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Seneca Global Income & Growth - Half-year Report




Unaudited results for the six months ended 31 October 2019

Chairman's Statement

Highlights for the period

  • Net asset value total return -1.6% vs Benchmark +3.7%
  • Share price total return -0.8%
  • Annualised volatility 6.2% compared with 11.4% for FTSE All-Share Index
  • Quarterly dividend increased by 2.4% to 1.68p
  • Discount Control Mechanism - issuance £4.5m; buy-ins £1.2m
  • Shares traded very closely around net asset value for the whole period
  • AGM approved all Resolutions by over 99% majority 


Seneca Global Income & Growth Trust plc ('SIGT' or 'the Company') generated a net asset value ('NAV') total return per share of -1.6% for the six months to 31 October 2019. This was below the CPI +6% annualised Benchmark, which over the six months provided a return of +3.7%. From time to time, underperformance over short periods will occur and is an inevitable consequence of the volatility of underlying financial markets as well as SIGT's high conviction and longer term investment approach. The Board believes returns are better judged over longer periods; for example, over the five years to 31 October 2019, SIGT's NAV per share total return was +47.9% and the Benchmark return was +30.3%.

When looked at overall, the six months appear unremarkable. Sterling ended the period about where it began against the dollar and the euro. The FTSE All-Share Index total return was just positive and the US stock market rose a little. These beginning to end period comparisons hide considerable intra-period movements, especially in relation to the UK as possible Brexit outcomes influenced markets in competing directions. SIGT's UK equity exposure is predominately focused on mid-cap companies whose performance is more closely tied to the UK's economic fortunes than that of large-cap companies. By and large, these mid-cap companies performed well in the period especially when fears of a no-deal Brexit receded. SIGT's lack of exposure to US equities and to sovereign debt both detracted from performance. These positions have been so for some time and are very much valuation led. Overall, the portfolio performed reasonably in a particularly volatile period.

The Manager's Review provides more detailed analysis on performance for the period.


The Company paid two interim dividends of 1.68p per share for the period, an increase of 2.4% on the equivalent dividends last year. Inflation, as represented by the Consumer Price Index, was 1.5% over the trailing 12 months meaning SIGT achieved its objective of growing dividends at least in line with inflation. It is the Board's intention, barring unforeseen circumstances, that it will at least maintain the quarterly rate of 1.68p per share for the full year to 30 April 2020 and, based on this quarterly rate, the shares yielded 3.9% on the share price of 173.5p at the period end.

Discount Control Mechanism ('DCM')

The Company's DCM has been operating since August 2016 and, in the six months under review, it issued 2,535,000 shares and bought-in 714,000 shares, resulting in net issuance of 1,821,000 shares. The Board is delighted to have been able to demonstrate its commitment to the DCM by both buying-in and issuing shares. The liquidity and very low discount volatility that the DCM provides is, the Board believes, of real value to Shareholders. Since August 2016, the operation of the DCM has resulted in net issuance of 9,354,727 shares (an increase of 23% in the Ordinary share capital) and as shares are issued at a small premium and bought-in at a small discount, the NAV of the Company has been enhanced by £147,034 after all applicable costs.


SIGT has available to it a debt facility of £14m of which £7m was drawn down during the period. The actual average net gearing level for the period was 2.8% as some of the drawn facility was held in cash, or similar, reflecting the Manager's caution and also to allow virtually instant access to funds should the need arise. The undrawn element of the facility is in place largely to assist with the operation of the DCM, enabling gearing levels to be maintained as the DCM results in the issuance of new shares, and/or providing short term working capital, if necessary, when shares are bought-in.

Board Composition

As alluded to in the Annual Report, Ian Davis has now retired from the Board following a suitable hand-over to Sue Inglis who now becomes Chair of the Audit Committee. Ian has served on the Board for over 14 years. During that time his technical expertise and wise counsel have been much valued and appreciated by his Board colleagues and the Manager.  As noted in the Annual Report, it is intended to recruit another Director in due course so that the Board comprises four members able to provide inputs from different perspectives and robust governance.

Investment Manager

In October, it was announced that Peter Elston had resigned from the Manager for personal reasons, and the Board wishes to record its gratitude to Peter for his contribution over the last five years. The Manager operates a team approach to the management of SIGT and that will continue with Gary Moglione providing portfolio oversight, as he has been doing jointly with Peter for over a year. Gary joined the Manager in April 2018 and has twenty years' investment experience, much of it involving multi-asset mandates. The other three members of the investment team have been employed by the Manager for an average of 13 years providing real depth of experience and excellent continuity.

Annual General Meeting ('AGM')

At the AGM held in July, Shareholders approved all Resolutions, each by a majority of over 99%, including those that help with the effective management of the DCM specifically allowing the Company to issue shares equivalent to 30% of its equity and to buy-in up to 14.99%.

Investment Outlook

During the period, the Manager continued the gradual process of the last two years or so of reducing the Company's equity exposure. The amount of reduction was modest and indeed was briefly paused during the period. While some modest further reduction is likely, the Manager considers the reductions near their end. There are signs that valuations of some equities now reflect much of the risk and prevailing uncertainty. The UK has of course been dominated by Brexit uncertainty and with an election now looming, it is difficult (and dangerous) to predict the outcome of either. Elsewhere, US-China trade discussions rumble on, and future US monetary policy remains uncertain. The Board is comforted that the Manager's well-established, disciplined and distinctive investment policy and process continues in a consistent manner. The diverse range of assets comprising the Company's portfolio should provide reasonable returns over time, as well as real risk reduction, which seems particularly relevant in the current environment.