BRITISH EMPIRE TRUST PLC

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.

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Company summary

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 Investment Companies (‘AIC’).

The Company’s net asset value as at 30 September 2017 was £903m and the market capitalisation was £806m.

VIEW AT A GLANCE d

Investment Manager

Asset Value Investors Limited
(Customer Services: 02076594800)

VISIT THE AVI WEBSITEd

STRATEGIC REPORT / at a glance

VALUE
INVESTING

Shareholders’ money is principally invested in companies with three key features:

  • Their shares trade at discounts to net asset value
  • They have high-quality underlying assets and strong balance sheets
  • There is likely to be an event that will narrow the discount

UNDERLYING DISCOUNT TO NET ASSET VALUE

34.1%1

NUMBER OF INVESTMENTS

452

(of which 15 are held in Japanese Special Situations)

The
Investments

Shareholders’ money is principally invested in three types of companies:

  • Holding Companies
  • Investment Companies
  • Asset-backed Companies

The Investment Manager can invest anywhere in the world. In practice, they find most opportunities in Europe and the Far East.

Benchmark

The return of the portfolio is measured against the MSCI All Country World ex-US Index return.

Performance

Over the past ten years, the Company has produced a compound average annual net asset value total return of 6.3%. There have been periods of underperformance when compared with the 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. Over the year under review, the level of absolute return was exceptionally strong and the net asset value total return outperformed the benchmark index.

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.

DIVIDENDS

The Investment Manager focuses on capital growth, but the Company has either maintained or increased its ordinary dividends for the past 30 years. When an exceptionally high payment is received from an investee company, the Company occasionally pays a special dividend. The Board would expect in future years at least to maintain the level of ordinary dividends.

DISCOUNTS
AND BUY-BACKS

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.

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

gEARING

The Company is geared by its Debenture Stock and also by Loan Notes that were issued in January 2016. A further issue of Loan Notes was announced after the financial year end and these were issued on 1 November 2017.

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.

ACCOUNTS

The Company has net assets of £903.2m and gross investment income of £17.4m.

STRATEGIC REPORT / COMPANY PERFORMANCE

Net asset value (‘NAV’) per share on a total return basis increased by
18.8%
Benchmark1 index increased by
16.3%
Final dividend increased by 3.1% to
10.0p
Share price total return
18.7%

1 The lead benchmark is the MSCI All Country World ex-US Index.

Look-through country exposure

Hover over areas of the world

Look through country exposure for LATIN AMERICA, AFRICA AND EMERGING EUROPE

7.8%

Look through country exposure for United Kingdom

1.1%

Look through country exposure for ASIA

17.4

Look through country exposure for Japan

18.0

Look through country exposure for Europe

32.0

Look through country exposure for north America

19.9

STRATEGIC REPORT / Chairman's statement

Investment Performance
Your Company delivered strong performance over the year, with a net asset value total return of 18.8%, which was 2.5 percentage points higher than the benchmark, the MSCI All Country World ex-US Index.”
Strone Macpherson
Chairman
VIEW full Chairman's statementd

Holdings in focus

% of total assets less current liabilities

6.6%

JAPANESE SPECIAL SOLUTIONS

The companies in this category are as follows:

Pasona Group
Tachi-S
Enplas
Hirano Tecseed
Nishimatsuya Chain
Nippon Road
Yamato Kogyo
Kato Sangyo

Toa
Takamatsu-Construction
Denyo
Matsui Construction
Daiwa Industries
Dai-Dan
Nakano

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% of total assets less current liabilities

4.7%

WENDEL/ Constantia Flexibles

Constantia Flexibles is one of the world’s leading manufacturers of flexible packaging and labels. The group supplies its products to numerous multinational corporations and local market leaders in the food, pet food, pharmaceuticals and beverage industries. In recent years the group has developed from a supplier with a strong European regional focus into a group which is active...

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% of total assets less current liabilities

3.8%

INVESTOR AB / ATLAS COPCO

Atlas Copco provides high quality compressors, industrial vacuum pumps, power tools and construction & mining equipment, as well as service plans, through its five business areas: Compressor Technique, Vacuum Technique, Industrial Technique, Construction Technique and Mining & Rock Excavation...

LEARN MOREd

STRATEGIC REPORT / Overview of strategy

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

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 or where pressure can be brought to bear to enact change to release value for shareholders.

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 16 of the Annual Report and the Company’s Investment Policy is set out on page 38.

key performance indicators ('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 include Net Asset Value Total Return, Discount to Net Asset Value and Value for Money.

Investment review / INVESTMENT MANGER'S REVIEW

Watch full Q&A
Over the financial year the total net asset value return was 18.8%.”
Joe Bauernfreund
Chief Investment Officer
VIEW INVESTMENT Manager's REVIEWd

STRATEGIC REPORT / TEN LARGEST EQUITY INVESTMENTS

The top ten equity investments make up 47.0% of total assets less current liabilities, with underlying businesses spread across a diverse range of sectors and regions.

1

Pargesa

Nature of business
Investment Holding Company
% of total assets less current liabilities
5.7%
Valuation
£55.5m
Discount
-32.8%
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2

Exor

Nature of business
Investment Holding Company
% of total assets less current liabilities
5.1%
Valuation
£50.1m
Discount
-29.4%
VIEW MORE ABOUT COMPANY d
3

Riverstone Energy

Nature of business
Investment Company
% of total assets less current liabilities
4.9%
Valuation
£47.4m
Discount
-17.7%
VIEW MORE ABOUT COMPANY d
4

Symphony International

Nature of business
Investment Company
% of total assets less current liabilities
4.8%
Valuation
£47.1m
Discount
-27.9%
VIEW MORE ABOUT COMPANY d
5

Wendel

Nature of business
Investment Holding Company
% of total assets less current liabilities
4.7%
Valuation
£45.5m
Discount
-27.1%
VIEW MORE ABOUT COMPANY d
6

JPEL Private Equity

Nature of business
Investment Company
% of total assets less current liabilities
4.6%
Valuation
£44.4m
Discount
-19.3%
VIEW MORE ABOUT COMPANY d
7

Jardine Strategic

Nature of business
Investment Holding Company
% of total assets less current liabilities
4.5%
Valuation
£43.8m
Discount
-23.5%
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8

Tetragon Financial

Nature of business
Investment Company
% of total assets less current liabilities
­4.5%
Valuation
£43.4m
Discount
-34.1%
VIEW MORE ABOUT COMPANY d
9

Adler Real Estate

Nature of business
Real Estate Company
% of total assets less current liabilities
4.3%
Valuation
£42.3m
Discount
-13.6%
VIEW MORE ABOUT COMPANY d
10

Pershing Square Holdings

Nature of business
Investment Company
% of total assets less current liabilities
3.9%
Valuation
£38.0m
Discount
-24.1%
VIEW MORE ABOUT COMPANY d

DOWNLOAD CENTRE

Strategic report

At a Glance / Download section

Company Performance / Download section

Chairman's Statement / Download section

Overview of Strategy / Download section

Ten Largest Equity Investments / Download section

Investment Portfolio / Download section

Investment REVIEW

Investment Managers' Q&A video / View video

Investment Managers' Review / Download section

Overview of AVI's Investment Philosophy / Download section

Performance Review / Download section

Portfolio Review / Download section

Outlook / Download section

Governance

Directors / Download section

Report of the Directors / Download section

Capital Structure / Download section

Financial Statements

Statement of Comprehensive Income / Download section

Statement of Changes in Equity / Download section

Balance Sheet / Download section

Statement of Cash Flows / Download section

Notes to the Financial Statements / Download section

AIFM Disclosures / Download section

Glossary / Download section

Report of the Audit Committee / Download section

Directors' Remuneration Policy / Download section

Report on Remuneration Implementation / Download section

Independent Auditor's Report / Download section

Shareholder Information

Notice of Annual General Meeting / Download section

Shareholder Information / Download section

Company Information / Download section