REG - F&C Investment Trust - Half-year Report
03/08/2023 07:00
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RNS Number : 1163I F&C Investment Trust PLC 03 August 2023
F&C INVESTMENT TRUST PLC
Unaudited Results for the half-year ended 30 June 2023
Legal Entity Identifier: 213800W6B18ZHTNG7371
Information disclosed in accordance with Disclosure Guidance and Transparency
Rule 4.2.2
3 August 2023
F&C Investment Trust PLC ('FCIT' /the 'Company') today announces its
results for the six months ended 30 June 2023.
· The Net Asset Value ('NAV') total return was +4.7%; behind the +7.5%
return from the benchmark, the FTSE All-World Index.
· The share price total return was -2.6%, in part due to a widening of
the discount during the period.
· Over one year's worth of dividends is held in the revenue reserve and
the Board aims to increase the total dividend again this year. The first
interim dividend of 3.4 pence for 2023 was paid on 1 August.
The Chairman, Beatrice Hollond, said:
"The valuation excesses in markets overall appear relatively contained and it
now seems likely that the US may avoid recession.…Against this background
your Manager will continue to adopt a diversified approach and remain focused
on the longer term opportunities as they emerge."
Commenting on the markets, Paul Niven, Fund Manager of FCIT, said:
"Looking forward, while we remain uncertain of the unfolding economic
environment, we do expect that
performance within equities will broaden and that relative value will be an
important consideration for prospective returns. We have a relatively balanced
approach within our portfolio between the cheaper, but more cyclically exposed
areas of the market, and the higher growth, more expensive segments which have
exciting prospects but appear fully priced. A narrow market presents both
opportunities and risks and we believe that a diversified approach will, in
due course, provide better returns, with lower risk, for shareholders."
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 over 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
Chairman's Statement
Markets and Performance
Equity markets were remarkably strong in the first half of 2023 despite
further rises in interest rates, higher than forecast inflation and a crisis
which led to the collapse of three regional banks in the US and the forced
takeover of Credit Suisse. Technology stocks drove returns, with the Nasdaq
Index gaining 32% in US dollar terms. A narrow cohort of mega-cap names were
responsible for the majority of US equity market gains helped in part by
investor enthusiasm for the perceived benefits of Artificial Intelligence. The
total return from our benchmark, the FTSE All-World, was +7.5% over the period
while the Company produced a net asset value ('NAV') total return of +4.7%.
There was a marked widening in the discount level of investment trust
companies across the sector and the Company's discount moved out from 3.0% to
9.8%. This led to a negative shareholder total return of -2.6%.
The NAV per share ended the period at 964.7 pence compared with 932.1 pence at
the end of 2022. The return from our investment portfolio, i.e. before fees
and other effects, of +4.8% lagged the benchmark return, while a further rise
in market interest rates reduced the fair value of our outstanding debt,
adding 0.4% to our NAV return.
The Company's gearing rose from 7.3% at the start of the year to 8.2% at the
end of the period. We held £208.5m in cash and £98m in short dated UK
Government bonds.
In response to growth that was better than feared, stubbornly high inflation
and a hawkish Bank of England, sterling rose by 5.1% against the US dollar
over the six months. This had the effect of reducing the return from our
investments in overseas assets. For our Private Equity holdings, the value of
our investments declined by 4.1%, partly reflecting the impact of these
currency movements. The near-term backdrop for the Private Equity area remains
challenging, though we have made good returns from our investments in this
area over longer time periods.
Income, Expenses and Dividends
We paid a third interim dividend of 3.2 pence per share for the year ended 31
December 2022 in February 2023 and a final dividend of 3.9 pence in May. Our
full year 2022 dividend of 13.5 pence per share was fully covered by earnings
of 13.92 pence per share and represented an increase of 5.5% on the previous
year.
Our net revenue return per share over the first six months of the year rose by
16.2% to 8.69p, compared to 7.48p over the corresponding period last year.
Although sterling strengthened in the first six months of 2023 it was still
trading at a lower level than in the first half of 2022 and this added £1.6m
to the return. Special dividends totalled £2.2m, up from £1.0m in the first
half of 2022.
Our income has risen substantially from the pandemic-induced downturn of 2020
and we anticipate that our earnings will also cover our full year dividend in
2023. It remains the aspiration of the Board to continue the Company's track
record of delivering rises in dividends which exceed inflation rates over the
long-term and we retain a substantial revenue reserve to help meet this
objective if required. We have declared a first interim dividend for the
current year of 3.4 pence per share payable on 1 August 2023. The Board plans
to deliver another rise in our total dividend for this year, which will be the
53rd consecutive annual rise.
Following the launch of our new branding last year, we are continuing with our
marketing campaign to
increase awareness of the benefits of investing in the Company and to attract
new investors. Early
indications are that the campaign is having a positive effect, however, the
Company's cost ratio is likely to
to increase marginally this year as a result.
The Board
Francesca Ecsery retired from the Board at the conclusion of the AGM in April
this year, after almost 10 years' service as a Director. She made a
considerable contribution to the effective promotion of the Company's
investment proposition through her marketing expertise. I am delighted that
Anu Chugh has replaced Francesca with effect from 1 July 2023. Anu is the
Chief Executive of Pukka Herbs where she is responsible for governance and
strategy. Anu is a Marketing professional with more than 25 years' experience
in the consumer-packaged goods industry, having formerly been Managing
Director of Ben & Jerry's Europe, Global Marketing Director of Unilever
and Marketing Director of Pepsi Lipton International.
Outlook
While equity markets have delivered strong gains in recent months investors
may have become too complacent about the potential near term risks. Although
it appears that inflation rates are moderating, we may not have yet seen the
peak in interest rates in most developed markets. In addition, the recent
economic resilience may not last given the long lag time associated with
monetary policy tightening. Furthermore, the enthusiasm for the big technology
stocks in the US suggests that valuations there give limited room for
disappointment. All these factors may give rise to some near-term caution for
equity markets but looking further out there are grounds for optimism. The
valuation excesses in markets overall appear relatively contained and it now
seems likely that the US may avoid recession. In addition, although there is
clearly some near term hype around the immediate benefits of AI, in the longer
term there are likely to be significant benefits from the adoption of
technology which will benefit both productivity and profitability. Of course
disruptive trends create the potential for tremendous gains for the corporate
winner as well as substantial challenges. Against this background your Manager
will continue to adopt a diversified approach and remain focused on the longer
term opportunities as they emerge.
Beatrice Hollond
Chairman
2 August 2023
Fund Manager's Review
Thus far in 2023, equity markets have performed more strongly than we had
anticipated and a US recession has been avoided. Returns, however, have been
extremely concentrated with Nvidia joining several familiar names, such as
Apple, Microsoft and Amazon amongst the largest and best performing stocks in
the market. Outside of the 'magnificent seven', which also includes Tesla,
Meta and Alphabet, all of which we hold in our portfolio, market returns have
generally been more modest overall though both Japan and Europe posted strong
gains over the period.
Sterling rose against the US dollar, from 1.21 to 1.27, and the yen posted
heavy falls as the Bank of Japan retained a loose monetary policy, while other
developed market central banks continued to raise interest rates.
Listed equity regions posted gains, except for Emerging Markets, where a
faltering Chinese recovery pushed returns into negative territory. Despite
rising interest rates and better than forecast economic growth, it was
growth-oriented stocks which were once again dominant in performance terms.
The market was also extremely narrow, driven by a small number of stocks which
accounted for most of the gains and led to a record level of market
concentration in the US, with the top five stocks accounting for around a
quarter of market index exposure. Nvidia, which almost trebled in value over
the period, was an AI winner given its dominant position in the manufacture of
chips that power machine learning and Apple became the first company in
history to reach a valuation of $3trn.
Contributors to total returns in first half of 2023
%
Portfolio return 4.8
Management fees (0.2)
Interest and other expenses (0.2)
Buybacks 0.1
Change in value of debt 0.4
Gearing/other (0.2)
Net asset value total return* 4.7
Change in share price discount (7.3)
Share price total return (2.6)
FTSE All-World total return 7.5
*Debt at market value
Source: Columbia Threadneedle/State Street
The return from our investment portfolio (i.e. before fees and other effects)
was +4.8%, compared to the market benchmark return of +7.5%, with a negative
impact from stock selection as well as a drag on performance from our
allocation to private equity, which underperformed listed markets. Overall
relative performance of our listed strategies was negatively impacted by an
underweight position in many of the names which drove the first half rally.
Early in the year, however, after strong relative performance in 2022 we did
reduce exposure to large cap value stocks in the US which, while cheap
compared to historic norms, were viewed as at risk from economic slowdown.
While US recession did not emerge, there was considerable stress in the
banking sector, in part due to recent interest rates rises (as well as
questionable management decisions) but the US Federal Reserve acted swiftly to
contain risks and alleviate the wider economic impact.
Within our US holdings we divested from our US growth manager, T Rowe Price,
during the first quarter and allocated their portion of the portfolio to
J.P.Morgan Asset Management. This segment of the portfolio produced the
strongest gains over the period, with exposure to Nvidia (+175.5%) seeing
significant upgrades to earnings expectations in response to AI driven demand
for their microchips. Meta (+126.9%) posted strong gains, recovering from
depressed valuations and driven by a renewed focus on operating efficiency. By
contrast, and in a reversal of the performance picture from 2022, our
long-standing value manager Barrow Hanley posted disappointing returns
(-1.8%), behind that of the value index and of the broader market. A lack of
exposure here to Meta, which formed part of the value index, was particularly
detrimental while the holding in Dollar General (-34.2%), the discount
retailer, which warned on sales and profits growth, detracted from returns and
offset gains from holdings in Vertiv (+72.5%), Broadcom (+49.5%) and Oracle
(+39.7%). Within our US holdings, we diversified exposure away from Barrow
Hanley and incepted a new US large cap value strategy run by the Manager,
Columbia Threadneedle. The backdrop proved challenging to value stocks over
the period and, while returns there were in line with value indices, they
lagged the broader market.
Our Global Strategies (+3.6% return) performed poorly relative to global
comparators. Global Income (+3.2%), Quality Income (+4.5%) and Global
Sustainable Opportunities (+3.5%) all lagged market indices. Global
Sustainable Opportunities was particularly disappointing, as this segment of
the Global Strategies component has a focus on growth oriented stocks but, as
was the case elsewhere, an under-exposure to the largest stocks in the
universe, which had provided exceptional gains over the six-month period,
detracted significantly from returns. Indeed, despite a position in Nvidia,
which was the standout performer over the period, a lack of exposure to the
other big names in the growth complex, such as Tesla (+102.2%), Apple (+42.4%)
and Microsoft (+35.7%), as well as a holding in SVB Financial, which filed for
bankruptcy after a bank run, hurt performance. Our Global Income and Quality
Income strategies, both of which have a focus on companies with an attractive
dividend yield, suffered as income-oriented stocks were shunned by investors,
with the picture of significant relative performance drag from a lack of
exposure to highly performing US technology names also evident. This negative
impact more than offset the positive effect of holdings in stocks such as SAP
(+28.0%) and Air Liquide (+22.5%).
Europe inc UK (+13.0%) produced the strongest returns amongst our regional
strategies and was substantially ahead of the benchmark. Melrose Industries
(+77.9%) was a strong performer, demerging several GKN units and repositioning
themselves as a pure play aerospace business. Elsewhere, holdings in discount
airlines Wizz Air (+43.6%) and Ryanair (+36.7%) were boosted by buoyant demand
from consumers. Ryanair, for example, reported their first profit since the
pandemic, helped by a sharp rise in passenger numbers and fares.
Japanese holdings produced returns which were in line with the local benchmark
but ahead of the global index. In local currency terms, this region was
amongst the strongest performing areas globally during the first half but
weakness in the yen, which declined by 13.4% relative to sterling, detracted
from returns. Advantest (+96.2%) was one of the strongest performing holdings,
helped by their linkages to the semiconductor industry, while holdings in SMC
(+24.3%), and longstanding holdings Hoya (+16.6%) and Keyence (+14.2%)
performed strongly. Nonetheless, several holdings such as Zozo (-20.2%) and
Takeda Pharmaceutical (-2.9%) disappointed over the six month period.
Our Emerging Markets strategy delivered a modestly negative return, in line
with the benchmark. While there were strong returns from holdings such as
Latin American retailer MercadoLibre (+33.2%) and Taiwanese chip maker TSMC
(+21.1%), several Chinese and Hong Kong listed holdings, including Anta Sports
(-25.3%) and Hong Kong Exchange (-16.1%), detracted from returns.
Our private equity holdings declined by 4.1% in sterling terms. Our recent
commitments, where we hold 8.3% of the portfolio assets, fell in value by 2.5%
while our older holdings overseen by Pantheon and Harbourvest declined by
4.4%. The two Pantheon Future Growth programmes, with a combined $360m of
commitments, also declined in value, by 4.6%. While our private equity returns
were impacted by strength in sterling, they lagged substantially behind the
gains delivered by listed markets. As noted previously, these investments are
long term in nature and we have, historically, enjoyed good returns from our
private equity holdings compared with listed market equivalents. Furthermore,
our holdings in this area are, as with the rest of our portfolio, diversified
across a range of geographies, sectors and individual businesses and we have
limited exposure to late-stage disruptive technology, which has been the focus
of the most substantial write-downs in value. Nevertheless, over the six month
period, the impact of a near 13% weight in these holdings accounted for around
1.5% of the underperformance which the investment portfolio suffered relative
to the market benchmark.
A further rise in market interest rates led to another reduction in the fair
value of our debt over the period. The ten-year gilt yields rose from less
than 3.7% at the start of the year to just under 4.4% by the end of June. The
rise in market yields added 0.4% to our NAV return over the six months.
Current Market Perspective
The recent performance of equity markets can be attributed largely to economic
growth being more resilient than had been feared. Investor enthusiasm for the
Artificial Intelligence theme has also buoyed valuations amidst a hope for
stock-specific winners, such as Nvidia, as well as the prospect for wider
benefits to productivity and corporate profits. With the anticipated downturn
in economic growth, and potential profits, being delayed (or potentially
avoided) equity markets are back trading at valuations which have only been
seen twice in recent history; in the market recovery stages of the pandemic
and in the late 1990s. Furthermore, valuations of the faster growing segments
of the market, which have led the rally so far this year, are trading at a
premium which has rarely been seen before.
This near-term backdrop presents a conundrum for investors, with relatively
high valuations, despite rising interest rates and generally stubborn
inflation, while economic (and earnings) risks are still present. Looking
forward, while we remain uncertain of the unfolding economic environment, we
do expect that performance within equities will broaden and that relative
value will be an important consideration for prospective returns. We have a
relatively balanced approach within our portfolio between the cheaper, but
more cyclically exposed areas of the market, and the higher growth, more
expensive, segments which have exciting prospects but appear fully priced. A
narrow market presents both opportunities and risks and we believe that a
diversified approach will, in due course, provide better returns, with lower
risk, for shareholders.
Paul Niven
Fund Manager
2 August 2023
Weightings, stock selection and performance in each investment portfolio
strategy and underlying geographic exposure versus index as at 30 June 2023
Investment portfolio strategy Our portfolio strategy weighting Underlying geographic exposure((1)) Benchmark weighting Our strategy performance in sterling Index performance in sterling
% % % % %
37.7 54.4 63.1 7.6 10.1
North America
13.4 26.6 16.2 13.0 7.5
Europe inc UK
4.7 7.3 6.3 5.7 6.2
Japan
6.5 9.0 10.0 (0.2) (0.2)
Emerging Markets
- 2.7 4.4 - (1.9)
Developed Pacific
25.9 - - 3.6 7.5
Global Strategies((2))
11.8 - - (4.1) -
Private Equity((3))
Source: Columbia Threadneedle/State Street
((1)) Represents the geographic exposure of the portfolio, including
underlying exposures in private equity and fund holdings
((2)) The Global Strategies allocation consists of Global Income, Global Value
and Global Sustainable Opportunities.
((3)) Includes the holdings in Schiehallion and Syncona.
UNAUDITED CONDENSED INCOME STATEMENT
6 months to 30 June 2023 6 months to 30 June 2022
Notes Revenue Capital Total Revenue Capital Total
£'000s £'000s £'000s £'000s £'000s £'000s
Gains/(losses) on investments and derivatives - 176,352 176,352 - (649,585) (649,585)
Exchange (losses)/gains (506) (4,797) (5,303) 335 (7,158) (6,823)
3 Income 58,420 - 58,420 50,833 - 50,833
4 Fees and other expenses (5,086) (6,287) (11,373) (4,848) (6,784) (11,632)
Net return before finance costs and taxation 52,828 165,268 218,096 46,320 (663,527) (617,207)
4 Interest payable and similar charges (1,702) (5,106) (6,808) (1,751) (5,255) (7,006)
Net return on ordinary activities before taxation 51,126 160,162 211,288 44,569 (668,782) (624,213)
5 Taxation on ordinary activities (6,116) (543) (6,659) (5,373) (551) (5,924)
6 Net return attributable to shareholders 45,010 159,619 204,629 39,196 (669,333) (630,137)
6 Net return per share - basic (pence) 8.69 30.80 39.49 7.48 (127.67) (120.19)
The total column is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing
operations.
UNAUDITED CONDENSED STATEMENT OF CHANGES IN EQUITY
Capital Total
Share redemption Capital Revenue shareholders'
capital reserve reserves reserve funds
Notes Half-year ended 30 June 2023 £'000s £'000s £'000s £'000s £'000s
Balance brought forward 140,455 122,307 4,289,599 97,464 4,649,825
31 December 2022
Movements during the half-year ended 30 June 2023
11 Shares repurchased by the Company and held in treasury
- - (13,213) - (13,213)
7 Dividends paid - - - (54,382) (54,382)
Return attributable to shareholders - - 159,619 45,010 204,629
Balance carried forward 140,455 122,307 4,436,005 88,092 4,786,859
30 June 2023
Capital Total
Share redemption Capital Revenue shareholders'
capital reserve reserves reserve funds
Notes Half-year ended 30 June 2022 £'000s £'000s £'000s £'000s £'000s
Balance brought forward
31 December 2021 140,455 122,307 4,924,320 93,852 5,280,934
Movements during the half-year ended 30 June 2022
Shares repurchased by the Company and held in treasury
- - (54,352) - (54,352)
7 Dividends paid - - - (52,382) (52,382)
Return attributable to shareholders - - (669,333) 39,196 (630,137)
Balance carried forward 140,455 122,307 4,200,635 80,666 4,544,063
30 June 2022
Capital redemption reserve £'000s Total shareholders' funds
Share capital Capital reserves Revenue reserve £'000s
£'000s £'000s £'000s
Notes Year ended 31 December 2022
Balance brought forward
31 December 2021 140,455 122,307 4,924,320 93,852 5,280,934
Movements during the year ended 31 December 2022
Shares repurchased by the Company and held in treasury - - (70,749) - (70,749)
7 Dividends paid - - - (68,983) (68,983)
Return attributable to shareholders - - (563,972) 72,595 (491,377)
Balance carried forward 140,455 122,307 4,289,599 97,464 4,649,825
31 December 2022
UNAUDITED CONDENSED BALANCE SHEET
31 December 2022
Notes 30 June 2023 30 June 2022 £'000s
£'000s £'000s
Fixed assets
8 Investments 5,092,930 4,850,660 4,924,533
Current assets
8 Investments 98,332 - 59,424
Debtors 22,246 15,589 11,061
14 Cash and cash equivalents 208,493 352,290 243,836
Total current assets 329,071 367,879 314,321
Creditors: amounts falling due within one year
9 Loans - (61,981) -
10 Other (54,525) (31,765) (7,190)
Total current liabilities (54,525) (93,746) (7,190)
Net current assets 274,546 274,133 307,131
Total assets less current liabilities 5,367,476 5,124,793 5,231,664
Creditors: amounts falling due after more than one year
9, 14 Loans (580,042) (580,155) (581,264)
9, 14 Debenture (575) (575) (575)
(580,617) (580,730) (581,839)
Net assets 4,786,859 4,544,063 4'649,825
Capital and reserves
11 Share capital 140,455 140,455 140,455
Capital redemption reserve 122,307 122,307 122,307
Capital reserves 4,436,005 4,200,635 4,289,599
Revenue reserve 88,092 80,666 97,464
12 Total shareholders' funds 4,786,859 4,544,063 4,649,825
12 Net asset value per ordinary share 926.04 873.36 896.94
- prior charges at nominal value (pence)
UNAUDITED CONDENSED STATEMENT OF CASH FLOWS
Half-year ended Half-year ended
30 June 30 June Year ended
2023 2022 31 December
2022
Notes £'000s £'000s £'000s
13 Cash flows from operating activities before dividends received and interest (15,031) (18,723) (34,064)
paid
Dividends received 54,895 49,033 93,292
Interest paid (6,832) (6,108) (13,239)
Cash flows from operating activities 33,032 24,202 45,989
Investing activities
Purchases of Investments (2,226,716) (1,236,993) (2,068,248)
Sales of Investments 2,212,566 1,519,188 2,338,540
Other capital charges and credits (21) (24) (50)
Cash flows from investing activities (14,171) 282,171 270,242
Cash flows before financing activities 18,861 306,373 316,231
Financing activities
Equity dividends paid (36,807) (35,733) (68,983)
Repayment of loans - (50,000) (110,329)
Drawdown of loans - 140,000 140,000
Cash flows from share buybacks for treasury shares (11,280) (53,812) (71,534)
Cash flows from financing activities (48,087) 455 (110,846)
14 Net (decrease)/increase in cash and cash equivalents (29,226) 306,828 205,385
Cash and cash equivalents at the beginning of the period 243,836 53,111 53,111
14 Effect of movement in foreign exchange (6,117) (7,649) (14,660)
Cash and cash equivalents at the end of the 208,493 352,290 243,836
period
Represented by:
Cash at bank 108,453 219,657 144,096
Short term deposits 100,040 132,633 99,740
Cash and cash equivalents at the end of the 208,493 352,290 243,836
period
UNAUDITED NOTES ON THE CONDENSED ACCOUNTS
1 Results
The results for the six months to 30 June 2023 and 30 June 2022 constitute
non-statutory accounts within the meaning of Section 434 of the Companies Act
2006. The latest published accounts which have been delivered to the Registrar
of Companies are for the year ended 31 December 2022; the report of the
Auditors thereon was unqualified and did not contain a statement under Section
498 of the Companies Act 2006. The condensed financial statements shown for
the year ended 31 December 2022 are an extract from those accounts.
2 Accounting policies
(a) Basis of preparation
These condensed financial statements have been prepared on a going concern
basis in accordance with the Companies Act 2006, Interim Financial Reporting
(FRS 104) and the Statement of Recommended Practice 'Financial Statements of
Investment Trust Companies and Venture Capital Trusts' (SORP), issued in July
2022.
The accounting policies applied for the condensed set of financial statements
are set out in the Company's annual report for the year ended 31 December
2022.
(b) Use of judgements, estimates and assumptions
The presentation of the financial statements in accordance with accounting
standards requires the Board to make judgements, estimates and assumptions
that affect the accounting policies and reported amounts of assets,
liabilities, income and expenses. Estimates and judgements are continually
evaluated and are based on perceived risks, historical experience,
expectations of plausible future events and other factors. Actual results may
differ from these estimates.
The area requiring the most significant judgement and estimation in the
preparation of the financial statements is accounting for the value of
unquoted investments.
The policy for valuation of unquoted securities is set out in note 8 of the
accounts and further information on Board procedures is contained in the
Report of the Audit Committee and note 26(d) of the Report and Accounts as at
31 December 2022. The choice to only apply cash flows in the roll forward is a
judgment made each year for the indirect investments. Material judgements were
applied to the valuation of the Company's direct investment, Inflexion
Strategic Partners. This investment was valued using the earnings method
multiplied by an average of European listed comparable companies multiple
(where the judgement of which comparable companies to select and what
discounts to apply are subjective). The fair value of unquoted (Level 3)
investments, as disclosed in note 8, represented 11.4% of total investments at
30 June 2023. Under foreseeable market conditions the collective value of such
investments may rise or fall in the short term by more than 25%, in the
opinion of the Directors. A fall of 25% in the value of the unlisted (Level 3)
portfolio at the half-year would equate to £148m or 3.1% of net assets and a
similar percentage rise should be construed accordingly.
3 Income
Half-year ended Half-year ended
30 June 2023 30 June 2022
£'000s £'000s
Income comprises:
UK dividends 3,992 4,649
UK bond income 566 -
Overseas dividends 51,066 45,988
Interest on short-term deposits and other income 2,796 196
Income 58,420 50,833
Included within income is £2.2m (30 June 2022: £1.0m; 31 December 2022:
£1.6m) of special dividends classified as revenue in nature.
The value of special dividends treated as capital in nature is £0.0m (30 June
2022: £0.1m; 31 December 2022: £0.5m).
4 Fees and other expenses and interest payable and similar charges
Half-year ended Half-year ended
30 June 2023 30 June 2022
£'000s £'000s
Fees and other expenses 11,373 11,632
Interest payable and similar charges 6,808 7,006
Total 18,181 18,638
Fees and other expenses comprise:
Allocated to Revenue Account
- Management fees payable directly to the Manager* 2,085 2,252
- Other expenses 3,001 2,596
5,086 4,848
Allocated to Capital Account
- Management fees payable directly to the Manager* 6,256 6,755
- Other expenses 31 29
6,287 6,784
Interest payable and similar charges comprise:
Allocated to Revenue Account 1,702 1,751
Allocated to Capital Account 5,106 5,255
* Including reimbursement in respect of services provided by sub-managers
As detailed in the Report and Accounts to 31 December 2022, with effect from 1
January 2023, the Manager's remuneration is based on a fee of 0.30% per annum
of the market capitalisation of the Company up to £4.0 billion and 0.25%
above £4.0 billion calculated at each month end date on a pro-rata basis. For
the year to 31 December 2022 it was 0.325% per annum of the market
capitalisation of the Company up to £3.0 billion, 0.30% between £3.0 and
£4.0 billion, and 0.25% above £4.0 billion calculated at each month end date
on a pro-rata basis. The fee is adjusted for fees earned by the Manager in
respect of investment holdings managed or advised by the Manager. Variable
fees payable in respect of third party sub-managers are also reimbursed. The
services provided by the Manager remain unchanged from those disclosed within
the accounts for the year ended 31 December 2022. The level of variable fees
payable in respect of third party sub-managers and private equity managers
remain unchanged since the year end.
5 Taxation
The taxation charge of £6,659,000 (30 June 2022: £5,924,000) relates to
irrecoverable overseas taxation and Indian tax on capital gains.
6 Net return per share
Net return per ordinary share attributable to ordinary shareholders reflects
the overall performance of the Company in the period. Net revenue recognised
in the first six months is not indicative of the total likely to be received
in the full accounting year.
Half-year ended Half-year ended Half-year ended Half-year ended
30 June 2023 30 June 2023 30 June 30 June
pence £'000s 2022 2022
pence £'000s
Revenue return 8.69 45,010 7.48 39,196
Capital return 30.80 159,619 (127.67) (669,333)
Total return 39.49 204,629 (120.19) (630,137)
Weighted average ordinary shares in issue excluding treasury shares (see note 518,236,585 524,268,795
11)
7 Dividends
Half-year ended 30 June 2023 Half-year ended 30 June 2022 Year ended 31 December 2022
£'000s £'000s £'000s
Dividends paid and payable on ordinary shares
Register date Payment date
2021 Third interim of 3.00p 7-Jan-2022 01-Feb-2022 - 15,804 15,804
2021 Final of 3.80p 8-Apr-2022 10-May-2022 - 19,929 19,929
2022 First interim of 3.20p 1-Jul-2022 1-Aug-2022 - 16,649 16,654
2022 Second interim of 3.20p 7-Oct-2022 1-Nov-2022 - - 16,596
2022 Third interim of 3.20p 6-Jan-2023 1-Feb-2023 16,589 - -
2022 Final of 3.90p 11-Apr-2023 11-May-2023 20,218 - -
2023 First interim of 3.40p 30-Jun-2023 1-Aug-2023 17,575 - -
54,382 52,382 68,983
The Directors have declared a first interim dividend in respect of the year
ending 31 December 2023 of 3.40p per share, payable on 1 August 2023 to all
shareholders on the register at close of business on 30 June 2023. The amount
of this dividend will be £17,575,000 based on 516,919,027 shares in issue at
29 June 2023. This amount has been accrued in the results for the half-year
ended 30 June 2023 as the ex-dividend date was 29 June 2023.
8 Investments
Fair value hierarchy
The Company's Investments as disclosed in the balance sheet are valued at fair
value.
The fair value as at the reporting date has been estimated using the following
fair value hierarchy:
Level 1 includes investments and derivatives listed on any recognised stock
exchange or quoted on the AIM market in the UK and quoted open-ended funds.
These also include gilts of £98m.
Level 2 includes investments for which the quoted price has been suspended,
forward exchange contracts and other derivative instruments.
Level 3 includes investments in private companies or securities, whether
invested in directly or through pooled Private Equity vehicles, for which
observable market data is not specifically available.
The analysis of the valuation basis for financial instruments based on the
hierarchy is as follows:
As at 30 June 2023 As at 30 June 2022 As at 31 December 2022
£'000s £'000s £'000s
Level 1 4,600,698 4,259,149 4,408,792
Level 3 590,564 591,511 575,165
Total valuation of investments 5,191,262 4,850,660
4,983,957
With respect specifically to investments in Private Equity, whether through
funds or partnerships, the Directors rely on the latest available unaudited
quarterly valuations of the underlying unlisted investments as supplied by the
investment advisers or managers of those funds or partnerships. The Directors
regularly review the principles applied by the managers to those valuations to
ensure they are in compliance with the principal accounting policies as stated
in the year end report and accounts.
No investments held at 30 June 2023, 30 June 2022 or 31 December 2022 were
valued in accordance with level 2.
Derivative instruments
Derivative instruments included forward exchange contracts with a net
unrealised capital gain of £0.3m as at 30 June 2023 (30 June 2022: unrealised
capital loss of £1.6m and 31 December 2022: unrealised capital gain of
£0.7m).
9 Loans and Debenture
31 December 2022
30 June 2023 30 June 2022 £'000s
£'000s £'000s
Loans falling due within one year - 61,981 -
Loans falling due after more than one year 580,042 580,155 581,264
Debenture falling due after more than one year 575 575 575
Comprising: - - -
Sterling denominated loan, falling due within one year
Euro denominated loan, falling due within one year - €72m -
Sterling denominated loan, falling due after more one year £544m £544m £544m
Euro denominated loan, falling due after more than one year €42m €42m €42m
4.25% perpetual debenture stock £0.575m £0.575m £0.575m
10 Other creditors falling due within one year
30 June 2023 30 June 2022 31 December 2022
£'000s £'000s £'000s
Cost of ordinary shares repurchased 1,933 1,325 -
Investment creditors 30,766 8,346 2,933
Management fee payable to the Manager 1,958 1,726 1,863
Foreign exchange contracts - 1,559 -
Dividend payable 17,575 16,649 -
Other accrued expenses 2,293 2,160 2,394
54,525 31,765 7,190
11 Share capital
Total shares in issue
Shares entitled to dividend nominal
Shares held in treasury Number Total shares in issue £'000s
Number Number
Equity share capital
Ordinary shares of 25p each
Balance at 31 December 2022 43,407,160 518,411,856 561,819,016 140,455
Shares repurchased by the Company and held in treasury 1,492,829 (1,492,829) - -
Balance at 30 June 2023 44,899,989 516,919,027 561,819,016 140,455
1,492,829 shares were repurchased during the period at a cost of £13,213,000.
Shares held in treasury have no voting rights and no right to dividend
distributions and are excluded from the calculations of earnings per share and
net asset value per share.
12 Net asset value per ordinary share 30 June 2023 30 June 2022 31 December 2022
Net asset value per share -pence 926.04 873.36 896.94
Net assets attributable at end of period - £'000s 4,786,859 4,544,063 4,649,825
Ordinary shares of 25p in issue at end of period excluding shares held in 516,919,027 520,294,833
treasury - number
518,411,856
Net asset value per share (with the debenture stock and long-term loans at
market value) at 30 June 2023 was 964.73p (30 June 2022: 892.77p and
31 December 2022: 932.10p). The market value of debenture stocks at 30 June
2023 was £429,000 (30 June 2022 and 31 December 2022: £429,000). The market
value of the long-term loans at 30 June 2023 was £380,170,000 (30 June 2022:
£479,338,000 and 31 December 2022: £399,134,000) based on the equivalent
benchmark gilts or relevant commercially available current debt.
13 Reconciliation of net return before taxation to cash flows from operating
activities
Half-year ended Half-year ended
30 June 2023 30 June 2022 Year ended
£'000s £'000s 31 December 2022
£'000s
Net return on ordinary activities before taxation 211,288 (624,213) (480,443)
Adjust for non-cash flow items, dividend income and interest expense:
(Gains)/losses on investments (176,352) 649,585 527,760
Exchange losses 5,303 6,823 10,995
Non-operating expense of a capital nature 31 29 46
Decrease/(increase) in other debtors 24 (112) (310)
Increase/(decrease) in creditors 28 (635) (122)
Dividends receivable (55,058) (50,637) (94,268)
Interest payable 6,808 7,006 13,981
Tax on overseas income and Indian Capital Gains Tax (7,103) (6,569) (11,703)
(226,319) 605,490 446,379
Cash flows from operating activities (before dividends received and interest
paid)
(15,031) (18,723) (34,064)
14 Analysis of changes in net debt
Forward exchange contracts
Long term loans £'000s
Cash £'000s Debenture Total
£'000s £'000s £'000s
243,836 (575) (337,266)
Opening net debt as at 31 December 2022 (581,264) 737
Cash-flows:
Net movement in cash and cash equivalents
(29,226) - - - (29,226)
Non-cash:
Effect of foreign exchange movements (6,117) (1,222) - (408) (5,303)
Closing net debt as at 30 June 2023 208,493 (580,042) (575) 329 (371,795)
15 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 policy; current cash
position; the availability of loan finance; compliance with all financial loan
and private placement covenants; and the operational resilience of the Company
and its service providers. It is recognised that the Company is mainly
invested in readily realisable, globally listed securities that can be sold,
if necessary, to repay indebtedness.
Based on this information and their knowledge and experience of the Company's
portfolio and stockmarkets, the Directors believe that the Company has the
ability to meet its financial obligations as they fall due for a period of at
least twelve months from the date of approval of these financial statements.
Accordingly, these financial statements have been prepared on a going concern
basis.
Statement of Principal and Emerging Risks
The Company's principal and emerging risks are described in detail under the
heading 'Principal and Emerging Risks' within the Strategic Report in the
Company's annual report for the year ended 31 December 2022. They have been
identified as: Investment Performance; Effectiveness of Appointed Manager;
Cyber Threats and Data Protections; Loss of Key Person; and Transition to Net
Zero.
In the view of the Board, there have not been any material changes to the
fundamental nature of these risks and they are applicable to the remainder of
the financial year.
Statement of Responsibilities in Respect of the Half Year Financial Report
In accordance with Chapter 4 of the Disclosure Guidance and Transparency
Rules, the Directors confirm that to the best of their knowledge:
· the condensed set of financial statements has been prepared in
accordance with applicable UK Accounting Standards on a going concern basis
and gives a true and fair view of the assets, liabilities, financial position
and net return of the Company;
· the half year report includes a fair review of the important
events that have occurred during the first six months of the financial year
and their impact on the financial statements;
· the Statement of Principal and Emerging Risks shown above is a
fair review of the principal and emerging risks for the remainder of the
financial year; and
· the half year report includes a fair review of the related party
transactions that have taken place in the first six months of the financial
year.
On behalf of the Board
Beatrice Hollond
Chairman
2 August 2023
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,
Company Secretary
ENDS
A copy of the half report will shortly be submitted to the National Storage
Mechanism and will be available for inspection at www.fca.org.uk
The half-year report will be posted to shareholders and made available on the
internet at www.fandc.com (http://www.fandc.com) shortly. Copies may be
obtained during normal business hours from the Company's Registered Office,
Cannon Place, 78 Cannon Street, London EC4N 6AG.
Columbia Threadneedle Investment Business Limited
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