Annual Financial Report

RNS Number : 2111U

F&C Managed Portfolio Trust PLC

27 July 2015

 



To:                  RNS

Date:              27 July 2015

From:             F&C Managed Portfolio Trust plc

Results for the year ended 31 May 2015

The Board of F&C Managed Portfolio Trust plc announces the audited results of the Company for the year to 31 May 2015.

Chairman's Statement

Highlights

•         NAV total returns for the Income shares of 10.0% and the Growth shares of 12.8% compared to the FTSE All-Share Index of 7.5%

•         Annual dividend increased by 4.2% to 5.0p per Income share for the year

•         £13.1 million net proceeds raised from the issue of shares

Introduction

This was another good year for shareholders, with reasonable returns comfortably above the UK equity market. We were also able to increase the dividend by 4.2%, well above inflation on any realistic measure. As a result, the yield on the Income shares was 3.9% on the year end share price. Both share classes have maintained their record of out-performance against the benchmark over both 3 years and 5 years to 31 May 2015.

Performance

Net asset value total return

For the Company's financial year to 31 May 2015, the NAV total return (i.e. adding dividends paid to capital performance) was 10.0% for the Income shares and 12.8% for the Growth shares. The total return for the benchmark index for both Portfolios, the FTSE All-Share Index was 7.5%, while the Investment Company sector, as measured by the FTSE Equity Investment Instruments Index, returned 13.0%.

The principal contributors to the performance and additional information on the Company's investment portfolios are included in the Investment Manager's Review.

Both share classes have also outperformed the benchmark over the 3 years and 5 years to 31 May 2015.

The Board would like to commend our dedicated manager, Peter Hewitt, for this considerable achievement.

 

Revenue and dividends

The Board has adopted the twin objectives of increasing the total dividends paid each year and of maintaining a revenue reserve equivalent to 6 months dividends. Notwithstanding the sizeable issuance of shares in the latter part of the year (which is referred to below) we have been able to increase the annual dividend by 4.2% and add to the revenue reserve, which is now equivalent to approximately 45% of the annual dividend cost.

For the year ended 31 May 2015, four interim dividends have now been paid totalling 5.0p per Income share. The fourth interim dividend was paid after the year end on 3 July 2015.

In the absence of unforeseen circumstances, your Board intends to declare three interim dividends, each of 1.2p per Income share payable in October 2015, January 2016 and April 2016. A fourth interim dividend will be paid in July 2016 when a clearer view emerges of income for the year.

Borrowing

During the year, the Company entered into a £5 million unsecured revolving credit facility with The Royal Bank of Scotland plc to replace the borrowing facility it had used with its custodian JPMorgan Chase Bank. The Board is responsible for the Company's gearing strategy and sets parameters within which the Investment Manager operates.

Borrowings are not normally expected to exceed 20% of the total assets of the relevant Portfolio and at the time of writing total £1.5 million (3.4%) in the Income Portfolio and £1.4 million (3.0%) in the Growth Portfolio.

Share capital

As I reported in the Interim report, the Board believes that the Company's continuing ability to issue shares at a premium to NAV increases liquidity, adds to net asset value per share and reduces share price volatility by preventing the build-up of excessive demand for shares. Towards the end of 2014, it was anticipated that future demand for shares would exceed the share issuance authority approved at the last AGM.

Accordingly, shareholder authority to allot up to a further 50,000,000 Income shares and 50,000,000 Growth shares and to dis-apply pre-emption rights in respect of those shares, was granted at a General Meeting held on 2 February 2015. A prospectus was then published on 4 February 2015 in accordance with the Prospectus Rules.

During the financial year, 7,175,000 new Income shares were issued raising £8.8 million net of expenses. In the Growth portfolio, the remaining 1,490,000 Growth shares were resold from treasury and a further 1,435,000 new Growth shares were also issued, raising a total of £4.3 million net of expenses. The Income shares and Growth shares were issued at average premiums to NAV of 1.6% and 1.5% respectively. This enhanced the respective net asset values after allowing for the costs of the issues which included the cost of the prospectus.

Much of the demand came from shareholders in British Assets Trust whose shares were no longer eligible for the F&C Share Plans when that company moved to another investment manager. Overall, this issuance has increased the size of the Company by approximately 19% to net assets of £88 million, which will assist in spreading operating costs over a larger asset base and should, increase liquidity.

In normal circumstances, we aim to maintain the discount to NAV at which our shares trade, at not more than 5%. In practice over the years the shares have generally traded close to NAV. During the year to 31 May 2015 we have been able to maintain an average premium of 1.6% for the Income shares and 0.6% for the Growth shares.

We will be seeking shareholders' approval to renew the powers to allot shares, buy back shares and sell shares from treasury at the Annual General Meeting. The resolutions are explained in the Report of the Directors within the Annual Report and Accounts.

Alternative Investment Fund Managers Directive ("AIFMD")

In July 2014 as required under AIFMD, the Board entered into arrangements with the Manager, F&C Investment Business Limited, to act as the Company's Alternative Investment Fund Manager, at no additional cost to the Company. The appointment of a Depositary was also required and JPMorgan Europe Limited were appointed.

Sadly, further regulation lies ahead and the Board is starting to assess the possible impact of MiFID II and the OECD Common Reporting Standard.

Share plans and conversion facility

Shareholders have the opportunity to convert their Income shares into Growth shares or their Growth shares into Income shares upon certain dates every year subject to minimum thresholds. The next opportunity will be on 22 October 2015. Information is provided in the Shareholder Information section in the Annual Report and full details will be provided on the Company's website (www.fcmanagedportfolio.co.uk) from 27 July 2015. Since launch, no conversion has yet taken place as the number of shares offered for conversion has been well below the minimum threshold. This minimum threshold is set by the Board in order to ensure that costs of a conversion are not incurred which would be disproportionate to the level of converting assets.

AGM

The annual general meeting ("AGM") will be held at 12.30pm on Monday 14 September 2015 in the offices of F&C Asset Management plc, Exchange House, Primrose Street, London. It will be followed by a presentation from our fund manager, Peter Hewitt. This is a good opportunity for shareholders to meet the Board and Manager and I would encourage you to attend.

Outlook

In recent years, it seems that almost every Chairman's statement points to the uncertainties ahead. That is more true this year than ever, with the badly-handled negotiations between Greece and its creditors leaving the future of the Eurozone and the place of Greece within it, deeply unclear. Beyond that lie the timing and impact of interest rate rises, the outlook for the Chinese economy and the ever-growing threat from global terrorism.

Against this background, we believe that the merits of a diversified portfolio of investment companies are more attractive than ever. The portfolios offer exposure to a wide sweep of economies and sectors, including fast-growing sectors such as biotechnology. I hope to be able to present similarly positive results next year.

Richard M Martin

Chairman

27 July 2015

Investment Manager's Review

Stockmarket Background

There were a number of notable features in the global economic background that have been apparent over the past twelve months:

·      The decline in the price of oil from $112 last June to a low of $50 in January and a recovery to around $60 currently

·      Ongoing saga of Greece and whether an agreement regarding Greek debt and broader reform package can be reached

·      Inflation falling to very low levels in the UK and the Euro zone

·      Only a moderate recovery in economic growth in the US and UK with no increase in interest rates

Aside from what may finally unfold with regard to the Greek situation, most of the factors highlighted were interpreted positively by global equity markets.

Although there appeared danger at almost every turn; with the threat of deflation, the lack of a robust recovery in the level of growth, the prospect of rising interest rates or even perhaps a geo-political event with widespread negative consequences, what actually transpired was a relatively benign background. The fall in energy costs is an undoubted positive for many countries and helped to keep inflation low, without, so far at least, deflation taking hold. Levels of growth have been lower than in previous recoveries but are evident, particularly in the US and UK and may even be moving in the right direction in Europe. The threat of an increase in interest rates, especially in the US, kept being deferred. Whilst from a UK perspective, although sterling appreciated against a persistently weak Euro, it once again moved lower relative to the all-important US dollar which resumed its upward trend against other major currencies.

Most major equity markets delivered positive returns. The strongest performing major equity market was in Japan which benefitted from the Bank of Japan embarking upon a policy of very aggressive quantitative easing. This was highly supportive of equity price levels. It also caused further marked weakness in the yen which created a tailwind for many of Japan's exporting companies enabling them to record substantial profits growth. Over the year the FTSE Japan Index rose over 40% in local currency however due to the yen weakness this translated to a 28.7% gain in sterling.

The next most significant return came from North America however in this case the effect of currency translation was exactly the opposite than Japan as dollar strength boosted a 10.5% local currency return in the FTSE North America Index to 21.5% (total return sterling adjusted).

The laggard region was Europe where similar to Japan this was partly the result of currency weakness of the euro relative to sterling which reduced a healthy local currency return to 4.7% (total return sterling adjusted) due to sterling's 13% rise against the Euro.

Performance

For the year to 31 May 2015 the FTSE All-Share Index rose by 7.5% (in total return terms). Over the same period the Net Asset Value for the Income Portfolio was ahead by 10.0% whilst that of the Growth Portfolio gained 12.8% (again both in total return terms). This was a welcome return to form for the Income Portfolio which underperformed the benchmark last year. It has outperformed the benchmark in six of the seven financial years since launch in 2008. The Growth Portfolio has outperformed the benchmark in each of the last three financial years and it is encouraging that both portfolios are ahead of the FTSE All-Share Index over one, three and five years.

The average sector discount for Investment Companies (excluding private equity, property and hedge funds) was largely unchanged over the year. For comparative purposes the FTSE Equity Investment Instruments Index (being the Investment Companies sector index and effectively the universe from which both portfolios are chosen from) rose by 13.0% over the year (also in total return terms). The FTSE World (ex UK) Index (adjusted back into sterling and in total return terms) rose by 16.7%. This index is a useful proxy for global equities where the Investment Company sector has over half its assets invested. The key driver behind the sector performance and global equities was the return recorded by the US (which accounts for well over 50% of the Index by market value). A number of very large global trusts, in which neither portfolio has holdings, did well in share price terms due to large weightings in the US and this was a key factor in the sector's strong relative performance.

The good returns from both portfolios was mainly due to stock selection the highlights of which is discussed more fully in the next section.

Income Portfolio - top and bottom five performers

In a year which did not favour high yield investments generally, the Income Portfolio managed to outperform the FTSE All-Share Index. This was driven by a number of equity income holdings whose total return over the year (capital growth plus dividends reinvested) was ahead of the benchmark.

In this regard the leader by far was BB Biotech which is an unusual holding for an income portfolio. The fund is Swiss based and listed on the Zurich Stock Exchange in 1993, is large with around £1.7bn of net assets and has an outstanding long term performance record. For the year to 31 May 2015 the share price total return was over 100%. After a prolonged period in the early part of the century, of apparently not much happening, recent years have witnessed an increased number of product approvals and a record number of products in clinical trials. This has been helped by a more co-operative approach from regulatory authorities in the US and Europe and has led to a series of blockbuster products which have addressed previously unmet medical needs. In addition, the pace of industry consolidation has picked up as large pharmaceutical companies have acquired biotech firms to replenish their patent-expiring drug pipelines. BB Biotech has a focussed portfolio and is exposed to a number of major biotech companies where stock valuations are not excessive given the exciting growth prospects. BB Biotech also returns 5% of its share price via a dividend each year which makes it an attractive holding for an income portfolio.

3i Infrastructure rather unexpectedly produced a return of 27% over the financial year. The company owns a number of steady income producing assets e.g. 20% of Anglian Water however one of their other holdings, Eversholt, a leading train leasing company, where they had a 33% stake, was acquired at a substantial premium to the valuation it was held at by 3i Infrastructure. This resulted in a useful capital uplift to its net asset value. The dividend yield is 4.1%.

Majedie Investments rose by 26% over the financial year which highlights the benefit of the decision, last year, to have the investment portfolio managed by Majedie Asset Management ("MAM"). The portfolio is invested in a number of strongly performing UK and Global funds run by MAM and has also benefitted from a holding in the management company which has risen significantly as funds under management have grown.

One of the largest holdings in the Income Portfolio is European Assets Trust and it recorded a share price total return of over 21% for the financial year. European Assets Trust focusses on medium and smaller sized companies in Continental Europe and has had strong performance driven consistently from good stock selection. This continued over the past year. In addition the trust has an attractive dividend yield of nearly 5%.

Long time holding Bankers Investment Trust achieved a total return of over 18% through both good asset allocation and stock selection. The trust also increased its dividend for the 48th consecutive year and has one of the lower yields in the Income Portfolio at 2.5%.

As with the positive contributors there was no one investment theme that dominated the holdings that detracted from overall portfolio performance.

The principal laggard was CQS New City High Yield Fund which experienced a share price total return decline of 3.1%. The trust invests in bonds, preference shares, convertibles and some equities with a high yield objective and a secondary aim of some capital growth. Over the long run this has been achieved and the dividend has edged ahead every year in the last ten. However last year it moved temporarily to a premium of over 10% but by the end of this fiscal year that had moved back to a more reasonable 3%. Whilst the net asset value has broadly moved sideways over the past year this fund offers an attractive dividend yield of 7%.

The Income Portfolio has a small holding in the Standard Life UK Smaller Companies Trust 3.5% Convertible Unsecured Loan Stock which fell by 3% over the year. Again this had less to do with the performance of the asset value of the underlying investment company which was reasonable and more to do with a de rating of the convertible share price. At current levels it offers interesting value.

The JPMorgan Global Emerging Markets Income Trust declined 1.7% in total return terms. The fund suffered from an underweight position in India, one of the best performing emerging markets, due to a lack of yield available from the Indian equity market. Also the fund was underweight China and overweight in its exposure to Russia which held back performance. The trust has an attractive dividend yield of 4.3%.

Long time holding Murray International Trust also relatively lagged, with a marginal 0.1% fall in total return terms. This was also due to emerging market exposure, which had previously served the trust well. However, encouragingly, the dividend was raised by 5% which gives the trust a 4.4% dividend yield.

Lowland Investment Company, a UK equity income trust, also experienced a small 0.1% decline in its total return over the financial year. The trust has an outstanding long term performance record however its strategy of having a substantial exposure to UK industrial companies was the reason for its dull asset performance and was behind a de-rating of the shares from a small premium to a 4% discount. The bright spot amongst the laggards in the portfolio was their dividends, none of which were reduced and in the case of CQS New City High Yield Fund, Murray International Trust and Lowland Investment Company all were raised during the year.

Growth Portfolio - top and bottom five performers

The Growth Portfolio had a strong financial year in terms of performance. As with the Income Portfolio the largest share price rise was achieved by a trust specialising in investment in the biotech sector. Biotech Growth Trust is managed by Orbimed investors in New York and achieved a 77% gain. Another holding, also managed by Orbimed, recorded the second largest rise in the portfolio; Worldwide Healthcare Trust was ahead by 49%. Whereas Biotech Growth Trust is focussed purely on the biotech sector, Worldwide Healthcare Trust has a wider remit with only around 30% exposure to biotech holdings. The balance of the portfolio is in pharmaceuticals, life sciences, medical devices and diagnostics. In broad terms both holdings have benefitted from the trends outlined previously in the BB Biotech summary. Although share prices in the sector have risen, the superior level of earnings growth from companies has meant forward price earnings multiples for many of the major biotech companies remain at attractive levels.

Baillie Gifford Japan Trust had a strong year with a 38% gain. The Japanese stockmarket has been a principal beneficiary of the Bank of Japan's policy of aggressive quantitative easing. Although this caused the yen to weaken, the Tokyo market was still amongst the top performers last year when returns were translated back into sterling. Baillie Gifford Japan Trust has a preference for medium sized growth companies which have done well and were behind last year's performance.

Two more Baillie Gifford managed trusts were the next best performers; Scottish Mortgage Investment Trust and Edinburgh Worldwide Investment Trust recorded share price total return gains of 33% and 30% respectively. The former has a highly focussed portfolio and takes a long term approach with a preference for companies with outstanding growth characteristics. Many are beneficiaries of the application of new technologies which disrupt traditional industries and have significant competitive advantages e.g. Amazon, Google, Alibaba, Rocket Internet and Facebook. Edinburgh Worldwide Investment Trust applies the same approach to companies with a market value of less than $5bn, endeavouring to catch the long term winners earlier in their life. Portfolios of both trusts are global in their exposures and have exciting prospects for growth.

As with the Income Portfolio there were no holdings which experienced substantial loss of value over the financial year. Graphite Enterprise Trust experienced a share price total return decline of 2.9%. It invests mainly in private equity funds in the UK and Europe and also has a direct portfolio of unquoted private companies. After a period of good progress in asset value growth, the past year has seen a slower pace in realisations in both portfolios and with a sizeable exposure to Europe the 13% rise in sterling relative to the Euro over the year further limited progress. However the trust is well positioned for future growth and is attractively valued with a share price discount of 15% relative to its asset value.

Aberdeen Asian Smaller Companies and BlackRock Frontiers Investment Trust have also had strong past performance records however poor performance from smaller companies in the Asia Pacific region and also from many frontier stock markets led to small share price declines from both trusts of 2.7%and 0.5% respectively. However the areas they invest in have exciting prospects for growth and as both trusts are well managed the intention is to maintain holdings in both trusts for the Growth Portfolio. The other two negative performers were holdings which are common to both portfolios; Murray International Trust and Lowland Investment Company which are covered above.

Investment strategy and prospects

The core view remains that we are still in a liquidity driven bull phase to equity markets. Although the policy of quantitative easing is no longer being operated by either the Federal Reserve in the US or the Bank of England in the UK it has been started, albeit rather belatedly, by the European Central Bank in the Euro zone and very aggressively by the Bank of Japan. In a global context the net effect is that monetary policy remains highly accommodative with ultra-low interest rates which is supportive of asset prices generally and equity markets in particular. Levels of economic activity have been below trend in this cycle, however, there appear signs that growth in the US economy is firming, continuing at decent levels in the UK and starting to improve in Europe. Only in certain emerging markets is the rate of growth slowing. In the short term the effect of the substantial decline in the price of oil has, in the US, actually been to depress activity levels as major energy companies have sharply curtailed expenditure. However, over time, as consumers become more confident, the impact on income levels is positive and should be supportive of consumer spending. This is good for growth. A similar scenario is likely in the US, Europe and also Japan.

It is likely that by the time of next year's annual report interest rates in the US will have begun to rise, although that may well not be the case in the UK. Employment levels and real wages are rising which are relevant indicators. On a long view, interest rates are unlikely to rise to anywhere near as in previous economic cycles however that is not to dismiss that volatility in both bond and equity markets will rise with setbacks to be anticipated.

As for equity markets, valuations are elevated, especially in the US, but are not excessive or in "bubble territory". The forward price earnings ratio in the US is between 16 and 17 times whilst for the UK it is around 14 to 15 times earnings. Should valuations rise markedly from here, it would increase the level of risk significantly. Further progress in equity markets requires corporate earnings to display growth, to begin to bring valuations back to more normal ranges. Excluding oil and commodity sectors, there are indications that profits and earnings growth is being achieved although more evidence is needed to confirm the trend.

What is encouraging is the recovery in relative performance within the equity market of medium and small companies as represented in the UK by the FTSE Mid 250 Index and the FTSE Small Companies (ex-Investment Companies) Index.

Total Returns	6 months	1 year
FTSE 100 Index
(Large Companies)	+5.8%	+5.7%
FTSE Mid 250 Index
(Medium Companies)	+16.1%	+16.5%
FTSE Small Companies
(ex Inv. Companies)	+15.0%	+8.6%

The recovery began in the second half of the fiscal year and is an interesting forward indicator of a strengthening economy both domestically and in Europe where much of the revenues for medium and smaller companies are reliant. Good earnings and dividend growth are anticipated and this would help to justify current valuations and create scope for more general progress in equity markets.

In terms of investment strategy both the Growth and Income Portfolios have a number of holdings in Investment Companies which specialise in the UK Mid and Small cap sectors. In the Growth Portfolio, The Mercantile Investment Trust and Schroder UK Mid Cap Fund, focus on mid caps whilst Strategic Equity Capital, new to the portfolio this year and BlackRock Throgmorton Trust are examples for the small cap sector. Two new holdings have been taken, both of which were IPO's this year and target the micro-cap sub sector (defined as quoted companies with a market value of less than £100m). They are River & Mercantile UK Micro Cap Investment Company and Miton UK MicroCap Trust. Provided there is a supportive macro environment, which there is in the UK currently, valuations are particularly attractive and if stock selection is good then returns can be especially strong. It is harder for an Income Portfolio to gain exposure in these areas due to a lack of dividend yield, however both The Mercantile Investment Trust and Invesco Perpetual UK Smaller Companies Investment Trust, a recent purchase, feature as holdings. One other holding purchased in the Growth Portfolio this year was Woodford Patient Capital Trust which listed in April, raising £800m. Eventually most of this fund will be invested in early stage growth companies in the UK many of which will have spun out from UK universities. Over the long term this fund has significant potential to grow.

From a longer term investment perspective this has been a period of unusually benign economic conditions both in the UK and the US. Combined with highly accommodative monetary policy this has been positive for equity markets. Although it is likely that the direction of interest rates over the next fiscal year may well change in the US which could cause a setback over the longer term, the broad environment in terms of inflation and growth remains constructive for equity markets. Provided corporate earnings and dividends grow as anticipated then that should support further progress in equity markets.

Peter Hewitt

Investment Manager

F&C Investment Business Limited

27 July 2015

Income Statement (audited)

Year to 31 May 2015

	Notes	Revenue	Capital	Total
		£'000	£'000	£'000
Gains on investments		-	6,908	6,908
Foreign exchange losses		-	(4)	(4)
Income		2,260	-	2,260
Investment management fees		(147)	(349)	(496)
Other expenses		(355)	-	(355)
Return on ordinary activities before finance      costs and tax		1,758	6,555	8,313
Finance costs		(13)	(27)	(40)
Return on ordinary activities before tax		1,745	6,528	8,273
Tax on ordinary activities	5	(8)	-	(8)
Return attributable to shareholders	2	1,737	6,528	8,265
Return per Income share	3	5.87p	5.95p	11.82p
Return per Growth share	3	-	17.80p	17.80p

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.

Segmental analysis, illustrating the two separate portfolios of assets, the Income Portfolio and the Growth Portfolio, is provided in note 2.

All revenue and capital items in the Income 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.

Income Statement (audited)

Year to 31 May 2014

	Notes	Revenue	Capital	Total
		£'000	£'000	£'000
Gains on investments		-	3,528	3,528
Foreign exchange losses		-	(9)	(9)
Income		1,971	-	1,971
Investment management fees		(125)	(297)	(422)
Other expenses		(332)	-	(332)
Return on ordinary activities before finance      costs and tax		1,514	3,222	4,736
Finance costs		(11)	(21)	(32)
Return on ordinary activities before tax		1,503	3,201	4,704
Tax on ordinary activities		(4)	-	(4)
Return attributable to shareholders	2	1,499	3,201	4,700
Return per Income share	3	5.56p	1.22p	6.78p
Return per Growth share	3	-	11.41p	11.41p

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.

Segmental analysis, illustrating the two separate portfolios of assets, the Income Portfolio and the Growth Portfolio, is provided in note 2.

All revenue and capital items in the Income 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.

Balance Sheet (audited)

As at 31 May 2015

		Income Shares	Growth Shares	Total
	Notes	£'000	£'000	£'000
Fixed assets
Investments at fair value		43,964	45,012	88,976
Current assets
Debtors		110	44	154
Cash at bank and on deposit		1,388	1,063	2,451
		1,498	1,107	2,605
Creditors
Amount falling due within one year		(1,623)	(1,728)	(3,351)
Net current liabilities		(125)	(621)	(746)
Net assets		43,839	44,391	88,230
Capital and reserves
Called-up share capital		3,469	2,884	6,353
Share premium		13,346	10,927	24,273
Capital redemption reserve		-	182	182
Special reserve		19,380	17,197	36,577
Capital reserves		6,320	13,201	19,521
Revenue reserve		1,324	-	1,324
Shareholders' Funds		43,839	44,391	88,230
Net asset value per share (pence)	6	126.37p	153.92p

Balance Sheet (audited)

As at 31 May 2014

		Income Shares	Growth Shares	Total
	Notes	£'000	£'000	£'000
Fixed assets
Investments at fair value		33,514	35,218	68,732
Current assets
Debtors		41	49	90
Cash at bank and on deposit		-	341	341
		41	390	431
Creditors
Amount falling due within one year		(577)	(258)	(835)
Net current (liabilities)/assets		(536)	132	(404)
Net assets		32,978	35,350	68,328
Capital and reserves
Called-up share capital		2,751	2,740	5,491
Share premium		5,312	8,295	13,607
Capital redemption reserve		-	182	182
Special reserve		19,380	15,700	35,080
Capital reserves		4,560	8,433	12,993
Revenue reserve		975	-	975
Shareholders' Funds		32,978	35,350	68,328
Net asset value per share (pence)	6	119.85p	136.41p

Cash Flow Statement (audited)

Year to 31 May 2015

		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Operating activities
Investment income received, net of withholding tax suffered		1,552	633	2,185
Deposit interest received		3	1	4
Investment management and performance fees paid		(220)	(239)	(459)
Other cash payments		(181)	(193)	(374)
Net cash inflow from operating activities		1,154	202	1,356
Servicing of finance
Interest paid on bank borrowings		(24)	(16)	(40)
Net cash outflow from servicing of finance		(24)	(16)	(40)
Capital expenditure and financial investment
Purchases of investments		(9,748)	(6,963)	(16,711)
Disposals of investments		1,609	1,826	3,435
Net cash outflow from capital expenditure and financial investment		(8,139)	(5,137)	(13,276)
Equity dividends paid		(1,388)	-	(1,388)
Net cash outflow before financing		(8,397)	(4,951)	(13,348)
Financing
Issue of new shares		8,752	2,115	10,867
Sale of shares from treasury		-	2,158	2,158
Loan drawndown		1,500	1,400	2,900
Net cash inflow from financing		10,252	5,673	15,925
Increase in cash		1,855	722	2,577
Reconciliation of net cash flow to movement in net debt
Increase in cash in the year Increase in loans		1,855 (1,500)	722 (1,400)	2,577 (2,900)
Opening net (debt)/cash		(467)	341	(126)
Closing net debt		(112)	(337)	(449)

Cash Flow Statement (audited)

Year to 31 May 2014

		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Operating activities
Investment income received, net of withholding tax suffered		1,397	565	1,962
Investment management and performance fees paid		(322)	(210)	(532)
Other cash payments		(163)	(187)	(350)
Net cash inflow from operating activities		912	168	1,080
Servicing of finance
Interest paid on bank borrowings		(25)	(7)	(32)
Net cash outflow from servicing of finance		(25)	(7)	(32)
Capital expenditure and financial investment
Purchases of investments		(3,602)	(3,937)	(7,539)
Disposals of investments		2,858	3,275	6,133
Net cash outflow from capital expenditure and financial investment		(744)	(662)	(1,406)
Equity dividends paid		(1,235)	-	(1,235)
Net cash outflow before financing		(1,092)	(501)	(1,593)
Financing
Issue of new shares		180	-	180
Shares purchased to be held in treasury		-	(325)	(325)
Sale of shares from treasury		866	1,597	2,463
Net cash inflow from financing		1,046	1,272	2,318
(Decrease)/increase in cash		(46)	771	725
Reconciliation of net cash flow to movement in net debt
(Decrease)/increase in cash in the year		(46)	771	725
Opening net debt		(421)	(430)	(851)
Closing net (debt)/cash		(467)	341	(126)

Reconciliation of Movements in Shareholders' Funds (audited)

Year to 31 May 2015

		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Opening shareholders' funds		32,978	35,350	68,328
Increase in share capital in issue, net of share issuance expenses		8,752	2,115	10,867
Shares sold from treasury		-	2,158	2,158
Transfer of net income to Income shares from Growth shares		393	(393)	-
Transfer of capital from Income shares to Growth shares		(393)	393	-
Dividends paid		(1,388)	-	(1,388)
Return attributable to shareholders		3,497	4,768	8,265
Closing shareholders' funds		43,839	44,391	88,230

Reconciliation of Movements in Shareholders' Funds (audited)

Year to 31 May 2014

		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Opening shareholders' funds		31,338	31,207	62,545
Increase in share capital in issue		180	-	180
Shares sold from treasury		866	1,597	2,463
Shares purchased for treasury		-	(325)	(325)
Transfer of net income to Income shares from Growth shares		368	(368)	-
Transfer of capital from Income shares to Growth shares		(368)	368	-
Dividends paid		(1,235)		(1,235)
Return attributable to shareholders		1,829	2,871	4,700
Closing shareholders' funds		32,978	35,350	68,328

Principal Risks and Uncertainties

The Board applies the principles detailed in the internal control guidance issued by the Financial Reporting Council, and has established an ongoing process designed to meet the needs of the Company in managing the risks and uncertainties to which it is exposed.

The Company's assets consist mainly of listed equity securities and its principal risks are therefore   market-related.  More detailed explanations of these risks and the way in which they are managed are contained in the notes to the accounts.

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 and exchange rates could affect share prices in particular markets.

·      Investment and strategic - incorrect strategy, asset 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 had 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 respect to the 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 1158 of the Corporation Tax Act 2010 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 to the Company, leading to a loss of shareholders' confidence.

·      Financial - inadequate controls by the Manager or third party service providers could lead to misappropriation of assets of the Company.  Inappropriate accounting policies or failure to comply with accounting standards could lead to misreporting or breaches of regulations.

The Board seeks to mitigate and manage these risks through continual review, policy-setting and reliance upon contractual obligations.  It also regularly monitors the investment environment and the management of the Company's investment portfolios.

Statement of Directors' Responsibilities in Respect of the Annual Financial Report

In accordance with Chapter 4 of the Disclosure and Transparency Rules, we confirm that to the best of our knowledge:

·      The financial statements contained within the Annual Report for the year to 31 May 2015, of which this statement of results is an extract, have been prepared in accordance with applicable UK Generally Accepted Accounting Practice, on a going concern basis, and give a true and fair view of the assets, liabilities, financial position and return of the Company;

·      The Strategic Report and the Report of the Directors within the Annual Report to 31 May 2015 includes a fair review of the important events that have occurred during the financial year and their impact on the financial statements;

·      'Principal Risks and Risk Management' includes a description of the Company's principal risks and uncertainties; and

·      The Annual Report includes details of related party transactions that have taken place during the financial year.

On behalf of the Board

Richard M. Martin

Chairman

27 July 2015

Notes (audited)

1.   The financial statements of the Company, which are the responsibility of, and were approved by, the Board on 27 July 2015, have been prepared in accordance with UK Generally Accepted Accounting Practice ("UK GAAP") and in accordance with guidelines set out in the Statement of Recommended Practice (''SORP'') for Investment Trust Companies and Venture Capital Trusts issued by the Association of Investment Companies (''AIC'') in January 2009. The audited financial statements for the Company comprise the Income Statement and the total columns of the Balance Sheet, the Cash Flow Statement, Reconciliation of Movements in Shareholders' Funds and the Company totals shown in the notes to the financial statements.

2.   Segmental analysis

            The Company carries on business as an investment trust and manages two separate portfolios of assets: the Income Portfolio and the Growth Portfolio.

            The Company's Income Statement can be analysed as follows. This has been disclosed to assist shareholders' understanding, but this analysis is additional to that required by UK GAAP:

Year ended 31 May 2015

	Income Portfolio			Growth Portfolio			Total
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments	-	2,315	2,315	-	4,593	4,593	-	6,908	6,908
Foreign exchange losses	-	(4)	(4)	-	-	-	-	(4)	(4)
Income	1,629	-	1,629	631	-	631	2,260	-	2,260
Investment management          fees	(96)	(144)	(240)	(51)	(205)	(256)	(147)	(349)	(496)
Other expenses	(173)	-	(173)	(182)	-	(182)	(355)	-	(355)
Return on ordinary activities before finance costs and tax	1,360	2,167	3,527	398	4,388	4,786	1,758	6,555	8,313
Finance costs	(10)	(14)	(24)	(3)	(13)	(16)	(13)	(27)	(40)
Return on ordinary activities before tax	1,350	2,153	3,503	395	4,375	4,770	1,745	6,528	8,273
Tax on ordinary activities	(6)	-	(6)	(2)	-	(2)	(8)	-	(8)
Return  #	1,344	2,153	3,497	393	4,375	4,768	1,737	6,528	8,265

Year ended 31 May 2014

	Income Portfolio			Growth Portfolio			Total
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments	-	845	845	-	2,683	2,683	-	3,528	3,528
Foreign exchange losses	-	(9)	(9)	-	-	-	-	(9)	(9)
Income	1,388	-	1,388	583	-	583	1,971	-	1,971
Investment management  fees	(82)	(123)	(205)	(43)	(174)	(217)	(125)	(297)	(422)
Other expenses	(162)	-	(162)	(170)	-	(170)	(332)	-	(332)
Return on ordinary activities before finance costs and tax	1,144	713	1,857	370	2,509	2,879	1,514	3,222	4,736
Finance costs	(10)	(15)	(25)	(1)	(6)	(7)	(11)	(21)	(32)
Return on ordinary activities before tax	1,134	698	1,832	369	2,503	2,872	1,503	3,201	4,704
Tax on ordinary activities	(3)	-	(3)	(1)	-	(1)	(4)	-	(4)
Return  #	1,131	698	1,829	368	2,503	2,871	1,499	3,201	4,700

# 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 and accordingly the whole return in the Growth Portfolio is capital.  Refer to the Reconciliation of Movements in Shareholders' Funds.

.

3.   Return per share

      The Return per share is as follows:

Year ended 31 May 2015	Income Shares			Growth Shares
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Return attributable to Portfolios	1,344	2,153	3,497	393	4,375	4,768
Transfer of net income from Growth to Income Portfolio	393	-	393	(393)	-	(393)
Transfer of capital from Income  to Growth Portfolio	-	(393)	(393)	-	393	393
Return attributable to    shareholders	1,737	1,760	3,497	-	4,768	4,768
Return per share	5.87p	5.95p	11.82p	-	17.80p	17.80p
Weighted average number of shares in issue during the year (excluding shares held in treasury)		29,576,498			26,785,117

Year ended 31 May 2014	Income Shares			Growth Shares
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Return attributable to Portfolios	1,131	698	1,829	368	2,503	2,871
Transfer of net income from Growth to Income Portfolio	368	-	368	(368)	-	(368)
Transfer of capital from Income  to Growth Portfolio	-	(368)	(368)	-	368	368
Return attributable to    shareholders	1,499	330	1,829	-	2,871	2,871
Return per share	5.56p	1.22p	6.78p	-	11.41p	11.41p
Weighted average number of shares in issue during the year (excluding shares held in treasury)		26,969,936			25,153,747

4.       Dividends

		2015
		Income shares Total
Dividends on Income shares		£'000
Amounts recognised as distributions to shareholders during the year:
For the year ended 31 May 2014
- fourth interim dividend of 1.5p per Income share		416
For the year ended 31 May 2015
- first interim dividend of 1.15p per Income share		318
- second interim dividend of 1.15p per Income share		325
- third interim dividend of 1.15p per Income share		329
		1,388
Amounts relating to the year but not paid at the year end:
- fourth interim dividend of 1.55p per Income share*		538

* Based on 34,689,936 Income Shares in issue at the record date of 19 June 2015.

The fourth interim dividend of 1.55p per Income share, was paid on 3 July 2015 to shareholders on the register on 19 June 2015, with an ex-dividend date of 18 June 2015.

The Growth shares do not carry an entitlement to receive dividends.

5.       (a) Tax on ordinary activities

    Year ended 31 May 2015

	Income Portfolio			Growth Portfolio			Total
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Current tax charge for the year (all irrecoverable overseas tax) being Taxation on ordinary activities	6	-	6	2	-	2	8	-	8

 (b) Reconciliation of tax charge

		2015
		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Return on ordinary activities before tax:		3,503	4,770	8,273
Corporation tax at standard rate of 20.8 per cent		729	994	1,723
Effects of:
Gains on investments not taxable		(482)	(957)	(1,439)
Overseas tax suffered		6	2	8
Non taxable UK dividend income		(165)	(117)	(282)
Non taxable overseas dividend income		(171)	(14)	(185)
Expenses not utilised		89	94	183
Current year tax charge (note 5 (a))		6	2	8

6.       The net asset value per Income share is calculated on net assets of £43,839,000 (2014: £32,978,000), divided by 34,689,936 (2014: 27,514,936) Income shares, being the number of Income shares in issue at the year end.

The net asset value per Growth share is calculated on net assets of £44,391,000 (2014: £35,350,000), divided by 28,839,843 (2014: 25,914,843) Growth shares, being the number of Growth shares in issue at the year end (excluding shares held in treasury). 

7.       During the year the Company resold nil (2014: 735,000) Income shares out of treasury, receiving net proceeds of £nil (2014: £866,000). At 31 May 2015 the Company held nil (2014: nil) Income shares in treasury.  A further 7,175,000 (2014: 150,000) Income shares were issued for net proceeds of £8,752,000 (2014: £180,000).

8.       During the year the Company bought back nil (2014: 270,000) Growth shares at a cost of £nil (2014: £325,000) to be held in treasury and resold out of treasury 1,490,000 (2014: 1,175,000) Growth shares, receiving net proceeds of £2,158,000 (2014: £1,597,000). At 31 May 2015 the Company held nil (2014: 1,490,000) Growth shares in treasury.  A further 1,435,000 Growth shares were issued for net proceeds of £2,115,000.

9.   Financial Instruments

The Company's financial instruments comprise its investment portfolio, cash balances, bank borrowings and debtors and creditors that arise directly from its operations. As an investment trust the Company holds a portfolio of financial assets in pursuit of its investment objective.

Listed and quoted fixed asset investments held are valued at fair value. The fair value of all other financial assets and liabilities is represented by their carrying value in the Balance Sheet.

The fair value of the financial assets and liabilities of the Company at 31 May 2015 and 31 May 2014 is not materially different from their carrying value in the financial statements.

The main risks that the Company faces arising from its financial instruments are:

(i)       market price risk, being the risk that the value of investment holdings will fluctuate as a result of changes in market prices caused by factors other than interest rate or currency rate movements;

(ii)      interest rate risk, being the risk that the future cash flows of a financial instrument or the fair value of the listed debt will fluctuate because of changes in market interest rates;

(iii)      foreign currency risk, being the risk that the value of investment holdings, investment purchases, investment sales and income will fluctuate because of movements in currency rates;

(iv)      credit risk, being the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company; and

(v)       liquidity risk, being the risk that the Company may not be able to liquidate its investments quickly or otherwise raise funds to meet financial commitments.

Market price risk

The management of market price risk is part of the fund management process and is typical of equity and debt investment. The portfolio is managed with an awareness of the effects of adverse price movements through detailed and continuing analysis with an objective of maximising overall returns to shareholders.

Interest rate risk

Floating rate

When the Company retains cash balances the majority of the cash is held in variable rate bank accounts yielding rates of interest linked to the UK base rate which was 0.5 per cent at 31 May 2015 (2014: 0.5 per cent). There are no other assets which are directly exposed to floating interest rate risk. The cost of the Company's borrowing facility from The Royal Bank of Scotland is linked to LIBOR which was 0.51 per cent at 31 May 2015.

Fixed rate

The Income Portfolio holds fixed interest investments.  Movements in market interest rates will affect the market value of fixed interest investments. 

              The Growth Portfolio does not hold any fixed interest investments.

The Company does not have any liabilities which are exposed to fixed interest rate risk.

Foreign currency risk

The Company may invest in overseas securities which give rise to currency risks.  At 31 May 2015 the Income Portfolio had a US dollar denominated investment valued at £1,372,000 (2014: £504,000), a Swiss Franc denominated investment valued at £1,430,000 (2014: £596,000) and a Euro denominated investment valued at £963,000 (2014:n/a).

As the remainder of the Company's investments and all other assets and liabilities are denominated in sterling there is no other direct foreign currency risk.  However, although the Company's performance is measured in sterling and the Company's investments (other than the above) are denominated in sterling a proportion of their underlying assets are quoted in currencies other than sterling. Therefore movements in the rates of exchange between sterling and other currencies may affect the market price of the Company's investment portfolios and therefore they have currency exposure.

Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The investment manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an ongoing basis. The carrying amounts of financial assets best represents the maximum credit risk exposure at the balance sheet date.

Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled transactions is considered to be small due to the short settlement period involved and the acceptable credit quality of the brokers used. The Manager monitors the quality of service provided by the brokers used to further mitigate this risk.

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 respect to securities held by the custodian to be delayed or limited. The Board monitors the Company's risk by reviewing the custodian's internal control reports.

The credit risk on liquid funds is controlled because the counterparties are banks with acceptable credit ratings, normally rated A or higher, assigned by international credit rating agencies. Bankruptcy or insolvency of such financial institutions may cause the Company's ability to access cash placed on deposit to be delayed, limited or lost.

              Liquidity risk

Liquidity risk is the risk that the Company will encounter difficulty in realising assets or otherwise raising funds to meet financial commitments.  The risk of the Company not having sufficient liquidity at any time is not considered by the Board to be significant, given that the Company's listed and quoted securities are considered to be readily realisable.

The Company's liquidity risk is managed on an ongoing basis by the investment manager in accordance with policies and procedures in place. The Company's overall liquidity risks are monitored on a quarterly basis by the Board.

The Company maintains sufficient investments in cash and readily realisable securities to pay accounts payable and accrued expenses which are settled in accordance with suppliers stated terms. At 31 May 2015, the Company had a £5 million unsecured revolving credit facility with The Royal Bank of Scotland plc of which £2.9 million had been drawn down.  All liabilities are considered to be repayable on demand for a consideration equal to the carrying value of the liabilities.

10.     Subject to certain minimum and maximum thresholds which may be set by the Board of F&C Managed Portfolio Trust plc ("the Board") from time to time, shareholders have the opportunity to convert their Income shares into Growth shares and/or their Growth shares into Income shares upon certain dates, the next of which will be 22 October 2015 and then annually or close to annually thereafter (subject to the articles of association of the Company). The Conversion notice period will commence on 27 July 2015 and full details will be provided on the Company's website from this date and in the Company's Annual Report and Accounts.

 11.    These are not full statutory accounts in terms of Section 434 of the Companies Act 2006. The full audited Annual Report and Accounts for the year ended 31 May 2015 will be sent to shareholders shortly, and will be available for inspection at 80 George Street, Edinburgh, the registered office of the Company.  The full Annual Report and Accounts will be available on the Company's website www.fcmanagedportfolio.co.uk 

The audited accounts for the year to 31 May 2015 will be lodged with the Registrar of Companies following the Annual General Meeting to be held on 14 September 2015.

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

 

END

 

 

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