TIDMAOT
ANGLO & OVERSEAS PLC
ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 31 JULY 2010
The full Annual Report and Accounts can be accessed via the Company's website
at www.angloandoverseasplc.com or by contacting the Company Secretary on
telephone 0131 270 3800.
HIGHLIGHTS
? Net asset value total return for the year 16.6%.
? Total dividend for year up 3.4% to 3.00p. Recommended final dividend 2.16p.
? New exposure to Japan - over 10% of net assets.
? UK exposure reduced by over 10% to 33%.
Financial Summary
Results for year 31 July 31 July % change
2010 2009
Shareholders' funds GBP80,636,000 GBP73,689,000 9.4%
Net asset value ("NAV") per Ordinary Share 110.13p 96.80p 13.8%
Share price per Ordinary Share 96.50p 89.75p 7.5%
Share price discount to NAV 12.4% 7.3%
Year to Year to
31 July 2010 31 July 2009
Capital return per Ordinary Share* 12.74p (9.35)p
Revenue return per Ordinary Share* 3.40p 3.17p
Total return per Ordinary Share* 16.14p (6.18)p
Dividend per Ordinary Share** 3.00p 2.90p
* Based on the weighted average number of Ordinary Shares in issue during the
year, excluding own shares held in treasury.
** Total dividend for the year, including proposed final dividend.
Year's high/low Year to Year to
31 July 2010 31 July 2009
NAV - high 121.24p 115.25p
- low 96.44p 75.47p
Share price - high 104.25p 103.00p
- low 86.25p 68.50p
Share price discount to NAV
- low 6.4% 0.1%
- high 18.1% 16.4%
Cost of running the Company
Total expense ratio* 0.9% 0.9%
* Based on the total expenses for the year and average monthly net asset value.
Performance record
Net asset Share Revenue
value per price per Discount to return per Dividend
Year ended Shareholders' Ordinary Ordinary net asset Ordinary per Ordinary
31 July funds Share Share value Share Share***
2006* GBP105.8m 118.36p 108.75p 8.1% 2.38p 1.92p
2007** GBP115.7m 130.99p 118.25p 9.7% 2.81p 2.20p
2008 GBP84.1m 105.04p 90.00p 14.3% 3.41p 2.84p
2009 GBP73.7m 96.80p 89.75p 7.3% 3.17p 2.90p
2010 GBP80.6m 110.13p 96.50p 12.4% 3.40p 3.00p
* Period 29 July 2005 to 28 July 2006.
** Period 29 July 2006 to 31 July 2007.
*** This includes the final dividend for each year, including the 2010 proposed
final dividend of 2.16p.
CHAIRMAN'S STATEMENT
Results
I am pleased to be able to report a positive return to shareholders in the year
ended 31 July 2010. During the year under review the net asset value per share
increased from 96.80p at 31 July 2009 to 110.13p as at 31 July 2010. This
represents an increase of 13.8% for the year.
The total return in the year was 16.6%, after including dividends paid. The
total return from the FTSE All-Share Index over the year to 31 July 2010 was
19.3%, while the corresponding total return from the FTSE All-World ex UK Index
was 18.3%. While the Company does not have any formal benchmark, for comparison
purposes the total return from the average of these two indices over the year
under review was 18.8%.
Investment Strategy
The investment philosophy adopted by the Investment Manager aims to identify,
through disciplined and extensive research, the long-term earnings potential of
a company and compares the intrinsic value to its share price. This approach
requires patience as the resulting portfolio is unlikely to resemble any index
and returns may be volatile against any index. Edinburgh Partners uses this
approach over all its funds under management. The Directors believe that
shareholders gain exposure to the merits of a fundamental, long-term approach,
particularly as we continue to navigate through the current difficult economic
environment.
Share Price and Discount
As at 31 July 2010 the Company's share price was 96.50p, an increase of 7.5%
over the year under review. This represents a discount to net asset value per
share of 12.4% and compares with a discount of 7.3% at the previous year end.
Your Board continues to believe that the shares of your Company should trade,
as far as possible, at a relatively narrow range around the net asset value.
Your Board was disappointed to see a widening of the share price discount to
net asset value per share despite the Company continuing to adopt a pro-active
policy with regards to the discount. During the year ended 31 July 2010, the
Company purchased a total of 2,907,249 shares at a cost of GBP2,818,000. Of
these, 1,177,249 shares were purchased for cancellation and 1,730,000 shares
were purchased and placed into treasury. As at 31 July 2010, and at the date of
this report, the number of shares held in treasury was 10,057,438 shares, which
represented 12.1% of the total number of shares in issue.
The authority to repurchase shares will expire at the Annual General Meeting on
19 November 2010 and a Special Resolution will be proposed for its renewal.
This will allow the Company to repurchase up to 14.99% of its shares in issue
(excluding treasury shares) in the open market and for the shares to be
cancelled or held in treasury. The Company's shares will only be purchased when
supply exceeds demand and where the Directors consider it to be in the best
interests of shareholders, particularly in the enhancement of the net asset
value per share to continuing shareholders. No shares will be repurchased if it
would dilute the net asset value of the remaining shares.
Your Investment Manager continues to actively market the Company through a
series of investor presentations across the UK co-ordinated by the Company's
marketing adviser, G&N Collective Funds Services Limited. In addition, private
investors can purchase shares in the Company through savings plans operated by
Edinburgh Partners. Edinburgh Partners have recently changed arrangements for
their savings schemes, which are detailed in the Annual Report.
Revenue and Dividend
I am pleased to be able to report an increase in the net income generated from
the Company's portfolio in the year under review. The revenue return per share
increased by 7.3% to 3.40p, principally due to a reduction in the Company's tax
charge as a result of the majority of overseas dividends being exempt from
corporation tax with effect from 1 July 2009.
Your Board continues to be aware of the importance that shareholders place on
dividend income, particularly in the more difficult economic environment we are
currently experiencing. The increase in revenue generated in the year under
review will enable the Company to continue the progressive dividend policy it
has been able to achieve since the launch of the Company in 2005.
It is therefore my pleasure to recommend a final dividend of 2.16p, an increase
of 0.08p on the prior year final dividend of 2.08p. The total dividend for the
year will be 3.00p, an increase of 3.4%.
After taking account of the proposed final dividend for 2010 the Company will
have revenue reserves of 2.98p per share, which represents almost one year's
dividend payment. This should ensure that it will be possible to at least
maintain the level of dividends to shareholders through the economic cycle.
Subject to the approval of shareholders at the Annual General Meeting on 19
November 2010, the proposed final dividend of 2.16p will be paid on 30 November
2010 to shareholders on the register as at the close of business on 5 November
2010. The ex-dividend date will be 3 November 2010.
Developments in the Investment Trust Sector
Your Board continues to be very supportive of any initiatives undertaken by the
Association of Investment Companies which ultimately benefit the Company.
Recent changes have included the refund of VAT on investment management fees
and the change in taxation of overseas dividends. Both changes have already had
a positive financial impact on the Company.
Board
In May 2010 the Financial Reporting Council ("FRC") published the UK Corporate
Governance Code which replaces the Combined Code on Corporate Governance. One
of the main changes is that all directors of FTSE 350 companies are now
recommended to stand for annual re-election. The Directors have agreed, despite
not being a FTSE 350 company, to adopt this provision as they believe it will
enhance the Board's accountability to shareholders. Accordingly, all Directors
of the Company will stand for re-election annually with effect from the
forthcoming Annual General Meeting and this decision will create a policy
whereby Directors are required to seek election more frequently than every
three years as currently set out in the Company's Articles of Association. The
Board recommends the re-election of all Directors to shareholders at the
forthcoming Annual General Meeting.
Investment Review
The year under review was volatile both in terms of expectations regarding the
economic outlook and as a consequence of stock market performance. Initially
there was a much more optimistic outlook on economic recovery after fears of a
1930's recession had faded. However, in the first half of 2010 economic worries
resurfaced, particularly in the Eurozone region, as the level of Greek
government debt and possible sovereign debt default shook bond and equity
markets. Sentiment rotated from optimism concerning economic recovery to focus
on the potential risks in the global economic system. There was a rebound in
sentiment when a rescue package was orchestrated and governments worldwide
started to place an increased focus on deficit reduction.
During this volatile period, your Investment Manager has continued with its
long-term fundamental approach to equity investment and reduced the number of
holdings towards 40, which they consider is the optimum level to balance
conviction and diversification. The principal portfolio change in the year was
to initiate an exposure to Japanese equities, which now represent over 10% of
the Company's assets and was principally financed from a reduction in UK
equities. Mindful of the differing outlook for developing and emerging
economies, your Investment Manager is maintaining sufficient exposure to
emerging markets which, when end sales demand is taken into account, represents
around 20% of the portfolio.
Outlook
There will eventually be a return to more normal economic conditions, including
a move from the current historic low level of interest rates and a reduction in
government budget deficits. We anticipate this will result in an overall
anaemic recovery in economic growth, with stronger growth in emerging markets
such as China and India offsetting much slower growth in the more developed
world. From a long-term investment perspective, equity markets globally
currently offer reasonable value when compared with other asset classes, such
as cash and bonds, and as a consequence we expect to maintain a high level of
equity exposure.
John Pearmund
Chairman
6 October 2010
MANAGER'S REPORT AND PORTFOLIO ANALYSIS
Objective
Anglo & Overseas Plc's investment objective is to provide shareholders with
above average returns over the longer term through both capital appreciation
and income growth.
The Company has no constraints on geographic exposure. The composition of the
portfolio is driven by company valuations and is constructed without reference
to the composition of any stock market index, or any sectoral asset allocation
limits. Consequently, over short periods of time, relative performance is
likely to be volatile against any index.
Portfolio Management
Dr Sandy Nairn continues to take overall responsibility for the management of
the portfolio together with Craig Armour. Details of the portfolio managers and
other investment partners of Edinburgh Partners are set out in the Annual
Report.
Economic and Geographic Overview
Governments responded to the global financial crisis of 2008/9 with massive
quantitative easing programmes, providing capital and liquidity to financial
markets. This loose monetary policy, which has allowed interest rates to settle
at historic lows, was accompanied by direct support in the banking sector. In
the second half of 2009, as fears of a depression receded, confidence returned
to financial markets and share prices recovered.
We believe that the economies of the developed markets of Europe and North
America will not return to their previous growth rates for some time.
Addressing the fiscal deficits means a combination of higher taxes and reduced
government spending. The banks need to rebuild their capital base while
reducing their dependence on wholesale funding, a balancing act that is likely
to lead to reduced loan books and reduced credit availability. Household
consumption is likely to be restrained, partly due to the actions of
governments and banks, but also through higher saving, where possible, as a
natural reaction to the crisis. In simple terms, the West has overspent and
needs to save. In 2010, as this stark reality set in, financial markets became
more volatile, with overreactions to small changes in lead indicators becoming
common.
By contrast, the economies of the emerging markets are in a much healthier
condition. Led by China, which is now the world's second largest economy, Asia
is gradually reducing its dependence on exports to the West. The increasing
size and affluence of the middle classes is likely to lead to growth in
domestic consumption, boosted by reductions in savings rates. Japan's
manufacturing base and proximity to the growth economies in Asia means that
Japanese companies are well placed to benefit from this growth in consumption.
Europe has taken centre stage as the problems in Greece and potential sovereign
debt fears have been played out in the media. In fact, Europe has a stronger
fiscal and trade position than the US and the issues with uncompetitive
countries in the periphery are unlikely to derail the key northern economies.
Portfolio
Portfolio construction is based upon our analysis of long-term earnings and
risk. During the year we have gradually increased the proportion of holdings in
economically sensitive companies where short-term fears have made the valuation
attractive on a long-term view. Examples include new investments in Norwegian
fertiliser manufacturer Yara and Spanish bank BBVA, as well as increased
holdings in US technology leader Cisco Systems. We established a presence in
Japan by purchasing a number of investments, including Sony and Fujitsu. The
Japanese corporate sector's successful restructuring efforts are starting to
show results with improved margins, albeit these are currently masked by a
strong Yen.
We have reduced the number of holdings in the portfolio closer to 40 which we
see as the optimum level going forward, balancing high conviction with
sufficient diversification. The most significant change came in the reduction
of UK holdings, where exposure was reduced by over 10% to 33%, which was used
to finance the purchase of the Company's new investments in Japan.
Mindful of the differing outlook for developed and emerging economies, we have
been keeping track of end sales demand for the companies in the portfolio.
While the portfolio has around 10% invested in emerging markets, when end sales
demand is taken into account the exposure is around 20%.
Outlook
As the consequences of the fiscal deficits in the West become clearer, optimism
has gradually faded. The imbalance between the developed and emerging economies
does need to be addressed and will involve an inexorable transfer of wealth
from the West to the East. We do not see any obvious valuation anomalies at a
sectoral level at present, therefore portfolio changes are likely to be driven
by stock specific valuations.
Against this backdrop, we expect to see increased volatility as investors both
grapple with the implications of the new economic environment and search for
the winners and losers. There are a number of quality companies that can
deliver good yields with acceptable risk and the schizophrenic market reaction
to newsflow should result in opportunities for long-term equity investors.
Edinburgh Partners Limited
6 October 2010
PORTFOLIO OF INVESTMENTS
as at 31 July 2010
20 Largest Investments
% of
Company Sector Country Valuation Net Assets
GBP'000
Banque Cantonale Vaudoise Financials Switzerland 2,838 3.5
Virgin Media Telecommunications United States 2,535 3.1
Fujitsu Technology Japan 2,506 3.1
Obayashi Industrials Japan 2,246 2.8
Vodafone Telecommunications United 2,231 2.8
Kingdom
Banco Bilbao Vizcaya Financials Spain 2,184 2.7
Argentaria
Centrica Utilities United 2,178 2.7
Kingdom
Sony Consumer Goods Japan 2,169 2.7
Scottish & Southern Utilities United 2,127 2.6
Energy Kingdom
ENI Oil & Gas Italy 2,123 2.6
China Mobile Telecommunications China 2,110 2.6
UBS Financials Switzerland 2,105 2.6
Singapore Telecommunications Singapore 2,086 2.6
Telecommunications
Belgacom Telecommunications Belgium 2,073 2.6
Deutsche Post Industrials Germany 2,063 2.6
BP Oil & Gas United 2,030 2.5
Kingdom
Provident Financial Financials United 2,016 2.5
Kingdom
Aviva Financials United 1,995 2.5
Kingdom
Cisco Systems Technology United States 1,944 2.4
Vivendi Consumer Services France 1,941 2.4
Total - 20 largest 43,500 53.9
investments
Other Investments
Tesco Consumer Services United 1,930 2.4
Kingdom
Gazprom Oil & Gas Russia 1,914 2.4
Intesa Sanpaolo Financials Italy 1,903 2.4
Sanofi-aventis Health Care France 1,853 2.3
UK Commercial Property Financials United 1,836 2.3
Kingdom
HSBC Financials United 1,824 2.3
Kingdom
Yara International Basic Materials Norway 1,793 2.2
Mitsubishi Industrials Japan 1,788 2.2
E.On Utilities Germany 1,676 2.1
Imperial Tobacco Consumer Goods United 1,661 2.1
Kingdom
Solvay Basic Materials Belgium 1,625 2.0
GlaxoSmithKline Health Care United 1,555 1.9
Kingdom
SK Telecom Telecommunications Korea, 1,546 1.9
Republic Of
Nokia Technology Finland 1,499 1.9
General Electric Industrials United States 1,403 1.7
Rexam Industrials United 1,324 1.6
Kingdom
Intel Corp Technology United States 1,315 1.6
Sage Group Technology United 1,290 1.6
Kingdom
Actelion Health Care Switzerland 1,278 1.6
Akzo Nobel Basic Materials Netherlands 1,255 1.6
Beazley Financials United 1,141 1.4
Kingdom
CRH Industrials Ireland 1,126 1.4
Invensys Technology United 1,106 1.4
Kingdom
General Dynamics Industrials United States 846 1.0
Total - 44 investments 79,987 99.2
Cash and other net assets 649 0.8
Net assets 80,636 100.0
The geographic distribution is based on each investment's principal stock
exchange listing, except in instances where this would not give a proper
indication of where its activities predominate.
Of the ten largest portfolio investments as at 31 July 2010 the valuations at
the previous year end, 31 July 2009, were Banque Cantonale Vaudoise GBP2,107,000;
Vodafone GBP1,841,000; Centrica GBP1,363,000; Scottish & Southern Energy GBP841,000;
ENI GBP2,272,000. The remaining five investments, Virgin Media, Fujitsu,
Obayashi, Banco Bilbao Vizcaya Argentaria and Sony, were new purchases made
during the year ended 31 July 2010.
DISTRIBUTION OF INVESTMENTS
as at 31 July 2010 (% of net assets)
Sector distribution % of Net Assets
Financials 22.2
Telecommunications 15.6
Industrials 13.3
Technology 12.0
Oil & Gas 7.5
Utilities 7.4
Health Care 5.8
Basic Materials 5.8
Consumer Goods 4.8
Consumer Services 4.8
Cash and other net assets* 0.8
100.0
Geographical distribution % of Net Assets
Europe 38.9
United Kingdom 32.6
Japan 10.8
United States 9.8
Asia Pacific 7.1
Cash and other net assets* 0.8
100.0
Source: Edinburgh Partners Limited
* Cash and other net assets includes foreign currency balances of GBP71,000
(0.1%).
The figures detailed in the geographical distribution represent the Company's
equity exposure to those countries or regional areas.
The geographic distribution is based on each investment's principal stock
exchange listing, except in instances where this would not give a proper
indication of where its activities predominate.
DIRECTORS
The Directors in office are:
John Pearmund (Chairman)
Christopher Duffett
John Sussens
Giles Weaver
All of the Directors are non-executive and independent of the Investment
Manager.
EXTRACTS FROM THE DIRECTOR'S REPORT
BUSINESS REVIEW
Financial reporting requirements direct that the Company is required to provide
a business review within the Directors' Report. The business review must
contain a review of the Company's business, the principal risks and
uncertainties it faces, an analysis of its performance during the financial
period, the position at the period end and the future business plans of the
Company. It must also provide information about the Company's environmental,
social and ethical policy and about persons with whom the Company has
contractual or other arrangements essential to the business of the Company. To
aid understanding of these areas the Board is required to include analysis
using appropriate Key Performance Indicators.
Forward looking statements
This business review contains "forward looking statements" with respect to the
Company's plans and its current goals and expectations relating to its future
financial condition, performance and results. By their nature, all forward
looking statements involve risk and uncertainty because they relate to future
events that are beyond the Company's control. Factors that could cause actual
results to differ materially from those estimated by the forward looking
statements include, but are not limited to:
* UK and overseas economic conditions
* UK and overseas equity market performance and prices
* Changes in Government policies, both in the UK and overseas
* Monetary and interest rate policies
* The impact of inflation and deflation
* Changes to regulations and taxes, both in the UK and overseas
* Changes to consumer saving or spending habits
* Foreign exchange rates
* The Company's success in managing its assets and business to manage the above factors
* The Company's use of gearing
As a result, the Company's actual future financial condition, performance and
results may differ materially from the plans, goals and expectations set forth
in the Company's forward looking statements. The Company undertakes no
obligation to update the forward looking statements contained within this
review or any other forward looking statements it makes.
Business and status of the Company
The Company is registered as a public limited company and is an investment
company within the terms of Section 833 of the Companies Act 2006. Its shares
are listed on the Official List of the UK Listing Authority and traded on the
main market of the London Stock Exchange. The Company has received approval
from the Inland Revenue as an authorised investment trust under Section 842 of
the Income and Corporation Taxes Act 1988 ("ICTA 1988") for the year ended 31
July 2009 and all previous periods. This approval is subject to there being no
subsequent enquiry under corporation tax self-assessment. In the opinion of the
Directors, the Company continues to direct its affairs so as to enable it to
qualify for such approval and the Company will continue to seek approval each
year. With effect from the year ended 31 July 2010, approval will be sought
under Sections 1158 and 1159 of the Corporation Tax Act 2010 ("CTA 2010").
Objective
The investment objective of the Company is to provide shareholders with above
average returns over the longer term through both capital appreciation and
income growth.
Investment policy
Asset allocation
The Company's investment policy is to invest in a focused portfolio comprising
principally securities of publicly quoted companies worldwide which the
Investment Manager considers to be undervalued on the basis of their earnings
potential. The Company may also invest up to 5 per cent of its gross assets in
unquoted securities and up to 10 per cent of its gross assets in other listed
investment companies or funds, including investment trusts. The Company's
portfolio will be constructed without reference to either the composition of
any stock market index or any geographic, industrial or sectoral asset
allocation limits.
Where the Investment Manager believes market or economic conditions make equity
investment unattractive or while seeking appropriate investment opportunities
for the portfolio or to maintain liquidity, the Company may invest in bonds and
other debt instruments, cash, cash equivalents or short-term deposits. The
proportion of the Company's assets which may be invested in this way will vary
according to the Investment Manager's view of market or economic conditions and
the availability of suitable equity investment opportunities. In the unlikely
event of very extreme conditions, 100 per cent of the portfolio could be so
invested, although the use of such investments is not expected normally to
exceed 30 per cent of gross assets. In addition, the Company may purchase
derivatives for the purposes of efficient portfolio management (i.e. for the
purpose of reducing, transferring or eliminating investment risk in its
investments, including protection against currency risk).
Risk diversification
In order to spread risk, the portfolio will normally consist of between 40 and
70 equity investments in publicly quoted companies. No single investment will
represent more than 15 per cent of the Company's gross assets at the time of
its acquisition.
Gearing
The Company's policy on gearing is not to have fixed or structural gearing, but
the Company may from time to time, when deemed appropriate, borrow for
investment purposes in various currencies to suit investment conditions. This
gearing will not exceed 20 per cent of shareholders' funds at the time of
borrowing. This is intended to enhance the Company's ability to take advantage
of future investment opportunities identified by the Investment Manager,
subject always to the Board's overall control in relation to borrowings.
Investment strategy
The Company is managed without reference to any stock market index. Investments
are selected for the portfolio only after extensive research which the
Investment Manager believes to be key. The whole process through which an
equity must pass in order to be included in the portfolio is very rigorous.
Only a security where the Investment Manager believes that the price will be
significantly higher in the future will pass the selection process. The
Company's Investment Manager believes the key to successful stock selection is
to identify the long-term value of a company's shares and to have the patience
to hold the shares until that value is appreciated by other investors.
Identifying long-term value involves detailed analysis of a company's earning
prospects over a five-year time horizon.
The Company's Investment Manager is Edinburgh Partners Limited, which is an
independent specialist investment manager focusing exclusively on achieving
above average returns for investors based on global investment analysis of the
highest quality. The Edinburgh Partners investment team includes experienced
investment professionals with strong investment performance records who believe
rigorous fundamental research allied to patience is the basis of long-term
investment success. Each of the investment professionals has specific
responsibilities for sector and regional research in addition to their fund
management role.
Edinburgh Partners is committed to investment trusts as flexible, long-term
savings vehicles and intends that they should form an important component of
its business offering.
Portfolio analysis
The Company has and intends to observe the investment restrictions necessary to
achieve and maintain approved investment trust status in the United Kingdom and
to comply with the Listing Rules. No single investment will represent more than
15 per cent of the Company's gross assets at the time of its acquisition.
A detailed review of how the Company's assets have been invested is contained
in the Manager's Report and Portfolio Analysis. A detailed list of all the
Company's investments is contained in the Portfolio of Investments. The
Portfolio of Investments details that the Company held 44 investments,
excluding cash and other net assets, as at 31 July 2010, with the largest
investment representing 3.5% of net assets, thus ensuring that the Company has
a suitable spread of investment risk. A sector and geographical distribution is
shown above.
Principal risks and uncertainties
The principal risks facing the Company relate to the Company's investment
activities. An explanation of these risks and how they are managed is contained
in note 18. These risks are: investment and strategy risk; discount volatility
risk; market risk (comprising: interest rate risk, currency risk and other
price risk); liquidity risk; credit risk and gearing risk.
In addition, the Board also considers the following as principal risks:
Regulatory risk
Failure to qualify under the terms of Sections 1158 and 1159 of the CTA 2010
(formerly Section 842 ICTA 1988) may lead to Anglo & Overseas Plc being subject
to capital gains tax. A breach of the Listing Rules of the Financial Services
Authority ("FSA") may result in censure by the FSA and/or the Company's
suspension from Listing.
The Investment Manager is responsible for certain administrative matters
including regulatory compliance. Accordingly, the Board has agreed service
levels with the Investment Manager which includes active and regular review of
compliance with the CTA 2010 and FSA requirements. These checks are reviewed
monthly and at each Board meeting.
Operational risk
In common with most other investment companies the Company has no employees;
the Company therefore relies upon the services provided by third parties. There
are a number of operational risks associated with the fact that third parties
undertake the Company's administration and custody. The main risk is that the
third parties may fail to ensure that statutory requirements, such as
compliance with the Companies Act and FSA Listing Rules, are met.
The Board regularly receives and reviews management information on third
parties which the Secretary compiles. In addition, each of the third parties
provides a copy of its report on internal controls (SAS 70, AAF or equivalent)
to the Board each year.
Financial risk
Inappropriate accounting policies or failure to comply with current or new
accounting standards may lead to a breach of regulations.
The Investment Manager employs independent administrators to prepare all
Financial Statements and the Audit Committee meets with the independent Auditor
at least once a year to discuss all financial matters including appropriate
accounting policies.
The Company is a member of the Association of Investment Companies ("AIC"), a
trade body intended to promote investment trusts which also develops best
practice for all of its members.
Key personnel risk
There is a risk that key personnel within the Investment Manager might leave
Edinburgh Partners or may no longer be involved in the management of the
Company's portfolio. The Investment Manager has in place an insurance policy
covering key personnel. The Investment Management Agreement provides for
termination in the event that certain key personnel are no longer involved in
the management of Anglo & Overseas Plc. Further details of the Investment
Management Agreement are below.
The Board undertakes an annual assessment and review of all the risks stated
above and in note 18 together with a review of any new risks which may have
arisen during the year. These risks are formalised within the Company's risk
assessment matrix.
Performance
Results and dividends: The results for the year ended 31 July 2010 are set out
in the Income Statement and in the Reconciliation of Movements in Shareholders'
Funds.
The Directors recommend a final dividend of 2.16p (2009: 2.08p) per Ordinary
Share to be paid on 30 November 2010 to shareholders on the register as at the
close of business on 5 November 2010. The ex-dividend date will be 3 November
2010. Subject to shareholders approving the final dividend, the total dividend
for the year ended 31 July 2010, including the interim dividend of 0.84p (2009:
0.82p), will be 3.00p (2009: 2.90p).
Further information on the performance of the Company may be found in the
Chairman's Statement and the Manager's Report and Portfolio Analysis.
Net asset value: The net asset value ("NAV") per Ordinary Share, including
revenue reserves, as at 31 July 2010 was 110.13p (2009: 96.80p).
Key performance indicators ("KPIs")
At each Board meeting, the Directors consider a number of performance measures
to assess the Company's success in achieving its objectives. The KPIs used to
measure progress and performance of the Company over time are established
industry measures and are as follows:
* NAV per Ordinary Share
* Share price per Ordinary Share
* Discount/premium to NAV
* Revenue return per Ordinary Share
* Dividend per Ordinary Share
* Portfolio turnover
* Total expense ratio
The records of the KPIs are shown below:
31 July 2010 31 July 2009 Change
Net asset value per Ordinary 110.13p 96.80p 13.8%
Share
Share price per Ordinary Share 96.50p 89.75p 7.5%
Discount to NAV 12.4% 7.3%
Year Year
to to
31 July 2010 31 July 2009
Revenue return per Ordinary 3.40p 3.17p
Share
Dividend per Ordinary Share* 3.00p 2.90p
Portfolio turnover 49% 44%
Total expense ratio 0.9% 0.9%
* This includes a final dividend for each year, including the 2010 proposed
final dividend of 2.16p.
Share capital
At the year end the Company's issued share capital comprised 83,275,319
Ordinary Shares of which 10,057,438 Ordinary Shares (including shares brought
back in prior accounting periods) were held in treasury. At general meetings of
the Company, one vote is attached to each Ordinary Share in issue. Own shares
held in treasury do not carry voting rights. The total voting rights of the
Company at the year end, 31 July 2010 and at the date of this report, were
73,217,881 Ordinary Shares. There are no restrictions on the transfer of the
Company's Ordinary Shares or special rights attached to these shares regarding
control.
During the year ended 31 July 2010, 1,177,249 Ordinary Shares (with a nominal
value of GBP117,725) were purchased for cancellation, representing 1.41% of the
issued share capital at the year end, for an aggregate amount of GBP1,122,000.
Also during the year ended 31 July 2010 the Company purchased 1,730,000
Ordinary Shares (with a nominal value of GBP173,000) for treasury, representing
2.08% per cent of the issued share capital at 31 July 2010, for an aggregate
amount of GBP1,696,000.
The Company also cancelled during the year 130,000 Ordinary Shares (with a
nominal value of GBP13,000) from treasury, representing 0.16% of the issued share
capital at the year end. The shares were cancelled from treasury in order to
ensure that the number of own shares held in treasury at any one time did not
exceed the limit prescribed by the Companies (Acquisition of Own Shares)
(Treasury Shares) Regulations 2003, being 10% of the issued share capital at
any one time. Since 1 October 2009, in accordance with the Companies (Share
Capital and Acquisition by Company of its Own Shares) Regulations 2009, there
is no longer a limit on the number of shares that a company can hold in
treasury at any one time. The Board has not set a limit on the number of shares
that can be held in treasury at any one time. The maximum number of own shares
held in treasury during the year was 10,057,438 Ordinary Shares (with a nominal
value of GBP1,005,744) representing 12.08% of the issued share capital of
83,275,319 Ordinary Shares at the time they were held in treasury.
Holding shares in treasury enables a company to issue shares cost effectively
that might otherwise have been cancelled. The Board has the facility to
authorise the sale of shares from treasury at prices at or above the net asset
value per share (plus costs of the relevant sale). In the future the Directors
will consider selling shares from treasury in order to meet demand as it
arises. This should result in a positive overall effect on the net asset value
per share if shares are bought back at a discount and then sold at a price at
or above the net asset value per share.
Current and future developments
A review of the main features of the year and the outlook for the coming year
is to be found in the Chairman's Statement and in the Manager's Report and
Portfolio Analysis. The Board's main focus is on the investment return and
investment approach. Attention is paid to the integrity and success of the
investment approach and on factors which may have an impact on this approach.
Due regard is paid to the promotion of the Company, including communication
with shareholders and other external parties. The Board is regularly updated on
wider investment trust industry issues. Detailed papers are presented to the
Board which lead to extensive discussion on development and strategy.
Social, environmental and ethical policy
Anglo & Overseas Plc seeks to invest in companies that are well managed, with
high standards of corporate governance, as the Directors believe this creates
the proper conditions to enhance long-term value for shareholders. The Company
adopts a positive approach to corporate governance and engagement with
companies.
In pursuit of the above objective, the Directors believe that proxy voting is
an important part of the corporate governance process and considers seriously
its obligation to manage the voting rights of companies in which it is
invested, for which it has delegated responsibility to its Investment Manager.
It is the policy of the Company to vote, as far as is practicable, at all
shareholder meetings of investee companies. The Company follows the relevant
applicable regulatory and legislative requirements in the UK, with the guiding
principles being to make proxy voting decisions which favour proposals that
will lead to maximising shareholder value while avoiding any conflicts of
interest. Voting decisions are taken on a case by case basis, with the key
issues on which the Investment Manager focuses being corporate governance,
including disclosure and transparency, board composition and independence,
control structures, remuneration and social and environmental issues.
Investment Management Agreement
The Company's investments are managed by Edinburgh Partners Limited under an
Investment Management Agreement dated 23 June 2005 (the "Investment Management
Agreement"). Edinburgh Partners receives a management fee of 0.125 per cent per
quarter of the market capitalisation of the issued Ordinary Shares, payable
quarterly in arrears. In addition it receives an administration fee (GBP111,000
per annum for the year ended 31 July 2010), payable quarterly in arrears and
adjusted annually in line with changes in the Retail Prices Index. The
Investment Management Agreement is terminable by 12 months' notice by either
party. The Company may terminate the agreement with less than 12 months'
notice; however, it may be required to pay liquidated damages for early
termination, unless certain specific circumstances set out in the agreement are
met.
Continuing appointment of the Investment Manager
The Company keeps the performance of the Investment Manager under review
through the Remuneration and Management Engagement Committee. It is the opinion
of the Directors that the continuing appointment of Edinburgh Partners is in
the interests of shareholders as a whole. The reasons for these views are that
the Directors are confident that the long-term investment strategy of Edinburgh
Partners will ensure that the Company's objective of providing above average
returns over the longer term through both capital appreciation and income
growth will be achieved. The remuneration of the Investment Manager is
considered reasonable both in absolute terms and compared with that of managers
of comparable investment companies. The Directors believe that by paying the
Investment Management fee calculated on a market capitalisation basis, rather
than a percentage of assets basis, the interests of the Investment Manager are
more closely aligned with those of shareholders.
MANAGEMENT REPORT AND STATEMENT OF DIRECTORS' RESPONSIBILITIES IN RESPECT OF
THE ANNUAL REPORT AND THE FINANCIAL STATEMENTS
Management report
Listed companies are required by the FSA's Disclosure and Transparency Rules
(the "Rules") to include a management report within their Annual Report and
Financial Statements.
The information required to be included in the management report for the
purpose of these Rules is included in the Chairman's Statement, the Manager's
Report and Portfolio Analysis and the Business Review contained in the
Directors' Report. Therefore no separate management report has been included.
The Financial Statements have been reviewed by the Company's Auditors.
Statement of Directors' responsibilities in respect of the Annual Report and
the Financial Statements
The Directors are responsible for preparing the Annual Report and the Financial
Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each
financial year. Under that law they have elected to prepare the Financial
Statements in accordance with UK Accounting Standards and applicable law (UK
Generally Accepted Accounting Practice).
Under company law the Directors must not approve the Financial Statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss of the Company for that
period. In preparing these Financial Statements, the Directors are required to:
* select suitable accounting policies and then apply them consistently;
* make judgements and estimates that are reasonable and prudent;
* state whether applicable UK Accounting Standards have been followed, subject
to any material departures disclosed and explained in the Financial Statements;
and
* prepare the Financial Statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors 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 the Financial Statements comply with the Companies
Act 2006 and include the information required by the Listing Rules of the FSA.
They have general responsibility for taking such steps as are reasonably open
to them to safeguard the assets of the Company and to prevent and detect fraud
and other irregularities.
Under applicable law and regulations, the Directors are also responsible for
preparing a Directors' Report, Directors' Remuneration Report and Corporate
Governance Statement 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.
The Directors confirm to the best of their knowledge:
* the Financial Statements, prepared in accordance with UK Accounting
Standards, give a true and fair view of the assets, liabilities, financial
position and net return of the Company; and
* the Annual 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.
On behalf of the Board
John Pearmund
Chairman
6 October 2010
INDEPENDENT AUDITOR'S REPORT
The Company's Financial Statements for the year ended 31 July 2010 have been
audited by KPMG Audit Plc. The text of the Auditor's report can be found in the
Company's Annual Report and Accounts at www.angloandoverseasplc.com.
INCOME STATEMENT
for the year ended 31 July 2010
Year to Year to
31 July 2010 31 July 2009
Revenue Capital Total Revenue Capital Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Gains/(losses) 8 - 9,724 9,724 - (7,275) (7,275)
on investments
at fair value
Foreign 8 - (127) (127) - 24 24
exchange
(losses)/gains
on capital
items
Income 2 3,289 - 3,289 3,399 - 3,399
Investment 3 (177) (177) (354) (165) (166) (331)
management fee
Refund of VAT 3 - - - 55 42 97
on investment
management and
administration
fees
Other expenses 4 (410) - (410) (389) - (389)
Net return/ 2,702 9,420 12,122 2,900 (7,375) (4,475)
(loss) before
interest and
taxation
Interest paid (1) - (1) (3) - (3)
Net return/ 2,701 9,420 12,121 2,897 (7,375) (4,478)
(loss) before
taxation
Taxation 5 (187) - (187) (412) 35 (377)
Net return/ 2,514 9,420 11,934 2,485 (7,340) (4,855)
(loss) after
taxation
pence pence pence pence pence pence
Return per 7 3.40 12.74 16.14 3.17 (9.35) (6.18)
Ordinary Share*
* Based on the weighted average number of Ordinary Shares in issue during the
year (excluding own shares held in treasury).
All revenue and capital items in the above statement derive from continuing
operations.
The total column of this statement is the profit and loss account of the
Company. The supplementary revenue and capital return columns are prepared
under guidance published by the Association of Investment Companies ("AIC").
A separate Statement of Total Recognised Gains and Losses has not been prepared
as all such gains and losses are included in the Income Statement.
The notes form part of these Financial Statements.
BALANCE SHEET
as at 31 July 2010
31 July 31 July
2010 2009
Notes GBP'000 GBP'000
Fixed assets:
Investments at fair value through 8 79,987 71,835
profit or loss
Current assets:
Debtors 10 492 592
Cash at bank and short-term deposits 331 1,845
823 2,437
Creditors - amounts falling due within 11 174 583
one year
Net current assets 649 1,854
Net assets 80,636 73,689
Capital and reserves:
Called-up share capital 14 8,327 8,458
Special reserve 64,415 67,233
Capital redemption reserve 695 564
Capital reserve 3,437 (5,983)
Distributable revenue reserve 3,762 3,417
Total equity shareholders' funds 80,636 73,689
pence pence
Net asset value per Ordinary Share 15 110.13 96.80
The Financial Statements were approved by the Board of Directors on 6 October
2010.
John Pearmund
Chairman
The notes form part of these Financial Statements.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
for the year ended 31 July 2010
Called-up Capital Distributable Total equity
share Special redemption Capital revenue shareholders'
Notes capital reserve reserve reserve reserve funds
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Year ended
31 July 2010
As at 31 8,458 67,233 564 (5,983) 3,417 73,689
July 2009
Cost of own (118) (1,122) 118 - - (1,122)
shares
bought for
cancellation
Cost of own - (1,696) - - - (1,696)
shares
bought for
treasury
Cost of own (13) - 13 - - -
shares
cancelled
from
treasury
Investment 8 - - - 4,830 - 4,830
holding
gains
Net gain on 8 - - - 4,894 - 4,894
realisation
of
investments
Foreign 8 - - - (127) - (127)
exchange
losses on
capital
items
Dividends 6 - - - - (2,169) (2,169)
paid in the
year
Investment 3 - - - (177) - (177)
management
fee
Net revenue - - - - 2,514 2,514
return for
the year
As at 31 8,327 64,415 695 3,437 3,762 80,636
July 2010
The notes form part of these Financial Statements.
Called-up Capital Distributable Own shares Total equity
share Special redemption Capital revenue held in shareholders'
Notes capital reserve reserve reserve reserve treasury funds
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Year ended 31
July 2009
As at 31 July 8,894 79,949 128 1,357 3,189 (9,441) 84,076
2008
Transfer of - (9,441) - - - 9,441 -
own shares
held in
treasury*
As at 31 July 8,894 70,508 128 1,357 3,189 - 84,076
2008
(restated)
Cost of own (392) (3,275) 392 - - - (3,275)
shares bought
for
cancellation
Cost of own (44) - 44 - - - -
shares
cancelled from
treasury
Investment 8 - - - 9,351 - - 9,351
holding gains
Net loss on 8 - - - (16,626) - - (16,626)
realisation of
investments
Foreign 8 - - - 24 - - 24
exchange gains
on capital
items
Dividends paid 6 - - - - (2,257) - (2,257)
in the year
Investment 3 - - - (166) - - (166)
management fee
Refund of VAT 3 - - - 42 - - 42
on investment
management
and
administration
fees
Tax on - - - 35 - - 35
investment
management fee
Net revenue - - - - 2,485 - 2,485
return for the
year
As at 31 July 8,458 67,233 564 (5,983) 3,417 - 73,689
2009
* Previously the cost of shares held in treasury was shown as a separate
reserve. In accordance with the AIC Statement of Recommended Practice issued in
January 2009, the cost of own shares held in treasury is now reflected as a
deduction from the special reserve.
The notes form part of these Financial Statements.
STATEMENT OF CASH FLOWS
for the year ended 31 July 2010
Year to Year to
31 July 31 July
2010 2009
Notes GBP'000 GBP'000
Operating activities:
Net investment income received 3,080 3,163
Other income 6 13
Refund of VAT, including interest, on 103 -
investment management and administration
fees
Investment management fees paid (354) (343)
Administration and secretarial fees paid (111) (111)
Other cash payments (302) (295)
Net cash inflow from operating activities 16 2,422 2,427
Servicing of finance:
Interest paid (1) (3)
Taxation (116) (65)
Capital expenditure and financial
investment:
Purchases of investments (38,721) (29,200)
Sales of investments 40,293 31,949
Exchange losses on settlement (127) (116)
Net cash inflow from capital expenditure 1,445 2,633
and financial investment:
Equity dividends paid (2,169) (2,257)
Net cash inflow before financing 1,581 2,735
Financing:
Own shares purchased for cancellation (1,399) (3,242)
Own shares purchased and held in treasury (1,696) -
Net cash outflow from financing (3,095) (3,242)
Decrease in cash 17 (1,514) (507)
The notes form part of these Financial Statements.
NOTES TO THE FINANCIAL STATEMENTS
at 31 July 2010
1 Accounting policies
Basis of accounting
The Financial Statements are prepared on a going concern basis, under the
historical cost convention modified to include fixed asset investments at fair
value, in accordance with the Companies Act 2006, in accordance with UK
Generally Accepted Accounting Practice ("UK GAAP") and with the AIC Statement
of Recommended Practice issued in January 2009 relating to the Financial
Statements of Investment Trust Companies and Venture Capital Trusts ("SORP").
All the Company's activities are continuing.
Income recognition
Dividend and other investment income is included as revenue when the
investments concerned are quoted 'ex-dividend'. Income arising on holdings of
fixed income securities is recognised on a time apportionment basis so as to
reflect the effective interest rate on that security. Deposit interest and
underwriting commission receivable is included on an accruals basis.
Expenses
All expenses are accounted for on an accruals basis. All operating expenses are
charged through revenue in the Income Statement except costs that are
incidental to the acquisition or disposal of investments, which are charged to
capital. Transaction costs are included within the gains and losses on
investments, as disclosed in the Income Statement.
The Investment Manager's fee is allocated 50 per cent to capital and 50 per
cent to revenue.
Expenses related to the issue of new shares are charged to the Company's share
premium account.
Investments
All investments held by the Company are classified as 'fair value through
profit or loss'. Investments are initially recognised at cost, being the fair
value of the consideration given.
After initial recognition, investments are measured at fair value, with changes
in the fair value of investments and impairment of investments recognised in
the Income Statement and allocated to capital. Realised gains and losses on
investments sold are calculated as the difference between sales proceeds and
cost.
For investments actively traded in organised financial markets, fair value is
generally determined by reference to Stock Exchange quoted market bid prices at
the close of business on the Balance Sheet date, without adjustment for
transaction costs necessary to realise the asset.
Foreign currency
Transactions denominated in foreign currencies are converted to sterling at the
actual exchange rate as at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies at the year end are reported at
the rate of exchange at the Balance Sheet date. Any gain or loss arising from a
change in exchange rate subsequent to the date of the transaction is included
as an exchange gain or loss in the capital reserve or in revenue depending on
whether the gain or loss is of a capital or revenue nature.
Taxation
The charge for taxation is based on the net return for the year. In accordance
with Financial Reporting Standard 16: Current Tax, UK dividend income is shown
net of attributable tax credits, therefore no tax credits are included within
the charge for taxation.
The charge for taxation takes into account taxation deferred or accelerated
because of timing differences between the treatment of certain items for
accounting and taxation purposes. Full provision for deferred taxation is made
under the liability method, without discounting, on all timing differences that
have arisen but not been reversed by the Balance Sheet date, unless such
provision is not permitted by Financial Reporting Standard 19: Deferred Tax.
This is subject to deferred tax assets only being recognised if it is
considered more likely than not that there will be suitable profits from which
the future reversal of the underlying timing differences can be deducted.
Timing differences are differences arising between the Company's taxable
profits and its results as stated in the Financial Statements which are capable
of reversal in one or more subsequent periods. The tax effect of different
items of expenditure is allocated between revenue and capital on the same basis
as the particular item to which it relates. Tax relief on expenses is allocated
between revenue and capital using the marginal basis in accordance with the
SORP.
Reserves
Capital reserve
The following are accounted for in this reserve:
* gains and losses on the realisation of investments;
* net movement arising from changes in the fair value of investments held at
the year end that can be readily converted to cash without accepting adverse
terms;
* realised exchange differences of a capital nature;
* expenses, together with related taxation effect, charged to this account in
accordance with the above policies; and
* net movement arising from changes in the fair value of investments held at
the year end that cannot be readily converted to cash without accepting adverse
terms.
Special reserve
The special reserve was created by a reduction in the share premium account by
order of the High Court on 25 August 2005. It can be used for the repurchase of
the Company's Ordinary Shares.
In accordance with the AIC SORP, the consideration paid for shares bought into
and held in treasury is shown as a deduction from the special reserve. The
number of own shares held in treasury is excluded from the calculation of the
net asset value per share as detailed in these Financial Statements.
Dividends payable to shareholders
Under Financial Reporting Standard 21: Events after the Balance Sheet Date,
interim dividends are recognised when paid, with final dividends being
recognised when approved by shareholders in general meeting.
2 Income
Year to Year to
31 July 2010 31 July 2009
GBP'000 GBP'000
Income from listed investments:
UK dividend income 1,331 1,644
Overseas dividends 1,896 1,631
Deposit funds 3 44
Interest 47 67
3,277 3,386
Other income:
Interest on VAT refund on investment 6 -
management and administration fees
Underwriting commission 6 13
3,289 3,399
Total income comprises:
Dividends 3,230 3,319
Interest 53 67
Underwriting commission 6 13
3,289 3,399
3 Investment Management fee
Year to Year to
31 July 2010 31 July 2009
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Investment Management fee 177 177 354 165 166 331
The Investment Management fee is paid quarterly in arrears, at the rate of 0.5
per cent per annum of the market capitalisation of the Company. At 31 July 2010
there was GBP84,000 outstanding (2009: GBP84,000). In addition, the Investment
Manager received an administration fee of GBP111,000 per annum subject to an
annual RPI adjustment (2009: GBP113,000) (see note 4 below). At 31 July 2010
there was GBP28,000 outstanding (2009: GBP28,000).
Following the AIC/Claverhouse judgement in 2007 regarding the charging of VAT
on investment management and administration fees, the Company has received
GBP97,000 which was recognised in the Financial Statements for the year ended 31
July 2009.
4 Other expenses
Year to Year to
31 July 2010 31 July 2009
GBP'000 GBP'000
Administration and secretarial fees 111 113
Auditor's remuneration 22 22
Directors\' remuneration 104 110
Registrars' fees 15 18
Irrecoverable VAT 12 (7)
Other 146 133
410 389
The entire amount of the Auditor's remuneration relates to audit services.
5 Taxation
Year to Year to
31 July 2010 31 July 2009
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
a) Analysis of charge
in year
Current tax:
UK corporation tax - - - 339 (35) 304
Overseas tax suffered - - - 173 - 173
Double taxation relief - - - (173) - (173)
Irrecoverable overseas 188 - 188 10 - 10
tax suffered
(Overcharge)/ (1) - (1) 63 - 63
undercharge relating to
prior year
187 - 187 412 (35) 377
b) The current taxation charge for the year is lower than the standard rate of
corporation tax in the UK of 28 per cent. The differences are explained below:
Year to Year to
31 July 2010 31 July 2009
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Net return before 2,701 9,420 12,121 2,897 (7,375) (4,478)
taxation
Theoretical tax at UK 756 2,638 3,394 811 (2,065) (1,254)
corporation tax rate of
28%
Effects of:
- UK dividends that are (373) - (373) (460) - (460)
not taxable
- Foreign dividends that (486) - (486) (1) - (1)
are not taxable
- Accrued income taxable 6 - 6 (1) - (1)
on receipt
- Accrued income exempt - - - (10) - (10)
on receipt
- Non-taxable investment - (2,687) (2,687) - 2,030 2,030
(gains)/losses
- Irrecoverable overseas 188 - 188 10 - 10
tax
- Unrelieved expenses 97 49 146 - - -
- (Overcharge)/ (1) - (1) 63 - 63
undercharge relating to
prior year
187 - 187 412 (35) 377
c) At 31 July 2010 the Company had unrelieved management expenses of GBP525,000
(2009: GBPnil). It is unlikely that the Company will generate sufficient taxable
income in the future to utilise these expenses to reduce future tax charges and
therefore no deferred tax asset has been recognised.
In addition, due to the Company's status as an investment trust and the
intention to continue meeting the conditions required to obtain approval as an
investment trust in the foreseeable future, the Company has not provided
deferred tax on any capital gains and losses arising on the revaluation or
disposal of investments.
6 Dividends
Year to Year to
31 July 2010 31 July 2009
GBP'000 GBP'000
Declared and paid
2009 final dividend of 2.08p (2008: 2.04p) per 1,554 1,619
Ordinary Share
2010 interim dividend of 0.84p per Ordinary Share 615 638
(2009: interim dividend of 0.82p per Ordinary
Share)
2,169 2,257
Proposed
2010 final dividend of 2.16p* (2009: 2.08p) per 1,582 1,559
Ordinary Share
* Figure based on 73,217,881 shares, being the number of shares in issue as at
the date of this report (excluding own shares held in treasury).
7 Return per Ordinary Share
Year to Year to
31 July 2010 31 July 2009
Net Ordinary Per Net Ordinary Per
return Shares* share return/ Shares* share
(loss)
GBP'000 pence GBP'000 pence
Revenue return 2,514 73,949,580 3.40 2,485 78,497,082 3.17
Capital return 9,420 73,949,580 12.74 (7,340) 78,497,082 (9.35)
Total 11,934 16.14 (4,855) (6.18)
* Weighted average number of Ordinary Shares in issue during the year
(excluding own shares held in treasury).
8 Investments
31 July 2010 31 July 2009
GBP'000 GBP'000
Listed investments 79,987 71,835
Analysis of investment portfolio movements
Opening book cost 77,700 98,203
Opening investment holding losses (5,865) (15,216)
Opening valuation 71,835 82,987
Movements in the year:
Purchases at cost 38,721 27,932
Sales - proceeds (40,293) (31,809)
- gains/(losses) on sales 4,894 (16,626)
Decrease in investment holding losses 4,830 9,351
Closing valuation 79,987 71,835
Closing book cost 81,022 77,700
Closing investment holding losses (1,035) (5,865)
79,987 71,835
Analysis of capital gains and losses
Realised gains/(losses) on sales 4,894 (16,626)
Investments holding gains 4,830 9,351
9,724 (7,275)
Foreign exchange (losses)/gains on capital (127) 24
items
Gains/(losses) on investments 9,597 (7,251)
Fair value hierarchy
In accordance with Financial Reporting Standard 29: Financial Instruments
Disclosures, the Company must disclose the fair value hierarchy of financial
instruments measured at fair value at one of three levels according to the
relative reliability of the inputs used to estimate the fair values.
Classification Input
Level 1 Valued using quoted prices in active markets for identical
assets.
Level 2 Valued by reference to valuation techniques using observable
inputs other than quoted prices included within Level 1.
Level 3 Valued by reference to valuation techniques using inputs that
are not based on observable market data.
Categorisation within the hierarchy has been determined on the basis of the
lowest level input that is significant to the fair value measurement of the
relevant asset. The valuation techniques used by the Company are explained in
the Accounting Policies.
All of the Company's financial instruments fall into level 1 being valued at
quoted prices in active markets.
Debtors consist purely of accrued income and prepayments and creditors consist
of accruals and are not restated at fair value. Cash is also not restated at
fair value. These assets and liabilities are represented by their carrying
value in the Balance Sheet.
Transaction costs
During the year the Company incurred transaction costs of GBP100,000 (2009:
GBP113,000) and GBP69,000 (2009: GBP58,000) on purchases and sales of investments
respectively. For purchases, transaction costs are included in the cost of
investments, and for sales they are netted off the gains on investments as
disclosed in the Income Statement.
9 Significant holdings
The Company had no holdings of 3 per cent or more of the share capital of any
portfolio companies.
10 Debtors
31 July 2010 31 July 2009
GBP'000 GBP'000
Dividends receivable 298 209
Prepayments and accrued income 16 155
Taxation recoverable 178 228
492 592
11 Creditors: amounts falling due within one year
31 July 2010 31 July 2009
GBP'000 GBP'000
Other creditors and accruals 174 189
Amounts due on share buy-backs - 277
Taxation - 117
174 583
12 Provision for liabilities and charges
No provision for liabilities and charges is considered necessary at the
Company's year end (2009: GBPnil). There were no amounts unprovided for in
respect of deferred taxation (2009: GBPnil).
13 Commitments and contingencies
At 31 July 2010 there were no outstanding commitments in respect of investments
carrying an obligation for future subscriptions (2009: GBPnil).
14 Share capital
31 July 2010 31 July 2009
GBP'000 GBP'000
Allotted, called-up and fully paid:
83,275,319 (2008: 84,582,568) Ordinary Shares of 10p 8,327 8,458
each
In the year ended 31 July 2010, the Company purchased 1,177,249 shares for
cancellation (2009: 3,920,251 shares) and 130,000 shares were cancelled from
treasury (2009: 436,000 shares).
Treasury shares held
31 July 31 July
2010 2009
Number of Number of
shares shares
Balance of treasury shares held at beginning of year 8,457,438 8,893,438
Shares purchased to be held in treasury 1,730,000 -
Shares cancelled from treasury (130,000) (436,000)
Balance of treasury shares held at end of year 10,057,438 8,457,438
Duration of the Company
The Company does not have a termination date nor the requirement for any
periodic continuation votes.
15 Net asset value per share
The net asset value per share, calculated in accordance with the Articles of
Association, is as follows:
31 July 2010 31 July 2009
pence pence
Ordinary Share 110.13 96.80
The net asset value per Ordinary Share is based on net assets of GBP80,636,000
(2009: GBP73,689,000) and on 73,217,881 (2009: 76,125,130) Ordinary Shares, being
the number of Ordinary Shares in issue at the year end, excluding own shares
held in treasury.
16 Reconciliation of net return before finance costs and taxation to net cash
inflow from operating activities
Year to Year to
31 July 2010 31 July 2009
GBP'000 GBP'000
Net return/(loss) before interest and taxation 12,122 (4,475)
Net (gains)/losses on investments and foreign (9,597) 7,251
exchange
Decrease in creditors (15) (36)
Decrease/(increase) in debtors and accrued 50 (61)
income
Tax deducted from investment income (188) (183)
Tax recoverable 50 (69)
Net cash inflow from operating activities 2,422 2,427
17 Reconciliation of net cash flow to movement in net cash
Year to Year to
31 July 2010 31 July 2009
GBP'000 GBP'000
Decrease in cash in year (1,514) (507)
Change in net cash (1,514) (507)
Net cash at 31 July 2009 1,845 2,352
Change in net cash (1,514) (507)
Net cash at 31 July 2010 331 1,845
18 Financial instruments
As an Investment Trust, the Company invests in equities and makes other
investments so as to achieve its investment objective to provide shareholders
with above average returns over the longer term through both capital
appreciation and income growth. In pursuing its investment objective, the
Company is exposed to various types of risk that are associated with the
financial instruments and markets in which it invests.
These risks are categorised as:
* Investment and strategy risk
* Discount volatility risk
* Market risk (comprising: interest rate risk, currency risk and other price risk)
* Liquidity risk
* Credit risk
* Gearing risk
The risk management policies and procedures outlined in this note have not
changed substantially from the previous accounting period.
The Investment Manager monitors the risks affecting the Company on an ongoing
basis within the policies and guidelines determined by the Board. The Directors
receive financial information, which is used to identify and monitor risk,
monthly. The Company may enter into derivative contracts to manage risk but has
not done so to date. A detailed description of the principal risks the Company
faces is detailed below and in the extract from the Directors' Report above.
Investment and strategy risk
Anglo & Overseas Plc may fail to deliver its objective due to poor stock
selection or as a result of being geared in a falling market or ungeared in a
rising market.
The Investment Manager meets regularly with the Board to discuss the portfolio
performance and strategy. The Board receives both monthly and quarterly reports
from the Investment Manager detailing all portfolio transactions and any other
significant changes in the market or stock outlooks. Details of the investment
policy are given in the extract from the Directors' Report above.
The investment process used by the Investment Manager is rigorous and is
designed to ensure that the portfolio risk level is commensurate with the
investment objective. The investment philosophy emphasises the need to identify
stocks which meet strict valuation parameters and therefore the analytical
inputs to the forecasts are reviewed in detail. At the individual stock level
central, best and worst case scenarios are constructed in order to form a clear
view of the potential risk in holding a particular stock. This information is
aggregated at portfolio level in order to gain an insight into the overall
portfolio profile.
Discount volatility risk
The Board recognises that it is in the long-term interests of shareholders to
reduce discount volatility and believes that the prime driver of discounts over
the longer term is investment performance. The Company is permitted to employ
gearing, a process whereby funds are borrowed principally for the purpose of
purchasing securities should the Board feel that it is appropriate to do so.
The use of gearing can magnify discount volatility.
The Board actively monitors the discount for Anglo & Overseas Plc, but it does
not intend to issue a precise discount target at which shares will be bought
back as it believes that the announcement of specific targets is likely to
hinder rather than help the successful execution of a buy-back policy. Equally
the Company will issue shares in order to meet demand as it arises.
Interest rate risk
The Company's assets and liabilities, excluding short-term debtors and
creditors, may comprise financial instruments which include investments in
fixed interest securities.
Details of the Company's interest rate exposure as at 31 July 2010 is disclosed
below
31 July 2010 31 July 2009
Cash Fair Cash Fair
No flow value No flow value
interest interest interest Fixed interest interest interest Fixed
rate rate rate interest rate rate rate interest
risk risk risk risk
Total exposure exposure exposure rate Total exposure exposure exposure rate
GBP'000 GBP'000 GBP'000 GBP'000 % GBP'000 GBP'000 GBP'000 GBP'000 %
Equity
shares
Sterling 26,244 26,244 - - - 30,478 30,478 - - -
Euro 21,321 21,321 - - - 20,284 20,284 - - -
US Dollar 11,503 11,503 - - - 7,807 7,807 - - -
Japanese 8,709 8,709 - - - - - - - -
Yen
Swiss 6,221 6,221 - - - 5,317 5,317 - - -
Franc
Hong Kong 2,110 2,110 - - - 4,613 4,613 - - -
Dollar
Singapore 2,086 2,086 - - - - - - - -
Dollar
Norwegian 1,793 1,793 - - - - - - - -
Krone
Swedish - - - - - 1,178 1,178 - - -
Krona
Fixed
interest
shares
Sterling - - - - - 750 - - 750 7
Euro - - - - - 696 - - 696 4
US Dollar - - - - - 712 - - 712 5
Cash at
bank
Sterling 260 - 260 - - 1,784 - 1,784 - -
US Dollar 69 - 69 - - 59 - 59 - -
Turkish 2 - 2 - - 2 - 2 - -
Lira
Debtors
Sterling* 263 263 - - - 551 551 - - -
Euro 99 99 - - - 10 10 - - -
US Dollar 43 43 - - - 5 5 - - -
Swiss 67 67 - - - - - - - -
Franc
Norwegian 5 5 - - - - - - - -
Krone
80,795 80,464 331 - 74,246 70,243 1,845 2,158
* Debtors exclude certain prepayments which under FRS25 are not classed as
financial assets.
At 31 July 2010 and 31 July 2009 the Company had no financial liabilities other
than short-term creditors. All fixed asset investments are held at fair value.
All other financial assets and liabilities are represented by their carrying
value in the Balance Sheet.
The majority of the Company's assets were non-interest bearing as at 31 July
2010. There was limited exposure to interest bearing liabilities during the
year ended 31 July 2010. Surplus cash is invested in money market funds.
If interest rates had reduced by 0.25 per cent (2009: 0.25 per cent) from those
obtained as at 31 July 2010 it would have the effect, with all other variables
held constant, of reducing the net revenue return before taxation on an
annualised basis by GBP1,000 (2009: GBP5,000). If there had been an increase in
interest rates of 0.25 per cent (2009: 0.25 per cent) there would have been an
equal and opposite effect in the net revenue return before taxation. The
calculations are based on the Company's cash at bank and short-term deposits as
at 31 July 2010 and these may not be representative of the year as a whole.
Currency risk
The base currency of the Company is Sterling. The international nature of the
Company's investment activities gives rise to a currency risk which is inherent
in the performance of its overseas investments. The Company holds overseas cash
balances and deposits from time to time and the Company's overseas income is
also subject to currency fluctuations.
The Investment Manager monitors the Company's exposure to foreign currencies
and reports to the Board on a regular basis. The Investment Manager assesses
the risk to the Company of the foreign currency exposure by considering the
effect on the Company's net asset value and income of a movement in the rates
of exchange to which the Company's assets, liabilities, income and expenses are
exposed. However, the country in which a company is listed is not necessarily
where it earns its profits. The movement in exchange rates on overseas earnings
may have a more significant impact upon a company's valuation than a simple
translation of the currency in which the company is quoted.
It is not the Company's policy to hedge this risk on a continuing basis.
However, the Investment Manager actively monitors investments held in foreign
currencies to ensure that they continue to meet investment criteria in Sterling
terms.
Details of the Company's currency risk exposure as at 31 July 2010 is detailed
below:
31 July 2010 31 July 2009
Cash Cash
Total Investments at Debtors Creditors Total Investments at Debtors Creditors
bank bank
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Sterling 26,593 26,244 260 263* (174) 32,980 31,228 1,784 551* (583)
Euro 21,420 21,321 - 99 - 20,990 20,980 - 10 -
US Dollar 11,615 11,503 69 43 - 8,583 8,519 59 5 -
Japanese 8,709 8,709 - - - - - - - -
Yen
Swiss 6,288 6,221 - 67 - 5,317 5,317 - - -
Franc
Hong Kong 2,110 2,110 - - - 4,613 4,613 - - -
Dollar
Singapore 2,086 2,086 - - - - - - - -
Dollar
Norwegian 1,798 1,793 - 5 - - - - - -
Krone
Turkish 2 - 2 - - 2 - 2 - -
Lira
Swedish - - - - - 1,178 1,178 - - -
Krona
80,621 79,987 331 477 (174) 73,663 71,835 1,845 566 (583)
*Debtors exclude certain prepayments which under FRS25 are not classed as
financial assets.
If Sterling had strengthened by 1 per cent against all other currencies as at
31 July 2010, with all other variables held constant, it would have the effect
of reducing the net capital return before taxation by GBP540,000 (2009:
GBP407,000). If Sterling had weakened by 1 per cent against all other currencies
there would have been an equal and opposite effect on the net capital return
before taxation. The calculations are based on the Company's foreign currency
risk exposure as at 31 July 2010 and this may not be representative of the year
as a whole.
Other price risk
The Company is exposed to market risk due to fluctuations in the market prices
of its investments. Market price risk arises mainly from uncertainty about
future prices of financial instruments used in the Company's business. It
represents the potential loss the Company might suffer through holding market
positions in the face of price movements. The Investment Manager monitors the
prices of financial instruments held by the Company on an ongoing basis.
The Investment Manager actively monitors market and economic data and reports
to the Board, which considers investment policy on a regular basis. The net
asset value per share of the Company is issued daily to the London Stock
Exchange and is also available on the Company's website
www.angloandoverseasplc.com.
Fixed asset investments are valued at their bid price which equates to their
fair value. Details of the Company's investment portfolio as at 31 July 2010
are disclosed above. In addition, an analysis of the investment portfolio by
sector and geographical distribution is also detailed above.
The maximum exposure to other price risk as at 31 July 2010 is the fair value
of investments of GBP79,987,000 (2009: GBP71,835,000).
If the investment portfolio valuation fell by 1 per cent from the amount
detailed in the Financial Statements as at 31 July 2010 it would have the
effect, with all other variables held constant, of reducing the net capital
return before taxation by GBP800,000 (2009: GBP718,000). An increase of 1 per cent
in the investment portfolio valuation would have an equal and opposite effect
on the net capital return before taxation. The calculations are based on the
Company's other price risk exposure as at 31 July 2010 and this may not be
representative of the year as a whole.
Liquidity risk
Liquidity risk is the risk that the Company will encounter difficulty in
meeting obligations associated with financial liabilities. The Company's policy
with regard to liquidity is to ensure continuity of funding. Short-term
flexibility is achieved through cash management and overdraft facilities.
Liquidity risk is not considered to be significant as the Company's assets
comprise mainly of readily realisable securities which can be sold freely to
meet funding requirements if necessary. Securities listed on a recognised stock
exchange have been valued at bid prices and exchange rates ruling at the close
of business on 31 July 2010. In certain circumstances, the market prices at
which investments are valued may not represent the realisable value of those
investments, taking into account both the size of the Company's holding and the
frequency with which such investments are traded.
Credit risk
Credit risk is the risk of financial loss to the Company if the contractual
party to a financial instrument fails to meet its contractual obligations.
The carrying amounts of financial assets best represent the maximum credit risk
exposure at the Balance Sheet date.
The Company's listed investments are held on its behalf by The Bank of New York
Mellon acting as the Company's custodian. Bankruptcy or insolvency of the
custodian may cause the Company's rights with respect to securities held by the
custodian to be delayed. The Board monitors the Company's risk by reviewing the
custodian's internal controls reports.
Investment transactions are carried out with a large number of brokers whose
creditworthiness is reviewed by the Investment Manager. Transactions are
ordinarily undertaken on a delivery versus payment basis whereby the Company's
custodian bank ensures that the counterparty to any transaction entered into by
the Company has delivered in its obligations before any transfer of cash or
securities away from the Company is completed.
Cash is only held at banks and in money market funds that have been identified
by the Board as reputable and of high credit quality.
The maximum exposure to credit risk as at 31 July 2010 was GBP823,000 (2009:
GBP2,437,000). The calculation is based on the Company's credit risk exposure as
at 31 July 2010 and this may not be representative of the year as a whole.
None of the Company's assets are past due or impaired.
Gearing risk
The aim of gearing is to enhance long-term returns to shareholders by investing
borrowed funds in equities and other assets. The Company is permitted to employ
gearing should the Board feel it appropriate to do so up to a maximum of 20 per
cent of shareholders' funds at the time of borrowing. The use of gearing can
cause both gains and losses in the asset value of the Company to be magnified.
The Company did not have any gearing as at 31 July 2010 (2009: nil).
The Board undertakes an annual assessment and review of all the risks stated
above and in the extract from the Directors' Report above together with a
review of any new risks which may have arisen during the year. These risks are
formalised within the Company's risk assessment matrix.
Financial assets
The majority of the Company's financial assets are listed equity shares which
neither pay interest nor have a maturity date. These financial assets are
disclosed at fair value through profit or loss. All other financial assets are
represented by their carrying value in the Balance Sheet.
Financial liabilities
The Company finances its operations primarily through equity and retained
profits although trade creditors and accruals arise from its operations. As at
31 July 2010 and 31 July 2009 all financial liabilities were due within one
year and are stated at their carrying value in the Balance Sheet.
19 Capital management policies
The Company's capital management objectives are to ensure that it will be able
to continue as a going concern and to provide shareholders with above average
returns over the longer term through both capital appreciation and income
growth in accordance with its investment policy.
The Company's capital comprises:
31 July 31 July
2010 2009
GBP'000 GBP'000
Called-up share capital 8,327 8,458
Special reserve 64,415 67,233
Capital redemption reserve 695 564
Capital reserve 3,437 (5,983)
Revenue reserve 3,762 3,417
Total shareholders' funds 80,636 73,689
The Company's objectives for managing capital are the same as the previous year
and have been complied with throughout the year.
20 Transactions with the Investment Manager
Information with respect to transactions with the Investment Manager is
provided in note 3 of these Financial Statements and in the extract from the
Directors' Report above.
National Storage Mechanism
A copy of the Annual Report and Financial Statements will be submitted shortly
to the National Storage Mechanism ("NSM") and will be available for inspection
at the NSM, which is situated at: www.hemscott.com/nsm.do.
Annual General Meeting
The Company's Annual General Meeting will be held on Friday, 19 November 2010
at 11.00 am at The Chamber of Shipping, 12 Carthusian Street, London EC1M 6EZ.
Enquiries:
Sandy Nairn
Kenneth Greig
Edinburgh Partners
Telephone: 0131 270 3800
END
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