Final Results

16 December 2020 

Finsbury Growth & Income Trust PLC

This announcement contains regulated information

Annual Financial Report for the year ended 30 September 2020

THE COMPANY

The Company is an investment trust and its shares are listed on the premium segment of the Official List and traded on the main market of the London Stock Exchange. The Company is a member of the Association of Investment Companies (“AIC”).

OBJECTIVES AND PERFORMANCE MEASUREMENT

The Company aims to achieve capital and income growth and to provide Shareholders with a total return in excess of that of the FTSE All-Share Index (the Company’s benchmark).

The Company’s net assets as at 30 September 2020 were £1,842.5 million (2019: £1,878.8 million) and the market capitalisation was £1,829.1 million (2019: £1,891.6 million).

MANAGEMENT

The Company is an Alternative Investment Fund (“AIF”) under the European Union Alternative Investment Fund Managers’ Directive (“AIFMD”).

As an externally managed investment trust the Company has no executive directors, employees or internal operations. The Company delegates its day-to-day management to third parties. The principal service providers to the Company are Frostrow Capital LLP (“Frostrow”) which acts as AIFM, company secretary and administrator; and Lindsell Train Limited (“Lindsell Train” or “Portfolio Manager”) which acts as Portfolio Manager.

Further details of the terms of these appointments and full disclosures required under the AIFMD can be found on the home page of the Company’s website: (www.finsburygt.com).

DIVIDENDS

An unchanged first interim dividend of 8.0p per share was paid on 15 May 2020 to shareholders registered at the close of business on 3 April 2020. The associated ex-dividend date was 2 April 2020.

An unchanged second interim dividend of 8.6p per share was paid on 13 November 2020 to shareholders registered at close of business on 9 October 2020. The associated ex-dividend date was 8 October 2020.

The total dividend paid for the year was therefore unchanged at 16.6p per share.

Company Performance

The Company was incorporated in Scotland on 15 January 1926. Lindsell Train was appointed in December 2000. The total return of the Company’s net asset value per share over the ten years to 30 September 2020 has been 247.4%, equivalent to a compound annual return of 13.3%*. This compares to a total return of 63.9%* from the Company’s benchmark, equivalent to a compound annual return of 5.1%*.

* Source: Morningstar, FTSE International Limited (“FTSE”)©FTSE 2020

FIVE YEAR PERFORMANCE SUMMARY

	30 SEP 2016	30 SEP 2017	30 SEP 2018	30 SEP 2019	30 SEP 2020
Share price	658.0p	736.5p	818.0p	942.0p	840.0p
Share price total return*, ^	+20.8%	+14.2%	+13.2%	+17.4%	-9.0%
Net asset value per share +	657.7p	732.8p	812.8p	935.6p	846.2p
Net asset value per share total return*, ^	+20.6%	+13.7%	+13.1%	+17.4%	-7.7%
FTSE All-Share Index total return**,#	+16.8%	+11.9%	+5.9%	+2.7%	-16.6%
Revenue return per share +	15.2p	15.8p	16.5p	18.3p	16.5p
Dividends per share	13.1p	14.2p	15.3p	16.6p	16.6p

* Source: Morningstar

** Source: FTSE International Limited (“FTSE”)©FTSE, 2020

^# See glossary of terms and alternative performance measures on pages 80 and 81 of the Annual Report

^ Alternative Performance Measure (“APM”)

+ UK GAAP Measure

FINANCIAL HIGHLIGHTS FOR THE YEAR

	AS AT	AS AT
	30 SEPTEMBER	30 SEPTEMBER
	2020	2019	CHANGE
Share price	840.0p	942.0p	(10.8%)
Net asset value per share†	846.2p	935.6p	(9.6%)
(Discount)/premium of share price to net asset value per share^	(0.7%)	0.7%
Gearing^	0.5%	0.5%
Shareholders’ funds†	£1,842.5m	£1,878.8m	(1.9%)
Number of shares in issue	217,751,303	200,811,712	+8.4%

^ Alternative Performance Measure (see glossary on pages 80 and 81 of the Annual Report)

† UK GAAP Measure

	YEAR ENDED	YEAR ENDED
	30 SEPTEMBER	30 SEPTEMBER
	2020	2019	CHANGE
Share price total return1, ^	-9.0%	+17.4%
Net asset value per share total return1, ^	-7.7%	+17.4%
FTSE All-Share Index total return (Company benchmark)1, 2	-16.6%	+2.7%
Ongoing charges^	0.64%	0.66%
Revenue return per share†	16.5p	18.3p	(9.8%)
Dividends per share:
First interim dividend	8.0p	8.0p
Second interim dividend	8.6p	8.6p
Total dividends per share for the year	16.6p	16.6p

^ Alternative Performance Measure (see glossary on pages 80 and 81 of the Annual Report)

† UK GAAP Measure

1. Source – Morningstar

2. Source – FTSE International Limited (“FTSE”)©FTSE 2020*

Chairman’s Statement

Dear Shareholders,

The year ended 30 September 2020 was dominated by the spread of Covid-19. This global pandemic continues to create uncertain times for many and I hope that all Shareholders and their families are managing through these difficult times.

PERFORMANCE

It is disappointing to report that your Company’s net asset value per share total return for the year was a negative one at -7.7% (2019: +17.4%) and the share price total return was also negative at -9.0% (2019: +17.4%). However, against the wider market, both measures have again significantly outperformed the Company’s benchmark, the FTSE All-Share Index which, measured on a total return basis, was down 16.6% over the same period (2019: +2.7%) demonstrating the resilience of the companies in our portfolio. As I reported at the half year, the negative return over the period as a whole reflects continuing uncertainty in the market about the impact of the COVID-19 global health crisis and the unfinished Brexit negotiations.

It is however pleasing to note that as we approach the 20th anniversary of the appointment of Lindsell Train Limited (“LTL”) as Portfolio Manager, the long term strategy continues to deliver excellent returns with £1,000 invested in the Company from the appointment of LTL to 30 September 2020 now being worth £6,283. This compares to a return of £2,187 delivered by the Company’s benchmark over the same period.

PROPOSED AMENDMENTS TO THE COMPANY’S INVESTMENT POLICY

Following a review of the Company’s investment policy the Directors are proposing to amend the Company’s existing investment policy to include a restriction that the Company will not invest more than 15% of the Company’s net assets, at the time of acquisition, in the securities of any one issuer. The Company has always adhered to an internal limit on exposure to any one issuer and it was felt appropriate that this should be reflected in the investment policy. Nonetheless the proposed change is considered a material change to the Company’s investment policy and in accordance with the Listing Rules the Company is required to seek shareholder approval for the change. In compliance with the Listing Rules, the proposed changes to the investment policy have been considered and approved by the Financial Conduct Authority.

The amended investment policy will apply, subject to shareholder approval, with effect from the conclusion of the Company’s Annual General Meeting (“AGM”) on 17 February 2021. Full details of the proposed amendments are set out in the Strategic Report and the appendix. The Board unanimously recommends that shareholders vote in favour of this resolution.

SHARE CAPITAL

Demand for the Company’s shares led to the issue of a total of 16,939,591 new shares during the year, ensuring that the share price premium was effectively managed throughout the year. The net proceeds received by the Company from the issue of these new shares amounted to £139.3 million and were invested in line with the Company’s investment objective. Since the financial year end, to 15 December 2020, the Company has issued a further 4,515,000 new shares.

The Company’s share issuance authority will be proposed as usual for renewal at the Company’s Annual General Meeting to be held in February 2021.

During the year to 30 September 2020 the Company bought back 505,409 shares into treasury at an average share price discount to net asset value per share of 6.7% (2019: nil). These shares were subsequently reissued from treasury at a price representing a premium to net asset value per share of 0.7%. As at 30 September 2020 there were no shares held in treasury. Shareholder authority to renew the authority to buy-back ordinary shares will be sought at the AGM.

RETURN AND DIVIDEND

The Income Statement shows a total loss of 67.1 pence per share (2019: gain 143.8 pence) consisting of a revenue return per share of 16.5 pence (2019: 18.3 pence) and a capital loss per share of 83.6 pence (2019: gain 125.5 pence). The Company’s net revenue return during the year was down 9.8% from last year (on a per share basis) but despite this your Board has declared two unchanged interim dividends for the year totalling 16.6 pence per share and remains confident of the Company’s long-term prospects.

This is the first time for many years that the total dividend for the year has not increased and the Board is of course disappointed about this at a time when income is important to many shareholders. However, 2020 has been a year when many businesses have been adversely affected by the COVID-19 pandemic and a number of companies within your Company’s investment portfolio have been forced to reduce their own dividend payments leading to a fall in the Company’s own income per share. In order to maintain the total dividend for the year at 16.6 pence we have chosen to use a modest amount from our retained revenues which ensures that the Board can comply with its long-term objective of at least maintaining the total dividend each year.

In light of the continued strong demand for the Company’s shares, and in order to facilitate dividend payments on a timely and cost effective basis, your Board continues to elect to distribute the Company’s income to Shareholders by means of two interim dividends rather than wait several months to secure shareholder approval to pay a final dividend at the AGM. This dividend policy will be proposed for approval at the forthcoming AGM.

GEARING

As at the date of this report, the Company was in the second year of its three-year secured fixed term loan from Scotiabank Europe plc, which consists of a committed revolving credit facility of £50 million together with an additional (accordion) £50 million facility. As at 30 September 2020 a total of £36.7 million has been drawn down under this facility (2019: £36.7 million).

BOARD COMPOSITION

This year saw the implementation of our significant board refreshment programme announced last year. Sandra Kelly joined us as a Director on 9 October 2019, Neil Collins retired at our AGM on 28 February 2020 and David Hunt retired on 12 May 2020, when Sandra succeeded him as Chair of our Audit Committee.

On 14 October 2020, we were delighted to welcome James Ashton to the Board. We are very pleased to have appointed a director with such expertise and knowledge of the markets in which the Company invests. A resolution proposing his election together with resolutions for those Directors standing for re?election will be put to Shareholders at the forthcoming AGM.

Finally, as announced in last year’s Annual Report, I will be retiring as a Director at the conclusion of the 2021 AGM and will therefore not be standing for re-election. As we reported in the Company’s Half Year Report, Simon Hayes will succeed me as Chairman of the Board.Sandra Kelly will be appointed as the Senior Independent Director at the conclusion of the 2021 AGM.

It has been an honour and a privilege to Chair this Company since January 2008 and watch it grow from net tangible assets of £145 million to £1.8 billion over those years. I have had the good fortune to work with many very capable and likeable fellow Directors and to be assisted by the first-class teams at Lindsell Train and Frostrow. I hope I will be indulged if I single out Nick Train and Alastair Smith, the respective principals of those two organisations, for special thanks for all the help and support they have given me personally over the years.

I shall miss all my Finsbury colleagues greatly and will also miss the opportunity to say farewell to Shareholders in person at the forthcoming AGM because of the Covid-19 regulations, as explained further below.

OUTLOOK

Despite the continued uncertainty, in particular in the UK surrounding Brexit and the continued effects of the pandemic, the Company has again outperformed its benchmark. Through these difficult times your Board continues to support fully the Portfolio Manager’s strategy of investing in high quality companies that own both durable and cash generative brands. We believe firmly that this strategy will continue to deliver strong investment returns to Shareholders over the longer term.

ANNUAL GENERAL MEETING (“AGM”)

The AGM is scheduled to be held on 17 February 2021. A notice of the AGM will be provided to all Shareholders and will be available on the Company’s website. This will include details of how the AGM will be held this year.

The health and welfare of our Shareholders, service providers and wider stakeholders is our primary concern. The restrictions put in place by the UK Government, in respect of social distancing, movement of individuals and of course gatherings of individuals from outside of the same household, remain in flux.

For this reason, following the passing of the Corporate Insolvency and Governance Act 2020 which provides temporary provisions to companies to use alternative methods to fulfil statutory requirements, we have decided to hold a virtual AGM. We really appreciate open interaction with shareholders and also believe engagement with shareholders is paramount to the essence of the Company. We do think that a virtual AGM is another way of engaging with shareholders and will be interested to see how it works. We will therefore endeavour to facilitate Shareholder engagement in an electronic way.

Whilst we appreciate this is not ideal, and may be awkward for some, we also think it may be easier for others, and a better alternative, now that it is available, to closed door AGMs. We feel this is the best and safest option available to us in current circumstances.

Anthony Townsend

Chairman

16 December 2020

 Investment Portfolio

Investments as at 30 September 2020

INVESTMENTS	FAIR VALUE 2019 £000	PURCHASES £000	SALES £000	CAPITAL APPRECIATION/ (DEPRECIATION) £000	FAIR VALUE 2020 £000	% OF INVESTMENTS
London Stock Exchange	198,047	–	(23,432)	42,310	216,925	11.7
Unilever	181,987	20,747	–	(2,405)	200,329	10.8
Diageo	181,749	31,735	–	(37,855)	175,629	9.5
Mondelez International1	165,852	8,022	–	(1,143)	172,731	9.3
RELX	188,930	3,600	–	(20,342)	172,188	9.3
Schroders+	140,554	3,704	–	(18,592)	125,666	6.8
Burberry Group	155,837	9,523	–	(44,334)	121,026	6.5
Hargreaves Lansdown#	144,979	9,293	–	(35,707)	118,565	6.4
Sage Group	111,356	1,955	–	4,975	118,286	6.4
Remy Cointreau2	66,110	6,542	–	23,672	96,324	5.2
Heineken3	101,428	13,332	–	(26,883)	87,877	4.7
Daily Mail & General Trust (non-voting)	48,209	–	–	(11,443)	36,766	2.0
Fever-Tree	–	17,704	–	14,511	32,215	1.7
Pearson	34,525	–	–	(8,812)	25,713	1.4
Manchester United1	27,898	2,220	–	(4,745)	25,373	1.4
Experian Group	–	22,672	–	537	23,209	1.3
Euromoney Institutional Investor	41,436	–	(257)	(18,887)	22,292	1.2
A.G. Barr	25,490	429	–	(4,102)	21,817	1.2
Rathbone Brothers	29,393	1,286	–	(9,338)	21,341	1.2
The Lindsell Train Investment Trust plc	13,500	–	–	(2,200)	11,300	0.6
PZ Cussons	3,982	3,292	–	1,334	8,608	0.5
Young & Co’s Brewery (non-voting)	11,550	–	–	(5,565)	5,985	0.3
Frostrow Capital LLP4**	2,140	150	–	1,660	3,950	0.2
Fuller Smith & Turner***	8,400	(875)	–	(3,745)	3,780	0.2
Celtic*	5,482	7	–	(1,796)	3,693	0.2
	1,888,834	155,338	(23,689)	(168,895)	1,851,588	100.0

+ Includes Schroders (non-voting) shares, fair value £8,315,000 (2019: £10,081,000)

* Includes Celtic 6% cumulative convertible preference shares, fair value £246,000 (2019:£290,000)

** Includes Frostrow Capital LLP AIFM Investment, fair value £750,000 (2019: £600,000)

*** A capital return of £875,000 was received during the year

# Reflects £623,000 return of capital receivable as at 30 September 2020

1 Listed in the United States

2 Listed in France

3 Listed in Netherlands

4 Unquoted

 Investment in Our Key Service Providers

CORPORATE INVESTMENTS

Investment trusts have a somewhat unusual structure compared to most limited companies in the corporate world. They frequently have an entirely non-executive board of directors and contract out the management services they need to one or more third party service providers.

In the Company’s case it employs Lindsell Train to provide portfolio management and Frostrow to act as AIFM and provide corporate administration, secretarial services, investor relations and marketing. These two firms are by far the Company’s most important service providers. Nick Train, one of the directors of Lindsell Train, heads the fund management team looking after the portfolio and Alastair Smith, Managing Partner of Frostrow, heads the team that oversees the range of services listed above. These two men do therefore effectively provide the senior executive management of the Company; they are an essential part of its successful operations. When the Company first started working with them, the Board felt it was of great importance to take a meaningful participation in each of their businesses. This was done not just to align the Company’s commercial interests with theirs but to bind them in to the future prosperity of the Company.

When the Board approached Lindsell Train in 2000 to discuss with them taking on the investment mandate for the Company, they were in the process of establishing The Lindsell Train Investment Trust plc (“LTIT”) which was to take a 25% interest in Lindsell Train. The balance of Lindsell Train is held by the founding directors Michael Lindsell and Nick Train together with some of their key colleagues. The option of taking a stake directly in Lindsell Train was not open to the Company, but taking a significant shareholding in their new investment trust was. The Company invested £1,000,000 in January 2001 into LTIT. At 30 September 2020, that holding was worth £11,300,000 (2019: £13,500,000), due in no small part to LTIT’s very valuable holding in Lindsell Train.

When Alastair Smith established Frostrow in 2007, the Board was able to negotiate with him that the Company took a 10% direct participation in Frostrow at a cost of £150,000, of which £75,000 has been repaid. The Company has also received very tax-efficient profit distributions totalling £3,014,000 from Frostrow since inception. It is of course an unlisted investment, but using well established industry norms, the Company has valued that holding at £3,950,000 (2019: £2,140,000) at 30 September 2020.

That valuation includes £750,000 (2019: £600,000) of regulatory capital that the Board agreed to have made available to Frostrow when the firm became AIFM to the Company in 2014 in addition to existing services provided. This capital contribution is made alongside other Frostrow partners to ensure the firm complies with regulatory capital requirements under the AIFM Directive. The capital is made available in return for a priority profit share of 9%, in line with the long-term annualised total rate of return delivered by Lindsell Train to the Company since 2001. The Board reviews this arrangement and rate offered on a regular basis. Subsequent to 30 September 2020 the Board agreed to make an additional £250,000 available if, or as, it is required to ensure Frostrow complies with the AIFM Directive as the firm continues to grow.

By any measure these investments in Lindsell Train and Frostrow have been hugely successful but that should not obscure the great strategic importance of them. The success of the Company is very largely due to the skill and commitment both these organisations bring to us, something the Board values even more highly than the investment return we have made on the holdings.

It is very pleasing to the Board that this is a two-way street. Shareholders will see that as at 30 September 2020, Nick Train holds 3,106,710 shares in the Company (2019: 2,665,336) and Alastair Smith 76,058 shares (2019: 74,827). The Board has consent from Nick Train to disclose that his holding represents the whole of his personal investment in Lindsell Train’s UK equity strategy and is a significant portion of his total assets.

Contributions to Total Return

for the year ended 30 September 2020

	TOTAL	CONTRIBUTION
	RETURN	PER SHARE
INVESTMENTS	£000	(PENCE)*
Equities
London Stock Exchange	44,294	21.0
Remy Cointreau	24,201	11.5
Fever-Tree	14,724	7.0
Sage Group	7,753	3.7
Unilever	3,407	1.6
Mondelez International	1,843	0.9
PZ Cussons	1,417	0.7
Experian	536	0.3
Celtic	(1,753)	(0.8)
Lindsell Train Investment Trust	(1,760)	(0.8)
Fuller Smith & Turner	(3,690)	(1.8)
A.G Barr	(3,926)	(1.9)
Manchester United	(4,440)	(2.1)
Young & Co’s Brewery (non-voting)	(5,454)	(2.6)
Pearson	(7,898)	(3.7)
Rathbone Brothers	(8,368)	(4.0)
Daily Mail & General Trust (non-voting)	(10,078)	(4.8)
Schroders **	(13,150)	(6.3)
RELX	(15,806)	(7.5)
Euromoney Institutional Investor	(18,262)	(8.7)
Heineken	(25,812)	(12.2)
Hargreaves Lansdown	(32,208)	(15.3)
Diageo	(33,452)	(15.9)
Burberry Group	(43,508)	(20.6)
	(131,390)	(62.3)
Preference Shares
Celtic 6% (cumulative convertible preference shares)	(36)	0.0
	(36)	(0.0)
Unquoted
Frostrow Capital LLP	2,168	1.0
Total Contributions to Total Return	(129,258)	(61.3)
Expenses and Finance Charges	(12,151)	(5.8)
Return on Ordinary Activities after Taxation	(141,409)	(67.1)

* Based on 210,795,674 shares, being the weighted average number of shares in issue during the year ended 30 September 2020

** Includes Schroders non-voting shares

 Portfolio Manager’s Review

December 2020 will mark the 20th anniversary of Lindsell Train’s (LT) responsibility for the investment affairs of your company. This is a big milestone for me personally and now I look forward to continuing the relationship for at least the next two decades – or, more accurately and humbly, for as long as we retain the confidence of your Board. FGT is by far the biggest external client we have at LT and also the largest stock market investment held by me and my family. The extraordinary events of 2020 have demonstrated none of us can legislate for the future; but it remains true that I and my colleagues could not be any more motivated to preserve and grow the real value of your company than we are today. It is disappointing that the NAV has fallen over the year to end September – as a result of the above-mentioned extraordinary events – but sticking with my 20 year time horizon for your company I have taken advantage of the fall and bought more shares.

The investment approach we apply to FGT remains unchanged, as do the underlying investment ideas that determine the choice of individual securities and the overall shape of the portfolio. I am going to remind you of the three rules of thumb we use in selecting the companies we commit your capital to. I do so because these rules of thumb have by and large led us to making successful investments over time and, even through the pandemic, we see no reason to believe they have lost their efficacy.

If a company’s products taste good, buy the shares

The performance over the years of the holdings in AG Barr, Diageo, Heineken, Mondelez, Remy Cointreau and Unilever confirm the validity of this simple but powerful proposition. Indeed, Mondelez’ Oreos, Unilever’s Hellmann’s and Magnum and Remy cognac have all done particularly well during the pandemic (and boosted the shares of their owners) as consumers have turned to home cooking and consoling treats. Accordingly we are always alert to opportunities to add beloved or trusted consumer brands to the portfolio and over the last 18 months have initiated holdings in Fever-Tree, whose products definitely taste good and in PZ Cussons (“PZC”) whose products definitely don’t. Nonetheless, the general principle still holds for PZC. The same affection that drinkers have for Tanqueray, or chocaholics for Cadbury, is shown in the trust and reliance consumers have placed in PZC’s biggest brand, Carex – the UK’s #1 hand sanitiser – with spectacular growth this year.

The world will never be bored of being informed or entertained

Owners or creators of must-have business information, like major FGT holdings London Stock Exchange (“LSE”) or RELX, have been reliable profit-makers and stock market winners for decades. It seems to us that the value of the information they offer is only going to increase as a result of their application of digital analytics to ever increasing reams of data. And this should drive future share price gains. We have added another new holding in 2020 that brings FGT even more participation in this theme – Experian, the credit-rating agency. Experian is one of the UK’s very few multi-billion pound and global companies that does clever things with data – and its clients are increasingly reliant on it. The new holding has in part been funded by a reduction in the investment in the LSE, which had grown to a position size of over 12% of your portfolio. This prudential reduction should not be construed as a loss of enthusiasm on our part for the LSE. As to entertainment, I admit it has proven harder for us to find successful exemplars in the UK. I do look at the incredible share price gains of Games Workshop and kick myself – because we don’t own it; and that despite one of my younger colleagues recommending it a few years ago. Sometimes it is the errors of omission – what you didn’t do but should’ve – that are most galling. Anyway, we still look for its sort of “sticky content” that can fix attention, preferably of millions of people. So, although its share price is signalling scepticism today, I believe our investment in Manchester United gives access to a unique entertainment asset and one that looks undervalued, we think, compared to transactions for sports franchises around the world.

The pros are always too cautious about the stock market

And this caution creates opportunities for those who take a more constructive view. Now, I grant you, this third idea has proven harder to justify in 2020 – at least from the perspective of an investor in the moribund UK stock market. Perhaps it has been right to be cautious about the short-term outlook for the FTSE All-Share Index. Nonetheless, to demonstrate what we mean, consider that as I write this – with the virus still rampaging – the S&P 500 Index in the US is up 14% in 2020 and NASDAQ up 40%. Those gains may seem inevitable in hindsight, but few professionals would have predicted them, we submit, if apprised of what was actually about to befall the world. No - we still act on the assumption that it is a winning investment strategy to take a steadfastly optimistic view about the prospects for equity markets – including that of the UK. This means that we hold as little cash as possible and don’t try to time the market. (We are though somewhat allergic to borrowing against stock market assets – hence the persistently low levels of borrowing your company runs.) It also means we are drawn to invest in companies that generally do well when stock markets do well, hence our longstanding holdings in Hargreaves Lansdown, LSE, Rathbones and Schroders. Several of these look notably undervalued to us as 2020 has gone on.

In addition to these three strategic ideas, we continue to invest in a truly strategic way. In other words, portfolio turnover remains exceptionally low by comparison to many. Turnover last year was only 1.3%. Low levels of portfolio activity keep transaction costs low, by definition and this is an important benefit. But the even more important reason why we so rarely sell is because we want to maximise the chances that our investments turn out not just successful, but spectacularly so. I know what follows is anecdotal and historic – but consider these more or less random picks from FGT’s portfolio (and to be clear, I have chosen the start dates either because they are as far back as Bloomberg data goes, or from the initial stock market listing of each company). Since 1988 Unilever’s share price is up 17x, Diageo’s 16x and Daily Mail 8x. The FTSE All Share has little more than trebled over the same period. Now, to demonstrate I’m not just cherry-picking winners here, let me acknowledge that our longstanding and patience-testing holding Pearson is only up 70% since 1988 – not great over 32 years. But moving on – since it listed in 1991 Sage is up 138x, Schroders 15x and Euromoney 10x. Since 2001 the LSE is up 22x and since 2014 Fever-Tree 12.5x. Of course we have other holdings where we can’t point to such long term gains, yet; and, of course, I am not claiming that we have captured all the gains I highlight above – we weren’t appointed until late 2000. But the point is, evidently, that over time shares of successful companies can go up a lot. Probably go up a lot more than investors who are just focussed on the next quarter or even twelve month might believe. The best way to ensure you have a chance of enjoying such returns is to deliberately only invest in what you believe to be exceptional companies and then to sell or top-slice as rarely as possible. This is the effect we are trying to capture.

It has been easy for investors to get discouraged in 2020 and, to repeat, particularly if you are an investor in the UK stock market, like FGT. Despite the unhelpful macro backdrop, we monitor many encouraging developments for the businesses of many of FGT’s portfolio holdings. We are sure these positive developments are by no means fully reflected, if at all, in share prices. Let me list several such developments – again somewhat at random – if only to illustrate the sort of incremental data or commentary we look for to validate our policy of taking very long term views on the investments.

Mondelez – CEO says market shares are “clearly increasing, more so than at any other time in the company’s history.”

RELX – Submissions to its subscription scientific journals are up 25% year on year. Open access submissions have more than doubled.

Unilever – In Q3 2020 its e-commerce sales were up 76% and now comprise 10% of group sales.

Daily Mail – at its last valuation DMGT’s holding in used-car website Cazoo was worth c£400m and this just one of several valuable subsidiaries and investments. DMGT’s entire market capitalisation at end September 2020 is only £1.5bn.

Hargreaves Lansdown – in its financial year 2019 trades placed by mobile devices on HL’s platform were 1.7m. In 2020 they grew to 4.2m.

Sage – 25% of all the UK’s VAT returns are made over Sage Business Cloud.

Diageo – US consumers spent 38% more on drink-at-home spirits in 2020 than last year, in what seems like a permanent switch away from watery beer to premium spirits. Meanwhile, Fever-Tree’s US off-trade sales were up 72% over the last six months.

Schroders – its 30% owned joint venture in China with Bank of Communications saw assets grow to £65bn, up 25% from last year. These assets are not included in Schroders’ published reports, but the stake could be worth a sizable proportion of Schroders’ depressed market value.

LSE – FGT’s biggest holding - announced the conditional sale of its Italian Stock Market subsidiary for €4.3bn. It was bought in 2007 for €1.6bn. Nice work.

During a bull market these kinds of developments might’ve driven share prices higher. In 2020 they’re dismissed or ignored. Peter Lynch – the great Fidelity investor – said:

“Often, there is no correlation between the success of a company’s operations and the success of its stock over a few months or even a few years. In the long term there is a 100% correlation between the success of a company and the success of its stock. It pays to be patient and to own successful companies.”

As we all battle through the challenges thrown at investors in 2020 let’s not forget Peter Lynch’s advice.

Nick Train
Director
Lindsell Train Limited
Portfolio Manager

16 December 2020

BUSINESS REVIEW

The Strategic Report provides a review of the Company’s policies and business model, together with an analysis of its performance during the financial year and its future developments.

It also considers the principal risks and uncertainties facing the Company. The Strategic Report has been prepared to provide information to shareholders to assess how the Directors have performed their duty to promote the success of the Company.

Further information on how the Directors have discharged their duty under Section 172 of the Companies Act 2006 can be found in the Strategic Report.

The Strategic Report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the date of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

As an externally managed investment trust the Company has no executive directors, employees or internal operations. The Company delegates its day-to-day management to third parties. The principal service providers to the Company are Frostrow which acts as AIFM, company secretary and administrator; and Lindsell Train which acts as Portfolio Manager. The Bank of New York Mellon (International) Limited is the Company’s Depositary.

The Board is responsible for all aspects of the Company’s affairs, including the setting of parameters for and the monitoring of the investment strategy as well as the review of investment performance and policy. It also has responsibility for all strategic issues, the dividend policy, the share issuance and buy-back policy, gearing, share price and discount/ premium monitoring and corporate governance matters.

STRATEGY FOR THE YEAR ENDED 30 SEPTEMBER 2020 AND STRATEGIC REVIEW

Throughout the period under review, the Company continued to operate as an approved Investment Trust, following its investment objective to achieve capital and income growth and to provide shareholders with a total return in excess of that of the FTSE All-Share Index.

During the year, the Board and Frostrow, the Alternative Investment Fund Manager (“AIFM”) and the Portfolio Manager undertook all strategic and administrative activities.

PROPOSED AMENDMENTS TO THE COMPANY’S INVESTMENT POLICY

As noted in the Chairman’s Statement, a proposal is being put forward at the Company’s Annual General Meeting to seek approval from shareholders to make amendments to the investment policy of the Company. The principal change is to include a restriction that the Company will not invest more than 15% of the Company’s net assets, at the time of acquisition, in the securities of any one issue. The Company has also made a number of non-material amendments to the Company’s investment policy since it was last approved by shareholders in January 2010, which have been notified to shareholders in previous annual reports. The amended investment policy, showing both the proposed material change and the previously implemented non-material changes, is set out in the appendix. The amended investment policy if approved, shall come into effect from the conclusion of the Company’s Annual General Meeting on 17 February 2021. If shareholders do not approve the investment policy resolution then the single issuer limit will not be introduced but the previously implemented non-material changes shall still stand.

Investment Policy (if approved by shareholders)

The Company’s investment policy is to invest principally in the securities of companies either listed in the UK or otherwise incorporated, domiciled or having significant business operations within the UK, whilst up to a maximum of 20% of the Company’s portfolio, at the time of acquisition, can be invested in companies not meeting this criteria.

The portfolio will normally comprise up to 30 investments. This level of concentration may lead to an investment return which is materially different from the Company’s benchmark index and may be considered to carry above average risk.

Unless driven by market movements, securities in FTSE 100 companies and comparable companies listed on an overseas stock exchange will normally represent between 50% and 100% of the portfolio; securities in FTSE 350 companies and comparable companies listed on overseas stock exchanges will normally represent at least 70% of the portfolio.

The Company will not invest more than 15% of the Company’s net assets, at the time of acquisition, in the securities of any single issuer. For the purposes of this limit only, net assets shall exclude the value of the Company’s investment in Frostrow Capital LLP.

The Company does not and will not invest more than 15%, in aggregate, of the value of the gross assets of the Company in other listed closed ended investment companies (including investment trusts). Further, the Company does not and will not invest more than 10%, in aggregate, of the value of its gross assets in other listed closed ended investment companies (including investment trusts), except where the investment companies themselves have stated investment policies to invest no more than 15% of their gross assets in other listed closed ended investment companies (including investment trusts).

The Company has the ability to invest up to 25% of its gross assets in preference shares, bonds and other debt instruments, although no more than 10% of any one issue may be held.

In addition, a maximum of 10% of the Company’s gross assets can be held in cash, where the Portfolio Manager believes market or economic conditions make equity investment unattractive or while seeking appropriate investment opportunities or to maintain liquidity.

The Company’s gearing policy is that gearing will not exceed 25% of the Company’s net assets.

No investment will be made in any company or fund managed by the Portfolio Manager without the prior approval of the Board.

In accordance with the Listing Rules of the Financial Conduct Authority (“FCA”), the Company can only make a material change to its investment policies with the approval of its shareholders.

DIVIDEND POLICY

The Company’s aim is to increase or at least maintain the total dividend each year. A first interim dividend is typically paid in May and a second interim in November in lieu of a final dividend.

The level of dividend growth is dependent upon the growth and performance of the companies within the Investment Portfolio. The decision as to the level of dividend paid takes into account the income forecasts maintained by the Company’s AIFM and Portfolio Manager as well as the level of revenue reserves. These forecasts consider dividends earned from the portfolio together with predicted future earnings and are regularly reviewed by the Board.

All dividends have been distributed from current year income and revenue reserves.

PRINCIPAL RISKS, EMERGING RISKS AND RISK MANAGEMENT

The Board considers that the risks detailed within this report are the principal risks currently facing the Company in that these are the risks that could affect the ability of the Company to deliver its strategy.

The Board is responsible for the ongoing identification, evaluation and management of the principal risks faced by the Company and has established a process for the regular review of these risks and their mitigation. This process accords with the UK Corporate Governance Code and the FRC’s Guidance on Risk Management, Internal Control and Related Financial and Business Reporting.

The Board has carried out a robust assessment of the emerging and principal risks facing the Company, including those that would threaten its business model, future performance, solvency and liquidity. Further details of the risk management processes that are in place can be found in the Corporate Governance Statement in the Annual Report.

During the year the Committee has undertaken a full review of the scoring methodology applied to the Company’s risk register, resulting in a new approach being implemented. This approach was then applied to the existing risks causing some inherent risks to be scored more highly than previously, whilst others had their risk level reduced. It also resulted in new emerging risks being identified.

The Committee also considered the controls in place to mitigate the inherent risks and whether additional controls or actions were required to bring the residual risk down to an acceptable level. The Committee were satisfied with the controls that are in place.

THE COMPANY’S APPROACH TO RISK MANAGEMENT

Principal Risks and Uncertainties		Key Mitigations
Corporate Strategy The Board may be unable to maintain its dividend policy.		The Board reviews income forecasts and levels of available revenue reserves produced by the AIFM at every Board meeting. The Company’s Articles of Association permit the payment of dividends out of capital.
The Company’s share price total return may differ materially from the NAV per share total return.		The Board operates a discount control mechanism which is intended to protect against the share price widening beyond a 5% discount to NAV per share. There is also a share issuance programme which acts as a premium control mechanism.
Investment Strategy and Activity The investment strategy adopted by the Portfolio Manager including the high degree of concentration of the investment portfolio, may lead to an investment return that is materially lower than the Company’s benchmark index, thereby failing to achieve the Company’s investment objective.		The Board discusses with the Portfolio Manager the structure of the portfolio, including asset allocation and portfolio concentration. The Board reviews the performance of the portfolio against the benchmark and the Company’s peer group at every meeting.
The departure of a key individual at the Portfolio Manager may affect the Company’s performance.		The Board keeps the portfolio management arrangements under continual review. In turn, the Portfolio Manager reports on developments at Lindsell Train, including succession and business continuity plans. The Board meets regularly with other members of the wider team employed by the Portfolio Manager.
A global event such as COVID-19 affects the portfolio companies so that they are no longer appropriate to achieve the Company’s investment objective.		The Board reviews the performance of the portfolio against the benchmark and the Company’s peer group at every meeting. Over the course of the COVID-19 pandemic the Board has held extra review meetings by video conference, initially weekly and more recently monthly.
The investment approach is not aligned with shareholder expectations in relation to Environmental, Social and Governance (“ESG”) matters.		The Board conducts an annual review of the Portfolio Manager’s ESG policy to ensure that the Company’s Portfolio manager’s ESG policy is consistent with that expected by the Board. The Board also conducts an annual review of other service providers’ policies in relation to internal controls and governance matters notably modern slavery, GDPR, cyber security and policies. The Board reviews media coverage of the Company as well as the Portfolio Manager’s investment approach to raise the awareness of engagement with portfolio companies and the factors that are considered when making investments.
Shareholder Relations and Governance The investment objective of existing shareholders no longer coincides with the investment objective of the Company.		At each meeting the Board reviews movements in the Company’s shareholder register. In addition, there are regular interactions and engagement with shareholders (including at the AGM). Regular feedback from shareholders is received from the Company’s broker.
Errors or irregularities in published information could lead to censure and/or result in reputational damage to the Company.		The Board reviews all information supplied to shareholders and the AIFM’s marketing activity at each meeting and periodically reviews the Company’s website. The AIFM’s daily controls ensure accurate publication of information.
Operational The Company’s service providers perform poorly, fail to meet their contractual obligations or fail to provide sufficient or accurate information to the Board for decision-making.		All major service agreements are in line with best practice and the Board annually reviews performance against these terms taking any action as needed. The Board has reviewed new working practices adopted at key services providers as a consequence of the COVID-19 pandemic to ensure no disruption to or erosion of service levels. The AIFM reports by exception on the performance of other outsourced service providers and reviews contracts to ensure they remain reasonable and competitive, undertaking tender processes when appropriate.
The Company’s service providers are unable to meet their contractual obligations as a result of a global event such as a terrorist attacks or pandemic.		Both the AIFM’s and the Portfolio Manager’s compliance officers report to the Audit Committee at every meeting and their internal control report, together with the internal control report of the Custodian, are reviewed annually. These reviews include consideration of their business continuity plans and the associated cyber security risks.
Adverse reputational impact of one or more of the Company’s key service providers which, by association, causes the Company reputational damage.		The Board receives regular press news updates from the AIFM of all references to the Company and its service providers and are well connected in the investment market so as to keep appraised of views of others in the sector in particular in relation to ESG matters. In addition, the Chairman and the Senior Independent Director meet with key shareholders to ascertain views and the Board undertakes annual review of service provision of the service providers.
Financial Fraud (including unauthorised payments and cyber fraud) occurs leading to a loss.		The AIFM and Portfolio Manager have in place robust compliance monitoring programmes. The Board regularly receives monthly compliance reviews and quarterly expenses analysis. An annual statement is obtained by the Audit Committee from all service providers giving representations that there have been no instances of fraud or bribery.
The Company is exposed to market price risk.		The Directors acknowledge that market risk is inherent in the investment process. The Portfolio Manager maintains a diversified portfolio which is concentrated in a few key sectors. The Board has imposed guidelines within its investment policy to limit exposure to individual holdings and limits the level of gearing. The AIFM reports to the Board with respect to compliance with investment guidelines on a monthly basis. The Portfolio Manager provides the Board with regular updates on market movements. No investment is made in derivative instruments and no currency hedging is undertaken. Further information on financial instruments and risk can be found in note 17 to the Financial Statements beginning.
The Company is exposed to credit risk		The Portfolio Manager is responsible for undertaking reviews of the creditworthiness of the counterparties that it uses and the Board receives regular updates on the identity and credit rating of such counterparties. All business with respect to portfolio activity is conducted through selected brokers on a delivery versus payment basis thereby minimising exposure to broking counterparties. Board approval is required for gearing and the Board monitors the credit rating of loan providers. Further information on financial instruments and risk can be found in note 17 to the Financial Statements.
Accounting, Legal and Regulatory The regulatory environment in which the Company operates changes, affecting the Company’s modus operandi.		The Board monitors regulatory change with the assistance of its AIFM, Portfolio Manager and external professional advisers to ensure that the Board is aware of any likely changes in the regulatory environment and will be able to adapt as required. The Directors attend AIC Roundtables and conferences to keep up to date on regulatory changes and receive industry updates from the AIFM.
The Company and/or the Directors fail(s) to comply with legal requirements in relation to FCA dealing rules/handbook procedures, the AIFMD, the Listing Rules, the Companies Act 2006, relevant accounting standards, the Bribery Act 2010, the Criminal Finances Act 2017, GDPR, tax regulations or any other applicable regulations.		The Board monitors regulatory change with the assistance of its AIFM, Portfolio Manager and external professional advisers to ensure compliance with applicable laws and regulations including the Companies Act 2006, the AIFM Rules, the Corporation Tax Act 2010 (‘Section 1158’), the Market Abuse Regulation (‘MAR’), the Disclosure Guidance and Transparency Rules (“DGTRs”) and the UKLA Listing Rules. The Board reviews compliance reports and internal control reports provided by its service providers, as well as the Company’s Financial Statements and revenue forecasts. The Depositary reports twice yearly to the Audit Committee, confirming that the Company, acting through the AIFM, has been managed in accordance with the AIFMD, the FUND sourcebook, the Articles (in relation to the calculation of the NAV per share) and with investment restrictions and leverage limits. The Depositary Report can be found in the Shareholder information section of the Company’s website (www.finsburygt.com). The Directors attend AIC Roundtables and conferences to keep up to date on regulatory changes and receive industry updates from the AIFM. The AIFM presents a quarterly report on changes in the regulatory environment, including AIC updates, and how changes have been addressed.
Poor adherence to corporate governance best practice or errors or irregularities in published information could lead to censure and/or result in reputational damage to the Company.		The Board reviews all information supplied to shareholders and the AIFM’s marketing activity at each meeting and periodically reviews the Company’s website. Details of the Company’s compliance with corporate governance best practice, including information on relationship with shareholders, are set out in the Corporate Governance Report in the Annual Report.

Emerging Risks

The Company has carried out a detailed assessment of the Company’s emerging and principal risks. The International Risk Governance Council definition of an ‘emerging’ risk is one that is new, or is a familiar risk in a new or unfamiliar context or under new context conditions (re-emerging). Failure to identify emerging risks may cause reactive actions rather than being proactive and, in worse case, could cause the Company to become unviable or otherwise fail or force the Company to change its structure, objective or strategy.

The Audit Committee reviews a risk map at its half-yearly meetings. Emerging risks are discussed in detail as part of this process and also throughout the year to try to ensure that emerging (as well as known) risks are identified and, so far as practicable, mitigated.

The experience and knowledge of the Directors is useful in these discussions, as are update papers and advice received from the Board’s key service providers such as the Portfolio Manager, the AIFM and the Company’s Brokers. In addition, the Company is a member of the AIC, which provides regular technical updates as well as drawing members’ attention to forthcoming industry and/or regulatory issues and advising on compliance obligations.

Brexit

The Board has considered whether the UK’s exit from the EU (“Brexit”) poses a unique threat to the Company. At the date of this report, the UK remains within a “transition period” while it negotiates new arrangements with the EU. There is, therefore, still considerable uncertainty about the effects of Brexit.

Due to the nature of the investee companies the effects of Brexit are likely to be limited.

Furthermore, whilst the Company’s current Shareholders are predominantly UK based holders, sharp or unexpected changes in investor sentiment, or tax or regulatory changes, arising from Brexit could lead to short term selling pressure on the Company’s shares which potentially could lead to a share price discount.

Overall, however, the Board believes that over the longer term, Brexit is unlikely to affect the Company’s business model or whether the shares trade at a premium or discount to the net asset value per share. The Board will continue to monitor developments as they occur.

PERFORMANCE AND PROSPECTS

As set out in the Chairman’s Statement, considering the opportunities and challenges faced during the year, relative to the wider market, the Board is satisfied with the Company’s performance relative to the benchmark and other Key Performance Indicators (“KPI’s”).

Whilst performance is measured against the FTSE All-Share Index, the Company’s portfolio is constructed and managed without reference to a stock market index.

With respect to the Company’s prospects, the Board believes that it is possible to achieve strong performance through investing principally in UK equities without trading portfolio securities on a short term basis.

This is demonstrated by the Company’s performance over the last ten years with a net asset total return^ of 247.4% compared to a total return from the Company’s benchmark index of 63.9%.

KEY PERFORMANCE INDICATORS (“KPI’s”)

The Board reviews the performance of the portfolio in detail and hears the views of the Portfolio Manager at each meeting. Information on the Company’s performance is provided in the Chairman’s Statement and the Portfolio Manager’s Review. This performance is assessed against the following KPI’s which are unchanged from last year:

Net asset value total return^

The Directors regard the Company’s net asset value total return to be a key indicator of performance.

This reflects net asset value growth of the Company including the impact of reinvested dividends.

During the year under review the Company’s net asset value per share total return was -7.7% (2019: +17.4%).

Share price total return^

The Directors also regard the Company’s share price total return to be a key indicator of performance.

This reflects share price value growth of the Company including the impact of reinvested dividends.

During the year under review the Company’s share price total return was -9.0% (2019: +17.4%).

Benchmark and peer group performance

The Company’s benchmark is the FTSE All-Share Index (total return) which delivered a return of -16.6% (2019: +2.7%) over the year. This compares to the Company’s share price total return of -9.0% (2019: +17.4%).

^ Alternative Performance Measure (“APM”) (see glossary on pages 80 and 81 of the Annual Report)

The Board also monitors the Company’s net asset value per share return against its AIC peer group^. As at 30 September 2020 the Company’s ranking against its peer group of UK growth and income sector investment trusts was:

Period	Rank out of 25
1 yr	5
3 yr	2
5 yr	1
10 yr	1

Revenue return per share⁺

The Directors regard the Company’s revenue return per share to be an important indicator of performance.

The revenue return per share for the year was 16.5 pence per share (2019: 18.3 pence per share). The Company’s revenue return per share during the year was down 9.8%.

Share price discount/premium to net asset value per share^

The Board reviews the level of discount/premium to net asset value per share at every Board meeting and consideration is given to ways in which the share price performance may be enhanced, including the effectiveness of marketing and share issuance and buy-backs, where appropriate. Details of how the Company’s discount/premium control mechanism works can be found in the Trust characteristics section on the Company’s website (www.finsburygt.com).

Demand for the Company’s shares led to the issue of a total of 16,939,591 new shares during the year (2019: 27,120,000) at a premium to the higher of the prevailing cum or ex income net asset value per share at the time of issue. At 30 September 2020 the Company’s share price stood at a 0.7% discount to the Company’s net asset value per share (2019: 0.7% premium).

In addition, the Company also bought back 505,409 shares into Treasury during the year (2019: nil). These shares were subsequently reissued to satisfy on going demand.

^ Alternative Performance Measure (see glossary on pages 80 and 81 of the Annual Report)

+ UK GAAP Measure

* Source: Morningstar

ALTERNATIVE PERFORMANCE MEASURES

The Financial Statements set out the required statutory reporting measures of the Company’s financial performance. In addition, the Board assesses the Company’s performance against a range of criteria which are viewed as particularly relevant for investment trusts, which are explained in greater detail in the Strategic Report under the heading ‘Key Performance Indicators’. Please also see the glossary on pages 80 and 81 of the Annual Report.

FUTURE DEVELOPMENTS

The Board’s primary focus is on the Portfolio Manager’s investment approach and performance. The subject is thoroughly discussed at every Board meeting.

In addition, the AIFM updates the Board on company communications, promotions and investor feedback, as well as wider investment company issues.

An outline of performance, investment activity and strategy, and market background during the year, as well as the outlook, is provided in the Chairman’s Statement and the Portfolio Manager’s Review.

It is expected that the Company’s strategy will remain unchanged in the coming year.

LONG TERM VIABILITY STATEMENT

In accordance with the UK Corporate Governance Code, the Directors have carefully assessed the Company’s position and prospects as well as the principal risks and have formed a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five financial years. The Board has chosen a five year horizon in view of the long term nature and outlook adopted by the Portfolio Manager when making investment decisions.

To make this assessment and in reaching this conclusion, the Audit Committee has considered the Company’s financial position and its ability to liquidate its portfolio and meet its liabilities as they fall due:

• The portfolio is principally comprised of investments traded on major international stock exchanges. Based on historic analysis 96.7% of the current portfolio could be liquidated within 30 trading days with 68.0% in seven days and there is no expectation that the nature of the investments held within the portfolio will be materially different in future;
• The expenses of the Company are predictable and modest in comparison with the assets and there are no capital commitments foreseen which would alter that position; and
• The Company has no employees, only its non-executive Directors. Consequently it does not have redundancy or other employment related liabilities or responsibilities.

The Audit Committee, as well as considering the potential impact of its principal risks and various severe but plausible downside scenarios, has also considered the following assumptions in considering the Company’s longer-term viability:

• There will continue to be demand for investment trusts;
• The Board and the Portfolio Manager will continue to adopt a long-term view when making investments, and anticipated holding periods will be at least five years;
• The Company invests principally in the securities of UK listed companies to which investors will wish to continue to have exposure;
• The Company will maintain its bank loan facility;
• Regulation will not increase to a level that makes running the Company uneconomical; and
• The performance of the Company will continue to be satisfactory.

COVID-19 was also factored into the key assumptions made by assessing its impact on the Company’s key risks and whether the key risks had increased in their potential to affect the normal, favourable and stressed market conditions. As part of this review the Board considered the impact of a significant and prolonged decline in the Company’s performance and prospects. This included a range of plausible downside scenarios such as reviewing the effects of substantial falls in investment values and the impact of the Company’s ongoing charges ratio, which were the subject of stress testing.

MANAGEMENT ARRANGEMENTS

Alternative Investment Fund Manager (“AIFM”)

Frostrow under the terms of its AIFM agreement with the Company provides, inter alia, the following services:

• oversight of the portfolio management function delegated to Lindsell Train;
• promotion of the Company;
• investment portfolio administration and valuation;
• risk management services;
• share price discount and premium management;
• administrative and company secretarial services;
• advice and guidance in respect of corporate governance requirements;
• maintenance of the Company’s accounting records;
• maintenance of the Company’s website;
• preparation and publication of annual, half year reports and monthly fact sheets; and
• ensuring compliance with applicable legal and regulatory requirements.

The AIFM Agreement may be terminated by either party on giving notice of not less than 12 months.

Portfolio Manager

Under the Portfolio Management Agreement Lindsell Train, as delegate of the AIFM, is responsible for the management of the Company’s portfolio of investments under an agreement between it, the Company and Frostrow (the “Portfolio Management Agreement”).

Under the terms of its Portfolio Management Agreement, Lindsell Train provides, inter alia, the following services:

• seeking out and evaluating investment opportunities;
• recommending the manner by which monies should be invested, realised or retained;
• advising on how rights conferred by the investments should be exercised;
• analysing the performance of investments made; and
• advising the Company in relation to trends, market movements and other matters which may affect the investment objective and policy of the Company.

The Portfolio Management Agreement may be terminated by either party on giving notice of not less than 12 months.

Annual Fees

That part of Market Capitalisation	AIFM	Portfolio Manager
? £1 Bn	0.15%	0.45%
> £1 Bn - £2 Bn	0.135%	0.405%
£2 Bn +	0.12%	0.36%

Performance Fees

The Company does not pay performance fees.

AIFM AND PORTFOLIO MANAGER EVALUATION AND RE-APPOINTMENT

The performance of Frostrow as AIFM and Lindsell Train as Portfolio Manager is continuously monitored by the Board with a formal evaluation being undertaken each year. As part of this process the Board monitors the services provided by the AIFM and the Portfolio Manager 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.

Following a review at a Board meeting in September 2020 the Board believes that the continuing appointment of Frostrow and Lindsell Train, under the terms described above, is in the best interests of the Company’s shareholders. In coming to this decision it took into consideration the following additional reasons:

• the quality and depth of experience of the management, company secretarial, administrative and marketing team that the AIFM brought to the management of the Company; and
• the quality and depth of experience that the Portfolio Manager brought to the management of the portfolio, the clarity and rigour of the investment process, the level of past performance of the portfolio in absolute terms and also by reference to the benchmark index.

Depositary

The Bank of New York Mellon (International) Limited (the “Depositary”) acts as the Company’s depositary in accordance with the AIFMD on the terms and subject to the conditions of the depositary agreement between the Company, Frostrow and the Depositary (the “Depositary Agreement”). Under the terms of the Depositary Agreement the Company pays the Depositary a fee of 0.009% of net assets.

The Depositary provides the following services:

• responsibility for the safe keeping of custodial assets of the Company;
• verification and maintenance of a record of all other assets of the Company and for the collection of income that arises from those assets;
• taking reasonable care to ensure that the Company is managed in accordance with the AIFMD, the FUND Sourcebook and the Company’s instrument of incorporation, in relation to the calculation of the net asset value per share and the application of income of the Company; and
• monitoring the Company’s compliance with investment restrictions and leverage limits set by the Board and the AIFM.

In accordance with the AIFM Rules the Depositary acts as global custodian and may delegate safekeeping to one or more global sub-custodians. The Depositary has delegated safekeeping of the assets of the Company to The Bank of New York Mellon SA/NV and/or The Bank of New York Mellon (The Global Sub?custodians). As at the date of this report, the applicable active sub?custodians appointed by the Depositary who might be relevant for the purposes of holding the Company’s investments are:

COUNTRY	NAME OF SUB-CUSTODIAN	REGULATOR
The Netherlands	The Bank of New York Mellon SA/NV	Financial Services and Markets Authority, Belgium
United States of America	The Bank of New York Mellon, New York	US Securities and Exchange Commission
France	The Bank of New York Mellon SA/NV	The Autorité des Marchés Financiers
The United Kingdom	Depositary and Clearing Centre (DCC) Deutsche Bank AG, London Branch	The Financial Conduct Authority
	The Bank of New York Mellon, New York	US Securities and Exchange Commission

The Global Sub-Custodian’s safekeeping fees are charged according to the jurisdiction in which the holdings are based. The majority of the Company’s assets attracted a fee of 0.0033% of their market value. Variable transaction fees were also chargeable.

The Depositary Agreement may be terminated by either party on giving notice of not less than 90 days.

COMPANY PROMOTION

The Company has appointed Frostrow to promote the Company’s shares to professional investors in the UK and Ireland. As investment company specialists, the Frostrow team provides a continuous, pro-active marketing, distribution and investor relations service that aims to promote the Company by encouraging demand for the shares.

Frostrow actively engages with professional investors, typically discretionary wealth managers, some institutions and a range of execution-only platforms. Regular engagement helps to attract new investors and retain existing shareholders, and over time results in a stable share register made up of diverse, long-term holders.

Frostrow arranges and manages a continuous programme of one-to-one meetings with professional investors around the UK. These include regular meetings with ‘gate keepers’, the senior points of contact responsible for their respective organisations’ research output and recommended lists. The programme of regular meetings also includes autonomous decision makers within large multi-office groups, as well as small independent organisations. Some of these meetings involve Lindsell Train, but most of the meetings do not, which means the Company is being actively promoted while Lindsell Train focuses on managing the portfolio. Over the course of the COVID-19 pandemic, many of these meetings have been through video conference.

The Company also benefits from involvement in the regular professional investor seminars run by Frostrow in major centres notably London and Edinburgh, or webinars which are focused on buyers of investment companies.

The creation and dissemination of information on the Company is also overseen by Frostrow. Frostrow produces all key corporate documents, monthly factsheets, Annual Reports and manages the Company’s website (www.finsburygt.com) and social media profile. All Company information and invitations to investor events, including updates from Lindsell Train on the portfolio and market developments, are regularly emailed to a growing database, overseen by Frostrow, consisting of professional investors across the UK and Ireland.

Frostrow maintains close contact with all the relevant investment trust broker analysts, particularly those from Winterflood, the Company’s corporate broker, but also others who publish and distribute research on the Company to their respective professional investor clients. Frostrow also engages Edison, a paid-for research provider, whose notes on the Company are freely available online to both professional and private investors.

The Company continues to benefit from regular press coverage, with articles appearing in respected publications that are widely read by both professional and self-directed private investors. The latter typically buy their shares via retail platforms, which account for a significant proportion of the Company’s share register. Over the years, Nick Train’s regular engagement with the press has resulted in a significant awareness of the Company’s investment proposition. This interaction with the press has been managed for many years by Quill Communications, who work closely with Frostrow to ensure regular press attendance at seminars and the Company’s AGM.

DIVERSITY

The Board supports the principle of boardroom diversity, of which gender is one important aspect.

The Company’s policy is that the Board should be comprised of directors who collectively display the necessary balance of professional skills, experience, length of service and industry knowledge and that appointments to the Board should be made on merit, against objective criteria, including diversity in its broadest sense. The objective of the policy is to have a broad range of approaches, backgrounds, skills, knowledge and experience represented on the Board. The Board believes that this will make the Board more effective at promoting the long-term sustainable success of the Company and generating value for all shareholders by ensuring there is a breadth of perspectives among the Directors and the challenge needed to support good decision making.

To this end achieving a diversity of perspectives and backgrounds on the Board will be a key consideration in any Director search process. The gender balance of three men and three women exceeds the original recommendation of Lord Davies’ report on Women on Boards. The Board is aware that new gender representation objectives have been set for FTSE 350 companies and that targets concerning ethnic diversity have been recommended for FTSE 250 companies. The Review set a target for each FTSE 100 Board to have at least one director of colour by 2021 and for each FTSE 250 Board to have the same by 2024.

ENGAGING WITH THE COMPANY’S STAKEHOLDERS

The following ‘Section 172’ disclosure, required by the Companies Act 2006 and the AIC Code, describes how the Directors have had regard to the views of the Company’s stakeholders in their decision-making.

Who?	Why?	How?
STAKEHOLDER GROUP	THE BENEFITS OF ENGAGEMENT WITH THE COMPANY’S STAKEHOLDERS	HOW THE BOARD, THE AIFM AND THE PORTFOLIO MANAGER HAVE ENGAGED WITH THE COMPANY’S STAKEHOLDERS
Investors	Clear communication of the Company’s strategy and the performance against the Company’s objective can help the share price trade at a narrower discount or a wider premium to its net asset value which benefits shareholders. New shares are issued to meet demand without net asset value per share dilution to existing shareholders. Increasing the size of the Company can benefit liquidity as well as spread costs. In an effort to try to eliminate discount volatility, that Directors introduced a discount control mechanism (“DCM”) in 2004. Under the DCM, the Company will normally buy in shares being offered on the stock market whenever the discount reaches a level of 5% or more and then either hold those shares in “treasury” or cancel them. Any shares held in treasury can later be sold back to the market if conditions permit.	Frostrow as AIFM, the Portfolio Manager and the Company’s broker, on behalf of the Board, complete a programme of investor relations throughout the year. In addition, the Chairman and the Senior Independent Director have continued to engage regularly with the Company’s larger shareholders. An analysis of the Company’s shareholder register is provided to the Directors at each Board meeting along with marketing reports from Frostrow. The Board reviews and considers the marketing plans on a regular basis. Reports from the Company’s broker are submitted to the Board on investor sentiment and industry issues. Key mechanisms of engagement include:
Portfolio Manager	Engagement with the Company’s Portfolio Manager is necessary to evaluate their performance against the Company’s stated strategy and to understand any risks or opportunities this may present. The Board ensures that the Portfolio Manager’s environmental, social and governance (“ESG”) approach is in line with standards elsewhere and is in line with the Board’s expectations. Engagement also helps ensure that Portfolio Management costs are closely monitored and remain competitive.	The Board meet regularly with the Company’s Portfolio Manager throughout the year both formally at the quarterly Board meetings and informally as needed for example during the COVID-19 pandemic where weekly meetings were held at the start of the pandemic when markets were particularly volatile, reducing in frequency to monthly as markets became more stable. The Board also receives monthly performance and compliance reporting. The Portfolio Manager’s attendance at each Board meeting provides the opportunity for the Portfolio Manager and Board to further reinforce their mutual understanding of what is expected from both parties.
Service Providers	The Company contracts with third parties for other services including: depositary, investment accounting & administration as well as company secretarial and registrars. The Company ensures that the third parties to whom the services have been outsourced complete their roles in line with their service level agreements thereby supporting the Company in its success and ensuring compliance with its obligations. The Covid-19 pandemic has meant that it was vital to make certain there were adequate procedures in place at the Company’s key service providers to ensure safety of their employees and the continued high quality service to the Company.	The Board and Frostrow engage regularly with other service providers both in one-to-one meetings and via regular written reporting. This regular interaction provides an environment where topics, issues and business development needs can be dealt with efficiently and collegiately. The Board together with Frostrow have maintained regular contact with the Company’s key service providers during the pandemic, as well as carrying out a review of the service providers’ business continuity plans and additional cyber security provisions. It is the Board’s belief that Frostrow and Lindsell Train are the most important service providers with relation to the success of the Company. It was therefore felt it was of great importance that the Company took a meaningful participation in each of their businesses.
Portfolio companies	Gaining a deeper understanding of the portfolio companies and their strategies as well as incorporating consideration of ESG factors into the investment process assists in understanding and mitigating risks of an investment as well as identifying future potential opportunities.	The Board encourages the Company’s Portfolio Manager to engage with companies and in doing so expects ESG issues to be a key consideration. The Board receives an update on Lindsell Train’s engagement activities within a dedicated quarterly ESG report.
The Company’s lender	Investment trusts have the ability to borrow with a view to enhancing long term returns to shareholders.  Engagement with the Company’s lender ensures that it fully understands the nature of the Company’s business, the strategy adopted by the Portfolio Manager and the extent to which the Company complies with its loan covenants.	Regular reporting to the lender with respect to adherence with loan covenants and ad hoc meetings with the AIFM.

What?	Outcomes and actions
WHAT WERE THE KEY TOPICS OF ENGAGEMENT?	WHAT ACTIONS WERE TAKEN, INCLUDING PRINCIPAL DECISIONS?
Key topics of engagement with investors
Ongoing dialogue with shareholders concerning the strategy of the Company, performance and the portfolio.	The Portfolio Manager, Frostrow and the broker meet regularly with shareholders and potential investors to discuss the Company’s strategy, performance and portfolio. The Chairman and Senior Independent Director meet with key shareholders from time to time.
Board Composition	The Board has in place a Board refreshment programme. Neil Collins and David Hunt retired during the year and Sandra Kelly joined the Board in October 2019. Anthony Townsend will retire at the forthcoming AGM to be held in February 2021 where Simon Hayes will succeed him as Chairman of the Board, and Sandra Kelly will become the Senior Independent Director. Since the year end James Ashton joined the Board on 14 October 2020.
Key topics of engagement with the external Portfolio Manager an ongoing basis are portfolio composition, performance, outlook and business updates.
The impact of Brexit upon their business and the portfolio. The impact of COVID-19 upon their business and how components in the portfolio have sought to take advantage of the pandemic, in particular through increased digitalisation.	No specific action required. The Board has received regular updates from the Portfolio Manager throughout the COVID?19 pandemic and its impact on investment decision making. In addition, the impact of new working practices adopted by the Portfolio Manager as a consequence of the pandemic have been reviewed by the Board.
The integration of ESG into the Portfolio Managers investment processes.	The Portfolio Manager reports regularly any ESG issues in the portfolio companies to the Board.
Other Service Providers
The Directors have frequent engagement with the Company’s other service providers through the annual cycle of reporting and due diligence meetings or site visits by Frostrow. This engagement is completed with the aim of maintaining an effective working relationship and oversight of the services provided.	No specific action required as the reviews of the Company’s service providers, have been positive and the Directors believe their continued appointment is in the best interests of the Company.
Continued compliance with covenants set out within the loan agreement between the Company and the lender.	No specific action was required due to compliance with loan covenants throughout the year.

COMMITTED TO RESPONSIBLE INVESTING

Responsible ownership

It is the Board’s view that, in order to achieve long-term success, companies need to maintain high standards of corporate governance and corporate responsibility. Therefore the Company expects the companies in which it is invested to comply with best practice in corporate governance matters, or to provide adequate explanation of any areas in which they fail to comply, whilst recognising that a different approach may be justified in special circumstances. In respect of UK companies, current best practice in corporate governance matters is set out in the Corporate Governance Code.

The Company also monitors the Environmental, Social and Governance (“ESG”) policies of the Portfolio Manager, given the likely influence of such factors on the long-term growth prospects of the companies in which they invest on the Company’s behalf. Whilst the Company’s Portfolio Manager is appraised of the Company’s approach to the stewardship of its assets and the importance of sound corporate governance, they use their discretion according to their knowledge of the relevant circumstances. The Portfolio Manager reports its compliance with the UK Stewardship Code, or equivalent legislation, to the Audit Committee each year.

The Portfolio Manager’s commitment to responsible investing is set out below which is in line with the direction from the Board:

Lindsell Train’s primary aim is to protect the real value of its clients’ capital over the long term. This is consistent with one of its key business principles, which calls them to invest its clients’ capital as they do their own. To achieve this aim, Lindsell Train invests in what they have determined to be “exceptional” companies - that is durable, cash generative businesses that achieve higher than average returns on capital - with the expectation of holding them for the very long term. It has historically found that such companies more often than not exhibit characteristics associated with good corporate governance and responsible business practices. Indeed, they believe that companies that observe high standards should increase their chances of survivability.

To that end Lindsell Train’s analysis and company engagement strategy seeks to incorporate all factors that it believes will affect the company’s ability to deliver long term sustainable value to shareholders. Such factors include, but are not limited to corporate strategy, operating performance, competitive positioning, governance, environmental factors (including climate change), social factors, remuneration, reputation and litigation risks, deployment of capital, regulation and any other risks or issues facing the business. Thus, whilst not a separate function, its evaluation of ESG factors is a natural part of its investment process and engaging with and monitoring investee companies is an integral element of its investment strategy.

As a product of its investment approach, Lindsell Train do not invest in capital intensive industries (energy, commodities or mining) or any companies involved in the extraction and production of coal, oil or natural gas. It also avoids industries that it judges to be sufficiently detrimental to society that they may be exposed to burdensome regulation or litigation that could impinge on financial returns (e.g. tobacco, gambling or arms manufacturers). Finally, a fortuitous outcome of Lindsell Train’s investment process is that a number of holdings in its portfolios play an important positive social role, for example through providing access to education or encouraging saving for the future.

From a corporate responsibility perspective, Lindsell Train are in the process of updating their UK Stewardship Code statement in response to the recently published 2020 Code. They engaged with the UK Financial Reporting Council as part of the 2019 Consultation and it is very much their intention that they will remain a signatory of the Code going forward.

Additionally, Lindsell Train became a signatory to the UN Principles for Responsible Investment in November 2019.

Earlier this year, Lindsell Train appointed Glass Lewis to assist the administration of its proxy voting process. It is their intention that proxy voting reports will be made publicly available on the Lindsell Train website in due course, in line with the expectations of the UK Stewardship Code 2020 and Shareholder Rights Directive II. Lindsell Train does not however outsource the proxy voting decisions, as this forms an important part of its investment process and proactive company engagement strategy. The Portfolio Manager maintains final decision making responsibility, which is based on its detailed knowledge of the companies in which it invests.

INTEGRITY AND BUSINESS ETHICS

The Company is committed to carrying out business in an honest and fair manner with a zero-tolerance approach to bribery, tax evasion and corruption. As such, policies and procedures are in place to prevent bribery and corruption. In carrying out its activities, the Company aims to conduct itself responsibly, ethically and fairly, including in relation to social and human rights issues.

As an investment trust with limited internal resource, the Company has little impact on the environment. The Company believes that high standards of ESG make good business sense and have the potential to protect and enhance investment returns. Consequently, the Portfolio Manager’s investment criteria ensure that ESG and ethical issues are taken into account and best practice is encouraged. The Board’s expectations are that its principal service providers have appropriate governance policies in place.

Anthony Townsend
Chairman

16 December 2020

 Statement of Directors’ Responsibilities

The Directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial period. Under that law the Directors have prepared the Company financial statements in accordance with United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law (United Kingdom Generally Accepted Accounting Practice).

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the return or loss of the Company for that period. In preparing the financial statements, the Directors are required to:

• select suitable accounting policies and then apply them consistently;
• state whether applicable United Kingdom Accounting Standards have been followed for the financial statements, subject to any material departures disclosed and explained in the financial statements;
• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information;
• make judgements and accounting estimates that are reasonable and prudent; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

The Directors are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements and the Directors’ Remuneration Report comply with the Companies Act 2006. The Directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

RESPONSIBILITY STATEMENT

The Directors consider that the annual report and accounts, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company’s position and performance, business model and strategy.

Each of the Directors confirm that, to the best of their knowledge:

• the company financial statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”, and applicable law (United Kingdom Generally Accepted Accounting Practice) United Kingdom Accounting Standards, comprising FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland”), and applicable law (United Kingdom Generally Accepted Accounting Practice), give a true and fair view of the assets, liabilities, financial position and loss of the company; and
• the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

Approved by the Board of Directors and signed on its behalf by

Anthony Townsend
Chairman

16 December 2020

Note to those who access this document by electronic means:

The annual report for the year ended 30 September 2020 has been approved by the Board of Finsbury Growth & Income Trust PLC. Copies of the annual report are circulated to shareholders and, where possible to potential investors. It is also made available in electronic format for the convenience of readers. Printed copies are available from the Company Secretary’s office in London.

Financial Statements / Income Statement

for the year ended 30 September 2020

		YEAR ENDED 30 SEPTEMBER 2020			YEAR ENDED 30 SEPTEMBER 2019
		REVENUE	CAPITAL	TOTAL	REVENUE	CAPITAL	TOTAL
	NOTE	£000	£000	£000	£000	£000	£000
(Losses)/gains on investments at fair value through profit or loss	9	–	(168,895)	(168,895)	–	242,306	242,306
Currency translations		–	(57)	(57)	–	(125)	(125)
Income	2	40,373	–	40,373	39,680	–	39,680
AIFM and Portfolio management fees	3	(3,381)	(6,864)	(10,245)	(3,045)	(6,181)	(9,226)
Other expenses	4	(1,194)	(19)	(1,213)	(1,199)	–	(1,199)
Return/(loss) on ordinary activities before finance charges and taxation		35,798	(175,835)	(140,037)	35,436	236,000	271,436
Finance charges	5	(209)	(427)	(636)	(275)	(557)	(832)
Return/(loss) on ordinary activities before taxation		35,589	(176,262)	(140,673)	35,161	235,443	270,604
Taxation on ordinary activities	6	(736)	–	(736)	(847)	–	(847)
(Loss)/return on ordinary activities after taxation		34,853	(176,262)	(141,409)	34,314	235,443	269,757
(Loss)/return per share – basic and diluted	7	16.5p	(83.6p)	(67.1p)	18.3p	125.5p	143.8p

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; therefore no separate statement of Total Comprehensive Income has been presented.

The notes form part of these Financial Statements.

Financial Statements / Statement of Changes in Equity

for the year ended 30 September 2020

	CALLED UP SHARE CAPITAL £000	SHARE PREMIUM ACCOUNT £000	CAPITAL REDEMPTION RESERVE £000	CAPITAL RESERVE £000	REVENUE RESERVE £000	TOTAL SHARE-HOLDERS’ FUNDS £000
At 1 October 2019	50,203	904,320	3,453	875,981	44,803	1,878,760
Net (loss)/return from ordinary activities	–	–	–	(176,262)	34,853	(141,409)
Second interim dividend (8.6p per share) for the year ended 30 September 2019	–	–	–	–	(17,297)	(17,297)
First interim dividend (8.0p per share) for the year ended 30 September 2020	–	–	–	–	(16,923)	(16,923)
Issue of shares	4,235	135,100	–	–	–	139,335
Repurchase of Shares into treasury	–	–	–	(3,394)	–	(3,394)
Sale of Shares from treasury	–	90	–	3,368	–	3,458
At 30 September 2020	54,438	1,039,510	3,453	699,693	45,436	1,842,530

	CALLED UP SHARE CAPITAL £000	SHARE PREMIUM ACCOUNT £000	CAPITAL REDEMPTION RESERVE £000	CAPITAL RESERVE £000	REVENUE RESERVE £000	TOTAL SHARE-HOLDERS’ FUNDS £000
At 1 October 2018	43,423	684,726	3,453	643,037	37,151	1,411,790
Net return from ordinary activities	–	–	–	235,443	34,314	269,757
Reclassification of the special dividend from Dr Pepper Snapple*	–	–	–	(2,499)	2,499	–
Second interim dividend (8.1p per share) for the year ended 30 September 2018	–	–	–	–	(14,077)	(14,077)
First interim dividend (8.0p per share) for the year ended 30 September 2019	–	–	–	–	(15,084)	(15,084)
Issue of shares	6,780	219,747	–	–	–	226,527
Cost of share issuance	–	(153)	–	–	–	(153)
At 30 September 2019	50,203	904,320	3,453	875,981	44,803	1,878,760

During the 2019 financial year, a special dividend paid by Keurig Dr Pepper Snapple in July 2018, was in part, reclassified as a revenue item. This had previously been classified as capital in nature. Further details can be found in the Company’s 2019 Annual Report.

The notes form part of these Financial Statements.

Financial Statements / Statement of Financial Position

as at 30 September 2020

		2020	2019
	NOTE	£000	£000
Fixed assets
Investments held at fair value through profit or loss	9	1,851,588	1,888,834
Current assets
Debtors	10	8,277	10,243
Cash and cash equivalents		20,440	22,379
		28,717	32,622
Current liabilities
Creditors: amounts falling due within one year	11	(1,075)	(5,996)
Bank loan	12	–	(36,700)
		(1,075)	(42,696)
Net current assets/(liabilities)		27,642	(10,074)
Total assets less current liabilities		1,879,230	1,878,760
Creditors: amount falling due after more than one year
Bank loan	12	(36,700)	–
Net assets		1,842,530	1,878,760
Capital and reserves
Called up share capital	13	54,438	50,203
Share premium account		1,039,510	904,320
Capital redemption reserve		3,453	3,453
Capital reserve	14	699,693	875,981
Revenue reserve		45,436	44,803
Total shareholders’ funds		1,842,530	1,878,760
Net asset value per share	15	846.2p	935.6p

The Financial Statements were approved by the Board of Directors on 16 December 2020 and were signed on its behalf by:

Anthony Townsend

Chairman

The notes form part of these Financial Statements.

Company Registration Number SC013958 (Registered in Scotland)

Financial Statements / Statement of Cash Flows

for the year ended 30 September 2020

		2020	2019
	NOTE	£000	£000
Net cash inflow from operating activities before interest	18	26,587	27,436
Interest paid		(770)	(822)
Net cash inflow from operating activities		25,817	26,614
Investing activities
Purchase of investments		(160,703)	(221,806)
Sale of investments		23,689	11,444
Net cash outflow from investing activities		(137,014)	(210,362)
Financing activities
Dividends paid		(34,220)	(29,161)
Shares issued		143,471	222,391
Repurchase of Shares into treasury		(3,394)	–
Sale of Shares from treasury		3,458	–
Cost of share issuance		–	(153)
Net cash inflow from financing activities		109,315	193,077
(Decrease)/increase in cash and cash equivalents		(1,882)	9,329
Currency translations		(57)	(125)
Cash and cash equivalents at 1 October		22,379	13,175
Cash and cash equivalents at 30 September		20,440	22,379

The notes form part of these Financial Statements.

FINANCIAL STATEMENTS / NOTES TO THE FINANCIAL STATEMENTS

1. ACCOUNTING POLICIES

The Company is a public limited company (PLC) incorporated in the United Kingdom, with registered office of 50 Lothian Road, Festival Square, Edinburgh EH3 9WJ.

The principal accounting policies, all of which have been applied consistently throughout the year in the preparation of these Financial Statements, are set out below:

(a) Basis of preparation

The Financial Statements have been prepared under UK Company Law, FRS 102 ‘The Financial Reporting Standard applicable in the UK and Ireland’ and 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 October 2019 and the Companies Act 2006.

The financial statements have been prepared on a going concern basis. The disclosure on going concern on in the Statement of Directors’ Responsibilities forms part of these financial statements.

Presentation of the Income Statement

In order to reflect better the activities of an investment trust company and in accordance with the SORP, supplementary information which analyses the Income Statement between items of a revenue and capital nature has been presented alongside the Income Statement. The net revenue return is the measure the Directors believe appropriate in assessing the Company’s compliance with certain requirements set out in Sections 1158 and 1159 of the Corporation Tax Act 2010.

Significant judgements and key sources of estimation and uncertainty

There were no significant judgements, estimates and uncertainty reported during the financial year ended 30 September 2020 (2019: none).

(b) Investments held at fair value through profit or loss

As the Company’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 held at fair value through profit or loss and are initially recognised at fair value. The Company manages and evaluates the performance of these investments on a fair value basis in accordance with its investment strategy, and information about the investments is provided internally on this basis to the Board. Fair value for quoted investments is deemed to be bid market prices, or last traded price, depending on the convention of the stock exchange on which they are quoted.

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 a capital item.

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/disposal through the gains on investment at fair value through profit or loss. The total of such expenses, showing the total amounts included in disposals and acquisitions are disclosed in note 9.

(c) Income

Dividends receivable from equity shares are recognised in Revenue on an ex-dividend basis except where, in the opinion of the Board, the dividend is Capital in nature, in which case it is included in Capital. Overseas dividends are stated gross of any withholding tax.

When the Company has elected to receive scrip dividends in the form of additional shares rather than cash, the amount of cash dividend foregone is recognised in Revenue.

Fixed returns on non-equity shares are recognised on a time apportionment basis.

Special dividends: In deciding whether a dividend should be regarded as a Capital or Revenue receipt, the Company reviews all relevant information as to the reasons for and sources of the dividend on a case by case basis depending upon the nature of the receipt. Special dividends of a revenue nature are recognised through the revenue column of the Income Statement. Special Dividends of a capital nature are recognised through the capital column of the Income Statement.

The limited liability partnership (LLP) profit share is recognised in the financial statements when the entitlement to the income is established.

Deposit interest receivable is taken to revenue on an accruals basis.

(d) Dividends payable

Dividends paid by the Company on its shares are recognised in the Financial Statements in the period in which they become payable and are shown in the Statement of Changes in Equity.

(e) Expenditure and Finance Charges

All the expense and finance costs are accounted for on an accruals basis. Expenses are charged through the revenue column of the Income Statement except as follows:

1. expenses which are incidental to the acquisition or disposal of an investment are treated as part of the cost or deducted from proceeds of that investment (as explained in 1(b) above);
2. expenses are taken to the Capital reserve via the capital column of the Income Statement, where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In line with the Board’s expected long term split of returns, in the form of capital gains and income from the Company’s portfolio, 67% of the portfolio management fee, AIFM fee and finance costs are taken to the Capital reserve and the balance to the Revenue reserve.

(f) Taxation

Current tax is provided at the amounts expected to be paid or recovered.

Deferred taxation is provided on all timing differences that have originated but not been reversed by the Statement of Financial Position date other than those differences regarded as permanent. This is subject to deferred tax assets only being recognised if it is considered more likely than not that there will be suitable profits from which the reversal of timing differences can be deducted. Any liability to deferred tax is provided for at the rate of tax enacted or substantially enacted.

Any tax relief obtained in respect of AIFM and portfolio management fees, finance costs and other capital expenses charged are allocated to the capital column of the Income Statement.

(g) Foreign currency

Transactions recorded in overseas currencies during the year are translated into Sterling at the exchange rates ruling at the date of the transaction. Assets and liabilities denominated in overseas currencies at the Statement of Financial Position date are translated into sterling at the exchange rate ruling at that date. Profits or losses on the translation of foreign currency balances, whether realised or unrealised are credited or debited to the Income Statement.

(h) Cash and Cash Equivalents

Cash and cash equivalents and demand deposits readily convertible to known amounts of cash and subject to insignificant risk of changes in value are defined as cash.

(i) Bank Loan

Bank loans are recognised at cost, being the fair value of the consideration received. Any issue costs are charged in the year in which they are incurred. The amounts falling due for repayment within one year are included under current liabilities in the Statement of Financial Position and amounts falling due after one year are included under “Creditors: amounts falling due after more than one year” in the Statement of Financial Position.

(j) Nature and purpose of reserves

Capital redemption reserve

This reserve arose when ordinary shares were bought by the Company and subsequently cancelled, at which point the amount equal to the par value of the ordinary share capital was transferred from the ordinary share capital to the Capital Redemption reserve.

Capital reserve

This reserve reflects any:

• gains or losses on the disposal of investments;
• exchange differences of a capital nature;
• increases and decreases in the fair value of investments which have been recognised in the capital column of the Income Statement; and
• expenses which are capital in nature as disclosed in note 1(e).

Following amendments to the Company’s Articles of Association in 2015, this reserve can be used to distribute certain capital profits by way of dividend.

Revenue reserve

This reserve reflects all income and expenditure which are recognised in the revenue column of the income statement and is distributable by way of dividend.

2. INCOME

	2020 £000	2019 £000
Income from investments
UK listed dividends	34,236	32,728
Overseas dividends	5,629	6,500
Limited liability partnership – profit-share and priority profit share on AIFM capital contribution	508	451
Bank interest	–	1
Total income	40,373	39,680

3. AIFM AND PORTFOLIO MANAGEMENT FEES

			2020			2019
	REVENUE	CAPITAL	TOTAL	REVENUE	CAPITAL	TOTAL
	£000	£000	£000	£000	£000	£000
AIFM fee	845	1,716	2,561	761	1,545	2,306
Portfolio management fee	2,536	5,148	7,684	2,284	4,636	6,920
Total fees	3,381	6,864	10,245	3,045	6,181	9,226

4. OTHER EXPENSES

			2020			2019
	REVENUE	CAPITAL	TOTAL	REVENUE	CAPITAL	TOTAL
	£000	£000	£000	£000	£000	£000
Directors’ fees	168	–	168	166	–	166
Auditors’ fees –
statutory annual audit	48	–	48	29	–	29
Stock listing and FCA fees	353	–	353	322	–	322
Depositary’s fees	192	–	192	169	–	169
Custody fees	96	–	96	91	–	91
Registrar’s fees	59	–	59	72	–	72
Promotional costs	51	–	51	62	–	62
Legal and professional fees*	16	19	35	9	–	9
Printing and postage	30	–	30	74	–	74
Company broker fees	27	–	27	36	–	36
Other expenses	154	–	154	169	–	169
Total expenses	1,194	19	1,213	1,199	–	1,199

* During the year the Company incurred additional legal fees totalling £29,000, in relation to the renewal of the Company’s loan facility, of which 67% has been charged to capital and 33% charged to revenue. This is in line with the Company’s accounting policy.

Further details of the amounts paid to Directors are included in the Directors’ Remuneration Report.

All of the above expenses include VAT where applicable, with the exception of the fees paid to the Company’s Auditors, which are shown excluding VAT.

5. FINANCE CHARGES

			2020			2019
	REVENUE	CAPITAL	TOTAL	REVENUE	CAPITAL	TOTAL
	£000	£000	£000	£000	£000	£000
Interest payable on bank loan	184	373	557	230	467	697
Arrangement fee	12	26	38	–	–	–
Loan facility expenses	13	28	41	45	90	135
	209	427	636	275	557	832

6. TAXATION ON ORDINARY ACTIVITIES

(a) Analysis of charge in the year

			2020			2019
	REVENUE	CAPITAL	TOTAL	REVENUE	CAPITAL	TOTAL
	£000	£000	£000	£000	£000	£000
UK Corporation tax at 19%
(2019: 19%)	–	–	–	–	–	–
Overseas withholding tax	880	–	880	1,150	–	1,150
Recoverable overseas withholding tax	(144)	–	(144)	(303)	–	(303)
	736	–	736	847	–	847

(b) Factors affecting current tax charge for year

The tax assessed for the year is higher (2019: lower) than the standard rate of UK corporation tax of 19% (2019: 19%). The differences are explained below:

			2020			2019
	REVENUE	CAPITAL	TOTAL	REVENUE	CAPITAL	TOTAL
	£000	£000	£000	£000	£000	£000
Total return on ordinary activities before taxation	35,589	(176,262)	(140,673)	35,161	235,443	270,604
Return on ordinary activities multiplied by UK corporation tax of 19% (2019: 19%)	6,762	(33,490)	(26,728)	6,681	44,734	51,415
Effects of:
Overseas taxation	736	–	736	847	–	847
Franked investment income not subject to corporation tax – UK dividend income	(6,504)	–	(6,504)	(6,218)	–	(6,218)
Overseas dividends not taxable	(1,070)	–	(1,070)	(1,236)	–	(1,236)
Excess management and loan expenses	812	–	812	773	–	773
Amounts charged to capital	–	1,389	1,389	–	1,280	1,280
Non-taxable losses/(gains) on investments*	–	32,090	32,090	–	(46,038)	(46,038)
Currency translations	–	11	11	–	24	24
Total tax charge for the year (note 6(a))	736	–	736	847	–	847

* Losses/(gains) on investments are not subject to corporation tax within an investment trust company.

(c) Provision for deferred taxation

As at 30 September 2020, the Company had unutilised management expenses and other reliefs for taxation purposes of £98,428,000 (2019: £86,943,000). It is unlikely that the Company will generate sufficient taxable income in excess of the available deductible expenses and therefore the Company has not recognised a deferred tax asset of £18,701,000 (2019: £14,780,000) based on the corporation tax rate of 19% (2019: 17%).

Due to the company’s status as an investment company and the intention to continue meeting the conditions required to maintain such a status in the foreseeable future, the Company has not provided for deferred tax on any capital gains or losses arising on the revaluation or disposal of investments.

7. (LOSS)/RETURN PER SHARE – BASIC AND DILUTED

	2020	2019
	£000	£000
The (loss)/return per share is based on the following figures:
Revenue return	34,853	34,314
Capital (loss)/return	(176,262)	235,443
Total (loss)/return	(141,409)	269,757
Weighted average number of shares in issue during the year	210,795,674	187,655,152
Revenue return per share	16.5p	18.3p
Capital (loss)/return per share	(83.6)p	125.5p
Total (loss)/return per share	(67.1)p	143.8p

The calculation of the total, revenue and capital (loss)/returns per ordinary share is carried out in accordance with IAS 33, “Earnings per Share (as adopted in the EU)”.

As at 30 September 2020 and 2019 there were no dilutive instruments in issue, therefore the basic and diluted (loss)/return per share are the same.

8. DIVIDENDS

In accordance with FRS 102 dividends are included in the Financial Statements in the year in which they are paid or approved by shareholders.

	EX-DIVIDEND	REGISTER	PAYMENT	2020	2019
	DATE	DATE	DATE	£000	£000
First interim dividend of 8.0p per share (2019: 8.0p)	2 April 2020	3 April 2020	15 May 2020	16,923	15,084
Second interim dividend of 8.6p per share (2019: 8.6p)	8 October 2020	9 October 2020	13 November 2020	18,727	17,297

The second interim dividend of 8.6p per share (2019: 8.6p) 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 dividends payable in respect of the financial year which ensures compliance with Section 1158 of the Corporation Tax Act 2010 are set out below:

	2020	2019
	£000	£000
Revenue available for distribution by way of dividend for the year	34,853	34,314
Amount transferred to revenue reserves during the year	–	2,499
Adjusted revenue available for distribution by way of dividend	34,853	36,813
2020: First interim dividend of 8.0p per share (2019: 8.0p) paid on 15 May 2020	(16,923)	(15,084)
2020 Second interim dividend of 8.6p per share (2019: 8.6p) paid on 13 November 2020	(18,727)	(17,297)
Transfer (from)/net additions to revenue reserves	(797)	4,432

9. INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS

Analysis of portfolio movements

	2020	2019
	£000	£000
Opening book cost	1,093,373	874,556
Opening investment holding gains	795,461	557,116
Valuation at 1 October	1,888,834	1,431,672
Movements in the year:
Purchases at cost	155,338	226,300
Sales Proceeds	(23,689)	(11,444)
(Losses)/gains on investments	(168,895)	242,306
Valuation at 30 September	1,851,588	1,888,834
Closing book cost	1,244,210	1,093,373
Investment holding gains at 30 September	607,378	795,461
Valuation at 30 September	1,851,588	1,888,834

The Company received £23,689,000 (2019: £11,444,000) from investments sold in the year. The book cost of these investments when they were purchased was £4,502,000 (2019: £7,483,000). These investments have been revalued over time and until they were sold any unrealised gains/ losses were included in the fair value of the investments.

Purchase transaction costs for the year to 30 September 2020 were £512,000 (2019: £1,070,000). These comprise of stamp duty costs of £449,000 (2019: £976,000) and commission of £63,000 (2019: £94,000). Sales transaction costs for the year to 30 September 2020 were £8,000 (2019: £1,000) and comprise commission.

10. DEBTORS

	2020	2019
	£000	£000
Amounts due from brokers in respect of shares issued by the Company	–	4,136
Accrued return of capital	623	–
Prepayments and accrued income	7,654	6,107
	8,277	10,243

11. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

	2020	2019
	£000	£000
Amounts due to brokers	–	4,742
Other creditors and accruals	1,075	1,254
	1,075	5,996

12. BANK LOAN

	2020	2019
	£000	£000
Bank loan	36,700	36,700

Scotiabank Europe PLC, the provider of the Company’s loan facility, has a fixed and floating charge over the assets of the Company as security against any funds drawn down under the loan facility. The multi-currency revolving loan facility of £50 million (with an additional £50 million available if required) was renewed on 4 October 2019 for a further three years, at more favourable terms. This replaced the previous loan facility of £75 million with an additional £25 million option.

The main covenant under the loan facility required that, at each month end, total borrowings should not exceed £100 million and the ratio of Adjusted Total Net Assets to Debt is not to be less than 4:1. There were no breaches of the covenant during the year.

The Board has set a gearing limit which must not exceed 25% of the Company’s Net Asset Value. (See the Strategic Report for further details).

13. CALLED UP SHARE CAPITAL

	2020	2019
	£000	£000
Allotted, issued and fully paid:
217,751,303 (2019: 200,811,712) ordinary shares of 25p each	54,438	50,203

During the year 16,939,591 (2019: 27,120,000) new ordinary shares were issued for consideration of £139,335,000 (2019: £226,527,000) being an average price of 822.54p (2019: 835.28p) per share.

In addition, the Company also bought back 505,409 shares into Treasury (2019: nil) for a consideration of £3,394,000 (2019: £nil). These shares were subsequently re-issued during the year at a consideration of £3,458,000 (2019: nil).

At the year end £nil was owed to the Company, (2019: £4,136,000) in relation to shares issued but not yet settled until after that date.

14. CAPITAL RESERVE

	CAPITAL RESERVE REALISED £000	CAPITAL RESERVE INVESTMENT HOLDING GAINS UNREALISED £000	2020 TOTAL £000	2019 TOTAL £000
At 1 October 2019	80,520	795,461	875,981	643,037
Net gains/(losses) on investments	19,188	(188,083)	(168,895)	242,306
Reclassification of the special dividend from Dr. Pepper Snapple	–	–	–	(2,499)
Sale of shares from treasury	3,368	–	3,368	–
Repurchase of shares into treasury	(3,394)	–	(3,394)	–
Expenses charged to capital	(6,883)	–	(6,883)	(6,181)
Finance costs charged to capital	(427)	–	(427)	(557)
Currency translations	(57)	–	(57)	(125)
At 30 September 2020	92,315	607,378	699,693	875,981

Under the terms of the Company’s Articles of Association, certain sums within “Capital Reserve” are available for distribution.

15. NET ASSET VALUE PER SHARE

	2020	2019
Net Assets (£000)	1,842,530	1,878,760
Number of shares in issue	217,751,303	200,811,712
Net asset value per share	846.2p	935.6p

As at 30 September 2020 and 2019 there were no dilutive instruments held, therefore the basic and diluted net asset value per share are the same.

16. TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES

Details of the relationship between the Company, Frostrow Capital LLP (“Frostrow”), and Lindsell Train Limited (“Lindsell Train”) are disclosed on the Company’s website (www.finsburygt.com).

The Company has an investment in Frostrow with a book cost of £825,000 (2019: £675,000) and a fair value of £3,950,000 (including the AIFM capital contribution of £750,000 (2019: 600,000)) as at 30 September 2020 (2019: £2,140,000).

The Company has an investment in The Lindsell Train Investment Trust plc, which is managed by Lindsell Train, with a book cost of £1,000,000 (2019: £1,000,000) and a fair value of £11,300,000 as at 30 September 2020 (2019: £13,500,000).

Details of the income received and fees payable to the AIFM are disclosed in notes 2 and 3 and details of the remuneration payable to the Portfolio Manager is detailed in note 3.

Details of the fees of all Directors can be found in note 4. There were no other material transactions during the year with the Directors of the Company.

17. 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 returns available for distribution.

The Company’s financial instruments comprise mainly of equity investments, cash balances, borrowings, 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 those where the Directors consider there to be a high inherent risk are set out in the Strategic Report.

Market risk

Market risk comprises three types of risk: market price risk, interest rate risk and currency risk.

Market price risk

As an investment company, performance is dependent on the performance of the underlying companies and securities in which it invests. The market price of investee companies’ shares is subject to their performance, supply and demand for the shares and investor sentiment regarding the company or the industry sector in which it operates. Consequently, market price risk is one of the most significant risks to which the Company is exposed.

At 30 September 2020, the fair value of the Company’s assets exposed to market price risk was £1,851,588,000 (2019: £1,888,834,000). If the fair value of the Company’s investments at the Statement of Financial Position date increased or decreased by 10%, while all other variables remained constant, the capital return and net assets attributable to shareholders for the year ended 30 September 2020 would have increased or decreased by £185,159,000 or 85.0p per share (2019: £188,883,000 or 94.1p per share).

No derivatives or hedging instruments are currently utilised to manage market price risk.

Interest rate risk

Interest rate risk is the risk that the fair value of future cash flows of a financial instrument will fluctuate because of changes in market interest rates.

Interest rate movement may affect:

• the interest payable on the Company’s variable rate borrowings
• the level of income receivable from variable interest securities and cash deposits
• the fair value of investments of fixed rate securities

The Company’s main exposure to interest rate risk during the year ended 30 September 2020 was through its three year £50,000,000 secured multi?currency committed revolving credit facility (with an additional £50 million facility available if required) with Scotiabank Europe PLC maturing in October 2022. Borrowings at the year-end amounted to £36,700,000 (2019: £36,700,000) at an interest rate of 1.10% (LIBOR plus 0.96% per annum).

If the above level of borrowing was maintained for a year a 1% increase/decrease in LIBOR would decrease/increase the revenue return by £121,000, (2019: £121,000), decrease/increase the capital return by £246,000 (2019: £246,000) and decrease/increase the net assets by £367,000 (2019: £367,000).

The weighted average interest rate, during the year, on borrowings under the above mentioned revolving credit facility was 1.57% (2019: 1.89%).

At 30 September 2020, the Company’s financial assets and liabilities exposed to interest rate risk were as follows:

	2020	2020	2019	2019
	WITHIN	MORE THAN	WITHIN	MORE THAN
	ONE YEAR	ONE YEAR	ONE YEAR	ONE YEAR
	£000	£000	£000	£000
Exposure to floating rates:
Assets
Cash and cash equivalents	20,440	–	22,379	–
Liabilities
Creditors: amount falling due within one year – borrowings on the loan facility	–	–	(36,700)	–
Creditors: amount falling due after more than one year – borrowings under the loan facility	–	(36,700)	–	–
Exposure to fixed rates:
Assets
Investments at fair value through profit or loss#	996	–	890	–
Liabilities	–	–	–	–

^# Celtic 6% cumulative convertible preference shares and Frostrow Capital LLP AIFM Investment

Currency risk

The Financial Statements are presented in sterling, which is the functional currency and presentational currency of the Company. At 30 September 2019, the Company’s investments, with the exception of four, were priced in sterling. The four exceptions were, Heineken, listed in the Netherlands, Remy Cointreau listed in France, Manchester United and Mondelez International, both of which are listed in the United States and all four represent 20.6% of the portfolio.

The AIFM and the Portfolio Manager monitor the Company’s exposure to foreign currencies on a continuous basis and regularly report to the Board. The Company does not hedge against foreign currency movements, but the Portfolio Manager takes account of the risk when making investment decisions.

Income denominated in foreign currencies is converted into sterling on receipt. The Company does not use financial instruments to mitigate the currency exposure in the period between its receipt and the time that the income is included in the Financial Statements.

Foreign currency exposure

At 30 September 2020 the Company held £198,104,000 (2019: £193,750,000) of investments denominated in U.S. dollars and £184,201,000 (2019: £167,538,000) in Euros.

Currency sensitivity

The following table details the sensitivity of the Company’s return after taxation for the year to a 10% increase or decrease in the value of sterling compared to the U.S. dollar and Euros (2019: 10% increase and decrease).

The analysis is based on the Company’s foreign currency financial instruments held at each Statement of Financial Position date.

If sterling had weakened against the U.S. dollar and Euros, as stated above, assuming all other variables remain constant, this would have had the following effect:

	2020	2019
	£000	£000
Impact on revenue return	175	134
Impact on capital return	42,472	40,017
Total return after tax/increase in shareholders’ funds	42,647	40,151

If sterling had strengthened against the foreign currencies as stated above, assuming all other variables remain constant, this would have had the following effect:

	2020	2019
	£000	£000
Impact on revenue return	(143)	(109)
Impact on capital return	(34,764)	(32,744)
Total return after tax/decrease in shareholders’ funds	(34,907)	(32,853)

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 disposal 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 which are considered to have a high credit rating.

– 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 AIFM and the Portfolio Manager.

– Cash is only held at banks that have been identified by the Board as reputable and of high credit quality. Bank of New York Mellon has a credit rating of Aa1 (Moodys) and AA- (S&P).

At 30 September 2020, the exposure to credit risk was £28,963,000 (2019: £32,912,000), comprising:

	2020	2019
	£000	£000
Fixed assets:
Non-equity investments (preference shares)	246	290
Current assets:
Other receivables (amounts due from brokers, dividends and priority profit share receivable)	8,277	10,243
Cash and cash equivalents	20,440	22,379
Total exposure to credit risk	28,963	32,912

Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with financial liabilities.

Liquidity risk is not considered significant as the majority of the Company’s assets are investments in quoted equities. As at 30 September 2020 96.7% of the investment portfolio could be liquidated within 30 days with 68.0% in seven days, based on average trading volumes taken from Bloomberg.

Liquidity risk exposure

Financial liabilities comprise:	30 SEPTEMBER 2020 £000	30 SEPTEMBER 2019 £000
Due within one month:
Balances due to brokers	–	4,742
Accruals	1,075	1,254
Bank loan	–	36,700
Due after three months and after one year
Bank loan	36,700	–

Fair value of financial assets and financial liabilities

Financial assets and financial liabilities are either carried in the Statement of Financial Position at their fair value or at a reasonable approximation of fair value.

Valuation of financial instruments

The Company measures fair values using the following fair value hierarchy that reflects the significance of the inputs used in making the measurements. Categorisation within the hierarchy has been determined on the basis of the lowest level input that is significant to the fair value measurement of the relevant asset as follows:

• Level 1 – quoted prices in active markets.
• Level 2 – prices of recent transactions for identical instruments.
• Level 3 – valuation techniques using observable and unobservable market data.

The financial assets and liabilities measured at fair value in the Statement of Financial Position are grouped into the fair value hierarchy at the reporting date as follows:

	LEVEL 1	LEVEL 2	LEVEL 3	TOTAL
AS AT 30 SEPTEMBER 2020	£000	£000	£000	£000
Equity investments	1,847,392	–	–	1,847,392
Limited liability partnership interest (Frostrow)	–	–	3,200	3,200
AIFM Capital contribution (Frostrow)	–	–	750	750
Preference share investments	246	–	–	246
	1,847,638	–	3,950	1,851,588
	LEVEL 1	LEVEL 2	LEVEL 3	TOTAL
AS AT 30 SEPTEMBER 2019	£000	£000	£000	£000
Equity investments	1,886,404	–	–	1,886,404
Limited liability partnership interest (Frostrow)	–	–	1,540	1,540
AIFM Capital contribution (Frostrow)	–	–	600	600
Preference share investments	290	–	–	290
	1,886,694	–	2,140	1,888,834

The unquoted investment in Frostrow, has been re-valued by the Directors during the year, using two unobservable market data sources, being Frostrow’s earnings and an agreed appropriate comparator multiple. In 2019, Frostrow was valued using an average of an adjusted revenue multiplier and an earnings multiplier.

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

	2020	2019
	£000	£000
Opening fair value	2,140	1,885
AIFM Capital Contribution (Frostrow)	150	50
Total gains included in gains on investments in the Income Statement	1,660	205
Closing fair value	3,950	2,140

If the earnings used in the valuation were to increase or decrease by 10% while all the other variables remained constant, the return and net costs attributable to shareholders for the year ended 30 September 2020 would have increased/decreased by £320,000 (2019: £154,000, applying the same assumptions as 2020).

Capital management objectives, policies and procedures

The structure of the Company’s capital is described in note 13 and details of the Company’s reserves are shown in the Statement of Changes in Equity.

The Company’s capital management objectives are:

• to ensure that it is able to continue as a going concern; and
• to achieve capital and income growth and to provide shareholders with a total return in excess of that of the FTSE All-Share Index through an appropriate balance of equity and debt.

The Board, with the assistance of the AIFM and the Portfolio Manager, regularly monitors and reviews the broad structure of the Company’s capital. These reviews include:

• the level of gearing, set at a limit in normal market conditions, is not to exceed 25% of the Company’s net assets, which takes account of the Company’s position and the views of the Board, the AIFM and the Portfolio Manager on the market;
• the extent to which revenue reserves should be retained or utilised; and
• ensuring the Company’s ability to continue as a going concern.

The Company’s objectives, policies and procedures for managing capital are unchanged from last year.

There were no breaches by the Company during the year of the financial covenants put in place by 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.

18. NET CASH INFLOW FROM OPERATING ACTIVITIES BEFORE INTEREST

	2020	2019
	£000	£000
Total (loss)/return before finance charges and taxation	(140,037)	271,436
Add/(deduct): capital loss/(gain) before finance charges and taxation	175,835	(236,000)
Net revenue before finance charges and taxation	35,798	35,436
Increase in accrued income and prepayments	(1,803)	(949)
(Decrease)/increase in creditors	(45)	249
Taxation – overseas withholding tax paid	(480)	(1,119)
AIFM, Portfolio management fees and other expenses charged to capital	(6,883)	(6,181)
Net cash inflow from operating activities	26,587	27,436

19. SUBSTANTIAL INTERESTS

At 30 September 2020 the Company held interests in 3% or more of any class of capital in the following entities:

COMPANY OR LIMITED LIABILITY PARTNERSHIP	SHARES HELD	2020 FAIR VALUE £000	% OF ISSUED SHARE CAPITAL OR LIMITED LIABILITY PARTNERSHIP INTEREST
A. G. Barr	4,480,000	21,817	4.0
Celtic	3,251,399	3,693	3.4
Frostrow Capital LLP (unquoted)+	–	3,950	10.0
Manchester United	2,256,000	25,373	5.6
Lindsell Train Investment Trust*	10,000	11,300	5.0
Young & Co’s Brewery (non voting shares)	1,050,000	5,985	5.5

* Also managed by Lindsell Train Limited who receive a portfolio management fee based on the Company’s market capitalisation. The details of the fee arrangements with the Company are detailed within the Strategic Report.

+ Includes Frostrow Capital LLP’s AIFM investment, which is £750,000.

Appendix

PROPOSED CHANGES TO THE INVESTMENT POLICY

The new investment policy for the Company, as proposed in resolution 16 within the notice of Annual General Meeting, is set out below. Changes to the existing policy, both the proposed material change and the previously implemented non-material changes, are marked in black-line.

INVESTMENT POLICY

The Company’s investment policy is to invest principally in the securities of companies either listed in the UK or otherwiseincorporated, domiciled or having significant business operations within the UK, whilstquoted companies, although up to a maximum of 20% of the Company’s portfolio, at the time of acquisition, can be invested in companies not meeting this criteria.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 will normally comprise up toapproximately 30 investments. This level of concentration may lead to an investmentreturn which is materially different from the Company’s benchmark index and may be considered to carry above average risk.

Unless driven by market movements, securities in FTSE 100 companies and comparable companies listed on an overseas stock exchange, including preference shares issued by such companies, 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. will normally be invested in companies within the FTSE 350.

The Company will not invest more than 15% of the Company’s net assets, at the time of acquisition, in the securities of any single issuer. For the purposes of this limit only, net assets shall exclude the value of the Company’s investment in Frostrow Capital LLP.

The Company does not and will not invest more than 15%, in aggregate, of the value of the gross assets of the Company in other listed closed ended investment companies (including investment trusts). Further, the Company does not and will not invest more than 10%, in aggregate, of the value of its gross assets in other listed closed ended investment companies (including investment trusts), except where the investment companies themselves have stated investment policies to invest no more than 15% of their gross assets in other listed closed ended investment companies (including investment trusts).

The Company has the ability to invest up to 25% of its gross assets in preference shares, bonds and other debt instruments, although no more than 10% of any one issue may be held.

In addition, a maximum of 10% of the Company’s gross assets can be held in cash, where the Portfolio Manager believes market or economic conditions make equity investment unattractive or while seeking appropriate investment opportunities or to maintain liquidity.

The Company’s gearing policy is that gearing will not exceed 25% of the Company’s net assets.

No investment will be made in any company or fund managed by the Portfolio Manager without the prior approval of the Board.

In accordance with the Listing Rules of the Financial Conduct Authority (“FCA”), the Company can only make a material change to its investment policies with the approval of its shareholders.

2020 Accounts 

The figures and financial information for 2020 are extracted from the Annual Report and financial statements for the year ended 30 September 2020 and do not constitute the statutory accounts for the year.  The Annual Report and financial statements include the Report of the Independent Auditor which is unqualified and does not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.  The Annual Report and financial statements have not yet been delivered to the Registrar of Companies.

2019 Accounts

The figures and financial information for 2019 are extracted from the published Annual Report and financial statements for the period ended 30 September 2020 and do not constitute the statutory accounts for that year.  The Annual Report and financial statements have been delivered to the Registrar of Companies and included the Report of the Independent Auditor which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

Annual report and financial statements

Copies of the Annual Report and financial statements will be posted to shareholders in early January 2021 and will be available on the Company’s website (www.finsburygt.com) or in hard copy format from the Company Secretary.

The Company's Annual Report for the period ended 30 September 2020 has been submitted to the Financial Conduct Authority and will shortly be available for inspection on the National Storage Mechanism (NSM) via?https://data.fca.org.uk/#/nsm/nationalstoragemechanism. 

The Annual General Meeting will be webcast on Wednesday, 17 February 2021.

Neither the contents of the Company's website nor the contents of any website accessible from hyperlinks on the Company's website (or any other website) is incorporated into, or forms part of, this announcement.

-ENDS-

For further information please contact

Victoria Hale

Company Secretary

For and on behalf of Frostrow Capital LLP

020 3170 8732