Half Yearly Report

RNS Number : 9636Z

Seneca Global Income & Growth PLC

17 December 2014

 



To:                    RNS

From:                Seneca Global Income & Growth Trust plc

Date:                17 December 2014

Unaudited results for the six months ended 31 October 2014

Highlights

• Net asset value total return of 0.6%

• Share price total return of 1.1%

• Annualised volatility* 6.7% compared with 11.9% for the FTSE All-Share Index

• Quarterly dividend increased by 4.5% to 1.40 pence

• Share price discount to net asset value of 6.1% at the period end (2.3% currently)

Introduction

Following the takeover and name change of your Manager in March, shareholders approved the change in your Company's name to Seneca Global Income & Growth Trust plc at the  AGM in September, as they also overwhelmingly did its continuation.

Investment Objective

The Company's investment objective is to outperform 3-month LIBOR plus 3.0 per cent over the longer term, with low volatility and the prospect of income and capital growth, through investment in a multi-asset portfolio. As I wrote in my July Statement that they would, your Manager has discussed with major shareholders the ongoing appropriateness and usefulness of your Company's benchmark. There was no appetite for change though various indices

and measures for comparative purposes remain under review, there being no 'perfect'

benchmark against which to judge the investment policy.

Investment and Share Price Performance

Your Company's net asset value total return for the six month period was 0.6%, behind the

benchmark return of 1.8%. As at 31 October 2014 your Company's net asset value total

return, since the introduction of the new investment policy in January 2012, was 33.6%; over the same period the benchmark return was 10.6%. Over this period the Company has performed strongly, and it has done so in the context of a volatility level that was substantially lower than that of the market and other trusts in the Global Equity Income sector over both the six month period and since January 2012.

The discount at which the Company's shares trade to net asset value stood at 6.1% at 31 October 2014, down from 6.5% at the previous year end, a slight tightening which contributed to a share price total return of 1.1%. The average discount over the six month period was 4.4%, and it stands at 2.3% as I write.

Dividends and Income

Your Company paid two interim dividends of 1.40 pence per share for the period, an increase of 4.5% on the first two interim dividends paid last year. It is the Board's intention, barring unforeseen circumstances, that it will at least maintain the quarterly dividend rate of 1.40p per share for the full year to 30 April 2015.

Gearing

The Company has in place a short term rolling debt facility of £7 million. The facility runs until 31 October 2015 and can be cancelled at any time without cost to the Company. The Company was 11% geared at the end of October.

Investment Outlook

The first half of October saw investor confidence put to the test, but after a brief dip markets rallied as the price of oil fell precipitately. October also saw the US 10 Year Treasury fall from 2.2% to 1.9% and recover in the space of two hours, an unprecedented degree of volatility in what is considered to be one of the safest asset classes in the world. Markets have a febrile feel to them and equities with a defensive bias remain our asset of choice. The Manager comments more fully on the investment outlook in its report.

The Board's Priorities

I conclude by reiterating the priorities that I set out when I wrote to you in July. As well as maintaining and building upon the record of good investment performance since the changes to the Company's investment policy approved by shareholders in January 2012 and marketing the qualities of the Company more actively, your Board remains committed

to pursuing the significant enlargement of your Company. This objective is shared by

your Manager. Contingent on the success of these efforts we are both committed to the

adoption of a discount control mechanism that would seek to regulate the share price at

close to its net asset value.

Richard Ramsay

Chairman

16 December 2014

*This measure describes the fluctuations of the NAV over time. Whilst volatility is specific to a fund's particular mix of investments, higher volatility is generally considered to equate to higher risk.

Manager's Review

Overview

The generally positive investor sentiment which prevailed for much of the period was tested in September and early October, as global growth forecasts were downgraded and the spectre of deflation, particularly in Europe, tested confidence. The end to Quantitative Easing (QE) in the US was at odds with increased QE measures in Japan and speculation that the European Central Bank may move to full blown QE early in 2015. Geopolitical concerns were also to the

fore, with Russian intervention in the Ukraine and tensions in the Middle East raising uncertainty. The slower pace of economic growth in China has also tested sentiment.

Meanwhile, the surplus of world oil supplies and reduced demand led to a sharp fall in prices as the period drew to a close, providing a welcome stimulus to consumers and reducing input costs to industrial companies.

The period saw mixed returns from markets with economic conditions in the United States and United Kingdom continuing to be more positive than in mainland Europe and Japan. However, whilst the US was the best performing major market, hitting a series of new all-time highs, the UK bourse lagged, finishing the period with a negative return. European equity markets also struggled against a difficult economic background, further compounded by weakness in the Euro. Elsewhere there were high single to low double digit returns from Asian and Emerging Market equities, reversing what had been a prolonged period of poor

performance. Meanwhile, Japanese equities were also strong as the Bank of Japan

increased its commitment to reflating the economy through further QE measures.

Sovereign bond yields fell further as the lack of inflation in developed economies

supported the view that interest rate rises were unlikely in the near future. The 10 year

UK benchmark gilt finished the period yielding 2.24%, having been 2.79% when the

period commenced (and having dipped below 2% briefly in mid-October).

Performance

Performance over the period was muted with a net asset value total return of +0.6%. This

was below the benchmark (3 month Libor +3%) return of +1.8%. The share price total return was slightly better at 1.1%, as the discount to net asset value narrowed. Over the period the FTSE All Share total return was -1.5%. The returns for the Company were achieved with a level of volatility (as measured by Financial Express Analytics) which was around half that of the FTSE 100 Share Index. The largest positive contributions to returns came from the Far East equity fund holdings, whilst Japanese equity managers also made a positive contribution, aided by circa 60% hedging of the Yen, which continued to weaken over the period. The main detractor to returns was the directly held UK equity portfolio, which has been a major driver to returns over previous periods. Here there were disappointing outturns from several large cap holdings such as Tesco and Standard Chartered, although both were sold

prior to further price weakness.

The UK portfolio also saw weakness in mid cap companies, which had performed well in the prior period. We remain attracted to many of these holdings on a medium term view and in several cases the price weakness has been used to add to holdings.

Income generated from the portfolio was satisfactory over the period and benefitted from dividend growth on equity positions and the commencement of distributions from several of the alternative asset positions built up over the past 12 months.

There were also bright spots within the UK equity holdings, with Phoenix Group Holdings (the closed life insurance company) making the biggest positive contribution. It is also pleasing to note that Barratt Developments has made an early contribution since its purchase in March. Other major contributors bore testimony to the better environment in Asian and Japanese equity markets.

Detractors from returns lay mainly within the UK equity portfolio, with the exception being

Blackrock World Mining, which suffered an asset hit and de-rating following the

announcement of a major write down within the portfolio.

Asset Allocation

There have been no major changes to asset allocation over the period. The portfolio continues to emphasise real assets such as equities and property, which can provide

capital growth and improved income over time. These holdings have been complimented

with a further small increased exposure to alternative assets, mainly in renewable energy,

asset leasing and private equity. Fixed interest positions have been maintained, although

further moves have been taken to reduce interest rate risk from this part of the portfolio.

UK Equities (35.7%)

The UK economy still appears to be performing reasonably well, notwithstanding the spectre of political change which will become more of a factor as we move towards the General Election in May 2015. However, we are a little concerned that wage pressures are beginning to emerge, as unemployment falls and this may yet threaten the generally benign inflationary outlook.

No net investment was made into UK equities over the period, with the weighting falling due to some disappointing relative underperformance compared to the other assets held. The relatively high weighting towards midcap holdings has been detrimental - although this emphasis had been very positive for returns over the previous two years. The de-rating of several holdings has led to a review of these holdings and we remain confident on the medium term prospects for the majority of companies we hold. However, in some cases where the investment case has deteriorated or changed holdings have been sold. Positions sold included Balfour Beatty, Standard Chartered and Tesco (sold before its announcement on misreporting profits), with all three providing severe concerns regarding stewardship and

prospects within their respective businesses.

There have been a small number of new additions to the portfolio over the period including Londonmetric Properties (to increase UK commercial property exposure) and HSBC (to replace Standard Chartered). Several existing positions have been added to, as prices fell over the period. These additions included Marston's, National Express, Kier and Assura Group. We believe the UK portfolio is attractively priced and offers significant recovery potential following recent underperformance.

Overseas Equities (30.5%)

The divergence in growth prospects between the major developed economies has been

pronounced over the period. The recovery in the US economy has continued, whilst

Europe and to a lesser extent Japan have struggled. The end to QE in the United States

has been absorbed by investors (albeit with a few wobbles) but the Bank of Japan has announced further QE measures in an attempt to reflate the economy. Meanwhile the European Central Bank has, to date, eschewed full blown monetary expansion, despite inflation running well below targeted levels and poor economic conditions across the continent.

There has been a small divestment from overseas equity holdings over the period,

mainly from reductions within the Asian portfolio, following much improved recent

performance and generally good performance from managers. This reduction was spread

across four holdings, effectively maintaining diversification within your Company's holdings

in the region. As in previous periods, the best performing Far Eastern fund held was Prusik

Asian Equity Income Fund, which gave a total return of 12.0% over the period.

A small additional investment was committed to Japan through the introduction of a new

Fund - the Michinori Japan Equity fund, which is focussed on mid-cap companies with strong

business franchises and which are targeting improved shareholder returns. Both funds held have given positive returns over the period with the Lindsell Train Japanese Equity Fund

producing an 11.6% outturn.

US equity exposure has been reduced slightly due to valuation concerns following a further

period of strong market progress. An equity tracker, namely the iShare MSCI USA Dividend

Fund, was introduced to the portfolio to replace the Harewood US Enhanced Income Fund,

which was wound up by the sponsor following a major investor withdrawing from the fund. The iShare gives a low cost exposure to US equities whilst also offering a yield of around 3%. All managers have produced positive returns over the period, although none have matched the very strong market rise. The US equity portfolio currency exposure is unhedged.

European equity investment was reduced marginally over the period, as the economic

picture continued to deteriorate. However, the managers employed have, in general, provided

satisfactory returns against what has been a difficult market background. At the period end

the Euro exposure was 25% hedged through holding a hedged share class in the Argonaut

European Enhanced Income Fund. This was the best performing fund held in Europe with a

small positive return, largely due to its hedged currency position.

Investor sentiment improved towards emerging markets and exposure was maintained. There

were no transactions within this part of the portfolio during the period. All managers gave positive returns with Somerset Emerging Dividend Growth Equity Fund providing the best

performance with a 7.7% return, which was a still a little behind the overall market.

Alternative Assets (18.9%)

Exposure to alternative assets increased slightly over the period with an additional commitment to leasing through a new closed end fund - SQN Asset Finance Income Fund. This fund will invest in short term leases on operational assets across a broad range of industries and will, when fully invested, target a yield in excess of 7% and total return of between 8-10%.This position compliments other longer term lease investments already held.

Private equity exposure was reduced with further regular redemptions of Partners Group Global Opportunities, which is carried at a 20% discount to net asset value due to its illiquidity. However, the manager has recently announced that the fund will be wound up, which may accelerate the redemption process. A new investment was made in Aberdeen Private Equity Fund with the company trading at a 28% discount to net asset value. The Fund offers exposure to a wide range of relatively mature private equity positions, which we believe have the potential to produce strong returns from realisations above current carried valuations. This purchase was funded by the sale of NB Private Equity, which had been a nicely profitable investment, but where the discount to net asset value had narrowed into the

mid-teens.

The investment in unquoted A J Bell Holdings (AJB), the fast growing SIPP provider and

investor platform operator, has remained valued at 575p per share throughout the period. AJB

released its interim results in early June, which demonstrated further significant growth in both client numbers (up 10%) and assets under administration (up 8%). However, profits fell from £13.3 million to £8 million due to lower interest margins on cash balances. Interest rate margin pressure is also likely to be a significant drag on profits in the second half.

At the time of writing AJB have just released their annual results (to 30 September 2014),

which showed that full year earnings had fallen by 31% to 30.76p per share (profit £16.1

million). This represents a carried valuation PE of 18.7x and yield of 4.4% - after a 1% uplift

in the dividend. Importantly the underlying business metrics showed further improvement,

with assets under administration rising to £23.7 billion (up 16%) and retail customers reaching

104,000 (an increase of 20%). The carried valuation is, we feel, prudent and compares

favourably with the main quoted comparator, Hargreaves Lansdown, which is trading

currently at a PE of 27.6x (June 2014 earnings) and a yield of 3.4%.

The portfolio's exposure to renewable energy infrastructure was maintained over the period,

with the four vehicles held providing exposure to a combination of solar, wind, waste and

waste water assets. The regulatory regime in the UK remains favourable to renewables,

we believe, and holdings offer the prospect of high nominal yields of between 6 to 7%, with

dividends rising in line with RPI inflation. The high and growing income generated from these

renewable energy investments will be helpful in providing further support to your Company's

dividend progression.

Fixed Interest (10.7% including cash)

Fixed interest exposure has been maintained, although further action has been taken to

protect this part of the portfolio from interest rate risk. To this end a new fund launch by

M&G investing in European Floating Rate Notes (FRNs) was introduced. This fund will act as

a hedge against your Company's borrowings, which are linked to moves on LIBOR. The vast

majority of fixed interest exposure is now in short duration specialist bond and senior loan

funds.

Property (4.2%)

Property exposure has fallen although there is further exposure through the REITs held as part of the UK equity portfolio. A new holding, namely Ediston Property Investment Company plc was introduced late in the period. The manager has proven ability to add value to UK commercial property through active management and the company will offer an initial yield of 5.5% from a seed portfolio of five properties, with a strong further deal pipeline already identified. The long held position in Macau Property Opportunities was sold following strong price performance.

One of the major benefits derived from operating a multi asset approach is the wide range of sources from which income can be derived. This high level of diversification provides a good degree of certainty around the portfolio's ability to produce an income stream that is not only robust but also capable of growth over time.

Outlook

The outlook for financial markets remains challenging. Asset prices have been inflated by the extraordinarily loose monetary environment prevalent since the financial crisis. The frictions caused by economies at different stages in the recovery process may further exacerbate issues surrounding the longer term effects of such unconventional policy response.

It seems likely that returns over the next five years will be lower than those seen in the

immediate post-crash crisis phase. However, economic recovery in the United States looks

well established and recent oil price falls will provide a boost to consumers and industrial

companies around the world.

We continue to feel that emphasis on real assets over monetary assets, which have been at the centre of policy response, provides further potential to grow dividends and provide capital growth. The diversification offered within a multi asset approach should continue to reduce volatility and enable advantage to be taken of tactical opportunities as they arise.

Seneca Investment Managers

16 December 2014

Enquiries:

Alan Borrows

Seneca Investment Managers Limited                  Tel:  [phone]

Martin Cassels, Company Secretary

R&H Fund Services Limited                                Tel:  [phone]

Unaudited Income Statement

		Six months ended 31 October 2014 (unaudited)			Six months ended 31 October 2013 (unaudited)
		Revenue	Capital	Total	Revenue	Capital	Total
	Notes	£'000	£'000	£'000	£'000	£'000	£'000
(Losses)/gains on investments		-	(508)	(508)	-	2,865	2,865
Income	2	1,393	-	1,393	1,309	-	1,309
Investment management fee		(121)	(121)	(242)	(115)	(115)	(230)
Administration fee		(211)	-	(211)	(235)	-	(235)
Exchange gains		-	3	3	-	-	-
Net return on ordinary activities before finance costs and taxation		1,061	(626)	435	959	2,750	3,709
Finance costs		(32)	(32)	(64)	(31)	(31)	(62)
Net return on ordinary activities before taxation		1,029	(658)	371	928	2,719	3,647
Taxation		-	-	-	-	-	-
Return on ordinary activities after taxation		1,029	(658)	371	928	2,719	3,647
Return per share (pence):	3	2.58	(1.65)	0.93	2.32	6.82	9.14

The total column of this statement represents the profit and loss account of the Company.

A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement.

All revenue and capital items in the above statement derive from continuing operations.

Audited Income Statement

		Year ended 30 April 2014 (audited)
		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Gains on investments		-	1,902	1,902
Income	2	2,969	-	2,969
Investment management fee		(232)	(232)	(464)
Administration fee		(402)	-	(402)
Exchange losses		-	-	-
Net return on ordinary activities before finance costs and taxation		2,335	1,670	4,005
Finance costs		(58)	(58)	(116)
Net return on ordinary activities before taxation		2,277	1,612	3,889
Taxation		-	-	-
Return on ordinary activities after taxation		2,277	1,612	3,889
Return per share (pence):	3	5.71	4.04	9.75

The total column of this statement represents the profit and loss account of the Company.

A Statement of Total Recognised Gains and Losses has not been prepared as all gains and losses are recognised in the Income Statement.

All revenue and capital items in the above statement derive from continuing operations.

Balance Sheet
		As at 31 October	As at 31 October	As at 30 April
		2014	2013	2014
		(unaudited)	(unaudited)	(audited)
		£'000	£'000	£'000
Non-current assets
Investments at fair value through profit or loss		62,660	64,412	63,624
Current assets
Debtors and prepayments		447	338	677
Cash at short term deposits		661	583	179
		1,108	921	856
Creditors: amounts falling due within one year
Bank loan		(7,000)	(7,000)	(7,000)
Other creditors		(137)	(127)	(102)
		(7,137)	(7,127)	(7,102)
Net current liabilities		(6,029)	(6,206)	(6,245)
Net assets		56,631	58,206	57,378
Capital and reserves
Called-up share capital		9,974	9,974	9,974
Share premium account		1,445	1,445	1,445
Special reserve		41,783	41,783	41,783
Capital redemption reserve		2,099	2,099	2,099
Capital reserve	5	572	2,337	1,230
Revenue reserve		758	568	847
Equity shareholders' funds		56,631	58,206	57,378
Net asset value per share (pence):	6	141.95	145.90	143.82

Reconciliation of Movements in Shareholders' Funds

Six months ended 31 October 2014 (unaudited)

	Notes	Share capital	Share premium	Special reserve	Capital redemption reserve	Capital reserve	Revenue reserve	Total
		£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 April 2014		9,974	1,445	41,783	2,099	1,230	847	57,378
Return on ordinary activities after taxation		-	-	-	-	(658)	1,029	371
Dividends paid	4	-	-	-	-	-	(1,118)	(1,118)
Balance at 31 October 2014		9,974	1,445	41,783	2,099	572	758	56,361

Six month ended 31 October 2013 (unaudited)

	Notes	Share capital	Share premium	Special reserve	Capital redemption reserve	Capital reserve	Revenue reserve	Total
		£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 April 2013		9,974	1,445	41,783	2,099	(382)	714	55,633
Return on ordinary activities after taxation		-	-	-	-	2,719	928	3,647
Dividends paid	4	-	-	-	-	-	(1,074)	(1,074)
Balance at 31 October 2013		9,974	1,445	41,783	2,099	2,337	568	58,206

Year ended 30 April 2014 (audited)

	Notes	Share capital	Share premium	Special reserve	Capital redemption reserve	Capital reserve	Revenue reserve	Total
		£'000	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 30 April 2013		9,974	1,445	41,783	2,099	(382)	714	55,633
Return on ordinary activities after taxation		-	-	-	-	1,612	2,277	3,889
Dividends paid	4	-	-	-	-	-	(2,144)	(2,144)
Balance at 30 April 2014		9,974	1,445	41,783	2,099	1,230	847	57,378

Cash Flow Statement
	Six months ended 31 October 2014 (unaudited)	Six months ended 31 October 2013 (unaudited)	Year ended 30 April 2014 (audited)
	£'000	£'000	£'000
Net return on ordinary activities before finance costs and taxation	435	3,709	4,005
Adjustments for: Losses/(gains) on investments	508	(2,865)	(1,902)
Exchange gains	(3)	-	-
Decrease/(increase) in accrued income	367	179	(159)
(Increase)/decrease in other debtors	(7)	3	2
Increase/(decrease) in creditors	35	18	(14)
Net cash inflow from operating activities	1,335	1,044	1,932
Net cash outflow from servicing of finance	(60)	(89)	(136)
Net cash inflow/(outflow) from financial investment	322	(1,653)	(1,828)
Equity dividends paid	(1,118)	(1,074)	(2,144)
Net cash inflow/(outflow) before financing	479	(1,772)	(2,176)
Net cash outflow from financing	-	-	-
Increase/(decrease) in cash	479	(1,722)	(2,176)
Reconciliation of net cash flow to movement in net debt
Increase/(decrease) in cash as above	479	(1,722)	(2,176)
Foreign exchange movements	3	-	-
Movement in net debt in the period	482	(1,722)	(2,176)
Opening net debt	(6,821)	(4,645)	(4,645)
Closing net debt	(6,339)	(6,417)	(6,821)
Represented by:
Cash at bank and in hand	661	583	179
Debt falling due within one year	(7,000)	(7,000)	(7,000)
	(6,339)	(6,417)	(6,821)

Notes

1.   Accounting policies

Basis of accounting

The accounts have been prepared in accordance with applicable UK Accounting Standards, with pronouncements on half-yearly reporting issued by the Accounting Standards Board and with the Statement of Recommended Practice 'Financial Statements of Investment Trust Companies and Venture Capital Trusts' (issued in January 2009). They have also been prepared on the assumption that approval as an investment trust will continue to be granted. The financial statements have been prepared on a going concern basis.

The financial statements and the net asset value per share figures have been prepared in

accordance with UK Generally Accepted Accounting Practice (UK GAAP).

The half yearly financial statements have been prepared using the same accounting policies as the preceding annual accounts.

2.   Income

	Six months ended 31 October 2014 £'000	Six months ended 31 October 2013 £'000	Year ended 30 April 2014 £'000
Income from investments
UK franked income	936	801	1,105
UK unfranked income	326	173	1,021
Overseas dividends	127	325	831
	1,389	1,299	2,957
Other income:
Deposit interest	4	10	12
	4	10	12
Total income	1,393	1,309	2,969

3 Return per share

The revenue return of 2.58 pence (31 October 2013 - 2.32 pence; 30 April 2014 - 5.71 pence) per ordinary share is calculated on net revenue on ordinary activities after taxation for the year of £1,029,000 (31 October 2013 - £928,000; 30 April 2014 - £2,277,000) and on 39,896,361 (31 October 2013 - 39,896,361; 30 April 2014 - 39,896,361) ordinary shares being the weighted average number of ordinary shares in issue during the period.

The capital loss of 1.65 pence (31 October 2013 - return of 6.82 pence; 30 April 2014 - return of 4.04 pence) per ordinary share is calculated on a net capital loss for the period of £658,000 (31 October 2013 - return of £2,719,000; 30 April 2014 - return of £1,612,000) and on 39,896,361 (31 October 2013 - 39,896,361; 30 April 2014 - 39,896,361) ordinary shares being the weighted average number of ordinary shares in issue during the period.

The total return of 0.93 pence (31 October 2013 - 9.14 pence; 30 April 2014 - 9.75 pence) per ordinary share is calculated on the total return for the period of £371,000 (31 October 2013 - £3,647,000; 30 April 2014 - £3,889,000) and on 39,896,361 (31 October 2013 - 39,896,361; 30 April 2014 - 39,896,361) ordinary shares being the weighted average number of ordinary shares in issue during the period.

4 Dividends

Ordinary dividends on equity shares deducted from reserves are analysed below:

	Six months ended 31 October 2014	Six months ended 31 October 2013	Year ended 30 April 2014
	£'000	£'000	£'000
2013 fourth interim dividend - 1.35p	-	539	539
2014 first interim dividend - 1.34p	-	535	535
2014 second interim dividend - 1.34p	-	-	535
2014 third interim dividend - 1.34p	-	-	535
2014 fourth interim dividend - 1.40p	559	-	-
2015 first interim dividend - 1.40p	559	-	-
	1,118	1,074	2,144

The Company has declared a second interim dividend in respect of the year ending 30 April 2015 of 1.40p (2014 - 1.34p) per ordinary share which was paid on 12 December 2014 to ordinary shareholders on the register on 21 November 2014.

5 Analysis of capital reserve

The capital reserve reflected in the Balance Sheet at 31 October 2014 includes losses of

£1,160,000 (31 October 2013 - gains of £7,193,000; 30 April 2014 - gains of £4,915,000) which relate to the revaluation of investments held at the reporting date.

6 Net asset value per share

	Six months ended 31 October 2014	Six months ended 31 October 2013	Year ended 30 April 2014
Net asset value per share	£'000	£'000	£'000
Attributable net assets (£'000)	56,631	58,206	57,378
Number of Ordinary shares in issue	39,896,361	39,896,361	39,896,361
Net asset value per Ordinary share (p)	141.95	145.90	143.82

7 Half-Yearly Financial Report

The results for the six months ended 31 October 2013 and six months ended 31 October 2014, which have not been reviewed by the Company's auditors pursuant to the Auditing Practices Board guidance on "Review of Interim Financial Information", constitute non-statutory accounts as defined in Sections 434 - 436 of the Companies Act 2006. The financial information for the year ended 30 April 2013 has been extracted from the latest published audited financial statements which have been filed with the Registrar of Companies. The report of the auditors on those accounts contained no qualification or statement under Section 498 (2),(3) or (4) of the Companies Act 2006.

The report and accounts for the half-year ended 31 October 2014 will be posted to shareholders and made available on the website www.senecaim/sigt/.  Copies may also be obtained from the Company Secretary, R&H Fund Services Limited, 15-19 York Place, Edinburgh, EH1 3EB.

Principal Risks and Uncertainties

Risks are inherent in the investment process, but it is important that their nature and magnitude are understood so that risks, particularly those which the Company does not wish to take, can be identified and either avoided or controlled. The Board has established a detailed framework of the key risks that the business is exposed to, with associated policies and processes devised to mitigate or manage those risks. The principal risks faced by the

Company are set out below.

Investment and Strategy Risk: The Board is responsible for deciding the investment strategy to fulfil the Company's objectives and monitoring the performance of the Investment Manager. Inappropriate strategy, including country and sector allocation, stock selection and the use of gearing, could lead to poor returns for shareholders. To manage this risk the Board requires the Investment Manager to provide an explanation of significant stock selection decisions and the rationale for the composition of the investment portfolio at each Board meeting, when gearing levels are also reviewed. The Board monitors the spread of investments to ensure that it is adequate to minimise the risk associated with particular countries or factors specific to particular sectors. The Investment Manager also provides the Board and shareholders with monthly factsheets which include an investment commentary.

Market Risk: The Company's assets consist principally of listed equities and fixed interest securities and its greatest risks are in consequence market-related. In addition to ordinary movements in the prices of the Company's investments and the loss that the Company might suffer through holding investments in the face of negative market movements, the Company's use of gearing necessarily amplifies this risk. The Board seeks to mitigate this risk through the processes described in the paragraph above, monitoring the implementation and results of the investment process with the Investment Manager.

Financial Risk: The Company's investment activities expose it to a variety of financial risks that include market price risk, foreign currency risk, interest rate risk and liquidity and credit risk.

Earnings and Dividend Risk: The earnings that underpin the amount of dividends declared and future dividend growth are generated by the Company's underlying portfolio. Fluctuations in earnings resulting from changes to the underlying portfolio or changes in the tax treatment of the dividends or interest received by the Company could reduce the level of dividends received by shareholders. The Board monitors and manages this risk by considering detailed income forecasts prepared by the Investment Manager and Company Secretary at each Board meeting and when the quarterly dividends are declared.

Operational Risk: The Company relies upon the services provided by third parties and is reliant on the control systems of the Investment Manager and the Company's other service providers. The security and/or maintenance of, inter alia, the Company's assets, dealing and settlement procedures, and accounting records depend on the effective operation of these systems. These are regularly tested and monitored and are reported on at each Board meeting. An internal control report, which includes an assessment of risks, together with the procedures to mitigate such risks, is prepared by the Investment Manager and the Company Secretary and reviewed by the Audit Committee at least once a year. The Custodian, State Street Bank and Trust Company, produces an internal control report each year which is reviewed by its auditors and gives assurance regarding the effective operation of controls. A summary of this report is reviewed by the Audit Committee.

Regulatory Risk: The breach of regulatory rules could lead to a suspension of the Company's stock exchange listing or financial penalties. Breach of Sections 1158 to 1159 of the Corporation Tax Act 2010 could lead to the Company being subject to tax on chargeable gains. The Company Secretary monitors the Company's compliance with the Listing Rules of the UK Listing Authority and Sections 1158 to 1159 of the Corporation Tax Act 2010.  Compliance with the principal rules is reviewed by the Directors at each Board meeting.

Key Man Risk: The Company is substantially dependent on the services of key individuals working for its Investment Manager, namely Alan Borrows and Simon Callow. The loss of either or both of these individuals could have an adverse effect on the Company's performance.

Directors' Statement of Responsibilities in Respect of the Half-Yearly Financial Report

In accordance with Chapter 4 of the Disclosure and Transparency Rules, the Directors confirm that to the best of their knowledge:

• the condensed set of financial statements has been prepared in accordance with applicable UK Accounting Standards on a going concern basis, and gives a true and fair view of the assets, liabilities, financial position and net return of the Company;

• the half-yearly report includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the financial statements;

• the Directors' Statement of Principal Risks and Uncertainties shown above is a fair review of the principal risks and uncertainties for the remainder of the financial year;

• the half-yearly report includes a fair review of the related party transactions that have taken place in the first six months of the financial year; and

• in light of the controls and monitoring processes that are in place, the Company has adequate resources and arrangements to continue operating within its stated objective and policy for the foreseeable future.  Accordingly, the accounts continue to be drawn up on the basis that the Company is a going concern.

On behalf of the Board

Richard Ramsay

Chairman

16 December 2014

 

END

 

 

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