Capital Gearing Trust Plc - Annual Results
From:
LEI: 213800T2PJTPVF1UGW53
Date:
Annual Results for the year ended
The Directors of
The Annual Report is expected to be posted to shareholders later this month.
Members of the public may obtain copies from the registered office,
The Annual General Meeting (“AGM”) of the Company will be held at
Performance Summary
Total Return Performance (to
1 Year 3 Years 5 Years 10 Years Share Price 0.8% 3.5% 19.1% 52.2% NAV per Share 1.8% 7.9% 23.7% 65.7% Consumer Price Index 3.2% 21.6% 24.3% 33.4%
Chairman’s Statement
The past year
At
This financial year started ominously with the shotgun wedding of Credit Suisse and
The last 12 months proved to be another year of rising interest rates and widening investment trust discounts as well as a period of sterling strength. These factors impeded many defensive investment companies and performance was pedestrian. However, the last two years have been a period of dramatic repricing in the most significant markets in which this Company invests, raising the prospect of improved medium-term returns.
Earnings and dividends
The amount the Company receives in dividends and interest is the outcome of the application of its investment policy, and the amounts distributed to shareholders are designed to satisfy the Company’s annual income distribution test to ensure that it maintains its investment trust status.
Although the Company, unusually, paid an additional special dividend to shareholders in February this year in respect of its financial year ended
Given the significant increase in bond yields, the Company has received appreciably more bond income compared to last year, but this year’s revenue return per share for the year, after tax and expenses, was 69.74p, a decrease of 1.3% on last year. The Company is proposing a dividend for the year ended
If bond income remains high, the Company is likely to consider paying at least part of future dividends as interest distributions. If interest distributions are to be paid, further information will be provided at the relevant time regarding any potential tax consequences for shareholders.
Share issuance and buybacks
During the year, the discount control policy (“DCP”), which provides liquidity for both buyers and sellers in the market at around NAV, played an important role in reducing share price volatility. Over the last 12 months the Company has repurchased 4,220,036 shares for a total consideration of £195
million. For a period of approximately three months in the second half of the year, the operation of the DCP was temporarily restricted while the Company sought court approval to cancel the Company’s share premium account and create an equivalent distributable reserve. These restrictions were lifted in
Issuing at a premium and buying back at a discount under the DCP more than compensates for its operational costs and is modestly accretive to NAV. Activity under the DCP added approximately 0.3% to shareholder total returns over the last financial year.
Supplier review process
Following the administrative issues and delays experienced by the Company over the last year in connection with the court process for the cancellation of the Company’s share premium account, the Company engaged an external consultant in late 2023 to assist the Board in conducting a review of its operational arrangements. Following completion of that review, the Board has decided to appoint
Costs
Although we have previously been able to report that the Company’s running costs have reduced substantially as a percentage of its net asset value, as buy-backs over the past year have reduced the size of the Company, there have been marginal increases in costs. The key measure of the overall costs is the OCR. This is reported in two ways. The OCR measured solely on the costs of running the Company has increased from 0.46% to 0.47% this year. As disclosed in the Key Information Document (“KID”), when the management costs of the underlying funds into which the Company invests are also taken into account, the OCR has risen from 0.64% last year to 0.69% this year.
As mentioned above, following the implementation of the outcome of the Company’s supplier review process, the Company’s investment management and administration costs will increase slightly. Based on the Company’s net asset value as at
Board matters
The Board currently has a complement of five Directors and complies with the recommendations of the Listing Rules, the Parker Review on diversity in the
In the last Annual Report we reported that
Although I have only held the role of Chairman since July 2020, I have now served for nine years on the Board. To avoid two long standing Directors standing down at the same time and facilitate an orderly handover, my colleagues have asked me to remain on the Board for a further period of one year and the current intention is that I will retire at the Company’s AGM in 2025. We have commenced a recruitment campaign and hope that we will be able to announce the outcome in the next few months.
Annual General Meeting
The AGM will be held on Tuesday
I hope as many shareholders as possible will be able to attend to take the opportunity to meet the Board and to hear a presentation from the Investment Manager. However, if you are unable to attend in person, you can listen to the Investment Manager‘s presentation and watch the AGM live by visiting:
https://stream.brrmedia.co.uk/broadcast/6633c53d2fcfbb6c6020254f
Full details are set out in the Notice of Annual General Meeting on pages 73 and 74 of the Annual Report. Further details on the resolutions to be proposed at the AGM can be found on pages 28 and 29 of the Directors’ Report in the Annual Report.
The Board firmly believes that all the resolutions being proposed are in the best interests of the Company and its shareholders and encourages shareholders to vote by proxy in favour of the resolutions, as the Board intends to do in respect of their own shareholdings. We would encourage shareholders to return their votes by electronic proxy, including by instructing their platform providers to vote on their behalf if their shares are held through platform nominees.
Outlook
Since the pandemic, both bond and equity markets have experienced a roller coaster ride with investor sentiment swinging from euphoria to panic and back again. The worst inflationary episode since the 1970’s has resulted in a significant reset in the bond market. Whilst this has proved a headwind for the Company over the last two years, dramatically higher yields will also result in improved medium term returns. Close to 70% of the portfolio is invested in a range of high quality bonds all now yielding well in excess of inflation. These should underpin returns for the next few years.
The extraordinary performance of the Magnificent Seven may have stretched US equity valuations too far and recent extreme volatility in those mega-capitalisation stocks may point to investor nervousness. By contrast, investment trust discounts, which recently hit lows last seen in the global financial crisis, are showing tentative signs of improvement. The Investment Manager believes this is a compelling opportunity and that the Company’s exposure to this corner of the equity markets can, over time, deliver strong returns without undue risk.
As the tectonic plates of macro-economic fragility and technological change grind against one another, no one can tell when or where the next earthquake will occur. This Company exists to protect its shareholders from just these sort of disruptions. This risk averse approach will inevitably result in periods of muted performance, but the Board shares the Investment Manager’s belief that the Company’s portfolio is well placed to achieve its objectives going forward.
Chairman
Investment Manager’s Report
We began the year defensively positioned and, as things turned out, were too cautious. Chief among our concerns was that years of ultra-low interest rates had caused a buildup of risk throughout the financial system which would be revealed by higher interest rates and the shrinking money supply. This is hardly a new phenomenon. Writing in 1848, Walter Bagehot put it as follows: “It is a fact of experience, that when the interest of money is two per cent, capital habitually emigrates, or, what is here the same thing, is wasted on foolish speculations, which never yield any adequate return.”
As it turned out, the spat of bank failures in the spring of 2023 were contained with little spillover into other markets. Outside of the banking system, credit losses so far have been modest: losses in commercial real estate lending have been manageable, private equity backed companies appear to be able to withstand much higher costs of borrowing, consumer confidence has not cracked despite rising mortgage rates and residential construction, in the US at least, has remained strong. Money supply in the US, as measured by M2 is growing again, alleviating pressure on the financial system.
Our second concern was that inflation would prove much stickier than markets expected and the subsequent repricing of both inflation and interest rate expectations would have unpleasant knock-on impacts on both bond and equity markets. The first part proved correct. Inflation did not fall back to target in either the
With rising yields, our index-linked bond holdings struggled to make headway, despite the larger than expected inflation accruals. They returned -0.5% for the year with most of the negative performance attributable to US TIPS, not helped by Sterling’s appreciation. Whilst a disappointing return, it was ahead of the Bloomberg Global Index-Linked Bond Index which was down 1.9%. The
Company’s
The credit portfolio performed well generating returns of 7.0%, the holdings of speculative grade credit did better returning 10.5%. Spreads have contracted materially which, combined with our cautious outlook for interest rates, has resulted in our taking profits and recycling into treasury bills and investment trust special situations.
Risk assets performed adequately, returning a little under 5.6%. Equities and property returned 12.6% and 11.6% respectively. Among the best contributors were some of our investment trust holdings. Pershing Square Holdings delivered a return of 47.8%. Originally built during the teeth of the Covid pandemic at an average price of
The Company’s infrastructure holdings performed poorly returning -15.1% over the year and it is within this category that the largest detractors to performance are found. Discounts on high quality infrastructure stocks rose dramatically and finished the year at an average of c. 20% across the sector. These discounts cannot be explained by investor concerns that the net asset values of these companies are overstated – all our major holdings reported extensive sales of assets at or above book value. Instead, their performance reflected technical dislocations in the wider alternatives sector of the investment trust market. Able, for the first time in over a decade, to earn reasonable returns on short - dated government bonds, investors have shunned alternative trusts. With the supply of shares fixed (at least in the short term), a collapse in demand meant that price inevitably took up the slack. We think these offer fantastic prospective returns with relatively low risk and have added materially to our holdings such that infrastructure now makes up 8% of the portfolio.
Outlook
If we are right that the world is in a structurally more inflationary environment, then the outlook for nominal bonds remains poor. This is exacerbated by the fiscal situation in developed countries. The average budget deficit across the G8 is forecast to be 4.6% in 2025, so the supply of bonds will increase while central banks continue to reduce their balance sheets. Added to which there is no imminent sign of recession, nor any discernible term premium in longer dated bonds.
The outlook for index-linked bonds is more nuanced. Real yields in the US are above 2% across the length of the treasury curve. It appears that the sustainable growth rate of the US economy has risen materially which suggests that these real interest rates are close to fair value. However, the fiscal position is poor and looks set to deteriorate. Real interest rates at these levels will not be sustainable if there is no prospect of bringing fiscal deficits under control. Left unchecked, financial repression – characterised by negative real interest rates – will be necessary. What is less certain is the path. Index-linked bonds trade in sympathy with nominal bonds. If nominal bonds are weak, as seems plausible, index-linked will most likely suffer with them. Yet the long-term prospects look fair or, should financial repression be enacted, excellent.
Risk assets present a similar conundrum. US equities have rarely been so expensive. The cyclically adjusted PE ratio stands at 34x today, it reached 38x during the “everything bubble” of 2021 and otherwise was only higher during the technology bubble. Market breadth has fallen dramatically as returns are increasingly concentrated in the so-called Magnificent Seven. Microsoft trades on a free cash flow yield of 1.7%. To deliver acceptable returns, from this starting valuation, it needs to be able to grow its free cashflow between 8-10% per annum in perpetuity.
In attempting to justify these high prices, investors might point to the huge outperformance of US earnings both against the rest of the world and against their own history. While tempting to attribute this to American exceptionalism, that is only part of the story. More significant in recent years has been the contribution from collapsing interest expenses and corporation tax rates. Having termed out their debt, it may be some years before interest expenses rise meaningfully, but it seems unlikely they can fall. With the US running ever larger fiscal deficits, we would not expect corporation tax to continue to fall. But with the possibility of a Trump presidency, nothing should be ruled out. In any event, it seems that this large tailwind to earnings will become a headwind.
While the prospect for US equities looks poor, the outlook for investment trusts is the most attractive that it has been for years. Discounts on investment trusts are the widest they have been since the global financial crisis. Furthermore, these discounts are broad based and include the larger, more liquid high quality trusts. In response we have added to our investment trust holdings, partly financed by sales of ETFs and partly from cash. We are optimistic that these holdings will provide better returns than broader equity markets.
Principal Risks and Risk Management
The Company has been subject to significant economic headwinds, such as substantial market movements, inflationary pressures and increasing interest rates. This makes preserving shareholders’ real wealth, far less growing it, challenging. The central aims remain to preserve value in the Company’s portfolio and liquidity in the Company’s shares.
The Directors aim to ensure that the Company maintains its investment strategy, has operational resilience, meets its regulatory requirements as an investment trust and navigates the financial and economic circumstances.
The Directors have carried out a robust assessment of the principal and emerging risks facing the Company, including those that would threaten its business model, future performance, solvency or liquidity. The principal risks and uncertainties facing the Company, together with the mitigating actions the Board takes, are set out in the table below.
The Company faces continuing risks of geopolitical events such as conflict in the
______________________________________________________________________________ |Risk |Mitigation | |______________________________________|_______________________________________| | | | |Investment strategy and performance | | | | | |The Board is responsible for setting | | |the investment strategy of the Company|The Company’s strategy is formally | |and monitoring investment performance.|reviewed by the Board at least | |Inappropriate strategy and/or poor |annually, considering investment | |investment performance may have an |performance, shareholder views, | |adverse effect on shareholder returns.|developments in the marketplace and the| | |structure of the Company. | |There is increasing awareness of the | | |challenges and emerging risks posed by|Investment performance is reviewed by | |climate change. The investment process|the Board on a regular basis against | |considers ESG factors, as set out in |CPI. The composition of the portfolio | |the Strategic Review. Overall the |is provided at each Board meeting and | |specific potential effects of climate |allows the monitoring of the spread of | |change are difficult, if not |investments and associated investment | |impossible, to predict and the Board |risks. The Investment Manager’s | |and Investment Manager will continue |approach to ESG is set out on pages 21 | |to monitor developments in this area. |to 25 of the Annual Report. The Company| | |has limited direct impact on the | |Geopolitical risk has always been part|environment as it invests primarily in | |of the investment process. The risk |government bonds and closed ended and | |has heightened as a result of the |other collective investment vehicles. | |Russian invasion ofUkraine and recent|Stock selection, portfolio composition | |events in theMiddle East . Inflation, |and liquidity are explained in detail | |heightened interest rates and |by the Investment Manager at each | |discounts on investment companies’ |meeting. | |shares have had and will continue to | | |have a significant impact on the |The Investment Manager is formally | |Company and its investment portfolio. |appraised at least annually by the | | |Management Engagement Committee. | |Increased overall risk due to | | |inflation, higher interest rates, | | |supply issues and ongoing global | | |political tensions and the impact of | | |heightened interest rates. | | |______________________________________|_______________________________________| | |The Company operates a discount/premium| | |control policy, under which it aims to | | |purchase or issue shares to ensure, in | | |normal market conditions, that the | | |shares trade close to their underlying | | |NAV per share. The DCP increases | |Premium/discount level |liquidity and reduces volatility by | | |preventing the build-up of excessive | |The Company’s share price could be |demand and/or supply for the Company’s | |impacted by a range of factors causing|shares which, the Board believes, is in| |it to be higher than (at a premium to)|the best interests of shareholders. The| |or lower than (at a discount to) the |DCP continues to be reviewed to ensure | |underlying NAV per share. |liquidity for issuance and buyback. | | | | |Excessive demand for, or supply of, |The levels of issuance/buyback of | |shares can create liquidity issues, |shares are reported to the Board on an | |restricting the ability of investors |ongoing basis and at each Board meeting| |to buy and sell shares in the |the Board considers the Investment | |secondary market. |Manager’s ability to invest new | | |proceeds (in the case of issuance) and | |Fluctuations in the share price can |maintain sufficient liquidity (in the | |cause volatility which may not be |case of buybacks) to meet the demands | |reflective of the underlying |of the DCP. Since the inception of the | |investment portfolio. |DCP, the Company has issued and bought | | |back a substantial number of shares, | |Risk remains relatively unchanged |with the more recent trend being buying| | |back. | | | | | |The full operation of the DCP was | | |restored during the year when | | |substantial distributable reserves were| | |created. | |______________________________________|_______________________________________| | |The Audit and Risk Committee formally | | |reviews each service provider at least | | |annually, considering their reports on | | |internal controls, information | | |security, and the resources available | | |to them. The Management Engagement | | |Committee reviews the service levels | | |and how the service providers have | | |performed. | | | | | |The operational requirements of the | |Operational |Company from its service providers are | | |subject to rigorous testing including | |The Company is reliant on third-party |the use of office/home working and | |service providers and key teams at |online communication. Additionally, the| |such service providers. Failure of the|Investment Manager’s and | |internal control systems of these |Administrator’s technology environments| |third parties could result in |are continually maintained and subject | |inaccurate information being reported |to regular testing, vulnerability scans| |or risk to the Company’s assets. |and patch management. As part of this | | |review the Board considers the measures| |Increased risk due to the risks |taken by each supplier to mitigate its | |associated with the transition to new |cybersecurity risk. | |suppliers | | | |The transition of secretarial and | | |administration services and operation | | |of the DCP to Frostrow Capital LLP and | | |JP Morgan Securities respectively has | | |been carefully planned and is not | | |expected to result in the disruption of| | |services required by the Company. | | |Further details of the Company’s | | |internal control and risk management | | |system is provided on pages 34 and 35 | | |of the Annual Report. | |______________________________________|_______________________________________| | |Compliance with relevant regulations is| | |monitored on an ongoing basis by the | | |Company Secretary and Investment | | |Manager who report regularly to the | |Regulatory and governance |Board. The Board also takes into | | |account increasing governance | |The Company operates in a regulatory |requirements and complies with them | |environment. Failure to comply with |wherever practical or explains why | |section 1158 of the Corporation Tax |there is any divergence. | |Act 2010 could result in the Company | | |losing investment trust status and |The Board monitors changes in the | |being subject to tax on capital gains.|regulatory environment and receives | |Failure to comply with other |regulatory updates from the Investment | |regulations could result in financial |Manager, Company Secretary, lawyers and| |penalties or the suspension of the |auditors as relevant. | |Company’s listing on the London Stock | | |Exchange. |The Board is appraised of corporate | | |governance issues and changes and as | |Risk remains relatively unchanged |far as practical the Company complies | | |with governance guidance or explains | | |where it does not and meets the | | |guidance of the AIC Code (refer to page| | |31 of the Annual Report). | |______________________________________|_______________________________________| | |The Board regularly reviews and | | |monitors the management of market risk,| | |interest rate risk, foreign currency | | |risk and credit risk. These are | | |explained in detail in note 15 to the | | |financial statements on pages 64 to 70 | | |of the Annual Report. Inflation, and | |Financial and economic |geopolitical risks, are considered a | | |component of market risk, with the | |The Company’s investments are impacted|impact of higher inflation and interest| |by financial and economic factors |rates and events in Ukraine and the | |including market prices, interest |Middle East taken into account. | |rates, foreign exchange rates and | | |credit which could cause losses to the|The Company has sufficient cash | |investment portfolio. |resources and liquidity in its | | |portfolio to meet its operating | |Risk has been heightened by |requirements, including the operation | |inflationary and interest rate |of DCP. In common with most commercial | |increases and geopolitical events |operations, there are always exogenous | | |risks and consequences, which are | | |difficult to predict and plan for in | | |advance. The Company does what it can | | |to address these risks when they | | |emerge, not least operationally and in | | |trying to meet its investment | | |objective. | |______________________________________|_______________________________________|
Directors' Responsibilities Statement in Respect of the Annual Financial Report and the Financial Statements
Each of the Directors, whose names and functions are listed in the Governance Report, confirms that, to the best of his or her knowledge:
-- the Company’s Financial Statements, which have been prepared in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 102, and applicable law), give a true and fair view of the assets, liabilities, financial position and net return of the Company;
-- the Board’s Strategic Report 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; and
-- the Annual Report, taken as a whole, is fair, balanced and understandable and provides information necessary for shareholders to assess the Company’s position and performance, business model and strategy.
Going Concern
The Company’s investment objective and business activities, together with the main factors likely to affect its future development and performance, are described in the Board’s Strategic Report. The financial position of the Company, including its cash flows and liquidity positions, is also described in the Strategic Report and financial statements contained in the Annual Report. The Board works closely with the Investment Manager and the Company Secretary to ensure that the Company’s operations are resilient, and its portfolio robust enough to meet challenges and opportunities. The Directors believe that the Company is well placed to manage its business risks successfully and consider that the Company currently has adequate resources, an appropriate financial structure and suitable management arrangements in place to continue in operational existence. For this reason, they continue to adopt the going concern basis in preparing the annual report and financial statements. The Directors do not consider that there are any material uncertainties to the Company’s ability to continue to adopt this approach over a period of twelve months from the date of approval of these financial statements.
For further information contact:
Investment Manager
Tel: 020 3906 1633
Company Secretary
Tel: 0131 378 0500
The Income Statement, Statement of Changes in Equity, Statement of Financial Position, and Cash Flow Statement follow.
Income Statement
for the year ended
Year ended 31 March 2024 Year ended 31 March 2023 Revenue Capital Revenue Capital Total Total £’000 £’000 £’000 £’000 £’000 £’000 Net losses on investments - (3,113) (3,113) - (68,449) (68,449) Net currency losses - (109) (109) - (547) (547) Investment income 25,145 - 25,145 24,846 - 24,846 Other income 400 - 400 93 - 93 Gross return 25,545 (3,222) 22,323 24,939 (68,996) (44,057) Investment management fee (4,298) - (4,298) (4,620) - (4,620) Other expenses (1,070) - (1,070) (974) - (974) Net return before tax 20,177 (3,222) 16,955 19,345 (68,996) (49,651) Tax charge on net return (3,220) - (3,220) (1,739) - (1,739) Net return attributable to 16,957 (3,222) 13,735 17,606 (68,996) (51,390) equity shareholders Net return per Ordinary 69.74p (13.25)p 56.49p 70.67p (276.96)p (206.29)p share
The total column of this statement represents the income statement of the Company. The revenue return and capital return columns are supplementary to this and are prepared under guidance issued by the
All revenue and capital items in the above statement derive from continuing operations. There are no gains or losses other than those recognised in the income statement and therefore no statement of comprehensive income has been presented. The following notes form an integral part of these financial statements.
Statement of Changes in Equity
for the year ended
Called-up Share Capital Special Realised Unrealised Revenue Total equity share premium redemption reserve* Capital Capital reserve* shareholders’ capital account reserve reserve* reserve* funds £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000 Opening balance at 1 5,223 816,009 16 - 159,561 57,222 11,804 1,049,835 April 2022 Net return attributable to equity shareholders - - - - (3,801) (65,195) 17,606 (51,390) and total comprehensive income for the year New shares 1,422 285,744 - - - - - 287,166 issued Shares bought back into - - - - (15,334) - - (15,334) treasury Dividends - - - - - - (10,558) (10,558) paid Total transactions with owners 1,422 285,744 - - (15,334) - (10,558) 261,274 recognised directly in equity Closing balance at 31 6,645 1,101,753 16 - 140,426 (7,973) 18,852 1,259,719 March 2023 Opening balance at 1 6,645 1,101,753 16 - 140,426 (7,973) 18,852 1,259,719 April 2023 Net return attributable to equity shareholders - - - - (1,980) (1,242) 16,957 13,735 and total comprehensive income for the year Cancellation of share - (1,101,753) - 1,101,753 - - - - premium account Shares bought back into - - - (64,350) (130,776) - - (195,126) treasury Dividends - - - - - (18,155) (18,155) paid Total transactions with owners - (1,101,753) - 1,037,403 (130,776) - (18,155) (213,281) recognised directly in equity Closing balance at 31 6,645 - 16 1,037,403 7,670 (9,215) 17,654 1,060,173 March 2024
*These reserves are available for distribution (except for the unrealised gains on Level 3 investments detailed in Note 4).
Statement of Financial Position
as at
31 March 2024 31 March 2023 £’000 £’000 Fixed assets Investments held at fair value through profit or 1,053,792 1,251,801 loss Current assets Debtors 4,500 7,892 Cash at bank 11,643 13,766 16,143 21,658 Creditors: amounts falling due within one year (9,762) (13,740) Net current assets 6,381 7,918 Total assets less current liabilities 1,060,173 1,259,719 Capital and reserves Called-up share capital 6,645 6,645 Share premium account - 1,101,753 Capital redemption reserve 16 16 Special reserve 1,037,403 - Capital reserve (1,545) 132,453 Revenue reserve 17,654 18,852 Total equity shareholders’ funds 1,060,173 1,259,719 Net asset value per Ordinary share 4,810.5p 4,797.3p
The financial statements were approved by the Board on
Chairman
Cash Flow Statement
for the year ended
Year ended 31 March 2024 Year ended 31 March 2023 £’000 £’000 Net cash inflow from operating 10,612 16,499 activities Payments to acquire investments (809,667) (1,037,482) Receipts from sale of 1,006,421 713,875 investments Net cash inflow/(outflow) from 196,754 (323,607) investing activities Equity dividends paid (18,155) (10,558) Repurchase of Ordinary shares (191,334) (15,315) Proceeds from the issue of - 297,172 Ordinary shares Cost of share issues - (1,036) Net cash (outflow)/inflow from (209,489) 270,263 financing activities Decrease in cash and cash (2,123) (36,845) equivalents Cash and cash equivalents at 13,766 50,611 start of year Cash and cash equivalents at 11,643 13,766 end of year
Notes:
1.Capital Gearing Trust P.l.c . is a public company limited by shares, incorporated and domiciled inNorthern Ireland and carries on business as an investment trust.
The accounts are prepared in accordance with the Companies Act 2006, United Kingdom Generally Accepted Accounting Practice (Accounting Standards “UK GAAP”) including Financial Reporting Standard (FRS) 102 “The Financial Reporting Standard applicable in the
The accounts have been prepared on a going concern basis under the historical cost convention, as modified by the revaluation of investments held at fair value through profit or loss.
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. There are no critical accounting estimates or judgements.
1. Investmentincome
Year to 31 Year to 31 March 2024 March 2023 £’000 £’000 Income from investments: Interest from conventional UK bonds 8,813 5,125 Interest from index-linked UK bonds 1,159 995 Income from UK equity and non-equity investments 9,435 10,986 Interest from conventional overseas bonds 3,260 2,215 Interest from index-linked overseas bonds 2,160 2,758 Income from overseas equity and non-equity investments 318 2,767 Total income 25,145 24,846 Year to 31 Year to 31 March 2024 March 2023 £’000 £’000 Total income comprises: Dividends 7,460 10,731 Property income and interest distributions 2,293 3,022 Interest from bonds 15,392 11,093 Deposit interest 400 81 Other income - 12 25,545 24,939 Year to 31 Year to 31 March 2024 March 2023 £’000 £’000 Income from investments comprises: Listed in the UK 19,407 17,106 Listed overseas 5,738 7,740 25,145 24,846
1. During the year to31 March 2024 , the Company did not issue (2023: 5,688,288) any Ordinary shares for cash proceeds totalling £nil (2023: £287,166,000). No Ordinary shares (2023: nil) were re-issued from treasury by the Company.
During the year to 31
1. The Company’s assets are measured at fair value through profit or loss. The fair value of financial instruments traded in active markets is based on quoted market prices at the Statement of Financial Position date.
A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service, or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.
Fair Value Hierarchy
Financial Reporting Standard 102 requires an entity to classify fair value measurements using a fair value hierarchy that reflects the significance of the inputs used in making the measurements. The fair value hierarchy has the following levels:
Level 1: valued using unadjusted quoted prices in active markets for identical assets.
Level 2: valued using observable inputs other than quoted prices included within Level 1.
Level 3: valued using inputs that are unobservable and are valued by the Directors using International Private Equity and Venture Capital Valuation (‘IPEV’) guidelines, such as earnings multiples, recent transactions and net assets, which equate to their fair values.
As at
The above provides an analysis of financial assets and financial liabilities based on the fair value hierarchy. Short term balances are excluded as their carrying value at the reporting date approximates to their fair value.
1. Reconciliation of net return on ordinary activities before tax to net cash inflow from operating activities
Year to 31 March 2024 Year to 31 March 2023 £’000 £’000 Net return on ordinary activities 16,955 (49,651) before tax Capital return before tax 3,222 68,996 Losses on foreign currency (109) (547) transactions Increase in prepayments (16) (5) Increase in accruals and accrued 18 39 income Decrease/(increase) in recoverable 4 (10) tax (Increase)/decrease in dividends (165) 186 receivable Increase in accrued interest (5,213) (1,520) Overseas withholding tax paid (41) (115) UK Corporation tax paid (4,043) (874) Net cash inflow from operating 10,612 16,499 activities
1. With the exception of the management fee (as disclosed on page 26 of the annual report), and the Directors’ fees and shareholdings (as disclosed in the Directors Remuneration Report on pages 37 and 38 of the Annual Report), there have been no related party transactions in the year ended31 March 2024 .
1. These are not statutory accounts in terms of Section 434 of the Companies Act 2006. Full audited accounts for the year to31 March 2024 will be sent to shareholders shortly. The audited accounts for the year ended31 March 2024 will be lodged with the Registrar of Companies.