Half Yearly Report
Date: 24 February 2011
Contact: Robert Siddles
F&C Management Limited
020 7628 8000
F&C US Smaller Companies PLC
Unaudited statement of results
for the half-year ended 31 December 2010
Summary of Unaudited Results
|
Attributable to equity shareholders |
31 December 2010 |
30 June 2010 |
% Change |
|
|
|
|
|
|
Net assets |
£91.04m |
£77.30m |
+17.8 |
|
|
|
|
|
|
Net asset value per share |
439.66p |
373.29p |
+17.8 |
|
|
|
|
|
|
Russell 2000 Index (sterling adjusted) |
500.53 |
407.39 |
+22.9 |
|
|
|
|
|
|
Share price |
425.50p |
354.50p |
+20.0 |
|
|
|
|
|
|
Gearing/(net liquidity)* |
(2.0)% |
(1.2)% |
|
|
|
|
|
|
|
Increase in net asset value per share since inception on 8 March 1993 |
|
|
356.0% |
|
Increase in the Russell 2000 Index (sterling adjusted) since 8 March 1993 |
|
|
216.7% |
*Calculated as loans less cash and investment debtors plus overdrafts and investment creditors at balance sheet value as a percentage of net assets.
Chairman's Statement
The US stock market rallied strongly from the end of August, recovering from the fears of a double-dip recession that emerged in early summer. Business activity improved and the Federal Reserve gave the market extra help with a further increase in money supply. Smaller companies led the market outpacing blue chips but the dollar fell slightly against sterling.
Performance
I am pleased to report that the net asset value ("NAV") per share of your Company advanced in the six month period to 31 December 2010, gaining 17.8%. The Company's benchmark, the sterling-adjusted Russell 2000 Index rose 22.9%. In the period under review, the value style of investing, the one used by your Company, underperformed as the technology sector did particularly well.
Although performance in this period is disappointing when compared to the benchmark, the Company has performed well over the financial crisis. In the three years to 31 December 2010 NAV per share rose 50.6% against a rise in the benchmark of 30.1%.
Market review
During the six month period, the US equity market rallied strongly. The Russell 2000 Index gained 28.6% in dollar terms. The dollar's fall against sterling meant that this rise was reduced to 22.9% in sterling terms so investors suffered from the exchange rate movement as the Company's assets are valued in sterling.
As earlier fears of a double-dip recession faded and confidence in the economic recovery returned, the market advanced strongly. In particular, the Institute of Supply Managers report, a key business indicator, turned positive at the end of August. The Federal Reserve, deciding to take no risks with the recovery, provided another round of quantitative easing or printing of money. The dollar declined because of this and the end of the flight to safety in the first half of 2010.
Smaller companies led the market; in dollar terms the 28.6% gain in the Russell 2000 exceeded that of the Standard & Poor's Composite Index, which rose 22.0% and the technology-oriented NASDAQ Composite Index, which moved up 25.8%. This outperformance by smaller companies is typical in periods of economic recovery because they are perceived as being more geared to economic growth.
The best performing sectors in the six month period under review were energy, technology, and materials and processing. The laggards were more defensive sectors such as consumer staples and utilities together with financial services.
Portfolio review
Good performance came from basic industries such as materials, fertilisers and railcar manufacturing. Poor performance occurred in areas still affected by the recession such as lenders, or pressurised by regulators, for example, home nursing.
Overall, the portfolio still favours producer durables and energy but avoids technology. Within financials, insurance is preferred. The Manager increased exposure to utility services and education.
Buy-backs and discount
The Company bought back no shares in the six-month period. The Board will continue to apply its policy of buying back shares at appropriate times with a view to limiting the discount in the longer term to around 10%.
The discount narrowed from 5.0% at 30 June 2010 to 3.2% at 31 December 2010. As at 22 February 2011, the discount was 2.0%.
Outlook
Business activity is expanding at a good pace but in order to put the recovery on a firmer footing we need to see growth in employment. There is reason to be somewhat optimistic as the first signs of this are appearing in the weekly US Initial Jobless Claims. It seems likely that US monetary policy will be accommodative for some time, however, the Russell 2000 Index is approaching its 2007 highs. The immediate danger for equities is that investor psychology becomes over-optimistic, although concerns about tighter monetary policy in China may well keep this at bay. Nevertheless, with corporate profitability high, merger and acquisition activity is likely to provide support for the market.
Looking further out, the US has plenty of spare capacity to sustain expansion but once recovery is on a more secure footing, the market may have to adjust to a less accommodative interest rate policy.
In recovering from the recent severe financial and economic crisis, the US has shown its vitality, although it waits to be seen whether the lessons learnt will avert another bubble in the medium term. The Company takes a risk averse approach to investment and it is pleasing that good returns have been generated through the crisis period.
Gordon Grender
24 February 2011
Directors' Statement of Principal Risks and Uncertainties
The Company's assets consist mainly of listed equities and its principal risks are therefore market related.
Other key risks faced by the Company relate to investment strategy, currency, gearing, investment management resources, regulation, financial control and counterparties (including custodian default). These risks, and the way in which they are managed, are described in more detail under the heading "Principal risks and their management" within the Directors' Report and Business Review contained within the Company's annual report for the year ended 30 June 2010. The Company's principal risks and uncertainties have not changed materially since the date of that report and are not expected to change materially for the remainder of the Company's financial year.
Directors' Statement of Responsibilities in Respect of the Financial Statements
In accordance with Chapter 4 of the Disclosure and Transparency Rules the Directors confirm, in respect of the report and accounts for the half-year ended 31 December 2010 of which this statement is an extract, that to the best of their knowledge:
· the condensed set of financial statements has been prepared in accordance with applicable UK Accounting Standards and gives a true and fair view of the assets, liabilities, financial position and return of the Company;
· the half-yearly report includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the financial statements;
· the Directors' Statement of Principal Risks and Uncertainties shown above is a fair review of the principal risks and uncertainties for the remainder of the financial year; and
· the half-yearly report includes details on related party transactions.
Signed on behalf of the Board
Gordon Grender
Chairman
24 February 2011
Unaudited Condensed Income Statement
|
for the half-year ended 31 December |
2010 |
2009 |
||||
|
|
Revenue |
Capital |
Total |
Revenue |
Capital |
Total |
|
|
£'000s |
£'000s |
£'000s |
£'000s |
£'000s |
£'000s |
|
|
|
|
|
|
|
|
|
Gains on investments |
- |
14,084 |
14,084 |
- |
12,983 |
12,983 |
|
Foreign exchange (losses)/gains |
- |
(61) |
(61) |
- |
41 |
41 |
|
Income |
271 |
- |
271 |
319 |
- |
319 |
|
Management fee |
(341) |
- |
(341) |
(295) |
- |
(295) |
|
Other expenses |
(166) |
(2) |
(168) |
(132) |
(2) |
(134) |
|
Net return on ordinary activities before taxation |
(236) |
14,021 |
13,785 |
(108) |
13,022 |
12,914 |
|
Taxation on ordinary activities |
(41) |
- |
(41) |
(41) |
- |
(41) |
|
Net return attributable to equity shareholders |
(277) |
14,021 |
13,744 |
(149) |
13,022 |
12,873 |
|
|
|
|
|
|
|
|
|
Return per share - pence |
(1.34) |
67.71 |
66.37 |
(0.72) |
62.89 |
62.17 |
The total column is the profit and loss account of the Company. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies.
All revenue and capital items in the above statement derive from continuing operations.
A statement of total recognised gains and losses is not required as all gains and losses of the Company have been reflected in the above statement.
Unaudited Condensed Reconciliation of Movements in Shareholders' Funds
|
Half-year ended 31 December 2010 |
Called-up |
Share |
Non- |
Capital |
|
|
Total |
|
|
share |
premium |
distributable |
redemption |
Capital |
Revenue |
shareholders' |
|
|
capital |
account |
reserve |
reserve |
reserves |
reserve |
funds |
|
|
£'000s |
£'000s |
£'000 |
£'000s |
£'000s |
£'000s |
£'000s |
|
|
|
|
|
|
|
|
|
|
Balance at 30 June 2010 |
5,177 |
2,468 |
841 |
8,175 |
62,016 |
(1,379) |
77,298 |
|
Movements during the half-year ended 31 December 2010 |
|
|
|
|
|
|
|
|
Net return attributable to equity shareholders |
- |
- |
- |
- |
14,021 |
(277) |
13,744 |
|
Balance at 31 December 2010 |
5,177 |
2,468 |
841 |
8,175 |
76,037 |
(1,656) |
91,042 |
|
Half-year ended 31 December 2009 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 June 2009 |
5,177 |
2,468 |
841 |
8,175 |
45,018 |
(1,072) |
60,607 |
|
Movements during the half-year ended 31 December 2009 |
|
|
|
|
|
|
|
|
Net return attributable to equity shareholders |
- |
- |
- |
- |
13,022 |
(149) |
12,873 |
|
Balance at 31 December 2009 |
5,177 |
2,468 |
841 |
8,175 |
58,040 |
(1,221) |
73,480 |
|
Year ended 30 June 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at 30 June 2009 |
5,177 |
2,468 |
841 |
8,175 |
45,018 |
(1,072) |
60,607 |
|
Movements during the year ended 30 June 2010 |
|
|
|
|
|
|
|
|
Net return attributable to equity shareholders |
- |
- |
- |
- |
16,998 |
(307) |
16,691 |
|
Balance at 30 June 2010 |
5,177 |
2,468 |
841 |
8,175 |
62,016 |
(1,379) |
77,298 |
Unaudited Condensed Balance Sheet
|
|
31 Dec 2010 |
31 Dec 2009 |
30 June 2010 |
|
|
£'000s |
£'000s |
£'000s |
|
Fixed assets |
|
|
|
|
Listed investments |
89,420 |
72,185 |
76,525 |
|
Current assets |
|
|
|
|
Debtors |
63 |
191 |
68 |
|
Cash at bank and short-term deposits |
1,808 |
1,393 |
1,036 |
|
|
1,871 |
1,584 |
1,104 |
|
Creditors: amounts falling due within one year |
(249) |
(289) |
(331) |
|
Net current assets |
1,622 |
1,295 |
773 |
|
Net assets |
91,042 |
73,480 |
77,298 |
|
|
|
|
|
|
Capital and reserves |
|
|
|
|
Called-up share capital |
5,177 |
5,177 |
5,177 |
|
Share premium account |
2,468 |
2,468 |
2,468 |
|
Non-distributable reserve |
841 |
841 |
841 |
|
Capital redemption reserve |
8,175 |
8,175 |
8,175 |
|
Capital reserves |
76,037 |
58,040 |
62,016 |
|
Revenue reserve |
(1,656) |
(1,221) |
(1,379) |
|
Total shareholders' funds |
91,042 |
73,480 |
77,298 |
|
|
|
|
|
|
Net asset value per share - pence |
439.66 |
354.85 |
373.29 |
Unaudited Condensed Cash Flow Statement
|
|
Half-year ended |
Half-year ended |
|
|
31 Dec 2010 |
31 Dec 2009 |
|
|
£'000s |
£'000s |
|
Net cash outflow from operating activities |
(244) |
(594) |
|
Net cash inflow/(outflow) from financial investment |
1,058 |
(1,200) |
|
Net cash inflow/(outflow) before use of liquid resources and financing |
814 |
(1,794) |
|
(Increase)/decrease in short-term deposits |
(807) |
1,889 |
|
Increase in cash |
7 |
95 |
|
|
|
|
|
Reconciliation of net cash flow to movement in net funds |
|
|
|
Increase in cash |
7 |
95 |
|
Increase/(decrease) in short-term deposits |
807 |
(1,889) |
|
Foreign exchange movement |
(61) |
41 |
|
Movement in net funds |
753 |
(1,753) |
|
Net funds at the beginning of the period |
1,036 |
3,144 |
|
Net funds at the end of the period |
1,789 |
1,391 |
|
|
|
|
|
Represented by: |
|
|
|
Short-term deposits |
1,808 |
1,393 |
|
Bank overdraft |
(19) |
(2) |
|
|
1,789 |
1,391 |
Notes
1 Accounting policies
These financial statements have been prepared on the basis of the accounting policies set out in the Company's financial statements at 30 June 2010. These accounting policies are expected to be followed throughout the year ending 30 June 2011.
2 Dividend
The Directors do not propose to pay an interim dividend.
3 Return per share
Return per share attributable to shareholders reflects the overall performance of the Company in the period. Net revenue recognised in the first six months is not indicative of the total likely to be received in the full accounting year.
|
|
Half-year ended |
Half-year ended |
|
|
31 Dec 2010 £'000s |
31 Dec 2009 £'000s |
|
Revenue return |
(277) |
(149) |
|
Capital return |
14,021 |
13,022 |
|
Total return |
13,744 |
12,873 |
|
Weighted average number of shares in issue |
20,707,135 |
20,707,135 |
4 Results
The results for the half-year ended 31 December 2010 and 31 December 2009, which have not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on the review of interim financial information, constitute non-statutory accounts within the meaning of Section 434 of the Companies Act 2006. The latest published accounts which have been delivered to the Registrar of Companies are for the year ended 30 June 2010; the report of the independent auditors thereon was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The abridged financial statements shown above for the year ended 30 June 2010 are an extract from those accounts.
5 Report and accounts
The report and accounts for the half-year ended 31 December 2010 will be posted to shareholders and made available on the website www.fandcussmallers.com shortly. Copies may also be obtained from the Company's registered office, Exchange House, Primrose Street, London EC2A 2NY.
By order of the Board
F&C Management Limited, Secretary
Exchange House, Primrose Street, London EC2A 2NY
24 February 2011
This information is provided by RNS