Interim Results
To: RNS
Date: 10 October 2008
From: F&C Managed Portfolio Trust plc
Unaudited Statement of Interim Results for the six months from 20 February 2008 (date of incorporation) to 20 August 2008
HIGHLIGHTS
-
Company successfully launched on 16 April 2008 with gross assets of £42.8 million, following a 95% rollover of assets from F&C's investment trust managed portfolio service.
-
Rebalancing of investment portfolios now largely complete which has broadened and diversified investment exposure.
-
Net asset value per Income share down 9.3% since launch compared to a fall in the benchmark, the FTSE All-Share Total Return Index, of 9.8%.
-
Net asset value per Growth share down 11.0% since launch compared to a fall in the benchmark, the FTSE All-Share Total Return Index, of 9.8%.
-
First interim dividend of 1.5p per Income share was paid on 9 October 2008.
-
On target to pay dividends totalling 4.9p per Income share in respect of the period from launch to 31 May 2009 as set out in the launch Prospectus.
Richard Martin, the Chairman said:
'This is my first report to shareholders since the launch of the Company, following the rollover of assets held in F&C's investment trust managed portfolio service ('MPS'). I would like to thank investors for their support which resulted in the successful rollover and launch of the Company. Approximately 95% of investors' assets in MPS were exchanged for shares in the new Company, providing the Company with gross assets of £42.8 million at launch. The Company's shares are now listed and traded on the main market of the London Stock Exchange.
The Company enables shareholders to invest in a tax-efficient way in diversified managed
portfolios of listed investment companies, with a choice of either income or capital growth. The investment objective and capital structure are set out clearly in the Company Summary at the start of the Interim Report so I will forbear from repeating it.
Investment portfolios
Following the launch of the Company in April, the Income and Growth portfolios each started
with a concentrated list of approximately twelve holdings in investment companies which had
been transferred from MPS. The initial task of our Manager, Peter Hewitt, was then to reduce the size of, or sell, certain of these holdings and redeploy the proceeds in order to broaden and diversify the underlying exposure of each portfolio.
This rebalancing is largely complete and each portfolio adheres to the investment policy restrictions as set out in the launch Prospectus. Ultimately the aim is to have approximately 25 to 30 holdings in each portfolio, with no restriction on underlying geographic regions or sectors. However, in current uncertain markets the Manager has sensibly retained cash balances of around 15%.
A key feature of the Company is its flexible investment strategy within a framework which
emphasises a long term approach. The main driver to performance over the long term is asset appreciation and, whilst mindful of discounts, the Manager believes discounts are less important when returns are viewed over the long run. The prime thrust of the investment research effort is therefore to identify fund managers who can achieve consistent outperformance over time in their various fields. We intend to take advantage of the wide opportunities that now exist within the investment company universe. For example, the Income Portfolio has holdings which have attractive dividend yields, yet are exposed to European small company, Pacific basin and mining and natural resources sectors, none of which are usually included within income portfolios. Similarly, the Growth Portfolio will, where appropriate, invest in new and existing sectors that possess strong growth prospects over the long term, such as private equity, environmental and alternative energy and emerging markets.
The transition to a better spread of risk with more holdings across additional sectors has been achieved. However, with around 25 to 30 holdings each, the portfolios possess a focus which, looking ahead, should serve them well in terms of returns. In the Annual Report to be published next July there will be a separate Manager's Report in which Peter Hewitt will report more fully on his strategy and portfolios. As most of our shareholders are individuals we aim to make our reports as clear and jargon-free as possible, to the extent permitted by the ever- rising structure of corporate governance.
Investment performance
From launch on 16 April 2008 to 20 August 2008, the UK stock market, as measured by the
FTSE All-Share Total Return Index, fell by 9.8% as the global credit crisis continued to affect both financial markets and the underlying economies. Over the same period, the net asset value per share (NAV) of the Income Portfolio fell by 9.3% to 88.87p and the Growth Portfolio fell by 11.0% to 87.20p. We believe this is a reasonable start bearing in mind the transaction costs of restructuring the portfolios and market turbulence during the period.
Revenue and dividends
The Company's net revenue earnings for the period from launch on 16 April 2008 to
20 August 2008 totalled £433,000. This is equivalent to 2.0p per Income share of which
1.3p arose from the Income Portfolio and 0.7p arose from the Growth Portfolio. As provided
under the Company's innovative capital structure, any net revenue arising on the Growth Portfolio is transferred to the Income Portfolio in exchange for a capital contribution of an identical amount, from the Income Portfolio.
Income shares are entitled to all the dividends paid by the Company; dividends are to be paid quarterly in July, October, January and April each year. The Directors have declared, in line with expectations, a first interim dividend in respect of the period from launch to 31 August 2008 of 1.5p per Income share. This dividend was paid to Income shareholders on 9 October 2008.
The launch Prospectus stated that, in the absence of unforeseen circumstances, the Company expects to pay four quarterly interim dividends in respect of the period from launch to 31 May 2009 totalling 4.9p per Income share. This would represent an annualised dividend yield of 5.1% based on the Income share price of 85.5p at 20 August 2008 and compares favourably with the yield on the FTSE All-Share Index of 4.2% at that date.
As a reminder the Growth shares are not entitled to dividends but instead benefit from a capital transfer from the Income Portfolio equivalent to any net income arising in the Growth Portfolio. This being a cost effective way to reinvest income in the Growth Portfolio.
Discount to NAV and share buy-backs
The share prices of the Company's Income and Growth shares will not always reflect their
underlying NAV. The Company has a stated policy for buying back its own shares when it is in the interests of shareholders to do so. At 20 August 2008, the Income shares were at a discount of 3.8% to NAV and the Growth shares at a discount of 4.2%. These discounts compare favourably with the average discount of 7.1% for the AIC Global Growth & Income sector and 8.3% for the AIC Global Growth sector at the end of August.
During the period to 20 August 2008, the Company bought back 975,000 Income shares and 1,350,000 Growth shares to be held in treasury. Subsequent to the period end, a further 290,000 Income shares and 135,000 Growth shares have been bought back for treasury. These buy-backs were at an average discount of 5% (Income shares) and 4% (Growth shares), thereby adding value for the remaining shareholders.
F&C have recently included the Company's shares in a number of investment savings plans which they operate and it is anticipated that this will be one of a number of means by which new investors are introduced to the Company.
Outlook
At the time of writing, uncertainty and volatility have reached unprecedented levels in financial markets causing substantial declines in equity and debt markets across the globe. The UK and US authorities are taking urgent action to restore the financial sector and in particular the banks to a stronger and more stable condition, which is vital for the world economy. The extent of their success will only become apparent over time. Either way, markets are likely to remain volatile and nervous for some time yet.
On a longer term view there is little doubt that equity valuations are depressed, indicating that there is scope for a significant recovery and positive returns at some stage. Over the last 140 years the investment trust movement has weathered wars, depressions and many financial crises. We believe it will continue to protect and grow the assets of its investors'.
Richard Martin
Chairman
Unaudited Income Statement
Six month period from 20 February 2008 (date of incorporation) to 20 August 2008
|
|
|
Income Shares |
||
|
|
|
Revenue |
Capital |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
Losses on investments |
|
- |
(2,426) |
(2,426) |
|
Income |
|
362 |
- |
362 |
|
Investment management fee |
|
(16) |
(24) |
(40) |
|
Other expenses |
|
(48) |
- |
(48) |
|
Return on ordinary activities before tax |
|
298 |
(2,450) |
(2,152) |
|
Tax on ordinary activities |
|
(12) |
5 |
(7) |
|
Return attributable to income shareholders |
|
286 |
(2,445) |
(2,159) |
|
|
|
|
|
|
|
Return per income share (pence) |
|
1.32p |
(11.28)p |
(9.96)p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Growth Shares |
||
|
|
|
Revenue |
Capital |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
Losses on investments |
|
- |
(2,531) |
(2,531) |
|
Income |
|
205 |
- |
205 |
|
Investment management fee |
|
(8) |
(30) |
(38) |
|
Other expenses |
|
(46) |
- |
(46) |
|
Return on ordinary activities before tax |
|
151 |
(2,561) |
(2,410) |
|
Tax on ordinary activities |
|
(4) |
6 |
2 |
|
Return attributable to growth shareholders * |
|
147 |
(2,555) |
(2,408) |
|
|
|
|
|
|
|
Return per growth share (pence) * |
|
0.71p |
(12.36)p |
(11.65)p |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total - The Company |
||
|
|
|
Revenue |
Capital |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
Losses on investments |
|
- |
(4,957) |
(4,957) |
|
Income |
|
567 |
- |
567 |
|
Investment management fee |
|
(24) |
(54) |
(78) |
|
Other expenses |
|
(94) |
- |
(94) |
|
Return on ordinary activities before tax |
|
449 |
(5,011) |
(4,562) |
|
Tax on ordinary activities |
|
(16) |
11 |
(5) |
|
Return attributable to shareholders |
|
433 |
(5,000) |
(4,567) |
|
|
|
|
|
|
The total column of this statement is the Profit and Loss Account of the Company.
The supplementary revenue and capital columns are prepared under guidance published by The Association of Investment Companies.
The Company was incorporated on 20 February 2008 and commenced operations on 16 April 2008.
* Any net revenue return attributable to the Growth Portfolio is transferred to the Income Portfolio and a corresponding transfer of an identical amount of capital is made from the Income Portfolio to the Growth Portfolio. Refer to the Reconciliation of Movements in Shareholders' Funds.
Unaudited Balance Sheet as at 20 August 2008
|
|
|
Income Shares |
Growth Shares |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
Non-current assets |
|
|
|
|
|
Investments at fair value |
|
15,585 |
14,759 |
30,344 |
|
Current assets |
|
|
|
|
|
Debtors |
|
152 |
35 |
187 |
|
Cash at bank and on deposit |
|
3,357 |
2,756 |
6,113 |
|
|
|
3,509 |
2,791 |
6,300 |
|
|
|
|
|
|
|
Creditors |
|
|
|
|
|
Amount falling due within one year |
|
(491) |
(472) |
(963) |
|
Net current assets |
|
3,018 |
2,319 |
5,337 |
|
Net assets |
|
18,603 |
17,078 |
35,681 |
|
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
|
Called-up share capital |
|
2,191 |
2,094 |
4,285 |
|
Special reserve |
|
18,571 |
17,392 |
35,963 |
|
Capital reserve |
|
(2,592) |
(2,408) |
(5,000) |
|
Revenue reserve |
|
433 |
- |
433 |
|
Shareholders' Funds |
|
18,603 |
17,078 |
35,681 |
|
|
|
|
|
|
|
Net asset value per share (pence) |
|
88.87p |
87.20p |
- |
Unaudited Reconciliation of Movements in Shareholders' Funds
Six month period from 20 February 2008 (date of incorporation) to 20 August 2008
|
|
|
Income Shares |
Growth Shares |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
Opening shareholders' funds at 20 February 2008 |
|
- |
- |
- |
|
Increase in share capital in issue |
|
21,907 |
20,936 |
42,843 |
|
Launch costs |
|
(328) |
(314) |
(642) |
|
Share buy-backs |
|
(817) |
(1,136) |
(1,953) |
|
Transfer of net income from Growth shares to Income shares |
|
147 |
(147) |
- |
|
Transfer of capital from Income shares to Growth shares |
|
(147) |
147 |
- |
|
Return attributable to shareholders |
|
(2,159) |
(2,408) |
(4,567) |
|
Closing shareholders' funds at 20 August 2008 |
|
18,603 |
17,078 |
35,681 |
Summarised Unaudited Cash Flow Statement
Six month period from 20 February 2008 (date of incorporation) to 20 August 2008
|
|
|
Income Shares |
Growth Shares |
Total |
|
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
Net cash inflow from operating activities |
|
233 |
134 |
367 |
|
Capital expenditure and financial investment |
|
3,395 |
3,476 |
6,871 |
|
Net cash inflow before financing |
|
3,628 |
3,610 |
7,238 |
|
|
|
|
|
|
|
Net cash outflow from financing |
|
(947) |
(995) |
(1,942) |
|
Increase in cash |
|
2,681 |
2,615 |
5,296 |
|
Reconciliation of net cash flow to movement in net debt |
|
|
|
|
|
Increase in cash as above |
|
2,681 |
2,615 |
5,296 |
|
Cash inflow from transfer of cash at launch |
|
676 |
141 |
817 |
|
Opening net cash |
|
- |
- |
- |
|
Closing net cash |
|
3,357 |
2,756 |
6,113 |
|
Reconciliation of net return before taxation to net cash inflow from operating facilities |
|
|
|
|
|
Net return before finance costs and taxation |
|
(2,152) |
(2,410) |
(4,562) |
|
Losses on investments |
|
2,426 |
2,531 |
4,957 |
|
Changes in working capital and other non-cash items |
|
(41) |
13 |
(28) |
|
Net cash inflow from operating activities |
|
233 |
134 |
367 |
On 16 April 2008, investments with a market value of £21,201,000 (Income) and £20,764,000 (Growth) together with cash of £676,000 (Income) and £141,000 (Growth) (all of which were held in F&C's investment trust managed portfolio service) were received by the Company in exchange for the issue of Income and Growth Shares.
Related Parties
Management Fee
The Company's investment manager is F&C Investment Business Limited. F&C Investment Business Limited receives an investment management fee comprising a base fee and, if certain conditions are met, a performance fee. The base fee is a management fee at the rate of 0.65 per cent per annum of the total assets of each Portfolio payable quarterly in arrears, subject to being reduced to 0.325 per cent per annum on any assets which are invested in other investment vehicles managed by the Manager. During the period, the Company has incurred management fees of £78,000, of which £47,000 is payable to F&C Investment Business Limited at the period end. At the period end, there was no performance fee payable.
Secretarial and Administration Fee
The Manager, F&C Investment Business Limited receives a secretarial and administrative fee of £65,000 per annum, subject to annual increases in line with the Consumer Price Index. During the period the Company has incurred secretarial and administrative fees of £24,000, of which £14,000 is payable to F&C Investment Business Limited at the period end.
Costs Agreement
Under a costs agreement, the Manager agreed to fix the costs of the Company's launch at 1.5 per cent of the gross proceeds from the issue of shares under the Placing and Offer for subscription. Total launch costs of £642,000 were incurred by the Company as shown in the Reconciliation of Movements in Shareholders' Funds.
Principal Risks and Uncertainties
The Company's assets consist principally of listed securities and its main risks are therefore market related. The Company is also exposed to currency risk in respect of overseas markets in which it invests. Other risks faced by the Company include the following:
-
External - events such as terrorism, protectionism, inflation or deflation, economic recessions and movements in interest rates could affect share prices in particular markets.
-
Investment and strategic - incorrect strategy, country and sector allocation, stock selection, and the use of gearing could all lead to poor returns for shareholders.
-
Credit risk - is the risk that a counterparty will fail to discharge an obligation or commitment that it has entered into with the Company. All the assets of the Company which are traded on a recognised exchange are held by JPMorgan Chase Bank, the Company's custodian. Bankruptcy or insolvency of the custodian may cause the Company's rights with the respect to securities held by the custodian to be delayed or limited.
-
Regulatory - breach of regulatory rules could lead to suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report. Breach of Section 842 of the Income and Corporation Taxes Act 1988 could lead to the Company being subject to tax on capital gains.
-
Operational - failure of the Manager's accounting systems or disruption to the Manager's business, or that of the third party service providers, could lead to an inability to provide accurate reporting and monitoring, leading to a loss of shareholders' confidence.
-
Financial - inadequate controls by the Manager or third party service providers could lead to misappropriation of assets. Inappropriate accounting policies or failure to comply with accounting standards could lead to misreporting or breaches of regulations.
-
Competitive - retention of key personnel is vital to the success of the Company.
The Board seeks to mitigate and manage these risks through continual review, policy setting and enforcement of contractual obligations. It also regularly monitors the investment environment and the management of the Company's investment portfolio, and applies the principles detailed in the internal control guidance issued by the Financial Reporting Council.
The Company's launch Prospectus contained a section on Risk Factors. The Company's principal risks and uncertainties have not changed materially since the date of that prospectus and are not expected to change materially for the remainder of the Company's first financial period. Further information on these risks, together with the Company's approach to controlling them, will be included in the Company's report and accounts to 31 May 2009.
Responsibility Statement of the Directors in Respect of the Interim Report
We confirm that to the best of our knowledge:
-
The condensed set of financial statements have been prepared in accordance with the Statement 'Half-Yearly Financial Reports' issued by the UK Accounting Standards Board and give a true and fair view of the assets, liabilities, financial position and return of the Company;
-
The Chairman's Statement includes a fair review of the information required by the Disclosure and Transparency Rules ('DTR') 4.2.7R(1), being an indication of important events that have occurred during the first six months of the financial period and their impact on the financial statements;
-
The Statement of Principal Risks and Uncertainties shown above is a fair review of the information required by DTR 4.2.7R(2); and
-
The condensed set of financial statements include a fair review of the information required by DTR 4.2.8R, being related party transactions that have taken place in the first six months of the current financial period and that have materially affected the financial position or performance of the Company during the period.
On behalf of the Board
RM Martin
Director
10 October 2008
NOTES
1. Accounting Policies
BASIS OF PREPARATION
INVESTMENTS
The Company's investments have been categorised as 'financial assets at fair value through profit or loss' and are recognised on a trade date basis. At the time of acquisition the investments are initially recorded at cost.
Listed investments are valued at their fair value which is represented by their bid price.
As investments have been categorised as 'financial assets at fair value through profit or loss', gains and losses arising from changes in fair value are included in the Income Statement as a capital item.
All expenses are accounted for on an accruals basis. Expenses are charged through the revenue column of the Income Statement except where incurred in connection with the maintenance or enhancement of the value of the Company's investment portfolio and taking account of the expected long term returns as follows:
-
Management fees have been allocated 40 per cent to revenue and 60 per cent to capital in the Income Portfolio and 20 per cent to revenue and 80 per cent to capital in the Growth Portfolio;
-
Performance fees will be charged wholly to capital.
Expenses charged to the Company common to both pools are allocated to the pools in the same proportion as their net assets at the quarter end immediately preceding the date on which the cost is to be accounted for.
Expenses charged to the Company in relation to a specific pool are charged directly to that pool, with the other pool remaining unaffected.
FOREIGN CURRENCY
Transactions denominated in foreign currencies are recorded in the local currency at actual exchange rates as at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the period end are reported at the rates of exchange prevailing at the period end. Any gain or loss arising from a change in exchange rates subsequent to the date of the transaction is included as an exchange gain or loss in either the capital or revenue column of the income statement depending on whether the gain or loss is of a capital or revenue nature respectively.
TAXATION
Tax is computed for each portfolio separately. A pool which generates taxable revenues in excess of tax deductible expenses may benefit from the excess of tax deductible expenses in the other portfolio. In return, by way of compensation, there would be a transfer from the portfolio with taxable profits to the portfolio with taxable losses.
Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date. Deferred tax liabilities are recognised for all taxable timing differences but deferred tax assets are only recognised if it is considered more likely than not that there will be suitable profits from which future reversal of the underlying timing differences can be deducted.
Timing differences are differences arising between the Company's taxable profits and its results as stated in the financial statements which are capable of reversal in one or more subsequent periods.
TRANSFER OF CAPITAL AND REVENUE
All net revenue of the Company attributable to the Growth Portfolio is, immediately following recognition in accordance with the Company's accounting policies, reallocated, applied and transferred to, and treated as revenue attributable to, the Income Portfolio. Contemporaneously with any such reallocation, application and transfer of any revenue to the Income Portfolio, such assets comprising part of the Income Portfolio as have a value equal to the net revenue so reallocated, applied and transferred shall be reallocated, applied, transferred and treated as capital attributable to the Growth Portfolio.
ISSUE COSTS
Issue costs were deducted from the share premium account, prior to its cancellation and the creation of a special reserve.
2. Income for the period to 20 August 2008 is derived from:
|
|
Income |
Growth |
|
|
|
Shares |
Shares |
Total |
|
|
£'000 |
£'000 |
£'000 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity investments |
311 |
155 |
466 |
|
Deposit interest |
51 |
50 |
101 |
|
|
_____ |
_____ |
_____ |
|
|
362 |
205 |
567 |
|
|
_____ |
_____ |
_____ |
|
|
|
|
|
3. The returns per Income share are based on 21,671,129 Income shares, being the weighted average number of Income shares in issue during the period. The returns per Growth share are based on 20,670,803 Growth shares, being the weighted average number of Growth shares in issue in the period.
4. Earnings for the period to 20 August 2008 should not be taken as a guide to the results of the full period to 31 May 2009.
5. A first interim dividend in respect of the period from Admission on 16 April 2008 to 31 August 2008 of 1.5p per Income share was paid on 9 October 2008 to shareholders on the register on 26 September 2008.
6. At incorporation, four subscriber shares (2 Income shares and 2 Growth shares) were subscribed for, fully paid, at a subscription price of £1 each (nominal value 10p each). On 15 April 2008, the Company issued 21,907,190 Income shares and 20,935,565 Growth shares each at an Issue price of £1 each. The value of the assets acquired in relation to the allotment of these Income shares were investments with a market value of £21,201,034 and cash of £706,158. The value of the assets acquired in relation to the allotment of these Growth shares were investments with a market value of £20,764,440 and cash of £171,127.
During the period to 20 August 2008 the Company bought back 975,000 Income shares at a
cost of £817,000 and 1,350,000 Growth shares at a cost of £1,136,000 to be held in treasury. At 20 August 2008 the Company held 975,000 Income Shares and 1,350,000 Growth Shares in treasury.
7. The net asset value per share is based on 20,932,192 Income shares and 19,585,567 Growth shares being the number of shares in issue at the period end.
8. On 23 June 2008, the Court of Session confirmed the cancellation of the entire amount standing to the credit of the share premium account and the creation of a special reserve. The special reserve is available to be used for the buy back of both Income shares and Growth shares.
9. The effective revenue tax rate for the period to 20 August 2008 is 3.6 per cent which is lower than the rate of corporation tax for small companies due to the level of non-taxable UK dividend income.
10. The Company's auditors, Ernst & Young LLP have not audited or reviewed the Interim Report to 20 August 2008 pursuant to the Auditing Practices Board guidance on 'Review of Interim Financial Information'.
11. These are not full statutory accounts in terms of Section 240 of the Companies Act 1985. The first full audited accounts for the period ending 31 May 2009, will be lodged with the Registrar of Companies following the Annual General Meeting in 2009.
12. The Interim Report will be posted to shareholders and made available on the internet at www.fcmanagedportfolio.co.uk in mid October 2008. Copies may be obtained during normal business hours from the Company's Registered Office, 80 George Street, Edinburgh, EH2 3BU.
For further information, please contact:
Peter Hewitt, F&C Investment Business Limited 0131 718 1244
Ian Ridge, F&C Investment Business Limited 0131 718 1010
This information is provided by RNS
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