Interim Results
Foreign & Colonial Eurotrust PLC
17 May 2006
Date: 17th May 2006
Contact: Davina Curling
F&C Management Limited
020 7628 8000
FOREIGN & COLONIAL EUROTRUST PLC
Unaudited Interim Statement of Results
for the half-year ended 31 March 2006
Between the year end at 30 September 2005 and 31 March 2006, the net asset value
per share rose from 624.89p to 745.71p, an increase of 19.3%. This compares with
a gain of 17.6% over the same period in the FTSE W Europe ex UK Index.
SUMMARY OF UNAUDITED RESULTS FOR THE HALF-YEAR TO 31 MARCH 2006
31 March 2006 30 September 2005 % Change
Net assets £433.55m *£391.35m +10.8
Net asset value per share 745.71p *624.89p +19.3
Share price 672.00p 560.00p +20.0
6 months to 6 months to
31 March 2006 31 March 2005 % Change
Revenue return per share 1.05p 0.45p +133.3
* Restated to reflect changes in accounting policies (see note 1).
Manager's Review
Between the year end at 30 September 2005 and 31 March 2006, the net asset value
per share rose from 624.89p to 745.71p, an increase of 19.3%. This compares with
a gain of 17.6% over the same period in the FTSE All-World Europe ex UK Index
which is adjusted for the movement in sterling against the European currencies.
Unaudited Figures
The revenue account for the period shows a healthy increase in dividend income.
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.
The Financial Statements included within this Report reflect a number of changes
from prior years, all arising from new Accounting Standards. The Statement of
Total Return has been re-named the Income Statement and a new statement with the
self-explanatory title of 'Reconciliation of Movements in Shareholders' Funds'
is presented. We have restated prior year figures in compliance with the new
Accounting Standards and have described the changes in the notes on the
accounts. The effect of these changes on net assets and returns is small.
Review of Markets
Europe's equity markets maintained their strong upward momentum during the
period under review. In addition to positive economic data, both global and
European, investors were also encouraged by an improvement in corporate earnings
and buoyant merger and acquisition activity. On the economic front, industrial
production and consumer confidence have been on an upward trend, whilst on the
corporate side, business confidence rose across the Eurozone. The improving
business climate in Germany was reflected in the rise of the Ifo-index to a
15-year high in March. This was mainly due to strong export growth and a surge
in merger and acquisition activity. The major economic concern for investors
from here is over any resurgence of inflation and higher than anticipated
interest rates.
Most companies have consistently reported better than expected earnings over the
six months under review, with the final quarter of 2005 seeing positive to
negative surprises at a ratio of three to one. Financials, basic industries,
general industrials, technology and some utilities did best whilst telecoms,
media and the traditionally defensive food producers disappointed. The oil
majors also failed to have any positive impact over the six months.
Portfolio Strategy
The composition of the Company remains a function of bottom up stock selection
overlaid by the identification of strong themes with investments drawn from
across the capitalisation scale.
EU accession countries continue to present some good investment opportunities,
particularly in areas of under penetration such as banking and financial
services and those companies which benefit from increased investment or are
geared into higher levels of discretionary spending.
High oil prices were maintained throughout the period. This has been positive in
performance terms not for the sector as a whole but for the mid and small cap
specialist equipment and service stocks. With supply/demand suggesting higher
oil prices are here to stay exposure to the sector remains targeted on areas
well placed to benefit from increased investment. Oil majors and governments
are rapidly increasing capital expenditure as they look to maintain or increase
their output. Norwegian Seadrill, for example, provides drilling equipment to
the offshore oil and gas industry. The Trust has further exposure through PGS,
Prosafe and Saipem.
We added to Greece. This was prompted both by geography, which places Greek
firms in a strong position to tap into the increasingly affluent consumer in
Europe, as well as deregulation within the economy as it moves into line with
practices prevalent elsewhere in Europe.
The high level of M&A activity has continued apace and undoubtedly spurred the
market onwards and upwards. This has been driven to some extent by low interest
rates but also shows that corporate Europe has confidence in the value of
corporate Europe. Although very underweight in telecoms generally, we did hold
Danish telecom operator TDC at the start of the Company's year. Its impressive
cash flow and healthy pension surplus were among the factors which raised its
attractiveness to potential bidders. Nordic Telephone Company's bid was
eventually accepted by the board and resulted in a positive outcome for TDC's
share price.
Elsewhere, we sold our position in Adidas on concerns over the implications of
the integration of its newly acquired Reebok business.
Outlook
In our view, European equities remain reasonably valued despite their strong
performance over the past year. The strength of corporate profits has left the
valuation support intact. Furthermore, the premium investors have to pay for
growth versus value is now historically small and offers significant potential.
High commodity prices and their inflationary impact remain a concern, together
with any disappointment that might come through in corporate earnings. We are
alert to the recent renewed weakness of the US Dollar and the impact of this on
the European exporters.
The gearing of the Trust was increased to 10% during the period. It currently
stands at 8%. It is the policy of the Board that the level of gearing should not
exceed 20%.
Davina Curling
Fund Manager,
F&C Management Limited
May 2006
UNAUDITED INCOME STATEMENT (incorporating the revenue account)+
6 months to 31 March 2006 6 months to 31 March 2005
Restated* Restated*
Revenue Capital Total Revenue Capital Total
£'000s £'000s £'000s £'000s £'000s £'000s
Gains on investments - 72,766 72,766 - 41,107 41,107
Exchange losses on currency balances (10) (901) (911) - (361) (361)
Income 3,082 - 3,082 2,089 - 2,089
Management fee (1,297) - (1,297) (1,130) - (1,130)
Other expenses (354) (27) (381) (387) (14) (401)
Net return before finance costs and taxation 1,421 71,838 73,259 572 40,732 41,304
Interest payable and similar charges (524) - (524) (231) - (231)
Return on ordinary activities before taxation 897 71,838 72,735 341 40,732 41,073
Taxation on ordinary activities (277) - (277) (40) - (40)
Return attributable to equity shareholders 620 71,838 72,458 301 40,732 41,033
Return per ordinary share - pence 1.05 122.13 123.18 0.45 60.49 60.94
+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. 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.
* Restated to reflect changes in accounting policies (see note 1).
UNAUDITED RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Capital Share Total
Share redemption Premium Capital Revenue Shareholders'
capital reserve Account reserves reserve Funds
£'000s £'000s £'000s £'000s £'000s £'000s
Balance at 30 September 2004
(as previously reported) 16,998 1,813 123,749 183,271 3,529 329,360
Investment valuation
restatement* - - - (220) - (220)
Dividend accrued at
30 September 2004 - - - - 3,672 3,672
Balance at 30 September 2004
(restated) 16,998 1,813 123,749 183,051 7,201 332,812
Shares repurchased during the year
ended 30 September 2005 (1,341) 1,341 - (29,215) - (29,215)
Return attributable to equity
shareholders for year
ended 30 September 2005
(as previously reported) - - - 86,848 4,680 91,528
Investment valuation
Restatement* - - - (125) - (125)
Dividends paid during the year ended
30 September 2005 - - - - (3,646) (3,646)
Balance at 30 September 2005
(restated) 15,657 3,154 123,749 240,559 8,235 391,354
Shares repurchased during the half-
year ended 31 March 2006 (1,122) 1,122 - (25,841) - (25,841)
Return attributable to equity
shareholders for the half-year
ended 31 March 2006 - - - 71,838 620 72,458
Dividends paid during the half-year
ended 31 March 2006 - - - - (4,417) (4,417)
Balance carried forward at
31 March 2006 14,535 4,276 123,749 286,556 4,438 433,554
* Restated to reflect changes in accounting policies (see note 1).
UNAUDITED BALANCE SHEET
At 31 Mar 2006 At 31 Mar 2005 At 30 Sep 2005
Restated* Restated*
£'000s £'000s £'000s
Fixed assets
Investments 465,335 365,599 403,303
Current assets
Debtors 5,264 6,668 24,083
Taxation recoverable 81 201 416
Short-term deposits - 6,947 13,971
Cash at bank 4,585 409 936
9,930 14,225 39,406
Creditors: amounts falling due within one year
Foreign currency loans (40,465) (8,597) (23,853)
Other (1,246) (5,005) (27,502)
(41,711) (13,602) (51,355)
Net current (liabilities)/assets (31,781) 623 (11,949)
Net assets 433,554 366,222 391,354
Capital and Reserves
Called up share capital 14,535 16,775 15,657
Capital redemption reserve 4,276 2,036 3,154
Share premium account 123,749 123,749 123,749
Capital reserves 286,556 219,832 240,559
Revenue reserve 4,438 3,830 8,235
Total equiy shareholders' funds 433,554 366,222 391,354
Net asset value per ordinary share
- pence 745.71 545.79 624.89
* Restated to reflect changes in accounting policies (see note 1).
The geographical distribution of investments at 31 March 2006 was:
Switzerland - 20.3%, France - 20.1%, Germany - 14.3%, Italy - 7.8%, Finland -
7.4%, Sweden - 7.3%, Spain - 4.6%, Netherlands - 4.5%, Greece - 4.3%,
Norway - 4.3%, Belgium - 1.9%, Eire - 1.4%, Austria - 1.2%, Denmark - 0.6%.
UNAUDITED CASH FLOW STATEMENT
6 months to 6 months to
31 March 2006 31 March 2005
£'000s £'000s
Net cash inflow from operating activities 746 1,155
Interest paid (511) (322)
Total tax paid (400) (276)
Net cash inflow from financial investment 28,309 22,293
Equity dividends paid (4,417) (3,646)
Net cash inflow before use of liquid resources and financing 23,727 19,204
Decrease/(increase) in short-term deposits 13,897 (6,938)
Net cash outflow from financing (34,121) (16,755)
Increase/(decrease) in cash during the period 3,503 (4,489)
Reconciliation of net cash movement to movement in net debt
Increase/(decrease) in cash during the period 3,503 (4,489)
(Decrease)/increase in short-term deposits (13,897) 6,938
(Increase)/decrease in short-term loans (15,609) 12,804
Movement in net debt resulting from cash flows (26,003) 15,253
Exchange movement (931) (361)
Movement in net debt during the period (26,934) 14,892
Net debt at the beginning of the period (8,946) (19,447)
Net debt at the end of the period (35,880) (4,555)
Notes
1 ACCOUNTING POLICIES
Changes in accounting policies
With effect from 1 October 2005, the Company has adopted the following Financial
Reporting Standards (FRS):
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 or 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 accounting policies during the period.
The results for the period ended 31 March 2005 and for the year ended 30
September 2005 have been restated to give effect to the above changes. Notes 2
and 3 further explain these restatements.
2 RETURN PER ORDINARY SHARE
6 months to 6 months to Year to
31 Mar 2006 31 Mar 05 30 Sep 05
(Restated) (Restated)
£'000s £'000s £'000s
Revenue return 620 301 4,680
Capital return 71,838 40,732 86,723
Total return 72,458 41,033 91,403
Weighted average ordinary shares in issue 58,823,382 67,331,085 67,173,257
6 months to Year to
31 Mar 05 30 Sep 05
As previously stated £'000s £'000s
Capital return 40,730 86,848
Total return 41,031 86,857
The total and capital returns for the six months to 31 March 2005 and year to 30
September 2005 have been increased by £2,000 (nil pence per share) and decreased
by £125,000 (0.19 pence per share) respectively. This reflects the effect of
the reduction in valuation of investments, as a result of the change in
accounting policy, at 30 September 2004 by £220,000, 31 March 2005 by £218,000
and 30 September 2005 by £345,000.
3 RESTATEMENT OF OPENING BALANCES
Balance Sheet Previously reported Restated
31 March 2005 Adjustment 31 March 2005
£'000s £'000s £'000s
Fixed assets
Investments* 365,817 (218) 365,599
Current assets
Debtors 6,668 - 6,668
Taxation recoverable 201 - 201
Short-term deposits 6,947 - 6,947
Cash at bank 409 - 409
14,225 - 14,225
Current liabilities
Loans (8,597) - (8,597)
Other (5,005) - (5,005)
(13,602) - (13,602)
Net current assets 623 - 623
Net assets 366,440 (218) 366,222
Capital and reserves
Called up share capital 16,775 - 16,775
Capital redemption reserve 2,036 - 2,036
Share premium account 123,749 - 123,749
Capital reserves* 220,050 (218) 219,832
Revenue reserve 3,830 - 3,830
Total equity shareholders' funds 366,440 (218) 366,222
Net asset value per ordinary share
- pence 546.11 (0.32) 545.79
Note to the restatement of opening balances
* Effect of revaluation of fixed asset investments from mid to bid value.
3 RESTATEMENT OF OPENING BALANCES (CONTINUED)
Balance Sheet Previously reported Restated
30 September 2005 Adjustment 30 September 2005
£'000s £'000s £'000s
Fixed assets
Investments* 403,648 (345) 403,303
Current assets
Debtors 24,083 - 24,083
Taxation recoverable 416 - 416
Short-term deposits 13,971 - 13,971
Cash at bank 936 - 936
39,406 - 39,406
Current liabilities
Loans (23,853) - (23,853)
Other+ (32,199) 4,697 (27,502)
(56,052) 4,697 (51,355)
Net current liabilities (16,646) 4,697 (11,949)
Net assets 387,002 4,352 391,354
Capital and reserves
Called up share capital 15,657 - 15,657
Capital redemption reserve 3,154 - 3,154
Share premium account 123,749 - 123,749
Capital reserves* 240,904 (345) 240,559
Revenue reserve+ 3,538 4,697 8,235
Total equity shareholders' funds 387,002 4,352 391,354
Net asset value per ordinary share
- pence 617.94 6.95 624.89
Notes to the restatement of opening balances
* Effect of revaluation of fixed asset investments from mid to bid value.
+Effect of not recognising the final and special dividends until after the
balance sheet date.
4 DIVIDENDS
The Board recommends that no interim dividend payment be made.
5 RESULTS
The results for the six months to 31 March 2006 and 31 March 2005, which are
unaudited, constitute non-statutory accounts within the meaning of Section 240
of the Companies Act 1985. The latest published accounts which have been
delivered to the Registrar of Companies are for the year ended 30 September
2005; the report of the auditors thereon was unqualified and did not contain a
statement under Section 237 of the Companies Act 1985. The abridged financial
statements shown above for the year ended 30 September 2005 are an extract from
those accounts (except as noted above).
6 INTERIM REPORT AND ACCOUNTS
The Interim Report and Accounts will be posted to shareholders in early June
2006. Copies may be obtained 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
Exchange House, Primrose Street, London EC2A 2NY
17 May 2006
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