TIDMBASC
RNS Number : 6824M
Brown Advisory US Smaller Cos. PLC
18 September 2023
Brown Advisory US Smaller Companies PLC (the 'Company')
Legal Entity Identifier: 549300HKKL9K1NY4TW55
Annual Financial Results for the year ended 30 June 2023
Financial Highlights for the year ended 30 June 2023
Ordinary Share Performance
30 June 30 June
2023 2022 % change
Net asset value (pence) 1,431.9 1,303.9 +9.8
=============================
Closing price (pence) 1,220.0 1,105.0 +10.4
============================= ------- ------- --------
Russell 2000 Index (sterling
adjusted) 7,860.0 7,308.5 +7.5
============================= ------- ------- --------
Discount to net asset value
(%) (14.8) (15.3) -
============================= ------- ------- --------
Ongoing charges ratio (%) 1.00 0.97 -
============================= ------- ------- --------
Ten year record
Year-on-year
change in
Net asset net asset Year-on-year
value per value per change in
Year ended 30 Ordinary Ordinary benchmark
June Net assets share share index
GBP'000 p % %
----------- ----------- ------------- -------------
2014 164,957 686.3 +11.0 +9.8
----------- ----------- ------------- -------------
2015 174,033 724.1 +5.5 +15.8
----------- ----------- ------------- -------------
2016 174,163 787.3 +8.7 +9.7
----------- ----------- ------------- -------------
2017 181,687 911.1 +15.7 +28.2
----------- ----------- ------------- -------------
2018 163,339 1,103.4 +21.1 +15.7
----------- ----------- ------------- -------------
2019 161,520 1,152.7 +4.5 +0.3
----------- ----------- ------------- -------------
2020 145,011 1,116.3 -3.2 -3.8
----------- ----------- ------------- -------------
2021 181,426 1,516.3 +35.8 +45.1
----------- ----------- ------------- -------------
2022 155,840 1,303.9 -14.0 -15.2
----------- ----------- ------------- -------------
2023 171,147 1,431.9 +9.8 +7.5
----------- ----------- ------------- -------------
Contact:
Brown Advisory US Smaller InvestmentTrustEnquiries@brownadvisory.com
Companies +44 203 301 8130
Chris Berrier, Portfolio
Manager
FundRock Partners Limited, ukfundscosec@apexfs.com
Company Secretary +44 (0) 7766 081 197
I nderpreet Kaur Bedi
--------------------------- -------------------------------------------
TB Cardew, Financial PR brownadvisory@tbcardew.com
to BASC 07789 998020
Tom Allison 07425 536903
Tania Wild 07918 207517
Henry Crane
--------------------------- -------------------------------------------
Introduction to Brown Advisory US Smaller Companies PLC
What does Brown Advisory US Smaller Companies PLC (the
"Company") do?
The Company aims to achieve long-term capital growth by
investing in a diversified portfolio of quoted US smaller and
medium-sized companies.
Who is it suitable for?
Brown Advisory manages the Company's portfolio on behalf of
individual investors and wealth managers. The Company provides a
cost-effective way to access the large, entrepreneurial group of
smaller companies in the world's largest economy - the United
States of America. For individuals who are willing to invest over
the long-term, these companies often outperform their large-cap
peers so make for a compelling investment opportunity.
How is Brown Advisory US Smaller Companies invested?
Managed by Chris Berrier and George Sakellaris, CFA, of the
US-based investment manager, Brown Advisory, the Company focuses on
businesses with strong growth potential, scalable go-to-market
strategies and well-aligned management and shareholder interests.
The resulting portfolio is diversified across sectors, business
models and economic cycles.
The power of compounding - the managers recognise the potential
of compounding in order to achieve long-term, risk-adjusted
returns. Therefore, they seek to invest in companies that present
above average capital growth rates.
Harnessing their local knowledge and innovative research
approach, they aim to capitalise on market inefficiencies in
valuations and invest in businesses that exhibit what they refer to
as "3G" qualities.
Out of a universe of over 2,000 companies, this process reduces
the available market to around 500 companies, while the portfolio
itself is typically made up of 70-80 of these companies.
Benchmark agnostic - while the Company's performance is measured
against the sterling adjusted Russell 2000 Total Return Index, the
managers are not beholden to this benchmark - individual sector and
security weightings are driven by their rigorous stock selection
process.
Why invest in US smaller companies?
-- US-based smaller companies include an exciting and dynamic
group of growing businesses that typically demonstrate high
innovation and strong entrepreneurial cultures.
-- Over half of global smaller companies - more than 2,000
companies - are listed in the US, creating a huge opportunity.
-- US smaller companies offer a deep and liquid market but are
typically not as well covered by sell-side research analysts as
their larger counterparts, creating inefficiencies and missed
opportunities that Brown Advisory aims to exploit.
-- A US stock market listing means there are high governance
hurdles relative to some of their global peers, considerably
reducing the risk profile of US smaller companies.
Why have the directors of Brown Advisory US Smaller Companies
PLC appointed Brown Advisory as the Portfolio Manager?
Chris Berrier and George Sakellaris, CFA, the portfolio leads
between them have more than 44 years' experience investing in US
small and mid-caps and are supported by a large team of
fundamental, investigative and environmental, social and governance
(ESG) analysts. Based in the US, the team have direct access to the
companies in which they invest.
Brown Advisory has more than 25 years' experience of investing
in small and medium-sized companies in the US and within its
broader US Small-Cap Growth strategy it manages $6.6bn. The firm
benefits from an extensive network of venture capital, private
equity and corporate relationships, which helps provide a strong
overview of the broader small to mid-sized company market.
Brown Advisory believes that disciplined, bottom-up research,
coupled with teamwork and the free exchange of ideas amongst
colleagues, are the keys to achieving long-term outperformance. The
combination of its investment philosophy and its client-first
culture were important factors in the Board's decision to appoint
Brown Advisory as the Company's Portfolio Manager.
Chairman's Statement
Dear Fellow Shareholder
I am pleased to report that for the year ended 30 June 2023,
your Company's net asset value (NAV) per share rose from 1,303.9p
to 1.431.9p, an increase of 9.8%. This compares favourably with the
7.5% gain in the Company's benchmark, the sterling adjusted Russell
2000 Total Return Index, over the same period. It was encouraging
to see the US smaller company sector generate a positive return
again after a very disappointing performance in the previous year,
even if it still lagged those of its larger peers, the S&P500
and the tech-heavy Nasdaq.
Over the twelve months under review, the Company's share price
rose from 1,105.00p to 1,220.00p, an increase of 10.4%. This
resulted in a small narrowing of the discount to NAV from 15.3% on
30 June 2022 to 14.8% on 30 June 2023. No shares were bought in or
issued during the year, as touched on below.
Market Review
In the first nine months of our financial year, US equity
markets lost ground. The geopolitical background worsened as
China/US relations deteriorated and the war in Ukraine ground on
with no signs of resolution. Supply chain problems remained an
issue, while at home in the US the inflation numbers continued to
come in stubbornly above expectations. This persuaded the Federal
Reserve to stick firmly to its policy of raising interest rates to
rein in inflation. Despite the Federal Reserve's actions, the US
economy continued to hold up well, supported by better-
than-expected employment numbers and by the willingness of
consumers to spend savings accumulated during the pandemic.
Corporate results were also largely positive. Unsurprisingly, with
interest rates rising sharply, merger and acquisition activity fell
off, and with many investors preferring to sit on the side-lines
and merely add to their money market funds, volumes on the
exchanges dwindled. For much of this period, as interest rates rose
there was some rotation within the markets back towards more
'value' stocks and away from the highly rated names, notably those
in tech, that had led the earlier bull market. The smaller company
asset class followed a similar trend.
However, the mood changed in the last four months of our
financial year as a potential financial crisis erupted in the
regional banks. With rising interest rates encouraging depositors
to look elsewhere for higher yields, several regional banks
suffered significant outflows of liquidity, which could only be met
through realising their loan and bond portfolios at a loss. Most
notable of these was Silicon Valley Bank which effectively
collapsed. Only through swift action by the authorities with
injections of liquidity and takeovers by stronger peers was the
turmoil brought to heel. Given the potential risks to the economy
from such a situation, bond yields eased again as investors
speculated on whether the peak in rates was nearing, despite
continuing Federal Reserve rhetoric to the contrary. With hopes of
an imminent peak in interest rates and news on the economy
remaining generally positive, the stock market enjoyed another lift
in the run up to our financial year end. That said, the major
winners were again the narrow group of technology mega-caps that
had led the market before, rather than the broader market or the
smaller company asset class.
Over the year, in US dollar terms, the Russell 2000 Index
returned 12.3%, the S&P 500 returned 19.6% and the Nasdaq
Composite returned 26.1%. Although the pound suffered a weak patch
last autumn at the time of the unsettling changes in British Prime
Minister, it recovered thereafter to end the financial year
slightly higher, thus eroding some of the equity market gains for
sterling-based investors.
Portfolio Manager and Continuation Vote
A more detailed coverage of the development of the US smaller
company sector over the past twelve months and our activity and
performance is included in the Portfolio Manager's Review.
As I mentioned in our most recent half yearly report, the Board
was pleased in October to visit the Baltimore offices of our
Portfolio Manager, Brown Advisory, and to review in detail with
Chris Berrier and his team their investment process and strengthen
our knowledge of the portfolio. The visit gave us an enhanced
insight into the investment operations in Baltimore.
Between 31 March 2021, the date on which Brown Advisory took
over the management of the portfolio, and 30 June 2023, a mixed
period for markets, the decline in the Company's NAV was held at
1.6%, compared to a negative return of 4.9% from the Company's
benchmark over the same period.
In accordance with the three-year cycle prescribed in the
Company's Articles of Association, there will be a continuation
vote at this year's Annual General Meeting (AGM). The Board has
considered the Company's investment remit, strategy, performance
and ongoing viability and believes that the Company's offering
remains attractive. Accordingly, the Board strongly recommends that
shareholders vote in favour of the continuation of the Company in
its present form, which as fellow shareholders they will be doing
themselves.
Revenue and Capital Returns
The net gain per Ordinary share was 128.07p, split (6.82p) to
Revenue and 134.89p to Capital. Dividend income was higher as some
companies raised pay-outs again as confidence returned and interest
income benefited from the rise in rates. With management expenses
broadly unchanged, the net revenue loss was thus marginally lower.
We still believe it appropriate to allocate all expenses to the
Revenue account. No distributable revenue is available for the
payment of dividends.
Share Price and Discount
After careful consideration, the Board has amended the Company's
share buyback policy that has been in place for several years. The
revised policy will see the Board 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. It believes this to be in shareholders'
interests. In determining whether to buy back shares, the Board
will consider, amongst other factors, and at its discretion, the
size of the Company, general market conditions and sentiment, the
liquidity in the shares and discounts in the investment trust
sector overall.
Alongside this share buyback policy, the Board believes that the
Company's discount will also be driven by demand for the Company's
shares, reflecting its long-term investment performance, its
relevance to investors, the appropriate marketing of the Company
and general market conditions.
Given the continuing volatility in markets during the period
under review and to allow further time for our Portfolio Manager to
build and market its performance record, we considered it
inappropriate to buy in any shares in this period.
As at 30 June 2023, the number of shares held in treasury was
unchanged at 6,271,254 and the total number in public hands was
also unchanged at 11,952,159.
Gearing
As an investment trust, the Company may use gearing for
investment purposes to enhance returns. However, over the past year
the Board, taking into consideration the views of the Portfolio
Manager regarding investment opportunities and outlook, did not
feel it appropriate to deploy gearing given the continuing
unsettled geopolitical and economic background and resultant market
volatility. Should conditions improve and the outlook become more
certain, the Board will review its decision to gear, as it is
mindful that the ability to gear to enhance returns is considered
one of the advantages of a closed-end vehicle.
Environmental, Social and Governance ('ESG')
The Board has continued to engage with the Portfolio Manager on
ESG matters. Governance has been a key focus within the Portfolio
Manager's investment process for many years and it uses its regular
meetings with management to discuss and challenge them on their
adherence to best practice. Further information on the Portfolio
Manager's approach to ESG matters is set out in the ESG Report.
Board Composition
In our half yearly report, I noted that we would be looking for
a replacement non-executive director for Tina Soderlund-Boley, who
had accepted a senior position at a Swedish real estate investment
company. In view of the time commitments required by this role,
Tina decided to step down from the Board once a replacement
non-executive director had been appointed. This she did at the end
of June. I should like to thank Tina for her outstanding
contribution to the Company over the past three years and wish her
every success for the future.
I was therefore pleased to announce in March that, with the help
of search firm Nurole Limited, we had appointed Jane Routledge as a
replacement independent non-executive director with effect from 1
April. Jane is a non-executive director of M&G Credit Income
Investment Trust plc, having previously had a long career in the
investment management sector, holding several senior marketing
positions, including at Schroders, Invesco, Hermes and Seven
Investment Management. Her considerable marketing knowledge and
experience in this field will be of great use to the Board.
As a result of Tina's resignation, the Board has revisited its
succession planning arrangements. Previously, the Board had
anticipated that Tina would replace Clive Parritt as Senior
Independent Director (SID) at this year's AGM when Clive was due to
retire. The Board believes that Jane Routledge has all the
necessary skills for this role, and she has agreed that, after
allowing for a period of getting to know the Company, she will
become SID on 1 April 2024.
In view of this, we have asked Clive Parritt to stay on the
Board for a further period in order to help smooth the transition.
He will retire during 2024 as Jane takes on the role of SID.
Although a long-standing Board member, we deem Clive to be
independent and the Company has benefited hugely from his
continuity, knowledge and experience. The Board believes that it is
in the interests of shareholders that he be re-elected for this
period.
In February, Jasper Judd took on the role of audit chair from
Lisa Booth. My thanks again to Lisa for her work as previous audit
chair and her help in organising a very smooth handover, as well as
to Jasper for taking on his new role. All five directors will be
representing themselves at the AGM.
Finally, as part of our refreshment of the Board and ahead of
next year when both Clive and Lisa will be stepping down, we will
begin a new search for a fourth independent non-executive director.
Going forward, we expect the size of the Board to oscillate between
four and five members.
The Board is aware of the FCA's Diversity and Inclusion Policy
and notes and supports their targets. Accordingly, two out of the
five non- executive directors presenting themselves at the
forthcoming AGM are female, while one of the three senior positions
will be occupied by a female when Jane becomes Senior Independent
Director early next year. As the Board going forward will only
comprise four to five members, it may not be big enough for us to
ensure that at least one member will be from a minority ethnic
background. That said, we look to create and
maintain a Board that has the correct mix of skills, diversity
of thought and a collegiate culture drawn from as wide a range of
sources as possible.
Annual General Meeting
This year's AGM will be held on Monday, 6 November 2023 at
2.00pm at the offices of Brown Advisory, 18 Hanover Square, London
W1S 1JY. It will include a short presentation via video-link by
Chris Berrier, covering the performance of the Company over the
past year as well as his outlook for the future. The Board and
Portfolio Manager would welcome questions which shareholders may
submit to: InvestmentTrustEnquiries@ brownadvisory.com. Subject to
confidentiality, we will respond to any questions submitted either
directly or by publishing our response on the Company website.
Electronic proxy voting is now available, and shareholders are
encouraged to submit voting instructions using the web-based voting
facility www.eproxyappointment.com and www.proxymity.io for
institutional shareholders. In order to use electronic proxy
voting, shareholders will require their shareholder registration
number, control number and pin. If you do not have access to these
details please contact the Company's Registrar, Computershare.
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
So far in 2023, both the US economy and the US stock market have
defied expectations on the upside. Despite major headwinds
comprising a huge jump in interest rates, persistent inflation, the
depletion of pandemic era savings, concerning geopolitical tensions
and a minor regional banking crisis, the US consumer has remained
resilient and continued to drive the American economy.
As a result, the recession forecast by many a year ago has
failed so far to materialise. The stock market has responded
positively, and it has been supported further by hopes that the
peak in interest rates is within sight.
Given the market's rise to date, some setback should not, of
course, be ruled out. While the Federal Reserve may have paused its
rate increases in June, this was done merely in order to take stock
and assess the impact so far. With the resilience of the economy
and still high inflation numbers, the trajectory for interest rates
remains upwards in view of the Federal Reserve's determination to
bring inflation back into its target range. The difficulty for the
Federal Reserve is in determining at what point the rise in rates
will achieve this, without putting the economy severely at risk.
With the Federal Reserve putting inflation restraint before
economic activity, there is a risk that investors underestimate the
extent and duration of tightening potentially to come.
At the same time, the geopolitical concerns remain, the economy
may slow if the consumer finally becomes more cautious and
corporate earnings may be impacted.
As we look further out, we become more optimistic. We expect the
Federal Reserve's tough medicine to work and for the inflation
numbers as we enter the autumn to trend lower, allowing interest
rates to ease back too. Although possibly somewhat softer, we still
expect the domestic US economy to hold its own, with demand
supported by recent wage growth and still high levels of
employment. We see this as a generally favourable background for
the US smaller company sector which should again draw investors
given its attractive valuations and extended period of
underperformance relative to its larger peers.
Any period of weakness in the short-term will thus be welcome
and offer our Portfolio Manager the opportunity to add to positions
at attractive prices, having cash on hand and the ability to
gear.
Stephen White
15 September 2023
Portfolio Manager's Review
Performance Review
During the year ended 30 June 2023, the Company's NAV increased
by 9.8%, compared to the benchmark Russell 2000 Index return of
7.5%.
Overall, we are pleased with the Company's absolute and relative
returns over the last financial year, representing a solid rebound
from the challenging market conditions experienced toward the end
of 2021 and most of 2022. Our emphasis on quality has certainly
helped results more recently. However, we see this condition as
temporary considering current economic and market dynamics. If
current conditions persist, we think there could be an increased
reliance on idiosyncratic successes to drive relative
outperformance. Nonetheless, our overall approach remains steady as
we continue to wait patiently for opportunities to introduce new
ideas a nd increase our investment in a select group of existing
portfolio holdings.
Portfolio Review
For the twelve-month period, the largest absolute contributors
to the Company's overall performance were the information
technology, healthcare and industrials sectors. However, on a
relative basis, the financials sector was the primary driver as our
eclectic list of holdings outperformed the bank-laden benchmark.
Consumer discretionary and industrials saw relative weakness due to
their comparative lack of cyclicality.
At the individual stock level, EVO Payments, ChampionX
Corporation and Workiva were the strongest contributors. EVO
Payments Inc, which operates a global merchant acquirer and payment
processor servicing company, entered into a definitive agreement to
be acquired by Global Payments for $34 per share in an all- cash
transaction. ChampionX Corporation is a chemicals company
specializing in delivering solutions that optimize the extraction
and drilling of oil and gas. The company continues to benefit from
the positive energy cycle, breathing new life into a new capital
deployment strategy that includes both dividends and share
repurchases - at the end of 2022 the company committed to returning
more than 60% of free cash flow to shareholders going forward.
Workiva Inc. provides a cloud-based software platform that enables
organisations to collect and analyse data for compliance and
management reporting. The company is seeing continued improvement
in profitability both in the short and long-term. There have also
been rumours that the company may be garnering interest from
private equity suitors.
The negative side of the ledger included Clarus Corporation,
Azenta Inc. and BlackLine Inc. Clarus Corporation, a manufacturer
of outdoor sporting equipment, was the victim of inventory
rationalization at several national account customers, which
prompted them to lower their forecast of future profits. Azenta
Inc. provides gene sequencing and gene synthesis services and
develops automated ultra-cold storage systems. The company lowered
its full year profitability guidance due to a weaker than
anticipated rebound in what we view as a highly profitable product
category. BlackLine Inc. provides cloud- based solutions for
accounting and finance operations. It has recently announced a CEO
transition that has prompted investor concerns around its product
roadmap and go-to-market strategy.
There were roughly an equal number of additions and deletions to
the portfolio over the twelve- month period. A substantial amount
of the portfolio turnover was due to M&A activity and our
desire to eliminate positions where our investment thesis appeared
violated or we believed a poor risk/reward dynamic necessitated a
redeployment of capital. For example, Biohaven Pharmaceutical
Holdings, CMC Materials, EVO Payments, IAA Inc., ManTech
International Corporation, and Terminex were all acquired.
Catalent, Nevro Corp, and Progyny were situations that fell into
the latter bucket. We were pleased that the team was able to
re-deploy the vast majority of the proceeds into a diverse
collection of businesses that we hope to own for the next several
years.
A thought on investing
Investment management is a straightforward, yet challenging
profession. Success hinges upon an empirically derived philosophy,
a committed team with clear roles, a culture fostering open and
honest communication, and decisive actions informed by collected
data and evidence. Time, attention and energy should be allocated
towards analysing and refining the investment process - the
controllable aspect - rather than towards the outcomes. Learning
and growth should be the focus of both investment successes and
failures.
Unlike more predictable professions, where following certain
procedures guarantees certain outcomes, investing demands similarly
precise methods but success is never guaranteed. We would all
prefer it to be straightforward.
Legendary NFL coach Bill Parcells once said, "You are what your
record says you are." While football teams are judged by a season,
investment teams should be assessed over an "investment cycle." A
3- to 5-year investment record represents a culmination of all the
bottom-up capital allocation decisions made during this time. We
make numerous decisions every day, guided by one primary thought:
what potential action is most likely to benefit long-term returns?
As such, we must always consider any factors that might distort or
obscure our perspective.
Being aware of our human fallibility, we foster a collaborative
investment-decision-making process. Each of us is influenced by
several behavioural or cognitive biases such as anchoring,
authority, confirmation, disposition effect, egocentricity,
endowment effect, familiarity, framing, hindsight, loss aversion,
mental accounting, narrative bias, overconfidence, recency, and
survivorship.
Conclusion
"Toto, I've a feeling we're not in Kansas anymore." - Dorothy,
The Wizard of Oz
Much like Dorothy's transition from Kansas to the fantastical
Land of Oz, we too have been transported to a different world in
the equity markets. The last decade has seen zero interest rate
policy (ZIRP), a global pandemic, a surge in inflation and a
dramatic policy reversal by the Federal Reserve. The advent of
passive capital (index funds, ETFs, etc.) has further altered the
structure of the stock market.
This journey has led to dramatic changes in investment
sentiment, capital flows, and market leadership. Our portfolio's
active share is high, which can cause significant shifts in
short-term relative performance. Despite an interesting investment
environment in the first half of 2023, our core elements have stood
the test of time over the last 17+ years and will continue to guide
us in the future. We anticipate volatility will remain prevalent
and intend to leverage it to our advantage. We remain pleased with
our long-term performance and will strive to continue to drive
solid risk-adjusted returns going forward.
Portfolio Manager
Brown Advisory LLC
15 September 2023
Strategic Report
The Strategic Report has been prepared in accordance with the
Companies Act 2006 (Strategic Report and Directors' Report)
Regulations 2013.
The Strategic Report seeks to provide shareholders with the
relevant information to enable them to assess the performance of
the Board during the period under review.
Business and Status
During the year the Company carried on business as an investment
trust with its principal activity being portfolio investment. The
Company has been approved by HM Revenue & Customs as an
investment trust subject to the Company continuing to meet the
eligibility conditions of sections 1158 and 1159 of the Corporation
Tax Act 2010 ('CTA 2010') and the ongoing requirements for approved
companies as detailed in Chapter 3 of Part 2 of the Investment
Trust (Approved Company) (Tax) Regulations 2011. In the opinion of
the Directors, the Company has conducted its affairs in the
appropriate manner to retain its status as an investment trust.
The Company is an investment company within the meaning of
section 833 of the Companies Act 2006.
The Company is not a close company within the meaning of the
provisions of the CTA 2010 and has no employees.
The Company was incorporated in England & Wales on 15
January 1993.
There has been no significant change in the activities of the
Company during the year to 30 June 2023 and the Directors
anticipate that the Company will continue to operate in the same
manner during the current financial year.
Gearing
The Company was not geared during the year.
Key Performance Indicators
At quarterly Board meetings, the Directors consider a number of
performance indicators to assess the extent to which the Company is
meeting its objective. The key performance indicators used to
measure the performance of the Company over time are as
follows:
-- Net Asset Value changes;
-- The discount or premium of share price to Net Asset Value;
-- A comparison of the absolute and relative performance of the
Ordinary share price and the Net Asset Value per share relative to
the return on the Company's Benchmark Index and of its peers;
-- Ordinary share price movement; and
-- The Company's ongoing charges ratio.
In addition, a history of the Net Asset Value, Ordinary share
price and Benchmark Index are shown on the monthly factsheets which
can be viewed on the Portfolio Manager's website
www.brownadvisory.com/basc .
Discount to Net Asset Value
The Directors regularly review the level of the discount or
premium between the closing price of the Company's Ordinary shares
and the Net Asset Value. The Company will issue shares when there
is sufficient demand. Such issues are always at a price which is in
excess of the NAV. No shares were issued during the year under
review.
The Board will apply its revised policy of buying back shares
with the aim of reducing discount volatility and maintaining any
discount such that it is not significantly wider than those of
similar investment trusts. It believes this to be in shareholders'
interests. In determining whether to buy back shares, the Board
will consider, amongst other factors, and at its discretion, the
size of the Company, general market conditions and sentiment, the
liquidity in the shares and discounts in the investment trust
sector overall.
The Directors had powers granted to them at the last Annual
General Meeting ('AGM') held on 31 October 2022 to purchase
Ordinary shares and either cancel or hold them in treasury as a
method of controlling the discount to Net Asset Value and enhancing
shareholder value. No shares were bought back during the year under
review.
Under the Listing Rules, the maximum price that may be paid by
the Company on the repurchase of any Ordinary shares is 105% of the
average of the middle market quotations for the Ordinary shares for
the five business days immediately preceding the date of
repurchase. The minimum price will be the nominal value of the
Ordinary shares. The Board is proposing that its authority to
repurchase up to approximately 14.99% of its issued share capital
(excluding treasury shares) be renewed at the AGM. The new
authority to repurchase will last until the conclusion of the AGM
of the Company in 2024 (unless renewed earlier). Any repurchase
made will be at the discretion of the Board in light of prevailing
market conditions and within guidelines set from time to time by
the Board, the Companies Act, the Listing Rules and the Market
Abuse Regulation.
Treasury Shares
In accordance with the Companies (Acquisition of Own Shares)
(Treasury Shares) Regulations 2003 (the 'Regulations') which came
into force on 1 December 2003 any Ordinary shares repurchased,
pursuant to the above authority, may be held in treasury. These
Ordinary shares may subsequently be cancelled or sold for cash.
This gives the Company the ability to reissue shares quickly and
cost effectively and provides the Company with additional
flexibility in the management of its capital.
At 30 June 2023 there were 6,271,254 Ordinary shares held in
Treasury.
Management
The Company has no employees and most of its day-to-day
responsibilities are delegated to Brown Advisory LLC which acts as
the Company's Portfolio Manager and FundRock Partners Limited which
acts as the Company's Alternative Investment Fund Manager ('AIFM')
and Company Secretary.
J.P. Morgan Europe Limited ('JPMEL') acts as the Company's
Depositary. The Company has also entered into an outsourcing
arrangement with J.P. Morgan Chase Bank N.A. ('JPMCB') as Custodian
and for the provision of accounting services.
Viability Statement
In accordance with Provision 36 of the Code of Corporate
Governance as issued by the Association of Investment Companies in
February 2019 (the 'AIC Code'), the Board has assessed the
prospects of the Company over a longer period than the twelve
months required by the 'Going Concern' provision, by reviewing the
next three years and assessing the implications of the next
required vote on the continuation of the Company at the 2023 AGM.
The Board has confirmed that, following consultation with key
stakeholders, it considers the continuation vote will be approved
by the shareholders.
The Board has considered the Company's business model including
its investment objective and investment policy, the principal and
emerging risks and uncertainties that may affect the Company, the
size threshold below which the Company would be considered
uneconomic or unviable, and the Company performance and
attractiveness to investors in the current environment. The Board
has noted that:
-- the Company holds a liquid portfolio invested predominantly in US listed equities;
-- the Company is not geared;
-- the Company has maintained a reasonable performance and share price discount to NAV;
-- the portfolio management fee is the most significant expense
of the Company. It is charged as a percentage of the Company's net
asset value and so would reduce if the market value of the
portfolio were to fall. The remaining expenses are modest in value
and predictable in nature;
-- no significant increase to ongoing charges or operational expenses is anticipated; and
-- the Board is satisfied that Brown Advisory LLC and the
Company's other key third-party suppliers maintain suitable
processes and controls to ensure that they can continue to provide
their services to the Company.
The Board has also considered the market outlook, both for US
smaller company equities and for investment trusts, and has
concluded that these remain an attractive opportunity for
investors.
The Board has therefore concluded that there is a reasonable
expectation that the Company will be able to continue in operation
and meet its liabilities as they fall due over the next three
years.
Principal and Emerging Risks and Uncertainties
The Board, through the Audit and Risk Committee, carries out a
regular review of the risk environment in which the Company
operates, changes to the environment and individual risks. The
Board also considers emerging risks which might affect the Company.
During the year, the continued conflict in Ukraine and tensions
between China and the US have created geopolitical uncertainties
which have increased market risk and volatility.
There are a number of other risks which, if realised, could have
a material adverse effect on the Company and its financial
condition, performance and prospects. The Board has carried out a
robust assessment of the Company's principal and emerging risks,
which include those that would threaten its business model, future
performance, solvency, liquidity or reputation.
The principal risks and uncertainties facing the Company at the
current time, together with a description of the mitigating actions
the Board has taken, are set out in the table below.
Risk Mitigating Action
Investment objective - the Company's Board review: the Board formally
objective becomes unattractive reviews the Company's objective
to investors which could result and related strategies on an
in a lack of demand for the annual basis, or more regularly
Company's shares, leading to if appropriate.
a widening of the discount of
the share price to its underlying Shareholder communication: the
NAV and a fall in the value Board is cognisant of the importance
of its shares. of regular communication with
shareholders. The Chairman offers
meetings with the Company's
largest shareholders, and the
Board meets with shareholders
at the Annual General Meeting.
Additionally a shareholder presentation
with questions and answers is
available at the AGM. The Board
reviews shareholder correspondence
and investor relations reports
and also receives feedback from
the Company's broker.
Discount monitoring: the Board,
through the Portfolio Manager
and AIFM, keeps the level of
discount under constant review.
The Board is responsible for
the Company's share buyback
policy and is prepared
to authorise the use of share
buybacks to provide liquidity
to the market and to try to
limit any widening of the discount,
to the extent that it is wider
than those of similar investment
trusts.
--------------------------------------------
Investment strategies - the Adherence to investment guidelines:
Company adopts inappropriate the Board sets investment guidelines
investment strategies in pursuit and restrictions which the Portfolio
of its objective which could Manager follows, covering matters
result in decreased demand for such as asset allocation, diversification,
the Company's shares, leading gearing and currency exposure.
to a widening of the discount These guidelines are reviewed
and poor investment performance. regularly and reports on compliance
with them are reviewed at Board
meetings.
In order to ensure adequate
diversification, the Board has
set absolute limits on minimum
holdings and maximum exposures
in the portfolio at the time
of investment.
--------------------------------------------
Investment performance - the Monitoring of performance: the
appointment or continuing appointment Board keeps performance under
of a portfolio manager with continual review. It meets the
inadequate resources, skills Portfolio Manager on a regular
or expertise, or which makes basis and keeps under close
poor investment decisions. This review (inter alia) its resources
could result in poor investment and adherence to investment
performance, a loss of value guidelines. The Board discusses
for shareholders and a widening with the Portfolio Manager reasons
discount. for over or under- performance
at every Board meeting.
A detailed formal appraisal
of the Portfolio Manager is
carried out annually by the
Board. The Board also keeps
under review the adequacy of
risk controls.
--------------------------------------------
Financial/market - insufficient Management controls: the Portfolio
oversight or controls over financial Manager has a range of procedures
risks, foreign currency risk, and controls relating to the
market price risk, interest Company's financial instruments
rate risk, liquidity risk, credit and maintains a closed 'approved
and counterparty risk, and insufficient broker' list.
revenue forecasting and monitoring,
could result in losses to the Board review: as stated above,
Company. the Board sets investment guidelines
and restrictions which are reviewed
regularly and the Portfolio
Manager reports on compliance
with them at Board meetings.
Revenue forecasting and monitoring:
the AIFM presents detailed forecasts
of income and expenditure covering
both the current and subsequent
financial years at Board meetings.
--------------------------------------------
Regulatory - changes to, or Board awareness: the Directors
failure to comply with, relevant have an awareness of the more
regulations (including the Companies important regulations and are
Act, the Financial Services provided with information on
and Markets Act, the Alternative changes by the Association
Investment Fund Managers Directive, of Investment Companies. In
accounting standards, investment terms of day to day compliance
trust regulations, the Listing with regulations, the Board
Rules, Disclosure Guidance and is reliant on the knowledge
Transparency Rules and Prospectus and expertise of the AIFM and
Rules) could result in fines, Company Secretary. However,
loss of reputation, reduced where necessary, the Board engages
demand for the Company's shares the services of external advisers.
and potentially the loss of
an advantageous tax regime. Management controls: the Company
Secretary and accounting teams
use checklists to aid compliance
and these are supported by the
AIFM's compliance monitoring
programme and risk-based internal
audit investigations.
--------------------------------------------
Operational (including cyber-crime) Agreements: written agreements
- the Company is reliant on are in place defining the roles
services provided by third parties and responsibilities of all
(in particular those of the third-party service providers.
Portfolio Manager, AIFM, custodian
and depositary) and any control Internal control systems of
gaps and failures in their operations the AIFM and Portfolio Manager:
could expose the Company to the Board receives reports on
loss or damage. the operation and efficacy of
IT and control systems, including
those relating to cyber-crime
and internal audit and compliance
functions.
Safekeeping of assets: the depositary
is ultimately responsible for
the safekeeping of the Company's
assets and holds cash and securities
in segregated accounts with
J.P. Morgan Chase Bank N.A.
The depository reconciles these
accounts daily against the records
of the Portfolio Manager.
Monitoring of other third-party
service providers: the AIFM
closely monitors the control
environments and quality of
services provided by third parties,
including those of the depositary.
This includes controls relating
to cyber-crime and is conducted
through service level agreements,
regular meetings and key performance
indicators. The Directors review
reports on the AIFM's monitoring
of third-party service providers
on a periodic basis.
A detailed formal appraisal
of the AIFM, Portfolio Manager
and other key third party providers
is carried out annually by the
Board.
--------------------------------------------
Geopolitical (including a pandemic, Board and Portfolio Manager
climate change and the conflict awareness: geopolitical events
in Ukraine) - the impact of over which the Company has no
geopolitical events could result control are always a risk. The
in losses to the Company. Board and Portfolio Manager
do what they can to address
these risks where possible.
--------------------------------------------
Directors
At 1 July 2023 the Board comprised two female and three male
directors.
Employees, Environmental, Social and Human Rights issues
The Company has no employees and, therefore no disclosures need
to be made in respect of employees. The Board has delegated the
day-today management and administration functions to the Portfolio
Manager, the AIFM, JPMEL, JPMCB and other third-party service
providers.
Integration of Environmental, Social and Governance ('ESG')
considerations into the Portfolio Manager's Investment Process
A report from the Portfolio Manager is included in the Annual
Report & Accounts for the year ended 30 June 2023.
Modern Slavery Act
The Modern Slavery Act 2015 requires certain companies to
prepare a slavery and human trafficking statement. As the Company
has no employees and does not supply goods and services, no
statement is required.
Global Greenhouse Gas Emissions
The Company has no greenhouse gas emissions to report from its
operations as its day-to-day management and administration
functions have been outsourced to third parties and it neither owns
physical assets or property nor has employees of its own. It
therefore does not have responsibility for any emissions-producing
sources under the Companies Act 2006 (Strategic Report on
Directors' Reports) Regulations 2013.
Section 172 Statement
Under Section 172 ('S172') of the Companies Act 2006, the
Directors have a duty to act in good faith and to promote the
success of the Company for the benefit of its shareholders as a
whole. This includes taking into consideration the likely
consequences of their decisions in the long-term and in respect of
the Company's stakeholders such as its shareholders, employees, if
any, and suppliers, while acting fairly as between
shareholders.
The Directors must also consider the impact of the Company's
decisions on the environment, the community and its reputation for
maintaining high standards of business conduct.
The Company ensures that the Directors are able to discharge
this duty by providing them with relevant information and training
on their duties. The Company also ensures that information
pertaining to its stakeholders is provided, as required, to the
Directors as part of the information presented in regular Board
meetings in order that stakeholder considerations can be factored
into the Board's decision-making. The Directors' responsibilities
are also set out in the schedule of matters reserved for the Board
and the terms of reference of its Audit and Risk Committee, both of
which are reviewed regularly by the Board. At all times the
Directors can access, either collectively or individually, advice
from its professional advisers including the Company Secretary and
independent external advisers.
The Company's investment objective, to achieve long-term capital
growth by investing in a diversified portfolio primarily of quoted
US smaller and medium-sized companies, supports the Directors'
statutory obligations to consider the long-term consequences of the
Company's decisions. How the long-term focus of the Company is
achieved is set out in more detail in the above section on the
Portfolio Manager's approach to ESG considerations. This approach
is fundamental to the Company achieving long-term success for the
benefit of all stakeholders.
The Company is aware of its own potential impact on the
environment and has practical policies in place to reduce that
impact. Examples include the use and sharing of electronic Board
materials and the provision of electronic copies of the annual
report and financial statements to shareholders and via the Company
website. Where physical copies of the annual and half yearly
financial reports are made, materials and processes are used which
are designed to both minimise the environmental impact and to
maximise the recycling potential.
Engagement with suppliers, customers and others and the e ect on
principal decisions
The Shareholders - The shareholders of the Company are both
institutional and retail and details of those with substantial
shareholdings are provided in the Annual Report & Accounts for
the year ended 30 June 2023.
The Board believes that shareholders have a vital role in
encouraging a higher level of corporate performance and is
committed to listening to the views of its shareholders and giving
useful and timely information. The Board provides open and
accessible channels of communication including those listed
below.
The AGM - The Company encourages participation from shareholders
at its AGMs, where they can communicate directly with the Directors
and Portfolio Manager. The upcoming AGM will include a short
presentation by the Portfolio Manager on the performance of the
Company over the past year, as well as an outlook for the future.
The Board and Portfolio Manager welcome questions which
shareholders may submit to InvestmentTrustEnquiries@
brownadvisory.com. Subject to confidentiality, we will respond to
any questions submitted either directly or by publishing our
response on the Company website. All views of the shareholders will
be taken into consideration and action taken where appropriate.
Online Information - The Company website contains the Annual and
Half Yearly Financial Report along with monthly factsheets and
commentaries from the Portfolio Manager. The daily NAV per share,
monthly top ten portfolio listings and other regulatory
announcements can be found on the regulatory news service of the
London Stock Exchange.
Shareholder Communications
Shareholders can raise issues or concerns at any time by writing
to the Chairman or the Senior Independent Director at the
Registered Office.
The AIFM and the Portfolio Manager
Brown Advisory LLC acts as the Company's Portfolio Manager and
FundRock Partners Limited has been appointed as the Company's
AIFM.
The portfolio management function is critical to the long-term
success of the Company. The Board and the Portfolio Manager
maintain an open and constructive relationship, with meetings
taking place a minimum of four times per annum, with monthly
updates and additional meetings as required.
The 'Management of the Company' section details the Board's
consideration of the Portfolio Manager's performance, its terms of
appointment and their annual assessment of its continued
stewardship of the portfolio and its oversight of the
administrative functions.
The Audit and Risk Committee meets at least twice a year and as
part of its role considers the reports on the internal control
objectives and procedures of the Portfolio Manager, the AIFM, and
other third party service providers together with independent,
external reviews where appropriate.
The AIFM also supplies company secretarial services to the
Company. The AIFM oversees the activities of the Company's other
third-party suppliers on behalf of the Company and maintains open
and collaborative relationships to maintain quality, efficiency and
cost control through regular communication with operational teams.
The Board regularly reviews reports from the Portfolio Manager, the
AIFM and Company Secretary, the depositary, the Company's broker,
the investor relations research provider and the Independent
Auditor.
These provide vital information concerning changes in market
practice or regulation which affect the Company and assist the
Board in its decision-making process. Representatives from these
providers attend Company Board meetings and give presentations on a
regular basis enabling in depth discussions concerning their
findings and performance.
Other Third-Party Service Providers
As an externally managed investment company with no employees or
physical assets, the principal stakeholders of the Company are its
shareholders, Portfolio Manager, AIFM, depositary, custodian,
administrator and registrar.
The continuance, or otherwise, of engagement of key third-party
service providers are principal decisions taken by the Board every
year.
In Summary
The governance structure and decision-making process are
underpinned by the duties of the Directors under S172 on all
matters. The Board firmly believes that the sustainable long-term
success of the Company is dependent upon taking account of the
interests of all its key stakeholders.
For and on behalf of the Board
Stephen White
Chairman
15 September 2023
Statement of Directors' Responsibilities
The Directors are responsible for preparing the Annual Report
and financial statements in accordance with applicable law and
regulation.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have elected to prepare financial statements in accordance with
United Kingdom Generally Accepted Accounting Practice (United
Kingdom Accounting Standards and applicable laws) including
Financial Reporting Standard 102, the financial reporting standard
applicable in the UK and the Republic of Ireland.
Under Company law the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the return or
loss of the Company for that period. In preparing those financial
statements, the Directors are required to:
(a) select suitable accounting policies and then apply them consistently;
(b) make judgements and accounting estimates that are reasonable and prudent;
(c) state whether applicable UK Accounting Standards have been
followed, subject to any material departures disclosed and
explained in the financial statements; and
(d) 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 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 comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Under applicable law and regulations, the Directors are also
responsible for preparing a Strategic Report, Report of the
Directors, Directors' Remuneration Report and Statement of
Corporate Governance that comply with that law and those
regulations.
The Directors are responsible for the maintenance and integrity
of the corporate and financial information included on the
Company's website www.brownadvisory.com/basc , which is a website
maintained by Brown Advisory LLP. Visitors to the website need to
be aware that legislation in the United Kingdom governing the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
Each of the Directors, who are listed in the Annual Report &
Accounts, confirms to the best of their knowledge that:
(a) the 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; and
(b) the Strategic Report of the Directors 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) in their opinion the Annual Report & Accounts, taken as
a whole, are fair, balanced and understandable and provide the
information necessary to assess the Company's position and
performance, business model and strategy.
So far as each Director is aware at the time the report is
approved:
(a) there is no relevant audit information of which the Company's auditor is unaware; and
(b) the Directors have taken all steps required of a company
director to make themselves aware of any relevant audit information
and to establish that the Company's auditor has been made aware of
that information.
By order of the Board
Stephen White
Chairman
15 September 2023
Income Statement
for the year ended 30 June 2023
2023 2022
Revenue Capital Revenue Capital
Return Return Total Return Return Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------ ---------- -------- ----------- ------- ---------- ----------
Gain/(loss) on investments
at fair value through
profit or loss - 16,474 16,474 - (25,401) (25,401)
------------------------------ ---------- -------- ----------- ------- ---------- ----------
Foreign exchange (loss)/gain - (746) (746) - 1,321 1,321
------------------------------ ---------- -------- ----------- ------- ---------- ----------
Investment income 873 - 873 738 - 738
------------------------------ ---------- -------- ----------- ------- ---------- ----------
Other income 111 - 111 - - -
------------------------------ ---------- -------- ----------- ------- ---------- ----------
Total income/(loss) 984 15,728 16,712 738 (24,080) (23,342)
------------------------------ ---------- -------- ----------- ------- ---------- ----------
Management fee (1,172) - (1,172) (1,192) - (1,192)
------------------------------ ---------- -------- ----------- ------- ---------- ----------
Other expenses (521) (2) (523) (475) (4) (479)
------------------------------ ---------- -------- ----------- ------- ---------- ----------
Total expenses (1,693) (2) (1,695) (1,667) (4) (1,671)
------------------------------ ---------- -------- ----------- ------- ---------- ----------
Return/(loss) before taxation (709) 15,726 15,017 (929) (24,084) (25,013)
------------------------------ ---------- -------- ----------- ------- ---------- ----------
Taxation (106) 396 290 (90) (309) (399)
------------------------------ ---------- -------- ----------- ------- ---------- ----------
Net return/(loss) after
taxation (815) 16,122 15,307 (1,019) (24,393) (25,412)
------------------------------ ---------- -------- ----------- ------- ---------- ----------
Net return/(loss) per
Ordinary share (6.82p) 134.89p 128.07p (8.52p) (204.03p) (212.55p)
------------------------------ ---------- -------- ----------- ------- ---------- ----------
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 items of other
comprehensive income, and therefore the net return after taxation
is also the total comprehensive income for the year.
All revenue and capital items in the above statement derive from
continuing operations. No operations were acquired or discontinued
in the year.
The Notes below form part of these accounts.
Statement of Financial Position
as at 30 June 2023
2023 2022
GBP'000 GBP'000
--------------------------------------- -------------- --------------
Fixed assets
--------------------------------------- -------------- --------------
Investments held at fair value through
profit or loss 159,134 147,856
--------------------------------------- -------------- --------------
Current assets
--------------------------------------- -------------- --------------
Debtors 67 304
--------------------------------------- -------------- --------------
Cash at bank and in hand 12,444 8,218
--------------------------------------- -------------- --------------
12,511 8,522
--------------------------------------- -------------- --------------
Creditors: amounts falling due within
one year (498) (538)
--------------------------------------- -------------- --------------
Net current assets 12,013 7,984
--------------------------------------- -------------- --------------
Total assets less current liabilities 171,147 155,840
--------------------------------------- -------------- --------------
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 136,573 121,266
--------------------------------------- -------------- --------------
Total shareholders' funds 171,147 155,840
--------------------------------------- -------------- --------------
Net asset value per Ordinary share
(pence) 1,431.9 1,303.9
--------------------------------------- -------------- --------------
The financial statements were approved by the Board of Directors
and signed on its behalf on 15 September 2023.
Stephen White
Chairman
Company Registration Number 02781968
The Notes below form part of these accounts.
Statement of Changes in Equity
for the year ended 30 June 2023
Called Non- Capital
up
Share Share distributable Redemption Retained
Capital Premium Reserve Reserve Earnings* Total
For the year ended 30 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
June 2023
------------------------ ------- ------- ------------- ---------- ---------- -----------
1 July 2022 4,555 19,550 841 9,628 121,266 155,840
------------------------ ------- ------- ------------- ---------- ---------- -----------
Net return for the year - - - - 15,307 15,307
------------------------ ------- ------- ------------- ---------- ---------- -----------
Balance at 30 June 2023 4,555 19,550 841 9,628 136,573 171,147
------------------------ ------- ------- ------------- ---------- ---------- -----------
Called Non- Capital
up
Share Share distributable Redemption Retained
Capital Premium Reserve Reserve Earnings* Total
For the year ended 30 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
June 2022
------------------------ ------- ------- ------------- ---------- ---------- -----------
1 July 2021 4,555 19,550 841 9,628 146,852 181,426
------------------------ ------- ------- ------------- ---------- ---------- -----------
Repurchase of Ordinary
shares to
be held in treasury - - - - (174) (174)
------------------------ ------- ------- ------------- ---------- ---------- -----------
Net return for the year - - - - (25,412) (25,412)
------------------------ ------- ------- ------------- ---------- ---------- -----------
Balance at 30 June 2022 4,555 19,550 841 9,628 121,266 155,840
------------------------ ------- ------- ------------- ---------- ---------- -----------
* Dividends are only payable from the Revenue Return element
of Retained Earnings.
Notes to the Accounts for the year ended 30 June 2023
1. General information
Brown Advisory US Smaller Companies PLC (a Public Company
Limited by shares) is an investment Company incorporated in the
United Kingdom with a premium listing on the London Stock Exchange.
The Company registration number is 02781968 and the registered
office is 6th floor, 125 London Wall, London, EC2Y 5AS.
The Company conducts its affairs so as to qualify as an
investment trust under the provisions of section 1158 of the
Corporation Tax Act 2010.
The Company has qualified as an investment trust in respect of
all relevant years up to and including the year ended 30 June 2023.
Section 1158 was amended to allow the Company to seek approval of
compliance in advance and for all subsequent financial years. The
Company received such advance approval subject to it continuing to
meet the relevant eligible conditions and ongoing requirements. The
Company intends to conduct its affairs so as to enable it to comply
with the requirements. Such approval exempts the Company from UK
corporation tax on gains realised in the relevant year on its
portfolio of fixed asset investments.
A summary of the accounting policies, all of which have been
applied consistently throughout the period is set out below.
2. Accounting policies
Basis of preparation
The financial statements for the year ended 30 June 2023 have
been prepared in accordance with UK Generally Accepted Accounting
Practice ('UK GAAP') including Financial Reporting Standard 102
('FRS 102'), the financial reporting standard applicable in the UK
and Republic of Ireland 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 October 2019.
The Company continues to adopt the going concern basis in the
preparation of the financial statements. The financial statements
have been prepared in accordance with the Company's accounting
policies as set out below. They are presented in accordance with
the Companies Act 2006 (the 'Act') and the requirements of the SORP
'Financial Statements of Investment Trust Companies and Venture
Capital Trusts' issued inJuly 2022.
The Company has taken advantage of the exemption from preparing
a Cash Flow Statement under FRS 102, as it is an investment fund
and the investments are substantially all highly liquid and carried
at fair (market) value.
In accordance with FRS 102, the Company is required to nominate
a functional reporting currency in which the Company predominantly
operates. Having regard to the Company's share capital and the
predominant currency in which its shareholders operate, pounds
sterling is the nominated functional reporting currency of the
Company.
The Directors are of the opinion that the Company is engaged in
a single segment of business activity, being investment business.
Consequently, no business segmental reporting is required.
Statement of Compliance
The financial statements of the Company have been prepared in
compliance with United Kingdom Accounting Standards, including FRS
102 and the Companies Act 2006.
Significant accounting judgements, estimates and assumptions
The preparation of the Company's financial statements on
occasion requires management to make judgements, estimates and
assumptions that affect the reported amounts in the primary
financial statements and the accompanying disclosures. These
assumptions and estimates could result in outcomes that require a
material adjustment to the carrying amount of assets or liabilities
affected in the current and future periods, depending on
circumstance.
Management do not believe that any significant accounting
judgements have been applied to these financial statements other
than the allocations between capital and revenue.
Further details of the Company's accounting policies can be
found in the Annual Report & Accounts for the year ended 30
June 2023.
3. Income
------
2023 2022
GBP'000 GBP'000
---------------------------------------- ------ ----------- ---- ------------
Income from investments
---------------------------------------- ------ ----------- ---- ------------
Dividends from United Kingdom companies 24 -
------------------------------------------------ ----------- ---- ------------
Dividends from overseas companies 849 738
------------------------------------------------ ----------- ---- ------------
873 738
----------------------------------------------- ----------- ---- ------------
Other income
---------------------------------------- ------ ----------- ---- ------------
Deposit interest 111 -
------------------------------------------------ ----------- ---- ------------
111 -
----------------------------------------------- ----------- ---- ------------
Total income 984 738
------------------------------------------------ ----------- ---- ------------
4. Management fee
2023 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------- ------- ------- ------- ------- -------
Management fee 1,172 - 1,172 1,192 - 1,192
-------------------- ------- ------- ------- ------- -------
1,172 - 1,172 1,192 - 1,192
-------------------- ------- ------- ------- ------- -------
5. Other expenses
2023 2022
Revenue Capital Total Revenue Capital Total
-----------------------------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------------- --------- ---------- ------- ----------- -------- -------
Directors' remuneration 151 - 151 137 - 137
----------------------------------- --------- ---------- ------- ----------- -------- -------
Auditor's remuneration - audit
of the company 52 - 52 34 - 34
----------------------------------- --------- ---------- ------- ----------- -------- -------
Directors' and Officers' liability
insurance 9 - 9 12 - 12
----------------------------------- --------- ---------- ------- ----------- -------- -------
Other expenses 309 2 311 292 4 296
----------------------------------- --------- ---------- ------- ----------- -------- -------
521 2 523 475 4 479
----------------------------------- --------- ---------- ------- ----------- -------- -------
6. Ongoing charges
2023 2022
GBP'000 GBP'000
-------------------------- ------- -------
Management fee 1,172 1,192
----------------------------- ------- -------
Other expenses 521 475
----------------------------- ------- -------
Total expenses (excluding
finance costs) 1,693 1,667
----------------------------- ------- -------
Average net assets 168,902 173,006
----------------------------- ------- -------
Ongoing charges % 1.00 0.97
----------------------------- ------- -------
7. Taxation
(a) Analysis of (credit)/charge
in year:
-------------------------------- ------- ------- ------- ----------- ------- -------
2023 2022
Revenue Capital Total Revenue Capital Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
-------------------------------- ------- ------- ------- ----------- ------- -------
Overseas tax (credit)/charge
relating to the current year 106 - 106 90 309 399
-------------------------------- ------- ------- ------- ----------- ------- -------
Overseas tax (credit)/charge
relating to the prior year - (396) (396) - - -
-------------------------------- ------- ------- ------- ----------- ------- -------
Total tax (see Note 7b) 106 (396) (290) 90 309 399
-------------------------------- ------- ------- ------- ----------- ------- -------
(b) Factors affecting current tax (credit)/charge for the
year
The tax assessed for the year is lower (2022: higher) than the
standard rate of corporation tax for a company (20.50%) (2022:
19.00%). The differences are explained below:
2023 2022
Revenue Capital Total Revenue Capital Total
-------------------------------------
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------- ------------- ---------- ------- --------- ---------- ------------
Net return/(loss) before taxation (709) 15,726 15,017 (929) (24,084) (25,013)
------------------------------------- ------------- ---------- ------- --------- ---------- ------------
Corporation tax at 20.50%
(2022: 19.00%) (146) 3,224 3,078 (176) (4,576) (4,752)
------------------------------------- ------------- ---------- ------- --------- ---------- ------------
Effects of:
------------------------------------- ------------- ---------- ------- --------- ---------- ------------
Tax free (loss)/gains on investments - (3,224) (3,224) - 4,575 4,575
------------------------------------- ------------- ---------- ------- --------- ---------- ------------
Non-taxable income received (162) - (162) (126) - (126)
------------------------------------- ------------- ---------- ------- --------- ---------- ------------
Capital expenses deductible
for tax purposes - - - - 1 1
------------------------------------- ------------- ---------- ------- --------- ---------- ------------
Overseas tax relating to the
current year 106 - 106 90 309 399
------------------------------------- ------------- ---------- ------- --------- ---------- ------------
Overseas tax relating to the
prior year - (396) (396) - - -
------------------------------------- ------------- ---------- ------- --------- ---------- ------------
Income taxed in different
years - - - (1) - (1)
------------------------------------- ------------- ---------- ------- --------- ---------- ------------
Unutilised management expenses
for the year 308 - 308 303 - 303
------------------------------------- ------------- ---------- ------- --------- ---------- ------------
Total tax (credit)/charge
for the year 106 (396) (290) 90 309 399
------------------------------------- ------------- ---------- ------- --------- ---------- ------------
Due to the Company's status as an investment trust and the
intention to continue meeting the conditions required to obtain
approval in the foreseeable future, the company has not provided
deferred tax on any capital gains and losses arising on the
revaluation or disposal of investments.
There is an unrecognised deferred tax asset of GBP5,461,000
(2022: GBP5,076,000) which relates to unutilised excess expenses.
The deferred tax asset would only be recovered if the Company were
to generate sufficient profits to utilise these expenses. It is
considered too uncertain that this will occur and therefore, no
deferred tax asset has been recognised.
8. Net return/(loss) per Ordinary share
The return per Ordinary share figure is based on the net profit
for the year of GBP15,307,432 (2022: Loss GBP25,412,443), and on
11,952,159 (2022: 11,955,536) Ordinary shares, being the weighted
average number of Ordinary shares in issue during the year.
The return per Ordinary share figure detailed above can be
further analysed between revenue and capital, as below.
2023 2022
GBP'000 GBP'000
------------------------------------------- ------------------- ------------------
Net revenue loss (815) (1,019)
------------------------------------------- ------------------- ------------------
Net capital return/(loss) 16,122 (24,393)
------------------------------------------- ------------------- ------------------
Net return/(loss) 15,307 (25,412)
------------------------------------------- ------------------- ------------------
Weighted average number of Ordinary shares
in issue during the year 11,952,159 11,955,536
------------------------------------------- ------------------- ------------------
Revenue loss per Ordinary share (6.82p) (8.52p)
------------------------------------------- ------------------- ------------------
Capital return/(loss) per Ordinary share 134.89p (204.03p)
------------------------------------------- ------------------- ------------------
Total return/(loss) per Ordinary share 128.07p (212.55p)
------------------------------------------- ------------------- ------------------
9. Related parties and transactions with the Portfolio Manager and the AIFM
Directors
There are no transactions with the Directors other than
aggregated remuneration for services as Directors as disclosed in
the Directors' Remuneration Report and as set out in the notes to
the accounts and the beneficial interests of the Directors in the
Ordinary shares of the company as detailed in the Annual Report
& Accounts for the year ended 30 June 2023.
Transactions with the Portfolio Manager and the AIFM
FundRock Partners Limited is AIFM to the Company pursuant to an
Alternative Investment Fund Management Agreement between FundRock
Partners Limited and the Company. FundRock Partners Limited has
also been appointed to provide company secretarial services to the
Company.
Brown Advisory is appointed to provide portfolio management
services pursuant to a Portfolio Management Agreement between the
Company, FundRock Partners Limited and Brown Advisory.
The management fee is calculated at an annual rate of 0.7% on
the first GBP200 million; 0.6% of the next GBP300 million; and 0.5%
thereafter of the Company's adjusted net assets.
The management fee is payable by the Company to FundRock
Partners Limited, 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 management fee payable to FundRock Partners Limited for the
period from 1 July 2022 to 30 June 2023 was GBP1,172,000 (payable
to FundRock Partners Limited for the period from 1 July 2021 to 30
June 2022: GBP1,192,000) with GBP298,000 outstanding as at 30 June
2023 (2022: GBP275,000).
The appointment of Brown Advisory and FundRock Partners Limited
may be terminated by not less than six months' notice.
10. Contingent liabilities and capital commitments
There were no contingent liabilities or capital commitments
outstanding at 30 June 2023 (2022: nil).
11. Annual results
This Annual Results announcement does not constitute the
Company's statutory accounts for the years ended 30 June 2022 and
30 June 2023 but is derived from those accounts. Statutory accounts
for the year ended 30 June 2022 have been delivered to the
Registrar of Companies. The statutory accounts for the year ended
30 June 2022 and the year ended 30 June 2023 both received an audit
report which was unqualified and did not include a reference to any
matters to which the auditor drew attention by way of emphasis
without qualifying the report and did not include statements under
Section 498 of the Companies Act 2006 respectively. The statutory
accounts for the year ended 30 June 2023 will be delivered to the
Registrar of Companies.
12. Other information
The Annual General Meeting of the Company will be held on 6
November 2023.
A copy of the Annual Report & Accounts for the year ended 30
June 2023 will shortly be submitted to the National Storage
Mechanism and will be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
The Annual Report & Accounts will also be available for
download from the Company's website www.brownadvisory.com/basc
Enquiries :
FundRock Partners Limited, Company Secretary
Inderpreet Kaur Bedi Tel: +44 (0) 7766 081 197
ukfundscosec@apexfs.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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END
FR UBOOROVUKAAR
(END) Dow Jones Newswires
September 18, 2023 02:00 ET (06:00 GMT)
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