REG - F&C Investment Trust - Annual Financial Report
09/03/2023 07:00
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RNS Number : 3590S F&C Investment Trust PLC 09 March 2023
F&C INVESTMENT TRUST PLC
Audited Statement of Results for the year ended 31 December 2022.
LEI: 213800W6B18ZHTNG7371
Information disclosed in accordance with DTR 4.1.3
9 March 2023
F&C Investment Trust PLC ('FCIT'/the 'Company') today announces its
results for the year ended
31 December 2022.
· FCIT's share price was 904.0 pence representing a total return of
-0.9%, ahead of its benchmark, the FTSE All-World Index, of -7.7%.
· FCIT's Net Asset Value ("NAV") total return of -5.3%, with debt at
market value, ahead of the benchmark.
· The Company has delivered a total shareholder return of 240.7% over
the ten-year period to the end of 2022, equivalent to 13.0% per annum.
· The final dividend will be 3.9 pence per share, subject to
shareholder approval, and will bring the total dividend for the year to 13.5
pence per share. This will be a 5.5% increase, the 52nd consecutive annual
increase.
· FCIT is committed to transition its portfolio to net zero carbon
emissions by 2050 at the latest.
Commenting on the markets, Paul Niven, Fund Manager said:
"Throughout 2022, rising inflation and interest rates, in conjunction with
geopolitical volatility, weighed on global equities and resulted in valuations
falling sharply over the course of the year. The exiting of a low interest
rate world has fundamentally changed the investment environment and we will
likely continue to see pressure on parts of the equity market. The coming
years may also see greater opportunity for performance from markets outside of
the US and improved prospects from emerging markets, partly driven by
valuation differentials."
The Chairman, Beatrice Hollond, commented:
"In a difficult market environment, F&C reported the strongest return
amongst our peer group of global investment companies and this performance led
to our promotion to the FTSE 100 in September 2022.
This year also marks the 52nd consecutive annual dividend increase and with
substantial revenue reserves, we remain in a very strong position to continue
our track record of increasing annual dividends well into the future.
F&C's flexible and diversified approach makes us well placed to navigate
the changed investment backdrop and we remain confident in the long-term
prospects for the Company."
The full results statement is attached.
Past performance should not be seen as an indication of future performance.
The value of investments and income derived from them can go down as well as
up as a result of market or currency movements and investors may not get back
the original amount invested.
Contacts
Paul Niven - Fund Manager
020 3530 6396
Campbell Hood
campbell.hood@columbiathreadneedle.com
(mailto:campbell.hood@columbiathreadneedle.com)
07860 911 622
FTI Consulting
columbiathreadneedleuk@fticonsulting.com
(mailto:columbiathreadneedleuk@fticonsulting.com)
020 3727 1888
About FCIT:
· Founded in 1868 - the oldest collective investment trust
· A diversified portfolio provides exposure to most of the world's
stock markets, with exposure to just under 400 individual companies across the
globe
· Its aim is to generate long-term growth in capital and income by
investing primarily in an international portfolio of listed equities
Visit our website: fandc.com (http://fandc.com)
Chairman's Statement
Dear Shareholder,
2022 was a challenging year for the world and for financial markets, with
global equities delivering their weakest annual returns since the Global
Financial Crisis of 2008. At the same time, government bond markets suffered
their steepest losses in decades. Investors grappled with geopolitical
concerns, dominated by the war in Ukraine, and the impact of sharp rises in
inflation, leading to aggressive rises in interest rates. Against this
backdrop, a sharp decline in sterling against major currencies helped to
cushion the decline in our Net Asset Value ('NAV'). Our NAV total return,
taking debt at market value, of -5.3% outperformed the return from our
benchmark of -7.7% and the discount on which our share price traded relative
to NAV per share narrowed, from a start of year level of 7.3%, to end the year
at 3.0%. The narrowing of our discount enhanced shareholder returns, resulting
in a share price total return of -0.9%. While it is disappointing to report
negative returns for shareholders, this return was the strongest amongst our
peer group of global investment companies.
Our strong performance, in comparison to other UK listed companies, led to our
promotion, for the first time since 2009, to the FTSE 100 in September 2022.
Our inclusion in the index of the largest 100 UK companies increases the
Company's profile to investors and may lead to higher demand for our shares,
which in turn may assist in narrowing the discount at which they trade.
Our NAV per share, with debt at market value, fell from 998.7p per share to
932.1p per share and our share price fell from 926.0p to 904.0p. Again, while
disappointing to report a decline, this was modest by comparison to deeper
losses in equity markets.
I am pleased to report that our portfolio was relatively well positioned for
the volatility which unfolded during the year, with cash levels raised and
gearing reduced ahead of significant market declines. A reduction in our long
position on sterling, which fell by -10.7% against the US dollar in response
to rising US interest rates, declining investor risk appetite and UK domestic
political concerns, as well as the sale of our small cap allocation also
helped returns. A significant positive contributor was the material reduction
in exposure to expensive growth stocks, which provided some protection against
their underperformance. Our private equity holdings once again outperformed
their listed equivalents which declined in value and lagged the return from
the benchmark. The impact of gearing in a weak market environment detracted
from our returns but we made significant mark-to-market gains on the fair
value of our outstanding debt as a result of rises in global interest rates.
Within our listed portfolio, all regions lost value over the year although the
sharp decline in sterling against major currencies reduced the scale of the
losses. Value and income-oriented strategies delivered strong excess returns
against both the market and growth-focused portfolios. While we were tilted
towards these outperforming areas in our listed portfolio, the
underperformance from stock specific exposure offset the positive impact of
this decision. Indeed, while there were some notable highlights, it was a year
of disappointing returns from a number of our underlying fund managers,
leading to our listed exposure underperforming the benchmark for the year.
In contrast to lacklustre returns from listed equities, our private equity
holdings had another strong year with both our newer commitments and historic
holdings delivering gains in absolute terms. While there is typically a lag in
recognising changes in valuations of private equity holdings and one must take
a long-term perspective in considering results, it is pleasing that our
portfolio of unlisted investments held up well in this challenging market
environment. The Company holds very limited exposure to unlisted disruptive
technology companies, many of which have been the subject of significant
reductions in valuation. Nonetheless, the Board remains mindful of the risks
associated with unlisted investments and continues to adopt a careful approach
to both valuation and any new commitment opportunities.
A CONTINUED FOCUS ON THE LONG-TERM
While it was disappointing to lose value for shareholders in 2022, we remain
firmly focused on the delivery of growth in both capital and income for
shareholders over the long-term. The past decade remains a period where
investors in global equities have enjoyed exceptional returns and your Company
has delivered a total shareholder return of +240.7% over the ten-year period
to the end of 2022, equivalent to +13.0% per annum. 2022 was only the second
year in the past decade during which shareholder returns have been negative,
with 2018 seeing a similarly modest decline (0.6%).
Reflecting further on longer-term returns and the power of compounding, over
the twenty-year period to 31 December 2022 the Company's share price total
return was +743.5%, equivalent to +11.2% per annum. Our capital-only returns
over the past twenty years were +454.6%. Dividends paid to shareholders have
risen by 4.7% per annum over the past decade and by 7.0% over the past twenty
years. Such results continue to demonstrate the importance of compounding
income and capital gains over long periods in the process of value creation
for shareholders.
FIFTY SECOND CONSECUTIVE ANNUAL DIVIDEND INCREASE
After a sharp downturn in our revenue during 2020, we enjoyed a robust
recovery in 2021 which continued over the course of 2022. Our earnings rose on
the year to £72.6m, a record high, while special dividends increased slightly
to £1.6m (2021: £1.4m). The impact of currency movements added £4.9m to our
income (2021: detracted £4.0m). Our Net Revenue Return per share rose by
26.7% to 13.92 pence per share from 10.99 pence per share in 2021.
Inflation rose sharply over the year and, while annual rates of Consumer Price
Index ('CPI') increases may now be past their highs, the backdrop is one where
price pressures are expected to remain elevated for some time to come. While
it remains the ambition of the Board to deliver real rises in dividends for
shareholders over the long-term, it is also our intention to deliver
sustainable rises in dividends. I am therefore delighted to report that the
proposed annual dividend will be fully covered by our revenue.
Subject to approval at the Annual General Meeting ('AGM'), shareholders will
receive a final dividend of 3.9 pence per share on 11 May 2023, bringing the
total dividend for 2022 to 13.5 pence: an increase of 5.5% over that of 2021.
The increase compares to the 10.5% rise in inflation as measured by the CPI,
which in October reached its highest level for over forty years. In addition,
as well as being our fifty second consecutive rise in annual dividends, it is
our one hundred and fifty fifth annual dividend payment.
Shareholders can also take comfort that in addition to our substantial revenue
reserve (£97.5m at the year end), we have capital reserves which stood at
£4.3bn at the year end. We therefore remain in a very strong position to
continue our track record of increasing annual dividends well into the future.
MARKETING
We launched our new branding at the FCIT sponsored lecture held last July at
The Guildhall, London. The lecture, which focused on "Smart Choices for a
Smarter Future" was a great success and we hope to host another such event in
2024. The new branding has been supported by a marketing campaign which will
continue into 2023 and is aimed at increasing awareness of the benefits of
investing in the Company and attracting new investors. We hope shareholders
like the new look of our annual report.
COMPANY RATING AND EFFICIENCY
Prior to the Covid-19 pandemic your Company was trading at a premium rating
and we issued shares in both 2018 and 2019. In 2020 and 2021 we saw the
re-emergence of a discount in our share price relative to NAV but it is
pleasing to report an improvement in the Company's rating over the course of
last year. We bought back a total of 8.4m shares into treasury as part of our
commitment towards achieving a sustainably low deviation between the share
price and NAV. The discount averaged 7.5% over 2022 and ended the year at
3.0%, narrower than the 7.3% level at the start of the year. The narrowing in
our discount was accretive to the shareholder total return over the year.
Contributors to total return in 2022 %
Portfolio return (7.9)
Management fees (0.4)
Interest and other Expenses (0.4)
Buy backs 0.2
Change of value of debt 4.2
Gearing/other (1.0)
NAV total return (5.3)
Change in share price discount 4.4
Share price total return (0.9)
FTSE All-World total return (7.7)
Source: Columbia Threadneedle Investments
Our Ongoing Charges figure remained at 0.54%, the same level as 2021, with an
increase in marketing expenses being offset by a reduction in the management
fee paid. From 1 January 2023, as explained in last year's Annual Report, the
management fee was reduced to a rate of 0.3% on our market capitalisation up
to £4 billion and at 0.25% thereafter. The Board remains focused on
delivering value for money for shareholders as part of its performance
objectives.
BORROWINGS
In recent years we have taken advantage of historically low interest rates to
secure long-dated fixed rate borrowings. We reported in last year's Annual
Report that, in the closing stages of 2021, we had agreed £140m of borrowings
with repayment dates between 2037 and 2061. These borrowings were drawn down
during the first quarter although, given the near term caution of the Fund
Manager, they have not yet been invested into equity markets.
As at the end of 2022 we had outstanding debt of £581.3m and a blended
borrowing rate of less than 2.4%. These are exceptionally low rates of
borrowing for your Company and represent a low hurdle which we expect the
returns from our investments to exceed and, therefore, expect that the use of
these borrowings will prove accretive to returns over the long-term. At the
year end, we held £244m in cash and cash equivalents leading to an effective
gearing level (with debt at par value) of 7.3% (2021: 9.4%).
A notable feature of the year was the sharp rise in borrowing costs for both
governments and companies. The rise in market based borrowing costs led to a
substantial reduction (£182m) in the fair value of our outstanding debt.
Indeed, taking debt at fair value, our effective gearing level fell from 9.8%
at the start of the year to 3.5% at the end.
BOARD COMPOSITION
Julie Tankard joined the Board on 1 August 2022 as Chairman of the Audit
Committee, replacing Jeffrey Hewitt, who retired at the conclusion of the 2022
Annual General Meeting. Her appointment continues our planned sequence of
Board changes and again reflects our focus on maintaining the highest level of
skills and knowledge on the Board. I would like to thank Jeff once again for
his significant contribution in chairing the Audit Committee for 10 years.
Francesca Ecsery will retire at the conclusion of the forthcoming AGM and the
process to appoint her successor is in progress. We thank Francesca for her
very considerable contribution over almost 10 years, through her expertise in
consumer marketing and branding and her guidance on the effective promotion of
the Company's investment proposition.
ANNUAL GENERAL MEETING
It was a great pleasure to be able to meet shareholders again last year as we
returned to an in-person AGM. It was a "hybrid" meeting, as we also enabled
shareholders to view the AGM and participate by asking questions and voting
online. We will again offer shareholders the opportunity to participate online
at this year's AGM. Full details of how to do so are set out in the letter
that accompanies your Form of Proxy or Form of Direction.
Voting at this year's AGM will again be conducted by way of a poll and you are
requested to lodge your votes ahead of the meeting by completing your Form of
Proxy or Form of Direction in accordance with the instructions. Its completion
and return will not preclude you from attending the meeting and voting in
person. If you are unable to attend the AGM, you are requested to submit any
questions you may have with regard to the resolutions proposed at the AGM, or
the performance of the Company, in advance of the meeting to
fcitagm@columbiathreadneedle.com. Following the AGM, the Fund Manager's
presentation will be available on the Company's website www.fandc.com
(http://www.fandc.com) .
OUTLOOK
In 2022 we witnessed a profound change in the backdrop which had supported
equity markets in recent decades. High inflation and rising interest rates
punctured extended valuations in equity markets and delivered sharp losses for
investors in the most expensive segments of the market. While company
fundamentals in many leading businesses may not have changed significantly,
the price which investors are willing to ascribe to the prospect of future
success has diminished.
Despite declines in equity markets last year leading to a more reasonable
valuation backdrop, there are still significant near-term risks. While recent
rises in food and energy prices are a challenge, especially to consumers and
businesses in Europe and the UK, domestically generated inflation remains
uncomfortably high in the US and UK in particular. The bulk of tightening may
now be behind us, but there are likely to be more interest rate rises to come
and risks to economic growth and corporate earnings are high. Indeed, there is
a possibility of recession in coming quarters in many developed economies and
corporate margins are likely to remain under pressure over the course of this
year.
While the near-term outlook for equity markets remains challenging, we
continue to have a long-term investment focus. We have secured long-dated
fixed borrowings at the lowest rates of interest for generations and recent
setbacks in markets should provide greater prospective returns for the patient
investor. We have significant cash which can be deployed to take advantage of
long-term opportunities that we expect to arise. In doing so, we will continue
to be mindful of our approach to investing responsibly and to our commitment
to transition to net zero carbon emissions by 2050, at the latest. While the
period of exceptional returns from equity markets and from US equities in
particular appears to be over, we remain focused on our overriding objective
in the delivery of long-term growth in capital and income for our
shareholders.
Beatrice Hollond
Chairman, 8 March 2023
Forward-looking statements
This document may contain forward-looking statements with respect to the
financial condition, results of operations and business of the Company. Such
statements involve risk and uncertainty because they relate to future events
and circumstances that could cause actual results to differ materially from
those expressed or implied by forward-looking statements. The forward looking
statements are based on the Directors' current view and on information known
to them at the date of this document. Nothing should be construed as a profit
forecast.
Weighting, stock selection and performance over one year in each investment
portfolio strategy and underlying geographic exposure versus Index at 31
December 2022
Investment Portfolio Strategy Our portfolio strategy weighting % Underlying geographic exposure(i) % Our strategy performance in Sterling % Gross index performance in Sterling %
Benchmark weighting %
North America 39.6 58.4 61.5 (9.2) (9.2)
Europe inc. UK(iv) 11.4 23.3 16.6 (7.2) (5.1)
Japan 4.6 7.2 6.4 (13.5) (5.2)
Emerging Markets 6.9 8.3 10.6 (13.8) (10.0)
Developed Pacific - 2.8 4.9 - (1.6)
Global Strategies(ii) 25.2 - - (7.3) (7.7)
Private Equity(iii) 12.3 - - 3.6 -
Source: Columbia Threadneedle Investments
(i)Represents the geographic exposure of the portfolio, including underlying
exposures in private equity and fund holdings.
(ii)The Global Strategies allocation consisted of Global Income, Global Value
and Global Sustainable Opportunities.
(iii)Includes the holdings in Schiehallion and Syncona.
(iv)Includes the holdings in Gilts.
PRINCIPAL AND EMERGING RISKS
The Board has carried out a robust review and assessment of the Company's
Principal and Emerging Risks and the uncertainties that could threaten its
future success. This includes near-term risks such as those posed by the
change of ownership of the Manager and longer-term risks, such as climate
change. The consequences for the Company's strategy, business model,
liquidity, future prospects, long-term viability and its commitment to
transition the portfolio to net zero carbon emissions by 2050, at the latest,
form an integral part of this review. As a result of the Board's assessment,
the following risk disclosures have been reviewed and revised to reflect what
it believes to be the Principal and Emerging Risks that the Company faces at
present.
In the past two years we have highlighted, as emerging risks, the extent and
impact of the response from governments to meet the costs of Covid-19 and the
potential for the imposition of controls and taxes that could be detrimental
to the savings industry and investors themselves. These risks are feeding
through, with the UK and many other countries now close to or in recession as
the impact of the various fiscal measures is being felt.
Economic and market shocks in one form or another, and their consequences, are
risks that have long been on the Board's risk assessment. The effects of the
Covid-19 pandemic have eased but there can be no complacency. The Company's
purpose, strategy, investment policy and innate characteristics, most notably
portfolio diversification and an embedded long-term outlook, again
demonstrated its strong resilience in the face of a global crisis. Our risk
evaluation forms an inherent part of our strategy determination, which seeks
to mitigate risks and to pursue the opportunities that arise, not least at
times of great turmoil.
BMO GAM has been acquired by Ameriprise and its integration with the business
of Columbia Threadneedle Investments is well advanced. The Board looks
favourably upon this acquisition and there has been little change for your
Company, however an acquisition of such magnitude introduces some uncertainty
until the integration of systems is fully implemented. The Board will continue
to monitor this risk closely.
PRINCIPAL RISKS
Investment Performance
Inappropriate asset allocation, sector and stock selection, currency exposure
and use of gearing and derivatives may give rise to under-performance and
impact the Company's dividend paying capacity. Political risk factors,
including the potential emergence of restrictive government controls, could
also impact performance as could market shocks such as those experienced as a
result of Covid-19 and geo political factors. Russia's invasion of Ukraine,
continuing economic and market uncertainty and political instability indicates
that this risk has increased.
Under our Business Model, a Manager is appointed with the capability and
resources to manage the Company's assets through asset allocation, sector and
stock selection, gearing and risk management. The Manager can delegate the
management of investment portfolios externally to third party managers. The
individual global and regional investment portfolios are managed as a whole to
provide diversification, lower volatility and lower risk. The performance of
the Company relative to its benchmark, its peers and inflation is a KPI
measured by the Board on an ongoing basis and is reported on page 39 of the
Report and Accounts.
The Company's portfolio is well diversified and its closed end structure
enables it to continue to take a long-term view. Detailed reports provided by
the Fund Manager are reviewed by the Board at each of its meetings. The
Manager's Performance and Risk Oversight team provide independent oversight on
investment risk management for the directly managed portfolios. As outlined in
the Fund Manager's Review starting on page 8 of the Report and Accounts and
reported in the Key Performance Indicators on page 39 of the Report and
Accounts, long-term performance remains in line with expectations. In 2020 the
Company purchased a series of forward currency contracts to the value of
£300m as a partial hedge against the US dollar. This was reduced by £100m in
late 2021 and further reduced in 2022 to £20m. Prudent management of the
Company's Revenue Reserve means that its dividend paying capacity remains
strong.
Effectiveness of Appointed Manager
The Business Model is based on the premise of an effective and strong working
relationship with the appointed Manager, while an important responsibility of
the Board is the robust annual evaluation of its performance, capabilities and
resources, leading to the decision as to whether to reappoint it. Succession
planning concerning any potential significant management changes is shared
with the Board. Internal performance KPIs and Manager errors are monitored by
the Board for indications of continuity or other Manager issues.
The Board met with Columbia Threadneedle's senior management to discuss the
acquisition of BMO GAM and comfort was taken as to Columbia Threadneedle's
long-term financial strength and resources and its policies and commitment
towards the investment trust business and the savings plans.
The Manager's systems and staffing capabilities continued to operate
satisfactorily throughout 2022. Thorough reviews and challenges were made
through the Audit Committee, Management Engagement Committee and the Board.
Whilst the Board has confirmed the reappointment of the Manager, the
integration of BMO GAM and Columbia Threadneedle's systems inevitably
introduces a degree of uncertainty. A critical milestone is the move to a new
order management system, Aladdin, widely regarded as the market leading
system. It is expected that this change will be completed in the first half of
2023. This risk is therefore categorised as unchanged.
Cyber Threats and Data Protections
The ancillary functions of administration, company secretarial, accounting and
marketing services are all carried out by the Manager. The Board monitors the
effectiveness and efficiency of the service providers' processes through
internal efficiency KPIs.
The Audit Committee and the Board have reviewed regularly the Company's risk
management framework with the assistance of the Manager. Regular control
reports from the Manager covering risk, compliance and oversight of its own
third-party service providers, including IT security and cyber threats, have
also been reviewed. The Manager maintains regular contact with its key
outsourced service providers and has received assurances regarding the
continuity of their operations. Service levels are monitored by the Manager
with any deviations from the service level agreements escalated immediately,
both internally and with the relevant third party. The Board has reviewed
reports from the Depositary, which is liable for loss of any of the Company's
securities and cash held in custody unless resulting from an external event
beyond its reasonable control. Whilst the risk of loss remains high, Board and
management vigilance also remains heightened and therefore this risk is
categorised as unchanged.
Loss of Key Person
The Board has considered who are the key people that could potentially pose a
risk to the Company should they leave Columbia Threadneedle Investments and
are confident that those people could be replaced appropriately through
internal promotion or external recruitment. The person posing the largest key
person risk is the Company's Fund Manager, Paul Niven, who is Head of Asset
Allocation (Europe, Middle East & Africa) at Columbia Threadneedle
Investments and as such is a key person in managing the Company's assets. He
has been our Fund Manager for almost 9 years.
The Board meets with members of the wider Columbia Threadneedle investment
management team to ensure that relationships are fully developed at all
levels. Succession planning concerning any potential significant management
changes is shared with the Board. Paul's team is 20 strong and it is divided
into sectors with lead individuals who have detailed knowledge of the
portfolio within their remit. The Board has received assurance from senior
management at Columbia Threadneedle Investments that Paul's team has the
necessary breadth and experience if they were required to manage without him.
The Board is confident that the structure that supports Paul could manage in
the event that he was to become incapacitated or leave the firm. The Board
considers that this risk is unchanged but has chosen to identify it separately
as a principal risk.
EMERGING RISK
Transition to Net Zero
The Board has made a commitment to transition the Company's portfolio to net
zero carbon emissions by 2050, at the latest. Responsible Investment is a
field that is evolving rapidly and it can present both opportunities and
threats to the long-term investment performance that we aim to deliver to our
shareholders.
The Manager believes in the power of engaged, long-term ownership as a force
for positive change. It applies high standards of Responsible Investment in
managing the investments on behalf of our shareholders and takes seriously its
stewardship responsibilities, actively engaging with investee companies. The
Board meets with Columbia Threadneedle's Responsible Investment team on a
regular basis. We recognise the importance of disclosing information on
Responsible Investment that is relevant, reliable and, as far as possible,
ensuring that it is presented in a consistent way from year to year in order
that our progress can be assessed.
The Board has continued to work with the Manager in managing the Company's
risks. A risk summary is produced by the Manager in consultation with the
Board to identify the risks to which the Company is exposed, the controls in
place and the actions being taken to mitigate them. The Board, through the
Audit Committee, has a robust process for considering the resulting risk
control assessment at regular meetings and on an ongoing basis reviews the
significance of the risks and the reasons for any changes.
The Board carried out a thorough review of the risks that could impact the
sustainable success of the Company. The purpose of the exercise was to
reassess the principal risks and identify any new, emerging risks and to take
any necessary action to mitigate their potential impact. The Risk Control
Assessment was then revised in line with the conclusions that were reached. It
was agreed that the risk to investment performance had increased as a result
of market uncertainty and political instability; that key person risk should
be regarded as a principal risk; and that, whilst the risk of loss through
cyber threats remained heightened, there had been increased Board and
management vigilance and therefore the risk remained unchanged. The Board
continues to review and challenge the risks that the Company faces.
Ten Year Horizon
Through a series of connected stress tests ranging from moderate to extreme
scenarios including the impact of market shocks and based on historical
information, but forward-looking over the ten years commencing 1 January 2023,
the Board assessed the effects of:
• falls in the value of the publicly listed investments;
• increased buyback volumes;
• illiquidity and early calls on private equity commitments;
• adverse fluctuations in exchange rates; and
• falls in annual revenue.
The assumptions used for these tests purposefully did not take into account
that under such severe conditions the Board and Manager would have taken
action to mitigate the risks and offset the impact. Furthermore, the tests
were a theoretical and illustrative scenario exercise, the assumptions for
which are extreme and highly unlikely. Their purpose was to help inform the
Directors of the Company's resilience under conditions so severe that they
would impact global economies, markets, companies and businesses alike. The
tests help to support the Board's assessment of the Company's long-term
viability. The results do not represent its views or give an indication of the
likely outcome.
Having considered its current position and the principal and emerging risks
that the Company faces and having applied stress tests under worst-case
scenarios that would severely impact global economies and markets alike, the
Board confirms that it has assessed the Company's prospects, to the extent
that it is able to do so, over the next ten years.
In concluding that ten years is an appropriate period for this assessment, the
Board considers that this approximates to a suitable period over which its
longer term investment performance is measurable and comparable; the periods
over which it would typically commit to and benefit from its private equity
investments; and the tenure of the Directors from a corporate governance
perspective.
The Board also took into consideration the long-term duration of the Company's
debt, the perceived viability of the Company's principal service providers,
the potential effects of expected regulatory changes and the potential threat
from competition. The Company's business model, strategy and the embedded
characteristics have helped define and maintain its stability over many
decades. The Board expects this to continue over many more years to come.
The Directors confirm therefore, that they have a reasonable expectation that
the Company will be able to continue in operation and meet its liabilities in
full over the coming ten years to 31 December 2032.
Statement of Directors' Responsibilities in Respect of the Financial
Statements
In accordance with Chapter 4.1.12 of the Disclosure Guidance and
Transparency Rules the Directors confirm, that to the best of their knowledge:
· the financial statements, prepared in accordance with applicable
accounting standards, give a true and fair view of the assets, liabilities,
financial position and profit of the Company;
· the Strategic Report includes a fair review of the development
and performance of the business and the position of the Company, together with
a description of the principal risks and uncertainties that it faces; and
· in the opinion of the Directors the annual report and financial
statements, taken as a whole, are fair, balanced and understandable and
provide the information necessary for shareholders to assess the Company's
position and performance, business model and strategy.
.
On behalf of the Board
Beatrice Hollond
Chairman, 8 March 2023
Income Statement
For the year ended 31 December 2022 2021
Revenue Capital Total Revenue Capital Total
£'000s £'000s £'000s £'000s £'000s £'000s
(Losses)/gains on investments - (527,760) (527,760) - 879,862 879,862
Exchange movements on foreign currency loans, cash balances and derivatives
387 (11,382) (10,995) (176) 4,251 4,075
Income 96,235 - 96,235 77,629 - 77,629
Management fees (4,582) (13,747) (18,329) (4,935) (14,805) (19,740)
Other expenses (5,567) (46) (5,613) (3,500) (57) (3,557)
Net return before finance costs and taxation 86,473 (552,935) (466,462) 69,018 869,251 938,269
Finance costs (3,495) (10,486) (13,981) (2,778) (8,335) (11,113)
Net return on ordinary activities before
taxation 82,978 (563,421) (480,443) 66,240 860,916 927,156
Taxation on ordinary activities (10,383) (551) (10,934) (7,740) (138) (7,878)
Net return attributable to shareholders 72,595 (563,972) (491,377) 58,500 860,778 919,278
Net return per share - basic (pence) 13.92 (108.14) (94.22) 10.99 161.74 172.73
The total column of this statement is the profit and loss account of the
Company.
All revenue and capital items in the above statement derive from continuing
operations.
The net return attributable to Shareholders is also the total comprehensive
income.
Statement of Changes in Equity
Share Capital Capital Revenue Total
Capital Redemption Reserves Reserve Shareholders'
Reserve Funds
For the year ended 31 December 2022 £'000s £'000s £'000s £'000s £'000s
Balance brought forward 31 December 2021 140,455 122,307 4,924,320 93,852 5,280,934
Dividends paid - - - (68,983) (68,983)
Shares repurchased by the Company and held in treasury
- - (70,749) - (70,749)
Net return attributable to shareholders - - (563,972) 72,595 (491,377)
Balance carried forward 31 December 2022 140,455 122,307 4,289,599 97,464 4,649,825
Share Capital Capital Revenue Total
Capital Redemption Reserves Reserve Shareholders'
Reserve Funds
For the year ended 31 December 2021 £'000s £'000s £'000s £'000s £'000s
Balance brought forward 31 December 2020 140,455 122,307 4,147,868 100,930 4,511,560
Dividends paid - - - (65,578) (65,578)
Shares repurchased by the Company and held in treasury
- - (84,326) - (84,326)
Net return attributable to shareholders - - 860,778 58,500 919,278
Balance carried forward 31 December 2021 140,455 122,307 4,924,320 93,852 5,280,934
Balance Sheet
At 31 December 2022 2021
£'000s £'000s £'000s £'000s
Fixed assets
Investments 4,924,533 5,779,123
Current assets
Investments 59,424 -
Debtors 11,061 8,267
Cash at Bank and short-term deposits 243,846 53,111
314,321 61,378
Creditors: amounts falling due within one year
Loans - (110,452)
Other (7,190) (9,277)
(7,190) (119,729)
Net current assets/(liabilities) 307,131 (58,351)
Total assets less current liabilities 5,231,664 5,720,772
Creditors: amounts falling due after more than one year
Loans (581,264) (439,263)
Debenture (575) (575)
(581,839) (439,838)
Net assets 4,649,825 5,280,934
Capital and Reserves
Share capital 140,455 140,455
Capital redemption reserve 122,307 122,307
Capital reserves 4,289,599 4,924,320
Revenue reserve 97,464 93,852
Total shareholders' funds 4,649,825 5,280,934
Net asset value per share - prior charges at
nominal value (pence) 896.94 1,002.49
Statement of Cash Flows
for the year ended 31 December 2022 2021
£'000s £'000s
Cash flows from operating activities before dividends received and interest
paid
(34,064) (27,576)
Dividends received
93,292 77,652
Interest paid
(13,239) (11,037)
Cash flows from operating activities 45,989 39,039
Investing activities
Purchases of investments (2,068,248) (2,527,995)
Sales of investments 2,338,540 2,483,392
Other capital charges and credits (50) (56)
Cash flows from investing activities 270,242 (44,659)
Cash flows before financing activities 316,231 (5,620)
Financing activities
Equity dividends paid (68,983) (65,578)
Repayment of loans (110,329) (120,000)
Drawdown of loans 140,000 270,000
Cash flows from share buybacks for treasury shares (71,534) (83,961)
Cash flows from financing activities (110,846) 461
Net increase/(decrease) in cash and cash equivalents 205,385 (5,159)
Cash and cash equivalents at the beginning of the year 53,111 46,654
Effect of movement in foreign exchange (14,660) 11,616
Cash and cash equivalents at the end of the year 243,836 53,111
Represented by:
Cash at bank 144,096 27,798
Short-term deposits 99,740 25,313
Cash and cash equivalents at the end of the year 243,836 53,111
Notes
1 NET RETURN PER SHARE
2022 2022 2021 2021
pence £'000s pence £'000s
Total return (94.22) (491,377) 172.73 919,278
Revenue return 13.92 72,595 10.99 58,500
Capital return (108.14) (563,972) 161.74 860,778
Weighted average ordinary shares in issue,
excluding shares held in treasury - number 521,526,881 532,196,543
2 DIVIDENDS
The Directors have proposed a final dividend in respect of the year ended 31
December 2022 of 3.90p per share payable on 11 May 2023 to all shareholders on
the register at close of business on 11 April 2023.
3 FINANCIAL RISK MANAGEMENT
The Company is an investment company, listed on the London Stock Exchange, and
conducts its affairs so as to qualify in the United Kingdom (UK) as an
investment trust under the provisions of Section 1158 of the Corporation Tax
Act 2010. In so qualifying, the Company is exempted in the UK from corporation
tax on capital gains on its portfolio of investments.
The Company's investment objective is to secure long-term growth in capital
and income through a policy of investing primarily in an internationally
diversified portfolio of public listed equities, as well as unlisted
securities and private equity, with the use of gearing. In pursuing the
objective, the Company is exposed to financial risks which could result in a
reduction of either or both of the value of the net assets and the profits
available for distribution by way of dividend. These financial risks are
principally related to the market (currency movements, interest rate changes
and security price movements), liquidity and credit. The Board of Directors,
together with the Manager, is responsible for the Company's risk management.
The full details of financial risks are contained in note 26 of the Report and
Accounts.
4 GOING CONCERN
In assessing the going concern basis of accounting the Directors have had
regard to the guidance issued by the Financial Reporting Council. They have
also considered the Company's objective, strategy and investment policy, the
current cash position of the Company, the availability of the loan facility
and compliance with its covenants and the operational resilience of the
Company and its service providers. More information on the Board's assessment
is provided on pages 42 and 43 of the Report and Accounts.
5 ANNUAL GENERAL MEETING
The annual general meeting will be held on 27 April 2023 at 12 noon.
6 ANNUAL REPORT AND ACCOUNTS
This statement was approved by the Board on 8 March 2023. It is not the
Company's statutory accounts. The statutory accounts for the financial year
ended 31 December 2022 have been approved and audited and received an audit
report which was unqualified and did not include a reference to any matters to
which the auditors drew attention by way of emphasis without qualifying the
report. The statutory accounts for the financial year ended 31 December 2021
received an audit report which was unqualified and did not include a reference
to any matters to which the auditors drew attention by way of emphasis without
qualifying the report.
The Annual Report and Accounts will be posted to shareholders on or around 24
March 2023.
Columbia Threadneedle Investment Business Limited,
Company Secretary, 8 March 2023
For further information, please contact:
Jonathan Latter
For and on behalf of
Columbia Threadneedle Investment Business Limited
020 3530 6283
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
Columbia Threadneedle Investment Business Limited
ENDS
A copy of the Annual Report and Accounts has been submitted to the National
Storage Mechanism and will shortly be available for inspection
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .
The Annual Report and Accounts will also shortly be available on the Company's
website at www.fandc.com (http://www.fandc.com) where up to date
information on the Company, including daily NAV and share prices, factsheets
and portfolio information can also be found.
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