Interim Management Statement
August 19 2008 - 9:16AM
UK Regulatory
Framlington Income & Capital Trust PLC
First interim management statement for the year ending 31 March 2009
To the members of Framlington Income & Capital Trust PLC
This is the Trust's first interim management statement for the year ending 31
March 2009 and covers the period to 30 June 2008. This statement has been
produced to comply with the requirements of the Disclosure and Transparency
Rules issued by the UKLA and should not be relied upon by any other party or
for any other purpose.
The Trust's articles of association provide that between April and September
2008 capital shareholders will decide by ordinary resolution whether the Trust
should be wound up.
The directors will send a circular to all shareholders convening an
extraordinary general meeting which is likely to be held in September 2008, at
which the capital shareholders only will vote on a resolution to wind up the
Trust. The directors believe that it is likely that capital shareholders will
vote to put the Trust into liquidation. Although it appears that there is
insufficient interest from enough investors to make the option of a closed
ended continuation vehicle viable, the board hopes to offer a tax efficient
option for those shareholders who do not wish to receive cash for their
investment at that time. Details of any such option will be included in the
circular to shareholders.
Investment objective
The objective of the Trust is to produce above average capital growth for
capital shareholders and above average income for income shareholders over the
life of the Trust.
* Benchmark
The board has agreed that, in considering the extent to which this objective is
being achieved by the Trust, the returns of the FTSE All-Share, FTSE 350 Higher
Yield and FTSE SmallCap (excluding investment companies) indices will be used
as reference points.
Although the performance of the Trust is measured by reference to the returns
of these indices, the Trust is not restricted to investing in companies
included within these indices except through the following covenants contained
within the Trust's loan facility with Bank of Scotland:
Ratio of investments and cash to borrowings must exceed 190%;
Ratio of FTSE 100 investments and cash to borrowings must exceed 100%;
Ratio of specified quoted investments (including UK quoted securities with
market capitalisation of greater than �500 million, UK Gilts and other liquid
assets) must exceed 125%;
Ratio of total income to total interest must exceed 125%.
The risks of investment are managed by investing in a diversified portfolio of
companies covering a range of sectors. There is no restriction on the number of
stocks in the portfolio but this would usually be in a range of 50 to 80. The
portfolio comprised 56 stocks at 30 June 2008.
The maximum amount which may be invested in any one company is 15% of the
Trust's investments.
The Trust may not invest more than 10%, in aggregate, of the value of its total
assets in other listed closed-ended investment funds except in the case of
investment in closed-ended investment funds which themselves have published
investment policies to invest no more than 15% of their total assets in other
listed closed-ended investment funds, in which case the limit is 15%.
* Investment Philosophy and Process
The portfolio is managed with a balanced view of the interests of the two
classes of shareholders. The underlying investment philosophy of the Manager is
Growth at a Reasonable Price (GARP). As a result, a significant part of the
portfolio will typically have a growth bias under style analysis. However, the
Manager also remains aware of the requirement to produce above average income
for the income shareholders and with this in mind also invests in companies
which have a higher yield than would normally be the case under GARP.
The emphasis on the market liquidity of the holdings is likely to increase with
the approach of the Trust's expected winding up at the end of September 2008
requiring the liquidation of the portfolio by that time.
* Gearing
The Trust's articles allow borrowings up to an amount not exceeding the sum of
1.5 times the amount paid up on the issued share capital for the time being of
the Trust and the amounts standing to the credit of the reserves of the Trust.
The Trust currently has borrowings comprising �2.8 million 12.6% debenture
stock 2008 and two bank loans totalling �30 million. Both the debenture stock
and the bank loans are repayable on 30 September 2008. The different rights of
the two classes of share also give the Trust inherent gearing. The board does
not currently intend to increase the level of gearing.
Material events
There have not been any material events during the period 1 April 2008 to the
date of publication of this statement.
A final dividend for the year ended 31 March 2008, of 2.90 pence per share, was
paid on 30 July 2008 to income shareholders on the register on 27 June 2008,
following approval by shareholders at the Annual General Meeting on 22 July
2008.
A first interim dividend in respect of the year ending 31 March 2009, of 2.50
pence per share, will be paid on 29 August 2008 to income shareholders on the
register on 1 August 2008.
There have not been any changes in the Trust's share capital, which remains as
39,134,832 income shares and 24,830,091 capital shares.
Material transactions
There have not been any material transactions during the period. As previously
stated, the Board intends that the Trust should remain fully invested until
near the end of its projected life in September 2008. However, as the date of
the likely liquidation of the Trust draws nearer, its cash balances will
increase in order to repay the debt of �32.8 million. The Trust's current cash
position at 15 August was �13.7 million.
Financial position
NAV and total assets at 30 June 2008
30 June 2008 31 March 2008
Net asset value per share:
Income share 32.87p 33.08p
Capital share (fully diluted) 189.89p 212.17p
Net assets �60.0 million �65.6 million
Ten largest holdings at 30 June 2008 Value at
30.06.08
�000s
BP $0.25 7,725
HSBC Holdings ord $0.50 4,840
Royal Dutch Shell B ord Euro0.07 4,036
GlaxoSmithKline ord 25p 3,894
British American Tobacco ord 25p 3,304
Weir Group ord 12.5p 3,283
BG Group ord 5p 3,263
Vodafone Group ord $0.11 3/7 2,982
BT Group ord 5p 2,772
Imperial Tobacco Group ord 10p 2,103
Sector allocation at 30 June 2008 %
Oil & Gas 19.4
Basic materials 2.9
Industrials 19.8
Consumer goods 9.8
Health care 8.6
Consumer services 3.7
Telecommunications 6.9
Utilities 6.9
Financials 21.5
Technology 0.5
Financial performance
Performance for the period to 30 June 2008
Three months to Year to
30 June 2008 31 March 2008
% %
Portfolio -3.6 -12.0
FTSE All-Share -1.4 -7.7
FT SmallCap ex Inv. Cos. -7.0 -29.0
FT 350 Higher Yield -3.0 -12.2
Company information
Year end: 31 March
Dividends paid: Final dividend 2008 paid 30 July 2008
First interim dividend 2008 to be paid 29 August 2008
Debenture interest: The final interest payment will be made on 30 September
2008 and the debenture stock will be redeemed on the same day.
Further information on the Trust, including the annual report and accounts for
the year ended 31 March 2008, is available from the Manager's website
www.axaframlington.com
By order of the board
AXA Framlington Investment Management Limited
Secretary
19 August 2008
END
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