4 December 2024
Finsbury
Growth & Income Trust PLC
(the
“Company”)
This
announcement contains regulated information
Annual
Financial Report for the year ended 30
September 2024
Finsbury
Growth & Income Trust PLC is a listed investment company and a
constituent of the FTSE 250. The Company is a member of the
Association of Investment Companies (“AIC”).
OBJECTIVES
AND PERFORMANCE MEASUREMENT
The
Company aims to achieve capital and income growth and to provide
Shareholders with a total return in excess of that of the FTSE
All-Share Index (the Company’s benchmark).
The net
asset value per share increased by 8.2% during the financial year
to 30 September 2024 on a total
return basis (2023: 7.2%).
DIVIDENDS
During the
year the Company paid two interim dividends totalling 19.6p (2023:
19.0p) which was an increase of 3.2%.
KEY
FACTS
943.4p
Net
asset value per share
2023:
891.2p (+5.8%)
861.0p
Share
price
2023:
852.0p (+1.1%)
8.7%
Discount
of share price to net asset value per
share^
2023:
4.4%
57.7p
Return
per share†
2023:
61.4p (-6.0%)
84.1%
Active
Share*^
2023:
85.3%
19.6p
Total
dividends per share for the year†
2023:
19.0p (+3.2%)
8.2%
Net
asset value per share total return*,
^
2023:
7.2%
£1.582bn
Shareholders’
funds†
2023:
£1.823bn (-13.2%)
0.61%
Ongoing
charges^
2023:
0.61%
3.4%
Share
price total return*,
^
2023:
7.5%
0.7%
Gearing^
2023:
0.8%
167,717,668
Number
of shares in issue (excluding 57,273,635 shares held in
Treasury)
2023:
204,519,434 (-18.0%) (Treasury shares 2023: 20,471,869)
* Source –
Morningstar
^
Alternative Performance Measure (see glossary)
† UK GAAP
Measure
FIVE
YEARS SUMMARY
|
AS
AT 30 SEPTEMBER
|
2020
|
2021
|
2022
|
2023
|
2024
|
|
Share
price
|
840.0p
|
876.0p
|
800.0p
|
852.0p
|
861.0p
|
|
Net asset
value per share
|
846.2p
|
917.7p
|
848.4p
|
891.2p
|
943.4p
|
|
Discount
of Share price to net asset value per share
|
0.7%
|
4.5%
|
5.7%
|
4.4%
|
8.7%
|
|
|
|
|
|
|
|
|
YEAR
ENDED 30 SEPTEMBER
|
2020
|
2021
|
2022
|
2023
|
2024
|
|
Share
price total return*
^
|
(9.0)%
|
+6.3%
|
(5.6)%
|
+7.5%
|
+3.4%
|
|
Net asset
value per share total return*
^
|
(7.7)%
|
+10.6%
|
(5.8)%
|
+7.2%
|
+8.2%
|
|
FTSE
All-Share Index total return**
#
|
(16.6)%
|
+27.9%
|
(4.0)%
|
+13.8%
|
+13.4%
|
|
Total
(loss)/return per share†
|
(67.1)p
|
88.0p
|
(53.4)p
|
61.4p
|
57.7p
|
|
Dividends
per share†
|
16.6p
|
17.1p
|
18.1p
|
19.0p
|
19.6p
|
* Source:
Morningstar
** Source:
FTSE International Limited (“FTSE”) © FTSE, 2024
# See
glossary of terms and alternative performance measures)
^
Alternative Performance Measure (“APM”) (see glossary)
† UK GAAP
Measure
The
Company was incorporated in Scotland on 15 January
1926. Lindsell Train Limited (“Lindsell Train”) was
appointed as Portfolio Manager in December
2000. The total return of the Company’s share price over the
ten years to 30 September 2024 has
been 108.4%, equivalent to a compound annual return of 7.6%. This
compares with a total return of 83.6%* from the Company’s
benchmark, equivalent to a compound annual return of
6.3%*.
Key
Performance Indicators (“KPIs”)
The
Board uses certain financial and non-financial KPIs to monitor and
assess the performance of the Company in achieving its strategic
aims.
The Board
reviews the performance of the portfolio in detail and hears the
views of the Portfolio Manager at each meeting.
Information
on the Company's performance is provided in the Chairman's
Statement and the Portfolio Manager's Review.
This
performance is assessed against the following KPIs which are
unchanged from last year.
Alternative
Performance Measures (“APM”)
The Board
believes that each of the APMs, which are typically used within the
investment company sector, provides additional useful information
to Shareholders in order to assess the Company’s performance
between reporting periods and against its peer group. The APMs used
for the year under review are unchanged from last year. Further
information on each of the APMs can be found in the
glossary.
^ Alternative
Performance Measure (see glossary)
† UK GAAP
Measure
* Source:
Morningstar
8.2%
Net
asset value total return^*
This
reflects the change in the Company’s net asset value including the
impact of reinvested dividends.
During the
year under review the Company’s net asset value per share total
return was 8.2% (2023: 7.2%).
19.6p
Dividends
per share†
The total
dividend declared for the year was 19.6
pence per share (2023: 19.0
pence per share), an increase of 3.2%.
57.7p
Return
per share†
The total
return per share for the year was 57.7
pence per share (2023: return of 61.4
pence per share).
Over five
years, the Company earned a total of 86.6
pence per share.
3.4%
Share
price total return^*
This
reflects the change in the value of the Company’s share price
including the impact of reinvested dividends.
During the
year under review the Company’s share price total return was 3.4%
(2023: 7.5%).
8.7%
Share
price discount/ premium to net asset value per
share^
The Board
reviews the level of discount/premium to net asset value per share
at every Board meeting and consideration is given to ways in which
the share price performance may be enhanced, including the
effectiveness of marketing, share issuance and buy-backs, where
appropriate. Details of how the Company’s share buy-back and
issuance policy works can be found in the Statutory Documentation
section on the Company’s website.
At
30 September 2024 the Company’s share
price stood at an 8.7% discount to the Company’s net asset value
per share (2023: 4.4% discount).
During the
year, the Company bought back 36,801,766 shares into Treasury
(2023: 11,218,558) at an average price of 844.5 pence and an average discount of
7.4%.
Since the
year end to 2 December 2024 the
Company has purchased a further 9,913,457 shares to be held in
Treasury. As at 2 December 2024 the
Company’s discount was 8.5%.
(10.0)%pt
Relative
underperformance to benchmark
Under the
Company’s Business Model, a Portfolio Manager is appointed with the
capability and resources to manage the Company’s assets through
asset allocation, stock selection, gearing and risk management. The
Company’s portfolio is constructed and managed without reference to
a stock market index with the Portfolio Manager selecting
investments based on their assessment of their long-term
value.
The
performance of the Company relative to its benchmark and its peers
is a KPI measured by the Board on an ongoing basis.
The
Company’s benchmark is the FTSE All-Share Index (total return)
which delivered a return of 13.4% (2023: 13.8%) over the year. This
compares with the Company’s share price total return of 3.4% (2023:
7.5%) resulting in a 10.0% underperformance against the
benchmark.
The Board
also monitors the Company’s share price return* against its AIC
peer group^.
As at 30 September
2024 the Company's ranking against its peer group of UK
Equity income sector was:
|
|
Rank
out of 23
|
|
Period
|
2024
|
2023
|
|
1
yr
|
21
|
14
|
|
3
yr
|
19
|
22
|
|
5
yr
|
21
|
9
|
|
10
yr
|
4
|
2
|
^
Alternative Performance Measure (see glossary)
* Source:
Morningstar
Chairman’s
Statement
Simon Hayes, Chairman
PERFORMANCE
As we
approach Finsbury’s 100th anniversary and after almost ten years on
your Board I am very aware of how essential it is that investment
managers have a long-term perspective.
However,
managing funds over such time horizons is inevitably difficult and
I am disappointed to report another year of underperformance by
your Company when measured against the performance of the
benchmark, the FTSE All-Share Index. While the Company’s long-term
track record remains impressive, this will provide little solace to
more recent investors for whom returns will be substantially below
what they may have hoped for.
The
Company’s net asset value (“NAV”) per share delivered a total
return of 8.2% over the financial year compared with a benchmark
total return of 13.4%. The share price return over the same period
was 3.4%, reflecting a widening of the discount to NAV.
In the
face of this ongoing period of challenging performance your Board
has continued to provide constructive challenge to the Portfolio
Manager, regularly reviewing the investment process, portfolio
themes and individual holdings throughout the year. The Board has
also undertaken a series of meetings with institutional
Shareholders (representing approximately a third of the Company’s
share capital), to ascertain their views of the Company and the
extent of their continued support for the investment approach.
While no one wants to experience a prolonged period of
underperformance, it is clear that there remains significant
support from investors for the Company’s concentrated investment
portfolio. No Shareholder has expressed to us any appetite for a
material change in approach.
We are
grateful for this continued support but do not take it for granted.
With that in mind, and as part of broader shareholder engagement,
your Board will hold a continuation vote after the current
financial year ends in
September 2025 (expected to be held at the Company’s AGM in
January 2026).
This will
offer all Shareholders, in particular our retail shareholders who
represent a significant proportion of our register, an opportunity
to express their support, or otherwise, for the continuation of the
Company with its current investment strategy.
In the
meantime, your Board remains committed to buying back shares, as
described in more detail below, aware of the value of the
additional liquidity an active buy-back strategy offers and of the
enhancement in net asset value that buy-backs
provide. In the past financial year, the Company has bought back
over £310 million worth of its own shares which is more then three
times the value bought back in 2023.
As it is
always important to point out, a highly concentrated portfolio
means higher risk, particularly in the short term. At 30 September 2024, the Company’s Active Share – a
measure of how much it varies from the FTSE All-Share Index
benchmark - was 84.1% (2023: 85.3%). Such an uncorrelated portfolio
will inevitably perform very differently from the wider market,
whether positively or negatively.
I urge you
to read Nick Train’s very helpful review where he discusses the
reasons for the relative underperformance and explains why he holds
the top ten holdings of the portfolio and why he is optimistic for
better future returns.
SHARE
BUY-BACKS
As at
30 September 2024 the discount to NAV
was 8.7% (2023: 4.4%). During the year under review the Company
bought back a total of 36,801,766 shares (18.0% of the shares in
issue) at a cost of over £310 million
(2023: £97.7 million) and at an average discount of 7.4%. This
resulted in the NAV per share being 14p higher than it would
otherwise have been.
As at the
close of the UK market on 2 December
2024, the discount was 8.5%. Since the year end, a further
9,913,457 shares have been bought back at a cost of £85.3 million.
As at 2 December 2024, the Company
had 157,804,211 shares in issue (excluding 67,187,092 shares held
in Treasury).
While
share buy-backs will not necessarily prevent a discount from
widening further, particularly in times of market volatility, they
may, to a limited extent, mitigate a widening trend. In addition,
buy-backs enhance the NAV per share for remaining Shareholders,
provide some additional liquidity and help to dampen discount
volatility which can damage Shareholder returns.
Discounts
are affected by many factors outside the Company’s control,
including investor sentiment towards the Company, the sector and
towards equity markets in general, but where it is in Shareholders’
interests (taking account of market conditions), the Company
remains committed to buying back shares at a discount to NAV, as
demonstrated over the past year.
Reflecting
the Company’s commitment to buying back shares, the Company held a
General Meeting in August 2024 to
renew Shareholder authority to buy-back shares when it became clear
that the Shareholder authority to buy-back 14.99% of the Company’s
share capital granted at the AGM in January
2024 would be exhausted before the expected date of the 2025
AGM. The Company’s share buy-back authority will as usual be
proposed for renewal at the Company’s Annual General Meeting to be
held in January 2025.
RETURN
AND DIVIDEND
The Income
Statement shows a total return of 57.7p per share (2023: 61.4p)
consisting of a revenue return per share of 20.8p (2023: 20.0p) and
a capital return per share of 36.9p (2023: 41.4p).
Your Board
has declared two interim dividends for the year totalling 19.6p per
share (2023: 19.0p), an increase of 3.2%. In order to facilitate
dividend payments on a timely and cost-effective basis, your Board
continues to elect to distribute the Company’s income to
Shareholders by means of two interim dividends rather than wait
several months to secure Shareholder approval to pay a final
dividend at the Annual General Meeting. This dividend policy will
again be proposed for approval at the forthcoming Annual General
Meeting.
CANCELLATION
OF SHARE PREMIUM ACCOUNT
On
7 August 2024, the Company’s share
premium account of £1.1 billion was cancelled pursuant to a Court
Order dated 12 July 2024, in order to
provide the Company with additional distributable reserves, which
can be used in the future for all permitted purposes, including, if
required, to fund share buy-backs or other returns of capital in
accordance with applicable law. This provides the Company with more
flexibility in how capital may be returned in the
future.
THE
BOARD
As
reported earlier this year, after nine years as a Director of the
Company, I will be standing down at the conclusion of the Company’s
forthcoming Annual General Meeting in January 2025. I am delighted that Pars Purewal,
who joined the Board in November
2022, has been chosen by my Board colleagues to succeed me
as Chairman.
I have
thoroughly enjoyed my time with the Company. This is principally
down to the hard work and professionalism of colleagues at Lindsell
Train and Frostrow and the exemplary levels of commitment and
engagement of my fellow Directors. I would like to thank them all
for making my job easier and wish Pars and the team every success
for the future.
CHANGE
OF AUDITOR
During the
year the Audit Committee led a competitive audit tender process,
which resulted in the recommendation that Deloitte LLP be appointed
as the Company’s new auditor.
ARTICLES
OF ASSOCIATION
It is
proposed that new Articles of Association (the “New Articles”) be
adopted with effect from the conclusion of the Annual General
Meeting, principally in order to increase the Company’s flexibility
in respect of how the Company can manage untraced Shareholders,
unclaimed dividends and the payment of dividends. The new Articles
are being updated to reflect developments in the market since the
Existing Articles were adopted in 2022, with a view to balancing
the Company’s administrative burden with the need to safeguard
Shareholder rights.
A summary
of the principal changes to the Existing Articles is included
within the Explanatory Notes to the Notice of Meeting.
ANNUAL
GENERAL MEETING
The Annual
General Meeting of the Company this year will again be held at
Guildhall, City of London EC2V 7HH
(please use the Basinghall Street Entrance) on Tuesday,
28 January 2025 at 12 noon, and we
hope as many Shareholders as possible will attend. This will be an
opportunity to meet the Board and to receive a presentation from
our Portfolio Manager.
The Board
strongly encourages all Shareholders to exercise their votes in
respect of the meeting in advance. Details of how Shareholders can
vote, whether holding their shares directly or on retail platforms,
are set out in the Notice of Meeting. Any Shareholder who requires
a hard copy form of proxy may request one from the Registrar, Link
Group.
OUTLOOK
During
this period of disappointing performance it is worth remembering
that the interests of Shareholders, your Board and your Portfolio
Manager are closely aligned. First, significant
buy-backs
at a discount increase the NAV per share for those Shareholders who
maintain their holding. Secondly, fees are levied on the market
capitalisation of the Company and not the NAV, meaning that fees
payable decline commensurately with the size of any discount.
Finally, our Portfolio Manager has continued to buy shares in the
Company. Over the last year, Nick
Train has acquired 222,800 shares and currently speaks for
3.5% of the equity of the Company (December
2023: 2.6%).
Your Board
continues to fully support the Portfolio Manager’s disciplined
strategy of investing for the long term in high quality companies
that own both durable and cash generative franchises. As an
investment trust, our portfolio is permitted to be concentrated on
the highest conviction ideas. When those ideas pay off, the impact
on performance will be significant. We believe that it is only a
matter of time before the Company resumes its excellent long-term
record.
It has
been a privilege to serve the Company and its Shareholders and I
wish you all the very best for the future.
Simon Hayes
Chairman
3 December 2024
Investment
Portfolio
PORTFOLIO
SECTOR WEIGHTINGS+
|
|
2024
|
2023
|
|
Consumer
Staples (“CS”)
|
28.7%
|
38.0%
|
|
Financials
(“F”)
|
25.2%
|
22.3%
|
|
Consumer
Discretionary (“CD”)
|
22.4%
|
23.4%
|
|
Industrials
(“I”)
|
13.5%
|
7.9%
|
|
Technology
(“T”)
|
10.2%
|
8.4%
|
Source:
Frostrow Capital LLP
+ FTSE
Industrial Classification Benchmark (“ICB”) sectors.
GEOGRAPHICAL
ALLOCATION†
|
|
2024
|
2023
|
|
United
Kingdom
|
97.1%
|
84.2%
|
|
United
States of America
|
1.4%
|
7.3%
|
|
France
|
1.2%
|
4.8%
|
|
Netherlands
|
0.3%
|
3.7%
|
Source:
Frostrow Capital LLP
† The
Company’s investment policy classifies geographical location based
on where companies are listed or otherwise incorporated, domiciled
or having significant business operations.
† The
Company’s Investment Policy restricts the Company from owning more
than 20% of the portfolio in overseas companies.
INVESTMENTS
AS AT 30 SEPTEMBER
2024
|
SECTOR
|
INVESTMENTS
|
FAIR
VALUE
1
OCTOBER
2023
£'000
|
NET
INVEST-MENTS
£'000
|
CAPITAL
APPRE-CIATION/
(DEPRE-CIATION)
£'000
|
FAIR
VALUE
30
SEPTE-MBER
2024
£’000
|
%
OF
INVES-TMENTS
|
TOTAL
RETURN
£000
|
CONTRIBU-TION
PER
SHARE
(PENCE)
|
|
I
|
Experian
|
144,803
|
(3,437)
|
73,954
|
215,320
|
13.5
|
76,694
|
40.9
|
|
F
|
London
Stock Exchange
|
212,962
|
(52,923)
|
47,018
|
207,057
|
13.0
|
49,702
|
26.5
|
|
CD
|
RELX
|
227,828
|
(84,855)
|
52,741
|
195,714
|
12.3
|
56,410
|
30.1
|
|
CS
|
Unilever
|
163,699
|
(7,507)
|
29,563
|
185,755
|
11.7
|
35,308
|
18.8
|
|
CS
|
Diageo
|
182,495
|
18,059
|
(26,270)
|
174,284
|
10.9
|
(21,048)
|
(11.2)
|
|
T
|
Sage
Group
|
154,066
|
2,634
|
5,281
|
161,981
|
10.2
|
8,370
|
4.5
|
|
F
|
Hargreaves
Lansdown
|
58,334
|
4,906
|
26,771
|
90,011
|
4.8
|
29,905
|
15.9
|
|
CD
|
Rightmove
|
4,821
|
71,853
|
8,219
|
84,893
|
5.6
|
9,377
|
5.0
|
|
F
|
Schroders
|
101,313
|
(11,776)
|
(13,546)
|
75,991
|
5.3
|
(8,618)
|
(4.6)
|
|
CD
|
Burberry
Group
|
147,145
|
(5,261)
|
(91,349)
|
50,535
|
3.2
|
(86,720)
|
(46.2)
|
|
|
Top
10 Investments
|
|
|
|
1,441,541
|
90.5
|
|
|
|
CS
|
Fever-Tree
|
40,908
|
1,006
|
(13,200)
|
28,714
|
1.8
|
(12,606)
|
(6.7)
|
|
CS
|
Mondelez
International#
|
133,956
|
(108,031)
|
(3,848)
|
22,077
|
1.4
|
(2,499)
|
(1.3)
|
|
CS
|
A.G.
Barr
|
21,702
|
(4,337)
|
4,658
|
22,023
|
1.4
|
5,262
|
2.8
|
|
CS
|
Remy
Cointreau^
|
68,168
|
(28,672)
|
(20,302)
|
19,194
|
1.2
|
(19,690)
|
(10.5)
|
|
CD
|
Manchester
United#
|
37,334
|
(19,132)
|
(945)
|
17,257
|
1.1
|
(945)
|
(0.5)
|
|
F
|
Rathbone
Brothers
|
23,298
|
(6,418)
|
132
|
17,012
|
1.1
|
693
|
0.3
|
|
F
|
The
Lindsell Train Investment Trust plc
|
8,760
|
–
|
(1,120)
|
7,640
|
0.5
|
(605)
|
(0.3)
|
|
CD
|
Celtic*
|
4,331
|
–
|
1,397
|
5,728
|
0.3
|
1,404
|
0.7
|
|
CS
|
Heineken†
|
88,569
|
(83,487)
|
265
|
5,347
|
0.3
|
871
|
0.4
|
|
CD
|
Young &
Co's Brewery (non-voting)
|
7,108
|
(2,707)
|
(941)
|
3,460
|
0.2
|
(756)
|
(0.4)
|
|
F
|
Frostrow
Capital LLP∆**
|
3,725
|
–
|
(500)
|
3,225
|
0.2
|
(14)
|
0.0
|
|
CD
|
Cazoo#
|
79
|
(12)
|
(67)
|
–
|
0.0
|
(67)
|
0.0
|
|
CD
|
Fuller
Smith & Turner
|
1,256
|
(1,351)
|
95
|
–
|
0.0
|
102
|
0.1
|
|
|
Total
Investments
|
1,836,660
|
(321,448)
|
78,006
|
1,593,218
|
100.0
|
120,530
|
64.3
|
|
|
Bank
interest
|
|
|
|
|
|
407
|
0.2
|
|
|
Total
Contributions to Total Return
|
|
|
|
|
|
120,937
|
64.5
|
|
|
Expenses,
Currency Translation and Finance Charges
|
|
|
|
|
|
(12,759)
|
(6.8)
|
|
|
Return
on Ordinary Activities after Taxation
|
|
|
|
|
|
108,178
|
57.7p
|
* Includes
Celtic 6% cumulative convertible preference shares, fair value
£363,000 (2023: £267,000)
** Includes
Frostrow Capital LLP AIFM Investment, fair value £125,000 (2023:
£125,000)
# Listed in
the United States
^ Listed in
France
† Listed in
Netherlands
∆
Unquoted
Portfolio
Manager’s Review
Nick Train, Lindsell Train Limited, Portfolio
Manager
Periods of
lacklustre performance are inevitable for all investors. When you
are in the midst of such a period, as we are, it is important to
keep your nerve and stick to your investment principles. However,
it is also important to consider, and answer honestly, searching
questions about the underperformance. Our clients excel at asking
searching questions. And three in particular have been put to us
that I propose to address in this report.
1
Do we understand why we have underperformed and have we taken
measures to mitigate the risk of future
underperformance?
2
Has the period of underperformance created a buying
opportunity?
3
Finally, is our continuing company research generating attractive
new investment ideas?
The first
question; what has been our problem? Candidly, the portfolio has
been a victim of its previous success. The peak of our relative
performance was in 2020. What drove the strong performance for much
of the preceding decade were the strong returns from our
investments in consumer branded goods owners, such as Burberry,
Diageo and Unilever, amongst others. As a result of that success
the combined weight of the holdings in consumer brands was 50% of
the whole portfolio as at year-end September
2020. In hindsight, this was too high. Covid-19 and its
inflationary aftermath have been unhelpful for many consumer
companies and their share prices have fallen or stagnated, hurting
our overall investment performance. Between year ended September 2020 and 2024, for instance, Burberry’s
share price has fallen 55%, Diageo is down 2% and Unilever up only
1%. How have we responded?
Well, the
headline is that exposure to consumer brands is now c.32% of the
portfolio, a marked reduction. We still like the consumer brand
companies we retain exposure to, but there are other investment
themes available in the UK stock market that we believe offer even
better prospects and since 2020 we have tilted the portfolio in
their direction.
Moving on
to the second question – is this a buying opportunity for your
portfolio? I would say, unequivocally, yes. And I have put my money
where my mouth is by buying more shares.
There are
two aspects to my optimism. First, I want to reiterate the
attraction of investing in owners of world-class consumer brands;
particularly when you can access their shares at low prices, as is
arguably the case today. Diageo and Unilever are examples of such
world-class businesses, we believe, and we have maintained and even
increased exposure to both during their recent share price
weakness. To understand the nature of the opportunity, I’d ask
Shareholders to consider the accompanying graph on page 11 of the
Annual Report which shows the share price total returns of Diageo
and Unilever since the start of the century, compared with the
returns on various stock market indices, all in Sterling. You may
be surprised to see that not only have Diageo and Unilever
handsomely outperformed the UK stock market over the last nearly
quarter of a century, they have also outperformed the S&P500
and even the NASDAQ Composite. This is the case even after Diageo
and Unilever’s disappointing performance of the last four years.
Now, of course, you can prove almost anything by cherry-picking a
favourable start-date
and, no doubt, the NASDAQ Composite was at a temporary peak at the
start of 2000, while Diageo and Unilever were out of favour
(interestingly, you could argue that both those conditions pertain
today). Nonetheless, it is impressive, I contend, that both should
have performed so competitively since 2000 and their performance is
consistent with the proposition that global brands as resonant and
still relevant as Guinness and Johnnie
Walker or Dove and Hellmann’s can help you get rich, albeit
slowly.
The 23%
total return from Unilever shares over the last 12 months is a
welcome reminder that well-run (or in
Unilever’s case, better-run) consumer companies can still reward
investors.
The second
reason for my optimism; I mentioned above that we have tilted the
portfolio toward investment ideas that we expect offer even better
prospects than those of consumer brand-owners. Today by far the
biggest thematic exposure, 60% of the portfolio at the year-end, is
to London-listed data, software
and technology platform companies. We own six businesses –
Experian, Hargreaves Lansdown, London Stock Exchange Group
(“LSEG”), RELX, Rightmove and Sage – and I have three observations
to make about the sextet.
First,
even though several of them have been strong performers over the
last couple of years, particularly RELX and Sage, it is not
difficult to demonstrate the valuations they are accorded are lower
than is the case for comparable companies listed on other markets.
That presents an opportunity, we believe.
Next, that
apparent undervaluation of the group has been confirmed by the fact
that two of them have received takeover bids during 2024, namely
Hargreaves Lansdown and Rightmove. It looks as though the offer for
the former will succeed, at a price 43% above where the shares
traded at the end of September 2023.
Meanwhile, Rightmove has successfully rebuffed a bid that was also
c.43% above its share price of a year ago.
I invite
Shareholders to review the table below. It illustrates why we
remain so optimistic about the prospect for future gains from this
part of the portfolio. The table draws on research done by Bank of
America in 2023, that sought to identify the criteria likely to
help companies become beneficiaries of, rather than losers from,
developments in Artificial Intelligence. To be clear, Bank of
America provided the framework, but the company analysis is ours.
The top criteria for AI success, according to Bank of America, is
ownership of large amounts of proprietary data. If a company owns
or generates data that others cannot, then that company has the
opportunity to derive unique insights from that data and create new
commercial opportunities. It is said in the 21st century that “data
is the new oil”. The proprietary data curated by, in particular,
Experian, LSEG, RELX and Rightmove has already made these
businesses world-class in their respective fields. We hope new
tools, for instance Sage’s AI-powered accounting tool Copilot, will
accelerate all these companies’ growth as we get deeper into the
21st
century.
I have no
doubt that the increase to our Digital Winners has improved the
quality of the portfolio. At 30 September
2024 and based on figures from Bloomberg, we calculate an
average Return on Equity (ROE) of 30% for the portfolio, the
highest level it has been for a number of years, and notably higher
than for the average of the UK stock market, of 9%. In the long
run, ROE is a good measure of the quality of a company, the higher
the better. Over time we must believe the superior business returns
earned by our portfolio companies will lead to superior share price
returns too. The question then is whether we are overpaying for
such quality. We don’t think so. The portfolio’s 12 month forward
Price-to- Earnings (P/E) ratio of 22x is higher than the Index at
12x, though by a lesser degree than the ROE. And whilst the ROE of
the portfolio has increased, the P/E premium compared to the market
has fallen more recently. This is of course no guarantee of future
performance, but it does gives us confidence that we own high
quality companies at what to us appear to be reasonable
valuations.
Finally,
the third question, are we unearthing new investment ideas? The
answer is “yes”, even if it is relatively rare for us to initiate
new holdings. I have always worked on the Warren Buffet principle
that often the best thing to do with investible funds is to buy
more of what you already own (assuming what you own is of high
quality). Nonetheless, when we do have compelling new ideas we back
them with conviction. There have been three initiations since 2020
– Experian, Fever-Tree and, more recently, Rightmove. We are
currently having to be patient with Fever-Tree,
as investors wait to see whether the brand can replicate its
domestic success internationally (we believe it can). Meanwhile,
Experian has become one of the top-3 holdings in the portfolio and
is, we believe, a relatively rare thing – a world-class data
business listed on the London
stock market. The accompanying chart within the Annual Report shows
the long-term investment success of Experian, since it listed in
2006; but note the sideways period for its shares between 2021 and
2024, a period that allowed us to accumulate the holding.
Subsequently Experian’s share price has hit new highs and we are
hoping for much more.
So far as
Rightmove is concerned, we believe the company was right to resist
being taken over. Certainly we did not buy it in the expectation of
a quick bounce, but rather hope to benefit from years of profitable
growth as the company innovates new services for home buyers and
agents.
Experian
Over 180
million individuals around the world now voluntarily provide
Experian with their personal financial data, in return for credit
scores and other services. This is a unique asset for Experian,
which makes its data services increasingly valuable to its banking
customers.
We
purchased Experian in 2020 and as you can see from the chart in the
Annual Report, concerns over interest rates and the credit cycle
have allowed us to build the position at a lower price over the
past four years. The shares have been much stronger in 2024 though
we are hopeful there’s much more to come from the
company.
LSEG
According
to LSEG it can now offer a wider range of crucial services to
global financial institutions than any of its competitors. This
means its customers can derive cost savings and business
efficiencies when they subscribe to more of its services. New
products derived from LSEG’s joint venture with Microsoft (and soon
to be released) are likely to make its services even more crucial
to its customers. LSEG’s shares hit a high in February 2021 of £98, then spent three years
trading sideways to down. It wasn’t until August 2024 that they pushed through that level
and are now trading well above £100. The shares are up 24x since
LSEG listed back in 2001 and while a repeat of that return over the
next couple of decades seems far-fetched today, there is no doubt
LSEG has a big growth opportunity and is highly profitable. That
combination can lead to outsize investment returns.
RELX
Scientists,
lawyers and risk consultants around the world are increasingly
reliant on RELX’s data and software. The company is a trusted and
credible provider of AI-enhanced
services to those communities and this offers it the prospect of
accelerating revenue growth. It is noteworthy that RELX’s market
capitalisation is now higher than BP’s, making it the fifth biggest
company on the London market.
Perhaps data really is the new oil.
Diageo
Diageo is
contending with a variety of headwinds that have hurt its share
price in 2024. To us these are predominantly cyclical not
structural. We prefer to focus on the company’s structural
advantages. Specifically that Scotch, Irish
Stout and Tequila are Diageo’s three biggest categories,
where the company has world-class brands and, as a result, a growth
opportunity not available to its competitors. We also believe the
long-term propensity for individuals to drink less alcohol, but to
drink higher quality alcohol is likely to continue and is
advantageous for Diageo, as the world’s biggest premium alcoholic
beverage company.
Schroders
We support
Schroders’ strategy of shifting its business toward higher profit
margin investment services, such as Private Equity and Private
Wealth and believe the company has made more progress with this
strategy than its current depressed share price
suggests.
Sage
In 2017
Sage acquired a US cloud-computing business called Intacct. This
was transformative for the company. Intacct’s subsequent success
has helped return Sage’s overall business to double digit revenue
growth and there remains a big opportunity for Intacct in its home
market and internationally.
Unilever
The energy
and improved execution of a new management team has reminded
investors of Unilever’s formidable strengths. Its existing global
brands are already very valuable, but there is a further
opportunity to use its innovation and distribution capabilities and
marketing expertise to create or acquire new brands and give them
global scale. Unilever’s fast-growing Health, Wellbeing and Premium
Beauty brands are pertinent examples.
Rightmove
The
investment appeal of Rightmove’s business was recently confirmed by
the bids the company received from Australian peer REA. We believe
that, like us, REA was attracted by Rightmove’s dominant market
position in property classified advertising and by the growth
opportunities presented to Rightmove from selling additional
services to property agents and home buyers themselves. We were
relieved in the end the bids did not eventuate, because we believe
Rightmove is at the early stages of a multi-year period of growth
and losing that potential would have been a shame for Shareholders
(and, indeed, for the UK stock market).
Hargreaves
Lansdown
It is
likely we will lose this investment to takeover in early 2025 and
it is likely we will replace it with new holdings with similar
business characteristics. Specifically, we are interested in
companies that are technology-driven and own or create unique data
sets.
Burberry
All
Burberry Shareholders, including us, were shocked by the fall in
its share price and the severity of the profit decline now forecast
for 2024. After extensive engagement with the company, discussions
with industry experts and a detailed review of the investment case
we find ourselves in agreement with the opinion of Burberry’s new
CEO. In his view, Burberry should be one of the top four or five
most valuable luxury brands in the world, based on its heritage and
purpose-led products (outerwear). If he is right, Burberry’s
current market value is far too low and we have retained the
holding.
Since the
year end we have added two new positions to the portfolio, though,
we are not yet ready to reveal their identity at this stage given
we are still building them from low levels. All I will say is that,
as you might expect, the long period of disappointing returns from
the UK stock market has thrown up interesting opportunities, with
world-class companies languishing at attractive valuations. That
proposition is confirmed by the decision we have taken to reduce
the non-UK holdings in the portfolio. The Company’s weighting to
UK-listed companies has increased from 81% to 97% in the five years
to year-end
September 2024. The UK and, in
particular, the key UK holdings in this portfolio offer
world-beating
value, in our opinion.
TOP
TEN HOLDINGS
The
portfolio is concentrated, with the top ten holdings accounting for
c.90% of portfolio value at the year end. Given that concentration
it is appropriate to provide an account of the opportunity we see
for each of the ten. I ask Shareholders to note how many of these
are global businesses, with big global growth opportunities. The
London stock market boasts more
truly impressive global companies than its reputation implies. Also
note the wide range of geographic markets and industries these
companies serve. This means the portfolio is more diverse than the
tight number of individual holdings suggests.
CONCLUSION
I share in
your Board’s disappointment with recent performance and acknowledge
this has been a frustrating period for Shareholders. But I remain
convinced that the best way we can get the NAV and share price
moving up again is to implement the same investment approach that
generated good returns for Shareholders in the 20 years prior to
2021. That is, to run a concentrated portfolio, built around the
shares of exceptional UK companies.
It remains
a great privilege to me to be responsible for the management of the
Company’s portfolio, and thereby the precious savings of many
investors, including my own. I told you last year that skin in the
game is no guarantee of superior investment performance, and the
last 12 months have unfortunately proven that correct. But I
continue to increase my personal holding in the Company. Why?. It
is true that I believe an alignment of interest between investment
manager and investor is important, but to be candid that is not my
main motivation. When I look at the portfolio today, I am more
enthused about its prospects – and
by association the UK stock market – than at any time this century.
I have increased my holding because LSEG, Experian, Diageo, Sage
and RELX (and I could go on), not only happen to be listed on the
London market, but are genuine
world class companies with substantive growth opportunities in
front of them. Finsbury Growth & Income Trust PLC holds those
businesses in big quantities, and if our analysis of them is right,
the impact on returns in the coming years will be very significant
indeed.
Nick Train
Director,
Lindsell Train Limited
Portfolio
Manager
3 December 2024
Business
Review
The
Strategic Report provides a review of the Company’s policies and
business model, together with an analysis of its performance during
the financial year and its future developments.
PORTFOLIO
STRUCTURE AS AT 30 SEPTEMBER
2024
|
97.1%
2023:
84.2%
Invested
in UK domiciled companies
|
2.9%
2023:
15.8%
Invested
globally
|
93.4%
2023:
91.9%
FTSE
100 companies
(and
comparable overseas companies)
|
|
90.5%
2023:
84.7%
Top
ten holdings
|
0.7%
2023:
0.8%^
Gearing^
|
84.1%
2023:
85.3%^
Active
Share^
|
^
Please see Glossary of Terms and Alternative Performance
Measures.
The
Strategic Report has been prepared for Shareholders to assess how
the Directors have carried out their duty to promote the success of
the Company. It also considers the principal risks and
uncertainties facing the Company.
The
Strategic Report contains certain forward-looking statements. These
statements are made by the Directors in good faith based on the
information available to them up to the date of this report and
such statements should be treated with caution due to the inherent
uncertainties, including both economic and business risk factors,
underlying any such forward-looking information.
As an
externally managed investment company there are no executive
directors, employees or internal operations. The Company delegates
its day-to-day management to third parties. The principal service
providers to the Company are Frostrow Capital LLP (“Frostrow”)
which acts as AIFM, company secretary and administrator; and
Lindsell Train Limited (“Lindsell Train”) which acts as Portfolio
Manager. The Bank of New York Mellon (International) Limited is the
Company’s Depositary.
The Board
is responsible for all aspects of the Company’s affairs, including
the setting of parameters for and the monitoring of the investment
strategy as well as the review of investment performance and
policy. It also has responsibility for all strategic issues, the
dividend policy, the share issuance and buy-back policy, gearing,
share price and discount/ premium monitoring as well as corporate
governance matters.
STRATEGY
FOR THE YEAR ENDED 30 SEPTEMBER
2024
Throughout
the year under review, the Company continued to operate as an
approved investment company, following its investment objective to
achieve capital and income growth and to provide Shareholders with
a total return in excess of that of the FTSE All-Share Index. The
Company’s performance is discussed in the Chairman’s Statement and
the Portfolio Manager’s Review.
During the
year, the Board, AIFM and the Portfolio Manager undertook all ESG,
strategic and administrative activities.
The
Portfolio Manager engages with all the companies in the portfolio
to understand their ESG approach and has developed its own
methodology to assess the carbon impact of the portfolio. Lindsell
Train became a signatory of the Net Zero Asset Managers initiative
(“NZAM”) in December 2021. This
reflects Lindsell Train’s enhanced efforts as a firm to support the
goal of net zero greenhouse gas emissions by 2050.
INVESTMENT
POLICY
The
Company’s investment policy is to invest principally in the
securities of companies either listed in the UK or otherwise
incorporated, domiciled or having significant business operations
within the UK. Up to a maximum of 20% of the Company’s portfolio,
at the time of acquisition, can be invested in companies not
meeting these criteria.
The
portfolio will normally comprise up to 30 investments. This level
of concentration is likely to lead to an investment return which is
materially different from the Company’s benchmark* index and is
likely to be more volatile and carry more risk.
Unless
driven by market movements, securities in FTSE 100 companies and
comparable companies listed on an overseas stock exchange will
normally represent between 50% and 100% of the portfolio;
securities in FTSE 350 companies and comparable companies listed on
overseas stock exchanges will normally represent at least 70% of
the portfolio.
The
Company will not invest more than 15% of the Company’s net assets,
at the time of acquisition, in the securities of any single issuer.
For the purposes of this limit only, net assets shall exclude the
value of the Company’s investment in Frostrow Capital
LLP.
The
Company does not and will not invest more than 15%, in aggregate,
of the value of the gross assets of the Company in other listed
closed ended investment companies. Further, the Company does not
and will not invest more than 10%, in aggregate, of the value of
its gross assets in other listed closed ended investment companies
except where the investment companies themselves have stated
investment policies to invest no more than 15% of their gross
assets in other listed closed ended investment
companies.
The
Company has the ability to invest up to 25% of its gross assets in
preference shares, bonds and other debt instruments, although no
more than 10% of any one issue may be held.
In
addition, a maximum of 10% of the Company’s gross assets can be
held in cash, where the Portfolio Manager believes market or
economic conditions make equity investment unattractive or while
seeking appropriate investment opportunities or to maintain
liquidity.
* The
Company publishes its Active Share scores in its monthly fact sheet
for investors and in both the annual and half-yearly reports to
highlight how different the portfolio is from the Company’s
benchmark index.
The
Company’s gearing policy is that gearing will not exceed 25% of the
Company’s net assets.
No
investment will be made in any fund or investment company managed
by Lindsell Train Limited without the prior approval of the
Board.
In
accordance with the UK Listing Rules of the Financial Conduct
Authority (“FCA”), the Company can only make a material change to
its investment policy with the approval of its Shareholders and
HMRC.
DIVIDEND
POLICY
The
Company’s aim is to increase or at least maintain the total
dividend each year. A first interim dividend is typically paid in
May and a second interim in November in lieu of a final
dividend.
The level
of dividend growth is dependent upon the growth and performance of
the companies within the investment portfolio. The decision as to
the level of dividend paid takes into account the income forecasts
maintained by the Company’s AIFM and Portfolio Manager as well as
the level of revenue reserves. These forecasts consider dividends
earned from the portfolio together with predicted future earnings
and are regularly reviewed by the Board.
All
dividends have been distributed from current year income and
revenue reserves.
PERFORMANCE
Whilst the
Board is disappointed that the Company has underperformed in the
short term, the Portfolio Manager’s report explains why he believes
that the Company’s portfolio remains appropriate. The Board remains
supportive of the Portfolio Manager’s view. Please refer to the
Chairman’s Statement for further information.
Whilst
performance is measured against the FTSE All-Share Index, the
Company’s portfolio is constructed and managed without reference to
a stock market index with the Portfolio Manager selecting
investments based on their assessment of their long-term
value.
PROSPECTS
The Board
continues to support the Portfolio Manager’s strategy of investing
in high quality companies that own both durable and cash generative
brands. The Board firmly believes that this strategy will continue
to deliver strong investment returns over the long term.
This is
supported by the Company’s performance over the last ten years with
a net asset value per share total return^ of 128.2% compared with a
total return from the Company’s benchmark index of
83.6%.
^ Alternative
Performance Measure (see glossary)
Principal
Risks, Emerging Risks and Risk Management
The Board
is responsible for managing the risks faced by the Company. Through
delegation to the Audit Committee, the Board has established
procedures to manage risk, to review the Company’s internal control
framework and to establish the level and nature of the principal
risks the Company is prepared to accept in order to achieve its
long-term strategic objective. At least once a year the Audit
Committee carries out a robust detailed assessment of the principal
and emerging risks.
A risk
management process has been established to identify and assess
risks, their likelihood and the possible severity of impact.
Further information is provided in the Audit Committee within the
Annual Report.
These
principal risks and the ways they are managed or mitigated are set
out as follows
For each
risk identified, during the year the Audit Committee considers both
the likelihood and impact of the risk and then assigns an inherent
risk score. The scoring of the risk is then reconsidered once the
respective key mitigations are applied and a residual risk score is
assigned.
The
Board’s policy on risk management has not materially changed during
the course of the reporting period and up to the year
end.
During the
year, the Audit Committee conducted an exercise to identify and
assess any new or emerging risks affecting the Company and to take
any necessary actions to mitigate their impact. Further information
can be found in the report of the Audit Committee within the Annual
Report.
THE
COMPANY'S APPROACH TO RISK MANAGEMENT
Change in
inherent risk assessment over the last financial year: No change,
Decreased, Increased, New risk included during the year
|
Principal
Risks and Uncertainties
|
Change
|
Key
Mitigations
|
|
Corporate
Strategy
The
Company’s investment objective or the UK Equity Income sector
becomes unattractive to Shareholders.
|
|
At each
meeting the Board reviews movements in the Company’s shareholder
register. There are regular interactions and engagement with
Shareholders (including at the AGM). Regular feedback from
Shareholders is received from the Company’s broker. Frostrow meets
regularly with major Shareholders on the Company’s
behalf.
In
addition, the Chairman, the incoming Chairman and the Senior
Independent Director meet with key Shareholders to ascertain
views.
The
Company publishes its Active Share score in its monthly fact sheet
for investors and in both the annual and half-yearly reports to
highlight how different the portfolio is from the Company’s
benchmark index.
|
|
The
Company’s share price total return may differ materially from the
NAV per share total return.
|
|
The Board
operates a share buy-back policy which is intended to offer some
protection against the share price widening beyond a 5% discount to
NAV per share. There is also a share issuance programme which acts
as a premium control mechanism. Further details of the Company’s
share buy-back policy and premium control mechanism can be found on
the Company’s website.
During the
year the majority of the shares available under the buy-back
authority granted at the 2024 AGM were bought back and the Company
held a General Meeting on 23 August 2024 where shareholder
authority was obtained to buy back a further 25,779,973 shares on
the same basis.
The Board
continues to keep this matter under close review and receives
feedback from the Company’s broker and major
Shareholders.
|
|
Investment
Strategy and Activity
The
departure of a key individual at the Portfolio Manager may affect
the Company’s performance.
|
|
The Board
keeps the portfolio management arrangements under continual review.
In turn, the Portfolio Manager reports on developments at Lindsell
Train, including succession and business continuity plans. The
Board meets regularly with other members of the wider team employed
by the Portfolio Manager.
|
|
Prolonged
underperformance against the Benchmark.
|
|
The Board
challenges the Portfolio Manager on the structure of the portfolio,
including asset allocation and portfolio concentration.
The Board
reviews the performance of the portfolio against the benchmark and
the Company’s peer group at every meeting.
The
Company publishes various measures and statistics in the monthly
fact sheet and in both the annual and half-yearly reports, to
highlight to investors the effects of the investment approach and
to show how different the portfolio is from the Company’s benchmark
index. These measures include number of holdings, Active Share and
portfolio turnover.
|
|
A major
geopolitical or natural event such as war, terrorism, natural
disaster or pandemic, and the financial, monetary and/or political
responses to such events may have an adverse impact on the revenues
and operations of portfolio companies to the extent that they may
no longer promise returns sufficient to meet the Company’s
investment objective.
Portfolio
companies experience a reduction in share price and
dividends.
|
|
The Board
reviews the performance of the portfolio against the benchmark and
the Company’s peer group at every meeting.
The Board
holds frequent portfolio update meetings with the Portfolio Manager
in addition to Board meetings.
The
Portfolio Manager regularly engages with the portfolio companies to
discuss any matters of concern that may effect operational
resilience.
|
|
The
investment approach is not aligned with shareholder expectations in
relation to ESG matters.
|
|
The Board
conducts an annual review of the Portfolio Manager’s ESG policy to
ensure that it is consistent with that expected by the Board. In
addition the Board reviews the ESG activities of Lindsell Train to
ensure progress is being made by portfolio companies. The Board
also conducts an annual review of other service providers’ policies
in relation to internal controls and governance matters, notably
modern slavery, GDPR, cyber security and whistleblowing
policies.
The
Portfolio Manager has developed a propriety system to assess the
inherent and emerging ESG risks for the investment portfolio which
the Portfolio Manager uses when engaging with the portfolio
companies. This informs the decision to invest, retain or divest
any portfolio investment.
|
|
The
adverse impact of climate change on the portfolio companies’
operational performance.
|
|
The Board
receives quarterly ESG updates, which include an update on any
climate change related engagement, from the Portfolio Manager
together with monthly portfolio updates. The Board challenges the
Portfolio Manager on ESG matters to ensure that the portfolio
companies are acting in accordance with the Board’s ESG
approach.
The
Portfolio Manager is a signatory to the UK Stewardship Code and
actively engages with portfolio companies on ESG matters including
climate change.
Lindsell
Train developed its own methodology to assess the carbon impact of
the portfolio. Lindsell Train became a signatory of the NZAM
initiative in December 2021. This reflects Lindsell Train’s
enhanced efforts as a firm to support the goal of net zero
greenhouse gas emissions by 2050.
|
|
Operational
Service
providers to the Company deliver poor performance or fail to meet
their contractual obligations to the Company, include errors or
irregularities in information published on behalf of the
Company.
|
|
The Board
reviews all information supplied to Shareholders and the AIFM’s
marketing activity at each meeting. The AIFM’s daily controls
ensure accurate publication of information.
The Board
receives regular updates from the AIFM of press references to the
Company and its major service providers, as well as regular news on
sector developments from the Company’s broker and the AIC. The
Board has the ability to replace any service provider which may be
the source of reputational concerns.
The Audit
Committee receives assurance from all service providers that they
have adequate business continuity plans and internal controls in
place. These controls are reviewed by the AIFM who also meets with
the Company’s principal service providers during the
year.
|
|
Financial
Fraud
(including unauthorised payments and cyber crime) occurs leading to
a loss.
Risk of
increased cyber crime on the portfolio companies which could lead
to the potential loss of confidential data and impact the
confidentiality, integrity or availability of data and systems,
potentially resulting in financial losses.
|
|
The AIFM
and Portfolio Manager have in place robust compliance monitoring
programmes.
The Board
receives monthly compliance reviews and a quarterly expenses
analysis.
An annual
statement is obtained by the Audit Committee from all service
providers giving assurances that there have been no instances of
fraud or bribery.
The Board
reviews the cyber security policies of all service
providers.
|
|
The
Company is exposed to market price risk (i.e. performance of
investee companies’ shares).
|
|
The
Directors acknowledge that market risk is inherent in the
investment process. The Portfolio Manager maintains a diversified
portfolio which is concentrated in a few key sectors. The Board has
imposed guidelines within its investment policy to limit exposure
to individual holdings and limits the level of gearing.
The AIFM
reports to the Board with respect to compliance with investment
guidelines on a monthly basis. The Portfolio Manager provides the
Board with regular updates on market movements. No investment is
made in derivative instruments and no currency hedging is
undertaken.
Further
information on financial instruments and risk can be found in note
17 to the Financial Statements.
|
|
Accounting,
Legal and Regulatory
The
Company and/or the Directors fail to comply with their legal and
regulatory obligations.
|
|
The Board
monitors regulatory change with the assistance of its AIFM,
Portfolio Manager and external professional advisers to ensure
compliance with applicable laws and regulations.
The Board
reviews compliance reports and internal control reports provided by
its service providers, as well as the Company’s Financial
Statements and revenue forecasts.
The
Depositary reports twice yearly to the Audit Committee, confirming
that the Company, acting through the AIFM, has been managed in
accordance with the AIFMD, the Investment Funds Sourcebook, the
Articles (in relation to the calculation of the NAV per share) and
with investment restrictions and leverage limits. The Depositary
Report can be found in the Shareholder information section of the
Company’s website.
The AIFM
presents a quarterly report on changes in the regulatory
environment, including AIC updates, and how changes have been
addressed.
|
|
Poor
adherence to corporate governance best practice or errors or
irregularities in published information could lead to censure
and/or result in reputational damage to the Company.
|
|
The Board
reviews all information supplied to Shareholders and the AIFM’s
marketing activity at each meeting. Details of the Company’s
compliance with corporate governance best practice, including
information on relationships with Shareholders, are set out in the
Corporate Governance Report in the Annual Report.
|
EMERGING
RISKS
During the
year, the Audit Committee conducted an exercise to identify and
assess any new or emerging risks affecting the Company and to take
any necessary actions to mitigate their impact.
The Audit
Committee regularly reviews the risk register. The scoring of each
risk and any emerging risks are discussed in detail as part of this
process to ensure that emerging as well as known risks are
identified and, so far as practicable, mitigated.
The
experience and knowledge of the Directors is useful in these
discussions, as are update papers and advice received from the
Board’s key service providers such as the Portfolio Manager, the
AIFM and the Company’s broker. In addition, the Company is a member
of the AIC, which provides regular technical updates as well as
drawing members’ attention to forthcoming industry and/or
regulatory issues and advising on compliance
obligations.
As well as
offering investment opportunities, the Board believes the
development and exploration of technological breakthroughs, such as
artificial intelligence, may damage the revenue and operations of
portfolio companies to the extent that they no longer offer the
promise of returns consistent with the Company’s investment
objective.
During the
year, the Board identified the global standing of the London Stock
Exchange as an emerging risk. International competition for new
listings and a significant number of market departures could mean
it is harder for a UK equity strategy to capture exposure to
important global growth themes.
To
mitigate these risks the Board holds monthly portfolio update
meetings with the Portfolio Manager, who continues to monitor the
situation closely.
The
Committee will continue to review newly emerging risks that arise
from time to time to ensure that the implications for the Company
are properly assessed and mitigating controls introduced where
necessary.
FUTURE
DEVELOPMENTS
The
Board’s primary focus is on the Portfolio Manager’s investment
approach and performance. The subject is thoroughly discussed at
every Board meeting.
In
addition, the AIFM updates the Board on Company communications,
promotions and investor feedback, as well as wider investment
company issues.
An outline
of performance, investment activity and strategy, and market
background during the year, as well as the outlook, is provided in
the Chairman’s Statement and the Portfolio Manager’s
Review.
It is
expected that the Company’s strategy will remain unchanged in the
coming year.
LONG-TERM
VIABILITY STATEMENT
The
Directors have carefully assessed the Company’s financial position
and prospects as well as the principal risks facing the Company and
have formed a reasonable expectation that the Company will be able
to continue in operation and meet its liabilities as they fall due
over the next five financial years. The Board has chosen a five
year horizon in view of the long-term outlook adopted by the
Portfolio Manager when making investment decisions.
To make
this assessment and in reaching this conclusion, the Audit
Committee has considered the Company’s financial position and its
ability to liquidate its portfolio and meet its liabilities as they
fall due and notes the following:
-
The
portfolio is principally comprised of investments traded on major
international stock exchanges. Based on current trading volumes,
98.1% of the current portfolio could be liquidated within 30
trading days, with 79.6% in seven days, and there is no expectation
that the nature of the investments held within the portfolio will
be materially different in future;
-
With an
ongoing charges ratio of 0.61%, the expenses of the Company are
predictable and modest in comparison with the assets and there are
no capital commitments foreseen which would alter that
position;
-
Expenses
of the Company are covered more than four times by investment
income;
-
The
closed-ended nature of the Company means that, unlike an open-ended
fund, it does not need to realise investments when Shareholders
wish to sell their shares;
-
The
founder directors of Lindsell Train Limited have given their verbal
assurance that they remain committed to Lindsell Train Limited for
at least seven years on a rolling basis; and
-
The
Company has no employees, only its Non-Executive Directors.
Consequently it does not have redundancy or other
employment-related liabilities or responsibilities.
The Audit
Committee has considered the potential impact of its principal
risks and various severe but plausible downside scenarios as well
as stress testing and reverse stress testing. It has also made the
following assumptions in considering the Company’s longer-term
viability:
-
There will
continue to be demand for investment companies;
-
The Board
and the Portfolio Manager will continue to adopt a long-term view
when making investments, and anticipated holding periods will be at
least five years;
-
The
Company invests principally in the securities of UK listed
companies to which investors will continue to wish to have
exposure;
-
The
Company will maintain its bank loan facility;
-
Regulation
will not increase to a level that makes running the Company
uneconomical; and
-
The
performance of the Company will be satisfactory.
The
Board’s long-term view of viability will, of course, be updated
each year in the Company’s Annual Report.
ENGAGING
WITH THE COMPANY'S STAKEHOLDERS
The
following ‘Section 172’ disclosure, required by the Companies Act
2006 and the AIC Code describes how the Directors have had regard
to the views of the Company’s stakeholders in their
decision-making.
|
Stakeholder
group
|
The
benefits of engagement with the Company’s
stakeholders
|
How
the board, the AIFM and the Portfolio Manager have engaged with the
Company’s stakeholders
|
|
Investors
|
Clear
communication of the Company’s strategy and the performance against
the Company's objective can help the share price trade closer to
its NAV per share which benefits Shareholders.
New shares
may be issued to meet demand without net asset value per share
dilution to existing Shareholders. Increasing the size of the
Company can benefit liquidity as well as spread costs.
Under the
share buy-back policy, the Company will normally buy in shares
being offered on the stock market whenever the discount approaches
a level of 5% and then either hold those shares in Treasury or
cancel them. Any shares held in Treasury can later be sold back to
the market if conditions permit.
|
The AIFM
and the Portfolio Manager, on behalf of the Board, complete a
programme of investor relations throughout the year.
An
analysis of the Company’s shareholder register is provided to the
Directors at each Board meeting along with marketing reports from
Frostrow. The Board reviews and considers the marketing plans on a
regular basis. Reports from the Company’s broker are submitted to
the Board on investor sentiment and industry issues.
Key
mechanisms of engagement include:
-
The Annual
General Meeting
-
The
Chairman, the incoming Chairman and the Senior Independent Director
make themselves available to engage with Shareholders
-
The
Chairman writes to major Shareholders each year offering them the
opportunity to meet with himself and the Senior Independent
Director.
-
The
Company’s website hosts reports, video interviews with the
Portfolio Manager and monthly fact sheets
-
One-on-one
investor meetings facilitated by Frostrow who actively engage with
professional investors, typically discretionary wealth managers,
some institutions and a range of execution-only platforms. Regular
engagement helps to attract new investors and retain existing
Shareholders, and over time results in a stable share register made
up of diverse, long-term holders
-
The Board
will explain in its announcement of the results of the AGM the
actions it intends to take to consult Shareholders in order to
understand the reasons behind any significant (defined for this
purpose as 20% or more) votes against resolutions. Following the
consultation, an update will be published no later than six months
after the AGM and the Annual Report will detail the impact the
Shareholder feedback has had on any decisions the Board has taken
and any actions or resolutions proposed
At each
meeting the Board reviews movements in the Company’s shareholder
register. There are regular interactions and engagement with
Shareholders (including at the AGM). Regular feedback from
Shareholders is received from the Company’s broker.
|
|
Portfolio
Manager
|
Engagement
with the Company's Portfolio Manager is necessary to:
-
evaluate
their performance against the Company's stated strategy and to
understand any risks or opportunities this may present.
-
better
understand the internal controls in place at Lindsell
Train.
The Board
ensures that the Portfolio Manager's ESG approach meets standards
set by the Board.
|
The Board
meets regularly with representatives of the Portfolio Manager
throughout the year, with quarterly presentations and also monthly
performance and compliance reporting. This provides the opportunity
for both the Board and Portfolio Manager to explore and understand
how the portfolio has performed and what may be expected in the
future.
The Board
receives regular updates from the Portfolio Manager concerning
engagement on ESG matters with the companies within the
portfolio.
The Audit
Committee also meets with members of the risk management and
investment compliance teams at Lindsell Train to better understand
the Portfolio Manager’s internal controls. The Audit Committee
reviews Lindsell Train’s control reports annually. During the year
the Board discussed its approach to ESG matters with the Lindsell
Train team providing more detail of their specific approach to
responsible ownership.
The Board
considers its approach to ESG as well as that of the companies in
which the Company invests, and has developed its own policy. The
Board encourages the Company’s Portfolio Manager to engage with
companies and in doing so expects ESG issues to be a key
consideration.
The Board
receives an update on Lindsell Train’s engagement activities within
a dedicated quarterly ESG report.
A member
of Lindsell Train’s investment team attends each Board meeting to
provide an update on ESG issues and engagement activities since the
last Board meeting.
The Board
holds at least one meeting at the offices of Lindsell Train each
year, where Directors meet with members of the Lindsell Train
team.
|
|
Other
Service Providers
|
The
Company contracts with third parties for other services including:
depositary, investment accounting & administration as well as
company secretarial and registrars. The Company ensures that the
third parties to whom the services have been outsourced complete
their roles in line with their service level agreements and are
able to continue to provide these services, thereby supporting the
Company in its success and ensuring compliance with its
obligations.
|
The Board
and Frostrow engage regularly with other service providers both in
one-to-one meetings and via regular written reporting. This regular
interaction provides an environment where topics, issues and
business development needs can be dealt with efficiently and
collegiately.
The Audit
Committee reviews Frostrow’s AAF controls report annually and no
issues have been identified.
|
|
The
Company’s Lender
|
Investment
companies have the ability to borrow with a view to enhancing
long-term returns to Shareholders. Engagement with the Company’s
lender ensures that it fully understands the nature of the
Company’s business, the strategy adopted by the Portfolio Manager
and the extent to which the Company complies with its loan
covenants.
|
Regular
reporting to the lender with respect to adherence with loan
covenants and ad hoc meetings with the AIFM.
|
|
Key
areas of engagement
|
Main
decisions and actions taken
|
|
Investors
The impact
of market volatility caused by certain geopolitical events on the
portfolio.
|
Shareholders
are provided with performance updates via the Company’s website as
well as the annual and half-year financial reports and monthly
factsheets.
|
|
Ongoing
dialogue with Shareholders concerning the strategy of the Company,
performance and the portfolio.
|
The
Portfolio Manager and Frostrow meet regularly with Shareholders and
potential investors to discuss the Company’s strategy, performance
and portfolio. Both the Portfolio Manager and Frostrow also engage
with the Press on the Company’s behalf.
The
Chairman, the incoming Chairman and Senior Independent Director,
accompanied by members of the Frostrow team, met with
representatives from major Shareholders to discuss, amongst other
things, shareholder engagement.
Further
details concerning ongoing discussions with major Shareholders can
be found in the Chairman’s Statement.
|
|
Share
price performance
|
The Board
reviews the Company’s share price discount/premium on a daily basis
and has a share buy-back policy, which during the year resulted in
36,801,766 shares being bought back. Details of the Company’s share
issuance and buy-back policy can be found on the Company’s
website.
|
|
Portfolio
Manager
Portfolio
composition, performance, ESG matters, outlook, and business
updates.
|
The
Portfolio Manager has set ESG targets and engages regularly with
investee companies’ executive management. The Board receives
quarterly ESG updates from the Portfolio Manager.
During the
year the Board engaged with the Portfolio Manager concerning the
outcome of the potential sale of Hargreaves Lansdown.
|
|
The impact
of market volatility upon their business and how some companies in
the portfolio have sought to take advantage of the increase of
digitisation and AI.
The
integration of ESG into the Portfolio Manager’s investment
processes.
|
The Board
has received regular updates from the Portfolio Manager throughout
the recent period of market volatility, including its impact on
investment decision making.
The
Portfolio Manager reports regularly any ESG issues in the portfolio
companies to the Board.
|
|
Climate
Change
|
During the
year the Audit Committee considered the Portfolio Manager’s
assessment of the risks associated with climate change on the
portfolio and how the transition to a low-carbon economy will
affect all businesses, irrespective of their size, sector or
geographic location.
|
|
Other
service providers
As an
externally managed investment company, the Company does not have
employees. Its main stakeholders therefore comprise its
Shareholders and a small number of service providers.
The Board
has delegated a wide range of activities to external agents, in
addition to the Portfolio Manager.
These
services include AIFM, investment administration, management and
financial accounting, Company Secretarial and certain other
administrative requirements and registration services. Each of
these contracts was entered into after full and proper
consideration by the Board of the quality and cost of the services
offered, including the control systems in operation in so far as
they relate to the affairs of the Company.
The
Directors have frequent engagement with the Company’s other service
providers through the annual cycle of reporting and due diligence
meetings or site visits by Frostrow. This engagement is completed
with the aim of maintaining an effective working relationship and
oversight of the services provided.
|
The Board
met regularly with Frostrow (the AIFM), representatives of which
attend every Board meeting to provide updates on risk management,
accounting, administration and corporate governance
matters.
Reviews of
the Company’s service providers have been positive and the
Directors believe their continued appointment is in the best
interests of the Company. The Company has invested in Frostrow and
The Lindsell Train Investment Trust plc. Further details can be
found on the Company’s website.
|
|
Auditor
|
During the
year the Audit Committee led a competitive audit tender process,
which resulted in the recommendation that Deloitte LLP be appointed
as the Company’s new auditor.
The Audit
Committee met with Deloitte LLP to review the audit plan for the
year, agree their remuneration, review the outcome of the annual
audit and to assess the quality and effectiveness of the audit
process.
|
|
The
Company’s Lender
Continued
compliance with covenants set out within the loan agreement between
the Company and the lender.
|
The Board
ensures compliance with loan covenants throughout the
year.
|
RESPONSIBLE
INVESTMENT
Our
Policy
The Board
recognises that the most material way for the Company to have an
impact on Environmental, Social and Governance (“ESG”) issues is
through the responsible ownership of its investments.
It has
delegated authority to its Portfolio Manager to engage actively
with the management of investee companies and encourage that high
standards of ESG practice are adopted.
The
Company seeks to generate long-term, sustainable returns on
capital. The investee companies which consistently deliver superior
returns over the long term are typically established, well-run
companies whose managers recognise their impact on the world around
them.
In its
Responsible Engagement & Investment Policy, the Portfolio
Manager states that its evaluation of ESG factors is an inherent
part of the investment process.
The Board
has delegated authority to the Portfolio Manager to vote the shares
owned by the Company that are held on its behalf by its Custodian.
The Board has instructed that the Portfolio Manager submit votes
for such shares wherever possible and practicable. The Portfolio
Manager may refer to the Board on any matters of a contentious
nature.
The
Portfolio Manager is a signatory of the 2021 UK Stewardship Code
and became a signatory of Net Zero Asset Managers initiative in
December 2021.
LINDSELL
TRAIN’S POLICY
ESG
integration
Sustainability
Key To Long-Term Investing
At the
heart of the investment approach at Lindsell Train Limited
(“Lindsell Train”) is a conviction that inefficiencies exist in the
valuation of ‘exceptional’ companies. Specifically, Lindsell Train
believes that durable, cash generative franchises are not only rare
but also appear to be undervalued by other investors for most of
the time. Nick Train and the
investment team invest in such ‘exceptional’ companies with the
expectation of holding them for the very long term. It is the
resultant long-term partnerships that they build with portfolio
companies that form the cornerstone of their approach to ESG and
Responsible Investing.
The truly
strategic time horizon (note that the long-term turnover of the
Company is under 5%, which implies an average holding period of 20
years) means the investment team at Lindsell Train must be
continually alert to all relevant long-term issues, with the
objective of pre-empting risk and enhancing returns. Hence the
consideration of all ESG factors which might affect holdings and
potential holdings has always been central to the investment
approach. Historically, Lindsell Train has typically found that
‘exceptional’ companies tend to exhibit characteristics associated
with good corporate governance and responsible business
practices.
The
average age of holdings currently held in the Company is
over
146
years*
*
excluding
Frostrow Capital LLP and The Lindsell Train Investment Trust
plc
In
Lindsell Train’s experience, companies with poor corporate
governance do not tend to have such longevity.
Furthermore,
Lindsell Train argues that companies which observe such standards,
and that are serious in their intention of addressing environmental
and social factors, will not only become more durable, but will
likely prove to be superior investments over time.
Lindsell
Train’s initial analysis and ongoing company engagement strategy
seeks to incorporate all sustainability factors that they believe
will affect the company’s ability to deliver long-term value to
Shareholders. Such factors may include but are not limited to:
environmental (including climate change), social and employee
matters (including turnover and culture) and governance factors
(including remuneration and capital allocation), cyber resilience,
responsible data utilisation, respect for human rights,
anti-corruption and anti-bribery, and any other risks or issues
facing the business and its reputation. This work is catalogued in
a proprietary database (Sentinel) of risk factors in order to
centralise and codify the team’s views, as well as to prioritize
Lindsell Train’s ongoing research and engagement work and is
cross-referenced with the SASB Materiality Map ©.
If, as a
result of this assessment, Lindsell Train believes that an ESG
factor is likely to materially impact a company’s long-term
business prospects (either positively or negatively) then this will
be reflected in the long-term growth rate that is applied in the
investment team’s valuation of that company, which alongside the
team’s more qualitative research will influence any final portfolio
decisions (for example, whether Lindsell Train starts a new
position or sell out of an existing holding).
CASE
STUDY
ESG
EVALUATION FOR INVESTMENT BUY CASE
Lindsell
Train’s long-term investment approach means that it seldom buys and
sells new holdings. Indeed, over the past five years, Portfolio
Manager Nick Train has only added
three new companies to the Company’s portfolio. The most recent of
these was Rightmove, which was first bought in Q4 2023.
Consideration of ESG risk and opportunity is integrated into the
pre-investment work that Lindsell Train does on all holdings, and
indeed Rightmove has been monitored on Sentinel – Lindsell Train’s
ESG risk and opportunity database – for a number of years, as it
has long been considered a serious potential investment.
As with
existing holdings, any ESG risk that Lindsell Train deems to be
materially significant requires careful assessment to ensure that
the investment team is comfortable that it does not pose an
existential threat to the business. In the case of Rightmove, the
UK’s largest online property portal, Lindsell Train identified no
ESG risks that the team deemed materially significant. Perhaps the
key risk – common to all data owners – is the potential for leakage
of sensitive information (Rightmove’s customers are estate agents,
who ultimately deal with details of individuals’ houses),
necessitating the robust cyber security measures the company has in
place. But having this unique view into the housing market also
brings opportunity, as political changes drive more demand for data
on properties – for example the mandatory displaying of Energy
Performance Certificate (“EPC”) ratings on all houses put on the
market – and Rightmove has more data than anybody in the
UK.
As a
capital-light, primarily digital company with low carbon emissions,
Rightmove’s inclusion marginally decreases the weighted carbon
footprint of the Portfolio. Additionally, from a net zero alignment
perspective, Rightmove is currently “Aligning”, which suggests that
the company is moving in the right direction; however we will
engage with management to encourage further progress.
Positive
/ Negative Screening
The
characteristics that Lindsell Train seeks in its investee companies
means that it typically invests in a fairly narrow set of sectors
and industries, and avoids others altogether. For example, Lindsell
Train has typically avoided:
-
capital
intensive industries (energy, commodities or mining) or any
companies involved in the extraction and production of coal, oil or
natural gas. The Company’s exposure to the Energy sector
is 0%.
-
industries
that Lindsell Train judges to be sufficiently detrimental to
society that they may be exposed to burdensome regulation or
litigation that could impinge on financial returns. The Company’s
exposure to Tobacco, Gambling and Arms Manufacturers is
0%.
COMPANY
SECTOR/INDUSTRY EXPOSURE
|
Consumer
Staples (“CS”)
|
28.7%
|
|
Financials
(“F”)
|
25.2%
|
|
Consumer
Discretionary (“CD”)
|
22.4%
|
|
Industrials
(“I”)
|
13.5%
|
|
Technology
(“T”)
|
10.2%
|
Source:
Frostrow Capital LLP
Similarly,
Lindsell Train’s investment approach has steered Nick Train (who is also Chairman of Lindsell
Train’s ESG Committee) and the investment team to invest in a
number of companies that play an important positive social or
environmental role, for example through providing access to
educational information (RELX), encouraging saving for the future
(Schroders, Hargreaves Lansdown) or encouraging environmental
progress and developing best practice (e.g., Diageo, Mondelez).
Lindsell Train believes that such positive benefits for society
should be consistent with its aim to generate competitive long-term
returns, thus helping it meet its clients’ investment objectives.
Furthermore, through its engagement strategy, Lindsell Train
increasingly seeks to encourage and support its companies to meet
their own ESG commitments with the aim of improving standards and
enhancing returns. Thus Lindsell Train’s evaluation of ESG factors
is a natural part of its investment process and the exercise of its
stewardship responsibilities is integral to the research
process.
Climate
Change
The risks
associated with climate change and the transition to a low-carbon
economy will affect all businesses, irrespective of their size,
sector or geographic location. Therefore, no company’s revenues are
immune and the assessment of such risks must be considered within
any effective investment approach, particularly one like Lindsell
Train’s that seeks to protect its clients’ capital for decades to
come. That said, evidently the transition to a low-carbon economy
will affect some sectors more than others and typically Lindsell
Train avoids those sectors that are most notably capital-intensive
industries and companies involved in the extraction and production
of coal, oil or natural gas. As a result, we are pleased to note
that the Trust continues to have a significantly lower than average
weighted average carbon intensity than its comparable
benchmarks.
Lindsell
Train supports the recommendations of the Task Force on
Climate-Related Financial Disclosures (“TCFD”) and its efforts to
encourage companies to report their climate related disclosures and
data in a uniform and consistent way. During 2024, Lindsell Train
published TCFD Product Reports ahead of the FCA’s deadline,
including for the Company. The report can be found on the Company’s
website, and includes analysis on the Trust’s Scope 1, 2 & 3
emissions relative to the benchmark.
As a
relatively small company with a single office location and fewer
than 30 employees, Lindsell Train’s climate exposure comes
predominantly from the investment portfolios that it manages on
behalf of its clients. Lindsell Train recognises the systemic risk
posed by climate change and the potential financial impacts
associated with a transition to a low-carbon economy. To help
address this, Lindsell Train became a signatory of the Net Zero
Asset Managers (“NZAM”) initiative in December 2021, which affirms its commitment to
support the goal of net zero greenhouse gas emissions by 2050 or
sooner. In line with this ambition, Lindsell Train published a 2030
interim target in Q4 2022 which has since been approved by The
Institutional Investors Group on Climate Change (“IIGCC”). Lindsell
Train selected to use the Paris Aligned Investment Initiative Net
Zero Investment Framework (“NZIF”) target setting approach. Of the
four specific targets recommended by NZIF, Lindsell Train believed
it most appropriate to adopt a portfolio coverage target, given the
strategic nature of its approach and the well below average carbon
footprints of its investee companies. Lindsell Train has targeted
55% of its asset-weighted committed1
assets to
be considered Aligned2
by 2030,
as set out by the PAII Net Zero Investment Framework. This
represents a c.50% improvement from its baseline of 36% of assets
being Aligned as of 2022, consistent with a fair share of the 50%
global reduction in CO2 identified as a requirement in the
Intergovernmental Panel on Climate Change (“IPCC”) special report
on global warming of 1.5°C.
With
regards to the current status of Lindsell Train portfolios,
Lindsell Train has not yet formally published its progress as at
2024; however Lindsell Train has committed to do so in early 2025
once it has had a chance to digest the revised Net Zero Investment
Framework “NZIF 2.0”, which was released in June
this year.
Whilst
Lindsell Train has not formally published a figure for 2024 at a
portfolio level, it has been encouraged by the progress of a number
of companies over the past year, including some that are held in
the Trust. Our engagement work this year has shown that the
introduction of mandatory TCFD reporting has had the desired effect
of driving progress and supporting consistency of reporting. Where
action is not mandated, there is a risk that certain companies or
geographies fail to prepare appropriately for the costs and
business risks brought about by the climate emergency’s physical
and transition risks.
Two years
on from having measured our baseline and set our interim target, we
are pleased with the progress that has been made by the companies
within the portfolio. The chart within the Annual Report shows the
progress made by all strategies at Lindsell Train, including the UK
Equity Strategy of which the Company forms a part. The proportion
of companies aligned, aligning, committed to aligning and not
aligned remained broadly unchanged over the two years, though we
have identified examples where companies have made progress. For
example, Young & Co Brewery has advanced from “Committed to
Aligning” to the “Aligning” stage. If there are cases of companies
not making adequate progress, we will continue to remind management
of our expectations and point them to similar companies where we
have identified improvements, to encourage collaboration, as well
as supplying details of potentially useful ‘gold standard’
resources such as the Science Based Targets Initiative.
Lindsell
Train’s clients have urged it to set realistic targets and the
investment team feel strongly that targets should be set in line
with industry expectation, which they truly believe are achievable
and will therefore strive to meet or better. The 55% target figure
is above the IIGCC’s recommendation that 50% of portfolio companies
should be “Aligned” by 2030 and is also philosophically in line
with the requirement to deliver a fair share of the 50% global
reduction in CO2 emissions by 2030, identified as a requirement in
the IPCC special report on global warming of 1.5°C.
Further
information on Lindsell Train’s TCFD related disclosures can be
found in its 2023 TCFD Report, which can be found on Lindsell
Train’s website.
Engagement
Where
Lindsell Train has specific concerns with management’s strategy,
company performance (financial and non-financial), or risk profile,
or where it deems it necessary to protect its clients’ interests,
the investment team will proactively engage with management.
Lindsell Train will consider the individual circumstances of the
company and the issue at hand, in order to determine realistic
objectives and define the scope of our engagement, ensuring
that:
-
The
objective is suitably focused on long-term value preservation and
creation
-
The
objective is specific and there is clarity around
delivery
-
The
objective is realistic and achievable
In most
circumstances Lindsell Train arranges a meeting with senior
management, board members, or if appropriate with the company
chairperson or the senior non-executive director. The feedback from
these meetings is then discussed amongst the Investment Team. In
some instances, the matter on which it is engaging is swiftly
resolved, and in other cases, the response may be a multistage,
multi-year process. As long as the dialogue is constructive and
ongoing, and management clearly outline a proposed course of
action, Lindsell Train is typically comfortable with a longer
timeline to resolution. Where this is not the case, it will
consider escalating our engagement.
The
long-term approach generally leads Lindsell Train to be supportive
of company management; however, where required and if in the best
interests of our clients, Lindsell Train will try to influence
management on specific matters or policies. Lindsell Train’s
intention is to have open and constructive dialogue with management
and board members, in order to broaden its knowledge of the
company’s strategy and operations and to ensure any concerns it
might have are assuaged. Given Lindsell Train often builds up
large, long-term, stakes in the businesses in which it invests,
Lindsell Train finds that management are open to (and very often
encourage) engaging with the Investment Team. As mentioned above,
constructive dialogue has more often than not resulted in
satisfactory outcomes, thus limiting the need for
escalation.
During the
year, Lindsell Train engaged with 13 companies held within the
Company’s portfolio on a wide range of environmental, social and
governance issues, there were 25 engagements in total.
CASE
STUDY
ENGAGEMENT
CASE STUDY
Company
name: Unilever
Year
Founded: 1929
Year
FGT first invested: 2000
Sector:
Consumer
Staples
Engagement
topics: Capital
Allocation & Strategy and Reputation
Date
of engagements:
July 2024
Engagement
format: Call
Reason
for Engagement: Ongoing
engagement regarding Unilever’s
capital allocation and strategy.
During the
second half of 2023, the Lindsell Train investment team engaged
with Unilever on its decision to retain its presence in
Russia, and changes to capital
allocation & strategy. On Russia, it sought justification for this
decision and, whilst the team recognises that there was no easy
choice, Lindsell Train conveyed its expectation that management
would keep the situation under active review with the hope of
finding the ‘least worst’ outcome.
As we are
long-term holders of Unilever in both our UK and Global strategy,
we have continued to engage regularly with management over our
holding period. During 2024, we closely monitored Unilever’s
position in Russia and were
pleased to receive confirmation that the company had completed the
sale of the Russian subsidiary during October this year.
Separately,
during Q3 2024, following news that Unilever will spin off its ice
cream business, we reignited our engagement with CFO, Fernando Fernandes, to review capital allocation
and strategic priorities. We were particularly interested to
understand why Unilever continues to maintain substantial debt on
its balance sheet. Fernandes reconfirmed Unilever’s capital
allocation policy, which remains unchanged, noting that the
business priority remains focused on increasing volume growth to
2+%, up from 1% at present. From a strategic perspective, the CFO
is acutely alert to the need to be in premium segments with global
scalability and so future capital allocation will be fundamentally
concentrated in the US and India
where the largest opportunities exist. Similarly, prestige beauty
represents one third of growth in Health & Wellbeing and will
be c.8% of revenue once ice cream is gone. This is a strong
business which has grown for 14 consecutive quarters, but
management is aiming for it to be a £10bn business and so ensuring
adequate capital allocation to priority segments such as this is
important.
Next
steps: The
engagement regarding Unilever’s capital allocation
and strategy has been productive and insightful. But as with all
our companies we will continue to monitor progress closely and
engage with management on aspects of their corporate strategy on an
ongoing basis.
Proxy
Voting
The
primary voting policy of Lindsell Train is to protect or enhance
the economic value of its investments on behalf of its clients.
Lindsell Train has appointed Glass Lewis to aid the administration
of proxy voting and provide additional support in this area.
However, the Investment Team maintains decision making
responsibility based on its detailed knowledge of the investee
companies. It is Lindsell Train’s policy to exercise all voting
rights which have been delegated to Lindsell Train by its
clients.
Voting
record for companies held in Finsbury Growth & Income Trust
PLC:
|
|
Management
Proposals
|
Shareholder
Proposals
|
Total
Proposals
|
|
With
Management
|
382
|
3
|
385
|
|
Against
Management
|
0
|
0
|
0
|
|
Abstain
|
0
|
1
|
1
|
|
Totals
|
382
|
4
|
386
|
Source:
Glass Lewis. 1 October 2023 –
30 September 2024.
Votes
against management and abstentions have typically been in the low
single-digit range. As mentioned above, the main reason for this is
that our long-term approach to investment generally leads us to be
supportive of company management. Furthermore, it is Lindsell
Train’s aim to be invested in ‘exceptional’ companies with strong
corporate governance and hence it ought to be rare that Lindsell
Train finds itself in a position where it is voting against
management.
During Q2
2024, Lindsell Train abstained on a shareholder proposal for
Mondelez, proposing an independent chair. In general, Lindsell
Train has a preference for chairs to be independent, though we
sympathise with management’s view that the existing set-up is
appropriate for the business. As a result, we decided to abstain on
this resolution rather than vote against.
2024
– ESG HIGHLIGHTS AT LINDSELL TRAIN
-
Improved
United Nations Principles for Responsible Investment scorecard
(“PRI”) – Lindsell
Train received the PRI’s updated 2023 scorecard
in Q1 2024, which shows that Lindsell Train has scored 4/5 in all
three relevant categories. This improved scorecard reflects on its
enhanced efforts as a company to continue to integrate stewardship
and responsible investment into its investment decision making,
reporting and governance activities.
-
Enhanced
ESG
Training – Lindsell
Train recognises the importance
of ongoing training for all employees and importantly the
Investment Team and ESG Committee. In October 2023 and July
2024 Lindsell Train hosted workshops for all staff and were
extremely grateful to have been supported by two portfolio
companies, Burberry and Heineken.
-
Strengthened
commitment to the abolishment of Modern Slavery
– Lindsell
Train updated its Responsible Investment and Engagement
Policy to specifically reflect on this commitment and have
strengthened its partnership with CCLA and other members of Find
It, Fix It, Prevent it.
-
Formalised
its Engagement Framework including the Engagement
Policy – this was
finalised in Q2 2024.
-
Additional
TCFD reporting – Lindsell
Train’s TCFD Entity and Product
reports were published on its website ahead of the FCA deadline in
Q2 2024.
-
Added
dedicated ESG resource – Lindsell
Train welcomed Azjin Ali to the
team as Responsible Investment Lead in Q3 2024. Prior to joining
Lindsell Train, Azjin worked at Aon as an Associate Investment
Consultant and Head of Biodiversity. Madeline Wright continues in her role as Head of
Investment ESG, coordinating the investment team’s work on
ESG.
-
Continued
partnership with UpReach –
culminated with Lindsell Train’s
hosting of its annual intern day in August
2024, which had 11 UpReach associates attended. The session
included presentations from all departments at Lindsell Train,
helping those in attendance to learn about asset management and how
Lindsell Train approaches the investment challenge.
INTEGRITY
AND BUSINESS ETHICS
The
Company is committed to carrying out business in an honest and fair
manner. The Board has adopted a zero-tolerance approach to
instances of bribery and corruption. Accordingly, it expressly
prohibits any Director or associated persons when acting on behalf
of the Company from accepting, soliciting, paying, offering or
promising to pay or authorise any payment, public or private, in
the United Kingdom or abroad to
secure any improper benefit from themselves or for the
Company.
The Board
applies the same standards to its service providers in their
activities for the Company.
A copy of
the Company’s Anti Bribery and Corruption Policy can be found in
the Board and Policies section of the Company’s website. The policy
is reviewed annually by the Audit Committee.
In
response to the implementation of the Criminal Finances Act 2017,
the Board adopted a zero-tolerance approach to the criminal
facilitation of tax evasion. A copy of the Company’s policy on
preventing the facilitation of tax evasion can be found in the
Board and Policies section of the Company’s website. The policy is
reviewed annually by the Audit Committee.
In
carrying out its activities, the Company aims to conduct itself
responsibly, ethically and fairly, including in relation to social
and human rights issues. As an investment company with limited
internal resource, the Company has little impact on the
environment. The Company believes that high standards of ESG make
good business sense and have the potential to protect and enhance
investment returns. Consequently, the Portfolio Manager’s
investment criteria ensure that ESG and ethical issues are taken
into account and best practice is encouraged. The Board’s
expectations are that its principal service providers have
appropriate governance policies in place.
COMPANY
PROMOTION
The
Company has appointed Frostrow to promote the Company’s shares to
professional investors in the UK and Ireland. As investment company specialists,
the Frostrow team provides a continuous, proactive marketing and
investor relations service that aims to promote the Company by
encouraging demand for the shares.
MANAGEMENT
ARRANGEMENTS
Alternative
Investment Fund Manager (“AIFM”)
Under the
terms of its AIFM agreement with the Company, Frostrow
provides, inter
alia, the
following services:
-
oversight
of the portfolio management function delegated to Lindsell
Train;
-
promotion
of the Company;
-
investment
portfolio administration and valuation;
-
risk
management services;
-
share
price discount and premium management;
-
administrative
and company secretarial services;
-
advice and
guidance in respect of corporate governance
requirements;
-
maintenance
of the Company’s accounting records;
-
maintenance
of the Company’s website;
-
preparation
and publication of annual reports, half year reports and monthly
fact sheets; and
-
ensuring
compliance with applicable legal and regulatory
requirements.
The AIFM
Agreement may be terminated by either party on giving notice of not
less than 12 months.
Portfolio
Manager
Lindsell
Train, as delegate of the AIFM, is responsible for the management
of the Company’s portfolio of investments under an agreement
between it, the Company and Frostrow (the “Portfolio Management
Agreement”).
Under the
terms of its Portfolio Management Agreement, Lindsell Train
provides, inter
alia, the
following services:
-
seeking
out and evaluating investment opportunities;
-
recommending
the manner by which monies should be invested, realised or
retained;
-
advising
on how rights conferred by the investments should be
exercised;
-
analysing
the performance of investments made; and
-
advising
the Company in relation to trends, market movements and other
matters which may affect the investment objective and policy of the
Company.
The
Portfolio Management Agreement may be terminated by either party on
giving notice of not less than 12 months.
Annual
Fees
|
|
|
PORTFOLIO
|
|
FEES
ON THAT PART OF MARKET CAP
|
AIFM
|
MANAGER
|
|
≤ £1
bn
|
0.15%
|
0.45%
|
|
Between £1
bn - £2 bn
|
0.135%
|
0.405%
|
|
£2 bn
+
|
0.12%
|
0.36%
|
Performance
Fees
The
Company does not pay performance fees.
AIFM
AND PORTFOLIO MANAGER EVALUATION AND
RE-APPOINTMENT
The
performance of Frostrow as AIFM and Lindsell Train as Portfolio
Manager is continuously monitored by the Board with a formal
evaluation being undertaken each year. As part of this process the
Board monitors the services provided by the AIFM and the Portfolio
Manager as well as receiving regular reports and views from them.
The Board has also considered the assessment carried out by the
AIFM as required by the FCA’s Consumer Duty obligations, that the
Company’s Shares provide fair value. It also receives comprehensive
long-term performance measurement reports to enable it to determine
whether or not the performance objective set by the Board has been
met.
Following
a review at the Board meeting in September
2024, the Board considers that the continuing appointment of
Frostrow and Lindsell Train, under the terms described above, is in
the best interests of the Company’s Shareholders. In coming to this
decision, it took into consideration the following additional
reasons:
-
the
quality and depth of experience of the company secretarial,
administrative and marketing team that the AIFM brought to the
management of the Company; and
-
the
quality and depth of experience that the Portfolio Manager brought
to the management of the portfolio, the clarity and rigour of the
investment process, consideration of ESG targets, the high degree
of engagement with portfolio companies on ESG matters, the level of
past long-term
performance of the portfolio in absolute terms and also by
reference to the benchmark index.
Depositary
The Bank
of New York Mellon (International) Limited (the “Depositary”) acts
as the Company’s depositary in accordance with the AIFMD on the
terms and subject to the conditions of the depositary agreement
between the Company, Frostrow and the Depositary (the “Depositary
Agreement”). Under the terms of the Depositary Agreement the
Company pays the Depositary a fee between 0.007% and 0.008% of net
assets.
The
Depositary provides the following services:
-
responsibility
for the safe-keeping of custodial assets of the
Company;
-
verification
and maintenance of a record of all other assets of the
Company;
-
the
collection of income that arises from those assets;
-
taking
reasonable care to ensure that the Company is managed in accordance
with the AIFMD, the Investment Funds Sourcebook and the Company’s
instrument of incorporation, in relation to the calculation of the
net asset value per share and the application of income of the
Company; and
-
monitoring
the Company’s compliance with investment restrictions and leverage
limits set by the Board and the AIFM.
In
accordance with the AIFM Rules the Depositary acts as global
custodian and may delegate safekeeping to one or more global
sub-custodians. The Depositary has delegated safekeeping of the
assets of the Company to The Bank of New York Mellon SA/NV and/or
The Bank of New York Mellon (The Global Sub-custodians).
As at the
date of this report, the applicable active sub-custodians appointed
by the Depositary who might be relevant for the purposes of holding
the Company’s investments are:
|
COUNTRY
|
NAME
OF SUB-CUSTODIAN
|
REGULATOR
|
|
The
Netherlands
|
The Bank
of New York Mellon SA/NV
|
Financial
Services and Markets Authority, Belgium
|
|
United
States of America
|
The Bank
of New York Mellon, New York
|
US
Securities and Exchange Commission
|
|
France
|
The Bank
of New York Mellon SA/NV
|
The
Autorité des Marchés Financiers
|
Custodian
The Global
Sub-Custodians’ safekeeping fees are charged according to the
jurisdiction in which the holdings are based. The majority of the
Company’s assets attract a custody fee of 0.0033% of their market
value. Variable transaction fees are also chargeable.
The
Depositary Agreement may be terminated by either party on giving
notice of not less than 90 days.
On behalf
of the Board
Simon Hayes
Chairman
3 December 2024
Statement
of Directors’ Responsibilities
The
Directors are responsible for preparing the Annual Report and the
Financial Statements in accordance with applicable law and
regulations.
Company
law requires the Directors to prepare Financial Statements for each
financial year. Under that law the Directors have prepared the
Company's Financial Statements in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting
Standards, comprising FRS 102 “The Financial Reporting Standard
applicable in the UK and Republic of Ireland”, and applicable
law).
Under
company law the Directors must not approve the Financial Statements
unless they are satisfied that they give a true and fair view of
the state of affairs of the Company and of the profit or loss of
the Company for that period. In preparing the Financial Statements,
the Directors are required to:
-
select
suitable accounting policies and then apply them
consistently;
-
state
whether applicable United Kingdom Accounting Standards, comprising
FRS 102 have been followed, subject to any material departures
disclosed and explained in the Financial Statements;
-
make
judgements and accounting estimates that are reasonable and
prudent; and
-
prepare
the Financial Statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in
business.
The
Directors are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The
Directors are responsible for keeping adequate accounting records
that are sufficient to show and explain the Company's transactions
and disclose with reasonable accuracy at any time the financial
position of the Company and enable them to ensure that the
Financial Statements and the Directors’ Remuneration Report comply
with the Companies Act 2006.
WEBSITE
PUBLICATION
The
Directors are responsible for ensuring the Annual Report and the
financial statements are made available on a website.
Financial
statements are published on the Company’s website in accordance
with legislation in the United
Kingdom governing the preparation and dissemination of
financial statements, which may vary from legislation in other
jurisdictions. The maintenance and integrity of the Company’s
website is the responsibility of the Directors.
The
Directors’ responsibility also extends to the ongoing integrity of
the financial statements contained therein.
RESPONSIBILITY
STATEMENT
The
Directors consider that the Annual Report and Financial Statements,
taken as a whole, are fair, balanced, understandable and provide
the information necessary for Shareholders to assess the Company’s
position, performance, business model and strategy.
Each of
the Directors, whose names and functions are listed in the ‘Board
of Directors’ section within the Annual Report, confirms that, to
the best of their knowledge:
-
the
Company's Financial Statements, which have been prepared in
accordance with United Kingdom Accounting Standards give a true and
fair view of the assets, liabilities, financial position and profit
of the Company; and
-
the
Strategic Report includes a fair review of the development and
performance of the business and the position of the Company,
together with a description of the principal risks and
uncertainties that it faces.
Approved
by the Board of Directors and signed on its behalf by
Simon Hayes
Chairman
3 December 2024
Note to
those who access this document by electronic means:
The Annual
Report for the year ended 30 September
2024 has been approved by the Board of Finsbury Growth &
Income Trust PLC. Copies of the Annual Report are circulated to
Shareholders and, where possible to potential investors. It is also
made available in electronic format for the convenience of readers.
Printed copies are available from the Company Secretary's office in
London.
Income
Statement
FOR
THE YEAR ENDED 30 SEPTEMBER
2024
|
|
|
YEAR
ENDED
30
SEPTEMBER 2024
|
YEAR
ENDED
30
SEPTEMBER 2023
|
|
|
|
REVENUE
|
CAPITAL
|
TOTAL
|
REVENUE
|
CAPITAL
|
TOTAL
|
|
|
NOTE
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Gains on
investments at fair
value
through profit or loss
|
9
|
–
|
78,006
|
78,006
|
–
|
96,387
|
96,387
|
|
Currency
translations
|
|
–
|
(185)
|
(185)
|
–
|
(65)
|
(65)
|
|
Income
|
2
|
43,160
|
–
|
43,160
|
47,391
|
–
|
47,391
|
|
AIFM and
portfolio management fees
|
3
|
(2,260)
|
(6,781)
|
(9,041)
|
(2,609)
|
(7,828)
|
(10,437)
|
|
Other
expenses
|
4
|
(1,184)
|
(126)
|
(1,310)
|
(1,150)
|
(17)
|
(1,167)
|
|
Return
on ordinary activities
before
finance charges and taxation
|
|
39,716
|
70,914
|
110,630
|
43,632
|
88,477
|
132,109
|
|
Finance
charges
|
5
|
(556)
|
(1,667)
|
(2,223)
|
(517)
|
(1,548)
|
(2,065)
|
|
Return
on ordinary activities
before
taxation
|
|
39,160
|
69,247
|
108,407
|
43,115
|
86,929
|
130,044
|
|
Taxation on
ordinary activities
|
6
|
(229)
|
–
|
(229)
|
(1,186)
|
–
|
(1,186)
|
|
Return
on ordinary activities
after
taxation
|
|
38,931
|
69,247
|
108,178
|
41,929
|
86,929
|
128,858
|
|
Return
per share – basic and
diluted
|
7
|
20.8p
|
36.9p
|
57.7p
|
20.0p
|
41.4p
|
61.4p
|
The
“Total” column of this statement represents the Company’s income
statement.
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; therefore no separate Statement of
Comprehensive Income has been presented.
The notes
form part of these Financial Statements.
Statement
of Changes in Equity
FOR
THE YEAR ENDED 30 SEPTEMBER
2024
|
|
NOTE
|
CALLED
UP
SHARE
CAPITAL
£’000
|
SHARE
PREMIUM
ACCOUNT
£’000
|
SPECIAL
DISTRIBUTABLE
RESERVE
£’000
|
CAPITAL
REDEMPTION
RESERVE
£’000
|
CAPITAL
RESERVE
£’000
|
REVENUE
RESERVE
£’000
|
TOTAL
SHAREHOLDERS’
FUNDS
£’000
|
|
|
|
|
|
|
|
|
At 1
October 2023
|
|
56,248
|
1,099,847
|
–
|
3,453
|
604,212
|
58,969
|
1,822,729
|
|
|
Net return
from ordinary activities
|
|
–
|
–
|
–
|
–
|
69,247
|
38,931
|
108,178
|
|
|
|
|
Second
interim dividend
(10.5p per
share)
for the
year ended 30 September
2023
|
8
|
–
|
–
|
–
|
–
|
–
|
(21,454)
|
(21,454)
|
|
|
|
|
|
|
|
|
First
interim dividend
(8.8p per
share)
for the
year ended 30 September
2024
|
8
|
–
|
–
|
–
|
–
|
–
|
(16,477)
|
(16,477)
|
|
|
|
|
|
|
|
|
Transfer to
special reserve account
|
|
–
|
(1,099,847)
|
–
|
–
|
–
|
–
|
(1,099,847)
|
|
|
|
|
Transfer
from share premium account
|
|
–
|
–
|
1,099,847
|
–
|
–
|
–
|
1,099,847
|
|
|
|
|
Repurchase
of shares into Treasury
|
13
|
–
|
–
|
(49,839)
|
–
|
(260,969)
|
–
|
(310,808)
|
|
|
|
|
At
30 September 2024
|
|
56,248
|
–
|
1,050,008
|
3,453
|
412,490
|
59,969
|
1,582,168
|
|
On
7 August 2024 the Company’s Share
Premium Account was cancelled and a new Special Distributable
Reserve was created. See Note 1(J) for further details.
|
|
NOTE
|
CALLED
UP
SHARE
CAPITAL
£’000
|
SHARE
PREMIUM
ACCOUNT
£’000
|
SPECIAL
DISTRIBUTABLE
RESERVE
£’000
|
CAPITAL
REDEMPTION
RESERVE
£’000
|
CAPITAL
RESERVE
£’000
|
REVENUE
RESERVE
£’000
|
TOTAL
SHAREHOLDERS’
FUNDS
£’000
|
|
|
|
|
|
|
|
|
At 1
October 2022
|
|
56,248
|
1,099,847
|
–
|
3,453
|
614,947
|
55,889
|
1,830,384
|
|
|
Net return
from ordinary activities
|
|
–
|
–
|
–
|
–
|
86,929
|
41,929
|
128,858
|
|
|
|
|
Second
interim dividend
(9.8p per
share)
for the
year ended 30 September
2022
|
8
|
–
|
–
|
–
|
–
|
–
|
(21,182)
|
(21,182)
|
|
|
|
|
|
|
|
|
First
interim dividend
(8.5p per
share)
for the
year ended 30 September
2023
|
8
|
–
|
–
|
–
|
–
|
–
|
(17,667)
|
(17,667)
|
|
|
|
|
|
|
|
|
Repurchase
of shares into Treasury
|
13
|
–
|
–
|
–
|
–
|
(97,664)
|
–
|
(97,664)
|
|
|
|
|
At
30 September 2023
|
|
56,248
|
1,099,847
|
–
|
3,453
|
604,212
|
58,969
|
1,822,729
|
|
The notes
form part of these Financial Statements.
Statement
of Financial Position
AS
AT 30 SEPTEMBER
2024
|
|
|
2024
|
2023
|
|
|
NOTE
|
£’000
|
£’000
|
|
Fixed
assets
|
|
|
|
|
Investments
held at fair value through profit or loss
|
9
|
1,593,218
|
1,836,660
|
|
Current
assets
|
|
|
|
|
Debtors
|
10
|
7,509
|
10,209
|
|
Cash and
cash equivalents
|
|
14,639
|
17,426
|
|
|
|
22,148
|
27,635
|
|
Current
liabilities
|
|
|
|
|
Creditors:
amounts falling due within one year
|
11
|
(3,998)
|
(4,866)
|
|
|
|
(3,998)
|
(4,866)
|
|
Net
current assets
|
|
18,150
|
22,769
|
|
Total
assets less current liabilities
|
|
1,611,368
|
1,859,429
|
|
Creditors:
amount falling due after more than one year
|
|
|
|
|
Bank
loan
|
12
|
(29,200)
|
(36,700)
|
|
Net
assets
|
|
1,582,168
|
1,822,729
|
|
Capital
and reserves
|
|
|
|
|
Called up
share capital
|
13
|
56,248
|
56,248
|
|
Share
premium account
|
|
–
|
1,099,847
|
|
Special
distributable reserve
|
|
1,050,008
|
–
|
|
Capital
redemption reserve
|
|
3,453
|
3,453
|
|
Capital
reserve
|
14
|
412,490
|
604,212
|
|
Revenue
reserve
|
|
59,969
|
58,969
|
|
Total
Shareholders’ funds
|
|
1,582,168
|
1,822,729
|
|
Net
asset value per share
|
15
|
943.4p
|
891.2p
|
The
Financial Statements were approved by the Board of Directors on
3 December 2024 and were signed on
its behalf by:
Simon Hayes
Chairman
The notes
form part of these Financial Statements.
Company
Registration Number SC013958 (Registered in Scotland)
Statement
of Cash Flows
FOR
THE YEAR ENDED 30 SEPTEMBER
2024
|
|
NOTE
|
2024
£’000
|
2023
£’000
|
|
Net
cash inflow from operating activities
|
18
|
33,805
|
36,895
|
|
Investing
activities
|
|
|
|
|
Purchase
of investments
|
|
(123,825)
|
(41,840)
|
|
Sale of
investments
|
|
445,464
|
154,301
|
|
Net
cash inflow from investing activities
|
|
321,639
|
112,461
|
|
Financing
activities
|
|
|
|
|
Dividends
paid
|
|
(37,931)
|
(38,849)
|
|
Repurchase
of shares into Treasury
|
|
(310,392)
|
(98,792)
|
|
Interest
paid
|
|
(2,223)
|
(2,059)
|
|
Repayment
of loans
|
|
(7,500)
|
–
|
|
Net
cash outflow from financing activities
|
|
(358,046)
|
(139,700)
|
|
(Decrease)/increase
in cash and cash equivalents
|
|
(2,602)
|
9,656
|
|
Currency
transactions
|
|
(185)
|
(65)
|
|
Cash and
cash equivalents at the beginning of the financial year*
|
|
17,426
|
7,835
|
|
Cash and
cash equivalents at the end of the financial year*
|
|
14,639
|
17,426
|
Reconciliation
of net debt
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
Cash and
cash equivalents*
|
14,639
|
17,426
|
|
Borrowings
|
(29,200)
|
(36,700)
|
|
Net
debt
|
(14,561)
|
(19,274)
|
* Comprises
solely cash held at bank.
The
notes
form part
of these Financial Statements.
Notes
to the
Financial Statements
FOR
THE YEAR ENDED 30 SEPTEMBER
2024
1.
Accounting Policies
The
Company is a public limited company (PLC) incorporated in the
United Kingdom, with registered
office at 50 Lothian Road, Festival Square, Edinburgh EH3 9WJ.
The
principal accounting policies, all of which have been applied
consistently throughout the year in the preparation of these
Financial Statements, are set out below:
(A)
BASIS OF PREPARATION
The
Financial Statements have been prepared in accordance with UK
Generally Accepted Accounting Practice (GAAP) under UK and Republic
of Ireland Company Law, FRS 102 ‘The Financial Reporting Standard
applicable in the UK, the Statement of Recommended Practice (SORP)
for “Financial Statements of Investment Trust Companies and Venture
Capital Trusts” issued by the Association of Investment Companies
in July 2022 and the Companies Act
2006 under the historical cost convention as modified by the
valuation of investments at fair value through profit or
loss.
The
Financial Statements have been prepared on a going concern basis.
The disclosure on going concern in the Statement of Directors’
Responsibilities forms part of these Financial
Statements.
Presentation
of the Income Statement
In order
to reflect better the activities of an investment trust company and
in accordance with the SORP, supplementary information which
analyses the Income Statement between items of a revenue and
capital nature has been presented alongside the Income Statement.
The net revenue return is the measure the Directors believe
appropriate in assessing the Company’s compliance with certain
requirements set out in Sections 1158 and 1159 of the Corporation
Tax Act 2010.
Significant
Judgements and Critical Sources of Estimation
Uncertainties
There were
no significant judgements or critical estimates reported during the
financial year ended 30 September
2024 (2023: none).
(B)
INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR
LOSS
Investments
are measured under FRS 102, sections 11 and 12 and are measured
initially, and at subsequent reporting dates, at fair
value.
Changes in
the fair value of investments and gains and losses on disposal are
recognised in the Income Statement as a capital item. The Company
manages and evaluates the performance of these investments on a
fair value basis in accordance with its investment strategy, and
information about the investments is provided internally on this
basis to the Board. Fair value for quoted investments is deemed to
be bid market prices, or last traded price, depending on the
convention of the stock exchange on which they are
quoted.
In
estimating the fair value of unquoted investments, the AIFM and
Board apply valuation techniques which are appropriate in light of
the nature, facts and circumstances of the investment and use
judgement and assumptions and apply these consistently.
All
purchases and sales of investments are accounted for on a trade
date basis.
The
Company’s policy is to expense transaction costs on
acquisition/disposal through the gains on investment at fair value
through profit or loss. The total of such expenses, showing the
total amounts included in disposals and acquisitions, is disclosed
in note 9.
(C)
INCOME
Dividends
receivable from equity shares are recognised in Revenue on an
ex-dividend basis except where, in the opinion of the Board, the
dividend is capital in nature, in which case it is included in
Capital. Overseas dividends are stated gross of any withholding
tax.
When the
Company has elected to receive scrip dividends in the form of
additional shares rather than cash, the amount of cash dividend
foregone is recognised in Revenue.
Fixed
returns on non-equity shares are recognised on a time apportionment
basis.
Special
dividends: In deciding whether a dividend should be regarded as a
Capital or Revenue receipt, the Company reviews all relevant
information as to the reasons for and sources of the dividend on a
case by case basis depending upon the nature of the receipt.
Special dividends of a revenue nature are recognised through the
Revenue column of the Income Statement. Special Dividends of a
capital nature are recognised through the Capital column of the
Income Statement.
The
limited liability partnership (LLP) profit share is recognised in
the financial statements when the entitlement to the income is
established, following the conclusion of the partnership’s annual
audit. Deposit interest receivable is taken to Revenue on an
accruals basis.
(D)
DIVIDENDS PAYABLE
Dividends
paid by the Company are recognised in the Financial Statements and
are shown in the Statement of Changes in Equity in the period in
which they became legally binding, which in the case of an interim
dividend is the point at which it is paid and for a final dividend
when it is approved by Shareholders in line with the ICAEW Tech
Release 02/17BL.
(E)
EXPENDITURE AND FINANCE CHARGES
All the
expense and finance costs are accounted for on an accruals basis.
Expenses are charged through the Revenue column of the Income
Statement except as follows:
(1)
expenses
which are incidental to the acquisition or disposal of an
investment are treated as part of the cost or deducted from
proceeds of that investment (as explained in 1(B)
above);
(2)
expenses
are taken to the Capital reserve via the Capital column of the
Income Statement, where a connection with the maintenance or
enhancement of the value of the investments can be demonstrated. In
line with the Board’s expected long-term
split of returns, 75% of the portfolio management fee, AIFM fee and
finance costs are taken to the Capital reserve and the balance to
the Revenue reserve.
(F)
TAXATION
Dividend
income received by the Company may be subject to withholding tax
imposed in the country of origin. The tax charges shown in the
Income Statement relates to overseas withholding tax on dividend
income.
Current
tax is provided at the amounts expected to be paid or
recovered.
Deferred
taxation is provided on all timing differences that have originated
but not been reversed by the Statement of Financial Position date
other than those differences regarded as permanent. This is subject
to deferred tax assets only being recognised if it is considered
more likely than not that there will be suitable profits from which
the reversal of timing differences can be deducted. Any liability
to deferred tax is provided for at the rate of tax enacted or
substantially enacted.
(G)
FOREIGN CURRENCY
Transactions
recorded in overseas currencies during the year are translated into
sterling at the exchange rates ruling at the date of the
transaction. Assets and liabilities denominated in overseas
currencies at the Statement of Financial Position date are
translated into sterling at the exchange rate ruling at that date.
Profits or losses on the translation of foreign currency balances,
whether realised or unrealised are credited or debited to the
Revenue or Capital column of the Income Statement depending on
whether the gain or loss is of a revenue or capital
nature.
(H)
CASH AND CASH EQUIVALENTS
Cash and
cash equivalents and demand deposits readily convertible to known
amounts of cash and subject to insignificant risk of changes in
value are defined as cash.
(I)
BANK LOAN
Bank loans
are initially recognised at fair value, net of transaction costs
incurred. Bank loans are subsequently measured at amortised cost.
The loan amounts falling due for repayment within one year are
included under current liabilities in the Statement of Financial
Position and the loan amounts falling due after one year are
included under “Creditors: amounts falling due after more than one
year” in the Statement of Financial Position.
(J)
REPURCHASE OF SHARES FOR CANCELLATION OR TO HOLD IN
TREASURY
The cost
of repurchasing ordinary shares (for cancellation or to hold in
Treasury) including the related stamp duty and transaction cost is
charged to the ‘Capital Reserve’ and the newly created Special
Distributable Reserve account, and dealt with in the Statement of
Changes in Equity. Share repurchase transactions are accounted for
on a trade date basis.
With
effect from 7 August 2024, the date
in which the Company’s Share Premium account was cancelled, all
shares bought back to be held in Treasury have been charged to the
Special Distributable Reserve. Prior to this date all Shares
cancelled were charged to the Capital Reserve account.
Where
shares are cancelled (or are subsequently cancelled having
previously been held in Treasury), the nominal value of those
shares is transferred out of ‘Called up share capital’ and into the
‘Capital redemption reserve’.
Should
shares held in Treasury be reissued, the sales proceeds will be
treated as a realised capital profit up to the amount of the
purchase price of those shares and will be transferred to capital
reserves. The excess of the sales proceeds over the purchase price
will be transferred to ‘Share premium’.
(K)
OPERATING SEGMENTS
The
Company defines operating segments and segment performance in the
financial statements based on information used by the Board of
Directors which is considered the Chief Operating Decision
Maker^.
The Directors are of the opinion that the Company is engaged in a
single segment of business, being the investments business. The
results published in this Annual Report therefore correspond to
this sole operating segment.
(L)
NATURE AND PURPOSE OF RESERVES
Capital
Redemption Reserve
This
reserve arose when ordinary shares were bought by the Company and
subsequently cancelled, at which point the amount equal to the par
value of the ordinary share capital was transferred from the
ordinary share capital to the Capital Redemption
reserve.
Capital
Reserve
This
reserve reflects any:
-
gains or
losses on the disposal of investments;
-
exchange
differences of a capital nature;
-
increases
and decreases in the fair value of investments which have been
recognised in the capital column of the Income
Statement;
-
expenses
which are capital in nature as disclosed in note 1(E);
and
-
excess of
the purchase price over the nominal value of shares which have been
bought back by the Company for cancellation or to be held in
Treasury. See note 1(J) above for further details.
Following
amendments to the Company’s Articles of Association in 2015, this
reserve can be used to distribute certain capital profits by way of
dividend.
Special
Distributable Reserve
This
reserve was created upon the cancellation of the Share Premium
Account on 7 August 2024; it is
distributable and is used to fund any repurchases of the Company’s
own shares.
Revenue
Reserve
This
reserve reflects all income and expenditure which are recognised in
the revenue column of the Income Statement and may be distributable
by way of dividend.
^ See
glossary of terms.
When
making a distribution to Shareholders, the Directors determine
profits available for distribution by reference to ‘Guidance on
realised and distributable profits under the Companies Act 2006’
issued by the Institute of Chartered Accountants in England and Wales and the Institute of Chartered
Accountants of Scotland in
April 2017. The availability of
distributable reserves in the Company is dependent on those
distributions meeting the definition of qualifying consideration
within that guidance and on available cash resources of the Company
and other accessible sources of funds. The distributable reserves
are therefore subject to these restrictions or limitations at the
time such distribution is made.
2.
Income
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
Income
from investments
|
|
|
|
UK listed
dividends
|
39,474
|
39,247
|
|
Overseas
dividends*
|
2,793
|
7,496
|
|
Limited
liability partnership – profit-share
|
486
|
443
|
|
Other
operating income – bank interest
|
407
|
205
|
|
Total
income
|
43,160
|
47,391
|
* Include
special dividends which have been credited to the revenue account
totalling £nil (2023: £591,000):
3.
AIFM and portfolio management fees
|
|
2024
|
2023
|
|
|
REVENUE
|
CAPITAL
|
TOTAL
|
REVENUE
|
CAPITAL
|
TOTAL
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
AIFM
fee
|
565
|
1,695
|
2,260
|
652
|
1,957
|
2,609
|
|
Portfolio
Management fee
|
1,695
|
5,086
|
6,781
|
1,957
|
5,871
|
7,828
|
|
Total
fees
|
2,260
|
6,781
|
9,041
|
2,609
|
7,828
|
10,437
|
75% of the
Portfolio management and AIFM fees are taken to the Capital reserve
and 25% is taken to the Revenue reserve. See note 1(E) for further
details.
4.
Other Expenses
|
|
|
2024
|
|
|
2023
|
|
|
|
REVENUE
|
CAPITAL
|
TOTAL
|
REVENUE
|
CAPITAL
|
TOTAL
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Directors’
fees
|
192
|
–
|
192
|
178
|
–
|
178
|
|
Auditors’
fees – statutory annual audit
|
72
|
–
|
72
|
69
|
–
|
69
|
|
Depositary’s
fees
|
160
|
–
|
160
|
175
|
–
|
175
|
|
Stock
listing and FCA fees
|
173
|
–
|
173
|
152
|
–
|
152
|
|
Custody
fees
|
130
|
–
|
130
|
119
|
–
|
119
|
|
Index
costs
|
85
|
–
|
85
|
85
|
–
|
85
|
|
Registrar’s
fees
|
79
|
–
|
79
|
64
|
–
|
64
|
|
Promotional
costs
|
55
|
–
|
55
|
55
|
–
|
55
|
|
Legal
fees
|
12
|
126
|
138
|
6
|
17
|
23
|
|
Other
expenses
|
226
|
–
|
226
|
247
|
–
|
247
|
|
Total
expenses
|
1,184
|
126
|
1,310
|
1,150
|
17
|
1,167
|
Further
details of the amounts paid to Directors are included in the
Directors’ Remuneration Report within the Annual Report.
During the
year ended 30 September 2024 there
were no non-audit services provided by the Company's Auditor (2023:
nil).
All of the
above expenses include VAT where applicable. The Auditor’s fees for
the statutory annual audit were £60,000 excluding VAT (2023:
£57,780).
During the
year the Company incurred legal expenses amounting to £126,000 in
relation to the cancellation of the share premium account; these
expenses have been charged 100% to the capital account.
5.
Finance Charges
|
|
|
2024
|
|
|
2023
|
|
|
|
REVENUE
|
CAPITAL
|
TOTAL
|
REVENUE
|
CAPITAL
|
TOTAL
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Interest
payable on bank loan
|
528
|
1,584
|
2,112
|
483
|
1,445
|
1,928
|
|
Loan
facility commitment fees
|
28
|
83
|
111
|
23
|
69
|
92
|
|
Arrangement
fee
|
–
|
–
|
–
|
11
|
34
|
45
|
|
|
556
|
1,667
|
2,223
|
517
|
1,548
|
2,065
|
6.
Taxation on Ordinary Activities
(A)
ANALYSIS OF CHARGE IN THE YEAR
|
|
|
2024
|
|
|
2023
|
|
|
|
REVENUE
|
CAPITAL
|
TOTAL
|
REVENUE
|
CAPITAL
|
TOTAL
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
UK
Corporation tax at 25%
(2023:
22%)
|
–
|
–
|
–
|
–
|
–
|
–
|
|
Overseas
withholding tax
|
476
|
–
|
476
|
1,308
|
–
|
1,308
|
|
Recoverable
overseas withholding tax
|
(247)
|
–
|
(247)
|
(122)
|
–
|
(122)
|
|
|
229
|
–
|
229
|
1,186
|
–
|
1,186
|
(B)
FACTORS AFFECTING TOTAL TAX CHARGE FOR YEAR
The tax
assessed for the year is lower (2023: lower) than the standard rate
of UK corporation tax of 25% (2023: 22%). The differences are
explained below:
|
|
|
2024
|
|
|
2023
|
|
|
|
REVENUE
|
CAPITAL
|
TOTAL
|
REVENUE
|
CAPITAL
|
TOTAL
|
|
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
£’000
|
|
Total
return on ordinary activities before taxation
|
39,160
|
69,247
|
108,407
|
43,115
|
86,929
|
130,044
|
|
Return on
ordinary activities multiplied by UK corporation tax of 25% (2023:
22%)
|
9,790
|
17,312
|
27,102
|
9,485
|
19,124
|
28,609
|
|
Effects
of:
Overseas
taxation
|
229
|
–
|
229
|
1,186
|
–
|
1,186
|
|
Franked
investment income not subject to corporation tax – UK dividend
income
|
(9,869)
|
–
|
(9,869)
|
(8,634)
|
–
|
(8,634)
|
|
Overseas
dividends not taxable
|
(698)
|
–
|
(698)
|
(1,649)
|
–
|
(1,649)
|
|
Non
allowable capital expenses in relation
to the cancellation of the Share premium account
|
–
|
32
|
32
|
–
|
–
|
–
|
|
Excess
management expenses
|
777
|
2,112
|
2,889
|
798
|
2,067
|
2,865
|
|
Non-taxable
(return) on investments*
|
–
|
(19,502)
|
(19,502)
|
–
|
(21,205)
|
(21,205)
|
|
Currency
translations
|
–
|
46
|
46
|
–
|
14
|
14
|
|
Total
tax charge for the year
(note
6(A))
|
229
|
–
|
229
|
1,186
|
–
|
1,186
|
* Returns
on investments are not subject to corporation tax within an
investment company.
(C)
DEFERRED TAXATION
As at 30
September 2024, the Company had unused management expenses and
other reliefs for taxation purposes of £146,618,000 (2023:
£135,063,000). It is unlikely that the Company will generate
sufficient taxable income in excess of the available deductible
expenses and therefore the Company has not recognised a deferred
tax asset of £36,655,000 (2023: £33,766,000) based on the
prospective corporation tax rate of 25% (2023: 25%).
Given the
Company’s status as an investment company and the intention to
continue to meet the conditions required to maintain such status in
the foreseeable future, the Company has not provided for a deferred
tax asset.
7.
Return per share – Basic and Diluted
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
The return
per share is based on the following figures:
|
|
|
|
Revenue
return
|
38,931
|
41,929
|
|
Capital
return
|
69,247
|
86,929
|
|
Total
return
|
108,178
|
128,858
|
|
Weighted
average number of shares in issue during the year
|
187,520,280
|
209,802,492
|
|
Revenue
return per share
|
20.8p
|
20.0p
|
|
Capital
return per share
|
36.9p
|
41.4p
|
|
Total
return per share
|
57.7p
|
61.4p
|
The
calculation of the total, revenue and capital returns per ordinary
share is carried out in accordance with IAS 33, “Earnings per Share
(as adopted in the UK)”.
As at 30
September 2024 and 2023 there were no dilutive instruments in
issue, therefore the basic and diluted return per share are the
same.
* Excludes
shares held in Treasury.
8.
Dividends
In
accordance with FRS 102 dividends are included in the Financial
Statements in the period in which they are paid or approved by
Shareholders.
Amounts
recognised as distributable to Shareholders for the year ended 30
September 2024 were as follows:
|
|
EX-DIVIDEND
|
PAYMENT
|
2024
|
2023
|
|
|
DATE
|
DATE
|
£’000
|
£’000
|
|
Second
interim dividend paid for the year ended 30 September 2023 of 10.5p
per share
|
5
October 2023
|
10
November
2023
|
21,454
|
–
|
|
First
interim dividend paid for the year ended 30 September 2024 of 8.8p
per share
|
4 April
2024
|
17 May
2024
|
16,477
|
–
|
|
Second
interim dividend paid for the year ended 30 September 2022 of 9.8p
per share
|
29
September
2022
|
4
November
2022
|
–
|
21,182
|
|
First
interim dividend paid for the year ended 30 September 2023 of 8.5p
per share
|
6 April
2023
|
19 May
2023
|
–
|
17,667
|
|
|
|
|
37,931
|
38,849
|
|
* Second
interim dividend of 10.8p per share for the year ended 30 September
2024
(2023:
10.5p)
|
3 October
2024
|
8
November
2024
|
18,097
|
21,454
|
* The
second interim dividend of 10.8p per share (2023: 10.5p) has not
been included as a liability in these Financial Statements as it is
only recognised in the financial year in which it is
paid.
The
maximum retention permitted under Section 1158 of the Corporation
Tax Act 2010 is c.£6.5 million (2023: c.7.0 million).
The total
dividends payable in respect of the financial year which forms the
basis of the retention test are set out below:
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
Revenue
available for distribution by way of dividend for the
year
|
38,931
|
41,929
|
|
2024 First
interim dividend of 8.8p per share (2023: 8.5p) paid on 17 May
2024
|
(16,477)
|
(17,667)
|
|
2024
Second interim dividend of 10.8p per share (2023: 10.5) paid on
8 November
2024
|
(18,097)
|
(21,454)
|
|
Net
additions to revenue reserves
|
4,357
|
2,808
|
9.
Investments held at Fair Value Through Profit or
Loss
ANALYSIS
OF PORTFOLIO MOVEMENTS
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
Opening
book cost
|
1,244,868
|
1,293,409
|
|
Opening
investment holding gains
|
591,792
|
558,669
|
|
Valuation
at 1 October
|
1,836,660
|
1,852,078
|
|
Movements
in the year:
|
|
|
|
Purchases
at cost
|
122,156
|
42,619
|
|
Sales
proceeds
|
(443,604)
|
(154,424)
|
|
Gains on
investments
|
78,006
|
96,387
|
|
Valuation
at 30 September
|
1,593,218
|
1,836,660
|
|
Closing
book cost
|
1,100,447
|
1,244,868
|
|
Investment
holding gains at 30 September
|
492,771
|
591,792
|
|
Valuation
at 30 September
|
1,593,218
|
1,836,660
|
The
Company received £443,604,000 (2023: £154,424,000) from investments
sold in the year. The realised gains of these investments were
£177,027,000 (2023: £63,263,000) and the book cost of these
investments when they were purchased was £266,577,000 (2023:
£91,161,000). These investments have been revalued over time and
until they were sold any unrealised gains/losses were included in
the fair value of the investments.
Purchase
transaction costs for the year to 30 September 2024 were £516,000
(2023: £50,000). These comprise stamp duty costs of £471,000 (2023:
£33,000) and commission of £45,000 (2023: £17,000). Sales
transaction costs for the year to 30 September 2024 were £127,000
(2023: £55,000) and comprise commission.
10.
Debtors
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
Amounts
due from brokers in respect of portfolio trading –
disposals
|
2,261
|
4,121
|
|
Accrued
income and prepayments
|
5,248
|
6,088
|
|
|
7,509
|
10,209
|
11.
Creditors: Amounts Falling Due Within One Year
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
Amounts
due to brokers in respect of portfolio trading –
purchases
|
–
|
1,669
|
|
Amounts
due to brokers in respect of shares repurchased by the
Company
|
2,550
|
2,134
|
|
Other
creditors and accruals
|
1,448
|
1,063
|
|
|
3,998
|
4,866
|
12.
Bank Loan
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
Bank
loan
|
29,200
|
36,700
|
Bank of
Nova Scotia, London Branch, the provider of the Company’s loan
facility, has a fixed and floating charge over the assets of the
Company as security against any funds drawn down under the loan
facility. As at 30 September 2024 the Company was in the second
year of its three year secured fixed term multi-currency
revolving loan facility of £60 million (with an additional £40
million available if required).
The three
year facility will expire in early October 2025.
The main
covenant under the loan facility required that, at each month end,
total borrowings should not exceed £100 million (2023: £100
million), Net Asset Value must not fall below £750 million (2023:
£750 million) and the ratio of Adjusted Total Net Assets to Debt is
not to be less than 4:1 (2023: 4:1). There were no breaches of the
covenants during the year.
The Board
has set a gearing limit which must not exceed 25% of the Company’s
net asset value.
13.
Called Up Share Capital
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
Allotted,
issued and fully paid:
|
|
|
|
167,717,668
(2023: 204,519,434) ordinary shares of 25p each
|
41,930
|
51,130
|
|
57,273,635
(2023: 20,471,869) ordinary shares of 25p held in
Treasury
|
14,318
|
5,118
|
|
224,991,303
(2023: 224,991,303) total ordinary shares of 25p each
|
56,248
|
56,248
|
No shares
were issued by the Company during the year (2023: Nil).
During the
year, the Company bought back 36,801,766 shares to be held in
Treasury at a cost of £310,808,000 (2023: 11,218,558 shares were
bought back at a cost of £97,664,000).
Between 1
October 2024 and 2 December 2024, the Company bought back a further
9,913,457 shares into Treasury at a cost of £85,300,000.
14.
Capital Reserve
|
|
CAPITAL
RESERVE
REALISED
£’000
|
CAPITAL
RESERVE
INVESTMENT
HOLDING
GAINS
UNREALISED
£’000
|
2024
TOTAL
£’000
|
CAPITAL
RESERVE
REALISED
£’000
|
CAPITAL
RESERVE
INVESTMENT
HOLDING
GAINS
UNREALISED
£’000
|
2023
TOTAL
£’000
|
|
At 1
October 2023
|
12,420
|
591,792
|
604,212
|
56,279
|
558,668
|
614,947
|
|
Net
gains/(losses) on investments
|
177,027
|
(99,021)
|
78,006
|
63,263
|
33,124
|
96,387
|
|
Repurchase
of shares into Treasury
|
(260,969)
|
–
|
(260,969)
|
(97,664)
|
–
|
(97,664)
|
|
Expenses
charged to capital
|
(6,907)
|
–
|
(6,907)
|
(7,845)
|
–
|
(7,845)
|
|
Finance
costs charged to capital
|
(1,667)
|
–
|
(1,667)
|
(1,548)
|
–
|
(1,548)
|
|
Currency
translations
|
(185)
|
–
|
(185)
|
(65)
|
–
|
(65)
|
|
At 30
September 2024
|
(80,281)
|
492,771
|
412,490
|
12,420
|
591,792
|
604,212
|
The amount
of the capital reserve that is distributable is complex to
determine and is not necessarily the full amount of the reserve as
disclosed within these Financial Statements of £412,490,000 as at
30 September
2024 (2023: £604,212,000) as this is subject to fair value
movements and may not be readily realisable at short
notice.
15.
Net Asset Value Per Share
|
|
2024
|
2023
|
|
Net assets
(£’000)
|
1,582,168
|
1,822,729
|
|
Number of
shares in issue (excluding shares held in Treasury)
|
167,717,668
|
204,519,434
|
|
Net asset
value per share
|
943.4p
|
891.2p
|
As at 30
September 2024 and 2023 there were no dilutive instruments held,
therefore the basic and diluted net asset value per share are the
same.
At 30
September 2024 57,273,635 shares were held in Treasury (2023:
20,471,869).
16.
Transactions with the AIFM, the Portfolio Manager and Related
Parties
Details of
the relationship between the Company, Frostrow and Lindsell Train
are disclosed in the Report of the Directors in the Annual Report
and also on the Company’s website.
As at 30
September 2024, the Company had an investment in Frostrow with a
book cost of £200,000 (2023: £200,000) and a fair value of
£3,225,000 (2023: £3,725,000) (including the AIFM capital
contribution of £125,000 (2023: £125,000)). During the year
Frostrow earned a total of £2,260,000 (2023: £2,609,000) in respect
of AIFM fees, of which £171,000 was outstanding at 30 September
2024 (2023: £209,000).
The
Company has an investment in The Lindsell Train Investment Trust
plc, which is managed by Lindsell Train, with a book cost of
£1,000,000 (2023: £1,000,000) and a fair value of £7,640,000 as at
30 September
2024 (2023: £9,720,000). During the year Lindsell Train earned a
total of £6,781,000 (2023: £7,828,000) in respect of Portfolio
Management fees of which £512,000 was outstanding at
30 September
2024 (2023: £626,000).
Further
details can be found in the Corporate Information section of the
Company’s website.
Details of
the income received from the AIFM are disclosed in note 2 and
details of the remuneration payable to the AIFM and the Portfolio
Manager are disclosed in note 3.
Details of
the fees of all Directors can be found in the Annual Report and in
note 4. There were no other material transactions during the year
with the Directors of the Company.
17.
Risk Management
As an
investment company the Company invests in equities and other
investments for the long term so as to secure its investment
objective. In pursuit of its investment objective, the Company is
exposed to a variety of risks that could result in either a
reduction in the Company’s net assets or a reduction in the revenue
returns available for distribution.
The
Company’s financial instruments comprise mainly equity investments,
cash balances, borrowings, debtors and creditors that arise
directly from its operations.
The
principal risks inherent in managing financial instruments are
market risk, liquidity risk and credit risk.
The
principal and emerging risks of the Company and the Directors’
approach to the management of those where the Directors consider
there to be a high inherent risk are set out in the Strategic
Report.
MARKET
RISK
Market
risk comprises three types of risk: market price risk, interest
rate risk and currency risk.
Market
Price Risk
As an
investment company, performance is dependent on the performance of
the underlying companies and securities in which it invests. The
market price of investee companies’ shares is subject to their
performance, supply and demand for the shares and investor
sentiment regarding the company or the industry sector in which it
operates. Consequently, market price risk is one of the most
significant risks to which the Company is exposed.
At 30
September 2024, the fair value of the Company’s assets exposed to
market price risk was £1,593,218,000 (2023: £1,836,660,000). If the
fair value of the Company’s investments at the Statement of
Financial Position date increased or decreased by 10%, while all
other variables remained constant, the capital return and net
assets attributable to Shareholders for the year ended 30 September
2024 would have increased or decreased by £159,322,000 or 94.99p
per share (2023: £183,666,000 or 89.80p per share).
No
derivatives or hedging instruments are currently utilised to manage
market price risk.
Interest
Rate Risk
Interest
rate risk is the risk that the fair value of future cash flows of a
financial instrument will fluctuate because of changes in market
interest rates.
Interest
rate movement may affect:
-
the
interest payable on the Company’s variable rate
borrowings
-
the level
of income receivable from variable interest securities and cash
deposits
-
the fair
value of investments of fixed rate securities
The
Company’s main exposure to interest rate risk during the year ended
30 September 2024 was through its three year £60 million (2023: £60
million) secured multi-currency
committed revolving credit facility (with an additional £40 million
facility available if required (2023: £40 million)) with Bank of
Nova Scotia, London Branch.
Borrowings
at the year end amounted to £29,200,000 (2023: £36,700,000) at an
interest rate of 6.5% (5.2% SONIA plus 1.30% margin) (2023: 6.5%
(5.2% SONIA plus 1.30% margin and fees)).
If the
above level of borrowing was maintained for a year, a 10% increase
or decrease in SONIA would decrease or increase the revenue return
by £38,000, (2023: £48,000), decrease or increase the capital
return in that year by £114,000 (2023: £142,000) and decrease or
increase the net assets by £152,000 (2023: £190,000).
The
weighted average interest rate, during the year, on borrowings
under the above mentioned revolving credit facility was 6.49%
(2023: 5.15%). At 30 September 2024, the Company’s financial assets
and liabilities exposed to interest rate risk were as
follows:
|
|
2024
|
2023
|
|
|
WITHIN
ONE
YEAR
£’000
|
MORE
THAN
ONE
YEAR
£’000
|
WITHIN
ONE
YEAR
£’000
|
MORE
THAN
ONE
YEAR
£’000
|
|
Exposure
to floating rates:
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Cash and
cash equivalents
|
14,639
|
–
|
17,426
|
–
|
|
Liabilities
|
|
|
|
|
|
Creditors:
amount falling due after more than one year
|
|
|
|
|
|
–
borrowings under the loan facility
|
–
|
(29,200)
|
–
|
(36,700)
|
|
Exposure
to fixed rates:
|
|
|
|
|
|
Assets
|
|
|
|
|
|
Investments
at fair value through profit or loss#
|
488
|
–
|
392
|
–
|
|
Liabilities
|
–
|
–
|
–
|
–
|
# Celtic 6%
cumulative convertible preference shares and Frostrow Capital LLP
AIFM Capital Contribution.
Currency
Risk
The
Financial Statements are presented in sterling, which is the
functional and presentational currency of the Company. At 30
September 2024, the Company’s investments, with the exception of
five, were priced in sterling. The five exceptions were: Heineken,
listed in the Netherlands, Remy Cointreau listed in France,
Manchester United, Cazoo and Mondelez, all of which are listed in
the United States. The aggregate of these represents 4.0% of the
portfolio.
The AIFM
and the Portfolio Manager monitor the Company’s exposure to foreign
currencies on a continuous basis and regularly report to the Board.
The Company does not hedge against foreign currency movements, but
the Portfolio Manager takes account of the risk when making
investment decisions.
Income
denominated in foreign currencies is converted into sterling on
receipt. The Company does not use financial instruments to mitigate
the currency exposure in the period between its receipt and the
time that the income is included in the Financial
Statements.
Foreign
Currency Exposure
At 30
September 2024 the Company held £39,334,000 (2023: £171,369,000) of
investments denominated in U.S. dollars and £24,541,000 (2023:
£156,737,000) in euros.
Currency
Sensitivity
The
following table details the sensitivity of the Company’s return
after taxation for the year to a 10% increase or decrease in the
value of sterling compared with the U.S. dollar and euro (2023: 10%
increase and decrease).
The
analysis is based on the Company’s foreign currency financial
instruments held at each Statement of Financial Position
date.
In
addition to the foreign currency exposure on investments held at 30
September 2024, the Company also held £385,000 (2023: £1,125,000)
in debtors denominated in U.S. dollars and £1,230,000 (2023:
£2,117,000) denominated in Euros.
This level
of sensitivity is considered to be reasonably possible based on
observation of current market conditions and historical
trends.
If
sterling had weakened against the U.S. dollar and euro, as stated
above, assuming all other variables remain constant, this would
have had the following effect:
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
Impact on
revenue return
|
106
|
259
|
|
Impact on
capital return
|
7,170
|
36,568
|
|
Total
return after tax/increase in Shareholders’ funds
|
7,276
|
36,827
|
If
sterling had strengthened against the foreign currencies as stated
above, assuming all other variables remain constant, this would
have had the following effect:
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
Impact on
revenue return
|
(87)
|
(212)
|
|
Impact on
capital return
|
(5,866)
|
(29,918)
|
|
Total
return after tax/decrease in Shareholders’ funds
|
(5,953)
|
(30,130)
|
Credit
Risk
Credit
risk is the risk that the counterparty to a transaction fails to
discharge its obligations under that transaction, which could
result in the Company suffering a loss. Credit risk is managed as
follows:
-
Investment
transactions are carried out only with brokers which are considered
to have a high credit rating.
-
Transactions
are undertaken on a delivery versus payment basis whereby the
Company’s custodian bank ensures that the counterparty to any
transactions entered into by the Company has delivered its
obligation before any transfer of cash or securities away from the
Company is completed.
-
Any
failing trades in the market are closely monitored by both the AIFM
and the Portfolio Manager.
-
Cash is
only held at banks that have been identified by the Board as
reputable and of high credit quality.
-
Bank of
New York Mellon has a credit rating of Aa2 (Moody’s) and AA-
(Fitch).
As at 30
September 2024, the exposure to credit risk was £17,263,000 (2023:
£21,814,000), comprising:
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
Fixed
assets:
|
|
|
|
Non-equity
investments (preference shares)
|
363
|
267
|
|
Current
assets:
|
|
|
|
Other
receivables (amounts due from brokers)
|
2,261
|
4,121
|
|
Cash and
cash equivalents
|
14,639
|
17,426
|
|
Total
exposure to credit risk
|
17,263
|
21,814
|
Liquidity
Risk
Liquidity
risk is the risk that the Company will encounter difficulty in
meeting obligations associated with financial
liabilities.
Liquidity
risk is not considered significant as the majority of the Company’s
assets are investments in quoted equities. As at 30 September 2024
it is estimated that 98.1% of the investment portfolio could be
realised within 30 days with 79.6% in seven days, based on current
trading volumes.
Liquidity
risk exposure
|
FINANCIAL
LIABILITIES COMPRISE:
|
30
SEPTEMBER
2024
£’000
|
30
SEPTEMBER
2023
£’000
|
|
Due
within one month:
|
|
|
|
Balances
due to brokers in respect of portfolio trading -
purchases
|
–
|
1,669
|
|
Amounts
due to brokers in respect of shares repurchased by the
Company
|
2,550
|
2,134
|
|
Accruals
|
1,448
|
1,063
|
|
Due
after three months and after one year:
|
|
|
|
Bank
loan
|
29,200
|
36,700
|
FAIR
VALUE OF FINANCIAL ASSETS AND FINANCIAL
LIABILITIES
Financial
assets and financial liabilities are either carried in the
Statement of Financial Position at their fair value or at a
reasonable approximation of fair value.
VALUATION
OF FINANCIAL INSTRUMENTS
The
Company measures fair values using the following fair value
hierarchy that reflects the significance of the inputs used in
making the measurements. Categorisation within the hierarchy has
been determined on the basis of the lowest level input that is
significant to the fair value measurement of the asset, noting that
most of the Company’s investments are quoted assets, which have
been categorised as level 1 investments:
-
Level 1 –
quoted prices in active markets.
-
Level 2 –
prices of recent transactions for identical
instruments.
-
Level 3 –
valuation techniques using observable and unobservable market
data.
The
financial assets and liabilities measured at fair value in the
Statement of Financial Position are grouped into the fair value
hierarchy at the reporting date as follows:
|
AS
AT 30 SEPTEMBER 2024
|
LEVEL
1
£’000
|
LEVEL
2
£’000
|
LEVEL
3
£’000
|
TOTAL
£’000
|
|
Equity
investments
|
1,584,265
|
5,365
|
–
|
1,589,630
|
|
Limited
liability partnership interest (Frostrow)
|
–
|
–
|
3,100
|
3,100
|
|
Frostrow -
AIFM capital contribution
|
–
|
–
|
125
|
125
|
|
Preference
share investments
|
–
|
363
|
–
|
363
|
|
|
1,584,265
|
5,728
|
3,225
|
1,593,218
|
During the
year the investment in Celtic was moved to level 2 due to low
trading volumes.
|
AS
AT 30 SEPTEMBER 2023
|
LEVEL
1
£’000
|
LEVEL
2
£’000
|
LEVEL
3
£’000
|
TOTAL
£’000
|
|
Equity
investments
|
1,832,668
|
–
|
–
|
1,832,668
|
|
Limited
liability partnership interest (Frostrow)
|
–
|
–
|
3,600
|
3,600
|
|
Frostrow -
AIFM capital contribution
|
–
|
–
|
125
|
125
|
|
Preference
share investments
|
267
|
–
|
–
|
267
|
|
|
1,832,935
|
–
|
3,725
|
1,836,660
|
The
unquoted investment in Frostrow is valued by taking the EBITDA and
applying a multiple; it has been re-valued by the Directors during
the year, using two unobservable market data sources, being
Frostrow’s earnings and an agreed appropriate comparator multiple.
This was the same methodology adopted to value Frostrow as at 30
September 2023.
There have
been no transfers during the year between Levels 1 and 2. A
reconciliation of fair value measurements in Level 3 is set out
below.
Level
3 Reconciliation of financial assets at fair value through profit
or loss at 30 September
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
Opening
fair value
|
3,725
|
4,725
|
|
Total
losses included in gains on investments in the Income
Statement
|
(500)
|
(1,000)
|
|
Closing
fair value
|
3,225
|
3,725
|
If the
earnings used in the valuation were to increase or decrease by 10%
while all the other variables remained constant, the return and net
costs attributable to Shareholders for the year ended
30 September
2024 would have increased/decreased by £310,000 (2023: £360,000,
applying the same assumptions).
CAPITAL
MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES
The
structure of the Company’s capital is described in note 13 and
details of the Company’s reserves are shown in the Statement of
Changes in Equity.
The
Company’s capital management objectives are:
-
to ensure
that it is able to continue as a going concern; and
-
to achieve
capital and income growth and to provide Shareholders with a total
return in excess of that of the FTSE All-Share Index through an
appropriate balance of equity and debt.
The Board,
with the assistance of the AIFM and the Portfolio Manager,
regularly monitors and reviews the broad structure of the Company’s
capital. These reviews include:
-
the level
of gearing, set at a limit in normal market conditions, is not to
exceed 25% of the Company’s net assets, which takes account of the
Company’s position and the views of the Board, the AIFM and the
Portfolio Manager on the market;
-
the extent
to which revenue reserves should be retained or utilised;
and
-
ensuring
the Company’s ability to continue as a going concern.
The
Company’s objectives, policies and procedures for managing capital
are unchanged from last year.
There were
no breaches by the Company during the year of the financial
covenants put in place by Bank of Nova Scotia, London Branch in
respect of the committed revolving credit facility provided to the
Company.
The
covenants are unchanged since last year and the Company has
complied with them at all times.
18.
Net Cash Inflow from Operating Activities
|
|
2024
|
2023
|
|
|
£’000
|
£’000
|
|
Total
return before finance charges and taxation
|
110,630
|
132,109
|
|
Deduct
capital gain before finance charges and taxation
|
(70,914)
|
(88,477)
|
|
Net
revenue before finance charges and taxation
|
39,716
|
43,632
|
|
Decrease
in accrued income and prepayments
|
1,406
|
2,235
|
|
Increase/(decrease)
in creditors
|
385
|
(18)
|
|
Taxation –
overseas withholding tax paid
|
(795)
|
(1,109)
|
|
AIFM,
portfolio management fees and other expenses charged to
capital
|
(6,907)
|
(7,845)
|
|
Net cash
inflow from operating activities
|
33,805
|
36,895
|
19.
Substantial Interests
At 30
September 2024 the Company held interests in 3% or more of any
class of capital in the following entities:
|
COMPANY
OR LIMITED LIABILITY PARTNERSHIP
|
NUMBER
OF
SHARES
HELD
|
2024
FAIR
VALUE
£’000
|
%
OF ISSUED
SHARE
CAPITAL OR
LIMITED
LIABILITY
PARTNERSHIP
INTEREST
|
|
A. G.
Barr
|
3,535,000
|
22,023
|
3.2
|
|
Frostrow
Capital LLP (unquoted)†
|
–
|
3,225
|
9.7
|
|
The
Lindsell Train Investment Trust plc*
|
10,000
|
7,640
|
5.0
|
† Includes
Frostrow Capital LLP’s AIFM Capital Contribution, fair value
£125,000.
* Also
managed by Lindsell Train Limited which receives a portfolio
management fee based on the Company’s market
capitalisation.
20.
Post Balance Sheet Events
During the
period from 1 October 2024 to 2 December 2024, a further 9,913,457
shares were bought back and held in Treasury at a cost of
£85,300,000.
Glossary
of Terms and Alternative Performance Measures –
Unaudited
ACTIVE
SHARE (APM)
Active
Share is expressed as a percentage and shows the extent to which a
fund’s holdings and their weightings differ from those of the
fund’s benchmark index. A fund that closely tracks its index might
have a low Active Share of less than 20% and be considered passive,
while a fund with an Active Share of 60% or higher is generally
considered to be actively managed. The Company has a distinctive
strategy: a concentrated portfolio of holdings invested across a
small number of sectors and themes. Active Share helps quantify the
extent to which the portfolio differs from the benchmark
index.
The Active
Share data is sourced from Morningstar.
AIC
Association
of Investment Companies. The AIC represents a broad range of
investment companies, investment trusts, VCTs and other
closed-ended funds.
ALTERNATIVE
INVESTMENT FUND MANAGERS DIRECTIVE (AIFMD)
Agreed by
the European Parliament and the Council of the European Union and
transposed into UK legislation, the AIFMD classifies certain
investment vehicles, including investment companies, as Alternative
Investment Funds (AIFs) and requires them to appoint an Alternative
Investment Fund Manager (AIFM) and depositary to manage and oversee
the operations of the investment vehicle. The Board of the Company
retains responsibility for strategy, operations and compliance and
the Directors retain a fiduciary duty to Shareholders.
ALTERNATIVE
PERFORMANCE MEASURE (“APM”)
An
Alternative Performance Measure (APM) is a numerical measure of the
Company’s current, historical or future financial performance,
financial position or cash flows other than a financial measure
defined or specified in the applicable financial framework. In
selecting these Alternative Performance Measures, the Directors
consider the key objectives and expectations of typical investors
and believe that each APM gives the reader useful and relevant
information in judging the Company’s performance and in comparing
other investment companies.
BENCHMARK
RETURN
Total
return on the benchmark, assuming that all dividends received were
re-invested, without transaction costs, into the shares of the
underlying companies at the time the shares were quoted
ex-dividend.
CHIEF
OPERATING DECISION MAKER
The Chief
Operating Decision Maker of the Company is considered to be the
Board of Directors. It is a Generally Accepted Accounting Principal
(GAAP) requirement to disclose who the chief operating decision
maker is.
DISCOUNT
OR PREMIUM (APM)
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 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. The Board regularly reviews the level of the
discount/premium of the Company’s share price to the net asset
value per share and considers ways in which share price performance
may be enhanced, including the effectiveness of share buy-backs,
where appropriate.
|
DISCOUNT
OR PREMIUM (APM)
|
|
30
SEPTEMBER
2024
|
30
SEPTEMBER
2023
|
|
Share
price (p)
|
|
861.0
|
852.0
|
|
Net asset
value per share (p)
|
|
943.3
|
891.2
|
|
Discount
|
|
8.7%
|
4.4%
|
ENTERPRISE
VALUE INCLUDING CASH (“EVIC”)
EVIC is
the denominator used to measure carbon emissions. EVIC means the
sum of the market capitalisation of ordinary shares, the market
capitalisation of preferred shares, and the book value of total
debt and non-controlling interests, without the deduction of cash
or cash equivalents.
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
(APM)
Gearing
represents prior charges, adjusted for net current assets,
expressed as a percentage of net assets (AIC methodology). The
Directors believe that it is appropriate to show net gearing in
relation to Shareholders’ funds as it represents the amount of debt
funding on the investment portfolio. The gearing policy is that
borrowing will not exceed 25% of the Company’s net
assets.
Prior
charges includes all loans and bank overdrafts for investment
purposes.
|
|
|
30
SEPTEMBER
|
30
SEPTEMBER
|
|
|
|
2024
|
2023
|
|
|
|
£’000
|
£’000
|
|
Bank loan
(prior charges)
|
|
(29,200)
|
(36,700)
|
|
Net
current assets
|
|
18,150
|
22,769
|
|
Bank loan
adjusted for net current assets
|
|
(11,050)
|
(13,931)
|
|
Net
assets
|
|
1,582,168
|
1,822,729
|
|
Gearing
|
|
0.7%
|
0.8%
|
THE
INSTITUTIONAL INVESTORS GROUP ON CLIMATE CHANGE
(“IIGCC”)
IIGCC
membership enables organisations to ensure that they are part of
the solution to climate change.
THE
INTERGOVERNMENTAL PANEL ON CLIMATE CHANGE
(“IPCC”)
The IPCC
is the United Nations body for assessing the science related to
climate change.
NET
ZERO ASSET MANAGERS INITIATIVE (“NZAM”)
The Net
Zero Asset Managers initiative is an international group of asset
managers committed to supporting the goal of net zero greenhouse
gas emissions by 2050 or sooner, in line with global efforts to
limit warming to 1.5 degrees Celsius; and to supporting investing
aligned with net zero emissions by 2050 or sooner.
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”. The NAV is often expressed
in pence per share after being divided by the number of shares that
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 PER SHARE (APM)
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 companies which is not affected by movements in
discounts or premiums. The Directors regard the Company’s net asset
value total return per share as being the overall measure of value
delivered to Shareholders over the long term. The Board considers
the principal comparator to be its benchmark, the FTSE All-Share
Index.
|
NAV
TOTAL RETURN
|
|
30
SEPTEMBER
2024
|
30
SEPTEMBER
2023
|
|
Opening
NAV per share (p)
|
|
891.2
|
848.4
|
|
Increase
in NAV per share (p)
|
|
52.1
|
42.8
|
|
Closing
NAV per share (p)
|
|
943.3
|
891.2
|
|
Increase
in NAV per share
|
|
5.8%
|
5.0%
|
|
Impact of
dividends re-invested*
|
|
+2.4%
|
+2.2%
|
|
NAV per
share total return
|
|
8.2%
|
7.2%
|
* The NAV
total return is calculated on the assumption that the total
dividends of 19.3p (2023: 18.3p) paid by the Company during the
year were reinvested into assets of the Company at the NAV per
share at the ex-dividend date. The Treasury shares held by the
Company have been excluded from this calculation.
The source
of this data is Morningstar who have calculated the return on an
industry comparative basis.
ONGOING
CHARGES FIGURE (APM)
Ongoing
charges are calculated by taking the Company’s annualised operating
expenses expressed as a proportion of the average daily net asset
value of the Company over the year. The costs of buying and selling
investments are excluded, as are interest costs, taxation, cost of
buying back or issuing ordinary shares and other non-recurring
costs. Ongoing charges represent the costs that Shareholders can
reasonably expect to pay from one year to the next, under normal
circumstances.
|
|
|
30
SEPTEMBER
|
30
SEPTEMBER
|
|
|
|
2024
|
2023
|
|
|
|
£’000
|
£’000
|
|
AIFM and
portfolio management fees
|
|
9,041
|
10,437
|
|
Operating
expenses
|
|
1,310
|
1,167
|
|
Total
expenses
|
|
10,351
|
11,604
|
|
Average
net assets during the year
|
|
1,697,345
|
1,907,121
|
|
Ongoing
charges figure
|
|
0.61%
|
0.61%
|
THE
PARIS AGREEMENT
The Paris
Agreement’s central aim is to strengthen the global response to the
threat of climate change by keeping a global temperature rise this
century well below 2 degrees Celsius above pre-industrial levels
and to pursue efforts to limit the temperature increase even
further to 1.5 degrees Celsius.
THE
PARIS ALIGNED INVESTMENT INITIATIVE (“PAII”)
The PAII
was launched by the Institutional Investors Group on Climate Change
(“IIGCC”) in Europe in May 2019, to explore how investors can align
their portfolios with the goals of the Paris Agreement.
PEER
GROUP
Finsbury
Growth & Income Trust PLC is part of the AIC’s UK Equity Income
sector. The trusts in this universe are defined as trusts whose
investment objective is to achieve a total return for Shareholders
through both capital and dividend growth.
REVERSE
STRESS TEST
Reverse
stress tests are stress tests that identify scenarios and
circumstances which would make a business unworkable and identify
potential business vulnerabilities.
SASB
The
Sustainability Accounting Standards Board (“SASB”) aims to
establish industry-specific disclosure standards across ESG topics
that facilitate communication between companies and investors about
financially material, information that is useful for
decision-making.
SHARE
PRICE TOTAL RETURN (APM)
The change
in capital value of a company’s shares over a given period, plus
dividends paid to Shareholders, expressed as a percentage of the
opening value. The assumption is that dividends paid to
Shareholders are re-invested in the shares at the time the shares
are quoted ex-dividend. The Directors regard the Company’s share
price total return to be a key indicator of performance. This
reflects share price growth of the Company which the Board
recognises is important to investors.
|
SHARE
PRICE TOTAL RETURN
|
|
30
SEPTEMBER
2024
|
30
SEPTEMBER
2023
|
|
Opening
share price share (p)
|
|
852.0
|
800.0
|
|
Increase
in share price (p)
|
|
9.0
|
52.0
|
|
Closing
share price (p)
|
|
861.0
|
852.0
|
|
Increase
in share price
|
|
1.1%
|
6.5%
|
|
Impact of
dividends re-invested*
|
|
+2.3%
|
+1.0%
|
|
Share
price total return
|
|
3.4%
|
7.5%
|
* The share
price total return is calculated on the assumption that the total
dividends of 19.3p (2023: 18.3p) paid during the year were
reinvested into shares of the Company at the share price at the
ex-dividend date.
The source
is Morningstar who have calculated the return on an industry
comparative basis.
STERLING
OVERNIGHT INDEX AVERAGE (“SONIA”)
SONIA is
an interest rate published by the Bank of England. SONIA can be
seen as the average interest rate at which a selection of financial
institutions lend to one another in British pound sterling (GBP)
with a maturity of 1 day (overnight).
STRESS
TESTING
Stress
testing Is a forward-looking analysis technique that considers the
impact of a variety of extreme but plausible economic scenarios on
the financial position of the Company.
TCFD
The
Financial Stability Board created the Task Force on Climate-related
Financial Disclosures (“TCFD”) to improve and increase reporting of
climate-related financial information.
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.
2024
Accounts
The
figures and financial information for 2024 are extracted from the
Annual Report and financial statements for the year ended 30
September 2024 and do not constitute the statutory accounts for the
year.
The Annual
Report and financial statements include the Report of the
Independent Auditor which is unqualified and does not contain a
statement under either section 498(2) or section 498(3) of the
Companies Act 2006.
The Annual
Report and financial statements have not yet been delivered to the
Registrar of Companies.
2023
Accounts
The
figures and financial information for 2023 are extracted from the
published Annual Report and financial statements for the period
ended 30 September 2023 and do not constitute the statutory
accounts for that year.
The Annual
Report and financial statements have been delivered to the
Registrar of Companies and included the Report of the Independent
Auditor which was unqualified and did not contain a statement under
either section 498(2) or section 498(3) of the Companies Act
2006.
Annual
report and financial statements
Copies of
the Annual Report and financial statements will be posted to
shareholders in mid-December 2024.
Members of
the public may obtain copies from Frostrow Capital LLP, 25
Southampton Buildings, London WC2A 1AL or from the Company’s
website
www.finsburygt.com where up
to date information on the Company, including daily NAV, share
prices and fact sheets, can also be found.
The
Company's Annual Report
for the period ended 30 September 2024 has
been submitted to the Financial Conduct Authority and will shortly
be available for inspection on the National Storage Mechanism (NSM)
via https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
The Annual
General Meeting will be held on Tuesday, 28 January
2025.
Neither
the contents of the Company's website nor the contents of any
website accessible from hyperlinks on the Company's website (or any
other website) is incorporated into, or forms part of, this
announcement.
-ENDS-
For
further information please contact
Victoria
Hale
Company
Secretary
For and on
behalf of Frostrow Capital LLP
020 3170
8732
For press
enquiries please contact:
Sarah
Gibbons-Cook
Quill
07702
412680
sarah@quillpr.com