Annual Report • Mar 31, 2019
Annual Report
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Company Registration No. 00328206 (England and Wales)
| Directors | A Barnes B Johnson K McKenna C Dyson |
(Appointed 30 May 2018) |
|---|---|---|
| Secretary | D Miller | |
| Company number | 00328206 | |
| Registered office | 30 Gresham Street London EC2V 7QP |
|
| Auditor | Ernst & Young LLP 25 Churchill Place London E14 5EY |
| Page | |
|---|---|
| Strategic report | 1 |
| Directors' report | 2 - 3 |
| Corporate governance statement | 4 |
| Independent auditor's report | 5 - 9 |
| Profit and loss account | 10 |
| Balance sheet | 11 |
| Statement of changes in equity | 12 |
| Notes to the financial statements | 13 - 19 |
The directors present the strategic report and financial statements for the year ended 31 March 2019.
The loss for the year, after taxation is £63,000 (2018: £62,000).
Investec Investment Trust plc (the "company") financial risks are managed at the Investec plc group level. Surplus liquidity is loaned by the company on an interest free basis to its immediate parent company. The loan is repayable on demand. Preference dividend payments are funded from the loan. The company's exposure to financial risks is further discussed in the financial statements.
Given the straight forward nature of the business the company's directors are of the opinion that analysis using key performance indicators is not necessary for an understanding of the development, performance or financial position of the business.
The company's 3.5 per cent and 5 per cent cumulative preference shares are listed on the London Stock Exchange.
The company's immediate parent company, Investec Group Investments (UK) Limited, a wholly owned subsidiary of Investec plc, owns all of the company's ordinary capital, £266,586 nominal of the company's 3.5 per cent cumulative preference shares and £96,612 nominal of the company's 5 per cent cumulative preference shares. The preference shares are classified as financial liabilities and not equity.
At 31 March 2019 the company had net assets of £25,643,000 (2018: £25,706,000).
On behalf of the board
K McKenna Director 27 June 2019
The directors present their annual report and financial statements for the year ended 31 March 2019.
The Corporate Governance Statement set out on page 4 forms part of this report.
The principal activity of the company is to source funds from the financial markets for Investec group activities and it will continue to operate in this capacity for the foreseeable future.
The results for the year are set out on page 10.
The directors do not recommend the payment of a final ordinary dividend for the year ended 31 March 2019 (2018: Nil).
Dividends paid on the preference shares in the year amounted to £63,000 (2018: £62,000).
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
| A Barnes | |
|---|---|
| C S Heyworth | (Resigned 30 May 2018) |
| B Johnson | |
| K McKenna | |
| C Dyson | (Appointed 30 May 2018) |
No director holding office at 31 March 2019 had any direct beneficial interest in the company during the year.
The company maintains a Directors' and Officers' Liability Insurance Policy. In accordance with the company's Articles of Association, the board may also indemnify a director from the assets of the company against any costs or liability incurred as a result of their office, to the extent permitted by law. Neither the insurance policy nor any indemnities that may be provided by the company provide cover for fraudulent or dishonest actions by the directors. However, costs may be advanced to directors for their defence in investigations or legal actions.
Ernst & Young LLP were appointed auditor to the company and in accordance with section 485 of the Companies Act 2006, a resolution proposing that they be re-appointed will be put forward at the next AGM.
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 the directors have elected to prepare the financial statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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:
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. They are also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Each director in office at the date of approval of this annual report confirms that:
This confirmation is given and should be interpreted in accordance with the provisions of section 418 of the Companies Act 2006.
On behalf of the board K McKenna
Director
27 June 2019
The company has issued preference shares that are listed on the London Stock Exchange. The company is part of the Investec plc group and is therefore subject to the group's system of risk management, internal control and financial reporting. The corporate governance statements and disclosures, as required by section 7.2.1. of the Disclosure and Transparency Rules are detailed in the Investec plc consolidated financial statements which are publicly available at 30 Gresham Street, London, EC2V 7QP or on www.investec.com.
We have audited the financial statements of Investment Trust plc (the 'company') for the year ended 31 March 2019 which comprise the profit and loss account, the statement of changes in equity and related notes 1 to 13, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 101 'Reduced Disclosure Framework' (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report below. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed public interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
We have nothing to report in respect of the following matters in relation to which the ISAs (UK) require us to report to you where:
Key audit matters Risk of incorrect recording of intercompany balances Materiality Overall materiality of £513,000 which represents 2% of equity
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in our opinion thereon, and we do not provide a separate opinion on these matters.
Risk of incorrect accounting for intercompany balances (2019:£27.3m, 2018: £27.4m) Refer to Note 7 of the Financial Statements (page 18)
There is a risk of material misstatement in relation to intercompany receivables as well as interest expense incurred during the year. The risk has remained the same as compared to the prior year.
We performed the following procedures in response to the identified risk:
We performed a walkthrough to confirm our understanding of the intercompany lending process.
We have agreed intercompany positions with the other party and confirmed that the ability to repay the creditor amount.
We did not identify any evidence of material misstatement in the intercompany balances for the year ending 31 March 2019.
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for the company. This enables us to form an opinion on the financial statements. We take into account size, risk profile, the organisation of the company and effectiveness of controls, including controls and changes in the business environment when assessing the level of work to be performed. All audit work was performed directly by the audit engagement team.
We apply the concept of materiality in planning and performing the effect of identified misstatements on the audit and in forming our audit opinion.
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the economic decisions of the financial statements. Materiality provides a basis for determining the nature and extent of our audit procedures.
We determined materiality for the company to be £513,000 (2018: £514,000), which is 2% (2018: 2%) of total equity. We believe that total equity appropriately reflects management's intentions and the purpose of the entity as an investment vehicle.
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the probability that the aggregate of uncorrected misstatements exceeds materiality.
On the basis of our risk assessments, together with our assessment of the company's overall control environment, our judgement was that performance materiality was 75% (2018: 75%) of our planning materiality, namely £385,000 (2018: £386,000). We have set performance materiality at this percentage based on our experience prior year audits.
An amount below which identified misstatements are considered as being clearly trivial.
We agreed with management that we would report to them all uncorrected audit differences in excess of £26,000 (2018: £26,000), which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other relevant qualitative considerations in forming our opinion.
The other information comprises the information included in the annual report, other than the financial statements and our auditor's report thereon. The directors are responsible for the other information.
Our opinion on the financial statements does not cover the other information and, except otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements or a material misstatement of the information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
In our opinion, based on the work undertaken in the course of our audit:
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report and the directors' report.
We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion:
As explained more fully in the directors' responsibilities statement set out on page 3, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
The objectives of our audit, in respect to fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing appropriate responses; and to respond appropriately to fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both those charged with governance of the entity and management.
Our approach was as follows:
We obtained an understanding of the legal and regulatory frameworks that are applicable to the company and determined that the most significant is the Companies Act 2006.
We understood how Investec Investment Trust plc is complying with this framework through making enquiries of management and reviewing the board minutes of the entity.
We assessed the susceptibility of the company's financial statements to material misstatement, including how fraud might occur, through discussions with management and obtaining an understanding of processes involved in drafting of the financial statements.
Based on this understanding we designed our audit procedures to identify non-compliance with such laws and regulations. Our procedures involved inquiries of management and inspection of board minutes, as well as procedures to identify any significant items inappropiately held in suspense and also any significant inappropriate adjustments made to the accounting records.
A further description of our responsibilities for the financial statements is located on the Financial Reporting Council's website at: http://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
We were appointed by the company on 19 June 2000 to audit the financial statements for the year ending 31 March 2000 and subsequent financial periods.
The period of total uninterrupted engagement iincluding previous and reappointments is 19 years, covering the years ending 31 March 2000 to 31 March 2019.
The non-audit services prohibited by the FRC's Ethical Standard were not provided to the company and we remain independent of the company in conducting our audit.
This report is made solely to the company's members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the company's members those matters we are required to state to them in an auditor's report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the company's members as a body, for our audit work, for this report, or for the opinions we have formed.
Kenneth Eglinton (Senior Statutory Auditor) for and on behalf of Ernst & Young LLP, Statutory Auditor London
28 Ju
| Notes | 2019 £000's |
2018 £000's |
|
|---|---|---|---|
| Interest payable and similar expenses | 5 | (63) | (62) |
| Loss before taxation | (63) | (62) | |
| Tax on loss | 6 | ||
| Loss and total comprehensive income for the | |||
| financial year | (63) | (62) | |
The profit and loss account has been prepared on the basis that all operations are continuing operations.
| Notes | 2019 £000's |
2018 £000's |
|
|---|---|---|---|
| Current assets | |||
| Debtors | 7 | 27,343 | 27,406 |
| Creditors: amounts falling due within one year |
|||
| Creditors | 9 | 55 | 55 |
| Net current assets | 27,288 | 27,351 | |
| Total assets less current liabilities | 27,288 | 27,351 | |
| Creditors: amounts falling due after more than one year |
|||
| Preference shares treated as debt | 8 | 1,645 | 1,645 |
| Net assets | 25,643 | 25,706 | |
| Capital and reserves | |||
| Called up share capital Retained earnings |
10 | 14,436 11,207 |
14,436 11,270 |
| Total equity | 25,643 | 25,706 |
The financial statements were approved by the board of directors and authorised for issue on 27 June 2019 and are signed on its behalf by:
B Johnson Director
Company Registration No. 00328206
| Balance at 1 April 2017 | Share capital £000's 14.436 |
Retained earnings 2000's 11.332 |
Total £000's 25,768 |
|---|---|---|---|
| Year ended 31 March 2018: Loss and total comprehensive income for the year |
(62) | (62) | |
| Balances at 31 March 2018 | 14.436 | 11.270 | 25,706 |
| Year ended 31 March 2019: Loss and total comprehensive income for the year |
(63) | (63) | |
| Balances at 31 March 2019 | 14.436 | 11.207 | 25.643 |
Investec Investment Trust plc is a public limited company incorporated in England and Wales. The registered office is 30 Gresham Street, London, EC2V 7QP.
The financial statements have been prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and in accordance with applicable accounting standards.
Investec Investment Trust plc is incorporated and domiciled in England and Wales.
The company's financial statements are presented in sterling and all values are rounded to the nearest thousand (£'000) except otherwise when indicated.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared on the historical cost basis. The principal accounting policies adopted are set out below.
The company has taken advantage of the following disclosure exemptions under FRS 101 where applicable to the company.
Where required, equivalent disclosures are given in the group accounts of Invested plc. The group accounts of Investec plc are available to the public and can be obtained as set out below.
Investec Investment Trust plc is a wholly owned subsidiary of Investec Group Investments (UK) Limited which is a wholly owned subsidiary of Investec plc and the results of Investment Trust plc are included in the consolidated financial statements of Investec plc which are available from 30 Gresham Street, London, EC2V 7QP.
(Continued)
On 1 April 2018 the Investec group adopted IFRS 9 'Financial Instruments' which replaced IAS 39 'Financial Instruments; Recognition and Measurement'. The impact of this standard on the company has been assessed and the classification of the intergroup loans made by the company will change from amortised cost to fair value loans under IFRS 9, but there will be no impact to measurement or impairment methodology as a result of adoption.
On the basis of current financial projections the directors have a reasonable expectation that the company has adequate resources to continue in operational existence for the foreseable future and accordingly the going concern basis is adopted in the preparation of the financial statements.
A qualifying entity which is a financial institution is not exempt from the disclosure requirements of IFRS 7 Financial Instruments: Disclosures, IFRS 13 Fair Value Measurement to the extent that they apply to financial instruments, and paragraphs 134 to 136 of IAS 1 Presentation of Financial Statements. Investec Investment Trust plc is considered a financial institution and is therefore not exempt from the requirements of IFRS 13 and IFRS 7.
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or, in its absence, the most advantageous market to which the company has access at that date. The fair value of a liability reflects its non-performance risk.
When available, the company measures the fair value of an instrument using the quoted price in an active market for that instrument. A market is regarded as active if the assets or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis.
If there is no quoted price in an active market, then the company uses valuation techniques that maximise the use of relevant observable inputs and minimise the use of unobservable inputs. The chosen valuation technique incorporates all of the factors that market participants would take into account in pricing a transaction.
If an asset or liability measured at fair value has a bid price, then the company measures assets and long positions at a bid price and liabilities and short positions at an ask price.
The company classifies disclosed fair values according to hierarchy that reflects the significance of observable market inputs. A transfer is made between the hierarchy when the inputs have changed or there has been a change in the valuation method. Transfers are deemed to occur at the end of each semi-annual group reporting period.
Financial assets and liabilities are designated as held at fair value through profit or loss only if:
(Continued)
Financial instruments issued by the group are classified as liabilities if they contain a contractual obligation to deliver cash or another financial asset.
Shares classified as debt are initially measured at fair value net of transaction costs and thereafter at amortised cost until extinguished on redemption. The corresponding dividends relating to the preference shares classified as a liability are charged as interest expense in the profit and loss account on an accrual basis.
A financial asset, or a portion thereof, is derecognised when the group's rights to cash flows have expired or when the group has transferred its rights to cash flows relating to the financial assets and either (a) the group has transferred substantially all the risks and rewards associated with the financial assets or (b) the group has neither transferred nor retained substantially all the risks and rewards associated with the financial assets but has transferred control of the assets.
The treatment of a renegotiation or modification of the contractual cash flows of a financial asset depends upon whether the modification is done for commercial reasons, in which case if they are significant the old asset is derecognised and a new asset recognised, or because of financial difficulties of the borrower.
A financial liability is derecognised when it is extinguished, that is when the obligation is discharged, cancelled or expired. When an existing financial liability is replaced or modified with substantially different terms, such a replacement or modification is treated as a derecognition of the original liability and the recognition of a new liability. The difference in the respective carrying amounts is recognised in the income statement.
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax is provided on the amount expected to be payable on taxable profit at rates that are enacted or substantively enacted and applicable to the relevant period.
Deferred taxation is provided using the balance sheet method on temporary differences between the carrying amount of an asset or liability in the balance sheet and its tax base, except where such temporary differences arise from:
Deferred tax assets or liabilities are measured using the tax rates that have been enacted or substantively enacted at the balance sheet date.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the deferred tax asset can be utilised.
Items recognised directly in other comprehensive income are net of related current and deferred taxation.
The company has no employees (2018: nil).
The directors were employed and remunerated as directors of Investec plc and its subsidiaries (the "group") in respect of their services to the group as a whole and their remuneration has been paid by other group companies. It is estimated that the remuneration for their services to the company in the year totalled £20,000 (2018: £20,000).
| 2019 | 2018 | |
|---|---|---|
| Fees payable to the company's auditor and associates: | £000's | £000's |
| For audit services | ||
| Audit of the financial statements of the company | 15.000 | 12.000 |
The auditor's remuneration in respect of the company's financial statements has been borne by another group entity. Statutory information for other services provided by the company's auditor is given in the consolidated financial statements of its ultimate parent company which are publicly available. There were no non-audit services provided to the company during the year and in the prior year.
2019
2018
| £000's | £000's | |
|---|---|---|
| Interest payable | 63 | 62 |
Interest payable represents the dividend paid and accrued on the cumulative preference shares classified as financial liabilities.
| 2019 £000's |
2018 £000's |
||
|---|---|---|---|
| Dividends paid | |||
| 3.5 per cent cumulative preference shares | 1-Jun | 7 | 7 |
| 3.5 per cent cumulative preference shares | 1-Dec | 23 | 23 |
| 5 per cent cumulative preference shares | 15-May | 2 | 2 |
| 5 per cent cumulative preference shares | 15-Nov | 9 | 9 |
| 41 | 41 | ||
| Dividends payable | |||
| 3.5 per cent cumulative preference shares | 15 | 15 | |
| 5 per cent cumulative preference shares | 7 | 6 | |
| 22 | 21 | ||
The charge for the year can be reconciled to the loss per the profit and loss account as follows:
| 2019 £000's |
2018 £000's |
|
|---|---|---|
| Loss before taxation | (63) | (62) |
| Expected tax credit based on a corporation tax rate of 19.00% Effect of expenses not deductible in determining taxable profit |
(12) 12 |
(12) 12 |
| Loss claimed from other group companies for nil payment Transfer pricing adjustment |
(90) 90 |
(70) 70 |
| Taxation charge for the year |
The Finance Act 2015 reduced the main rate of corporation tax to 19% with effect from 1 April 2017. On 16 March 2016, the Chancellor of the Exchequer announced a further reduction of the corporation tax rate to 17% effective from 1 April 2020. This change was enacted on 15 September 2016.
A deferred tax asset has not been recognised in respect of capital losses carried forward of £137,712 (2018: £137,712) as there is insufficient evidence that the loss will be recovered.
| 2019 £000's |
2018 £000's |
|
|---|---|---|
| Amount owed by parent undertaking | 27.343 | 27,406 |
The amount receivable from the immediate parent undertaking currently bears no interest and is repayable on demand at request of the company.
Receivables are carried on the balance sheet at fair value and are measured using level 2 techniques.
| 80 | Preference Shares | 2019 | 2018 |
|---|---|---|---|
| £000's | £000's | ||
| Secured borrowings at amortised cost | |||
| Preference shares | 1,645 | 1.645 | |
The balance of preference shares is comprised of two classes: 1,300,000 3.5 per cent cumulative preference shares of £1 each (1.75p each dividend); and 345,438 5.0 per cent cumulative preference shares of £1 each (2.5p each dividend), in both cases authorised, issued, allotted and fully paid up.
Both classes of share carry the following rights:
The preference shares are carried on the balance sheet at amortised cost. The fair value is £1,645k (2018 - £1,645k) and the fair value hierarchy is level 1 (2018 - level 1).
10
| Due within one year | ||
|---|---|---|
| 2019 | 2018 | |
| £000's | £000's | |
| Other creditors | 55 | 55 |
| Share capital | 2019 | 2018 |
| £000's | £000's | |
| Ordinary share capital Authorised |
||
| 60,000,000 Ordinary Shares of 25p each | 15,000 | 15,000 |
| Issued and fully paid | ||
| 57,744,387 Ordinary Shares of 25p each | 14,436 | 14,436 |
| 14.436 | 14,436 | |
The directors confirm that there were no significant events occurring after the balance sheet date to the date of this report that would meet the criteria to be disclosed in the financial statements for the year end 31 March 2019.
As a wholly-owned subsidiary of Investec plc, the company falls under Investec plc Group's Risk Management Framework which is set out in the combined Investec Limited 2019 financial statements, Risk Management and Corporate Governance report.
The company has no exposure to credit risk other than on the loan advanced to the parent undertaking.
The company's only financial obligations in the foreseeable future are payment of the dividend on the preference shares and administrative expenses. The company is able to recall the loan to the parent undertaking (or part thereof) at any time and therefore does not foresee any risk of being unable to meet its financial commitments.
The company has a fixed interest obligation in respect of the dividend on the preference shares and is therefore not exposed to fluctuation in interest rates. The loan to the parent is interest free. However, the company has the right at any time and at its sole discretion to charge interest thereon at a commercial rate.
The company manages and monitors its capital on an ongoing basis and with consideration for the ongoing commitments of the entity. The company is not regulated and therefore it is not subject to any capital adequacy requirements.
The company's ultimate parent and controlling party is Invested plc, a company incorporated in the United Kingdom and registered in England and Wales. The consolidated financial statements of Invested plc are available to the public and may be obtained from Investec plc at 30 Gresham Street, London, EC2V 7QP.
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