The Association of Investment Companies
Annual Report and Accounts
Year Ended 30 September 2019
Annual Reports and Accounts 2019
Mission Statement
The Association’s mission is to help members add value for shareholders over the longer-term.
Membership Information
The industry reached the milestone of £200bn of gross assets during the year, finishing with £198bn, of which over 92% were members of the Association. VCT assets increased by 10% over the year to around £4.5bn. A total membership of 362 investment companies was the highest number ever.
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Contents
Chair’s Statement 4
Chief Executive’s Report 8
Board of Directors 12
Committees and Forums 15
Company Information 16
Executive Staff 17
Report of the Directors 18
Notice of Annual General Meeting 22
Statement of Directors’ Responsibilities 23
Independent Auditor’s Report 24
Consolidated Statement of Income and Retained Earnings 27
Consolidated and Company Balance Sheets 28
Consolidated Statement of Cash Flows 29
Notes to the Consolidated Accounts 30
Members of the Association 37
Acronyms 41
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Chair’s Statement
Introduction
It gives me great pleasure to write to you after a particularly busy year for the AIC and one in which the profile of the sector, as a home for illiquid or ‘hard to sell’ assets, shot into the headlines as a result of the Woodford Equity Income gating.
Industry update
The sector overall continues to demonstrate good health. Sector assets stood at £198bn at the end of September, up 5%, or £9.5bn over the period, having broken through the £200bn milestone in July. IPO activity was 25% higher over the 12 month period by value at £2.3bn (year to end September 2018: £1.9bn). It’s worth noting, however, that much of the activity was focussed on the final calendar quarter of 2018, before the fundraising window shut due to the market setbacks around that time. This activity was also dominated by the launch of Smithson Investment Trust which launched in October 2018 at £822m, making it the largest UK investment trust launched ever. There have only been 7 IPOs so far in the calendar year 2019 in comparison with 21 in the calendar year 2018.
IPO activity was dwarfed by secondary market issuance which, yet again, recorded strong levels of activity at £6.8bn (year to end September 2018: £6.4bn). Issuance in alternatives with income characteristics continued to be the most significant factor by value. VCTs once again enjoyed strong fundraising conditions, benefitting from their relative attractiveness in the tax advantaged savings market particularly for higher rate tax payers.
Whilst the sector has produced strong returns in the calendar year to date, the setbacks in Q4 2018 meant that overall total returns during the 12 months to September were just 2.74%, modestly ahead of the FTSE All-Share. However, the long-term track record of the sector remains extremely strong.
Discounts widened a little, particularly towards the end of the period, finishing at 4.6%1 (30th Sept 2018: 3.3%) excluding VCTs. They nonetheless remain relatively low by historic standards and around 30% of the sector is trading at a premium to NAV, of which I write more later.
The Chief Executive reports in detail about key regulatory and other developments during the year but I would like to mention three specific areas of focus in our work over the last year. The first is our work to continue to promote investment companies as a suitable investment vehicle for illiquid assets. This is of huge importance to the sector in light of the IA’s proposals for the Long-Term Asset Fund and following the Woodford Equity Income suspension this year and previous gatings of open-ended property funds.
The second has been the AIC’s successful lobbying of the FRC, following consultation with members, to allow more flexibility on the tenure of Chairs and their membership of Audit Committees in the AIC’s Corporate Governance Code.
Finally, I would encourage you all to use the income finder on the AIC’s website which has been widely lauded in the financial press and is responsible for record visitors to the AIC’s website.
1 Cum income with debt at market value
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Industry demand and AIC’s business plan
The sector has been transformed over the past 10 years. Around 30% of the sector is now trading at a premium to NAV, and many of these companies are issuing shares regularly. There is a theme running through the transformation. In order to generate consistent demand, investment companies need to demonstrate one or more of three characteristics: be able to deliver a high and dependable income stream; use the investment company wrapper to house illiquid or alternative assets which have attractive return characteristics and low correlation to traditional asset classes; or, particularly if investing in more traditional asset classes, have managers with a particularly strong track record and a significant retail following. ESG considerations are also rapidly rising up investor’s wish lists of demonstrable qualities. And of course all of this has to be delivered at a competitive cost, so scale, and its benefits, can be helpful.
So whilst those companies that can meet these tests are able to enjoy premium ratings, boards of companies that do not will have to work hard to attract demand and to ensure the long term success of those companies. It is also becoming increasingly challenging to launch IPOs due to minimum size requirements of wealth managers.
Shareholders are also increasingly prioritising gender diversity in the light of initiatives such as the Hampton-Alexander review, which is currently targeting 33% female representation on FTSE 350 boards by 2020. Investment companies in the FTSE 350 have made good progress towards this target in the last year, with female representation up from around 25% to 32%. However, shareholders are likely to continue to exert pressure on individual boards which are making less obvious progress towards this target.
The AIC Board held a strategy day in February focussing specifically on maximising investor demand and how we might help accelerate many of the positive sectoral demand trends, whilst ameliorating some of the negative ones. The workstreams emerging from this day have informed this year’s business plan and will continue to do so for a number of years ahead.
Key areas involve promoting the sector widely as a good home for illiquid assets, including responding to the IA’s proposals for a new Long-Term Asset Fund; continuing to lobby both in Europe and domestically to limit the detrimental impact of PRIIPs KIDs and to campaign ultimately for meaningful reform of these publications; and a number of workstreams to increase the profile of investment companies on platforms and in the advised retail sector. We also plan to continue to communicate the economic and social benefits provided by VCT investment and look to demonstrate the re-targeting of VCT investment to higher risk, growth businesses by undertaking, and promoting the results of, a VCT survey in the New Year.
We will be discussing all these areas of focus at our Director Roundtable events so I would really encourage you to attend.
Membership levels and feedback
Our membership statistics, whilst always high, continue to improve and our 362 members now represent 91% of the industry by number, up from 351 (88%) over the 12 month period. Strong representation makes an enormous difference to us as a trade body as it gives us real authority when representing the industry to stakeholders, including politicians, regulators and policy makers. We are very grateful to members for their support.
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As a member-led organisation, we depend on feedback from you, our members, to inform our work going forward. Please do keep in touch with us, either face to face at our conferences or Directors’ Roundtables, or by email and phone. We are always keen to hear your views and concerns and the Chief Executive or I would be very happy to attend a board meeting to discuss these and any broader industry issues.
I would also like to take this opportunity to thank those individuals that participate in the essential work undertaken by the network of 10 committees which meet regularly and help to inform our work.
Finances and subscriptions
The accounts for the year to September 2019 show a modest surplus. Subscription rates for 19/20 remain unchanged at 0.75bp of assets for non-VCT members and 1.75bp for VCTs. The maximum fee is also unchanged at £21,000 and the minimum fee has increased from £3,500 to £3,600. Overall the funding from the different membership groups of VCTs, non-UK and UK members broadly reflects the costs of servicing them.
Board changes
Melville Trimble retired at the AGM in January. Melville was Deputy Chair and Audit Committee Chair during his time on the Board and I would like to thank him for his wise input and dedication to our members over this period. Patrick Reeve has succeeded Melville as Audit Committee Chair.
The Board welcomed one new member this year when Peter Niven, a member director and Guernsey resident, was elected. Peter brings experience of a wide range of alternative asset classes as well as experience of running a trade body, from when he was Chief Executive of Guernsey Finance, and he has already made a welcome impact.
Harry Morgan and Peter Arthur will both retire from the Board at the 2020 AGM. As an experienced private wealth manager, Harry’s insights have been very much appreciated over a period when this part of the industry’s shareholder base has experienced considerable change in its demand patterns. Peter retires after 9 years on the Board, including 3 as Chair. His calm leadership whilst Chair, and vast sector knowledge over his entire tenure has been highly valued. We will miss them both.
Lastly I would like to take this opportunity to thank the staff at the AIC for their hard work over what has been a particularly challenging and busy year. The AIC is fortunate to have such an experienced and committed team in place.
Final thoughts
The external profile of the sector has most likely never been more positive and there is an opportunity for boards who are using the investment company wrapper to its best advantage, in a cost effective way for investors, to leverage off this and to increase demand for their members’ shares.
The AIC Board and executive remains committed to trying to create the best possible environment for investment companies to operate in, and we look forward to continuing to
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deliver to our mission statement which is ‘to help members add value for shareholders over the longer-term’.
Rachel Beagles, Chair [email protected]
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Chief Executive’s Report
I doubt many member directors reading last year’s report would have predicted how many column inches would be devoted in the recent press to the relative merits of the open and closed-ended structure as a means for holding illiquid assets.
From being a technical nuance that few outside financial services discussed, it has been thrust into the limelight by the problems currently being experienced by investors in Woodford Equity Income Fund. After the Governor of the Bank of England’s provocative ‘built on a lie’ intervention, the cosy consensus that was emerging that suspensions are somehow part of the normal operation of a fund is being challenged, and questions are being asked about what investors should be entitled to expect when it comes to realising their investments.
Illiquid assets and patient capital
We have been critical of the response that finally emerged from the FCA some three years after open-ended property funds were forced to suspend after the Brexit referendum. The proposals will see more frequent suspensions and place too much reliance on some additional disclosure as key measures to address these problems. We do not believe this response is adequate or fair to investors and it fails to address the systemic risks that the Governor, Mark Carney, has raised. The FCA is promising a further review of these issues, and we will be arguing for a more comprehensive and robust approach.
That said, outside the regulatory sphere we have seen positive signs of a reappraisal of the merits of the closed-ended structure for illiquid assets. Only a few years ago, few model portfolios used by wealth managers had any appreciable exposure to closed-ended funds. Today, most of the allocation to property is being provided by closed-ended funds. Recently, the British Business Bank produced a report highlighting a desire to see more DC pension assets allocated to venture capital. It rated the investment company structure as ‘highly suitable’ for these purposes.
Given the desire of institutional shareholders to allocate more money to ‘alternative’ asset classes, it is perhaps not surprising that the fund management industry has come forward with proposals for a ‘hybrid’ open-ended structure (‘the Long-Term Asset Fund’). This new structure could invest 100% of its assets in illiquid assets, albeit with hugely complex redemption provisions to deal with the illiquidity mismatch. Needless to say, we feel that there exists already a ready-made product that is far better suited to these types of asset.
Corporate governance
The AIC published a revised AIC Code of Corporate Governance following a revision of the FRC’s Code of Corporate Governance. We were pleased that the FRC was able to accept two different approaches in the AIC Code. The first was to accept investment companies having a policy on Chair tenure consistent with the need for regular refreshment and diversity, as opposed to a rigid nine-year limit. The second was to allow the Chair to remain a member of the Audit Committee.
Gender diversity remains very much in focus, with voting agencies increasingly willing to exercise their power if they feel companies are not making sufficient progress. The AIC has also been working to develop the pipeline of future NED candidates from a wider range of
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backgrounds by supporting external NED development schemes and running its own seminars for potential future candidates.
ESG
Environmental, Social and Governance issues are rapidly gaining in importance amongst investor groups and regulators and ESG has already figured prominently at the AIC’s conferences and director roundtables. However, what it means in practical terms for fund management and how this might best be communicated to shareholders is constantly evolving. The AIC will keep members informed of continuing developments and provide guidance as to how members may wish to address these issues in the coming months.
Key Information Documents (KIDs)
Despite strong support for the findings of the AIC’s report ‘Burn before reading’ in the media and even among national regulators across Europe, progress towards addressing the fundamental flaws of KIDs is slow. This reflects the difficulty of changing EU regulation (as opposed to technical standards) which has gone through the full panoply of EU processes. Some small changes will be made, which will help to some extent, but we are committed to a ‘long haul’ campaign for more fundamental reform over time.
Venture Capital Trusts
We are very pleased to report a stable period for VCTs, with high levels of fundraising showing that investor appetite remains undiminished despite the rules changes a few years back. A successful VCT conference at the beginning of the year highlighted how VCT investment is now targeted even more closely on the dynamic, high-growth companies that the Government wishes to see. However, we are not complacent and are currently gathering data for one of our regular VCT surveys to demonstrate the value that VCTs bring to smaller businesses and the economy at large.
Communication and training
In addition to dealing with the huge amount of press interest in Woodford, we have continued to secure strong media coverage through themed press releases, articles and newsletters on topics as diverse as the Rugby World Cup in Japan, the Brazilian and Indian elections and the US-China trade war.
Interest in income remains extremely strong, so we have added to our video library by creating two new income videos. The first explains how investment companies can meet your income needs, the second discusses the highly successful concept of ‘dividend heroes’. We have also made two infrastructure and renewable energy videos to add to those made previously on private equity and VCTs.
Demand for adviser training remains high. We hosted 15 adviser workshops in May and June 2019 and five adviser seminars this autumn. In conjunction with our bespoke training sessions and online training we have trained around 700 advisers this year, and nearly 8,000 since we started this training in response to the abolition of commission in the Retail Distribution Review. Demand from IFAs has increased significantly in recent years, but we have recently commissioned further research to see how we take this to the next level.
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Finally, the AIC’s Communications Team was voted the Press Team of the Year at the Headline Money Awards 2019. Congratulations to Annabel and her team.
Website and statistics
For the 5th year in a row the AIC website recorded double-digit percentage growth in traffic. The retail site averages 40,000 visits and almost 20,000 unique visitors each month, roughly doubling in the past 6 years.
One of the main reasons for this year’s increase is the launch of Income Finder. This provides a range of tools where users can research the dividend profile of investment companies as well as accessing other dividend related information such as a calendar of upcoming and historic payments. However, the centrepiece is the deceptively simple but now hugely popular Income Builder, where investors can design a virtual portfolio of investment company shares and see how much income it would have generated month by month. Thousands of users have set up portfolios on the site, as it provides a convenient way to design a portfolio to meet real-life income needs.
On the statistics side, we recently completed the most comprehensive AIC sector review ever. The sectors are used throughout the industry by data aggregators, media, brokers, managers, advisers and platforms. One key aim of the review was to reflect the expansion of alternative assets such as private equity, direct property and debt over the last five years by creating more relevant peer groups. All new sectors and constituents are now being used industry-wide.
Events
AIC events continue to prove popular with member directors, with both the conferences and the roundtables seeing larger numbers attend in the last 12 months than in previous years.
The flagship UK Conference 2020 will be taking place on Wednesday 4 March. This year’s conference saw the FT’s Martin Wolf present his thoughts on the economy to a packed room of over 375 delegates representing over 70% of AIC members. BBC’s Huw Edwards as conference moderator brought the event together expertly and professionally, whilst quality speakers shared their expertise on a variety of ‘new generation’ topics.
During the last year we also held a VCT conference complemented by two VCT-specific director roundtables. Next year’s VCT Conference has been confirmed for Wednesday 13 May 2020. A well-attended and successful Channel Islands Conference has also just taken place in Guernsey.
Director roundtables have proved so popular that additional events have been scheduled in both London and Edinburgh and, through the year, over 280 directors have attended at least one. These roundtables are deemed invaluable in taking the headline issues discussed at the conferences and drilling down into more detail.
But we do recognise that not everyone can attend a roundtable and so are pleased to announce that this autumn we will be launching a new online resource to support the director roundtables. For those who cannot make the events, or who prefer to access information online, or who just wish to revisit the information they heard at the event, we will be offering presentations on the issues discussed at the roundtables. These will be short presentations on specific topics
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enabling you to pick and choose the ones of relevance and listen to/view them at a time convenient to you.
Ian Sayers, Chief Executive [email protected]
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Board of Directors
Rachel Beagles (Chair) (N, R) Rachel joined the Board in 2015. She is a director of Aberdeen New India Investment Trust plc and Gresham House plc and has recently retired as Chair of Securities Trust of Scotland plc. Her career included working for County NatWest Wood Mackenzie and Bankers Trust from 1990 to 1998, and Deutsche Bank from 1999 to 2003 where she was a Managing Director and co-head of the European bank equity research and sales teams. Since then, she has worked as a non-executive director with roles in the investment company, asset management, charity and social housing sectors.
William Hemmings (Deputy Chair) (R) William joined the Board in 2013. He is Head of Closed-End Funds at Aberdeen Standard Investments and has responsibility for all of their UK listed closed-end funds. He has filled this role since 2003. Before his current role he was an investment manager of a number of investment trusts and, prior to that, specialised in UK smaller company investments.
Chris Fletcher (Senior Independent Director) (A, R) Chris joined the Board in 2012. He is a director of INVESCO Perpetual UK Smaller Companies Investment Trust plc. He was head of retail at Baillie Gifford & Co, responsible for its pooled fund and investment trust business, until 2011. Prior to this, he was a partner in KPMG’s Edinburgh office until 1997. He is a member of the Institute of Chartered Accountants of Scotland.
Peter Arthur Peter joined the Board in 2011. He was formerly a director of ISIS Asset Management plc where, ultimately, he was managing director with responsibility for the group’s investment trust and institutional business. Prior to this, he was chief legal counsel, Europe for Franklin Templeton Global Investors and previously he was joint managing director of Edinburgh Fund Managers plc. He was formerly Chair of Aberdeen Asian Income Fund Ltd and is a qualified solicitor and a Fellow of the Chartered Institute of Secretaries and Administrators.
Simon Crinage (N) Simon joined the Board in 2014. He joined Robert Fleming & Co. (now J.P. Morgan) in 1984, becoming Managing Director, Head of Investment Trusts at J.P. Morgan Asset Management in April 2013. His career at J.P. Morgan has focused in four main areas: investment trust administration, sales, marketing and product development, board management and latterly business management.
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Susie Farnon (A) Susie joined the Board in April 2018. She is a director of Apax Global Alpha, BH Global, HICL Infrastructure Company, Real Estate Credit Investments and Bailiwick Investments Limited. Susie’s career has included working for KPMG from 1979 to 2001 where she was a banking and finance partner with KPMG Channel Islands from 1990 to 2001. Subsequent to this she has joined numerous boards as a non-executive director in the charitable and investment sectors. Susie is a Fellow of the Institute of Chartered Accountants of England and Wales and has served as President of the Guernsey Society of Chartered and Certified Accountants and as Vice Chair of The Guernsey Financial Services Commission.
Chris Hills (R) Chris joined the Board in 2015. He is a director of Henderson Opportunities Trust plc. After graduating from Cambridge, Chris began his portfolio management career in the City at Sun Life (now AXA) in 1974. From 1980 until 1984 he was responsible for the stewardship of their holdings of investment trust shares. He worked subsequently for Target Investment Management, before becoming a director at Baring Fund Management, where he managed an investment trust among other fund responsibilities. He has been Chief Investment Officer at Investec Wealth & Investment since 1995. He has been a member of the Advisory Committee of the Charities Property Fund since its establishment in 2000 and is also on the Investor Committee of the Association of Real Estate Funds (AREF). He is also a member of the Investment Committee for University College London.
Harry Morgan (N) Harry joined the Board in 2014. He is a Director of Investment Management at Tilney Group and has worked as a wealth manager for over 25 years. He was previously Chief Investment Officer at Anderson Strathern Asset Management, before which he held senior roles at Adam & Company and Newton Investment Management. He has been a non-executive director of Mid Wynd International Investment Trust PLC since May 2012. He is a
Chartered Fellow of the Chartered Institute of Securities & Investment and has an MBA from the Edinburgh Business School.
Peter Niven (R) Peter joined the Board in 2019. He is a director of SQN Asset Finance Income Fund and India Capital Growth Fund in addition to a number of unlisted funds, a Captive Insurance company and the Guernsey subsidiary of a large Canadian bank. Peter’s career included 30 years with the Lloyds Banking Group and latterly the Chief Executive of Guernsey Finance, marketing Guernsey as an international financial services destination. He is a Fellow of the Institute of Bankers, a Fellow of the Institute of Directors and a Chartered Director.
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Patrick Reeve (A) Patrick joined the Board in 2016. He is a director of Albion Development VCT PLC, Albion Enterprise VCT plc and Albion Technology & General VCT PLC. He is Chair of Albion Capital, a venture capital investor and fund manager which he founded in 1996 as Close Ventures, part of the Close Brothers Group and which he took independent in 2009. He qualified as a chartered accountant with Deloitte Haskins + Sells, before joining Cazenove & Co. Patrick has been on the board of the British Venture Capital Association since 2010 and is a member of the University College London audit committee.
Ian Sayers Ian joined the Board in 2010 when he became Director General (now Chief Executive) of the AIC. Prior to that, he was the AIC’s Deputy Director General and Technical Director, advising members on areas such as taxation, accounting, company law and regulation. He joined the AIC in 1998 from Ernst & Young, where he was a tax manager in the Investment Management Group specialising in investment trusts. He is a member of the Institute of Chartered Accountants in England and Wales and the Chartered Institute of Taxation.
Elisabeth Scott (N) Elisabeth joined the Board in 2018. She is the Chair of India Capital Growth Fund and a director of Allianz Technology Trust, Dunedin Income Growth Investment Trust and Fidelity China Special Situations. She began her career as a trainee investment manager with British Investment Trust and continued to have an involvement with investment companies during her time at Edinburgh Fund Managers, including as fund manager of American Trust. From 1992 to 2008 Elisabeth had a career in fund management with Schroders in Hong Kong. From 2005 to 2007 Elisabeth chaired the Hong Kong Investment Funds Association. Elisabeth has a Sloan Fellowship MSc from the London Business School.
(A) Member of Audit Committee (N) Member of Nominations Committee (R) Member of Remuneration Committee
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Committees and Forums
The Company would like to thank the members of its committees and forums for their contributions:
Channel Islands Committee Chair: Ian Sayers Members: Donald Adamson, David Becker, Heather Bestwick, Andrew Dann, Susie Farnon, Gavin Farrell, Patrick Firth, Fraser Hiddelston, Vic Holmes, Christopher Jehan, Fiona Le Poidevin, John Le Prevost, Peter Mills, Ben Morgan, Tim Morgan, Peter Niven, Tim Pearce, Simon Schilder, Christopher Spencer, Dominic Wheatley
Self Managed Investment Trust Committee Chair: Ian Sayers Members: Graeme Denison, James Hart, Tom Hill, Denis Jackson, Simon Knott, Peter Spiller, Keith Williams
Statistics Committee Chair: Christopher Brown Members: Robert Botha, Alan Brierley, Charles Cade, James Carthew, Simon Elliott, Melissa Fogg, Sarah Godfrey, Jamie Goodwin, Alistair Harkness, Anthony Leatham, Simon Moore, Charlie Murphy, Alan Ray, Iain Scouller, Sapna Shah, Connor Sloman, Monica Tepes
Technical Committee Chair: Ian Sayers Members: Morbeen Ahmad, Peter Ames, Sarah Beynsberger, Vanessa Bradley, Nathan Brown, Nish Dissanayake, Stephanie Eastment, Tom Evans, Ian Fox, Colin French, Benjamin Hanley, Alex Haynes, Pauline Imlach, Neil Langford, Lucy Lewis, Alastair Moreton, Liz Moxham, Ken Murray, Lars Pappers, Nick Pearce, Richard Plaskett, Sally Porter, Neil Richardson, Alastair Robertson, Maryanna Sharrock, Andrew Whittaker, Michael Wylie, Victoria Younghusband
VCT Technical Committee Chair: Ian Sayers Members: Roger Blears, Robert Brittain, James Bryce, Delphine Currie, Gary Fraser, Vikash Hansrani, Philip Hare, Tania Hayes, Keith Lassman, Paul Latham, Chris Lloyd, Philip Merchant, Gurpal Nahal, Kavita Patel, Chris Psathas, Peter Smith, Grant Whitehouse, Rhodri Whitlock, Tom Wilde
Brokers Forum Chair: Ian Sayers Members: John Armstrong-Denby, Michael Bateman, David Benda, Mark Bloomfield, Andrew Davies, Tom Durie, Robert Finlay, Gary Gould, William Marle, Gillian Martin, Neil Morgan, Robert Peel, Alan Ray, Robbie Robertson, Sapna Shah, Luke Simpson, Darren Vickers, Neil Winward
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Managers Forum Chair: William Hemmings Members: Stuart Baldwin, David Barron, Stephanie Carbonneil, Simon Crinage, Anzelm Cydzik, Alex Denny, James de Sausmarez, Dion Di Miceli, Tracey Lago, Mark Laurence, Claire McSwiggan, Richard Pavry, Henry Pollard, Angus Pottinger, Alastair Smith, John Spedding, Magnus Spence, Marrack Tonkin, Stephen Westwood, Simon White
Private Equity Forum Chair: Ian Sayers Members: Bernie Boylan, Vicki Bradley, Duncan Budge, Sir Michael Bunbury Bt KCVO, Douwe Cosijn, George Crowe, Alan Devine, Nikki Edgar, Jock Green-Armytage, Richard Hickman, Martin Knight, Andrew Lebus, David Macfarlane, Hamish Mair, Gavin Manson, Merrick McKay, Roger Mountford, Howard Myles, Roger Pim, Steven Tredget
Property & Infrastructure Forum Chair: Simon Moore Members: Douglas Armstrong, John Armstrong-Denby, Jason Baggaley, Calum Bruce, Andrew Dawber, Michael Denny, Will Fulton, Peter Greenslade, Chris Holmes, Nathan Imlach, Shelagh Mason, Graeme McDonald, Martin Moore, Duncan Owen, Ian Reeves CBE, Chris Russell, Ian Russell CBE, Frank Sanderson, Harry Seekings, Bryan Sherrif, Erica Sibree, Chris Tanner
VCT Managers Forum Chair: Patrick Reeve Members: Chris Allner, Michael Bayer, Oliver Bedford, John Davies, John Glencross, Ben Guest, Dave Hall, Russell Healey, William Horlick, Paul Jourdan, Eliot Kaye, Paul Latham, Tim Levett, Steve Marshall, Simon Porter, Stuart Veale, Mark Wignall
Company Information
Registered Office: Auditor: 24 Chiswell Street BDO LLP London 150 Aldersgate Street EC1Y 4YY London EC1A 4AB Telephone: 020 7282 5555 Email: [email protected] Website: www.theaic.co.uk
Registered Number 04818187
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Executive Staff
Chief Executive’s Office Ian Sayers, Chief Executive Christine Lewis, Personal Assistant to Chief Executive
Ian Sayers Communications and Adviser Training Annabel Brodie-Smith, Communications Director Nick Britton, Head of Intermediary Communications Elmley de la Cour, Communications Manager William Sanderson, Communications Executive Debra Gibbons, Training Executive Annabel Brodie-Smith Public Affairs & Technical Guy Rainbird, Public Affairs Director Megan Charles, Policy and Technical Manager Lisa Easton, Policy and Technical Manager Janette Sawden, Tax and Legal Adviser
Guy Rainbird
Events Kathryn Skidmore, Events Director Hazel Weston, Events Executive
Kathryn Skidmore
Website and Statistics David Michael, Website and Statistics Director Sophie Driscoll, Website and Statistics Manager Sten Mandal, Website and Statistics Assistant
David Michael
Member Services Lori Fox, Membership Director/Company Secretary Joanne Ross, Office and Membership Manager Danielle Parker, Office Administrator
Lori Fox
Finance and HR Alison Andrews, Finance and HR Director Iain Williams, Finance Manager Sadaf Shah, Finance and HR Assistant
Alison Andrews
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Report of the Directors
The Directors present their report together with the audited financial statements for the year ended 30 September 2019.
Principal activity and group structure
Until recently, the business of the group was split between two entities. The principal activity of the Company was to represent the views and concerns of the members to the UK government or other government or regulatory bodies on matters including legislation, regulation and taxation which affect the business or professional interests of members in relation to investment companies. The principal activity of AIC Information Services Limited, the Company’s wholly-owned subsidiary, was the provision of marketing and promotional services for and on behalf of the Company and its members.
Following a review to simplify the group’s VAT arrangements, the subsidiary’s business and assets have been transferred to the Company. From 1 October 2018, all of the group’s activities, which have not changed, have been conducted through the Company.
On 11 March 2019, a dividend in specie was approved from the subsidiary to the Company, after which the balance sheet of the subsidiary was reduced to net assets of £1, comprising an amount due from the Company of £1 and issued share capital of £1. It is not intended that any further transactions will be made by the subsidiary for the foreseeable future. More information is given in note 19.
A view of the Company’s business activity during the year is given in the Chief Executive’s Report on pages 8 to 11.
Status
The Company is a company limited by guarantee. The Company’s members have undertaken that, in the event of a winding up, they will contribute to the assets of the Company an amount not exceeding £1. The terms of the payment are set out in the Company’s Articles of Association.
Directors and their interests
The names of the current directors are listed on pages 12 to 14.
In accordance with the Company’s Articles of Association, by virtue of having served three years on the Board since his most recent election, Mr Simon Crinage is due to retire at the forthcoming Annual General Meeting (‘AGM’). However, being eligible, he has indicated that he will seek re-election.
Mr Peter Arthur and Mr Harry Morgan will retire at the forthcoming AGM.
In addition to Mr Simon Crinage seeking re-election, the Company has received a valid nomination on behalf of and acceptance from Ms Gay Collins, Mr Tom Durie, Ms Francesca Ecsery, Ms Katie Thorpe, Mr William van Heesewijk, Mr Andrew Watkins and Mr Simon White. As there are more candidates than vacancies the election process is triggered. Members will already have received information regarding each of the candidates, including how to vote.
Directors’ and Officers’ liability insurance and Professional Indemnity insurance have been maintained throughout the year at the expense of the Company.
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Committees of the Board
The Board had delegated certain responsibilities and functions to three committees:
- Audit Committee - Nominations Committee - Remuneration Committee
Details of the Directors who served on the committees at 30 September 2019 are given on pages 12 to 14.
The Audit Committee reviews the Company’s annual report and accounts, the financial reporting process, the system of internal controls and management of the Company’s key risks and reports its findings to the Board. It also defines and conducts the relationship between the Company and its auditors.
The Nominations Committee helps to ensure that the Board has an appropriate balance of skills, experience and representation to enable the Board to represent the interests of all the Company’s members. It endeavours to identify where any gaps exist so that these can be communicated to member companies when they are asked to consider nominating persons to stand for election to the Board and when submitting voting forms.
The Nominations Committee also makes recommendations to the Board as to succession planning for the Company’s Chair and Deputy Chair as well as the chair and membership of the Board’s committees.
The Remuneration Committee supports the Board in fulfilling its responsibilities by making recommendations as to the Chief Executive’s remuneration and objectives. It also reviews and makes recommendations to the Board on the remuneration of the Company’s non-Executive Directors.
Non-Executive Directors’ Remuneration Policy
The Board’s policy is to set non-executive directors’ remuneration at a level commensurate with the skills and experience necessary for the effective stewardship of the Company and the expected contribution of the Board as a whole in continuing to achieve the objectives of the Company. Time committed to the Association’s business and the specific responsibilities of the Chair, Deputy Chair, Directors and Chairs of the various committees of the Board are taken into account.
As noted above, the Remuneration Committee reviews and makes recommendations to the Board on the remuneration of the non-executive Directors.
The Company’s Articles of Association limit the aggregate fees payable to the non-executive directors to a total of £250,000 per annum. Any change to this limit is subject to agreement by the members of the Company by way of a resolution at an AGM. The current limit was agreed at the 2014 AGM. The fees are fixed and paid quarterly in arrears.
Non-executive directors are not eligible for any other form of remuneration.
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Annual Reports and Accounts 2019
The level of annual non-executive directors’ fees which prevailed during the year ended 30 September 2019 was:
Chair £39,500 Director £16,500 Deputy Chair £1,000 increment Audit Committee Chair £3,000 increment Nominations Committee Chair £2,500 increment Remuneration Committee Chair £2,000 increment
Following a recommendation from the Remuneration Committee, the Board has approved the following level of annual non-executive directors’ fees from 1 October 2019:
Chair £40,000 Director £17,000 Deputy Chair £1,000 increment Audit Committee Chair £3,000 increment Nominations Committee Chair £2,500 increment Remuneration Committee Chair £2,000 increment
Directors are also entitled to be compensated for certain travel and accommodation costs incurred in the performance of their duties.
Anti-Bribery policy
The Company’s policy continues to be to conduct itself to the highest ethical and business standards in all of its business dealings and in all matters which may reflect on the Company. It takes a zero tolerance approach on these matters.
Annual Report and Accounts
Unless a member has indicated that it wishes to receive its copy of the Annual Report and Accounts in paper format, documents will be distributed electronically. A member may opt for paper format by contacting the Company Secretary.
Results and dividends
The result for the year is set out on page 27. By virtue of its constitution no dividends are payable by the Company.
Audit information
The Directors who held office at the date of approval of the Report of the Directors confirm that, so far as they are aware, there is no relevant audit information of which the Company’s auditor is unaware; and each Director has taken all the steps that he/she ought to have taken as a Director to make himself/herself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.
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Annual Reports and Accounts 2019
Auditor
The Auditors, BDO LLP, have indicated their willingness to continue in office and a resolution proposing their re-appointment will be proposed at the forthcoming AGM.
This report has been prepared in accordance with the special provisions of part 15 of the Companies Act 2006 relating to small entities.
By order of the Board
L A Fox Company Secretary 3 December 2019 The Association of Investment Companies (Registered Number 04818187)
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Annual Reports and Accounts 2019
Notice of Annual General Meeting
Notice is hereby given that the Annual General Meeting of the Company will be held on Thursday 16 January 2020 at: 9th Floor, 24 Chiswell Street, London EC1Y 4YY, at 9.30am for the following purposes:
Ordinary business
1 To receive the Annual Report and Accounts of the Company for the year ended 30 September 2019.
2 To announce the names of the three candidates who have received the most votes in the ballot for election to the three vacancies on the Board, such candidates being deemed to be elected with effect from the conclusion of the Meeting.
3 To re-appoint BDO LLP as auditor of the Company and to authorise the Directors to fix their remuneration.
4 To transact any other ordinary business of the Company.
By order of the Board
L A Fox Company Secretary 3 December 2019
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Annual Reports and Accounts 2019
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Report of the Directors 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 the Group and of the profit or loss of the Group 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 accounting 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, to disclose with reasonable accuracy at any time the financial position of the Company and to 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 the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
Financial statements are published on the company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the company’s website is the responsibility of the directors. The directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein.
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Annual Reports and Accounts 2019
Independent Auditor’s Report to the members of The Association of Investment Companies
Opinion
We have audited the financial statements of The Association of Investment Companies (“the Parent Company”) and its subsidiaries (“the Group”) for the year ended 30 September 2019 which comprise the Consolidated Statement of Income and Retained Earnings, the Consolidated and Company Balance Sheets, the Consolidated Statement of Cash Flows and Notes to the Consolidated Accounts, 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 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion, the financial statements:
• give a true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 30 September 2019 and of the Group’s surplus for the year then ended;
• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
Basis for opinion
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. We are independent of the Group and the Parent 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, 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.
Conclusions relating to going concern
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:
• the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is not appropriate; or
• the Directors have not disclosed in the financial statements any identified material uncertainties that may cast significant doubt about the Group or the Parent Company’s ability to continue to adopt the going concern basis of accounting for a period of at least twelve months from the date when the financial statements are authorised for issue.
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Annual Reports and Accounts 2019
Other information
The Directors are responsible for the other information. The other information comprises the information included in the annual report and accounts, other than the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except to the extent 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 other 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 other 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.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of the audit:
• the information given in the Report of the Directors for the financial year for which the financial statements are prepared is consistent with the financial statements; and
• the Report of the Directors has been prepared in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the Group and the Parent Company and its environment obtained in the course of the audit, we have not identified material misstatements in the Report of the Directors.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion;
• adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or
• the Parent Company financial statements are not in agreement with the accounting records and returns; or
• certain disclosures of Directors’ remuneration specified by law are not made; or
• we have not received all the information and explanations we require for our audit; or
• the Directors were not entitled to take advantage of the small companies’ exemptions in preparing the Report of the Directors and from the requirement to prepare a Strategic report.
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Annual Reports and Accounts 2019
Responsibilities of Directors
As explained more fully in the Statement of Directors’ Responsibilities, 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 determines 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 Group’s and the Parent 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 Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
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.
A further description of our responsibilities for the audit of the financial statements is located at the Financial Reporting Council’s website at https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor’s report.
Use of our report
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.
Peter Smith (Senior Statutory Auditor) For and on behalf of BDO LLP, statutory auditor London 3 December 2019
BDO LLP is a limited liability partnership registered in England and Wales (with registered number OC305127).
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Annual Reports and Accounts 2019
Consolidated Statement of Income and Retained Earnings
For the year ended 30 September 2019
2019 2018 Note £’000s £’000s
Subscriptions and other income Membership subscriptions 5,206 4,821 Events income 9 131 133 Other income 1 - 5,338 4,954 Expenditure Salaries, fees and pensions 2 2,929 2,751 Office accommodation and services 5 436 420 Professional and consultancy 6 143 213 Administration 7 322 451 Publications 9 23 Media and public relations 8 241 256 Statistics service 151 154 Events 9 485 412 150th anniversary 10 57 67 Website 225 229 Adviser services 11 145 180 Consumer information programme 59 38 Depreciation 12 85 28 5,287 5,222
Operating surplus/(deficit) 4 51 (268)
Interest received 27 18
Surplus/(Deficit) on ordinary activities before taxation 78 (250)
Taxation on surplus/(deficit) on ordinary activities 16 (21) 42
Surplus/(Deficit) on ordinary activities after taxation 57 (208)
Accumulated fund at beginning of year 2,910 3,118
Accumulated fund at end of year 2,967 2,910
The notes on pages 30 to 36 form an integral part of these accounts.
All amounts relate to continuing operations, with the exception of amounts relating to AIC Information Services Limited, the Company’s wholly owned subsidiary, which relate to discontinued operations (see note 19).
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Annual Reports and Accounts 2019
Consolidated and Company Balance Sheets
As at 30 September 2019
Group Group Company Company Note 2019 2018 2019 2018 £’000s £’000s £’000s £’000s
Fixed assets Tangible assets 12 221 227 221 227 Investment in subsidiary 13 - - - 15 undertaking 221 227 221 242
Current assets Debtors and prepayments 195 221 195 221 Amounts recoverable from - - - 18 subsidiary undertaking Current investments 14 2,520 2,335 2,520 2,335 Cash at bank and in hand 562 523 562 523 Corporation tax recoverable - 53 - 53 VAT recoverable 72 57 72 24 3,349 3,189 3,349 3,174
Creditors: Amounts falling due within one year Corporation tax payable (12) - (12) - Trade creditors (71) (59) (71) (59) Taxation and social security (277) (260) (277) (260) Accruals and deferred income (215) (168) (215) (168) (575) (487) (575) (487)
Net current assets 2,774 2,702 2,774 2,687
Provision for liabilities and charges Deferred tax 15 (28) (19) (28) (19)
Net Assets 2,967 2,910 2,967 2,910
Reserve Accumulated fund 2,967 2,910 2,967 2,910
Approved and authorised for issue by the Board on 3 December 2019 and signed on its behalf by
W J C Hemmings P H Reeve
The notes on pages 30 to 36 form an integral part of these accounts.
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Annual Reports and Accounts 2019
Consolidated Statement of Cash Flows
For the year ended 30 September 2019
2019 2018 Note £’000s £’000s
Cash flows from operating activities Surplus/(Deficit) for the year 57 (208) Adjustments for: Depreciation of tangible assets 12 85 28 Rent free period (25) (25) Taxation 12 (53) Interest received (27) (18) Decrease/(Increase) in trade and other debtors 13 (18) Increase/(Decrease) in trade and other creditors 100 (6) Increase in provisions 9 12 224 (288) Cash from operations Corporation tax refund (payment) 53 (53) 53 (53)
Net cash generated from operating activities 277 (341)
Cash flows from investing activities Purchases of tangible fixed assets (79) (179) Interest received 26 22 Purchase of current asset investments (1,215) (1,205) Sale of current asset investments 1,205 1,200 Net cash from investing activities (63) (162)
Net increase/(decrease) in cash and cash equivalents 214 (503)
Cash and cash equivalents at beginning of year 1,653 2,156 Cash and cash equivalents at end of year 1,867 1,653
Cash and cash equivalents Cash at bank and in hand 562 523 Money market funds 14 1,305 1,130 1,867 1,653
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Annual Reports and Accounts 2019
Notes to the Consolidated Accounts
1 Accounting policies
These financial statements have been prepared in accordance with FRS 102, the Financial Reporting Standard (FRS) applicable in the United Kingdom.
The following principal accounting policies have been applied:
Basis of consolidation: The consolidated financial statements present the results of The Association of Investment Companies (Company) and its wholly-owned subsidiary company, AIC Information Services Limited, as if they formed a single entity (Group). Inter-company transactions and balances between group companies are therefore eliminated in full.
The Association of Investment Companies is a company limited by guarantee and incorporated in England and Wales under the Companies Act. The address of the registered office is given on page 16. The principal activity of the Company is set out on page 18. As permitted by section 408 of the Companies Act 2006, the Company has not presented its own Statement of Income and Retained Earnings.
The principal activity of AIC Information Services Limited, which became dormant during the year, is set out on page 18.
The Company also owns two other subsidiary companies, Association of Investment Funds Limited and The Association of Investment Trust Companies Limited. These have not traded since their incorporation and it is not intended that they will do so in the foreseeable future. They are therefore excluded from the consolidated accounts.
Income and expenditure: Income and expenditure are recognised on an accruals basis and exclude VAT where relevant. Membership subscriptions are recognised evenly over the period to which they relate.
Tangible fixed assets: Tangible fixed assets are stated at historical cost less accumulated depreciation and any accumulated impairment losses. Historical cost includes expenditure that is directly attributable to making the asset capable of operating as necessary. Depreciation is charged so as to allocate the cost of assets less their residual value over their estimated useful lives. The annual rates and methods of depreciation are as follows:
Office furniture and equipment: 20% reducing balance Computer hardware and software: 25% straight line Leasehold improvements: Over the shorter of the remaining term of the lease to the break clause or the expected useful life
Investment in subsidiary: The holding in AIC Information Services Limited is shown in the Company balance sheet at cost less any impairment.
Current asset investments: Current asset investments comprise deposit accounts with maturity of three months or more held at amortised cost and money market funds valued at bid price.
Pension costs: Contributions made by the Company to staff members’ personal plans are charged in the year in which they became payable.
Leases: Rental costs under operating leases are charged to the Statement of Income and Retained Earnings on a straight line basis over the term of the lease. The benefit of the rent free period is spread evenly over the period to which it relates.
Taxation: The tax expense for the period comprises current and deferred tax. Full provision is made for deferred tax assets and liabilities arising from timing differences between the recognition of gains and losses in the financial statements and their recognition in a tax computation.
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Annual Reports and Accounts 2019
Cash and cash equivalents: Cash and cash equivalents comprise cash at bank and in hand and money market funds.
2 Salaries, fees and pensions
2019 2018 £’000s £’000s Staff salaries 2,163 2,048 Non-executive directors’ fees (see note 3) 194 185 Social security costs 280 263 Other pension costs 233 201 Other staff costs 59 54 2,929 2,751
The Company contributes to a personal pension plan for qualifying staff and such contributions amounted to £234,000 (2018: £201,000). The Company also paid pension contributions of £29,000 (2018: £50,000) in accordance with the terms of the Company’s scheme whereby salary is given up in exchange for the Company making additional pension contributions at an enhanced rate. These additional pension contributions are included within staff salaries above.
2019 2018 Average number of employees during the year: 22 21
3 Directors of the Board
The names of the current directors are listed on pages 12 to 14.
Annual fees paid to non-executive directors are set out on page 20. The Chief Executive receives no fee.
Emoluments paid to directors, who also represent the key management personnel, are £661,000 (2018: £627,000). This includes £7,000 (2018: £7,000) of reimbursed directors’ expenses and £2,000 (2018: £3,000) of tax paid on these expenses on behalf of the directors. This also includes £36,000 (2018: £33,000) paid to third parties for making available the services of directors.
Ian Sayers, the Company’s Executive Director and Chief Executive, was the Company’s highest paid director and received total remuneration during the year of £458,000 (2018: £438,000) which was made up as follows:
2019 £’000s Basic salary 327 Performance related bonus 113 Pension contributions 10 Other emoluments and benefits 8 Total 458
Mr Sayers participated in the Company’s Season Ticket Loan Scheme during the year. The Scheme is open to all staff and loans are interest free, made for a maximum duration of 12 months and repayable in monthly instalments over the life of the loan. During the year Mr Sayers borrowed £5,056 (2018: £nil) and at the year end the amount outstanding was £1,264 (2018: £nil). The amounts borrowed represent the maximum amounts outstanding.
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Annual Reports and Accounts 2019
From 1 October 2018 to 30 September 2019 there were 4 scheduled Board meetings, 2 Audit Committee meetings, 4 Nominations Committee meetings and 2 Remuneration Committee meetings.
Attendance record Attendance
2019 2018
Fee Fee
£ £
Audit
Board
Committee Committee Committee
Nominations Remuneration
Rachel Beagles (Chair from Jan 2018) 39,500 33,250 4/4 4/4 2/2
William Hemmings (Deputy Chair from Jan 17,500 16,750 4/4 2/2 2018)
Chris Fletcher 18,500 18,000 4/4 2/2 2/2
Peter Arthur (Chair Jan 2015 – Jan 2018) 16,500 21,750 4/4
Simon Crinage (waived fee) - - 4/4 4/4
Sarah Evans (retired Jan 2018) - 4,000
Susie Farnon (from April 2018) 16,500 8,000 4/4 1/1
Chris Hills 16,500 16,000 4/4 2/2
Peter Moffatt (retired Jan 2018) - 4,000 n/a
Harry Morgan 16,500 16,000 4/4 4/4
Peter Niven (from Jan 2019) 12,375 - 2/3 1/2
Patrick Reeve 18,616 16,000 3/4 2/2
Ian Sayers (Chief Executive) - - 4/4
Elisabeth Scott (from Jan 2018) 16,500 12,000 4/4 3/3
Melville Trimble (retired Jan 2019) 4,875 19,250 1/1 1/1
193,866 185,000
In addition to the above, directors may attend ad-hoc board meetings throughout the year.
4 Operating surplus/(deficit)
Operating surplus/(deficit) is stated after charging: 2019 2018 £’000s £’000s Fees payable to the auditor: - audit 20 21 - other services 8 18 Depreciation of owned fixed assets 85 28 Operating lease expense - land and buildings 234 234 - other 3 16
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Annual Reports and Accounts 2019
5 Office accommodation and services
Expenditure on office accommodation and services includes rent, rates and service charge.
Operating lease commitments
Property lease The Company entered into a lease on its premises at 24 Chiswell Street on 5 August 2015, which terminates on 28 September 2025, with the Company having the option to exercise a break clause on 29 September 2020. The annual rent, after accounting for the rent free period, was £91,000 from 5 August 2015 to 28 September 2015 and is £233,000 from 29 September 2015 to 29 September 2020. Thereafter the annual rent may increase following the outcome of a rent review and after a second rent free period.
Up until the break clause can be exercised, the Group and Company is committed to the following future minimum lease payments in respect of the property lease, analysed by when the payments are due:
2019 2018 £’000s £’000s Due within one year 258 259 Due in two to five years - 258 258 517
Other leases The Group and Company is committed to the following future minimum lease payments under non-cancellable operating leases, analysed by when the payments are due:
2019 2018 £’000s £’000s Due within one year 5 2 Due in two to five years 7 2 12 4
6 Professional and consultancy
Professional and consultancy costs include audit fees, legal fees and payments to consultants working with the Company in connection with its VCT and offshore membership. Costs were also incurred in 2017/2018 for carrying out an independent survey of members.
7 Administration
Administration costs include spending on stationery, postage, telephone, internet, insurance, office equipment, repairs and maintenance, staff recruitment and travel. They also include the proportion of VAT paid by the Company that it is unable to recover, which fell in 2018/19 following a review of VAT arrangements. Administration costs also include access to an email distribution tool. Previously, the cost of this tool was categorised under Media and Public Relations as it was only used for these purposes. It is now used for the majority of email communications and is classed as a general administration cost. Comparative figures have been adjusted accordingly.
8 Media & public relations
Media and public relations expenditure includes events for journalists, research and social media. Also see note 7 regarding the re-classification of costs relating to an email distribution tool.
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Annual Reports and Accounts 2019
9 Events
Expenditure on member events includes the costs of running the UK conference, dinners, roundtables and seminars. The costs of the annual London Dinner and the annual Edinburgh Dinner are met by those attending and the income received is included within Events income. Due to a change in timing, the VCT conference did not take place in 2017/18.
10 150th anniversary
These costs relate to initiatives to celebrate the 150th anniversary of the investment company sector. In 2018/19 this include a special Saving for Children campaign and in 2017/18 a special exhibition, branded promotional items and the production of a video.
11 Adviser services
Adviser services costs relate to training and promotion of investment companies in the financial adviser community. A special event was held for financial advisers in 2017/18.
12 Tangible assets Office Leasehold Computer Total furniture & improvements equipment equipment £’000s £’000s £’000s £’000s Cost At 1 October 2018 138 224 133 495 Additions 2 7 70 79 Disposals* (1) - (5) (6) At 30 September 2019 139 231 198 568
Depreciation At 1 October 2018 63 174 31 268 Provided during the year 14 28 43 85 Disposals* (1) - (5) (6) At 30 September 2019 76 202 69 347
Net book value 30 Sept 2019 63 29 129 221 Net book value 30 Sept 2018 75 50 102 227
£000s £000s £000s £000s Cost At 1 October 2017 116 172 36 324 Additions 30 52 97 179 Disposals* (8) - - (8) At 30 September 2018 138 224 133 495
Depreciation At 1 October 2017 59 172 17 248 Provided during the year 12 2 14 28 Disposals* (8) - - (8) At 30 September 2018 63 174 31 268
Net book value 30 Sept 2018 75 50 102 227 Net book value 30 Sept 2017 57 - 19 76
*Including elimination of balances on items fully depreciated
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Annual Reports and Accounts 2019
13 Investment in subsidiary undertaking
2019 £’000s At 1 October 2018 15 Less impairment (see note 19) (15) At 30 September 2019 -
2018 £’000s At 1 October 2017 15 Less impairment - At 30 September 2018 15
14 Current investments
2019 2018 £’000s £’000s Business savings account (95 days variable rate) 1,215 1,205 Money market funds 1,305 1,130 2,520 2,335
The Company has three (2018: three) holdings in money market funds which are subject to same day access. The managers of the money market funds are members of the Institutional Money Market Funds Association.
15 Provision for deferred tax
Deferred tax is provided for at 17.00% as follows: 2019 2018 £’000s £’000s Accelerated capital allowances 33 22 Short term timing differences (5) (3) Total deferred tax liability 28 19
Movement in provision: Provision at start of year 19 8 Deferred tax charged in Statement of Income and 9 11 Retained Earnings for the year Provision at end of year 28 19
16 Taxation
(a) Analysis of tax charge for the year 2019 2018 £’000s £’000s Current tax UK corporation tax at 19.00% (2018: 19.00%) 12 - Adjustments in respect of prior years - (53) Total current tax charge/(credit) 12 (53) Deferred tax Origination and reversal of timing differences 9 11 Tax on profit on ordinary activities 21 (42)
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Annual Reports and Accounts 2019
(b) Reconciliation of tax charge
The tax assessed for the year is higher than the standard rate of corporation tax in the UK applied to profit before tax. The differences are explained below:
2019 2018 £’000s £’000s Surplus/(Deficit) on ordinary activities before taxation 78 (250)
Surplus/(Deficit) multiplied by the standard rate of corporation 15 (47) tax in the UK of 19.00% (2018: 19.00%)
Effects of: Expenses not deductible for tax purposes 9 7 Adjustment to closing deferred tax to average rate of 19.00% (3) (2) Adjustment to opening deferred tax to average rate of 19.00% 2 - Fixed asset differences 1 1 Group income (3) - Losses carried back - 52 Adjustments to tax charge in respect of previous periods - (53) Tax charge for the year 21 (42)
17 Parent company results for the year
The surplus, after taxation, of the Company amounted to £57,000 (2018: deficit £208,000).
18 Contingent liability
The property lease entered into by the Company on 5 August 2015 (see note 5) contains obligations in relation to dilapidations at the expiry of the lease on 28 September 2025, or earlier on 29 September 2020 were the Company to exercise its right to terminate its tenancy at the break date. At this stage, and given the uncertainties involved, it is not considered probable that a financial liability will arise and therefore no provision has been made. The current estimated costs of the dilapidation work, should it arise, might be about £120,000.
19 Change to group structure
In May 2018, the board of the Company and the board of its wholly owned subsidiary company, AIC Information Services Limited, approved proposals for the subsidiary to cease trading and to become dormant following a review to simplify the Group’s VAT arrangements.
On 25 September 2018, the boards of both companies approved a reduction of the issued share capital of AIC Information Services Limited from £15,000 to £1 by the cancellation of 14,999 ordinary shares of £1 each held by its parent for the purposes of creating distributable reserves of £14,999.
On 11 June 2019, the boards of both companies approved a dividend in specie from the subsidiary to the Company by way of the transfer of an amount due from the parent undertaking of £14,973, representing the cash amount that was held in the bank account of the Company which has been transferred to the parent undertaking to be held on the Company’s behalf.
Following this dividend, the balance sheet of AIC Information Services Limited shows net assets of £1, comprising an amount due from the parent undertaking of £1 and issued share capital of £1. It is not intended that any further transactions will be made by the subsidiary for the foreseeable future.
As a result, the value of the investment in subsidiary undertaking held by the Company has been reduced from £15,000 to £1 (see note 13).
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Annual Reports and Accounts 2019
Members of the Association At 30 September 2019
3i Infrastructure plc Baillie Gifford US Growth Trust plc Aberdeen Asian Income Fund Limited The Bankers Investment Trust PLC Aberdeen Diversified Income and Growth Trust plc Baring Emerging Europe PLC Aberdeen Emerging Markets Investment Company Limited Baronsmead Second Venture Trust plc Aberdeen Frontier Markets Investment Company Limited Baronsmead Venture Trust plc Aberdeen Japan Investment Trust PLC BB Healthcare Trust plc Aberdeen Latin American Income Fund Limited BBGI SICAV S.A. Aberdeen New Dawn Investment Trust PLC Better Capital PCC Limited Aberdeen New India Investment Trust PLC BH Global Limited Aberdeen New Thai Investment Trust PLC BH Macro Limited Aberdeen Smaller Companies Income Trust plc BioPharma Credit PLC Aberdeen Standard Asia Focus PLC The Biotech Growth Trust Plc Aberdeen Standard Equity Income Trust PLC BlackRock Energy and Resources Income Trust plc Aberdeen Standard European Logistics Income PLC BlackRock Frontiers Investment Trust plc Aberforth Smaller Companies Trust plc BlackRock Greater Europe Investment Trust plc Aberforth Split Level Income Trust plc BlackRock Income and Growth Investment Trust plc Acorn Income Fund Limited BlackRock Latin American Investment Trust PLC Adamas Finance Asia Limited BlackRock North American Income Trust plc AEW UK REIT plc BlackRock Smaller Companies Trust plc Albion Development VCT PLC BlackRock Throgmorton Trust plc Albion Enterprise VCT plc BlackRock World Mining Trust plc Albion Technology & General VCT PLC Blackstone / GSO Loan Financing Limited Albion Venture Capital Trust PLC Blue Planet Investment Trust plc Alcentra European Floating Rate Income Fund Limited Bluefield Solar Income Fund Limited Alliance Trust PLC BMO Capital and Income Investment Trust PLC Allianz Technology Trust PLC BMO Commercial Property Trust Limited Alternative Liquidity Fund Limited BMO Global Smaller Companies PLC Amati AIM VCT plc BMO Managed Portfolio Trust plc Amedeo Air Four Plus Limited BMO Private Equity Trust plc Apax Global Alpha Limited BMO Real Estate Investments Limited Aquila European Renewables Income Fund PLC BMO UK High Income Trust plc Artemis Alpha Trust plc British & American Investment Trust PLC Artemis VCT plc British Smaller Companies VCT plc Ashmore Global Opportunities Limited British Smaller Companies VCT 2 plc Ashoka India Equity Investment Trust plc The Brunner Investment Trust PLC Athelney Trust plc Calculus VCT plc Atlantis Japan Growth Fund Limited Caledonia Investments plc Augmentum Fintech plc Capital Gearing Trust p.l.c. Aurora Investment Trust plc CATCo Reinsurance Opportunities Fund Limited AVI Global Trust plc CC Japan Income & Growth Trust plc AVI Japan Opportunity Trust plc CEIBA Investments Limited Axiom European Financial Debt Fund Limited Channel Islands Property Fund Limited Bailiwick Investments Limited Chelverton Growth Trust PLC The Baillie Gifford Japan Trust PLC Chelverton UK Dividend Trust PLC Baillie Gifford Shin Nippon PLC Chenavari Toro Income Fund Limited Baillie Gifford UK Growth Fund plc Chrysalis VCT plc
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Annual Reports and Accounts 2019
CIP Merchant Capital Limited GCP Asset Backed Income Fund Limited City Merchants High Yield Trust Limited GCP Infrastructure Investments Limited The City of London Investment Trust plc GCP Student Living plc Civitas Social Housing PLC Geiger Counter Limited CQS Natural Resources Growth and Income plc Genesis Emerging Markets Fund Limited CQS New City High Yield Fund Limited Gore Street Energy Storage Fund plc Crown Place VCT plc Greencoat Renewables PLC Crystal Amber Fund Limited Greencoat UK Wind PLC Custodian REIT plc Gresham House Energy Storage Fund PLC CVC Credit Partners European Opportunities Limited Gresham House Renewable Energy VCT 1 plc The Diverse Income Trust plc Gresham House Renewable Energy VCT 2 plc Downing FOUR VCT plc Gresham House Strategic plc Downing ONE VCT plc Gulf Investment Fund Plc Downing Strategic Micro-Cap Investment Trust plc Hadrian's Wall Secured Investments Limited Downing THREE VCT plc Hansa Investment Company Limited Downing TWO VCT plc HarbourVest Global Private Equity Limited DP Aircraft I Limited Hargreave Hale AIM VCT plc Draper Esprit VCT plc Henderson Alternative Strategies Trust plc Drum Income Plus REIT plc Henderson Diversified Income Trust plc Dunedin Enterprise Investment Trust PLC Henderson European Focus Trust plc Dunedin Income Growth Investment Trust PLC Henderson EuroTrust plc Ecofin Global Utilities and Infrastructure Trust plc Henderson Far East Income Limited Edinburgh Dragon Trust plc Henderson High Income Trust plc Edinburgh Investment Trust plc Henderson International Income Trust plc Edinburgh Worldwide Investment Trust plc Henderson Opportunities Trust plc Ediston Property Investment Company plc The Henderson Smaller Companies Investment Trust plc EJF Investments Limited Herald Investment Trust plc Electra Private Equity plc HgCapital Trust plc EP Global Opportunities Trust plc HICL Infrastructure PLC European Assets Trust PLC Highbridge Tactical Credit Fund Limited The European Investment Trust PLC Hipgnosis Songs Fund Limited F&C Investment Trust PLC ICG Enterprise Trust PLC Fair Oaks Income Limited ICG-Longbow Senior Secured UK Property Debt Investments Limited Fidelity Asian Values PLC Impact Healthcare REIT plc Fidelity China Special Situations PLC Impax Environmental Markets plc Fidelity European Values PLC The Income & Growth VCT plc Fidelity Japan Trust PLC The Independent Investment Trust PLC Fidelity Special Values PLC India Capital Growth Fund Limited Finsbury Growth & Income Trust PLC International Biotechnology Trust plc Foresight Solar Fund Limited International Public Partnerships Limited Foresight VCT plc Invesco Asia Trust plc Foresight 4 VCT plc Invesco Enhanced Income Limited The Forest Company Limited Invesco Income Growth Trust PLC Fundsmith Emerging Equities Trust plc Invesco Perpetual Select Trust plc Gabelli Merger Plus+ Trust Plc Invesco Perpetual UK Smaller Companies Investment Trust plc Gabelli Value Plus+ Trust Plc The Investment Company plc
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Annual Reports and Accounts 2019
JLEN Environmental Assets Group Limited The Mercantile Investment Trust plc JPEL Private Equity Limited The Merchants Trust PLC JPMorgan American Investment Trust plc Merian Chrysalis Investment Company Limited JPMorgan Asian Investment Trust plc Mid Wynd International Investment Trust PLC JPMorgan Brazil Investment Trust plc Middlefield Canadian Income PCC JPMorgan Chinese Investment Trust plc Miton Global Opportunities plc JPMorgan Claverhouse Investment Trust plc Miton UK Microcap Trust plc JPMorgan Elect plc Mobeus Income & Growth VCT plc JPMorgan Emerging Markets Investment Trust plc Mobeus Income & Growth 2 VCT plc JPMorgan European Investment Trust plc Mobeus Income & Growth 4 VCT plc JPMorgan European Smaller Companies Trust plc Mobius Investment Trust plc JPMorgan Global Convertibles Income Fund Limited Monks Investment Trust PLC JPMorgan Global Emerging Markets Income Trust plc Montanaro European Smaller Companies Trust plc JPMorgan Global Growth & Income plc Montanaro UK Smaller Companies Investment Trust PLC JPMorgan Indian Investment Trust plc Murray Income Trust PLC JPMorgan Japan Smaller Companies Trust plc Murray International Trust PLC JPMorgan Japanese Investment Trust plc NB Distressed Debt Investment Fund Limited JPMorgan Mid Cap Investment Trust plc NB Global Floating Rate Income Fund Limited JPMorgan Multi-Asset Trust plc NB Private Equity Partners Limited JPMorgan Russian Securities plc NextEnergy Solar Fund Limited JPMorgan Smaller Companies Investment Trust plc The North American Income Trust plc JPMorgan US Smaller Companies Investment Trust plc Northern 2 VCT PLC Jupiter Emerging & Frontier Income Trust PLC Northern 3 VCT PLC Jupiter European Opportunities Trust PLC Northern Venture Trust PLC Jupiter Green Investment Trust PLC Oakley Capital Investments Limited Jupiter UK Growth Investment Trust PLC Octopus AIM VCT PLC Jupiter US Smaller Companies PLC Octopus AIM VCT 2 plc JZ Capital Partners Limited Octopus Apollo VCT plc Keystone Investment Trust PLC Octopus Titan VCT plc Kings Arms Yard VCT plc Odyssean Investment Trust plc The Law Debenture Corporation p.l.c. Oxford Technology Venture Capital Trust plc The Lindsell Train Investment Trust plc Pacific Assets Trust plc LMS Capital PLC Pacific Horizon Investment Trust plc Lowland Investment Company plc Pantheon International Plc LXI REIT plc Pembroke VCT plc M&G Credit Income Investment Trust plc Perpetual Income and Growth Investment Trust plc Macau Property Opportunities Fund Limited Pershing Square Holdings, Ltd Majedie Investments PLC Personal Assets Trust plc Marble Point Loan Financing Limited Phoenix Spree Deutschland Limited Martin Currie Asia Unconstrained Trust plc Polar Capital Global Healthcare Trust plc Martin Currie Global Portfolio Investment Trust plc Polar Capital Global Financials Trust plc Marwyn Value Investors Limited Polar Capital Technology Trust PLC Maven Income & Growth VCT PLC Pollen Street Secured Lending plc Maven Income & Growth VCT 3 PLC Premier Global Infrastructure Trust PLC Maven Income & Growth VCT 5 PLC Princess Private Equity Holding Limited Menhaden PLC ProVen Growth and Income VCT plc
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Annual Reports and Accounts 2019
ProVen VCT PLC Strategic Equity Capital plc The PRS REIT plc Supermarket Income REIT plc Puma VCT 10 plc SVM UK Emerging Fund plc Puma VCT 11 plc Target Healthcare REIT plc Puma VCT 12 plc Temple Bar Investment Trust PLC RDL Realisation Plc Templeton Emerging Markets Investment Trust PLC Real Estate Credit Investments Limited Tetragon Financial Group Limited Regional REIT Limited Third Point Offshore Investors Limited The Renewables Infrastructure Group Limited TOC Property Backed Lending Trust PLC Residential Secure Income plc TR European Growth Trust PLC Rights and Issues Investment Trust P.L.C. TR Property Investment Trust PLC RIT Capital Partners plc Triple Point Income VCT plc River and Mercantile UK Micro Cap Investment Company Limited Triple Point Social Housing REIT plc Riverstone Credit Opportunities Income Plc Triple Point VCT 2011 plc Riverstone Energy Limited Tritax Big Box REIT plc RM Secured Direct Lending plc Tritax EuroBox plc Ruffer Investment Company Limited Troy Income & Growth Trust plc Sanditon Investment Trust plc Tufton Oceanic Assets Limited The Schiehallion Fund Limited TwentyFour Income Fund Limited Schroder Asian Total Return Investment Company plc TwentyFour Select Monthly Income Fund Limited Schroder AsiaPacific Fund plc UIL Limited Schroder European Real Estate Investment Trust plc UK Commercial Property REIT Limited Schroder Income Growth Fund plc UK Mortgages Limited Schroder Japan Growth Fund plc Unicorn AIM VCT PLC Schroder Oriental Income Fund Limited Urban Logistics REIT plc Schroder Real Estate Investment Trust Limited US Solar Fund plc Schroder UK Mid Cap Fund plc Utilico Emerging Markets Trust plc ScotGems plc Value and Income Trust plc The Scottish American Investment Company P.L.C. Ventus VCT plc The Scottish Investment Trust PLC Ventus 2 VCT plc Scottish Mortgage Investment Trust PLC Vietnam Enterprise Investments Limited The Scottish Oriental Smaller Companies Trust P.L.C. VietNam Holding Limited SDCL Energy Efficiency Income Trust plc VinaCapital Vietnam Opportunity Fund Limited Securities Trust of Scotland plc Volta Finance Limited Seneca Global Income & Growth Trust PLC VPC Specialty Lending Investments PLC Seneca Growth Capital VCT plc Warehouse REIT plc Sequoia Economic Infrastructure Income Fund Limited Witan Investment Trust plc Shires Income plc Witan Pacific Investment Trust plc SME Credit Realisation Fund Limited Woodford Patient Capital Trust plc Smithson Investment Trust plc Worldwide Healthcare Trust PLC SQN Asset Finance Income Fund Limited SQN Secured Income Fund plc Standard Life Investments Property Income Trust Limited Standard Life Private Equity Trust PLC Standard Life UK Smaller Companies Trust PLC Starwood European Real Estate Finance Limited
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Annual Reports and Accounts 2019
Acronyms
AIC Code AIC Code of Corporate Governance
ESG Environmental, Social and Governance issues
FCA Financial Conduct Authority
FRC Financial Reporting Council
IA Investment Association
IFA Independent Financial Adviser
IPO Initial Public Offering
KID Key Information Document
NAV Net Asset Value
NED Non-Executive Director
PRIIPS Packaged Retail and Insurance-based Investment Products
VCT Venture Capital Trust
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Annual Reports and Accounts 2019
The Association of Investment Companies (Registered Number 04818187)
24 Chiswell Street London EC1Y 4YY
Telephone; 020 7282 5555 Email: [email protected] Website: www.theaic.co.uk
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