Established in 1889, the Company’s investment objective is to achieve capital growth through a focused portfolio of investments, particularly in companies whose shares stand at a discount to estimated underlying net asset value.

British Empire Trust plc ('British Empire' of 'the Company') is managed by Asset Value Investors ('AVI').

AVI aims to deliver superior returns and specialises in securities that, for a number of reasons, may be selling on anomalous valuations.

AVI continues to seek (and find) investment opportunities with real value and excellent prospects for good medium to long-term capital appreciation.

About british empire

The Company is an investment trust and its shares have a premium listing on the London Stock Exchange. It is a member of the Association of InvestmentCompanies (‘AIC’).

£942m

The Company’s net asset value as at 30 September 2018 was £942m and the market capitalisation was £854m.

AT A GLANCE

AVI'S INVESTMENT APPROACH

Shareholders’ money is principally invested in companies with three key features:
  • They have high-quality underlying assets and strong balance sheet
  • Their shares trade at discounts to net asset value
  • There is likely to be an event that will narrow the discount

THE INVESTMENTS

Investments are principally made in three types of company:
  • Investment Holding Companies
  • Investment Companies
  • Asset-backed Companies
The Investment Manager can invest anywhere in the world. In practise, they find most opportunities in Europe and Asia.

PERFORMANCE

Over the past ten years, the Company has produced a compound average annual net asset value total return of 10.0% versus 9.0% from the MSCI All Country World ex-US Total Return Index in sterling terms.

It is possible that, in the future, there will be periods of underperformance when compared with the target benchmark but, over the longer term, the Board believes that the Investment Manager’s style of investment will provide higher-than-average returns for investors.
36%1
Underlying discount to net asset value
39
Number of investments (of which 16 are held in Japanese Special Situations
1 Refer to Glossary on page 88 for further details.

Comparator Benchmark

The return of the portfolio is compared with the MSCI All Country World ex-US Total Return Index (with net income reinvested).

The comparator benchmark (the ‘benchmark’) isused for performance measurement purposes. The Investment Manager is not required to follow the sector or geographic allocations of the benchmark and, as such, British Empire Trust’s portfolio will likely differ significantly from the benchmark.

Fees

The Investment Manager charges 0.7% of net assets. There is no performance fee. The Company's total annual costs (known as Ongoing Charges) are 0.87% of net assets for the year to 30 Septemeber 2018.

DIVIDENDS

The Investment Manager focuses on capital growth. The Company has either maintained or increased its ordinary dividends for the past 30 years, and expects to continue to do so in the future.

In exceptional circumstances, a special dividend may be paid.
We expect that long-term returns on equities will exceed the cost of debt and it is expected that the portfolio will be fully invested, provided there are attractive opportunities in our universe.”
Joe Bauernfreund
Chief Investment Officer

GOVERNANCE AND RISK

The Company has a Board of Directors which is responsible for oversight of the Investment Manager and also the risks and controls operated by the Company. All investment involves risk. The aim is to secure attractive returns without undue risk.

DISCOUNTS AND BUYBACKS

The Company’s shares have been trading at a discount to their net asset value. The Company manages the volatility of the discount through a policy of buying back its own shares.

GEARING

The Company is geared by its Debenture Stock and also by Loan Notes that were issued in January 2016 and November 2017.

ACCOUNTS

The Company has net assets of £941.7m and gross investment income of £22.6m.

COMPANY PURPOSE

The Company is an investment trust. Its investment objective is to achieve capital growth through a focused portfolio of mainly listed investments, particularly in companies whose shares stand at a discount to estimated underlying net asset value.

STRATEGY
Read more about our Strategy
Our strategy is to seek out-of-favour companies whose assets are misunderstood by the market or under-researched, and which trade significantly below their intrinsic value and where pressure can be brought to bear to enact change to release value for shareholders.
INVESTMENT APPROACH
Read more about our Investment Approach
As an investment trust, the Company’s most important relationship is with the Investment Manager.

The Company’s assets are managed by Asset Value Investors Limited. AVI aims to deliver superior returns and specialises in investment in securities that for a number of reasons may be selling on anomalous valuations.

The Investment Manager has the flexibility to invest around the world and is not constrained by any fixed geographic or sector weightings, but does seek to maintain a concentrated yet diversified portfolio. No more than 10% of the Company’s investments may be in unlisted securities. AVI’s investment philosophy is described in more detail on page 18, and the Company’s Investment Policy is set out on page 38, of the Annual Report.
KEY PERFORMANCE INDICATORS (‘KPIs’)
Read more about our KPIs
The Company uses KPIs as an effective measurement of the development, performance or position of the Company’s business, in order to set and measure performance reliably. These are Net Asset Value Total Return, Discount to Net Asset Value and Value for Money.

TEN LARGEST EQUITY INVESTMENTS

Source / Aker BP

AKER /AKER BP

Although its roots can be traced back to the formation of Norway’s first oil company in 1971, Aker BP in its current form was established just two years ago through the merger of Det Norske Oljeselskap ASA and BP Norge.

Aker BP operates as a fully-fledged oil company, involved in the exploration, development and production of petroleum resources on the Norwegian continental shelf. Measured by production, Aker BP is one the largest independent oil companies in Europe.

2.2%
% of total assets less current liabilities
Learn more about the Case Study

PERSHING SQUARE HOLDINGS /CHIPOTLE MEXICAN GRILL

Chipotle Mexican Grill operates in the fast-casual dining segment, offering customers a range of all -natural Mexican-themed food, with a focus on burritos and tacos.

Founded in 1993 with a single restaurant, the brandrapidly expanded across the United States and todayoperates over 2,400 restaurants.

Pershing Square invested in Chipotle in September2016 following a near-50% share price decline drivenby an e-coli outbreak, with the rationale being that theopportune time to buy into a quality business is whentemporary factors are depressing the share price.

6.5%
% of total assets less current liabilities
Learn more about the Case Study
Source / Chipotle Mexican Grill
Source / Getty Images

JAPAN SPECIAL SITUATIONS BASKET

14% of your company's assets are invested in a basket of cash-rich Japanese companies, which has been a focus area over the past year. We have continued to develop this basket of undervalued, asset-backed quality companies and are engaging with management to initiate discussions about improving shareholder value.

Corporate governance reform has firmly taken hold in Japan – pushed as one of the “Three Arrows” of Prime MinisterShinzo Abe’s economic reform plan – and the culture of change is now ingrained in the mind-set of the regulatorsand institutions alike. Several key institutions have supported the reforms, including the Ministry of Economy, Trade &Industry; the Financial Services Agency; the Panasonic Pension Scheme; and foreign activist investors (including AVI).

13.6%
% of total assets less current liabilities
75%
Average percentage of market capitalisation covered by net cash and listed securities
Learn more about the Case Study

Key Figures

Discount

30 September 2018

8.5%

Discount

30 September 2017

9.9%

NUMBER OF INVESTMENTS

39

(of which 16 are held in Japanese Special Situations)

ESTIMATED PERCENTAGE ADDED TONET ASSET VALUE PER SHARE FROM BUYBACKS

2017

0.8%

2018

0.4%

TOP TEN INVESTMENTS REPRESENT

50.6%

of total assets less current liabilities

ONGOING CHARGES RATIO

2017

0.87%

2018

0.87%