Annual Financial Report and Change of Year-End

Corporate Governance Report

 

On 18 December 2019, the Company became a member of the Association of Investment Companies ("AIC") and except as noted herein complies with the 2019 AIC Code of Corporate Governance issued in February 2019 ("the AIC Code"), effective for accounting periods commencing on or after 1 January 2019. By complying with the AIC Code, the Company is deemed to comply with both the UK Corporate Governance Code (July 2018) (the "UK Code") issued by the Financial Reporting Council ("FRC") and the Code of Corporate Governance issued by the Guernsey Financial Services Commission (the "GFSC Code").

                   

The Board considers that reporting against the principles and recommendations of the AIC Code provides appropriate information to shareholders and during the year the Board has reviewed its policies and procedures against the AIC Code.

 

The GFSC Code provides a governance framework for GFSC licensed entities, authorised and registered collective investment schemes. Companies reporting against the UK Code or the AIC Code are deemed to comply with the GFSC Code. The AIC Code is available in the AIC's website, www.theaic.co.uk.

 

For the year ended 30 June 2020, the Company has complied with the recommendations of the AIC Code and the relevant provisions of the UK Code, except for the following provisions relating to:

 

·      Senior Independent Director;

·      the need for an internal audit function;

·      the whistle blowing policy;

·      Remuneration Committee; and

·      Nomination Committee

 

The Board considers these provisions are not relevant given the nature, scale and lack of complexity of the Company and its legal and operating structure as a self-managed investment company. The Company has therefore not reported further in respect of these provisions. Details of compliance are noted below. The absence of an Internal Audit function is discussed in the Audit Committee Report.

 

The Directors are non-executive and the Company does not have any employees, hence no Chief Executive, Executive Directors' remuneration or whistle-blowing policy is required. The Board is satisfied that any relevant issues can be properly considered by the Board. Moreover, the Directors have satisfied themselves that the Company's service providers have appropriate whistle-blowing policies and procedures and have received confirmation from the service providers that nothing has arisen under those policies and procedures which should be brought to the attention of the Board.

 

Composition, Independence and Role of the Board

The Board currently comprises three non-executive Directors. Both Mr Scott and Mr Burke are considered by the Board to be independent of the Company's Investment Advisor. Mr Nixon is Founding Partner of the Investment Advisor and is therefore not independent.

 

Whilst Mr Nixon is not an independent director, the presence of two other directors who are independent and non-executive mitigates the risk of Mr Nixon acting in his own interest.

                           

Mr Scott was appointed Chairman on 28 March 2019. The Chairman of the Board must be independent for the purposes of Chapter 15 of the Listing Rules. Mr Scott is considered independent because he:

                        

·      has no current or historical employment with the Investment Advisor; and

·    has no current directorships in any other investment funds managed by the Investment Advisor.

 

The Board has overall responsibility for maximising the Company's success by directing and supervising the affairs of the business and meeting the appropriate interests of shareholders and relevant stakeholders, while enhancing the value of the Company and also ensuring protection of investors. A summary of the Board's responsibilities is as follows:

                        

·      statutory obligations and public disclosure;

·      strategic direction and financial reporting;

·      risk assessment and management including reporting compliance, governance, monitoring and control; and

·      other matters having a material effect on the Company.

                       

 

The Board is responsible to shareholders for the overall management of the Company.

 

The Board needs to ensure that the Annual Report and Financial Statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's performance, business model and strategy. In seeking to achieve this, the Directors have set out the Company's investment objective and policy and have explained how the Board and its delegated Committees operate and how the Directors review the risk environment within which the Company operates and set appropriate risk controls. Furthermore, throughout the Annual Report and Financial Statements the Board has sought to provide further information to enable shareholders to better understand the Company's business and financial performance.

 

The Board's responsibilities for the Annual Report are set out in the Directors' Responsibility Statement.

 

The Board is also responsible for issuing half yearly reports, NAV updates and other price sensitive public reports.

 

The Board does not consider it appropriate to appoint a Senior Independent Director. The Board believes it has a good balance of skills and experience to ensure it operates effectively. The Chairman is responsible for leadership of the Board and ensuring its effectiveness.

 

The Board has engaged external companies to undertake the investment advisory and administrative activities of the Company. Documented contractual arrangements are in place with these companies and these define the areas where the Board has delegated responsibility to them. The Board has adopted a schedule of matters specifically reserved for its decision-making and distinguishing these from matters it has delegated to the Company's key service providers.

 

The Company holds regular board meetings to discuss general management, structure, finance, corporate governance, marketing, risk management, compliance, asset allocation and gearing, contracts and performance. The quarterly Board meetings are the principal source of regular information for the Board enabling it to determine policy and to monitor performance, compliance and controls which are supplemented by communication and discussions throughout the year.

 

A representative each of the Investment Advisor and Administrator attends each Board meeting either in person or by telephone, thus enabling the Board fully to discuss and review the Company's operation and performance. Each Director has direct access to the Investment Advisor and Company Secretary and may at the expense of the Company seek independent professional advice on any matter.

 

Individual Directors may, at the expense of the Company, seek independent professional advice on any matter which concerns them in the furtherance of their duties. The Company maintains appropriate Directors' and Officers' liability insurance.

 

Conflicts of interest

Directors are required to disclose all actual and potential conflicts of interest as they arise for approval by the Board, who may impose restrictions or refuse to authorise conflicts. The process of consideration and, if appropriate, approval will be conducted only by those Directors with no material interest in the matter being considered. The Board maintains a Conflicts of Interest policy which is reviewed periodically and a Business Interests and Potential Conflicts of Interest register which is reviewed by the Board at each quarterly Board meeting.

 

Re-election

There are provisions in the Company's Articles of Incorporation which require Directors to seek re-election on a periodic basis. There is no limit on length of service, nor is there any upper age restriction on Directors. The Board considers that there is significant benefit to the Company arising from continuity and experience among directors, and accordingly does not intend to introduce restrictions based on age or tenure. It does, however, believe that shareholders should be given the opportunity to review membership of the Board on a regular basis.

 

The Board believes that, while regular rotation is in keeping with good governance, the unquestionable benefits of ensuring that there is some continuity mean that it is in the best interests of the Company that not all Directors offer themselves for re-election each year. The Company may terminate the appointment of a Director immediately on serving written notice and no compensation is payable upon termination of office as a director of the Company becoming effective.

 

In accordance with the Company's Articles of Association, at each AGM all Directors who held office at the two previous AGM's and did not retire shall retire from office and shall be available for re-election. Messrs Scott and Nixon will stand for re-election at this year's AGM. Further details regarding the experience of each of the Directors are set out within the Board of Directors section.

 

Board Diversity

The Board has also given careful consideration to the recommendation of the Davies Report on "Women on Boards" and notes the recommendations of the Parker review into ethnic diversity and the Hampton-Alexander review on gender balance in FTSE leadership. As recommended in the Davies Report, the Board has reviewed its composition. However, it believes that the current appointments provide an appropriate range of skills and experience and are in the interests of shareholders.

 

Board Evaluation and Succession Planning

The Board conducts an annual self-evaluation of its performance and that of the Company's individual Directors, which is led by the Chairman and, as regards the Chairman's performance evaluation, by the other Directors. The annual self-evaluation considers how the Board functions as a whole taking balance of skills, experience and length of service into consideration and also reviews the individual performance of its members.

 

To facilitate this annual self-evaluation, the Company Secretary circulates a detailed questionnaire to each Director and a separate questionnaire for the evaluation of the Chairman. The questionnaires, once completed, are returned to the Company Secretary who collates responses, prepares a summary and discusses the Board evaluation with the Chairman prior to circulation to the remaining Board members. The performance of the Chairman is evaluated by the other Directors. On occasions, the Board may seek to employ an independent third party to conduct a review of the Board.

 

The Board considers it has a breadth of experience relevant to the Company, and the Directors believe that any changes to the Board's composition can be managed without undue disruption. An induction programme has been prepared for any future Director appointments and all Directors receive other relevant training as necessary.

 

Board and Committee Meetings

The table below sets out the number of scheduled Board, Audit Committee and Management Engagement Committee meetings held during the year ended 30 June 2020 and, where appropriate, the number of such meetings attended by each Director who held office during the same period.

 

	Board of Directors		Audit Committee		Management Engagement Committee
	Scheduled	Attended	Scheduled	Attended	Scheduled	Attended
W. Scott (Chairman)	3	3	2	2	1	1
R. H. Burke	3	3	2	2	1	1
B. A. Nixon	3	3	2*	2*	1*	1*
*In attendance by invitation

 

In addition to the scheduled quarterly Board meetings, the Board, or committees thereof, held six ad hoc meetings which were required in connection with the capital raise and to deal with certain other matters of an administrative nature.  In normal circumstances the Board intends to meet not less than four times per year on a quarterly basis in addition to such ad hoc meetings as may be necessary.

 

Audit Committee

The Company has established an Audit Committee with formal duties and responsibilities. The Audit Committee meets formally at least twice a year and each meeting is attended by the independent external auditor and Administrator. The Company's Audit Committee is comprised of Mr Burke and Mr Scott. Mr Nixon was a member from his appointment as a director on 23 January 2019 until 31 May 2019 when Worsley Associates was appointed Investment Advisor. At the invitation of the Audit Committee, Mr. Nixon may attend meetings of the committee. With effect from the 29 March 2019, the Audit Committee was chaired by Mr Burke.

 

The Audit Committee monitors the performance of the auditor, and also examines the remuneration and engagement of the auditor, as well as its independence and any non-audit services provided by it.  The report of the Audit Committee details its responsibilities and its key activities.

 

Risk Committee

The Company established a Risk Committee on 26 February 2020 with formal duties and responsibilities. The Risk Committee will meet formally at least twice a year. The Risk Committee is comprised of the entire Board and is chaired by Mr Scott. The principal function of the Risk Committee is to identify, assess, monitor and, where possible, oversee the management of risks to which the Company's investments are exposed, with regular reporting to the Board. The Directors have appointed the Risk Committee to manage the additional risks faced by the Company as well as the relevant disclosures to be made to investors and the necessary regulators.

 

The Risk Committee will review the robustness of the Company's risk management processes, the integrity of the Company's system of internal controls and risk management systems, and the identification and management of risks through the use of the Company's risk matrix. The Risk Committee reviews the principal, emerging, and other risks relevant to the Company.

The Risk Committee will report on the internal controls and risk management systems to the Board of Directors. The Board of Directors is responsible for establishing the system of internal controls relevant to the Company and for reviewing the effectiveness of those systems. The review of internal controls is an on-going process for identifying and evaluating the risks faced by the Company, designed to effectively manage rather than eliminate business risks to ensure the Board's ability to achieve the Company's business objectives.

It is the responsibility of the Board to undertake the risk assessment and review of the internal controls in the context of the Company's objectives in relation to business strategy, and the operational, compliance and financial risks facing the Company. These controls are operated in the Company's main service providers: the Investment Advisor and Administrator. The Board will receive regular updates and will undertake an annual review of each service provider.

The Board of Directors considers the arrangements for the provision of Investment Advisor and Administration services to the Company and as part of the annual review the Board considered the quality of the personnel assigned to handle the Company's affairs, the investment process and the results achieved to date.

The Board is satisfied that each service provider has effective controls in place to control the risks associated with the services that they are contracted to provide to the Company and therefore the Board is satisfied with the internal controls of the Company.

 

Management Engagement Committee

The Company has established a Management Engagement Committee with formal duties and responsibilities. The Management Engagement Committee meets formally at least once a year. The Management Engagement Committee is comprised of Mr Burke and Mr Scott. The principal function of the Management Engagement Committee is to ensure that the Company's investment advisory arrangements are competitive and reasonable for the shareholders, along with the Company's agreements with all other third party service providers (other than the external auditor).

 

During the year the Management Engagement Committee has reviewed the services provided by the Investment Advisor and other service providers, and recommended that the continuing appointments of the Company's service providers was in the best interests of the Company. The Management Engagement Committee was chaired by Mr Scott.

 

Nomination Committee

The Board does not have a separate Nomination Committee. The Board as a whole fulfils the function of a Nomination Committee. Any proposal for a new Director will be discussed and approved by the Board, giving full consideration to succession planning and the leadership needs of the Company.

 

Remuneration Committee

In view of its non-executive nature, the Board considers that it is not appropriate for there to be a separate Remuneration Committee, as anticipated by the AIC Code, because this function is carried out as part of the regular Board business. A Remuneration Report prepared by the Board is contained in the Financial Statements.

 

Terms of Reference

All Terms of Reference for Committees are available from the Administrator upon request.

 

Internal Controls

The Board is ultimately responsible for establishing and maintaining the Company's system of internal controls and for maintaining and reviewing its effectiveness. The system of internal controls is designed to manage rather than to eliminate the risk of failure to achieve business objectives and by its nature can only provide reasonable and not absolute assurance against misstatement and loss. These controls aim to ensure that assets of the Company are safeguarded, proper accounting records are maintained and the financial information for publication is reliable.

 

The Board has delegated the day to day management of the Company's investment portfolio and the administration, registrar and corporate secretarial functions including the independent calculation of the Company's NAV and the production of the Annual Report and Financial Statements, which are independently audited. Whilst the Board delegates responsibility, it retains accountability for the functions it delegates and is responsible for the systems of internal control.

 

Formal contractual agreements have been put in place between the Company and providers of these services. On an ongoing basis, board reports are provided at each quarterly board meeting from the Investment Advisor, Administrator and Company Secretary and Registrar; and a representative from the Investment Advisor is asked to attend these meetings.

 

In accordance with Listing Rule 15.6.2 (2) R the Directors formally appraise the performance and resources of the Investment Advisor on an annual basis. In the opinion of the Directors their continuing appointment of the Investment Advisor on the terms agreed is in the interests of the Company and the shareholders.

 

The Investment Advisor was appointed on 31 May 2019.

 

The Board has reviewed the need for an internal audit function and owing to the size of the Company and the delegation of day-to-day operations to regulated service providers, an internal audit function is not considered necessary. The Directors will continue to monitor the systems of internal controls in place in order to provide assurance that they operate as intended.

 

Principal Risks and Uncertainties

In respect of the Company's system of internal controls and its effectiveness, the Directors:

·       are satisfied that they have carried out a robust assessment of the emerging and principal risks facing the Group, including those that would threaten its business model, future performance, solvency or liquidity; and

·       have reviewed the effectiveness of the risk management and internal control systems including material financial, operational and compliance controls (including those relating to the financial reporting process) and no significant failings or weaknesses were identified.

The principal risks and uncertainties which have been identified and the steps which are taken by the Board to mitigate them are as follows:

 

Investment Risks

The Company is exposed to the risk that its investment portfolio and the remaining investment property fail to perform in line with the Company's objectives. The Company is exposed to the risk that markets move adversely, or the remaining property asset is disposed of inappropriately. The Board reviews reports from the Investment Advisor at each quarterly Board meeting and at other times when expedient, paying particular attention to the diversification of the portfolio and to the performance and volatility of underlying investments.

 

Operational Risks

The Company is exposed to the risk arising from any failures of systems and controls in the operations of the Investment Advisor, Administrator and the Corporate Broker. The Board and its Committees regularly review reports from the Investment Advisor and the Administrator on their internal controls.

 

Accounting, Legal and Regulatory Risks

The Company is exposed to the risk that it may fail to maintain accurate accounting records, fail to comply with requirements of its Prospectus or fail to adapt its processes to changes in law or regulations. The accounting records prepared by the relevant service providers are reviewed by the Investment Advisor. The Administrator, Corporate Broker and Investment Advisor provide regular updates to the Board on compliance with the Prospectus and any changes in regulation.

 

Financial Risks

The financial risks, including market, credit, liquidity and interest rate risk faced by the Company are set out in note 14 of the Financial Statements. These risks and the controls in place to reduce the risks are reviewed at the quarterly Board meetings.

 

Foreign Exchange Risk

The Company is exposed to currency risk given that the assets of its subsidiaries are predominantly denominated in Euro but the presentation currency of the Company is Pounds sterling. The Investment Advisor reports at least quarterly to the Board on the strategy for managing this risk. Although the Company has the ability to hedge this risk, it has not to date chosen to do so and has no plans to make such arrangements.

 

COVID-19

The COVID-19 pandemic has presented a significant emerging risk to the global economy and financial markets and resulted in an unprecedented level of market volatility and disruption earlier this year. The impact of the pandemic is discussed further in the Chairman's statement, the Investment Advisor's report and the report of the Audit Committee.

 

The Board seeks to mitigate and manage these risks through ongoing review, policy-setting and enforcement of contractual obligations and monitoring of the Company's investment portfolio. The Board, Investment Advisor and the Corporate Broker also continually monitor the investment environment in order to identify any new or emerging risks.

 

Emerging Risks

The Board is alert to the identification of any new or emerging risks through the ongoing monitoring of the Company's investment portfolio and by conducting regular reviews of the Company's risk assessment matrix. Should an emerging risk be identified the risk assessment matrix is updated and appropriate mitigating measures and controls will be agreed.

 

Non-Audit Services Policy

The Company has adopted rules in relation to the engagement of the external auditor, BDO Limited, to perform non-audit services. As a Market Traded Company ("MTC"), since March 2020, the Company is classified as an EU/UK Public Interest Entity ("PIE"). Accordingly, the Audit Committee must consider whether or not the provision of such non-audit services is compatible with the list of permissible services under the FRC's UK Auditing Standards (the "Auditing Standards"):

 

·      in accordance with the Auditing Standards, the Company may not utilise external auditors for internal audit purposes, secondments, valuation or tax advice or other services which are not included on the "white list" of permissible services, as amended from time to time by the FRC; and

·      the Directors must consider the actual, perceived and potential impact upon the independence of external audit prior to engaging external audit to undertake any non-audit service.

 

The Audit Committee will review the need for non-audit services and authorise such on a case by case basis and recommend an appropriate fee for such non-audit services to the board of directors of the Company.

 

The Board will consider the actual, perceived and potential impact upon the independence of external auditors prior to engaging external auditors to undertake any non-audit service, as well as confirming that any non-audit services are included on the list of permissible services, as amended from time to time by the FRC.

 

During the year, BDO LLP (UK) provided service in relation to the capital raise. The Board considered the potential impact upon the independence of external auditors prior to the engagement. The Board believe this engagement did not materially impact the independence of the external audit as BDO LLP (UK) is a separate legal entity and does not provide any resources in relation to the external audit work.

 

The Board reserves the right to review the policy periodically and, if required, amend it to ensure that the policy is compliant with all applicable law and regulation and best practice.

 

Relations with Shareholders

The Board welcomes shareholders' views and places great importance on communication with its shareholders. The Board receives regular reports on the views of shareholders and the Chairman and other Directors are available to meet shareholders if required. The Investment Advisor meets with major shareholders on a regular basis and reports to the Board on these meetings. Issues of concern can be addressed by any shareholder in writing to the Company at its registered address. The AGM of the Company provides a forum for shareholders to meet and discuss issues with the Directors and Investment Advisor of the Company. In addition, the Company maintains a website (www.worsleyinvestors.com) which contains comprehensive information, including regulatory announcements, share price information, financial reports, investment objectives and strategy and investor contacts.

 

Promotion of the success of the Company

The Board acts in a manner which is considered to be:

 

·      in good faith;

·      likely to promote the continuing success of the Company; and

·      to the benefit of its shareholders as a whole.

 

 

Whilst the primary duty of the Directors is owed to the Company, the Board considers as part of its discussions and decision making process the interests of all stakeholders.

 

The Board is committed to maintaining high standards of corporate governance and accountability.

 

As an investment company, the Company does not have any employees and conducts its core operations through third party service providers. Each provider has an established track record and, through regulatory oversight and control, is required to have in place suitable policies to ensure it maintains high standards of business conduct, treat customers fairly, and employ corporate governance best practice.

 

Particular consideration is given to the continued alignment between the activities of the Company and those which contribute to delivering the Board's strategy, which include the Investment Advisor, the Corporate Broker and the Administrator.

 

The Board respects and welcomes the views of all stakeholders. Any queries or areas of concern regarding the Company's operations can be raised with the Company Secretary.

 

Signed on behalf of the Board by:

 

W. Scott                               

Chairman                                            

02 October 2020                               

Audit Committee Report

 

Dear Shareholders,

 

I am pleased to present the Audit Committee's Report for the year ended 30 June 2020, which covers the following topics:

                                                                            

·      Responsibilities of the Audit Committee and its key activities during the year,

·      Financial reporting and significant areas of judgement and estimation,

·      Independence and effectiveness of the external auditor, and

·      Internal control and risk management systems.

                                                                                                                

The Company is currently undergoing a transition period. The Audit Committee's activities during the year have therefore concentrated on maintaining an appropriate risk and control environment, providing suitable disclosure of progress and residual risks in the Financial Statements, ensuring ongoing engagement from service providers and keeping sufficient liquid funds to meet expenditure for essential or justified items.

 

Responsibilities

The Audit Committee reviews and recommends to the Board for approval or otherwise, the Financial Statements of the Company and is the forum through which the independent external auditor reports to the Board of Directors. The independent external auditor and the Audit Committee will meet together without representatives of either the Administrator or Investment Advisor being present if either considers this to be necessary.

 

The responsibilities of the Audit Committee include:

1.     Monitoring the integrity of the Financial Statements of the Company covering:

           

·      formal announcements relating to the Company's financial performance;

·      significant financial reporting issues and judgements;

·      matters raised by the external auditors; and

·      appropriateness of accounting policies and practices.

        

2.     Reviewing and considering the AIC Code and FRC Guidance on Audit Committees.

 

3.     Monitoring the quality and effectiveness of the independent external auditor, which includes:

 

·      meeting regularly to discuss the audit plan and the subsequent findings;

·      considering the level of fees for both audit and non-audit work;

·      reviewing independence, objectivity, expertise, resources and qualification; and

·      making recommendations to the Board on the appointment, reappointment, replacement and remuneration.

 

4.     Reviewing the Company's procedures for prevention, detection and reporting of fraud, bribery and corruption, and

 

5.     Monitoring and reviewing the internal control and risk management systems of the service providers together with the need for a Company Internal Audit function.

                           

The Audit Committee's full terms of reference can be obtained by contacting the Company's Administrator.

 

Financial Reporting

The Audit Committee's review of the Audited Annual Report and Financial Statements focused on the following significant risks;

 

Valuation of Investment Property

The Company's sole remaining investment property was independently valued at £8.70 million (€9.60 million) as at 30 June 2020 (30 June 2019: £8.78 million (€9.80 million)) and represented the majority of the total assets of the Group. The remaining investment property comprises a cinema complex in Curno, Italy, owned via an intermediate holding company. The valuation of this investment is in accordance with the requirements of IFRS as issued by the International Accounting Standards Board. The valuation estimate is provided by Knight Frank LLP, an external independent valuer. The Audit Committee considers the fair value of the sole remaining investment property held by the Group as at 30 June 2020 to be reasonable based on information provided by the Investment Advisor and Administrator. All valuations are also subject to review and oversight by the Investment Advisor.

 

The valuation report received from the independent valuer included a 'Material Valuation Uncertainty' paragraph in relation to the market risks linked to the COVID-19 pandemic: this paragraph explains that valuer has attached less weight to previous market evidence for comparison purposes to achieve an informed opinion on value. The valuer therefore recommends that a higher degree of caution should be attached to this valuation compared to valuations carried out under normal circumstances.

 

Valuation of investments

The Company's non-property investments had a fair value of £1.68 million as at 30 June 2020 (30 June 2019: nil). The investments are all listed. The Committee considered the fair value of the investments held by the Company as at 30 June 2020 to be reasonable based on information provided by the Investment Advisor and Administrator. All prices are confirmed to independent pricing sources as at 30 June 2020 by the Administrator and are subject to a review process at the Administrator and oversight at the Investment Advisor. We also note the work of the independent Auditor on these balances as set out in their report.

 

Audit Findings Report

The independent external auditor reported to the Audit Committee that no material unadjusted misstatements were found in the course of their work. Furthermore, the Investment Advisor and Administrator confirmed to the Audit Committee that they were not aware of any material unadjusted misstatements including matters relating to the Financial Statements presentation.

 

Accounting Policies & Practices

The Audit Committee has assessed the appropriateness of the accounting policies and practices adopted by the Group together with the clarity of disclosures included in the Financial Statements. Following a review of the presentations and reports from the Administrator and consulting where necessary with the independent external auditor, the Audit Committee is satisfied that the Financial Statements appropriately address the critical judgements and key estimates (both in respect to the amounts reported and the disclosures). It is also satisfied that the significant assumptions used for determining the value of assets and liabilities have been appropriately scrutinised, challenged and are sufficiently robust.

 

The Audit Committee advised the Board that this Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable.

 

Fraud, Bribery and Corruption

The Audit Committee continues to monitor the fraud, bribery and corruption policies of the Group. The Board receives a confirmation from all service providers that there have been no instances of fraud or bribery.

 

The Independent External Auditor

BDO Limited served as the Company's Independent Auditor throughout the year and have indicated their willingness to continue in office. 

 

The independence and objectivity of the external auditor is reviewed by the Audit Committee, which also reviews the terms under which the independent external auditor is appointed to perform non-audit services. The Audit Committee has established pre-approval policies and procedures for the engagement of the auditor to provide audit, assurance and tax services. The principles on which these are based are that the external auditor may not provide a service which:

 

·      places them in a position to audit their own work

·      creates a mutuality of interest

·      results in the external auditor developing close relationships with service providers of the Company

·      results in the external auditor functioning as a manager or employee of the Company

·      puts the external auditor in the role of advocate of the Company

 

As a general rule, the Company does not utilise external auditors for internal audit work, secondments or valuation advice. Services which are in the nature of audit, such as tax compliance, tax structuring, accounting advice, quarterly reviews and disclosure advice are normally permitted but are subject to prior approval by the Audit Committee.

 

The following table summarises the remuneration payable to BDO Limited for audit and non-audit services provided to the Company during the years ended 30 June 2020 and 30 June 2019.

                                                                                                                                                                          

		30 June 2020	30 June 2019
		£	£
Statutory audit		35,000	40,000
Total fees		35,000	40,000

 

The following table summarises the remuneration payable to BDO Italia S.p.A for audit and non-audit services provided to the Group during the years ended 30 June 2020 and 30 June 2019.

 

		30 June 2020	30 June 2019
		€	€
Statutory audit of subsidiary		8,000	-
Total fees		8,000	-

 

The following table summarises the remuneration payable to BDO LLP (UK) for audit and non-audit services provided to the Group during the years ended 30 June 2020 and 30 June 2019.

 

		30 June 2020	30 June 2019
		£	£
Professional services in relation to the capital raise		32,500	-
Total fees		32,500	-

Performance and Effectiveness

During the year, when considering the effectiveness of the independent external auditor, the Audit Committee has taken into account the following factors:

 

·      the audit plan presented to them before the audit;

·      changes in audit personnel;

·      the post audit findings report;

·      the independent external auditor's own internal procedures to identify threats to independence; and

·      feedback received from both the Investment Advisor and Administrator.

 

The Audit Committee reviewed and, where appropriate, challenged the audit plan and the audit findings report of the independent external auditor and concluded that the audit plan sufficiently identified audit risks and that the audit findings report indicated that the audit risks were sufficiently addressed with no significant variations from the audit plan. The Audit Committee considered reports from the independent external auditor on their procedures to identify threats to independence and concluded that the procedures were sufficient.

 

Appointment of External Auditor

Consequent to this review process, the Audit Committee recommended to the Board that a resolution be put to the next AGM to confirm the reappointment of BDO Limited as independent external auditor.

 

 

Internal Control and Risk Management Systems

The Board of Directors considers the arrangements for the provision of Investment Advisory, Investment Management, Administration and Custody services to the Company on an on-going basis and a formal review is conducted annually. As part of this review the Board considered the quality of the personnel assigned to handle the Company's affairs, the investment process and the results achieved to date.

 

The Audit Committee has reviewed the need for an internal audit function and has decided that the system and procedures employed by the Investment Advisor and the Administrator's internal audit function provide sufficient assurance that a sound system of internal control, which safeguards the Company's assets, is maintained. An internal audit function specific to the Group is therefore considered unnecessary.

 

In finalising the Financial Statements for recommendation to the Board for approval, the Audit Committee has satisfied itself that the Financial Statements taken as a whole are fair, balanced and understandable, and provide the information necessary for shareholders to assess the Company's performance, business model and strategy.

 

A member of the Audit Committee will continue to be available at each AGM to respond to any shareholder questions on the activities of the Audit Committee.

 

 

 

 

R. H. Burke,

Chairman, Audit Committee

02 October 2020

Directors' Remuneration Report

 

Introduction

An ordinary resolution for the approval of the Director's Remuneration Report will be put to the shareholders at the forthcoming AGM held.

 

Remuneration Policy

All Directors are non-executive and a Remuneration Committee has not been established. The Board as a whole considers matters relating to the Directors' remuneration. No advice or services were provided by any external person in respect of its consideration of the Directors' remuneration.

 

The Company's policy is that the fees payable to the Directors should reflect the time spent by the Directors on the Company's affairs and the responsibilities borne by the Directors and be sufficient to attract, retain and motivate directors of a quality required to run the Company successfully. The Chairman of the Board is paid a higher fee in recognition of his additional responsibilities. The policy is to review fee rates periodically, although such a review will not necessarily result in any changes to the rates, and account is taken of fees paid to directors of comparable companies. The Directors of the Company are remunerated for their services at such a rate as the Directors determine provided that the aggregate amount of such fees does not exceed £120,000 per annum.

 

There are no long-term incentive schemes provided by the Company and no performance fees are paid to Directors.

 

None of the Directors has a service contract with the Company but each of the Directors is appointed by a letter of appointment which sets out the main terms of their appointment. Directors hold office until they retire by rotation or cease to be a director in accordance with the Articles of Incorporation, by operation of law or until they resign.

 

Remuneration

Directors are remunerated in the form of fees, payable quarterly in arrears, to the Director personally. No Directors have been paid additional remuneration outside their normal Directors' fees and expenses.

 

The current annual Directors' fees comprise £20,000 per annum payable to the Chairman and £15,000 per annum payable to the other Directors.

 

Upon appointment of Worsley as Investment Advisor on 31 May 2019, Mr Nixon waived any future Director's fee for as long as he is a member of the Investment Advisor.

 

For the years ended 30 June 2020 and 30 June 2019 Directors' fees incurred were as follows:

 

		30 June 2020	30 June 2019
		£	£
W. Scott (Chairman, appointed on 28 March 2019)		20,000	5,205
B.A. Nixon (appointed on 23 January 2019)		-	4,500
R. H. Burke (appointed on 28 March 2019)		15,000	3,905
C. J. Hunter (resigned on 28 December 2018)		-	9,000
G. J. Farrell (resigned on 28 March 2019)		-	10,125
S. C. Monier (resigned on 28 December 2018)		-	6,750
S. J. Lawson (resigned on 28 March 2019)		-	10,125
		35,000	49,610

 

The directors of the subsidiaries of the Group received emoluments amounting to £12,589 (30 June 2019: £16,312). Total fees paid to Directors and directors of the subsidiaries were £47,589 (30 June 2019: £65,922).

 

 

Signed on behalf of the Board by:

 

 

 

W. Scott                                              

Director                                               

02 October 2020                                

 

Independent Auditor's Report to the Members of Worsley Investors Limited

Opinion

We have audited the financial statements of Worsley Investors Limited ("the Parent Company") and its subsidiaries (the "Group") for the year ended 30 June 2020 which comprise the Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity, the Consolidated Statement of Financial Position, the Consolidated Statement of Cash Flows, and notes to the financial statements, including a summary of significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRS's) as issued by the International Accounting Standards Board.

 

In our opinion, the financial statements:

 

·      give a true and fair view of the state of the Group's affairs as at 30 June 2020 and of its loss for the year then ended;

 

·      have been properly prepared in accordance with IFRS's; and

 

·      have been properly prepared in accordance with the requirements of the Companies (Guernsey) Law, 2008.

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 Parent Company in accordance with the ethical requirements relevant to our audit of the financial statements in the UK, including the FRC's Ethical Standard as applied to listed entities and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Conclusions relating to emerging and principal risks, going concern and viability statement

We have nothing to report in respect of the following information within the annual report, in relation to which the ISAs (UK) require us to report to you whether we have anything material to add or draw attention to:

 

·      the directors' confirmation in the annual report that they have carried out a robust assessment of the Group's emerging and principal risks and the disclosures in the annual report that describe the principal risks and the procedures in place to identify emerging risks and explain how they are being managed or mitigated;

 

·      the directors' statement in the financial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements and the directors' identification of any material uncertainties to the Group's ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;

 

·      whether the directors' statement relating to going concern required under the Listing Rules in accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our knowledge obtained in the audit; or

 

·      the directors' explanation in the annual report as to how they have assessed the prospects of the Group, over what period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

 

Key Audit Matter

How we addressed the Key audit matter in our audit

Valuation of investment property   Refer to the Audit Committee Report, accounting policies 2(d) and 2(l) and the disclosure note 7)   The group holds a single investment property which is fair valued and represents 67% of the group's net asset value.   The fair value has been determined by the Directors based on an independent Royal Institution of Chartered Surveyors "RICS" valuation performed by independent valuers, Knight Frank LLP.   Such property valuations are a highly subjective area as it requires the valuer to make judgements as to property yields, quality of tenants and other variables to arrive at the current fair value of the property.   Such subjectivity and judgements are greater this year due to the Covid‑19 pandemic and we were expecting the valuer to include 'Material Uncertainty' paragraphs within their valuation report.   Any input inaccuracies or unreasonable bases used in the valuation judgements (such as in respect of the estimated rental value and yield profile applied) could result in a material misstatement in the consolidated financial statements.

Independent valuations   For the independent property valuation, we evaluated the competence and independence of the external valuer, which included consideration of their qualifications and expertise. We read the terms of their engagement with the group to determine whether there were any matters that might have affected their objectivity or may have imposed scope limitations upon their work.   We have read the valuation report for the property, noted the material uncertainty clauses inserted as a result of the impact of Covid-19 on the property markets, discussed the basis of the property valuation, including the Covid-19 impact, with the valuer to understand the process undertaken by them and confirmed that the valuation was prepared in accordance with professional valuation standards and IFRS.   We considered the reasonableness of the inputs used by the valuer in the valuation, such as the rental terms and other assumptions that impact the value. This included discussions with and challenge of the valuer around the Covid-19 impact, the resulting adjustments to yields and overall consideration of the resulting valuation in light of Covid-19. In addition, we agreed a sample of the significant inputs into the valuation, such as the rental details, to supporting documentation.   Disclosures   We reviewed and challenged the disclosures in relation to property valuations within note 2(d), 2(l) and in particular note 7 (sensitivities) given the 'Material Uncertainty' paragraphs within the valuations reports.   Key observation   We draw attention to the valuers inclusion of a material uncertainty over the valuation as a result of Covid-19 as detailed in note 2(d).   From the procedures performed, we have not identified any material misstatements in the investment property valuation amounts reported in these financial statements.

 

Key Audit Matter

How we addressed the Key audit matter in our audit

Valuation and existence of Listed Investments   Refer the Audit Committee Report, accounting policies 2(d) and 2(p) and the disclosure note 8)   The investment portfolio as at 30 June 2020 comprised listed investments whose price is readily available.   We focused on the valuation and existence of investments because investments represent a principal element of the net asset value as disclosed in the Statement of Financial Position in the financial statements as well as being the principle activity of the group going forward.

Listed investments   For all of the listed investments, we agreed the existence of the investment portfolio holdings to the respective custodian confirmation which we independently obtained.   We tested the valuation of all listed investments by agreeing the priced used in the valuation to independent third-party sources.   Key observation   Based on the procedures performed we are satisfied that the investment valuations and existence is appropriate.

Our application of materiality

We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. We consider materiality to be the magnitude by which misstatements, including omissions, could influence the economic decision of reasonable users that are taken on the basis of the financial statements. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

Based on our professional judgement, we determined materiality for the financial statements as a whole to be £195,000 (£150,000) which is based on a level of 1.5% (2019: 1.5%) of total assets. We considered total assets to be the most appropriate benchmark due to the Group being an asset holding Group with no external borrowings and which is no longer in an active wind down process.

In order to reduce to an appropriately low level the probability that any misstatements exceed materiality, we use a lower materiality level, performance materiality, to determine the extent of testing needed. Importantly, misstatements below these levels will not necessarily be evaluated as immaterial as we also take account of the nature of identified misstatements, and the particular circumstances of their occurrence, when evaluating their effect on the financial statements as a whole.

This performance materiality has been set at £136,500 (£90,000) which is 70% (2019: 60%) of materiality. This has been set based upon the control environment in place, the directors' assessment of risk and this being our second year of audit.

We agreed with the Audit Committee that we would report to the committee all individual audit differences identified during the course of our audit in excess of £5,850 (2019: £4,500). We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds.

An overview of the scope of our audit

We tailored the scope of our audit taking into account the nature of the Group's investments, involvement of the Group's service providers, the accounting and reporting environment and the industry in which the Group operates.

This assessment took into account the likelihood, nature and potential magnitude of any potential misstatement. As part of this risk assessment we considered the Group's interaction with the service providers. We assessed the control environment in place within the Group to the extent that it was relevant to our audit. Following this assessment, taking into consideration materiality, we applied professional judgement to determine the extent of testing required over each balance in the financial statements.

As the Group's annual report does not include financial statements for the standalone Parent Company we concluded that the most effective audit approach for the Group was to audit the consolidated financial statements as if the Group was one entity.

Other information

The Directors are responsible for the other information. The other information comprises the information included in the annual report and consolidated financial statements, 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.

 

In this context, we also have nothing to report in regard to our responsibility to specifically address  the following items in the other information and to report as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:

 

• Fair, balanced and understandable- the statement given by the directors that they consider the annual report and financial statements taken as a whole is fair, balanced and understandable and provides the information necessary for shareholders to assess the Group's position, performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or

 

• Audit committee reporting- the section describing the work of the audit committee does not appropriately address matters communicated by us to the audit committee; or

 

• Directors' statement of compliance with the UK Corporate Governance Code - the parts of the Directors' statement required under the Listing Rules relating to the Company's compliance with the UK Corporate Governance Code containing provisions specified for review by the auditor in accordance with Listing Rule 9.8.10R(2) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code.

 

Matters on which we are required to report by exception

 

We have nothing to report in respect of the following matters where the Companies (Guernsey) Law, 2008 requires us to report to you if, in our opinion:

 

·      proper accounting records have not been kept by the Parent Company; or

 

·      the Parent Company financial statements are not in agreement with the accounting records; or

 

·      we have failed to obtain all the information and explanations which, to the best of our knowledge and belief, are necessary for the purposes of our audit.

 

Responsibilities of Directors

 

As explained more fully in the Directors' Responsibilities statement within the Report of the Directors, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view and for such internal control as the Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

 

In preparing the financial statements, the Directors are responsible for assessing the Group'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 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 on 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 Parent Company's members, as a body, in accordance with Section 262 of the Companies (Guernsey) Law, 2008. Our audit work has been undertaken so that we might state to the Parent 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 Parent Company and the Parent Company's members, as a body, for our audit work, for this report, or for the opinions we have formed.

 

 

 

 

Justin Marc Hallett

For and on behalf of BDO Limited

Chartered Accountants and Recognised Auditor

Place du Pré

Rue du Pré

St Peter Port

Guernsey

 

02 October 2020

 

 

 

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2020

 

 

					For the year ended		For the year ended
					30 June 2020		30 June 2019
				Notes	£000s		£000s
		Gross property income		4 & 7	725		727
		Property operating expenses		4	(147)		(151)
Net property income					578		576
		Other income			5		-
		Net gain on investments at fair value through profit or loss		8	85		-
		Loss on disposals of a subsidiary and investment property			-		(53)
		Unrealised (loss)/gain on investment property		7	(175)		799
		Lease incentive movement		4	(248)		(301)
		General and administrative expenses		5	(585)		(827)
Operating (loss)/profit					(340)		194
		Foreign exchange loss			-		(29)
		Share in loss of joint venture			-		(10)
(Loss)/profit before tax					(340)		155
Income tax expense				11	(79)		(50)
(Loss)/profit for the year					(419)		105
Other comprehensive income
	Foreign exchange translation gain				122		41
Total items that are or may be reclassified to profit or loss					122		41
Total comprehensive (loss)/income for the year					(297)		146
Basic and diluted (loss)/income per ordinary share (pence)				6	(1.71)		0.47

 

 

 

 

The accompanying notes form an integral part of these Financial Statements

 

Consolidated Statement of Changes in Equity

For the year ended 30 June 2020

 

		Revenue reserve	Distributable reserve	Foreign currency reserve	Total equity
	Note	£000s	£000s	£000s	£000s
Balance at 1 July 2019		(46,210)	43,653	12,134	9,577
Share issue	12	-	3,895	-	3,895
Share issue costs	12	-	(285)	-	(285)
Loss for the year		(419)	-	-	(419)
Other comprehensive income		-	-	122	122
Balance at 30 June 2020		(46,629)	47,263	12,256	12,890

 

 

 

For the year ended 30 June 2019

   

 

		Revenue reserve	Distributable reserve	Foreign currency reserve	Total equity
	Note	£000s	£000s	£000s	£000s
Balance at 1 July 2018		(46,315)	44,853	12,093	10,631
Share redemptions	12	-	(1,200)	-	(1,200)
Profit for the year		105	-	-	105
Other comprehensive income		-	-	41	41
Balance at 30 June 2019		(46,210)	43,653	12,134	9,577

 

 

 

 

The accompanying notes form an integral part of these Financial Statements

 

Consolidated Statement of Financial Position

As at 30 June 2020

 

			30 June 2020		30 June 2019
		Notes	£000s		£000s
Non-current assets
	Investment property	4 & 7	8,135		8,476
Current assets
	Cash and cash equivalents		2,632		793
	Investments held at fair value through profit or loss	8	1,684		-
	Trade and other receivables	9	100		162
	Lease incentive	4 & 7	561		301
	Tax receivable		130		96
Total assets			13,242		9,828
Non-current liabilities
	Provisions		46		45
Current liabilities
	Trade and other payables	10	205		172
	Tax payable		101		34
Total liabilities			352		251
Total net assets			12,890		9,577
Equity
	Revenue reserve	15	(46,629)		(46,210)
	Distributable reserve	15	47,263		43,653
	Foreign currency reserve	15	12,256		12,134
Total equity			12,890		9,577
Number of ordinary shares		12	33,740,929		20,758,441
Net asset value per ordinary share (pence)		13	38.20		46.14

 

The Consolidated Financial Statements were approved by the Board of Directors and authorised for issue on 02 October 2020. They were signed on its behalf by:-

 

 

 

 

                                                                               

W. Scott                                                               

Director                                                 

 

 

 

The accompanying notes form an integral part of these Financial Statements

 

Consolidated Statement of Cash Flows

For the year ended 30 June 2020

 

				Year ended		Year ended
				30 June 2020		30 June 2019
			Notes	£000s		£000s
Operating activities
	(Loss)/profit before tax			(340)		155
	Adjustments for:
	Unrealised loss/(gain) on investment property		7	175		(799)
	Net gains on investments held at fair value through profit or loss		8	(85)		-
	Dividend income		8	4		-
	Lease incentive movement		4 & 7	248		301
	Foreign exchange gain on investment property		7	(82)		(107)
	Share in loss of joint venture			-		10
	(Increase)/decrease in trade and other receivables			(193)		13
	Increase/(decrease) in provisions			1		(164)
	Increase/(decrease) in trade and other payables			34		(310)
	Foreign exchange loss			-		29
	Return of capital from joint ventures			-		155
	Purchase of investments held at fair value through profit or loss		8	(1,633)		-
	Sale of investments held at fair value through profit or loss		8	30		-
Net cash used in operations				(1,841)		(717)
	Tax paid			(52)		(622)
Net cash outflow from operating activities				(1,893)		(1,339)
Financing activities
	Redemption of shares		12	-		(1,200)
	Share issue		12	3,895		-
	Share issue cost		12	(285)		-
Net cash from/(used) in financing activities				3,610		(1,200)
	Effects of exchange rate fluctuations			122		34
Increase/(decrease) in cash and cash equivalents				1,839		(2,505)
	Cash and cash equivalents at start of the year			793		3,298
Cash and cash equivalents at the year end				2,632		793

 

 

 

The accompanying notes form an integral part of these Financial Statements