Annual Financial Report
LONDON STOCK EXCHANGE ANNOUNCEMENT
11 December 2012
Finsbury Growth & Income Trust PLC
Audited Results for the Year Ended 30 September 2012
The Company's annual report will be posted to shareholders on Tuesday, 18
December 2012. Members of the public may obtain copies from Frostrow Capital
LLP. 25 Southampton Buildings, London WC2A 1AL or from the Company's website
at:
www.finsburygt.com
The Company's annual report and financial statements for the year ended 30
September 2012 has been submitted to the UK Listing Authority, and will shortly
be available for inspection on the National Storage Mechanism (NSM):
www.hemscott.com/nsm.do
(Documents will usually be available for inspection within two business days of
this notice being given)
Victoria Streater
Frostrow Capital LLP,
Company Secretary - 0203 170 8732
11 December 2012
*******************************************************************************
Company Summary
Key Statistics
As at As at % Change
30 September 30 September
2012 2011
Share price 376.0p 308.1p +22.0
Net asset value per share 370.7p 310.3p +19.5
(including income)
Net asset value per share 365.1p 305.5p +19.5
(excluding income)~
Premium of share price to net asset 3.0% 0.9%
value per share (excluding income)
Gearing (net basis)* 5.1% 6.2%
Shareholders' funds £254.2m £177.6m +43.1
Market capitalisation £257.8m £176.4m +46.1
Number of shares in issue 68,568,381 57,237,423 +19.8
Year ended Year ended
30 September 30 September
2012 2011
Share price (total return)# +23.6% +6.5%
Net asset value per share total +21.1% +5.8%
return#
FTSE All-Share Index (total return) +17.3% -4.4%
(Company benchmark)# +
Ongoing charges 0.9% 1.0%
Dividends per Share
First interim dividend 4.6p 4.4p
Second interim dividend 5.2p 4.8p
9.8p 9.2p +6.5
#Source - Morningstar
+Source - FTSE International
Limited ("FTSE")©FTSE 2012*
~excluding accumulated net income
as at 30 September.
Chairman's Statement
"...I am delighted to report that the Company's net asset value total return
and share price total return have again significantly outperformed the
Company's benchmark during the year"
Performance
I am delighted to report that the Company's net asset value total return for
the year of 21.1% (2011: 5.8%) and the share price total return of 23.6% (2011:
6.5%) have again both significantly outperformed the Company's benchmark, the
FTSE All-Share Index, measured on a total return basis, which rose by 17.3%
over the same period. The principal contributions to net asset value
performance came from our major holdings in Diageo, Unilever and Rathbone
Brothers.
As at 30 September 2012 the premium of the Company's share price to the
ex-income net asset value per share was 3.0% (30 September 2011: 0.9%). During
the year the Company traded consistently at a premium of not less than 0.5% to
the prevailing cum income net asset value per share.
It is also particularly pleasing to note that our Investment Manager's strategy
has delivered excellent returns over the last ten years with £100 invested ten
years ago now being worth approximately £425. This compares to approximately £
235 if you invested in the Company's benchmark.
Share Capital
Continued strong demand has meant that the Company's shares have traded
consistently close to its net asset value per share. As can be seen in the
graph below, in order to satisfy this demand, the Company issued 11,330,958
shares during the year, at a minimum premium of 0.5% to the prevailing cum
income net asset value per share at the time of issue, raising £39.2 million of
new funds for the Company. The number of shares issued exceeded the maximum
number possible under the authority obtained at the Company's Annual General
Meeting held in January 2012 and a General Meeting was therefore held in May
2012 where shareholder authority was obtained to issue a further 6.5 million
shares on a non-pre-emptive basis at prices not less than the prevailing cum
income net asset value per share. The authority granted in May 2012 has been
almost fully utilised. Therefore the Company has convened a General Meeting to
be held on Friday, 28 December 2012 to obtain shareholder authority to continue
to issue further shares on a non-pre-emptive basis at prices not less than the
prevailing cum income net asset value per share. The Company's most recent
prospectus dated 12 December 2011 is also being renewed in order that your
Company is able to continue to issue shares in accordance with the Prospectus
Directive under both the existing and reviewed authority. The authority granted
in December 2012 will be proposed for renewal at the Company's Annual General
Meeting to be held on Wednesday, 30 January 2013.
Return and Dividend
The Income Statement shows a total return per share of 68.8 pence per share
(year ended 30 September 2011: 15.8 pence) consisting of a revenue return per
share of 10.8 pence (year ended 30 September 2011: 9.7 pence) and a capital
return per share of 58.0 pence (year ended 30 September 2011: 6.1 pence).
I am pleased to report that the Company's net revenue return during the year
was again higher than the previous year and your Board has declared two interim
dividends for the year totalling 9.8 pence per share (year ended 30 September
2011: 9.2 pence) an increase of 6.5%. This is in line with the Board's
long-term objective of a progressive dividend policy
In light of the continued strong demand for the Company's shares and in order
to facilitate dividend payments on a timely basis, your Board continues to
elect to distribute the Company's income to shareholders by means of two
interim dividends.
Borrowings
The Company is in the second year of its £25 million secured fixed term
committed revolving credit facility with Scotiabank Europe PLC. The facility is
subject to a variable interest rate. As at 11 December 2012 a total of £17.2
million was drawn down from this facility.
Chairman's Statement… Continued
The Company's Investment Policy
The Company obtained shareholder approval to amend its Investment Policy in
January 2010, to allow up to a maximum of 20% of the Company's portfolio, at
the time of acquisition, to be invested in quoted companies outside of the UK.
The Board has recently agreed that a further minor amendment should be made
such that securities in FTSE 100 companies, and comparable companies listed on
an overseas stock exchange will normally represent between 50% and 100% of the
portfolio and securities in FTSE 350 companies and comparable companies listed
on overseas stock exchanges will normally represent at least 70% of the
portfolio. The Board has made this change to ensure that comparable companies
listed on overseas stock exchanges are included within the weightings referred
to above.
Investment Tax Rules and Proposed Changes to the Company's Memorandum and
Articles of Association
New legislation for investment trusts has been introduced and one of the
changes has resulted in the removal of the prohibition on the distribution of
capital profits by way of dividend.
The Board therefore intends to seek shareholder approval at the Annual General
Meeting to amend the Articles of Association to permit the distribution of
capital profits by way of dividend. It should be noted that this does not in
any way indicate that there will be a change in the Company's dividend policy.
The Board believes that this change will provide greater flexibility for future
dividends in the context of the Board's long term objective of a progressive
dividend policy.
As part of this process the Board is also making a number of other amendments
including the deletion of all the provisions of the Company's Memorandum of
Association which, by virtue of section 28 Companies Act 2006, are to be
treated as provisions of the Company's Articles of Association, and the removal
of the upper limit of the Company's share capital included in its current
Articles of Association.
A Special Resolution will be proposed at the Annual General Meeting which will,
if approved, ratify the adoption of new Articles of Association and the
deletion of the Memorandum of Association.
Outlook
As mentioned within the half year report, the outlook for the UK economy
remains uncertain with the International Monetary Fund having recently scaled
down its growth forecasts for both 2012 and 2013. However, with the S&P 500
index up 15% during the calendar year to 30 September 2012, the Nasdaq index up
20% and Apple, the world's biggest company, up over 50% there is evidence that
we are in a bull market for equities, particularly in the technology and growth
sector.
Against this background, your Board continues to fully support our Investment
Manager's strategy. We firmly believe that this will continue to deliver strong
investment returns to shareholders over the longer-term.
Annual General Meeting
The Annual General Meeting of the Company will be held at the Barber-Surgeons'
Hall, Monkwell Square, Wood Street, London EC2Y 5BL on Wednesday, 30 January
2013 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
Investment Manager.
Anthony Townsend
Chairman
11 December 2012
Investment Manager's Review
"...There's plenty to be cheerful about, if you're looking for it"
I've decided to devote this report to an attempt to refute two assertions that
have been put to me recently at separate client meetings. I do so because each
of the two assertions tells us something about many investors' beliefs and
attitudes today toward equity markets. In addition, in attempting the
refutation, I can remind shareholders how Lindsell Train goes about trying to
make money for them and make some suggestions about the possible shape of
equity returns over the next decade or so.
The two assertions are as follows:
"I don't believe anyone could have made any money in UK equities in recent
years without trading."
"Equity markets are likely to remain sluggish for at least the next ten years."
Both were made by smart and experienced market watchers and, although making
very different claims, both have something in common. What they have in common
is a certain cynicism, indeed pessimism, about equities. Perhaps this is not so
surprising. As this review is written, in October 2012, the FTSE All-Share
Index was still below the level it attained 13 years ago, back in 1999. And
there has certainly been enough roller-coaster volatility since then to leave
most participants feeling nauseous and uncertain whether they want to stay on
for the next leg of the ride. Nonetheless, we disagree with both propositions
and below explain why.
As to the first; the idea that because the UK market has gone nowhere, the only
way to have made an adequate return was to trade the up swings and the down
swings - we have to say: "Well, what about us?" It is for shareholders to
determine whether Lindsell Train has earned an adequate return for them over
the period of our responsibility the numbers show the Company's net asset value
total return running at 7.4% per annum since our appointment, versus the FTSE
All-Share at 3.5% per annum. But however else we have achieved that return, we
certainly have not done so by trading. Our turnover runs at around 6% per annum
on average or looked at another way, it would take 16 years at this rate for us
to turn the whole portfolio over once; an average holding period of 16 years
for each position. That is, by industry standards, an extraordinarily low level
of turnover and is enough, we think, to demonstrate that you don't have to deal
like a dervish to generate competitive performance.
In addition, although I was too polite to say it to his face, what I could have
said to this first client is something on the following lines. "Sir, you are
making a text book error. You persist in thinking about the stock market as
though it were a thing that actually exists, as though it were an homogenous
entity that shows a propensity to go up and down in lockstep. Of course, such
an entity does not exist. Rather, what we are presented with is not a stock
market, but a market of stocks. What you call the "market" is actually made up
of hundreds of individual companies, each with its own strengths and weaknesses
and, critically, each with its own destiny. Forget this chimera of the stock
market and ignore the frankly useless predictions that "experts" make about
where the market may be in three or 36 months time. Instead concentrate on
individual companies and, most important, remember that no one is requiring you
to invest in every company. Why not just invest in good companies; they will
tend to do better than mediocre ones over time?"
Anyway, this is the way that Lindsell Train looks at the investment challenge.
We do more or less ignore the stock market, but we are very, very focussed on
the companies to which we've allocated your capital and we've tried to ensure
that we are only invested in what we analyse to be good, or preferably great
ones.
So, we note that over the last decade there has been plenty to worry about as
regards economics, politics and all the rest, and yet all those worries haven't
prevented Unilever, Pearson or the London Stock Exchange, to pick just three
"great" businesses from your portfolio, from turning out to be fine
investments, if one has been prepared to hold them patiently and put up with
the bumps along the way.
This is not to say that such bumps don't present opportunities. Last summer we
were thrilled to be offered the chance to accumulate shares for the Company in
what we regard as one of the world's great companies; Heineken, after a sharp
drop in its price. Indeed, we continue to add; now a c. 8% holding.
Investment Manager's Review…. Continued
Heineken's stock had been clattered because of concerns that its business on
continental Europe would be impaired by the Euro debt crisis. In fact, from
that low last August, the shares have risen c. 40%. Now, this is not because
those fears about Europe turned out to be unfounded.
Heineken's sales have indeed been hit by the crisis. Instead, it is because
investors have been reassured by the resilience of profits, even through a
difficult period for beer volumes and, more importantly, enthused by Heineken's
unfolding strategy to build its sales in Emerging Markets. The high calibre of
Heineken's franchise has, to date, turned out to be more important for
investors than the immediate troubled economic climate.
Heineken is a good example of the effect - trust the company, not the market -
that we are trying to capture for the Company's shareholders, but even we
acknowledge that, in the long run, the health and vigour of global capitalism
is important for every investment strategy, including ours. Given a choice, we
would far prefer the UK stock market to be going up, rather than turning its
wheels, because a buoyant stock market would imply an innovative,
entrepreneurial and value-creating corporate sector and an even better business
environment for our holdings.
Our preference for bull markets bring me to that second assertion: the
prediction by a cautious prospective client that he was in no hurry to buy the
Company's shares "because equity markets are likely to remain sluggish for at
least the next ten years."
Well, who is to say that he's wrong? As I suggested above, we know that all
stock market prognostications, including our own, are two-a-penny. However, and
with every caveat, we present here three grounds for questioning his pessimism.
1. We might hope that this forecast for sluggish equity markets is, in fact,
less of a forecast and rather more of an accurate description of past
conditions. Or, put another way, I'd be more impressed if this prediction had
been made back in 1999, at the peak of the last equity bull market. 13 years of
more or less desperate markets later, it would've been an inspired call. Today
it smacks of forecasting more rain because it rained yesterday. We know that a
lot of investors - both private individuals and the big institutions - are
disenchanted with equities. We see them throwing in the towel and embracing
bonds or "alternatives". We can't say for sure that they're wrong, but we might
question whether, 13 years from the last peak, they're a little late in
abandoning equities.
2. Our client is cautious because everywhere he looks he sees debt and deficits
- the heavy burden of public and private debt depressing government and
consumer spending, stretching out into the future. We see it too, but we always
remember what the late, great investor Sir John Templeton had to say on the
subject: "Government deficits always end in inflation". And it is undeniable
today that central banks around the world are engaging in ever more spirited
legerdemains to create new money. It is easy to see why such lax monetary
policies might turn out to be very malign indeed for those assets investors
regard as safe today, such as bonds and cash. Meanwhile, good equities, with
their inbuilt inflation protection, might turn out surprisingly "unsluggish",
even if only in nominal terms.
3. But our most potent riposte to today's prevailing caution about equities is
this question: "If things are so terrible in 2012, how come Global Equity
markets are up 12% year-to-date?" And the fact is, by late October 2012;
Germany is up 22%, Hong Kong 18%, and the S&P 500 index 14%. Meanwhile, even
after a recent setback, the world's biggest company by market capitalisation is
up over 50% - Apple. Could this actually be a bull market, one that
backward-looking, depressed investors are missing? We are not so daft as to
proclaim it. But we expect that any genuine bull market will be driven by the
same sorts of factors that have helped those leading equity markets do
surprisingly well in 2012 namely Emerging Markets and technology. Certainly,
those same factors are already helping the Company. Diageo, the biggest holding
in your portfolio is up 24% so far this year and we're sure it's because the
company has been able to announce some smart acquisitions, in Brazil, India and
Turkey, which meaningfully increase its exposure to Emerging Markets. Or, Daily
Mail is up 18%, as the spread of tablet devices and smart phones means that
more and more people in more and more countries are entertaining themselves
with MailOnline; the site turning profitable for the first time in July 2012.
There's plenty to be cheerful about, if you're looking for it.
Nick Train
Director
Lindsell Train Limited Investment Manager
11 December 2012
Performance
Ten Year Total Return Performance to 30 September 2012
Five Year Performance Summary 30 Sep 30 Sep 30 Sep 30 Sep 30 Sep
2008 2009 2010 2011 2012
Share price 202.0p 231.0p 297.8p 308.1p 376.0p
Share price total return* -33.1% +22.9% +33.1% +6.5% +23.6%
Net asset value per share 215.5p 249.0p 301.4p 310.3p 370.7p
(including income)
Net asset value per share 215.5p 243.9p 297.0p 305.5p 365.1p
(excluding income)
Net asset value per share -31.4% +24.0% +25.6% +5.8% +21.1%
(total return)*
FTSE All-Share Index (total -22.3% +10.8% +12.5% -4.4% +17.3%
return)**
(Discount)/premium of share (6.3)% (5.3)% 0.3% 0.9% 3.0%
price to net asset value per
share (excluding income)
Revenue return per share 10.1p 9.1p 8.5p 9.7p 10.8p
Dividends per share 9.5p 9.5p 8.8p 9.2p 9.8p
Ongoing charges†1.0% 0.9% 1.0% 1.0% 0.9%
*Source: Morningstar
**†Source: FTSE International Limited ("FTSE")©FTSE 2012
Investments
as at 30 September 2012
Rank Rank Description Fair Purchases Sales Appreciation/ Fair % of
Value £'000 (depreciation) Value
(2012) (2011) £'000 investments
2011 £'000 2012
£'000
£'000
1 1 Diageo 21,397 128 - 8,821 30,346 11.4
2 2 Unilever 19,428 3,124 - 2,366 24,918 9.3
3 24 Heineken Holdings (A 1,888 17,120 - 2,110 21,118 7.9
Shares)**
4 4 Pearson 14,618 4,414 - 987 20,019 7.5
5 3 A. G. Barr 17,233 - - 2,175 19,408 7.3
6 9 Schroders 7,613 3,457 - 1,741 12,811 4.8
7 6 Sage Group 9,466 1,028 - 2,205 12,699 4.8
8 7 Rathbone Brothers 9,373 52 - 2,583 12,008 4.5
9 5 Fidessa 10,597 1,561 - (772) 11,386 4.3
10 10 Reed Elsevier 7,587 1,811 - 1,637 11,035 4.1
11 16 Daily Mail & General
Trust
(A Shares) 5,425 2,432 - 2,090 9,947 3.7
12 20 Hargreaves Lansdown 3,765 3,215 - 2,574 9,554 3.6
13 14 London Stock 5,612 2,863 - 865 9,340 3.5
Exchange
14 8 Kraft Foods^# 7,845 - - 1,476 9,321 3.5
15 11 Greene King 6,135 203 - 2,363 8,701 3.2
16 13 Marston's 5,776 - - 1,355 7,131 2.7
17 15 Euromoney 5,587 - - 1,406 6,993 2.6
Institutional
Investor
18 17 Dr Pepper Snapple^ 5,394 - - 578 5,972 2.2
19 12 Burberry Group 5,977 414 - (890) 5,501 2.1
20 19 Young & Co's Brewery
(non-voting) 4,191 816 - 102 5,109 1.9
21 18 Fuller Smith & 4,585 - - 455 5,040 1.9
Turner
22 21 Thomson Reuters~ 3,438 1,205 - 62 4,705 1.8
23 22 The Lindsell Train 2,130 - - 640 2,770 1.0
Investment Trust
24 25 Celtic 585 5 - (31) 559 0.2
25 26 Frostrow Capital 470 - - - 470 0.2
LLP+
26 27 Celtic 6% (cum 60 - - (6) 54 -
preference)*
- 23 Lloyds Banking Group
9.25%
(non cum preference) 2,072 - (2,855) 783 - -
*
- - Royal Dutch Shell
(class action - - (10) 10 - -
proceeds)***
Total investments 188,247 43,848 (2,865) 37,685 266,915 100.0
All of the above investments are equities listed in the UK, unless otherwise
stated.
* Non-equity - Preference Shares
^ Listed in the United States
~ Listed in Canada
+ Unquoted partnership interest
** Listed in the Netherlands
# Demerger effective 2 October 2012, Kraft Food's name changed to Mondelez
International Inc and the Company received one new share in
Kraft Foods Group for every three shares held.
*** The Company disposed of this holding in April 2009.
Contribution to Total Return
For the year ended 30 September 2012
Investment Total Return Contribution
per share
£'000 (pence)*
Equities
Diageo 9,578 15.3
Unilever 3,142 5.0
Rathbone Brothers 2,997 4.8
Hargreaves Lansdown 2,908 4.6
Greene King 2,720 4.3
Sage Group 2,608 4.2
A.G Barr 2,579 4.1
Heineken Holdings (A Shares) 2,493 4.0
Daily Mail & General Trust (A Shares) 2,369 3.8
Schroders 2,021 3.2
Reed Elsevier 1,986 3.2
Marston's 1,722 2.7
Kraft Foods 1,703 2.7
Pearson 1,649 2.6
Euromoney Institutional Investor 1,584 2.5
London Stock Exchange 1,095 1.7
Dr Pepper Snapple 735 1.2
The Lindsell Train Investment Trust 682 1.1
Fuller Smith & Turner 543 0.9
Young & Co's Brewery (non-voting) 217 0.3
Thomson Reuters 192 0.3
Royal Dutch Shell (class action proceeds)** 10 -
Celtic (31) -
Fidessa (138) (0.2)
Burberry Group (763) (1.2)
44,601 71.1
Preference Shares (franked income)
Lloyds Banking Group 9.25% (non-cum preference) 880 1.4
Celtic 6% (cum preference) - -
880 1.4
Unquoted
Frostrow Capital LLP 149 0.2
Total contribution after the deduction of 45,630 72.7
withholding taxation
Other deductions including fees & finance (2,438) (3.9)
charges
Total contribution for the year 43,192 68.8
* Based on 62,788,996 shares, being the weighted average number of shares in
issue during the year ended 30 September 2012. ** The Company disposed of this
holding in April 2009.
Analysis of the Portfolio
as at 30 September 2012 £'000 %
Listed on a recognised stock exchange 266,391 99.8
Total listed equities 266,391 99.8
Frostrow Capital LLP 470 0.2
Total unquoted investments 470 0.2
Celtic 6% (cum preference) 54
Total listed preference shares 54 -
Total investments 266,915 100.0
Investment by sector
as at 30 September 2012
Investments Market Value % of
Portfolio
£'000
Beverages 28.8
Diageo 30,346
Heineken Holdings (A Shares) ** 21,118
A. G. Barr 19,408
Dr. Pepper Snapple ^ 5,972
Food Producers 12.8
Unilever 24,918
Kraft Foods ^ # 9,321
Personal Goods 2.1
Burberry Group 5,501
Media 19.7
Pearson 20,019
Reed Elsevier 11,035
Daily Mail & General Trust (A Shares) 9,947
Euromoney Institutional Investor 6,993
Thomson Reuters ~ 4,705
Travel & Leisure 10.0
Greene King 8,701
Marston's 7,131
Young & Co's Brewery (non-voting) 5,109
Fuller Smith & Turner 5,040
Celtic 559
Celtic 6% (cum preference)* 54
Financial Services 17.6
Schroders 12,811
Rathbone Brothers 12,008
Hargreaves Lansdown 9,554
London Stock Exchange 9,340
The Lindsell Train Investment Trust 2,770
Frostrow Capital LLP + 470
Software & Computer Services 9.0
Sage Group 12,699
Fidessa 11,386
Total Portfolio 266,915 100.0
* Non- equity- Preference Shares
^ Listed in the United States
~ Listed in Canada
+ Unquoted partnership interest
** Listed in the Netherlands
# Demerger effective 2 October 2012, Kraft Food's name changed to Mondelez
International Inc and the Company received one new share in
Kraft Foods Group for every three shares held.
Report of the Directors incorporating theBusiness Review
The Directors present their report and the financial statements for the year
ended 30 September 2012.
Introduction
The Report of the Directors includes the Business Review and Corporate
Governance Statement. The Business Review contains a review of the Company's
business, the principal risks and uncertainties it faces and an analysis of its
performance during the financial year and the position at the year end and the
future business plans of the Company. To aid understanding of these areas the
Board has included an analysis using appropriate Key Performance Indicators.
The Business Review, prepared in accordance with the requirements of Section
417 of the Companies Act 2006, should be read in conjunction with the
Chairman's Statement the Investment Manager's Review and the analyses.
Business and Status of the Company
The Company is registered as a public limited company and is an investment
company within the terms of Section 833 of the Companies Act 2006. Its shares
are listed on the Official List of the UK Listing Authority and traded on the
main market of the London Stock Exchange. The Company has received approval
from HM Revenue & Customs as an authorised investment trust under Section 1158
of the Corporation Tax Act 2010 ("CTA 2010"), for the year ended 30 September
2011 and all previous periods. This approval is subject to there being no
subsequent enquiry under corporation tax self-assessment. In the opinion of the
Directors, the Company continues to direct its affairs so as to enable it to
continue to qualify for such approval.
Subsequent to 30 September 2012, the upfront application for approval as an
investment trust, for the period which commenced on 1 October 2012, was made.
Approval was received from HM Revenue & Customs in November 2012.
The Company's shares are eligible for inclusion in the following: Investment
Dealing Accounts, ISAs, Junior ISAs and SIPPs.
Investment Objective
The Company's investment objective is to achieve capital and income growth and
to provide shareholders with a total return in excess of that of the FTSE
All-Share Index.
Investment Policy
The Company invests principally in the securities of UK quoted companies,
although up to a maximum of 20% of the Company's portfolio, at the time of
acquisition, can be invested in quoted companies worldwide. Where possible, a
minimum position size of 1% of the Company's gross assets is held unless the
holding concerned is being built or disposed of.
The portfolio is managed by Lindsell Train Limited ("Lindsell Train" or the
"Investment Manager") and will normally comprise approximately 30 investments.
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 does not and will not invest more than 15%, in aggregate, of the
value of the gross assets of the Company in other closed ended investment
companies (including investment trusts) listed on the London Stock Exchange.
Further, the Company does not and will not invest more than 10%, in aggregate,
of the value of its gross assets in other closed ended investment companies
(including investment trusts) listed on the London Stock Exchange, except where
the investment companies themselves have stated investment policies to invest
no more than 15% of their gross assets in other closed ended investment
companies (including investment trusts) listed on the London Stock Exchange.
No investment will be made in any company or fund where Lindsell Train acts as
the investment manager without the prior approval of the Board.
The Board has set a gearing level of between 5% and 25% of the Company's net
assets. Any gearing ratio outside these limits will be subject to Board
approval.
The Company has the ability to invest a proportion (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 Investment Manager
believes market or economic conditions make equity investment unattractive or
while seeking appropriate investment opportunities or to maintain liquidity.
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,
investments being selected only after extensive research by the Investment
Manager. The Investment Manager uses a bottom-up stock picking approach and
looks to invest in a universe of excellent listed businesses that appear
undervalued.
Results and Dividends
The results attributable to shareholders for the year are shown in the Income
Statement. The dividends for the year to 30 September 2012 were:
2012 2011
£'000 £'000
First Interim dividend paid of 4.6p per 2,899 2,353
share (2011: 4.4p)
Second Interim dividend paid of 5.2p per 3,579 2,740
share (2011: 4.8p)
Total 6,478 5,093
Report of the Directors incorporating theBusiness Review…. Continued
Performance and Performance Measurement
While the Board monitors the net asset value as the primary financial
measurement it is aware that share price performance and income return are the
most important factors to the Company's shareholders. Net asset value and share
price performance are of course closely linked and it is the responsibility of
the Investment Manager to seek the best investments and to manage the portfolio
in the most beneficial way to achieve the highest returns for shareholders. The
Company's net asset value per share total return for the year was 21.1%. The
Company's benchmark, the FTSE All-Share Index (measured on a total return
basis) rose by 17.3% during the same period. The Company's share price total
return for the year was 23.6%.
The Board recognises that income return is also important to shareholders. Due
to an increase in the Company's net revenue this year, the Company paid an
increased second interim dividend of 5.2p per share (2011: 4.8p per share),
making total dividends for the year of 9.8p per share compared to a total of
9.2p per share for the previous year.
The Board continually reviews overall performance. The Company's net asset
value per share is announced daily via a regulatory news service and is
available online.
Monitoring Performance - Key Performance Indicators ("KPIs")
At each Board meeting, the Board considers a number of performance measures to
assess the Company's success in achieving its investment objective. The key
KPI's are as follows:
Net asset value per share total return
Share price total return
Revenue return per share
Share price premium/(discount) to net asset value per share analysis
Benchmark performance
As indicated, Lindsell Train has been appointed by the Board as Investment
Manager and Frostrow Capital LLP ("Frostrow" or the "Manager") has been
appointed as the Company's Manager, Company Secretary and Administrator. Each
provider is responsible to the Board which is ultimately responsible to the
shareholders for performing against inter alia the above KPIs within the terms
of their respective agreements by utilising the capabilities of the experienced
professionals within each firm.
Principal Risks and their Mitigation
The Company's assets consist principally of listed equities; its main area of
risk is therefore stock market related. The specific key risks faced by the
Company, together with the mitigation approaches adopted, are as follows
(further information on the Company's risk management strategy can be seen in
note 16).
Objective and Strategy - The Company and its Investment Objective become
unattractive to investors
The Board regularly reviews the investment mandate and the long-term investment
strategy in relation to market and economic conditions, and the operation of
the Company's peers, thereby monitoring whether the Company should continue in
its present form. Each month the Board receives a Monthly Review, which
monitors the Company's investment performance (both on an absolute basis and
against the benchmark and peer group) and its compliance with the investment
guidelines. The Company's Manager and Investment Manager regularly present
additional reports and presentations to the Board and their continuity is
regularly considered by the Board.
Level of discount/premium - Share price performance lags NAV performance
The Board undertakes a regular review of the level of discount/premium and
consideration is given to ways in which share price performance may be
enhanced, including the effectiveness of marketing. The Board operates an
active discount control mechanism with the aim of limiting the discount of the
share price to the ex-income net asset value per share to a maximum of 5%. In
the event of shares being re-purchased by the Company, such shares may be held
in treasury for reissue into the market when demand arises. Shareholders should
note that it remains possible for the share price discount to the ex-income net
asset value per share to be greater than 5% on any one day and this is due to
the fact that the share price continues to be influenced by overall supply and
demand for the Company's shares in the secondary market.
Market Price Risk
Market price risk arises mainly from uncertainty about future prices of
financial instruments held. It represents the potential gain or loss the
Company might suffer through holding market positions in the face of price
movements.
The Board meets on at least a quarterly basis during the year and at each
meeting they consider the asset allocation and concentration of the portfolio
in order to review the risk associated with particular instruments, as well as
receiving a report from the Investment Manager on the portfolio and its
performance. The Investment Manager has responsibility for selecting
investments in accordance with the Company's investment objective and seeks to
ensure that individual stocks meet an acceptable risk-reward profile.
Liquidity Risk
The Company's assets comprise mainly realisable securities, which can be sold
to meet funding requirements where necessary.
Interest Rate Risk
The Company borrows in sterling at floating rates of interest and hence is
exposed to the risk that its cashflow will change due to movements in
prevailing interest rates. The Board imposes borrowing limits to ensure gearing
levels are appropriate to market conditions and reviews these on a regular
basis.
The Company also invests in fixed rate preference shares which are exposed to
movements in their fair value arising from changes in interest rates. These
risks are managed alongside market price risk as described above.
Report of the Directors incorporating theBusiness Review…. Continued
Credit Risk
The Company's principal financial assets are bank balances, debtors and
investments which represent the Company's maximum exposure to credit risk in
relation to financial assets. The credit risk on bank balances is considered
low because the counter-parties are banks with high credit ratings assigned by
international credit agencies. The credit risk in relation to the companies
that comprise the portfolio is monitored closely by the Investment Manager.
Currency Risk
Movements in exchange rates could adversely affect the Company's financial
performance. Currently four of the Company's investments are not denominated in
sterling. The return to shareholders will be affected by changes in the value
of sterling to those foreign currencies in which certain investments are held
(see note 16).
The Board has made clear the Company's position with regard to currency
fluctuations, which is that it does not currently hedge against currency
exposure.
Portfolio Performance - Investment performance may not be meeting the
investment objective or shareholder
Requirements
The Board regularly reviews investment performance against the benchmark and
against the peer group. The Board also receives reports that show an analysis
of performance compared with other relevant indices. The Investment Manager
provides an explanation of stock selection decisions and an overall rationale
for the make-up of the portfolio. The Investment Manager discusses current and
potential investment holdings with the Board on a regular basis in addition to
new initiatives, which may enhance shareholder returns.
Operational and Regulatory Risk
Failure to qualify as an Investment Trust under the terms of Section 1158 of
the CTA 2010 may lead to the Company being subject to corporation tax on its
capital profits. A breach of the Listing Rules of the Financial Services
Authority ("FSA") may result in censure by the FSA and/or the Company's
suspension from listing. Other control failures, either by the Manager, the
Investment Manager or any other of the Company's service providers, may result
in operational and/or reputational problems, erroneous disclosures or loss of
assets through fraud, as well as breaches of regulations. An independent
custodian has been appointed by the Company to safeguard the assets of the
Company.
The Manager and the Investment Manager review the level of compliance with
Section 1158 of the CTA 2010 and other financial regulatory requirements on a
continuous basis. All transactions, income and expenditure forecasts are
reported to the Board. The Board regularly considers all risks, the measures in
place to control them and the possibility of any other risks that could arise.
These risks are formalised in the Company's risk assessment register. The Board
ensures that satisfactory assurances are received from its various service
providers. In addition, each of the third party providers provides a copy of
its report on internal controls (SAS 70, AAF or equivalent) to the Board each
year. The Manager's and the Investment Manager's Compliance Officers also
produce regular reports for review by the Company's Audit Committee and are
available to attend meetings in person if required.
Investment Management Key Person Risk
There is a risk that the individual responsible for managing the Company's
portfolio may leave his employment or may be prevented from undertaking his
duties.
The Investment Manager has in place an insurance policy covering key personnel.
There is a qualified individual within the Investment Manager who works with
the designated portfolio manager who could take over if necessary.
Fixed Asset Investments
The fair value of the Company's investments at 30 September 2012 was £
266,915,000 (2011: £188,247,000) showing a gain since acquisition of £
100,286,000 (2011: gain £60,810,000). Taking these investments at this
valuation, the net assets attributable to each share at 30 September 2012
amounted to 370.7p (2011: 310.3p).
Issue of Shares
At the Annual General Meeting held on Wednesday, 18 January 2012, authority to
allot up to 5,916,216 shares on a non pre-emptive basis was granted.
All of the shares available under the allotment authority granted at the Annual
General Meeting held in January 2012 have been issued and the Company held a
General Meeting on Friday, 11 May 2012 where shareholder authority was obtained
to issue a further 6,507,838 shares on a non-pre-emptive basis at prices not
less than the prevailing cum income net asset value per share. The authority
granted in May 2012 has been almost fully utilised and the company will hold a
General Meeting on Friday, 28 December 2012 in order to obtain Shareholder
approval to issue a further 7,080,388 shares on a non-pre-emptive basis at
prices not less than the prevailing cum income net asset value per share. A
prospectus has also been published in order to obtain admission to the Official
List maintained by the UK Listing Authority of any shares issued pursuant to
the authority obtained.
During the year, 11,330,958 new shares were issued during the year by the
Company at a minimum of a 0.5% premium to the estimated cum income net asset
value per share at the time of issue. Since the year-end and to the date of
this report, a further 2,735,000 new shares were issued under the same issuance
criteria.
Repurchase of Shares
The Board continues to believe the use of a discount management policy, to buy
back shares if offered at a discount greater than 5% to the ex-income net asset
value per share, and the use of the treasury share facility, whereby shares
repurchased by the Company are held in treasury for reissue into the market (at
a discount less than 5% to the ex income net asset value per share) when demand
is present, are in the best interests of the Company and shareholders. During
the year no shares were repurchased by the Company, and no shares were reissued
out of treasury. As at 11 December 2012 no shares were held in treasury.
The reissue of shares at a discount to the Company's prevailing ex income net
asset value per share would have a dilutive effect on the net asset value per
share.
Report of the Directors incorporating theBusiness Review… Continued
Current and Future Developments
A review of the Company's year, its performance since the year-end and the
outlook for the Company can be found in the Chairman's Statement and in the
Investment Manager's Review. The Board concentrates its attention on the
Company's investment performance and the Investment Manager's investment
approach and on factors that may have an effect on this approach. Marketing
reports are given to the Board at each Board meeting, which include how the
Company is being promoted and details of communications with existing and
potential shareholders. The Board is regularly updated on wider investment
trust industry issues and discussions are held concerning the Company's
development and strategy.
Management
The Company has no employees and most of its day-to-day activities are
delegated to third parties. The Company has appointed Lindsell Train as
Investment Manager and Frostrow as Manager, Company Secretary and
Administrator.
Lindsell Train was appointed Investment Manager to the Company in December
2000. Lindsell Train has given Mr Nick Train responsibility for managing the
Company's portfolio. Mr Train was previously head of Global Equities at M&G PLC
and head of Pan-European Equities at GT Management PLC. Mr Train has managed
money in the UK equity market since 1983, including the top decile performer GT
Income Fund (1985-1998). Lindsell Train is authorised and regulated by the
Financial Services Authority.
The Board looks to the Investment Manager to deliver investment performance.
The Investment Manager continues to manage the portfolio in accordance with the
investment objective and policy. The Investment Manager is an independent
investment management company and is able to access, through in-depth research
and analysis, the most profitable investments for the Company.
Frostrow is a firm established in 2007 to provide specialist management,
company secretarial, administration and marketing services to investment
companies. Frostrow is authorised and regulated by the Financial Services
Authority.
Frostrow is responsible for providing company secretarial, administrative,
accounting and marketing services. Details of the appointment of each party are
given below.
Investment Management Agreement: Under the terms of the Investment Management
Agreement, Lindsell Train provides discretionary investment management services
to the Company for a periodic fee equal to 0.45% per annum of the Company's
market capitalisation. The Investment Management Agreement may be terminated by
either party giving notice of not less than 12 months. The Investment Manager
under the terms of the Agreement provides inter alia the following services:
seeking out and evaluating investment opportunities;
recommending the manner by which monies should be invested, disinvested,
retained or realised;
advising on how rights conferred by the investments should be exercised;
analysing the performance of investments made;
advising the Company in relation to trends, market movements and other matters
which may affect the investment policy of the Company; and
marketing.
Management, Secretarial Services and Administrative Agreement: Management,
Secretarial, Administrative and other services are provided to the Company by
Frostrow.
Under the terms of the Management, Secretarial Services and Administrative
Agreement Frostrow receives a periodic fee at a rate of 0.15% per annum of the
Company's market capitalisation plus a fixed fee of £70,000 per annum
calculated monthly and payable monthly in arrears.
The notice period on the Management, Company Secretarial and Administration
Agreement with Frostrow is 12 months and may be terminated by either party.
Frostrow, under the terms of the Management, Secretarial Services and
Administrative Agreement provides inter alia the following services:
marketing and shareholder services;
company secretarial and administrative services;
advice and guidance in respect of corporate governance requirements;
performance measurement reports;
maintenance of adequate accounting records and management information;
preparation and despatch of the audited annual financial statements, the
unaudited interim report and the interim management statements; and
attending to general tax affairs where necessary. Performance Fee:
In the year under review, no performance fee was accrued or paid (30 September
2011: Nil).
Dependent on the level of performance achieved, Lindsell Train and Frostrow are
also entitled to the payment of a performance fee. The calculation basis of the
performance fee is by reference to the annual increase in the Company's
adjusted market capitalisation per share, but only after attainment of an
absolute return hurdle, which is the sum of the increase in the Retail Price
Index ("RPI") in the year, plus a fixed return of 6%. The performance fee is
calculated annually and is based on 15% of the outperformance per share over
the absolute return hurdle. Lindsell Train receives 85% and Frostrow receives
15% of the performance fee. During the year the RPI rose by 2.65%, therefore
the performance fee hurdle, as at 30 September 2012, was 551.70p per share,
being 8.65% above the hurdle at 30 September 2011. The Company's adjusted
market capitalisation per share as at 30 September 2012 was 375.91p. The total
fixed, periodic and performance fees payable in any one year to Lindsell Train
and Frostrow are capped at 1.25% of the Company's market capitalisation. Any
outperformance, that would have resulted in a higher fee being paid had there
been no cap, is carried forward into the calculation of future years' fees.
Similarly, in the case of underperformance, any underperformance has to be made
up in future years before a performance fee becomes payable in those years.
Report of the Directors incorporating theBusiness Review… Continued
Holding in The Lindsell Train Investment Trust plc and Partnership Interest in
Frostrow Capital LLP
In 2001 the Company acquired a holding, equivalent to 5% of its issued share
capital, in The Lindsell Train Investment Trust plc, which is managed by
Lindsell Train, the Company's Investment Manager. The Lindsell Train Investment
Trust plc owns 25% of Lindsell Train and so the Company has an indirect
interest of 1.25% in Lindsell Train.
The Company also acquired a 10% interest in Frostrow at a cost of £150,000 in
2007, of which £75,000 was repaid to the Company by Frostrow in 2008.
Investment Manager, Manager Evaluation and Re-Appointment
The review of the performance of Lindsell Train as Investment Manager and
Frostrow as Manager is a continuous process carried out by the Board with a
formal evaluation being undertaken each year. As part of this process the Board
monitors the services provided by the Investment Manager and the Manager and
receives regular reports and views from them. The Board also receives
comprehensive performance measurement reports to enable it to determine whether
or not the performance objective set by the Board has been met.
The Board believes the continuing appointment of the Investment Manager and the
Manager, under the terms described on the previous above, is in the best
interests of shareholders as a whole. In coming to this decision it also took
into consideration the following additional reasons:
- the quality and depth of experience allocated by the Investment Manager to
the management of the portfolio, the Clarity and rigour of the investment
process, the level of past performance of the portfolio in absolute terms and
also by reference to the benchmark index; and
- the quality and depth of experience of the management, company secretarial,
administrative and marketing team that the Manager allocates to the management
of the Company.
Going Concern
The Directors, having made relevant enquiries, are satisfied that it is
appropriate to prepare financial statements on the going concern basis as the
net assets of the Company consist of liquid securities, all of which, with the
exception of the partnership interest in Frostrow Capital LLP, are traded on
recognised stock exchanges.
Creditors' Payment Policy
Terms of payment are negotiated with service providers when agreeing settlement
details for transactions. While the Company does not follow a formal code, it
is the Company's continuing policy to pay amounts due to creditors as and when
they become due. As at 30 September 2012, the Company did not have any trade
creditors (2011: Nil).
Social, Economic and Environmental Matters
The Company invests principally in the securities of UK quoted companies,
although up to a maximum of 20% of the Company's portfolio, at the time of
acquisition, can be invested in quoted companies worldwide. The Board
recognises that this should be achieved by investing in an environmentally
responsible and ethical way. The Directors, through the Company's Investment
Manager, encourage companies in which investments are made to adhere to best
practice with regard to Corporate Governance. They believe that this can best
be achieved through dialogue with company management to persuade them, where
necessary, to improve their policies in this area. However, as the majority of
the Company's investments are in blue-chip companies, the Board is of the
opinion that investee companies are likely to have high standards of corporate
governance and considerable regard both for the welfare of their employees and
on environmental matters in relation to areas where their operations are
located.
The Company itself owns no premises, consumes no electricity, gas or diesel
fuel and consequently does not have a measurable carbon footprint.
Charitable and Political Donations
The Company has not in the past and does not intend in the future to make any
charitable or political donations.
Directors
The Directors of the Company, all of whom served throughout the year, are shown
below.
Anthony Townsend (Chairman)
John Allard
Neil Collins
David Hunt
Vanessa Renwick
Giles Warman
Report of the Directors incorporating theBusiness Review… Continued
Directors' Interests
The beneficial interests in the Company of the Directors and also of Mr Nick
Train, the individual with responsibility for managing the Company's portfolio
at Lindsell Train and Mr Alastair Smith, Managing Partner at Frostrow Capital,
and their families were as set out below:
Number of shares held
30 September 30 September
2012 2011
Anthony Townsend 127,968 120,638
John Allard 19,604 17,094
Neil Collins 21,986 12,986
David Hunt 23,500 20,500
Vanessa Renwick 18,514 18,514
Giles Warman 78,540 78,540
Alastair Smith 43,621 30,251
Nick Train 153,486 133,179
Mr Allard purchased a further 636 of the Company's shares between 30 September
2012 and the date of this report.
Mr Smith purchased a further 3,000 of the Company's shares between 30 September
2012 and the date of this report.
Mr Train purchased a further 7,000 of the Company's shares between 30 September
2012 and the date of this report.
None of the Directors were granted or exercised rights over shares during the
year. None of the Directors has any contract (including service contracts) with
the Company.
Directors' Fees
A report on Directors' Remuneration is set out in the Directors Remuneration
Report.
Directors' and Officers' Liability Insurance Cover
Directors' and Officers' liability insurance cover was maintained by the Board
during the year ended 30 September 2012. It is intended that this policy will
continue for the year ended 30 September 2013 and subsequent years.
Directors' Indemnities
As at the date of this report, indemnities are in force between the Company and
each of its Directors under which the Company has agreed to indemnify each
Director, to the extent permitted by law, in respect of certain liabilities
incurred as a result of carrying out his role as a Director of the Company. The
Directors are also indemnified against the costs of defending any criminal or
civil proceedings or any claim by the Company or a regulator as they are
incurred provided that where the defence is unsuccessful the Director must
repay those defence costs to the Company. The indemnities are qualifying third
party indemnity provisions for the purposes of the Companies Act 2006.
A copy of each deed of indemnity is available for inspection at the offices of
Frostrow Capital LLP during normal business hours and will be available for
inspection at the Annual General Meeting.
Capital Structure
The following information is disclosed in accordance with Part 6 of Schedule 7
of The Large and Medium Sized Companies and Groups (Accounts and Reports)
Regulations 2008:
The Company's capital structure and voting rights are summarised on page 1 of
the Annual Report and Financial Statements;
Details of the substantial shareholders in the Company are listed below;
The rules concerning the appointment and replacement of Directors are contained
in the Company's Articles of Association;
The giving of powers to issue or buy back the Company's shares requires the
relevant resolution to be passed by shareholders. Proposals for the renewal of
the Board's current powers to issue and buy back shares are detailed in the
Corporate Governance Report;
There are no restrictions concerning the transfer of securities in the Company;
no special rights with regard to control attached to securities; no
restrictions on voting rights; no agreements between holders of securities
regarding their transfer known to the Company; and no agreements which the
Company is party to that might affect its control following a successful
takeover bid; and
There are no agreements between the Company and its Directors concerning
compensation for loss of office.
Report of the Directors incorporating theBusiness Review… Continued
Substantial Share Interests
The Company was aware of the following substantial interests in the voting
rights of the Company:
30 September 2012 30 November 2012
Number of Fund Registered Number of % of Number % of
manager holder shares of
shares shares shares
Brewin Dolphin Various 11,262,641 16.53 11,776,732 16.75
Brewin
Nominee
Managed
Accounts
Alliance Trust Alliance 6,947,452 10.20 7,290,446 10.37
Savings Trust
Savings
Nominees
Rathbone Various 4,969,998 7.29 5,053,694 7.19
Rathbone
Nominee
Managed
Accounts
Investec Wealth Various 4,191,366 6.15 4,255,485 6.05
& Investment Nominee
Accounts
Henderson Various 3,421,550 5.02 2,906,155 4.13
Global Nominee
Investors Accounts
JP Morgan Asset Chase 2,847,041 4.18 3,102,567 4.41
Management Nominees
Scottish Widows Various 2,691,517 3.95 2,698,178 3.84
Nominee
Accounts
Charles Stanley Rock 2,602,327 3.82 2,677,972 3.81
Nominees
As at 30 September 2012 the Company had 68,568,381 shares in issue. As at 30
November 2012 the Company had 70,578,381 shares in issue.
Auditor
Grant Thornton UK LLP have indicated their willingness to continue to act as
Auditor to the Company and a resolution for their re-appointment will be
proposed at the forthcoming Annual General Meeting.
Audit Information
So far as the Directors are aware, there is no relevant information of which
the Auditors are unaware. The Directors have taken all steps they ought to have
taken to make themselves aware of any relevant audit information and to
establish that the Auditors are aware of such information.
Corporate Governance
A formal statement on Corporate Governance forms part of the Report of the
Directors.
Beneficial Owners of Shares - Information Rights
The beneficial owners of shares who have been nominated by the registered
holder of those shares to receive information rights under Section 146 of the
Companies Act 2006 are required to direct all communications to the registered
holder of their shares rather than to the Company's registrar, Capita
Registrars, or to the Company directly.
Directors' Remuneration
The Directors Remuneration Report details the fees paid to the Company's
Directors for the years to 30 September 2011 and 30 September 2012.
The Bribery Act 2010
The Board of Finsbury Growth & Income Trust PLC 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 for 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 on its
website at www.finsburygt.com.
Notice Period for General Meetings
At last year`s Annual General Meeting, a special resolution was passed allowing
general meetings of the Company to be called on a minimum notice period
provided for in the Companies Act 2006. For meetings other than Annual General
Meetings this is a period of 14 clear days.
The Board believes that it should continue to have the flexibility to convene
general meetings of the Company (other than annual general meetings) on 14
clear days' notice.
The Board is therefore proposing Resolution No. 14 as a special resolution to
approve 14 clear days as the minimum period of notice for all General Meetings
of the Company other than Annual General Meetings. The notice period for Annual
General Meetings will remain 21 clear days.
The authority, if given, will lapse at the next Annual General Meeting of the
Company after the passing of this resolution.
Report of the Directors incorporating theBusiness Review… Continued
Annual General Meeting
Resolutions relating to the following items of special business will be
proposed at the forthcoming Annual General Meeting:
Issue of Shares
Ordinary Resolution No. 10 in the Notice of Annual General Meeting will renew
the authority to allot the unissued share capital up to an aggregate nominal
amount of £1,782,584 (equivalent to 7,130,338 shares, or 10% of the Company's
existing issued share capital on 11 December 2012, being the nearest
practicable date prior to the signing of this Report). Such authority will
expire on the date of the next Annual General Meeting or after a period of 15
months from the date of the passing of the resolution, whichever is earlier.
This means that the authority will have to be renewed at the next Annual
General Meeting.
When shares are to be allotted for cash, Section 551 of the Companies Act 2006
(the "Act") provides that existing shareholders have pre-emption rights and
that the new shares must be offered first to such shareholders in proportion to
their existing holding of shares. However, shareholders can, by special
resolution, authorise the Directors to allot shares otherwise than by a pro
rata issue to existing shareholders. Special Resolution No. 11 will, if passed,
give the Directors power to allot for cash equity securities up to 10% of the
Company's existing share capital on 11 December 2012 (reduced by any treasury
shares sold by the Company pursuant to Resolution No. 12, as described below),
as if Section 551 of the Act does not apply. This is the same nominal amount of
share capital which the Directors are seeking the authority to allot pursuant
to Resolution No. 10. This authority will also expire on the date of the next
Annual General Meeting or after a period of 15 months, whichever is earlier.
This authority will not be used in connection with a rights issue by the
Company.
Under Section 724 of the Companies Act 2006 (`s724') the Company is permitted
to buy back and hold shares in treasury and then sell them at a later date for
cash, rather than cancelling them. It is a requirement of s724 that such sale
be on a pre-emptive, pro rata, basis to existing shareholders unless
shareholders agree by special resolution to disapply such pre-emption rights.
Accordingly, in addition to giving the Directors power to allot unissued share
capital on a non pre-emptive basis pursuant to Resolution No. 11, Resolution
No. 12, if passed, will give the Directors authority to sell shares held in
treasury on a non pre-emptive basis. The benefit of the ability to hold
treasury shares is that such shares may be resold. This should give the Company
greater flexibility in managing its share capital, and improve liquidity in its
shares. Any re-sale of treasury shares would only take place at a narrower
discount to the ex-income net asset value per share than that at which they had
been bought into treasury, and in any event at a discount no greater than 5% to
the prevailing ex-income net asset value per share, and this is reflected in
the text of Resolution No. 12. It is also the intention of the Board that sales
from treasury would only take place when the Board believes that to do so would
assist in the provision of liquidity to the market. The number of treasury
shares which may be sold pursuant to this authority is limited to 10% of the
Company's existing share capital on 11 December 2012 (reduced by any equity
securities allotted for cash on a non-pro rata basis pursuant to Resolution No.
11, as described above). This authority will also expire on the date of the
next Annual General Meeting or after a period of 15 months, whichever is
earlier.
The Directors intend to use the authority given by Resolutions Nos. 10, 11 and
12 to allot shares and disapply pre-emption rights only in circumstances where
this will be clearly beneficial to shareholders as a whole. The issue proceeds
would be available for investment in line with the Company's investment policy.
No issue of shares will be made which would effectively alter the control of
the Company without the prior approval of shareholders in general meeting.
Share Repurchases
At the Annual General Meeting held on Wednesday, 18 January 2012, shareholders
approved the renewal of the authority permitting the Company to repurchase its
own shares.
The Directors wish to renew the authority given by shareholders at the previous
Annual General Meeting. The principal aim of a share buy-back facility is to
enhance shareholder value by acquiring shares at a discount to net asset value,
as and when the Directors consider this to be appropriate. The purchase of
shares, when they are trading at a discount to net asset value per share,
should result in an increase in the net asset value per share for the remaining
shareholders. This authority, if conferred, will only be exercised if to do so
would result in an increase in the net asset value per share for the remaining
shareholders and if it is in the best interests of shareholders generally. Any
purchase of shares will be made within guidelines established from time to time
by the Board. It is proposed to seek shareholder authority to renew this
facility for another year at the Annual General Meeting.
Under the current Listing Rules, the maximum price that may be paid on the
exercise of this authority must not exceed the higher of (i) 105% of the
average of the middle market quotations for the shares over the five business
days immediately preceding the date of purchase and (ii) the higher of the last
independent trade and the highest current independent bid on the trading venue
where the purchase is carried out. The minimum price which may be paid is 25p
per share. Shares which are purchased under this authority will either be
cancelled or held as treasury shares.
Special Resolution No. 13 in the Notice of Annual General Meeting will renew
the authority to purchase in the market a maximum of 14.99% of shares in issue
on 11 December 2012, being the nearest practicable date prior to the signing of
this Report, (amounting to 10,688,376 shares). Such authority will expire on
the date of the next Annual General Meeting or
Report of the Directors incorporating theBusiness Review… Continued
after a period of 15 months from the date of passing of the resolution,
whichever is earlier. This means in effect that the authority will have to be
renewed at the next Annual General Meeting or earlier if the authority has been
exhausted.
General Meetings
Special Resolution No. 14 seeks shareholder approval for the Company to hold
General Meetings (other than the Annual General Meeting) at 14 clear days'
notice.
Amendment to Articles of Association
It is proposed to make certain changes to the Company's Articles of Association
in order to (i) take advantage of HM Government's reform of the tax and company
law rules affecting investment trusts by removing the prohibition on
distributing capital profits, which the Company is no longer required to
include; (ii) reflect the increase in the maximum aggregate limit of directors'
fees from £150,000 to £200,000 (exclusive of any applicable VAT), approved at
the Annual General Meeting held on 18 January 2012; (iii) remove the upper
limit of the Company's share capital, which is no longer required pursuant to
the Companies Act 2006; and (iv) make other technical amendments so that the
Articles of Association conform to the Companies Act 2006 and other legislation
applicable to companies and current best practices in its current form.
Accordingly, Special Resolution No. 15 will be put to the Annual General
Meeting to be held on 30 January 2013.
Recommendation
The Board considers that the resolutions relating to the above items of special
business, are in the best interests of shareholders as a whole. Accordingly,
the Board unanimously recommends to the shareholders that they vote in favour
of the above resolutions to be proposed at the forthcoming Annual General
Meeting as the Directors intend to do in respect of their own beneficial
holdings totalling 290,748 shares.
By order of the Board
Frostrow Capital LLP
Company Secretary
11 December 2012
Statement of Directors' Responsibilities
Company law in the United Kingdom requires the Directors to prepare financial
statements for each financial year. The Directors are responsible for preparing
the Financial Statements in accordance with applicable law and regulations. In
preparing these financial statements, the Directors have:
selected suitable accounting policies and applied them consistently;
made judgements and estimates that are reasonable and prudent;
followed applicable UK accounting standards; and
prepared the financial statements on a going concern basis.
The Directors are responsible for keeping adequate accounting records which
disclose with reasonable accuracy at any time the financial position of the
Company and enable them to ensure that the financial statements comply with the
Companies Act 2006. They 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 ensuring that the Report of the Directors and
other information included in the Annual Report is prepared in accordance with
company law in the United Kingdom. They are also responsible for ensuring that
the Annual Report includes information required by the Listing Rules of the
Financial Services Authority.
The financial statements are published on the Company's website (website
address: www.finsburygt.com) and via the website of the Manager (website
address: www.frostrow.com). The maintenance and integrity of these websites, so
far as it relates to the Company, is the responsibility of the Manager. The
work carried out by the Auditors does not involve consideration of the
maintenance and integrity of these websites and, accordingly, the Auditors
accept no responsibility for any changes that have occurred to the financial
statements since they were initially presented on these websites. Visitors to
the websites need to be aware that legislation in the United Kingdom governing
the preparation and dissemination of the financial statements may differ from
legislation in their jurisdiction.
The Directors, confirm that to the best of their knowledge the financial
statements, within the Annual Report, have been prepared in accordance with
applicable accounting standards, give a true and fair view of the assets,
liabilities, financial position and the return for the year ended 30 September
2012, and that the Chairman's Statement, Investment Manager's Review and the
Report of the Directors include a fair review of the information required by
4.1.8R to 4.1.11R of the FSA's Disclosure and Transparency Rules.
On behalf of the Board
Anthony Townsend
Chairman
11 December 2012
Corporate Governance
This Corporate Governance Statement forms part of the Report of the Directors .
Compliance
The Board has considered the principles and recommendations of the AIC Code of
Corporate Governance ("AIC Code") by reference to the AIC Corporate Governance
Guide for Investment Companies ("AIC Guide"), both of which can be found on the
AIC website www.theaic.co.uk. The AIC Code, as explained by the AIC Guide,
addresses all the principles set out in the UK Corporate Governance Code
published in May 2010 (the "UK Governance Code") as well as setting out
additional principles and recommendations on issues that are of specific
relevance to the Company. The Board considers that reporting against the
principles and recommendations of the AIC code, and by reference to the AIC
Guide (which incorporates the UK Governance Code), will provide better
information to shareholders. A copy of the UK Governance Code can be found at
www.frc.org.uk. The Board has noted the recommendations of the UK Corporate
Governance Code published in October 2012 (applicable for financial years
beginning after 1 October 2012) and will duly report on these recommendations
in the Company's 2013 Annual Report.
The Board considers that it has managed its affairs throughout the year ended
30 September 2012 in compliance with the recommendations of the AIC Code and
the relevant provisions of the UK Governance Code, except as set out below:
the role of the chief executive;
executive directors' remuneration; and
the need for an internal audit function.
For the reasons set out in the AIC Guide, and in the preamble to the AIC Code,
the Board considers these provisions are not relevant to the position of the
Company, being an externally managed investment trust. The Company has
therefore not reported further in respect of these provisions.
Internal Audit
As the Company delegates to third parties its day-to-day operations and has no
employees, the Board has determined that there are no requirements for an
internal audit function. The Board reviews annually whether a function
equivalent to an internal audit is needed and it will continue to monitor its
systems of internal controls in order to provide assurance that they operate as
intended.
Board Independence, Composition and Tenure
The Board, chaired by Anthony Townsend who is responsible for its leadership
and for ensuring its effectiveness in all aspects of its role, currently
consists of six non-executive Directors. The Directors' demonstrate a breadth
of investment, commercial and professional experience. David Hunt has been
designated as the Senior Independent Director, who can act as a sounding board
for the Chairman and also acts as an intermediary for the other Directors when
necessary. The Directors review their independence annually.
The Company's Articles of Association provide that a Director appointed during
the year is required to retire and seek election by shareholders at the next
Annual General Meeting and that all Directors are required to submit themselves
for re-election at least once every three years. While the Company is not a
FTSE 350 company the Board has implemented the provisions of the UK Governance
Code whereby all Directors of the Company stand for re-election on an annual
basis.
John Allard, Vanessa Renwick (who both joined the Board in 2000) and Giles
Warman (who became a Director in 1988) have all served in excess of nine years
on the Board. Nonetheless, the Board considers them to be independent in
character and judgement and does not consider that the criterion of length of
service should necessarily preclude them from being so considered. Anthony
Townsend, who rejoined the Board in 2005, David Hunt, appointed a Director in
2006 and Neil Collins who became a Director in 2008, are all also considered by
the Board to be independent. This position accords with the recommendation of
the AIC Code that a director may be viewed as being independent notwithstanding
service that could be considerably more than nine years. The Board subscribes
to the view expressed within the AIC Code that long-serving Directors should
not be prevented from forming part of an independent majority. It does not
consider that a Director's tenure necessarily reduces his ability to act
independently and, following formal performance evaluations, believes that each
of those Directors is independent in character and judgement and that there are
no other relationships or circumstances which are likely to affect their
Corporate Governance.. Continued
judgement. The Board has considered the position of Mr Townsend, Mrs Renwick
and Messrs Allard, Collins, Hunt and Warman as part of the evaluation process,
and believes that it would be in the Company's best interests to propose them
for re-election at the forthcoming Annual General Meeting.
None of the Directors has a service contract with the Company. New Directors
are appointed with the expectation that they will serve for a minimum period of
three years and the terms of their appointment are detailed in a letter sent to
them when they join the Board. These letters are available for inspection at
the offices of the Company's Manager and will be available at the Annual
General Meeting. When a new Director is appointed to the Board, he/she is
provided with all relevant information regarding the Company and his/her duties
and responsibilities as a Director. In addition, a new Director will also spend
time with representatives of the Manager and Investment Manager in order to
learn more about their processes and procedures. The Chairman also regularly
reviews the training and development needs of each Director. Directors'
appointments are reviewed formally every three years by the Board. Any Director
may resign in writing to the Board at any time.
The Board also receives regular briefings from, amongst others, the Auditors
and the Company Secretary regarding any proposed developments or changes in
laws and regulatory requirements that could affect the Company and/or the
Directors.
The Board's Responsibilities
The Board is responsible for efficient and effective leadership of the Company
and has reviewed the schedule of matters reserved for its decision. The Board
meets at least on a quarterly basis and at other times as necessary. 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 and the review
of investment performance and investment policy. It also has responsibility for
all corporate strategy issues, dividend policy, share buy-back policy, gearing,
share price and discount/premium monitoring and corporate governance matters.
To enable them to discharge their responsibilities, prior to each meeting the
Directors are provided, in a timely manner, with a comprehensive set of papers
giving detailed information on the Company's transactions, financial position,
performance and income forecast. Representatives of the Manager and Investment
Manager attend each Board meeting, enabling the Directors to seek clarification
on specific issues or to probe further on matters of concern; a full written
report is also received from the Investment Manager at each quarterly meeting.
In light of these reports, the Board gives direction to the Investment Manager
with regard to the Company's investment objectives and guidelines. Within these
established guidelines, the Investment Manager takes decisions as to the
purchase and sale of individual investments.
There is an agreed procedure for Directors, in the furtherance of their duties,
to take independent professional advice if necessary at the Company's expense.
The Directors have access to the advice and services of the Company Secretary,
through its appointed representative, who is responsible to the Board for
ensuring that Board procedures are followed.
Performance Evaluation
Since the year-end the performance of the Board, committees and individual
Directors (including each Director's independence) was evaluated through a
formal assessment process led by the Chairman. This involved the circulation of
a Board effectiveness checklist, tailored to suit the nature of the Company,
followed by discussions between the Chairman and each of the Directors. The
performance of the Chairman was evaluated by the other Directors under the
leadership of David Hunt.
Conflicts of Interest
It is a statutory requirement that a Director must avoid a situation in which
he or she has, or can have, a direct or indirect interest that conflicts, or
possibly may conflict, with the Company's interests (a "situational conflict").
It is the responsibility of each individual Director to avoid an unauthorised
conflict situation arising. He or she must request authorisation from the Board
as soon as he or she becomes aware of the possibility of a situational conflict
arising.
The Board is responsible for considering Directors' requests for authorisation
of situational conflicts and for deciding whether they should be authorised.
The factors to be considered will include whether the situational conflict
could prevent the Director from performing his or her duties, whether it has,
or could have, any impact on the Company and whether it could be regarded as
likely to affect the judgment and/or actions of the Director in question. When
the Board is deciding whether to authorise a conflict or potential conflict,
only Directors who have no interest in the matter being considered are able to
take the relevant decision, and in taking the decision the Directors must act
in a way they consider, in good faith, will be most likely to promote the
Company's success. The Directors are able to impose limits or conditions when
giving authorisation if they think this is appropriate in the circumstances.
Corporate Governance.. Continued
A register of conflicts is maintained by the Company Secretary and is reviewed
at quarterly Board meetings, to ensure that any authorised conflicts remain
appropriate. Directors are required to confirm at these meetings whether there
has been any change to their position.
The Directors must also comply with the statutory rules requiring company
directors to declare any interest in an actual or proposed transaction or
arrangement with the Company.
Committees of the Board
During the year the Board delegated certain responsibilities and functions to
committees. In line with the AIC Code, the Nominations and Remuneration
function is carried out by the full Board under the Chairmanship of the
Chairman of the Company, Anthony Townsend. The Audit and Management Engagement
Committees continue in operation and copies of the full Terms of Reference,
which clearly define the responsibilities of each Committee, can be obtained
from the Company Secretary, will be available at the Annual General Meeting and
can be found on the Company's website on www.finsburygt.com and via the website
of the Manager at www.frostrow.com. The Audit Committee is chaired by David
Hunt. All Directors of the Company, including the Chairman of the Company, are
members of this Committee to enable them to be kept fully informed of any
issues that may arise. The Directors believe that Mr Hunt, a Chartered
Accountant, has relevant financial knowledge and experience to enable him to
chair this Committee effectively. The Management Engagement Committee is
chaired by the Chairman of the Company, Anthony Townsend. Again, all Directors
of the Company are members of this Committee to enable them to be kept fully
informed of any issues that may arise.
The table below details the number of Board and Committee meetings attended by
each Director. During the year there were five Board meetings, two Audit
Committee meetings and one meeting of the Management Engagement Committee.
Audit Committee
The Company's Audit Committee meets at least twice per year. The Audit
Committee is responsible for the review of the Annual Report and the Half Year
Report, the nature and scope of the external audit and the findings thereof and
the terms of appointment of the Auditors, including their remuneration and the
provision of any non-audit services by them.
The Audit Committee reviews the need for non-audit services and authorises such
on a case by case basis having given consideration to the cost effectiveness of
the services and the independence and objectivity of the auditors.
The Audit Committee meets representatives of the Manager and the Investment
Manager and their Compliance Officers who report as to the proper conduct of
business in accordance with the regulatory environment in which both the
Company, the Manager and the Investment Manager operate. The Company's external
Auditor also attends the Audit Committee at the Audit Committee's request and
reports on its work procedures, the quality and effectiveness of the Company's
accounting records and its findings in relation to the Company's statutory
audit. The Committee meets with the external Auditor, without representatives
of the Manager and the Investment Manager being present, at least once a year.
Management Engagement Committee
The Management Engagement Committee meets at least once per year. The
Management Engagement Committee is responsible for the regular review of the
terms of the management and investment management agreements with, and the
performance of, the Manager and Investment Manager and also the Company's other
service providers. The Committee last met in September 2012, at which time it
was agreed that no amendments to the agreements were required. The agreements
shall continue to be reviewed on a periodic basis as necessary.
The table below details the number of Board and Committee meetings attended by
each Director. During the year there were five Board meetings, three Audit
Committee meetings and one meeting of the Management Engagement Committee.
Management
Type and number of Audit Engagement
meetings held in the year Board Committee Committee
to 30 September 2012 (5) (3) (1)
Anthony Townsend 5 3 1
John Allard 5 3 1
Neil Collins 4 3 -
David Hunt 4 2 -
Vanessa Renwick 5 3 1
Giles Warman 5 3 1
Other ad hoc meetings of the Board and Committees are held in connection with
specific events as and when necessary. All of the Directors attended the Annual
General Meeting held on 18 January 2012.
Corporate Governance.. Continued
Board Diversity
The Company welcomes the objectives of the Davies Report to improve the
performance of corporate boards by encouraging the appointment of the best
people from a range of differing perspectives and backgrounds. The Company
recognises the benefits of diversity on the Board, including gender, and takes
this into account in its Board appointments. The Company is committed to
ensuring that any director search process actively seeks persons with the right
qualifications so that appointments can be made, on the basis of merit, against
objective criteria from a diverse selection of candidates. To this end the
Board will continue to dedicate time to consider diversity during any director
search process.
Internal Controls
Risk assessment and the review of internal controls are undertaken by the Board
in the context of the Company's overall investment objective. The review covers
the key business, operational, compliance and financial risks facing the
Company. In arriving at its judgement of what risks the Company faces, the
Board has considered the Company's operations in the light of the following
factors:
the nature and extent of risks which it regards as acceptable for the Company
to bear within its overall business objective;
the threat of such risks becoming a reality; and
the Company's ability to reduce the incidence and impact of risk on its
performance.
Against this background, the Board has split the review of risk and associated
controls into five sections reflecting the nature of the risks being addressed.
These sections are as follows:
corporate strategy;
investment activity;
published information, compliance with laws and regulations;
service providers; and
financial activity.
The Company, which has outsourced all its activities, has obtained assurances
and information from its various service providers relating to their internal
systems and controls to enable the Board to make an appropriate risk and
control assessment, including the following:
details of the control environment in operation;
identification and evaluation of risks and control objectives;
review of communication methods and procedures; and
assessment of the control procedures.
The key procedures which have been established to provide internal financial
controls are as follows:
investment management is provided by Lindsell Train. The Board is responsible
for setting the overall investment policy and monitors the actions of the
Investment Manager at regular Board meetings;
company secretarial, administration and marketing duties for the Company are
performed by Frostrow;
custody of assets is undertaken by The Bank of New York Mellon;
the duties of Investment Manager, Manager and the Custodian are segregated. The
procedures of the individual parties are designed to complement one another;
the Board clearly defines the duties and responsibilities of their agents and
advisers. The appointment of agents and advisers to the Company is conducted by
the Board after consideration of the quality of the parties involved; the Board
monitors their ongoing performance and contractual arrangements;
mandates for authorisation of investment transactions and expense payments are
set by the Board; and
the Board reviews financial information produced by the Investment Manager and
the Manager in detail on a regular basis.
All of the Company's management functions are performed by third parties whose
internal controls are reviewed by the Board or on its behalf by Frostrow.
In accordance with guidance issued to directors of listed companies, the
Directors confirm that they have carried out a review of the effectiveness of
the system of risk management and internal financial control during the year,
through the procedures set out above.
Corporate Governance.. Continued
Relations with Shareholders
Accordingly, the Board reviews the shareholder register at each Board meeting;
the Company has regular contact with its institutional shareholders
particularly through the Manager. The Board supports the principle that the
Annual General Meeting be used to communicate with private investors.
Accordingly, steps have been taken to ensure that the Board develops an
understanding of the views of the major shareholders about the Company. The
full Board attends the Annual General Meeting under the Chairmanship of the
Chairman of the Board. Details of proxy votes received in respect of each
resolution are made available to shareholders at the meeting and are also
published on the Company's website at www.finsburygt.com.
Representatives from the Investment Manager attend the Annual General Meeting
and give a presentation on investment matters to those present. The Company has
adopted a nominee share code.
The Board receives marketing and public relations reports from the Manager to
whom the marketing function has been delegated. The Board reviews and considers
the marketing plans of the Manager on a regular basis.
The Annual and Half Year Reports, the Interim Management Statements and a
monthly fact sheet are available to all shareholders. The Board considers the
format of the Annual and Half Year Reports so as to ensure they are useful to
all shareholders and others taking an interest in the Company. In accordance
with best practice, the Annual Report, including the Notice of the Annual
General Meeting, is sent to shareholders at least 20 working days before the
meeting. Separate resolutions are proposed for substantive issues.
Shareholders wishing to communicate with the Chairman, the Senior Independent
Director or any other member of the Board may do so by writing to the Company
Secretary.
Proxy Voting and Stewardship
The Financial Reporting Council (`FRC') published the revised UK Stewardship
Code (the `Code') for institutional shareholders on 1 October 2012. The purpose
of the Code is to improve the quality of engagement between institutional
investors and companies to help enhance long-term returns to shareholders and
assist institutional investors with the exercise of their governance
responsibilities. The FRC is encouraging institutional investors to make a
statement of their commitment to the Code.
The Board has delegated responsibility for monitoring the activities of
portfolio companies to the Investment Manager. The Board has reviewed and
accepts the Investment Manager's Corporate Governance Principles, which may be
found on their website, at www.lindselltrain.com. These Principles set out the
Investment Manager's framework on corporate governance, proxy voting and
shareholder engagement in relation to the companies in which the Investment
Manager has invested or is considering investing. The Board has also reviewed
the Investment Manager's Disclosure Response to the UK Stewardship Code, which
also appears on the Investment Manager's website given above.
The Investment Manager is responsible for reviewing, on a regular basis, the
publications produced by the portfolio companies and also for attending company
meetings. The Investment Manager, in the absence of explicit instruction from
the Board is empowered to use discretion in the exercise of the Company's
voting rights.
The Board recognises and supports the Investment Manager's policy of active
engagement with investee companies and the voting of all of the shares held by
the Company. The Board receives from the Investment Manager regular reports on
the exercise by the Investment Manager of the Company's voting rights and
discusses with the Investment Manager any issues arising. It is the Board's
view that having an active voting policy and a process for the monitoring by
the Board of the Manager's exercise of those votes, especially in relation to
controversial issues, aids the efficient exercise of the Company's governance
responsibilities.
Accountability and Audit
The Board has delegated contractually to external agencies, including the
Manager and the Investment Manager, the management of the portfolio, custodial
services (which includes the safeguarding of the Company's assets), the day to
day marketing, accounting administration, company secretarial 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 Board receives and considers regular reports
from the Manager and ad hoc reports and information are supplied to the Board
as required.
Nominee Share Code
Where shares are held in a nominee company name, where the beneficial owner of
the shares is unable to vote in person, the Company nevertheless undertakes:
to provide the nominee company with multiple copies of shareholder
communications, so long as an indication of quantities has been provided in
advance;
Corporate Governance.. Continued
to allow investors holding shares through a nominee company to attend general
meetings, provided the correct authority from the nominee company is available;
and
that investors in the Alliance Trust Savings Scheme or ISA are automatically
sent shareholder communications, including details of general meetings,
together with a form of direction to facilitate voting and to seek authority to
attend.
Nominee companies are encouraged to provide the necessary authority to
underlying shareholders to attend the Company's general meetings.
By order of the Board
Frostrow Capital LLP
Company Secretary
11 December 2012
Directors' Remuneration Report
for the year ended 30 September 2012
The Board has prepared this report, in accordance with the requirements of
Schedule 8 to The Large and Medium Sized Companies and Groups (Accounts and
Reports) Regulations 2008. An ordinary resolution for the approval of this
report will be put to the members at the forthcoming Annual General Meeting.
The law requires your Company's auditors to audit certain of the disclosures
provided. Where disclosures have been audited, they are indicated as such. The
auditors' opinion is included in their report.
Policy on Directors' Fees
The Company follows the recommendations of the AIC Code that Directors'
remuneration should reflect their duties, responsibilities and the value of
their time spent. The Board's policy is that the remuneration of the Directors
should reflect the experience of the Board as a whole, and is determined with
reference to comparable organisations and appointments. There are no
performance conditions attaching to the remuneration of the Directors as the
Board does not believe that this is appropriate for non-executive Directors. It
is intended that this policy will continue for the year ending 30 September
2013 and for subsequent financial years.
The fees for the Directors are determined within the limits set out in the
Company's Articles of Association, the maximum aggregate amount currently being
£200,000 per annum, and they are not eligible for bonuses, pension benefits,
share options, long-term incentive schemes or other benefits.
Directors' Service Contracts
It is the Board's policy that none of the Directors has a service contract. The
terms of their appointment provide that Directors shall retire and be subject
to election at the first annual general meeting after their appointment and to
re-election annually thereafter. The terms also provide that a Director may be
removed without notice and that compensation will not be due on leaving office.
Your Company's Performance
The law requires a line graph be included in the Directors' Remuneration Report
showing total shareholder return for each of the financial years in the
relevant period. The graph set out below compares, on a cumulative basis, the
total return (assuming all dividends are reinvested) to shareholders compared
to the total shareholder return on a notional investment made up of shares of
the same kind and number as those by reference to which the FTSE All-Share
Index (total return) (the Company's stated benchmark) is calculated.
The Board, while fulfilling the function of a Remuneration Committee, reviews
the level of remuneration on an annual basis by reference to the activities of
the Company and comparison with other companies of a similar structure and
size.
Directors' Emoluments for the Year (audited)
The Directors who served in the year received the Fees Fees
following emoluments in the form of fees:
2012 2011
Anthony Townsend (Chairman) £30,000 £27,500
John Allard £20,000 £18,000
Neil Collins £20,000 £18,000
David Hunt* £23,000 £21,000
Vanessa Renwick £20,000 £18,000
Giles Warman £20,000 £18,000
£133,000 £120,500
*Chairman of the Audit Committee and Senior Independent
Director
Approval
The Directors' Remuneration Report was approved by the Board of Directors on 11
December 2012 and signed on its behalf by Anthony Townsend
Chairman
Independent Auditor's Report to the Members ofFinsbury Growth & Income Trust
PLC
We have audited the financial statements of Finsbury Growth & Income Trust PLC
for the year ended 30 September 2012 which comprise the Income Statement, the
Reconciliation of Movements in Shareholders' Funds, the Balance Sheet, the Cash
Flow Statement and the related notes. The financial reporting framework that
has been applied in their preparation is applicable law and United Kingdom
Accounting Standards (United Kingdom Generally Accepted Accounting Practice).
This report is made solely to the company's members, as a body, in accordance
with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been
undertaken so that we might state to the company's members those matters we are
required to state to them in an auditor's report and for no other purpose. To
the fullest extent permitted by law, we do not accept or assume responsibility
to anyone other than the company and the company's members as a body, for our
audit work, for this report, or for the opinions we have formed.
Respective responsibilities of directors and auditor
As explained more fully in the Statement of Directors Responsibilities, the
Directors are responsible for the preparation of the financial statements and
for being satisfied that they give a true and fair view. Our responsibility is
to audit and express an opinion on the financial statements in accordance with
applicable law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Auditing Practices Board's (APB's)
Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on
the APB's website at www.frc.org. uk/apb/scope/private.cfm.
Opinion on financial statements
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 30
September 2012 and of its return for the year then ended;
have been properly prepared in accordance with United Kingdom Generally
Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act
2006.
Opinion on other matters prescribed by the Companies Act 2006
In our opinion:
the part of the Directors' Remuneration Report to be audited has been properly
prepared in accordance with the Companies Act 2006; and
the information given in the Report of the Directors for the financial year for
which the financial statements are prepared is consistent with the financial
statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if, in our
opinion:
adequate accounting records have not been kept, or returns adequate for our
audit have not been received from branches not visited by us; or
the financial statements and the part of the Directors' Remuneration Report to
be audited are not in agreement with the accounting records and returns; or
certain disclosures of Directors' remuneration specified by law are not made;
or
we have not received all the information and explanations we require for our
audit.
Under the Listing Rules, we are required to review:
the Directors' statement, in relation to going concern;
the part of the Corporate Governance Statement relating to the company's
compliance with the nine provisions of the UK Corporate Governance Code
specified for our review; and
certain elements of the report to the shareholders by the Board on Directors'
remuneration.
Julian Bartlett
Senior Statutory Auditor
for and on behalf of Grant Thornton UK LLP
Statutory Auditor, Chartered Accountants
London 11 December 2012
Income Statement
for the year ended 30 September 2012
Revenue Capital 2012 Revenue Capital 2011
Total Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Gains on investments 9 - 37,685 37,685 - 4,344 4,344
designated at fair value
through profit or loss
Exchange difference - (39) (39) - (1) (1)
Income 2 8,083 - 8,083 6,299 - 6,299
Investment management and 3 (479) (974) (1,453) (390) (793) (1,183)
management fees
Other expenses 4 (543) (5) (548) (458) (4) (462)
Return on ordinary 7,061 36,667 43,728 5,451 3,546 8,997
activities before finance
charges and taxation
Finance charges 5 (131) (267) (398) (98) (200) (298)
Return on ordinary 6,930 36,400 43,330 5,353 3,346 8,699
activities before
taxation
Taxation on ordinary 6 (138) - (138) (100) - (100)
activities
Return on ordinary 6,792 36,400 43,192 5,253 3,346 8,599
activities after taxation
Return per share 7 10.8p 58.0p 68.8p 9.7p 6.1p 15.8p
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.
Reconciliation of Movements in Shareholders'Funds
for the year ended 30 September 2012
Share Share Capital Special Capital Revenue Total
capital premium redemption reserve reserve reserve
account reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 30 September 2011 14,309 50,253 3,453 12,424 92,285 4,894 177,618
Net return from - - - - 36,400 6,792 43,192
ordinary activities
Second interim - - - - - (2,740) (2,740)
dividend (4.8p per
share) for the year
ended 30 September
2011
First interim dividend - - - - - (2,899) (2,899)
(4.6p per share) for
the year ended 30
September 2012
Issue of shares 2,833 36,321 - - - - 39,154
Cost of share issuance - (116) - - - - (116)
Year ended 30 17,142 86,458 3,453 12,424 128,685 6,047 254,209
September 2012
At 30 September 2010 13,237 37,213 3,453 12,424 88,939 4,324 159,590
Net return from - - - - 3,346 5,253 8,599
ordinary activities
Second interim - - - - - (2,330) (2,330)
dividend (4.4p per
share) for the year
ended 30 September
2010
First interim dividend - - - - - (2,353) (2,353)
(4.4p per share) for
the year ended 30
September 2011
Issue of shares 1,072 13,040 - - - - 14,112
Year ended 30 14,309 50,253 3,453 12,424 92,285 4,894 177,618
September 2011
Balance Sheet
as at 30 September 2012
Notes 2012 2011
£'000 £'000
Fixed assets
Investments designated at fair value 9 266,915 188,247
through profit or loss
Current assets
Debtors 10 2,343 1,145
Cash at bank 2,224 2,466
4,567 3,611
Current liabilities
Creditors (2,023) (690)
Bank loan (15,250) (13,550)
11 (17,273) (14,240)
Net current liabilities (12,706) (10,629)
Total net assets 254,209 177,618
Capital and reserves
Share capital 12 17,142 14,309
Share premium account 86,458 50,253
Capital redemption reserve 3,453 3,453
Special reserve 12,424 12,424
Capital reserve 13 128,685 92,285
Revenue reserve 6,047 4,894
Equity shareholders' funds 254,209 177,618
Net asset value per share 14 370.7p 310.3p
The financial statements were approved by the Board of Directors on 11 December
2012, and were signed on its behalf by:
Anthony Townsend Chairman
Cash Flow Statement
for the year ended 30 September 2012
Notes 2012 2011
£'000 £'000
Net cash inflow from operating 17 5,956 4,034
activities
Net cash outflow from servicing of (310) (350)
finance
Financial investment
Purchase of investments (42,666) (17,588)
Sale of investments 2,865 2,705
Net cash outflow from financial (39,801) (14,883)
investment
Equity dividends paid (5,639) (4,683)
Net cash outflow before financing (39,794) (15,882)
Financing
Shares issued 38,007 14,112
Drawdown of loans 1,700 2,850
Cost of share issuance (116) -
Net cash inflow from financing 39,591 16,962
(Decrease)/increase in cash 18 (203) 1,080
Reconciliation of net cash flow to
movement in net debt
(Decrease)/increase in cash resulting (203) 1,080
from cashflows
Increase in debt (1,700) (2,850)
Exchange movements (39) (1)
Movement in net debt (1,942) (1,771)
Net debt at 1 October 2011 (11,084) (9,313)
Net debt at 30 September 2012 18 (13,026) (11,084)
Notes to the Financial Statements
1. Accounting Policies
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 under the historical cost
convention, except for the measurement at fair value of investments, and in
accordance with UK Generally Accepted Accounting Practice (GAAP) and the
Statement of Recommended Practice (SORP) for "Financial Statements of
Investment Trust Companies and Venture Capital Trusts" issued by the
Association of Investment Companies dated January 2009.
b. Investments
As the entity's business is investing in financial assets with a view to
profiting from their total return in the form of dividends, interest or
increases in fair value, investments are designated at fair value through
profit or loss and are initially recognised at fair value. The entity 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 exchange on which they are quoted.
Unquoted investments are valued by the Directors using primary valuation
techniques, in accordance with IPEVCA guidelines.
Changes in the fair value of investments held at fair value through profit or
loss, and gains and losses on disposal are recognised in the Income Statement
as "gains or losses on investments designated at fair value through profit or
loss".
All purchases and sales of investments are accounted for on the trade date
basis.
The Company's policy is to expense transaction costs on acquisition through the
capital column of the Income Statement. The total of such expenses, showing the
total amounts included in disposals and acquisitions are disclosed in note 9,
as recommended by the SORP.
c. Dividend Payments
Dividends paid by the Company on its shares are recognised in the financial
statements in the period in which they are paid and are shown in the
Reconciliation of Movements in Shareholders' Funds.
d. Investment Income
Dividends receivable on equity shares are recognised on the ex-dividend date.
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.
LLP profit share is recognised in the financial statements when the entitlement
to the income is established.
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 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, in the form of capital gains and income from the
Company's portfolio, 67% of the investment management fee, management fee and
finance costs are taken to the capital reserve;
3. performance fees are charged 100% to capital.
f. Taxation
The payment of taxation is deferred or accelerated because of timing
differences between the treatment of certain items for accounting and taxation
purposes. Full provision for deferred taxation is made under the liability
method, without discounting, on all timing differences that have arisen, but
not reversed by the balance sheet date, unless such provision is not permitted
by Financial Reporting Standard 19.
Notes to the Financial Statements…Continued
Any tax relief obtained in respect of management and investment management
fees, finance costs and other capital expenses charged or allocated to the
capital column of the Income Statement is reflected in the Capital Reserve -
realised and a corresponding amount is charged against the revenue column of
the Income Statement. The tax relief is the amount by which corporation tax
payable is reduced as a result of these capital expenses.
g. Capital Reserve
The following are charged to the capital column of the Income Statement and
transferred to this reserve:
- Gains and losses on the disposal of investments;
- Exchange differences of a capital nature;
- Expenses, together with the related taxation effect, in accordance with the
above policies; and - Increase and decrease in the valuation of investments
held at the year end.
h. Cash at bank
Cash at bank comprises cash in hand and on demand deposits.
2. Income
2012 2011
£'000 £'000
Income from investments
Franked investment income
- dividends 6,901 5,628
Unfranked investment income
- limited liability partnership profit-share 149 105
- overseas dividends 1,033 566
Total income 8,083 6,299
3. Investment Management and Management Fees
Revenue Capital Total Revenue Capital Total
2012 2012 2012 2011 2011 2011
£'000 £'000 £'000 £'000 £'000 £'000
Investment management fee 322 656 978 259 527 786
Management fee 131 265 396 110 222 332
VAT on management fees 26 53 79 21 44 65
Total fees 479 974 1,453 390 793 1,183
4. Other Expenses
Revenue Capital Total Revenue Capital Total
2012 2012 2012 2011 2011 2011
£'000 £'000 £'000 £'000 £'000 £'000
Directors' fees 133 - 133 121 - 121
Fees payable to the 23 - 23 22 - 22
Company's auditor -
statutory annual audit
Fees payable to the 4 - 4 3 - 3
Company's auditor - audit
related assurance
services
Fees payable to the 3 - 3 3 - 3
Company's auditor -
taxation compliance
services
Printing 40 - 40 31 - 31
Bank and custody fees 31 - 31 21 - 21
Marketing costs 65 - 65 45 - 45
Other expenses 244 5 249 212 4 216
Total expenses 543 5 548 458 4 462
All of the above expenses include VAT where applicable, with the exception of
the fees paid to the Company's auditor, which are shown net of VAT. Details of
the amounts paid to Directors are included in the Directors' Remuneration
Report.
Notes to the Financial Statements… Continued
5. Finance Charges
Revenue Capital Total Revenue Capital Total
2012 2012 2012 2011 2011 2011
£'000 £'000 £'000 £'000 £'000 £'000
On bank loans wholly 113 229 342 85 173 258
repayable within five
years
Arrangement fees 8 17 25 13 27 40
Loan facility expenses 10 21 31 - - -
131 267 398 98 200 298
6. Taxation on Ordinary Activities
Revenue Capital Total Revenue Capital Total
2012 2012 2012 2011 2011 2011
£'000 £'000 £'000 £'000 £'000 £'000
a. Analysis of charge for 138 - 138 100 - 100
the year
Irrecoverable overseas tax
Revenue Capital Total Revenue Capital Total
2012 2012 2012 2011 2011 2011
£'000 £'000 £'000 £'000 £'000 £'000
b. Factors affecting tax
charge for year
Return on ordinary 6,930 36,400 43,330 5,353 3,346 8,699
activities before taxation
Return on ordinary 1,732 9,100 10,832 1,445 903 2,348
activities
multiplied by corporation
tax of 25%^ (2011: 27%)
Effects of:
Overseas tax 159 - 159 100 - 100
Overseas tax recoverable (21) - (21) - - -
Franked investment income (1,725) - (1,725) (1,519) - (1,519)
not subject to corporation
tax
Overseas dividends not (258) - (258) (153) - (153)
taxable
Excess expenses unutilised 251 - 251 223 - 223
Amounts charged to capital - 311 311 - 270 270
Expenses not deductible - 10 10 4 - 4
for tax purposes
Capital return not subject - (9,421) (9,421) - (1,173) (1,173)
to tax*
Current tax charge for the 138 - 138 100 - 100
year (note 6(a))
^Under the Finance Act 2012, the rate of corporation tax was lowered to 24%
from 26%. An average rate of 25% was applicable for the year ended 30 September
2012. *Gains on investments are not subject to corporation tax within an
investment trust company.
c. Provision for deferred taxation
No provision for deferred taxation has been made in the current or prior year.
At 30 September 2012, the Company has not recognised a deferred tax asset of £
8,869,000 (2011: £9,228,000) arising principally as a result of excess
management and loan expenses. It is not anticipated that this asset will be
utilised in the foreseeable future.
Deferred tax is not provided on unrealised capital gains or losses arising on
investments because the Company meets and intends to continue meeting the
conditions for approval as an investment trust.
Notes to the Financial Statements… Continued
7. Return per Share
Revenue Capital Total Revenue Capital Total
2012 2012 2012 2011 2011 2011
Return per Share 10.8p 58.0p 68.8p 9.7p 6.1p 15.8p
The total return per share is based on the total return attributable to equity
shareholders of £43,192,000 (2011: £8,599,000), and on 62,788,996 (2011:
54,352,887) shares, being the weighted average number of shares in issue during
the year.
Revenue return per share is based on the net revenue on ordinary activities
after taxation of £6,792,000 (2011: £5,253,000). Capital return per share is
based on the net capital profit for the year of £36,400,000 (2011: £3,346,000).
8.Dividends
Ex-Div Register Payment 2012 2011
Date Date Date £'000 £'000
2012: 28 March 30 March 2012 4 May 2012 2,899 2,353
2012
First interim dividend
of 4.6p per share of
(2011: 4.4p)
Second interim dividend 3 October 5 October 2 November 3,579 2,740
2012 2012 2012
of 5.2p per share
(2011: 4.8p)
The second interim dividend of 5.2p per share (2011: 4.8p) 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 total dividend payable in respect of the financial year which forms the
basis of Section 1158 of the Corporation Tax Act 2010 are set out below:
2012
£'000
Revenue available for distribution by way of 6,792
dividend for the year
2012: First interim dividend of 4.6p per (2,899)
share paid on 4 May 2012
2012: Second interim dividend of 5.2p per (3,579)
share paid on 2 November 2012
Net addition to revenue reserves 314
Notes to the Financial Statements… Continued
9. Investments
Analysis of portfolio movements 2012 2011
£'000 £'000
Opening book cost 127,437 112,305
Opening investment holding gains 60,810 56,209
Valuation at 30 September 2011 188,247 168,514
Movements in the year:
Purchases at cost 43,848 18,094
Sales
- proceeds (2,865) (2,705)
- Loss on sales (1,791) (257)
Net movement in investment holding gains 39,476 4,601
Valuation at 30 September 2012 266,915 188,247
Closing book cost 166,629 127,437
Investment holding gains at 30 September 2012 100,286 60,810
Valuation at 30 September 2012 266,915 188,247
Investment holding gains
2012 2011
£'000 £'000
Losses based on historical cost (1,791) (257)
Amounts recognised as investment holding losses in 2,583 291
previous year
Gain based on carrying values at previous year's 792 34
balance sheet date
Net movement in investment holding gains in the 36,893 4,310
year
Gains on investments during the year 37,685 4,344
Transaction costs on the acquisition and sale of investments totalled £211,000
and £Nil respectively (2011: £116,000 and £4,000) and are included within the
gains/(losses) on investments within the Income Statement.
10.Debtors
2012 2011
£'000 £'000
Prepayments and accrued income 724 694
Amount due from broker in respect of shares issued by the 1,619 451
Company
2,343 1,145
11.Creditors
Amounts falling due within one year
2012 2011
£'000 £'000
Amounts due to brokers 1,688 506
Bank loan with Scotiabank Europe PLC* 15,250 13,550
Other creditors and accruals 335 184
17,273 14,240
* Further details on the loan facility can be found in note 16.
Notes to the Financial Statements… Continued
12.Share Capital
2012 2011
£'000 £'000
Authorised:
Shares of 25p 25,000 25,000
Allotted, issued and fully paid:
68,568,381 (2011: 57,237,423) shares of 25p 17,142 14,309
each
During the year 11,330,958 new shares were issued for consideration of £
39,154,000 being an average price of 345.5p per share and at an average premium
of 0.5% to the cum income net asset value per share at the time of issue. At
the year-end there was a debtor of £1,598,000 (2011: £451,000) in relation to
shares issued but not settled until after the year-end. At the year-end the
Company held no shares in treasury (2011: Nil).
13.Capital Reserve
Capital
Reserve
Capital Investment
Reserves Holding
Gains
Realised Unrealised Total
£'000 £'000 £'000
At 1 October 2011 31,475 60,810 92,285
Transfer on disposal of investments (2,583) 2,583 -
Net gains on investments 792 36,893 37,685
Expenses charged to capital (1,246) - (1,246)
Foreign currency exchange difference (39) - (39)
At 30 September 2012 28,399 100,286 128,685
Under the terms of the Company's Articles of Association, sums within "Capital
Reserves" are available for distribution only by way of redemption or purchase
of any of the Company's own shares.
14.Net Asset Value per Share
The net asset value per share is based on net assets of £254,209,000 (2011: £
177,618,000) and on 68,568,381 (2011: 57,237,423) (excluding treasury shares)
shares in issue at the year end. As at 30 September 2012 the Company held no
shares in treasury (2011: Nil).
15.Related Parties
Details of the relationship between the Company and Lindsell Train Limited are
disclosed in the Report of the Directors. During the year ended 30 September
2012, Lindsell Train Limited received £978,000 (2011: £786,000) in respect of
Investment Management fees, of which £95,000 (2011: £66,000) was outstanding at
the year end.
The Company has an investment in The Lindsell Train Investment Trust plc with a
book cost of £1,000,000 (2011: £1,000,000) and a fair value of £2,770,000
(2011: £2,130,000) as at 30 September 2012. The Lindsell Train Investment Trust
plc is managed by the Company's Investment Manager.
16. Risk Management
As an investment trust, 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 profits available for distribution.
The Company's financial instruments comprise equity and fixed rate investments,
cash balances, borrowings and debtors and creditors that arise directly from
its operations.
The principal risks inherent in managing the Company's financial instruments
are market risk, liquidity risk and credit risk. These risks and the Directors'
approach to the management of them are set out in the Report of the Directors.
Notes to the Financial Statements… Continued
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. Further information
regarding market price risk can be found in the Report of the Directors.
At 30 September 2012, the fair value of the Company's assets exposed to market
price risk was £266,915,000 (2011: £188,247,000). If the fair value of the
Company's investments at the balance sheet 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 2012 would have
increased or decreased by £26,692,000 or 38.9p per share (2011: £18,825,000 or
32.9p per share).
No derivatives or hedging instruments are 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 at
bank and on deposit
the fair value of investments of fixed rate securities
The Company's main exposure to interest rate risk during the year ended 30
September 2012 was through its £25,000,000 secured multicurrency committed
revolving credit facility with Scotiabank Europe PLC. Borrowings varied
throughout the year as part of the Board's endorsed policy. Borrowings at the
year-end amounted to £15,250,000 (2011: £13,550,000) at an interest rate of
2.25% (LIBOR plus 1.35%).
If the above level of borrowing was maintained for a year a 1% increase/
decrease in LIBOR would decrease/increase the revenue return by £50,000, would
decrease/increase the capital return by £102,000, and would decrease/increase
the net assets by £152,000 (2011: decrease/increase the revenue return by £
45,000, decrease/increase the capital return by £91,000 and decrease/increase
the net assets by £136,000).
The weighted average interest rate, during the year, on borrowings under the
above mentioned revolving credit facility provided by Scotiabank Europe PLC was
2.34% (2011: 2.05%).
At the year-end, the Company's financial assets and liabilities exposed to
interest rate risk were as follows:
2012 2011
Within Within
one year one year
£'000 £'000
Exposure to floating rates:
Cash at bank 2,224 2,466
Creditors: amount falling due within one year
- borrowings under the loan facility 15,250 13,550
Exposure to fixed rates:
Investments designated at fair value through 54 2,132
profit or loss#
# Comprises holdings Celtic 6% cum preference (2011: Lloyds Banking Group 9.25%
non cum preference and Celtic 6% cum preference).
Currency risk
The financial statements are presented in sterling, which is the functional
currency and presentational currency of the Company. At 30 September 2012, the
Company's investments, with the exception of four, were priced in sterling. The
four exceptions, Thomson Reuters, listed in Canada, Heineken, listed in the
Netherlands, and Dr Pepper Snapple and Kraft Foods, both listed in the United
States, represent 15.4% of the portfolio.
The Investment Manager and 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 Investment Manager
takes account of
Notes to the Financial Statements… Continued
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 the time that the income is included in the
financial statements and its receipt.
At 30 September 2012 the Company held £15,293,000 (2011: £13,239,000) of
investments denominated in U.S. dollars and £4,705,000 (2011: £3,438,000) in
Canadian dollars and £21,118,000 (2011: £1,888,000) Euros.
The following table details the sensitivity of the Company's capital or revenue
return after taxation for the year to a 5% increase and decrease in sterling
against foreign currency (2011: 5% increase and decrease).
The above percentages have been determined based on market volatility in
exchange rates over the previous twelve months. The analysis is based on the
Company's foreign currency financial instruments held at each year end date.
If sterling had weakened against the foreign currencies, as stated above, this
would have had the following effect:
2012 2012 2012 2011 2011 2011
US$ Euro US$ Euro
Canadian$ Canadian$
£'000 £'000 £'000 £'000 £'000 £'000
Increase in revenue return 5 - 1 5 - -
Increase in capital return 805 237 1,099 697 181 73
Total return after tax/ 810 237 1,100 702 181 73
increase in shareholders'
funds
If sterling had strengthened against the foreign currency as stated overleaf,
this would have had the following effect:
2012 2012 2012 2011 2011 2011
US$ Euro US$ Euro
Canadian$ Canadian$
£'000 £'000 £'000 £'000 £'000 £'000
Decrease in revenue return (4) - (1) (5) - -
Decrease in capital return (728) (214) (630) (164) (66)
Total return after tax/ (732) (214) (635) (164) (66)
decrease in shareholders'
funds
Credit Risk
Credit risk is the Company's exposure to financial loss from the failure of a
counterparty to deliver securities or cash for acquisition or disposals of
investments which could result in the Company suffering a financial loss.
Credit risk is managed as follows:
- Investment transactions are carried out only with brokers whose
creditworthiness is reviewed by the Investment Manager.
- Transactions are ordinarily 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 Investment
Manager and the 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 Aa3 (Moodys) and A+ (S&P).
Scotiabank Europe PLC, the provider of the Company's loan facility, has
established a first fixed and floating charge over the assets of the Company as
security against any funds drawn down by the Company under the loan facility.
As at 30 September 2012, the exposure to credit risk was £4,621,000 (2011: £
5,743,000), comprising:
2012 2011
£'000 £'000
Fixed assets:
Non-equity investments (preference shares) 54 2,132
Current assets:
Other receivables (amounts due from brokers, dividends 2,343 1,145
and interest receivable)
Cash at bank 2,224 2,466
Total exposure to credit risk 4,621 5,743
Notes to the Financial Statements… Continued
Liquidity Risk
Liquidity Risk is the risk that the Company will encounter difficulty in
meeting obligations associated with financial liabilities.
Liquidity risk is not significant as the majority of the Company's assets are
investments in quoted equities and other quoted securities that are readily
realisable, and are significantly in excess of its financial liabilities.
Fair value of financial assets and financial liabilities
Financial assets and financial liabilities are either carried in the balance
sheet 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
relevant asset as follows:
Level 1 - valued using quoted prices unadjusted in active markets for identical
assets or liabilities.
Level 2 - valued by reference to valuation techniques using observable inputs
for the asset or liability other than quoted prices included within Level 1.
Level 3 - valued by reference to valuation techniques using inputs that are not
based on observable market data for the asset or liability.
The table below sets out fair value measurements of financial instruments as at
the end of the reporting period by the level in the fair value hierarchy into
which the fair value measurement is categorised.
Financial assets at fair value Level 1 Level 2 Level 3 Total
through profit or loss
at 30 September 2012 £'000 £'000 £'000 £'000
Equity investments 266,391 - 470 266,861
Preference share investments 54 - - 54
266,445 - 470 266,915
Financial assets at fair value Level 1 Level 2 Level 3 Total
through profit or loss
at 30 September 2011 £'000 £'000 £'000 £'000
Equity investments 185,645 - 470 186,115
Preference share investments 2,132 - - 2,132
187,777 - 470 188,247
The valuation techniques used by the company are explained in the accounting
policies note.
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
2012 2011
£'000 £'000
Opening fair value 470 340
Total gains or losses included in gains on investments in
the Income Statement
- on assets held at the end of the year - 130
Closing fair value 470 470
Capital management objectives, policies and procedures
The structure of the Company's Capital is described in note 12 to the financial
statements and details of the Company's reserves are shown in the
Reconciliation of Movements in Shareholders' Funds. Details of the Company's
debt, representing 6.0% (2011: 7.6%) of net assets, can be found on the Balance
Sheet and in note 16.
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 capital and debt.
The Board, with the assistance of the Investment Manager and Manager, regularly
monitors and reviews the broad structure of the Company's capital. These
reviews include:
the level of gearing, set at limits between 5% and 25% of net assets, which
takes account of the Company's position and the views of the Board and the
Investment Manager on the market; and
Notes to the Financial Statements… Continued
the extent to which revenue reserves should be retained or utilised.
The Company's objectives, policies and procedures for managing capital are
unchanged from last year.
The Company is subject to an externally imposed capital requirement:
In order to be able to pay dividends out of profits available for distribution,
the Company has to be able to meet one of the two capital restriction tests
imposed on investment companies by company law.
There were no breaches by the Company, during the year, of the financial
covenants put in place by Scotiabank Europe PLC in respect of the committed
revolving credit facility provided to the Company.
These requirements are unchanged since last year and the Company has complied
with them at all times.
17.Reconciliation of Net Return Before Finance Charges and Taxation to Net Cash
Inflow from Operating Activities
2012 2011
£'000 £'000
Total return before finance charges and taxation 43,728 8,997
Less: capital return before finance charges and (36,667) (3,546)
taxation
Net revenue before finance charges and taxation 7,061 5,451
Increase in accrued income and prepayments (30) (83)
Increase in debtors - (451)
Increase in creditors 63 12
Taxation - irrecoverable overseas tax paid (159) (98)
Investment management and management fees charged to (974) (793)
capital
Other expenses charged to capital (5) (4)
Net cash inflow from operating activities 5,956 4,034
18. Analysis of Changes in Net Debt
At At
1 October Exchange 30
September
2011 Cashflow Movement 2012
£'000 £'000 £'000 £'000
Cash at bank 2,466 (203) (39) 2,224
Debt falling due within 1 year (13,550) (1,700) - (15,250)
Net debt (11,084) (1,903) (39) (13,026)
19.Substantial Interests
The Company holds interests in 3% or more of any class of capital in the
following entities:
% of issued
share
capital
or Limited
Liability
Fair Partnership
value
Company or Limited Liability Partnership Shares held £'000 interest
A.G. Barr 4,340,802 19,408 3.7
Frostrow Capital LLP (unquoted) - 470 10.0
Frostrow Capital LLP (unquoted) - 470 10.0
The Lindsell Train Investment Trust* 10,000 2,770 5.0
Marston's 6,244,565 7,131 3.7
Young & Co's Brewery 1,001,740 5,109 3.5
*Also managed by Lindsell Train Limited who receive an Investment Management
fee of 0.65% per annum of the company's adjusted market capitalisation.
Explanatory Notes of Principal Changes to theCompany's Articles of Association
Set out below is a summary of the main differences between the current and the
proposed new Articles of Association ("the Articles"). The principal changes in
the new Articles to be adopted at the Annual General Meeting to be held on
Wednesday, 30 January 2013 relate to:
Distribution of Capital Profits
The Company is no longer required to include a prohibition on distributing
capital profits in its Articles, following HM Government's reform of the tax
and company law rules affecting investment trusts. The Company has amended the
current Articles to remove this prohibition.
A copy of the current Articles and of the proposed new Articles marked up to
show the proposed amendments will be available for inspection at the offices of
Frostrow Capital LLP during normal business hours and will be available for
inspection at the Annual General Meeting, in each case until conclusion of the
meeting.
Directors' Fees
The new Articles have been updated to reflect the increase in the maximum
aggregate limit of directors' fees from £150,000 to £200,000 (exclusive of any
applicable VAT), approved at the Company's Annual General Meeting held on 18
January 2012.
Authorised Share Capital
The Companies Act 2006 abolished the requirement for companies to have an
authorised share capital, with effect from 1 October 2009. The Company is
therefore taking the opportunity to remove the upper limit of the Company's
share capital included in its current Articles.
Deletion of Provisions Formerly in the Memorandum of Association
Most of the provisions of the memorandum of association of a company
incorporated before 1 October 2009 are now deemed to form part of its articles
of association. Of these the Company is only required to retain in its articles
the statements that the liability of members is limited and that the company's
registered office is situated in Scotland. The Company is therefore taking this
opportunity to remove from its Articles of Association all those provisions
formerly in its Memorandum of Association which it is not required to retain.
In particular the clause setting out the objects of the Company is to be
removed so that the Company's objects will in future be wholly unrestricted.
Other Changes
Other technical changes have been made so that the Articles of Association
conform to the Companies Act 2006 and other legislation applicable to companies
and current best practices as currently in force.
Notice of the Annual General Meeting
Notice is hereby given that the Annual General Meeting of Finsbury Growth &
Income Trust PLC will be held at the Barber-Surgeons' Hall, Monkwell Square,
Wood Street, London EC2Y 5BL on Wednesday, 30 January 2013 at 12 noon, for the
following purposes:
Ordinary Business
1.To receive and consider the audited accounts and the Report of the Directors
for the year ended 30 September 2012.
2.To re-elect Anthony Townsend as a Director of the Company.
3.To re-elect John Allard as a Director of the Company.
4.To re-elect Neil Collins as a Director of the Company.
5.To re-elect David Hunt as a Director of the Company.
6.To re-elect Vanessa Renwick as a Director of the Company.
7.To re-elect Giles Warman as a Director of the Company.
8.To approve the Directors' Remuneration Report.
9.To reappoint Grant Thornton UK LLP as auditors of the Company and to
authorise the Directors to determine their remuneration.
Special Business
To consider, and if thought fit, pass the following resolutions of which
resolutions 11, 12, 13, 14 and 15 are proposed as special resolutions:
Authority to Allot Shares
10.THAT in substitution of all existing authorities the Directors be and are
hereby generally and unconditionally authorised in accordance with Section 551
of the Companies Act 2006 (the `Act') to exercise all powers of the Company to
allot relevant securities (within the meaning of Section 551 of the Act) up to
a maximum aggregate nominal amount of £1,782,584 being 10% of the issued share
capital at 11 December 2012 and representing 7,130,338 shares of 25p each in
the Company (or, if changed, the number representing 10% of the issued share
capital of the Company at the date at which this resolution is passed) provided
that this authority share expire at the conclusion of the Annual General
Meeting of the Company to be held in 2014 or 15 months from the date of passing
this resolution, whichever is the earlier, unless previously revoked, varied or
renewed, by the Company in general meeting and provided that the Company shall
be entitled to make, prior to the expiry of such authority, an offer or
agreement which would or might require relevant securities to be allotted after
such expiry and the Directors may allot relevant securities pursuant to such
offer or agreement as if the authority conferred hereby had not expired.
Disapplication of Pre-emption Rights
11.THAT in substitution of all existing powers (but in addition to any power
conferred on them by resolution 12 set out in the notice convening the Annual
General Meeting at which this resolution is proposed ("Notice of Annual General
Meeting")) the Directors be and are hereby generally empowered pursuant to
Section 570 of the Companies Act 2006 (the "Act") to allot equity securities
(within the meaning of Section 560 of the Act) for cash pursuant to the
authority conferred on them by resolution 10 set out in the Notice of Annual
General Meeting or otherwise as if Section 561(1) of the Act did not apply to
any such allotment:
a. pursuant to an offer of equity securities open for acceptance for a period
fixed by the Directors where the equity
securities respectively attributable to the interests of holders of shares of
25p each in the Company ("Shares") are proportionate (as nearly as may be) to
the respective numbers of Shares held by them but subject to such exclusions or
other arrangements in connection with the issue as the Directors may consider
necessary, appropriate or expedient to deal with equity securities representing
fractional entitlements or to deal with legal or practical problems arising in
any overseas territory, the requirements of any regulatory body or stock
exchange, or any other matter whatsoever; and
b. provided that (otherwise than pursuant to sub-paragraph (a) above) this
power shall be limited to the allotment of equity
securities up to an aggregate nominal value of £1,782,584, being 10% of the
issued share capital of the Company as at 11 December 2012 and representing
7,130,338 shares or, if changed, the number representing 10% of the issued
share capital of the Company at the date of the meeting at which this
resolution is passed, and provided further that (i) the number of equity
securities to which this power applies shall be reduced from time to time by
the number of treasury shares which are sold pursuant to any power conferred on
the Directors by resolution 12 set out in the Notice of Annual General Meeting
and (ii) no allotment of equity securities shall be made under this power which
would result in Shares being issued at a price which is less than the net asset
value per Share as at the latest practicable date before such allotment of
equity securities as determined by the Directors in their reasonable
discretion,
Notice of the Annual General Meeting… Continued
and such power shall expire at the conclusion of the next Annual General
Meeting of the Company after the passing of this resolution or 15 months from
the date of passing this resolution, whichever is earlier, unless previously
revoked, varied or renewed by the Company in general meeting and provided that
the Company shall be entitled to make, prior to the expiry of such authority,
an offer or agreement which would or might otherwise require equity securities
to be allotted after such expiry and the Directors may allot equity securities
pursuant to such offer or agreement as if the power conferred hereby had not
expired.
Treasury Shares
12. THAT in substitution of all existing powers (but in addition to any power
conferred on them by resolution 11 set out in the Notice of Annual General
Meeting) the Directors be and are hereby generally empowered pursuant to
Section 570 of the Companies Act 2006 (the "Act") to sell relevant shares
(within the meaning of Section 560 of the Act) if, immediately before the sale,
such shares are held by the Company as treasury shares (as defined in Section
724 of the Act ("treasury shares")), for cash as if Section 561(1) of the Act
did not apply to any such sale provided that:
a. where any treasury shares are sold pursuant to this power at a discount to
the then prevailing net asset value of ordinary
shares of 25p each in the Company ("Shares"), such discount must be (i) lower
than the discount to the net asset value per Share at which the Company
acquired the Shares which it then holds in treasury and (ii) not greater than
5% to the prevailing net asset value per Share at the latest practicable time
before such sale (and for this purpose the Directors shall be entitled to
determine in their reasonable discretion the discount to their net asset value
at which such Shares were acquired by the Company and the net asset value per
Share at the latest practicable time before such Shares are sold pursuant to
this power); and
b. this power shall be limited to the sale of relevant shares having an
aggregate nominal value of £1,782,584 being 10% of the issued share capital of
the Company as at 11 December 2012 and representing 7,130,338 Shares or, if
changed, the number representing 10% of the issued share capital of the Company
at the date of the meeting at which this resolution is passed, and provided
further that the number of relevant shares to which power applies shall be
reduced from time to time by the number of Shares which are allotted for cash
as if Section 561(1) of the Act did not apply pursuant to the power conferred
on the Directors by resolution 11 set out in the Notice of Annual General
Meeting,
and such power shall expire at the conclusion of the next Annual General
Meeting of the Company after the passing of this resolution or 15 months from
the date of passing this resolution, whichever is earlier, unless previously
revoked, varied or renewed by the Company in general meeting and provided that
the Company shall be entitled to make, prior to the expiry of such authority,
an offer or agreement which would or might otherwise require treasury shares to
be sold after such expiry and the Directors may sell treasury shares pursuant
to such offer or agreement as if the power conferred hereby had not expired.
Authority to Repurchase Shares
13. THAT the Company be and is hereby generally and unconditionally authorised
in accordance with Section 701 of the Companies Act 2006 (the "Act") to make
one or more market purchases (within the meaning of Section 693(4) of the Act)
of ordinary shares of 25 pence each in the capital of the Company ("Shares")
(either for retention as treasury shares for future reissue, resale, transfer
or cancellation) provided that:
the maximum aggregate number of Shares authorised to be purchased is 10,668,376
or, if changed, the number
representing 14.99% of the issued share capital of the Company at the date of
the meeting at which this resolution is proposed;
the minimum price (exclusive of expenses) which may be paid for a Share is 25
pence;
the maximum price (exclusive of expenses) which may be paid for a Share is an
amount equal to the greater of (i) 105% of the average of the middle market
quotations for a Share as derived from the Daily Official List of the London
Stock Exchange for the five business days immediately preceding the day on
which that Share is purchased and (ii) the higher of the last independent trade
in shares and the highest then current independent bid for shares on the London
Stock Exchange as stipulated in Article 5(1) of Regulation No. 2233/2003 of the
European Commission (Commission Regulation of 22 December 2003 implementing the
Market Abuse Directive as regards exemption for buyback programmes and
stabilisation of financial instruments);
this authority shall expire at the conclusion of the Annual General Meeting of
the Company to be held in 2014 or, if earlier, on the expiry of 15 months from
the date of the passing of this resolution unless such authority is renewed
prior to such time; and
the Company may make a contract to purchase Shares under this authority before
the expiry of the authority which will or may be executed wholly or partly
after the expiration of such authority, and may make a purchase of Shares in
pursuance of any such contract.
Notice of the Annual General Meeting… Continued
General Meetings
14. THAT as permitted by the EU Shareholders' Rights Directive (2007/36/EC) any
General Meeting of the Company (other than the Annual General Meeting of the
Company) shall be called by notice of at least 14 clear days in accordance with
the provisions of the Articles of Association of the Company provided that the
authority shall expire on the conclusion of the next Annual General Meeting of
the Company, or, if earlier, on the expiry 15 months from the date of the
passing of the resolution.
Adoption of New Articles of Association
15. THAT:
i. the Articles of Association of the Company be and are hereby amended by
deleting all the provisions of the Company's
Memorandum of Association which, by virtue of section 28 Companies Act
2006, are to be treated as provisions of the Company's Articles of
Association; and
i. the Articles of Association set out in the document produced to this
meeting and signed by the Chairman of the meeting for the purposes of
identification be and are hereby approved and adopted as the Articles of
Association of the Company in substitution for and to the exclusion of the
existing Articles of Association of the Company.
By order of the Board
Frostrow Capital LLP
Company Secretary
Registered Office
50 Lothian Road
Festival Square
Edinburgh
EH3 9WJ
Members are entitled to appoint a proxy to exercise all or any of their rights
to attend and to speak and vote on their behalf at the meeting. A shareholder
may appoint more than one proxy in relation to the meeting provided that each
proxy is appointed to exercise the rights attached to a different share or
shares held by that shareholder. A proxy need not be a shareholder of the
Company. A proxy form which may be used to make such appointment and give proxy
instructions accompanies this notice.
A vote withheld is not a vote in law, which means that the vote will not be
counted in the calculation of votes for or against the resolutions. If no
voting indication is given, a proxy may vote or abstain from voting at his/her
discretion. A proxy may vote (or abstain from voting) as he or she thinks fit
in relation to any other matter which is put before the meeting.
To be valid any proxy form or other instrument appointing a proxy must be
completed and signed and received by post or (during normal business hours
only) by hand at Capita Registrars, PXS, 34 Beckenham Road, Beckenham, Kent BR3
4TU no later than 12 noon on Monday, 28 January 2013.
In the case of a member which is a company, the instrument appointing a proxy
must be executed under its seal or signed on its behalf by a duly authorised
officer or attorney or other person authorised to sign. Any power of attorney
or other authority under which the instrument is signed (or a certified copy of
it) must be included with the instrument.
The return of a completed proxy form, other such instrument or any CREST Proxy
Instruction (as described below) will not prevent a shareholder attending the
meeting and voting in person if he/she wishes to do so.
Any person to whom this notice is sent who is a person nominated under Section
146 of the Companies Act 2006 to enjoy information rights (a "Nominated
Person") may, under an agreement between him/her and the shareholder by whom he
/she was nominated, have a right to be appointed (or have someone else
appointed) as a proxy for the meeting. If a Nominated Person has no such proxy
appointment right or does not wish to exercise it, he/she may, under any such
agreement, have a right to give instructions to the shareholder as to the
exercise of voting rights.
The statement of the rights of shareholders in relation to the appointment of
proxies in paragraph 1 above does not apply to Nominated Persons. The rights
described in that paragraph can only be exercised by shareholders of the
Company.
Pursuant to regulation 41 of the Uncertificated Securities Regulations 2001,
only shareholders registered on the register of members of the Company (the
"Register of Members") at 5.30 p.m. on Monday, 28 January 2013 (or, in the
event of any adjournment, on the date which is two days before the time of the
adjourned meeting) will be entitled to attend and vote or be represented at the
meeting in respect of shares registered in their name at that time. Changes to
the Register of Members after that time will be disregarded in determining the
rights of any person to attend and vote at the meeting.
As at 11 December 2012 (being the last business day prior to the publication of
this notice) the Company's issued share capital consists of 71,303,381 ordinary
shares, carrying one vote each. Therefore, the total voting rights in the
Company as at 11 December 2012 are 71,303,381.
CREST members who wish to appoint a proxy or proxies through the CREST
electronic proxy appointment service may do so by using the procedures
described in the CREST Manual. CREST Personal Members or other CREST sponsored
members, and those CREST members who have appointed a service provider(s),
should refer to their CREST sponsor or voting service provider(s), who will be
able to take the appropriate action on their behalf.
In order for a proxy appointment or instruction made using the CREST service to
be valid, the appropriate CREST message (a "CREST Proxy Instruction") must be
properly authenticated in accordance with the specifications of Euroclear UK
and Ireland Limited ("CRESTCo"), and must contain the information required for
such instruction, as described in the CREST Manual. The message, regardless of
whether it constitutes the appointment of a proxy or is an amendment to the
instruction given to a previously appointed proxy must, in order to be valid,
be transmitted so as to be received by the issuer's agent (ID RA10) no later
than 48 hours before the time appointed for holding the meeting. For this
purpose, the time of receipt will be taken to be the time (as determined by the
timestamp applied to the message by the CREST Application Host) from which the
issuer's agent is able to
Notice of the Annual General Meeting… Continued
retrieve the message by enquiry to CREST in the manner prescribed by CREST.
After this time any change of instructions to proxies appointed through CREST
should be communicated to the appointee through other means.
CREST members and, where applicable, their CREST sponsors or voting service
providers, should note that CRESTCo does not make available special procedures
in CREST for any particular message. Normal system timings and limitations
will, therefore, apply in relation to the input of CREST Proxy Instructions. It
is the responsibility of the CREST member concerned to take (or, if the CREST
member is a CREST personal member or sponsored member, or has appointed a
voting service provider, to procure that his CREST sponsor or voting service
provider(s) take(s)) such action as shall be necessary to ensure that a message
is transmitted by means of the CREST system by any particular time. In this
connection, CREST members and, where applicable, their CREST sponsors or voting
system providers are referred, in particular, to those sections of the CREST
Manual concerning practical limitations of the CREST system and timings.
The Company may treat as invalid a CREST Proxy Instruction in the circumstances
set out in Regulation 35(5)(a) of the Uncertificated Securities Regulations
2001.
In the case of joint holders, where more than one of the joint holders purports
to appoint a proxy, only the appointment submitted by the most senior holder
will be accepted. Seniority is determined by the order in which the names of
the joint holders appear in the Register of Members in respect of the joint
holding (the first named being the most senior).
Members who wish to change their proxy instructions should submit a new proxy
appointment using the methods set out above. Note that the cut-off time for
receipt of proxy appointments (see above) also applies in relation to amended
instructions; any amended proxy appointment received after the relevant cut-off
time will be disregarded.
Members who have appointed a proxy using the hard-copy proxy form and who wish
to change the instructions using another hard-copy form, should contact Capita
Registrars on 0871 664 0300 (calls cost 10p per minute plus network extras).
If a member submits more than one valid proxy appointment, the appointment
received last before the latest time for the receipt of proxies will take
precedence.
In order to revoke a proxy instruction, members will need to inform the
Company. Members should send a signed hard copy notice clearly stating their
intention to revoke a proxy appointment to Capita Registrars, PXS, 34 Beckenham
Road, Beckenham, Kent BR3 4TU.
In the case of a member which is a company, the revocation notice must be
executed under its common seal or signed on its behalf by an officer of the
company or an attorney for the company. Any power of attorney or any other
authority under which the revocation notice is signed (or a duly certified copy
of such power of attorney) must be included with the revocation notice. If a
member attempts to revoke its proxy appointment but the revocation is received
after the time for receipt of proxy appointments (see above) then, subject to
paragraph 4, the proxy appointment will remain valid.
Location of the Annual General Meeting
to be held at the Barber-Surgeons' Hall, Monkwell Square, Wood Street, London
EC2Y 5BL on Wednesday, 30 January 2013 at 12 noon.
Glossary of Terms
Discount or Premium
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 usually 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.
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
The term used to describe the process of borrowing money for investment
purposes. The expectation is that the returns on the investments purchased will
exceed the finance costs associated with those borrowings.
There are several methods of calculating gearing and the following has been
selected:
Total assets, less current liabilities (before deducting any prior charges)
minus cash/cash equivalents divided by Shareholders' funds, expressed as a
percentage.
Net Asset Value (NAV)
The value of the Company's assets, principally investments made in other
companies and cash being held, minus any liabilities. The NAV is also described
as `shareholders' funds' per share. The NAV is often expressed in pence per
share after being divided by the number of shares which 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
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 trusts which is not affected by
movements in discounts or premiums.
Ongoing Charges
Ongoing charges are calculated by taking the Company's annualised expenses,
excluding performance fees and exceptional items, and dividing by the average
net asset value of the Company over the year.
The publishing of ongoing charges information rather than a total expense ratio
(TER) is advocated by the Association of Investment Companies who believe that
using a single methodology to calculate ongoing charges will help reduce
inconsistencies and allow investors and advisers to compare investment
companies more easily with open-ended funds.
Share Price Total Return
The change in capital value of a company's shares over a given period, plus
dividends received, expressed as a percentage of the opening value.
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.
Contact: Victoria Streater at Frostrow Capital LLP,
0203 170 8732 Frostrow Capital LLP, Company Secretary
11 December 2012
ANNOUNCEMENT ENDS