REG - Brown Advisory US - Half Yearly Results to 31 December 2024
19/02/2025 07:00
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RNS Number : 5924X Brown Advisory US Smaller Cos. PLC 19 February 2025
Brown Advisory US Smaller Companies PLC (the 'Company')
Legal Entity Identifier: 549300HKKL9K1NY4TW55
Half-yearly financial results for the six months ended 31 December 2024
Financial Highlights for the six months ended 31 December 2024
Ordinary Share Performance
31 December 30 June
2024 2024 % change
Net asset value* (pence) 1,550.0 1,471.4 +5.3
Closing price (pence) 1,400.0 1,282.5 +9.2
Russell 2000 Total Return Index (Sterling-adjusted) 9,633.4 8,699.0 +10.7
Discount to net asset value* (%) (9.7) (12.8)
Ongoing charges ratio* (%) 1.02 1.05
* For definitions of the above alternative performance measures please refer
to the glossary of terms in the Half-yearly Report.
Stephen White, Chairman, Brown Advisory US Smaller Companies, said:
"We are pleased to report a share price return of 9.2% for the Company during
the period. It is encouraging to see a resurgence of interest in US smaller
companies, which we believe remain undervalued and under-owned. While the
Russell 2000 benchmark* rose by 10.7%, much of this was led by a narrow
subgroup of more speculative or unprofitable stocks, many of which were driven
by exuberance in the AI, quantum computing, and cryptocurrency sectors.
Conversely, our Portfolio Managers continue to focus on strong quality
businesses and long-term compounders, that they believe will deliver truly
sustainable growth, but which lagged the rally.
"While US equity markets more broadly had another stand-out year in 2024,
recent developments have caused us to remain optimistic for the prospects of
our portfolio. The shift in monetary policy by the Fed in September and the
first rate cuts since 2020, combined with Donald Trump's 'clean sweep'
presidential win and a perceived more business-friendly administration, should
be supportive for smaller companies with a more domestic bias. I am pleased to
note that relative performance has picked up since the half year end.
"The Board was also pleased to recently introduce some important measures that
will deliver additional value to shareholders. As announced on 11 February
2025, the Board agreed with Brown Advisory to introduce a reduced tiered
management fee, based on the lower of the Company's market capitalisation and
net asset value (NAV), rather than NAV as is currently the case. This will
have an immediate beneficial impact on shareholders' costs. At the same time,
the Board committed to offer shareholders an opportunity to tender some or all
of their shares if the Company does not outperform its benchmark over the
period to 30 June 2028, recognising the importance of liquidity to investors.
We are confident in the ability of the Portfolio Manager to outperform in this
timeframe and beyond, when, despite recent outperformance, US smaller
companies we believe remain undervalued and provide access to some of the most
exciting and entrepreneurial companies in the world's largest economy."
*Sterling-adjusted Russell 2000 Total Return Index
Contact:
Brown Advisory US Smaller Companies InvestmentTrustEnquiries@brownadvisory.com
(mailto:InvestmentTrustEnquiries@brownadvisory.com)
+44 203 301 8130
FundRock Partners Limited, ukfundscosec@apexgroup.com (mailto:ukfundscosec@apexgroup.com)
Company Secretary
Singer Capital Markets, Corporate Broker + 44 207 496 3000
Alan Geeves, William Gumpel, James Waterlow, Sam Greatrex (Sales)
Alaina Wong, Sam Butcher (Investment Banking)
Lansons, Financial PR edh (mailto:edh@lansons.com) @l (mailto:edh@lansons.com) ansons
(mailto:edh@lansons.com) .com (mailto:edh@lansons.com)
Ed Hooper
07783 387713
Chairman's Statement
Dear Fellow Shareholder,
For the six months ended 31 December 2024, your Company's net asset value
(NAV) per share rose from 1,471.4p to 1,550.0p, an increase of 5.3%. Over this
period, US equity markets performed well, buoyed by the Federal Reserve (Fed)
finally cutting interest rates, economic activity holding up and Donald Trump
and the Republican party winning an unexpected 'clean sweep' in November's
presidential and legislative elections.
Also, after a few years of US small caps lagging their larger peers, it was
pleasing to see a renewal of interest in small-cap stocks, as reflected in the
performance of our benchmark the Sterling-adjusted Russell 2000 Total Return
index. This rose by 10.7% over the period, slightly ahead of the large-cap
indices. The NAV's underperformance of the benchmark was at first sight
disappointing, but due in large part to our Portfolio Manager's focus on
quality and their policy of avoiding the more speculative situations which
were the leaders in this small-cap rally. I am pleased to note that relative
performance has picked up since the half-year end.
Over the six months, the Company's share price rose from 1,282.5p to 1,400.0p,
up 9.2%. This resulted in a small narrowing of the discount from 12.8% to
9.7%.
Market Review
In the first couple of months of our financial half year, US equity markets
made little headway, oscillating within a relatively narrow trading range. The
political background was unsettled with, at home in the US, the assassination
attempts on former president Trump and President Biden's withdrawal from the
presidential race and, abroad, the growing tensions in the Middle East and
lack of resolution to the war in Ukraine. Economic news was also less
supportive, with softer jobs and unemployment data and the important
technology sector, which had been leading the markets previously, hit a bout
of profit taking as half year results proved somewhat mixed. On a more
positive note, the softer economic data and lacklustre corporate news, coupled
with better-than-expected inflation numbers, boosted expectations that
September would finally see the Fed begin its much-awaited programme of
interest rate cuts.
In the event, the Fed went further than expected in September, cutting
interest rates by 50 basis points, rather than the 25 generally forecast, in
its first rate cut since March 2020. This more dovish move, coupled with
generally steady economic commentary, left investors feeling relatively
comfortable that monetary policy was not too restrictive, and that the Fed
would act again to prevent further labour market weakness if necessary.
Markets responded positively and pushed steadily ahead through the autumn to
reach new all-time highs. They received a further boost towards the end of
November as Donald Trump won a resounding victory in the presidential election
and the Republican party won control in a 'clean sweep' of both the Senate and
the House of Representatives. Investors responded positively to the decisive
result given earlier fears of a drawn-out contested outcome and the likely
future government pro-business/anti-regulatory policy agenda.
The shift in monetary policy by the Fed over the summer, the start of rate
cuts in September and the expectation of more to come, coupled with the
perceived return of a more pro-business administration in November prompted
renewed buying of US equities. Domestic and international investors bought
asset classes that had lagged. Especially sought after were small and mid-cap
stocks given their notable earlier underperformance relative to large and
mega-caps and the expectation that they would be the greater beneficiaries of
the new administration's domestic policies. As a result, over the period under
review small and mid-cap stocks performed better than their larger
counterparts. Over the half year, the Russell 2000 in US dollar terms returned
a gross 9.6%, compared to 8.4% from the S&P 500 and 9.3% from the Nasdaq.
The pound weakened a little against the US dollar over the period, falling
from 1.266 to 1.252, which added slightly to the return for Sterling-based
investors.
Portfolio Manager Oversight
A more detailed coverage on the development of the US smaller company sector
over the past six months and our activity and performance is included in the
below Portfolio Manager's Review.
The Board continues to monitor closely investment performance and, in
accordance with the Portfolio Management Agreement (PMA), carries out a
detailed formal appraisal of the Portfolio Manager annually. An additional
detailed review was carried out last year once the Portfolio Manager had been
managing the portfolio for three years. Despite recent underperformance during
a difficult period for small cap investors, we continue to have confidence in
the Portfolio Manager's philosophy and process to identify successful, quality
companies and in their ability to deliver positive results over the long term.
Conditional Tender Offer
As communicated to the market on 11 February 2025 the Board has decided that,
should long-term performance not be satisfactory for shareholders, there
should be a mechanism for them to realise up to 100% of the issued share
capital in the Company at close to the prevailing NAV of the Company.
Accordingly, should the NAV performance of the Company not outperform the
Company's benchmark (Sterling-adjusted Russell 2000 Total Return Index) for
the period 1 July 2023 to 30 June 2028 (i.e. a total period of five years with
three and a half remaining), the Board intends to offer shareholders a one-off
opportunity to tender some or all their shares at close to the prevailing NAV,
less costs.
It should be noted that the Portfolio Manager outperformed the benchmark in
the period from taking over as Portfolio Manager of the Company on 1 April
2021 to 30 June 2023 by 3.3%.
The Board believes that such a Conditional Tender Offer will allow the Company
and its Portfolio Manager appropriate time to outperform against the Company's
benchmark and, in the event it does not, to offer shareholders a liquidity
event.
This redemption option will sit alongside the existing 3-year continuation
vote, see below.
Continuation Vote
In accordance with the three-year cycle prescribed in the Company's Articles
of Association, the next continuation vote will be held at our Annual General
Meeting (AGM) in November 2026. At the last vote in November 2023 the
resolution in favour of continuation was passed with 3,885,193 proxy votes or
90.5 percent in favour.
Management Fee
The Board reviews the total costs of the Company on a regular basis. The aim
is to ensure that the costs continue to represent good value to shareholders,
that they are competitive with similar investment products and consider the
quality and experience of the teams involved.
As also communicated to the market on 11 February 2025, following recent
engagement with Brown Advisory, I am pleased to report that they have agreed
to a reduced tiered management fee replacing the current fee arrangements,
effective from and backdated to 1 January 2025.
Details of the amendments to the management fee arrangements are set out
below.
New fee arrangements:
- The management fee will be calculated based on the lower of the
Company's market capitalisation and net asset value (NAV), rather than NAV as
is currently the case; and
- The management fee on the first £200m will be reduced to 0.65%,
from 0.7%, and will continue to be calculated on a tiered basis.
From 1 January 2025, the management fee is therefore calculated at an annual
rate of:
- 0.65% on the first £200 million;
- 0.6% of the next £300 million; and
- 0.5% thereafter,
in each case of the lower of the Company's market capitalisation and the
Company's NAV.
The new fee arrangements do not introduce any performance fee or
performance-related elements.
The Board believes that the changes have the potential to reduce costs for
shareholders in both the short and long term, and ensure stronger alignment
between the Portfolio Manager and investors.
The Portfolio Management Agreement between the Company, FundRock Partners
Limited (as the Company's AIFM) and the Portfolio Manager has been amended to
reflect the new management fee. No other changes have been made to the
agreement.
Share Price and Discount
The Board also remains committed to using share buybacks with the aim of
reducing discount volatility and working to reduce any discount should it
become significantly wider than those of similar investment trusts, rather
than at a fixed discount level. In accordance with our share buyback policy as
revised two years ago we bought in 115,262 shares over the half-year.
On 31 December 2024, the number of shares held in treasury was 6,476,516 and
the total number in public hands was 11,746,897.
Gearing
With interest rates at still high levels and taking into consideration the
views of the Portfolio Manager regarding investment opportunities in the
smaller company sector the Board held back from gearing the portfolio.
However, the situation with regards to gearing remains under regular review.
Shareholder Communications
The Board encourages shareholders to visit the Company's website
(www.brownadvisory.com/basc) for the latest information, podcasts and monthly
factsheets.
Outlook
US equity markets gave another blockbuster showing in 2024 as the economy
remained healthy, inflation trended lower, the Fed cut interest rates, and an
Artificial Intelligence (AI) rally powered the technology sector. Adding to
the positive returns of the year before the US markets achieved their best
consecutive years' performance since 1997 and 1998 during the lead-up to the
bursting of the dot-com bubble.
With the economy holding up, US markets could well produce positive returns
again in 2025. That said, there are a few factors which in the short term
might limit the extent of any advance. First, interest rates may stay higher
for longer than investors expect as the Fed take a more cautious view on the
inflation outlook given the underlying strength of the economy, price rises
still to come through the supply chain and several of the measures proposed by
the new administration, such as widespread import tariffs, which would have
inflationary consequences. Indeed, since the Fed has started cutting interest
rates yields of longer dated paper have risen markedly, an unhelpful signal.
Secondly, the rally of the past couple of years leaves much of the markets
looking increasingly expensive. Stocks are trading at well above their
long-term averages, even if flattered by the hefty presence of fast-growing
tech stocks, with the greater risk therefore of disappointment. Finally, there
is the risk that investors fall out of love with the tech sector itself as
they become more cautious about AI and its returns on investment. All of this
is without considering the very uncertain geopolitical background.
Given these potential headwinds, US markets may see some volatility in the
short term. However, assuming the economy remains in good shape, the Fed
continues to cut interest rates, even if less than originally hoped for, and
corporate earnings hold up, the longer-term prospects remain favourable. We
are hopeful that, coupled with a business-friendly administration in place,
this may prove a favourable background for smaller companies with their more
domestic bias. It may also persuade many investors to review their exposure to
the US smaller company asset class.
Stephen White
Chairman
18 February 2025
Portfolio Manager's Review
Over the six months ended December 2024, the Company's portfolio advanced but
did not keep pace with the benchmark. Standard attribution analysis shows we
trailed due to: 1) an underweight in the financials sector and 2) stock
selection in the industrials and consumer sectors. Since we believe the
fundamentals of our portfolio holdings generally remain sound, we attribute
the shortfall mostly to our conservative and prudent investment style amid a
uniquely ebullient and narrow market, in which a small number of companies
increased in value dramatically when compared to the vast majority of the rest
of our investment universe.
Performance Overview
U.S. equities surged leading up to and after the US presidential election.
According to analysis by Jefferies, in the small-cap range, the
fastest-growing equities - those with lofty price-to-earnings ratios (or no
earnings), the worst returns on equity, and the highest betas - drove most of
the gains. Beta is a measure of a stock's volatility relative to the overall
market; a higher beta indicates greater volatility. Thematically, sectors
related to artificial intelligence (AI), quantum computing, and cryptocurrency
skyrocketed. Financials rallied with rising rates and hopes of an economic
upturn, while healthcare stocks remained stagnant. Quality compounders, which
are companies showing attractive fundamental characteristics and consistent
earnings growth, produced solid absolute returns but were not the focus of the
majority of investors.
The Russell 2000 index illustrates the wild exuberance in certain niches. For
example, Rocket Lab, a money consuming space company, saw its share price
increase by 431% in the second half of 2024. Upstart, an AI consumer-lending
platform whose share price collapsed over 90% after peaking in 2021, jumped
161% in the period and Rigetti Computing stole the show with an increase of
1,326%. For context, not owning these benchmark securities contributed over
one percentage point to the strategy's relative shortfall during the last six
months. Meanwhile, some of our long-term portfolio compounders like Waste
Connections (-2%) and EastGroup Properties (-4%) posted decent results given
the tepid macroeconomy but saw their share prices stall as investors flocked
to riskier assets.
We note that the strategy lagged in a similar manner for several weeks after
Donald Trump's surprise victory in late 2016; it subsequently recovered from
that painful but brief shortfall in the months that followed. Given the solid
fundamental performance of our holdings and recently waning market momentum,
we believe a similar dynamic could recur.
Sector Performance and Allocation
The portfolio's philosophy hinges on selecting a diverse array of "3G"
companies (those that demonstrate durable Growth, sound Governance &
scalable Go-to-market strategies). This focus tends to lead to sector
allocations that are consistent, but significantly different than the
benchmark.
Relative sector weights played a meaningful role in our performance comparison
to the benchmark. First, we have historically maintained a small weight in
financials. During the period, our average weight was roughly 5% compared to
the Russell 2000 Index weight of nearly 18%. The financials sector rose over
20% during this period, negatively impacting our relative results by
approximately one percentage point.
Second, healthcare constitutes a large weight in the portfolio, approximately
6% more than the index when including biotech stocks classified in
non-healthcare sectors. We anticipated that small-company earnings would face
challenges over the last couple of years, and typically, healthcare performs
well in such environments. That concern proved correct - per-share earnings
for the Russell 2000 Index constituents have fallen on average for two
consecutive years. Nonetheless, relative healthcare sector performance has
been quite lacklustre over the last few years, including the last six months,
with sector gains of 2.2% compared to 10.7% total return for the Russell 2000
Index.
Finally, stock selection hindered our results in the industrial sector.
However, we believe our portfolio holdings trailed the benchmark primarily due
to their low cyclicality or growth profiles rather than any significant
fundamental issues. For example, investors favoured industrials like Rocket
Lab (+431%) and Aurora Innovation, a self-driving vehicle company (+127%).
Some of our industrial holdings, such as Applied Industrial Technologies
(+24%), nuclear leader Curtis-Wright (+31%), and Mueller Water Products
(+26%), posted strong gains due to their cyclical or thematic exposure, but it
was insufficient to offset price declines from non-cyclicals such as pest
eliminator Rentokil (-14%), bankruptcy consultant FTI (-11%), and safety
product maker MSA (-11%).
Market Dynamics and Strategy Adjustments
The equity market is currently characterized by intense concentration, with
numerous examples of speculative behaviour in sectors such as artificial
intelligence, quantum computing, and cryptocurrency. Additionally, small- cap
stock prices have risen largely due to multiple expansions. This combination
has posed a headwind for our relative results during brief but intense periods
throughout the strategy's history, as seen in the last six months.
Overall, we remain focused on executing our investment philosophy and process,
making the best bottom-up, fundamental, and long-term investment decisions
possible. Our inability to keep pace with the benchmark in this narrow equity
market has been frustrating, but we have experienced similar periods in the
past and are confident in our team's ability to execute well in the upcoming
quarters and years.
Additions and Disposals
During the six months to the end of December 2024, we made several strategic
additions and disposals to better position the portfolio for future growth.
Notable additions include Insmed Incorporated (INSM), which has a promising
lead drug with blockbuster potential, and OpenLane (KAR), a leading wholesale
auction marketplace with improved competitive environment. We also added
KinderCare Learning (KLC), the largest provider of childcare centres in North
America, and Mirion Technologies (MIR), a high recurring revenue business with
growth tailwinds in cancer treatment and radiation measurement. Other
additions include StandardAero (SARO), Simpson Manufacturing (SSD), Tandem
Diabetes Care (TNDM), and ServiceTitan (TTAN), each offering unique growth
opportunities in their respective sectors.
On the disposal side, we eliminated Accolade (ACCD) due to concerns regarding
its ability to scale profitably and Ascendis Pharma (ASND) on worries that the
management team is making the same pricing mistake on its second marketed drug
that hindered the adoption of its first. We also sold Clearwater Analytics
(CWAN) after a significant run-up in valuation and Envestnet (ENV) following
its acquisition by Bain Capital. Other disposals included Haemonetics (HAE),
Immunome (IMNM), and the SPDR S&P Biotech ETF (XBI), as we reallocated
capital to higher conviction ideas.
Conclusion
Investing is a journey, and the lessons learned from a difficult year like
2024 are invaluable. We remain
committed to our disciplined, bottom-up investment approach and believe that
our focus on quality, valuation discipline, and long-term growth will continue
to serve our investors well. As we move into 2025, we are confident that our
strategy is well- positioned to navigate the evolving market landscape and
capitalize on opportunities for growth.
Brown Advisory LLC
Portfolio Manager
18 February 2025
Statement of Directors' Responsibilities
Each of the Directors confirms to the best of their knowledge that:
a) the condensed set of financial statements, prepared in accordance
with the applicable set of accounting standards, give a true and fair view of
the assets, liabilities, financial position and profit or loss of the Company
at, or, as applicable, for the period ended 31 December 2024.
b) in their opinion the Chairman's statement, the Portfolio Manager's
review and the interim management report include a fair review of the
development and performance of the Company, together with a description of the
principal risks and uncertainties that the Company faces; and
c) the interim management report includes a fair review of the
information required by Disclosure Guidance and Transparency Rule 4.2.8R on
related party transactions.
The Half Yearly Financial Report has not been audited or reviewed by the
Company's auditors.
By order of the Board
Stephen White
Chairman
18 February 2025
Income Statement
for the six months ended 31 December 2024 (unaudited)
Six months to 31 December 2024 Six months to 31 December 2023
Revenue Capital Revenue Capital
Return Return Total Return Return Total
£'000 £'000 £'000 £'000 £'000 £'000
Gains from investments held at fair value through profit or loss (Note 2) - 9,604 9,604 - 3,715 3,715
Currency exchange loss - (32) (32) - (120) (120)
Investment income 533 - 533 613 - 613
Total income 533 9,572 10,105 613 3,595 4,208
Management fee (628) - (628) (603) - (603)
Other expenses (283) (1) (284) (263) (1) (264)
(Loss)/return before taxation (378) 9,571 9,193 (253) 3,594 3,341
Taxation (70) - (70) (80) - (80)
Net (loss)/ return after taxation (448) 9,571 9,123 (333) 3,594 3,261
Net (loss)/return per Ordinary share (Note 3) (3.79)p 80.95p 77.16p (2.78)p 30.07p 27.29p
The 'Total' column of this statement is the profit and loss account of the
Company.
The 'Revenue' and 'Capital' columns represent supplementary information
prepared under guidance issued by The Association of Investment Companies. The
Company has no other comprehensive income, and therefore the net return after
taxation is also the total comprehensive income for the year.
All items in the above statement derive from continuing operations. No
operations were acquired or discontinued in the year.
The financial information does not constitute 'accounts' as defined in section
434 of the Companies Act 2006.
The Notes below form part of these accounts.
Statement of Financial Position
as at 31 December 2024 (unaudited)
31 December 30 June
2024 2024
(unaudited) (audited)
£'000 £'000
Fixed assets
Investments at fair value through profit or loss 174,943 165,925
Current assets
Debtors 104 79
Cash at bank and in hand 7,509 9,722
7,613 9,801
Creditors: amounts falling due within one year (477) (1,182)
Net current assets 7,136 8,619
Total assets less current liabilities 182,079 174,544
Capital and reserves
Called up share capital 4,555 4,555
Share premium account 19,550 19,550
Non-distributable reserve 841 841
Capital redemption reserve 9,628 9,628
Retained earnings - capital reserve 157,956 149,973
Retained earnings - revenue reserve (10,451) (10,003)
Total shareholders' funds 182,079 174,544
Net asset value per Ordinary share (Note 6) 1,550.0p 1,471.4p
The financial statements were approved by the Board of Directors and signed on
its behalf on 18 February 2025.
Stephen White
Chairman
Company Registration Number 02781968
The Notes below form part of these accounts.
Statement of Changes in Equity
for the six months ended 31 December 2024 (unaudited)
Called up Share Non-distributable Capital Capital Revenue Total
Share
Premium
Reserve
Redemption
Reserve†
reserve*†
Capital
Reserve
For the six months to 31 December 2024 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 July 2024 4,555 19,550 841 9,628 149,973 (10,003) 174,544
Net return for the period - - - - 9,571 (448) 9,123
Repurchase of Ordinary shares to be held in treasury - - - - (1,588) - (1,588)
Balance at 31 December 2024 4,555 19,550 841 9,628 157,956 (10,451) 182,079
Called up Share Non-distributable Capital Capital Revenue Total
Share
Premium
Reserve
Redemption
reserve†
reserve*†
Capital
Reserve
For the six months to 31 December 2023 £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 July 2023 4,555 19,550 841 9,628 146,090 (9,517) 171,147
Net return for the period - - - - 3,594 (333) 3,261
Balance at 31 December 2023 4,555 19,550 841 9,628 149,684 (9,850) 174,408
Called up Share Non-distributable Capital Capital Revenue Total
Share
Premium
Reserve
Redemption
reserve†
reserve*†
Capital
Reserve
For the year ended 30 June 2024 (audited) £'000 £'000 £'000 £'000 £'000 £'000 £'000
Balance at 1 July 2023 4,555 19,550 841 9,628 145,848 (9,275) 171,147
Repurchase of Ordinary shares to be held in treasury - - - - (1,199) - (1,199)
Net return for the year - - - - 5,324 (728) 4,596
Balance at 30 June 2024 4,555 19,550 841 9,628 149,973 (10,003) 174,544
† Retained earnings comprise the total of Capital reserve and Revenue
reserve.
* Under the Company's Articles of Association any dividends may be distributed
only from the revenue reserve element of retained earnings and, as at 31
December 2024, there were no available earnings of this type.
The Notes below form part of these accounts.
Statement of Cash Flows
for the six months ended 31 December 2024
Six months ended Six months ended
31 December 2024 (unaudited) 31 December 2023 (unaudited)
£'000
£'000
Cash flows from operating activities
Investment income received (gross) 444 517
Deposit interest received 68 88
Investment management fee paid (609) (591)
Other cash expenses (317) (291)
Net cash outflow from operating activities before taxation and interest (414) (277)
Taxation (70) (80)
Net cash outflow from operating activities (484) (357)
Cash flows from investing activities
Purchases of investments (31,399) (18,975)
Sales of investments 31,290 20,385
Net cash (outflow)/inflow from investing activities (109) 1,410
Cash flows from financing activities
Repurchase of ordinary shares into Treasury (1,588) -
Net cash outflow from financing activities (1,588) -
(Decrease)/increase in cash (2,181) 1,053
Cash and cash equivalents at the start of the period 9,722 12,444
Realised loss on foreign currency (32) (120)
Cash and cash equivalents at end of the period 7,509 13,377
The Notes below form part of these accounts.
Notes to the Financial Statements for the six months to 31 December 2024
1. Accounting policies
Accounting policies
The accounting policies applied for the condensed financial statements are as
set out in the Company's Annual Report & Accounts for the year ended 30
June 2024. They have been applied consistently during the period ended 31
December 2024.
FRS 104, 'Interim Financial Reporting', issued by the FRC in March 2015 has
been applied in preparing the financial statements included in this half
yearly report.
Basis of accounting
The accounts of the Company are prepared on a going concern basis under the
historical cost convention, modified to include fixed asset investments at
fair value through profit or loss and in accordance with the Companies Act
2006, UK GAAP and with the Statement of Recommended Practice ('SORP') for
Investment Trust Companies and Venture Capital Trusts issued by the
Association of Investment Companies ('AIC') in November 2014 and updated in
April 2021.
The functional and reporting currency of the Company is pounds sterling
because that is the currency of the primary economic environment in which the
Company operates.
In accordance with the SORP, the Income Statement has been analysed between a
revenue account (dealing with items of a revenue nature) and a capital account
(relating to items of a capital nature). Revenue returns include, but are not
limited to, dividend income, operating expenses and tax. Net revenue returns
are allocated via the revenue account to the retained earnings, out of which
dividend payments may be made. Capital returns include, but are not limited
to, profits and losses on the disposal and revaluation of fixed asset
investments and currency profits and losses on cash and borrowings. Net
capital returns may not be distributed by way of dividend and are allocated
via the capital account to the retained earnings.
2. Gains on investments held at fair value through profit or loss
Six months to Six months to
31 December 31 December
2024 2023
£'000 £'000
Investment Income
Net losses realised on sale of investments (1,209) (3,382)
Movement in investment holdings gains 10,813 7,097
Gains on investments held at fair value through profit or loss 9,604 3,715
3. Return per Ordinary share
Six months to Six months to
31 December 31 December
2024 2023
£'000 £'000
Net revenue loss (448) (333)
Net capital return 9,571 3,594
Net total return 9,123 3,261
Weighted average number of Ordinary shares in issue during the year 11,823,200 11,952,159
Revenue loss per Ordinary share (3.8)p (2.8)p
Capital return per Ordinary share 81.0p 30.1p
Total return per Ordinary share 77.2p 27.3p
4. Transaction Costs
During the period, expenses were incurred in acquiring or disposing of
investments classified as fair value through profit or loss. These have been
expensed through capital and are included within gains on investments in the
Income Statement. The total costs were as follows:
Six months to Six months to
31 December 31 December
2024 2023
£'000 £'000
Purchases 24 20
Sales 19 18
Total 43 38
5. Comparative information
The financial information contained in this interim report does not constitute
statutory accounts as defined in section 434 of the Companies Act 2006. The
financial information for the six months to 31 December 2024 and 31 December
2023 has not been audited.
The information for the year ended 30 June 2024 has been extracted from the
latest published audited financial statements. The audited financial
statements for the year ended 30 June 2024 have been filed with Companies
House. The report of the auditors on those accounts contained no qualification
or statement under section 498(2) or (3) of the Companies Act 2006.
6. Net asset value per Ordinary share
The net asset value per Ordinary share as at 31 December 2024, calculated in
accordance with the Articles of Association, was as follows:
31 December 2024 30 June 2024
Net asset Net assets attributable Net asset value per share attributable Net assets attributable
£'000
(p)
£'000
value per
share attributable
(p)
Ordinary shares 1,550.0 182,079 1,471.4 174,544
Net asset value per Ordinary share on the balance sheet is based on net assets
of £182,079,000 (30 June 2024: £174,544,000) and on 11,746,897 (30 June
2024: 11,862,159) Ordinary shares, being the number of Ordinary shares in
issue at the end of the period.
7. Fair valuation of investments
The fair value hierarchy analysis for investments held at fair value at the
period end is as follows:
31 December 2024 30 June 2024
Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
£'000
£'000
£'000
£'000
£'000
£'000
£'000
£'000
Investments 174,943 - - 174,943 165,925 - - 165,925
Financial instruments include fixed asset investments, derivative assets and
liabilities.
Accounting standards recognise a hierarchy of fair value measurements for
financial instruments which gives the highest priority to unadjusted quoted
prices in active markets for identical assets or liabilities (level 1) and the
lowest priority to unobservable inputs (level 3). The classification of
financial instruments depends on the lowest significant applicable input, as
follows:
Level 1: Unadjusted, fully accessible and current quoted prices in active
markets for identical assets or liabilities. Included within this category are
investments listed on any recognised stock exchange.
Level 2: Quoted prices for similar assets or liabilities, or other directly or
indirectly observable inputs which exist for the duration of the period of
investment. Examples of such instruments would be those for which the quoted
price has been recently suspended, forward exchange contracts and certain
other derivative instruments.
Level 3: External inputs are unobservable. Value is the Directors' best
estimate, based on advice from relevant knowledgeable experts, use of
recognised valuation techniques and on assumptions as to what inputs other
market participants would apply in pricing the same or similar instruments.
Included within this category are unquoted investments
8. Related parties and transactions with the manager
FundRock Partners Limited (FundRock) has been appointed as AIFM to the Company
pursuant to an Alternative Investment Fund Management Agreement between
FundRock and the Company. FundRock has also been appointed to provide company
secretarial services to the Company.
Brown Advisory has been appointed to provide portfolio management services
pursuant to a Portfolio Management Agreement between the Company, FundRock and
Brown Advisory.
The management fee has been calculated at an annual rate of 0.7% on the first
£200 million; 0.6% of the next £300 million; and 0.5% thereafter of the
Company's adjusted net assets.
The management fee is payable by the Company to FundRock, who shall deduct
from the management fee the amounts due to it as AIFM and for company
secretarial services and shall pay the balance to Brown Advisory.
The management fee is calculated and payable on a quarterly basis.
The investment management fee payable to FundRock for the period 1 July 2024
to 31 December 2024 was £628,000. For the period 1 July 2023 to 31 December
2023 the fee payable was £603,000.
The appointment of Brown Advisory and FundRock may be terminated by not less
than six months' notice.
There are no transactions with the directors other than the remuneration paid
to the directors as disclosed in the Directors' Remuneration Report on pages
59 to 62 of the 2024 Annual Report & Accounts and as set out in Note 5 to
the Accounts on page 85 and the beneficial interests of the directors in the
ordinary shares of the Company as disclosed on page 62 of the 2024 Annual
Report & Accounts.
Effective 1 January 2025, new management fee arrangements have been agreed
with Brown Advisory as set out in the Chairman's statement above.
9. Other information
A copy of the Half-yearly financial results for the six months ended 31
December 2024 will shortly be submitted to the National Storage Mechanism and
will be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The Half-yearly financial results for the six months ended 31 December 2024
will also be available to download from the Company's website
www.brownadvisory.com/basc
Enquiries:
FundRock Partners Limited, Company Secretary
ukfundscosec@apexgroup.com
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on this announcement (or any other website) is
incorporated into, or forms part of, this announcement.
END
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