ANNUAL REPORT
FOR THE YEAR ENDED
31 DECEMBER 2023
CONTENTS
Strategic Report
Company Overview 2
Financial Highlights 3
Chairman’s Statement 4
Fund Manager’s Review 9
Our Approach to Responsible Investment 17
Twenty Largest Listed Equity Holdings 28
Ten Year Record 30
Business Review 32
Purpose, Values and Investment Objective 32
Section 172 Statement 34
Key Stakeholder and Shareholder Engagement 35
Principal Policies 37
Key Performance Indicators 40
Principal and Emerging Risks 42
Long-Term Viability 44
Governance Report
Board of Directors 47
Directors’ Report 49
Corporate Governance Report 54
Report of the Management Engagement
Committee 57
Report of the Audit Committee 59
Directors’ Remuneration Report 65
Statement of Directors’ Responsibilities 69
Independent Auditor’s Report 70
Financial Report
Income Statement 78
Statement of Changes in Equity 79
Balance Sheet 80
Statement of Cash Flows 81
Notes to the Accounts 82
Notice of Annual General Meeting 105
Other Information
Management and Advisers 110
Additional Information for Shareholders 111
How to Invest 113
Alternative Performance Measures 114
Glossary of Terms 117
2024-25 Financial Calendar
Annual General Meeting 2 May 2024
Final dividend for 2023 payable 9 May 2024
Interim Results for 2024 announced end July 2024
First interim dividend for 2024 payable August 2024
Second interim dividend for 2024 payable November 2024
Third interim dividend for 2024 payable February 2025
Final Results for 2024 announced March 2025
Final dividend for 2024 payable May 2025
THIS DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION. If you are in any doubt about the
action you should take, you are recommended to seek your own independent financial advice from your stockbroker,
bank manager, solicitor, accountant or other independent financial adviser authorised under the Financial Services and
Markets Act 2000 if you are in the United Kingdom or, if not, from another appropriately authorised financial adviser. If
you have sold or otherwise transferred all your ordinary shares in F&C Investment Trust PLC please forward this document,
together with the accompanying documents, immediately to the purchaser or transferee or to the stockbroker, bank or
agent through whom the sale or transfer was effected for transmission to the purchaser or transferee. If you have sold or
otherwise transferred only part of your holding of shares, you should retain these documents.
TRUE TO OUR GOAL
FOR OVER 150 YEARS
Our focus has never wavered since the day we were
founded in 1868. Our approach aims to deliver long-
term growth in capital and income. To achieve this,
we invest on the world’s major and developing stock
and private markets in the shares of established
companies, strong newcomers and rising stars.
It’s a diverse portfolio strategy that also gives investors
exposure to a range of well managed private equity
funds and co-investments. Whether you’re new to
investing or looking to add a firm foundation to your
existing portfolio, it's smart to start with F&C.
2
COMPANY OVERVIEW
F&C Investment Trust PLC (the ‘Company’ or ‘FCIT’ or ‘F&C’) was founded in 1868 as the first investment trust with the
purpose of providing the investor of more moderate means access to the same opportunities and advantages as the very
largest investors.
This purpose continues today, providing a foundation for the long-term investment needs of large and small investors
through a diversified, convenient and cost-effective global investment choice.
The Company’s objective is to achieve long-term growth in capital and income through a policy of investing primarily in
an internationally diversified portfolio of publicly listed equities, as well as unlisted securities and private equity, combined
with the use of gearing.
Our approach is designed to obtain the investment performance benefits from a range of individually concentrated global
and regional portfolios alongside the diversification benefits of lower risk and lower volatility achieved by managing
those portfolios in combination. Offering a globally diversified portfolio of growth assets, the Company aims to be a core
investment choice through all available channels.
The Company continues to evolve, allowing it to keep pace with new investment opportunities and maintain its relevance in
today’s world. A commitment has been made to transition the Company's portfolio to net zero carbon emissions by 2050,
at the latest.
The Company is suitable for retail investors in the UK, professionally advised private clients and institutional investors who
seek growth in capital and income from investment in global markets and who understand and are willing to accept the
risks, as well as the rewards, of exposure to equities.
VISIT OUR WEBSITE AT fandc.com
The Company is registered in England and Wales with company registration number 12901
Legal Entity Identifier: 213800W6B18ZHTNG7371
FORWARD-LOOKING STATEMENTS
This document may contain forward-looking statements with respect to the financial condition, results of operations and business of the
Company. Such statements involve risk and uncertainty because they relate to future events and circumstances that could cause actual
results to differ materially from those expressed or implied by forward-looking statements. The forward-looking statements are up to
date as at the date of this report and are based on the Directors’ current view and on information available to them as at that date. There
is no obligation to update the statements and nothing should be construed as a profit forecast.
DIVIDEND
HERO
3
Strategic Report
Annual Report and Accounts 2023
FINANCIAL HIGHLIGHTS
8.1% share price total return*
+8.1%
DELIVERING LONG-TERM GROWTH IN CAPITAL AND INCOME
Potential investors are reminded that the value of investments and the income from dividends may go down as well as up
and investors may not receive back the full amount invested. Tax benefits may vary as a result of statutory changes and
their value will depend on individual circumstances.
* See Alternative Performance Measures on page 114.
† The final dividend for 2023 is subject to shareholder approval at the forthcoming Annual General Meeting.
Total dividends*† per share – pence
Share price discount/premium* to net asset
value* at 31 December – %
A dividend has been paid every year since inception and has increased every year for the past 53 years. Over the last ten years
it has increased by 63.3% (5.0% compound per annum), compared with inflation of 32.8% (2.9% compound per annum).
Source: Columbia Threadneedle Investments
Net asset value* per share with debt at market
value at 31 December – pence
Mid-market price per share at 31 December –
pence
0
100
200
300
400
500
600
700
800
900
1,000
2023202220212020201920182017201620152014
962.0
Source: Columbia Threadneedle Investments
Source: Columbia Threadneedle Investments Source: Columbia Threadneedle Investments
In the last ten years the Company has grown a £1,000 investment, with dividends reinvested, to £3,030.
Net Asset Value total return*
of 11.3%, with debt at market
value, which was behind the
return from our benchmark, the
FTSE All-World Index, of +15.1%
+11.3%
Annual dividend*† per share
up by 8.9% to 14.7p, our 53rd
consecutive annual increase
53rd
The discount* to NAV moved
from 3.0%, to end the year at
5.9%
5.9%
0
100
200
300
400
500
600
700
800
900
1,000
1,100
2023202220212020201920182017201620152014
1,022.1
-10
-8
-6
-4
-2
0
2
2023202220212020201920182017201620152014
-5.9
0
2
4
6
8
10
12
14
16
2023202220212020201920182017201620152014
14.7
4
CHAIRMANS STATEMENT
“ONE OF THE GREAT STRENGTHS OF YOUR COMPANY IS
ITS ROBUST CORPORATE STRUCTURE AND ITS ABILITY
TO TAKE A LONG-TERM PERSPECTIVE WITH RESPECT TO
INVESTMENT OPPORTUNITIES.
Dear Shareholder,
2023 was a good year for global equity markets after
significant losses during 2022. For most of the year overall
market returns were driven by a handful of the largest US
listed companies. As a result, market concentration was
the highest it has been in decades. Gains amongst this so-
called ‘Magnificent Seven’ group of stocks, which includes
Amazon, Apple, Microsoft and Nvidia, each of which are
held in our portfolio, were a reversal of the losses seen
amongst this cohort in 2022 and were driven, in part, by
optimism over Artificial Intelligence (‘AI’).
As well as investor enthusiasm for the AI theme, the global
economy performed significantly better than had been
feared. Despite further rises in interest rates by major
central banks during 2023 the US and global economy
avoided recession, delivering a better outcome than had
widely been expected at the start of the year. As the
year progressed investors had increasing conviction that
an economic soft landing would unfold, with economic
growth slowing but remaining reasonably robust, and
inflation rates would continue to decline in 2024. This led
to the view that central banks would be able to embark on
a course of meaningful cuts in interest rates and a global
recession could be avoided. This propelled equity markets
more broadly to strong gains in the latter months of the
year, leading to a period of solid returns for our listed
portfolio.
Our net asset value ('NAV') per share, with debt at market
value, rose from 932.1 pence to 1,022.1 pence and our
share price rose from 904.0 pence to 962.0 pence. The
Company produced a strong NAV total return in absolute
terms of +11.3% but underperformed the total return from
our benchmark of +15.1%. In common with much of the
investment company sector, the discount at which our
share price traded relative to NAV widened. It moved from
3.0% at the start of the year to end the year at 5.9%. This
widening detracted from shareholder returns, resulting in
a share price total return of +8.1%. Following a challenging
year for markets in 2022 when we had delivered the
strongest shareholder return amongst our peer group of
global investment companies, in 2023 our return slightly
lagged those peers.
In many respects, performance trends within equity
markets during 2023 were a reversal of those of the prior
year. Developed equity markets performed well, with the
US S&P 500 index delivering dollar returns of greater than
25%, while the Japanese market produced its strongest
annual return for decades. The largest capitalised growth
stocks which had suffered material losses during 2022
recovered meaningfully despite further rises in interest
rates and lingering concerns over inflation. Our portfolio,
having navigated volatile markets relatively successfully
during the prior year, began 2023 with a greater
weighting to more lowly-rated, value stocks relative to
the more expensive, faster growing, growth stocks. This
stance was adjusted during the early part of the year
to provide a more balanced exposure. Growth stocks
subsequently delivered material outperformance against
cheaper value stocks.
We delivered strong absolute performance from most
of our underlying strategies, most notably European
equities, but under exposure relative to our benchmark
index to some of the very largest stocks in the market
5Annual Report and Accounts 2023
Strategic Report
in several of our US and global strategies led to modest
underperformance against our benchmark index within
our listed equity portfolio. Meanwhile, our private equity
holdings, in aggregate, lost value over the year and
produced returns well behind those of listed equivalents.
As our portfolio of investments is predominantly invested
in overseas assets, the rise in sterling, which gained 6.0%
against the US dollar, was detrimental to absolute returns.
In a year when equity markets delivered good positive
returns, our gearing added value.
I reported last year that our strong performance had led
to our inclusion, for the first time since 2009, in the FTSE
100 index. I am pleased to report that we maintained
our position in this index of leading UK listed companies
through the year and have now retained our place in the
index for the longest period since it was launched 40
years ago. While there is much debate over the challenges
facing listed UK companies and the performance
delivered by our domestic market, our decision to adopt
a truly global approach to consideration of investment
opportunities has served shareholders extremely well.
Although it is not our primary comparator index, since
the FTSE 100 index was launched in 1984 your Company
has delivered a cumulative total return of approximately
double the return of this index, with a gain of over 7,800%
over the forty year period, equivalent to 11.6% total return
per annum.
LONG-TERM RESULTS
Our investment objective is the delivery of growth in both
capital and income for shareholders over the long-term
and our results remain strong. While there have been
periods of volatility over shorter-term periods, global
equity markets have delivered extremely impressive
returns in recent decades.
Over the ten years to the end of 2023 your Company
delivered a total shareholder return of +203.0%, equivalent
to +11.7% per annum, which compares with a return of
+178.6% (equivalent to +10.8% per annum) from our
benchmark index. As well as strong returns over the decade,
returns for shareholders have been remarkably consistent
on an annual basis, with only two years of negative returns,
which in each case were less than 1% per annum.
Further demonstrating the importance of taking a
long-term perspective to investment returns, over the
FCIT NAV and share price performance vs Benchmark
(1)
over 10 years
FCIT annual dividend growth vs Consumer Price
Index over 10 years
Rebased to 100 at 31 December 2013
Source: Columbia Threadneedle Investments & Refinitiv Eikon
50
100
150
200
250
300
350
2015 20202013 2016 2017 2018 20192014
FCIT - NAV total return
FCIT - Share price total return
2021
Market Benchmark
20232022
100
110
120
130
140
150
160
170
2015
2020
2013
2016
2017
2018
2019
2014
Consumer Price index
F&C Investment Trust
annual dividend per share
2021
2023
2022
Rebased to 100 at 31 December 2013
Source: Columbia Threadneedle Investments & Refinitiv Eikon
(1) See glossary of terms on page 117 for explanation of "benchmark".
6
twenty-year period to 31 December 2023 the Company’s
NAV return was +561.8%, equivalent to +9.9% per annum.
Our NAV capital-only return over the past twenty years
was +410.3% (8.5% per annum) and our shareholder
total return was 667.9%, or 10.7% per annum. Dividends
paid to shareholders have risen by 5.0% per annum over
the past decade and by 7.1% over the past twenty years.
Such results continue to demonstrate the importance of
compounding income and capital gains over long periods
in the process of value creation for shareholders.
FIFTY THIRD CONSECUTIVE ANNUAL DIVIDEND
INCREASE
It was another positive year for our earnings, with our
gross income exceeding £100m for the first time and our
net return rising to another record high of £81.7m. Special
dividends increased to £4.4m (2022: £1.6m). The impact
of currency movements reduced our income by £0.6m
(2022: +£4.9m). Our Net Revenue Return per share rose
by 13.7%, to 15.83 pence, from 13.92 pence per share in
2022. This is a lower rate of increase than the previous
year but, nonetheless, represents another period of robust
growth in our income.
Inflation remained elevated, particularly in the early part
of the year, but began to decline at a relatively brisk pace
during the second half of the year. Indeed, the annual rate
of inflation (as measured by the Consumer Price Index)
fell to 4.0% by the end of the year, less than half that of
the 10.5% level seen at the end of 2022.
It remains the ambition of the Board to deliver real rises
in dividends for shareholders over the long-term that
are sustainable. I am therefore pleased to report another
rise in the proposed annual dividend which will again be
fully covered by our revenue. Subject to approval at the
Annual General Meeting (‘AGM’), shareholders will receive
a final dividend of 4.5 pence per share on 9 May 2024,
bringing the total dividend for 2023 to 14.7 pence: an
increase of 8.9% over that of 2022. The increase compares
to the 4.0% rate of inflation and means that the growth
in our total dividend has exceeded the UK inflation rate
over three, five and ten years. Indeed, the growth in
our dividends over the past decade, at 63.3%, is almost
double that of UK inflation over the equivalent period.
Furthermore, as well as being our fifty-third consecutive
rise in annual dividends, our full year 2023 dividend is our
one hundred and fifty-sixth annual dividend payment.
We continue to benefit from a strong financial position
with respect to both our revenue reserve (£107.3m),
which represents almost one year of dividend payments
to shareholders, and our capital reserves which stood at
£4.66bn at the year end. We therefore remain very well
placed to continue our track record of increasing annual
dividends well into the future.
COMPANY RATING AND EFFICIENCY
Since the Covid-19 pandemic, your Company’s shares have
generally traded at a discount to NAV. They did, however,
trade at a premium rating once again in the early part
of the year but in common with the wider investment
company sector the discount widened over 2023.
Consequently, we bought back a total of 8.6m shares into
treasury as part of our commitment towards achieving
a sustainably low deviation between our share price and
NAV as well as reducing the volatility of the discount. Our
discount averaged 6.6% over 2023 and ended the year at
5.9%.
Our Ongoing Charges figure declined to 0.49%, down
from 0.54% in 2022. Management fees declined by
9.5%, reflecting the benefits of firstly our revised fee
arrangement with Columbia Threadneedle Investments
(0.3% on our market capitalisation up to £4 billion and
at 0.25% thereafter), secondly a lower level of equity
assets managed by third party managers and thirdly
a lower fee arrangement with JPMorgan, our newly
appointed US large cap growth manager. The Board
remains focused on delivering value for money for
shareholders as part of its performance objectives.
BORROWINGS
We entered 2023 with £244m of cash and cash
equivalents, reflecting the impact of long-term borrowings
which we had drawn but not invested during 2022 and
the relatively cautious view of our Fund Manager. We did
not undertake any new borrowings over the course of
the year, but we invested some of our cash. Our overall
borrowings stood at £581.0m at the end of the year,
meaning that our effective gearing level (with debt at par
and including our £80m holding of Government bonds as
part of our investment portfolio) rose to 9.9% from 7.3% at
the start of the year.
The Company remains exceptionally well positioned with
respect to long-term borrowings, which (excluding our
very small perpetual debenture) we have put in place with
CHAIRMANS STATEMENT (CONTINUED)
7Annual Report and Accounts 2023
Strategic Report
maturities out to 2061 and have a blended fixed interest
rate of approximately 2.4%. Low interest rates present
a low hurdle for our investments held against these
borrowings to add value for shareholders over the life of
the loans.
F&C INVESTMENT TRUST LECTURE
Following the success of the lectures that the Company
sponsored in 2018, 2020 and 2022, I am pleased to advise
that the Company will again be sponsoring a lecture this
year. The lecture will be held at The Nobu Hotel, London
on 6 June 2024, with the theme "Social Change and
Future Generations " and will feature thought-provoking
presentations from two renowned speakers as well as
information on the Company’s investment approach from
our Fund Manager, Paul Niven.
As tickets will be limited, they will be made available to
shareholders and the public via a ballot, with successful
applicants selected at random. Video clips will be made
available to everyone on the Company’s website following
the event.
BOARD COMPOSITION
Anuradha (Anu) Chugh was appointed to the Board on 1
July 2023, replacing Francesca Ecsery who retired from
the Board at the conclusion of the 2023 AGM. Anu’s
appointment continues our succession planning which
aims to ensure that we maintain the highest levels of
skills and experience on the Board in order to deliver the
Company’s objective.
I am sorry to report that Tom Joy will step down from
the Board on 31 March. Tom has accepted an opportunity
to take a new executive role which precludes him from
continuing as a Director of the Company. We shall miss
Tom’s considerable investment knowledge and experience
in global equity markets. The process to recruit his
successor is already under way and we expect to make an
announcement at, or shortly after, the AGM.
ANNUAL GENERAL MEETING
This year’s AGM will again be a "hybrid" meeting, which
will enable shareholders who cannot attend in person
to view the AGM online and to participate by asking
questions and voting if they wish. Full details of how to do
so are set out in the letter that accompanies your Form of
Proxy or Form of Direction.
Voting will be conducted by way of a poll and you are
requested to lodge your votes ahead of the meeting by
completing your Form of Proxy or Form of Direction in
accordance with the instructions. Its completion and
return will not preclude you from attending the meeting
and voting in person. If you are unable to attend the
AGM, you are requested to submit any questions you
may have with regard to the resolutions proposed at the
AGM, or the performance of the Company, in advance
of the meeting to fcitagm@columbiathreadneedle.com.
Following the AGM, the Fund Manager’s presentation will
be available on the Company’s website fandc.com.
OUTLOOK
2023 saw a reversal of many of the performance
trends which had dominated equity markets in 2022.
The renewed optimism in large capitalisation growth
stocks has pushed US equity market valuations to high
levels. It is important to recognise, however, that the
high valuation levels are largely a function of the small
number of exceptional companies which hold dominant
market positions in segments of the market which have
enjoyed rapid growth and which provide exciting growth
prospects for investors going forward.
While economic growth is slowing it currently seems that
the outlook for the global economy looking into 2024
and beyond is significantly better than had been feared.
Inflation should continue to moderate, falling closer to
central banks’ targets and the interest rate cuts which
markets are now pricing in should materialise as we move
through this year. With a reasonable outlook for corporate
earnings this backdrop presents a generally more positive
fundamental picture for global equities.
As usual, however, markets face numerous risks. Market
valuations, while concentrated in a specific segment of the
market, leave limited scope for disappointment if inflation
and interest rates remain higher, or corporate earnings
prove less robust, than expected. Furthermore, conflict in
both Ukraine and the Middle East present ongoing risks
to wider economic fundamentals, primarily through any
potential impact on commodity prices. Globally the large
number of elections taking place in 2024 also present
scope for uncertainty and impact on investor sentiment.
In particular the US Presidential election in November is
likely to prove a point of focus as we move through the
year.
8
One of the great strengths of your Company is its
robust corporate structure and its ability to take a
long-term perspective with respect to investment
opportunities. While interest rate rises have recently
presented challenges in the form of increased costs for
those companies which needed to refinance their debt,
our long-dated and diversified fixed rate loans provide
extremely low rates of funding for our investments. Our
dividend, set to rise for the fifty-third consecutive year,
is covered by our earnings and we continue to hold
significant revenue reserves which should help us to meet
our aspiration of delivering rises in dividends in real terms
in coming years. Technological advancements in AI and
related areas are creating great excitement and significant
opportunity for investors. There are also signs that market
performance is broadening beyond the dominant (and
highly valued) few which should benefit our diversified
approach.
Our Private Equity portfolio, which is predominantly
focused on mid-market opportunities, has largely avoided
exposure to some of the more speculative areas of the
market in the last few years and our recent Growth and
Venture Capital investments remain very early in terms of
their programme. While exits within the private markets
space have slowed materially, we continue to see good
opportunities in terms of both primary and secondary
investment.
There remains uncertainty with respect to the near term
economic and political outlook and we expect an element
of volatility in both bond and equity markets as inflation
and interest rate expectations adjust over 2024 and as
investors assess the implications of fast-evolving trends
in AI and technology. Nonetheless, we remain confident
that our long-term focus and diversified approach will
continue to serve shareholders well in terms of pursuit of
our objective of delivering growth in capital and income.
Beatrice Hollond
7 March 2024
CHAIRMANS STATEMENT (CONTINUED)
9Annual Report and Accounts 2023
Strategic Report
FUND MANAGERS REVIEW
“WHILE NEAR TERM UNCERTAINTY OVER THE PATH OF
INTEREST RATES AND ECONOMIC GROWTH REMAINS HIGH
AND POLITICAL EVENTS AND MILITARY CONFLICT PRESENT
RISKS, WE REMAIN OPTIMISTIC ON THE PROSPECTS FOR
OUR HOLDINGS OVER THE LONGER TERM.
MARKET BACKDROP
A small group of stocks, who have come to be known
as the ‘Magnificent Seven’, comprising Apple, Alphabet,
Amazon, Meta, Microsoft, Nvidia, and Tesla, dominated
market returns during 2023. These stocks collectively
doubled in value over the year, with Nvidia delivering the
strongest returns amongst all of the S&P 500 constituents.
It became the fifth amongst this group to end the year
with a $1 trillion market valuation.
The marked turn in fortunes for leading technology-
based companies after a poor 2022 was fuelled, in part,
by investor excitement related to Artificial Intelligence
(‘AI’). Applications such as Chat-GPT entered public and
market consciousness, leading to a debate over the speed
of technological advancement, the likely rate of uptake
by businesses and consumers and the wider economic
and social implications for workers and corporates. Each
of these seven highly performing companies were seen
as key beneficiaries from the more widespread adoption
of AI, with Nvidia the standout winner in performance
terms over the year. More generally, the outperformance
of highly valued growth stocks in the US market was
particularly pronounced in the early part of the year. Rises
in interest rates caused stress in US regional banks, with
Silicon Valley Bank ('SVB') the largest bank to fail since
Washington Mutual during the Global Financial Crisis in
2008. The US Federal Reserve responded quickly and
forcefully to contain the problem and widespread fears
that this would generate a broader credit crunch proved
to be unfounded.
Despite ongoing strength in labour markets, with US
unemployment hitting the lowest rate since 1969 at 3.4%
in April, as the year progressed inflation began to fall and
the widely expected recession failed to materialise. Having
raised interest rates to 5.5% at their July meeting, the US
rate-setting committee kept them on hold for the rest of
the year and, following the December meeting, dovish
comments by the Chair, Jerome Powell, fuelled hopes that
rate cuts were likely in the coming spring. Markets rallied
in response, taking the gain in the S&P500 to 26.3% in US
dollar terms for the year. As optimism increased that the
US economy would enjoy a soft landing, even conflict in
the Middle East could not disrupt market optimism and
the rally in equities broadened beyond the previously
dominant mega-cap technology names, reflecting a view
FCIT share price 2023 (pence per share)
825
850
875
900
925
950
975
1,000
Dec
2022
Mar
2023
Jun
2023
Sep
2023
Dec
2023
Source: Refinitiv Eikon
10
that earnings more widely would remain positive and that
the cost of government and corporate borrowing should
continue to ease.
Outside of the US, Japan enjoyed a renaissance in
the stock market, with the Nikkei delivering the best
annual return in yen terms for more than three decades.
Optimism over corporate reform and the prospects for
improving focus on shareholder value buoyed markets.
Elsewhere in Asia though, China and Hong Kong
delivered negative returns for the year, with investor
disappointment over a lack of policy action and sluggish
growth post Covid impacting sentiment. By contrast,
despite a relatively poor economic backdrop, Europe
had a good year. As in the US, inflation declined closer to
central bank targets as the year progressed and, although
Germany seemed to be on the edge of recession during
the year, investors focused on the prospect of interest
rates cuts in 2024, boosting market valuations, despite
sluggish corporate earnings.
INVESTMENT PERFORMANCE
As explained on page 32, our investment strategy remains
one of managing the Company’s assets across a range of
diversified investment portfolios, each adopting their own
individual investment approach. Each individual portfolio
invests on a global or a regional basis using the wide
range of skills and resources available from the Manager
or, in the case of the majority of our US exposure, from
external third-party managers. The Company invests
in both public and private equity opportunities across
the world and has adopted this diversified approach to
reduce risk and produce consistent returns for investors
with the objective of delivering growth in both capital and
income over the long-term.
Our portfolio of investments delivered a return of +11.7%
for the year against the benchmark return of +15.1%. The
contributors to our total return are shown in the table
below.
Our year-end allocations and underlying geographic
exposures are shown in the tables below and overleaf.
LISTED EQUITIES
Developed market equities posted strong gains, after a
year of losses in 2022. Amongst our regional strategies
European equities (including UK equities and Gilts)
posted a gain of 22.7% while North America, our largest
exposure, increased by 16.6%. Japan (+11.4%) also
delivered strong gains while emerging markets were a
laggard, rising by a relatively modest 0.4% for the year.
Excitement over the potential impact from AI was a
significant contributor to market performance during
the year. Nvidia, which ended the year as our sixth
Contributors to total returns in 2023 (%)
Portfolio return
(1)
11.7
Management fees (0.4)
Interest and other expenses (0.4)
Buy backs 0.2
Change of value of debt (0.1)
Gearing/other 0.3
NAV total return 11.3
Change in share price discount (3.2)
Share price total return 8.1
FTSE All-World total return 15.1
Source: Columbia Threadneedle Investments
(1) See Glossary of terms on page 120 for explanation of "Portfolio return".
Underlying Classification of Listed Investment
Portfolio (excluding Gilts) as at 31 December 2023
Technology 25.6%
Consumer Discretionary 17.0%
Financials 14.6%
Industrials 12.6%
Healthcare 10.4%
Energy 4.9%
Consumer Staples 3.8%
Basic Materials 3.8%
Telecommunications 3.2%
Utilities 2.6%
Real Estate 1.5%
Source: Columbia Threadneedle Investments
FUND MANAGER’S REVIEW (CONTINUED)
11Annual Report and Accounts 2023
Strategic Report
largest holding, produced the strongest returns amongst
the S&P500 stocks, gaining by 239% and helping the
bellwether index to a return, in US dollar terms, of +26.3%.
It benefited from increased demand for its AI processors,
where the company holds a dominant market position.
While Nvidia produced extraordinary levels of return on
the year, it followed a halving of the stock price in 2022.
This pattern of recovery in share prices was repeated
across the other leading growth stocks in the US market.
Meta, which had declined in value by close to two thirds
in 2022, also posted strong gains on the year, up by 194%
in US dollar terms. Including the performance of the
other five stocks which constitute the 'Magnificent Seven'
(Apple (+49.0%), Alphabet (+58.3%), Amazon (+80.9%),
Microsoft (+58.2%) and Tesla (+101.7%)) in aggregate this
group of stocks doubled in value over the year, propelling
them to a combined weight of around one third of the US
stock market. Such high levels of market concentration
have rarely been seen throughout history and, reflecting
the narrow performance seen during the year, the gap
between the annual return from the market capitalisation
and equally weighted versions of the index (+13.8%) was
the widest since 1998 and the “dot com” bubble.
The marked outperformance of highly valued growth
stocks relative to more lowly rated value holdings
contrasted with the performance trends of the prior year.
Financial stocks were hit particularly hard during the first
quarter when SVB collapsed, leading to a brief period of
contagion that threatened to cause wider damage to the
financial system. Around the same time, Credit Suisse,
which had been under pressure for some time, suffered
large deposit outflows and agreed to a takeover by
UBS, backed by state-based guarantees from the Swiss
government.
Our North American returns (+16.6%) were behind
those of the US benchmark (+18.9%). Barrow Hanley,
our longstanding US value manager, produced a return
of +7.1%, which lagged the broader market but which
exceeded the returns from comparator value-based
indices. Our exposure to Barrow Hanley was reduced
during the first quarter, as we split our exposure to
value stocks and funded a new allocation to Columbia
Threadneedle Investments. This new strategy produced
modest underperformance from the date of funding to
the end of the year.
As reported last year, we also allocated capital to a new
growth-based strategy managed by JPMorgan Asset
Management, divesting in entirety from T Rowe Price,
who had delivered below benchmark returns in recent
years. This strategy produced returns of +26.0% from
the point of funding in January to end of the year, the
highest return of all of our strategy exposures, but lagged
the exceptional returns of growth-oriented stocks over
the period. Finally, within our North American allocation,
our core holding, which is also managed by Columbia
Weighting, stock selection and performance over one year in each investment portfolio strategy and underlying
geographic exposure versus Index at 31 December 2023
Investment
Portfolio
Strategy
Our portfolio
strategy
weighting %
Underlying
geographic
exposure
(1)
%
Benchmark
weighting %
Our strategy
performance
in sterling %
Net index
performance
in sterling %
North America 38.6 58.1 63.4 16.6 18.9
Europe inc UK
(4)
12.2 23.3 16.1 22.7 13.4
Japan 4.7 6.3 6.2 11.4 12.8
Emerging Markets 6.1 8.7 9.9 0.4 3.6
Developed Pacific 3.6 4.4 4.8
Global Strategies
(2)
27.1 10.7 15.1
Private Equity
(3)
11.3 (1.7)
(1) Represents the geographic exposure of the portfolio, including underlying exposures in private equity and fund holdings.
(2) The Global Strategies allocation consists of Global Income, Global Value, Global Sustainable Opportunities and latterly Global Focus.
(3) Includes the holdings in Schiehallion and Syncona.
(4) Includes the holdings in Gilts.
Source: Columbia Threadneedle Investments
12
Threadneedle Investments, kept pace with strong markets,
producing a return of +19.5%, slightly ahead of benchmark.
The US value portfolio, managed by Barrow Hanley,
delivered good returns against value indices, delivering
outperformance of around 2%. Much of the excess return
was driven by positions in industrials and information
technology, where stock selection was beneficial to
relative returns. Two stocks stood out in terms of
positive contribution to returns during the year. Firstly,
Broadcom, which increased by 93.6%. This company
designs, develops and supplies semiconductor and
infrastructure software solutions and it reported strong
growth in AI and enterprise software segments. The
integration of recently acquired VMW may provide
scope for further improvement in growth in due course.
The second significant contributor to relative returns
for the year was Vertiv Holdings which, in delivering a
gain of 233.5%, rivalled Nvidia for best performing US
holding during the year. This company supplies cooling
equipment and technology to data centres and stands to
benefit from increased spending on digital infrastructure.
Improvements in margins and bullish sentiment on AI
helped contribute to strong returns. Other positive
contributors included technology company Qualcomm
(+28.0%) which stands to benefit from a recovery in the
handset market, while Dollar General was a detractor.
This holding was disposed of during the year after the
company reduced earnings guidance meaningfully due
to softer sales and challenges in clearing inventory.
The manager concluded that these uncharacteristic
operational challenges from a previously highly
performing stock were likely to continue.
JPMorgan delivered strong returns although they did
slightly lag the gain from the Russell 1000 Growth
index. Technology and consumer discretionary holdings
produced the strongest returns from a sectoral
perspective. Overweight positions in index heavyweights
Meta and Nvidia, as well as a position in Uber were all
helpful for relative returns, with each of these stocks
more than doubling in value over the year. Conversely,
while a smaller portion of the portfolio, stock selection in
financials (including a small position in SVB Financial, the
holding company of SVB), energy and in healthcare stocks
was detrimental to relative returns.
Our European portfolio produced excellent returns in
absolute and relative terms, gaining by 22.7% versus the
benchmark return of +13.4%. Significant contributors
during the year included Melrose Industries (+100.0%)
which, after three consecutive years of annual losses,
posted strong performance as the spin-off of its autos
business demonstrated the focus on its core aerospace
division, where the business quality is high and future
prospects for growth are strong. CRH (+71.7%) was also
a highlight, with strong underlying business performance
and a re-listing in the US driving new investor interest
while also, unfortunately, demonstrating some of the
shortcomings of a UK listing for leading companies.
Litigation finance company Burford (+83.2%) was also a
highlight during the year, with a significant legal decision
relating to the forced nationalisation of Argentinian
oil company, YPF, contributing to positive results.
Elsewhere, UBS (+62.1%) which, with state backing,
purchased troubled Credit Suisse on attractive terms,
to create an enlarged wealth management group, was
buoyed as investors warmed to the deal, recognising
improved growth prospects and positive synergies from
the transaction. Other positives included our holding in
SAP (+44.1%), which is seeing a return to growth in cloud
revenues and viewed as another beneficiary of the AI
theme. Detractors from returns included some of our bank
holdings, including disappointing returns from the Bank
of Ireland (-7.5%) as well as poor returns from online food
delivery platforms, Delivery Hero (-45.3%) and JustEat
(-29.9%) due to increased competition and slowing
growth.
In 2023 our Japanese strategy slightly underperformed
its benchmark, though still gained by 11.4% on the year.
The Japanese market enjoyed a very strong year in local
currency terms (the Nikkei gained 30.9%), though returns
for sterling-based investors were somewhat dampened by
yen weakness. Japanese equities in general hit levels not
seen for over thirty years, spurred by global interest rate
cut expectations, economic re-opening, healthier wage
growth, modest inflation, and long-awaited improvements
in corporate governance. We saw sector allocation
headwinds in 2023, with an underweight stance on banks
detracting as Japanese lenders rallied on the prospects
of higher net interest margins. An overweight stance on
healthcare was also a headwind given the fact that this
more defensive sector underperformed in the more risk-
tolerant environment. In contrast to the US, the Japanese
market also saw strong performance from lowly rated
stocks in 2023, largely driven by Tokyo Stock Exchange
emphasis on cheap (low Price to Book ratio) companies
FUND MANAGER’S REVIEW (CONTINUED)
13Annual Report and Accounts 2023
Strategic Report
improving their valuation ratios through increased
dividends and buybacks. Stylistically, the portfolio was
relatively overweight to more highly valued quality growth
names and therefore the strong performance of value was
a headwind during the year.
There were some good returns from individual stock
selection decisions. Owning Daiwa House (+28.7%),
Japan’s leading manufacturer of houses and commercial
and logistics facilities, drove significant returns, as the
company saw solid sales of logistics facilities, a recovery
in its hotel business and positive increases in shareholder
returns. Long-term holding Hoya (+23.2%) also drove
positive returns, as the company saw resilient growth in its
eyecare business and signs of a recovery in its EUV mask
blank business, an instrumental part of cutting-edge semi-
conductor manufacturing.
Recent years have been challenging for emerging markets
equities and this area, while posting a modest positive
return for the first time in three years, was disappointing,
with the gain of 0.4% behind that of the benchmark.
Throughout most of the year tighter financial conditions
weighed on risk sentiment, although during the second
half inflation began to decline and central banks began
to cut interest rates. Unlike many developed markets
(excluding Japan), value significantly outperformed
growth during the year.
The Chinese equity market posted significant declines,
falling by 17%, due to lacklustre recovery from Covid-19
and the impact of geopolitical tensions. The year had
started on a positive note for China with optimism
surrounding the re-opening after Covid-19. However, the
excitement was short lived as the lack of meaningful
policy support and sudden policy changes against
targeted industries, as well as ongoing elevated levels of
tensions with the US and Taiwan, contributed negatively
to sentiment. Our exposure to China and Hong Kong
detracted from our performance, particularly in our
investments in healthcare and insurance, with AIA
(-24.2%) and Wuxi Biologics (-53.1%) notable drags on our
returns.
India was again a bright spot as mid-sized companies
rallied with increased optimism around Prime
Minister Modi’s continued focus on infrastructure and
manufacturing, as well as business minded reforms. Our
investments in the healthcare (Torrent Pharmaceuticals
+41.9%) and consumer (Nestle India +29.1%) sectors
helped performance. India remains one of the more
exciting markets due to a long runway of growth
prospects, however, we are being selective given valuation
concerns in certain pockets of the market.
Although we had a holding in TSMC (+28.6%), our
underexposure to micro chip makers in South Korea and
Taiwan detracted from relative returns. Latin America had
a strong 2023 and our portfolios benefited from owning
MercadoLibre (+76.0%) and Raia Drograsil (+34.3%).
The Brazilian market was dominated by stocks such
as Petrobras. Mexico also had a strong year, with the
currency outperforming the US dollar as a nearshoring
theme took hold. We have kept a wide range of exposure
there through the largest retailer (the aforementioned
MercadoLibre) as well as one of the leading banks (Grupo
Financiero Banorte +45.6%).
Within our Global Strategies, we started the year
with exposure to Global Income, Global Sustainable
Opportunities and Global Value. The combined return
from these components was +10.7%, behind that of the
index (+15.1%). Each of our respective allocations within
this strategy lagged returns from the market index. Our
Global Income allocation, which targets a diversified
exposure to stocks that provide a higher dividend yield
than the market, gained by 13.3% which was a highly
respectable result, considering returns from high yield
index comparators. This strategy is helpful for the
management of our overall revenue and has, over a
period of more than a decade, delivered results which
have matched broad index returns, while providing a
higher income for the Company. The holding in Broadcom
(+93.6%) was a positive contributor though Bristol-Myers
Squibb (-30.0%) detracted, as did underexposure to the
“Magnificent Seven” during the year.
Our Global Value strategy that is managed by Pyrford (an
investment boutique that operates independently within
Columbia Threadneedle Investments), unsurprisingly
lagged global index returns with a gain of 9.7% for the
year. While the strategy had positive contributions from
stock selection in China and Europe, the underweight
stance on the highly performing US market and an
overweight stance on Asian equities, which lagged,
was detrimental. More significant, however, was a zero
weight in some of the US mega-cap growth stocks which
produced such strong returns.
14
While our Global Sustainable Opportunities strategy
held a material position in highly performing
Nvidia, unfortunately, many of the key drivers of
underperformance seen in other components of our
Global Strategies allocation (underexposure to the
'Magnificent Seven') helped to drive underperformance
here. This factor, plus the holding in SVB Financial, which
was partially sold just ahead of financial collapse, and a
holding in Orsted which suffered financial write-downs
during the year, contributed to underperformance from
the strategy. We divested from this strategy towards the
end of the year, allocating capital instead to a new Global
Focus strategy, managed by Columbia Threadneedle
Investments, which has a long track record of delivering
strong returns, has a less constrained approach and
which offers comparable credentials from a responsible
investment perspective.
PRIVATE EQUITY
Activity across fundraising, deal activity and exits
remained relatively muted over the course of 2023, with
the backdrop centred around the valuation disconnect
between buyers and sellers and an elevated caution
around the economic outlook.
After a strong period of performance, where our private
equity holdings delivered excess returns relative to listed
markets in 2021 and 2022, returns last year were relatively
disappointing. Our overall private equity portfolio
delivered a modest decline in value, of -1.7%, with all areas
posting losses on the year. Recent investments, managed
by Columbia Threadneedle Investments, fared best on the
year, though still delivered a return of -0.2%. Our exposure
here tends to be focused on mid-market businesses where
valuations are attractive and where these businesses have
high levels of cashflow generation. We have, therefore,
deliberately avoided the later stage private market
opportunities which had been fuelled to speculative levels
of valuations and which have suffered the most during the
past year. In addition, our co-investments, as well as fund
opportunities, have a focus on businesses which require
limited amounts of additional cash financing to fund their
ongoing operations and growth ambition.
A feature of the private, as well as public, markets last
year was the decreasing availability of financing, in part
driven by the collapse of SVB and a generalised tightening
in credit conditions and this has pressured overall
valuations in the private markets as well as leading to
pressure on the ongoing operations of some cash hungry
enterprises. While we saw a significant slowdown in exits
last year, we did enjoy a very good realisation on one of
our recent co-investments – the sale of Polyplus (which
provides solutions for advanced biologic, cell and gene
therapy) to Sartorius, an international pharmaceutical and
laboratory equipment supplier, which resulted in a 3.7x
return on our investment and a 61% internal rate of return
with overall proceeds in excess of €22m. Less positively,
despite excellent progress in terms of its underlying
business, we wrote down the value of our holding in
Inflexion Strategic Partners, from £79.6m to £60.0m
during the year. This reduction reflected a valuation
Private Equity portfolio
Commitment outstanding
31 December 2023
£’000s
Value of holding
31 December 2023
£’000s
Total Private Equity portfolio
(1)
Brought forward
483,353 574,860
Committed in 2023
(2)
15,000 -
Cash drawn in 2023
(2)
(61,511) 61,511
Cash returned in 2023
(2)
- (39,763)
Valuation movements
(3)
- 9,966
Exchange movements
(3)
(13,461) (12,523)
Total Private Equity portfolio
(3)
Carried forward
423,381 594,051
(4)
(1) Exchange rates ruling at 31 December 2022
(2) At actual exchange rates in 2023
(3) Exchange rates ruling at 31 December 2023
(4) Total does not include investments in Syncona and Schiehallion, which are classified as Level 1 investments.
Source: Columbia Threadneedle Investments
FUND MANAGER’S REVIEW (CONTINUED)
15Annual Report and Accounts 2023
Strategic Report
level which is consistent with that of a new investor who
allocated capital into the structure during the year.
In recent years we have invested in two bespoke Pantheon
Future Growth programmes which invest in leading
growth and venture private equity managers on a global
basis. Our two programmes had initial total commitments
of $360m. These investments have a long time horizon
and we remain several years away from being fully drawn
on our commitments. It will be perhaps a decade before
we can properly assess investment outcomes fully. It is
important to note, however, as has been stated in previous
reports, that these investments bear limited sensitivity to
recent corrections in market valuations which have also
been felt in private markets and one has to take a long-
term perspective on this exposure.
Our holdings in Syncona (-31.8%), a backer of healthcare
companies, and Schiehallion C shares (-1.8%) both had a
poor year. Schiehallion is managed by Baillie Gifford and
invests in late stage disruptive technology businesses.
Older fund investments, which we hold with Harbourvest
and Pantheon, declined modestly in value (-2.9%). We
continue to work with the managers to realise value from
these holdings as they head towards the end of their lives.
Overall, our private equity holdings have been a drag on
returns this year but have been a strong contributor over
the long term and we remain well positioned.
PORTFOLIO ACTIVITY
We made several material changes to the portfolio
through the year. In recent years, we have been active
in the management of our relative exposures between
growth and value stocks in the US. We began to reduce
significantly our exposure to large capitalisation growth
stocks from the second half of 2020, after a period of
extremely strong relative performance during the early
stages of the recovery after Covid-19 had hit equity
markets, and carried on reducing exposure through to the
early part of 2022. This strategy of reducing our weight
in highly valued stocks, many with a focus on disruptive
technology, was accretive to returns in 2022 as cheaper,
value stocks outperformed significantly, in part driven
by rises in inflation and interest rates as well as by a
convergence in relative valuations within the market.
During the first quarter of 2023, recognising the
significant outperformance of US value stocks, as well as
the likely risks of economic slowdown impacting on the
performance of this area, we cut our overall exposure to
US value through a reduction in our holdings managed
by longstanding manager, Barrow Hanley. In addition, we
chose to allocate a portion of our US capital to Columbia
Threadneedle Investments, to manage a complementary
US value strategy for us. We had previously identified
Columbia Threadneedle Investments as a highly
performing manager in this space and this had the
additional benefit of reducing the fees paid to third party
managers as part of the overall mandate.
In addition to net sales of US value stocks we also chose,
having made significant divestments in recent years, to
switch our remaining US growth exposure from T Rowe
Price to JPMorgan Asset Management. T Rowe Price
delivered disappointing performance for the Company in
recent years and our view was that JPMorgan offered a
strong performance track record, backed by significant
resources and a robust process which had displayed
flexibility in managing different phases of performance for
growth stocks. We did not anticipate that equity markets
would deliver returns which were dominated by such a
narrow group of companies during 2023 but JPMorgan
have an excellent track record of delivering strong returns
for investors against different backdrops for growth
stocks.
Elsewhere, within our listed equity portfolio, towards the
end of the year we switched exposure from the Global
Sustainable Opportunities strategy to a new Global
Focus strategy, managed by Columbia Threadneedle
Investments. These strategies have similar portfolio
characteristics from a responsible investment perspective
but the new strategy that we have invested in has more
freedom with respect to its investment opportunities. The
Global Focus strategy has a more than decade long track
record of delivering strong returns for investors through
an approach which focuses on high quality businesses
with faster than market growth prospects.
REVENUE RETURNS
Our gross income was up by 10.8% to £106.6m, exceeding
the £100m level for the first time and our net income
per share gained by 13.7% from 13.92 pence per share to
15.83 pence per share. Special dividends rose to £4.4m
(from £1.6m in 2022). The impact of sterling was modest,
detracting £0.6m, compared with a positive impact of
£4.9m in 2022.
16
Another strong year for our revenue pushed our earnings
to a new record high in 2023 and it is pleasing to report
that our dividend will again be covered by revenue for the
year. Our substantial revenue reserve ended the year at
£107.3m. We will deliver our fifty-third consecutive annual
dividend increase for shareholders in May of this year.
GEARING
Our gearing stood at 9.9% at the end of the year, above
the level of 7.3% at the start of the year. Gearing added
0.3% to our NAV total return on the year, whilst the fair
value of our debt increased modestly, detracting 0.1%
from our NAV return.
At year end, our total borrowings were £581.0m in
aggregate. We held £87m in cash and £80m in short-
dated gilts (which is not reflected in our liquidity
position). Our blended average fixed interest rate on our
outstanding loans is approximately 2.4%, which remains
exceptionally low by historic standards. Over the long
term, we expect the returns from the investments we have
made from these borrowings to exceed the cost of the
debt and to therefore be accretive to NAV returns.
CURRENT MARKET PERSPECTIVE
The fundamental backdrop for equity markets over the
remainder of this year appears constructive with economic
growth expected to continue at a reasonable pace and
inflation levels in developed economies likely to decline
to levels closer to central banks' targets. Consequently,
interest rate cuts should begin as we move towards
the middle of the year. This environment suggests that
corporates should deliver robust earnings growth and
corporate credit risk should, in general, remain relatively
muted.
This benign perspective is not without risks. The widely
expected economic recession failed to materialise in 2023
and both consumer and corporate sectors have proven
to be far more resilient in the face of rising interest rates
than had been feared. It is worth remembering the adage,
however, that ‘monetary policy works with a long and
variable lag’ and there does remain the likelihood that the
full impact of past rate rises has yet to be felt. Furthermore,
while politics will be in focus in 2024 with elections in both
the US and the UK, investors have become accustomed to
unexpected outcomes in recent years and so the scope for
political shocks this year may be somewhat diminished.
Despite this, we do anticipate volatility into and around the
US Presidential election and the accompanying rhetoric will
be closely scrutinised with respect to wider implications
in areas such as trade policy. There does remain scope for
political events to play a role in driving market returns.
For global equity markets, although the fundamental
picture appears positive, valuations are, once again,
relatively demanding. As has been the case in recent years,
a narrow segment of the market has driven returns and the
US market continues to command a significant premium to
the rest of the world. However, in recent years, it has rarely
been a successful strategy to bet against the continued
outperformance of US stocks and of US technology
stocks in particular. The AI theme has provided additional
support to a number of large US stocks and investors are
increasingly discriminating between the corporate winners
and losers of what may prove to be a profound and wide-
ranging disruptive force.
While near term uncertainty over the path of interest rates
and economic growth remains high and political events
and military conflict present risks, we remain optimistic on
the prospects for our holdings over the longer term. Our
diversified portfolio seeks to spread exposure to a range
of investment opportunities, balancing consideration of
growth prospects alongside the quality and consistency
of earnings while ensuring that we do not overpay for
exciting, but potentially highly valued, companies. In
coming years accelerating technological change and an
increasing influence from AI will create opportunities and
risks, both in those companies which stand to directly
benefit from these trends and for those which stand to be
challenged. Our approach is well placed to identify and
capture both the beneficiaries of these trends and those
whose business prospects are underpriced, through our
broad and deep consideration of investment opportunities
from across the world.
Paul Niven
Fund Manager
7 March 2024
FUND MANAGER’S REVIEW (CONTINUED)
17Annual Report and Accounts 2023
Strategic Report
OUR APPROACH TO RESPONSIBLE
INVESTMENT
AS STEWARDS OF £5.5 BILLION OF ASSETS, WE BELIEVE INVESTING RESPONSIBLY IS
FUNDAMENTAL TO LONG-TERM WEALTH CREATION.
OUR APPROACH
We believe that good financial outcomes are more likely to
be achieved if we fully understand the risks and opportunities
that relate to the markets in which we invest. More than ever,
Environmental, Social and Governance ('ESG') factors are
critical components of this understanding. As a responsible
investor we need to ensure that we, and the companies we
invest in, have a robust approach to managing environmental
and social risks and opportunities. We also expect good
governance practices which we believe positions issuers better
to manage risks, identify opportunities and deliver sustainable
growth. We have a Manager that integrates ESG into its
research and investment process and encourages stronger
ESG practices through its engagement and voting activities.
Our approach covers our own governance responsibilities
on matters such as the composition of the Board but,
most importantly, it is our portfolio of investments which
represents the greatest impact we can have. As responsible
investment and sustainability are integral, we believe that our
disclosures should go beyond minimum standards. In setting
and reporting on our responsible investment policies, we
have considered relevant regulatory guidance including the
Companies Act 2006 (the 'Act'), the UK and AIC Corporate
Governance Codes and the Task Force on Climate-related
Financial Disclosures ('TCFD').
The primary purpose of this report is to provide shareholders
with a clear understanding of our approach to responsible
investment and how that is integrated into the Manager’s
investment process. It also outlines how we are implementing
our commitment to achieving a net zero carbon portfolio by
2050, at the latest. We also explain our stewardship in terms of
engagement with portfolio companies and our voting practice;
how we measure our progress; and how we have performed
against those measures. We recognise the importance of
disclosing information that is relevant, reliable and, as far as
possible, ensuring that it is presented in a consistent way from
year to year in order that our progress can be assessed.
The Board has broadened its approach in 2024, beyond the
primary focus on climate change, and agreed four priority
themes: Social Media and Responsible AI, Human Rights, Net
Zero and Biodiversity. We will provide more information on
these areas in future reports.
The impact of climate change on the value of the Company's
investments has been considered and more information is
given in the following pages, and in note 2(c)(xiii) to the
Accounts.
STEWARDSHIP
We and our Manager believe that a robust approach to
managing ESG risks and opportunities can support the
achievement of sustainable growth and investment returns.
Our Manager sets out its expectations for issuers in its
Environmental and Social practices statement and its
Corporate Governance Guidelines which are available on the
Managers website at columbiathreadneedle.com.
We view engagement and proxy voting as powerful
levers that can help us create investor value and targeted
responsible investment engagement with issuers is an
important part of our Managers investment approach.
Our purpose with engagement is to support long-term
investment returns by mitigating risk, capitalising on
opportunities linked to ESG factors and reducing any
material negative impact that our investment decisions could
have on these factors. We believe that we can play a part
in building a more sustainable and resilient global economy
by encouraging issuers to improve their ESG practices. This
can also help drive positive impacts for the environment and
society that are in line with achieving the United Nations
Sustainable Development Goals ('SDGs').
Active use of our voting rights is an important component
of our stewardship approach. In the absence of explicit
instructions from the Board, our Manager has been
empowered to exercise discretion in the use of the
Company's voting rights, in accordance with its own
corporate governance policies. These policies take a robust
line on key governance issues such as executive pay and
integrate sustainability issues into the voting process,
particularly climate change, biodiversity, human rights and
board level diversity.
Columbia Threadneedle Investments is a signatory to the UK
Stewardship Code. Its statement of compliance can be found
on the Managers’ website at columbiathreadneedle.com.
18
EXCLUSIONS
The focus of our Manager's responsible investment approach
is to incorporate material ESG issues into investment
decisions and to engage with investee companies to
encourage them towards meeting or setting best practices
in the management of ESG issues. However, the Board
believes that there are some business activities which are
incompatible with a responsible approach to investment and
where exclusion or divestment are the only options: namely,
tobacco producers, cluster bombs and landmines and
thermal coal. We exclude companies with exposure to these
activities which exceed certain revenue thresholds.
CLIMATE CHANGE
Climate change and the energy transition present a major
global macroeconomic shift which presents both risks
and opportunities to our investments. We aim to support
the global effort to tackle climate change and the low-
carbon transition, whilst continuing to maximise returns to
our shareholders, identifying the risks and opportunities
presented by the changing environment.
The Board has committed to a target of net zero emissions
by 2050, at the latest, for the Company's portfolio. Our
Manager has selected the Net Zero Investment Framework
(1)
(‘NZIF’) to implement this commitment, reflecting our belief
in the power of investor engagement and our aim to achieve
emissions reductions through encouraging our investee
companies to take on and implement ambitious targets and
credible transition plans to deliver it. However, engagement
will not be open-ended and we may ultimately choose to
divest from companies that are unresponsive and/or fail to
meet our expectations.
PRIVATE EQUITY
Many aspects of our responsible investment activities and
reporting focus on our listed equity investments. However,
sustainability issues are equally significant in private markets.
Whilst obtaining consistent data and metrics is a challenge,
we believe that there are approaches that can be effective in
identifying responsible investment risks and opportunities.
We are engaging with our managers to understand their
current ESG approaches and plans to develop these in future.
For the past five years, we have disclosed the weighted-
average carbon intensity of the Company’s listed
investments.
PERFORMANCE IN 2023
The weighted-average carbon intensity of the portfolio
increased over 2023 and as at the end of the year was in
line with that of the benchmark. This was in large part a
consequence of changes in sector exposure, driven in turn
by changes to the composition of manager allocations,
as well as their stock selection decisions. Exposure to the
energy and utilities sectors increased overall over the course
of the year, which pushed up the Scope 1 & 2 emissions
represented by the portfolio.
We retain our commitment to a net zero target and
continue to aim to strike a balance between reduction in
the carbon intensity of our portfolio over the medium to
long term with our overriding objective to deliver growth in
capital and income for shareholders.
CLIMATE CHANGE AND OUR NET ZERO COMMITMENT
Weighted-average carbon intensity
('WACI')
(2)
2019
0
50
100
150
200
250
FCIT
Benchmark
(3)
Tons CO2e / sales $m
185
125
2020
158
72
Source: MSCI ESG
2021
155
96
124
2022
165
137
136
2023
(1) See www.parisalignedinvestment.org for further details.
(2) WACI shows the emissions impact of companies as a proportion of sales. It is calculated by dividing greenhouse gases (‘GHG’) emissions by the revenue
generated by companies held. It is reported in GHG per $m of underlying revenues of holdings in the portfolio. A low score indicates that a fund invests in more
carbon-efficient companies.
(3) See Glossary of terms on page 117 for explanation of 'Benchmark'.
OUR APPROACH TO RESPONSIBLE INVESTMENT (CONTINUED)
19Annual Report and Accounts 2023
Strategic Report
We worked to engage with the companies in the energy and
energy-intensive industries, to look beyond the immediate
market conditions and prepare for the longer-term transition
toward a low-carbon global environment. One significant
contributor to the portfolio’s emissions profile is US electric
utility Vistra, which still has a legacy coal fleet that it is in
the process of phasing out. Our Manager has engaged with
Vistra since 2018, including direct dialogue with the CEO and
CFO as well as a number of meetings with sustainability and
strategy leaders. The company has significantly improved
its climate strategy over this period, which now includes
a target for net zero emissions by 2050; a 60% reduction
target by 2030 from a 2010 baseline; and a commitment to
have its targets and strategy verified by the Science-based
Targets Initiative.
Another major contributor is cement firm CRH. Again, our
Manager has had several discussions with the firm on its
emissions reduction strategy, which in 2023 included a site
visit to its Platin cement plant in Ireland
(1)
and discussions
with the board chair on climate risks and opportunities.
The company has targets around the carbon intensity of
its electricity use and is investing in alternative production
methods for cement, such as clinker replacements.
Decarbonising the cement production process is challenging
but necessary and we would argue that continuing to invest
in companies that are involved in solutions is important for
the energy transition, even if this increases the portfolio's
carbon intensity and carbon footprint in the short term.
As companies in our portfolio such as Vistra and CRH take
steps to implement their emissions reductions goals, we
expect to see the weighted-average carbon intensity fall
again, in line with our net zero commitment.
OUR NET ZERO APPROACH
Our Manager is using the NZIF as a basis for its approach
and has published details of how it is implementing this
methodology, for equities and corporate credit
(2)
.
The primary focus of this approach remains unchanged from
the previous year and is aligned to the Climate Action 100+
framework. The methodology has three key components:
1. Company level assessment. Using a range of data
sources, our Manager has created a framework to assess
companies’ performance on a number of criteria relating
to their emissions management and strategy. This
framework is used to assign an alignment rating:
Aligned: company meets expectations highly in all
relevant categories.
Aligning: company meets core expectations
around disclosure, setting targets and strategy.
Committed: company has not yet met these
expectations, but has committed to set a science-
based target.
Not aligned: company does not meet expectations
and has not committed to set a science-based
target.
2. Portfolio analysis and target setting. Company level
alignment statuses are aggregated to give portfolio
level alignment. Targets are then set to increase the
overall proportion of companies in the Aligned or
Aligning category over time. The Manager makes
active use of stewardship to improve the alignment
of companies, aiming to have at least 70% of
portfolio emissions either Aligned or under active
engagement for the funds committed to using this net
zero framework. In 2023, this figure was 79.6%, thus
achieving this target.
In addition to the portfolio alignment status we
calculate portfolio-level financed emissions intensity
(3)
and seek to reduce this in line with a net zero trajectory.
3. We monitor our investment in firms providing low-
carbon solutions.
The charts overleaf show the Company’s current
performance on these metrics, as well as the targets that
we have set.
(1) https://docs.columbiathreadneedle.com/documents/ESG Viewpoint_Challenges of realising zero-carbon cement.pdf?inline=true
(2) https://docs.columbiathreadneedle.com/documents/Net Zero Investing - Columbia Threadneedle Investments Approach.pdf?inline=true
(3) Sum of the GHG emissions of each portfolio company, weighted by the proportion of each company that the portfolio holds as a proportion of each $m
invested in the total portfolio.
20
The grey line in the chart above represents a net zero-
aligned benchmark trajectory. It is based on taking the
financed emissions intensity of the FTSE All-World Index,
which is the market benchmark for the Company, as at the
end of 2019 and reducing this by 50% by 2030. The bars
represent financed emissions intensity for the Company,
showing data as at the end of the last three financial years.
This has decreased, from 44.5 to 40.3 tCO2e/$m invested.
Our aim is, at a minimum, to keep this within the net
zero trajectory for the benchmark – however, given that
the Company’s starting point was already below the
benchmark, we will strive to significantly outperform this
target. Having said that, we may choose to retain our
investments in certain higher-emissions companies and
sectors if we feel those companies are strongly aligned to
net zero or that our engagement is making good progress.
Where companies are not yet net zero aligned, we will make
active use of our stewardship influence to move them in this
direction. This will include continued active engagement
through our Manager, as well as the use of our voting power.
We are focusing initially on companies which are not yet
aligned and are high contributors to portfolio emissions.
Engagement will have clear objectives and be time-limited.
If companies fail to respond and continue to fall short of our
minimum expectations, we will divest our holding.
This approach applies to our listed equity holdings. Different
considerations apply to private equity, where data is not
available in the same way and net zero methodologies are
more nascent (see below).
CLIMATE CHANGE AND PRIVATE EQUITY
Disclosure, strategies and targets continue to improve
within the private equity asset class, as evidenced in the
annual survey of General Partners ('GPs') carried out by one
of our managers in this asset class, Columbia Threadneedle
Investments. They found that of the GPs surveyed, 17%
have a net zero target in place, with a further 13% planning
to implement this in the next 12 months. The proportion
reporting carbon emissions on the majority of their holdings
has more than doubled since 2021, from 20% to 46%.
Industry best practice is also evolving, with the publication
in late 2023 of the Private Markets Decarbonisation
Roadmap, which seeks to be a standard methodology for
implementing net zero approaches across private asset
classes. One of our private equity managers, HarbourVest,
was a project lead for this initiative and our third manager,
Pantheon, was a contributor.
All three managers have published company-level TCFD
reports and all are working on emissions data for underlying
portfolio companies.
0
20
40
60
80
100
2021 2030
Net zero aligned benchmark trajectory
Financed emissions intensity,
tonnes CO2e/$m invested
2022 2023 2024 2025 2026 2027 2028 2029
FCIT
Source: Columbia Threadneedle Investments & Refinitiv Eikon
(1) Shows the financed emissions of the Company in relation to the amount
invested. We calculate the total emissions of the companies held using the
same method as for total emissions calculation (shown above). We then
express this as a proportion of each $m invested in the portfolio.
Financed emissions intensity
(1)
OUR APPROACH TO RESPONSIBLE INVESTMENT (CONTINUED)
Aligned 0.2%
Aligning 51.3%
Committed 28.1%
Not Aligned 20.2%
Not Assessed 0.3%
Company-level alignment status, as a % of total
portfolio financed emissions
(1)
(1) Sum of the GHG emissions of each portfolio company, weighted by the
proportion of each company that the portfolio holds
21Annual Report and Accounts 2023
Strategic Report
TASK FORCE ON CLIMATE-RELATED FINANCIAL
DISCLOSURES ('TCFD') REPORTING
In June 2023 our Manager published its second company
level report on how it manages climate-related risks and
opportunities in investment portfolios and across its
business operations in line with the recommendations of the
TCFD.
This year, in accordance with the deadline for complying
with regulations set by the Financial Conduct Authority,
a disclosure specific to the Company’s portfolio will be
published on the Managers website. This report will provide
data on the portfolio’s carbon footprint and the largest
individual contributors to it by individual issuer and sector
as well as the overall net zero alignment of the portfolio. We
have included much of this data in this Annual Report.
More information on how to interpret climate data for
investment portfolios is outlined on our Manager’s website
at: https://www.columbiathreadneedle.co.uk/en/inst/
insights/esg-viewpoint-interpreting-climate-data-for-
investment-portfolios/.
With respect to the listing of its shares on the New Zealand
Stock Exchange, by virtue of its listing on the London Stock
Exchange, the Company is exempt from the climate-related
disclosure requirements imposed under New Zealand law.
269 UNIQUE
MEETINGS VOTED
votes with
management 86.8%
votes against
management 13.2%
VOTING
Exercising the right to vote is a key part of our stewardship
responsibilities and an opportunity to influence change.
The Manager applies its voting policy to all listed portfolio
holdings. During 2023, it voted against management on
13.2% of proposals. This compared to 21% in 2022 and 19% in
2021. There are a number of reasons for the decrease in the
number of votes cast against management. These include
increased access to management and boards, where we
can have direct discussions on potential improvements that
encourages alignment with our voting policy; a tightening of
the regulatory environment that requires companies across
sectors and markets to adhere to global best practice; and
the annual update to our voting policy that takes into account
new market trends, local market best practices and other
factors.
The highest number of votes against management related
to director elections and compensation. The Manager did
not support 24% (2022:43%) of all management resolutions
relating to remuneration, often due either to concerns
around the incentive reward disclosure or a misalignment
between pay and long-term performance. Levels of overall
quantum and grants through vehicles such as an annual
bonus scheme or long-term incentive plan should be
designed to promote sustainable, long-term shareholder
value creation and reflect the executives’ work and
contribution to the company.
Votes against management on director elections related
mostly to board structure, particularly on independence but
also on diversity and tenure. Boards should have a diverse
representation of skills, background, and expertise that
can manifest in a variety of ways. Non-executives should
be primarily independent of the company, although we
recognize that, in certain cases, connected non-executives
have a valuable role to play.
Each year the Manager’s proxy voting and corporate
governance analysts lead a review of its voting policy, with a
view to updating, where necessary, the principles that form
the basis of the Manager's approach.
22
Climate Change 22%
Environmental Stewardship 15%
Business Conduct 5%
Human Rights 12%
Labour Standards 22%
Public Health 7%
Corporate Governance 17%
2022
895 issues raised
with 166 listed
companies across
28 countries.
2021
765 issues raised
with 168 listed
companies across
27 countries.
Climate Change 22%
Environmental Stewardship 11%
Business Conduct 4%
Human Rights 6%
Labour Standards 23%
Public Health 12%
Corporate Governance 22%
2023
Climate Change 24%
Environmental Stewardship 12%
Business Conduct 4%
Human Rights 10%
Labour Standards 18%
Public Health 7%
Corporate Governance 25%
714 ISSUES RAISED
WITH 164 LISTED
COMPANIES ACROSS
26 COUNTRIES.
OUR APPROACH TO RESPONSIBLE INVESTMENT (CONTINUED)
During 2023, the Manager engaged with 164 listed
companies in our portfolio to encourage stronger policies
and disclosure on a range of responsible investment
issues. Corporate governance was a key theme for ESG
engagement accounting for 25% of issues raised with
companies. Effective corporate governance is instrumental
to supporting the delivery of strategic objectives that drive
long-term shareholder value. It is also critical to fostering
accountability and maintaining legal, ethical and reputational
standing among a company’s key stakeholders. Within
this theme remuneration, board effectiveness and board
diversity were priorities.
Climate change continued to be a high priority, accounting
for 24% of issues raised during engagement. The Manager
continued its work with the Climate Action 100+ initiative,
joining collaborative engagements to discuss companies'
progress towards net zero. Following the success of this
and other investor engagement, and active encouragement
by certain governments, it has been found that many
companies have targets in place but that implementation
is often lacking. In 2024 the Manager will continue to seek
concrete plans that include interim milestones and clear
alignment of capital expenditure.
Environmental stewardship was a key focus for the Manager
in 2023, recognising the fundamental interlinkages between
climate change and wider environmental challenges such
as deforestation. The Manager was one of the founders of
the new Nature Action 100 initiative, which seeks to engage
with companies that are globally significant in their direct
or supply-chain biodiversity impacts, with a view to driving
enhanced strategies to identify, manage and disclose risks
and develop mitigation strategies.
ENGAGEMENT
23Annual Report and Accounts 2023
Strategic Report
SUPPORTING SUSTAINABLE DEVELOPMENT
The Board views responsible investment issues not just
as a source of risk, but also of opportunity. Considering
the alignment of our investments to global sustainability
trends can help us benefit from growth in solution provider
companies, as well as to understand the positive social and
environmental impact we can make through investing.
The framework we use to understand our impact – both
positive and negative – is that of the UN Sustainable
Development Goals ('SDGs'). These 17 goals, adopted by
all United Nations Member States in 2015, provide a shared
blueprint for peace and prosperity for people and the
planet, now and into the future.
The accompanying SDG alignment chart shows how the
listed companies that we hold support the achievement of
the SDGs through their products and services. We map the
investment portfolio against the SDGs, based on an analysis
of the main sources of revenue for each of the investee
companies. Specifically, we measure how the individual
sources of revenue for each company correspond to the
169 targets that underlie the goals - so that one company,
depending on its mix of goods and services, may have links
to more than one goal.
At the end of December 2023, 53% of investee company
revenues had a positive link to the SDGs. As in previous
years the goal most represented was SDG 8 – Decent Work
and Economic Growth. This reflects holdings in technology
companies such as Microsoft, Alphabet, Apple and Taiwan
Semiconductor Manufacturing Co, which support Target
8.2 in calling for boosting economic productivity through
technological upgrading and innovation; and in financial
companies including American Express and Indian bank
HDFC, which we map to Target 8.10, focusing on access to
financial services.
Alignment to SDG 9 – Industry, Innovation and Infrastructure
– increased from 11% in 2022 to 12% in 2023. A diverse range
of holdings align with this goal, including gas and chemicals
companies providing essential solutions to the energy
transition, such as China based electric vehicle manufacturer
BYD Co, and telecommunications companies that support
stronger communications infrastructure through the
provision of wireless services, such as Cisco systems and
Axiata.
This year, our analysis identified a small increase in negative
mapping, from 9% to 12%. This change represents certain
products or services offered by companies that could hinder
the achievement of some of the SDGs. These mostly relate
to climate change through SDG 7 – Affordable and Clean
Energy – and SDG 13 – Climate Action. Those companies
contributing negatively to SDG 13 include power generators,
mining companies and those involved in transportation
including delivery services.
More information on SDGs can be found at: https://docs.
columbiathreadneedle.com/documents/ESG Viewpoint -
Sustainable Development Goals (SDGs) - A framework for
investors.pdf?inline=true
24
SDG alignment as at 31 December 2023
53
%
positive revenue
alignment with
the SDGs
FCIT
Source: Columbia Threadneedle Investments, as
at 31st December 2023, designed for illustrative
purposes, subject to change.
Other = SDGs less than 2% aligned.
Revenue alignment breakdown:
Positive 53%
Negative 12%
Neutral 22%
Cash & Sovereigns 13%
Unmapped 0%
Other (positive link)
Neutral
Cash
Unmapped
Other (negative link)
Source: Columbia Threadneedle Investments, as at 31st December 2023.
Only SDGs with more than a 2% revenue alignment are shown. All SDGs less than 2% aligned are accounted for in the ‘Other’ sections of
the chart (both positive and negative alignments). Due to a lack of data, investments in private equity markets are not currently mapped.
REVENUE ALIGNMENT
BREAKDOWN:
POSITIVE 53%
NEGATIVE 12%
NEUTRAL 22%
CASH & SOVEREIGNS 13%
UNMAPPED 0%
OTHER (POSITIVE LINK)
NEUTRAL
CASH
OTHER (NEGATIVE LINK)
OUR APPROACH TO RESPONSIBLE INVESTMENT (CONTINUED)
25Annual Report and Accounts 2023
ADOBE INC
(0.41% OF THE COMPANY'S PORTFOLIO)
THEME: HUMAN RIGHTS
SUB-THEME(S): HUMAN RIGHTS OTHER
SDG TARGET(S): 10 REDUCED INEQUALITIES
Background
In this case, we sought reassurance on Adobe’s use of AI.
It is an example which demonstrates that engagement
with investee companies is not only to encourage better
ESG practices. Sometimes it is equally important to
gain insight in order to understand how good practices
operate, especially in a field moving as fast as AI.
Adobe is one of the largest software companies in the
world, offering a suite of products and services used
by creative professionals, businesses, and customers
to create, manage, measure and optimise content and
experiences. Artificial Intelligence ('AI') is embedded in
many of its offerings and has the power to drive greater
innovation and monetisation opportunities. With this in
mind, their approach to Responsible AI was high on our
engagement agenda.
Action
We held a dialogue with Adobe's Investor Relations and
General Counsel to learn more about the company's
approach to Responsible AI. We asked about the
company’s governance approach as well as requesting
further details on its impact assessment. We also
discussed areas of biggest potential risks and the
company's approach to mitigating them. Several years
ago, Adobe formed an AI ethics governance committee
which is responsible for conducting an AI ethics
review every time an AI feature is proposed. It involves
identifying potential harm and bias and conducting
multiple tests to minimise and eliminate these risks
where possible. In order to measure the success of its
efforts to mitigate AI bias or harm, the company tracks
the percentage of outputs that are categorised as
harmful. Adobe provided context about its Firefly tool
(its generative machine learning model used in the field
of design) which is trained solely on its licensed assets in
order to reduce copyright related risks. It also mentioned
that a wide variety of teams are involved in the oversight
of testing to ensure diversity of perspectives are taken
into account. Beyond social issues, the environmental
risks in relation to AI are believed by Adobe to be more
nascent. Nonetheless, the topic is addressed at board
level when considering the potential impact on its net
zero commitment.
Verdict
Overall, it is clear the company has been ahead of the
curve on Responsible AI which presents a revenue
opportunity, competitive advantage and the opportunity
for proactive risk mitigation. We were encouraged
by the constructive dialogue, using the opportunity
to understand better Adobe’s leading approach. We
will take some of these findings and outcomes into
our internal Responsible AI assessment framework
as Responsible AI remains a key topic for 2024.
Engagements such as these are key for us to continue to
evolve our understanding of how companies are thinking
about Responsible AI and to learn and share good
practices as we encourage industry-wide improvement.
ENGAGEMENT CASE STUDIES provided by our Manager
26
ROCHE HOLDING AG
(0.54% OF THE COMPANY'S PORTFOLIO)
THEME: PUBLIC HEALTH, CLIMATE CHANGE, ENVIRONMENTAL STEWARDSHIP
SUB-THEME(S): ACCESS TO HEALTHCARE, HEALTH SECURITY, EMISSIONS MANAGEMENT, ENERGY
TRANSITION, NET ZERO STRATEGY, ENVIRONMENTAL SUPPLY CHAIN MANAGEMENT, NATURAL RESOURCES –
WATER, PRODUCT SUSTAINABILITY, SUSTAINABLE WASTE MANAGEMENT
SDG TARGET(S): 3 GOOD HEALTH AND WELL-BEING, 6 CLEAN WATER AND SANITATION, 7 AFFORDABLE
CLEAN ENERGY, 9 INDUSTRY, INNOVATION AND INFRASTRUCTURE, 12 RESPONSIBLE CONSUMPTION AND
PRODUCTION
Background
Roche is a Swiss multinational company and one of
the world’s largest pharmaceutical companies with a
broad portfolio covering diabetes care, haemophilia A,
immunology, infectious diseases, neuroscience, oncology
and ophthalmology. Over the past few years, we have
engaged with Roche on a number of ESG topics with
a strong focus on climate change. The company is
also ranked by the Access to Medicine Index and has
taken important steps to expand its access to medicine
strategies.
Action
In the second quarter of 2023, we attended Roche’s
online investor event on environmental sustainability,
attended by its Chief Financial and Information Officer
and its Global Expert in Environmental Sustainability.
Roche’s 2023 aspirations included the prioritisation of
resource allocation towards long-term sustainability
goals and the appointment of a Chief Sustainability
Officer. Roche will also refine and further develop its
internal and external reporting strategy - we have been
engaging Roche for many years on its disclosure, in
particular a demand for participating in the carbon
disclosure project survey, which the company is still not
considering at present. We are, however, pleased with
Roche’s reiteration of its commitment to submit emission
reduction targets to the Science-Based Targets Initiative
('SBTi').
We also discussed with Roche its approach to diversity
in clinical trials. Its Head of Health Equity considers
diversity in clinical trials first and foremost a data quality
issue given that assessing the safety and efficacy of
drugs and treatments based on different demographics
can lead to a more comprehensive understanding and
quality assessment of the developed products. Roche
aims to consider diversity planning early on in the
drug development process and focuses its efforts on
improving health literacy and collaborating with patient
advocacy groups.
Verdict
The investor event was very insightful, particularly
because of the many case studies provided across
its different business divisions. Roche’s 2022 Annual
Report was designed in a similar manner with many
case studies provided, but the overall strategy on
environmental stewardship and climate change remains
unclear in our view. We will continue to engage Roche
on improving transparency. On diversity in clinical trials,
we acknowledge the large amount of work that Roche
is undertaking to align with increased expectations and
regulatory changes in this area and we will continue our
engagements with Roche on this topic.
OUR APPROACH TO RESPONSIBLE INVESTMENT (CONTINUED)
ENGAGEMENT CASE STUDIES (CONTINUED)
provided by our Manager
27Annual Report and Accounts 2023
Strategic Report
LOWE'S COMPANIES INC.
(0.98% OF THE COMPANY'S PORTFOLIO)
THEME: CLIMATE CHANGE, HUMAN RIGHTS
SUB-THEME(S): EMISSIONS MANAGEMENT, HUMAN RIGHTS DUE DILIGENCE
SDG TARGET(S): 13 CLIMATE ACTION, 8 DECENT WORK AND ECONOMIC GROWTH
Background
Lowe's is the second-largest home improvement retailer
in the world. The firm's stores offer products and
services for home decorating, maintenance, repair and
remodelling, with maintenance and repair accounting
for two thirds of products sold. In 2023 we approached
Lowe’s for dialogue on environmental and social risk
management.
Action
During 2023, we had several calls with Lowe's Corporate
Sustainability and Investor Relations teams to discuss
their approach to environmental and social supply chain
risk mitigation. Amongst others, we view human rights
and climate action as key themes for engagement.
Whilst the company has a human rights policy and a
vendor code of conduct, against which suppliers are
audited, it is difficult to determine the effectiveness
of their risk mitigation efforts. There is increasing
awareness of the negative social impacts of physical
climate risk on workers and we believe it is important
that companies consider climate adaptation and the
concept of a just transition in their interactions with
suppliers. We made several recommendations to
encourage the company to assess better its supply
chain risks, including steps to map its supply chain
beyond tier 1
(1)
and to ensure grievance mechanisms
are communicated to and are being used by supply
chain workers. At the company’s request, we provided
feedback on Lowe’s ESG programmes, following the
publication of its sustainability report. Here, we focused
on Lowe's commitment to achieve net zero emissions
by 2050. We are pleased with the focus on Scope 3
emissions
(2)
and 'the use of products sold' in particular,
as this is likely to have the most positive impact on
their mitigation strategy. We are also pleased that the
company's emissions reduction targets are set to be
approved by the SBTi. We continued to highlight human
rights due diligence as an area where disclosure could
be improved significantly. Lowe's acknowledged this and
was receptive to our suggested narrative covering how
risk assessment is conducted and operational change
is implemented. Additionally, we provided insights into
the distinction between actions in its direct operations
versus the supply chain. Finally, we discussed the need
for a more proactive approach to analysing the wage
sensitivity of employees but also how ensuring suppliers
pay living wages can help mitigate other human rights
risks.
Verdict
The company has a roadmap to improve environmental
and social risk mitigation. There is a clear focus on
meeting environmental goals aligned to its net zero
commitment. That said, we encouraged the company
to consider ways to integrate social aspects, particularly
in the face of increasing human rights due diligence-
focused legislation. We will continue our engagement
with Lowe's in 2024 with a particular focus on the
implementation of more robust supplier oversight,
more transparency over the effectiveness of their
human capital management strategy in terms of worker
retention and the implementation of chemical safety
programmes.
(1) tier 1 refers to suppliers with whom the company contracts
directly.
(2) Scope 3 emissions refers to indirect emissions that result
from activities related to a company but which are not
owned or controlled by the company, including emissions
from supply chains and product use.
28
TWENTY LARGEST LISTED EQUITY HOLDINGS
1. MICROSOFT (1)
US listed technology company focused on software
products and cloud computing. The company also
designs and sells hardware devices.
2.97% TOTAL INVESTMENTS
£164.2M VALUE
2. ALPHABET (5)
US listed parent company of Google. Google’s primary
business is focused on internet related services and
products, including its internet search engine and its
Android smartphone operating system.
2.03% TOTAL INVESTMENTS
£112.4M VALUE
3. BROADCOM (7)
US designer and supplier of semiconductor and
infrastructure software solutions.
1.66% TOTAL INVESTMENTS
£92.0M VALUE
4. APPLE (3)
US listed technology company predominantly
involved in design, development and sale of consumer
electronics and software worldwide.
1.53% TOTAL INVESTMENTS
£84.5M VALUE
5. AMAZON.COM (6)
US listed e-commerce and cloud computing company.
Largest listed internet retailer in the world based on
market capitalisation.
1.44% TOTAL INVESTMENTS
£79.8M VALUE
6. NVIDIA (33)
US listed designer and manufacturer of graphic
processing units.
1.34% TOTAL INVESTMENTS
£73.9M VALUE
7. MASTERCARD (16)
US listed financial services company providing financial
transaction procession services worldwide as well as
offering credit and debit cards and internet payment
systems.
1.00% TOTAL INVESTMENTS
£55.1M VALUE
8. LOWE'S COMPANIES (149)
US listed retailer specialising in tools, furnishings and
building supplies. The world’s second largest home
improvement company.
0.98% TOTAL INVESTMENTS
£54.0M VALUE
9. META PLATFORMS (128)
US listed operator of social media sites and social
networking services.
0.96% TOTAL INVESTMENTS
£53.0M VALUE
10. ELI LILLY (25)
US listed pharmaceutical company that develops
diabetes, oncology, immunology and neuroscience
medicines.
0.85% TOTAL INVESTMENTS
£46.9M VALUE
29Annual Report and Accounts 2023
Strategic Report
The value of the twenty largest listed equity holdings represents 21.41% (2022: 20.96%) of the Company’s total investments.
The figures in brackets denote the position within the portfolio at the previous year end.
There were no convertible securities in the total portfolio at 31 December 2023 (2022: nil). There were fixed interest gilts of £80m included in the investments as at
31 December 2023 (2022: £60m).
These are the largest listed equity holdings excluding collective investment schemes. If the whole portfolio was considered then PE Investment Holdings 2018 LP
(£258.3m), Pantheon Access SICAV (£105.3m), Inflexion Strategic Partners (£60.0m), IShares Core MSCI EM IMI UCITS (£48.7m) and Vanguard FTSE 100 UCITS ETF
(£37.7m) would have been included in the list.
The Company’s full list of investments is over 400 and is published monthly on the Company's website at fandc.com.
11. TAIWAN SEMICONDUCTOR
MANUFACTURING (TSMC) (17)
Taiwanese listed manufacturer and designer of
semiconductors.
0.83% TOTAL INVESTMENTS
£45.7M VALUE
12. COMCAST (20)
US listed provider of media and television broadcasting
services. The company also offers video streaming,
television programming, internet and communication
services to customers worldwide.
0.82% TOTAL INVESTMENTS
£45.2M VALUE
13. WELLS FARGO (19)
US listed diversified financial services company that
provides banking, investment, mortgage, and finance
products and services internationally.
0.72% TOTAL INVESTMENTS
£39.7M VALUE
14. VERTIV (45)
US listed company that provides power systems,
monitoring equipment, and cooling solutions for data
centres, including those hosting Generative Artificial
Intelligence (AI) applications.
0.68% TOTAL INVESTMENTS
£37.9M VALUE
15. MORGAN STANLEY (94)
US listed bank providing diversified financial services
spanning investment banking, wealth management and
investment management.
0.65% TOTAL INVESTMENTS
£36.1M VALUE
16. VISA (51)
US listed financial services company operating a
worldwide retail electronic payments network as well
as offering credit and debit cards and internet payment
systems.
0.62% TOTAL INVESTMENTS
£34.0M VALUE
17. NOVO NORDISK (47)
Denmark listed pharmaceutical company operating
worldwide. Develops, produces and markets healthcare
products and educational and training materials with a
focus on diabetes related medicines and devices.
0.61% TOTAL INVESTMENTS
£33.9M VALUE
18. KLA (189)
US listed leader in the design and supply of process
control and yield management solutions for the
semiconductor industry.
0.58% TOTAL INVESTMENTS
£31.9M VALUE
19. HDFC BANK (69)
India listed bank offering a wide range of financial
services. India’s largest private sector bank by size of
balance sheet.
0.57% TOTAL INVESTMENTS
£31.6M VALUE
20. ABBVIE (111)
US listed pharmaceutical company producing
medicines for specialty therapeutic areas including
immunology, kidney disease, women’s health, oncology
and neuroscience.
0.57% TOTAL INVESTMENTS
£31.3M VALUE
30
TEN YEAR RECORD (UNAUDITED)
Assets at 31 December
£m 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Total assets less current
liabilities (excl loans) 2,657 2,838 3,001 3,461 3,960 3,817 4,545 4,919 5,831 5,232 5,615
Loans and debentures 227 261 299 248 292 325 436 407 550 582 581
Net assets 2,430 2,577 2,702 3,213 3,668 3,492 4,109 4,512 5,281 4,650 5,034
Number of ordinary
shares (million)
(1)
570 562 559 547 542 542 543 537 527 518 510
All Company data are based on assets, liabilities, earnings and expenses as reported in accordance with the Company’s
accounting policies and are unaudited but derived from the audited Accounts or specified third-party data providers.
Net Asset Value (NAV) at 31 December
pence 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
NAV per share – with
debt at par 426.1 458.4 483.4 587.9 676.5 643.9 757.3 840.7 1002.5 896.9 987.6
NAV per share – with
debt at market value 424.8 458.4 483.4 587.2 675.8 642.9 753.9 831.8 998.7 932.1 1,022.1
NAV total return % – 5
years
(2)
71.4
NAV total return % – 10
years
(2)
184.4
Share price at 31 December
pence 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Middle market price per
share 378.0 421.2 449.2 544.0 647.0 633.0 765.0 787.0 926.0 904.0 962.0
(Discount)/premium to
NAV with debt at
market value % (11.0) (8.1) (7.0) (7.4) (4.3) (1.5) 1.5 (5.4) (7.3) (3.0) (5.9)
Share price High 383.0 425.9 465.0 544.0 649.0 741.0 778.0 807.0 941.0 946.0 992.0
Share price Low 320.5 363.0 401.6 391.2 542.0 612.0 636.0 478.0 750.0 770.0 830.0
Share price total return
% – 5 years
(2)
64.5
Share price total return
% – 10 years
(2)
203.0
31Annual Report and Accounts 2023
Strategic Report
Revenue for the year ended 31 December
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Available for ordinary
share holders – £’000s
(3)
44,037 37,857 47,262 58,393 63,486 69,438 70,937 52,480 58,500 72,595 81,660
Net revenue return per
share – pence 7.69 6.69 8.42 10.57 11.67 12.81 13.06 9.71 10.99 13.92 15.83
Dividends per share –
pence 9.00 9.30 9.60 9.85 10.40 11.00 11.60 12.10 12.80 13.50 14.70
Cost of running the Company
% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Expressed as a
percentage of average
net assets:
Total Expense Ratio
(4)
0.50 0.53 0.53 0.53 0.52 0.56 0.53 0.51 0.47 0.48 0.45
Ongoing Charges
(4)
0.86 0.87 0.80 0.79 0.79 0.65 0.63 0.59 0.54 0.54 0.49
Total Costs
(4) (5 )
1.06 1.01 1.05 1.19 1.16 1.12 0.97
Gearing
(4)
at 31 December
% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
Net gearing
8.0 8.9 8.6 6.9 7.2 6.6 9.9 8.0 9.4 7.3 9.9
(1) Shares in issue, excluding those held in treasury.
(2) Source: Morningstar UK Limited.
(3) Management fees and finance costs are allocated 25% to revenue account from 2015 onwards (previously 50%).
(4) See Alternative Performance Measures on page 114 for explanation.
(5) Not calculated for years prior to 2017.
32
PURPOSE, VALUES AND INVESTMENT
OBJECTIVE
Our purpose is essentially unchanged since inception in
1868; at the outset it was to provide the investor of relatively
moderate means access to the same opportunities and
advantages as the very largest investors and to diminish
risk by investing broadly. We now invest in global equities,
both listed and private, and continue to provide a diversified,
convenient and cost-effective global investment choice to
meet the longer-term investment needs of large and small
investors. Our values centre around integrity, innovation,
adaptation and diversification and are integral to and
inherent in our long-term strategy. More recently, we have
incorporated a commitment to transitioning the portfolio
to net zero carbon emissions by 2050, at the latest, with a
greater focus on investing responsibly.
Our investment objective is to secure long-term growth in
capital and income for our shareholders. Our investment
strategy is therefore designed to produce outperformance
and rises in dividends in excess of inflation over the longer-
term. We do this by investing mainly in public and private
equity markets, using borrowings to enhance returns and
by managing costs carefully. Our investments are held in a
number of portfolios that are individually concentrated but
are managed as a whole to provide global diversification,
lower volatility and lower risk. In an ever changing
environment in which there is a greater need for individuals
to take control of their future financial wellbeing, our wider
business strategy aims to position us as a core investment
choice through all available channels.
BUSINESS MODEL
As an investment trust company with no employees, we
believe that the best way to achieve our objective is to
have an effective and strong working relationship with our
appointed manager, Columbia Threadneedle Investment
Business Limited (the ‘Manager’). Within policies set and
overseen by the Board of Directors, our Manager has
been given overall responsibility for the management of
the Company's assets, including asset allocation, gearing,
stock and sector selection as well as risk management. The
Manager has the flexibility to use other fund managers by
delegating the management of some investment portfolios
externally. These currently include a proportion of the
North American listed equity portfolios and the Private
Equity holdings. Engagement on responsible investment
matters is undertaken through a global team within
Columbia Threadneedle Investments composed of staff in
Columbia Threadneedle Management Limited, Columbia
Management Investment Advisers LLC and Threadneedle
Asset Management Limited, as affiliates acting on behalf of
the Manager. The Board remains responsible for the matters
listed on pages 54 and 55.
To provide a breadth of sources of return, the individual
investment portfolios are managed on a global or regional
basis. While we invest primarily in listed equities, we retain
complete investment flexibility to invest in other types of
securities or assets depending on the return prospects
and in consideration of the implications for the broader
portfolio. Furthermore, as a closed-end, listed investment
trust company we are not constrained by asset sales to
meet redemptions. Our share capital structure gives us the
flexibility to take a longer-term view and remain invested,
while taking advantage of illiquidity throughout normal and
volatile market conditions. Having the ability to borrow to
invest gives us a significant advantage over a number of
other investment fund structures. These features combine
to form a resilient and adaptable business model that has
helped us to weather the impact of many a world crisis,
including the Covid-19 pandemic.
ALIGNMENT OF VALUES AND CULTURE
In addition to strong investment performance from our
Manager, we expect it to adhere to the highest standards of
responsible investment, transparency, corporate governance
and business ethics and that its values and culture align
with our own. As a founder signatory to the United Nations
Principles for Responsible Investment (‘UNPRI’), Columbia
Threadneedle Investments continues to perform well in the
2022 UNPRI assessment and compared to our peers for key
areas of their responsible investment approach and active
ownership in listed equities. The Board considered the
Managers culture and shared values as part of the annual
assessment of its performance and in determining whether
its reappointment is in the interests of shareholders.
RESPONSIBLE INVESTMENT IMPACT
Our environmental, social and governance principles are key
elements of our responsible investment approach and are
central to our objective to deliver sustainable investment
performance over the long-term. We continue to review
and challenge our approach to responsible investment,
recognising our globally diversified strategy. As we continue
to evolve our approach, our responsible investment
principles will remain at the core of our strategy.
BUSINESS REVIEW
33Annual Report and Accounts 2023
Strategic Report
The direct impact of the Company’s activities is minimal
as it has no employees, premises, physical assets or
operations, either as a producer or a provider of goods or
services and it does not have customers in the traditional
sense. It is therefore exempt from reporting on its energy
and carbon emissions under the Streamlined Energy and
Carbon Reporting requirements. However, we provide
information on the emissions of our portfolio companies in
Our Approach to responsible investment which begins on
page 17.
MANAGER EVALUATION AND ALIGNMENT OF
SHAREHOLDER INTERESTS
An important responsibility of our wholly independent
Board of non-executive Directors is the robust annual
evaluation of the Manager’s performance and its capabilities
and resources, given that investment performance and
responsible investment are fundamental to delivering
sustainable long-term growth in capital and income for
our shareholders. This evaluation is an essential element of
strong governance and mitigation of risk, as outlined under
the Principal Risks identified on page 42. The process for
the evaluation of our Manager for the year under review
and the basis on which the reappointment decision was
made are set out on page 57. The management fee is based
on the Company’s market capitalisation, thus aligning the
Managers interests with those of our shareholders through
share price performance. Details of the management fee
arrangements are set out in the Report of the Management
Engagement Committee.
MANAGING RISKS AND OPPORTUNITIES
We seek to make effective use of our corporate structure
and the investment opportunities that lead to long-term
growth in capital and income for our shareholders. These
opportunities do not come without risks and therefore the
performance of our Manager is monitored at each Board
meeting on a number of levels. In addition to managing
the investments, the ancillary functions of administration,
company secretarial, accounting and marketing services are
all carried out by the Manager. It reports on the Company's
investment portfolios; the wider portfolio structure; risks;
compliance with borrowing covenants; income, dividend
and expense forecasts; errors; internal control procedures;
marketing; shareholder and other stakeholder issues,
including the Company’s share price discount or premium
to NAV; and accounting and regulatory updates. The
performance of each individual investment portfolio is
reviewed through a series of presentations given by each
specialist investment management team throughout the
year.
Shareholders can assess the Company’s financial
performance from the Key Performance Indicators that
are set out on pages 40 and 41. On pages 42 to 44 are
set out what the Directors consider to be the principal
and emerging risks that the Company faces. In addition
to monitoring our Manager’s performance, commitment,
available resources and its systems and controls, the
Directors also review the services provided by other
principal suppliers. These include the Custodian and
Depositary in the safeguarding of the Company's assets.
The principal policies that support our investment and
business strategy are set out on pages 37 to 39, whilst
the Fund Managers review of activity in the year can be
found on pages 9 to 16. In light of the Company’s strategy,
investment processes and control environment (relating
to both the oversight of its service providers and the
effectiveness of the risk mitigation activities), we have set
out in our long-term viability statement on pages 44 to 46
our reasonable expectation that the Company will continue
in operation for at least the next ten years.
FUND MANAGER AND MANAGEMENT OF THE ASSETS
As Fund Manager on behalf of our Manager, Paul Niven
is responsible for developing and implementing the
investment strategy with the Board and for the day to day
management of the total portfolio, covering the entire range
of individual investment portfolio strategies. His role covers
tactical decisions over the allocation of assets between
the different investment portfolios as well as determining
the level and timing of gearing within the range prescribed
by the Board. He has responsibility for overall portfolio
composition but delegates stock selection decisions. The
underlying specialist portfolio management teams are
responsible and accountable to him and ultimately to the
Board for their investment performance.
MARKETING
Reflecting changes in the market in more recent years,
an increasing proportion of the Company’s shareholders
hold their investments via third-party platforms, as well
as through the Columbia Threadneedle Savings Plans,
which remain a cost effective and flexible way to invest.
Recognising the changes in how our key target market is
choosing to invest, as well as the benefits of the Company
continuing to maintain and grow a well-diversified
34
underlying shareholder base, a key focus of our marketing
activities is to maintain, and ideally increase, the proportion
of shares held via third-party platforms and the Columbia
Threadneedle Savings Plans. This has been on an upward
trend in recent years, as shown in the Key Performance
Indicators on page 41. In 2022 we launched new branding
for the Company and we have supported it with a marketing
campaign aimed at increasing awareness of the benefits
of investing in the Company and attracting new investors,
which will continue through 2024.
SECTION 172 STATEMENT
Section 172(1) of the Companies Act 2006 ('Section 172')
requires that a Director must act in the way that they
consider, in good faith, would be most likely to promote
the success of the Company for the benefit of its members
(i.e. shareholders) as a whole and, in doing so, have regard
(amongst other matters) to the likely consequences of any
decision in the long-term; the need to foster the Company’s
business relationships with suppliers, customers and others;
the impact of the Company’s operations on the community
and the environment; the desirability of the Company
maintaining a reputation for high standards of business
conduct; and the need to act fairly as between members of
the Company.
BUSINESS REVIEW (CONTINUED)
The Directors have had regard to the matters set out in
Section 172 and have continued to act to promote the
success of the Company for the benefit of its shareholders
as a whole. This included the likely consequences of their
decisions in the longer-term and how they have taken wider
stakeholders’ needs into account. Details of the Company's
key stakeholders and the engagement undertaken in 2023
are set out below.
As a long-term investor we always look to the future and
to the success of the Company from that perspective. We
believe that the Company provides a clear investment
choice, not only for investors large and small, but also
for those starting their investment journey. As reported
above, we continue therefore to promote the Company
through marketing initiatives and, at a wider social level, by
supporting broader financial education across schools and
universities. We have continued to work on these initiatives
and towards the optimal delivery of the Company’s
investment proposition and to promote the success of the
Company for the benefit of all shareholders, stakeholders
and the community at large.
35Annual Report and Accounts 2023
Strategic Report
KEY STAKEHOLDER AND SHAREHOLDER ENGAGEMENT
Stakeholders Engagement and Outcomes in 2023
The Manager
The Board's main working relationship
is with our Manager, with the aim of
achieving the Company’s investment
objective in an effective, responsible
and sustainable way in the interests
of shareholders, future investors and
society at large.
Engagement with our Manager is ongoing through regular Board meetings and
discussion. Emphasis was on investment performance and our progress towards
transitioning the Company’s investment portfolio to net zero carbon emissions
by 2050, at the latest. Our approach towards responsible investment and
aspects concerning environmental, social and governance issues are set out on
pages 17 to 27. We also show the key performance indicators that are in place to
measure our progress in meeting this net zero objective. The portfolio activities
undertaken by our Manager and the impact of decisions affecting investment
performance are set out in the Fund Manager’s Review on pages 9 to 16.
With Columbia Threadneedle we are well placed to encourage awareness and
dialogue on responsible investment issues amongst the wider community. As
in 2018, 2020 and 2022, the Company is sponsoring a lecture at The Nobu
Hotel, London on 6 June 2024, with the theme "Social Change and Future
Generations". It will include information on the Company's investment approach.
Video clips will be available on the Company’s website at fandc.com following
the event.
Lenders
Our lenders are key stakeholders as we
use borrowings to enhance returns to
shareholders over the longer-term.
We keep our lenders informed through monthly covenant compliance reporting.
The Company has total borrowings of £581m, the majority of which are through
sterling denominated private placements which have maturities between 2026
and 2061. The pricing levels are highly attractive by historic comparisons and
the blended fixed interest rate is approximately 2.4%. At present, the Company
does not have any short term bank facilities.
Child Trust Fund, Junior ISA and other young investors
Many of our underlying shareholders
are young and hold their shares
through their parents in Columbia
Threadneedle’s Child Trust Fund and
Junior ISA. We hope to retain these
investors for the longer-term and also
foster education among young people
more generally.
Now that many Child Trust Fund accounts have reached maturity, our focus
is on keeping as many of these young investors with us as possible. Ahead of
account maturity, Columbia Threadneedle writes to their parents setting out
their options. The results of our initiative to retain these young investors are in
line with expectations.
In 2023, we resumed our financial education programme, following our
rebranding in 2022. The Programme is designed to help people understand
better the opportunities and significance of not just of saving, but how their
savings can work much harder through investment over the long-term.
36
Shareholders
Although not in the traditional sense,
our shareholders are our customers
who we hope will stay invested with us
and reap the benefits of investing over
the long-term.
The Chairman and Senior Independent Director are available to engage with
shareholders. Access to the daily publication of the Company's NAV and
monthly factsheet is available from our website.
We also publish our detailed half year and annual results for main register
shareholders and Columbia Threadneedle Savings Plan investors. As an
alternative, we provide the option of a short notification summary with the
main highlights and access details to where the full information can be found. In
addition to main register shareholders, savings plan investors are encouraged to
participate fully at shareholder meetings.
In 2023, we held our second “hybrid” Annual General Meeting. This allowed
many more of our shareholders to view the meeting, to ask questions and to
vote online. Voting at the annual general meeting was taken on a poll and the
results on each resolution, which were all strongly in favour, were published on
the Company’s website. The 2024 AGM will follow the same format.
The Company has very few institutional shareholders and instances of
engagement are therefore rare but will always be reported to the Board.
Wealth managers and independent financial advisers
Columbia Threadneedle has a
team dedicated to fostering good
relations with wealth managers
and independent financial advisers
and keeping underlying investors
informed, with the aim to promote the
Company’s investment proposition and
improve the share price.
This team organises meetings with wealth managers and independent financial
advisers as well as preparing webinars, interviews, newsletters and videos
shared via several media channels. The team gathers feedback and answers
questions in relation to the Company and its investment strategy. Feedback
from these meetings, webinars and interviews is reported regularly to the Board.
On pages 42 to 44 we show how we employ our strategies to mitigate the principal and
emerging risks associated with our:
Investment Performance
Effectiveness of Appointed Manager
Cyber Threats and Data Protections
Loss of Key Person
Transition to Net Zero
Further to the provisions of the Companies Act 2006 relating to the preparation of a Strategic Report and concerning non-financial and
diversity information, we have integrated the information required for a Non-Financial and Sustainability Information Statement (‘NFSIS’)
into this Strategic Report with a view to cohesive reporting. The NFSIS requirements are explained on page 119, together with a guide to
the location of the embedded information.
BUSINESS REVIEW (CONTINUED)
37Annual Report and Accounts 2023
Strategic Report
PRINCIPAL POLICIES
The Board has responsibility for the Company’s principal
policies, which support its investment objective of
achieving long-term growth in capital and income for our
shareholders.
INVESTMENT
Our publicly stated investment objective and policies are
designed to help shareholders, prospective investors and
stakeholders understand the scope of our investment remit
and the constraints imposed under it. Any material changes
to the stated objective or policies can only be made with
shareholder approval. No changes are necessary at present
as a result of the decision to transition our investments to
net zero carbon emissions by 2050, at the latest.
Our remit is global. Risk diversification is achieved through
geographic asset allocation and industry sector and stock
selection across a wide range of markets. Within the general
policy of maintaining a diversified portfolio, there are no
specific geographic or industry sector exposure limits for
the publicly listed equities. A limit of 5% of the value of the
total portfolio, excluding private equity investments, has
been placed on unlisted securities at the time of acquisition.
Any unlisted investment requires specific Board approval,
with the exception of new private equity investments,
responsibility for which has been delegated to our Manager.
Shareholder approval would be sought in the event that it
is considered that the long-term exposure to Private Equity
investments could exceed 20% of the value of the total
portfolio.
Under the Company's Articles of Association, with limited
exceptions, no single investment may be made which
exceeds 10% of the value of the total portfolio at the time
of acquisition. Under the Listing Rules, no more than 10% of
the total assets may be invested in other listed closed-end
investment companies, unless such investment companies
have themselves published investment policies to invest
no more than 15% of their total assets in other closed-end
investment companies, in which case the limit is 15%. A limit
of 5% of the value of the total portfolio has been placed on
investment funds managed by the Manager at the time of
acquisition and any such investment requires specific Board
approval.
The Company will typically remain fully invested in
equities but is not prohibited from investing in other types
of securities or assets. Derivatives may be used for the
purposes of income enhancement and efficient portfolio
management, covering tactical asset allocation and risk
mitigation, including protection against currency risks
within strict limits. Government bond instruments, such as
UK Gilts and US Treasuries, may be used as an alternative to
holding cash.
Due diligence with regard to the investment policies
is carried out at each Board meeting, with regular,
comprehensive reporting from the Fund Manager.
Confirmation of adherence to the investment restrictions
set by the Board is required, and given, at each meeting.
The Fund Manager’s Review on pages 9 to 16 provides
an overview of the outcome from the application of the
investment policies during the course of the year.
BORROWING
Using our closed-end investment company structure, we
have a long record of successfully using gearing to enhance
shareholder returns. Our policy is to borrow in sterling or
foreign currency over short, medium or long-term periods.
Our Fund Manager has discretion to be invested within
the range of 90-120% of net assets. Borrowing levels and
covenant headroom are monitored at each Board meeting.
In his report, the Fund Manager explains the impact and
longer-term performance potential for our returns as a
result of our borrowings.
DIVIDEND
Our revenue account is managed with a view to delivering
a rising income stream in real terms over the long-term
for shareholders. Prudent use of our Revenue Reserve
established over many decades is made whenever
necessary to help meet any revenue shortfall and to
weather periods of crisis. The Revenue Reserve meant
that we had the capacity to continue to pay an increased
dividend in recent years, despite the impact on our earnings
of the Covid-19 pandemic. Worldwide economic, political
and financial instability continues and the ongoing conflicts
in Ukraine and the Middle East are of great concern, but in
the year under review our net return per share increased by
13.7% on 2022 and as a result the proposed dividend for the
year is covered by our earnings. Dividends can also be paid
from Capital Reserves, although we have no current need,
or intention, to do so.
The Board applies due diligence and determines dividend
payments by taking account of timely income forecasts,
38
brought forward distributable reserves, prevailing inflation
rates, the Company’s dividend payment record and
Corporation Tax rules governing investment trust status.
Risks to the dividend have been considered as part of the
Principal and Emerging Risks review noted on page 42.
They include worldwide economic, political and financial
instability leading to significant deterioration in the level of
income we receive and unforeseen and significant changes
to our regulatory environment. We have sufficient liquid
resources to fund envisaged levels of dividend payment.
Information on the dividend for 2023 is reported on page 6.
DISCOUNT/PREMIUM
Over many years we have consistently applied a share
“buyback” policy. Under this policy we buy back the
Company’s shares in the market for the benefit of
shareholders where we see value and, importantly, in pursuit
of a sustainably low deviation between the share price
and NAV per share and to dampen discount volatility, in
normal market conditions. The policy and the levels within
which it has operated are continually reviewed, with the
aim of achieving the long-held aspiration of the Company’s
shares trading at or close to NAV per share. Shares bought
back may be cancelled or held in treasury. Those held in
treasury can be re-issued, or new shares issued, in order to
satisfy shareholder demand and to moderate the premium
to which the share price can rise in relation to the NAV per
share. The discount or premium levels are reviewed at each
Board meeting. Information on the results of this policy can
be found on page 6.
RESPONSIBLE INVESTMENT
The Board has committed to transition the Company’s
portfolio to net zero carbon emissions by 2050, at the
latest. Our approach reflects our belief in the power of
investor engagement rather than simply divesting or
excluding stocks or sectors. However, the activities of
some companies are incompatible with our responsible
investment approach; namely producers of tobacco
products, controversial weapons (such as cluster bombs
and landmines) and thermal coal. We exclude companies
with exposure to these activities which exceed certain
revenue thresholds.
BOARD DIVERSITY
Our policy towards the appointment of non-executive
directors to the Board is based on our belief in the benefits
of having a diverse range of experience, skills, length of
service and backgrounds, including gender, ethnicity and
contributions from an international perspective. The policy
is always to appoint the best person for the role and, by
way of this policy statement, we confirm that there is not
and will not be any discrimination on the grounds of gender,
race, ethnicity, religion, sexual orientation, age or disabilities.
The overriding aim of the policy is to ensure that the Board
is composed of the best combination of people for ensuring
the delivery of investment performance for shareholders
over the longer-term in the form of sustainable growth
in both capital and income. We apply the policy for the
purpose of appointing individuals that, together as a
board, will continue to achieve that aim as well as ensuring
optimal promotion of our investment proposition in the
marketplace. In terms of progress in achieving diversity,
the current gender balance of four men and four women
Directors exceeds the recommendation of the FTSE Women
Leaders Review of a target of 40% women on FTSE 350
boards by the end of 2025. This was an increase from the
target of 33% set under the Hampton-Alexander Review
(1)
.
As at 31 December 2023, the Company meets the targets of
the FCA's Listing Rules for gender and ethnic diversity on
the board. The Board will strive to ensure that it continues
to comprise individuals with diverse and complementary
skills and experience in order to meet the Company's
objectives. In accordance with Listing Rule 9.8.6R (9), (10)
and (11) the Board has provided the following information in
relation to its diversity:
Board Gender as at 31 December 2023
(1)
Number
of Board
members
Percentage
of the Board
Number
of senior
positions on
the Board
Men 4 50% 1
Women 4 50%
(2)
2
(3)
(1) The Company does not disclose the number of Directors in executive
management as this is not applicable for an externally managed investment
trust company.
(2) This exceeds the FCA Listing Rules target of 40%.
(3) This exceeds the FCA Listing Rules target of 1. The position of the Chairman
of the Audit Committee is held by a woman. This role is not currently defined
as a senior position under the Listing Rules, however the Board believes that,
for an investment trust company, it should be regarded as such as it is broadly
equivalent to the Chief Financial Officer of a trading company.
BUSINESS REVIEW (CONTINUED)
(1) See Glossary of Terms on page 119.
39Annual Report and Accounts 2023
Strategic Report
Board Ethnic Background as at 31 December 2023
(1)
Number
of Board
members
Percentage
of the
Board
Number
of senior
positions
on the
Board
White British
or other White
(including
minority-white
groups)
7 88% 3
(2)
Mixed/Multiple
Ethnic Groups
1
(3)
12%
(1) The Company does not disclose the number of Directors in executive
management as this is not applicable for an externally managed investment
trust company.
(2) The three senior positions are: Chairman of the Board, Senior Independent
Director and Chairman of the Audit Committee.
(3) This meets the FCA Listing Rules target of the Board having at least one
director from an ethnic minority background.
The information included in the above tables has been
obtained through questionnaires completed by the
individual Directors.
TAXATION
As an investment trust company, it is essential that we
retain our tax status by complying at all times with Section
1158 of the Corporation Tax Act 2010 (‘Section 1158’) such
that UK Corporation Tax is not suffered on our capital gains.
Taxation returns are submitted annually and any taxation
due is settled promptly. Where possible, all taxes suffered in
excess of taxation treaty rates on non-UK dividend receipts
are claimed back in a timely manner. The Board’s policy
towards taxation is one of full commitment to complying
with applicable legislation and statutory guidelines. In
applying due diligence towards the retention of Section 1158
status and adhering to our tax policies, the Board receives
regular reports from the Manager. We have received
approval from HMRC as an investment trust under Section
1158 and have since continued to comply with the eligibility
conditions.
MODERN SLAVERY ACT 2015
The values that we hold, our culture and the rationale
for the appointment of the Manager are explained on
page 32. Columbia Threadneedle Investments is an
organisation committed to respecting human rights and
stands against all forms of slavery and human trafficking.
It is recognised as a leader in responsible investment and
works with policymakers worldwide to deliver market-
wide improvements in standards and regulations. In
2023 approximately 28% of its engagement across the
companies in which the Manager invests for its clients was
on social themes, with extensive work on labour practices.
The Manager is an investor signatory to the Workforce
Disclosure Initiative (‘WDI’) which aims at enhancing
relevant and material workforce-related disclosure on a
wide range of workforce issues, covering companies’ direct
operations and supply chains. As part of its commitment to
the WDI, in 2023 the Manager held 167 engagements with
154 companies seeking improved transparency of workforce
management. We are very supportive of the Manager's
approach and whose formal statement can be found on its
website at columbiathreadneedle.com.
Our own supply chain consists predominately of
professional advisers and service providers in the financial
services industry, which is highly regulated. We believe
therefore that the potential risk of acts of modern slavery or
human trafficking in our own environment is extremely low.
INTEGRITY AND BUSINESS ETHICS
We apply a strict anti-bribery and anti-corruption policy
insofar as it applies to the Directors and any directors or
employees of the Manager or of any other organisation
with which we conduct business. The Board ensures that
adequate procedures are in place and followed in respect
of third-party appointments, acceptance of gifts and
hospitality and similar matters.
40
KEY PERFORMANCE INDICATORS
We assess the efficacy of our strategy by comparing the
Company’s long-term performance against the following
five key measures: Performance, Dividend, Discount/
Premium, Efficiency and Marketing. Detailed commentary
on these measures can be found in the Chairman’s
Statement and in the Fund Manager’s Review.
Our Key Performance Indicators ('KPIs') have been set
to help us achieve our overriding strategic objective of
delivering long-term growth in capital and income for our
shareholders. Whilst the NAV per share is an important
indicator of our portfolio performance, we recognise that
the share price total return, which is the change in the share
price and assumes all dividends are reinvested, is most
important to shareholders. Income is important and we
aspire to a rising dividend in real terms over the long run,
but this is not achieved at the expense of risking capital
growth potential. A balance is struck between income
and capital needs, which may result in periods when the
dividend is not covered by earnings in pursuit of superior
total returns. Nevertheless, with our substantial revenue
reserve and the flexibility to use capital reserves, we are
in the enviable position of being able to continue our
long track record of dividend increases, even in recent
years when many companies passed or cut their dividend
payments. 2023 marks the fifty-third consecutive increased
annual dividend and the one hundred and fifty-sixth annual
dividend payment.
Volatility in the share price discount to the NAV per share
can be regarded by many as an investment opportunity but
can be unsettling for shareholders. We therefore show this
disparity between the share price and the NAV per share as
a KPI and have set a policy aspiration to see the Company’s
shares trading consistently at, or close to, the NAV per
share. Whilst not a panacea for controlling the discount,
the application of a consistent buyback policy over many
years has seen the disparity narrow significantly. The Board
remains resolute in applying the necessary measures
towards achieving this important policy aspiration.
We are also very focused on costs. The recognised method
of cost measurement within the investment trust industry
is Ongoing Charges
(1)
and the Company's Ongoing Charges
ratio has shown a downward trend in recent years. In
2023 it was 0.49% and remains highly competitive within
the investment trust sector. Our Total Costs
(1)
ratio, which
includes interest and transaction costs, was 0.97%. Many
competing products in the financial services industry are
not required to disclose the Total Costs measure and like-
for-like comparisons against investment trust companies
are therefore not possible. Our Ten Year Record on page
31 shows the extent to which we have kept costs under
control, which has made a considerable contribution to our
results over multiple years.
We promote and market the Company in a number of
ways. One of our KPIs is a marketing performance measure
that tracks the percentage of the Company’s shares held
on retail platforms as we recognise that these can provide
investors with convenient and relatively low cost access to
the Company’s shares and an important source of demand.
A healthy level of demand will show the extent to which
we are continuing to meet our purpose and should help
to support the share price. In turn, a well-supported share
price should help towards achieving the Board's aspiration
of the Company's shares trading consistently at, or close
to, the NAV per share. The percentage of shares held on
platforms has continued on an upward trend in 2023.
In 2021, the Board added KPIs to measure progress towards
transitioning the Company’s portfolio to net zero carbon
emissions by 2050, at the latest. Those KPIs are shown
within the responsible investment report on pages 17 to 27.
(1) See Alternative Performance Measures on page 115 for explanation.
BUSINESS REVIEW (CONTINUED)
41Annual Report and Accounts 2023
Strategic Report
(1) See Alternative Performance Measures on page 114 for explanation.
(2) See Glossary of terms on page 117 for explanation of “benchmark”.
(3) These are considered by the Board to be the most relevant and reliable industry-standard peer group performance measures.
Efficiency: Costs
Year to 31 December:
2019
%
2020
%
2021
%
2022
%
2023
%
Our policy is to control the costs of running the
Company
Ongoing charges
(1)
0.63 0.59 0.54 0.54 0.49
This data measures the running costs as a
percentage of the average net assets in the year.
Total costs are inclusive of interest expense and
transaction charges.
Total costs
(1)
1.05 1.19 1.16 1.12 0.97
Source: Columbia Threadneedle Investments
(Discount)/premium: Share price (discount)/premium to NAV
2019
%
2020
%
2021
%
2022
%
2023
%
We aspire to seeing the shares trading at or
close to NAV per share
(Discount)/premium at 31 December
(1)
1.5 (5.4) (7.3) (3.0) (5.9)
This is the difference between the share price
and the NAV per share. It is an indicator of
excess supply over demand for the Company’s
shares in the case of a discount and the excess
demand over supply in the case of a premium.
Average discount in year (2.2) (6.1) (7. 2) (7.5) (6.6)
Source: Columbia Threadneedle Investments
Dividend: Dividend Growth per annum to 31 December 2023 (Annualised)
1
Year
%
3
Years
%
5
Years
%
10
Years
%
We aim to deliver a rising dividend stream in
real terms over the longer-term
Dividend
(1)
8.9 6.7 6.0 5.0 This shows the Company’s compound annual
dividend growth rate and compares it to the
Consumer Price Index.
Consumer Price Index 4.0 6.6 4.3 2.9
Source: Columbia Threadneedle Investments and Refinitiv Eikon
Performance: Total returns to 31 December 2023 (Cumulative)
1
Year
%
3
Years
%
5
Years
%
10
Years
%
We aim to secure long-term growth in capital
and income
Share price
(1)
8.1 27. 9 64.5 203.0
This compares the Company's share price and
NAV total return against those produced by the
benchmark and our peer group, and against
inflation.
NAV (with debt at market value)
(1)
11.3 28.2 71.4 184.4
Benchmark
(2)
15.1 26.9 73.5 178.6
AIC Global Sector Median share price
(investment companies)
(3)
12.5 (0.9) 59.5 186.0
AIC Global Sector Median NAV
(investment companies)
(3)
11.6 13.3 65.5 163.2
IA Global Sector Median
(open-ended funds)
(3)
12.0 16.6 62.5 140.2
Consumer Price Index 4.0 21.1 23.4 32.8
Source: Columbia Threadneedle Investments, Morningstar UK Limited and Refinitiv Eikon
Marketing: Platforms
As at 31 December:
2019
%
2020
%
2021
%
2022
%
2023
%
We promote access to FCIT’s shares through all
available distribution channels with the aspiration
of being on as many platforms as possible.
Platforms 64.97 64.86 65.52 67.06 67. 53
This shows how the percentage of shares held
through platforms, including the Columbia
Threadneedle Investment Savings Plans, has been
increasing.
Other individuals, advisers and
institutions
35.03 35.14 34.48 32.94 32.47
Source: Columbia Threadneedle Investments
42
PRINCIPAL AND EMERGING RISKS
The Board has carried out a robust review and assessment
of the Company's Principal and Emerging Risks and the
uncertainties that could threaten its future success. This
includes near-term risks such as those posed by the change
of ownership of the Manager and longer-term risks, such
as climate change. The consequences for the Company’s
strategy, business model, liquidity, future prospects, long-
term viability and its commitment to transition the portfolio
to net zero carbon emissions by 2050, at the latest, form
an integral part of this review. As a result of the Board's
assessment, the following risk disclosures reflect what it
believes to be the Principal and Emerging Risks that the
Company faces at present.
The extent and impact of the response from governments to
meet the costs of Covid-19 are feeding through, with the UK
and many other countries now close to or in recession as the
impact of the various fiscal measures is being felt. Russia’s
invasion of Ukraine and increased conflict in the Middle
East have added to the continuing economic and market
uncertainty and political instability, with elections in both the
UK and the US also on the horizon.
Economic and market shocks in one form or another,
and their consequences, are risks that have long been on
the Board’s risk assessment. The effects of the Covid-19
pandemic have eased but there can be no complacency. The
Company’s purpose, strategy, investment policy and innate
characteristics, most notably portfolio diversification and an
embedded long-term outlook, again demonstrated its strong
resilience in the face of a global crisis. Our risk evaluation
forms an inherent part of our strategy determination, which
seeks to mitigate risks and to pursue the opportunities that
arise, not least at times of great turmoil.
BMO GAM, our former Manager, was acquired by
Ameriprise and its integration with the business of Columbia
Threadneedle Investments is largely completed.
The following sets out what the Board regards as the
Principal and Emerging Risks faced by the Company,
whether those risks have changed in the year under review
and how those risks are mitigated.
PRINCIPAL RISKS
Investment Performance
Inappropriate asset allocation, sector and stock selection,
currency exposure and use of gearing and derivatives may
give rise to under-performance and impact the Company’s
dividend paying capacity. Political risk factors, including the
potential emergence of restrictive government controls,
could also impact performance as could market shocks such
as those experienced as a result of Covid-19 and geo political
factors such as those described above. The emergence of
new technology in the form of Artificial Intelligence, and how
that technology is used, also presents both opportunities
and threats. The Board considers that this risk has increased.
Under our Business Model, a Manager is appointed with
the capability and resources to manage the Company’s
assets through asset allocation, sector and stock selection,
gearing and risk management. The Manager can delegate
the management of investment portfolios externally to
third-party managers. The individual global and regional
investment portfolios are managed as a whole to provide
diversification, lower volatility and lower risk. The
performance of the Company relative to its benchmark, its
peers and inflation is a KPI measured by the Board on an
ongoing basis and is reported on page 41.
The Company’s portfolio is well diversified and its closed-
end structure enables it to continue to take a long-term
view. Detailed reports provided by the Fund Manager
are reviewed by the Board at each of its meetings. The
Managers Performance and Risk Oversight team provide
independent oversight on investment risk management
for the directly managed portfolios. As outlined in the
Fund Managers Review starting on page 9 and reported
in the Key Performance Indicators on page 41, long-term
performance remains in line with expectations. Prudent
management of the Company’s Revenue Reserve means
that its dividend paying capacity remains strong.
Effectiveness of Appointed Manager
The Business Model is based on the premise of an effective
and strong working relationship with the appointed
Manager, while an important responsibility of the Board is
the robust annual evaluation of its performance, capabilities
and resources, leading to the decision as to whether to
reappoint it. Succession planning concerning any potential
significant management changes is shared with the Board.
BUSINESS REVIEW (CONTINUED)
43Annual Report and Accounts 2023
Strategic Report
Internal performance KPIs and Manager errors are monitored
by the Board for indications of continuity or other Manager
issues.
The Manager’s systems and staffing capabilities continued
to operate satisfactorily throughout 2023. Thorough reviews
and challenges were made through the Audit Committee,
Management Engagement Committee and the Board. Whilst
the Board has confirmed the reappointment of the Manager,
the integration of BMO GAM and Columbia Threadneedle's
systems inevitably introduced a degree of uncertainty. A
critical milestone was the move to a new order management
system, Aladdin, widely regarded as the market leading
system. This change was completed successfully in 2023.
This risk is therefore categorised as reduced.
Cyber Threats and Data Protections
The ancillary functions of administration, company
secretarial, accounting and marketing services are all carried
out by the Manager. The Board monitors the effectiveness
and efficiency of the service providers’ processes through
internal efficiency KPIs.
The Audit Committee and the Board have reviewed regularly
the Company’s risk management framework with the
assistance of the Manager. Regular control reports from the
Manager covering risk, compliance and oversight of its own
third-party service providers, including IT security and cyber
threats, have also been reviewed. The Manager maintains
regular contact with its key outsourced service providers
and has received assurances regarding the continuity of their
operations. Service levels are monitored by the Manager
with any deviations from the service level agreements
escalated immediately, both internally and with the relevant
third party. The Board has reviewed reports from the
Depositary, which is liable for loss of any of the Company’s
securities and cash held in custody unless resulting from an
external event beyond its reasonable control. Whilst the risk
of loss remains high, Board and management vigilance also
remains heightened and therefore this risk is categorised as
unchanged.
Loss of Key Person
The Board has considered who are the key people that could
potentially pose a risk to the Company should they leave
Columbia Threadneedle Investments and it is confident
that those people could be replaced appropriately through
internal promotion or external recruitment. The person
posing the largest key person risk is the Company’s Fund
Manager, Paul Niven, who is Head of Asset Allocation
(EMEA) at Columbia Threadneedle Investments and as such
is a key person in managing the Company’s assets. He has
been our Fund Manager for almost 10 years.
The Board meets with members of the wider Columbia
Threadneedle investment management team to ensure that
relationships are fully developed at all levels. Succession
planning concerning any potential significant management
changes is shared with the Board. Paul’s team is 20 strong
and it is divided into sectors with lead individuals who have
detailed knowledge of the portfolio within their remit. The
Board has received assurance from senior management at
Columbia Threadneedle Investments that Paul’s team has
the necessary breadth and experience if they were required
to manage without him. The Board is confident that the
structure that supports Paul could manage in the event that
he was to become incapacitated or leave the firm. The Board
considers that this risk is unchanged.
EMERGING RISK
Transition to Net Zero
The Board has made a commitment to transition the
Company's portfolio to net zero carbon emissions by
2050, at the latest. Responsible investment is a field that is
evolving rapidly and it can present both opportunities and
threats to the long-term investment performance that we
aim to deliver to our shareholders.
The Manager believes in the power of engaged, long-
term ownership as a force for positive change. It applies
high standards of responsible investment in managing
the investments on behalf of our shareholders and
takes seriously its stewardship responsibilities, actively
engaging with investee companies. The Board meets with
Columbia Threadneedle’s responsible investment team on
a regular basis. We recognise the importance of disclosing
information on responsible investment that is relevant,
reliable and, as far as possible, ensuring that it is presented
in a consistent way from year to year in order that our
progress can be assessed. The Board considers that this risk
is unchanged.
44
RISK MONITORING
The Board has continued to work with the Manager in
managing the Company’s risks. A risk summary is produced
by the Manager in consultation with the Board to identify
the risks to which the Company is exposed, the controls in
place and the actions being taken to mitigate them. The
Board, through the Audit Committee, has a robust process
for considering the resulting risk control assessment at
regular meetings and on an ongoing basis reviews the
significance of the risks and the reasons for any changes.
The Board carried out a thorough review of the risks that
could impact the sustainable success of the Company. The
purpose of the exercise was to reassess the principal and
emerging risks and identify any new, emerging risks and to
take any necessary action to mitigate their potential impact.
The Risk Control Assessment was then revised in line with
the conclusions that were reached. The results of that review
and reassessment are set out in the statement on Principal
and Emerging Risks on page 42. The Board continues to
review and challenge the risks that the Company faces.
GOING CONCERN
The Directors confirm their reasonable expectation that
the Company has adequate resources to continue in
operational existence for a period of at least twelve months
from the date of approval of the financial statements. This
confirmation is based on a review of assumptions that
took into account the outlook for global stock markets and
economies; the diversified portfolio of readily realisable
securities which can be used to meet short-term funding
commitments; and the ability of the Company to meet all of
its liabilities and ongoing expenses. The Directors also took
account of the results of illustrative stress tests, which were
based on assumptions that they considered to be the most
relevant, covering the period to 31 March 2025 that enabled
them to assess the impact of varying degrees of:
falls in the value of the publicly listed investments;
increased buyback volumes;
illiquidity and early calls on private equity
commitments;
adverse fluctuations in exchange rates; and
falls in annual revenue.
In addition to the stress tests, a reverse stress test was
carried out to establish the extent to which markets and
revenue would need to fall and exchange rates move such
that the Company would breach its most onerous financial
loan covenants. These covenants stipulate that the net
assets of the Company must not fall below £750m and
that gearing must not exceed 35% of the adjusted portfolio
value
(1)
. The results of the test illustrated that a 61% fall in the
values of the public and private equity portfolios alongside
a 60% fall in revenue and adverse exchange rate movements
of 20% would take the gearing position to over 35% of the
adjusted portfolio value
(1)
and would therefore be in breach.
The test was illustrative only and undertaken without any
assumptions of intervention that would mitigate their effect.
Such an event is therefore highly unlikely. Under any scenario
of prolonged severe market falls that could threaten the
Company’s ability to continue as a going concern, the Board
would work with the Manager to take mitigating action
that could include portfolio restructuring, reduced dividend
payments and share buybacks and cost cutting.
At present, the Company does not have any revolving
credit facilities in place and currently its gearing is provided
entirely by a perpetual debenture and fixed rate senior
unsecured loan notes, with various rates of interest and
maturities. Should the Board wish to take out a short term
loan facility, based on past experience, it does not believe
that it would have difficulty in obtaining such a facility.
Based on their assessment of the magnitude of the events
that would cause the Company to fail to meet its liabilities
as they fall due, and their knowledge and experience of
the Company’s portfolio and stock markets, the Directors
continue to adopt the going concern basis in preparing the
accounts for the year ended 31 December 2023. See also
note 24 to the Accounts.
LONG-TERM VIABILITY
The UK Corporate Governance Code and the AIC Code
of Corporate Governance require the Board to assess the
prospects of the Company over a longer period than the 12
months required by the Going Concern provision.
The Directors carried out scenario testing in order to
consider the Company’s long-term viability over a period of
ten years to 31 December 2033. The tests commenced with
a base case scenario that covered a range of assumptions
that they considered to be the most relevant, to which
BUSINESS REVIEW (CONTINUED)
(1) See Glossary of Terms on page 117 for an explanation of adjusted portfolio value.
45Annual Report and Accounts 2023
Strategic Report
sensitivity analysis was then applied in order to assess the
impact of more extreme scenarios. A key assumption in each
scenario included no change to the Company’s dividend
policy.
The worst case scenario tested by the Directors was based
on what they believed to be severe but realistic assumptions.
It addressed the potential impact of falls of 40% in the
value of the listed investments and 35% for the private
equity investments in 2024; followed by a 20% index fall
in 2025 impacting equities, together with fluctuations
in income receipts. The fall in value of investments may
occur for a variety of reasons, including climate change.
Under this scenario the early payment of the private
equity commitments would increase the proportion of
that portfolio as a percentage of the total value of the
investments as a whole. All loans were assumed to have
been repaid at the beginning of the year. Private equity
valuations were assumed to make a modest recovery in later
years, while exchange rate movements would fluctuate from
year to year.
The results from the worst-case scenario showed that under
such highly adverse conditions the net assets would fall to no
lower than £1.5 billion and would be at £2.1 billion by
31 December 2033. Dividend payments to shareholders could
continue to be paid through the support of Capital Reserves.
Under a scenario based on the movements in income,
inflation and valuations over the ten year period that
followed the financial crisis of 2008, net assets would rise to
£9.8 billion at 31 December 2033. Whilst a scenario that used
the movements in income, inflation and valuations in the ten
years following the 1970’s oil crisis showed that net assets
would rise to £15.0 billion by 31 December 2033.
The assumptions used for these tests purposefully did not
take into account that under such severe conditions the
Board and Manager would have taken action to mitigate
the risks and offset the impact. Furthermore, the tests
were a theoretical and illustrative scenario exercise, the
assumptions for which are extreme and highly unlikely. Their
purpose was to help inform the Directors of the Company’s
resilience under conditions so severe that they would impact
global economies, markets, companies and businesses alike.
The tests help to support the Board’s assessment of the
Company’s long-term viability. The results do not represent
its views or give an indication of the likely outcome.
Having considered its current position and the principal and
emerging risks that the Company faces and having applied
stress tests under worst-case scenarios that would severely
impact global economies and markets alike, the Board
confirms that it has assessed the Company’s prospects, to
the extent that it is able to do so, over the next ten years.
RESILIENT, RESPONSIBLE AND PROSPEROUS FOR OVER 150 YEARS
We have set a target to transition our portfolio to net
zero carbon emissions by 2050, at the latest.
We have a strong record of taking advantage of
investment opportunities that arise from market
shocks and volatility.
We have substantial headroom under our loan
covenants which is rigidly monitored.
We have a long-term investment strategy under
which we invest mainly in readily realisable, publicly
listed securities and which restricts the level of
borrowings.
We are able to take advantage of our closed-end
investment trust structure to deliver on our objective
over the long-term and have secured borrowings
with terms well in excess of ten years at historically
low interest rates.
Our business model and strategy are not time limited
and, as a global investment trust, we are unlikely to
be adversely impacted materially as a direct result of
geo-political events over the longer-term.
We can hold a proportion of our long-term less liquid
private equity investments over very many years
without pressure to realise them ahead of time.
Our revenue and expenditure forecasts are subject
to regular and robust review throughout the year
against a backdrop of large revenue and capital
reserves.
We retain title to all assets held by the Custodian
which are subject to further safeguards imposed on
the Depositary.
46
BUSINESS REVIEW (CONTINUED)
In concluding that ten years is an appropriate period for
this assessment, the Board considers that this approximates
to a suitable period over which its longer-term investment
performance should be judged and the periods over which it
would typically commit to and benefit from its private equity
investments.
The Board also took into consideration the long-term
duration of the Company’s debt, the perceived viability of
the Company’s principal service providers, the potential
effects of expected regulatory changes and the potential
threat from competition. The Company’s business model,
strategy and the embedded characteristics have helped
define and maintain its stability over many decades. The
Board expects this to continue over many more years to
come.
The Directors confirm therefore, that they have a reasonable
expectation that the Company will be able to continue in
operation and meet its liabilities in full over the coming ten
years to 31 December 2033.
On behalf of the Board
Beatrice Hollond
Chairman
7 March 2024
47Annual Report and Accounts 2023
Governance Report
BOARD OF DIRECTORS
BEATRICE HOLLOND
(2)
Chairman Appointed to the Board on
1 September 2017 and as Chairman of the Board
and the Management Engagement Committee
on 1 January 2020. She was appointed Chairman
of the Nomination Committee on 1 September
2019.
Experience and contribution: Beatrice brings to
the Board investment knowledge and expertise
in both equities and global fixed income. She
also brings leadership skills from her time as
a Managing Director of Credit Suisse Asset
Management, LLC where she spent 16 years
in global fixed income. Beatrice was a non-
executive director of Templeton Emerging
Markets Investment Trust PLC until 2022.
Other public company appointments: Beatrice
is a member of the board of Brown Advisory
in the United States and chairs its international
advisory board. She is also a non-executive
director at Telecom Plus PLC, where she is
Senior Independent Director.
ANURADHA CHUGH
(1)
Appointed to the Board on 1 July 2023.
Experience and contribution: Anu brings to the
Board extensive marketing experience. She was
the Chief Executive of Pukka Herbs, where she
was responsible for governance and strategy
until June 2023. She is a marketing professional
with more than 25 years’ experience in the
consumer-packaged goods industry, having
formerly been Managing Director of Ben and
Jerrys Europe, Global Marketing Director of
Unilever and Marketing Director of Pepsi Lipton
International. Prior to that she held a number of
senior marketing roles at Unilever.
Other public company appointments: None.
EDWARD KNAPP
(1)
Appointed to the Board on 25 July 2016.
Experience and contribution: Edward brings
a combination of investment, operational and
general management experience worldwide,
with expertise in the digital transformation
of large-scale organisations, portfolio
management, risk, strategy and technology.
Edward was previously Chief Operating Officer
and Global Head of Business Management
within the Technology function at HSBC and
prior to that he was a global Chief Operating
Officer at Barclays Bank. Until 2012 he was
at McKinsey & Company, providing board
and advisory services to clients worldwide,
focusing on growth strategy, technology,
risk and transformation, including across
asset management, banking and technology
organisations. He is a former Senior Advisor to
Revolut Limited, the global Financial Technology
company.
Other public company appointments: Edward
is a non-executive director and Chairman of the
Board Audit and Risk Committee of Ten Group
PLC, the technology service platform.
TOM JOY
(2)
Appointed to the Board on 1 January 2021.
Experience and contribution: Tom has
extensive investment knowledge, expertise
and experience in global equity markets. Until
March 2023, he was Chief Investment Officer of
the Church Commissioners for England which
is responsible for managing the endowment
portfolio of the Church of England. He began
his career at Royal Sun Alliance Investment
Management and later joined Schroders, where
he held a variety of different roles and ultimately
become Head of Investment – Multi-Manager.
He then joined RMB Asset Management where
he was Chief Investment Officer until his
appointment at the Church Commissioners for
England in October 2009.
Other public company appointments: None.
Tom will step down from the Board with effect
from 31 March 2024.
48
QUINTIN PRICE
(1)(2)
Senior Independent Director
Appointed to the Board on 10 March 2020.
Experience and contribution: Quintin
brings investment banking and investment
management knowledge and expertise to
the Board from a 30 year career working at a
senior level for a number of leading companies.
From 2005 to 2015 he was at BlackRock where
he was Global Head of Alpha Strategies and a
member of the Global Executive Committee.
Other public company appointments: None.
RAIN NEWTON-SMITH
(2)
Appointed to the Board on 11 May 2021.
Experience and contribution: Rain has
considerable economic and political
insight as well as expertise in sustainability,
governance on reducing carbon emissions
and in developing environmental, social and
governance (‘ESG’) reporting. She is Chief
Executive of the Confederation of British
Industry, having previously been its Chief
Economist, providing business leaders with
advice on the UK economic outlook and global
risks. Rain was formerly Head of Emerging
Markets at Oxford Economics, where she was
the lead expert on China. Prior to that, Rain
worked as a research advisor to the Bank of
England’s Monetary Policy Committee, which
included a secondment to the International
Monetary Fund.
Other public company appointments: None.
STEPHEN RUSSELL
(1)
Appointed to the Board on 1 February 2022.
Experience and contribution: Stephen brings
the highest level of investment skills and
knowledge to the Board. He is Investment
Director and a member of the multi asset
investment committee at Ruffer LLP, where he
helps direct its investment strategy. He joined
Ruffer in 2003 and has managed its flagship
pooled funds and developed its institutional
pension fund offering into one of the largest
multi asset/absolute return fund managers
in the UK. Stephen previously managed
segregated pension funds at Sun Life of
Canada and advised pension fund managers as
a strategist at HSBC.
Other public company appointments: None.
JULIE TANKARD
(1)(2)
Chairman of the Audit Committee
Appointed to the Board and as Chairman of the
Audit Committee on 1 August 2022.
Experience and contribution: Julie has a
strong financial background. She is a fellow
of the Chartered Institute of Management
Accountants and until July 2023 was the
Chief Financial Officer and a Board member
of the Port of London Authority where, as
well as finance, she was responsible for risk,
procurement, legal and information technology.
Julie previously chaired the audit committee
of Leeds & York NHS Foundation Trust, prior to
which she held various senior positions at BT
plc.
Other public company appointments: None.
(1) Member of the Audit Committee
(2) Member of the Nomination Committee
All the Directors are members of the Management Engagement Committee. No Director has a shared directorship elsewhere with other Directors.
BOARD OF DIRECTORS (CONTINUED)
49Annual Report and Accounts 2023
Governance Report
DIRECTORS’ REPORT
The Directors submit the Annual Report and Accounts of
the Company for the year ended 31 December 2023. The
Corporate Governance statement, Directors’ biographies,
the Reports of the Management Engagement and Audit
Committees and the Directors' Remuneration Report all
form part of this Directors’ Report.
STATEMENT REGARDING ANNUAL REPORT AND
ACCOUNTS
The Directors consider that, following advice from the
Audit Committee, the Annual Report and Accounts of the
Company for the year ended 31 December 2023, taken as
a whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the
Company’s position and performance, business model and
strategy. The Audit Committee reviewed the draft Annual
Report and Accounts for the purpose of this assessment
having also put in place, as explained on pages 62 and 63,
an independent process to provide additional comfort to
the Directors in making this statement. The Chairman’s
Outlook for the Company can be found on pages 7 and 8.
The Board’s assessment of the Company’s Principal and
Emerging Risks can be found on pages 42 to 44 with further
information in note 25 to the Accounts. The Directors have
evaluated the period since the financial year end and have
not identified any subsequent events to be disclosed. There
are no instances where the Company is required to make
disclosures in respect of Listing Rule 9.8.4R.
RESULTS AND DIVIDENDS
The results for the year are set out in the attached accounts.
The three interim dividends totalling 10.20 pence per
share, together with the final dividend of 4.50 pence per
share which, subject to approval at the forthcoming AGM
(Resolution 3), will be paid on 9 May 2024 to shareholders
registered on 12 April 2024, will bring the total dividend
for the year to 14.70 pence per share. This represents an
increase of 8.9% over the comparable 13.50 pence per share
paid in respect of the previous year.
COMPANY STATUS
The Company is a public limited company and an
investment company as defined by section 833 of the Act.
The Company is registered in England and Wales with
company registration number 12901 and is subject to the
FCA Listing Rules, Disclosure Guidance and Transparency
Rules (‘DTRs’) and other applicable legislation and
regulations including company law, financial reporting
standards, taxation law and its own Articles of Association.
TAXATION
As set out on page 39 and in note 7 to the Accounts,
the Company is exempt from UK Corporation Tax on its
worldwide dividend income and from UK Corporation
Tax on any capital gains arising from the portfolio of
investments, provided it complies at all times with Section
1158 of the Corporation Tax Act 2010. Dividends received
from investee companies domiciled outside the UK are
subject to taxation in those countries in accordance with
relevant double taxation treaties.
CRIMINAL FINANCES ACT 2017
The Board is committed to compliance with the Criminal
Finances Act 2017, designed to prevent tax evasion in
the jurisdictions in which the Company operates, and has
zero tolerance for tax evasion. The Company's shares are
purchased through third party intermediaries, therefore no
funds flow directly into the Company. As the Company has
no employees, the Board’s focus is to ensure that the risk of
the Company’s service providers facilitating tax evasion is
also very low. Therefore it seeks assurance from its service
providers that effective policies and procedures are in place.
ACCOUNTING
The Financial Statements, starting on page 78, comply
with current UK Financial Reporting Standard (FRS)
102, supplemented by the Statement of Recommended
Practice ‘Financial Statements of Investment Trust
Companies and Venture Capital Trusts’ (‘SORP) published
by the Association of Investment Companies (AIC’). The
significant accounting policies of the Company are set
out in note 2 to the Accounts. The unqualified auditors’
opinion on the Financial Statements appears on page 70.
Shareholders will be asked to approve the adoption of
the Annual Report and Accounts at the forthcoming AGM
(Resolution 1).
STATEMENT AS TO DISCLOSURE OF INFORMATION TO
THE AUDITORS
Each Director confirms that, to the best of their knowledge
and belief, there is no information relevant to the
preparation of the Annual Report and Accounts of which
Ernst & Young LLP (‘EY’ or the ‘auditors’) is unaware
and that they have taken all the steps a Director might
reasonably be expected to have taken to be aware of
relevant audit information and to establish that EY is aware
of that information.
50
REAPPOINTMENT OF AUDITOR
EY have indicated their willingness to continue in office
as auditor to the Company and resolutions proposing its
reappointment and authorising the Audit Committee to
determine its remuneration for the ensuing year will be put
to shareholders at the AGM (Resolutions 11 and 12). Further
information in relation to their reappointment can be found
on page 63.
CAPITAL STRUCTURE
As at 31 December 2023 there were 561,819,016 ordinary
shares of 25 pence each (‘ordinary shares’) in issue, of
which 52,025,962 were held in treasury. The total number of
voting rights in the Company as at 4 March 2024 is set out
in Note 17 to the Notice of Annual General Meeting.
All ordinary shares rank equally for dividends and
distributions and carry one vote each. There are no
restrictions concerning the transfer of securities in the
Company, no special rights with regard to control attached
to securities, no agreements between holders of securities
regarding their transfer known to the Company and no
agreement which the Company is party to that affects its
control following a takeover bid. More details of the capital
structure can be found in note 16 to the Accounts. The
revenue profits of the Company (including accumulated
Revenue Reserve), together with the realised capital profits
of the Company, are available for distribution by way of
dividends to the holders of the ordinary shares. Upon a
winding-up, after meeting the liabilities of the Company, the
surplus assets would be distributed to shareholders pro rata
to their holdings of ordinary shares. Full details are set out
in the Company’s Articles of Association.
The Company may only adopt new Articles of Association
by special resolution passed by shareholders at a general
meeting.
BUYBACK AND ISSUE OF SHARES
At the annual general meeting held on 27 April 2023,
shareholders renewed the Board’s authority to purchase
up to 14.99% of its own issued ordinary shares, (excluding
any shares held in treasury) at a discount to NAV per share.
The shares bought back can either be cancelled or held
in treasury, to be re-issued as and when the share price
is at a premium to the NAV per share. Shareholders also
authorised the Board to issue new ordinary shares or sell
shares from treasury up to 10% of the number then in issue.
A total of 8,618,802 ordinary shares were bought back
during the year, all of which were placed in treasury. The
shares bought back represented 1.7% of the shares in issue
(calculated exclusive of any shares held in treasury) as at
31 December 2022. The purchases were made at prices
ranging between 830.0 pence and 965.4 pence and the
aggregate consideration paid for the shares, including
stamp duty and commissions, was £76.3m. A total of
2,690,221 ordinary shares have been bought back into
treasury between 31 December 2023 and 4 March 2024.
NOTIFIABLE INTERESTS IN THE COMPANY'S VOTING
RIGHTS
As at 31 December 2023 and since that date no notifications
of significant voting rights have been received under the
DTRs.
PROPORTIONAL VOTING
Approximately 43% of the Company’s share capital is held
on behalf of non-discretionary clients through the Columbia
Threadneedle savings plans. For those planholders who do
not return their voting directions for the forthcoming AGM,
the nominee company will vote their shares in proportion to
those who do vote (‘proportional voting’). Implementation
of this arrangement is subject to a minimum threshold of
5% of the shares held in the plans being voted. A maximum
limit of 545,000 shares that any one individual investor can
vote, being approximately 5% of the minimum threshold,
also applies. Any shares voted by an investor in excess
of the maximum limit remain valid, but do not form part
of the proportional voting basis. Planholders have the
right to exclude their shares from the proportional voting
arrangement.
BORROWINGS
The Company has issued various fixed rate senior unsecured
private placement notes (the ‘Notes’). The Company also
has a perpetual debenture stock. At present it does not
have any revolving credit facilities. Further information is
given in notes 14 and 15 to the Accounts.
REMUNERATION REPORT
At the Annual General Meeting held on 27 April 2023,
shareholders approved the Directors’ remuneration policy.
It is a requirement that shareholder approval is sought at
least every three years and therefore shareholders will be
asked to approve the Directors’ remuneration policy at
the AGM to be held in 2026. The Directors’ Remuneration
Report, which includes the remuneration policy and can
DIRECTORS’ REPORT (CONTINUED)
51Annual Report and Accounts 2023
Governance Report
be found on pages 65 to 68, provides detailed information
on the remuneration arrangements for Directors of the
Company. Shareholders will be asked to approve the
Directors' Remuneration Report (excluding the Directors'
remuneration policy) at the AGM (Resolution 2).
APPOINTMENTS TO THE BOARD
Under the Articles of Association of the Company, the
number of Directors on the Board may be no less than
three and no more than fifteen. Directors may be appointed
by the Board or by the Company by ordinary resolution.
All Directors so appointed are subject to re-election by
shareholders at the next annual general meeting. On
appointment, Directors are provided with a handbook
that includes key company documents and details and
have a series of meetings with key individuals at Columbia
Threadneedle Investments as part of their induction process.
REMOVAL OF DIRECTORS
The Company may by special resolution remove any Director
and may by ordinary resolution appoint another person who
is willing to act to be a Director in their place. The provisions
under which a Director would automatically cease to be a
Director are set out in the Company’s Articles of Association.
CONTRIBUTION AND INDEPENDENCE OF DIRECTORS
The Board is composed solely of independent non-
executive Directors. The Nomination Committee has
considered each Director's performance and the Board has
concurred with its assessment that each Director continues
to make a valuable and effective contribution and remains
committed in their role. Furthermore, no Director has a
past or current connection with the Manager and each
remains independent in character and judgement with no
relationships or circumstances relating to the Company that
are likely to affect their judgement. The Board has therefore
concurred with the Nomination Committee’s assessment
that all the Directors are independent of the Manager and of
the Company itself.
DIRECTOR RE-ELECTIONS
The biographies of the Directors are set out on pages 47
and 48 and are incorporated into this report by reference.
The skills and experience each Director brings to the Board
for the long-term sustainable success of the Company are
also set out there. Francesca Ecsery retired from the Board
on 27 April 2023. With the exception of Anuradha Chugh,
who was appointed on 1 July 2023, all of the other Directors
held office throughout the year under review. All Directors,
with the exception of Tom Joy who will stand down from
the Board on 31 March 2024, will stand for re-election by
shareholders at the forthcoming AGM in accordance with
the Company’s Articles of Association (Resolutions 4 to 10).
DIRECTORS’ INTERESTS AND INDEMNIFICATION
There were no contracts to which the Company was a party
and in which a Director is, or was, materially interested during
the year. There are no agreements between the Company
and its Directors concerning compensation for loss of office.
The Company has granted a deed of indemnity to the
Directors in respect of liabilities that may attach to them
in their capacity as Directors of the Company. This covers
any liabilities that may arise to a third party for negligence,
default or breach of trust or duty. This deed of indemnity is
a qualifying third-party provision (as defined by section 234
of the Act) and has been in force throughout the year under
review and remains in place as at the date of this report. It is
available for inspection at the Company’s registered office
during normal business hours and at the AGM. The Company
also maintains directors’ and officers’ liability insurance.
CONFLICTS OF INTEREST
A company director has a statutory obligation to avoid a
situation in which they have, or potentially could have, a
direct or indirect interest that conflicts with the interests
of the company of which they are a director (a ‘situational
conflict’). The Board therefore has procedures in place for
the authorisation and review of potential conflicts relating
to the Directors. Limits can be imposed as appropriate.
Other than the formal authorisation of the Directors’ other
directorships, no authorisations have been sought. Those
authorisations were reviewed in January 2024. Aside from
situational conflicts, the Directors must also comply with the
statutory rules requiring company directors to declare any
interest in an actual or proposed transaction or arrangement
with the Company.
SAFE CUSTODY OF ASSETS
The Company’s listed investments are held in safe custody
by JPMorgan Chase Bank (the ‘Custodian’). Operational
matters with the Custodian are carried out on the
Company’s behalf by Columbia Threadneedle in accordance
with the provisions of the investment management
agreement. The Custodian is paid a variable fee dependent
on the volume of transactions and the value and location of
the securities held.
52
DEPOSITARY
JPMorgan Europe Limited (the ‘Depositary’) acts as the
Company’s Depositary in accordance with the Alternative
Investment Fund Managers Directive (AIFMD’). The
Depositary’s responsibilities, which are set out in an
Investor Disclosure Document on the Company’s website,
include: cash monitoring; ensuring the proper segregation
and safe keeping of the Company’s financial instruments
that are held by the Custodian; and monitoring the
Company’s compliance with investment and leverage limits
requirements. The Depositary receives for its services a fee
of one basis point per annum on the first £1 billion of the
Company’s net assets and 0.25 basis points per annum on
net assets in excess of that amount, payable monthly in
arrears.
Although the Depositary has delegated to the Custodian
the safekeeping of all assets held within the Company’s
investment portfolio, in the event of loss of those
assets that constitute financial instruments under the
AIFMD, the Depositary will be obliged to return to the
Company financial instruments of an identical type, or the
corresponding amount of money, unless it can demonstrate
that the loss has arisen as a result of an external event
beyond its reasonable control, the consequences of which
would have been unavoidable despite all reasonable efforts
to the contrary.
MANAGEMENT FEES
Information on the management fees payable by the
Company is set out in the Report of the Management
Engagement Committee on page 57.
ANNUAL GENERAL MEETING (‘AGM’)
The Company's AGM will be held at The Merchant
Taylors’ Hall, 30 Threadneedle Street, London EC2R
8JB on Thursday 2 May 2024 at 12.00 noon. The Notice
of Meeting is set out on pages 105 to 109 and includes
a map of the venue location. The Fund Manager will
give a presentation at the meeting and there will be an
opportunity to ask questions. If you are unable to attend
the AGM, you are requested to submit any questions
you may have with regard to the resolutions proposed
at the AGM or the performance of the Company, in
advance of the meeting to the following email address:
fcitagm@columbiathreadneedle.com. The Fund Manager’s
presentation will be available to view on the Company’s
website, fandc.com, following the meeting.
The AGM will be a "hybrid" meeting, with shareholders
being able to attend the meeting in person or online. For
shareholders choosing to view the AGM online, they will be
able to participate by asking questions and voting. Details
of how to do so are given in the letter that accompanies
your Form of Proxy or Form of Direction. Voting on all
resolutions will be conducted by way of a poll. You are
therefore requested to lodge your votes either through the
online portal or by completing and returning your Form of
Proxy or Form of Direction in accordance with the guidance
set out below. The results of each poll will be announced via
a regulatory announcement and posted on the Company’s
website at fandc.com after the meeting.
AUTHORITY TO ALLOT SHARES AND SELL SHARES FROM
TREASURY (RESOLUTIONS 13 AND 14)
By law, directors are not permitted to allot new shares (or
to grant rights over shares) unless authorised to do so by
shareholders. In addition, directors require specific authority
from shareholders before allotting new shares (or granting
rights over shares) for cash or selling shares out of treasury,
without first offering them to existing shareholders in
proportion to their holdings.
Resolution 13 gives the Directors the necessary authority
to allot securities up to an aggregate nominal amount of
£12,677,571 (50,710,284 ordinary shares), being equivalent
to approximately 10% of the Company’s issued share capital
(calculated exclusive of any shares held by the Company in
treasury) as at 4 March 2024, being the latest practicable
date before the publication of the notice of the AGM.
Resolution 14 empowers the Directors to allot such
securities for cash, other than to existing shareholders on a
pro rata basis and also to sell treasury shares without first
offering them to existing shareholders in proportion to their
holdings, up to an aggregate nominal amount of £12,677,571
(representing approximately 10% of the issued ordinary
share capital of the Company at 4 March 2024, calculated
exclusive of the shares held in treasury).
These authorities provide the Directors with a degree
of flexibility to increase the assets of the Company by
issuing new shares or re-issuing shares from treasury, in
accordance with the policies set out on page 38 or should
any other favourable opportunities arise to the advantage
of shareholders. The Directors expect that they will use the
authorities mainly to satisfy demand from participants in
the Columbia Threadneedle savings plans when they believe
DIRECTORS’ REPORT (CONTINUED)
53Annual Report and Accounts 2023
Governance Report
it is advantageous to the Company’s shareholders to do so.
Under no circumstances would the Directors issue shares
or re-issue treasury shares at a price which would result in a
dilution of the NAV per ordinary share.
AUTHORITY FOR THE COMPANY TO PURCHASE ITS OWN
SHARES (RESOLUTION 15)
At the annual general meeting held in 2023 the Company
was authorised to purchase approximately 14.99% of its
own shares for cancellation or to be held in treasury. The
number of shares remaining under that authority as at 31
December 2023 was 69,184,310 shares or 13.57% of the
issued share capital, exclusive of the number of shares held
in treasury. Resolution 15 will authorise the renewal of such
authority, enabling the Company to purchase in the market
up to a maximum of 76,014,715 ordinary shares (equivalent
to approximately 14.99% of the issued share capital,
exclusive of treasury shares) and sets out the minimum and
maximum prices at which they may be bought exclusive
of expenses, reflecting the requirements of the Companies
Act 2006 (the ‘Act) and the Financial Conduct Authority
Listing Rules (the ‘Listing Rules’).
The Directors will continue to use this authority in
accordance with its share buyback policy. Under the Act,
the Company is allowed to hold its own shares in treasury
following a buyback, instead of cancelling them. This gives
the Company the ability to reissue shares from treasury
quickly and cost-effectively (including pursuant to the
authority under Resolution 14, see above) and provides the
Company with additional flexibility in the management of
its capital base. Such shares may be resold for cash but all
rights attaching to them, including voting rights and any
right to receive dividends are suspended whilst they are
held in treasury. Purchases of ordinary shares under the
authority will be financed out of realised revenue and/or
capital reserves and funded from the Company’s own cash
resources or, if appropriate, from borrowings. The Board
intends to seek a renewal of such authority at subsequent
annual general meetings.
APPROVAL OF INCREASE IN MAXIMUM AGGREGATE
DIRECTORS' FEES
Resolution 16 seeks approval to increase the maximum
aggregate payable in Directors' fees in any one year
from £500,000 to £750,000. The proposal represents an
increase of 50%, which compares with the rate of inflation
(as measured by the Consumer Price Index) of 66% since
the limit was last increased in 2006. The Board believes that
it is important to maintain sufficient headroom to allow for
future increases in fees, which are set at a competitive level
in order to attract and retain individuals of a high calibre.
FORM OF PROXY
If you are a registered shareholder you will have received
a Form of Proxy for use at the AGM. You will also have
the option of lodging your proxy vote using the internet.
For shares held through CREST, proxy appointments may
be submitted via the CREST proxy voting system. Please
either complete, sign and return the Form of Proxy in the
envelope provided as soon as possible in accordance with
the instructions or, alternatively, lodge your proxy vote via
the internet or the CREST proxy voting system, whether or
not you intend to be present at the AGM.
All proxy appointments should in any event be returned or
lodged so as to be received not later than 12.00 noon on
Tuesday 30 April 2024.
FORM OF DIRECTION
If you are an investor in any of the Columbia Threadneedle
savings plans, you will have received a Form of Direction for
use at the AGM and you will also have the option of lodging
your voting directions using the internet.
All voting directions should be made as soon as possible in
accordance with the instructions on the Form of Direction
and, in any event, not later than 12.00 noon on Thursday
25 April 2024, so that the nominee company can submit a
Form of Proxy within the required period.
VOTING RECOMMENDATION
The Board considers that the resolutions to be proposed
at the AGM are in the best interests of shareholders as a
whole. It therefore recommends that shareholders vote in
favour of each resolution, as the Directors intend to do in
respect of their own beneficial holdings.
By order of the Board
Columbia Threadneedle Investment Business Limited
Company Secretary
7 March 2024
54
CORPORATE GOVERNANCE REPORT
COMPLIANCE
The Board is committed to high standards of corporate
governance. It has considered the principles and provisions
of the AIC Code of Corporate Governance published in
2019 (the AIC Code’), which addresses the principles and
provisions set out in the UK Corporate Governance Code (the
‘UK Code’) published in 2018, as they apply to investment
trust companies. It considers that reporting against the AIC
Code, therefore, provides more appropriate information to
the Company’s shareholders. The Board confirms that the
Company has complied with the principles and provisions
of the AIC Code, in so far as they apply to the Company’s
business, throughout the year under review. As all of the
Company’s day-to-day management and administrative
functions are outsourced to third parties, it has no executive
directors, employees or internal operations and therefore has
not reported in respect of the following:
the role of the executive directors and senior
management;
executive directors’ and senior management
remuneration; and
the workforce
The need for an internal audit function is addressed on page
61.
Copies of the AIC Code and UK Code and can be found on
the following websites: theaic.co.uk and frc.org.uk.
GOVERNANCE OVERVIEW
The Board has established an Audit Committee, Management
Engagement Committee and Nomination Committee. As
the Board has no executive directors and no employees
and is composed solely of non-executives, it does not have
a Remuneration Committee. Detailed information on the
remuneration arrangements for the Company’s Directors can
be found in the Directors' Remuneration Report on pages 65
to 68 and in note 5 to the Accounts.
The Company has appointed the Manager to manage the
investment portfolios as well as to carry out the day-to-day
management and administrative functions. An explanation
of the reporting arrangements from the Manager is set out
in the Strategic Report on page 35 and in the Report of
the Audit Committee in respect of risk management and
internal control on pages 60 to 61. Explanations regarding
the Board’s appointment of the Manager, including reference
to the strength and depth of its resources, measurement of
performance and alignment with the values of the Board can
be found on page 32.
The Board has direct access to the company secretarial
advice and services of the Manager which, through the
Company Secretary, is responsible for ensuring that Board
and committee procedures are followed and applicable laws
and regulations are complied with. The proceedings at all
Board and committee meetings are fully recorded through a
process that allows any Director’s concerns to be recorded
by the Company Secretary in the minutes. The Board has
the power to appoint or remove the Company Secretary in
accordance with the terms of the investment management
agreement.
BOARD LEADERSHIP
The Board, led by the Chairman, is responsible for the
effective stewardship of the Company’s affairs and has in
place a schedule of matters that is reserved for its decision,
which are reviewed annually. These are categorised and
reviewed under strategy, policy, finance, risk, investment
restrictions, performance, marketing, appointments, the
Board and public documents. It has responsibility for all
corporate strategic issues, principal policies and corporate
governance matters, which are all reviewed regularly.
At each meeting the Board reviews the Company’s
investment performance and considers financial analyses
and other reports of an operational nature. The Board
monitors compliance with the Company’s objectives and is
responsible for setting investment and gearing limits within
which the Fund Manager has discretion to act and thus
supervises the management of the investment portfolio
which is contractually delegated to the Manager. The Board
has the right of veto over the appointment of sub-managers
recommended by the Fund Manager. It has responsibility for
the approval of all investments in in-house funds managed
or advised by the Manager and any unlisted investments
with the exception of new private equity investments,
responsibility for which has been delegated to the Manager.
DIVISION OF BOARD RESPONSIBILITIES
As an externally managed investment company, there are
no executive directors; all the Directors are non-executive. The
Chairman is responsible for the leadership and management
of the Board and promotes a culture of openness, challenge
and debate. The Chairman sets the agenda for all Board
meetings under a regular programme of items in conjunction
with the Company Secretary. Building on the strong working
55Annual Report and Accounts 2023
Governance Report
relationship with the Manager, the Fund Manager and other
management company personnel attend the meetings
throughout the year and report to the Board. Discussions at
all levels are held in a constructive and supportive manner
with appropriate challenge and strategic guidance and
advice from the Board whenever necessary consistent with
the culture and values.
Quintin Price is the Board’s Senior Independent Director. He
acts as an experienced sounding board for the Chairman
and an intermediary for other Directors and shareholders
and he leads the annual evaluation of the Chairman.
In order to enable them to discharge their responsibilities, all
Directors have full and timely access to relevant information.
Directors are able to seek independent professional advice
at the Company’s expense in relation to their duties. No such
advice was taken during 2023.
COMPOSITION OF BOARD COMMITTEES
Committee membership is noted in each Director’s
biography on pages 47 and 48, while the respective terms of
reference can be found on the Company’s website at
fandc.com.
NOMINATION COMMITTEE
The primary role of the Nomination Committee is to
review and make recommendations regarding Board
structure, size and composition, the balance of knowledge,
experience, range of skills and diversity and to consider
succession planning and tenure policy. It oversees the
process for evaluating the Board, its committees and
individual Directors. The Committee also reviews the level of
Directors' fees and makes recommendations to the Board as
appropriate.
TENURE
The Board is of the view that length of service will not
necessarily compromise the independence or contribution
of directors of an investment trust company or, indeed, its
chairman. This is because continuity and experience can add
significantly to the strength of investment trust company
boards where the characteristics and relationships tend
to differ from those of trading companies. However, the
Chairman and Directors normally serve for a maximum nine-
year term. None of the Directors standing for re-election at
the forthcoming AGM has served in excess of nine years.
DIVERSITY
The Board's policy on diversity is set out on page 38.
SUCCESSION PLANNING
A Board succession plan is in place, with the emphasis
on maintaining the highest level of skills, knowledge and
experience on the Board. When recruiting a new Director to
the Board, the Committee refers to a matrix that sets out the
skills and experience and considers the remaining tenure of
each of the Directors. This assists in identifying the desired
attributes of the new Director and ensures that the Board
continues to be composed of individuals with appropriate
and complementary skills and experience and provides
continuity.
Sapphire Partners was engaged for the recruitment process
that resulted in the appointment of Anuradha Chugh in
July 2023 to succeed Francesca Ecsery who retired at the
conclusion of the 2023 AGM. A wide range of candidates
with diverse backgrounds, skills and experience were
considered. Sapphire Partners does not provide any other
services to the Company and has no other connection with
the Company or individual Directors.
Tom Joy will step down from the Board on 31 March 2024
due to other commitments, as explained in the Chairman's
Statement. The process to appoint his successor has
commenced and we expect the appointment to be effective
shortly after the forthcoming AGM. Nurole Limited has been
engaged to manage the selection and recruitment process
for Tom’s successor. Nurole Limited does not supply any
other services to the Company and has no other connection
with the Company or individual Directors.
In due course the Board will focus on succession for Edward
Knapp, who is due to retire from the Board in 2025.
BOARD EVALUATION AND EFFECTIVENESS
The 2023 annual evaluation of the Board, its committees
and the individual Directors has been carried out by the
Chairman. The process included the completion by each
Director of a questionnaire, which was followed by a
confidential, unattributable one-to-one interview with the
Chairman. Progress in achieving the priorities agreed for
2023 was reviewed as part of the process, as was feedback
on maintaining the culture and values of the Board. The
appraisal of the Chairman was covered as part of the
process and, as noted above, was led separately by the
Senior Independent Director. The evaluation concluded
56
that the Board oversees the management of the Company
effectively and continues to have the skills and expertise
necessary to safeguard stakeholders’ interests. All Directors
demonstrate commitment to their roles and, drawing on
diverse but complementary skills and experience, provide
constructive challenge to the Fund Manager. All Directors
provide valuable contributions to the deliberations of
the Board commensurate with their experience and
responsibilities, so contributing to the Company’s long-term
success.
The activities of the Nomination, Management Engagement
and Audit Committees were considered as part of the Board
evaluation process. The conclusion from this process was
that the Committees continued to operate effectively, with
an appropriate balance of membership, experience and
skills.
BOARD AND COMMITTEE MEETINGS
The table below sets out the Directors’ meeting attendance
record in 2023. The Board also held a separate meeting in
September 2023 to consider strategic issues. In addition to
its scheduled annual meeting, the Nomination Committee
met on several other occasions as part of the process to
recruit a new Director.
AUDIT, RISK MANAGEMENT AND INTERNAL CONTROL
The Board has a well established and effective Audit
Committee, whose report is set out on pages 59 to 64.
The report includes an explanation of the assessment
of the Company’s going concern status and how the
Board oversees the risk management and internal control
framework and the procedures under which risk is managed.
The Committee also considers the Company’s long-term
viability and the nature and extent of the principal risks the
Company is willing to take in order to achieve its long-term
strategic objectives as well as identifying emerging risks. The
rationale for the Company not having established its own
internal audit function is explained on page 61, while further
information on the Company’s risk management and internal
control framework can be found on pages 60 to 61.
The report of the Audit Committee provides an overview
of how the Board satisfies itself on the integrity of financial
statements and how the independence and effectiveness of
the external auditor is assessed. An explanation is also given
on the process under which the Board satisfied itself that
the Annual Report and Accounts, taken as a whole, presents
a fair, balanced and understandable assessment of the
Company’s position and prospects.
RELATIONS WITH SHAREHOLDERS AND STAKEHOLDERS
Information on the Company’s engagement with its key
stakeholders is set out on pages 35 and 36.
DIRECTORS' REMUNERATION AND THE MANAGEMENT
FEE
The Directors' remuneration policy is explained on page
65. As non-executive Directors, fees are set at a level
commensurate with the skills and experience necessary
for the effective stewardship of the Company and the
contribution towards the delivery of the investment
objective. While there are no executive directors and no
employees, shareholders should expect that the fees paid
to the Manager are aligned with the Company’s purpose,
values and the successful delivery of its long-term strategy.
This is achieved by charging the management fee on the
Company’s market capitalisation, on a tiered basis. This
assists in bringing down the Company’s cost ratio as it grows,
with the benefits of scale being passed on to shareholders.
By order of the Board
Columbia Threadneedle Investment Business Limited
Company Secretary
7 March 2024
Directors’ attendance in 2023
Board
Audit
Committee
Nomination
Committee
Management
Engagement
Committee
No. of meetings
6 3 1 1
Beatrice
Hollond
(1)
6 3 1 1
Anuradha
Chugh
(2)
3 n/a n/a n/a
Francesca
Ecsery
(3)
3 n/a 1 1
Tom Joy 6 n/a 1 1
Edward Knapp 6 3 n/a 1
Rain
Newton-Smith
6 n/a 1 1
Quintin Price
(4)
6 3 n/a 1
Stephen Russell 6 3 n/a 1
Julie Tankard
(4)
6 3 n/a 1
(1) Attended but was not a member of the Audit Committee.
(2) Appointed to the Board on 1 July 2023. Appointed to the Audit
Committee on 1 February 2024.
(3) Retired from the Board on 27 April 2023.
(4) Appointed to the Nomination Committee on 1 January 2024.
CORPORATE GOVERNANCE REPORT (CONTINUED)
57Annual Report and Accounts 2023
Governance Report
REPORT OF THE MANAGEMENT
ENGAGEMENT COMMITTEE
ROLE OF THE COMMITTEE
The primary role of the Management Engagement
Committee is to monitor the performance of the Manager
for the investment, company secretarial, financial,
administration, marketing and support services that it
provides under the investment management agreement.
It also reviews the terms of that agreement, including the
level and structure of fees payable, the length of the notice
period and best practice provisions generally. All of the
Committee’s responsibilities have been carried out over the
course of 2023 and 2024 to date. With effect from January
2024, the Committee has assumed responsibility for the
review of the Company's third-party service providers.
MANAGER EVALUATION PROCESS
The Committee met once during the year and again in
January 2024 for the purpose of the formal evaluation of
all aspects of the Managers performance. Its performance
is considered at every Board meeting, with a formal
evaluation by the Committee each year. For the purposes of
its ongoing monitoring, the Board receives detailed reports
and views from the Fund Manager on investment policy,
asset allocation, stock selection, gearing and risk, together
with quarterly reports on the Columbia Threadneedle
managed portfolio strategies. Quarterly updates are also
received from the US sub-managers. The Board receives
comprehensive performance data from the Manager and
also from Morningstar UK Limited and Refinitiv Eikon,
which are leading data suppliers. These enable it to assess:
the success or failure of the management of the total
portfolio against the performance objectives set by the
Board; the sources of positive and negative contribution
to portfolio returns in terms of asset allocation, sector
and stock selection and gearing; and the performance of
each investment portfolio against its local index, where
applicable, and the risk/return characteristics. Portfolio
performance information, which is relevant in monitoring
the Manager, the sub-managers and the Private Equity
funds of funds managers, is set out on pages 9 to 16.
MANAGER REAPPOINTMENT
The annual evaluation that took place in January 2024
included presentations from the Fund Manager and the
Manager's Head of Investment Trusts. This focused primarily
on the objectives set by the Board and the Manager’s
contribution towards achieving those objectives, particularly
with regard to investment strategy and marketing. As part
of the evaluation, the Fund Manager and the Manager's
Head of Investment Trusts reported on progress of the
integration of the business of Columbia Threadneedle
with that of BMO GAM. They also presented to the Board
on the strength of its current business, the resources and
opportunities of the enlarged business and its continued
support for the investment trust business. With regard to
performance, the Company’s share price and net asset
value total returns have outperformed the benchmark over
ten years to 31 December 2023, meeting the Company’s
objective of delivering long-term growth in capital and
income. The Committee met in closed session following
the presentations and concluded that, in its opinion, the
continuing appointment of the Manager on the terms
agreed was in the interests of shareholders as a whole. The
Board ratified this recommendation.
THE MANAGER’S FEE
An important responsibility of the Committee is the
regular review of the Manager’s fee. The management
fee is reviewed by the Committee every three years and
is next due to be reviewed in January 2025. With effect
from 1 January 2023 the fee was charged at a rate of 0.3%
per annum of the market capitalisation of the Company
up to £4.0 billion and then at 0.25% thereafter. The fee is
calculated and paid monthly in arrears and is subject to a
reimbursement for amounts earned from investments in
other investment vehicles managed by the Manager. As
part of the current fee arrangement, the Manager makes an
annual contribution to the Company’s budget for marketing
activities in each of the three years to and including 2024.
In the year under review, the total management fee paid
was £13.6m, a decrease from the fee of £14.1m paid in 2022,
with the reduction in the fee rate more than offsetting
the higher average market capitalisation of the Company
over the year. Note 4 to the Accounts provides detailed
information in relation to the management fee.
During the year, the Manager delegated the management
of the US portfolios to Barrow, Hanley, Mewhinney & Strauss
and JPMorgan Asset Management for which it incurs fees.
The Company reimburses the Manager for these fees, which
in 2023 amounted to £3.0m (2022: £4.2m) (see note 4 to
the Accounts).
58
PRIVATE EQUITY MANAGEMENT FEES
No additional fees (beyond the fee detailed above) are paid
to the Manager for any future commitments made to Private
Equity that fall within its remit. The Manager and certain
individuals employed by the Manager are, however, entitled
to participate in a performance fee arrangement in the form
of carried interest over secondary or co-investments made
within the Private Equity programme.
The fees paid to the Private Equity managers in respect of
the Private Equity funds amounted to £1.9m for 2023 (2022:
£2.6m) (see note 4 to the Accounts) all of which were
incurred indirectly through the funds. Some of the funds
have arrangements whereby the Private Equity managers
share in the profits once certain “hurdle” rates of return
to investors have been achieved. These arrangements are
varied and complex but are on normal commercial terms
within the Private Equity funds of funds industry. Fees
payable by the underlying funds are negotiated by each
manager. The arrangements also vary from fund to fund,
but management fees of 2% per annum and a 20% carried
interest, once an agreed hurdle rate of return for investors
has been achieved, are normal.
PE Investment Holdings 2018 LP pays an annual fee of
£1,000 to the General Partner. This is not directly incurred
by the Company but is reflected in the underlying value
of the investment. The investment in Inflexion Strategic
Partners is a direct investment in that business and
therefore no fees are incurred in relation to it.
USE OF THE “F&C” NAME
The Company was previously named Foreign & Colonial
Investment Trust PLC and continues to own the name
“Foreign & Colonial” while the Manager owns the name
“F&C”. The terms under which the Company can use the
“F&C” name are set out in a separate trade mark licence
agreement with the Manager dated 1 March 2018. The
licence agreement is royalty free subject to there being
no material change to the Company’s management
arrangements with the Manager within the next 9 years.
Beatrice Hollond
Chairman, Management Engagement Committee
7 March 2024
59Annual Report and Accounts 2023
Governance Report
ROLE OF THE COMMITTEE
The primary responsibilities of the Audit Committee are
to ensure the integrity of the financial reporting and
statements of the Company, to oversee the preparation and
audit of the annual accounts, the preparation of the half
year accounts and the risk management and internal control
processes. The Committee met three times during the year
with the Managers Investment Trust Accountant, Head of
Investment Trusts, Risk Managers and the Fund Manager in
attendance. EY attended on two occasions and have met
in private session with the Committee. The Board Chairman
was invited to, and regularly attended, Committee meetings.
Specifically, the Committee considered, monitored and
reviewed the following matters:
The financial statements, including advice to the Board
as to whether the annual report and accounts taken as
a whole is fair, balanced and understandable;
The accounting policies of the Company;
A report setting out the review of going concern
undertaken by the Manager and reviewed and assessed
the basis and results of its associated reverse stress
test;
The principal and emerging risks faced by the
Company and the effectiveness of the Company’s
system of risk management and internal control
environment;
The assumptions and results of the scenario testing of
the long-term viability of the Company and the basis of
the Long-Term Viability statement;
How the Company has applied the principles and
complied with the provisions of the AIC Code;
The effectiveness of the external audit process and the
current independence and objectivity of the auditor,
EY;
The appointment, remuneration and terms of
engagement of EY;
The policy on the engagement of the external auditor
to supply non-audit services and approval of any such
services;
Whether to change the Company’s current policy by
establishing its own Internal Audit function;
The implications of the acquisition of BMO GAM
by Ameriprise Inc. in terms of the integration of
the systems, risk management and internal control
infrastructure with its existing asset management arm,
Columbia Threadneedle Investments;
The ISAE/AAF and SSAE16 reports or their equivalent
from the Manager, the Custodian, Depositary, the
Private Equity managers and the sub-managers and
a due diligence report from the Company’s Share
Registrar;
Bank counterparties;
The Company’s trademarks and intellectual property
rights;
The operational performance of the Manager and third-
party service providers (with effect from January 2024,
this responsibility has now passed to the Management
Engagement Committee); and
The Committee’s terms of reference for approval by the
Board.
Comprehensive papers relating to each of these matters
were prepared for discussion. These were debated by the
Committee and any recommendations were fully considered
if there was a judgement to be applied in arriving at
conclusions. Recommendations were then made to the
Board as appropriate. Following the change of ownership
of BMO GAM in 2021, the integration with Columbia
Threadneedle is now almost complete. The pre-existing
BMO GAM systems and controls were largely unchanged
and continued to operate effectively until the successful
implementation of the “Aladdin” order management
system in October 2023, following which the Managers
control framework has been aligned to that of Columbia
Threadneedle for equities and fixed interest (with the
exception of some back office and middle office functions,
which continue to be outsourced to State Street). The
Committee has received confirmation from the Manager
that the systems of risk management and internal control
operated effectively throughout the year under review and
thereafter to the date of this report.
The Board retains ultimate responsibility for all aspects
relating to external financial statements and other
significant published financial information, as noted in
the Statement of Directors’ Responsibilities on page 69.
On broader control policy issues, the Committee has
reviewed, and is satisfied with, the Code of Conduct and
the Anti-Corruption Policy and Guidelines to which the
Manager's employees are subject. The Board is responsible
for ensuring appropriate procedures and processes are
in place to enable issues of concern to be raised. Mindful
of this, the Committee has reviewed the Manager's
Whistleblowing Policy, under which its directors and
staff may, in confidence, raise concerns about possible
improprieties in financial reporting or other matters. The
REPORT OF THE AUDIT COMMITTEE
60
necessary arrangements are in place for communication by
the Manager to this Committee where matters might impact
the Company, with appropriate follow-up action. In 2023
there were no such concerns raised with the Committee.
COMPOSITION OF THE COMMITTEE
The Board recognises the requirement for at least one
member of the Committee to have recent and relevant
financial experience and for the Committee as a whole
to have competence relevant to the sector in which
the Company operates. The Committee comprises four
independent non-executive Directors. Julie Tankard is
Chairman of the Committee and a fellow of the Chartered
Institute of Management Accountants. Until early 2023,
she was Chief Financial Officer of the Port of London
Authority and was also responsible for risk. The other
members of the Committee have a combination of
financial, investment and business experience through the
senior posts held throughout their careers. Details of the
Committee members can be found on pages 47 and 48.
The Committee’s terms of reference can be found on the
Company's website at fandc.com.
MANAGEMENT OF RISK
The Manager’s Operational Risk Department provides
regular control reports to the Committee covering risk and
compliance, while the Company’s investment management
agreement requires that any significant issues of direct
relevance to the Company are reported to the Committee
and to the Board without delay. There were no such reports
during the year under review and up to the date of this
report.
Following the Covid-19 pandemic, most staff at the
management company have continued to operate a
“hybrid” working arrangement, sharing their working time
between their office and working remotely. The necessary
arrangements for remote working are well established, with
staff having the facilities to operate effectively.
For the management of risk, a key risk summary is
produced by the Manager in consultation with the Board
to identify the risks to which the Company is exposed,
the controls that are in place and the actions being taken
to mitigate them. The Board has a robust process for
considering the resulting risk control assessment at regular
meetings and dynamically reviews the significance of the
risks and the reasons for any changes. The Company’s
Principal and Emerging Risks and the process for the
identification of other emerging risks, are set out on
pages 42 to 44, with additional information given in note
25 to the Accounts. Included within these disclosures is
information detailing the reverse stress test that has again
been carried out as part of the Board’s assessment of the
Company’s going concern status and the scenario testing
that encapsulates the long-term viability of the Company.
Those tests consider the combination and magnitude of
plausible events that could potentially force the Company
to discontinue its operations or impact its resilience and its
ability to meet its liabilities over the coming ten years.
The Board, through the Committee, carried out a
robust review and assessment of the principal risks
and identification of emerging risks to the Company.
The integration of the risks identified into the analyses
underpinning the Long-Term Viability statement on page
44 was considered fully and the Committee concluded that
the Board’s statement was soundly based. The period of
ten years was also agreed as remaining appropriate for the
reasons given in the statement, whilst recognising that it
remains longer than that used by many other companies.
RISK MANAGEMENT AND INTERNAL CONTROL
The Board has overall responsibility for the Company’s
system of risk management and internal control, for
reviewing its effectiveness and ensuring that risk
management and internal control processes are embedded
in the Manager's day-to-day operations. The Committee
has reviewed and reported to the Board on those controls,
which aim to ensure that the assets of the Company are
safeguarded, proper accounting records are maintained
and the financial information used within the business and
for publication is reliable. Control of the risks identified,
covering financial, operational, compliance and overall
risk management, is exercised by the Committee through
regular reports provided by the Manager. The reports
cover investment performance, performance attribution,
compliance with agreed and regulatory investment
restrictions, financial analyses, revenue estimates,
performance of the third-party administrators of Columbia
Threadneedle's savings plans and on other relevant
management issues. In addition, the Committee receives an
annual presentation from the Manager's Chief Information
Security Officer to gain assurance on its cyber security
policies, testing and controls.
The system of risk management and internal control is
designed to manage rather than eliminate the risk of
REPORT OF THE AUDIT COMMITTEE (CONTINUED)
61Annual Report and Accounts 2023
Governance Report
failure to achieve business objectives and can only provide
reasonable, but not absolute, assurance against material
misstatement or loss or fraud. Further to the review by the
Committee, the Board has assessed the effectiveness of
the Company’s internal controls. The assessment included
a review of the Manager’s risk management infrastructure
and the report on its policies and procedures in operation
and tests for the year to 1 October 2023 and subsequent
confirmation from the Manager that there had been no
material changes to the control environment in the period
to 4 March 2024. The report on the Manager’s control
policies and procedures with respect to the management
of clients’ investments and maintenance of their financial
records is prepared in accordance with the International
Standard on Assurance Engagement (ISAE) No. 3402 and
to the standards of the Institute of Chartered Accountants
in England and Wales Technical Release AAF (01/06)
(the ‘ISAE/AAF Report’) and is reviewed and reported
on by independent reporting accountants KPMG. The
effectiveness of the controls is monitored by the Manager’s
Audit and Risk Committee which, for the year to 1 October
2023, received regular reports from its internal audit
department. Procedures are also in place to capture and
evaluate any failings and weaknesses within the Manager’s
control environment and those extending to any outsourced
service providers to ensure that action would be taken to
remedy any significant issues.
Any errors or breaches relating to the Company are
reported at each Committee and Board meeting by the
Manager, including those relating to the administration of
their savings plans and related complaint levels. Material
issues would be reported earlier to the Chairman. No failings
or weaknesses that were material to the overall control
environment or financial statements were identified in the
year under review. The Committee also reviewed the control
reports of the Custodian, the Depositary, Barrow, Hanley,
Mewhinney & Strauss, JPMorgan Asset Management, the
Private Equity managers and the Share Registrars' due
diligence report and was satisfied that there were no
material exceptions.
Through the reviews noted above and by direct enquiry of the
Manager and other relevant parties, the Committee and the
Board are satisfied that there were no material control failures
or exceptions affecting the Company’s operations during the
year under review or in 2024 to the date of this report.
Based on the processes and controls in place within the
management company, the Committee has concluded, and
the Board has concurred, that there is no current need for
the Company to have a separate internal audit function.
EXTERNAL AUDIT PROCESS AND SIGNIFICANT ISSUES
CONSIDERED BY THE COMMITTEE
In carrying out its responsibilities, the Committee has
considered the planning arrangements, scope, materiality
levels and conclusions of the external audit for 2023. The
table on page 62 describes the significant judgements
and issues considered by the Committee in relation to the
financial statements for the year and how these issues were
addressed. Specifically, the most significant judgement
for the year concerned the private equity investment,
Inflexion Strategic Partners, which was written down in
value. The Committee also included in its review the areas
of judgements, estimates and assumptions referred to in
note 2(c)(xiii) to the Accounts. Likewise, the Committee
reviewed the disclosure and description of the Alternative
Performance Measures provided on pages 114 to 116 and is
satisfied that the disclosure is fair and relevant.
With the increasing complexity of the Private Equity
investments, the Committee continues to scrutinise and
challenge the valuation of those investments. It questioned
Columbia Threadneedle and Pantheon on their processes
in meetings during the year. The year end valuation is an
estimate based on the September valuations extrapolated
to the year end by adjusting for cash flows and any
known events (as described in notes 2(c)(ii) and 25(d)
to the Accounts). The Committee reviewed prior year
experience on the validity of this estimation process by
comparing variances in the estimated value with the
actual audited values as at 31 December 2022 (which
become known in May/June of the following year). The
overall percentage change between the Company’s year
end valuations and those shown in the audited accounts
of the underlying holdings was immaterial. In testing and
challenging underlying adjustments made by the Private
Equity managers the Committee ensures that the highest
levels of oversight and scrutiny are applied. The process
for determining the direct Private Equity valuations was
reviewed and confirmed by the Committee as being
appropriate. The Committee has adopted a formal valuation
policy for the Company’s private equity investments which
is reviewed annually.
62
The Committee met in February 2024 to discuss the
final draft of the Annual Report and Accounts, with
representatives of EY and the Manager in attendance. EY
submitted its year end report and indicated that at that
stage it would have no reason not to issue an unqualified
audit opinion in respect of the Annual Report and Accounts.
The Committee established that there were no material
issues or findings arising which needed to be brought to the
attention of the Board.
The Committee recognises the importance of continually
improving non-financial reporting and the increased
focus on the Strategic Report by investors and regulators.
Therefore, the Committee has carefully considered the
disclosures made in the Annual Report and Accounts
particularly in relation to those made under section 172(1)
of the Act, including how wider stakeholder interests
have been taken into account by the Directors while
performing their duties and related disclosures with regard
to responsible investment issues. The Committee has had
regard to the non-financial reporting requirements in the
Act, which is an area of reporting that continues to evolve.
The Committee also noted that an independent,
experienced and objective third-party consultant was
engaged to review the Annual Report and Accounts and
comment on its fairness, balance and comprehension. The
Committee recommended to the Board that the Annual
Significant Judgements and Issues considered by the Committee
Matter Action
Investment Portfolio Valuation
The Company’s portfolio of
investments comprises large
cap, liquid securities quoted on
recognised stock exchanges,
together with illiquid Private Equity
funds of funds and one direct
investment. The Private Equity
vehicles, which are subject to
signed agreements covering long-
term commitments and funding,
hold a diversity of unquoted
investments whose values are
subjective.
The Committee reviewed annual audited internal control reports from the Manager, the
sub-managers and Private Equity funds of funds managers. These reports indicated
that the relevant systems and controls surrounding daily pricing, cash and holdings
reconciliations, security valuation and Private Equity funding had operated satisfactorily.
In addition, with regard to Private Equity vehicles, the Committee: discussed controls
directly with the managers; reviewed the managers’ estimated valuations in detail at six
monthly intervals; and performed a thorough review and comparison of each Private
Equity fund’s 31 December 2022 or most recent audited value versus the managers’
estimated valuation adopted by the Company in its own reporting. The review indicated
that the Private Equity managers’ estimated valuations could continue to be relied upon
as being at fair value in accordance with the Company’s accounting policy. The process
for valuing the direct private equity valuations, including the write down of the value of
Inflexion Strategic Partners was reviewed and agreed by the Committee.
Misappropriation of Assets
Misappropriation of the Company’s
investments or cash balances could
have a material impact on its NAV.
The Committee reviewed the annual audited internal control reports of the Manager
and the Custodian. Neither of these reports indicated any failures of controls over
the existence and safe custody of the Company’s investments and cash balances. The
Committee reviews regularly the list of banks which the Manager and sub-managers
are authorised to place cash and deposits with. The Company’s Depositary reported
quarterly on the safe custody of the Company’s investments and the operation of
controls over the movement of cash in settlement of investment transactions. Through
these reports the Committee is satisfied that the assets remained protected throughout
the year.
Income Recognition
Incomplete controls over, or
inaccurate recognition of, income
could result in the Company
misstating its revenue receipts and
associated tax, with consequences
for overall performance, payment
of dividends to shareholders, and
compliance with taxation rules.
The Committee’s review of the Manager’s annual audited controls report indicated that
there were no control failures in the year. The Committee satisfied itself that special
dividends had been correctly treated in accordance with the Company’s accounting
policy. Investment income was tested and reported on by the Manager and agreed by
the Committee.
REPORT OF THE AUDIT COMMITTEE (CONTINUED)
63Annual Report and Accounts 2023
Governance Report
Report and Accounts was in its view, fair, balanced and
understandable in accordance with accounting standards,
regulatory requirements and best practice.
The Independent Auditor’s Report which sets out the
unqualified audit opinion, the scope of the audit and the
areas of focus, in compliance with applicable auditing
standards, can be found on pages 70 to 77.
AUDITOR ASSESSMENT, INDEPENDENCE AND
APPOINTMENT
The Committee reviews the reappointment of the auditor
every year and has been satisfied with the effectiveness
of EY’s performance. The audit partner rotates at least
every five years, in accordance with professional guidelines.
James Beszant is the senior statutory auditor and this is his
third year as audit partner. The Committee is satisfied that
EY are independent of the Company and have complied
with relevant auditing standards. In evaluating EY, the
Committee has taken into consideration the standing, skills
and experience of the firm and of the audit team. From
direct observation and indirect enquiry of management,
the Committee is satisfied that EY will continue to provide
effective independent challenge in carrying out their
responsibilities.
The Committee also considered the evaluation of EY’s
audit performance through the Audit Quality Inspection
Report for 2022/23 published by the Financial Reporting
Council (the ‘FRC’). The FRC reviewed 20 of EY’s audits,
of which 80% were graded as good or requiring limited
improvements. This reflected an improvement compared
with the previous year (65%). Of the FTSE 350 company
audits reviewed (9 of the total of 20), 89% needed no more
than limited improvements. The Committee discussed
the findings with EY's audit partner, who confirmed that
EY would continue to strive for greater consistency of
execution.
The FRC’s Ethical Standard continues to press for ever
higher quality auditing standards which means that
audit firms are incurring substantial costs. It also expects
audit firms to demonstrate that they are economically
sustainable. This upward pressure on costs has been
reflected in significant increases in the audit fee in recent
years. The audit fee for 2023, excluding VAT, was £151,000
(2022: £143,000). The increase reflected the inflationary
environment in 2023. The Committee discussed with
EY how they are seeking to utilise new technology and
tools in the audit to enhance audit quality and efficiency.
More details can be found in Note 5 to the Accounts. The
Committee has a duty to consider carefully the audit for
value and effectiveness and, as part of its annual review,
the need for putting the audit out to tender for reasons of
quality, independence or value. The Company is required
to carry out a tender every ten years with the next due no
later than 2026. In view of the substantial increases in the
fee over recent years and the potential for further increases
in future years, the Committee continues to monitor
developments and take market soundings on audit quality
and fees as appropriate.
The Committee confirms that the Company is in compliance
with the requirements of the Statutory Audit Services for
Large Companies Market Investigation (Mandatory Use
of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014. This order relates to the
frequency and governance of tenders for the appointment
of the external auditor and the setting of the policy on the
provision of non-audit services.
NON-AUDIT SERVICES
The Committee regards the continued independence of
the external auditor to be a matter of the highest priority.
The Company’s policy with regard to the provision of
non-audit services by the external auditor ensures that no
engagement will be permitted if:
the provision of the services would contravene any
regulation or ethical standard;
the auditors are not considered to be expert providers
of the non-audit services;
the provision of such services by the auditor creates a
conflict of interest for either the Board or the Manager;
and
the services are considered to be likely to inhibit the
auditor’s independence or objectivity as auditors.
In particular, the Committee has a policy that the
accumulated costs of all non-audit services sought from
the auditor in any one year should not exceed 30% of
the likely audit fees for that year and not exceed 70%
cumulatively over three years. Any individual service likely
to exceed £5,000 is agreed by the Committee prior to the
commencement of the service. There were no non-audit
services for the year ended 31 December 2023 (2022: nil).
64
REGULATION
The Board, through the Audit Committee, seeks to
maintain a forward-looking view of forthcoming regulatory,
legislative and governance requirements to ensure that it
is fully prepared to meet and, where appropriate, exceed
requirements, given its firm commitment that sound
governance adds value and mitigates risk.
The Committee has noted that, following the Governments
consultation on audit and corporate governance reform,
proposals that would have introduced new annual
reporting requirements, including a requirement to disclose
distributable profits and make new statements on resilience
and material fraud, have been withdrawn. However, some
of the requirements have been reflected in the revised UK
Corporate Governance Code (the 'Revised Code') to take
effect from 1 January 2025. The Board will be responsible
for not only establishing but also for maintaining the
effectiveness of the risk management and internal control
framework and providing a declaration concerning the
effectiveness of material internal controls. The new Board
declaration will come into effect from 1 January 2026, i.e.
one year after the remainder of the Revised Code. The
Government has confirmed its commitment to the creation
of the Audit, Reporting and Governance Authority (‘ARGA’)
to replace the FRC, but the timing is unknown.
Julie Tankard
Chairman, Audit Committee
7 March 2024
REPORT OF THE AUDIT COMMITTEE (CONTINUED)
65Annual Report and Accounts 2023
Governance Report
DIRECTORS’ REMUNERATION POLICY
The Board’s policy is to set Directors’ remuneration at
a level to recruit and retain individuals with the skills
and experience necessary for the effective stewardship
of the Company and the expected contribution of the
Board as a whole in continuing to achieve the Company’s
objectives. The time committed to the Company’s
business and the specific responsibilities of the Chairman,
Senior Independent Director, Directors and the chairmen
and members of the various committees of the Board
are taken into account. The policy aims to be fair and
reasonable in relation to comparable investment trust
companies and other similar sized financial companies. This
includes provision for the Company’s reimbursement of
all reasonable travel and associated expenses incurred by
the Directors in attending Board and committee meetings,
including those treated as a benefit in kind subject to tax
and national insurance.
This policy was last approved by shareholders in April 2023:
of the votes cast, 93.1% were in favour, with 6.9% against.
Of the total proxy votes received, 4.6% were withheld from
this resolution (a vote withheld is not a vote in law and is
not counted in the calculation of the votes for and against
a resolution). The Board has not subsequently received
any views from shareholders in respect of the levels of
Directors’ remuneration. It is a requirement that shareholder
approval is sought at least every three years and therefore
it is expected that shareholders will be asked to approve
the Directors’ remuneration policy at the AGM to be held in
2026.
The Company’s Articles of Association currently limit the
aggregate fees payable to the Board to a total of £500,000
per annum. Within that limit, it is the responsibility of the
Board as a whole to determine and approve the Directors’
fees, following a recommendation from the Chairman
and, in the case of the Chairman’s fee, from the Senior
Independent Director. The fees are fixed and are payable
in cash, quarterly in arrears. Directors are not eligible for
bonuses, pension benefits, share options or long-term
incentive schemes. The Board considers the level of
Directors’ fees annually. In January 2024, the Board agreed
the recommendation of the Nomination Committee that,
commencing 1 January 2024, all fees should be increased
by 6% to the levels shown in the table below.
At the forthcoming AGM, shareholders will be requested to
approve an increase in the maximum aggregate Directors'
fees payable per annum to £750,000 (Resolution 16).
The limit was last increased in 2006. The Board is seeking
approval to increase this limit to ensure there is sufficient
headroom to continue to set fees at competitive levels in
order to attract and retain individuals of a high calibre to
the Board. The proposed increase of 50% compares with
the rate of inflation of 66% since the limit was last increased.
Annual fees for Board Responsibilities
2024
£
2023
£
Board
Chairman 86,600 81,705
Senior Independent Director 50,520 47,660
Director 43,300 40,850
Additional fees payable for committee membership:
Audit Committee
Chairman 15,545 14,665
Members 6,105 5,760
Nomination Committee
Chairman 3,605 3,400
Members 3,605 3,400
No additional fees are payable for membership of the
Management Engagement Committee.
The Board is composed solely of non-executive Directors,
none of whom has a service contract with the Company
and therefore the Board has not established a separate
remuneration committee. Each Director has signed a terms
of appointment letter with the Company, in each case
including one month’s notice of termination by either party.
There is no provision for compensation for loss of office.
The letters of appointment are available for inspection
by emailing the Company Secretary at FCITCoSec@
columbiathreadneedle.com and will be available for 15
minutes before, and during, the forthcoming AGM. The
dates on which each Director was appointed to the Board
are set out in their biographies on pages 47 and 48.
DIRECTORS' REMUNERATION REPORT
66
DIRECTORS’ SHAREHOLDINGS
There is no requirement under the Company’s Articles of
Association for the Directors to hold shares in the Company.
The beneficial shareholdings of the Directors who held
office at the end of the financial year are shown below:
Directors’ share interests (audited)
At 31 December 2023 2022
Beatrice Hollond 8,020 6,752
Anuradha Chugh
(1)
n/a
Tom Joy 3,500 3,500
Edward Knapp 8,753 8,575
Rain Newton-Smith 165 165
Quintin Price 12,461 12,461
Stephen Russell 3,360
Julie Tankard 332 333
(1) Appointed to the Board 1 July 2023
The Company’s register of Directors’ interests contains full details of
Directors’ shareholdings.
Since the year end, and up to 4 March 2024 (being the
latest practicable date before the publication of the Annual
Report and Accounts), the following Directors have acquired
ordinary shares in the Company: Anuradha Chugh 2,084;
Beatrice Hollond 221; Edward Knapp 35; and Julie Tankard
1. There have been no changes in any of the other Directors’
shareholdings detailed above. No Director held any interests
in the issued stock or shares of the Company other than as
stated above.
As at 4 March 2024 the Fund Manager held 204,296
ordinary shares in the Company.
POLICY IMPLEMENTATION
The Directors’ Remuneration Report (excluding the
Directors' remuneration policy) is subject to an annual
advisory vote and therefore an ordinary resolution for its
approval will be put to shareholders at the forthcoming AGM
(Resolution 2). At the 2023 AGM, shareholders approved
the Remuneration Report in respect of the year ended
31 December 2022: of the total votes cast, 94.0% were
cast in favour of the resolution, with 6.0% against. Of the
total proxy votes received, 5.6% were withheld from this
resolution.
SINGLE TOTAL FIGURE OF REMUNERATION
The single total figure of remuneration for the Board as a
whole for the year ended 31 December 2023 was £410,500
(excluding taxable benefits). The single total figure of
remuneration for each Director is detailed overleaf, together
with the prior year comparative. The amounts paid by the
Company to the Directors were for services as non-executive
Directors.
DIRECTORS' REMUNERATION REPORT (CONTINUED)
67Annual Report and Accounts 2023
Governance Report
The following table sets out the annual percentage change in Directors’ fees for the years to 31 December 2021, 2022 and 2023
(where Directors have served for a full year in each of the two years and therefore fees can be compared on a like-for-like basis):
Single total figure table (audited)
Fees
£’000s
Taxable Benefits
(1)
£’000s
Total
£’000s
Director 2023 2022 2023 2022 2023 2022
Sarah Arkle
(2)
n/a 3.8 n/a 0.0 n/a 3.8
Anuradha Chugh
(3)
20.4 n/a 0.6 n/a 21.0 n/a
Francesca Ecsery
(4)
14.3 42.3 0.1 0.9 14.4 43.2
Jeffrey Hewitt
(5)
n/a 18.0 n/a 0.8 n/a 18.8
Beatrice Hollond
(6)
85.1 81.3 0.4 1.2 85.5 82.5
Tom Joy 44.3 42.3 0.4 1.3 44.7 43.6
Edward Knapp 46.6 44.5 0.4 1.2 47.0 45.7
Rain Newton-Smith
(7)
44.3 41.4 0.4 0.8 44.7 42.2
Quintin Price
(8)
53.4 51.0 0.4 1.1 53.8 52.1
Stephen Russell
(9)
46.6 40.5 0.3 0.9 46.9 41.4
Julie Tankard
(8)(10)
55.5 22.1 0.4 0.5 55.9 22.6
Total 410.5 387.2 3.4 8.7 413.9 395.9
(1) Comprises amounts reimbursed for expenses incurred in carrying out business for the Company, which have been grossed up to include PAYE and NI contributions.
(2) Retired from the Board on 31 January 2022.
(3) Appointed to the Board on 1 July 2023. Appointed to the Audit Committee on 1 February 2024.
(4) Retired from the Board immediately following the AGM on 27 April 2023.
(5) Retired from the Board immediately following the AGM on 3 May 2022.
(6) Highest paid Director.
(7) Appointed to the Nomination Committee on 8 February 2022.
(8) Appointed to the Nomination Committee on 1 January 2024.
(9) Appointed to the Board and Audit Committee on 1 February 2022.
(10) Appointed to the Board and as Chairman of the Audit Committee on 1 August 2022.
Annual Percentage Change in Directors' fees
% change from 2022 to 2023 % change from 2021 to 2022 % change from 2020 to 2021
Sarah Arkle
(1)
n/a n/a 0.0
Sir Roger Bone
(2)
n/a n/a n/a
Anuradha Chugh
(3)
n/a n/a n/a
Francesca Ecsery
(4)
n/a 4.4 0.0
Jeffrey Hewitt
(5)
n/a n/a 0.0
Beatrice Hollond 4.7 4.2 0.0
Tom Joy
(6)
4.7 5.8 n/a
Edward Knapp 4.7 4.0 0.0
Rain Newton-Smith
(7)
7.0 n/a n/a
Quintin Price
(8)
4.7 9.2 n/a
Stephen Russell
(9)
n/a n/a n/a
Julie Tankard
(10)
n/a n/a n/a
(1) Retired from the Board on 31 January 2022.
(2) Retired immediately following the AGM on 10 May 2021.
(3) Appointed to the Board on 1 July 2023.
(4) Retired from the Board immediately following the AGM on 27 April 2023.
(5) Retired from the Board immediately following the AGM on 3 May 2022.
(6) Appointed to the Board on 1 January 2021 and the Nomination Committee on 9 February 2021.
(7) Appointed to the Board on 11 May 2021 and to the Nomination Committee on 8 February 2022.
(8) Appointed to the Board on 10 March 2020, the Audit Committee on 7 May 2020 and became Senior Independent Director on 11 May 2021.
(9) Appointed to the Board and Audit Committee on 1 February 2022
(10) Appointed to the Board and as Chairman of the Audit Committee on 1 August 2022
68
Shareholder total return vs benchmark total return
over ten years
Rebased to 100 at 31 December 2013
Source: Columbia Threadneedle Investments & Refinitiv Eikon
75
100
125
150
175
200
225
250
275
300
325
350
375
400
2015 20202013 2016 2017 2018 20192014
FTSE All World Index
(total return)
F&C Investment Trust Ord
2021 20232022
The following table shows the total remuneration, excluding
taxable benefits, for the Chairman over the five years ended
31 December 2023:
Remuneration for the Chairman over the five years
ended 31 December 2023
Year ended 31 December Fees £’000s
2023 85.1
2022 81.3
2021 78.0
2020 78.0
2019 77.0
DIRECTORS' REMUNERATION REPORT (CONTINUED)
The table below is shown to enable shareholders to assess
the relative importance of spend on remuneration. It
compares the remuneration, excluding taxable benefits,
against the shareholder distributions of dividends and share
buybacks.
Actual expenditure
2023
£’000s
2022
£’000s
%
Change
Aggregate Directors’
Remuneration
410.5 387.2 6.0
Aggregate Dividends paid
to Shareholders
71,837 68,983 4.1
Aggregate cost of ordinary
shares repurchased
76,345 70,749 7.9
COMPANY PERFORMANCE
An explanation of the performance of the Company for the
year ended 31 December 2023 is given in the Chairman’s
Statement and Fund Manager’s Review.
A comparison of the Company’s performance over the last
ten years is set out on the graph below. This shows the total
return (assuming all dividends are reinvested) to ordinary
shareholders compared with that of the Company’s
benchmark, the FTSE All-World Index (total return). The
Board believes that this index is the most appropriate for
performance comparison purposes as it reflects the Fund
Managers investment universe.
ANNUAL STATEMENT
On behalf of the Board and in accordance with Part 2 of
Schedule 8 of the Large and Medium-sized Companies and
Groups (Accounts and Reports) (Amendment) regulations
2013, it is confirmed that the above Remuneration Report
summarises, as applicable, for the year to 31 December
2023:
The major decisions on Directors’ remuneration;
Any substantial changes relating to Directors’
remuneration made during the year; and
The context in which the changes occurred and
decisions have been taken.
On behalf of the Board
Beatrice Hollond
Chairman
7 March 2024
69Annual Report and Accounts 2023
Governance Report
The Directors are responsible for preparing the Annual
Report and Accounts in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the
Directors have prepared the financial statements in
accordance with United Kingdom Accounting Standards,
comprising FRS 102 “The Financial Reporting Standard
applicable in the UK and Republic of Ireland”.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Company
and of the return or loss of the Company for that period.
In preparing these financial statements, the Directors are
required to:
select suitable accounting policies and then apply them
consistently;
make judgements and accounting estimates that are
reasonable and prudent;
state whether applicable UK Accounting Standards
have been followed, subject to any material departures
disclosed and explained in the financial statements
respectively; and
prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors confirm that they have complied with the above
requirements in preparing the financial statements. Further
details can be found in notes 2 and 24 to the Accounts.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the Company
and enable them to ensure that the financial statements
comply with the Act. They are also responsible for
safeguarding the assets of the Company and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.
Under applicable law and regulations, the Directors are
also responsible for preparing a Strategic Report, Directors’
Report, Directors’ Remuneration Report and Corporate
Governance Report that comply with that law and those
regulations.
The Annual Report and Accounts is published on the
fandc.com website, which is maintained by the Manager.
The maintenance and integrity of the website maintained
by the Manager is, so far as it relates to the Company,
the responsibility of the Manager. The Directors are
responsible for the maintenance and integrity of the
corporate and financial information that is published on
the website. The work undertaken by the auditor does not
involve consideration of the maintenance and integrity
of the website and, accordingly, the auditor accepts no
responsibility for any changes that have occurred to the
financial statements since they were initially presented
on the website. Visitors to the website need to be aware
that legislation in the United Kingdom governing the
preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Each of the Directors listed on pages 47 and 48 confirm to
the best of their knowledge that:
the financial statements, prepared in accordance with
applicable accounting standards, give a true and fair
view of the assets, liabilities, financial position and
profit of the Company;
the Strategic Report includes a fair review of the
development and performance of the business
and the position of the Company, together with a
description of the principal risks and uncertainties
that it faces; and
in the opinion of the Directors the Annual Report
and Accounts, taken as a whole, is fair, balanced
and understandable and provides the information
necessary for shareholders to assess the Company’s
position and performance, business model and
strategy.
On behalf of the Board
Beatrice Hollond
Chairman
7 March 2024
STATEMENT OF DIRECTORS’
RESPONSIBILITIES
70
INDEPENDENT AUDITORS REPORT TO THE
MEMBERS OF F&C INVESTMENT TRUST PLC
OPINION
We have audited the financial statements of F&C
Investment Trust PLC (the ‘Company’) for the year ended
31 December 2023 which comprise the Income Statement,
Statement of Changes in Equity, Balance Sheet, Statement
of Cash Flows and the related Notes to the Accounts 1 to
27, including a summary of significant accounting policies.
The financial reporting framework that has been applied
in their preparation is applicable law and United Kingdom
Accounting Standards including FRS 102 “The Financial
Reporting Standard applicable in the UK and Republic of
Ireland” (United Kingdom Generally Accepted Accounting
Practice).
In our opinion, the financial statements:
give a true and fair view of the Company’s affairs as at
31 December 2023 and of its profit for the year then
ended;
have been properly prepared in accordance with
United Kingdom Generally Accepted Accounting
Practice; and
have been prepared in accordance with the
requirements of the Companies Act 2006.
BASIS FOR OPINION
We conducted our audit in accordance with International
Standards on Auditing (UK) (ISAs (UK)) and applicable
law. Our responsibilities under those standards are further
described in the Auditor’s responsibilities for the audit of
the financial statements section of our report. We believe
that the audit evidence we have obtained is sufficient and
appropriate to provide a basis for our opinion.
INDEPENDENCE
We are independent of the Company in accordance with
the ethical requirements that are relevant to our audit of the
financial statements in the UK, including the FRC’s Ethical
Standard as applied to public interest entities, and we have
fulfilled our other ethical responsibilities in accordance with
these requirements.
The non-audit services prohibited by the FRC’s Ethical
Standard were not provided to the Company and we remain
independent of the Company in conducting the audit.
CONCLUSIONS RELATING TO GOING CONCERN
In auditing the financial statements, we have concluded that
the Directors’ use of the going concern basis of accounting
in the preparation of the financial statements is appropriate.
Our evaluation of the Directors’ assessment of the
Company’s ability to continue to adopt the going concern
basis of accounting included:
Confirming our understanding of the Company’s going
concern assessment process and making enquiries of
the Directors and Columbia Threadneedle Investment
Business Limited (‘CTIB’ or ‘the Manager’) to determine
if the key factors that we have become aware of during
our audit were considered in their assessment.
Inspecting board minutes to identify any risks, events
or contrary evidence that, individually or collectively,
may cast significant doubt on the Company’s ability to
continue as a going concern.
Inspecting the Directors’ assessment of going concern
and reviewing the factors and assumptions as applied
to the revenue forecast for the period to 31 March 2025,
the stress and reverse stress tests and the liquidity
assessment of the investments held by the Company.
We considered the appropriateness of the methods
used to calculate the revenue forecast and determined,
through testing of the methodology and calculations,
that the methods, inputs and assumptions utilised were
appropriate to be able to make an assessment for the
Company. We also considered the likelihood of the
occurrence of the reverse stress test scenario and any
available mitigating actions that could be taken.
In relation to the Company’s borrowing arrangements,
we inspected the Company’s assessment of the risk
of breaching the debt covenants as a result of a
reduction in the value of the Company’s portfolio. We
recalculated the Company’s compliance with debt
covenants in the scenarios assessed by the Directors
in order to identify what factors would lead to the
Company breaching the financial covenants.
Reviewing the Director’s assessment of the principal
and emerging risks facing the Company, including
those that would threaten its business model, future
performance, solvency or liquidity and comparing them
to our understanding of the Company’s risks.
Reviewing the Company’s going concern disclosures
included in the annual report in order to assess whether
the disclosures are appropriate and in conformity with
the reporting standards.
Based on the work we have performed, we have not
identified any material uncertainties relating to events
or conditions that, individually or collectively, may cast
significant doubt on the Company’s ability to continue as a
going concern for the period to 31 March 2025.
71Annual Report and Accounts 2023
Auditor’s Report
In relation to the Company’s reporting on how they have
applied the UK Corporate Governance Code, we have
nothing material to add or draw attention to in relation to
the Directors’ statement in the financial statements about
whether the Directors considered it appropriate to adopt
the going concern basis of accounting.
Our responsibilities and the responsibilities of the Directors
with respect to going concern are described in the relevant
sections of this report. However, because not all future
events or conditions can be predicted, this statement is not
a guarantee as to the Company’s ability to continue as a
going concern.
AN OVERVIEW OF THE SCOPE OF OUR AUDIT
Tailoring the scope
Our assessment of audit risk, our evaluation of materiality
and our allocation of performance materiality determine our
audit scope for the Company. This enables us to form an
opinion on the financial statements. We take into account
size, risk profile, the organisation of the Company and
effectiveness of controls, the potential impact of climate
change and changes in the business environment when
assessing the level of work to be performed.
Climate change
The Company has determined that the most significant
future impacts from climate change on its operations will be
on the valuation of its investment portfolio. This is explained
on page 43 in the principal and emerging risks section
of the annual report. The Company has also explained
their climate commitments on page 18 of the annual
report. All of these disclosures form part of the “Other
information,” rather than the audited financial statements.
Our procedures on these unaudited disclosures therefore
consisted solely of considering whether they are materially
inconsistent with the financial statements or our knowledge
obtained in the course of the audit or otherwise appear to
be materially misstated, in line with our responsibilities on
“Other information”.
In planning and performing our audit we assessed the
potential impacts of climate change on the Company’s
business and any consequential material impact on its
financial statements. The Company has explained in Note
2 (c)(xiii) how climate change has been reflected in the
financial statements. Significant judgements and estimates
relating to climate change are included in Note 2 (c)(xiii).
Our audit effort in considering the impact of climate change
on the financial statements was focused on evaluating
management’s assessment of the impact of climate risk,
physical and transition, their climate commitments, the
effects of material climate risks disclosed on pages 18
and 43 and the significant judgements and estimates
disclosed in Note 2 (c)(xiii) and whether these have been
appropriately reflected in the valuation of quoted and
unquoted investments.
We also challenged the Directors’ considerations of climate
change risks in their assessment of going concern and
viability and associated disclosures. Where considerations
of climate change were relevant to our assessment of going
concern, these are described above.
OVERVIEW OF OUR AUDIT APPROACH
KEY AUDIT MATTERS Incorrect valuation or ownership of the unquoted investment portfolio and the
resulting impact on the Income Statement.
Incomplete or inaccurate revenue recognition, including the classification of special
dividends as revenue or capital items in the Income Statement.
Incorrect valuation or ownership of the quoted investment portfolio.
MATERIALITY Overall materiality of £50.3m which represents 1% of net assets.
72
Based on our work we have not identified the impact of
climate change on the financial statements to be a key audit
matter or to impact a key audit matter.
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the
financial statements of the current period and include the
most significant assessed risks of material misstatement
(whether or not due to fraud) that we identified. These
matters included those which had the greatest effect on:
the overall audit strategy, the allocation of resources in the
audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit
of the financial statements as a whole, and in our opinion
thereon, and we do not provide a separate opinion on these
matters.
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
73Annual Report and Accounts 2023
Auditor’s Report
Risk Our response to the risk
Incorrect valuation or ownership of
the unquoted investment portfolio and
the resulting impact on the Income
Statement (2023: £594.3m, 2022:
£575.2m)
Refer to the Audit Committee Report
(page 62); Accounting policies (page
83); and Note 10 of the Financial
Statements (page 91)
The Company invests in a number of
unquoted private equity holdings, either
through fund investments or through co-
investments managed by the Company’s
specialist private equity managers (‘PE
Managers’). The primary PE Managers
are CTIB, HarbourVest Partners LLP and
Pantheon Ventures (UK) LLP. Primary
PE fund investments are held through
the Company while secondary or
co-investment opportunities are held
through PE Investment Holdings 2018
LP (‘PE LP’), an investment vehicle in
which the Company is the sole Limited
Partner. The Company also holds a
direct investment in Inflexion Strategic
Partners, a Private Equity Investment
Management business, which is valued
by CTIB.
Valuation
The Company’s approach to the
valuation of these investments is as
follows;
Funds and co-investments – the
Directors rely on unaudited valuations
of the underlying unquoted
investments as supplied by the PE
Managers, rolled forward for any calls
and distributions in the subsequent
period.
Direct investment – As at 31 December
2023, the investment is valued by CTIB.
There is the risk that inaccurate
judgements and estimates made in the
assessment of fair value could materially
misstate the value of the investment
portfolio in the Balance Sheet, and the
unrealised gains/(losses) in the Income
Statement. There is also incentive
and opportunity for the Manager to
inflate valuations to meet shareholders'
expectations.
Ownership
There is a risk that the incorrect
holdings in investments are recorded,
particularly where transactions are
initiated or settled close to the Balance
Sheet date. In addition, there is a risk of
failure to maintain proper legal title of
the unquoted investments held by the
Company which could have a significant
impact on the portfolio valuation and the
return generated for shareholders.
Valuation procedures
We obtained an understanding of the Manager’s and primary PE Manager’s processes and
controls for the valuation of the unquoted investments by performing walkthrough procedures
and reviewing the primary PE Manager’s internal control reports to evaluate the design and
implementation of controls.
We obtained an understanding of the governance of unquoted valuations through discussions
with the Manager and assessing the oversight of the unquoted valuation process at Board level
through reading minutes and reports of Board meetings throughout the year.
To address the risk of management override, we tested a sample of manual journal entries
posted in relation to unquoted investments during the year.
We recalculated the valuation of all unquoted investments in foreign currencies using exchange
rates from third party sources to gain assurance over the reasonableness of currency rates used.
We recalculated the unrealised gains/(losses) on the revaluation of all unquoted investments
and tied these to the financial statements.
We compared the Company’s valuation methodology to the requirements of International
Private Equity and Venture Capital Valuation Guidelines.
Fund and co-investments
For all of the unquoted investments, we performed a back-testing exercise to assess the
historical accuracy of a sample of valuations of unquoted investments in the 31 December
2022 financial statements. We compared the valuations per the Company’s 2022 audited
financial statements, which were estimates at the time, to the unquoted investment values
subsequently reported by the respective PE Manager in the audited financial statements as at
31 December 2022. For this sample, we also confirmed that the PE Managers are following fair
value accounting principles by reviewing the valuation policies disclosed in their latest audited
accounts or quarterly valuation report.
For a sample of unquoted investments on the investment report, we agreed the NAV to
the estimated NAV valuations included in the 31 December 2023 NAV statements provided
directly by the respective PE Managers or PE fund administrators, whether held directly by the
Company or indirectly through PE LP. Where 31 December 2023 estimated NAV valuations are
not available, we obtained the 30 September 2023 NAV statements from the underlying PE
managers and tested management’s roll forward exercise which adjusts for cash flows, foreign
exchange movements and any other adjustments, as determined by the Manager, in the period
to 31 December 2023.
We made enquiries of HarbourVest Partners LLC, Pantheon Ventures (UK) LLP and the CTIB
private equity team to understand:
the annual performance of the investment funds during the year to 31 December 2023 and
the valuation approaches adopted;
the reasons for any material variances noted between estimated and actual NAVs for the
year ended 31 December 2022; and
whether any post balance sheet information is available that would require adjustments to
be made to the estimated 31 December 2023 NAVs.
For a sample of unquoted investments, we confirmed the realised gains/(losses) to the notices
received from the relevant PE Manager.
Direct investment in Inflexion Strategic Partners
With the assistance of our specialist valuation team, we performed the following procedures:
updated our understanding of the performance of the Inflexion Strategic Partners
investment through discussions with the CTIB private equity team;
reviewed the CTIB valuation model and assessed its appropriateness against FRS 102 and
the International Private Equity and Venture Capital Valuation Guidelines;
challenged management’s judgements and assumptions, including: any changes to the
valuation model from the prior year, the choice of comparable quoted companies and the
discount applied compared to comparable quoted company multiples; and
performed an independent valuation analysis to derive a reasonable valuation range.
The audit team compared the inputs to the model to third party data (earnings, net debt,
comparable quoted company multiples), and recalculated the valuation using the model inputs
to test the mathematical accuracy of the calculation.
Ownership procedures
We obtained an understanding of the Manager’s processes and controls for the ownership of
the unquoted investments by performing walkthrough procedures.
For all investments, we compared independently obtained confirmations from the underlying
general partners or PE fund administrators to the Company’s records to confirm the total
committed capital and the amount drawn down at the year end.
Key observations communicated to the Audit Committee
The results of our procedures identified no material misstatement in relation to the incorrect valuation or ownership of unquoted investments
and the resulting impact on the Income Statement.
Based on the work performed, we had no matters to report to the Audit Committee.
74
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
Risk Our response to the risk
Incomplete or inaccurate revenue recognition, including the
classification of special dividends as revenue or capital items in the
Income Statement (Special dividends - 2023: £4.5m, 2022: £2.1m;
Other revenue - 2023: £102.2m, 2022: £94.6m)
Refer to the Audit Committee Report (page 62); Accounting policies
(page 84); and Note 3 of the Financial Statements (page 86)
The investment income received by the Company during the year
directly affects the Company’s revenue return. There is a risk of
incomplete or inaccurate recognition of revenue through the failure to
recognise proper income entitlements or failure to apply appropriate
accounting treatment.
The income received during the year consisted primarily of dividend
income from listed investments.
Special dividends represent dividends paid by investee companies
that are additional to the normal or expected dividend cycle for that
Company. In accordance with the AIC SORP, special dividends can be
included within either the revenue or capital columns of the Income
Statement, depending on the commercial circumstances behind the
payments. The Directors may be required to exercise judgement
in determining whether income receivable in the form of special
dividends should be classified as ‘revenue’ or ‘capital’.
As such, there is a potential manual and judgemental element in
classifying special dividends between revenue and capital. The
revenue column of the Income Statement is the main driver of the
minimum dividend calculation.
The Administrator’s special dividend listing contained 24 special
dividends received during the year; 23 classified as revenue (£4.4m)
and 1 classified as capital (£0.1m).
There is a risk that an incorrect classification of special dividends
could result in an under distribution of revenue and put the
Company's Investment Trust status at risk. There is also a risk that
the revenue column is overstated to increase the dividend paid to
shareholders.
We obtained an understanding of the Manager’s and State
Street Bank and Trust’s (the 'Administrator') processes and
controls surrounding revenue recognition and identification and
classification of special dividends by reviewing their internal
controls report and performing our walkthrough procedures. We
also obtained an understanding of the design and implementation
of controls.
For 100% of dividends received and accrued, we recalculated the
dividend income by multiplying the investment holdings at the ex-
dividend date, traced from the accounting records, by the dividend
per share, which we agreed to an independent data vendor. We
agreed a sample of dividend receipts to bank statements.
Where dividends were received or accrued in a foreign currency, we
translated the amount into the reporting currency of the Company
using exchange rates sourced from an independent data vendor.
To test completeness of recorded income, we verified that expected
dividends for each investee company held during the year have
been recorded as revenue with reference to investee company
announcements obtained from an independent data vendor.
For 100% of dividends received and accrued during the period,
we reviewed the type of dividends paid with reference to an
independent external data vendor to identify those which are
special.
For a sample of special dividends, including the one special
dividend above our testing threshold, we assessed the
appropriateness of the Directors’ classification as either revenue or
capital by reviewing the rationale for the underlying distribution.
Key observations communicated to the Audit Committee
The results of our procedures identified no material misstatement in relation to incomplete or inaccurate revenue recognition, including the
classification of special dividends as revenue or capital items in the Income Statement.
Based on the work performed, we had no matters to report to the Audit Committee.
Incorrect valuation or ownership of the quoted investment portfolio
(2023: £4,936.6m, 2022: £4,408.8m)
Refer to the Audit Committee Report (page 62); Accounting policies
(page 83); and Note 10 of the Financial Statements (page 91)
The Company holds a portfolio of quoted investments both in the
UK and overseas. The quoted portfolio is managed by the Manager
who in turn sub-delegates the role of investment management for
a proportion of the portfolio to Barrow, Hanley, Mewhinney and
Strauss LLC, and JPMorgan Asset Management (together ‘the Sub-
Managers’).
Per the Company’s accounting policy, the fair value of investments is
the bid value at the close of business on the Balance Sheet date.
Certificates of investment ownership are held by JPMorgan Chase
(‘the Custodian’) and not directly by the Company. JPMorgan Europe
Limited (‘the Depositary’) has a regulatory obligation to oversee the
investment holdings stated by the Administrator and the Custodian.
The incorrect valuation of the investment portfolio, including
incorrect application of exchange rates, could have a significant
impact on the financial statements. In addition, there is a risk of
failure to maintain proper legal title of the quoted investments
held by the Company which could have a significant impact on the
portfolio valuation and the return generated for shareholders.
Valuation Procedures
We obtained an understanding of the Manager's and the
Administrator’s processes and controls surrounding investment
pricing by performing our walkthrough procedures and reviewing
the Manager’s and the Administrator's internal control reports.
For 100% of quoted investments in the portfolio, we verified the
market prices and exchange rates to an independent pricing vendor
and recalculated the investment valuations as at the year-end.
We inspected the stale pricing report produced by the
Administrator as at 31 December 2023 to identify prices that
have not changed around the year-end and verified whether
the Administrator’s price is a fair value through review of trading
activity.
Ownership procedures
We obtained an understanding of the Administrator’s and the
Custodian’s processes and controls related to legal title of quoted
investments by inspecting their internal control reports.
We compared the Company’s investment holdings at 31 December
2023 to independent confirmations received directly from
the Company’s Custodian and Depositary for the listed equity
investments. No reconciling items were identified.
Key observations communicated to the Audit Committee
The results of our procedures identified no material misstatement in relation to the incorrect valuation or ownership of the quoted investment
portfolio.
Based on the work performed, we had no matters to report to the Audit Committee.
75Annual Report and Accounts 2023
Auditor’s Report
OUR APPLICATION OF MATERIALITY
We apply the concept of materiality in planning and
performing the audit, in evaluating the effect of identified
misstatements on the audit and in forming our audit opinion.
Materiality
The magnitude of an omission or misstatement that,
individually or in the aggregate, could reasonably be
expected to influence the economic decisions of the users
of the financial statements. Materiality provides a basis for
determining the nature and extent of our audit procedures.
We determined materiality for the Company to be £50.3
million (2022: £46.5 million), which is 1% (2022: 1%) of net
assets. We believe that net assets is the most appropriate
measure as it is the primary measure that investors use to
assess the performance of the Company.
During the course of our audit, we reassessed initial
materiality and made no changes to the basis of calculation
from our original assessment at the planning stage.
Performance materiality
The application of materiality at the individual account
or balance level. It is set at an amount to reduce to an
appropriately low level the probability that the aggregate
of uncorrected and undetected misstatements exceeds
materiality.
On the basis of our risk assessments, together with our
assessment of the Company’s overall control environment,
our judgement was that performance materiality was 75%
(2022: 75%) of our planning materiality, namely £37.8m
(2022: £34.9m). We have set performance materiality
at this percentage based on our understanding of the
control environment that indicates a lower risk of material
misstatements, both corrected and uncorrected.
Given the importance of the distinction between revenue
and capital for investment trusts, we have also applied a
separate testing threshold for the revenue column of the
Income Statement of £4.6m (2022: £4.1m) being 5% of the
net revenue return on ordinary activities before taxation.
Reporting threshold
An amount below which identified misstatements are
considered as being clearly trivial.
We agreed with the Audit Committee that we would report
to them all uncorrected audit differences in excess of £2.5m
(2022: £2.3m), which is set at 5% of planning materiality, as
well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds.
We evaluate any uncorrected misstatements against both
the quantitative measures of materiality discussed above
and in light of other relevant qualitative considerations in
forming our opinion.
OTHER INFORMATION
The other information comprises the information included
in the annual report, other than the financial statements
(including notes to the accounts 1 to 27) and our auditor’s
report thereon. The Directors are responsible for the other
information contained within the annual report.
Our opinion on the financial statements does not cover
the other information and, except to the extent otherwise
explicitly stated in this report, we do not express any form of
assurance conclusion thereon.
Our responsibility is to read the other information and,
in doing so, consider whether the other information is
materially inconsistent with the financial statements or our
knowledge obtained in the course of the audit or otherwise
appears to be materially misstated. If we identify such
material inconsistencies or apparent material misstatements,
we are required to determine whether this gives rise
to a material misstatement in the financial statements
themselves. If, based on the work we have performed, we
conclude that there is a material misstatement of the other
information, we are required to report that fact.
We have nothing to report in this regard.
OPINIONS ON OTHER MATTERS PRESCRIBED BY THE
COMPANIES ACT 2006
In our opinion the part of the Directors’ remuneration report
to be audited has been properly prepared in accordance
with the Companies Act 2006.
In our opinion, based on the work undertaken in the course
of the audit:
the information given in the strategic report and the
Directors’ report for the financial year for which the
financial statements are prepared is consistent with the
financial statements; and
76
the strategic report and Directors’ reports have
been prepared in accordance with applicable legal
requirements.
MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY
EXCEPTION
In the light of the knowledge and understanding of the
Company and its environment obtained in the course of the
audit, we have not identified material misstatements in the
strategic report or Directors’ report.
We have nothing to report in respect of the following
matters in relation to which the Companies Act 2006
requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or
returns adequate for our audit have not been received
from branches not visited by us; or
the financial statements and the part of the Directors’
Remuneration Report to be audited are not in
agreement with the accounting records and returns; or
certain disclosures of Directors’ remuneration specified
by law are not made; or
we have not received all the information and
explanations we require for our audit.
CORPORATE GOVERNANCE STATEMENT
We have reviewed the Directors’ statement in relation to
going concern, long-term viability and that part of the
Corporate Governance Statement relating to the Company’s
compliance with the provisions of the UK Corporate
Governance Code specified for our review by the Listing
Rules.
Based on the work undertaken as part of our audit, we
have concluded that each of the following elements of the
Corporate Governance Statement is materially consistent
with the financial statements or our knowledge obtained
during the audit:
Directors’ statement with regards to the
appropriateness of adopting the going concern basis of
accounting and any material uncertainties identified set
out on page 44;
Directors’ explanation as to its assessment of the
Company’s prospects, the period this assessment
covers and why the period is appropriate set out on
pages 44 to 46;
Directors’ statement on whether it has a reasonable
expectation that the group will be able to continue in
operation and meets its liabilities set out on page 44;
Directors’ statement on fair, balanced and
understandable set out on page 69;
Board’s confirmation that it has carried out a robust
assessment of the emerging and principal risks set out
on page 42;
The section of the annual report that describes the
review of effectiveness of risk management and internal
control systems set out on pages 60 and 61; and
The section describing the work of the audit committee
set out on page 59.
RESPONSIBILITIES OF DIRECTORS
As explained more fully in the Directors’ responsibilities
statement set out on page 69, the Directors are responsible
for the preparation of the financial statements and for being
satisfied that they give a true and fair view, and for such
internal control as the Directors determine is necessary to
enable the preparation of financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are
responsible for assessing the Company’s ability to continue
as a going concern, disclosing, as applicable, matters related
to going concern and using the going concern basis of
accounting unless the Directors either intend to liquidate
the Company or to cease operations, or have no realistic
alternative but to do so.
AUDITOR’S RESPONSIBILITIES FOR THE AUDIT OF THE
FINANCIAL STATEMENTS
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from
material misstatement, whether due to fraud or error,
and to issue an auditor’s report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not
a guarantee that an audit conducted in accordance with
ISAs (UK) will always detect a material misstatement when
it exists. Misstatements can arise from fraud or error and are
considered material if, individually or in the aggregate, they
could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial
statements.
EXPLANATION AS TO WHAT EXTENT THE AUDIT WAS
CONSIDERED CAPABLE OF DETECTING IRREGULARITIES,
INCLUDING FRAUD
Irregularities, including fraud, are instances of non-
compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above,
INDEPENDENT AUDITOR’S REPORT (CONTINUED)
77Annual Report and Accounts 2023
Auditor’s Report
to detect irregularities, including fraud. The risk of not
detecting a material misstatement due to fraud is higher
than the risk of not detecting one resulting from error, as
fraud may involve deliberate concealment by, for example,
forgery or intentional misrepresentations, or through
collusion. The extent to which our procedures are capable of
detecting irregularities, including fraud is detailed below.
However, the primary responsibility for the prevention
and detection of fraud rests with both those charged with
governance of the Company and management.
We obtained an understanding of the legal and
regulatory frameworks that are applicable to the
Company and determined that the most significant
are UK Generally Accepted Accounting Practice,
Companies Act 2006, the Listing Rules, the UK
Corporate Governance Code, the Association
of Investment Companies’ Code, Statement of
Recommended Practice, Section 1158 of the Corporation
Tax Act 2010 and The Companies (Miscellaneous
Reporting) Regulations 2018.
We understood how the Company is complying with
those frameworks through discussions with the Audit
Committee and Company Secretary and review of
Board minutes and the Company's documented policies
and procedures.
We assessed the susceptibility of the Company’s
financial statements to material misstatement, including
how fraud might occur by considering the key risks
impacting the financial statements. We identified
fraud risks with respect to incomplete or inaccurate
revenue recognition through incorrect classification
of special dividends between revenue and capital and
the incorrect valuation of the unquoted investment
portfolio and resulting impact on the Income
Statement. Further discussion of our approach is set
out in the section on key audit matters above.
Based on this understanding we designed our audit
procedures to identify non-compliance with such
laws and regulations. Our procedures involved journal
entry testing with a focus on manual journals posted
in relation to unquoted investments during the year,
a review of the Company Secretary’s reporting to
the Directors with respect to the application of the
documented policies and procedures and review of the
financial statements to confirm compliance with the
reporting requirements of the Company.
A further description of our responsibilities for the audit
of the financial statements is located on the Financial
Reporting Council’s website at https://www.frc.org.uk/
auditorsresponsibilities. This description forms part of our
auditor’s report.
OTHER MATTERS WE ARE REQUIRED TO ADDRESS
Following the recommendation from the audit
committee, we were appointed by the Company on
26 April 2016 to audit the financial statements for the
year ending 31 December 2016 and subsequent financial
periods.
The period of total uninterrupted engagement including
previous renewals and reappointments is 8 years,
covering the years ending 31 December 2016 to
31 December 2023.
The audit opinion is consistent with the additional
report to the audit committee.
USE OF OUR REPORT
This report is made solely to the Company’s members,
as a body, in accordance with Chapter 3 of Part 16 of the
Companies Act 2006. Our audit work has been undertaken
so that we might state to the Company’s members those
matters we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility
to anyone other than the Company and the Company’s
members as a body, for our audit work, for this report, or for
the opinions we have formed.
James Beszant (Senior Statutory Auditor)
For and on behalf of Ernst & Young LLP,
Statutory Auditor
London
7 March 2024
78
INCOME STATEMENT
for the year ended 31 December
Revenue
£’000s
Capital
£’000s
2023
Total
£’000s
Revenue
£’000s
Capital
£’000s
2022
Total
£’000s
10
Gains/(losses) on investments 477,671 477,671 (527,760) (527,760)
18,21
Exchange movements on foreign currency loans,
cash balances and derivatives (561) (482) (1,043) 387 (11,382) (10,995)
3
Income 106,621 106,621 96,235 96,235
4
Management fees (4,146) (12,438) (16,584) (4,582) (13,747) (18,329)
5
Other expenses (5,727) (68) (5,795) (5,567) (46) (5,613)
Net return before finance costs and taxation 96,187 464,683 560,870 86,473 (552,935) (466,462)
6
Finance costs (3,460) (10,381) (13,841) (3,495) (10,486) (13,981)
Net return on ordinary activities before taxation 92,727 454,302 547,029 82,978 (563,421) (480,443)
7
Taxation on ordinary activities (11,067) (3,118) (14,185) (10,383) (551) (10,934)
8
Net return attributable to shareholders 81,660 451,184 532,844 72,595 (563,972) (491,377)
8
Net return per share – basic (pence) 15.83 87.46 103.29 13.92 (108.14) (94.22)
The total column of this statement is the profit and loss account of the Company.
All revenue and capital items in the above statement derive from continuing operations.
The net return attributable to shareholders is also the total comprehensive income.
The notes on pages 82 to 104 form an integral part of the financial statements.
Notes
79Annual Report and Accounts 2023
Financial Report
STATEMENT OF CHANGES IN EQUITY
for the year ended 31 December 2023
Notes
Share
capital
£’000s
Capital
redemption
reserve
£’000s
Capital
reserves
£’000s
Revenue
reserve
£’000s
Total
shareholders’
funds
£’000s
Balance brought forward 31 December 2022 140,455 122,307 4,289,599 97,464 4,649,825
9
Dividends paid (71,837) (71,837)
16
Shares repurchased by the Company and held in
treasury
(76,345) (76,345)
Net return attributable to shareholders 451,184 81,660 532,844
Balance carried forward 31 December 2023 140,455 122,307 4,664,438 107,287 5,034,487
for the year ended 31 December 2022
Notes
Share
capital
£’000s
Capital
redemption
reserve
£’000s
Capital
reserves
£’000s
Revenue
reserve
£’000s
Total
shareholders’
funds
£’000s
Balance brought forward 31 December 2021 140,455 122,307 4,924,320 93,852 5,280,934
9
Dividends paid
(68,983) (68,983)
Shares repurchased by the Company and held in
treasury
(70,749)
(70,749)
Net return attributable to shareholders
(563,972) 72,595 (491,377)
Balance carried forward 31 December 2022 140,455 122,307 4,289,599 97,464 4,649,825
The notes on pages 82 to 104 form an integral part of the financial statements.
80
BALANCE SHEET
at 31 December
Notes
£’000s
2023
£’000s £’000s
2022
£’000s
Fixed assets
10
Investments 5,451,521 4,924,533
Current assets
10
Investments 79,357 59,424
12
Debtors 11,244 11,061
21
Cash and cash equivalents 87,170 243,836
177,771 314,321
Creditors: amounts falling due within one year
13
Other (13,836) (7,190)
(13,836) (7,190)
Net current assets 163,935 307,131
Total assets less current liabilities 5,615,456 5,231,664
Creditors: amounts falling due after more than one year
14,21
Loans (580,394) (581,264)
15,21
Debenture (575) (575)
(580,969) (581,839)
Net assets 5,034,487 4,649,825
Capital and reserves
16
Share capital 140,455 140,455
17
Capital redemption reserve 122,307 122,307
18
Capital reserves 4,664,438 4,289,599
18
Revenue reserve 107,287 97,464
Total shareholders’ funds 5,034,487 4,649,825
19
Net asset value per share – prior charges at nominal value (pence) 987.56 896.94
The notes on pages 82 to 104 form an integral part of the financial statements.
The Financial Statements were approved by the Board on 7 March 2024 and signed on its behalf by
Beatrice Hollond, Chairman
81Annual Report and Accounts 2023
Financial Report
STATEMENT OF CASH FLOWS
for the year ended 31 December
Notes
2023
£’000s
2022
£’000s
20
Cash flows from operating activities before dividends received and interest paid (25,774) (34,064)
Dividends received 98,937 93,292
Interest paid (13,842) (13,239)
Cash flows from operating activities 59,321 45,989
Investing activities
Purchases of investments (4,224,563) (2,068,248)
Sales of investments 4,155,297 2,338,540
Other capital charges and credits (63) (50)
Cash flows from investing activities (69,329) 270,242
Cash flows before financing activities (10,008) 316,231
Financing activities
9
Equity dividends paid (71,837) (68,983)
Repayment of loans (110,329)
Drawdown of loans 140,000
Cash flows from share buybacks into treasury (73,645) (71,534)
Cash flows from financing activities (145,482) (110,846)
21
Net (decrease)/increase in cash and cash equivalents (155,490) 205,385
21
Cash and cash equivalents at the beginning of the year 243,836 53,111
21
Effect of movement in foreign exchange (1,176) (14,660)
Cash and cash equivalents at the end of the year 87,170 243,836
Represented by:
Cash at bank 39,827 144,096
Short-term deposits 47,343 99,740
Cash and cash equivalents at the end of the year 87,170 243,836
The notes on pages 82 to 104 form an integral part of the financial statements.
82
NOTES TO THE ACCOUNTS
1. GENERAL INFORMATION
F&C Investment Trust PLC is an Investment Company, incorporated in the United Kingdom with a premium listing on the London
Stock Exchange. The Company Registration number is 12901, and the Registered office is Cannon Place, 78 Cannon Street, London,
EC4N 6AG, England. The Company has conducted its affairs so as to qualify as an Investment Trust under the provisions of Section
1158 of the Corporation Tax Act 2010. Approval of the Company under Section 1158 has been received. The Company intends to
conduct its affairs so as to enable it to continue to comply with the requirements of Section 1158. Such approval exempts the
Company from UK Corporation Tax on gains realised in the relevant year on its portfolio of fixed asset investments and derivatives.
There have been no significant changes to the Company’s accounting policies during the year ended 31 December 2023, as set out
in note 2 below.
2. SIGNIFICANT ACCOUNTING POLICIES
(a) Going concern
As referred to in note 24 and the Business Review on page 44, the Directors believe that it is appropriate for the accounts to be
prepared on a going concern basis.
(b) Basis of accounting
The accounts of the Company have been prepared on a going concern basis under the historical cost convention, modified to
include fixed asset investments and derivatives at fair value, and in accordance with the Act, Financial Reporting Standard (FRS)
102 applicable in the United Kingdom and with the Statement of Recommended Practice ‘Financial Statements of Investment Trust
Companies and Venture Capital Trusts’ issued in July 2022 ('SORP').
The functional and presentational currency of the Company is pounds sterling because that is the currency of the primary economic
environment in which the Company operates.
All of the Company’s operations are of a continuing nature.
The Company had no operating subsidiaries at any time during the years ended 31 December 2023 and 31 December 2022.
Consequently, consolidated accounts have not been prepared.
The Directors are of the opinion that the Company’s activities comprise a single operating segment, which is investing
internationally in equities to secure long-term growth in income and capital.
In accordance with the SORP, the Income Statement has been analysed between a Revenue Account (dealing with items of a
revenue nature) and a Capital Account (relating to items of a capital nature). Revenue returns include, but are not limited to,
dividend income and operating expenses and tax (insofar as the expenses and tax are not allocated to capital, as described in notes
2(c)(vii) and 2(c)(viii)). Net revenue returns are allocated via the Revenue Account to the Revenue Reserve, out of which interim
and final dividend payments are made. The amounts paid by way of dividend are shown in the Statement of Changes in Equity.
Capital returns include, but are not limited to, realised and unrealised profits and losses on fixed asset investments and derivatives
and currency profits and losses on cash and borrowings. The Company may distribute net capital returns by way of dividend. It is
the Board’s current stated intention to continue paying dividends to equity shareholders out of the Revenue Reserve.
(c) Principal accounting policies
The policies set out below have been applied consistently throughout the year ended 31 December 2023 and the prior year.
(i) Financial instruments
Financial instruments include fixed asset investments, derivative assets and liabilities, long-term debt instruments, cash and short-
term deposits, debtors and creditors. FRS 102 recognises a hierarchy of fair value measurements, for financial instruments measured
at fair value in the Balance Sheet, which gives the highest priority to unadjusted quoted prices in active markets for identical assets
83Annual Report and Accounts 2023
Financial Report
or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The classification of financial instruments depends on
the lowest significant applicable input, as follows:
Level 1 – Unadjusted, fully accessible and current quoted prices in active markets for identical assets or liabilities. Included within
this category are investments listed on any recognised stock exchange or quoted on the AIM Market in the UK.
Level 2 – Quoted prices for similar assets or liabilities or other directly or indirectly observable inputs which exist for the duration
of the period of investment. Examples of such instruments would be forward exchange contracts and certain other derivative
instruments.
Level 3 – Where no active market exists and recent transactions for identical instruments do not provide a good estimate of fair
value, the value is the Directors’ best estimate, based on advice from relevant knowledgeable experts, use of recognised valuation
techniques and on assumptions as to what inputs other market participants would apply in pricing the same or similar instruments.
Included within this category are investments in private companies or securities, whether invested in directly or through pooled
Private Equity vehicles, (see notes 10 and 25(d) for further information).
(ii) Investments
As an investment trust company, the Company measures its fixed asset investments at fair value through profit or loss and treats
all transactions on the realisation and revaluation of investments held as fixed assets, as transactions on the Capital Account.
Purchases are recognised on the relevant trade date, including expenses which are incidental to the acquisition of the investments.
Sales are also recognised on the trade date, after deducting expenses incidental to the sales. Quoted investments are valued at bid
value at the close of business on the relevant date on the exchange on which the investment is quoted. Included within investments
are short-dated gilts which have been classified as current investments in the balance sheet given their short maturity of six months
or less. Investments which are not quoted or which are not frequently traded are stated at Directors’ best estimate of fair value. In
arriving at their estimate, the Directors make use of recognised valuation techniques and may take account of recent arm’s length
transactions in the same or similar investment instruments. Where no reliable fair value can be estimated, investments are carried at
cost less any provision for impairment.
With respect specifically to investments in Private Equity, whether through funds or partnerships, where year end valuations are
not available the Directors establish an estimate of the value at 31 December using unaudited valuations of the underlying unlisted
investments as at 30 September as supplied by the investment advisers or managers of those funds or partnerships and roll
forward for any calls and distributions in the subsequent quarter and any foreign exchange movements plus significant events
which have occurred in the subsequent quarter. The advisers or managers’ unlisted investment policy applies methodologies
consistent with the International Private Equity and Venture Capital Valuation guidelines (‘IPEV’). The Directors regularly review
the principles applied by the managers to those valuations to ensure they are in compliance with the above policies. Distributions
from Private Equity funds are recognised when the right to distributions is established. Direct investments are fair valued on initial
recognition and are revalued at the balance sheet date at fair value with reference to a price earnings model. Changes in fair value
are recognised in the Income Statement.
(iii) Derivative Instruments
Derivatives including forward exchange contracts, futures and options are classified as fair value through profit or loss and
accounted for as financial assets or liabilities. Where it can be demonstrated that the derivative is connected to the maintenance
of the Company’s investments, the change in fair value is recognised as capital and shown in the Capital column of the Income
Statement. Where an option is written in the expectation that it will not be exercised, or that any losses on exercise will be
outweighed by the value of the premiums received, the premiums are recognised in the Revenue column of the Income Statement.
The value of the premium is usually the option’s initial fair value and is recognised evenly over the life of the option. Subsequent
changes to fair value are adjusted in the Capital column of the Income Statement such that the total amounts recognised within
Revenue and Capital represent the change in fair value of the option.
84
(iv) Debt Instruments
The Company’s debt instruments include the 4.25% perpetual debenture stock included in the Balance Sheet at proceeds received,
net of issue costs, as well as unsecured loan notes, bank borrowings and overdrafts. These are all initially measured at the amount of
cash received less direct issue costs and subsequently measured at amortised cost using the effective interest rate method. No debt
instruments held during the year required hierarchical classification.
The fair market value of the Company's borrowings are set out in notes 14 and 15. Finance charges, including interest, are accrued
using the effective interest rate method. See 2(c)(vii) below for allocation of finance charges within the Income Statement.
(v) Foreign currency
Foreign currency monetary assets and liabilities are expressed in sterling at rates of exchange ruling at the Balance Sheet date.
Purchases and sales of investment securities, dividend income, interest income and expenses are translated at the rates of exchange
prevailing at the respective dates of such transactions. Exchange profits and losses on fixed assets investments are included within
the changes in fair value in the Capital Account. Exchange profits and losses on other currency balances are separately credited or
charged to the Capital Account except where they relate to revenue items.
(vi) Income
Income from equity shares is brought into the Revenue Account (except where, in the opinion of the Directors, its nature indicates
it should be recognised within the Capital Account) on the ex-dividend date or, where no ex-dividend date is quoted, when the
Company’s right to receive payment is established. Fixed returns on non-equity shares and debt securities are recognised on a
time apportionment basis so as to reflect the effective yield on the investment. Dividends are accounted for on the basis of income
actually receivable, without adjustment for any tax credit attaching to the dividends. Dividends from overseas companies are shown
gross of withholding tax. Where the Company has elected to receive its dividends in the form of additional shares rather than in cash
(scrip dividends), the amount of the cash dividend foregone is recognised as income. Any excess in the value of the shares received
over the amount of the cash dividend foregone is recognised in the Capital Account. Rebates on investee funds management fees
are accounted for on a receipts basis.
(vii) Expenses, including finance charges
Expenses inclusive of associated value added tax (VAT) are charged to the Revenue Account of the Income Statement, except as
noted below:
expenses incidental to the acquisition or disposal of fixed assets investments are charged to Capital Reserves via the Capital
Account;
– costs of professional advice relating to the capital structure of the Company are charged to Capital Reserves (see note 2(c)(xi));
100% of management fees, invoiced to the Company in respect of certain Private Equity investments, are allocated to Capital
Reserves, via the Capital Account, in accordance with the Board’s long-term expected split of returns from those investments;
75% of other management fees and finance costs are allocated to Capital Reserves via the Capital Account, in accordance with
the Board’s long-term expected split of returns from the investment portfolio (excluding Private Equity investments) of the
Company.
All expenses are accounted for on an accruals basis.
(viii) Taxation
Taxation currently payable is calculated using tax rules and rates in force at the year end, based on taxable profit for the period
which differs from the net return before tax. Note 7(b) sets out those items which are not subject to UK Corporation Tax.
NOTES TO THE ACCOUNTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
85Annual Report and Accounts 2023
Financial Report
Deferred tax is provided for in accordance with FRS 102 on all timing differences that have been enacted by the Balance Sheet date
and are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax assets are only recognised
if it is considered more likely than not that there will be suitable profits from which the future reversal of timing differences can
be deducted. In line with the recommendations of the SORP, the allocation method used to calculate the tax relief on expenses
charged to capital is the “marginal” basis. Under this basis, if taxable income is capable of being offset entirely by expenses charged
through the Revenue Account, then no tax relief is transferred to the Capital Account.
(ix) Dividends payable
Dividends are included in the financial statements on the date on which they are paid or, in the case of final dividends, when they
are approved by shareholders.
(x) Capital Redemption Reserve
This is a non-distributable reserve. The nominal value of ordinary share capital repurchased for cancellation is transferred out of
Share Capital and into the Capital Redemption Reserve, on a trade date basis. Where shares are repurchased into treasury, the
transfer of nominal value to the Capital Redemption Reserve is made if and when the shares are cancelled.
(xi) Capital Reserves
These are distributable reserves which may be utilised for the repurchase of share capital and for distributions to shareholders by
way of dividend.
Capital reserve – arising on investments sold
The following are accounted for in this reserve:
gains and losses on the disposal of fixed asset investments and derivatives;
realised exchange differences of a capital nature;
costs of professional advice, including related irrecoverable VAT, relating to the capital structure of the Company;
other capital charges and credits charged or credited to this account in accordance with the above policies; and
costs of repurchasing ordinary share capital into treasury or for cancellation, including related stamp duty, are recognised on a
trade date basis.
Capital reserve – arising on investments held
The following are accounted for in this reserve:
increases and decreases in the valuation of fixed asset investments and derivatives held at the year end; and
unrealised exchange differences of a capital nature.
(xii) Revenue reserve
The Revenue Reserve represents accumulated revenue profits retained by the Company that have not currently been distributed to
shareholders as a dividend.
(xiii) Use of judgements, estimates and assumptions
The presentation of the financial statements in accordance with accounting standards requires the Board to make judgements,
estimates and assumptions that affect the accounting policies and reported amounts of assets, liabilities, income and expenses.
Estimates and judgements are continually evaluated and are based on perceived risks, historical experience, expectations of
plausible future events and other factors. Actual results may differ from these estimates.
The areas requiring the most significant judgement and estimation in the preparation of the financial statements are: accounting for
the value of unquoted investments and recognising and classifying unusual or special dividends received as either revenue or capital in
nature.
86
The policy for valuation of unquoted securities is set out in note 2(c)(ii) and further information on Board procedures is contained in the
Report of the Audit Committee and note 25(d). The choice to use the September quarter end valuations and apply a roll forward process
to incorporate any known transactions and material events is a judgement made each year for the indirect investments. The valuations as
at 31 December are not generally available before approval of the financial statements. Material judgments were applied to the valuation
of the Company’s direct investment, Inflexion Strategic Partners. This investment was valued using an earnings method multiplied by an
average of European listed comparable companies multiple (where the judgement of which comparable companies to select and what
discounts to apply are subjective). The fair value of unquoted (Level 3) investments, as disclosed in note 10 to the accounts, represented
10.7% of total investments at 31 December 2023. In the opinion of the Directors, under foreseeable market conditions the collective value
of such investments may rise or fall in the short term by more than 10%. A fall of 10% in the value of the unlisted (Level 3) portfolio at the
year-end would equate to £59m or 1.2% of net assets and a similar percentage rise would equate to a similar increase in net assets.
We have considered the impact of climate change on the value of both the listed and private equity investments included in the financial
statements. The listed investments should already include the impact of climate change in their prices as quoted on the relevant
exchange. Climate risk is indirectly factored into the valuation of the indirect and direct private equity investments, by GPs and the
Manager respectively, through consideration and use of market comparable data where climate risk is factored into the quoted prices.
Specific ESG risks are covered, as applicable, as part of the investment onboarding procedures performed by the Manager. For further
detail on the private equity investment process, refer to page 18.
Dividends received which appear to be unusual in size or circumstance are assessed on a case-by-case basis, based on interpretation of
the investee companies’ relevant statements, to determine their allocation in accordance with the SORP to either the Revenue Account
or Capital Account. Dividends which have clearly arisen out of the investee company’s reconstruction or reorganisation are usually
considered to be capital in nature and allocated to Capital Account. Investee company dividends which appear to be paid in excess of
current year profits will still be considered as revenue in nature unless evidence suggests otherwise. The value of dividends received in the
year treated as capital in nature, as disclosed in note 18, was not material in relation to capital reserves or the revenue account. The value
of special dividends receivable in any period cannot be foreseen as such dividends are declared and paid by investee companies and
funds without prior reference to the Company.
3. INCOME
2023
£’000s
2022
£’000s
Income from investments:
UK dividends
6,660 7,582
UK gilt income
(i)
3,070
Overseas dividends
91,864 86,686
101,594 94,268
Other Income:
Interest on cash and short-term deposits
5,027 1,967
5,027 1,967
Total income
106,621 96,235
Included within income from investments is £4,382,000 (2022: £1,576,000) of special dividends classified as revenue in nature in
accordance with note 2(c)(xiii).
(i) Investments were made into gilts at the end of December 2022.
NOTES TO THE ACCOUNTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
87Annual Report and Accounts 2023
Financial Report
4. MANAGEMENT FEES
2023
£’000s
2022
£’000s
Payable directly to Columbia Threadneedle Investments:
– in respect of management services provided by the Manager (i) 13,582 14,113
– reimbursement in respect of services provided by sub-managers (i) 3,002 4,216
Total directly incurred management fees 16,584 18,329
Incurred indirectly within funds managed by Private Equity managers (ii) 1,860 2,614
Total direct and indirect management fees 18,444 20,943
(i) 75% of these fees allocated to Capital Reserve-arising on investments sold. See note 2(c)(vii).
(ii) Indirectly incurred fees are included within the value of the respective funds and therefore arise in the Income Statement in gains/(losses) on investments.
The fees are disclosed here for completeness and transparency.
Directly incurred fees are analysed as follows:
Management fees
2023
£’000s
2022
£’000s
– payable directly to Columbia Threadneedle Investments 16,584 18,329
Less: allocated to capital reserves (see note 18) (12,438) (13,747)
Allocated to revenue account 4,146 4,582
(a) Management fees payable to Columbia Threadneedle Investments
The Manager provides investment management, company secretarial, financial, marketing and general administrative services to the
Company under the terms of an agreement which may be terminated upon six months’ notice given by either party. In the event of
a change of control of the Manager, the Company may give three months’ notice of termination.
The Manager’s remuneration is based on a fee of 0.30% per annum of the market capitalisation of the Company up to £4.0
billion and 0.25% above £4.0 billion, calculated at each month end on a pro rata basis (2022: 0.325% per annum of the market
capitalisation of the Company up to £3.0 billion, 0.30% between £3.0 and £4.0 billion and 0.25% above £4.0 billion); the fee
is adjusted for fees earned by the Manager in respect of investment holdings managed or advised by the Manager or other
members of the Columbia Threadneedle Investments Group. Variable fees payable in respect of third-party sub-managers are also
reimbursed.
(b) Management fees payable to the Private Equity funds of funds managers
At 31 December 2023 the Company had outstanding commitments in 36 Private Equity funds (2022: 36) (see note 22). Fees in
respect of Private Equity funds are based on capital commitments and are charged quarterly against the underlying investments
in those funds. The fees are not directly incurred by the Company and are disclosed for information purposes only. The fee rates
applying during 2023 varied from 0.10% per annum to 2.50% per annum (2022: 0.10% to 2.50%).
PE Investment Holdings 2018 LP pays an annual fee of £1,000 to the General Partner. This is not directly incurred by the Company
but included in the underlying value of the investment.
88
5. OTHER EXPENSES
2023
£’000s
2022
£’000s
Other revenue expenses
Auditor’s remuneration:
for audit and audit-related assurance services
(1)
154 148
Custody fees 486 494
Depositary fees 197 201
Directors’ emoluments (see Remuneration Report on pages 65 to 68):
Fees for services to the Company 410 387
Subscriptions 21 21
Directors’ and officers’ liability insurance 73 80
Marketing 3,418 3,006
Loan commitment and arrangement fees 293
Registrars fees 168 156
Professional charges 117 202
Printing and postage 199 191
Sundry 484 388
Total other revenue expenses 5,727 5,567
Other capital expenses 68 46
Total other expenses 5,795 5,613
All expenses are stated gross of irrecoverable VAT, where applicable.
(1) Total auditor’s remuneration for audit services, exclusive of VAT, amounted to £151,000, (2022: £143,000 exclusive of VAT). Irrecoverable VAT of £3,000
(2022: £5,000) is included within the table above. There were no non-audit services paid to EY in the year (2022: none).
6. FINANCE COSTS
2023
£’000s
2022
£’000s
Debenture stock 24 24
Loans 13,628 13,891
Overdrafts 189 66
13,841 13,981
Less: allocated to capital reserves (see note 2(c)(vii) and note 18) (10,381) (10,486)
Allocated to revenue account 3,460 3,495
The interest on the debenture stock, loans and overdrafts is further analysed as follows:
Loans and overdrafts repayable within one year, not by instalments 189 768
Debenture and loans repayable after more than one year, not by instalments (see notes 14 and 15) 13,652 13,213
13,841 13,981
NOTES TO THE ACCOUNTS (CONTINUED)
89Annual Report and Accounts 2023
Financial Report
7. TAXATION ON ORDINARY ACTIVITIES
(a) Analysis of tax charge for the year
Revenue
£’000s
Capital
£’000s
2023
Total
£’000s
Revenue
£’000s
Capital
£’000s
2022
Total
£’000s
Overseas taxation 11,067 11,067 10,383 10,383
Indian tax on capital gains 3,118 3,118 551 551
Total taxation (see note 7(b)) 11,067 3,118 14,185 10,383 551 10,934
The tax assessed for the year is lower (2022: lower) than the standard rate of Corporation Tax in the UK.
(b) Factors affecting the current tax charge for the year
Revenue
£’000s
Capital
£’000s
2023
Total
£’000s
Revenue
£’000s
Capital
£’000s
2022
Total
£’000s
Net return on ordinary activities before taxation 92,727 454,302 547,029 82,978 (563,421) (480,443)
Net return on ordinary activities multiplied by the standard
rate of corporation tax of 23.5%
(1)
(2022: 19%)
21,791 106,761 128,552 15,766 (107,050) (91,284)
Effects of:
Dividends
(2)
(23,153) (23,153) (17,911) (17,911)
Exchange losses/(gains)
(2)
132 132 (74) (74)
Capital returns
(2)
(112,139) (112,139) 102,437 102,437
Expenses not deductible for tax purposes 395 16 411 279 9 288
Expenses not utilised in the year 835 5,362 6,197 1,940 4,604 6,544
Overseas tax in excess of double taxation relief 11,067 11,067 10,383 10,383
Indian tax on capital gains
(3)
- 3,118 3,118 551 551
Total taxation (see note 7(a)) 11,067 3,118 14,185 10,383 551 10,934
(1) Nine months at the new rate of 25% and three months at previous rate of 19%.
(2) These items are not subject to Corporation Tax within an investment trust company.
(3) The Company is liable to taxation in India on gains realised on the sale of securities. The tax is allocated to Capital Reserve as it relates to capital
transactions.
The Company has an unrecognised deferred tax asset of £118.3 million (2022: £90.8 million) in respect of unutilised expenses at 31 December 2023 which has
not been recognised in the financial statements as it is unlikely to be utilised in the foreseeable future. Of this amount £40.9 million (2022: £32.4 million) relates
to revenue expenses and £77.4 million (2022: £58.4 million) to capital expenses.
8. NET RETURN PER SHARE
2023
pence
2023
£’000s
2022
pence
2022
£’000s
Total return 103.29 532,844 (94.22) (491,377)
Revenue return 15.83 81,660 13.92 72,595
Capital return 87.46 451,184 (108.14) (563,972)
Weighted average ordinary shares in issue, excluding shares
held in treasury – number
515,891,788 521,526,881
90
9. DIVIDENDS
Dividends on ordinary shares Record date Payment date
2023
£’000s
2022
£’000s
2021 Third interim of 3.00p 7-Jan-2022 1-Feb-2022 15,804
2021 Final of 3.80p 8-Apr-2022 10-May-2022 19,929
2022 First interim of 3.20p 1-Jul-2022 1-Aug-2022 16,654
2022 Second interim of 3.20p 7-Oct-2022 1-Nov-2022 16,596
2022 Third interim of 3.20p 6-Jan-2023 1-Feb-2023 16,589
2022 Final of 3.90p 11-Apr-2023 11-May-2023 20,214
2023 First interim of 3.40p 30-Jun-2023 1-Aug-2023 17,581
2023 Second interim of 3.40p 6-Oct-2023 1-Nov-2023 17,453
71,837 68,983
A third interim dividend of 3.40p was paid on 1 February 2024 to all shareholders recorded on the register on 5 January 2024.
The Directors have proposed a final dividend in respect of the year ended 31 December 2023 of 4.50p payable on 9 May 2024 to all
shareholders recorded on the register at close of business on 12 April 2024. The total dividends paid and payable in respect of the
financial year for the purposes of the income retention test for Section 1159 of the Corporation Tax Act 2010 are set out below.
2023
£’000s
2022
£’000s
Revenue available for distribution by way of dividends for the year 81,660 72,595
First interim dividend for the year ended 31 December 2023 - 3.40p per share (2022: 3.20p) (17,581) (16,654)
Second interim dividend for the year ended 31 December 2023 - 3.40p per share (2022: 3.20p) (17,453) (16,596)
Third interim dividend for the year ended 31 December 2023 - 3.40p per share (2022: 3.20p) (17,325) (16,589)
Proposed final dividend for the year ended 31 December 2023 - 4.50p per share (2022: 3.90p) (22,820) (20,218)
(estimated cost based on 507,102,833 shares in issue at 4 March 2024, excluding shares held
in treasury)
Estimated amount transferred to revenue reserve for Section 1159 purposes
(1)
6,481
2,538
All dividends are paid from revenue.
(1) Represents 6% of total income as stated in note 3 (2022: 3%)
The table below reflects the revenue reserve after adjusting for the third interim and final dividends for the years to 31 December
2023 and 31 December 2022.
2023
£’000s
2022
£’000s
Revenue reserve at 31 December (per Balance Sheet) 107,287 97,464
Third interim dividend for the year ended 31 December 2023 – 3.40p per share (2022: 3.20p) (17,325) (16,589)
Proposed final dividend for the year ended 31 December 2023 – 4.50p per share (2022: 3.90p) (22,820) (20,218)
Revenue reserve after adjusting for the third interim and final dividends 67,142
60,657
NOTES TO THE ACCOUNTS (CONTINUED)
91Annual Report and Accounts 2023
Financial Report
10. INVESTMENTS
Investments
Level 1
(1)
£’000s
Level 3
(1)
£’000s
2023
Total
£’000s
Level 1
(1)
£’000s
Level 3
(1)
£’000s
2022
Total
£’000s
Cost at 1 January 3,844,474 479,678 4,324,152 3,929,156 442,353 4,371,509
Unrealised gains at 1 January 564,318 95,487 659,805 1,330,795 76,819 1,407,614
Fair value of investments at 1 January 4,408,792 575,165 4,983,957 5,259,951 519,172 5,779,123
Purchases at cost* 4,163,790 61,511 4,225,301 2,013,522 57,617 2,071,139
Sales proceeds* (4,116,288) (39,763) (4,156,051) (2,282,107) (56,438) (2,338,545)
Gains on investments sold 416,881 18,838 435,719 183,903 36,146 220,049
Gains/(losses) on investments held 63,393 (21,441) 41,952 (766,477) 18,668 (747,809)
Fair value of investments at 31 December 4,936,568 594,310 5,530,878 4,408,792 575,165 4,983,957
Analysed at 31 December
Cost 4,308,857 520,264 4,829,121 3,844,474 479,678 4,324,152
Unrealised gains 627,711 74,046 701,757 564,318 95,487 659,805
Fair value of investments at 31 December 4,936,568 594,310 5,530,878 4,408,792 575,165 4,983,957
Gains/(losses) on investments held at fair value
2023
£’000s
2022
£’000s
Gains on investments sold during the year 435,719 220,049
Gains/(losses) on investments held at year end 41,952 (747,809)
Total gains/(losses) on investments 477,671 (527,760)
Investments sold during the year have been revalued over time since their original purchase, and until they were sold any unrealised gain or loss was included in
the fair value of investments.
(1) The hierarchy of investments and derivative instruments is described in note 2(c)(i) and below.
No investments held in 2023 or 2022 were valued in accordance with Level 2.
Level 1 includes investments and derivatives listed on any recognised stock exchange or quoted on the AIM market in the UK and quoted open-ended funds.
These also include gilts of approximately £80m (2022: £60m).
Level 3 includes investments in private companies or securities, whether invested in directly or through pooled Private Equity vehicles, for which observable
market data is not specifically available.
* These amounts include the transactions undertaken as a result of changes in the portfolio sub-managers that took place in the year.
Investments managed or advised by Columbia Threadneedle Investments
The portfolio of investments, excluding unquoted investments, did not include at any time during the year any funds or investments
managed or advised by Columbia Threadneedle Investments (2022: none). Under the terms of the Company’s Management
Agreement with the Manager set out in note 4, the management fee is adjusted for fees earned by the Manager on all such
holdings.
Unquoted investments
Unquoted investments include £594.0 million (2022: £574.9 million) of investments described as Private Equity, together with £0.3
million (2022: £0.3 million) of other partnerships, the underlying portfolios of which principally comprise unlisted investments.
These are valued in accordance with the policies set out in note 2(c)(ii).
It is in the nature of Private Equity and similar unquoted investments that they may be loss making, with no certainty of survival, and
that they may prove difficult to realise. The concept of “fair value” as applied to such investments is not precise and their ultimate
realisation may be at a value materially different from that reflected in the accounts. Further details on the valuation process in
respect of Private Equity investments can be found in note 25(d).
92
11. SUBSTANTIAL INTERESTS
At 31 December 2023 the Company held more than 3% of one class of the capital of the following undertakings held as investments,
none of which, in the opinion of the Directors, provide the Company with significant influence.
Investment and share class
Country of
registration,
incorporation and
operation Holding
(1)
%
Private Equity Funds
Dover Street VI LP USA 11.12
HarbourVest Partners VII – Buyout Partnership Fund LP USA 3.86
HIPEP V – Direct Fund LP USA 15.66
HarbourVest Partners V – Asia Pacific and Rest of World LP USA 4.74
HIPEP VI – Emerging Markets Fund USA 12.06
HIPEP VI – Asia Pacific Fund LP USA 4.93
Pantheon Europe Fund III LP USA 44.41
Pantheon Europe Fund V LP Scotland 9.29
Pantheon Asia Fund IV LP Channel Islands 8.40
Pantheon Asia Fund V LP Channel Islands 6.19
Pantheon Global Secondary Fund III LP Scotland 3.50
Graycliff USA 4.78
Volpi Capital Europe 4.28
Maison Capital China 4.84
MVM USA/Europe 4.10
PE Investment Holdings 2018 LP* Scotland 100.00
Other Investments
Esprit Capital Fund 1 LP England 10.80
(1)
The Company neither has a controlling interest nor significant influence in the management of any of these undertakings. The
Board has no participation in the investment decision making process as this lies solely with the General Partner. The percentage
holdings have not changed since the prior year.
The valuation of those holdings greater than 10% are: Dover Street VI LP: £nil; HIPEP V – Direct Fund LP: £435,000; HIPEP VI –
Emerging Markets Fund: £14,017,000; Pantheon Europe Fund III LP: £2,740,000; PE Investment Holdings 2018 LP: £258,257,000;
Esprit Capital Fund 1 LP: £259,000.
Under FRS 102, as interests are held as part of an investment portfolio, consolidation is not required.
*In 2018 the Company signed a Limited Partnership agreement in which it holds 100% of the Limited Partner share in PE Investment
Holdings 2018 LP and Columbia Threadneedle Investments holds the General Partner interest. The Partnership was set up to
partake in Private Equity investments. The Board has no participation in the investment decision making process as this lies solely
with the General Partner and therefore no consolidated financial statements are prepared. The registered address of PE Investment
Holdings 2018 LP is 6th Floor, Quartermile 4, 7a Nightingale Way, Edinburgh, EH3 9EG.
The profit for the year ended 31 December 2023 in the LP was £7.6m and the Capital and Reserves was £258.3m.
The outstanding commitment is shown in note 22.
NOTES TO THE ACCOUNTS (CONTINUED)
93Annual Report and Accounts 2023
Financial Report
12. DEBTORS
2023
£’000s
2022
£’000s
Investment debtors 1,178 425
Forward exchange contracts* 737
Prepayments and accrued income 4,499 4,887
Overseas taxation recoverable 5,567 5,012
11,244 11,061
*There were no forward exchange contracts as at 31 December 2023. As at 31 December 2022 there was a net unrealised capital
gain of £737,000 valued in accordance with level 2. See notes 2(c)(i) and 25(c).
13. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
Other
2023
£’000s
2022
£’000s
Investment creditors 3,670 2,933
Management fees payable to the Manager 2,625 1,863
Provision for Capital Gains Taxation on Indian Investments 2,258
Cost of ordinary shares repurchased 2,700
Other accrued expenses 2,583 2,394
13,836 7,190
14. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Loans
Non-instalment debt payable after more than one year
2023
£’000s
2022
£’000s
2.80% Loan notes £25 million repayable June 2028 25,000 25,000
3.16% Loan notes £50 million repayable June 2031 50,000 50,000
2.92% Loan notes £75 million repayable May 2048 75,000 75,000
0.93% Loan notes €42 million repayable June 2026 36,394 37,264
2.59% Loan notes £57 million repayable June 2042 57,000 57,000
2.69% Loan notes £37 million repayable June 2049 37,000 37,000
2.72% Loan notes £20 million repayable June 2059 20,000 20,000
2.09% Loan notes £50 million repayable June 2036 50,000 50,000
2.15% Loan notes £50 million repayable June 2038 50,000 50,000
2.33% Loan notes £40 million repayable June 2056 40,000 40,000
2.06% Loan notes £50 million repayable March 2037 50,000 50,000
1.96% Loan notes £45 million repayable March 2056 45,000 45,000
1.87% Loan notes £45 million repayable March 2061 45,000 45,000
580,394 581,264
94
In June 2016 the Company issued fixed rate senior unsecured notes in tranches of £25 million and £50 million loan notes expiring in
June 2028 and June 2031 respectively. In May 2018 the Company issued fixed rate senior unsecured notes of £75 million loan notes
expiring in May 2048. In June 2019 the Company issued fixed rate senior unsecured notes in tranches of EUR42 million, £57 million,
£37 million and £20 million expiring in June 2026, June 2042, June 2049 and June 2059 respectively. In June 2021 the Company
issued fixed rate senior unsecured notes in tranches of £50 million, £50 million and £40 million expiring in June 2036, June 2038
and June 2056 respectively. In March 2022 the Company issued fixed rate senior unsecured notes in tranches of £50 million, £45
million and £45 million expiring in March 2037, March 2056 and March 2061 respectively. Interest rates applying to the notes are
commercially competitive and fixed until the expiry dates.
The market value of the long-term loans at 31 December 2023 was £404,572,000 based on the equivalent benchmark gilts or
relevant commercially available current debt (2022: £399,134,000).
At 4 March 2024, long-term borrowings comprised £544 million loan notes and €42 million loan notes.
15. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Debenture
2023
£’000s
2022
£’000s
4.25% perpetual debenture stock – secured 575 575
The 4.25% perpetual debenture stock, which was issued in 1960, is listed on the London Stock Exchange and secured by floating
charges over the assets of the Company. The market value of the debenture stock at 31 December 2023 was £429,000
(2022: £429,000).
16. SHARE CAPITAL
2023
Shares held in
treasury
Number
Shares
entitled to
dividend
Number
Total shares
in issue
Number
Issued and
fully paid
nominal
£’000s
Ordinary shares of 25p each
Balance brought forward 43,407,160 518,411,856 561,819,016 140,455
Shares repurchased by the Company and held in treasury 8,618,802 (8,618,802)
Balance carried forward 52,025,962 509,793,054 561,819,016 140,455
2022
Shares held in
treasury
Number
Shares
entitled to
dividend
Number
Total shares
in issue
Number
Issued and
fully paid
Nominal
£’000s
Ordinary shares of 25p each
Balance brought forward 35,035,876 526,783,140 561,819,016 140,455
Shares repurchased by the Company and held in treasury 8,371,284 (8,371,284)
Balance carried forward 43,407,160 518,411,856 561,819,016 140,455
During the year the Company bought back 8,618,802 ordinary shares at a total cost of £76,345,000, all of which were placed in
treasury.
Since the year end, and up to 4 March 2024, 2,690,221 ordinary shares of 25p each have been repurchased and held in treasury.
NOTES TO THE ACCOUNTS (CONTINUED)
95Annual Report and Accounts 2023
Financial Report
17. CAPITAL REDEMPTION RESERVE
2023
£’000s
2022
£’000s
Balance brought forward and carried forward 122,307 122,307
18. OTHER RESERVES
Capital reserve
arising on
investments
sold
£’000s
Capital reserve
arising on
investments
held
£’000s
Capital
reserves
– total
£’000s
Revenue
reserve
£’000s
Gains and losses transferred in current year:
Gains on investments and derivatives sold (see note 10) 435,719 435,719
Gains on investments held at year end (see note 10) 41,952 41,952
Exchange movements on foreign currency loans, cash balances
and derivatives
25,773 (26,255) (482)
Management fees (see note 4) (12,438) (12,438)
Finance costs (see note 6) (10,381) (10,381)
Other capital charges (see note 5) (68) (68)
Indian capital gains tax (see note 7) (3,118) (3,118)
Net revenue return attributable to shareholders 81,660
Total gains and losses transferred in current year 435,487 15,697 451,184 81,660
Cost of ordinary shares repurchased in year (see note 16) (76,345) (76,345)
Dividends paid in year (see note 9) (71,837)
Balance brought forward 3,592,821 696,778 4,289,599 97,464
Balance carried forward 3,951,963 712,475 4,664,438 107, 287
Included within the capital reserve movement for the year is £73,000 (2022: £459,000) of dividend receipts recognised as capital
in nature in accordance with note 2(c)(xiii). £2,043,000 of transaction costs on purchases of investments are included within the
capital reserve movements disclosed above (2022: £1,247,000). £1,069,000 of transaction costs on sales of investments are similarly
included (2022: £726,000).
19. NET ASSET VALUE PER ORDINARY SHARE
2023 2022
Net asset value per share – pence 987.56 896.94
Net assets attributable at end of period – £’000s 5,034,487 4,649,825
Ordinary shares of 25p in issue at end of year, excluding shares held in treasury – number 509,793,054 518,411,856
Net asset value per share (with the debenture stock and long-term loans at market value – see notes 14 and 15) was 1,022.07p
(2022: 932.10p).
96
20. RECONCILIATION OF NET RETURN BEFORE TAXATION TO CASH FLOWS FROM OPERATING ACTIVITIES
2023
£’000s
2022
£’000s
Net return on ordinary activities before taxation 547,029 (480,443)
Adjust for non-cash flow items, dividend income and interest expense:
(Gains)/losses on investments (477,671) 527,760
Exchange losses 1,043 10,995
Non-operating expenses of a capital nature 68 46
Decrease/(increase) in debtors 81 (310)
Increase/(decrease) in creditors 964 (122)
Dividends receivable (98,524) (94,268)
Interest payable 13,841 13,981
Tax on overseas income (12,605) (11,703)
(572,803) 446,379
Cash flows from operating activities (before dividends received and interest paid) (25,774) (34,064)
21. ANALYSIS OF CHANGES IN NET DEBT
2023
Cash
£’000s
Long-term
loans
£’000s
Debenture
£’000s
Forward
exchange
contracts
£’000s
Total
£’000s
Opening net debt as at
31 December 2022
243,836 (581,264) (575) 737 (337, 266)
Cash-flows:
Net movement in cash and cash
equivalents
(155,490) (155,490)
Non-cash:
Effect of Foreign Exchange
movements
(1,176) 870 (737) (1,043)
Closing net debt as at
31 December 2023 87,170 (580,394) (575) (493,799)
NOTES TO THE ACCOUNTS (CONTINUED)
97Annual Report and Accounts 2023
Financial Report
2022
Cash
£’000s
Short term
loans
£’000s
Long-term
loans
£’000s
Debenture
£’000s
Forward
exchange
contracts
£’000s
Total
£’000s
Opening net debt as at
31 December 2021
53,111 (110,452) (439,263) (575) (4,806) (501,985)
Cash-flows:
Drawdown of loans (140,000) (140,000)
Repayment of loans 110,329 110,329
Net movement in cash and cash
equivalents
205,385 205,385
Non-cash:
Effect of foreign exchange
movements
(14,660) 123 (2,001) 5,543 (10,995)
Closing net debt as at
31 December 2022 243,836 (581,264) (575) 737 (337,266)
98
22. CAPITAL COMMITMENTS
The Company had the following outstanding capital commitments, which are all in relation to its private equity investments at the
year end:
2023
Currency
2022
Currency
2023
£’000s
2022
£’000s
Managed by Harbourvest:
HarbourVest Partners VII:
– Buyout Partnership Fund LP US$4.3m US$4.3m 3,365 3,566
– Venture Partnership Fund LP US$0.5m US$0.5m 412 436
– Mezzanine Fund LP US$0.7m US$0.7m 565 599
Dover Street VI LP US$3.1m US$3.1m 2,437 2,583
Dover Street VII LP US$3.2m US$3.2m 2,500 2,650
HarbourVest Partners V – Asia Pacific and Rest of World LP US$1.5m US$1.5m 1,177 1,247
HarbourVest Partners VIII:
– Buyout Partnership Fund LP US$1.8m US$1.8m 1,412 1,496
– Venture Partnership Fund LP US$0.8m US$0.8m 628 665
HIPEP V – Direct Fund LP €2.1m 2.1m 1,787 1,830
HIPEP VI – Asia Pacific Fund LP US$1.3m US$1.3m 981 1,039
Managed by Pantheon:
Pantheon Europe Fund III LP €5.4m €5.4m 4,645 4,756
Pantheon Europe Fund V LP €4.5m €4.5m 3,899 3,993
Pantheon Asia Fund IV LP US$2.7m US$2.7m 2,079 2,203
Pantheon Asia Fund V LP US$3.5m US$3.5m 2,726 2,889
Pantheon Global Secondary Fund III LP US$2.4m US$2.4m 1,922 2,037
Pantheon Access SICAV US$230.7m US$266.0m 180,946 221,091
Selected by Columbia Threadneedle Investments:
Esprit Capital Fund I LP £0.27m £0.27m 265 265
Astorg VI
(1)
1.1m €1.1m 970 994
August Equity IV
(1)
£0.2m £0.2m 197 198
Procuritas VI
(1)
€0.6m €0.9m 543 791
Stellex Capital
(1)
US$0.0m US$0.0m 9 9
Centana
(1)
US$0.2m US$0.3m 166 211
Graycliff
(1)
US$1.3m US$1.3m 1,005 1,065
Volpi Capital
(1)
€0.0m €0.0m 27 27
Maison Capital
(1)
US$0.1m US$0.1m 44 46
Inflexion Partnership Capital II
(1)
£0.5m £1.4m 452 1, 374
Inflexion Buyout Fund V
(1)
£0.0m £0.4m - 425
PE Investment Holdings 2018 LP
(1)
£167.1m £186.6m 167,118 186,618
Verdane Edda
(1)
SEK 15.1m SEK 15.1m 1,175 1,204
MVM
(1)
US$0.5m US$3.0m 366 2,470
Inflexion Supplemental V
(1)
£2.9m £3.6m 2,898 3,587
Graycliff IV
(1)
US$3.7m US$5.1m 2,900 4,249
Centana II
(1)
US$2.0m US$3.0m 1,585 2,472
MED Platform
(1)
€1.0m €1.7m 900 1,472
Inflexion Buyout Fund VI
(1)
£11.1m £14.7m 11,084 14,748
Hg Saturn 3
(1)
US$7.0m US$10.0m 5,461 8,313
Inflexion Partnership Capital III
(1)
£15.0m 15,000
423,646 483,618
(1) Columbia Threadneedle Investments is responsible for the selection and oversight of these funds, within the terms of its management agreement with the Company.
These commitments will be called upon over a number of years.
NOTES TO THE ACCOUNTS (CONTINUED)
99Annual Report and Accounts 2023
Financial Report
23. TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
The Board of Directors is defined as a related party. Under the FCA Listing Rules, the Manager is also defined as a related party.
However, under the Investment Trust SORP issued by the AIC, in accordance with which these financial statements are prepared,
the Manager is not considered to be a related party for accounting purposes.
There are no transactions with the Board other than aggregated remuneration for services as Directors as disclosed in the
Remuneration Report on page 65 and as set out in note 5. There were no outstanding balances with the Board at the year end.
There were no transactions with the Ameriprise group other than those detailed: in note 4 on management fees; in note 10, where
investments managed or advised by Columbia Threadneedle Investments are disclosed; in note 13 in relation to fees owed to the
Manager at the Balance Sheet date; and in the Report of the Management Engagement Committee on page 57 regarding the
Management agreement in respect of Private Equity fees and a trademark licence agreement in respect of the “F&C” name.
24. GOING CONCERN
In assessing the going concern basis of accounting the Directors have had regard to the guidance issued by the Financial Reporting
Council. They have also considered the Company’s objective, strategy and investment policy, the current cash position of the
Company, the availability of borrowings and compliance with covenants and the operational resilience of the Company and its
service providers. More information on the Board's assessment is provided on page 44.
25. FINANCIAL RISK MANAGEMENT
The Company is an investment company, listed on the London Stock Exchange, and conducts its affairs so as to qualify in the UK as
an investment trust under the provisions of Section 1158 of the Corporation Tax Act 2010. In so qualifying, the Company is exempted
in the UK from corporation tax on capital gains on its portfolio of investments.
The Company’s objective is to secure long-term growth in capital and income through a policy of investing primarily in an
internationally diversified portfolio of publicly listed equities, as well as unlisted securities and Private Equity, with the use of
gearing. In pursuing the objective, the Company is exposed to financial risks which could result in a reduction of either or both of
the value of the net assets and the profits available for distribution by way of dividend. These financial risks are principally related to
the market (currency movements, interest rate changes and security price movements), liquidity and credit. The Board of Directors,
together with the Manager, is responsible for the Company’s risk management. The Directors’ policies and processes for managing
the financial risks are set out in (a), (b) and (c) on the following pages.
The significant accounting policies which govern the reported Balance Sheet carrying values of the underlying financial assets and
liabilities, as well as the related income and expenditure, are set out in note 2 to the accounts. The policies are in compliance with
FRS 102 and best practice, and include the valuation of financial assets and liabilities at fair value except as noted in (d) on page 104
and in notes 14 and 15 in respect of loans and the perpetual debenture stock. The Company does not make use of hedge accounting
rules.
(a) Market risks
The fair value of equity and other financial securities, including any derivatives, held in the Company’s portfolio fluctuates with
changes in market prices. Prices are themselves affected by movements in currencies, interest rates and other macroeconomic,
market and financial issues, including the market perception of future risks. The Board’s policies for managing these risks within
the Company’s objective are set out on page 33. The Board meets regularly to review full, timely and relevant information on
investment performance and financial results. The Manager assesses exposure to market risks when making each investment
decision and monitors ongoing market risk within the portfolio.
100
The Company’s other assets and liabilities may be denominated in currencies other than sterling and may also be exposed to
interest rate risks. The Manager and the Board regularly monitor these risks. Foreign currency borrowings are limited to amounts
and currencies commensurate with the portfolio’s exposure to those currencies, thereby limiting the Company’s exposure to future
changes in foreign exchange rates. The debenture deed and loan contracts are agreed and signed by the Board and compliance
with the agreements is monitored by the Board at each meeting. Gearing may be short or long-term in sterling and foreign
currencies, and enables the Company to take a long-term view of the countries and markets in which it is invested without having
to be concerned about short-term volatility.
Currency Exposure
The carrying value of the Company’s assets and liabilities at 31 December, by currency, are shown below:
2023
Short-term
debtors
£’000s
Cash and
deposits
£’000s
Debentures
£’000s
Unsecured
loans
£’000s
Short-term
creditors
£’000s
Net monetary
assets/
(liabilities)
£’000s
Investments
£’000s
Net exposure
£’000s
Sterling 1,544 36,833 (575) (544,000) (7,666) (513,864) 690,033 176,169
US Dollar 2,687 33,234 (1,414) 34,507 3,291,645 3,326,152
Euro 3,339 13,113 (36,394) (5) (19,947) 439,017 419,070
Yen 1,104 4,139 (2,493) 2,750 350,012 352,762
Other 2,570 (149) (2,258) 163 760,171 760,334
Total 11,244 87,170 (575) (580,394) (13,836) (496,391) 5,530,878 5,034,487
2022
Short-term
debtors
£’000s
Cash and
deposits
£’000s
Debentures
£’000s
Unsecured
loans
£’000s
Short-term
creditors
£’000s
Net monetary
assets/
(liabilities)
£’000s
Investments
£’000s
Net exposure
£’000s
Sterling 910 140,518 (575) (544,000) (3,619) (406,766) 655,131 248,365
US Dollar 5,223 78,890 (2,872) 81,241 2,909,773 2,991,014
Euro 3,088 19,682 (37,264) (5) (14,499) 416,633 402,134
Yen 465 3,445 (454) 3,456 348,674 352,130
Other 1,375 1,301 (240) 2,436 653,746 656,182
Total 11,061 243,836 (575) (581,264) (7,19 0) (334,132) 4,983,957 4,649,825
The principal currencies to which the Company was exposed were the US Dollar, Euro and Yen. The exchange rates applying against
sterling at 31 December, and the average rates during the year, were as follows:
2023 Average 2022
US Dollar 1.2748 1.2444 1.2029
Euro 1.1540 1.1505 1.1271
Yen 179.7213 175.1086 158.7167
NOTES TO THE ACCOUNTS (CONTINUED)
25. FINANCIAL RISK MANAGEMENT (CONTINUED)
101Annual Report and Accounts 2023
Financial Report
Based on the financial assets and liabilities held, (adjusted for the underlying gross exposure value of the forward exchange
contracts against USD in the prior year), and exchange rates applying at each Balance Sheet date, a weakening or strengthening of
sterling against each of these currencies by 10% would have had the following approximate effect on annualised income after tax
and on NAV per share:
Weakening of sterling
US$
£’000s
£’000s
2023
¥
£’000s
US$
£’000s
£’000s
2022
¥
£’000s
Income Statement Return after tax
Revenue return 3,637 1,639 708 3,771 1,221 787
Capital return 332,615 41,907 35,276 297,120 40,214 35,213
Total return 336,252 43,546 35,984 300,891 41,435 36,000
NAV per share – pence 65.96 8.54 7.06 58.04 7.99 6.94
Strengthening of sterling
US$
£’000s
£’000s
2023
¥
£’000s
US$
£’000s
£’000s
2022
¥
£’000s
Income statement return after tax
Revenue return (3,637) (1,639) (708) (3,771) (1,221) (787)
Capital return (332,615) (41,907) (35,276) (297,120) (40,214) (35,213)
Total return (336,252) (43,546) (35,984) (300,891) (41,435) (36,000)
NAV per share – pence (65.96) (8.54) (7.06) (58.04) (7.99) (6.94)
These analyses are broadly representative of the Company’s activities during the current and prior years as a whole, although the
level of the Company’s exposure to currencies fluctuates in accordance with the investment and risk management processes.
Interest rate exposure
The exposure of the financial assets and liabilities to interest rate risks at 31 December is shown below:
Within
one year
£’000s
More than
one year
£’000s
2023
Total
£’000s
Within
one year
£’000s
More than
one year
£’000s
2022
Total
£’000s
Exposure to floating rates
Cash 39,827 39,827 144,096 144,096
Exposure to fixed rates
Deposits 47,343 47,343 99,740 99,740
Gilts 79,357 79,357 59,424 59,424
Debentures (575) (575) (575) (575)
Loans (580,394) (580,394) (581,264) (581,264)
Net exposure at year end 166,527 (580,969) (414,442) 303,260 (581,839) (278,579)
Exposures vary throughout the year as a consequence of changes in the composition of the net assets of the Company arising out
of the investment and risk management processes.
Interest received on cash balances, or paid on bank overdrafts and borrowings, is at ruling market rates. The interest rate applying
on the loans and the debenture stock is set out in notes 14 and 15. There were gilts of approximately £80m at the year end
(31 December 2022: £60m).
102
The Company’s total returns and net assets are sensitive to changes in interest rates on cash and borrowings, except in respect of
the debenture, loans and gilts (see notes 10, 14 and 15), on which the interest rates are fixed.
Based on the financial assets and liabilities held, and the interest rates pertaining, at each Balance Sheet date, a decrease or
increase in interest rates by 2% would have the following approximate effects on the Income Statement revenue and capital
returns after tax and on the NAV:
Increase
in rate
£’000s
2023
Decrease
in rate
£’000s
Increase
in rate
£’000s
2022
Decrease
in rate
£’000s
Revenue return 797 (797) 2,881 (2,881)
Capital return
Total return 797 (797) 2,881 (2,881)
NAV per share – pence 0.16 (0.16) 0.56 (0.56)
Other market risk exposures
Based on the portfolio of investments held at each Balance Sheet date, and assuming other factors remain constant, a decrease
or increase in the fair values of the portfolio by 20% would have had the following approximate effects on the net capital return
attributable to equity shareholders and on the NAV:
Increase
in value
£’000s
2023
Decrease
in value
£’000s
Increase
in value
£’000s
2022
Decrease
in value
£’000s
Income statement capital return 1,106,176 (1,106,176) 996,791 (996,791)
NAV per share – pence 216.99 (216.99) 192.28 (192.28)
(b) Liquidity risk exposure
The Company requires funds to meet commitments associated with financial instruments, Private Equity investments, dividends
and share buybacks. These commitments may be met by utilisation of existing cash balances, through the realisation of assets or
through increased borrowing. The risk of the Company not having sufficient liquidity at any time is not considered by the Board
to be significant, given: the large value of the listed investments held in the Company’s portfolio (89.3% at 31 December 2023); the
liquid nature of the portfolio of investments; the industrial and geographical diversity of the portfolio and the ability to meet short
term settlements through our custody account and the availability of loan facilities. Cash balances are held with approved banks,
usually on overnight deposit. The Manager reviews liquidity at the time of making each investment decision. The Board reviews
liquidity exposure at each of its meetings.
The Company has total borrowings of £581 million as set out in notes 14 and 15. Their terms limit the amount which the Company
may borrow at any one time as a proportion of the relevant portfolio of investments and cash. The most onerous financial covenant
limits total borrowings to 35% of the Company’s adjusted portfolio value, which at 31 December 2023 was £4,944 million. Actual
borrowings at par value at 31 December 2023 were £580.4 million in loans (market value: £404.6 million) (see note 14) and £0.6
million (market value: £0.4 million) in a debenture (see note 15).
At 31 December 2023 the Company had £423.6 million outstanding commitments to Private Equity investments (see note 22).
NOTES TO THE ACCOUNTS (CONTINUED)
25. FINANCIAL RISK MANAGEMENT (CONTINUED)
103Annual Report and Accounts 2023
Financial Report
The un-discounted contractual maturities of the financial liabilities at each balance sheet date, based on the earliest date on which
payment can be required, were as follows:
2023
Three months
or less
£’000s
More than three
months but less
than one year
£’000s
More than
one year
£’000s
Total
£’000s
Other creditors 13,836 13,836
Long-term liabilities
(1)
(including interest) 1,372 12,272 846,839 860,483
15,208 12,272 846,839 874,319
2022
Three months
or less
£’000s
More than three
months but less
than one year
£’000s
More than
one year
£’000s
Total
£’000s
Other creditors 7,190 7,1 9 0
Long-term liabilities
(1)
(including interest) 1,372 12,280 861,538 875,190
8,562 12,280 861,538 882,380
(1) See notes 14 and 15 for maturity dates
(c) Credit risk and counterparty exposure
The Company is exposed to potential failure by counterparties to deliver securities for which the Company has paid, or to pay for
securities which the Company has delivered. The Board reviews all counterparties used in such transactions, which must be settled
on the basis of delivery against payment (except where local market conditions do not permit).
A list of pre-approved counterparties is maintained by the Manager. Broker counterparties are selected based on a combination of
criteria, including credit rating, balance sheet strength and membership of a relevant regulatory body. The rate of default in the past
has been negligible. Payments in respect of Private Equity investments are made only to counterparties with whom a contracted
commitment exists. Cash and deposits are held with approved banks.
The Company has an ongoing contract with the Custodian for the provision of custody services. The contract was executed in 2014
and custody fees last revised in 2017. Details of securities held in custody on behalf of the Company are received and reconciled
monthly. The Depositary has regulatory responsibilities relating to segregation and safe keeping of the Company’s financial assets,
amongst other duties, as set out in the Directors’ Report. The Board has direct access to the Depositary and receives regular reports
from it via the Manager.
To the extent that the Manager carries out management and administrative duties (or causes similar duties to be carried out
by third parties) on the Company’s behalf, the Company is exposed to counterparty risk. The Board assesses this risk through
regular meetings with the management of Columbia Threadneedle Investments (including the Fund Manager) and with its Risk
Management function. In reaching its conclusions the Board, through the Audit Committee, also reviews the annual ISAE/AAF
Report on the Manager's internal control policies and procedures.
The Company held UK Gilts of approximately £80m in its portfolio at the year end (2022: £60m). None of the Company’s financial
assets are past its due date or impaired.
During the year the Company closed the forward exchange contract in sterling against the US dollar and therefore there is no
unrealised capital gain/loss as at 31 December 2023. At 31 December 2022 there was a net unrealised capital gain of £737,000.
The maximum exposure to credit risk on cash and debtors equates to their carrying amounts as per the balance sheet.
104
(d) Fair values of financial assets and liabilities
The assets and liabilities of the Company are, in the opinion of the Directors, reflected in the balance sheet at fair value, or at a
reasonable approximation thereof, except for the long-term loans which are carried at amortised cost and the debenture which is
carried at proceeds less costs, in accordance with Accounting Standards.
The fair values of the long-term loans and debenture at 31 December 2023 are set out in notes 14 and 15. Borrowings under overdraft
and short-term loan facilities do not have a value materially different from their capital repayment amount. Borrowings in foreign
currencies are converted into sterling at exchange rates ruling at each valuation date.
The fair value of investments quoted on active markets is determined directly by reference to published price quotations in these
markets.
Forward currency contracts are valued on the basis of exchange rates for a similar contract for the same residual duration, as
provided by the counterparty.
Unquoted investments, including Private Equity investments, are valued based on professional advice and assumptions that
are not wholly supported by prices from current market transactions or by observable market data. The Directors make use of
recognised valuation techniques including reference to: net assets; industry benchmarks; cost of investment; roll forward of calls
and redemptions; and recent arm’s length transactions in the same or similar investments. With respect specifically to investments
in Private Equity funds or partnerships, the underlying investment advisers and managers provide regular estimated valuations to
the Directors, based on the latest information available. The Directors review these valuations for consistency with the Company’s
own accounting policies and with fair value principles. The investment advisers’ and managers’ estimated valuations relating to the
Private Equity funds’ period ends are compared annually by the Directors to the final audited annual valuations of those funds to
ensure that their valuation techniques gave rise to valid estimates. The Directors were satisfied with the results of this annual review,
which took place most recently in June 2023, indicating that the Company can, all things being equal, continue to place reliance
on the Private Equity advisers’ and managers’ estimates and valuation techniques. The Company's direct investment in Inflexion
Strategic Partners is valued with reference to an earnings multiple.
(e) Capital risk management
The objective of the Company is stated as being to secure long-term growth in capital and income. In pursuing this long-term
objective, the Board has a responsibility for ensuring the Company’s ability to continue as a going concern. It must therefore maintain
an optimal capital structure through varying market conditions. This involves the ability to:
issue and buy back share capital within limits set by shareholders in general meeting;
borrow monies in the short and long terms; and
pay dividends to shareholders out of current year revenue earnings as well as out of brought forward revenue and capital reserves.
Changes to ordinary share capital are set out in note 16. Dividend payments are set out in note 9. The Directors have no current
intention to pay dividends out of capital reserves. Borrowings are set out in notes 14 and 15.
26. SECURITIES FINANCING TRANSACTIONS (‘SFT’)
The Company has not, in the year to 31 December 2023 (2022: same), participated in any: repurchase transactions; securities lending
or borrowing; buy-sell back transactions; margin lending transactions; or total return swap transactions (collectively called SFT). As
such, it has no disclosure to make in satisfaction of the UK regulations on transparency of SFT, issued in November 2015.
27. EVENTS AFTER THE END OF THE REPORTING PERIOD
There were no material events after the end of the reporting period.
NOTES TO THE ACCOUNTS (CONTINUED)
25. FINANCIAL RISK MANAGEMENT (CONTINUED)
105Annual Report and Accounts 2023
Notice of Meeting
NOTICE OF ANNUAL GENERAL MEETING
Notice is hereby given that the one hundred and forty-fifth
Annual General Meeting of the Company will be held at
Merchant Taylors’ Hall, 30 Threadneedle Street, London
EC2R 8JB on Thursday 2 May 2024 at 12.00 noon for the
following purposes:
ORDINARY RESOLUTIONS
1. To receive and adopt the Directors’ report and the
audited accounts for the year ended 31 December
2023.
2. To approve the Directors’ Remuneration Report
(excluding the Directors' remuneration policy) for the
year ended 31 December 2023.
3. To declare a final dividend for the year ended
31 December 2023 of 4.50 pence per ordinary share.
4. To re-elect Anuradha Chugh as a Director.
5. To re-elect Beatrice Hollond as a Director.
6. To re-elect Edward Knapp as a Director.
7. To re-elect Rain Newton-Smith as a Director.
8. To re-elect Quintin Price as a Director.
9. To re-elect Stephen Russell as a Director.
10. To re-elect Julie Tankard as a Director.
11. To re-appoint Ernst & Young LLP as auditors to the
Company.
12. To authorise the Audit Committee to determine the
remuneration of the auditors.
13. Authority to allot shares.
THAT, in substitution for any existing authority, but without
prejudice to the exercise of any such authority prior to the
date hereof, the Directors be and they are hereby generally
and unconditionally authorised, in accordance with section
551 of the Companies Act 2006, to exercise all the powers
of the Company to allot shares in the Company and to grant
rights to subscribe for, or convert any security into, shares in
the Company (together being ‘relevant securities’) up to an
aggregate nominal amount of £12,677,571 during the period
commencing on the date of the passing of this resolution
and expiring at the conclusion of the annual general
meeting of the Company to be held in 2025 or on 30 June
2025, whichever is earlier, unless previously revoked, varied
or extended by the Company in a general meeting (the
‘relevant period’) save that the Company may, at any time
prior to the expiry of this authority, make offers or enter
into agreements which would or might require relevant
securities to be allotted after the expiry of the relevant
period and notwithstanding such expiry the Directors
may allot relevant securities in pursuance of such offers or
agreements.
SPECIAL RESOLUTIONS
14. Disapplication of pre-emption rights
THAT, subject to the passing of resolution 13 above and in
substitution for any existing authority, but without prejudice
to the exercise of any such authority prior to the date
hereof, the Directors be and they are hereby authorised,
pursuant to sections 570 and 573 of the Companies Act
2006 (the 'Act'), to allot equity securities (within the
meaning of section 560 of the Act) either pursuant to the
authority conferred by resolution 13 for cash or by way of a
sale of treasury shares as if section 561(1) of the Act did not
apply to any such allotment or sale, provided this authority
shall be limited to:
(a) the allotment of equity securities and sale of treasury
shares for cash in connection with an offer of, or
invitation to apply for, equity securities:
(i) to ordinary shareholders in proportion (as
nearly as may be practicable) to their existing
holdings; and
(ii) to holders of other equity securities as required
by the rights of those securities or as the
Directors otherwise consider necessary,
so that the Directors may impose any limits or restrictions
and make any arrangements which they consider necessary
or appropriate to deal with any treasury shares, fractional
entitlements or securities represented by depositary
receipts, record dates, legal, regulatory or practical
problems in, or under the laws of, any territory or the
requirements of any regulatory body or stock exchange or
any other matter; and
(b) the allotment (otherwise than under paragraph
(a) of this Resolution 14) of equity securities up to
an aggregate nominal amount of £12,677,571, such
authority to expire upon the expiry of the general
authority conferred by Resolution 13 above save that
the Company may at any time prior to the expiry of this
authority make offers or enter into agreements which
would or might require equity securities to be allotted
(and treasury shares to be sold) after the expiry of the
relevant period and notwithstanding such expiry the
Directors may allot equity securities (and sell treasury
shares) in pursuance of such offers or agreements as
if the authority conferred by this resolution had not
expired.
106
15. Share buyback authority
THAT, in substitution for any existing authority, but without
prejudice to the exercise of any such authority prior to the
date hereof, the Company be and is hereby generally and
unconditionally authorised, pursuant to and in accordance
with section 701 of the Companies Act 2006 (the 'Act'),
to make market purchases (within the meaning of section
693(4) of the Act) of fully paid ordinary shares of 25p each
in the capital of the Company (‘ordinary shares’) on such
terms and in such manner as the Directors may from time to
time determine, provided that:
(a) the maximum number of ordinary shares hereby
authorised to be purchased shall be 76,014,715 or, if
less, 14.99% of the number of ordinary shares in issue
(excluding treasury shares) as at the date of the passing
of this resolution;
(b) the minimum price (exclusive of expenses) which may
be paid for an ordinary share shall be 25p;
(c) the maximum price (exclusive of expenses) which may
be paid for an ordinary share is the higher of:
(i) an amount equal to 105% of the average of
the middle market quotations for an ordinary
share (as derived from the London Stock
Exchange Daily Official List) for the five
business days immediately preceding the date
on which the ordinary share is contracted to
be purchased, and
(ii) an amount equal to the higher of the price
of the last independent trade for an ordinary
share and the highest current independent bid
for an ordinary share on the trading venues
where the purchase is carried out;
(d) the authority hereby conferred shall expire on 30 June
2025 unless the authority is renewed at the Company’s
annual general meeting to be held in 2025 or unless
such authority is varied, revoked or renewed prior
to such time by the Company in general meeting by
special resolution; and
(e) the Company may at any time prior to the expiry of
such authority enter into a contract or contracts to
purchase ordinary shares under such authority which
will or may be completed or executed wholly or partly
after the expiration of such authority and the Company
may purchase ordinary shares pursuant to any such
contract or contracts as if the authority conferred by
this resolution had not expired.
ORDINARY RESOLUTION
16. Maximum aggregate Directors' fees
THAT the maximum aggregate fees which the Directors are
entitled to receive pursuant to Article 92 of the Company's
Articles of Association be increased to £750,000 per
annum.
By Order of the Board
Columbia Threadneedle
Investment Business Limited,
Company Secretary
7 March 2024
Registered office:
Cannon Place
78 Cannon Street
London EC4N 6AG
Registered number: 12901
The AGM will be a “hybrid” meeting, with shareholders
and savings plan holders being able to attend the
meeting in person or online. This allows many more of
our shareholders the opportunity to view the AGM and
to participate by asking questions and voting online. Full
details of how to do so are set out in your Form of Proxy
or Form of Direction. Please read these carefully as failure
to complete your form correctly will result in you not
being able to vote at the meeting.
Mansion
House
Bank
Monument
Cornhill
Leadenhall Steet
Threadneedle Street
Bank
of
England
Lloyds
of
London
Fenchurch St
Station
Liverpool
Street
King William Street
Bishopsgate
Old Broad Street
Lombard Street
Threadneedles
Hotel
Merchant
Taylors’ Hall
Meeting Location
NOTICE OF ANNUAL GENERAL MEETING (CONTINUED)
107Annual Report and Accounts 2023
Notice of Meeting
Notes:
1. A member is entitled to appoint one or more proxies to
exercise all or any of the member’s rights to attend, speak
and vote at the meeting. A proxy need not be a member
of the Company but must attend the meeting for the
members vote to be counted. If a member appoints more
than one proxy to attend the meeting, each proxy must
be appointed to exercise the rights attached to a different
share or shares held by that member.
Please contact Computershare Investor Services PLC by
email on corporate-representatives@computershare.co.uk
or alternatively call 0800 923 1506, providing details of
your proxy appointment including their email address so
that unique credentials can be issued to allow the proxy
to access the electronic meeting. Access credentials will
be emailed to the appointee one working day prior to the
meeting. Lines are open 8.30am to 5.30pm Monday to
Friday (excluding bank holidays).
2. If the Chairman, as a result of any proxy appointments,
is given discretion as to how the votes are cast and the
voting rights in respect of those discretionary proxies,
when added to the interests in the Company’s securities
already held by the Chairman, result in the Chairman
holding such number of voting rights that she has a
notifiable obligation under the Disclosure Guidance and
Transparency Rules (‘DTRs’), the Chairman will make the
necessary notifications to the Company and the Financial
Conduct Authority (‘FCA’). As a result, any person holding
3% or more of the voting rights in the Company who
grants the Chairman a discretionary proxy in respect of
some or all of those voting rights and so would otherwise
have a notification obligation under the DTRs need not
make a separate notification to the Company and the FCA.
3. Any such person holding 3% or more of the voting rights
in the Company who appoints a person other than the
Chairman as their proxy will need to ensure that both they
and such person complies with their respective disclosure
obligations under the DTRs.
4. A Form of Proxy is provided with this notice for members.
If a member wishes to appoint more than one proxy and
so requires additional Forms of Proxy, the member should
contact Computershare Investor Services PLC on 0800
923 1506. To be valid, the Form of Proxy and any power
of attorney or other authority under which it is signed
(or a notarially certified copy of such authority) must be
received by post or (during normal business hours only) by
hand at the Company’s registrars, Computershare Investor
Services PLC, The Pavilions, Bridgwater Road, Bristol BS99
6ZY, no later than 12.00 noon on Tuesday 30 April 2024
or two business days before the time of any adjournment.
Completion and return of a Form of Proxy will not preclude
members from attending and voting at the meeting should
they wish to do so. Amended instructions must also be
received by the Company’s registrars by the deadline for
receipt of Forms of Proxy.
5. Alternatively, members may register the appointment of
a proxy for the meeting electronically, by accessing the
website eproxyappointment.com where full instructions for
the procedure are given. The Control Number, Shareholder
Reference and PIN as printed on the Form of Proxy will be
required in order to use the electronic proxy appointment
system. This website is operated by Computershare
Investor Services PLC. The proxy appointment and
any power of attorney or other authority under which
the proxy appointment is made must be received by
Computershare Investor Services PLC no later than 12.00
noon on Tuesday 30 April 2024 or two business days
before any adjourned meeting or (in the case of a poll
taken otherwise than at or on the same day as the meeting
or adjourned meeting) for the taking of the poll at which it
is to be used. If you wish to appoint more than one proxy
electronically please contact Computershare Investor
Services PLC on 0800 923 1506.
6. Investors holding shares in the Company through the
Columbia Threadneedle Investment Trust ISA, Junior ISA,
Child Trust Fund, General Investment Account, Lifetime
ISA and/or Junior Investment Account should ensure
that Forms of Direction are returned to Computershare
Investor Services PLC not later than 12.00 noon on
Thursday 25 April 2024. Alternatively, voting directions can
be submitted electronically at eproxyappointment.com
by entering the Control Number, Shareholder Reference
Number and PIN as printed on the Form of Direction.
Voting directions must be submitted electronically no later
than 12.00 noon on Thursday 25 April 2024.
7. Any person receiving a copy of this notice as a person
nominated by a member to enjoy information rights
under section 146 of the Companies Act 2006 (the 'Act')
(a ‘Nominated Person’) should note that the provisions
in notes 1, 4 and 5 above concerning the appointment
of a proxy or proxies to attend the meeting in place of
a member do not apply to a Nominated Person as only
shareholders have the right to appoint a proxy. However, a
Nominated Person may have a right under an agreement
between the Nominated Person and the member by whom
he or she was nominated to be appointed, or to have
someone else appointed, as a proxy for the meeting. If a
Nominated Person has no such proxy appointment right or
does not wish to exercise it, he/she may have a right under
such an agreement to give instructions to the member as
to the exercise of voting rights at the meeting.
8. Nominated Persons should also remember that their
main point of contact in terms of their investment in
the Company remains the member who nominated the
Nominated Person to enjoy information rights (or, perhaps,
the custodian or broker who administers the investment
on their behalf). Nominated Persons should continue to
contact that member, custodian or broker (and not the
Company) regarding any changes or queries relating to
the Nominated Person’s personal details and interest in the
Company (including any administrative matter). The only
exception to this is where the Company expressly requests
a response from a Nominated Person.
9. Pursuant to Regulation 41(1) of the Uncertificated
Securities Regulations 2001 (as amended) and for the
purposes of section 360B of the Act, the Company has
specified that only those members registered on the
register of members of the Company at close of business
on Tuesday 30 April 2024 (the ‘Specified Time’) (or, if
the meeting is adjourned to a time more than 48 hours
after the Specified Time, by close of business on the
day which is two business days prior to the time of the
adjourned meeting) shall be entitled to attend and vote at
the meeting in respect of the number of shares registered
108
in their name at that time. If the meeting is adjourned
to a time not more than two business days after the
Specified Time, that time will also apply for the purpose
of determining the entitlement of members to attend and
vote (and for the purposes of determining the number of
votes they may cast) at the adjourned meeting. Changes
to the register of members after the relevant deadline shall
be disregarded in determining the rights of any person to
attend and vote at the meeting.
If you are an institutional investor, you may be able to
appoint a proxy electronically via the Proxymity platform,
a process which has been agreed by the Company
and approved by the Registrar. For further information
regarding Proxymity, please go to proxymity.io. Your
proxy must be lodged by 12.00 noon on Tuesday 30 April
2024 in order to be considered valid. Before you can
appoint a proxy via this process you will need to have
agreed to Proxymity’s associated terms and conditions.
It is important that you read these carefully as you will
be bound by them and they will govern the electronic
appointment of your proxy.
10. CREST members who wish to appoint a proxy or proxies
through the CREST electronic proxy appointment service
may do so for the meeting and any adjournment(s) thereof
by using the procedures described in the CREST Manual.
CREST Personal Members or other CREST sponsored
members, and those CREST members who have appointed
a voting service provider(s), should refer to their CREST
sponsor or voting service provider(s), who will be able to
take the appropriate action on their behalf.
11. In order for a proxy appointment or instruction made using
the CREST service to be valid, the appropriate CREST
message (a ‘CREST Proxy Instruction’) must be properly
authenticated in accordance with Euroclear UK & Ireland
Limited’s specifications and must contain the information
required for such instruction, as described in the CREST
Manual (available via euroclear.com/CREST). The message,
regardless of whether it constitutes the appointment of
a proxy or is an amendment to the instruction given to a
previously appointed proxy must, in order to be valid, be
transmitted so as to be received by the issuer’s agent (ID
number 3RA50) by the latest time(s) for receipt of proxy
appointments specified in notes 4 and 5 above. For this
purpose, the time of receipt will be taken to be the time (as
determined by the time stamp applied to the message by
the CREST Application Host) from which the issuer’s agent
is able to retrieve the message by enquiry to CREST in the
manner prescribed by CREST. After this time, any change
of instructions to proxies appointed through CREST should
be communicated to the appointee through other means.
12. CREST members and, where applicable, their CREST
sponsors or voting service provider(s) should note that
Euroclear UK & Ireland Limited does not make available
special procedures in CREST for any particular messages.
Normal system timings and limitations will therefore apply
in relation to the input of CREST Proxy Instructions. It
is the responsibility of the CREST member concerned
to take (or, if the CREST member is a CREST personal
member or sponsored member or has appointed a voting
service provider(s), to procure that his CREST sponsor
or voting service provider(s) take(s)) such action as shall
be necessary to ensure that a message is transmitted by
means of the CREST system by any particular time. In this
connection, CREST members and, where applicable, their
CREST sponsors or voting service provider(s) are referred,
in particular, to those sections of the CREST Manual
concerning practical limitations of the CREST system and
timings (euroclear.com/CREST).
13. The Company may treat as invalid a CREST Proxy
Instruction in the circumstances set out in Regulation
35(5)(a) of the Uncertificated Securities Regulations 2001
(as amended).
14. Any corporation which is a member can appoint one or
more corporate representatives who may exercise on its
behalf all of its powers as a member provided that, if it is
appointing more than one corporate representative, it does
not do so in relation to the same shares.
Please contact Computershare Investor Services PLC by
emailing corporate-representatives@computershare.co.uk
providing details of your appointment including their
email address, confirmation of the meeting they wish to
attend and a copy of the Letter of Representation, so that
unique credentials can be issued to allow the corporate
representative to access the electronic meeting. Access
credentials will be emailed to the appointee one working
day prior to the meeting. If documentation supporting the
appointment of the corporate representative is supplied
later than the deadline for appointment of a proxy (48
hours prior to the meeting), issuance of unique credentials
to access the meeting will be issued on a best endeavours
basis.
15. Under section 527 of the Act, members meeting the
threshold requirements set out in that section have the
right to require the Company to publish on a website a
statement setting out any matter relating to:
(a) the audit of the Company’s accounts (including the
auditor’s report and the conduct of the audit) that are to
be laid before the meeting; or
(b) any circumstances connected with an auditor of
the Company ceasing to hold office since the previous
meeting at which annual accounts and reports were laid in
accordance with section 437 of the Act.
The Company may not require the members requesting
any such website publication to pay its expenses in
complying with sections 527 or 528 of the Act. Where
the Company is required to place a statement on a
website under section 527 of the Act, it must forward the
statement to the Company’s auditor not later than the time
when it makes the statement available on the website. The
business which may be dealt with at the meeting includes
any statement that the Company has been required under
section 527 of the Act to publish on a website.
16. Any member attending the meeting has the right to ask
questions. The Company must cause to be answered any
question relating to the business being dealt with at the
meeting put by a member attending the meeting. However,
members should note that no answer need be given in the
following circumstances:
(a) if to do so would interfere unduly with the preparation
of the meeting or would involve a disclosure of confidential
information;
NOTICE OF ANNUAL GENERAL MEETING (CONTINUED)
109Annual Report and Accounts 2023
Notice of Meeting
(b) if the answer has already been given on a website in
the form of an answer to a question; or
(c) if it is undesirable in the interests of the Company
or the good order of the meeting that the question be
answered.
17. As at 4 March 2024, being the latest practicable date prior
to the printing of this notice, the Company’s issued capital
(i.e. excluding those shares held in treasury) consisted of
507,102,833 ordinary shares of 25 pence each carrying
one vote each. Therefore, the total voting rights in the
Company as at 4 March 2024 are 507,102,833.
18. This notice, together with information about the total
number of shares in the Company in respect of which
members are entitled to exercise voting rights at the
meeting as at 4 March 2024 being the latest practicable
date prior to the printing of this notice and, if applicable,
any members’ statements, members’ resolutions or
members’ matters of business received by the Company
after the date of this notice, will be available at fandc.com.
19. Any electronic address provided either in this notice or in
any related documents (including the Form of Proxy) may
not be used to communicate with the Company for any
purposes other than those expressly stated.
20. Copies of the letters of appointment between the
Company and its Directors; a copy of the Articles of
Association of the Company; the register of Directors’
holdings; and a deed poll relating to Directors’ indemnities
will be available for inspection at the registered office of
the Company during usual business hours on any weekday
(Saturdays, Sundays and Public Holidays excluded) until
the date of the meeting and also on the date and at
the place of the meeting from 15 minutes prior to the
commencement of the meeting to the conclusion thereof.
21. No Director has a service agreement with the Company.
22. Your personal data includes all data provided by you,
or on your behalf, which relates to you as a shareholder,
including your name and contact details, the votes you
cast and your shareholder Reference Number (attributed
to you by the Company). The Company determines the
purposes for which and the manner in which your personal
data is to be processed. The Company and any third party
to which it discloses the data (including the Company's
registrar) may process your personal data for the purposes
of compiling and updating the Company's records, fulfilling
its legal obligations and processing the shareholder rights
you exercise. A copy of the Company's privacy policy can
be found online at: fandc.com.
110
THE MANAGEMENT COMPANY
F&C Investment Trust plc is
managed by Columbia Threadneedle
Investment Business Limited (the
‘Manager’), a wholly-owned subsidiary
of Columbia Threadneedle AM
(Holdings) PLC, which is ultimately
owned by Ameriprise Financial, Inc.
The Manager is appointed under an
investment management agreement
with the Company, which sets out
its responsibilities for investment
management, administration and
marketing. The Manager is authorised
and regulated by the Financial
Conduct Authority.
The Manager also acts as the
Alternative Investment Fund Manager
and Company Secretary.
Paul Niven is the Company’s Fund
Manager and Columbia Threadneedle
Investments’ Head of Asset Allocation
(EMEA). He has extensive experience
in managing large, diversified
investment funds and has managed
the Company’s assets since July 2014.
He joined the management company
in 1996.
Jonathan Latter represents the
Manager as Company Secretary and
is responsible for the Company’s
statutory compliance. He joined the
management company in 2021.
Marrack Tonkin is Head of Investment
Trusts at the Manager, with
responsibility for its relationship
with the Company. He joined the
management company in 1989.
US SUB-MANAGERS
Barrow, Hanley, Mewhinney & Strauss,
LLC (North America) – appointed
2005
JPMorgan Asset Management (UK)
Limited – appointed 2023
PRIVATE EQUITY MANAGERS
HarbourVest Partners LLC –
appointed 2003
Pantheon Ventures Limited –
appointed 2003
COMPANY SECRETARY AND
REGISTERED OFFICE
Columbia Threadneedle Investment
Business Limited
Cannon Place
78 Cannon Street
London EC4N 6AG
Telephone: 020 7464 5000
Website: fandc.com
Email: invest@columbiathreadneedle.com
INDEPENDENT AUDITOR
Ernst & Young LLP
25 Churchill Place
London E14 5EY
CUSTODIAN
JPMorgan Chase Bank
25 Bank Street
Canary Wharf
London E14 5JP
DEPOSITARY
JPMorgan Europe Limited
25 Bank Street
Canary Wharf
London E14 5JP
NEW ZEALAND SHARE REGISTRARS
Computershare Investor Services
Limited Private Bag 92119
Auckland 1142
Level 2
159 Hurstmere Road
Takapuna
Auckland 0622
New Zealand
Telephone: +64 9 488 8700
Facsimile: +64 9 488 8787
SHARE REGISTRARS
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Telephone: 0800 923 1506
Facsimile: 0870 703 6143
Authorised and regulated in the UK by
the Financial Conduct Authority.
SOLICITORS
Norton Rose Fulbright LLP
3 More London Riverside
London SE1 2AQ
STOCKBROKER
JPMorgan Cazenove
25 Bank Street
Canary Wharf
London E14 5JP
MANAGEMENT AND ADVISERS
111Annual Report and Accounts 2023
Other Information
ADDITIONAL INFORMATION
FOR SHAREHOLDERS (UNAUDITED)
ALTERNATIVE INVESTMENT FUND MANAGERS
DIRECTIVE
The Company is an ‘alternative investment fund’ (AIF) for
the purposes of the AIFMD and has appointed its Manager,
Columbia Threadneedle Investment Business Limited, to act
as its Alternative Investment Fund Manager (the AIFM’).
The Manager is authorised and regulated by the FCA as a
‘full scope UK AIFM’.
The Company is required to make certain disclosures
available to investors in accordance with the AIFMD. Those
disclosures that are required to be made pre-investment
are included within the Investor Disclosure Document
(‘IDD’) which can be found on the Company’s website,
fandc.com. There have not been any material changes to
the disclosures contained within the IDD since it was last
updated in September 2023.
In accordance with the AIFMD, information in relation
to the Company’s leverage and the remuneration of the
Company’s AIFM are required to be made available to
investors. Detailed regulatory disclosures including those
on the AIFM’s remuneration policy and costs are available
on the Company’s website or from Columbia Threadneedle
Investments on request.
LEVERAGE
The Company’s maximum and actual leverage levels at
31 December 2023 are shown below:
Leverage exposure
Gross
method
Commitment
method
Maximum permitted limit 200% 200%
Actual 111% 112%
The Leverage limits are set by the AIFM and approved by
the Board and are in line with the maximum leverage levels
permitted in the Company’s Articles of Association. The
AIFM is also required to comply with the gearing parameters
set by the Board in relation to borrowings.
The Company and the AIFM also wish to make the following
disclosures to investors:
the investment strategy, geographic and sector
investment focus and principal stock exposures are
included in the Strategic Report. A list of the twenty
largest listed equity holdings is included on pages 28
and 29; none of the Company’s assets is subject to
special arrangements arising from their illiquid nature;
the Strategic Report and note 25 to the accounts set
out the risk profile and risk management systems
in place. There have been no changes to the risk
management systems in place in the year under review
and no breaches of any of the risk limits set, with no
breach expected;
there are no new arrangements for managing the
liquidity of the Company or any material changes to
the liquidity management systems and procedures that
it employs;
all authorised Alternative Investment Fund Managers
are required to comply with the AIFMD Remuneration
Code in respect of the AIFM’s remuneration. The
relevant disclosures required are within the IDD; and
information in relation to the Company’s leverage is
contained within the IDD.
Following completion of an assessment of the application
of the proportionality principle to the FCA’s AIFM
Remuneration Code, the AIFM has disapplied the pay-out
process rules with respect to it and any of its delegates.
This is because the AIFM considers that it carries out non-
complex activities and is operating on a small scale.
KEY INFORMATION DOCUMENT
The Key Information Document relating to the Company’s
shares (the ‘KID’) can be found on its website at fandc.com.
The KID has been produced in accordance with the PRIIPs
Regulations.
NET ASSET VALUE AND SHARE PRICE
The Company’s net asset value is released daily, on the
working day following the calculation date, to the London
and New Zealand Stock Exchanges. The current share price
of the Company is shown in the investment trust section
of the stock market page in several leading newspapers.
Investors in New Zealand can obtain share prices from
leading newspapers in that country.
UK CAPITAL GAINS TAX (‘CGT’)
An approved investment trust does not pay tax on its
capital gains. UK resident individuals may realise net capital
gains of up to £3,000 in the tax year ending 5 April 2025
without incurring any tax liability.
112
A rate of CGT of 10% will apply where taxable income and
gains do not exceed the income tax higher rate threshold.
A higher rate of 20% will apply to those whose income and
gains exceed this figure.
INCOME TAX
The final dividend of 4.50 pence per share is payable on
9 May 2024. From 6 April 2023, the annual tax-free
allowance to UK residents on dividend income was £1,000.
It will be reduced from 6 April 2024 to £500. Dividend
income received in excess of this amount will be taxed at
rates of 8.75% (basic rate taxpayers), 33.75% (higher rate
taxpayers) or 39.35% (additional rate taxpayers). Dividend
income on shares within an Individual Savings Account is
not subject to tax.
ADDITIONAL INFORMATION FOR SHAREHOLDERS (CONTINUED)
113Annual Report and Accounts 2023
Other Information
HOW TO INVEST
Charges
Annual management charges and other charges apply
according to the type of Savings Plan, these can be found on
the relevant product Pre-sales Cost & Charges disclosure on our
website www.ctinvest.co.uk.
Annual account charge
ISA/LISA: £60+VAT
GIA: £40+VAT
JISA/JIA/CTF: £25+VAT
You can pay the annual charge from your account, or by direct
debit (in addition to any annual subscription limits).
One of the most convenient ways to invest in F&C Investment Trust plc is through one of the Savings Plans run by
Columbia Threadneedle Investments.
CT Individual Savings Account (ISA)
You can use your ISA allowance to make an annual tax
efficient investment of up to £20,000 for the current tax
year with a lump sum from £100 or regular savings from £25
a month. You can also transfer any existing ISAs to us whilst
maintaining the tax benefits.
CT Junior Individual Savings Account (JISA)*
A tax efficient way to invest up to £9,000 per tax year for
a child. Contributions start from £100 lump sum or £25 a
month. JISAs with other providers can be transferred to
Columbia Threadneedle Investments.
CT Lifetime Individual Savings Account (LISA)
For those aged 18-39, a LISA could help towards purchasing
your first home or retirement in later life. Invest up to £4,000
for the current tax year and receive a 25% Government bonus
up to £1,000 per year. Invest with a lump sum from £100 or
regular savings from £25 a month.
CT General Investment Account (GIA)
This is a flexible way to invest in our range of Investment
Trusts. There are no maximum contributions, and
investments can be made from £100 lump sum or £25 a
month.
CT Junior Investment Account (JIA)
This is a flexible way to save for a child in our range of
Investment Trusts. There are no maximum contributions, and
the plan can easily be set up under bare trust (where the
child is noted as the beneficial owner) or kept in your name if
you wish to retain control over the investment. Investments
can be made from a £100 lump sum or £25 a month per
account. You can also make additional lump sum top-ups at
any time from £100 per account.
CT Child Trust Fund (CTF)*
If your child already has a CTF, you can invest up to £9,000
per birthday year, from £100 lump sum or £25 a month.
CTFs with other providers can be transferred to Columbia
Threadneedle Investments.
New Customers:
Call: 0345 600 3030**
(9.00am – 5.00pm, weekdays)
Email: invest@columbiathreadneedle.com
Existing Savings Plan Holders:
Call: 0345 600 3030**
(9:00am – 5:00pm, weekdays)
Email: investor.enquiries@columbiathreadneedle.com
Post: Columbia Threadneedle Management Limited,
PO Box 11114, Chelmsford CM99 2DG
You can also invest in the trust through online dealing platforms
for private investors that offer share dealing and ISAs. Companies
include: Barclays Stockbrokers, EQi, Halifax, Hargreaves
Lansdown, HSBC, Interactive Investor, Lloyds Bank, The Share
Centre
*The CTF and JISA accounts are opened in the child’s name and they can
have access to the account at age 18.
**Calls may be recorded or monitored for training and quality purposes.
Dealing charges
£12 per fund (reduced to £0 for deals placed through the online
Columbia Threadneedle Investor Portal) for ISA/GIA/LISA/JIA and
JISA. There are no dealing charges on a CTF.
Dealing charges apply when shares are bought or sold but not
on the reinvestment of dividends or the investment of monthly
direct debits. Government stamp duty of 0.5% also applies on the
purchase of shares (where applicable).
The value of investments can go down as well as up and you
may not get back your original investment. Tax benefits depend
on your individual circumstances and tax allowances and rules
may change. Please ensure you have read the full Terms and
Conditions, Privacy Policy and relevant Key Features documents
before investing. For regulatory purposes, please ensure you
have read the Pre-sales Cost & Charges disclosure related to the
product you are applying for, and the relevant Key Information
Documents (KIDs) for the investment trusts you want to invest in,
these can be found at www.ctinvest.co.uk/documents.
How to Invest
To open a new Columbia Threadneedle Savings Plan, apply
online at www.ctinvest.co.uk Online applications are not
available if you are transferring an existing Savings Plan with
another provider to Columbia Threadneedle Investments, or
if you are applying for a new Savings Plan in more than one
name but paper applications are available at www.ctinvest.
co.uk/documents or by contacting Columbia Threadneedle
Investments.
To find out more, visit ctinvest.co.uk
or call 0345 600 3030, 9.00am – 5.00pm, weekdays, calls may
be recorded or monitored for training and quality purposes.
Capital at risk.
This material relates to an investment trust and its Ordinary Shares that are traded on the main market of the London Stock Exchange.
The Investor Disclosure Document, Key Information Document (KID), latest annual or interim reports and the applicable terms & conditions are available from Columbia
Threadneedle Investments Cannon Place, 78 Cannon Street, London EC4N 6AG, your financial advisor and/or on our website www.columbiathreadneedle.com. Please
read the Investor Disclosure Document before taking any investment decision. This material should not be considered as an offer, solicitation, advice or an investment
recommendation. This communication is valid at the date of publication and may be subject to change without notice. Information from external sources is considered
reliable but there is no guarantee as to its accuracy or completeness.
In the UK: Issued by Columbia Threadneedle Management Limited, No. 517895, registered in England and Wales and authorised and regulated in the UK by the Financial
Conduct Authority. © 2024 Columbia Threadneedle Investments. WF560250 (01/24) UK. Expiration Date: 31/01/2025
Financial promotion
114
ALTERNATIVE PERFORMANCE MEASURES
The Company uses the following Alternative Performance Measures (APMs’) throughout the annual report, financial
statements and notes to the financial statements. The APMs are reconciled to the financial statements through the narrative
detailed below. The Board believes that each of the APMs, which are typically used within the investment trust sector,
provide additional useful information to shareholders in order to assess the Company’s performance between reporting
periods and against its peer group.
Discount or Premium – the share price of an investment trust company is derived from buyers and sellers trading their
shares on the stock market. This price is not identical to the NAV per share of the underlying assets less liabilities of the
Company. If the share price is lower than the NAV per share, the shares are trading at a discount. This usually indicates that
there are more sellers of shares than buyers. Shares trading at a price above NAV per share are said to be at a premium, in
which case there tend to be more buyers than sellers. The Board’s policy is set out on page 38.
31 December 2023
pence
31 December 2022
pence
Net Asset Value per share with debt at market value (a)
1,022.07 932.10
Share price per share (b)
962.00 904.00
(Discount)/Premium (c= (b-a)/a) (c)
(5.9)% (3.0)%
Dividend growth – the amount by which the Company's annual dividend has increased compared to the previous year,
expressed as a percentage of the previous annual dividend.
31 December 2023
pence
31 December 2022
pence
Total dividend paid/payable for the prior year (a)
13.50
12.80
Total dividend paid/payable for the current year (b)
14.70
13.50
Dividend growth (c= (b-a)/a) (c)
8.9%
5.8%
Gearing – this is the ratio of the borrowings of the Company to its net assets. Borrowings have a “prior charge” over the
assets of a company, ranking before ordinary Shareholders in their entitlement to capital and/or income. They may include:
preference shares; debentures; overdrafts and short and long-term loans from banks; and derivative contracts. If the
Company has cash assets, these may be assumed either to net off against borrowings, giving a “net” or “effective” gearing
percentage, or to be used to buy investments, giving a “gross” or “fully invested” gearing figure. Where cash assets exceed
borrowings, the Company is described as having “net cash”. The Company’s maximum permitted level of gearing is set by
the Board and is set out in the Business Review and in Note 25(b).
31 December 2023
£’000
31 December 2022
£’000
Loans
580,394 581,264
Debenture
575 575
(a)
580,969 581,839
Less Cash and cash equivalents
(87,170) (243,836)
Less Investment debtors
(1,178) (425)
Add Investment creditors
3,670 2,933
Total (b)
496,291 340,511
Net Asset Value (c)
5,034,487 4,649,825
Effective gearing (d= b/c) (d)
9.9% 7.3%
Fully invested gearing (e= a/c) (e)
11.5% 12.5%
115Annual Report and Accounts 2023
Other Information
Net Asset Value (NAV) – the assets less liabilities of the Company, as set out in the Balance Sheet, all valued in accordance
with the Company’s Accounting Policies (see note 2 to the accounts) and UK Accounting Standards. The net assets
correspond to Total Shareholders’ Funds, which comprise the share capital account, capital redemption reserve and capital
and revenue reserves.
31 December 2023 31 December 2022
Net assets at year end - £'000s (a)
5,034,487 4,649,825
Number of ordinary shares in issue at year end (b)
509,793,054 518,411,856
Net asset value (with debt at par) at year end - pence (c=a/b) (c)
987.56 896.94
Net Asset Value (NAV) with Debt at Market Value – the Company's debt (debenture and loans) is valued in the Balance
Sheet (on page 80) at amortised cost, which is materially equivalent to the repayment value of the debt on the assumption
that it is held to maturity. This is often referred to as "Debt at par". The current replacement or market value of the debt,
which assumes it is repaid and renegotiated under current market conditions, is often referred to as the "Debt at Market
Value" or "Debt at Fair Value". The market value of the debt is shown in notes 14 and 15 to the Accounts.
31 December 2023 31 December 2022
Net assets at year end - £'000s
5,034,487 4,649,825
Add back: Debt at par - £'000s
580,969 581,839
Deduct: Debt at market value - £'000s
(405,001) (399,563)
(a)
5,210,455 4,832,101
Number of ordinary shares in issue at year end (b)
509,793,054 518,411,856
Net asset value (with debt at market value) at year end - pence (c=a/b) (c)
1,022.07 932.10
Ongoing Charges – all operating costs expected to be regularly incurred and that are payable directly by the Company or
incurred indirectly within underlying investee funds, expressed as a proportion of the average net assets of the Company
over the reporting year. The costs of buying and selling investments and derivatives are excluded as are interest costs,
taxation, non-recurring costs and the costs of buying back or issuing ordinary shares.
Ongoing Charges calculation
31 December 2023
£’000
31 December 2022
£’000
Management fees
16,584 18,329
Other expenses
5,727 5,567
Less loan commitment/arrangement fees
(293)
Underlying costs of Private Equity Funds
1,860 2,614
Total (a)
24,171 26,217
Average daily net assets (b)
4,969,791 4,878,293
Ongoing charges (c= a/b) (c)
0.49% 0.54%
Total Costs – these total 0.97% and comprise all operating costs actually incurred by the Company in the period and
costs suffered within underlying funds (0.49% as shown in the Ongoing Charges calculation), together with interest on
borrowings (0.28%) and estimated implicit and explicit costs of dealing (0.20%). These are all expressed as a proportion of
the average daily NAVs of the Company over the period. Taxation expense and the costs of buying back or issuing ordinary
shares are excluded from the calculation.
116
Total Expense Ratio (TER) – an alternative measure of expenses to Ongoing Charges. It comprises all operating costs
incurred in the reporting period by the Company (see notes 4 and 5 to the Accounts), calculated as a percentage of the
average net assets in that year. Operating costs exclude costs suffered within underlying investee funds, costs of buying
and selling investments and derivatives, interest costs, taxation and the costs of buying back or issuing ordinary shares.
TER calculation
31 December 2023
£’000
31 December 2022
£’000
Management fees
16,584 18,329
Other expenses
5,727 5,567
Less loan commitment/arrangement fees
(293)
Total (a)
22,311 23,603
Average daily net assets (b)
4,969,791 4,878,293
TER (c= a/b) (c)
0.45% 0.48%
Total Return – the theoretical return to shareholders calculated on a per share basis by adding dividends paid in the period
to the increase or decrease in the Share Price or NAV in the period. The dividends are assumed to have been re-invested in
the form of shares or net assets, respectively, on the date on which the shares were quoted ex-dividend.
Net Asset Value Share price
NAV/Share Price per share at 31 December 2022 (pence)
932.10 904.00
NAV/Share Price per share at 31 December 2023 (pence)
1,022.07 962.00
Change in the year
9.7% 6.4%
Impact of dividend reinvestments
1.6% 1.7%
Total return for the year to 31 December 2023
11.3% 8.1%
Net Asset Value Share price
NAV/Share Price per share at 31 December 2021 (pence)
998.72 926.00
NAV/Share Price per share at 31 December 2022 (pence)
932.10 904.00
Change in the year
(6.7)% (2.4)%
Impact of dividend reinvestments
1.4% 1.5%
Total return for the year to 31 December 2022
(5.3)% (0.9)%
ALTERNATIVE PERFORMANCE MEASURES (CONTINUED)
117Annual Report and Accounts 2023
Other Information
GLOSSARY OF TERMS
AAF Report – Report prepared in accordance with Audit and Assurance Faculty guidance issued by the Institute of
Chartered Accountants in England and Wales.
Adjusted portfolio value – This is as defined within our loan covenant tests and comprises the gross assets less the value of
all unquoted and private equity investments.
Administrator – The administrator is State Street Bank and Trust Company to which Columbia Threadneedle has
outsourced trade processing, valuation and middle office tasks and systems.
AGM – annual general meeting of the Company.
AIC – Association of Investment Companies, the trade body for closed-end Investment Companies.
AIC Code – the AIC Code of Corporate Governance published in 2019, which addresses the principles and provisions set
out in the UK Code, as they apply to investment trust companies.
AIFMD – the Alternative Investment Fund Managers Directive that requires investment vehicles to appoint a Depositary and
an Alternative Investment Fund Manager.
AIFM – the Alternative Investment Fund Manager appointed by the Board of Directors in accordance with the AIFMD is the
Company’s Manager, as defined below.
Ameriprise Financial, Inc. – the ultimate owner of Columbia Threadneedle Investments, it is a diversified financial services
company and bank holding company incorporated in Delaware, USA.
Columbia Threadneedle Savings Plans – these comprise the CT General Investment Account, CT Junior Investment
Account, CT Lifetime ISA, CT Investment Trust ISA, CT Junior ISA and CT Child Trust Fund operated by Columbia
Threadneedle Management Limited, a company authorised by the Financial Conduct Authority.
Benchmark – the FTSE All-World (Total Return) Index is the benchmark against which the increase or decrease in the
Company’s NAV is measured. The Index averages the performance of a defined selection of companies listed in stock
markets around the world and gives an indication of how those markets have performed in any period. Divergence between
the performance of the Company and the Index is to be expected as: the investments within this Index are not identical
to those held by the Company; the Index does not take account of operating costs; and the Company’s strategy does not
include replicating (tracking) this Index. Prior to January 2013 the benchmark was a composite of 40% FTSE All-Share
(Total Return)/60% FTSE WI World ex UK (Total Return).
Carbon intensity – this is measured in tons of CO2 equivalent (i.e. including the basket of six Kyoto Protocol gases) of
Scope 1 and 2 emissions, divided by $1 million of sales at a company level. This is aggregated to portfolio level using a
weighted average (by holding).
Climate Action 100+ initiative – An investor-led initiative to ensure the world’s largest corporate greenhouse gas emitters
take necessary action on climate change.
Closed-end company – a company, including an Investment Company, with a fixed issued ordinary share capital, the shares
of which are traded on an exchange at a price not necessarily related to the net asset value of the company and which can
only be issued or bought back by the company in certain circumstances.
118
Columbia Threadneedle – the asset management business of Ameriprise.
Cum-dividend – shares are classified as cum-dividend when the buyer of a security is entitled to receive a dividend that has
been declared, but not paid. Shares which are not cum-dividend are described as ex-dividend.
Custodian – The Custodian is JPMorgan Chase Bank. The custodian is a financial institution responsible for safeguarding,
worldwide, the listed securities and certain cash assets of the Company, as well as the income arising therefrom, through
provision of custodial, settlement and associated services.
Depositary – The Depositary is JPMorgan Europe Limited. Under AIFMD rules the Company must appoint a depositary
whose duties in respect of investments, cash and similar assets include: safekeeping; verification of ownership and
valuation; and cash monitoring. Under the AIFMD rules, the Depositary has strict liability for the loss of the Company’s
financial assets in respect of which it has safe-keeping duties. The Depositary’s oversight duties will include but are not
limited to oversight of share issues/buybacks, dividend payments and adherence to investment limits.
Derivative – a contract between two or more parties, the value of which fluctuates in accordance with the value of an
underlying security. The contract is usually short-term (for less than one year). Examples of derivatives are Put and Call
Options, Swap contracts, Futures and Contracts for Difference. A derivative can be an asset or a liability and is a form of
gearing because the fluctuations in its value are usually greater than the fluctuations in the underlying security’s value.
Distributable Reserves – Reserves distributable by way of dividend or for the purpose of buying back ordinary share
capital (see notes 2(c)(x), 2(c)(xi), 16, 17 and 18 to the Accounts). Company Law requires that Share Capital and the Capital
Redemption Reserve may not be distributed. The Company’s Articles of Association allow distributions by way of dividend
out of Capital Reserves. Dividend payments are currently made out of Revenue Reserve. The cost of all share buybacks is
deducted from Capital Reserves.
Dividend Dates – Reference is made in announcements of dividends to three dates. The “record” date is the date after
which buyers of the shares will not be recorded on the register of shareholders as qualifying for the pending dividend
payment. The “payment” date is the date that dividends are credited to shareholders’ bank accounts. The “ex-dividend”
date is normally the business day prior to the record date (most ex-dividend dates are on a Thursday).
DTRs – the Disclosure Guidance and Transparency rules issued by the FCA.
EY – The Company’s auditor, Ernst & Young LLP.
FCA – Financial Conduct Authority, the conduct regulator for financial services firms and financial markets in the UK.
FCIT – F&C Investment Trust PLC or the 'Company'.
FRC – Financial Reporting Council which regulates auditors, accountants and actuaries in the UK and sets the UK's
Corporate Governance and Stewardship Codes.
FTSE Women Leaders Review – an independent body that aims to increase the number of women on boards and
leadership teams which sets out target recommendations for FTSE 350 companies.
Fund Manager – Paul Niven, an employee of the Manager with overall management responsibility for the total portfolio.
GAAP – Generally Accepted Accounting Practice. This includes UK Financial Reporting Standards ('FRS') and International
GAAP (IFRS or International Financial Reporting Standards applicable in the UK).
GLOSSARY OF TERMS (CONTINUED)
119Annual Report and Accounts 2023
Other Information
Hampton-Alexander Review – The independent review body which aims to increase the number of women on FTSE 350
boards.
Investment Company (Section 833) – UK Company Law allows an Investment Company to make dividend distributions out
of realised distributable reserves, even in circumstances where it has made Capital losses, provided the Company’s assets
remaining after payment of the dividend exceed 150% of its liabilities. An Investment Company is defined as investing its
funds in shares, land or other assets with the aim of spreading investment risk.
Investment portfolios – sometimes referred to as strategies, the separate regional, global and Private Equity portfolios that
together make up the total investment portfolio of the Company.
Investment Trust taxation status (Section 1158) – UK Corporation Tax law allows an Investment Company (referred to
in Tax law as an Investment Trust) to be exempted from tax on its profits realised on investment transactions, provided
it complies with certain rules. These are similar to the provisions that apply to investment companies as set out above
but further require that the Company must be listed on a regulated stock exchange and that it cannot retain more than
15% of income received. The Directors’ Report contains confirmation of the Company’s compliance with this law and its
consequent exemption from taxation on capital gains.
ISAE Report – Report prepared in accordance with the International Standard on Assurance Engagements.
Leverage – as defined under AIFMD rules, leverage is any method by which the exposure of an AIF (being an investment
vehicle under the AIFMD) is increased through borrowing of cash or securities or leverage embedded in derivative
positions. Leverage is broadly equivalent to gearing but is expressed as a ratio between the assets (excluding borrowings)
and the net assets (after taking account of borrowings). Under the gross method, exposure represents the sum of the
Company’s positions after deduction of cash balances, without taking account of any hedging or netting arrangements.
Under the commitment method, exposure is calculated without the deduction of cash balances and after certain hedging
and netting positions are offset against each other.
Manager (AIFM) – Columbia Threadneedle Investment Business Limited, which is a subsidiary of Ameriprise Financial, Inc..
Its responsibilities and the management fee are set out in the Business Model, Report of the Management Engagement
Committee and note 4 to the Accounts.
Market capitalisation – the stock market quoted price of the Company’s shares, multiplied by the number of shares in issue
excluding any shares held in treasury. If the Company’s shares trade at a discount to NAV, the market capitalisation will be
lower than the NAV or higher in the event of a premium.
Nature Action 100 – is a global investor engagement initiative focused on driving greater corporate ambition and action to
reverse nature and biodiversity loss.
Non-executive Director – a Director who has a contract for services, rather than a contract of employment, with the
Company. The Company does not have any executive Directors.
Non-Financial and Sustainability Information Statement (NFSIS) – Under sections 414CA and 414CB of the Companies
Act 2006 certain large companies within scope are subject to an additional layer of narrative reporting originally
introduced under EU Non-Financial Reporting Directive (EU/2014/95) and implemented by amending the strategic report
requirements in the Companies Act 2006 by the Companies, Partnerships and Groups (Accounts and Non-Financial
Reporting) Regulations 2016 and by the Companies (Strategic Report)(Climate-related Financial Disclosure) Regulations
2022. The regulations require those companies to disclose to the extent necessary an understanding of the company’s
development, performance, position and impact of its activity, information relating to environmental, employee, social,
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respect for human rights, anti-corruption and anti-bribery matters. Although F&C Investment Trust plc does not fall
within the scope of these requirements, the Board has opted to comply and has integrated the disclosures into the
Strategic Report. F&C Investment Trust plc’s Non-Financial Reporting disclosures that have been made in relation to the
requirements are referenced in the following table to indicate in which part of the Strategic Report they appear.
Non-financial information Section Page
Business model Business Review 32
Key performance Indicators Key Performance Indicators 40
Principal Risks Principal and Emerging Risks 42
Policies Principal Policies 37
Open-ended Fund – a collective investment scheme which issues shares or units directly to investors, and redeems directly
from investors, at a price that is linked to the net asset value of the fund.
Peer group – investment trust companies and funds investing in Global markets on behalf of investors, in competition with
the Company and included within either the AIC Global Sector or the Investment Association (IA) Global Sector in the UK.
Portfolio Return – the gross return on assets generated by the Company's portfolio of investments.
PRIIPs – Packaged Retail and Insurance-based Investment Products regulations that require generic pre-sale disclosure of
investment “product” costs, risks and indicative future return scenarios. The Company’s ordinary shares are defined as a
product for the purposes of the regulations. Costs as calculated under PRIIPs are explained within Alternative Performance
Measures on page 115, under “Total Costs”.
Private Equity – an asset consisting of shares and debt in operating companies that are not publicly traded on a
stock exchange. The holdings in such companies may be collected in a fund which operates as a limited partnership,
with partners contributing capital to the fund over a period of years and receiving proportional repayments when the
investments are sold.
Public Documents – Financial statements, reports, circulars, press releases, analyst presentations and other documents to
be issued publicly.
Science-based Targets Initiative (SBTi) – This is a partnership between Carbon Disclosure Project (CDP), the United
Nations Global Compact (UNGC), World Resources Institute (WRI) and the World Wide Fund for Nature (WWF). SBTi
drives ambitious climate action in the private sector by enabling companies to set science-based emissions reduction
targets.
Section 172(1) – Section 172(1) of the Companies Act 2006 requires a director of a company to act in the way they consider,
in good faith, to be most likely to promote the success of the company for the benefit of its members as a whole, and in
doing so have regard to matters specified in that section. The directors are required to report on this in the Strategic Report
section of the Annual Report and Accounts each year.
Sustainable Development Goals (SDGs) – The 2030 Agenda for Sustainable Development, adopted by all United Nations
Member States in 2015, provides a shared blueprint for peace and prosperity for people and the planet, now and into the
future. At its heart are the 17 goals, which are an urgent call for action by all countries – developed and developing – in a
global partnership. They recognise that ending poverty and other deprivations must go hand-in-hand with strategies that
improve health and education, reduce inequality, and spur economic growth – all the while tackling climate change and
working to preserve our oceans and forests.
GLOSSARY OF TERMS (CONTINUED)
121Annual Report and Accounts 2023
Other Information
SSAE – Statement on Standards for Attestation Engagements issued by the American Institute of Certified Public
Accountants.
SORP – Statement of Recommended Practice. The accounts of the Company are drawn up in accordance with the
Investment Trust SORP, issued by the AIC, as described in note 2 to the Accounts.
Special Dividends – dividends received from investee companies which have been paid out of capital reconstructions or
reorganisations of the investees are sometimes referred to as Special Dividends and may be allocated to Capital Reserves
in accordance with the Company’s accounting policies and the SORP. Dividends which are unusually large in terms of the
investee companies’ annual earnings or normal payment pattern are also sometimes referred to as special but are treated
as revenue in nature unless evidenced otherwise.
The Act – the Companies Act 2006.
The Task Force on Climate-related Financial Disclosures (TCFD) – This was set up in 2015 by the Financial Stability Board
(FSB) to develop voluntary, consistent climate-related financial risk disclosures for use by companies, banks, and investors
in providing information to stakeholders. Columbia Threadneedle supports the TCFD and it reports in line with TCFD
recommendations. These disclosures are not mandatory for investment companies.
The Transition Pathway Initiative (TPI) – A global, asset-owner led initiative which assesses companies' preparedness for
the transition to a low carbon economy.
Treasury shares – ordinary shares in issue that have been bought back from shareholders on the open market and kept
in treasury by the Company. Such shares may, at a later date, be reissued on the open market or cancelled if demand
is insufficient. Treasury shares carry no rights to dividends and have no voting rights and hence are not included within
calculations of earnings per share or net asset value per share.
UK Code – the UK Code of Corporate Governance, published in 2018, which sets out the standards of good practice
in relation to board leadership and effectiveness, remuneration, accountability and relations with shareholders that all
companies with a Premium Listing on the London Stock Exchange are required to report on in their annual report and
accounts.
The United Nations-supported Principles for Responsible Investment (UNPRI) – The six Principles for Responsible
Investment are a voluntary and aspirational set of investment principles that offer a menu of possible actions for
incorporating ESG issues into investment practice. In implementing them, signatories contribute to developing a more
sustainable global financial system.
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Warning to ShareholdersBeware of Share Fraud.
Fraudsters use persuasive and high-pressure tactics to lure investors into scams. They may offer to sell to you shares
that turn out to be worthless or non-existent, or to buy your shares at an inflated price in return for an upfront payment
following which the proceeds are never received.
If you receive unsolicited investment advice or requests:
Check the Financial Services Register from fca.org.uk to see if the person or firm contacting you is authorised by
the FCA
Call the Financial Conduct Authority ('FCA') on 0800 111 6768 if the firm does not have contact details on the
Register or you are told they are out of date
Search the list of unauthorised firms to avoid at fca.org.uk/scams
Consider that if you buy or sell shares from an unauthorised firm you will not have access to the Financial
Ombudsman Service or Financial Services Compensation Scheme
Think about getting independent financial and professional advice
If you are approached by fraudsters please tell the FCA by using the share fraud reporting form at fca.org.uk/scams
where you can find out more about investment scams. You can also call the FCA Consumer Helpline on 0800 111 6768.
If you have already paid money to share fraudsters you should contact Action Fraud on 0300 123 2040 or online
at www.actionfraud.police.uk.
Registered office:
Cannon Place
78 Cannon Street
London EC4N 6AG
020 7464 5000
invest@columbiathreadneedle.com
fandc.com
Registrars:
Computershare Investor Services PLC
The Pavilions, Bridgwater Road
Bristol BS99 6ZZ
0800 923 1506
web.queries@computershare.co.uk
computershare.com
© 2024 Columbia Threadneedle Investments. Columbia Threadneedle Investments is the global brand name of the Columbia and Threadneedle group of companies.