Finsbury Growth & Income Trust Plc - Final Results

8 December 2022

Finsbury Growth & Income Trust PLC

(the “Company”)

This announcement contains regulated information

Annual Financial Report for the year ended 30 September 2022

STRATEGIC REPORT / COMPANY SUMMARY

Finsbury Growth & Income Trust PLC is a listed investment company, its shares are quoted 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 2022 were £1,830.4 million (2021: £2,064.7 million) and the market capitalisation was £1,725.9 million (2021: £1,970.9 million).

DIVIDENDS

A first interim dividend of 8.3p per share was paid on 13 May 2022 to shareholders registered at close of business on 1 April 2022. The associated ex-dividend date was 31 March 2022.

A second interim dividend of 9.8p per share was paid on 4 November 2022 to shareholders registered at close of business on 30 September 2022. The associated ex-dividend date was 29 September 2022.

The total dividend declared for the year was therefore 18.1p per share (2021: 17.1p per share), an increase of 5.8%.

STRATEGIC REPORT / COMPANY PERFORMANCE

KEY FACTS

848.4p Net asset value per share 2021: 917.7p (change: -7.6%)	(5.8)% Net asset value per share total return*,^ 2021: +10.6%	(5.6)% Share price total return*,^ 2021: +6.3%
800.0p Share price 2021: 876.0p (change: -8.7%)	£1.830bn Shareholders’ funds† 2021: £2.065bn (change: -11.4%)	215,737,992 (excluding 9,253,311 shares held in treasury) Number of shares in issue 2021: 224,991,303 (treasury shares 2021: Nil) (change: -4.1%)
5.7% Discount of share price to net asset value per share^ 2021: 4.5%	0.60% Ongoing charges^ 2021: 0.62%	1.2% Gearing^ 2021: 0.3%
(53.4)p (Loss)/return per share† 2021: +88.0p
84.8% Active Share*^ 2021: 86.0%
18.1p Total dividends per share for the year† 2021: 17.1p (change: +5.8%)

* Source – Morningstar

^ Alternative Performance Measure (see glossary)

^† UK GAAP Measure

FIVE YEAR PERFORMANCE SUMMARY

	30 SEP	30 SEP	30 SEP	30 SEP	30 SEP
	2018	2019	2020	2021	2022
Share price	818.0p	942.0p	840.0p	876.0p	800.0p
Share price total return* ^	+13.2%	+17.4%	(9.0)%	+6.3%	(5.6)%
Net asset value per share	812.8p	935.6p	846.2p	917.7p	848.4p
Net asset value per share total return* ^	+13.1%	+17.4%	(7.7)%	+10.6%	(5.8)%
FTSE All-Share Index total return** #	+5.9%	+2.7%	(16.6)%	+27.9%	(4.0)%
Total (loss)/return per share†	93.6p	143.8p	(67.1)p	88.0p	(53.4)p
Dividends per share†	15.3p	16.6p	16.6p	17.1p	18.1p

* Source: Morningstar

** Source: FTSE International Limited (“FTSE”) © FTSE, 2022

^# See glossary of terms and alternative performance measures)

^ Alternative Performance Measure (“APM”) (see glossary)

^† UK GAAP Measure

The Company was incorporated in Scotland on 15 January 1926. Lindsell Train Limited (“Lindsell Train”) was appointed as Portfolio Manager in December 2000. The total return of the Company’s share price over the ten years to 30 September 2022 has been 165.7%, equivalent to a compound annual return of 10.3%. This compares with a total return of 79.5%* from the Company’s benchmark, equivalent to a compound annual return of 6.0%*.

* Source: Morningstar, FTSE International Limited (“FTSE”) © FTSE2022

STRATEGIC REPORT / KEY PERFORMANCE INDICATORS

The Board reviews the performance of the portfolio in detail and hears the views of the Portfolio Manager at each meeting.

Information on the Company’s performance is provided in the Chairman’s Statement and the Portfolio Manager’s Review.

This performance is assessed against the following KPIs which are unchanged from last year with the exception of Dividend Per Share.

Alternative Performance Measures (“APM”)

The Board believes that each of the APMs, which are typically used within the investment trust sector, provides additional useful information to the shareholders in order to assess the Company’s performance between reporting periods and against its peer group. The measures used for the year under review have remained consistent with the prior year. Further information on each of the APMs can be found in the glossary.

^ Alternative Performance Measure (see glossary)

† UK GAAP Measure

* Source: Morningstar

(5.8)%

NET ASSET VALUE TOTAL RETURN^{^*}

This reflects the change in the Company’s net asset value including the impact of reinvested dividends.

During the year under review the Company’s net asset value per share total return was -5.8% (2021: +10.6%).

(53.4)p

(LOSS)/RETURN PER SHARE^†

The total loss per share for the year was 53.4 pence per share (2021: return of 88.0 pence per share).

Over five years, the Company earned a total of 204.9 pence per share.

See the chart below for the five year history.

18.1p

DIVIDENDS PER SHARE^†

The total dividend declared for the year was 18.1p per share

(2021: 17.1p per share), an increase of 5.8%.

(5.6)%

SHARE PRICE TOTAL RETURN^{^*}

This reflects the change in the value of the Company’s share price including the impact of reinvested dividends.

During the year under review the Company’s share price total return was -5.6% (2021: +6.3%).

Over five years, the share price total return was +21.5%.

(1.6)%

RELATIVE PERFORMANCE TO BENCHMARK AND PEER GROUP

The Company’s benchmark is the FTSE All-Share Index (total return) which delivered a return of -4.0% (2021: +27.9%) over the year. This compares with the Company’s share price total return of -5.6% (2021: +6.3%).

Over five years the share price total return was 21.5% compared with the Company’s benchmark which delivered a return of 11.3%.

The Board also monitors the Company’s net asset value per share return against its AIC peer group^. As at 30 September 2022 the Company’s ranking against its peer group of UK growth and income sector investment trusts was:

	Rank out of 23
Period	2022	2021
1 yr	6	21
3 yr	17	9
5 yr	4	2
10 yr	1	3

(5.7)%

SHARE PRICE DISCOUNT/ PREMIUM TO NET ASSET VALUE PER SHARE^{^}

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

No shares were issued by the Company during the year (2021: 7,240,000 new shares were issued by the Company 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 2022 the Company’s share price stood at a 5.7% discount to the Company’s net asset value per share (2021: 4.5% discount).

During the year, the Company bought back 9,253,311 shares into treasury (2021: Nil) at an average price of 826.9p and an average discount of 5.5%.

Since the year end the Company has purchased a further 1,668,897 shares to be held in treasury.

^ Alternative Performance Measure (see glossary)

* Source: Morningstar

STRATEGIC REPORT / CHAIRMAN’S STATEMENT

“Your Board continues to fully support the Portfolio Manager’s disciplined strategy of investing in high quality companies that own both durable and cash generative brands. It has delivered attractive returns over the longer-term and we believe firmly that this will continue to deliver strong investment returns to shareholders in the future.”

SIMON HAYES

CHAIRMAN

PERFORMANCE

I am disappointed to report that the total return of the Company’s net asset value per share for the year was -5.8% (2021: +10.6%).  Its benchmark (the FTSE All-Share Index) over the period was -4.0% (2021: +27.9%) and the share price total return was -5.6% (2021: +6.3%). 

The year under review has seen significant price volatility and shifts in investors’ risk appetites as companies and markets were buffeted by a relentless series of economic and geopolitical shocks, including rising interest rates and inflation, domestic political turmoil, and the many devastating effects of the war in Ukraine. This has led to poor absolute returns from most major asset classes, a strengthening dollar and a sell-off in more speculative equity sectors.

Looking to the Company’s own performance, the year saw marked differences between the first and second halves of the year, at least on a relative basis. In the six months to 31 March 2022, the Company underperformed its benchmark by some 6.9% (NAV, on a total return basis) and by 7.7% in share price terms; the difference between the two measures indicative of a widening discount over that period of the Company’s shares relative to its NAV. Conversely, in the second half of the year the Company’s net asset value total return exceeded the benchmark by 4.6% and the share price by 5.6%.

The Portfolio Manager’s concentrated approach results in a very different portfolio when compared with the constituents of the Company’s benchmark and demonstrates a high level of active management. The extent to which a portfolio differs from the benchmark can be quantified and expressed as a percentage (“Active Share”).

At 30 September 2022, the Company’s Active Share versus the FTSE All-Share Index was 84.8% (2021: 86.0%). Such an uncorrelated portfolio will inevitably perform very differently from its benchmark (positively or negatively) over different periods of time. We continue to believe that over time our investment approach, selecting companies with durable business models that generate consistently higher returns, will ultimately be reflected in the share prices of the companies we own and hence in the performance of the Company. This view is supported by the Company’s long-term performance record.

The Portfolio Manager’s report describes the Company’s investment philosophy, portfolio composition and performance in more detail.

SHARE BUY-BACKS

The Board keeps the Company’s discount under close review and is committed to buying back its own shares at or near the 5% level, in accordance with its policy.

While share buy-backs will not necessarily prevent the discount from widening further, particularly in times of market volatility, the Board believes that buy-backs enhance the net asset value per share for remaining shareholders, provide some additional liquidity and help to mitigate discount volatility which can damage shareholder returns.

Discounts are affected by many factors outside the Company’s control but where it is in Shareholders’ interests (taking account of market conditions), the Company remains committed to buying back shares at a discount to NAV, as demonstrated over the past year.

As at 30 September 2022 the discount was 5.7% compared with a closing discount at the last year end of 4.5%. During the year under review the Company bought back a total of 9,253,311 shares into treasury at a cost of approximately £76 million and at an average discount of 5.5%. Over the course of the year the Company’s discount averaged 5.2%.

As at the close of the UK market on 5 December 2022, the discount was 4.4%. Since the year end, a further 1,668,897 shares were bought back into treasury at a cost of £14.1 million. As at 5 December 2022, the Company had 214,069,095 shares in issue (excluding 10,922,208 shares held in treasury).

RETURN AND DIVIDEND

The Income Statement shows a total loss of 53.4p per share (2021: gain of 88.0p) consisting of a revenue return per share of 20.6p (2021: gain of 18.1p) and a capital loss per share of 74.0p (2021: gain of 69.9p).

Your Board has declared two interim dividends for the year totalling 18.1p per share (2021: 17.1p), an increase of 5.8%. In order to facilitate dividend payments on a timely and cost effective basis, your Board continues to elect to distribute the Company’s income to Shareholders by means of two interim dividends rather than wait several months to secure shareholder approval to pay a final dividend at the Annual General Meeting. This dividend policy will again be proposed for approval at the forthcoming Annual General Meeting.

LOAN FACILITY

As at 30 September 2022 a total of £36.7 million was drawn down under our £50 million facility (2021: £36.7 million).

This facility expired on 4 October 2022 and was renewed on that date for a three year term with an increased limit of £60 million, and the option of an additional £40 million. Further details can be found within the Report of the Directors and note 12 to the financial statements.

OUTLOOK

Your Board continues to fully support the Portfolio Manager’s disciplined strategy of investing in high quality companies that own both durable and cash generative brands. It has delivered attractive returns over the longer-term and we believe firmly that this will continue to deliver strong investment returns to shareholders in the future.

Our belief is clearly shared with our Portfolio Manager who has continued to buy shares in the Company during the year. Since December 2021, Nick Train and his family have acquired over 800,000 shares and currently speak for 2.2% of the equity of the Company (December 2021: 1.6%).

BOARD COMPOSITION

I am delighted to welcome Pars Purewal to our Board. Pars brings a wealth of knowledge of the investment company sector and his experience will complement that of existing colleagues. Pars will offer himself for election by shareholders at the 2023 Annual General Meeting (“AGM”).

ANNUAL GENERAL MEETING

The AGM of the Company this year will again be held at Guildhall, City of London EC2V 7HH (please use the Basinghall Street Entrance) on Tuesday, 17 January 2023 at 12 noon, and we hope as many Shareholders as possible will attend. This will be an opportunity to meet the Board and to receive a presentation from our Portfolio Manager.

The Board strongly encourages all Shareholders to exercise their votes in respect of the meeting in advance. Details of how Shareholders who hold their shares on retail platforms can vote is set out in the Notice of Meeting. Any shareholder who requires a hard copy form of proxy may request one from the Registrar, Link Group.

Simon Hayes

Chairman

7 December 2022

^ Alternative Performance Measure (see glossary)

STRATEGIC REPORT / INVESTMENT PORTFOLIO

PORTFOLIO SECTOR WEIGHTINGS 2022

Consumer Staples (“CS”)	43.4%
Financials (“F”)	22.2%
Consumer Discretionary (“CD”)	22.1%
Technology (“T”)	6.2%
Industrials (“I”)	6.1%

Source: Frostrow Capital LLP

GEOGRAPHICAL ALLOCATION^† 2022

United Kingdom	80.8%
United States of America	8.2%
France	5.8%
Netherlands	5.2%

Source: Frostrow Capital LLP

^† The Company’s investment policy attributes geographical location based on where companies are listed or otherwise incorporated, domiciled or having significant business operations.

INVESTMENTS AS AT 30 SEPTEMBER 2022

SECTOR	INVESTMENTS	FAIR VALUE 2021 £’000	NET INVEST-MENTS £’000	CAPITAL APPRECIATION/ (DEPRECIATION) £’000	FAIR VALUE 2022 £’000	% OF INVEST-MENTS	TOTAL RETURN/ (LOSS) £’000	CONTRI-BUTION PER SHARE (PENCE)
CS	Diageo	245,949	(30,535)	14,058	229,472	12.4	18,880	8.5
CD	RELX	230,416	(15,337)	6,694	221,773	12.0	12,059	5.4
F	London Stock Exchange	179,571	12,472	5,332	197,375	10.7	7,954	3.6
CS	Unilever	170,333	2,590	(1,363)	171,560	9.3	4,847	2.2
CS	Mondelez#	167,697	(41,242)	25,926	152,381	8.2	29,530	13.3
CD	Burberry	145,735	2,051	(737)	147,049	7.9	3,071	1.4
T	Sage	116,978	(261)	(2,059)	114,658	6.2	895	0.4
I	Experian	69,004	61,579	(18,318)	112,265	6.1	(16,801)	(7.5)
F	Schroders	167,290	501	(58,970)	108,821	5.9	(53,085)	(23.9)
CS	Remy Cointreau^	101,286	1,948	4,150	107,384	5.8	5,570	2.5
	Top 10 Investments				1,562,738	84.5
CS	Heineken†	97,280	3,547	(4,311)	96,516	5.2	(2,584)	(1.2)
F	Hargreaves Lansdown	109,724	1,242	(43,687)	67,279	3.6	(40,606)	(18.3)
CD	Manchester United#	32,683	217	(5,657)	27,243	1.5	(5,341)	(2.4)
CS	Fevertree	43,410	28,232	(44,929)	26,713	1.4	(43,276)	(19.5)
F	Rathbone Brothers	28,281	–	(5,292)	22,989	1.2	(4,140)	(1.9)
CS	A.G. Barr	23,162	(709)	(2,308)	20,145	1.1	(1,776)	(0.8)
F	The Lindsell Train Investment Trust plc	14,350	–	(4,630)	9,720	0.5	(4,100)	(1.8)
CD	Young & Co’s Brewery (non-voting)	9,072	(65)	(2,816)	6,191	0.3	(2,621)	(1.2)
F	Frostrow Capital LLPv*	5,200	(775)	300	4,725	0.3	994	0.5
CD	Celtic**	3,488	–	266	3,754	0.2	274	0.1
CD	Fuller Smith & Turner	4,970	(885)	(1,520)	2,565	0.1	(1,454)	(0.6)
CD	Cazoo#	–	13,257	(11,757)	1,500	0.1	(11,758)	(5.3)
CD	Daily Mail & General Trust (non-voting)	66,223	(64,782)	(1,441)	–	–	(347)	(0.2)
CD	Euromoney Institutional Investor	20,462	(19,009)	(1,453)	–	–	(1,246)	(0.6)
CD	Pearson	10,442	(9,969)	(473)	–	–	(473)	(0.2)
CS	PZ Cussons	8,260	(7,372)	(888)	–	–	(761)	(0.3)
	Total Investments	2,071,266	(63,305)	(155,883)	1,852,078	100.0
	Total Contributions to the net loss for the year						(106,295)	(47.8)
	Expenses, Currency Translations and Finance Charges~						(12,445)	(5.6)
	Loss on Ordinary Activities after Taxation						(118,740)	(53.4)

^# Listed in the United States

^ Listed in France

^† Listed in Netherlands

* Includes Frostrow Capital LLP AIFM Capital Contribution, fair value £125,000 (2021: £900,000). During the year £775,000 of this capital was repaid

^v Unquoted

** Includes Celtic 6% cumulative convertible preference shares, fair value £242,000 (2021: £236,000)

~ Net of £14,000 bank interest

STRATEGIC REPORT / PORTFOLIO MANAGER’S REVIEW

“For the benefit of my ego and, I hope, to cheer up readers of this report, can I nonetheless note that my investment performance improved in the second half of your Company’s financial year and outperformed – admittedly only by dint of falling less than the weak UK stock market. I sincerely hope this recent trend continues.”

NICK TRAIN

LINDSELL TRAIN LIMITED

PORTFOLIO MANAGER

It is disappointing to me to have to report on a second consecutive year of my underperformance of your Company’s benchmark. It has been particularly frustrating, given that the business performance of most of the companies in the portfolio has met or exceeded my expectations. Sometimes this happens. Other investors’ attention is turned to different areas of the stock market, or they disagree with my enthusiasm about the prospects for certain companies – leaving our investments for you becalmed, or worse.

Nowhere was this more apparent than in the shares of domestic UK wealth management companies: your holdings in Hargreaves Lansdown and Schroders have suffered a miserable year in terms of their share prices (along with others in this sector), even though their businesses have grown, as measured by increases in customer numbers or assets under management. I can only hope investor sentiment will improve towards the UK wealth management industry and, indeed, for the whole UK stock market.

For the benefit of my ego and, I hope, to cheer up readers of this report, can I nonetheless note that my investment performance improved in the second half of your Company’s financial year and outperformed – admittedly only by dint of falling less than the weak UK stock market. I sincerely hope this recent trend continues.

While there are some stock specific factors that help explain this improvement in relative investment performance, I believe it is more helpful to analyse it as resulting from a shift in investor preference – a shift back to favouring the sort of industries and companies that have always formed the backbone of your Company’s investment portfolio.

First, as 2022 has progressed, confidence in the sustainability of high valuations for young technology companies has waned – most obviously reflected in the just under 30% calendar year to date fall in the NASDAQ Index, but also in the falls of technology shares in many other jurisdictions.

Now, your portfolio does own some technology companies, or businesses that utilise technology to enhance their services, – for instance, Experian, Hargreaves Lansdown, London Stock Exchange, RELX and Sage. But these are very different businesses, coming from very different (lower) valuations than the latest generation of NASDAQ tech darlings, and our holdings have not, therefore, suffered from their share prices being hit so hard in recent months.

I would venture more and hope that these tech-advantaged UK companies have a chance to continue to do well as businesses (as they all have) and to do better as share prices. As a foretaste of that possibility, note, at the end of the Company’s year-end, London Stock Exchange shares were up 10% in calendar 2022. Meanwhile RELX shares, although down, are on track to outperform the FTSE All-Share Index for the 12th consecutive year (testament to the unheralded, but consistent way that RELX has succeeded in exceeding investors’ expectations for its business, year-in year-out).

Meanwhile, the alarming macro-economic disturbance afflicting many nations has also weakened investors’ confidence in the earnings power of cyclical businesses. As a result, we observe investors turning for their equity exposure to the shares of durable, conservatively-financed and steadily compounding companies – on the expectation their business operations are likely to be less adversely affected than the average. We own a lot of this type of company – deliberately so.

A review of our best performing portfolio constituents in the second half of your Company’s financial year endorses this analysis, with notable relative contributions from Diageo, Heineken, Mondelez and Sage, for instance. All of these are companies with, well-merited, reputations for predictable cash flows generated from brands or business franchises that their customers are likely to continue patronising in all but the most adverse economic circumstances.

In passing, it is noteworthy that there were also helpful share price gains in two big portfolio holdings where changes in senior management were announced during the last six months – namely Burberry and Unilever. No doubt those management changes have alerted investors to the possibility of change in business strategy (or even, perhaps, in ownership) and their share prices have risen accordingly. Certainly, we analyse the strategic value of Burberry and Unilever to be meaningfully higher than the value currently accorded either in the stock market.

It is a relief to be able to report better recent relative performance, albeit in tough market conditions. But here I must reassert the fundamental investment proposition we use to build your portfolio. This is that the shares of the “durable, conservatively-financed and steadily compounding companies” noted above, do not ONLY do well in relative terms during periods of difficult economic conditions – as they have recently. In fact, they should ALSO outperform (and make their investors attractive capital returns) over entire stock market and/or economic cycles. For instance, there are times when Diageo’s (credible) ambition to grow its annual sales at steady 6-7% per annum, with profits and earnings per share likely to be ahead of that, looks uninteresting – because investors believe they can get faster growth elsewhere. But over time, the remorseless reliability of Diageo’s growth should allow it to surpass that of others that may have shot ahead in the short term.

In summary – while it is easy to categorise our investment approach for the Company as purely “defensive”, we do not see it as such. Instead, it is my hope that by holding concentrated positions in such exceptional and predictable companies as those mentioned above and others – AG Barr, Experian, Fever-Tree, Rathbones, Remy Cointreau and, yes, Hargreaves Lansdown and Schroders – we can not only protect our shareholders’ savings in difficult times, but also generate competitive absolute returns over longer periods.

I have forborne from discussing macro-economic conditions in this report, though it is evident investors are currently thinking about little else. My reluctance to opine, is primarily because I know that we, and I don’t believe anyone else, can really know what is in store. I do know two things, though. First, your portfolio is largely invested in substantive companies which have survived and thrived through similarly challenging episodes in the past. Second, all investors, indeed most people on the planet, must earnestly hope this wretched war in Ukraine ends soon. I ask you to conceive the boost to consumer confidence and government finances that would result from peace breaking out and the likely reaction of stock markets around the world. That is not a prediction for Company’s new financial year, but it is a sincere hope.

Nick Train

Director,
Lindsell Train Limited

Portfolio Manager

7 December 2022

STRATEGIC REPORT / 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.

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

Information on how the Directors have discharged their duty under Section 172 of the Companies Act 2006 can be found within 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 company we have no executive directors, employees or internal operations. The Company delegates its day-to-day management to third parties. The principal service providers to the Company are Frostrow Capital LLP ("Frostrow") which acts as AIFM, company secretary and administrator; and Lindsell Train Limited ("Lindsell Train") which acts as Portfolio Manager. The Bank of New York Mellon (International) Limited is the Company’s Depositary.

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

STRATEGY FOR THE YEAR ENDED 30 SEPTEMBER 2022

Throughout the year under review, the Company continued to operate as an approved investment company, following its investment objective to achieve capital and income growth and to provide shareholders with a total return in excess of that of the FTSE All-Share Index. The Company’s performance is discussed in the Chairman’s Statement and the Portfolio Manager’s Review which explains investment performance.

During the year, the Board, AIFM and the Portfolio Manager undertook all ESG, strategic and administrative activities.

The Board is aware of the continued emphasis on ESG matters in recent years. The Portfolio Manager engages with all the companies in the portfolio to understand their ESG approach and has developed its own methodology to assess the carbon impact of the portfolio. Lindsell Train became a signatory of Net Zero Asset Managers (“NZAM”) in December 2021. This reflects Lindsell Train’s enhanced efforts as a firm to support the goal of net zero greenhouse gas emissions by 2050. Further details of the Portfolio Manager’s approach to ESG matters can be found in the Annual Report.

PORTFOLIO STRUCTURE

80.8% INVESTED IN UK DOMICILED COMPANIES	19.2% INVESTED GLOBALLY	93.2% FTSE 100 COMPANIES (AND COMPARABLE OVERSEAS COMPANIES)
84.5% TOP TEN HOLDINGS	1.2%^ GEARING	84.8%^ ACTIVE SHARE

^ Please see Glossary of Terms and Alternative Performance Measures.

INVESTMENT POLICY

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

The portfolio will normally comprise up to 30 investments. This level of concentration is likely to lead to an investment return which is materially different from the Company’s benchmark index and 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. Further, the Company does not and will not invest more than 10%, in aggregate, of the value of its gross assets in other listed closed ended investment companies except where the investment companies themselves have stated investment policies to invest no more than 15% of their gross assets in other listed closed ended investment companies.

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

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

The Company’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.

PERFORMANCE

Whilst the Board is disappointed that the Company has underperformed in the short term, the Portfolio Manager’s report explains why he believes that the Company’s portfolio remains appropriate. The Board fully supports the Portfolio Manager’s view.

Whilst performance is measured against the FTSE All-Share Index, the Company’s portfolio is constructed and managed without reference to a stock market index with the Portfolio Manager selecting investments based on his assessment of their long-term value.

NAV PER SHARE RECONCILIATION

The chart below shows the contribution (in pence per share) attributable to the various components of investment performance and costs, which together demonstrate the fall from the starting NAV for the year of 917.7 pence to the year-end NAV of 848.4 pence, after the payment of dividends to Shareholders.

PROSPECTS

The Board continues to fully support the Portfolio Manager’s strategy of investing in high quality companies that own both durable and cash generative brands. The Board firmly believes that this strategy will continue to deliver strong investment returns over the long term.

This is supported by the Company’s performance over the last ten years with a net asset value per share total return^ of 181.7% compared to a total return from the Company’s benchmark index of 79.5%.

^{^} Alternative Performance Measure (see glossary)

STRATEGIC REPORT / 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 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.

The Audit 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.

During the year, the Audit Committee conducted an exercise to identify and assess any new or emerging risks affecting the Company and to take any necessary actions to mitigate their impact. Further information can be found in the report of the Audit Committee in the Annual Report.

THE COMPANY'S APPROACH TO RISK MANAGEMENT

Movement during the year: No change,  Decreased,  Increased,  New risk included during the year

Movement	Principal Risks and Uncertainties	Key Mitigations
No change	Corporate Strategy The Company’s share price total return may differ materially from the NAV per share total return.	The Board operates a share buy-back policy which is intended to offer some protection against the share price widening beyond a 5% discount to NAV per share. There is also a share issuance programme which acts as a premium control mechanism. Further details of the Company’s share buy-back policy and premium control mechanism can be found on the Company’s website.
No change	The Company's investment mandate no longer appeals to investors leading to long-term selling pressure which threatens the stability of the Company.	At each meeting the Board reviews movements in the Company’s shareholder register. There are regular interactions and engagement with Shareholders (including at the AGM). Regular feedback from shareholders is received from the Company’s broker. In addition, the Chairman and the Senior Independent Director meet with key shareholders to ascertain views. The Company publishes its Active Share score in its monthly fact sheet for investors and in both the annual and half-yearly reports to highlight how different the portfolio is from the Company’s benchmark index.
No change	Investment Strategy and Activity The investment strategy adopted by the Portfolio Manager including the high degree of stock and sector 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 departure of a key individual at the Portfolio Manager may affect the Company’s performance.	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 Company publishes various measures and statistics in the monthly fact sheet and in both the annual and half-yearly reports, to highlight to investors the effects of the investment approach and to show how different the portfolio is from the Company’s benchmark index. These measures include number of holdings, Active Share and portfolio turnover. 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.
Increased	A global event such as the war in Ukraine or macro-economic disturbance such as rising interest rates and global inflation, ongoing supply chain issues and/or labour shortages may adversely impact the operational activities of 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. The Board holds monthly portfolio update meetings with the Portfolio Manager. The Portfolio Manager regularly engages with the portfolio companies to discuss any matters of concern that may effect operational activities.
No change	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 it is consistent with that expected by the Board. In addition the Board reviews the ESG activities of Lindsell Train to ensure progress is being made by portfolio companies. The Board also conducts an annual review of other service providers' policies in relation to internal controls and governance matters notably modern slavery, GDPR, cyber security and whistleblowing policies. The Portfolio Manager has developed a propriety system to assess the inherent and emerging ESG risks for the investment portfolio which the Portfolio Manager uses when engaging with the portfolio companies. This informs the decision to invest, retain or divest any portfolio investment.
No change	The adverse impact of climate change on the portfolio companies’ operational performance.	The Board receives quarterly ESG updates, which include an update on any climate change related engagement, from the Portfolio Manager together with monthly portfolio updates. The Board challenges the Portfolio Manager on ESG matters to ensure that the portfolio companies are acting in accordance with the Board’s ESG approach. The Portfolio Manager is a signatory to the UK Stewardship Code and actively engages with portfolio companies on ESG matters including climate change. Lindsell Train developed its own methodology to assess the carbon impact of the portfolio. Lindsell Train became a signatory of NZAM in December 2021. This reflects Lindsell Train’s enhanced efforts as a firm to support the goal of net zero greenhouse gas emissions by 2050. Details of the Company’s and Portfolio Manager’s ESG policies together with the weighted average carbon intensity of the portfolio companies are set out in the Annual Report.
No change	Shareholder Relations and Governance 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.
No change	Operational 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 updates from the AIFM of press references to the Company and its major service providers, the Board receives regular news on sector developments from the Company’s broker and from the AIC. The Board has the ability to replace any service provider which may be the source of reputational concerns.
No change	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 receives monthly compliance reviews and a 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.
No change	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.
No change	Accounting, Legal and Regulatory The regulatory environment in which the Company operates changes materially, affecting the Company’s modus operandi.	The Board monitors regulatory change with the assistance of the Company’s 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.
No change	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, the Association of Investment Companies (“AIC”) Statement of Recommended Practice (“SORP”), 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 (“DTRs”) 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. 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.
No change	Poor adherence to corporate governance best practice or errors or irregularities in published information could lead to censure and/or result in reputational damage to the Company.	The Board reviews all information supplied to shareholders and the AIFM’s marketing activity at each meeting. Details of the Company’s compliance with corporate governance best practice, including information on relationships with shareholders, are set out in the Corporate Governance Report in the Annual Report.

EMERGING RISKS

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 worst 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 and holds a separate session to review the register, mitigations and scoring of each risk. Emerging risks are discussed in detail as part of this process, and also throughout the year, to ensure that emerging as well as known risks are identified and, so far as practicable, mitigated. Any emerging risks and mitigations are added to the risk register.

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

During the year, the Board identified as an emerging risk, the deteriorating economic environment which impacts portfolio investments; and potentially, the Company's service providers.

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 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 current trading volumes, 97.6% of the current portfolio could be liquidated within 30 trading days, with 61.6% in seven days, and there is no expectation that the nature of the investments held within the portfolio will be materially different in future;
• 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 has considered the potential impact of its principal risks and various severe but plausible downside scenarios as well as stress testing and reverse stress testing. It has also made the following assumptions in considering the Company’s longer-term viability:

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

The continuing uncertainty in the global economy, the ongoing war in Ukraine and COVID-19 related lockdowns, have created significant supply chain disruption exacerbating inflationary pressures worldwide. These were factored into the key assumptions made by assessing their 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.

The Directors confirm therefore, that they have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities in full over the coming five years.

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 closer to its NAV per share which benefits shareholders. New shares may be issued to meet demand without net asset value per share dilution to existing shareholders. Increasing the size of the Company can benefit liquidity as well as spread costs. Under the share buy-back policy, the Company will normally buy in shares being offered on the stock market whenever the discount approaches a level of 5% and then either hold those shares in “treasury” or cancel them. Any shares held in treasury can later be sold back to the market if conditions permit.	The AIFM and the Portfolio Manager, on behalf of the Board, complete a programme of investor relations throughout the year. An analysis of the Company’s shareholder register is provided to the Directors at each Board meeting along with marketing reports from Frostrow. The Board reviews and considers the marketing plans on a regular basis. Reports from the Company’s broker are submitted to the Board on investor sentiment and industry issues. Key mechanisms of engagement include: At each meeting the Board reviews movements in the Company’s shareholder register. There are regular interactions and engagement with shareholders (including at the AGM). Regular feedback from shareholders is received from the Company’s broker.
Portfolio Manager	Engagement with the Company's Portfolio Manager is necessary to evaluate their performance against the Company's stated strategy and to understand any risks or opportunities this may present. The Board ensures that the Portfolio Manager's ESG approach meets standards set by the Board.	The Board meets with the Portfolio Manager throughout the year, with quarterly presentations and also monthly performance and compliance reporting. This provides the opportunity for both the Board and Portfolio Manager to explore and understand how the portfolio has performed and what may be expected in the future. The Board receives regular updates from the Portfolio Manager concerning engagement on ESG matters with the companies within the portfolio.
Service Providers	The Company contracts with third parties for other services including: depositary, investment accounting & administration as well as company secretarial and registrars. The Company ensures that the third parties to whom the services have been outsourced complete their roles in line with their service level agreements and are able to continue to provide these services, thereby supporting the Company in its success and ensuring compliance with its obligations.	The Board and Frostrow engage regularly with other service providers both in one-to-one meetings and via regular written reporting. This regular interaction provides an environment where topics, issues and business development needs can be dealt with efficiently and collegiately.
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.	During the year the Board discussed its approach to ESG matters with the Lindsell Train team providing more detail of their specific approach to responsible ownership. The Board considers its approach to ESG as well as that of the companies in which the Company invests, and has developed its own policy. The Board encourages the Company’s Portfolio Manager to engage with companies and in doing so expects ESG issues to be a key consideration. The Board receives an update on Lindsell Train's engagement activities within a dedicated quarterly ESG report. A member of Lindsell Train’s investment team attends each Board meeting to provide an update on ESG issues and engagement activities since the last Board meeting.
The Company's Lender	Investment companies have the ability to borrow with a view to enhancing long-term returns to shareholders. Engagement with the Company’s lender ensures that it fully understands the nature of the Company’s business, the strategy adopted by the Portfolio Manager and the extent to which the Company complies with its loan covenants.	Regular reporting to the lender with respect to adherence with loan covenants and ad hoc meetings with the AIFM.

   

What?	Outcomes and actions
WHAT WERE THE KEY TOPICS OF ENGAGEMENT?	WHAT ACTIONS WERE TAKEN, INCLUDING PRINCIPAL DECISIONS?
Investors Impact of market volatility on the performance of the Company. Ongoing dialogue with Shareholders concerning the strategy of the Company, performance and the portfolio. Share price performance and the widening of investment company sector discounts.	Shareholders are provided with performance updates via the Company’s website as well as the annual and half-year financial reports and monthly factsheets. The Portfolio Manager, Frostrow and the broker meet regularly with shareholders and potential investors to discuss the Company’s strategy, performance and portfolio. Information on how to vote your investment company shares on a selection of major platforms can be found in the Notice of Meeting. The Chairman and Senior Independent Director, accompanied by members of the Frostrow team, met with representatives of interactive investor (“ii”) and Hargreaves Lansdown (“HL”) to discuss, amongst other things, shareholder engagement, particularly with shareholders who hold their shares via these platforms. The Board reviews the Company’s share price discount/premium on a daily basis and has a share buy-back policy, details of this policy can be found on the Company’s website.
Portfolio Manager Climate Change - Weighted Average Carbon Intensity Portfolio composition, performance, ESG matters, outlook, and business updates. The impact of market volatility upon their business and how some companies in the portfolio have sought to take advantage of the pandemic, in particular through increased digitalisation. The integration of ESG into the Portfolio Manager’s investment processes.	During the year the Audit Committee reviewed the risks associated with climate change on the portfolio and how the transition to a low-carbon economy will affect all businesses, irrespective of their size, sector or geographic location. The Portfolio Manager engages regularly with investee companies’ Executive management and the Board receives quarterly ESG updates from the Portfolio Manager, enabling the conclusion that the risk of material misstatement due to climate risk remains low. The Board has received regular updates from the Portfolio Manager throughout the recent period of market volatility, including its impact on investment decision making. The Portfolio Manager reports regularly any ESG issues in the portfolio companies to the Board.
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.	Reviews of the Company’s service providers have been positive and the Directors believe their continued appointment is in the best interests of the Company. The Company has invested in Frostrow and Lindsell Train. Further details can be found on the Company’s website.
Board Composition	Trust Associates Limited were appointed by the Board in June 2022 to assist with the appointment of a new Director, resulting in the appointment of Pars Purewal. Mr Purewal joined the Board on 28 November 2022 and will offer himself for election by shareholders at the 2023 Annual General Meeting.
The Company’s Lender Continued compliance with covenants set out within the loan agreement between the Company and the lender. Terms of the loan facility agreement	The Board ensures compliance with loan covenants throughout the year. During the year the Company’s loan facility agreement was renewed, details of which can be found within the Report of the Directors in the Annual Report and note 12 to the Financial Statements.

RESPONSIBLE INVESTMENT

Our Policy

The Board recognises that the most material way for the Company to have an impact on Environmental, Social and Governance (“ESG”) issues is through the responsible ownership of its investments.

It has delegated authority to its Portfolio Manager to engage actively with the management of investee companies and encourage that high standards of ESG practice are adopted.

The Company seeks to generate long-term, sustainable returns on capital. The investee companies which consistently deliver superior returns over the long term are typically established, well-run companies whose managers recognise their impact on the world around them.

In its Responsible Engagement & Investment Policy, the Portfolio Manager states that its evaluation of ESG factors is an inherent part of the investment process.

The Board has delegated authority to the Portfolio Manager to vote the shares owned by the Company that are held on its behalf by its Custodian. The Board has instructed that the Portfolio Manager submit votes for such shares wherever possible and practicable. The Portfolio Manager may refer to the Board on any matters of a contentious nature.

The Portfolio Manager is a signatory of the 2021 UK Stewardship Code and became a signatory of Net Zero Asset Managers in December 2021.

LINDSELL TRAIN’S POLICY

ESG INTEGRATION

Seeking Sustainability

As long-term investors, Lindsell Train’s aim is to identify companies that can generate long-term sustainable high returns on capital. Lindsell Train has historically found that such companies tend to exhibit characteristics associated with good corporate governance and responsible business practices. Indeed, it believes that companies which observe such standards, and that are serious in their intention of addressing environmental and social factors, will not only become more durable but will likely prove to be superior investments over time.

To that end, its initial analysis and ongoing company engagement strategy seeks to incorporate all sustainability factors that it believes will affect the company’s ability to deliver long-term value to shareholders. Such factors may include but are not limited to environmental (including climate change), social and employee matters (including turnover and culture) and governance factors (including remuneration and capital allocation), cyber resilience, responsible data utilisation, respect for human rights, anti-corruption and anti-bribery, and any other risks or issues facing the business and its reputation. This work is catalogued in a proprietary database of risk factors in order to centralise and codify the team’s views, as well as to prioritise its ongoing research and engagement work and is cross-referenced with the SASB Materiality Map^©.

If, as a result of this assessment, it believes that an ESG factor is likely to materially impact a company’s long-term business prospects (either positively or negatively) then this will be reflected in the long-term growth rate that is applied in its valuation of that company, which alongside its more qualitative research will influence any final portfolio decisions (for example, whether it starts a new position or sells out of an existing holding).

Positive/Negative Screening

As a product of Lindsell Train’s investment philosophy, it does not invest in the following industries:

• capital intensive industries (energy, commodities or mining) or any companies involved in the extraction and production of coal, oil or natural gas; and
• industries that Lindsell Train judges to be sufficiently detrimental to society that they may be exposed to burdensome regulation or litigation that could impinge on financial returns (e.g. tobacco, gambling or arms manufacturers).

Similarly, its investment approach has steered it to invest in a number of companies that play an important positive social or environmental role, for example through providing access to educational information (RELX), encouraging saving for the future (Schroders, Hargreaves Lansdown) or encouraging environmental progress and best practice (Unilever). Lindsell Train believes that such positive benefits for society should be consistent with its aim to generate competitive long-term returns, thus helping it meet its clients’ investment objectives.

Climate Change

The risks associated with climate change represent the great issue of our era and the transition to a low-carbon economy will affect all businesses, irrespective of their size, sector or geographic location. Therefore, no company’s revenues are immune and the assessment of such risks must be considered within any effective investment approach, particularly one like Lindsell Train that seeks to protect its clients’ capital for decades to come.

As a relatively small company with a single office location and 25 employees, Lindsell Train’s climate exposure comes predominantly from the investment portfolios that it manages on behalf of its clients. Lindsell Train recognise the systemic risk posed by climate change and the potential financial impacts associated with a transition to a low-carbon economy. Lindsell Train therefore supports the recommendations of the Task Force on Climate-Related Financial Disclosures (“TCFD”) and its efforts to encourage companies to report their climate related disclosures and data in a uniform and consistent way. Further information on Lindsell Train’s TCFD related disclosures can be found on its website: www.lindselltrain.com within its 2022 TCFD Report.

In December 2021, Lindsell Train also became a signatory of the Net Zero Asset Managers (“NZAM“) initiative, committing to support the goal of net zero greenhouse gas emissions by 2050, in line with global efforts to limit warming to 1.5 degrees Celsius. Lindsell Train is now in the process of confirming its net zero roadmap, which will include the necessary interim targets and disclosures, which it published in November 2022, within a year of its net zero announcement.

Further, using Morningstar’s carbon metrics calculations, Lindsell Train is pleased to note that the Finsbury Growth and Income Trust PLC has a significantly lower weighted average carbon intensity than its comparable benchmark.

Due to availability of carbon intensity data, the Morningstar UK GBP index has been used as a proxy for the FTSE All-Share index. The Morningstar UK index measures the performance of the UK's equity markets targeting the top 97% of stocks by market capitalisation.

Weighted Average Carbon Intensity

Source: Morningstar. Data as of June 2020, June 2021 and June 2022. Data reflects Scope 1 & 2 emissions only.

The Morningstar carbon intensity definition is as follows: The asset-weighted average of holdings with actual emissions data from the Carbon Disclosure Project or estimated values from Sustainalytics in a portfolio. A lower score is better. Carbon Intensity is computed for each holding as follows: Total Emissions (metric tons of Co2) divided by Revenue (Mil USD), and aggregated at the fund level. Sustainalytics looks at the latest reported scope 1 (direct emissions from owned or controlled sources) and scope 2 (indirect emissions from the generation of purchased energy) Green House Gas intensity and emissions for over 10,000 companies. More than 100 different estimation models are used for non-reporting companies.

Stewardship

Engagement

Engaging with and monitoring investee companies on matters relating to stewardship has always been an essential element of Lindsell Train’s investment strategy. Its long-term approach generally leads it to be supportive of company management. However, where Lindsell Train disagrees with a company’s actions, it will try to influence management on specific matters or policies if they believe it is in the best interests of its clients. Constructive dialogue has more often than not resulted in satisfactory outcomes, thus limiting the need for escalation. However, where this is not the case, Lindsell Train will consider escalating its engagement and stewardship activities.

During the year, Lindsell Train engaged with companies held within the Company’s portfolio on a wide range of environmental, social and governance issues as detailed in the chart overleaf. Madeline Wright, Deputy Portfolio Manager and Head of Investment ESG at Lindsell Train, has also completed her process of holding an ESG specific discussion with all of Lindsell Train’s investee companies (c.70 in total), aimed at establishing a baseline for its ongoing engagement and clarifying its portfolio companies’ stances on, and approaches to, certain ESG factors, with the objective of ensuring that all portfolio companies report this essential data going forward. This information is stored, assessed, and monitored within Sentinel, Lindsell Train’s proprietary ESG database.

As public supporters of TCFD and The IFRS Sustainability Alliance (previously known as the Sustainability Accounting Standards Board), Lindsell Train is also encouraging its portfolio companies to report in line with these, or similar (if more relevant to their business) frameworks, and also to report on positive impact goals and progress to net zero. Furthermore, as signatories of NZAM, Lindsell Train is monitoring carefully the transition to net zero of each of its businesses and encouraging the companies to set science-based targets where possible.

This ongoing ESG research is further complemented by a series of ESG specific telephone calls that Lindsell Train is hosting with each of its companies. This will enable Lindsell Train to identify additional matters of concern or opportunity that require further scrutiny within its engagement programme.

Engagement by Topic

Other Social (e.g. supply chain, health & nutrition)                                              21.4%

Human Rights                                                                                                       21.4%

Capital Allocation & Strategy                                                                                21.4%

Fair treatment of shareholders                                                                             14.3%

Remuneration                                                                                                       14.3%

Cruelty Free                                                                                                            7.2%

Source: Lindsell Train Limited. 14 topics raised with 5 companies between 1 October 2021 and 30 September 2022.

Key Engagement Examples:

Unilever

This engagement in Q2 2022 was in part in response to the news that from 1 May 2021, China would remove the mandatory animal testing requirements for imported cosmetics. In the case of Unilever, this follows ten years of hard work to ban this practice and it will enable Unilever to develop its Chinese cosmetics business. Animal testing of health and personal care products, cosmetics and fragrances is a practice that is not only unnecessary but also acts as a barrier to the growing numbers of cruelty-conscious consumers globally. Fortunately, the practice is less common these days and Lindsell Train has determined through its research that very few companies engage in animal testing. Indeed, only companies selling personal care products, cosmetics or fragrances into China will have made its products available for animal testing. Nonetheless Lindsell Train has monitored this for some time and engaged with the management of Unilever on this matter.

Later in 2022, Lindsell Train’s engagement centred on the recent news of the appointment of activist investor, Nelson Peltz of Trian Fund Management L.P. (“Trian”), to its board as a non-executive director, following his purchase of shares representing 1.5% of Unilever's issued share capital. As Trian’s objectives are ostensibly in line with that of Lindsell Train's, it had no objection to the appointment despite being somewhat surprised at the low ticket price to get a seat at the table. Lindsell Train did however take the opportunity to urge the board to resist any proposals that might merely boost short-term value. Unilever's Chair, Nils Andersen confirmed that the board remained committed to their long-term strategy and were focussed on protecting the strategic value of Unilever’s assets.

Mondelez

Lindsell Train has also engaged with the company on several occasions to share its views regarding compensation best practice and continue to believe that the company could foster greater shareholder alignment through improved compensation structures. In assessing its compensation policies Lindsell Train focus more on how incentives are structured rather than the actual quantum of compensation. In other words, Lindsell Train can be comfortable with the large rewards provided that the incentives are aligned with shareholders’ interest and its principles. In the case for Mondelez, Lindsell Train wrote to management, outlining its reason for abstaining on the resolution concerning compensation at the company’s 2021 AGM.

Burberry and Young & Co's Brewery

Lindsell Train became signatories of Find It, Fix It, Prevent It, in Q2 2022. This initiative convened and resourced by CCLA and overseen by an advisory committee, brings together investors, academics and non-governmental organisations (“NGO”) to share knowledge, set targets and monitor the progress of its initiative to eradicate modern slavery. In Q3 2022 Lindsell Train engaged with both Burberry and Young & Co's Brewery ("Young's"), putting what it felt to be Find It, Fix It, Prevent It’s illuminating questions about modern slavery to both companies. Both Burberry and Young's already have formal Modern Slavery policies in place.

Burberry acknowledged that modern slavery has been found in its supply chain but expects this would be the case for any company should it delve deep enough. The company was understandably discreet about the details of detection and remediation but reassured Lindsell Train that its policies are robust and always supported by NGO input, and that it is indeed incumbent on Burberry to report that slavery was found and describe how it was fixed.

So far Young’s has not found modern slavery in its supply chain, but revealed that the areas of greatest risk are the use of agencies to supply workers (although these comprise <5% of all staff), and employees working without the correct documentation. The former issue will hopefully be phased out as Young’s turns away from contracted staff and the latter is being addressed with a well-established checking process and a full yearly HR audit.

In response to the Modern Slavery Act’s recommendations becoming mandatory, Young’s is beefing up its due diligence, e.g. requiring suppliers to register on the Sedex platform which allows for supply chain transparency and the identification of risk areas. Most big suppliers are already on Sedex, and overall the aim is to get 100% of suppliers and agencies onto the platform.

Proxy Voting

The primary voting policy of Lindsell Train is to protect or enhance the economic value of its investments on behalf of its clients. Lindsell Train has appointed Glass Lewis to aid the administration of proxy voting and provide additional support in this area. However, the Manager maintains decision making responsibility based on its detailed knowledge of the investee companies. It is Lindsell Train’s policy to exercise all voting rights which have been delegated to it by its clients.

Voting Record

	MANAGEMENT PROPOSALS	SHAREHOLDER PROPOSALS	TOTAL PROPOSALS
With Management	387	3	390
Against Management	0	0	0
Abstain	1	1	2
Totals	388	4	392

Source: Glass Lewis. 1 October 2021 – 30 September 2022.

Votes against management in previous years have typically been in the low single-digit range. The main reason for this is that Lindsell Train’s long-term approach to investment generally leads it to be supportive of company management and, where required, Lindsell Train will try to influence management through its engagement activities. Given Lindsell Train often builds up large, long-term stakes in the businesses in which it invests, they find that management is open to (and very often encourages) engagement with them. Furthermore, it is Lindsell Train’s aim to be invested in ‘exceptional’ companies with strong corporate governance and hence it ought to be rare that Lindsell Train finds itself in a position where it is voting against management.

In the majority of cases where Lindsell Train has voted against management it has been on matters relating to remuneration. Where Lindsell Train does not believe that a company’s compensation policy is aligned with the long-term best interests of the shareholders it will write to management to inform them of its intention to vote against such policies.

INTEGRITY AND BUSINESS ETHICS

The Company is committed to carrying out business in an honest and fair manner. The Board has adopted a zero-tolerance approach to instances of bribery and corruption. Accordingly, it expressly prohibits any Director or associated persons when acting on behalf of the Company from accepting, soliciting, paying, offering or promising to pay or authorise any payment, public or private, in the United Kingdom or abroad to secure any improper benefit from themselves or for the Company.

The Board applies the same standards to its service providers in their activities for the Company.

A copy of the Company’s Anti Bribery and Corruption Policy can be found in the Board and Policies section of the Company's website. The policy is reviewed annually by the Audit Committee.

In response to the implementation of the Criminal Finances Act 2017, the Board adopted a zero-tolerance approach to the criminal facilitation of tax evasion. A copy of the Company’s policy on preventing the facilitation of tax evasion can be found in the Board and Policies section of the Company's website. The policy is reviewed annually by the Audit Committee.

In carrying out its activities, the Company aims to conduct itself responsibly, ethically and fairly, including in relation to social and human rights issues. As an investment company with limited internal resource, the Company has little impact on the environment. The Company believes that high standards of ESG make good business sense and have the potential to protect and enhance investment returns. Consequently, the Portfolio Manager’s investment criteria ensure that ESG and ethical issues are taken into account and best practice is encouraged. The Board's expectations are that its principal service providers have appropriate governance policies in place.

COMPANY PROMOTION

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

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 reports, half year reports and monthly fact sheets; and
• ensuring compliance with applicable legal and regulatory requirements.

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

Portfolio Manager

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

FEES ON THAT PART OF MARKET CAPITALISATION	AIFM	PORTFOLIO MANAGER
Less than or equal to £1 bn	0.15%	0.45%
> Between £1 bn - £2 bn	0.135%	0.405%
£2 bn +	0.12%	0.36%

Performance Fees

The Company does not pay performance fees.

AIFM AND PORTFOLIO MANAGER EVALUATION AND RE-APPOINTMENT

The performance of Frostrow as AIFM and Lindsell Train as Portfolio Manager is continuously monitored by the Board with a formal evaluation being undertaken each year. As part of this process the Board monitors the services provided by the AIFM and the Portfolio Manager as well as receiving regular reports and views from them. The Board also receives comprehensive long-term performance measurement reports to enable it to determine whether or not the performance objective set by the Board has been met.

Following a review at a Board meeting in September 2022, the Board considers that the continuing appointment of Frostrow and Lindsell Train, under the terms described above, is in the best interests of the Company’s shareholders. In coming to this decision, it took into consideration the following additional reasons:

• the quality and depth of experience of the 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 long-term performance of the portfolio in absolute terms and also by reference to the benchmark index.

Depositary

The Bank of New York Mellon (International) Limited (the “Depositary”) acts as the Company’s depositary in accordance with the AIFMD on the terms and subject to the conditions of the depositary agreement between the Company, Frostrow and the Depositary (the “Depositary Agreement”). Under the terms of the Depositary Agreement the Company pays the Depositary a fee between 0.007% to 0.008% of net assets.

The Depositary provides the following services:

• responsibility for the safe-keeping of custodial assets of the Company;
• verification and maintenance of a record of all other assets of the Company;
• 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
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

Custodian

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 custody fee of 0.0033% of their market value. Variable transaction fees are also chargeable.

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

By order of the Board

Simon Hayes

Chairman

7 December 2022

GOVERNANCE / Statement of Directors’ Responsibilities

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

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

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

• select suitable accounting policies and then apply them consistently;
• state whether applicable United Kingdom Accounting Standards, comprising FRS 102 have been followed, subject to any material departures disclosed and explained in the Financial Statements;
• make judgements and accounting estimates that are reasonable and prudent; and
• prepare the Financial Statements on the going concern basis unless it is inappropriate to presume that the Company will continue in business.

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

The Directors are responsible for:

• keeping adequate accounting records that are sufficient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial Statements and the Directors’ Remuneration Report comply with the Companies Act 2006; and
• 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 Financial Statements, taken as a whole, are fair, balanced, understandable and provide the information necessary for shareholders to assess the Company’s position, performance, business model and strategy.

Each of the Directors, whose names and functions are listed in the ‘Board of Directors’ section in the Annual Report confirms that, to the best of their knowledge:

• the Company's Financial Statements, which have been prepared in accordance with United Kingdom Accounting Standards, comprising FRS 102 give a true and fair view of the assets, liabilities, financial position and profit of the Company; and
• the Strategic Report includes a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

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

Simon Hayes

Chairman

7 December 2022

Note to those who access this document by electronic means:

The Annual Report for the year ended 30 September 2022 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 2022

		YEAR ENDED 30 SEPTEMBER 2022			YEAR ENDED 30 SEPTEMBER 2021
		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	–	(155,883)	(155,883)	–	164,020	164,020
Currency translations		–	14	14	–	(16)	(16)
Income	2	50,792	–	50,792	46,114	–	46,114
AIFM and portfolio management fees	3	(2,678)	(8,034)	(10,712)	(3,709)	(7,531)	(11,240)
Other expenses	4	(1,069)	(9)	(1,078)	(1,004)	(3)	(1,007)
Return/(loss) on ordinary activities before finance charges and taxation		47,045	(163,912)	(116,867)	41,401	156,470	197,871
Finance charges	5	(171)	(512)	(683)	(136)	(277)	(413)
Return/(loss) on ordinary activities before taxation		46,874	(164,424)	(117,550)	41,265	156,193	197,458
Taxation on ordinary activities	6	(1,190)	–	(1,190)	(844)	–	(844)
Return/(loss) on ordinary activities after taxation		45,684	(164,424)	(118,740)	40,421	156,193	196,614
Return/(loss) per share – basic and diluted	7	20.6p	(74.0)p	(53.4)p	18.1p	69.9p	88.0p

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 2022

	NOTE	CALLED UP SHARE CAPITAL £’000	SHARE PREMIUM ACCOUNT £’000	CAPITAL REDEMPTION RESERVE £’000	CAPITAL RESERVE £’000	REVENUE RESERVE £’000	TOTAL SHAREHOLDERS’ FUNDS £’000
At 1 October 2021		56,248	1,099,847	3,453	855,886	49,224	2,064,658
Net (loss)/return from ordinary activities		–	–	–	(164,424)	45,684	(118,740)
Second interim dividend (9.1p per share) for the year ended 30 September 2021	8	–	–	–	–	(20,474)	(20,474)
First interim dividend (8.3p per share) for the year ended 30 September 2022	8	–	–	–	–	(18,545)	(18,545)
Repurchase of shares into treasury	13	–	–	–	(76,515)	–	(76,515)
At 30 September 2022		56,248	1,099,847	3,453	614,947	55,889	1,830,384

   

	NOTE	CALLED UP SHARE CAPITAL £’000	SHARE PREMIUM ACCOUNT £’000	CAPITAL REDEMPTION RESERVE £’000	CAPITAL RESERVE £’000	REVENUE RESERVE £’000	TOTAL SHAREHOLDERS’ FUNDS £’000
At 1 October 2020		54,438	1,039,510	3,453	699,693	45,436	1,842,530
Net return from ordinary activities		–	–	–	156,193	40,421	196,614
Second interim dividend (8.6p per share) for the year ended 30 September 2020		–	–	–	–	(18,727)	(18,727)
First interim dividend (8.0p per share) for the year ended 30 September 2021	8	–	–	–	–	(17,906)	(17,906)
Issue of shares		1,810	60,337	–	–	–	62,147
At 30 September 2021		56,248	1,099,847	3,453	855,886	49,224	2,064,658

The notes form part of these Financial Statements.

FINANCIAL STATEMENTS / Statement of Financial Position

AS AT 30 SEPTEMBER 2022

	NOTE	2022 £’000	2021 £’000
Fixed assets
Investments held at fair value through profit or loss	9	1,852,078	2,071,266
Current assets
Debtors	10	12,398	9,428
Cash and cash equivalents		7,835	22,531
		20,233	31,959
Current liabilities
Creditors: amounts falling due within one year	11	(5,227)	(1,867)
Bank loan	12	(36,700)	–
		(41,927)	(1,867)
Net current liabilities		(21,694)	30,092
Total assets less current liabilities		1,830,384	2,101,358
Creditors: amount falling due after more than one year
Bank loan	12	–	(36,700)
Net assets		1,830,384	2,064,658
Capital and reserves
Called up share capital	13	56,248	56,248
Share premium account		1,099,847	1,099,847
Capital redemption reserve		3,453	3,453
Capital reserve	14	614,947	855,886
Revenue reserve		55,889	49,224
Total shareholders’ funds		1,830,384	2,064,658
Net asset value per share	15	848.4p	917.7p

The Financial Statements were approved by the Board of Directors on 7 December 2022 and were signed on its behalf by:

Simon Hayes
Chairman

The notes form part of these Financial Statements.

Company Registration Number SC013958 (Registered in Scotland)

FINANCIAL STATEMENTS / Statement of Cash Flows

FOR THE YEAR ENDED 30 SEPTEMBER 2022

	NOTE	2022 £’000	2021 £’000
Net cash inflow from operating activities before interest	18	38,098	31,953
Interest paid		(683)	(375)
Net cash inflow from operating activities		37,415	31,578
Investing activities
Purchase of investments		(79,080)	(92,966)
Sale of investments		139,227	37,981
Net cash inflow/(outflow) from investing activities		60,147	(54,985)
Financing activities
Dividends paid		(39,019)	(36,633)
Shares issued		–	62,147
Repurchase of Shares into treasury		(73,253)	–
Net cash (outflow)/inflow from financing activities		(112,272)	25,514
(Decrease)/increase in cash and cash equivalents		(14,710)	2,107
Currency transactions		14	(16)
Cash and cash equivalents at the beginning of the financial year*		22,531	20,440
Cash and cash equivalents at the end of the financial year*		7,835	22,531

Reconciliation of net debt

	2022	2021
	£’000	£’000
Cash and cash equivalents*	7,835	22,531
Borrowings	(36,700)	(36,700)
Total	(28,865)	(14,169)

* Comprises solely cash held at bank.

The notes form part of these Financial Statements.

FINANCIAL STATEMENTS / Notes to the financial statements

FOR THE YEAR ENDED 30 SEPTEMBER 2022

1. Accounting Policies

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

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

(A) BASIS OF PREPARATION

The Financial Statements have been prepared in accordance with UK Generally Accepted Accounting Practice (GAAP) under UK and Republic of Ireland Company Law, FRS 102 ‘The Financial Reporting Standard applicable in the UK, the Statement of Recommended Practice (SORP) for “Financial Statements of Investment Trust Companies and Venture Capital Trusts” issued by the Association of Investment Companies in July 2022 and the Companies Act 2006 under the historical cost convention as modified by the valuation of investments at fair value through profit or loss.

The Financial Statements have been prepared on a going concern basis. The disclosure on going concern in the Statement of Directors' Responsibilities forms part of these Financial Statements.

Presentation of the Income Statement

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

Significant Judgements and Critical Sources of Estimation Uncertainties

There were no significant judgements or critical estimates reported during the financial year ended 30 September 2022 (2021: none).

(B) INVESTMENTS HELD AT FAIR VALUE THROUGH PROFIT OR LOSS

Investments are measured under FRS 102, sections 11 and 12 and are measured initially, and at subsequent reporting dates, at fair value.

Changes in the fair value of investments and gains and losses on disposal are recognised in the Income Statement as a capital item. The Company manages and evaluates the performance of these investments on a fair value basis in accordance with its investment strategy, and information about the investments is provided internally on this basis to the Board. Fair value for quoted investments is deemed to be bid market prices, or last traded price, depending on the convention of the stock exchange on which they are quoted.

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, is disclosed in note 9.

(C) INCOME

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

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

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

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

The limited liability partnership (LLP) profit share is recognised in the financial statements when the entitlement to the income is established, following the conclusion of the partnership's annual audit. Deposit interest receivable is taken to revenue on an accruals basis.

(D) DIVIDENDS PAYABLE

Dividends paid by the Company are recognised in the Financial Statements and are shown in the Statement of Changes in Equity in the period in which they became legally binding, which in the case of an interim dividend is the point at which it is paid and for a final dividend when it is approved by Shareholders in line with the ICAEW Tech Release 02/17BL.

(E) EXPENDITURE AND FINANCE CHARGES

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

1. expenses which are incidental to the acquisition or disposal of an investment are treated as part of the cost or deducted from proceeds of that investment (as explained in 1(b) above);
2. expenses are taken to the Capital reserve via the capital column of the Income Statement, where a connection with the maintenance or enhancement of the value of the investments can be demonstrated. In line with the Board's expected long-term split of returns, 75% of the portfolio management fee, AIFM fee and finance costs are taken to the Capital reserve and the balance to the Revenue reserve (2021: 67% capital, 33% revenue).

(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 revenue or capital column of the Income Statement depending on whether the gain or loss is of a revenue or capital nature.

(H) CASH AND CASH EQUIVALENTS

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

(I) BANK LOAN

Bank loans are initially recognised at fair value, net of transaction costs incurred. Bank loans are subsequently measured at amortised cost. The loan amounts falling due for repayment within one year are included under current liabilities in the Statement of Financial Position and the loan amounts falling due after one year are included under “Creditors: amounts falling due after more than one year” in the Statement of Financial Position.

(J) REPURCHASE OF SHARES FOR CANCELLATION OR TO HOLD IN TREASURY

The cost of repurchasing ordinary shares (for cancellation or to hold in Treasury) including the related stamp duty and transaction cost is charged to the ‘capital reserve’ and dealt with in the Statement of Changes in Equity. Share repurchase transactions are accounted for on a trade date basis.

Where shares are cancelled (or are subsequently cancelled having previously been held in Treasury), the nominal value of those shares is transferred out of ‘Called up share capital’ and into the ‘Capital redemption reserve’.

Should shares held in Treasury be reissued, the sales proceeds will be treated as a realised capital profit up to the amount of the purchase price of those shares and will be transferred to capital reserves. The excess of the sales proceeds over the purchase price will be transferred to ‘Share premium’.

(K) OPERATING SEGMENTS

The Company defines operating segments and segment performance in the financial statements based on information used by the Board of Directors which is considered the Chief Operating Decision Maker^. The Directors are of the opinion that the Company is engaged in a single segment of business, being the investments business. The results published in this report therefore correspond to this sole operating segment.

(L) NATURE AND PURPOSE OF RESERVES

Capital Redemption Reserve

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

Capital Reserve

This reserve reflects any:

• gains or losses on the disposal of investments;
• exchange differences of a capital nature;
• increases and decreases in the fair value of investments which have been recognised in the capital column of the Income Statement; 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 may be distributable by way of dividend.

When making a distribution to shareholders, the Directors determine profits available for distribution by reference to ‘Guidance on realised and distributable profits under the Companies Act 2006’ issued by the Institute of Chartered Accountants in England and Wales and the Institute of Chartered Accountants of Scotland in April 2017. The availability of distributable reserves in the Company is dependent on those distributions meeting the definition of qualifying consideration within that guidance and on available cash resources of the Company and other accessible sources of funds. The distributable reserves are therefore subject to these restrictions or limitations at the time such distribution is made.

^ See glossary of terms.

2. Income

	2022	2021
	£’000	£’000
Income from investments
UK listed dividends*	41,827	39,167
Overseas dividends*	8,257	6,350
Limited liability partnership – profit-share and priority profit share on
AIFM capital contribution	694	597
Other operating income – bank interest	14	–
Total income	50,792	46,114

*      Include special dividends which have been credited to the revenue account totalling £1,833,000 (2021: £949,000):

•      UK listed dividends £1,205,000 (2021: £949,000).

•      Oversea dividends £628,000 (2021: nil).

3. AIFM and portfolio management fees

	2022			2021
	REVENUE	CAPITAL	TOTAL	REVENUE	CAPITAL	TOTAL
	£’000	£’000	£’000	£’000	£’000	£’000
AIFM fee	670	2,008	2,678	927	1,883	2,810
Portfolio Management fee	2,008	6,026	8,034	2,782	5,648	8,430
Total fees	2,678	8,034	10,712	3,709	7,531	11,240

With effect from 1 October 2021, 75% of the Portfolio management and AIFM fees were taken to the Capital reserve and 25% is taken to the Revenue reserve. Previously, 67% was taken to the Capital reserve and 33% to the Revenue reserve.

4. Other Expenses

	2022			2021
	REVENUE	CAPITAL	TOTAL	REVENUE	CAPITAL	TOTAL
	£’000	£’000	£’000	£’000	£’000	£’000
Directors’ fees	150	–	150	159	–	159
Auditors’ fees – statutory annual audit	63	–	63	58	–	58
Depositary’s fees	193	–	193	211	–	211
Stock listing and FCA fees	140	–	140	133	–	133
Custody fees	118	–	118	109	–	109
Indices cost	74	–	74	40	–	40
Registrar’s fees	59	–	59	57	–	57
Promotional costs	60	–	60	51	–	51
Printing and postage	52	–	52	35	–	35
Directors' D&O insurance	41	–	41	33	–	33
Other expenses	119	9	128	118	3	121
Total expenses	1,069	9	1,078	1,004	3	1,007

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

During the year ended 30 September 2022 there were no non-audit services provided by the Company's Auditor (2021: nil).

All of the above expenses include VAT where applicable.

5. Finance Charges

	2022			2021
	REVENUE	CAPITAL	TOTAL	REVENUE	CAPITAL	TOTAL
	£’000	£’000	£’000	£’000	£’000	£’000
Interest payable on bank loan	161	482	643	123	250	373
Loan facility commitment fees	10	30	40	13	27	40
	171	512	683	136	277	413

With effect from 1 October 2021, 75% of the finance costs were taken to the Capital reserve and 25% is taken to the Revenue reserve. Previously, 67% was taken to the Capital reserve and 33% to the Revenue reserve.

6. Taxation on Ordinary Activities

(A) ANALYSIS OF CHARGE IN THE YEAR

	2022			2021
	REVENUE	CAPITAL	TOTAL	REVENUE	CAPITAL	TOTAL
	£’000	£’000	£’000	£’000	£’000	£’000
UK Corporation tax at 19% (2021: 19%)	–	–	–	–	–	–
Overseas withholding tax	1,364	–	1,364	1,036	–	1,036
Recoverable overseas withholding tax	(174)	–	(174)	(192)	–	(192)
	1,190	–	1,190	844	–	844

(B) FACTORS AFFECTING CURRENT TAX CHARGE FOR YEAR

The tax assessed for the year is higher (2021: higher) than the standard rate of UK corporation tax of 19% (2021: 19%).

The differences are explained below:

		2022			2021
	REVENUE	CAPITAL	TOTAL	REVENUE	CAPITAL	TOTAL
	£’000	£’000	£’000	£’000	£’000	£’000
Total return/(loss) on ordinary activities before taxation	46,874	(164,424)	(117,550)	41,265	156,193	197,458
Return/(loss) on ordinary activities multiplied by UK corporation tax of 19% (2021: 19%)	8,906	(31,240)	(22,334)	7,840	29,677	37,517
Effects of:
Overseas taxation	1,190	–	1,190	844	–	844
Franked investment income not subject to corporation tax – UK dividend income	(7,947)	–	(7,947)	(7,441)	–	(7,441)
Overseas dividends not taxable	(1,569)	–	(1,569)	(1,207)	–	(1,207)
Excess management expenses	610	–	610	808	–	808
Amounts charged to capital	–	1,625	1,625	–	1,484	1,484
Non-taxable loss/(return) on investments*	–	29,618	29,618	–	(31,164)	(31,164)
Currency translations	–	(3)	(3)	–	3	3
Total tax charge for the year (note 6(a))	1,190	–	1,190	844	–	844

* Loss/(return) on investments are not subject to corporation tax within an investment company.

(C) DEFERRED TAXATION

As at 30 September 2022, the Company had unutilised management expenses and other reliefs for taxation purposes of £122,041,000 (2021: £110,404,000). 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 £30,510,000 (2021: £27,601,000) based on the prospective corporation tax rate of 25% (2021: 25%).

Given the Company’s status as an investment company and the intention to continue meeting the conditions required to maintain such 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. Return/(loss) per share – Basic and Diluted

	2022	2021
	£’000	£’000
The return/(loss) per share is based on the following figures:
Revenue return	45,684	40,421
Capital (loss)/return	(164,424)	156,193
Total (loss)/return	(118,740)	196,614
Weighted average number of shares* in issue during the year	222,335,694	223,371,358
Revenue return per share	20.6p	18.1p
Capital (loss)/return per share	(74.0)p	69.9p
Total (loss)/return per share	(53.4)p	88.0p

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 UK)".

As at 30 September 2022 and 2021 there were no dilutive instruments in issue, therefore the basic and diluted (loss)/return per share are the same.

* Excludes shares held in Treasury.

8. Dividends

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

	EX-DIVIDEND	RECORD	PAYMENT	2022	2021
	DATE	DATE	DATE	£’000	£’000
First interim dividend of
8.3p per share (2021: 8.0p)	31 March 2022	1 April 2022	13 May 2022	18,545	17,906
Second interim dividend of 9.8p per share (2021: 9.1p)	29 September 2022	30 September 2022	4 November 2022	21,181	20,474
				39,726	38,380

The second interim dividend of 9.8p per share (2021: 9.1p) 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:

	2022	2021
	£’000	£’000
Revenue available for distribution by way of dividend for the year	45,684	40,421
2022 First interim dividend of 8.3p per share (2021: 8.0p) paid on 13 May 2022	(18,545)	(17,906)
2022 Second interim dividend of 9.8p per share (2021: 9.1p) paid on 4 November 2022	(21,181)	(20,474)
Net additions to revenue reserves	5,958	2,041

The Company’s dividend policy is set out in the Business Review section of the Strategic Report in the Annual Report.

9. Investments held at Fair Value Through Profit or Loss

ANALYSIS OF PORTFOLIO MOVEMENTS

	2022	2021
	£’000	£’000
Opening book cost	1,303,097	1,244,210
Opening investment holding gains	768,169	607,378
Valuation at 1 October	2,071,266	1,851,588
Movements in the year:
Purchases at cost	79,246	93,690
Sales proceeds	(142,551)	(38,032)
(Losses)/gains on investments	(155,883)	164,020
Valuation at 30 September	1,852,078	2,071,266
Closing book cost	1,293,409	1,303,097
Investment holding gains at 30 September	558,669	768,169
Valuation at 30 September	1,852,078	2,071,266

The Company received £142,551,000 (2021: £38,032,000) from investments sold in the year. The book cost of these investments when they were purchased was £53,618,000 (2021: £34,803,000). 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 2022 were £161,000 (2021: £213,000). These comprise stamp duty costs of £110,000 (2021: £173,000) and commission of £51,000 (2021: £40,000). Sales transaction costs for the year to 30 September 2022 were £53,000 (2021: £15,000) and comprise commission.

10. Debtors

	2022	2021
	£’000	£’000
Amounts due from brokers in respect of portfolio trading – disposals	3,998	674
Accrued income and prepayments	8,400	8,754
	12,398	9,428

11. Creditors: Amounts Falling Due Within One Year

	2022	2021
	£’000	£’000
Amounts due to brokers in respect of portfolio trading – purchases	890	724
Amounts due to brokers in respect of shares repurchased by the Company	3,262	–
Other creditors and accruals	1,075	1,143
	5,227	1,867

12. Bank Loan

	2022	2021
	£’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. As at 30 September 2022 the Company was in its final few days of its three year secured fixed term multi-currency revolving loan facility of £50 million (with an additional £50 million available if required).

The facility was renewed on 4 October 2022 with the following new terms: Three year secured fixed term multi-currency revolving credit facility of £60 million (with an additional £40 million available if required).

The main covenant under the loan facility required that, at each month end, total borrowings should not exceed £100 million (2021: £100 million), Net Asset Value must not fall below £750 million (2021: £300 million) and the ratio of Adjusted Total Net Assets to Debt is not to be less than 4:1 (2021: 4:1). There were no breaches of the covenants during the year.

The Board has set a gearing limit which must not exceed 25% of the Company’s net asset value. See the Strategic Report and the Report of the Directors in the Annual Report for further details.

13. Called Up Share Capital

	2022	2021
	£’000	£’000
Allotted, issued and fully paid:
215,737,992 (2021: 224,991,303) ordinary shares of 25p each	53,935	56,248
9,253,311 (2021: Nil) ordinary shares of 25p held in treasury	2,313	–
224,991,303 (2021: 224,991,303) total ordinary shares of 25p each	56,248	56,248

No shares were issued by the Company during the year (2021: 7,240,000 new shares were issued).

During the year, the Company bought back 9,253,311 shares to be held in treasury at a cost of £76,515,000 (2021: Nil).

Between 1 October 2022 and 5 December 2022, the Company bought back a further 1,668,897 shares into treasury.

14. Capital Reserve

		CAPITAL
		RESERVE
		INVESTMENT
	CAPITAL	HOLDING
	RESERVE	GAINS	2022	2021
	REALISED	UNREALISED	TOTAL	TOTAL
	£’000	£’000	£’000	£’000
At 1 October 2021	87,717	768,169	855,886	699,693
Net gains/(losses) on investments	53,618	(209,501)	(155,883)	164,020
Repurchase of shares into treasury	(76,515)	–	(76,515)	–
Expenses charged to capital	(8,043)	–	(8,043)	(7,534)
Finance costs charged to capital	(512)	–	(512)	(277)
Currency translations	14	–	14	(16)
At 30 September 2022	56,279	558,668	614,947	855,886

The amount of the capital reserve that is distributable is complex to determine and is not necessarily the full amount of the reserve as disclosed within these Financial Statements of £614,947,000, as at 30 September 2022 as this is subject to fair value movements and may not be readily realisable at short notice.

15. Net Asset Value Per Share

	2022	2021
Net assets (£’000)	1,830,384	2,064,658
Number of shares in issue (excluding shares held in treasury)	215,737,992	224,991,303
Net asset value per share	848.4p	917.7p

As at 30 September 2022 and 2021 there were no dilutive instruments held, therefore the basic and diluted net asset value per share are the same.

At 30 September 2022 9,253,311 shares were held in treasury (2021: Nil).

16. Transactions with the AIFM, the Portfolio Manager and Related Parties

Details of the relationship between the Company, Frostrow and Lindsell Train are disclosed on the Company’s website and also in the Report of the Directors in the Annual Report.

The Company has an investment in Frostrow with a book cost of £200,000 (2021: £975,000) and a fair value of £4,725,000 (including the AIFM capital contribution of £125,000 (2021: £900,000)) as at 30 September 2022 (2021: £5,200,000)). During the year Frostrow received a total of £2,678,000 in respect of AIFM fees, of which £209,000 was outstanding at 30 September 2022. (2021: £236,000).

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 (2021: £1,000,000) and a fair value of £9,720,000 as at 30 September 2022 (2021: £14,350,000). During the year Lindsell Train received £8,034,000 in respect of Portfolio Management fees of which £627,000 was outstanding at 30 September 2022. (2021: £708,000).

Further details can be found in the Corporate Information section of the Company’s website.

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

Details of the fees of all Directors can be found in the Annual Report and in note 4. Directors’ interests in the capital of the Company can be found in the Annual Report. There were no other material transactions during the year with the Directors of the Company.

17. Risk Management

As an investment company the Company invests in equities and other investments for the long term so as to secure its investment objective. In pursuit of its investment objective, the Company is exposed to a variety of risks that could result in either a reduction in the Company’s net assets or a reduction in the revenue returns available for distribution.

The Company’s financial instruments comprise mainly equity investments, cash balances, borrowings, debtors and creditors that arise directly from its operations.

The principal risks inherent in managing financial instruments are market risk, liquidity risk and credit risk.

The principal and emerging risks of the Company and the Directors’ approach to the management of those where the Directors consider there to be a high inherent risk are set out in the Strategic Report.

MARKET RISK

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

Market Price Risk

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

At 30 September 2022, the fair value of the Company’s assets exposed to market price risk was £1,852,078,000 (2021: £2,071,266,000). 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 2022 would have increased or decreased by £185,208,000 or 85.85p per share (2021: £207,127,000 or 92.1p 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 2022 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 which matured in early October 2022.

Borrowings at the year end amounted to £36,700,000 (2021: £36,700,000) at an interest rate of 3.257% (2.188% SONIA plus 1.069% margin and fees (2021: 1.033% (0.078% LIBOR plus 0.955% margin and fees))).

If the above level of borrowing was maintained for a year, a 10% increase or decrease in SONIA: (2021: LIBOR) would decrease or increase the revenue return by £20,000, (2021: £1,000), decrease or increase the capital return in that year by £60,000 (2021: £2,000) and decrease or increase the net assets by £80,000 (2021: £3,000).

The weighted average interest rate, during the year, on borrowings under the above mentioned revolving credit facility was 1.74% (2021: 1.02%). At 30 September 2022, the Company’s financial assets and liabilities exposed to interest rate risk were as follows:

	2022		2021
	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	7,835	–	22,531	–
Liabilities
Creditors: amount falling due within one year – borrowings under 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#	367	–	1,136	–
Liabilities	–	–	–	–

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

Currency Risk

The Financial Statements are presented in sterling, which is the functional and presentational currency of the Company. At 30 September 2022, the Company’s investments, with the exception of five, were priced in sterling. The five exceptions were: Heineken, listed in the Netherlands, Remy Cointreau listed in France, Manchester United, Cazoo and Mondelez, all of which are listed in the United States. The aggregate of these represents 20.8% 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 2022 the Company held £181,124,000 (2021: £200,380,000) of investments denominated in U.S. dollars and £203,900,000 (2021: £198,566,000) 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 euro (2021: 10% increase and decrease).

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

This level of sensitivity is considered to be reasonably possible based on observation of current market conditions and historical trends.

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

	2022	2021
	£’000	£’000
Impact on revenue return	299	231
Impact on capital return	43,109	44,314
Total return after tax/increase in shareholders’ funds	43,408	44,545

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

	2022	2021
	£’000	£’000
Impact on revenue return	(245)	(189)
Impact on capital return	(35,288)	(36,259)
Total return after tax/decrease in shareholders’ funds	(35,533)	(36,448)

Credit Risk

Credit risk is the risk that the counterparty to a transaction fails to discharge its obligations under that transaction, which could result in the Company suffering a loss. Credit risk is managed as follows:

–     Investment transactions are carried out only with brokers which are considered to have a high credit rating.

–     Transactions are 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 Aa2 (Moody’s) and AA- (Fitch).

At 30 September 2022, the exposure to credit risk was £12,075,000 (2021: £23,441,000), comprising:

	2022	2021
	£’000	£’000
Fixed assets:
Non-equity investments (preference shares)	242	236
Current assets:
Other receivables (amounts due from brokers)	3,998	674
Cash and cash equivalents	7,835	22,531
Total exposure to credit risk	12,075	23,441

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 2022 it is estimated that 97.6% of the investment portfolio could be liquidated within 30 days with 61.6% in seven days, based on current trading volumes.

Liquidity risk exposure

	30 SEPTEMBER	30 SEPTEMBER
	2022	2021
FINANCIAL LIABILITIES COMPRISE:	£’000	£’000
Due within one month:
Balances due to brokers in respect of portfolio trading - purchases	890	724
Amounts due to brokers in respect of shares repurchased by the Company	3,262	–
Accruals	1,075	1,143
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 asset noting that most of the Company’s investments are quoted assets, these have been categorised as level 1 investments:

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

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

AS AT 30 SEPTEMBER 2022	LEVEL 1	LEVEL 2	LEVEL 3	TOTAL
	£’000	£’000	£’000	£’000
Equity investments	1,847,111	–	–	1,847,111
Limited liability partnership interest (Frostrow)	–	–	4,600	4,600
Frostrow - AIFM capital contribution	–	–	125	125
Preference share investments	242	–	–	242
	1,847,353	–	4,725	1,852,078

   

AS AT 30 SEPTEMBER 2021	LEVEL 1	LEVEL 2	LEVEL 3	TOTAL
	£’000	£’000	£’000	£’000
Equity investments	2,065,830	–	–	2,065,830
Limited liability partnership interest (Frostrow)	–	–	4,300	4,300
Frostrow - AIFM capital contribution	–	–	900	900
Preference share investments	236	–	–	236
	2,066,066	–	5,200	2,071,266

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. This was the same methodology adopted to value Frostrow as at 30 September 2021.

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

	2022	2021
	£’000	£’000
Opening fair value	5,200	3,950
Frostrow - AIFM capital contribution (repayment)/drawndown	(775)	150
Total gains included in gains on investments in the Income Statement	300	1,100
Closing fair value	4,725	5,200

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 2022 would have increased/decreased by £460,000 (2021: £430,000, applying the same assumptions).

CAPITAL MANAGEMENT OBJECTIVES, POLICIES AND PROCEDURES

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

The Company’s capital management objectives are:

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

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

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

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

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

	2022	2021
	£’000	£’000
Total (loss)/return before finance charges and taxation	(116,867)	197,871
Add/(deduct): capital loss/(gain) before finance charges and taxation	163,912	(156,470)
Net revenue before finance charges and taxation	47,045	41,401
Decrease/(increase) in accrued income	81	(1,111)
(Decrease)/increase in creditors	(68)	30
Taxation – overseas withholding tax paid	(917)	(833)
AIFM, portfolio management fees and other expenses charged to capital	(8,043)	(7,534)
Net cash inflow from operating activities	38,098	31,953

19. Substantial Interests

At 30 September 2022 the Company held interests in 3% or more of any class of capital in the following entities:

			% OF ISSUED
			SHARE
			CAPITAL
		2022	OR LIMITED
			LIABILITY
COMPANY OR LIMITED LIABILITY PARTNERSHIP	SHARES	FAIR VALUE	PARTNERSHIP
	HELD	£’000	INTEREST
A. G. Barr	4,427,500	20,145	4.0
Frostrow Capital LLP (unquoted)+	–	4,725	9.2
Manchester United	2,293,500	27,243	4.2
The Lindsell Train Investment Trust plc*	10,000	9,720	5.0
Young & Co’s Brewery (non voting shares)	1,042,282	6,191	4.3

+ Includes Frostrow Capital LLP’s AIFM Capital Contribution, fair value £125,000.

* Also managed by Lindsell Train Limited which receives a portfolio management fee based on the Company’s market capitalisation. The details of the fee arrangements with the Company are detailed in the Annual Report.

20. Post Balance Sheet Event

Subsequent to the year-end, on 4 October 2022, the Company’s loan facility with Scotiabank was renewed.

During the period from 1 October 2022 to 5 December 2022, a further 1,668,897 shares were bought back and held in treasury at a cost of £14,082,000.

FURTHER INFORMATION / GLOSSARY OF TERMS AND ALTERNATIVE PERFORMANCE MEASURES

ACTIVE SHARE (APM)^

Active Share is expressed as a percentage and shows the extent to which a fund’s holdings and their weightings differ from those of the fund’s benchmark index. A fund that closely tracks its index might have a low Active Share of less than 20% and be considered passive, while a fund with an Active Share of 60% or higher is generally considered to be actively managed. The Company has a distinctive strategy: a concentrated portfolio of holdings invested across a small number of sectors and themes. Active Share helps quantify the extent to which the portfolio differs from the benchmark index.

The Active Share performance is sourced from Morningstar.

AIC

Association of Investment Companies. The AIC represents a broad range of investment companies, investment trusts, VCTs and other closed-ended funds.

ALTERNATIVE INVESTMENT FUND MANAGERS DIRECTIVE (AIFMD)

Agreed by the European Parliament and the Council of the European Union and transposed into UK legislation, the AIFMD classifies certain investment vehicles, including investment companies, as Alternative Investment Funds (AIFs) and requires them to appoint an Alternative Investment Fund Manager (AIFM) and depositary to manage and oversee the operations of the investment vehicle. The Board of the Company retains responsibility for strategy, operations and compliance and the Directors retain a fiduciary duty to shareholders.

ALTERNATIVE PERFORMANCE MEASURE ("APM")

An Alternative Performance Measure (APM) is a numerical measure of the Company’s current, historical or future financial performance, financial position or cash flows other than a financial measure defined or specified in the applicable financial framework. In selecting these Alternative Performance Measures, the Directors considered the key objectives and expectations of typical investors and believe that each APM gives the reader useful and relevant information in judging the Company’s performance and in comparing other investment companies.

BENCHMARK RETURN

Total return on the benchmark, assuming that all dividends received were re-invested, without transaction costs, into the shares of the underlying companies at the time the shares were quoted ex-dividend.

CHIEF OPERATING DECISION MAKER

The Chief Operating Decision Maker of the Company is considered to be the Board of Directors. It is a Generally Accepted Accounting Principal (GAAP) requirement to disclose who the chief operating decision maker is.

DISCOUNT OR PREMIUM (APM)

A description of the difference between the share price and the net asset value per share. The size of the discount or premium is calculated by subtracting the share price from the net asset value per share and is usually expressed as a percentage (%) of the net asset value per share. If the share price is higher than the net asset value per share the result is a premium. If the share price is lower than the net asset value per share, the shares are trading at a discount. The Board regularly reviews the level of the discount/premium of the Company’s share price to the net asset value per share and considers ways in which share price performance may be enhanced, including the effectiveness of share buy-backs, where appropriate.

DISCOUNT OR PREMIUM (APM)		30 SEPTEMBER	30 SEPTEMBER
		2022	2021
Share price (p)		800.0	876.0
Net asset value per share (p)		848.4	917.7
Discount		5.7%	4.5%

FTSE DISCLAIMER

“FTSE©” is a trade mark of the London Stock Exchange Group companies and is used by FTSE International Limited under licence. All rights in the FTSE indices and/or FTSE ratings vest in FTSE and or its licensors. Neither FTSE nor its licensors accept any liability for any errors or omissions in the FTSE indices and/or FTSE ratings or underlying data. No further distributions of FTSE Data is permitted without FTSE’s express written consent.

GEARING (APM)

Gearing represents prior charges, adjusted for net current assets, expressed as a percentage of net assets (AIC methodology). The Directors believe that it is appropriate to show net gearing in relation to shareholders’ funds as it represents the amount of debt funding on the investment portfolio. The gearing policy is that borrowing will not exceed 25% of the Company’s net assets.

Prior charges includes all loans and bank overdrafts for investment purposes.

		30 SEPTEMBER	30 SEPTEMBER
		2022	2021
		£’000	£’000
Bank loan (prior charges)		(36,700)	(36,700)
Net current assets		15,006	30,092
Net debt		(21,694)	(6,608)
Net assets		1,830,384	2,064,658
Gearing		1.2%	0.3%

LEVERAGE

For the purpose of the Alternative Investment Fund Managers (AIFM) Directive, leverage is a method which increases the Company’s exposure, including the borrowing of cash and the use of derivatives.

Leverage is calculated slightly differently from the AIC method of calculating gearing in that it is expressed as a ratio between the Company’s exposure and its net asset value. It is calculated under gross and commitment methods. Under the gross method, exposure represents the Company’s investment positions excluding sterling cash balances. Under the commitment method, exposure represents the Company’s investment positions including sterling cash balances and after certain hedging and netting positions are offset (where applicable). For these purposes the Board has set a maximum leverage of 125% for both methods.

	30 SEPTEMBER	30 SEPTEMBER
	2022	2021
Gross method	101.2%	100.3%
Commitment method	101.6%	101.4%

NET ASSET VALUE (NAV)

The value of the Company’s assets, principally investments made in other companies and cash being held, less any liabilities. The NAV is also described as ‘shareholders’ funds’. The NAV is often expressed in pence per share after being divided by the number of shares that have been issued. The NAV per share is unlikely to be the same as the share price which is the price at which the Company’s shares can be bought or sold by an investor. The share price is determined by the relationship between the demand and supply of the shares.

NET ASSET VALUE TOTAL RETURN PER SHARE (APM)

The theoretical total return on an investment over a specified period assuming dividends paid to shareholders were reinvested at net asset value per share at the time the shares were quoted ex-dividend. This is a way of measuring investment management performance of investment companies which is not affected by movements in discounts or premiums. The Directors regard the Company’s net asset value total return per share as being the overall measure of value delivered to shareholders over the long term. The Board considers the principal comparator to be its benchmark, the FTSE All-Share Index.

NAV TOTAL RETURN		30 SEPTEMBER	30 SEPTEMBER
		2022	2021
Opening NAV per share (p)		917.7	846.2
(Decrease)/increase in NAV per share (p)		(69.3)	71.5
Closing NAV per share (p)		848.4	917.7
(Decrease)/increase in NAV per share		(7.6)%	+8.4%
Impact of dividends re-invested*		+1.8%	+2.2%
NAV per share total return		(5.8)%	+10.6%

* The NAV total return is calculated on the assumption that the total dividends of 17.4p (16.6p) paid by the Company during the year were reinvested into assets of the Company at the NAV per share at the ex-dividend date. The treasury shares held by the Company have been excluded from this calculation.

The source of this data is Morningstar who have calculated the return on an industry comparative basis.

ONGOING CHARGES (APM)

Ongoing charges are calculated by taking the Company’s annualised operating expenses expressed as a proportion of the average daily net asset value of the Company over the year. The costs of buying and selling investments are excluded, as are interest costs, taxation, cost of buying back or issuing ordinary shares and other non-recurring costs. Ongoing charges represent the costs that shareholders can reasonably expect to pay from one year to the next, under normal circumstances. The Board continues to be conscious of expenses and works hard to maintain a sensible balance between high quality service and the cost of provision.

		30 SEPTEMBER	30 SEPTEMBER
		2022	2021
		£’000	£’000
AIFM and portfolio management fees		10,712	11,240
Operating expenses		1,078	1,007
Total expenses		11,790	12,247
Average net assets during the year		1,973,934	1,988,069
Ongoing charges		0.60%	0.62%

PEER GROUP

Finsbury Growth & Income Trust PLC is part of the AIC’s UK Equity Income Investment Trust Sector. The trusts in this universe are defined as trusts whose investment objective is to achieve a total return for shareholders through both capital and dividend growth.

REVERSE STRESS TEST

Reverse stress tests are stress tests that identify scenarios and circumstances which would make a business unworkable and identify potential business vulnerabilities.

SASB

The Sustainability Accounting Standards Board aims to establish industry-specific disclosure standards across ESG topics that facilitate communication between companies and investors about financially material, decision-useful information.

SHARE PRICE TOTAL RETURN (APM)

The change in capital value of a company’s shares over a given period, plus dividends paid to shareholders, expressed as a percentage of the opening value. The assumption is that dividends paid to shareholders are re-invested in the shares at the time the shares are quoted ex-dividend. The Directors regard the Company’s share price total return to be a key indicator of performance. This reflects share price growth of the Company which the Board recognises is important to investors.

SHARE PRICE TOTAL RETURN		30 SEPTEMBER	30 SEPTEMBER
		2022	2021
Opening share price share (p)		876.0	840.0
(Decrease)/increase in share price (p)		(76.0)	+36.0
Closing share price (p)		800.0	876.0
(Decrease)/increase in share price		(8.7)%	+4.3%
Impact of dividends re-invested*		+3.1%	+2.0%
Share price total return		(5.6)%	+6.3%

* The share price total return is calculated on the assumption that the total dividends of 17.4p (16.6p) paid during the year were reinvested into shares of the Company at the share price at the ex-dividend date.

The source is Morningstar who have calculated the return on an industry comparative basis.

STERLING OVERNIGHT INDEX AVERAGE ("SONIA")

SONIA is an interest rate published by the Bank of England. SONIA can be seen as the average interest rate at which a selection of financial institutions lend to one another in British pound sterling (GBP) with a maturity of 1 day (overnight).

STRESS TESTING

Stress testing Is a forward-looking analysis technique that considers the impact of a variety of extreme but plausible economic scenarios on the financial position of the Company.

TCFD

The Financial Stability Board created the Task Force on Climate-related Financial Disclosures (”TCFD”) to improve and increase reporting of climate-related financial information.

TREASURY SHARES

Shares previously issued by a company that have been bought back from shareholders to be held by the company for potential sale or cancellation at a later date. Such shares are not capable of being voted and carry no rights to dividends.

2022 Accounts

The figures and financial information for 2022 are extracted from the Annual Report and financial statements for the year ended 30 September 2022 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.

2021 Accounts

The figures and financial information for 2021 are extracted from the published Annual Report and financial statements for the period ended 30 September 2021 and do not constitute the statutory accounts for that year.  The Annual Report and financial statements have been delivered to the Registrar of Companies and included the Report of the Independent Auditor which was unqualified and did not contain a statement under either section 498(2) or section 498(3) of the Companies Act 2006.

Annual report and financial statements

Copies of the Annual Report and financial statements will be posted to shareholders in mid December 2022 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 2022 has been submitted to the Financial Conduct Authority and will shortly be available for inspection on the National Storage Mechanism (NSM) via https://data.fca.org.uk/#/nsm/nationalstoragemechanism. 

The Annual General Meeting will be held on Tuesday, 17 January 2023.

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