Half Yearly Report

RNS Number : 1202S

Foreign & Colonial Eurotrust PLC

12 May 2009

Date: 12 May 2009

Contact: Peter Jarvis

F&C Management Limited

020 7628 8000

Foreign & Colonial Eurotrust PLC

Unaudited Statement of Results

for the half-year ended 31 March 2009

Summary of Unaudited Results

Attributable to equity shareholders	31 March 2009	30 September 2008	% Change

Net assets	£215.89m	£292.38m	-26.2

Net asset value per share	454.46p	599.36p	-24.2

FTSE World Europe Index - excluding the UK (adjusted to sterling)			-19.0

Share price	381.25p	518.00p	-26.4

	Half-year ended 31 March 2009	Half-year ended 31 March 2008	% Change

Revenue return per share	5.02p	0.93p	+439.8

Managers' Review

Capital performance

Over the half-year ended 31 March 2009, your Company’s net asset value per share fell by 24.2% from 599.36p to 454.46p compared with a fall of 19.0% in the FTSE World Europe Index, excluding the UK and adjusted to sterling. The Company’s share price fell by 26.4% from 518.00p to 381.25p. The discount widened from 13.6% to 16.1%.

Revenue

The net revenue return attributable to shareholders of 5.02p is higher than at the half-year stage in 2008 of 0.93p. This is primarily due to the recovery of VAT on management fees and interest thereon. From a total recovery of £4,166,000, £2,166,000 has been recognised in the period. £2,000,000 was recognised in the Income Statement for the year ended 30 September 2008. Management fees and finance costs are also lower in the period. Management fees are based on lower average assets under management and the decrease in finance costs reflects the decision to repay the loan during the period. The figures are not indicative of the full year results because European companies tend to pay their dividends between April and September whereas expenses are incurred throughout the year.

Review of markets

The European equity market backdrop remains difficult as 2009 progresses. Economic surveys confirm the marked loss of momentum and the period under review was the weakest since the post-war period. We are yet to see clear signs of stabilisation, suggesting that sentiment and the inventory cycle are under severe strain. Within this environment, capacity utilisation fell rapidly, as indicated by the collapse of industrial commodity prices and freight rates.

In response, the European Central Bank (“ECB”) cut rates by a further 25 bps at its meeting in the first week of May. The ECB has now slashed official borrowing costs by 300 bps since early October, to 1.25%, the lowest ever. It also announced that the unlimited liquidity provisions, introduced after Lehman Brothers collapsed last September, would be extended.

The combination of collapsing economic growth expectations and sharp negative revisions to earnings expectations put downward pressure on the equity market. Further pressure came from the high level of equity issuance to shore up balance sheets, particularly in the financial sectors.

Some support to the market has been gained from the global fiscal policy response, such as pledges to assist the auto industry in France and Germany. The size of the fiscal response by governments around the world has few precedents.

Portfolio strategy

We have focused investment on companies with high quality businesses that exhibit solid, long-term growth prospects and are not highly dependent on external funding. Examples of this are the media companies Wolters Kluwer and Reed Elsevier, which are intellectual property businesses, and SAP, which is driven by innovation.

Elsewhere we used market weakness to increase our exposure to Nokia and CRH. The former should be a beneficiary of an improving product portfolio at a time when its competitors are likely to see extreme pressure. At the same time the company is progressing well in taking costs out of its business. CRH, in the short term, should benefit from the US fiscal stimulus plan, where highway and bridge building will receive US$30 billion, which is to be spent within three years.

We have continued to add to the sounder financial stocks, such as Credit Suisse, with the belief that institutions with strong franchises will earn good profits over the long term as weaker competitors withdraw from the industry. On top of this, and at least as important, is that the policy actions around the financial system have moved on from piecemeal to systemic as they have increased in scale.

Outlook

We believe the recent stabilisation in equity markets reflects the progress made in both cleaning up banks’ balance sheets and the headway made in recapitalising the financial sector. For longer term growth, bond yields will need to remain low to reduce the cost of capital, promote investment and facilitate debt reduction. On the economic front there is little room for further fiscal stimulus given the constrained government budgets.

However, a range of lead or early-cycle indicators, such as the ISM new orders index, are showing a slower rate of descent. This has led to some increase in risk appetite.

Finally, lower commodity prices offer some respite from the inflationary pressures felt over the last year, enabling policy makers in Europe to remain aggressive with monetary policy.

Peter Jarvis
12 May 2009

Unaudited Income Statement

Half-year ended 31 March 2009				Half-year ended 31 March 2008
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s

Losses on investments	-	(67,533)	(67,533)	-	(46,021)	(46,021)
Foreign exchange gains/(losses)	33	1,162	1,195	36	(393)	(357)
Income	3,206	-	3,206	2,301	-	2,301
Management fee	(591)	-	(591)	(987)	-	(987)
Recoverable VAT	1,103	-	1,103	-	-	-
Other expenses	(328)	(20)	(348)	(347)	(21)	(368)
Return before finance costs and taxation	3,423	(66,391)	(62,968)	1,003	(46,435)	(45,432)
Finance costs	(63)	-	(63)	(460)	-	(460)
Return on ordinary activities before taxation	3,360	(66,391)	(63,031)	543	(46,435)	(45,892)
Taxation on ordinary activities	(943)	-	(943)	(64)	-	(64)
Return attributable to equity shareholders	2,417	(66,391)	(63,974)	479	(46,435)	(45,956)

Return per share - pence	5.02	(137.89)	(132.87)	0.93	(90.58)	(89.65)

Year ended 30 September 2008
	Revenue	Capital	Total
	£'000s	£'000s	£'000s

Losses on investments	-	(153,461)	(153,461)
Foreign exchange gains/(losses)	11	(941)	(930)
Income	11,607	-	11,607
Management fee	(1,863)	-	(1,863)
Recoverable VAT	2,000	-	2,000
Other expenses	(662)	(24)	(686)
Return before finance costs and taxation	11,093	(154,426)	(143,333)
Finance costs	(895)	-	(895)
Return on ordinary activities before taxation	10,198	(154,426)	(144,228)
Taxation on ordinary activities	(2,934)	-	(2,934)
Return attributable to equity shareholders	7,264	(154,426)	(147,162)

Return per share - pence	14.30	(303.93)	(289.63)

The total column of this statement is the profit and loss account of the Company. The revenue return and capital return columns

are supplementary to this and are prepared under guidance published by the Association of Investment Companies.

All revenue and capital items in the above statement derive from continuing operations.

A statement of total recognised gains and losses is not required as all gains and losses of the Company have been reflected in

the above statement.

Unaudited Reconciliation of Movements in Shareholders' Funds

Half-year ended 31 March 2009	Called-up	Share	Capital			Total
	share	premium	redemption	Capital	Revenue	shareholders'
	capital	account	reserve	reserves	reserve	funds
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s

Balance at 30 September 2008	12,195	123,749	6,616	138,618	11,200	292,378
Movements during the half-year ended 31 March 2009
Dividends paid	-	-	-	-	(7,219)	(7,219)
Shares purchased and cancelled	(319)	-	319	(5,291)	-	(5,291)
Return attributable to equity shareholders	-	-	-	(66,391)	2,417	(63,974)
Balance at 31 March 2009	11,876	123,749	6,935	66,936	6,398	215,894

Half-year ended 31 March 2008	Called-up	Share	Capital			Total
	share	premium	redemption	Capital	Revenue	shareholders'
	capital	account	reserve	reserves	reserve	funds
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s

Balance at 30 September 2007	12,942	123,749	5,869	313,755	8,205	464,520
Movements during the half-year ended 31 March 2008
Dividends paid	-	-	-	-	(4,269)	(4,269)
Shares purchased and cancelled	(229)	-	229	(7,154)	-	(7,154)
Return attributable to equity shareholders	-	-	-	(46,435)	479	(45,956)
Balance at 31 March 2008	12,713	123,749	6,098	260,166	4,415	407,141

Year ended 30 September 2008	Called-up	Share	Capital			Total
	share	premium	redemption	Capital	Revenue	shareholders'
	capital	account	reserve	reserves	reserve	funds
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s

Balance at 30 September 2007	12,942	123,749	5,869	313,755	8,205	464,520
Movements during the year ended 30 September 2008
Dividends paid	-	-	-	-	(4,269)	(4,269)
Shares purchased and cancelled	(747)	-	747	(20,711)	-	(20,711)
Return attributable to equity shareholders	-	-	-	(154,426)	7,264	(147,162)
Balance at 30 September 2008	12,195	123,749	6,616	138,618	11,200	292,378

Unaudited Balance Sheet

	31 March 2009	31 March 2008	30 September 2008
	£'000s	£'000s	£'000s
Fixed assets
Listed investments	214,233	410,828	286,025
Current assets
Debtors	4,975	4,863	19,817
Taxation recoverable	354	245	292
Cash at bank	200	-	877
	5,529	5,108	20,986

Creditors: amounts falling due within one year
Foreign currency loans	-	-	(11,820)
Other	(3,868)	(8,795)	(2,813)
	(3,868)	(8,795)	(14,633)
Net current assets/(liabilities)	1,661	(3,687)	6,353
Net assets	215,894	407,141	292,378
Capital and reserves
Called-up share capital	11,876	12,713	12,195
Share premium account	123,749	123,749	123,749
Capital redemption reserve	6,935	6,098	6,616
Capital reserves	66,936	260,166	138,618
Revenue reserve	6,398	4,415	11,200
Total shareholders' funds - equity	215,894	407,141	292,378

Net asset value per share - pence	454.46	800.62	599.36

Unaudited Summary Cash Flow Statement

	Half-year ended 31 March 2009	Half-year ended 31 March 2008	Year ended 30 September 2008
	£'000s	£'000s	£'000s
Net cash inflow from operating activities	5,136	1,131	9,690
Interest paid	(82)	(513)	(941)
Total tax paid	(1,628)	(291)	(2,015)
Net cash inflow from purchases and sales of investments	19,055	43,783	48,307
Equity dividends paid	(7,219)	(4,269)	(4,269)
Net cash inflow before use of liquid resources and financing	15,262	39,841	50,772
Net cash outflow from financing	(17,206)	(39,749)	(41,070)
(Decrease)/increase in cash	(1,944)	92	9,702

Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash	(1,944)	92	9,702
Decrease in short-term loans	11,912	32,595	20,362
Movement in net debt resulting from cash flows	9,968	32,687	30,064
Foreign exchange movement	1,175	(419)	(799)
Movement in net debt	11,143	32,268	29,265
Net debt brought forward	(10,943)	(40,208)	(40,208)
Net cash/(debt) carried forward	200	(7,940)	(10,943)

Represented by:
Cash at bank	200	-	877
Bank overdraft	-	(7,940)	-
	200	(7,940)	877
Short-term loans	-	-	(11,820)
	200	(7,940)	(10,943)

Unaudited Notes

1 Accounting policies

These financial statements have been prepared on the basis of the accounting policies set out in the Company's financial statements at 30 September 2008. These accounting policies are expected to be followed throughout the year ending 30 September 2009.

2 Income

	Half-year ended 31 March 2009		Half-year ended 31 March 2008	Year ended 30 September 2008
		£'000s	£'000s	£'000
Income from investments
Overseas dividends		2,029	2,103	11,216
UK dividends		-	-	71
		2,029	2,103	11,287
Other income
Interest on recoverable VAT (see note 3)		1,063	-	-
Bank interest		114	152	274
Stock lending fees		-	46	46
		1,177	198	320
Total income		3,206	2,301	11,607

3 Recoverable VAT

	Half-year ended 31 March 2009	Half-year ended 31 March 2008	Year ended 30 September 2008
	£'000s	£'000s	£'000

VAT recovered in respect of management fees	1,103	-	2,000

Management fees are no longer subject to VAT. The Company has now recovered £3,103,000 from HMRC, via its Manager, in relation to VAT paid on such fees in the periods 1990 to 1996 and 2001 to 2007. Of this amount, £2,000,000 was recognised in the Income Statement for the year ended 30 September 2008 and £1,103,000 has been recognised in the current period to 31 March 2009. Amounts relating to the period 1997 to 2000 have not been accrued or recognised as a contingent asset as their recovery remains uncertain under law. In addition, interest of £1,063,000 relating to the VAT recovered has been received and is recognised in the Income Statement in the current period (see note 2).

4 Return per share

	Half-year ended	Half-year ended	Year ended
	31 March 2009	31 March 2008	30 September 2008
Revenue return per share - pence	5.02	0.93	14.30
Net revenue return attributable to equity shareholders - £'000s	2,417	479	7,264
Capital return per share - pence	(137.89)	(90.58)	(303.93)
Net capital return attributable to equity shareholders - £'000s	(66,391)	(46,435)	(154,426)
Weighted average number of shares in issue during the period	48,147,218	51,262,887	50,810,529

5 Dividends

Dividends on ordinary shares

Payment date

Half-year ended

31 March 2009

£'000s

Half-year ended

31 March 2008

£'000s

Year ended

30 September 2008

£'000

Final for the year ended

30 September 2008 of 12.0p

14 November

2008

22 December 2008

5,814

Special for the year ended

30 September 2008 of 2.9p

14 November 2008

22 December 2008

1,405

Final for the year ended

30 September 2007 of 1.7p

16 November 2007

20 December 2007

874

Special for the year ended

30 September 2007 of 6.6p

16 November 2007

20 December 2007

3,395

7,219

4,269

The Directors have not declared an interim dividend.

6 Creditors: amounts falling due within one year

Foreign currency loans	31 March 2009 £'000s	31 March 2008 £'000s	30 September 2008 £'000s

	-	-	11,820

Comprise	€'000s	€'000s	€'000s
Euro denominated	-	-	15,000

7 Called-up share capital


Equity share capital	Authorised Number £'000s		Issued and fully paid Number £'000s
Ordinary shares of 25p each
Balance at 30 September 2008	100,000,000	25,000	48,781,641	12,195
Transfer to capital redemption reserve	-	-	(1,275,588)	(319)
Balance at 31 March 2009	100,000,000	25,000	47,506,053	11,876

During the half-year ended 31 March 2009 1,275,588 ordinary shares were purchased and cancelled at a cost of £5,291,000. Since the period end a further 134,180 ordinary shares have been purchased and cancelled at a cost of £574,000.

8 Net asset value per share

	31 March 2009	31 March 2008	30 September 2008
Net asset value per share - pence	454.46	800.62	599.36
Net assets attributable at the period end - £'000s	215,894	407,141	292,378
Number of shares in issue at the period end	47,506,053	50,853,206	48,781,641

9 Reconciliation of return before finance costs and taxation to net cash inflow from operating activities


	Half-year ended 31 March 2009	Half-year ended 31 March 2008	Year Ended 30 September 2008
	£'000s	£'000s	£'000s
Return before finance costs and taxation	(62,968)	(45,432)	(143,333)
Adjust for returns from non-operating activities
- Losses on investments	67,533	46,021	153,461
- Foreign exchange (gains)/losses of a capital nature	(1,162)	393	941
- Non-operating expenses of a capital nature	20	21	24
Return from operating activities	3,423	1,003	11,093
Adjust for non-cash flow items
- Foreign exchange gains of a revenue nature	(33)	(36)	(11)
- Decrease/(increase) in recoverable VAT debtor	2,000	-	(2,000)
- (Increase)/decrease in prepayments and accrued income	(105)	408	951
- Decrease in other creditors	(149)	(244)	(343)
Net cash inflow from operating activities	5,136	1,131	9,690

10 Results

The results for the half-year ended 31 March 2009 and for the half-year ended 31 March 2008, which are unaudited, 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 30 September 2008; the report of the independent auditors thereon was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The abridged financial statements shown above for the year ended 30 September 2008 are an extract from those accounts.

11 Report and accounts

The report and accounts for the half-year ended 31 March 2009 will be posted to shareholders and made available on the internet at www.foreignandcolonialeurotrust.com in late May 2009. Copies may be obtained from the Company's registered office, Exchange House, Primrose Street, London EC2A 2NY.

By order of the Board

F&C Management Limited, Secretary

Exchange House, Primrose Street, London EC2A 2NY

12 May 2009

Director' Statement of Principal Risks and Uncertainties

The Company's assets consist of quoted equity securities and its principal risks are therefore market related. Other key risks faced by the Company relate to investment strategy, currency, gearing, investment management resources, regulatory issues, counterparties and financial controls. These risks, and the way in which they are managed, are described in more detail under the heading 'Principal risks' within the Directors' Report and Business Review in the Company's annual report for the year ended 30 September 2008. The Company's principal risks and uncertainties have not changed materially since the date of that report.

Directors' Statement of Responsibilities in Respect of the Financial Statements

In accordance with Chapter 4 of the Disclosure 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 and gives a true and fair view of the assets, liabilities, financial position and return of the Company;

the half-yearly 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 Directors' Statement of Principal Risks and Uncertainties shown above is a fair review of the principal risks and uncertainties for the remainder of the financial year; and