Half-yearly Report
For immediate release
30 April 2014
To: City Editors
Finsbury Growth & Income Trust PLC
Announces Half Year Results for the six months to 31 March 2014
Financial Summary and Key Data
As at As at % Change
31 March 30 September
2014 2013
Share price 515.5p 479.0p +7.6
Net asset value per share 513.5p 476.1p +7.9
Premium of share price to net asset value 0.4% 0.6% -
per share (excluding income)
Gearing* 3.8% 3.6% -
Shareholders' funds £468.9m £395.8m +18.5
Number of shares in issue 91,310,212 83,136,557 +9.8
Six months One year to
to 30
31 March September
2014 2013
Share price (total return)# +9.0% +30.5%
Net asset value per share (total return)# +9.9% +31.6%
FTSE All-Share Index (total return) +4.8% +18.9%
(Company benchmark)#â€
Dividends per share Year ending Year ended
30 September 30 September
2014 2013
First interim dividend 5.1p 4.8p
Second interim dividend Yet to be 5.7p
declared
# Source - Morningstar
* See glossary
†Source - FTSE International Limited ("FTSE") © FTSE 2013*
This Announcement is not the Company's Half Year Report & Accounts. It is an
abridged version of the Company's full Half Year Report & Accounts for the six
months ended 31 March 2014. The full Half Year Report & Accounts will be sent
to shareholders on 6 May 2014. The full Half Year Report & Accounts, together
with a copy of this announcement, will also be available on the Company's
website: www.finsburygt.com
The Company's Half Year Report & Accounts for the six months ended 31 March
2014 has been submitted to the UK Listing Authority, and will shortly be
available for inspection on the National Storage Mechanism (NSM):
www.hemscott.com/nsm.do
For further information please contact: Victoria Hale, Frostrow Capital LLP 020
3170 8732
Chairman's Statement
"I am pleased to report that the Company's net asset value per share total
return of 9.9% and the share price total return of 9.0% have again both
substantially outperformed the Company's benchmark.."
Performance
Markets continued rising over the six month period to 31 March 2014 and the
Company's net asset value per share and share price have again both
substantially outperformed the Company's benchmark, the FTSE All-Share Index
(all measured over the period on a total return basis) as shown below:
• Growth in net asset value per share 9.9%
• Increase in share price 9.0%
• Increase in FTSE All-Share Index 4.8%
The principal contributors to the Company's net asset value performance were
Hargreaves Lansdown, London Stock Exchange and Fidessa. Further information on
the Company's portfolio can be found in our Investment Manager's Review.
During the period, the Company's shares have consistently traded close to net
asset value, beginning the period at a 0.6% premium to the Company's ex-income
net asset value per share and ending on a 0.4% premium.
Share Capital
As I reported at the year-end, due to the constant demand for your Company's
shares, we took the following actions:
•Three new block listing authorities were obtained from the UK Listing
Authority to enable shares to be issued as cost effectively as possible;
•a Prospectus was also published in order that the Company can continue to
issue shares in accordance with the Prospectus Directive; and
•shareholder authority to issue further shares equal to 10% of the Company's
issued share capital on a non-pre-emptive basis was renewed at the Company's
Annual General Meeting held in January 2014.
As at 31 March 2014 the Company had 91,310,212 shares of 25p each in issue (31
March 2013: 75,986,219). No shares had been held in treasury by the Company
since 26 May 2010. During the six months under review 8,173,655 new shares were
issued raising £41.0 million. Since the end of the half-year, to the date of
this report, a further 1,460,000 new shares have been issued raising £7.4
million. As at 30 April 2014, the Company had 92,770,212 shares in issue.
The Directors believe that the issuance of those new shares continues to yield
the following principal benefits:
Improvement of liquidity in the market for the Company's shares;
Maintenance of the Company's ability to issue shares tactically, so as to
manage the premium to net asset value per share at which the shares trade;
Increase in the size of the Company, thereby spreading operating costs over a
larger capital base with a consequent reduction in the ongoing charges ratio;
and
Chairman's Statement
Continued
Enhancement of the net asset value per share of existing shares through new
share issuance at a premium to the cum income net asset value per share;
Dividend
The Board has declared a first interim dividend of 5.1p per share, compared to
last year's first interim dividend of 4.8p per share, an increase of 6.3%. The
dividend will be paid on Tuesday, 6 May 2014 to shareholders who were on the
register on Friday, 4 April 2014. The associated ex dividend date was
Wednesday, 2 April 2014.
Regulatory Matters
As stated in the Company's Annual Report and Accounts the Board, together with
its advisors is currently working to achieve compliance with the Alternative
Investment Fund Managers Directive (the `Directive') which is due to come into
force on 22 July 2014. In accordance with the Directive it is intended that the
Bank of New York Mellon will be appointed as the Company's Depository and the
Company's Manager, Frostrow Capital LLP, will undertake the role of the
Company's Alternative Investment Fund Manager.
Outlook
The FTSE All Share Index is barely changed in the year so far. Since our
half-year end technology companies have been among the worst performing stocks,
while the exposure of many companies in the portfolio to emerging markets has
also eroded their profits due to the strength of sterling.
However, your Board continues to believe that our Investment Manager's strategy
of investing for the long-term in durable cash generative franchises capable of
sustained dividend growth will continue to deliver superior investment returns
to shareholders.
Anthony Townsend
Chairman
30 April 2014
Investment Manager's Review
"Your Company has had a great run of absolute and relative performance over the
last few years and this continued through the recent half-year…"
Of course we are delighted by the return the strategy has delivered for
shareholders (including me as an ongoing buyer of shares) and remain
enthusiastic about its prospects - nonetheless we hope shareholders will keep
their expectations in check.
Perhaps the best corrective for any excessive optimism about Finsbury's
prospects - if such exists - is a review of the dividend growth being delivered
by the portfolio constituents. Not surprisingly we pay a lot of attention to
dividend announcements made by each company and look at the effects of these
announcements at portfolio level too. To us the decision any board takes twice
a year (in the UK at least) about what to do with its next dividend payment is
full of valuable information for a long-term investor. This valuable
information relates to a company's sustainable long term growth rate, or the
sustainable growth rate its board believes the company can deliver. Profits and
earnings are volatile from period to period, but boards are usually concerned
that dividends be a lot less volatile. For this reason they tend to set
dividend increases no higher than their expectation for long term growth in
cash flow (because dividends have to be paid out of cash) - all other things
being equal. This is an informative number.
Turning to our most recent experience, here are the bald statistics for your
portfolio. Measuring the last dividend declared by each company and comparing
it to the comparable payment 12 months previous - 12.5% of our holdings by
value have left their dividends unchanged; another 12.5% have increased by up
to 5%; 48% have increased by between 5% and 10% and the remainder, 27% by
value, have increased dividends by 10% or more. At portfolio level, with a lot
of errors and omissions excepted, it looks as though current weighted dividend
growth is around 7.5% per annum.
There are three observations we make about that 7.5%. The first, bluntly, is
that it is not likely that your Company's NAV and share price will rise at high
teen rates or more year after year if the underlying rate of dividend growth -
dividends being, after all, what end up in shareholders' hands - is half that.
Here is the basis for my attempt at expectations management in the opening
paragraph.
Next, though, I don't want shareholders to get downcast - because in truth we
regard dividend growth of c.7.5% as a satisfactory outcome, if it really does
represent a credible estimate of long-term growth. Think about it this way -
the underlying dividend yield of your portfolio, before all expenses, is
roughly 3% and growing at that 7.5%pa. So, the strategy offers a starting cash
return that is nearly double the current rate of UK inflation (1.7% in February
2014), growing at more than four times the rate of inflation. This is the sort
of investment proposition - a growing return in excess of inflation - that
makes you a great deal of money over time.
Finally and again accentuating the positive, closer analysis of the dividend
policies of individual holdings gives us hope that aggregate dividend growth
for the portfolio is more likely to tick up, rather than down, over the next
few years. For instance, we are, candidly, somewhat taken aback that as much as
25% of our portfolio is increasing its dividends by less than 5% in 2013/14.
Growth in dividends, or the potential for it, is one of our key selection
criteria and sub 5% is not what we are looking for. But we are prepared to cut
some slack for offending companies. For instance, there are extenuating
circumstances for the two major holdings where dividends are static in 2013/14.
These are Fidessa and Heineken, combined over 12.0% of NAV. Fidessa has been
operating against unusually straightened commercial conditions for its major
customers - it sells software services to global investment banks - and, in
addition, investing heavily in new products and its ordinary dividend is
unchanged since 2011. However, like most successful software companies, Fidessa
generates a great deal of cash which it has shared with its owners via a
substantial special dividend, paid over each of the last four years. Meanwhile,
Heineken and the London Stock Exchange, whose most recent dividend increase was
"only" 4%, are both digesting recent substantial acquisitions made for cash and
can be excused for stinginess with their dividends while they pay down the
resultant debt.
Investment Manager's Review
Continued
Another dividend we watch especially closely at the moment is Pearson's. The
most recent payment was up 7%, maintaining the company's record of 25 years of
consecutive increases ahead of UK inflation. In this case we really do hope
that Pearson's board is signalling a realistic expectation for its long term
cash flows, because there is no doubt investors are sceptical. The shares have
done poorly over the last six months, being the biggest detractor from the
performance of your Company over that period and now stand on a historic
dividend yield of 4.6%, some 35% higher than for the average for the FT
All-share Index. We continue to add to the holding and do so, when it comes
right down to it, because we are impressed by the relationships that Pearson
has built and maintains with technology leaders such as Apple and Microsoft.
Technology is changing the delivery of education; technology companies clearly
sense a major profit opportunity from this change and, to date at least, big
tech companies appear to value Pearson educational content and know-how highly
and want to work with, rather than against, the company. There are not so many
UK-quoted companies that can lay credible claim to being at the heart of a
technology-driven productivity revolution, but Pearson is definitely one and is
as a result very valuable, in our opinion.
In conclusion to this report and somewhat in the spirit of provocation I attach
a piece written earlier in 2014 for a client with a very long term time
horizon. A piece that outlines our strategic thinking about equity markets:
Think about the implications of the following recent advertising copy, for
Cisco's smart routers and widgets:
"Homes know when to turn up the heat. Pill bottles are ordering their own
refills. Shopping carts are handling checkout. Crops are telling farmers when
to harvest. Street lights will prevent crime. Clothing will detect fevers.
Factories will react to markets in real time. Cities will adjust to changes in
the weather."
We know from our own day-to-day experience that this is not pie-in-the-sky
futurology. It's happening now. McKinsey calculates that the productivity gains
from the "Internet of Everything" will boost global output by c$23 trillion
(not billion!) by 2025. UBS predicts global GDP will accelerate by c0.6% pa -
so a 20% increase on a 3% non-tech enhanced rate - and that inflation will be
1% per annum lower than it would have been otherwise. A spokesman for British
tech leader ARM, which designs these increasingly ubiquitous chips confirmed:
"There's enormous scope for making many things more efficient. Low-cost sensors
can be deployed in large numbers and there are many applications."
This stuff is of critical importance for those of us charged with allocating
and preserving client capital. History teaches that what really drives wealth
creation for humanity are the productivity gains that result from the
widespread adoption of new technology - from the railways, the telegraph and
through to the Internet. Everything else is pretty much noise - inflation,
interest rates, government deficits or currency fluctuation. People have always
worried about these "macro" factors, but I ask you to look back at long term
charts of stock market performance, at least stock markets in nations that
respect individual property rights, and acknowledge that you can't see those
macro worries in the charts. They go up and they go up because human ingenuity
discovers new ways to meet needs and wants and that ingenuity is rewarded with
profit. The S&P 500 is within 0.5% of its all-time high today - show me the
malign impact of the US budget deficit, or the debauch of the Dollar. No, can't
see them? But I can show you 500 of the most innovative, productive, rational
companies on the planet. Natural selection makes S&P 500 constituents pretty
"fit".
I'm not pretending there aren't losers. It's fascinating to read that even US
coffee shops are feeling the pinch of the digital revolution. Howard Schultz,
CEO of Starbucks, had this to say about last Christmas:
Investment Manager's Review
Continued
"I firmly believe that the month of December will go down as a turning point in
the overall way in which people are shopping...people spent much more time on
the Web...there were clearly less people out shopping.... There will be a real
sea change for many, many retailers, who are going to have a hard time
navigating through what I believe will not (just) be a December problem."
Or consider the "lost" $32.5billion of texting revenues for telephony companies
in 2013. Instead of texting over the phone networks people are doing it for
free via the Internet, using applications like WhatsApp. In Mexico WhatsApp has
already captured 90% of all instant messaging. That's painful for the incumbent
telephone companies, but great for people who need to communicate.
Throw this into the mix - the US drilled another 30,000 shale gas wells in
2013, further accelerating the point at which the world's most innovative and
dynamic economy becomes energy self-sufficient. Surely the price of energy is
going to plummet in years to come, in response to this new, unlooked for supply
of cheap gas? That's another huge wealth and productivity boost for
corporations and people around the world.
Market strategists fret that equity valuations are "high", whatever that means.
But they're often valuing industries and companies of the past, not the future.
We say Equity valuations look high because - whether they know it consciously
or not - investors are beginning to discount a massive increase in global
profitability, derived from the factors I've scratched the surface of above.
For investors knowing how to participate is tough. Some of the biggest gains of
the next 20 years will arise from companies and probably industries that don't
even exist yet. But those that follow us - our children or future officers of
the institutions we are responsible for today - will not thank us if we sit out
on this next, probably unprecedented, wave of wealth creation.
Nick Train
Director
Lindsell Train Limited
Investment Manager
30 April 2014
Investments
as at 31 March 2014
Investment Sector Fair % of
Value Investments
£'000
Unilever Food Producers 43,627 9.0
Diageo Beverages 41,163 8.4
Heineken Holdings (A Shares)* Beverages 32,174 6.6
Pearson Media 31,478 6.5
Reed Elsevier Media 29,981 6.1
London Stock Exchange Financial Services 29,053 6.0
Fidessa Software & Computer 28,044 5.8
Services
Schroders Financial Services 26,655 5.5
Daily Mail & General Trust (A Media 26,580 5.4
Shares)
A.G. Barr Beverages 26,505 5.4
Top 10 investments 315,260 64.7
Sage Group Software & Computer 25,510 5.2
Services
Hargreaves Lansdown Financial Services 24,942 5.1
Rathbone Brothers Financial Services 21,562 4.5
Greene King Travel & Leisure 16,594 3.4
Burberry Group Personal Goods 14,299 3.0
Mondelez^ Food Producers 11,771 2.4
Euromoney Institutional Media 11,128 2.3
Investor
Dr.Pepper Snapple^ Beverages 10,678 2.2
Thomson Reuters~ Media 8,328 1.7
Kraft Foods^ Food Producers 7,385 1.5
Top 20 investments 467,457 96.0
Young & Co's Brewery Travel & Leisure 7,062 1.5
(non-voting)
Fuller Smith & Turner Travel & Leisure 6,335 1.3
Lindsell Train Investment Financial Services 3,410 0.7
Trust
Celtic Travel & Leisure 1,872 0.4
Frostrow Capital+ Financial Services 650 0.1
Celtic Convertible Preferred** Travel & Leisure 103 -
Celtic 6% (cum preference)** Travel & Leisure 69 -
Total investments 486,958 100.0
All of the above investments are equities listed in the UK, unless otherwise
stated.
* Listed in the Netherlands
^ Listed in the United States
~ Listed in Canada
+ Unquoted partnership interest
** Non-equity - Preference Shares
Comparison of Sector Weightings with the
FTSE All-Share Index
as at 31 March 2014
Sector Finsbury FTSE Finsbury
Growth All-Share Growth
& Income Index & Income
% % (under)/
overweight
%
Oil & Gas - 14.6 (14.6)
Basic Materials - 8.2 (8.2)
Industrials - 10.5 (10.5)
Consumer Goods 38.6 13.8 24.8
Health care - 7.8 (7.8)
Consumer Services 28.6 11.0 17.6
Telecommunications - 4.7 (4.7)
Utilities - 3.8 (3.8)
Financials 21.8 24.1 (2.3)
Technology 11.0 1.5 9.5
Total 100.0 100.0 -
Income Statement
For the six months ended 31 March 2014
(Unaudited) (Unaudited) (Audited)
Six months ended 31 Six months ended 31 Year ended 30 September
March 2014 March 2013 2013
Revenue Capital Total Revenue Capital Total Revenue Capital Total
£'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Gains on - 35,256 35,256 - 66,685 66,685 - 77,323 77,323
investments held at
fair value through
profit or loss
Exchange - (11) (11) - (15) (15) - (36) (36)
differences
Income (note 2) 3,809 - 3,809 3,311 - 3,311 11,300 - 11,300
Investment (473) (961) (1,434) (323) (656) (979) (735) (1,493) (2,228)
management and
management fees
(note 3)
Other expenses (351) (19) (370) (261) - (261) (603) - (603)
Return on ordinary 2,985 34,265 37,250 2,727 66,014 68,741 9,962 75,794 85,756
activities before
finance charges and
taxation
Finance charges (77) (157) (234) (57) (116) (173) (121) (244) (365)
Return on ordinary 2,908 34,108 37,016 2,670 65,898 68,568 9,841 75,550 85,391
activities before
taxation
Taxation on (80) - (80) (60) - (60) (184) - (184)
ordinary activities
Return on ordinary 2,828 34,108 36,936 2,610 65,898 68,508 9,657 75,550 85,207
activities after
taxation
Return per share 3.2 39.1 42.3 3.6p 91.3p 94.9p 12.7p 99.4p 112.1p
(note 4)
The "Total" column of this statement represents the Income Statement of the
Company. The "Revenue" and "Capital" columns are supplementary to this and are
prepared under guidance published by the Association of Investment Companies
(AIC).
All items in the above statement derive from continuing operations. The Company
had no recognised gains or losses other than those declared in the Income
Statement.
Reconciliation of Movements in Shareholders' Funds
(Unaudited) Share Share Capital Special Capital Revenue Total
capital premium redemption reserve reserve reserve £'000
Six months ended 31 £'000 account reserve £'000 £'000 £'000
March 2014 £'000 £'000
At 30 September 2013 20,784 146,465 3,453 12,424 204,235 8,478 395,839
Net return from ordinary - - - - 34,108 2,828 36,936
activities
Second interim dividend - - - - - (4,748) (4,748)
(5.7p per share) for the
year ended
30 September 2013
Issue of shares 2,043 38,952 - - - - 40,995
Cost of share issuance - (110) - - - - (110)
At 31 March 2014 22,827 185,307 3,453 12,424 238,343 6,558 468,912
(Unaudited)
Six months ended 31
March 2013
At 30 September 2012 17,142 86,458 3,453 12,424 128,685 6,047 254,209
Net return from ordinary - - - - 65,898 2,610 68,508
activities
Second interim dividend - - - - - (3,579) (3,579)
(5.2p per share) for the
year ended
30 September 2012
Issue of shares 1,854 28,367 - - - - 30,221
Cost of share issuance - (114) - - - - (114)
At 31 March 2013 18,996 114,711 3,453 12,424 194,583 5,078 349,245
(Audited)
Year ended 30 September
2013
At 30 September 2012 17,142 86,458 3,453 12,424 128,685 6,047 254,209
Net return from ordinary - - - - 75,550 9,657 85,207
activities
Second interim dividend - - - - - (3,579) (3,579)
(5.2p per share) for the
year ended
30 September 2012
First interim dividend - - - - - (3,647) (3,647)
(4.8p per share) for the
year ended 30 September
2013
Issue of shares 3,642 60,121 - - - - 63,763
Cost of share issuance - (114) - - - - (114)
Year ended 30 September 20,784 146,465 3,453 12,424 204,235 8,478 395,839
2013
Balance Sheet
as at 31 March 2014
(Unaudited) (Unaudited) (Audited)
31 March 31 March 30 September
2014 2013 2013
£'000 £'000 £'000
Fixed assets
Investments designated at fair value 486,958 365,197 409,997
through profit or loss
Current assets
Debtors 1,215 2,211 1,348
Cash at bank 1,972 1,264 5,943
3,187 3,475 7,291
Current liabilities
Creditors (433) (2,227) (1,249)
Bank loan (20,800) (17,200) (20,200)
(21,233) (19,427) (21,449)
Net current liabilities (18,046) (15,952) (14,158)
Total net assets 468,912 349,245 395,839
Capital and reserves
Share capital 22,827 18,996 20,784
Share premium account 185,307 114,711 146,465
Capital redemption reserve 3,453 3,453 3,453
Special reserve 12,424 12,424 12,424
Capital reserve 238,343 194,583 204,235
Revenue reserve 6,558 5,078 8,478
Equity shareholders' funds 468,912 349,245 395,839
Net asset value per share (note 5) 513.5p 459.6p 476.1p
Cash Flow Statement
for the six months ended 31 March 2014
(Unaudited) (Unaudited) (Audited)
31 March 31 March 30 September
2014 2013 2013
£'000 £'000 £'000
Net cash inflow from operating 1,707 1,953 8,262
activities (note 7)
Net cash outflow from servicing of (328) (180) (359)
finance
Financial investment
Purchase of investments (42,457) (31,420) (76,004)
Sale of investments 26 - 9,368
Net cash outflow from financial (42,431) (31,420) (66,636)
investment
Equity dividends paid (4,748) (3,579) (7,226)
Net cash outflow before financing (45,800) (33,226) (65,959)
Financing
Shares issued 41,350 30,445 64,878
Drawdown of loans 600 1,950 4,950
Cost of share issuance (110) (114) (114)
Net cash inflow from financing 41,840 32,281 69,714
(Decrease)/increase in cash (3,960) (945) 3,755
Reconciliation of net cash flow to
movement in
net debt
(Decrease)/increase in cash resulting (3,960) (945) 3,755
from cashflows
Increase in debt (600) (1,950) (4,950)
Exchange movements (11) (15) (36)
Movement in net debt (4,571) (2,910) (1,231)
Net debt at start of period/year (14,257) (13,026) (13,026)
Net debt at end of period/year (18,828) (15,936) (14,257)
Notes to the Accounts
1. Basis of preparation
The condensed financial statements have been prepared under the historical cost
convention, except for the measurement at fair value of investments, and in
accordance with UK Generally Accepted Accounting Practice (GAAP) and the
Statement of Recommended Practice (SORP) for `Financial Statements of
Investment Trust Companies and Venture Capital Trusts' issued by the
Association of Investment Companies dated January 2009.
The same accounting policies used for the year ended 30 September 2013 have
been applied.
2. Income
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended ended 30 September
31 March 31 March 2013
2014 2013 £'000
£'000 £'000
Income from investments
Franked investment income
- dividends 3,274 2,911 9,739
Unfranked investment income
- limited liability partnership - - 138
profit-share
- overseas dividends 535 400 1,423
Total income 3,809 3,311 11,300
3. Investment management and management fees
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended ended 30 September
31 March 31 March 2013
2014 2013 £'000
£'000 £'000
Investment management fee 994 670 1,531
Management fee 367 258 581
VAT on management fees 73 51 116
Total fees 1,434 979 2,228
4. Return per share
The total return per share is based on the total return attributable to equity
shareholders of £36,936,000 (six months ended 31 March 2013: return of £
68,508,000; year ended 30 September 2013: return of £85,207,000) and on
87,264,241 shares (six months ended 31 March 2013: 72,182,311; year ended
30 September 2013: 75,974,098), being the weighted average number of shares in
issue.
The revenue return per share is calculated by dividing the net revenue return
of £2,828,000 (six months ended 31 March 2013: return of £2,610,000; year ended
30 September 2013: return of £9,657,000) by the weighted average number of
shares in issue as above.
The capital return per share is calculated by dividing the net capital return
attributable to shareholders of £34,108,000, (six months ended 31 March 2013:
return of £65,898,000; year ended 30 September 2013: return of £75,550,000) by
the weighted average number of shares in issue as above.
5. Net asset value per share
The net asset value per share is based on net assets attributable to shares of
£468,912,000 (31 March 2013: £349,245,000 and 30 September 2013: £395,839,000)
and on 91,310,212 shares in issue (31 March 2013: 75,986,219 and 30 September
2013: 83,136,557).
Notes to the Accounts
Continued
6. Transaction costs
Purchase transaction costs for the six months ended 31 March 2014 were £251,000
(six months ended 31 March 2013: £184,000; year ended 30 September 2013: £
448,000).
Sales transaction costs for the six months ended 31 March 2014 were £nil (six
months ended 31 March 2013: £nil; year ended 30 September 2013: £19,000).
7. Reconciliation of net total return before finance costs and taxation to net
cash inflow from operating activities
(Unaudited) (Unaudited) (Audited)
Six months Six months Year ended
ended ended 30 September
31 March 31 March 2013
2014 2013 £'000
£'000 £'000
Total return before finance charges and 37,250 68,741 85,756
taxation
Less capital return before finance (34,265) (66,014) (75,794)
charges and taxation
Net revenue before finance costs and 2,985 2,727 9,962
taxation
Increase in accrued income and (236) (108) (129)
prepayments
Increase in creditors 4 34 96
Taxation - irrecoverable overseas tax (66) (44) (174)
paid
Investment management and management (961) (656) (1,493)
fees charged to capital
Other expenses charged to capital (19) - -
Net cash inflow from operating 1,707 1,953 8,262
activities
8. 2013 accounts
The figures and financial information for the year to 30 September 2013 are
extracted from the latest published accounts of the Company and do not
constitute statutory accounts for the year.
Those accounts have been delivered to the Registrar of Companies and included
the Report of the Auditors which was unqualified and did not contain a
reference to any matters to which the auditors drew attention by way of
emphasis without qualifying the report, and did not contain a statement under
section 498 of the Companies Act 2006.
Interim Management Report
Principal Risks and Uncertainties
A review of the half year, including reference to the risks and uncertainties
that existed during the period, and the outlook for the Company can be found in
the Chairman's Statement and in the Investment Manager's Review. The principal
risks faced by the Company fall into the following broad categories: market
price risk; interest rate risk; portfolio performance; operational and
regulatory risk; credit risk; liquidity risk; investment management key person
risk; availability of bank finance; inability to maintain a progressive
dividend policy. Information on each of these areas, with the exception of the
availability of bank finance and the Board's ability to maintain a progressive
dividend policy, is given in the Report of the Directors within the Annual
Report and Accounts for the year ended 30 September 2013. The risk associated
with the availability of bank finance is that the provider or any other lender
may no longer be prepared to lend to the Company. Copies of the monthly loan
covenant compliance certificates, provided for the lender, are circulated to
the Board and both the Board and the Investment Manager are kept fully informed
of any likelihood of the withdrawal of the loan facility so that repayment can
be effected in an orderly fashion if necessary. With regard to the Company's
dividend policy, the Board regularly reviews the Company's portfolio and also
income forecasts prepared by the Manager; regular reports on the Company's
income position are also made by the Company's Investment Manager at each Board
meeting. The Company also maintains a distributable revenue reserve which can
be used to help make up any shortfall in income received by the Company.
In the view of the Board these principal risks and uncertainties are applicable
to the remaining six months of the financial year as they were to the six
months under review.
Related Party Transactions
During the first six months of the current financial year, no transactions with
related parties have taken place which have materially affected the financial
position or the performance of the Company.
Going Concern
The Directors, having made relevant enquiries, are satisfied that it is
appropriate to prepare financial statements on the going concern basis as the
net assets of the Company consist of liquid securities, all of which, with the
exception of the partnership interest in Frostrow Capital LLP, are traded on
recognised stock exchanges.
Directors' Responsibilities
The Board of Directors confirms that, to the best of its knowledge:
(i) the condensed set of financial statements contained within the Half Year
Report has been prepared in accordance with applicable accounting standards;
and
(ii) the interim management report includes a true and fair review of the
information required by 4.2.7R and 4.2.8R of the UK Listing Authority and
Transparency Rules.
The Half Year Report has not been reviewed or audited by the Company's
auditors.
The Half Year Report was approved by the Board on 30 April 2014 and the above
responsibility statement was signed on its behalf by:
Anthony Townsend
Chairman
Glossary of Terms
AIFM
The Alternative Investment Fund Manager Directive (the "Directive") is a
European Union Directive that entered into force on 22 July 2013. The Directive
regulates EU fund managers that manage alternative investment funds (this
includes investment trusts). There is a one-year transition period within which
alternative funds must comply with the provisions of the Directive.
Discount or Premium
A description of the difference between the share price and the net asset value
per share. The size of the discount or premium is calculated by subtracting the
share price from the net asset value per share and is usually expressed as a
percentage (%) of the net asset value per share. If the share price is higher
than the net asset value per share the result is a premium. If the share price
is lower than the net asset value per share, the shares are trading at a
discount.
FTSE Disclaimer
"FTSE©" is a trade mark of the London Stock Exchange Group companies and is
used by FTSE International Limited under licence. All rights in the FTSE
indices and/or FTSE ratings vest in FTSE and/or its licensors. Neither FTSE nor
its licensors accept any liability for any errors or omissions in the FTSE
indices and/or FTSE ratings or underlying data. No further distributions of
FTSE Data is permitted without FTSE's express written consent.
Gearing
Gearing is calculated by dividing total assets (as defined below) less cash or
cash equivalents by shareholders' funds expressed as a percentage.
Net Asset Value (NAV)
The value of the Company's assets, principally investments made in other
companies and cash being held, less any liabilities. The NAV is also described
as `shareholders' funds' per share. The NAV is often expressed in pence per
share after being divided by the number of shares which have been issued. The
NAV per share is unlikely to be the same as the share price which is the price
at which the Company's shares can be bought or sold by an investor. The share
price is determined by the relationship between the demand and supply of the
shares.
Net Asset Value Total Return
The theoretical total return on an investment over a specified period assuming
dividends paid to shareholders were reinvested at net asset value per share at
the time the shares were quoted ex-dividend. This is a way of measuring
investment management performance of investment trusts which is not affected by
movements in discounts or premiums.
Ongoing Charges
Ongoing charges are calculated by taking the Company's annualised expenses,
excluding performance fees and exceptional items, and dividing by the average
net asset value of the Company over the year.
Share Price Total Return
The change in capital value of a company's shares over a given period, plus
dividends received, expressed as a percentage of the opening value.
Glossary of Terms
Continued
Treasury Shares
Shares previously issued by a company that have been bought back from
shareholders to be held by the Company for potential sale or cancellation at a
later date. Such shares are not capable of being voted and carry no rights to
dividends.
For and on behalf of
Frostrow Capital LLP, Secretary
30 April 2014
- ENDS -
The following are attached:
* Chairman's Statement
* Investment Manager's Review
* Income Statement
* Reconciliation of Movements in Shareholders' Funds
* Balance Sheet
* Cash Flow Statement
* Notes to the Interim Accounts
*Interim Management Report
*Glossary of Terms
For further information please contact:
Alastair Smith/Victoria Hale, Frostrow Capital LLP 020 3008 4911/020 3170 8732
Jo Stonier, Quill PR 020 7466 5066.
Nick Train, Lindsell Train Limited 020 7227 8200
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