Final Results
F&C Capital & Income Inv Tst PLC
29 November 2006
Date: 28 November 2006
Contact: Julian Cane
F&C Management Limited
020 7628 8000
F&C Capital and Income Investment Trust plc
Unaudited Preliminary Statement of Results
for the year ended 30 September 2006
HIGHLIGHTS
• Net asset value per share rose by 13.0% while the FTSE All-Share index
increased by 11.1%;
• Revenue return per share increased by 10.5%;
• Directors recommend a final dividend of 2.1p per share, giving a total
of 6.5p, an increase of 12.1%;
• This is the first full year of quarterly dividend payments;
• Active share buy-back programme continues so that shares should not
stand at any material discount to NAV.
SUMMARY OF RESULTS
30 September 2006 30 September 2005 % Change
Net assets £200.76m *£179.35m +11.9
Net asset value per share 249.03p *220.39p +13.0
Net revenue after tax + £5.88m £4.05m +45.2
Earnings per share + 7.25p 6.56p +10.5
Dividends per share 6.50p 5.80p +12.1
Share Price 233.50p 211.25p +10.5
* Restated to reflect changes in accounting policies (see note 1).
+ The results for the year ended 30 September 2006 are not directly comparable
with the corresponding prior period as a consequence of the merger of the
Company with F&C Income Growth Investment Trust PLC on 5 May 2005.
Extracts from the Chairman's Statement
Dear Shareholder
The year to 30 September 2006 again saw a period of good performance from the UK
stock market, and the performance of your Company reflected this. Over the last
twelve months the FTSE All-Share index rose by 11.1%, while the net asset value
(NAV) per share and share price of your Company rose by 13.0% and 10.5%
respectively.
The Directors are recommending a final dividend of 2.1 p per share to give a
total for the year of 6.5p per share, an increase of 12.1% on the previous year.
Capital Performance
Your Company's asset performance last year was encouraging with a return of
13.0%, ahead of its main benchmark, the FTSE All-Share Index. The market
continued to rebound from the bear market of 2000 to 2003, and your Company,
while being more resilient throughout that downturn, has also recovered more
rapidly than the index in recent years. Over the medium and long term, results
are well ahead of the FTSE All-Share benchmark index.
The UK stock market has been driven upwards by a combination of strong earnings
and dividend growth while interest rates and bond yields have remained at low
levels. These conditions have led to improved sentiment towards equities and to
continued merger and acquisition activity as companies and private equity
investors have taken advantage of cheap finance.
The Manager's Review, which follows, examines more thoroughly the performance of
the UK and European stock markets and your Company's holdings. There is further
commentary by industry classifications in the review of the Investment Portfolio
by Sector.
Revenue and Dividend
The merger with F&C Income Growth Investment Trust (FIGIT) in May 2005, was very
positive for your Company, but it complicates comparisons between the year under
review and previous years. This year's figures show the effects of the merger
for a full twelve months, but those for last year reflect them for less than
five months. This accounts for much of the increase in revenues and costs
between the two periods. The best indicator is the revenue return per ordinary
share as this shows the dividend paying capacity of the Company. This increased
by 10.5% to 7.25p per share (following an increase of more than 20% in the
previous year) and largely reflects the strong corporate dividend growth over
the past year.
Against this background the Directors are recommending to shareholders a final
dividend of 2.1p per share. This, together with the three quarterly dividends
already paid of 4.4p per share in total, gives a dividend for the year as a
whole of 6.5p per share. The rate of growth in the total dividend of more than
12% is well ahead of the rate of underlying inflation (RPI-X) of 3.2% and of the
headline rate of 3.6% (RPI) for the year to 30 September 2006.
Share Price Performance and Discount
The rise in NAV per share was greater than that of the FTSE All-Share index, but
the rise in the share price was a little less. The shares ended the year trading
at a discount 2% wider than at the start of the year.
Whilst the change in NAV measures exactly the performance of the investment
portfolio after all costs, the share price reflects supply and demand for the
Company's shares and therefore often does not track the NAV movement precisely.
To help strengthen the relationship between the two, the Directors remain
committed to ensuring that the Company's shares should not stand at a material
discount to NAV. This commitment has been shown by an active share buy-back
programme resulting in the purchase of 760,011 shares during the year at an
average price of 215.3p per share.
Gearing
Throughout the year, your Company had modest borrowings which were never greater
than £14m. As the total return on the additional assets of the portfolio
exceeded the interest cost incurred, the use of gearing was advantageous for
shareholders.
Shareholders
Your Board recognises the attractions of a broadly spread shareholder base and
this has widened considerably over the last 18 months. Before the merger with
FIGIT more than two-thirds of the 8,000 investors in your Company held their
shares within Personal Equity Plans. Although most are long-term investors, the
dependence on one particular tax wrapper which is closed to new investment meant
that the shareholder base was unbalanced. Since the merger the number of
investors has increased from nearly 16,000 to 20,000, with more than 4,000 in
each of the F&C Private Investor Plan and the F&C Child Trust Fund and the
numbers continue to grow fairly rapidly.
Prospects
Headline stock market valuations are moderately attractive with growth in
earnings and dividends expected to continue, albeit at a slower rate than in the
past. Inflation, although increasing a little, is far from the worrying levels
of earlier decades, and unemployment levels are low. However concerns remain,
and fall broadly under two headings. First, that the current phase of economic
expansion has been long-lived. Amongst other things, this has encouraged greater
risk-taking behaviour by some financial institutions and a considerable
accumulation of personal debt, which could prove to be a problem if economic
circumstances become less benign. Secondly, the impact of geopolitics;
instability in the Middle East and terrorism have the potential to cause severe
economic and financial disruption. Despite these concerns, on balance we are
cautiously optimistic for the market and your Company's performance over the
coming twelve months.
Pen Kent
November 2006
INCOME STATEMENT
for the year ended 30 September 2006 2005
Revenue Capital Total* Revenue Capital Total*
Restated+ Restated+
£'000s £'000s £'000s £'000s £'000s £'000s
Gains on investments - 22,769 22,769 - 27,234 27,234
Exchange gains/(losses) 1 (24) (23) 1 8 9
Income 7,088 - 7,088 4,876 - 4,876
Management fee (472) (472) (944) (316) (316) (632)
Other expenses (476) (17) (493) (294) (14) (308)
Net return before finance costs and taxation 6,141 22,256 28,397 4,267 26,912 31,179
Interest payable and similar charges (229) (229) (458) (178) (178) (356)
Net return on ordinary activities before taxation 5,912 22,027 27,939 4,089 26,734 30,823
Taxation on ordinary activities (33) - (33) (43) - (43)
Net return attributable to equity shareholders 5,879 22,027 27,906 4,046 26,734 30,780
Return per ordinary share - pence 7.25 27.18 34.43 6.56 43.34 49.90
*The total column is the profit and loss account of the Company.
+ Restated to reflect changes in accounting policies (see note 1).
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.
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Called up Share Capital Total
share premium redemption Special Capital Revenue shareholders'
capital account reserve reserve reserves reserve funds
£'000s £'000s £'000s £'000s £'000s £'000s £'000s
Balance at 30 September 2004
(as previously reported) 12,051 18,771 3,154 12,348 36,970 1,005 84,299
Investment valuation restatement - - - - (83) - (83)
Dividend accrued at 30 September
2004 - - - - - 1,293 1,293
Balance at 30 September 2004
(restated) 12,051 18,771 3,154 12,348 36,887 2,298 85,509
Movements during the year ended
30 September 2005:
Dividends paid - - - - - (2,615) (2,615)
Purchase of ordinary shares held in
treasury - - - (2,360) - - (2,360)
Sale of ordinary shares held in
treasury - 272 - 1,972 - - 2,244
Issue of ordinary shares 8,497 57,291 - - - - 65,788
Return attributable to equity
shareholders (as previously - - - - 26,785 4,046 30,831
reported)
Investment valuation restatement - - - - (51) - (51)
Balance at 30 September 2005
(restated) 20,548 76,334 3,154 11,960 63,621 3,729 179,346
Movements during the year ended
30 September 2006:
Dividends paid - - - - - (4,850) (4,850)
Purchase of ordinary shares held in
treasury - - - (1,647) - - (1,647)
Return attributable to equity
shareholders - - - - 22,027 5,879 27,906
Balance carried forward as at
30 September 2006 20,548 76,334 3,154 10,313 85,648 4,758 200,755
BALANCE SHEET
At 30 September 2006 2005
Restated* Restated*
£'000s £'000s £'000s £'000s
Fixed assets
Investments
Listed in the United Kingdom 192,908 176,108
Listed outside the United Kingdom 11,070 9,622
203,978 185,730
Current assets
Debtors 3,069 6,582
Cash at bank and short-term deposits 3,152 1,700
6,221 8,282
Creditors: amounts falling due within one year
Loans (8,000) (8,500)
Other (1,444) (6,166)
(9,444) (14,666)
Net current liabilities (3,223) (6,384)
Net assets 200,755 179,346
Capital and Reserves
Called up share capital 20,548 20,548
Share premium account 76,334 76,334
Capital redemption reserve 3,154 3,154
Special reserve 10,313 11,960
Capital reserves 85,648 63,621
Revenue reserve 4,758 3,729
Total equity shareholders' funds 200,755 179,346
Net asset value per ordinary share - pence 249.03 220.39
* Restated to reflect changes in accounting policies (see note 1).
CASH FLOW STATEMENT
for the year ended 30 September 2006 2005
£'000s £'000s
Operating activities
Investment income received 6,970 4,492
Interest received 70 30
Other revenue 13 2
Fee paid to management company (781) (443)
Fees paid to Directors (80) (65)
Other cash payments (475) (264)
Net cash inflow from operating activities 5,717 3,752
Servicing of finance
Interest paid (455) (360)
Net cash outflow from servicing of finance (455) (360)
Taxation
Overseas tax paid (21) (45)
Total tax paid (21) (45)
Financial investment
Purchase of equities and other investments (50,189) (28,566)
Sales of equities and other investments 53,717 27,098
Other expenses (19) (14)
Net cash inflow/(outflow) from financial 3,509 (1,482)
investment
Equity dividends paid (4,850) (2,615)
Net cash inflow/(outflow) before use of
liquid resources and financing 3,900 (750)
Management of liquid resources
Decrease/(increase) in short-term deposits 1,700 (1,700)
Financing
Sterling loans (repaid)/raised (500) 2,500
Purchase of ordinary shares (1,605) (2,419)
Cash outflow under Scheme of Arrangement - (1,675)
Proceeds from ordinary share issues and sales
of treasury shares - 2,973
Net cash (outflow)/inflow from financing (2,105) 1,379
Increase/(decrease) in cash 3,495 (1,071)
Reconciliation of movement in cash flows
to movement in net debt
Increase/(decrease) in cash 3,495 (1,071)
(Decrease)/increase in short-term deposits (1,700) 1,700
Decrease/(increase) in short-term loans 500 (2,500)
Change in net debt resulting from cash 2,295 (1,871)
flows
Exchange movement on currency balances (24) 9
Movement in net debt during the period 2,271 (1,862)
Net debt brought forward (7,119) (5,257)
Net debt carried forward (4,848) (7,119)
Notes
1 ACCOUNTING POLICIES
Changes in accounting policies
With effect from 1 October 2005, the Company has adopted the following Financial
Reporting Standards (FRS) 21 to 26. The effect of adoption, where it has
resulted in a change in a significant accounting policy, is described briefly
below.
FRS 21 (Events after the Balance Sheet date)
Dividends paid by the Company are accounted for in the period in which the
Company is liable to pay them. Previously, the Company accrued dividends in the
period in which the net revenue, to which those dividends related, was accounted
for.
FRS 25 (Financial Instruments: Disclosure and Presentation) and FRS 26
(Financial Instruments: Measurement)
The Company has designated its assets as being measured at "fair value through
profit and loss". The fair value of fixed asset listed investments is deemed to
be the bid value of those investments at the close of business on the relevant
date. Previously, all listed investments were valued at mid value.
There have been no other changes to significant accounting policies during the
year.
The comparatives for the year ended 30 September 2005 have been restated to give
effect to the above changes. Notes 3 and 4 further explain these restatements.
2 DIVIDENDS
The third interim dividend of 1.50p per share in respect of the year ended 30
September 2006 was paid on 2 October 2006 to shareholders registered on 1
September 2006. The total cost of this dividend, based on 80,684,140 shares
entitled to dividend, was £1,210,000. The Directors recommend a final dividend
in respect of the year ended 30 September 2006 of 2.10p per share on 2 February
2007 to all shareholders on the register at close of business on 5 January 2007.
The recommended final dividend is subject to approval by the shareholders at
Annual General Meeting.
3 RETURN PER ORDINARY SHARE
Revenue return
The revenue return per share is based on the revenue return attributable to
equity shareholders of £5,879,000 (2005: £4,046,000).
Capital return
The capital return per share is based on the capital return attributable to
equity shareholders of £22,027,000
(2005: £26,734,000 restated). The capital return per share for the year ended 30
September 2005 has been decreased by £51,000 (0.8 pence per share). This
reflects the effect of the decrease in valuation of investments at 30 September
2004 by £83,000 and 30 September 2005 by £134,000.
Both the revenue and capital returns per share as based on a weighted average of
81,045,828 (2005: 61,686,327) ordinary shares in issue during the year. Shares
held in treasury have been excluded from the weighted average number of shares
in issue with effect from the date of purchase.
4 RESTATEMENT OF OPENING BALANCES
Balance Sheet Previously reported Restated
30 September 2005 Adjustment 30 September 2005
£'000s £'000s £'000s
Fixed assets
Investments* 185,864 (134) 185,730
Current assets
Debtors 6,582 - 6,582
Cash at bank and short-term deposits 1,700 - 1,700
8,282 - 8,282
Current liabilities
Short term loans (8,500) - (8,500)
Other creditors+ (8,677) 2,511 (6,166)
(17,177) 2,511 (14,666)
Net current liabilities (8,895) 2,511 (6,384)
Net assets 176,969 2,377 179,346
Capital and reserves
Called up share capital 20,548 - 20,548
Share premium account 76,334 - 76,334
Capital redemption reserve 3,154 - 3,154
Special reserve 11,960 - 11,960
Capital reserves* 63,755 (134) 63,621
Revenue reserve+ 1,218 2,511 3,729
Total equity shareholders' funds 176,969 2,377 179,346
Net asset value per ordinary share
- pence 217.47 2.92 220.39
Notes to the restatement of opening balances
* Effect of revaluation of fixed asset investments from mid to bid value.
+Effect of recognising dividends in the period in which the Company is liable to
pay them.
4 RESTATEMENT OF OPENING BALANCES (continued)
Balance Sheet Previously reported Restated
30 September 2004 Adjustment 30 September 2004
£'000s £'000s £'000s
Fixed assets
investments at fair value* 91,012 (83) 90,929
Current assets
Debtors 609 - 609
Cash at bank and short-term deposits 743 - 743
1,352 - 1,352
Current liabilities
Short term loans (6,000) - (6,000)
Other creditors+ (2,065) 1,293 (772)
(8,065) 1,293 (6,772)
Net current liabilities (6,713) 1,293 (5,420)
Net assets 84,299 1,210 85,509
Capital and reserves
Called up share capital 12,051 - 12,051
Share premium account 18,771 - 18,771
Capital redemption reserve 3,154 - 3,154
Special reserve 12,348 - 12,348
Capital reserves* 36,970 (83) 36,887
Revenue reserve+ 1,005 1,293 2,298
Total equity shareholders' funds 84,299 1,210 85,509
Net asset value per ordinary share
- pence 177.62 2.55 180.17
Notes to the restatement of opening balances
* Effect of revaluation of fixed asset investments from mid to bid value.
+Effect of recognising dividends in the period in which the Company is liable to
pay them.
5 FINANCIAL INFORMATION
The above financial information comprises non-statutory accounts within the
meaning of section 240 of the Companies Act 1985. The financial information for
the year ended 30 September 2005 has been extracted from published accounts
(except as restated) for the year ended 30 September 2005 that have been
delivered to the Registrar of Companies and on which the report of the auditors
was unqualified.
6 ANNUAL GENERAL MEETING
The Annual General Meeting will be held on Tuesday 30 January 2007 at 11.30 am
at the offices of F&C Management Limited at Exchange House, Primrose Street,
London EC2A 2NY.
7 REPORT AND ACCOUNTS
The Report and Accounts will be posted to shareholders in December 2006. Copies
may be obtained thereafter during normal business hours from the Company's
Registered Office, Exchange House, Primrose Street, London EC2A 2NY.
By order of the Board
F&C Management Limited, Secretary
28 November 2006
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