Good morning investment trust investors, 

Contents

1. Overview for the week
2. Frostrow Retail Investor Events
3. Investment Themes
4. Sector data for the week

1. Overview for the week

Let’s be frank, this was a week of real ‘whiplash’ volatility and it remains to be seen whether the Federal Reserve end up saying this is “not quite my tempo.” China was really the only nation that chose to take a hard stand against the tariffs, although Europe had brought in a staggered and more measured push back. While others were publicly making concessions and sending delegations to negotiate, China had clearly calculated that not being seen to be bullied is worth the cost that retaliation would bring. In the early part of the week, Trump started to indicate that he was using the tariffs to negotiate with countries. He was stirring things up saying “I’m telling you, these countries are calling us up kissing my ass….it’s our turn to do the ripping, “ whilst China were saying “when challenged, we will never back down.” As the tariffs kicked in and equities fell, in some cases, quite dramatically, it started to look like a test of who blinks first between the US and China. With US equities falling, that was fine for Trump, but it was only when US Treasuries sold off (particularly at the long end of the curve) that he would have known he was potentially heading to a Liz Truss 2.0 moment. He knows the US bond market is his (only) boss. He blinked and pulled all tariffs to 10% for 90 days except those for China, which he upped, again, with markets recovering significantly, before another period of nervousness came again. In amongst this, the VIX Index went as high as 57 and then back down again.

Net net, the FTSE All Share Index is down circa 0.9% in the week and S&P 500 up 3% (at time of writing), but the ‘whiplash’ volatility would have been a major problem for anyone deciding to trade in that time, and also for hedge funds, who, according to the ‘Economist’ were potentially getting squeezed with margin calls and acting like they were ‘picking up nickels in front of a steam roller” (the ‘steam roller’ being the US bond market). The real questions now are not just what happens with China, what happens in 90 days, but also, knowing Trump can issue a tweet and move markets full circle, will investors and corporates invest? As we stand, the US are now up to 145% tariffs on Chinese goods and China have pushed US goods to 125% tariffs. As a final general comment, it is very rare to see the US$ and US Treasuries fall together. We saw it this week and some pundits believe it as an indicator of monies moving out of the US back to their domestic markets. The “R” word has also been used a little more in the newspapers.

The investment trust sector has not escaped this volatility. Confidence may take a little time to come back and certainly investors will be counting the days to the Easter break. Assura shareholders will be feeling somewhat happy, having received a Board recommended cash offer come through from KKR and Stonepark Partners. At Frostrow, we had full year results from Aurora UK Alpha which is well positioned post its recent combination with Artemis Alpha Trust as a leading UK Equity listed fund, together with a compelling investment approach and fee structure.

2. Frostrow Retail investor events - will be coming soon

Augmentum Fintech (AUGM LN, Financials & Financial Innovation, £133.5m mkt capn, 51.4% discount to NAV)
Aurora UK Alpha (ARR LN, UK All Companies, £254.4m mkt capn, 9.5% discount to NAV)
Biotech Growth Trust (BIOG LN, Biotechnology & Healthcare, £173.4m mkt cap, 9.0% discount to NAV)
CC Japan Income & Growth Trust (CCJI LN, Japan, £231.1m mkt capn, 9.9% discount to NAV)
CQS Natural Resources Growth & Income (CYN LN, Commodities & Natural Resources, £110.7m mkt capn, 5.8% discount to NAV)
Custodian Property Income REIT (CREI LN, Property UK Commercial, £311.2m mkt capn, 28.3% discount to NAV)
Ecofin Global Utilities (EGL LN, Infrastructure Securities, £197.8m mkt capn, 11.6% discount to NAV)

Finsbury Growth & Income Trust (FGT LN, UK Equity Income, £1,231.6m mkt capn, 6.8% discount to NAV)

MIGO Opportunities Trust (MIGO LN, Flexible Investment, £61.7m mkt capn, 3.1% discount to NAV)
Mobius Investment Trust (MMIT LN, Global Emerging Markets, £136.2m mkt capn, 5.6% discount to NAV)
Temple Bar Investment Trust (TMPL LN, UK Equity Income, £765.6m mkt capn, 2.6% discount to NAV)
Worldwide Healthcare Trust webinar (WWH LN, Biotechnology & Healthcare, £1,350.9m mkt capn, 12.3% discount to NAV)

Please contact us on ir@frostrow.com

Trump is doing his best to re-set the world trade order and in so doing will potentially re-set the investment landscape. What has worked for the last few years (ie US Equity trackers, passive investments and short dated bonds) will not necessarily be the best idea in the coming periods. The investment trust sector in the UK represents one third of the FTSE 250 Index and half of the FTSE Small Cap Index. There are highly valuable listed fund vehicles available to use for savings and investment today, as there have been for the last 150 + years.

Find us on the web:  https://www.frostrow.com/

Find us on You Tube:  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

Polar Capital Global Financials Trust (PCFT LN, Financials & Financial Innovation, £561.0m mkt capn, 3.6% discount to NAV): held its AGM on 10 April. 100% tender opportunity for shareholders offered (next one in June 2030 and every 5 years thereafter) at no less than NAV less 1%. Review of management fees such that from 1 July 2025 the rate falls from 70bps to 65bps. "The basis of calculation for both tiers will be amended so that 50% is calculated by reference to the NAV and 50% is calculated by reference to the lower of market capitalisation and NAV. Currently, the base management fee is calculated purely by reference to the NAV. The performance fee element of the fee structure will be completely removed." "the above proposals will be conditional on the size of the Company's net assets following the 2025 Tender Offer. Should the outcome result in a size which, in the Board's opinion, is too small to be deemed viable to continue as a closed ended investment trust, the Board will put forward proposals for the liquidation of the Company, together with the option of an appropriate rollover vehicle."

M&A

Assura (AGR LN, £1,550m mkt capn): AGR received a revised indicative proposal from Primary Health Properties and the Board is in the process of carefully considering it. Firm intention required from PHP by 5pm on 5 May (or walk away). The Board's objective is to maximise value for AGR shareholders. The Company subsequently announced that it has considered the Primary Health Properties (PHP LN) possible share and cash offer and “concluded that it is not at a level that is sufficient to be recommended to shareholders. The Board has therefore rejected the PHP proposal unanimously.” The AGR Board subsequently announced that they have reached agreement on terms of a recommended cash offer by a Bidco controlled by KKR and Stonepeak Partners for 49.4pps. The offer value represents 100% of Assura's EPRA NTA of 49.4p as at 30 September 2024. "... the Assura Directors intend to recommend unanimously that Assura Shareholders vote in favour of the Scheme at the Court Meeting and that Assura Shareholders vote in favour of the Special Resolutions to be proposed at the Assura General Meeting."

HydrogenOne Capital (HGEN LN, Renewable Energy Infrastructure, £26.0m mkt capn, 77.6% discount to NAV) investment adviser “HydrogenOne Capital confirmed that discussions with Cordiant Capital Inc regarding a potential transaction to purchase the investment adviser have not reached an agreement and that the long stop for the proposed transaction has passed.”

Urban Logistics (SHED LN, £575.9m mkt capn): notes the recent press speculation and confirms that it has received a preliminary, indicative proposal from LondonMetric Property plc regarding a possible offer for the Company. The Board is currently reviewing the Proposal with its advisers. There can be no certainty that any offer will be made nor as to the terms of any such offer. A further announcement will be made as appropriate

Continuation vote

Nippon Active Value Fund FY results to 31 December 2024 (NAVF LN, Japanese Smaller Companies, £349.4m mkt capn, 2.3% discount to NAV): NAV TR +15.2% vs MSCI Japan Small Cap Index £ +6.8%; "Whilst the Company has had very strong performance, the Board is mindful that the Company's shares have been trading at a discount to net asset value at times, during the year under review, and is considering all aspects of capital allocation which could assist in managing any discount. The Board will take Shareholder views into account." Continuation vote at AGM 5 June (and every two years thereafter)

Aurora UK Alpha FY results to 31 December 2024 (ARR LN, £254.3m mkt capn, 9.5% discount to NAV): NAV TR -4.3% vs FTSE All Share Index TR +9.5%; share price TR -5.5%; "Top positive contributors in the year were Castelnau Group, Netflix and Lloyds Banking Group. Frasers Group and Barratt Redrow were the most significant detractors." "The Company's most notable event in the year was the successful combination with Artemis Alpha Trust plc ("ATS"). The project was concluded on 29 November 2024, when the Company acquired approximately £101 million of net assets from ATS in consideration for the issue to ATS shareholders of 38,369,114 new shares in the Company. The enlarged Company continues to be managed by Phoenix Asset Management Partners Limited ("Phoenix") using the same deeply researched, concentrated, value-based approach as before. The scale of the enlarged Company is expected to improve secondary market liquidity of the shares and reduce the ongoing charges, since fixed costs are spread over a larger asset base. The Board is grateful to our shareholders and advisers, in particular Phoenix, for supporting the project. The Company, newly renamed Aurora UK Alpha plc, has a clearly differentiated proposition and this transaction leaves the Company in a strong position to further build its shareholder base and scale." "The portfolio will remain concentrated, and as at 31 December 2024 the top 5 stocks amounted to 61% and the top 20 stocks amounted to 89% by value of gross assets." Triennial continuation vote, with next vote at the AGM on 11 June 2025

Results / updates

AVI Japan Opportunity Trust (AJOT LN, Japanese Smaller Companies, £207.8m mkt capn, 7.3% discount to NAV) FY2024 results to 31 December 2024: NAV TR +20.9% vs MSCI Japan Small-Cap Index +6.2%. Share price TR +19.9%; Full year dividend per share of 2.2p (2023 1.7pps);

Sirius Real Estate (SRE LN, £1,230m mkt capn) trading update for financial year ended 31 March 2025: +12.8% YOY increase in rent roll (+6.3% LFL), “driven by a combination of strong organic growth and the ongoing successful asset acquisition programme.” "We believe the Group is well placed to benefit from the positive impact of the recently announced German defence and infrastructure spending plans, which are widely expected to provide a clear catalyst for economic growth in Germany with a read across to the U.K."

Unite Group (UTG LN, £4,020m mkt capn) trading update and valuation as at 31 March 2025: 75% of beds sold for 2025/26 (2024/25: 84%) in-line with expectations; on track to deliver 4 – 5% rental growth and 97 – 98% occupancy for AY2025/26. “Rental growth driving valuation increases in Q1 (USAF: +0.7%, LSAV +0.8%). Property yields were stable over the quarter at 5.2%.

Mercantile Investment Trust (MRC LN, UK All Companies, £1,557.8m mkt capn, 9.9% discount to NAV) FY results to 31 December 2025: NAV TR +14.1% vs FTSE All Share +12.3%, with outperformance primarily driven by stock selection. “The discount at which the Company's shares trade versus its NAV with debt at fair value narrowed over the review period to finish the year at 9.2% (2024: 12.6%). The Board is cognisant that it is in shareholders' interests that the Company's share price should not differ excessively from the underlying NAV under normal market conditions. In the Board's view, the level of the share price's discount to NAV is unwarranted, so during the financial year the Company repurchased 35,388,374 shares, amounting to 3.7% of the shares in issue.” Ongoing Charge Ratio 0.48%; Total dividends per share 7.9p (+3.3% 2023); gearing 14.1%

Merchants Trust FY results to 31 January 2025 (MRCH LN, UK Equity Income, £737.7m mkt capn, 3.3% discount to NAV): NAV TR +13.5% vs FTSE All Share Index TR +17.1%; FY dividend 29.1pps (+2.5% 2023); Gearing at 11.9%; "Shareholders will appreciate that one of the key advantages of the investment trust structure is its ability to smooth income distributions-drawing on reserves during challenging market conditions and replenishing them in stronger periods."

US Solar Fund (USF/P LN, Renewable Energy Infrastructure, £103.1m mkt capn, 47.4% discount to NAV) FY results to 31 December 2024: NAV TR -13.4% to $0.63, driven by discount rate widening (discount rate now 10.8%), updates to operating cost assumptions. “During the year, the Board delivered on its commitment to return capital to shareholders, via an $18.6m tender offer. The Board has resized the Company's revolving credit facility, and reduced the dividend target on an interim basis to ensure the balance sheet remains robust. Following a detailed analysis of options available to the Company to refinance its existing senior debt facilities, the Board is taking steps to conclude a refinancing by the end of April 2025. The Board and Investment Manager will continue to monitor the market for comparable sales of performing operational portfolios, with a view to realising value from the Company's assets when the time is right."

Wind up news

abrdn European Logistics Income (ASLI LN, Property Europe, £221.7m mkt capn, 27.4% discount to NAV) FY2024 results to 31 December 2024: NAV TR +0.9% to €0.908; Share price TR 0.1%; Company in managed wind down since May 2024. “Initial portfolio sales have provided encouraging validation of asset valuations, and the manager remains optimistic regarding both the portfolio quality and the level of buyer interest. However, recent US tariff impositions could introduce potential volatility within the sector.” As part of the sales process, “due diligence remains ongoing for three portfolio assets totalling over 90,000 square metres. The vast majority of the portfolio by value is now being actively marketed and is in various stages of the disposal process, with several assets expected to enter exclusivity in the coming months.” "Further returns of capital via the B Share route will be communicated via Company announcements as sufficient funds become available for meaningful distributions."

Management agreement novation

India Capital Growth (IGC LN, India, £132.0m mkt capn, 7.1% discount to NAV): the current Investment Advisory Agreement between ODAM and Saltoro Advisers Pte Ltd, an independent company owned and operated by Gaurav Narain (the Company's existing principal adviser) and his team in Mumbai, has been novated from ODAM to River Global Investors LLP, a River Global subsidiary which provides portfolio management services for SVM, with unchanged terms, also effective from 9 April 2025. Gaurav Narain remains as the Company's principal adviser and the Board do not anticipate any change in the Company's investment strategy or approach as a result of these changes which are intended simply to streamline and rationalise the Company's management.

Acquisitions / Disposals

Literacy Capital (BOOK LN, Private Equity, £237.0m mkt capn, 19.8% discount to NAV) has completed its investment into Langford’s, a manufacturer and supplier of meat products in Wales.

LondonMetric Property (LMP LN, £3,670m mkt capn) has sold five assets for an aggregate consideration of £40.4m, reflecting a 4.3% NIY, in-line with end-September 2024 book values. "The sales proceeds will be reinvested into our core sectors and assets that have superior income and rental growth prospects." "In light of the Board's keen focus on corporate governance, the Board announced its intention to offer the Exit Opportunity on an annual basis (rather than biennially), on that same discretionary basis, from October 2024. The Board therefore expects to offer another Exit Opportunity to Shareholders in October 2025 and every twelve months thereafter." LMP subsequently announced that it has acquired a “ long-let M&S logistics warehouse for £74m, reflecting a NIY of 5.65%.” “The 390,000 sq ft regional logistics warehouse is pre-let to M&S on a 20-year lease with five yearly upward only rent reviews linked to CPI” and LMP will receive a funding coupon of 5.5% during the development (expected to complete in Summer 2026).

Molten Ventures (GROW LN, £445.8m mkt capn): ZOZO has acquired portfolio company Lyst, a leading global fashion shopping platform. The transaction is expected to complete before the end of April 2025, delivering expected proceeds of c.£9 million to Molten, 7% above the last reported Net Asset Value (NAV). "The Group will continue to review capital allocation, balancing the pipeline of new investment opportunities with the ability to drive returns to shareholders through share buyback programmes, while maintaining sufficient reserves."

Portfolio news

Pershing Square Holdings (PSH/D LN, North America, £6,124.8m mkt capn, 28.8% discount to NAV) manager PSCM “further extended the term of its standstill agreement with Howard Hughes Holdings (HHH US) to facilitate ongoing discussions regarding the proposal previously announced by Pershing Square on 18 February 2025 and potential alternatives,” from 1700 ET on 7 April 2025 to 1700 ET on 15 April 2025.

Ruffer Investment Company monthly report March 2025 (RICA LN, Flexible Investment, £853.4m mkt capn, 3.0% discount to NAV): "Looking beyond the near-term risks, we have a growing conviction that we are witnessing a regime change in markets and that we may be passing the point of no return for US exceptionalism. Although the market could swing back to the US-centric narrative of 2023 and 2024, we doubt such a swing would last. Our view has been that covid marked a regime shift from monetary policy dominance to fiscal policy dominance, and that view has only been strengthened by recent events in the US and Europe. The flow of global government spending - which has supercharged US markets in recent years - is being diverted. Investors have a significant overweight in US assets and the dollar predicated on long-term US exceptionalism. It will take time for institutions to alter their strategic asset allocations, but we believe the investment supertanker has started to turn."

4. Sector data this week (AIC data, as at Thursday's close)

Equity Capital Markets

Chelverton UK Dividend Trust (SDV LN, UK Equity Income, £28.5m mkt capn, 1.5 premium to NAV): looking to raise a minimum of £10m and maximum of £15m in new zero dividend preference shares with a 2031 maturity. Placing closes 11am 23 April. Previously announced that the new zeros have a term of 5.75 years with a gross redemption yield of 7.5% and a cover ratio of at least 2.0x

Ex Dividend

AA4 2p, ATR 11.50p, BRAI 2p, BRLA $0.0555, CTPE 7.01p, FCIT 4.80p, IAD 3.90p, JAGI 6.10p, MCT 1.375p, MNL 7p & 7p special, MRC 3.40p, PHLL $0.14 special, SERE €0.0148

Mercifully the weekend beckons.

Neil

Frostrow Investor Relations team – Grant Challis, Neil Winward, Matt Burrows, Matt Norfolk-Clarke, Nicholas Todd

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.