% with the dividend growing at in excess of 20% per year.
Discount Control Mechanism
During the course of its reporting year the Trust's shares traded at a small premium over Net Asset Value for the vast majority of days, demonstrating the price stability generated by the discount control mechanism. This small premium allowed the company to issue just under 100 million new shares without diluting existing shareholders. The result is that your Trust is now larger, more liquid, and benefits from significantly reduced ongoing charges of 1.27%. The chart on page 8 of the Annual Report shows the movement in shares in issue since the implementation of the discount control mechanism.
Investment Outlook
The announcement of a third round of quantitative easing by the US Federal Reserve marked a significant development in monetary policy. This latest round was different in two material ways. Ben Bernanke, the Federal Reserve chairman, made it clear that with QE3 unemployment was being explicitly targeted rather than the level of inflation, and that inflation would therefore be allowed to find its own level. Additionally, monetary easing will continue at a rate of $40bn per month for as long as is needed to deliver the required reduction in unemployment. These developments serve to reinforce our view that higher inflation is likely to be the product of unbridled monetary easing and that owning businesses with strong pricing power and robust franchises is the best way to ensure the real preservation of wealth. Such companies will be able to continue to grow revenues ahead of costs and will have the confidence, when supported by a strong balance sheet, to deliver a growing stream of dividends to investors. As we emphasised previously it is dividends and dividend growth that have proved the primary driver of long term equity returns and it is for this reason that we remain confident that your Trust is well positioned to deliver for its investors.
Troy Asset Management Limited
30 November 2012
Troy Asset Management is an independent fund management company aiming to generate absolute returns for investors over the long term. It manages approximately £4.6bn of assets including three open-ended investment funds: the Trojan Fund, the Trojan Income Fund and the Trojan Capital Fund; and two investment trusts: Troy Income & Growth Trust plc and Personal Assets Trust plc. Our investors include private individuals, charities, pension funds, trusts and endowments.
3. RESULTS & DIVIDENDS
|
Financial Highlights |
||
|
|
2012 |
2011 |
|
Net asset value total return |
+15.5% |
+7.9% |
|
Share price total return |
+18.0% |
+7.8% |
|
FTSE All-Share Index total return |
+17.2% |
-4.4% |
|
Dividends per share |
2.025p |
1.9175p |
|
Dividend yield* |
3.6% |
3.9% |
|
FTSE All-Share Index yield |
3.6% |
3.7% |
|
* Dividend per share as a percentage of share price at 30 September |
||
|
|
Performance (total return) |
||
|
|
Year ended |
3 years ended |
From change of manager 38 months ended |
|
|
30 September |
30 September |
30 September |
|
|
2012 |
2012 |
2012 |
|
Share price |
+18.0% |
+51.6% |
+75.6% |
|
Net asset value per share |
+15.5% |
+40.9% |
+59.1% |
|
FTSE All-Share Index |
+17.2% |
+26.1% |
+42.3% |
|
Dividends |
||||
|
|
Rate per share |
xd date |
Record date |
Payment date |
|
First interim dividend |
0.5000p |
4 January 2012 |
6 January 2012 |
27 January 2012 |
|
Second interim dividend |
0.5000p |
4 April 2012 |
10 April 2012 |
27 April 2012 |
|
Third interim dividend |
0.5000p |
4 July 2012 |
6 July 2012 |
27 July 2012 |
|
Fourth interim dividend |
0.4000p |
15 August 2012 |
17 August 2012 |
26 October 2012 |
|
Fifth interim dividend |
0.1250p |
3 October 2012 |
5 October 2012 |
26 October 2012 |
|
2011/12 |
2.0250p |
|
|
|
|
|
|
|
|
|
|
First interim dividend |
0.4725p |
5 January 2011 |
7 January 2011 |
28 January 2011 |
|
Second interim dividend |
0.4725p |
6 April 2011 |
8 April 2011 |
28 April 2011 |
|
Third interim dividend |
0.4725p |
6 July 2011 |
8 July 2011 |
29 July 2011 |
|
Fourth interim dividend |
0.5000p |
5 October 2011 |
7 October 2011 |
28 October 2011 |
|
2010/11 |
1.9175p |
|
|
|
|
Distribution of Assets and Liabilities |
|||||||
|
|
|||||||
|
|
Valuation at |
|
|
|
Valuation at |
||
|
|
30 September |
|
|
Appreciation/ |
30 September |
||
|
|
2011 |
Purchases |
Sales |
(depreciation) |
2012 |
||
|
|
£'000 |
% |
£'000 |
£'000 |
£'000 |
£'000 |
% |
|
|
|
|
|
|
|
|
|
|
Listed investments |
|
|
|
|
|
|
|
|
Ordinary shares |
55,107 |
87.2 |
56,450 |
(2,798) |
7,508 |
116,267 |
93.4 |
|
Convertibles |
217 |
0.3 |
- |
(223) |
6 |
- |
- |
|
Other fixed interest |
1,922 |
3.0 |
- |
- |
251 |
2,173 |
1.7 |
|
|
______ |
_____ |
________ |
_______ |
________ |
______ |
_____ |
|
|
57,246 |
90.5 |
56,450 |
(3,021) |
7,765 |
118,440 |
95.1 |
|
|
______ |
_____ |
________ |
_______ |
________ |
______ |
_____ |
|
Current assets |
6,247 |
9.9 |
|
|
|
7,245 |
5.8 |
|
Current liabilities |
(266) |
(0.4) |
|
|
|
(1,160) |
(0.9) |
|
|
______ |
_____ |
|
|
|
______ |
_____ |
|
Net assets |
63,227 |
100.0 |
|
|
|
124,525 |
100.0 |
|
|
______ |
_____ |
|
|
|
______ |
_____ |
|
Net asset value per share |
50.00p |
|
|
|
|
55.18p |
|
|
|
______ |
|
|
|
|
______ |
|
4. BUSINESS REVIEW
Activities
The Company is an investment trust.
Investment Objective and Policy
Following shareholder approval at an extraordinary general meeting held on 17 September 2009, the Company's investment objective is to provide shareholders with an attractive income yield and the prospect of income and capital growth through investing in a portfolio of predominantly UK equities.
Results and Dividends
The financial statements for the year ended 30 September 2012 appear below. Dividends in respect of the year amounted to 2.025p per share (2011 - 1.9175p). In order to facilitate the offer of the Company's shares as a roll over option to the shareholders of Albany Investment Trust plc, the normal fourth interim dividend was split into two parts. Shareholders on the company's share register on 17 August 2012 were entitled to the fourth interim dividend and those on register on 5 October 2012 were entitled to the fifth interim dividend. The fourth and fifth interim dividends were paid on 26 October 2012. The Board intends to revert to paying four quarterly dividends in relation to the financial year to 30 September 2013. The fifth interim dividend of 0.125p per share announced on 25 September 2012 (2011 - fourth interim 0.5p) will be accounted for in the financial year ending on 30 September 2013.
Share Capital
At the Annual General Meeting held on 5 January 2012, shareholders approved the renewal of the authority permitting the Company to make market purchases of its own Ordinary shares. This authority (which, unless renewed, will expire at the conclusion of the Company's forthcoming AGM) is limited to Ordinary shares with a maximum aggregate nominal value of £4,894,850 (being equal to approximately 14.99% of the Ordinary shares in issue as at 5 January 2012). It is proposed that this authority will be renewed at the Company's forthcoming AGM. During the year ended 30 September 2012 no Ordinary shares were purchased and no Ordinary shares were re-issued. The issued share capital at 30 September 2012 consisted of 225,684,445 Ordinary shares of 25p each and there were no Ordinary shares held in treasury. As at the date of this report the issued share capital consisted of 228,484,445 Ordinary shares of 25p each and no 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.
Principal Risks and Uncertainties and Risk Management
The principal risks facing the Company relate to the Company's investment activities and include market price risk (comprising interest rate risk, foreign currency risk and other price risk), liquidity risk and credit risk. 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 Tax Act 2010 could lead to the Company being subject to tax on capital gains. An explanation of the principal risks and how they are managed is contained below and in note 16 to the financial statements.
Risk Management
The Directors are responsible for supervising the management of the Company, while the day-to-day management of the Company's assets has been delegated to the Manager. Troy is an independent fund management company aiming to generate absolute returns for investors over the longer term. Troy seeks to preserve and build investors' wealth by constructing conservative portfolios for the long term which demonstrate lower than average volatility.
Portfolio exposure is limited by the investment guidelines drawn up by the Board in conjunction with the Manager.
These, (which may only be varied with the permission of the Board), include:
- Overseas investments not to exceed 15% of gross assets;
- UK equity portfolio to comprise between 30 and 50 individual holdings;
- No more than 6% of gross assets in any one FTSE 100 stock;
- No more than 3% of gross assets in any one FTSE Mid 250 stock;
- No more than 2% of gross assets in any one FTSE small cap or AIM stock;
- No more than 20% of gross assets in any one FTSE Industry Sector.
Analysis of Portfolio
An analysis of the portfolio is given in the Manager's Review and the Distribution of Assets and Liabilities.
Manager
With effect from 1 August 2009, investment management services are provided to the Company by Troy Asset Management Limited and the fee was, until 30 September 2012, at an annual rate of 0.75% of the Company's net assets. From 1 October 2012 the fee is at an annual rate of 0.75% of the Company's net assets up to £175 million and at an annual rate of 0.65% of the Company's net assets at or above £175 million. The key terms of the investment management agreement (including details of the arrangements relating to the termination of the Manager's appointment) are set out in the section entitled "Investment Management Agreement" below.
Investment Management Agreement
Details of the fee charged by Troy in the financial year and how it is calculated are set out in note 3 to the financial statements. The Board believes the fee charged by Troy is competitive by comparison with other investment trusts with a similar investment mandate and is priced appropriately given the level of service provided by the Manager.
The contract between the Company and Troy may be terminated by either party on six months' notice. No compensation is payable to the Manager in the event of termination of the contract over and above payment in respect of the required minimum notice.
The contract is also terminable summarily by either party in the event of material breach by the other party; the occurrence of certain events suggesting the insolvency of the other party or relating to the winding up of the other party; the serious misconduct, negligence, wilful default, or fraud of the other party; or the Company being the subject of any reconstruction or amalgamation following a continuation vote having failed to be passed by the Company in general meeting and/or the Company being wound up, liquidated or dissolved. In addition, the Company is entitled to terminate the contract summarily (a) if Francis Brooke ceases to be a full-time executive of Troy, (b) if Troy ceases to have the appropriate FSA authorisation to manage the Company's assets, (c) if Troy or any of its employees or associates is involved in any conduct which is materially prejudicial to the interests of the Company, (d) if Troy undergoes a change of control (other than through a change of control whereby the existing management team of Sebastian Lyon, Francis Brooke and Simon de Zoete increases its aggregate holding in Troy to more than 50 per cent of the voting rights or through a change of control which does not involve a change of control of the Manager's ultimate holding company), (e) if the Company ceases to satisfy the conditions for approval as an investment trust by reason of the Manager's negligence or wilful default or (f) if an FSA audit or investigation gives rise to an adverse finding in relation to any significant aspect of the Manager's business which might be expected to have a materially adverse effect on the Company's business or reputation.
The Board considers the continuing appointment of the Manager to be in the best interests of the shareholders at this time. The Board believes Troy has the skills and experience appropriate to achieving the Company's investment objective.
Company Secretary
On 1 July 2010 Personal Assets Trust Administration Company Ltd ('PATAC') was appointed to provide Company Secretarial, accounting and administrative services, for an annual fee of £95,000 plus VAT payable quarterly in advance. The appointment is terminable on three months notice. This fee is adjusted annually by the higher of the increase in the Retail Price Index or the Consumer Price index.
Going Concern
The Directors believe that it is appropriate to continue to adopt the going concern basis in preparing the financial statements as the assets of the Company consist mainly of securities which are readily realisable and, accordingly, the Company has adequate financial resources to continue in operational existence for the foreseeable future. In reaching this view, the Directors reviewed the level of expenditure of the Company against the cash and asset liquidity within the portfolio.
Discount Policy
The Company's discount policy was introduced with effect from the conclusion of the AGM held on 14 January 2010. This 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 Troy for a fee (additional to its investment management fee) of £30,000 per annum (excluding VAT) and from 1 October 2010 this has been 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. 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 (as last published). Such purchases will also only be made in accordance with the rules of the UK Listing 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 a Share is below the net asset value per Ordinary share most recently published by 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.
Share Premium Account and Special Capital Reserve
At an Extraordinary General Meeting of the Company held on 5 August 2010, the shareholders approved, subject to the consent of the Court of Session in Scotland, the cancellation of the share premium account and the creation of a special capital reserve. The Court of Session's consent was received on 1 October 2010 and the cancellation of the share premium account and the creation of the special capital reserve has been reflected in the year to 30 September 2011. The special capital reserve may only be used for certain restricted purposes including the purchase of the Company's own shares.
By Order of the Board
Steven Cowie C.A.
Secretary
30 November 2012
5. STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Report & Accounts, in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Prior to the dissolution of the Company's subsidiary, under the law they were required to prepare the group financial statements in accordance with IFRSs as adopted by the EU. The Directors are required to prepare the company financial statements on the same basis.
Under Company law, the Directors must not approve the financial statements unless they are satisfied they present fairly the financial position, financial performance and cash flows for that period.
In preparing the financial statements, the Directors are required to:
- select suitable accounting policies in accordance with IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors and then apply them consistently;
- present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
- provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the impact of particular transactions, other events and conditions on the company's financial position and performance;
- make judgements and estimates that are reasonable and prudent; and
- state whether they have been prepared in accordance with IFRSs as adopted by the EU subject to any material departures disclosed and explained in the Notes to the Financial Statements.
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 Directors' Report (including a business review), 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.
Statement under Disclosure and Transparency Rules
Each of the Directors confirms that to the best of their knowledge:
- the financial statements, prepared in accordance with IFRSs, as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss; and
- the Directors' Report (incorporating the other sections of this document which are referred to in it) includes 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
I M Boyd
Chairman of the Audit Committee
30 November 2012
TROY INCOME & GROWTH TRUST PLC
STATEMENT OF COMPREHENSIVE INCOME
|
|
|
Year ended 30 September 2012 |
Year ended 30 September 2011 |
||||
|
|
|
Revenue |
Capital |
|
Revenue |
Capital |
|
|
|
Note |
return |
return |
Total |
return |
return |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Profits on investments held at fair value |
9 |
- |
7,765 |
7,765 |
- |
2,200 |
2,200 |
|
Currency losses |
|
- |
(8) |
(8) |
- |
(4) |
(4) |
|
Revenue |
2 |
|
|
|
|
|
|
|
Income from listed investments |
|
3,885 |
- |
3,885 |
2,766 |
- |
2,766 |
|
Other income |
|
1 |
- |
1 |
2 |
- |
2 |
|
|
|
______ |
_______ |
______ |
______ |
_______ |
______ |
|
|
|
3,886 |
7,757 |
11,643 |
2,768 |
2,196 |
4,964 |
|
|
|
______ |
_______ |
______ |
______ |
_______ |
______ |
|
Expenses |
|
|
|
|
|
|
|
|
Investment management fees |
3 |
(217) |
(403) |
(620) |
(154) |
(285) |
(439) |
|
VAT recoverable on investment management fees |
3 |
- |
- |
- |
19 |
19 |
38 |
|
Other administrative expenses |
4 |
(364) |
- |
(364) |
(373) |
- |
(373) |
|
Finance costs of borrowing |
5 |
(5) |
(10) |
(15) |
(5) |
(10) |
(15) |
|
|
|
______ |
_______ |
______ |
______ |
_______ |
______ |
|
Profit before taxation |
|
3,300 |
7,344 |
10,644 |
2,255 |
1,920 |
4,175 |
|
Taxation |
6 |
(55) |
- |
(55) |
(35) |
- |
(35) |
|
|
|
______ |
_______ |
______ |
______ |
_______ |
______ |
|
Profit for the year |
|
3,245 |
7,344 |
10,589 |
2,220 |
1,920 |
4,140 |
|
|
|
______ |
_______ |
______ |
______ |
_______ |
______ |
|
Earnings per Ordinary share (pence) |
8 |
2.16 |
4.88 |
7.04 |
1.95 |
1.68 |
3.63 |
|
|
|
______ |
_______ |
______ |
______ |
_______ |
______ |
The "Profit for the Year" is also the Total Comprehensive Income for the year as defined in IAS1 (revised).
The total column of this statement represents the Statement of Comprehensive Income, prepared in accordance with IFRS, as adopted by the European Union. 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.
All income and losses are attributable to the equity holders of the company.
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
BALANCE SHEET
|
|
|||||
|
|
|
|
|
As at |
As at |
|
|
|
|
|
30 September |
30 September |
|
|
|
|
|
2012 |
2011 |
|
|
Notes |
|
|
£'000 |
£'000 |
|
Non-current assets |
|
|
|
|
|
|
Ordinary shares |
|
|
|
116,267 |
55,107 |
|
Convertibles |
|
|
|
- |
217 |
|
Other fixed interest |
|
|
|
2,173 |
1,922 |
|
|
|
|
|
______ |
______ |
|
Investments held at fair value through profit or loss |
9 |
|
|
118,440 |
57,246 |
|
|
|
|
|
______ |
______ |
|
Current assets |
|
|
|
|
|
|
Accrued income and prepayments |
|
|
|
608 |
337 |
|
Other debtors |
|
|
|
41 |
- |
|
Cash and cash equivalents |
|
|
|
6,596 |
5,910 |
|
|
|
|
|
______ |
______ |
|
Total current assets |
|
|
|
7,245 |
6,247 |
|
|
|
|
|
______ |
______ |
|
Total assets |
|
|
|
125,685 |
63,493 |
|
Current liabilities |
|
|
|
|
|
|
Trade and other payables |
|
|
|
(428) |
(266) |
|
Dividends payable |
|
|
|
(732) |
- |
|
|
|
|
|
______ |
______ |
|
Total current liabilities |
|
|
|
(1,160) |
(266) |
|
|
|
|
|
______ |
______ |
|
Net assets |
|
|
|
124,525 |
63,227 |
|
|
|
|
|
______ |
______ |
|
Issued capital and reserves attributable to equity holders |
|||||
|
Called-up share capital |
11 |
|
|
56,421 |
31,610 |
|
Share premium account |
12 |
|
|
30,941 |
1,547 |
|
Special reserve |
13 |
|
|
58,163 |
58,163 |
|
Capital reserve |
14 |
|
|
(23,371) |
(30,715) |
|
Revenue reserve |
15 |
|
|
2,371 |
2,622 |
|
|
|
|
|
______ |
______ |
|
Equity shareholders' funds |
|
|
|
124,525 |
63,227 |
|
|
|
|
|
______ |
______ |
|
Net asset value per Ordinary share (pence) |
8 |
|
|
55.18 |
50.00 |
|
|
|
|
|
______ |
______ |
TROYINCOME & GROWTH TRUST PLC
STATEMENT OF CHANGES IN EQUITY
|
|
||||||
|
For year ended 30 September 2012 |
|
|
|
|
|
|
|
|
|
Share |
|
|
|
|
|
|
Share |
premium |
Special |
Capital |
Revenue |
|
|
|
capital |
account |
reserve |
reserve |
reserve |
Total |
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
Balance at 30 September 2011 |
31,610 |
1,547 |
58,163 |
(30,715) |
2,622 |
63,227 |
|
Total comprehensive income for the year |
- |
- |
- |
7,344 |
3,245 |
10,589 |
|
Equity dividends |
- |
- |
- |
- |
(3,496) |
(3,496) |
|
Costs incurred on the issue of new shares |
- |
(558) |
- |
- |
- |
(558) |
|
Contribution to costs incurred on issue of new shares |
- |
254 |
- |
- |
- |
254 |
|
Discount control costs |
- |
(36) |
- |
- |
- |
(36) |
|
New shares issued |
24,811 |
29,734 |
- |
- |
- |
54,545 |
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
Balance at 30 September 2012 |
56,421 |
30,941 |
58,163 |
(23,371) |
2,371 |
124,525 |
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
For year ended 30 September 2011 |
|
|
|
|
|
|
|
Balance at 30 September 2010 |
30,486 |
53,204 |
249 |
(32,635) |
2,321 |
53,625 |
|
Total comprehensive income for the year |
- |
- |
- |
1,920 |
2,402 |
4,322 |
|
Equity dividends |
- |
- |
- |
- |
(2,101) |
(2,101) |
|
Cancellation of share premium account |
- |
(53,204) |
53,204 |
- |
- |
- |
|
Release of costs of cancellation of share premium account |
- |
- |
5 |
- |
- |
5 |
|
Shares issued from treasury |
- |
435 |
7,256 |
- |
- |
7,691 |
|
Shares bought back into treasury |
- |
- |
(2,551) |
- |
- |
(2,551) |
|
Discount control costs |
- |
(36) |
- |
- |
- |
(36) |
|
New shares issued |
1,124 |
1,148 |
- |
- |
- |
2,272 |
|
|
______ |
______ |
______ |
______ |
______ |
______ |
|
Balance at 30 September 2011 |
31,610 |
1,547 |
58,163 |
(30,715) |
2,622 |
63,227 |
|
|
______ |
______ |
______ |
______ |
______ |
______ |
TROY INCOME & GROWTH TRUST PLC
CASH FLOW STATEMENT
|
|
Year ended |
Year ended |
||
|
|
30 September 2012 |
30 September 2011 |
||
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
Cash flows from operating activities |
|
|
|
|
|
Investment income received |
3,621 |
|
2,778 |
|
|
Deposit interest received |
1 |
|
2 |
|
|
Other cash receipts |
- |
|
38 |
|
|
Administrative expenses paid |
(856) |
|
(770) |
|
|
|
________ |
|
________ |
|
|
Cash generated from operations (note 20 (a)) |
|
2,766 |
|
2,048 |
|
Finance costs paid |
|
(15) |
|
(15) |
|
Taxation |
|
(55) |
|
(35) |
|
|
|
________ |
|
________ |
|
Net cash inflows from operating activities |
|
2,696 |
|
1,998 |
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
Purchases of investments |
(34,517) |
|
(9,325) |
|
|
Sales of investments |
3,021 |
|
6,186 |
|
|
|
________ |
|
________ |
|
|
Net cash outflow from investing activities |
|
(31,496) |
|
(3,139) |
|
|
|
________ |
|
________ |
|
Net cash outflow before financing |
|
(28,800) |
|
(1,141) |
|
Financing activities |
|
|
|
|
|
Proceeds of issue of shares |
32,576 |
|
9,927 |
|
|
Cost of share buy backs |
- |
|
(2,551) |
|
|
Dividends paid |
(2,764) |
|
(2,101) |
|
|
Release of costs/ (costs) of cancellation of share premium account |
- |
|
5 |
|
|
Costs incurred on issue of new shares |
(317) |
|
- |
|
|
|
________ |
|
________ |
|
|
Net cash inflow from financing activities |
|
29,495 |
|
5,280 |
|
|
|
________ |
|
________ |
|
Net increase in cash and short term deposits (note 20(b)) |
|
695 |
|
4,139 |
|
Cash and cash equivalents at the start of the year |
|
5,910 |
|
1,778 |
|
Effect of foreign exchange rate changes |
|
(9) |
|
(7) |
|
|
|
________ |
|
________ |
|
Cash and cash equivalents at the end of the year |
|
6,596 |
|
5,910 |
|
|
|
________ |
|
________ |
TROY INCOME & GROWTH TRUST PLC
YEAR ENDED 30 SEPTEMBER 2012
|
1. |
Accounting Policies |
||
|
|
(a) |
Basis of accounting |
|
|
|
|
The financial statements of the Company have been prepared in accordance with International Financial Reporting Standards ("IFRS") which comprise standards and interpretations approved by the International Accounting Standards Board ("IASB"), and International Accounting Standards and Standing Interpretations Committee interpretations approved by the International Accounting Standards Committee ("IASC") that remain in effect, and to the extent that they have been adopted by the European Union. |
|
|
|
|
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 January 2009) 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 Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. In accordance with the Company's Articles of Association, net capital returns may not be distributed by way of dividend. 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 Section 1159 of the Corporation Tax Act 2010. |
|
|
|
|
At the date of authorisation of these financial statements, the following Standards and Interpretations were in issue but not yet effective: |
|
|
|
|
- |
Amendment to IAS 1 - Presentation of Financial Statements - presentation of items of other comprehensive income (effective for annual periods beginning on or after 1 July 2012). |
|
|
|
- |
Amendment to IAS 1 - Presentation of Financial Statements - additional comparative information (effective for annual periods beginning on or after 1 January 2013). |
|
|
|
- |
Amendment to IAS 27- Reissued as IAS 27 - Separate Financial Statements (2011) (effective for annual periods beginning on or after 1 January 2013). |
|
|
|
- |
Amendment to IFRS 7 - Financial Instruments: Disclosures - amendments related to the offsetting of assets and liabilities (effective for annual periods beginning on or after 1 January 2013). |
|
|
|
- |
IFRS 9 - Financial Instruments - Classification and Measurement (effective for annual periods beginning on or after 1 January 2015). |
|
|
|
- |
IFRS 12 - Disclosures of Interests in Other Entities (effective for annual periods beginning on or after 1 January 2013). |
|
|
|
- |
IFRS 13 - Fair Value Measurement (effective for annual periods beginning on or after 1 January 2013). |
|
|
|
The Directors do not anticipate that the adoption of these Standards and Interpretations in future periods will materially impact the financial results in the period of initial application. The Company intends to adopt the standards in the reporting period when they become effective. |
|
|
|
(b) |
Basis of preparation |
|
|
|
|
Following the dissolution of the Company's subsidiary on 29 September 2011 these financial statements are for the Company only. |
|
|
|
(c) |
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. |
|
|
|
(d) |
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. |
|
|
|
|
Interest from debt securities is accounted for using the effective interest rate method. Any write off of the premium or discount on acquisition as a result of using this basis is allocated as a revenue item in the Income Statement. Interest from deposits is dealt with on an accrual basis. |
|
|
|
|
Underwriting commission is taken to revenue, unless any shares underwritten are required to be taken up, in which case the proportionate commission received is deducted from the cost of the investment. |
|
|
|
(e) |
Expenses |
|
|
|
|
All expenses are accounted for on an accruals basis. In respect of the analysis between revenue and capital items presented within the Income Statement, 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. |
|
|
|
(f) |
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. Finance charges, including premiums payable on settlement or redemption and direct issue costs, are accounted for in the Income Statement using the effective interest rate method. |
|
|
|
(g) |
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. |
|
|
|
(h) |
Foreign currency |
|
|
|
|
Transactions denominated in foreign currencies are recorded at the actual exchange rate as at the date of the transaction. 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. |
|
|
|
|
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 income statement as a revenue or capital item depending on the nature of the gain or loss. |
|
|
|
(i) |
Cash and cash equivalents |
|
|
|
|
Cash comprises cash in hand and demand deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and which are subject to an insignificant risk of changes in value. |
|
|
|
(j) |
Use of estimates |
|
|
|
|
The preparation of financial statements require the Company to make estimates and assumptions that affect items reported in the Balance Sheet and Statement of Comprehensive Income and the disclosure of contingent assets and liabilities at the date of the financial instruments. Although these 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 estimates in the current period. |
|
|
|
|
2012 |
2011 |
|
2. |
Income |
£'000 |
£'000 |
|
|
Income from listed investments |
|
|
|
|
UK dividend income |
3,516 |
2,551 |
|
|
Interest income from investments and overseas interest |
369 |
215 |
|
|
|
________ |
________ |
|
|
|
3,885 |
2,766 |
|
|
|
________ |
________ |
|
|
Other income from investment activity |
|
|
|
|
Deposit interest |
1 |
- |
|
|
Interest on recoverable VAT on management fees |
- |
2 |
|
|
|
________ |
________ |
|
|
|
1 |
2 |
|
|
|
________ |
________ |
|
|
Total income |
3,886 |
2,768 |
|
|
|
________ |
________ |
|
3. |
Investment management fees |
|
|
On 31 July 2009, Troy Asset Management Limited ("Troy") became the Investment Manager. Until the 30 September 2012 the investment management fee paid was at an annual rate of 0.75% of the Company's net assets, calculated monthly and paid quarterly. From 1 October 2012 the investment management fee will be paid at an annual rate of 0.75% of the Company's net assets up to £175 million and at an annual rate of 0.65% of the Company's net assets at or above £175 million. The fee is calculated monthly and paid quarterly. The fee is allocated 35% to revenue and 65% to capital. |
|
|
|
2012 |
2011 |
||||
|
|
|
Revenue |
Capital |
|
Revenue |
Capital |
|
|
|
|
return |
return |
Total |
return |
return |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Investment management fee |
217 |
403 |
620 |
154 |
285 |
439 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
|
In the year ended 30 September 2011 the Company recognised a refund of £38,000 plus interest of £2,000, representing the proportion of VAT charged on investment management fees for the period to 30 September 2007 that was recoverable; and this has been allocated to revenue and capital in accordance with the accounting policy of the Company for the periods in which the VAT was charged. Interest on the refund was allocated to revenue. |
||||||
|
|
|
||
|
|
|
2012 |
2011 |
|
4. |
Other administrative expenses |
£'000 |
£'000 |
|
|
Directors' remuneration - fees as Directors |
68 |
60 |
|
|
Secretarial fees - PATAC |
100 |
95 |
|
|
Fees payable to auditor |
|
|
|
|
- fees payable to the Company's auditor for the audit of the annual accounts {a} |
22 |
22 |
|
|
- fees payable to the Company's auditor for taxation services |
9 |
9 |
|
|
Other management expenses {b} |
165 |
187 |
|
|
|
_______ |
_______ |
|
|
|
364 |
373 |
|
|
|
_______ |
_______ |
|
|
{a} Includes irrecoverable VAT of £3,700 (2011 - £3,500). |
||
|
|
{b} Includes non-recurring expenses of £nil (2011 - £36,000). |
||
|
|
In addition to the fees payable to the auditors and charged to administrative expenses, further fees of £43,200 were paid and are included in the costs incurred on the issue of new shares. These fees related to certain agreed upon procedures in relation to the acquisition of assets from Grampian Investment Trust plc and Albany Investment Trust plc. |
||
|
|
The Company had no employees during the year (2011 - nil). No pension contributions were paid for Directors (2011 - £nil). |
||
|
|
|
|
|
|
|
|
|
|
|
|
2012 |
2011 |
||||
|
|
|
Revenue |
Capital |
|
Revenue |
Capital |
|
|
|
|
return |
return |
Total |
return |
return |
Total |
|
5. |
Finance costs and borrowings |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Bank loans and overdrafts repayable within one year |
5 |
10 |
15 |
5 |
10 |
15 |
|
|
|
______ |
_____ |
_____ |
_____ |
_____ |
_____ |
|
|
Interest on bank overdrafts is at floating rates related to the lenders' UK base rates. |
||||||
|
|
. |
|
|
|
|
|
|
|
|
|
2012 |
2011 |
||||
|
|
|
Revenue |
Capital |
|
Revenue |
Capital |
|
|
|
|
return |
return |
Total |
return |
return |
Total |
|
6. |
Taxation |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Irrecoverable overseas tax |
55 |
- |
55 |
35 |
- |
35 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
|
The following table is a reconciliation of the current taxation charge to the charges or credits which would arise if all ordinary activities were taxed at the standard UK effective corporation tax rate of 25% (2011 - 27%): |
||||||
|
|
|
2012 |
2011 |
||||
|
|
|
Revenue |
Capital |
|
Revenue |
Capital |
|
|
|
|
return |
return |
Total |
return |
return |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Profit on ordinary activities before taxation |
3,300 |
7,344 |
10,644 |
2,255 |
1,920 |
4,175 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
|
Taxation of return on ordinary activities at the standard rate of corporation tax |
825 |
1,836 |
2,661 |
609 |
518 |
1,127 |
|
|
Effects of: |
|
|
|
|
|
|
|
|
UK dividend income not liable to further tax |
(879) |
- |
(879) |
(689) |
- |
(689) |
|
|
Overseas dividend income not liable to further tax |
(92) |
- |
(92) |
(58) |
- |
(58) |
|
|
Disallowed expenses |
- |
- |
- |
2 |
- |
2 |
|
|
Capital profits not taxable |
- |
(1,939) |
(1,939) |
- |
(593) |
(593) |
|
|
Movement in unutilised management expenses |
146 |
103 |
249 |
136 |
75 |
211 |
|
|
Overseas withholding tax suffered |
55 |
- |
55 |
35 |
- |
35 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
|
Current taxation charge for the year |
55 |
- |
55 |
35 |
- |
35 |
|
|
|
_______ |
______ |
______ |
_______ |
______ |
______ |
|
|
At 30 September 2012, the Company had surplus management expenses of £2,420,000 (2011 - £1,435,000) with a tax value of £556,600 (2011 - £373,000) to carry forward. No deferred tax asset has been recognised in the current or prior period 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. |
||||||
|
|
|
||||||
|
|
|
|
|
|
|
|
2012 |
2011 |
|
7. |
Dividends on equity shares |
£'000 |
£'000 |
|
|
Amounts recognised as distributions to equity shareholders in the year: |
|
|
|
|
Fourth interim dividend for the year ended 30 September 2010 of 0.45p per share |
- |
504 |
|
|
Fourth interim dividend for the year ended 30 September 2011 of 0.5p per share |
633 |
- |
|
|
Four interim dividends for the year ended 30 September 2012 totalling 1.9p (2011 - three interims totalling 1.4175p) per share |
2,863 |
1597 |
|
|
|
________ |
________ |
|
|
|
3,496 |
2,101 |
|
|
|
________ |
________ |
|
|
The fifth interim dividend of 0.125p per share, declared on 25 September 2012 and paid on 26 October 2012, 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. |
||
|
|
|
2012 |
2011 |
|
|
|
£'000 |
£'000 |
|
|
Four interim dividends for the year ended 30 September 2012 totalling 1.9p (2011 - three interim dividends totaling1.4175p) per share |
2,863 |
1,597 |
|
|
Fifth interim dividend for the year ended 30 September 2012 of 0.125p (2011 - fourth interim dividend 0.5p) per share |
282 |
633 |
|
|
|
________ |
________ |
|
|
|
3,145 |
2,230 |
|
|
|
________ |
________ |
|
|
|
|
|
|
|
|
2012 |
2011 |
|
8. |
Return and net asset value per share |
£'000 |
£'000 |
|
|
The returns per share are based on the following figures: |
|
|
|
|
Revenue return |
3,245 |
2,220 |
|
|
Capital return |
7,344 |
1,920 |
|
|
|
________ |
________ |
|
|
Total |
10,589 |
4,140 |
|
|
|
________ |
________ |
|
|
Weighted average number of Ordinary shares |
150,380,633 |
113,953,962 |
|
|
|
__________ |
__________ |
|
|
The net asset value per share is based on net assets attributable to shareholders of £124,525,000 (2011 - £63,227,000) and on 225,684,445 (2011 - 126,441,432) Ordinary shares in issue at the year end. |
||
|
|
|
|
|
|
|
|
2012 |
2011 |
|
9. |
Investments held at fair value through profit or loss |
£'000 |
£'000 |
|
|
Listed on recognised stock exchanges: |
|
|
|
|
United Kingdom |
104,269 |
52,621 |
|
|
Overseas |
14,171 |
4,625 |
|
|
|
________ |
________ |
|
|
|
118,440 |
57,246 |
|
|
|
________ |
________ |
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
|
£'000 |
£'000 |
|
|
Opening book cost |
50,931 |
46,679 |
|
|
Opening fair value gains on investments held |
6,315 |
5,223 |
|
|
|
________ |
________ |
|
|
Opening fair value |
57,246 |
51,902 |
|
|
Purchases for cash |
34,517 |
9,325 |
|
|
Purchases financed by the issue of shares (note 11) |
21,933 |
- |
|
|
Sales - proceeds |
(3,021) |
(6,186) |
|
|
Sales - net (losses)/gains on sales |
(276) |
1,113 |
|
|
Movement in fair value during the year |
8,041 |
1,092 |
|
|
|
________ |
________ |
|
|
Closing fair value |
118,440 |
57,246 |
|
|
|
________ |
________ |
|
|
Closing book cost |
104,084 |
50,931 |
|
|
Closing fair value gains on investments held |
14,356 |
6,315 |
|
|
|
________ |
________ |
|
|
Closing fair value |
118,440 |
57,246 |
|
|
|
________ |
________ |
|
|
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 £181,000 (2011 - £50,000) and on sales £3,000 (2011 - £9,000). |
||
|
|
|
|
|
|
|
|
2012 |
2011 |
|
|
Gains/(losses) on investments held at fair value |
£'000 |
£'000 |
|
|
Net (losses)/gains on sales |
(276) |
1,113 |
|
|
Gains in investment holdings |
8,041 |
1,092 |
|
|
Capital loss on dissolution of subsidiary |
- |
(5) |
|
|
|
________ |
________ |
|
|
|
7,765 |
2,200 |
|
|
|
________ |
________ |
|
|
|
|
|
|
|
|
|
|
|
10. |
Subsidiary |
|
|
|
|
The Company owned 100% of the Ordinary share capital of its sole subsidiary, G.I.T. Securities Limited, an investment dealing company registered in Scotland. This Company was dormant and was dissolved with effect from 29 September 2011. |
||
|
|
|
Ordinary shares of 25p each |
|
|
11. |
Called-up share capital |
Number |
£'000 |
|
|
Allotted, called up and fully paid |
|
|
|
|
At 30 September 2012 |
225,684,445 |
56,421 |
|
|
Held in treasury |
- |
- |
|
|
|
__________ |
________ |
|
|
|
225,684,445 |
56,421 |
|
|
|
__________ |
________ |
|
|
Allotted, called up and fully paid |
|
|
|
|
At 30 September 2011 |
126,441,432 |
31,610 |
|
|
Held in treasury |
- |
- |
|
|
|
__________ |
________ |
|
|
|
126,441,432 |
31,610 |
|
|
|
__________ |
________ |
|
|
During the year to 30 September 2012 there were no Ordinary shares of 25p each repurchased by the Company. During the year to 30 September 2011 there were 5,065,000 Ordinary shares of 25p each repurchased by the Company at a total cost, (including transaction costs), of £2,551,300 and placed in treasury. During the year to 30 September 2012 no shares were re-issued from treasury. During the year to 30 September 2011 the Company re-issued 15,059,335 Ordinary shares of 25p each from treasury for proceeds totalling £7,691,000. |
||
|
|
During the year to 30 September 2012 there were 99,243,013 new Ordinary shares of 25p each issued by the Company for proceeds totalling £54,545,159. During the year to 30 September 2011 there were 4,498,915 new ordinary shares of 25p each issued by the Company for proceeds totalling £2,273,075. Of the 99,243,013 shares issued, 39,543,885 were allotted for non cash consideration of £21,932,912. All other shares issued during the year to 30 September 2012 were issued for cash. All shares issued during the year to 30 September 2011 were issued for cash.
|
||
|
|
No shares were purchased for cancellation during the year (2011 - nil) and at the year end no shares were held in treasury (2011- nil). From 1 October 2010 the costs of the operation of the discount control mechanism of £36,000 (including VAT) have been charged against the premium on shares issued. |
||
|
|
|
|
|
|
|
|
2012 |
2011 |
|
12. |
Share premium account |
£'000 |
£'000 |
|
|
At 1 October |
1,547 |
53,204 |
|
|
Cancellation of share premium |
- |
(53,204) |
|
|
Premium on shares issued from treasury |
- |
435 |
|
|
Premium on issue of new shares |
29,734 |
1,148 |
|
|
Costs incurred on issue of new shares |
(558) |
- |
|
|
Contributions to costs incurred on issue of new shares |
254 |
- |
|
|
Discount control costs (note 11) |
(36) |
(36) |
|
|
|
________ |
________ |
|
|
At 30 September |
30,941 |
1,547 |
|
|
|
________ |
________ |
|
|
On 1 October 2010, following the special resolution passed at the Extraordinary General Meeting held on 5 August 2010, the Courts of Session in Scotland approved the cancellation of the Share Premium Account and the creation of a Special Capital Reserve from the balance of the Share Premium Account. |
||
|
|
This Special Capital Reserve, together with the balance of the Special Reserve (note 13) will be used to fund market purchases by the Company of its own shares. |
||
|
|
|
2012 |
2011 |
|
13. |
Special reserve |
£'000 |
£'000 |
|
|
At 1 October |
58,163 |
249 |
|
|
Cancellation of share premium |
- |
53,204 |
|
|
Shares bought back during the year into treasury |
- |
(2,551) |
|
|
Shares issued during the year from treasury |
- |
7,256 |
|
|
Release of provision for costs of cancellation of the Share Premium Account (note 12) |
- |
5 |
|
|
|
________ |
________ |
|
|
At 30 September |
58,163 |
58,163 |
|
|
|
________ |
________ |
|
|
The purpose of this reserve is to fund market purchases by the Company of its own Ordinary shares. |
||
.
|
|
|
|
|
|
|
|
2012 |
2011 |
|
14. |
Capital reserve |
£'000 |
£'000 |
|
|
At 1 October |
(37,033) |
(37,858) |
|
|
Net (losses)/gains on sales of investments during the year |
(276) |
1,113 |
|
|
Finance costs of borrowings |
(10) |
(10) |
|
|
Capital loss on dissolution of subsidiary |
- |
(5) |
|
|
Investment management fee |
(403) |
(285) |
|
|
VAT recoverable on investment management fees |
- |
19 |
|
|
Currency losses |
(5) |
(7) |
|
|
|
________ |
________ |
|
|
At 30 September |
(37,727) |
(37,033) |
|
|
|
________ |
________ |
|
|
|
|
|
|
|
Investment holdings gains |
|
|
|
|
At 30 September |
6,318 |
5,223 |
|
|
Investment gains |
8,041 |
1,092 |
|
|
Unrealised currency (losses)/gains |
(3) |
3 |
|
|
|
________ |
________ |
|
|
|
14,356 |
6,318 |
|
|
|
________ |
________ |
|
|
Total capital reserve |
(23,371) |
(30,715) |
|
|
|
________ |
________ |
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
2012 |
2011 |
|
15. |
Revenue reserve |
|
|
£'000 |
£'000 |
|
|
At 1 October |
|
|
2,622 |
2,321 |
|
|
Transfer to revenue account net of dividends |
|
|
(251) |
301 |
|
|
|
|
|
______ |
______ |
|
|
At 30 September |
|
|
2,371 |
2,622 |
|
|
|
|
|
______ |
______ |
|
16. |
Risk management, financial assets and liabilities |
|||||||||||||||||||
|
|
Risk management |
|||||||||||||||||||
|
|
With effect from 17 September 2009, the Company's objective changed to that of providing 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 and will vary as opportunities are identified and will include convertibles, preference shares, fixed income securities and corporate bonds. 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 Group's financial assets include investments, cash at bank and short-term debtors. Financial liabilities consist of short-term creditors and bank overdraft. |
|||||||||||||||||||
|
|
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 are 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; |
|||||||||||||||||
|
|
|
- |
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 Balance Sheet date was as follows (there were no interest bearing financial liabilities at the Balance Sheet dates): |
||||||||||||||||||
|
|
|
|
|
|
Weighted |
|
|
|||||||||||||
|
|
|
|
|
|
average |
|
|
|||||||||||||
|
|
|
|
|
|
interest |
Fixed |
Floating |
|||||||||||||
|
|
|
|
|
|
rate |
rate |
rate |
|||||||||||||
|
|
|
As at 30 September 2012 |
|
|
% |
£'000 |
£'000 |
|||||||||||||
|
|
|
Assets |
|
|
|
|
|
|||||||||||||
|
|
|
UK preference shares |
|
|
7.78 |
2,173 |
- |
|||||||||||||
|
|
|
Cash |
|
|
- |
- |
6,596 |
|||||||||||||
|
|
|
|
|
|
________ |
______ |
________ |
|||||||||||||
|
|
|
Total assets |
|
|
- |
2,173 |
6,596 |
|||||||||||||
|
|
|
|
|
|
________ |
______ |
________ |
|||||||||||||
|
|
|
|
|
|
Weighted |
|
|
|||||||||||||
|
|
|
|
|
|
average |
|
|
|||||||||||||
|
|
|
|
|
|
interest |
Fixed |
Floating |
|||||||||||||
|
|
|
|
|
|
rate |
rate |
rate |
|||||||||||||
|
|
|
As at 30 September 2011 |
|
|
% |
£'000 |
£'000 |
|||||||||||||
|
|
|
Assets |
|
|
|
|
|
|||||||||||||
|
|
|
UK preference shares |
|
|
8.80 |
1,922 |
- |
|||||||||||||
|
|
|
Cash |
|
|
- |
- |
5,910 |
|||||||||||||
|
|
|
|
|
|
________ |
______ |
________ |
|||||||||||||
|
|
|
Total assets |
|
|
- |
1,922 |
5,910 |
|||||||||||||
|
|
|
|
|
|
________ |
______ |
________ |
|||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
|
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 Balance Sheet date was as follows: |
||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
|
Within |
Within |
Within |
Within |
Within |
More than |
||||||||||||
|
|
|
|
1 year |
1-2 years |
2-3 years |
3-4 years |
4-5 years |
5 years |
||||||||||||
|
|
|
At 30 September 2012 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||||||||||||
|
|
|
Fixed rate |
|
|
|
|
|
|
||||||||||||
|
|
|
UK preference shares |
- |
- |
- |
- |
- |
2,173 |
||||||||||||
|
|
|
|
________ |
_____ |
______ |
________ |
______ |
________ |
||||||||||||
|
|
|
Floating rate |
|
|
|
|
|
|
||||||||||||
|
|
|
Cash |
6,596 |
- |
- |
- |
- |
- |
||||||||||||
|
|
|
|
________ |
_____ |
______ |
________ |
______ |
________ |
||||||||||||
|
|
|
Total |
6,596 |
- |
- |
- |
- |
2,173 |
||||||||||||
|
|
|
|
________ |
_____ |
______ |
________ |
______ |
________ |
||||||||||||
|
|
|
|
Within |
Within |
Within |
Within |
Within |
More than |
||||||||||||
|
|
|
|
1 year |
1-2 years |
2-3 years |
3-4 years |
4-5 years |
5 years |
||||||||||||
|
|
|
At 30 September 2011 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
||||||||||||
|
|
|
Fixed rate |
|
|
|
|
|
|
||||||||||||
|
|
|
UK preference shares |
- |
- |
- |
- |
- |
1,922 |
||||||||||||
|
|
|
|
________ |
_____ |
______ |
________ |
______ |
________ |
||||||||||||
|
|
|
Floating rate |
|
|
|
|
|
|
||||||||||||
|
|
|
Cash |
5,910 |
- |
- |
- |
- |
- |
||||||||||||
|
|
|
|
________ |
_____ |
______ |
________ |
______ |
________ |
||||||||||||
|
|
|
Total |
5,910 |
- |
- |
- |
- |
1,922 |
||||||||||||
|
|
|
|
________ |
_____ |
______ |
________ |
______ |
________ |
||||||||||||
|
|
|
Interest rate sensitivity |
||||||||||||||||||
|
|
|
The sensitivity analysis below has been determined based on the exposure to interest rates at the Balance Sheet date 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 2012 would increase/decrease by £33,000 (2011 - £29,000) given 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. |
|||||||||||||||||
|
|
|
- |
profit before tax for the year ended 30 September 2012 would decrease by £145,000 (2011 - decrease by £114,000), increase by £167,000 (2011 - increase by £130,000) given the Company's exposure to interest rates on its fixed interest securities. |
|||||||||||||||||
|
|
|
- |
net assets at 30 September 2012 would decrease by £112,000 (2011 - decrease by £85,000), increase by £134,000 (2011 - increase by £101,000) as a result of the combined effect on its floating rate cash balances and its fixed interest securities. |
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||||||
|
|
|
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 currency exposure is detailed below: |
||||||||||||||||||
|
|
|
|
|
|
||||||||||||||||
|
|
|
|
30 September 2012 |
30 September 2011 |
||||||||||||||||
|
|
|
|
|
Net |
|
Net |
||||||||||||||
|
|
|
|
Overseas |
monetary |
Overseas |
monetary |
||||||||||||||
|
|
|
|
investments |
assets |
investments |
assets |
||||||||||||||
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
||||||||||||||
|
|
|
US Dollar |
12,492 |
119 |
3,492 |
59 |
||||||||||||||
|
|
|
Swiss Franc |
1,679 |
- |
1,133 |
- |
||||||||||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||||||||||
|
|
|
Total |
14,171 |
119 |
4,625 |
59 |
||||||||||||||
|
|
|
|
_______ |
_______ |
_______ |
_______ |
||||||||||||||
|
|
|
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 Balance Sheet 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 2012 would have increased/decreased by £11,627,000 (2011 - increase/decrease of £5,511,000). 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 balance sheet date 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 investment manager, and limits are set on the amount that may be due from any one broker; |
|||||||||||||||||
|
|
|
- |
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 is secured by collateral or other credit enhancements. |
||||||||||||||||||
|
|
|
Credit risk exposure |
||||||||||||||||||
|
|
|
In summary, compared to the amounts in the Balance Sheet, the maximum exposure to credit risk at 30 September was as follows: |
||||||||||||||||||
|
|
|
|
2012 |
2011 |
||||||||||||||||
|
|
|
|
Balance |
Maximum |
Balance |
Maximum |
||||||||||||||
|
|
|
|
Sheet |
exposure |
Sheet |
exposure |
||||||||||||||
|
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
||||||||||||||
|
Non-current assets |
|
|
|
|
||||||||||||||||
|
Securities at fair value through profit or loss |
- |
- |
217 |
217 |
||||||||||||||||
|
Current assets |
|
|
|
|
||||||||||||||||
|
Accrued income |
608 |
608 |
337 |
337 |
||||||||||||||||
|
Other debtors |
41 |
41 |
- |
- |
||||||||||||||||
|
Cash and short term deposits |
6,596 |
6,596 |
5,910 |
5,910 |
||||||||||||||||
|
|
|
|
________ |
________ |
________ |
________ |
||||||||||||||
|
|
|
|
7,245 |
7,245 |
6,464 |
6,464 |
||||||||||||||
|
|
|
|
________ |
________ |
________ |
________ |
||||||||||||||
|
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 has in place a multi-currency overdraft facility with HSBC for the lesser of £12 million or 25% of the market value of assets they hold as custodians. This gives the Company the ability to augment finance from time to time with short-term borrowings. The facility is secured against the cash accounts and assets held by the custodian. |
||||||||||||||||||||
|
The Company had no 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. |
||||||||||||||||||||
|
17. |
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: |
||||
|
|
|
2012 |
2011 |
||
|
|
|
£'000 |
£'000 |
||
|
|
Equity share capital |
56,421 |
31,610 |
||
|
|
Retained earnings and other reserves |
68,104 |
31,617 |
||
|
|
|
________ |
________ |
||
|
|
|
124,525 |
63,227 |
||
|
|
|
________ |
________ |
||
|
|
The Board, with the assistance of the Manager, 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 (2011 - nil). |
||||
|
18. |
Commitments and contingencies |
|
|
At 30 September 2012 there were no contingent liabilities in respect of outstanding underwriting commitments or uncalled capital (2011 - £nil). |
|
19. |
Financial instruments measured at Fair Value |
||||||||
|
|
|
|
|
|
2012 |
|
|
|
2011 |
|
|
|
Level 1 |
Level 2 |
Level 3 |
Total |
Level 1 |
Level 2 |
Level 3 |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Investments |
118,440 |
- |
- |
118,440 |
57,246 |
- |
- |
57,246 |
|
|
Cash and cash equivalents |
6,596 |
- |
- |
6,596 |
5,910 |
- |
- |
5,910 |
|
|
|
______ |
_____ |
______ |
______ |
______ |
_____ |
______ |
______ |
|
|
|
125,036 |
- |
- |
125,036 |
63,156 |
- |
- |
63,156 |
|
|
|
______ |
_____ |
______ |
______ |
______ |
_____ |
______ |
______ |
|
|
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. |
||||||||
|
20. |
Notes to the Cash Flow Statement |
||||
|
|
(a) Reconciliation of operating profit to operating cash flows |
||||
|
|
|
2012 |
2011 |
||
|
|
|
£'000 |
£'000 |
||
|
|
Profit before taxation |
10,644 |
4,175 |
||
|
|
Add interest payable |
15 |
15 |
||
|
|
Adjustments for: |
|
|
||
|
|
Gains on investments |
(7,765) |
(2,200) |
||
|
|
Currency losses |
8 |
4 |
||
|
|
(Increase)/decrease in accrued income and prepayments |
(312) |
7 |
||
|
|
Increase in trade and other payables |
176 |
47 |
||
|
|
|
________ |
________ |
||
|
|
|
2,766 |
2,048 |
||
|
|
|
________ |
________ |
||
|
|
|
|
|
||
|
|
(b) Analysis of changes in net funds |
||||
|
|
|
30 September |
Cash |
Exchange |
30 September |
|
|
|
2011 |
Flow |
Movements |
2012 |
|
|
|
£'000 |
£'000 |
£'000 |
£'000 |
|
|
Cash at bank |
5,910 |
695 |
(9) |
6,596 |
|
|
|
________ |
________ |
________ |
________ |
|
|
|
|
|
||
|
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 2012. The statutory accounts for the year ended 30 September 2012 received an audit report which was unqualified.
The statutory accounts for the financial year ended 30 September 2012 were approved by the Directors on 30 November 2012 but will not be filed with the Registrar of Companies until after the company's Annual General Meeting which is to be held at 11.00am on 18 January 2013 at 16 Charlotte Square, Edinburgh, EH2 4DF.
The Annual Report will be posted to shareholders in December 2012 and available in due course by download for the Company's webpage (http://tigt.co.uk/secure/documents/annual/TIGTAnnual2012.pdf)
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 Steven Cowie, C.A., Secretary 30 November 2012 Enquiries: 0131 538 6610 |
This information is provided by RNS
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