Good morning investment trust investors,
Contents
1. Overview for the week
2. Frostrow Events
3. Investment Themes
4. Sector data for the week
1. Overview for the week
Frostrow Capital are intending on putting out on the newswires a weekly recap of the investment trust news and themes seen. If it looks interesting for you, please subscribe to receive it:
https://www.investormeetcompany.com/frostrow-capital/register-investor
We all saw Butch Wilmore and Suni Williams bring an end to their period of being “stuck at work” for nine months with a splashdown landing off the coast of Florida (good job they weren’t landing at Heathrow!) fittingly marking the Spring Equinox period for us all also. Having left earth originally in June 2024, they may find life is a bit different though. They missed it all – Biden still in power and still running for the US Presidency, Trump’s assassination attempt, him winning the presidency and the tariff tantrum since then. Frankly, they may be looking to head back to space once they hear the update.
We have a little less ourselves to chew over this week thankfully. We saw the Gaza ceasefire end as Israel struck Hamas with a US blessing. In addition, there was a first call between Putin and Trump to, in theory, try to halt the Ukraine conflict. Debates about whether Trump actually won anything there or whether Putin has the upper hand are ongoing. At this stage though, it didn’t really lead to much progress there other than agreeing to fix up some US / Russia ice hockey matches. Talks continue today in Saudi Arabia.
Shifts in market sentiment and nervousness continue to manifest itself with the OECD lowering the UK's growth forecast to 1.4%, down from 1.7%. We further saw that UK Government borrowing was £10.7bn in February, higher than predicted by forecasters putting more pressure on Rachel Reeves for the Spring Budget next week, with UK Gilt yields marginally widening. In addition, the UK Bank of England held interest rates at 4.5%. Japan’s Central Bank kept interest rates on hold at 0.5% despite 4% inflation, as did the US Fed (range of 4.25%-4.5%). The US Federal Reserve said “Uncertainty around the economic outlook has increased."
Last week was a more sedate and positive week generally in terms of price moves though. US equities, which were previously red hot are slightly less so but closing the week up 0.2% (S&P 500 Index, at time of writing). Gold has been very strong, north of $3k per ounce, but other risk off assets such as Treasuries / Gilts have been weak as investors are concerned about slightly weaker growth and increased inflationary concerns. The FTSE All Share Index closed up 0.1%.
Drilling down into the investment trust sector, discounts on average narrowed a little, with most discount contraction seen in the REIT and renewables sectors. We note the news that Harmony Energy Income (HEIT LN) has agreed terms with Foresight Group for its assets to be sold to them. That has got the sector ‘charged up’, with HEIT up 21% this week, and GRID and GSF up 25% and 14% in sympathy. Foresight Solar Fund put out their full year results also we note and commented that “The Board is of the view that consolidation is likely to be a major feature in the sector in the year ahead. Directors are fully aware of the benefits that successful consolidation can deliver to Shareholders, and this forms a critical part of the ongoing strategic considerations."
At Frostrow, we had Temple Bar Investment Trust FY results to 31 December 2024 come out. So pleasing to see that it is possible for UK active management to be rewarding for shareholders in a UK closed ended fund. The FY dividend is up 17.3% but the Board is not finished there. They are proposing a revision to the dividend policy such that “This revised dividend policy would see the recent quarterly dividends declared by the Company of 3.0p per share rise to 3.75p per share, representing an annualised dividend yield of c. 5.0%, based on the share price at the time of writing." Further to that, Citywire have also increased the rating of the fund to AA now also. Have some of that!
2. Frostrow Events
Watch this space in forthcoming weekly editions to be updated soon with IMC events for Frostrow corporate clients
Frostrow Investor Relations team – Messrs Grant Challis, Neil Winward, Matt Burrows, Matt Norfolk-Clarke & Nicholas Todd
Please contact us on ir@frostrow.com
Do not be short of UK listed funds in 2025. Trump is just ‘getting started’, so are we. Now is not the time to sit on the side lines at all or invest along with everyone else.
Find us on the web: https://www.frostrow.com/
Find us on YouTube: https://www.youtube.com/channel/UCAptpfmx0HITqvlI68psd7Q
Check out our inaugural podcast also, released today: FROSTROW CAPITAL - Frostrow Talks Trusts - AI Podcast - InvestorMeetCompany
Frostrow Capital, bringing you high quality, differentiated product in a UK listed closed-ended form
3. Further investment themes evident in the investment trust sector this week include:
Discount Control
Plenty of share buyback announcements as per the norm (I counted on Thursday, 82 in total, for example).
Saba update
European Smaller Companies Trust HY results to 31 December 2024 (ESCT LN, European Smaller Companies, £741.2m mkt capn, 6.8% discount to NAV): Discussions with Saba remain ongoing; NAV TR -7.5% vs MSCI Europe ex UK Small Cap Index -3.8%; share price TR -1.6%; average discount 9.3% vs sector average 11%; HY dividend 1.45pps (same as 2023)
Achilles update
Achilles Investment Company (AIC LN, £55.6m mkt capn) noted the potential conflict of interest at Urban Logistics REIT (SHED LN) whereby Richard Moffitt, CEO of Logistics Asset Management LLP, the Investment Adviser, also holds an interest in M1 Agency LLP which has received over £6.3m in fees from the company. “On 4 and 5 March 2025, through the Board's adviser, Kinmont Advisory, Achilles urged the Board to ensure that no further fees are paid by Urban Logistics to M1 Agency LLP.” “Achilles formally requests that the Board of SHED confirm that, should Mr Moffitt in fact proceed with the sale of his partnership interest in M1 Agency LLP, there is no understanding or agreement for any future payments to be made to M1 Agency LLP.
Urban Logistics shareholder update (SHED LN, Property UK Logistics, £593.5m mkt capn, 19.7% discount to NAV): The Board "is well advanced in the process of conducting meetings with a significant number of the Company's larger Shareholders. Dialogue is being carried out on the internalisation proposal across Shareholders collectively representing c.50 per cent of the issued share capital. The Board notes the statement from Achilles Investment Company Limited ("Achilles") on 17 March 2025. In its statement, Achilles referred to its intention to write to shareholders regarding its views on the Urban Logistics internalisation proposal. The Board encourages Achilles to publish this as soon as possible so that its views are clearly in the public domain and can be part of the consultation process. A Shareholder update will follow completion of the consultation exercise." "Richard Moffitt agreed in September 2024 with the other members of M1 Agency LLP ("M1") that he would retire from M1 as he no longer has any role in the business and that he would not receive any share of M1 profits generated after 30 September 2024. The Board of Urban Logistics has confirmed that position with M1". "Urban Logistics does not intend to comment on every piece of press speculation or Achilles commentary during the Shareholder consultation period. However, Urban Logistics believes that a statement made in the Achilles announcement of 17 March 2025 should be corrected."
Continuation
Schroder Asian Total Return FY results to 31 December 2024 (ATR LN, Asia Pacific, £436.8m mkt capn, 4.3% discount to NAV): NAV TR +13.0% vs MSCI AC Asia Pacific ex Japan index +12.1%; share price TR +12.6%; the ninth year in the last decade that the Company has outperformed the Reference Index. The Board aims to achieve a discount of no more than 5% in normal market conditions. The discount at which the Company's share price trades widened slightly during the year from 4.6% at the start of the year to 5.1% at the end of December 2024. A total of 3,709,666 shares were repurchased during 2024, amounting to 3.8% of the issued share capital at the start of the year (at an average discount of 6.6%). For the first time since 2021 the Company has paid a performance fee in addition to the management fee of 0.65% of gross assets less cash and cash equivalents. The Board has committed to put to shareholders a resolution at the AGM that the Company continue as an investment trust for a further three years.
Fidelity European Trust FY results to 31 December 2024 (FEV LN, Europe, £1,649.2m mkt capn, 4.3% discount to NAV): NAV TR +0.5% vs FTSE World Europe ex UK Index + 3.0%; share price TR -0.1%; 9.1p DPS (+10.3% 2023); "...following seven years of outperformance up to and including 2023, your Portfolio Managers, Sam Morse and Marcel Stötzel, had a trickier time in 2024." "...slight widening in the discount to NAV from 7.3% at the start of the year to just below 8.0% at the year end." "...heavy potential defence spending could help to lift the European economy out of the doldrums, with the fiscal framework possibly more broadly loosened." Net gearing 11.3% via CFDs. "In accordance with the Articles of Association, your Company is subject to a continuation vote every two years. The next continuation vote will take place at this year’s AGM on 8 May 2025. At the last continuation vote in May 2023, it was pleasing to see strong evidence of shareholder support from the 99.86% of votes cast in favour of continuation of the Company. The enfranchisement of shareholders is a key advantage for investment trust investors over open-ended company investors, and we would urge all shareholders to use their vote at the forthcoming AGM."
Amended dividend policy
Temple Bar Investment Trust FY results to 31 December 2024 (TMPL LN, UK Equity Income, £856.7m mkt capn, 3.6% discount to NAV): NAV TR +19.9% vs FTSE All Share Index TR +9.9%; share price TR +19.1%; DPS 11.25pps (+17.2% 2023); "In recent years, companies have been altering the nature of their distributions to shareholders. Increasingly, they have been looking to provide investors with a return via share buybacks either alongside or instead of dividends. Unlike dividends, which are recognised as revenue in your Company’s accounts, and which underpin the dividends we pay, buybacks by portfolio companies have not contributed to the distributions paid to our shareholders. In order to address this distributional shift in the behaviour of portfolio companies, Temple Bar is proposing to amend its dividend policy to enhance the dividend it pays. This revised dividend policy would see the recent quarterly dividends declared by the Company of 3.0p per share rise to 3.75p per share, representing an annualised dividend yield of c. 5.0%, based on the share price at the time of writing." Ian Lance and Nick Purves, lead PMs say "The consensus view today is that American ‘exceptionalism’ will continue, suggesting to us that expectations are already high and that the potential for disappointment is great. The UK stock market in contrast contains a good number of neglected companies, where the bar of expectation is much lower, and where the likelihood of positive surprise is much greater. Accordingly, we believe that the long-term outlook for investment returns in the UK stock market is better." Citywire have also increased the rating of the fund to AA now also
Debt reduction / refinance
Octopus Renewables Infrastructure (ORIT LN, Renewable Energy Infrastructure, £359.5m mkt capn, 36.6% discount to NAV) has extended the term of its RCF from February 2026 to June 2028 and reduced its size from £270.8m to £150m resulting in a cost saving of about £850k pa
Schroder European Real Estate IT Qtr end NAV 31 December 2024 (SERE LN, Property Europe, £88.1m mkt capn, 35.1% discount to NAV): NAV TR -0.6%. First interim dividend 1.48cps declared, 100% covered by EPRA earnings. "Agreed the disposal of the Frankfurt grocery investment for €11.80 million, in line with the 30 September 2024 valuation. The sale is expected to complete by 31 March 2025". "Post period end, the Company also completed the sale of its 50% stake in the Metromar joint venture. These two disposals further strengthen the balance sheet, decreasing the net loan-to-value ("LTV") ratio from 25% to approximately 20%, with an available cash balance of approximately €25 million"
Literacy Capital FY results to 31 December 2024 (BOOK LN, Private Equity, £237.6m mkt capn, 19.6% discount to NAV): NAV 492.8p, -1.5%; share price TR -5.4%; NAV, adjusted for the post-period end event (Halsbury Travel's bolt-on acquisition), of 499.2p per ordinary share, with adjusted net assets of £300.4m. £41.1m cash invested and £30.1m cash received. "further refinancings underway in early 2025 to fund new investment activity and pay down RCF debt"
LondonMetric Property (LMP LN, £3,680m mkt capn): has been BBB+ rating by Fitch with a Stable outlook and a senior unsecured rating of A-. "The senior unsecured rating applies to LondonMetric's existing US Private Placement notes in issue."
Globalworth Real Estate Investments (GWI LN, £727.4m mkt capn): "Standard & Poor's has revised Globalworth's long-term issuer credit rating to 'BB' with a Stable outlook (from 'BB+' with a Negative outlook), and its issue rating on its senior unsecured bonds to 'BB-' from 'BB' citing a low interest coverage ratio. The Company remains committed to implementing strategic initiatives aimed at optimising its existing property portfolio and operational efficiencies to improve its interest cover ratio over time.
Material change to investment policy
Schroder British Opportunities Trust (SBO LN, Growth Capital, £49.5m mkt capn, 39.8% discount to NAV): proposing a material change to the investment policy such that the Company only focuses on private investments. "As at 11th March 2025, the Company's NAV was £82.0 million. The portfolio was split approximately 23.5% and 70.0% in public equity and private equity investments, respectively, and 6.5% held in cash. Should shareholders vote to approve the Proposed Material Change, it is expected that the Company's public equity investments will be transitioned to cash, cash equivalent investments or other instruments as permitted by the Company's investment policy, pending reinvestment into private equity investments." "Contingent on approving the Proposed Material Change, the Board is proposing to bring forward the Winding-Up Resolution, to the first quarter of 2027. In line with the provisions in the articles, the Board will consult with shareholders ahead of this vote. If the Proposed Material Change is accepted by Shareholders, it is expected the Company will be fully deployed in private equity investments by the end of 2026."
Shareholder consultation
Crystal Amber HY results to 31 December 2024 (CRS LN, UK Smaller Companies, £78.6m mkt capn, 38.0% discount to NAV): NAV TR +2.4% vs Numis Small Cap Index +3.8%; £1.4m spent on share buybacks. "The Investment Manager has consistently stated that the strategic value of De La Rue is far greater than its operational value and is fully supportive of De La Rue conducting its formal sale process. The Fund is confident that this will lead to a very substantial cash return to its shareholders." "The Fund has also prepared the way for more flexible returns of capital through the ability to create B shares, as approved by shareholders in October 2024." "In my last Chairman's Statement, I wrote that by the end of the first quarter of 2025, it was intended that the Board would consult the Fund's larger shareholders and/or make arrangements to seek shareholder approval on the future strategy of the Company. Following publication of today's results, that consultation will commence but will necessarily be conducted in the light of both the expected regulatory approval at MMI and further clarity on the quantum and timing of cash returns from De La Rue, both of which will be important in maximising returns to shareholders."
M&A
Harmony Energy Income Trust (HEIT LN, Renewable Energy Infrastructure, £178.5m mkt capn, 14.9% discount to NAV) has reached agreed terms with Foresight Group LLP for a potential acquisition of HEIT at 84pps. “Having carefully considered the Possible Cash Offer with its advisers, the HEIT Board has concluded that the Possible Cash Offer, on balance, delivers a superior outcome for shareholders [vs the ongoing asset sale process]. As a result, the HEIT Board has indicated to Foresight that, should a firm offer be made on the financial terms set out above, it would be minded to recommend such an offer to HEIT shareholder.” Foresight has received irrevocables totalling approx. 12% of HEIT’s ISC and the PUSU deadline is 14 April 2025.
Consolidation as a theme…?
Foresight Solar Fund FY results to 31 December 2024 (FSFL LN, Renewable Energy Infrastructure, £456.7m mkt capn, 27.2% discount to NAV): 8pps 1.4x covered by earnings (despite low irradiation levels); £66.5m returned via buybacks and dividends; target dividend for 2025 of 8.1pps (+1.25% 2024); Australian portfolio sale continues. " the Board and the Investment Manager have agreed to extend the Company's divestment programme, earmarking at least another 75MW of operational assets for disposal." "With certain Shareholders seeking a material return of capital, the Board envisages that proceeds from these additional sales should be used to facilitate enhanced liquidity for those Shareholders seeking it." "The Board is of the view that consolidation is likely to be a major feature in the sector in the year ahead. Directors are fully aware of the benefits that successful consolidation can deliver to Shareholders, and this forms a critical part of the ongoing strategic considerations."
Results / updates
Bellevue Healthcare Trust (BBH LN, Biotechnology & Healthcare, £304.2m mkt capn, 6.4% discount to NAV) FY results to 30 November 2024: NAV TR +11.1% vs MSCI World Healthcare Index +11.5%; share price TR +13.7%. “Your Board is determined to try and steer a fair course between redemptions and buybacks whilst ensuring the long-term viability of the company. Uses share buybacks and an annual redemption facility in regard to discount control. "Your Board is determined to try and steer a fair course between redemptions and buybacks whilst ensuring the long-term viability of the Company." Kate Bolsover to be Chair
F&C Investment Trust FY results to 31 December 2024 (FCIT LN, Global, £5,311.8m mkt capn, 6.9% discount to NAV): NAV TR +21.0% vs FTSE All-World Index +19.3%; share price TR +16.9%; FY dividend 15.6pps (+6.1% 2023); "Following our re-admission to the FTSE100 index in 2022, I am pleased to report that we not only maintained this position, but we actually rose within the index, cementing our position as one of the UK's leading listed companies. As noted in our 2023 Annual Report, we have previously been a FTSE100 constituent, but this current period is the longest that we have remained in the index" OCR 0.45% (0.49% 2023). Gearing 8.6% (9.9% end 2023). "Our robust corporate structure and long-term perspective on investment opportunities is one of our great strengths. Our long-dated senior notes provide fixed, low-cost borrowings from which we can fund investments. Our dividend, rising for a fifty-fourth consecutive year, is fully covered. We continue to hold significant revenue reserves, which should help us to continue to meet our objective of delivering above inflation increases in the dividend over the coming years. Our Private Equity portfolio, mainly focused on mid-market opportunities, remains well positioned, after a relatively fallow period, to benefit from future growth."
Tufton Assets (SHIP LN, Leasing, £310.2m mkt capn, 27.0% discount to NAV) H1 results to 31 December 2024:NAV TR +6% to $1.593, “primarily driven by operating performance. The unwind of portfolio negative charter value during the period outweighed the fall in charter-free value.” Support for the continuation vote “is interpreted as a show of confidence in the company and the principles of the mid-term strategy review and capital allocation policy which [the Board] will continue to prioritise.”
Manchester & London IT HY results to 31 January 2025 (MNL LN, Global, £266.8m mkt capn, 11.4% discount to NAV): NAV TR +5.8% vs MSCI UK Investable Market Index +4.1%; "It should be noted that the average discount for the Company for the last 5 years sits at ~13.5 per cent (Source: Bloomberg) which, considering the free float of the Company is less than £150m, could be argued as ‘in line’ with expectations (if not ideal)." "Make no mistake of this, the West is now in a cold war with China and the Chinese are our enemy." "The next decade could be one of the most interesting eras for technology investing ever. It is of a low probability but still possible that we could see Ai completely transform the global economy in the short period of a decade whereby the effective Total Addressable Market of Software 2.0 sees a greater than 10 fold growth."
Partners Group Private Equity FY results to 31 December 2024 (PEY LN, Private Equity, £705.3m mkt capn, 32.5% discount to NAV): NAV TR +11.4%; share price TR +10.0%; 5% of NAV paid as dividend; Eur144m of distributions received (Eur93m from exits); Invested a total of Eur31m; Eur140m credit facility in place and available but not utilised. Cash of Eur19m
JPMorgan Claverhouse FY results to 31 December 2024 (JCH LN, UK Equity Income, £411.4m mkt capn, 5.6% discount to NAV): NAV TR +9.2% vs FTSE All Share Index TR +9.4%; share price TR +8.3%; "...the Company's NAV has risen in absolute terms over three, five and ten years, and while performance has lagged the benchmark over three and five year periods, annualised returns have matched the benchmark's annualised return of +6.1% over ten years. This has reflected a period that included a global pandemic, a generational inflationary spike and a war on the European continent." As previously announced, in the period, " Anthony Lynch and Katen Patel joined Callum Abbot as new Portfolio Managers for the Company, effective from 1st July 2024." "While they have maintained a focus on companies already offering high yields, they have also increased the portfolio's exposure to companies across the whole of the FTSE All Share Index, enhancing the dividend growth opportunity of the portfolio. As a result of this dual focus, portfolio exposure to some traditional high yielding sectors such as utilities and miners has been reduced, in favour of positions in a broader range of sectors, across the market cap spectrum, where the managers believe medium term growth prospects are more attractive." 7.6% geared
Orderly realization / wind down news
Jupiter Green IT (JGC LN, Environmental, £46.5m mkt capn): PWC appointed as liquidators. JGC residual NAV of 247.10pps and Ecology Price Per Unit: 601.53 pence
Keystone Positive Change (KPC LN, Global, £131.8m mkt capn, 7.0% discount to NAV): ordinary shares to be disabled and to move towards liquidation in the coming weeks. Monies likely to be transferred to investors in week commencing 7 April. Company subsequently announced that shareholders voted for the scheme of reconstruction and members' voluntary winding-up of the Company. 30.3% of shareholders voted for Shares in the Baillie Gifford Positive Change Fund and 69.7% voted for cash
Weiss Korea Opportunity Fund (WKOF LN, Country Specialist, £97.0m mkt capn, 4.1% discount to NAV) has published a circular in relation to its proposed managed wind-down and will hold an EGM at 1400 on 14 April 2025 at which shareholders will be asked to vote on the new investment objective and policy. "Under the proposed Managed Wind-down process, the Company will be managed with the intention of realising all of the assets in its Portfolio in an orderly manner that aims to achieve a balance between seeking to obtain the best achievable value for those assets and making timely returns of capital to Shareholders. The Proposal is conditional on the passing of the Resolutions by Shareholders at the EGM."
Change of management / name / ticker
VinaCapital Vietnam Opportunity Fund (VOF LN, Country Specialist, £611.5m mkt capn, 22.6% discount to NAV): Khanh Vu has been appointed as Lead Portfolio Manager with immediate effect. Mr Vu joined VinaCapital in 2010 and has been an integral part of the team managing VOF since then. He is also a member of VOF's investment committee.
Henderson Smaller Companies (HSL LN, UK Smaller Companies, £572.3m mkt capn, 10.5% discount to NAV): Neil Hermon has decided to retire from Janus Henderson and the industry on 30 September 2025. "Indriatti van Hien, Co-Fund Manager, will continue to manage the portfolio according to its fundamental ethos, as she and Neil have successfully done for the past 9 years." "Neil will remain in his current role until his retirement, working closely with Indriatti and the team to ensure a smooth transition and handover of responsibilities"
Disposals
Schroders Capital Global Innovation Trust (INOV LN, Growth Capital, £100.3m mkt capn, 38.4% discount to NAV): holding Araris Biotech, a Swiss biotechnology company developing next-generation antibody drug conjugates, has entered into an agreement to be acquired by Taiho Pharmaceutical Co. at a price of $400m upfront, with the potential for additional milestonee payments of up to $740m. Acquisition expected to be completed in first half 2025
Biopharma Credit (BPCR LN, Debt Direct Lending, £1,010.4m mkt capn, 10.2% discount to NAV): Paratek Pharmaceuticals to acquire OptiNose for up to $330m, likely to close in mid 2025. "The Company has a US$71.5 million investment in a US$130 million senior secured loan to OPTN, which would be prepaid upon the closing of the Transaction."
4. Sector data this week (AIC data, as at Thursday's close)
Equity Capital Markets
M&G Credit Income placing (MGCI LN, Debt Loans & Bonds, £149.2m mkt capn, 2.5% premium to NAV): confirms the issue price of 95.13 pence per share representing a premium of 1.0% to the cum-income NAV per Ordinary Share as at 28 February 2025. Company subsequently announced it raised £6.3m in the placing.
Ex Dividend
BRWM 6.5pps, PPET 4.4pps, HGT 3.5pps, RICA 2.85pps, DIVI 1.05pps, AUSC 3.7pps, GSF 1pps, SMIF 0.5pps, GWI 9cps, NBDG 3.17pps, OCI 2.25p
Finally we have more daylight hours to enjoy than darkness. Enough to make anyone smile for World happiness day. Hopefully we are still smiling after the Spring Budget next week.
Neil
Frostrow Investor Relations team – Grant Challis, Neil Winward, Matt Burrows, Matt Norfolk-Clarke, Nicholas Todd
Regards
Frostrow Capital LLP
Frostrow Capital LLP,
25 Southampton Buildings,
London WC2A 1AL
020 3008 4912
Disclaimers:
Although all emails sent and received by Frostrow Capital LLP are passed through virus scanning technologies, we cannot guarantee that emails (including attachments) are virus free. You should take whatever measures you deem appropriate within your organisation to ensure maximum protection from potential viruses. Frostrow Capital LLP accepts no liability for any loss or damage which may be caused by software viruses.
This message (including any attachments) is confidential and is for the intended recipient only. If you are not the intended recipient, please inform the sender and delete any copies from your system. Internet communications are not secure and therefore Frostrow Capital LLP does not accept legal responsibility for any of the contents of this message (including any attachments).
Information relating to any company or security is for information purposes only and should not be interpreted as a solicitation to offer to buy or sell any security or to make any investment.