Source - PRN
All information is at31 August 2016 and unaudited.
Performance at month end is calculated on a cum income basis
Net asset value (undiluted)# 4.4 1.3 5.6 38.0 105.8
Net asset value (fully diluted) 4.4 1.3 5.6 38.0 100.2
Share price 5.1 -0.8 0.3 29.7 99.1
Benchmark* 2.6    2.7 3.6 25.6 71.4

Sources: BlackRock and Datastream
#Prior to dilution arising on conversion of subscription shares.
*With effect from 1 December 2013 the Numis Smaller Companies excluding AIM (excluding investment companies) Index replaced the Numis Smaller Companies plus AIM (excluding investment companies) Index as the Company’s benchmark. The three and five year period indices have been blended to reflect this. 
At month end
Net asset value capital only: 392.29p    
Net asset value incl. income: 396.79p    
Share price 328.00p    
Discount to cum income NAV 17.3%    
Net yield 2.1%*   
Total Gross assets £290.2m**  
Net market exposure as a % of net asset value^ 106.0%    
Ordinary shares in issue: 73,130,326*** 
2015 ongoing charges (excluding performance fees): 1.1%****
2015 ongoing charges (including performance fees): 2.3%    

* Calculated using current year interim dividend and prior year final dividend.
** Includes current year revenue and excludes the gross exposure through contracts for difference.
*** Excluding 7,400,000 shares held in treasury.
**** Calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs for the year ended 30 November 2015.
^Long positions less short positions as a percentage of net asset value.
Sector Weightings % of Total Assets
Industrials 31.2
Consumer Services 20.4
Financials 14.5
Consumer Goods 9.0
Technology 7.7
Health Care 6.7
Basic Materials 6.5
Oil & Gas 2.0
Net current assets 2.0
Total 100.0
Market Exposure (Quarterly)
Long 115.2 118.2 114.4 114.3
Short 9.2 11.2 8.3 8.3
Gross exposure 124.4 129.4 122.7 122.6
Net exposure 106.0 107.0 106.1 106.0
Ten Largest Investments
Company % of Total Gross Assets
4imprint Group 3.2
CVS Group 3.1
Dechra Pharmaceuticals 2.6
JD Sports 2.3
Hill & Smith 2.2
Fevertree Drinks 1.8
Accesso Technology 1.8
Savills 1.8
Workspace Group 1.8
Restore 1.7

Commenting on the markets, Mike Prentis and Dan Whitestone, representing the Investment Manager noted:

During August the Company’s NAV per share rose by 4.4% on a cum income basis whilst our benchmark index rose by 2.6%; the FTSE 100 Index rose by 1.7%.

The long only portfolio increased in value by 4.2%, outperforming the benchmark by 1.6%. The CFD portfolio added 0.1% to performance. Long CFDs added 0.5% to NAV whilst short CFDs detracted 0.4%.

Outperformance in the long only portfolio was largely driven by stock selection with our large holdings in 4imprint Group and CVS Group contributing well. 4imprint announced half year results which showed revenues up by 17%, all organic, 19% increase in earnings per share and net cash of $20m. 96% of 4imprint revenue is generated in the USA. Trading patterns in the first half are expected to continue into the second half. CVS put out a year end trading update which indicated results were expected to be modestly ahead of market expectations. Like-for-like revenues were up 4.8% for the year to 30 June, up from a more normal 3.0% in the first half. CVS has continued to be acquisitive adding 67 surgeries in the year taking its total surgeries operated to 360.

There were no long only portfolio holdings which were significant detractors from relative performance from a stock specific point of view during the month.

Sector allocation made a small position contribution helped by both our underweight position in mining stocks and our overweight position in housing related stocks.

During the month we added a number of small holdings in the long only portfolio including Ultra Electronics, Coats, Dairy Crest and Costain. Ultra and Coats both generate the majority of their revenues internationally. Ultra is more confident of seeing a return to organic sales growth and defence budgets are generally looking better underpinned. Coats is benefitting from the growth of the Asian consumer, although it is a truly global business. Dairy Crest should benefit from higher cheese profits and the growth of its demineralised whey business. Costain should benefit from increasing infrastructure spending. 

Turning to the CFD portfolio, August proved quite a challenging month, particularly for the short book in light of the market rally and also the overall shape of the market. Despite that backdrop, the CFD portfolio was still able to deliver a positive return, but it felt hard work! The Long CFD book benefitted from some strong stock specifics, notably CVS Group, 4Imprint Group, Balfour Beatty and MicroFocus. The enduring benefits of Sterling weakness, combined with the monetary policy response we’ve witnessed has helped fuel a “risk-on” rally, which has negatively impacted areas of the short book which dragged on performance. Overall, we’ve not made too many changes to the portfolio, but have tactically increased exposure to UK housebuilders and construction related activities in the long book in the hope that the lever of fiscal policy is used with greater effect going forward to stimulate economic growth. 

16 September 2016


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