Annual Financial Report

RNS Number : 1123L

F&C Managed Portfolio Trust PLC

26 July 2011

 



To:      RNS

Date:  26 July 2011

From: F&C Managed Portfolio Trust plc

Results for the year ended 31 May 2011

The Board of F&C Managed Portfolio Trust plc announces the audited results of the Company for the year to 31 May 2011.

Chairman's Statement

Highlights

•           Strong NAV total returns for both the Income shares (+24.4%) and Growth shares (+24.0%)

•           Both share classes beat their benchmark, the FTSE All-Share Index

•           Annual dividend maintained at 4.4p per Income share for the year

•           Both shares traded at a small premium to NAV on average during the year

Introduction

This was another strong year for the UK equity market - and indeed many overseas markets too. News on economic growth was at best patchy, but corporate results were robust. With interest rates at rock bottom, savers turned to equities in the search for reasonable yields.

Across the investment trust sector there was some reduction in average discounts but the outperformance largely came from good selection by our manager, Peter Hewitt.

It was particularly pleasing to see another year of strong performance from the Growth shares; however, given a particularly difficult period in late 2008, during the financial crisis, the Growth shares remain behind the benchmark index when measured since launch.

Performance

For the Company's financial year to 31 May 2011, the total return (i.e. adding dividends paid to capital performance) of the FTSE All-Share Index was 20.4%. This index is the performance benchmark for both Portfolios.

The net asset value ('NAV') per share of the Income shares rose by 18.8% to 103.09p. With the four dividends paid out during the year included, the total return of 24.4% was ahead of the benchmark.

The NAV per share of the Growth shares rose by 24.0% to 107.52p per share and was also ahead of the benchmark.

Since launch in April 2008, the NAV per share total return of the Income shares is 22.0% and 9.7% for the Growth shares which compares to a total return of 13.7% from the benchmark index.

Dividends

Under the Company's capital structure any net revenue arising on the Growth Portfolio is transferred to the Income Portfolio in exchange for a capital contribution of an identical amount. The net revenue return for the Growth shares for the year to 31 May 2011 totalled £89,000, which is equivalent to 0.4p per Income share. Including this transfer, the Company's net revenue return was £927,000 which is equivalent to 4.20p per Income share.

Four interim dividends with respect to the year to 31 May 2011 have now been paid, totalling 4.4p per Income share. This is at the same annual rate as in the previous year to 31 May 2010. The fourth interim dividend was paid after the year end on 8 July 2011. In order to maintain the annual dividend rate, £52,000 was utilised from the revenue reserve, which now totals £78,000 or 0.35p per Income share. As referred to in my Statement last year a number of investee companies accelerated the payment of their dividends prior to the end of the last tax year on 5 April 2010, which contributed in part to the lower level of net income in the financial year under review. As the Company's income is recognised when dividends from our investments are marked ex dividend, any changes in the timing of these will impact the net revenue position.

As before, in the absence of unforeseen circumstances, your Board intends to declare three interim dividends, each of 1p per Income share payable in October 2011, January 2012 and April 2012. It is intended that a fourth interim dividend will be paid to Income shareholders in July 2012 but the directors will determine the amount of the fourth interim dividend when a clearer view emerges of income for the year to 31 May 2012.

Dividends paid by companies in the FTSE All-Share index are estimated to rise by some 10% over the current calendar year. In time this should feed through to an increase in payments from investment trusts, although some may be retained to re-build revenue reserves.

Borrowing

Early in the year borrowings of approximately £1 million were drawn down for the Income Portfolio and amounted to 4.2% of that Portfolio at the end of the financial year. The funds were invested primarily into existing holdings with higher yields, producing a net contribution to income after deducting interest charges.

At the time of writing borrowings in the Income Portfolio total £1.4 million but we are unlikely to increase this unless the market outlook improves significantly.

Discounts and share buy-backs

The share price of investment trusts does not always reflect closely their underlying NAV and many trusts trade at a substantial discount. In normal circumstances we aim to maintain our discount at not more than 5% by buying back shares from time to time. During the year to 31 May 2011 we have been able to maintain an average premium of 2.9% for the Income shares and 1.7% for the Growth shares. At the year end, the ratings were a discount of 0.1% for the Income shares and a premium of 1.4% for the Growth shares.

By maintaining these ratings we have been able to sell shares from treasury and issue new shares to meet demand. During the year the Company sold all 427,000 Income shares held in treasury and issued 650,000 Income shares from its block listing facility (part of the potential 9.99% increase in share capital which shareholders approved at the last AGM). In total 1,910,000 Growth shares were also sold from treasury and 485,000 Growth shares were bought back to be held in treasury. In addition 440,000 Growth shares were issued from the block listing facility. These Income and Growth shares were sold at a small premium to NAV, thereby providing a modest enhancement to the NAV of both share classes.

Demand for the Company's shares has been boosted by investors through the F&C savings plans.

We will be seeking shareholders' approval to renew the powers to allot shares, buy back shares and sell shares from treasury at the Annual General Meeting.

Share plans and conversion facility

Subject to minimum thresholds, shareholders have the opportunity to convert their Income shares into Growth shares or their Growth shares into Income shares upon certain dates every year, the next of which will be 28 October 2011. Information is provided in the Company's Annual Report and Accounts and full details will be provided on the Company's website www.fcmanagedportfolio.co.uk from 29 July 2011. Since launch no conversion has yet taken place as the number of shares offered for conversion has been well below the minimum threshold.

AGM

The annual general meeting ("AGM") will be held at 12.30pm on Tuesday 20 September 2011 and I hope you will attend. The meeting will be held in the offices of F&C Asset Management plc at Exchange House, Primrose Street, London.

Outlook

It is becoming clear that the problems which emerged so dramatically in the financial crisis of 2008-9 are far from resolved. Western economies face several years of slow growth, hampered by high levels of state and personal debt and ageing populations. Even with interest rates at all-time lows and the application of extensive programmes of stimulation, economic growth is faltering again. European politicians have proved woefully slow in tackling sovereign debt crises in the eurozone periphery.

Fortunately the corporate sector appears in generally robust shape, benefitting from strong balance sheets and a trend towards greater global trading. We believe that a well-diversified portfolio of investment companies provides valuable "defence in depth" to weather these challenging times.

Richard M. Martin

Chairman

26 July 2011

Manager's Review as follows:

Stockmarket background

In last year's Manager's review particular mention was made of the unprecedented level of uncertainty that prevailed regarding the likely path of the economy and also the equity market over the coming year. In the event, the actual outcome was a second year of returns from UK equities in excess of 20% which was almost certainly much better than most investors had envisaged.

This was achieved against a background which at first glance was not very conducive to positive returns from equities. There was the view that the actions being taken to address the massive budget deficit in terms of cutbacks to public sector spending and higher taxes were not supportive of growth and may lead to a double dip recession in the UK. Also a worry, which grew in importance over the course of the last twelve months, was the high level of inflation in the UK and whether this might force the hand of the Bank of England's monetary policy committee into raising interest rates when domestic activity levels were still subdued. Then there was the all-pervading issue of sovereign debt, in particular in relation to certain countries in the Euro-zone. Bail-outs and severe austerity measures have led to political unrest. For the highly indebted countries of Greece, Ireland, Portugal, and possibly Spain, it is not clear what the eventual outcome will be.

Yet despite the factors highlighted above equities did well.

Perhaps the principal element underpinning the performance was the decision by the Federal Reserve to embark on a second phase of quantitative easing (or "QE2"). This had the effect of providing liquidity to the system with the objective of supporting economic activity in the US. It also had the effect of bolstering equity markets globally as much of the liquidity created found a home there. With a background of historically very low interest rates (both in the UK and US) and much better than expected corporate profits from companies, equity markets, despite the many concerns which have been outlined, moved ahead usefully over the past twelve months. However a note of caution should be struck as progress since the turn of the calendar year has been much more modest as markets anticipated the end of QE2 and worried over the still faltering performance in terms of growth from many developed economies, especially that of the UK.

Performance

For the year to 31 May 2011 the FTSE All-Share Index rose by 20.4% (in total return terms). Over the same period the Net Asset Value per share for the Income Portfolio returned 24.4% whilst that of the Growth Portfolio was ahead by 24.0% (again both in total return terms). This is the second consecutive financial year that both Portfolios have generated returns ahead of that of the benchmark. For comparative purposes, the FTSE Equity Investment Instruments Index which measures the performance of Investment Companies rose by 21.4% (also in total return terms). The relative outperformance against the FTSE All-Share Index was evident throughout the financial year though was more modest during the second half.

The key factors behind the performance were:

Average sector discounts across the Investment Company sector in general tightened over the past twelve months from 10.3% to 8.0% by the end of the period. This is beneficial for share prices generally in the Investment Company sector. A combination of share buybacks, corporate activity and retail demand all contributed. The Income Portfolio in particular has benefited from the high ratings accorded to higher yielding investment companies where dividends are perceived to be secure. These ratings reflect the low yield available on gilts and cash deposits.

Gearing. One of the main advantages that investment companies have over their open ended counterparts is the ability to borrow and invest in the markets. Of course this can work against performance should equity price levels decline, however over the past year markets have recorded good gains which will have benefited trusts that have gearing.

Small/Mid Cap effect. When non-FTSE 100 stocks do well this tends to be beneficial for investment companies who have much greater exposure in their portfolios outside of the largest companies. During the past year the FTSE 250 Index rose 28.3% and the FTSE Small Cap Index (ex Investment Companies) gained 23.1% whilst the FTSE 100 Index was ahead by 19.1% (all in total returns). This trend was also evident in Europe and the US.

It should also be noted that the performance of both the Investment Companies sector and F&C Managed Portfolio Trust was achieved despite an adverse move in the important sterling/U.S. dollar exchange rate. During the period under review sterling rose from $1.446 to $1.646 an appreciation of nearly 14%. This had the effect of reducing returns, when translated back into sterling, from dollar related overseas equity markets.

Leading Contributors - Income Portfolio (all figures total return)

The leading performer in the Income Portfolio was Lowland Investment Company which appreciated by 46.5%. Lowland is a trust which resides in the UK Growth & Income sector and has been managed for a number of years by James Henderson. The key to this outstanding performance lies in the portfolio's exposure outside FTSE 100 stocks. Around one-third is held in mid and one-third in small capitalisation companies with a strong preference for manufacturing and industrial stocks. This type of company performed particularly well over the past year benefiting from strong export growth. Law Debenture is another trust run by the same manager and, although having around 30% of its assets overseas, the same themes can be found within the portfolio which has proved highly beneficial for investment performance. The trust gained 36.9% and has a yield of 3.4% slightly above that of Lowland's at 3.1%. European Assets Trust was the second strongest performer appreciating 45.0% over the year. The trust has a focus on European mid cap companies, an area that did well and has a yield of 6.1%. Another strong performance came from Edinburgh Investment Trust which rose 36.5%. This trust is run by Neil Woodford, one of the UK's most successful investment managers with a clear focus on steady defensive companies which can pay consistent dividends. Its portfolio has no banks or oil companies and has a yield of 4.2%. Finally it is extremely helpful for performance when the largest holding has a strong year; this was the case with British Assets Trust which returned 31.7% with a yield of 4.4%.

Leading Contributors - Growth Portfolio (all figures total return)

The largest return was achieved by Montanaro UK Smaller Companies Investment Trust which rose by 57.1%. This outstanding performance was achieved through a clear focus on the best quality small and medium sized companies with strong market positions and over 40% of the portfolio was in the industrial sector. TR Property Investment Trust - Sigma shares was the next strongest performer with a 52.3% gain. The remit of this trust is property securities throughout Europe with a market capitalisation of less than £1billion. It has a 70% exposure to Europe with most of that in northern countries like Germany, Sweden and the Netherlands. The property market in these nations has been much more stable and reflects the underlying strength of respective economies. In addition the discount on the trust has narrowed sharply. For the second year running Jupiter European Opportunities Trust has been amongst the strongest contributors; this time with a gain of 51.4%. Typically the manager, Alex Darwall, has a focus on quality growth companies across Europe which has driven performance. Once again this underlines the importance of picking the right manager with a clear investment approach. Schroder UK Mid Cap Fund rose by 47.8% and here again a bias to the best performing segment of the UK equity market combined with an experienced management team with proven stock-picking skills resulted in strong performance.

Investment Approach

For investment companies, whilst the discount between the share price and the net asset value is an important element in the decision to invest, and close attention is paid to it, it is not the dominant factor behind the investment selections of F&C Managed Portfolio Trust. The policy which we believe will serve shareholders best is to employ a long-term approach to investment and, as such, the key driver to performance is asset growth over the long-run. Integral to this approach is endeavouring to identify fund managers, within the investment company universe, who can demonstrate good performance records over the long-term either relative to a benchmark index or against a relevant peer group.

Once a potential investment has been identified an analysis of the fundamentals is then undertaken. Examples of factors to focus on include:

- what the prospects are for the relevant market or sector in which the company specialises;

- the need to understand the capital structure, the attitude to and use of gearing, as well as the cost and flexibility of the borrowings;

- meeting with the fund manager regularly to gain an understanding and appreciation of their views and approach and also to ensure that they are properly resourced and not managing too many other funds or different mandates;

- what is the investment style; for example, value or growth and how does this translate into portfolio selections.

Investment Strategy and Outlook

Last year in this section, the very high level of uncertainty that was pervading financial markets, particularly with regard to economic prospects, was noted. However it was felt much of this was discounted in historically attractive valuations for equities such that although uncertainty was high, the investment stance was one of cautious optimism.

One year on, the prospects for economic activity are more uniform in that the majority of commentators are on balance holding to the view that recovery in the UK economy will continue although the level of growth will be very modest. This recovery is different in that consumers are facing an almost unprecedented squeeze on incomes due to tax rises, inflation and few, if any, pay rises. Exports and manufacturing are doing better and this is helping to rebalance the economy however it is not a "feel good" recovery. All this, contributes to a low level of consumer confidence and preparedness to spend. In the US, the surge of growth experienced after the recession has faded and the pace of activity is slowing which is a concern. Europe is split between severe problems in the south and a remarkably resilient performance from Germany and certain other northern European countries. Pacific and key emerging market economies have had the contrasting problem of overheating, however there are signs that this may be brought under control during the second half of this year. Meantime, and thankfully for the rest of the world, growth should remain robust from countries such as China, India and Brazil.

However, there remains a great deal to be concerned about that could derail the scenario outlined above. Perhaps the most worrisome is the sovereign debt problems of Greece, Ireland and Portugal. Quite what the solution will be is open to debate; however, sovereign default and the break up of the Euro should not be discounted.

If a prolonged period of below trend growth from the UK and many developed economies appears most likely, what does mean for the prospects for equity markets?

Interestingly, against a background of almost unremittingly poor negative news on the economic front, stockmarkets have been reasonably resilient and so far have held their value. Sentiment however is not good. With the ending of the Federal Reserve's policy of quantitative easing and the near term risks to growth on the downside, it would appear the most vulnerable period for equity markets may be in the coming months.

Looking beyond, it is possible to become more positive with regard to the prospects for equities. Consensus corporate earnings and dividend growth expectations to December 2011 have the UK equity market on a prospective price earnings ratio of 10.5 times with a dividend yield of 3.6%. Whilst not outstandingly cheap, these valuations are still modest and attractive when compared to either the returns on bank deposits or UK gilts where the yield on 10 year gilts is just 3.3%. Markets have been dominated by macro uncertainties; however, should these recede it would pave the way for equity markets, with attractive fundamentals, to move ahead.

Since the inception of F&C Managed Portfolio Trust over three years ago, the principal theme in strategy has been to have, where possible, a bias to overseas growth with the aim of seeking to capture the superior growth and inherent potential of Pacific and emerging markets. In addition as, over the long term, sterling is viewed as a weak currency, returns should be boosted when translated back into sterling. There seems little cause to change this key element of strategy.

In conclusion, despite the many apparent risks to economies and markets; with attractive valuations and reasonable corporate earnings and dividend growth the Manager approaches the coming year similarly to twelve months ago, with cautious optimism.

Peter Hewitt

Investment Manager

F&C Investment Business Limited

Income Statement (audited)

Year to 31 May 2011

	Notes	Revenue	Capital	Total
		£'000	£'000	£'000
Gains on investments		-	7,798	7,798
Income		1,353	-	1,353
Investment management and performance fee		(76)	(244)	(320)
Other expenses		(345)	-	(345)
Return on ordinary activities before finance costs and tax		932	7,554	8,486
Finance costs		(5)	(7)	(12)
Return on ordinary activities before tax		927	7,547	8,474
Tax on ordinary activities	5	-	-	-
Return attributable to shareholders	2	927	7,547	8,474
Return per Income share	3	4.20p	16.41p	20.61p
Return per Growth share	3	-	20.74p	20.74p

The total column of this statement is the Profit and Loss Account of the Company.  The supplementary revenue and capital columns are prepared under guidance published by The Association of Investment Companies.

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

All revenue and capital items in the Income Statement derive from continuing operations.

A statement of total recognised gains and losses is not required as all gains and losses of the Company have been reflected in the above statement.

Income Statement (audited)

Year to 31 May 2010

	Notes	Revenue	Capital	Total
		£'000	£'000	£'000
Gains on investments		-	5,746	5,746
Income		1,314	-	1,314
Investment management and performance fee		(61)	(142)	(203)
Other expenses		(285)	-	(285)
Return on ordinary activities before finance costs and tax		968	5,604	6,572
Finance costs		-	-	-
Return on ordinary activities before tax		968	5,604	6,572
Tax on ordinary activities		(12)	-	(12)
Return attributable to shareholders	2	956	5,604	6,560
Return per Income share	3	4.58p	12.54p	17.12p
Return per Growth share	3	-	16.82p	16.82p

The total column of this statement is the Profit and Loss Account of the Company.  The supplementary revenue and capital columns are prepared under guidance published by The Association of Investment Companies.

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

All revenue and capital items in the Income Statement derive from continuing operations.

A statement of total recognised gains and losses is not required as all gains and losses of the Company have been reflected in the above statement.

Balance Sheet (audited)

As at 31 May 2011

		Income Shares	Growth Shares	Total
	Notes	£'000	£'000	£'000
Non-current assets
Investments at fair value		24,421	20,398	44,819
Current assets
Debtors		30	22	52
Cash at bank and on deposit		-	333	333
		30	355	385
Creditors
Amount falling due within one year		(1,197)	(82)	(1,279)
Net current (liabilities)/assets		(1,167)	273	(894)
Net assets		23,254	20,671	43,925
Capital and reserves
Called-up share capital		2,256	1,956	4,212
Share premium		729	654	1,383
Capital redemption reserve		-	182	182
Special reserve		19,380	16,870	36,250
Capital reserves		495	1,009	1,504
Revenue reserve		394	-	394
Shareholders' Funds		23,254	20,671	43,925
Net asset value per share (pence)	6	103.09p	107.52p

Balance Sheet (audited)

As at 31 May 2010

		Income Shares	Growth Shares	Total
	Notes	£'000	£'000	£'000
Non-current assets
Investments at fair value		18,013	14,743	32,756
Current assets
Debtors		41	19	60
Cash at bank and on deposit		717	356	1,073
		758	375	1,133
Creditors
Amount falling due within one year		(125)	(66)	(191)
Net current assets		633	309	942
Net assets		18,646	15,052	33,698
Capital and reserves
Called-up share capital		2,191	1,912	4,103
Share premium		99	5	104
Capital redemption reserve		-	182	182
Special reserve		19,055	15,866	34,921
Capital reserves		(3,130)	(2,913)	(6,043)
Revenue reserve		431	-	431
Shareholders' Funds		18,646	15,052	33,698
Net asset value per share (pence)	6	86.81p	86.70p

Cash Flow Statement (audited)

Year to 31 May 2011

		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Operating activities
Investment income received, net of withholding tax suffered		1,075	283	1,358
Deposit interest received		1	2	3
Investment management fees paid		(124)	(108)	(232)
Other cash payments		(172)	(168)	(340)
Net cash inflow from operating activities		780	9	789
Servicing of finance
Interest paid on bank borrowings		(10)	-	(10)
Net cash outflow from servicing of finance		(10)	-	(10)
Capital expenditure and financial investment
Purchases of investments		(3,518)	(3,888)	(7,406)
Disposals of investments		1,003	2,159	3,162
Net cash outflow from capital expenditure and financial investment		(2,515)	(1,729)	(4,244)
Equity dividends paid		(964)	-	(964)
Net cash outflow before financing		(2,709)	(1,720)	(4,429)
Financing
Issue of new shares		646	419	1,065
Shares purchased for cancellation		-	-	-
Shares purchased to be held in treasury		-	(493)	(493)
Sale of shares from treasury		374	1,771	2,145
Net cash inflow from financing		1,020	1,697	2,717
Decrease in cash		(1,689)	(23)	(1,712)
Reconciliation of net cash flow to movement in net (debt)/cash
Decrease in cash in the year		(1,689)	(23)	(1,712)
Opening net cash		717	356	1,073
Closing net (debt)/cash		(972)	333	(639)

Cash Flow Statement (audited)

Year to 31 May 2010

		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Operating activities
Investment income received, net of withholding tax suffered		954	344	1,298
Deposit interest received		3	1	4
Investment management fees paid		(102)	(85)	(187)
Other cash payments		(162)	(141)	(303)
Net cash inflow from operating activities		693	119	812
Capital expenditure and financial investment
Purchases of investments		(2,054)	(1,496)	(3,550)
Disposals of investments		1,056	2,084	3,140
Net cash (outflow)/inflow from capital expenditure and financial investment		(998)	588	(410)
Equity dividends paid		(919)	-	(919)
Net cash (outflow)/inflow before financing		(1,224)	707	(517)
Financing
Shares purchased for cancellation		-	(1,156)	(1,156)
Shares purchased to be held in treasury		(243)	-	(243)
Sale of shares from treasury		1,203	196	1,399
Net cash inflow/(outflow) from financing		960	(960)	-
Decrease in cash		(264)	(253)	(517)
Reconciliation of net cash flow to movement in net cash
Decrease in cash in the year		(264)	(253)	(517)
Opening net cash		981	609	1,590
Closing net cash		717	356	1,073

Reconciliation of Movements in Shareholders' Funds (audited)

Year to 31 May 2011

		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Opening shareholders' funds		18,646	15,052	33,698
Increase in share capital in issue		646	419	1,065
Sale of shares from treasury		374	1,771	2,145
Shares purchased for treasury		-	(493)	(493)
Transfer of net income to Income shares from Growth shares		89	(89)	-
Transfer of capital from Income shares to Growth shares		(89)	89	-
Dividends paid		(964)	-	(964)
Return attributable to shareholders		4,552	3,922	8,474
Closing shareholders' funds		23,254	20,671	43,925

Reconciliation of Movements in Shareholders' Funds (audited)

Year to 31 May 2010

		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Opening shareholders' funds		15,031	13,026	28,057
Sale of shares from treasury		1,203	196	1,399
Shares purchased for treasury		(243)	-	(243)
Shares purchased for cancellation		-	(1,156)	(1,156)
Transfer of net income to Income shares from Growth shares		189	(189)	-
Transfer of capital from Income shares to Growth shares		(189)	189	-
Dividends paid		(919)	-	(919)
Return attributable to shareholders		3,574	2,986	6,560
Closing shareholders' funds		18,646	15,052	33,698

Principal Risks and Uncertainties

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

Other risks faced by the Company include the following:

·      External - events such as terrorism, protectionism, inflation or deflation, economic recessions and movements in interest rates and exchange rates could affect share prices in particular markets.

·      Investment and strategic - incorrect strategy, asset allocation, stock selection and the use of gearing could all lead to poor returns for shareholders.

·      Credit risk - is the risk that a counterparty will fail to discharge an obligation or commitment that it had entered into with the Company.  All the assets of the Company which are traded on a recognised exchange are held by JPMorgan Chase Bank, the Company's custodian.  Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to the securities held by the custodian to be delayed or limited.

·      Regulatory - breach of regulatory rules could lead to suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report.  Breach of Chapter 4, Part 24 of the Corporation Tax Act 2010 could lead to the Company being subject to tax on capital gains.

·      Operational - failure of the Manager's accounting systems or disruption to the Manager's business, or that of the third party service providers, could lead to an inability to provide accurate reporting and monitoring to the Company, leading to a loss of shareholders' confidence.

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

The Board seeks to mitigate and manage these risks through continual review, policy-setting and reliance upon contractual obligations.  It also regularly monitors the investment environment and the management of the Company's investment portfolio, and applies the principles detailed in the internal control guidance issued by the Financial Reporting Council.

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

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

·      The financial statements contained within the Annual Report for the year to 31 May 2011, of which this statement of results is an extract, have been prepared in accordance with applicable UK Generally Accepted Accounting Practice, on a going concern basis, and give a true and fair view of the assets, liabilities, financial position and return of the Company;

·      The Chairman's Statement and Manager's Review include a fair review of the important events that have occurred during the financial year and their impact on the financial statements;

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

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

On behalf of the Board

Richard M. Martin

Chairman

26 July 2011

Notes (audited)

1.   The financial statements of the Company, which are the responsibility of, and were approved by, the Board on 26 July 2011, have been prepared in accordance with UK Generally Accepted Accounting Practice ("UK GAAP") and in accordance with guidelines set out in the Statement of Recommended Practice (''SORP''), for Investment Trust Companies and Venture Capital Trusts issued by the Association of Investment Companies (''AIC'') in January 2009.

2.   Segmental analysis

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

            The Company's Income Statementcan be analysed as follows. This has been disclosed to assist shareholders' understanding, but this analysis does not represent statutory accounts:

            Year ended 31 May 2011

	Income Portfolio			Growth Portfolio			Total
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments	-	3,872	3,872	-	3,926	3,926	-	7,798	7,798
Income	1,066	-	1,066	287	-	287	1,353	-	1,353
Investment   management and   performance fee	(53)	(151)	(204)	(23)	(93)	(116)	(76)	(244)	(320)
Other expenses	(170)	-	(170)	(175)	-	(175)	(345)	-	(345)
Return on ordinary activities before finance costs and tax	843	3,721	4,564	89	3,833	3,922	932	7,554	8,486
Finance costs	(5)	(7)	(12)	-	-	-	(5)	(7)	(12)
Return on ordinary activities before tax	838	3,714	4,552	89	3,833	3,922	927	7,547	8,474
Tax on ordinary activities	-	-	-	-	-	-	-	-	-
Return  #	838	3,714	4,552	89	3,833	3,922	927	7,547	8,474

                Year ended 31 May 2010

	Income Portfolio			Growth Portfolio			Total
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments	-	2,878	2,878	-	2,868	2,868	-	5,746	5,746
Income	972	-	972	342	-	342	1,314	-	1,314
Investment   management and   performance fee	(43)	(71)	(114)	(18)	(71)	(89)	(61)	(142)	(203)
Other expenses	(153)	-	(153)	(132)	-	(132)	(285)	-	(285)
Return on ordinary activities before tax	776	2,807	3,583	192	2,797	2,989	968	5,604	6,572
Tax on ordinary activities	(9)	-	(9)	(3)	-	(3)	(12)	-	(12)
Return  #	767	2,807	3,574	189	2,797	2,986	956	5,604	6,560

# Any net revenue return attributable to the Growth Portfolio is transferred to the Income Portfolio and a corresponding transfer of an identical amount of capital is made from the Income Portfolio to the Growth Portfolio and accordingly the whole return in the Growth Portfolio is capital.  Refer to the Reconciliation of Movements in Shareholders' Funds.

.

3.   Return per share

      The return per share is as follows:

Year ended 31 May 2011	Income Shares			Growth Shares
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Return attributable to Portfolios	838	3,714	4,552	89	3,833	3,922
Transfer of net income from Growth to Income Portfolio	89	-	89	(89)	-	(89)
Transfer of capital from Income to Growth Portfolio	-	(89)	(89)	-	89	89
Return attributable to shareholders	927	3,625	4,552	-	3,922	3,922
Return per share	4.20p	16.41p	20.61p	-	20.74p	20.74p
Weighted average number of shares in issue during the year (excluding shares held in treasury)		22,081,107			18,907,225

      The return per share is as follows:

Year ended 31 May 2010	Income Shares			Growth Shares
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Return attributable to Portfolios	767	2,807	3,574	189	2,797	2,986
Transfer of net income from Growth to Income Portfolio	189	-	189	(189)	-	(189)
Transfer of capital from Income to Growth Portfolio	-	(189)	(189)	-	189	189
Return attributable to shareholders	956	2,618	3,574	-	2,986	2,986
Return per share	4.58p	12.54p	17.12p	-	16.82p	16.82p
Weighted average number of shares in issue during the year (excluding shares held in treasury)		20,880,041			17,752,074

4.       Dividends

		2011
				Income shares Total
Dividends on Income shares				£'000
Amounts recognised as distributions to shareholders during the year:
For the year ended 31 May 2010
- fourth interim dividend of 1.4p per share				301
For the year ended 31 May 2011
- first interim dividend of 1p per share				220
- second interim dividend of 1p per share				221
- third interim dividend of 1p per share				222
				964
Amounts relating to the year but not paid at the year end: - fourth interim dividend of 1.4p per share*				316
				316

* Based on 22,557,192 Income Shares at the record date of 24 June 2011.

The fourth interim dividend of 1.4p per Income share, was paid on 8 July 2011 to shareholders on the register on 24 June 2011, with an ex-dividend date of 22 June 2011.

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

5.       (a) Tax on ordinary activities

	Income Portfolio			Growth Portfolio			Total
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Current tax charge for the year being Taxation on ordinary activities	-	-	-	-	-	-	-	-	-

 (b) Reconciliation of tax charge

		2011
		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Return on ordinary activities before tax:		4,552	3,922	8,474
Corporation tax at standard rate of 27.7 per cent (2010: 28 per cent)		1,261	1,086	2,347
Effects of:
Gains on investments not taxable/relievable		(1,072)	(1,088)	(2,160)
Overseas tax suffered		-	-	-
Non taxable UK dividend income		(199)	(71)	(270)
Non taxable overseas dividend income		(95)	(8)	(103)
Expenses not utilised		105	81	186
Current year tax charge (note 5 (a))		-	-	-

6.       The net asset value per Income share is calculated on net assets of £23,254,000 (2010: £18,646,000), divided by 22,557,192 (2010: 21,480,192) Income shares, being the number of Income shares in issue at the year end (excluding shares held in treasury).

The net asset value per Growth share is calculated on net assets of £20,671,000 (2010: £15,052,000), divided by 19,225,567 (2010: 17,360,567) Growth shares, being the number of Growth shares in issue at the year end (excluding shares held in treasury). 

7.       During the year the Company bought back nil (2010: 320,000) Income shares at a cost of £nil (2010: £243,000) to be held in treasury and resold out of treasury 427,000 (2010: 1,450,000) Income shares, receiving net proceeds of £374,000 (2010: £1,203,000). At 31 May 2011 the Company held nil (2010: 427,000) Income shares in treasury.  A further 650,000 Income shares were issued for net proceeds of £646,000.

          During the year the Company bought back 485,000 (2010: nil) Growth shares at a cost of £493,000 (2010: nil) to be held in treasury and resold out of treasury 1,910,000 (2010: 250,000) Growth shares receiving net proceeds of £1,771,000 (2010: £196,000).   During the year the Company bought back nil (2010: 1,555,000) Growth shares at a cost of £nil (2010: £1,156,000) for cancellation.  At 31 May 2011 the Company held 335,000 (2010: 1,760,000) Growth shares in treasury.  A further 440,000 Growth shares were issued for net proceeds of £419,000.

8.   Financial Instruments

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

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

The fair value of the financial assets and liabilities of the Company at 31 May 2011 and 31 May 2010 is not materially different from their carrying value in the financial statements.

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

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

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

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

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

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

Market price risk

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

Interest rate risk

Floating rate

When the Company retains cash balances the majority of the cash is held in variable rate bank accounts yielding rates of interest linked to the UK base rate which was 0.5 per cent at 31 May 2011 (2010: 0.5 per cent). There are no other assets which are directly exposed to floating interest rate risk. The cost of the Company's borrowing facility from its custodian JPMorgan Chase Bank is liked to the Sterling Overnight Interbank Average Rate (SONIA) which was 0.54 per cent at 31 May 2011.

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

Foreign currency risk

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

                  Credit risk

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

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

All the assets of the Company which are traded on a recognised exchange are held by JPMorgan Chase Bank, the Company's custodian. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held by the custodian to be delayed or limited. The Board monitors the Company's risk by reviewing the custodian's internal control reports.

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

Liquidity risk

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

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

The Company maintains sufficient investments in cash and readily realisable securities to pay accounts payable and accrued expenses which are settled in accordance with suppliers stated terms. During the year, the Company also secured a borrowing facility from its custodian JPMorgan Chase Bank which is repayable on demand.

9.       Subject to certain minimum and maximum thresholds which may be set by the Board of F&C Managed Portfolio Trust plc ("the Board") from time to time, shareholders have the opportunity to convert their Income shares into Growth shares and/or their Growth shares into Income shares upon certain dates, the next of which will be 28 October 2011 and then annually or close to annually thereafter (subject to the articles of association of the Company). The Conversion notice period will commence on 29 July 2011 and full details will be provided on the Company's website from this date and in the Company's Annual Report and Accounts.

10.     These are not full statutory accounts in terms of Section 434 of the Companies Act 2006. The full audited Annual Report and Accounts for the year ended 31 May 2011 will be sent to shareholders shortly, and will be available for inspection at 80 George Street, Edinburgh, the registered office of the Company.  The full Annual Report and Accounts will be available on the Company's website www.fcmanagedportfolio.co.uk.

The audited accounts for the year to 31 May 2011 will be lodged with the Registrar of Companies following the Annual General Meeting to be held on 20 September 2011.

For further information, please contact:

Peter Hewitt, F&C Investment Business Limited    0131 718 1244

Ian Ridge, F&C Investment Business Limited        0131 718 1010

 

END

 

 

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