Half Yearly Report

RNS Number : 3935X

F&C U.S. Smaller Companies PLC

14 February 2012

 



Date:                14 February 2012

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 2011

Summary of Unaudited Results

Attributable to equity shareholders	31 December 2011	30 June 2011	% Change
Net assets	£93.97m	£96.20m	-2.3
Net asset value per share	453.80p	464.58p	-2.3
Russell 2000 Index (sterling adjusted)	476.75	515.39	-7.5
Share price	427.13p	433.88p	-1.6
Gearing/(net liquidity)*	(2.3)%	(3.9)%
Increase in net asset value per share since inception on 8 March 1993			370.3
Increase in the Russell 2000 Index (sterling adjusted) since 8 March 1993			202.3

*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 fell sharply in August and September on fears of a global slowdown but staged a recovery subsequently as business activity improved. The value of our smaller companies holdings suffered more than blue chips, however, shareholders benefited from a rally in the dollar. Net asset value ("NAV") per share did not fall as much as the benchmark.

Performance

The NAV per share of your Company fell by 2.3% in the six month period to 31 December 2011, compared with a drop of 7.5% in the Company's benchmark, the sterling-adjusted Russell 2000 Index. Although it is disappointing to report a decline in NAV, it is pleasing that the Company's conservative investment approach helped protect shareholders.

Market review

During the six month period, the US equity market declined. The Russell 2000 Index fell 10.5% in dollar terms. The dollar's rise against sterling meant that this drop was reduced to 7.5% in sterling terms, so investors benefited slightly from the exchange rate movement because the Company's assets are valued in sterling.

The market was negatively affected by two developments: firstly by the political impasse in Washington DC over government borrowing and secondly by a worsening of the Euro Zone crisis. This was a particular concern because of the potential for another banking crisis or, at the least, a recession in Europe, which might harm economic prospects elsewhere. Despite this, from September US business activity improved, as measured by the usually reliable Institute of Supply Managers indicators. Towards the period end, employment conditions improved as well, with weekly jobless claims dropping below the critical level of 400,000 that signifies declining unemployment.

Smaller companies lagged the market: in dollar terms the 10.5% fall in the Russell 2000 exceeded that of the Standard & Poor's Composite Index, which lost only 4.8% and the technology-oriented NASDAQ Composite Index, which dropped 6.1%. This underperformance by smaller companies is typical in periods of economic uncertainty because they are perceived as being more geared to changes in economic growth.

In the six month period all sectors of the market declined but utilities, consumer staples and financial services fell least, as these are viewed as being more defensive. Those that lost most were energy, technology, and materials and processing, areas that are thought sensitive to the state of the economy.

Portfolio review

 

Good performance came from producer durables, technology, materials and processing, and consumer discretionary sectors. Conn's produced the best contribution amongst these sectors although the largest positive individual stock contribution came from Rex Energy. Poor performance occurred in health care, where Amedisys did badly. Outside of health care, the largest negative contribution came from Career Education. Both of these were sold.

Overall, the portfolio still favours producer durables but avoids technology. Within financials, insurance is preferred. The manager added new holdings in analogue semiconductors, civil construction, dental supplies and intermodal transportation. Several commodity-related stocks were sold.

 

Buy-backs and discount

The price of the shares fell by 1.6% to 427.1p over the six month period. The discount to NAV per share was 5.9% at the end of the period compared to 6.6% at 30 June 2011. As at 10 February 2012, the discount was 3.1%.

The Company did not buy back any 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%.

Outlook

Although the US economy seems to be regaining its footing following the summer slowdown and improvements in employment are very encouraging, there are still many uncertainties ahead, especially overseas. In addition, during the run-up to the November Presidential Election, populist political measures may come to the fore.

Absent a collapse in Europe, a property bust in the Far East or worsening of the conflict in the Middle East, the US economy should continue to progress. Help should come from a sustained recovery in the automobile industry, the benefits of cheap energy as a result of recent shale discoveries and dynamic business culture in the USA. The Company takes a risk averse approach to investment which should benefit shareholders over time.

Gordon Grender

14 February 2012

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 2011.  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 2011 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

14 February 2012

Unaudited Condensed Income Statement

for the half-year ended 31 December	2011			2010
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
(Losses)/gains on investments	-	(2,125)	(2,125)	-	14,084	14,084
Foreign exchange gains/(losses)	-	18	18	-	(61)	(61)
Income	449	-	449	271	-	271
Management fee	(350)	-	(350)	(341)	-	(341)
Other expenses	(155)	(2)	(157)	(166)	(2)	(168)
Net return on ordinary activities before taxation	(56)	(2,109)	(2,165)	(236)	14,021	13,785
Taxation on ordinary activities	(67)	-	(67)	(41)	-	(41)
Net return attributable to equity shareholders	(123)	(2,109)	(2,232)	(277)	14,021	13,744
Return per share - pence	(0.59)	(10.18)	(10.77)	(1.34)	67.71	66.37

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 2011	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 2011	5,177	2,468	841	8,175	81,407	(1,867)	96,201
Movements during the half-year ended 31 December 2011
Net return attributable to equity shareholders	-	-	-	-	(2,109)	(123)	(2,232)
Balance at 31 December 2011	5,177	2,468	841	8,175	79,298	(1,990)	93,969

Half-year ended 31 December 2010
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

Year ended 30 June 2011
Balance at 30 June 2010	5,177	2,468	841	8,175	62,016	(1,379)	77,298
Movements during the year ended 30 June 2011
Net return attributable to equity shareholders	-	-	-	-	19,391	(488)	18,903
Balance at 30 June 2011	5,177	2,468	841	8,175	81,407	(1,867)	96,201

Unaudited Condensed Balance Sheet

	31 Dec 2011	31 Dec 2010	30 June 2011
	£'000s	£'000s	£'000s
Fixed assets
Listed investments	91,911	89,420	92,630
Current assets
Debtors	115	63	522
Cash at bank and short-term deposits	2,195	1,808	3,441
	2,310	1,871	3,963
Creditors: amounts falling due within one year	(252)	(249)	(392)
Net current assets	2,058	1,622	3,571
Net assets	93,969	91,042	96,201
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	79,298	76,037	81,407
Revenue reserve	(1,990)	(1,656)	(1,867)
Total shareholders' funds	93,969	91,042	96,201
Net asset value per share - pence	453.80	439.66	464.58

Unaudited Condensed Cash Flow Statement

	Half-year ended	Half-year ended
	31 Dec 2011	31 Dec 2010
	£'000s	£'000s
Net cash outflow from operating activities	(180)	(244)
Net cash (outflow)/inflow from financial investment	(1,084)	1,058
Net cash (outflow)/inflow before use of liquid resources and financing	(1,264)	814
Decrease/(increase) in short-term deposits	1,213	(807)
(Decrease)/increase in cash	(51)	7
Reconciliation of net cash flow to movement in net funds
(Decrease)/increase in cash	(51)	7
(Decrease)/increase in short-term deposits	(1,213)	807
Foreign exchange movement	18	(61)
Movement in net funds	(1,246)	753
Net funds at the beginning of the period	3,441	1,036
Net funds at the end of the period	2,195	1,789
Represented by:
Short-term deposits	2,188	1,808
Cash at bank/(bank overdraft)	7	(19)
	2,195	1,789

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 2011. These accounting policies are expected to be followed throughout the year ending 30 June 2012.

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 2011 £'000s	31 Dec 2010 £'000s
Revenue return	(123)	(277)
Capital return	(2,109)	14,021
Total return	(2,232)	13,744
Weighted average number of shares in issue	20,707,135	20,707,135

4    Results

The results for the half-year ended 31 December 2011 and 31 December 2010, 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 2011; 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 2011 are an extract from those accounts.

5    Report and accounts

The report and accounts for the half-year ended 31 December 2011 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

14 February 2012

 

END

 

 

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