Annual Financial Report

RNS Number : 6420N

F&C Global Smaller Companies PLC

15 June 2010

 



Date:                15 June 2010

Contact:           Peter Ewins                                                   

                        F&C Management Limited                              

                        020 7628 8000                                               

F&C Global Smaller Companies PLC

Audited Statement of Results

for the year ended 30 April 2010

Summary of results

Attributable to equity shareholders	30 April 2010	30 April 2009	% Change
Share price	461.00p	325.00p	+41.8
Net asset value per share (debenture at nominal value)	518.10p	360.23p	+43.8
Net asset value per share (debenture at market value)	510.14p	351.06p	+45.3
	Year ended 30 April 2010	Year ended 30 April 2009	% Change
Revenue return per share	4.88p	5.66p	-13.8
Dividends per share	5.00p	4.89p	+2.2
Total expense ratio (based on average net assets)	0.78%	0.93%

Chairman's Statement

While at the start of the period under review many countries were still in deep recession, the underlying economic environment brightened as the year progressed. This, in combination with ultra-low interest rates on a global basis, was supportive to the case for equities over other asset classes. Encouragingly, smaller company shares did better than the overall markets in most parts of the world as investors became more positive on the outlook for corporate earnings and looked to gain greater exposure to the recovery.

Performance and the Benchmark

The positive background was duly reflected in the Company's net asset value ("NAV") per share and share price, both of which rose substantially and closed the year near to their all-time highs. Measured on a total return basis, the NAV per share return was 45.6%, while the share price was up 43.8%. The increase in the value of the Company's assets combined with tight control of costs meant that the total expense ratio fell from 0.93% to 0.78%.

In March the Board announced that, following a review, it had concluded that the Company's Benchmark should be changed with effect from the start of the 2010/11 financial year. For the year under review, the Benchmark was a blended index of the returns from the Hoare Govett UK Smaller Companies Index (40%) and the MSCI World ex UK Small Cap Index (60%).

Over the period since the last change in the Benchmark in 2005, the world's equity markets have evolved and a notable trend, mirroring economic developments, has been the growth in importance of emerging markets. Many countries in Asia, most notably China, but also Latin America with Brazil at the forefront, have been growing at a rapid pace and their equity markets are also now significantly bigger, offering a better spread of companies of all sizes. The Board believes that this should be reflected in the construction of the Benchmark, not least because these markets more likely offer better growth potential than developed markets over the long term as a result of their superior underlying growth dynamics.  Hence, for the international component of the Benchmark, the MSCI All Country World ex UK Small Cap Index will now be used as this incorporates around 20 additional countries compared to the previously used index and has a much higher emerging market exposure.

The Board also decided to reduce the UK's weighting in the Benchmark as, while there is an established, vibrant and broadly spread domestic small cap equity market, the faster pace of economic growth elsewhere is likely to diminish the UK's relative importance. In addition, as the UK portfolio no longer holds any investment companies, these will be stripped out from the Benchmark calculation. The Benchmark for the new financial year will be 30% Hoare Govett UK Smaller Companies (excluding investment companies) Index and 70% MSCI All Country World ex UK Small Cap Index.

The Company has a policy to allocate management fees and interest expenses between its Capital Reserve and Revenue Reserve, broadly in proportion to the Board's long-term expected split of returns from the portfolio. The proportion allocated to Capital Reserve has historically been 70%. In recognition of the likely switch in geographic emphasis of the portfolio over the medium term, the Board amended the proportion of such expenses allocated to Capital Reserve to 75% with effect from 1 May 2010.

The Benchmark used for the 2009/10 year produced a total return of 47.0%, a little ahead of the return from the Company's NAV per share and therefore no performance fee was earned. Underperformance is carried forward into future performance fee calculations, which will use the new Benchmark. However, over the last five years, it is pleasing to report that the NAV per share has shown a total return of 76.7% compared to the Benchmark return of 65.9%, while the share price including reinvested dividends has returned 83.7%.

While it is always pertinent to consider performance against a relevant benchmark, the Board also monitors how the Company is doing in relation to other global growth orientated investment companies. In the year to the end of April 2010 the Company's NAV per share growth ranked 8th out of 31 investment trusts in the Association of Investment Companies Global Growth sector, following on from a strong 2008/9 in this context.

Dividends

A year ago, I highlighted that we expected dividend income from the investment portfolio to be under pressure due to the global downturn. Although UK dividend receipts actually grew, overseas companies held in the portfolio were less generous in their payments and this, combined with lower income from our cash deposits, meant that the revenue return per share fell by 13.8% this year.

While this has been a difficult time for dividend income, improving trends in corporate earnings in the last few months around the world provide some encouragement for the new year and, on this basis, the Board is recommending a dividend payment of 3.40p per share, a 3.3% rise on last year's final, making a total dividend for the year of 5.00p per share, an increase of 2.2%. This will be paid on 6 August 2010 to shareholders on the register on 25 June 2010. The decision to pay an increased final dividend means that the Company has now delivered 40 consecutive years of dividend increases. Looking forward, however, the likely reduction in exposure to the UK compared to historic levels as a consequence of the revised Benchmark could put pressure on our income, so shareholders should not necessarily expect that our own dividend payment can necessarily carry on rising forever.

Economic and market background

The world economy was still contracting in early 2009, but concerted efforts to stimulate activity by governments and central banks proved successful in turning things around, and to a greater extent than many had forecast. The US, which led the world into the downturn, started to pick up around the middle of 2009 and now appears to be growing at an annual rate of about 3%, while economies in mainland Europe, such as Germany and France, were also early beneficiaries of the widespread initiatives to encourage the sale of new cars. Asia as a whole also picked up pace and the UK moved out of recession in the last quarter of 2009, albeit at a pedestrian rate.

The economic recovery was good news for corporate earnings and stock markets were boosted by a steady stream of analyst upgrades, although in many cases forecasts were rising from a low base. Cyclical recovery stocks performed strongly, particularly in the early part of the year, but gains broadened out later on. The best performing markets over the year were to be found in Asia; the region had been weak in 2008/9 but bounced back strongly as the impact of the massive Chinese stimulus packages and improving demand elsewhere in the world boosted demand for exports. Japan, however, failed to keep pace with the rest of Asia, with the strength of the yen hurting its exporters and political change failing to excite investors.

In early 2010, attention in the financial markets swung more towards the endemic risks of high sovereign debt levels. Falling tax revenues as a result of the global recession combined with fiscal stimulus packages designed to get economies moving again have led many countries to become dangerously indebted. Yields on some government bonds rose dramatically, most notably in the smaller southern euro-zone states, leading to the need for an EU/IMF bail-out for Greece. Equity markets, having initially been relaxed about the wider implications of pressure in bond markets, became more concerned about the potential contagion effect as the year drew to a close.

Portfolio performance

All markets delivered a positive return in the year under review and the returns from the regional portfolios against their local small cap indices are shown below. This illustrates that, in an absolute sense, the performance of our portfolio was strongest in Asia and weakest in Japan.

Geographical performance (total return sterling adjusted)
for the year ended 30 April 2010
	Portfolio	Local smaller companies index
UK	41.7%	41.8%
US	45.7%	44.2%
Europe ex UK	44.8%	46.0%
Japan	24.3%	26.9%
Pacific ex Japan	67.2%	68.6%
Source: F&C Management Limited

In a relative sense, however, the portfolio did best in the US, where the outperformance followed a particularly strong year in 2008/9. Elsewhere, we almost matched the local small cap indices in the UK and were a little further behind in Asia, Japan and Europe.

Currencies and asset allocation

Having the portfolio appropriately spread in a geographic sense is always important and once again the range of returns from the different markets illustrates this point. This year, however, currency movements had less of an effect than in the most recent past, as sterling ended the year not much changed against the other main currencies.

Geographical distribution of the investment portfolio
	30 April 2010	30 April 2009
North America	43.3%	43.9%
UK	33.5%	34.1%
Continental Europe	9.1%	7.1%
Rest of World	8.7%	8.6%
Japan	5.4%	6.3%
Source: F&C Management Limited

In overall terms, asset allocation decisions worked well. Going into the year our largest positions were to be overweight in the Rest of the World and the US and to be underweight in the UK. The Rest of the World exposure, in practice, was predominantly Asian exposure, although the Manager has been investigating opportunities to increase the presence in Latin America. The better economic performance of Asia and the potential for a re-rating of smaller stocks in these markets at the start of the year underpinned this stance and we were rewarded by strong gains. In the US early in the year we took some money out of the market, but later in the period we again lifted the weighting as the Manager became more cautious on developments in Europe. For the year as a whole, however, we were wrong to be underweight in European markets as they performed well until late on.

The Manager has been cautious about the UK's prospects in a relative sense for some time, given the country's weak fiscal position, balance of payments deficit and the over-indebted consumer. We did, however, increase the UK weighting early in the year which worked out well in terms of timing, but exposure was reduced again later on following a recovery in sterling versus the dollar.

Gearing policy

The Company was geared for nearly all of the first three quarters of the year and, given the run-up in markets, this was helpful to NAV performance. A more cautious view on market valuations and the potential for an eventual fall-out stemming from bond market weakness prompted the Manager to de-gear early in 2010. At the end of April there was a 3.3% net cash position taking account of the debenture liability at nominal value.

Discount and buybacks

At the end of the year the discount at which the share price trades to NAV per share, calculated to exclude current period income and taking the debenture at market value, was 9.0%. This was higher than the 6.3% at the end of the prior year and the 5.5% at the end of October 2009. During the year the Board continued to act to protect the degree of volatility in, and level of, the discount by using its buyback powers. The aim remains to keep the discount as close as is possible to 5% over time. Late in the year profit taking by some shareholders meant that buyback activity was stepped up and a total of 1,694,928 shares (4% of the starting share capital) were bought in and cancelled over the year. This process enhanced the NAV per share by approximately 0.6%. It is encouraging to note that nearly 3,000 new shareholders joined the register in the year, illustrating continuing strong retail investor demand for the mandate.

At the annual general meeting we will again seek shareholder approval to buy back up to 14.99% of the issued share capital, with the option of holding shares bought back in treasury. As previously, it is likely that shares bought in will be immediately cancelled. Any shares held in treasury would only be re-issued at a premium to NAV per share.

Outlook

Continuing strong growth in China, combined with solid expansion in the US, underpin an improved outlook for the world economy in 2010. However, in China and some other places including the UK, it is possible that interest rates may have to rise to curtail inflationary pressures, and we have already seen some rate increases in commodity orientated economies such as Australia. The outlook for growth in the euro-zone and in the UK looks less encouraging as stimulus packages are being replaced by fiscal austerity plans.

Equity markets have rallied a long way and this has been reflected in a year end NAV per share nearly double the level reached when sentiment was at its worst in March 2009. The Manager has therefore taken a more cautious stance in recent months as a consequence of the higher valuations and concern about possible contagion from the crisis of confidence in the sovereign bond markets of Europe. This move has been vindicated at the start of the new financial year by a correction in share prices.

The resilient overall profit performance of much of the portfolio during the recession and the strong bounce back in earnings into the recovery are encouraging indications of the longer term potential for a global smaller companies mandate to deliver good returns to shareholders.

Anthony Townsend

Chairman

15 June 2010

Principal Risks

The Company's assets consist mainly of listed equities and its principal risks are therefore market related. The specific key risks faced by the Company include the following:

·      Investment strategy - an inappropriate investment strategy could result in poor returns for shareholders and a widening of the discount of the share price to the net asset value ("NAV") per share. The Board regularly reviews strategy and considers the allocation of assets between geographic regions and industrial sectors, gearing, currency exposure and the balance between quoted and unquoted stocks.

·      Investment management resources - the quality of the management team is a crucial factor in delivering good performance and loss of the Manager's key staff could affect investment returns. The Manager develops its recruitment and remuneration packages in order to retain key staff, has training and development programmes in place and undertakes succession planning.

·      Regulatory - failure to comply with applicable legal and regulatory requirements could result in the Company losing its listing and/or being subject to corporation tax on its capital gains. The Board reviews regular reports from the Manager on the controls in place to ensure the Company's compliance with these requirements, together with regular investment listings and income forecasts, as part of its monitoring of compliance with section 842.

·      Operational - failure of the Manager's core accounting systems or a disastrous disruption to its business could lead to an inability to provide accurate reporting and monitoring. The Manager is contractually obliged to ensure that its conduct of business conforms to applicable laws and regulations. The Manager has confirmed that reliable back-up systems are in place.

·      Financial - inadequate financial controls could result in misappropriation of assets, loss of income and debtor receipts and inaccurate reporting of NAV per share. The Board regularly reviews the Manager's statements on its internal controls and procedures and subjects the books and records of the Company to an annual audit. The financial risks are set out in more detail in note 4.

·      Safe custody - failure of the custodian to provide a secure service or continue operating could result in the Company's assets being at risk. The Board receives regular information on the service of the custodian from the Manager, which reviews service levels and receives an annual SAS70 report on the custodian by an independent auditor.

·      Counterparties - the Company is exposed to potential failures by counterparties to deliver securities for which it has paid or to pay for securities which it has delivered.

Statement of Directors' 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 annual report for the year ended 30 April 2010 of which this statement of results is an extract, that to the best of their knowledge:

·      the financial statements have been prepared in accordance with applicable UK generally accepted accounting standards, on a going concern basis, and give a true and fair view of the assets, liabilities, financial position and return of the Company;

·      the annual report includes a fair review of the development and performance of the Company and the important events that have occurred during the financial year and their impact on the financial statements and of the principal risks and uncertainties; and

·      the annual report includes details on related party transactions.

On behalf of the Board

Anthony Townsend

Chairman

15 June 2010

Income Statement

for the year ended 30 April	2010			2009
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Gains/(losses) on investments	-	65,261	65,261	-	(32,248)	(32,248)
Foreign exchange gains	3	5	8	2	2,017	2,019
Income	3,460	-	3,460	3,948	-	3,948
Management fee	(189)	(442)	(631)	(173)	(404)	(577)
Performance fee	-	-	-	-	-	-
Recoverable VAT	-	-	-	171	58	229
Other expenses	(783)	(21)	(804)	(817)	(21)	(838)
Net return before finance costs and taxation	2,491	64,803	67,294	3,131	(30,598)	(27,467)
Finance costs	(345)	(806)	(1,151)	(344)	(804)	(1,148)
Net return on ordinary activities before taxation	2,146	63,997	66,143	2,787	(31,402)	(28,615)
Taxation on ordinary activities	(130)	(5)	(135)	(357)	171	(186)
Net return attributable to equity shareholders	2,016	63,992	66,008	2,430	(31,231)	(28,801)
Return per share - pence	4.88	154.87	159.75	5.66	(72.77)	(67.11)

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.

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.

Reconciliation of Movements in Shareholders' Funds

for the year ended 30 April 2010		Share	Capital			Total equity
	Share	premium	redemption	Capital	Revenue	shareholders'
	capital	account	reserve	reserves	reserve	funds
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 30 April 2009	10,479	23,132	15,704	94,022	7,657	150,994
Movements during the year ended 30 April 2010
Dividends paid	-	-	-	-	(2,027)	(2,027)
Shares purchased and cancelled	(424)	-	424	(6,591)	-	(6,591)
Net return attributable to equity shareholders	-	-	-	63,992	2,016	66,008
Balance at 30 April 2010	10,055	23,132	16,128	151,423	7,646	208,384

for the year ended 30 April 2009		Share	Capital			Total equity
	Share	premium	redemption	Capital	Revenue	shareholders'
	capital	account	reserve	reserves	reserve	funds
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Balance at 30 April 2008	10,981	23,132	15,202	131,463	7,322	188,100
Movements during the year ended 30 April 2009
Dividends paid	-	-	-	-	(2,095)	(2,095)
Shares purchased and cancelled	(502)	-	502	(6,210)	-	(6,210)
Net return attributable to equity shareholders	-	-	-	(31,231)	2,430	(28,801)
Balance at 30 April 2009	10,479	23,132	15,704	94,022	7,657	150,994

Balance Sheet

at 30 April		2010		2009
	£'000s	£'000s	£'000s	£'000s
Fixed assets
Investments		202,279		157,668
Current assets
Debtors	6,182		1,227
Taxation recoverable	34		30
Cash at bank and short-term deposits	12,963		5,925
	19,179		7,182
Creditors: amounts falling due within one year
Other	(3,074)		(3,856)
	(3,074)		(3,856)
Net current assets		16,105		3,326
Total assets less current liabilities		218,384		160,994
Creditors: amounts falling due after more than one year
Debenture		(10,000)		(10,000)
Net assets		208,384		150,994
Capital and reserves
Share capital		10,055		10,479
Share premium account	23,132		23,132
Capital redemption reserve	16,128		15,704
Capital reserves	151,423		94,022
Revenue reserve	7,646		7,657
		198,329		140,515
Total shareholders' funds		208,384		150,994
Net asset value per share - pence		518.10		360.23

Cash Flow Statement

for the year ended 30 April		2010		2009
	£'000s	£'000s	£'000s	£'000s
Operating activities
Investment income received	2,938		3,208
Interest received	28		151
Stock lending fees received	-		61
Underwriting commission received	18		11
Management fee paid to the management  company	(568)		(516)
Directors' fees paid	(134)		(134)
VAT recovered (including interest thereon)	-		1,651
Other payments	(669)		(643)
Net cash inflow from operating activities		1,613		3,789
Servicing of finance
Interest paid	(1,151)		(1,152)
Cash outflow from servicing of finance		(1,151)		(1,152)
Financial investment
Purchases of equities and other investments	(93,824)		(100,867)
Sales of equities and other investments	108,896		105,564
Other capital charges and credits	(17)		(27)
Net cash inflow from financial investment		15,055		4,670
Equity dividends paid		(2,027)		(2,095)
Net cash inflow before use of liquid resources and financing		13,490		5,212
Management of liquid resources
Decrease in short-term deposits		-		-
Financing
Shares purchased and cancelled	(6,466)		(7,131)
Cash outflow from financing		(6,466)		(7,131)
Increase/(decrease) in cash		7,024		(1,919)

Notes

1   Return per ordinary share

Revenue return

The revenue return per share is based on the net revenue return attributable to equity shareholders of £2,016,000 profit (2009: £2,430,000 profit).

Capital return

The capital return per share is based on the net capital return attributable to equity shareholders of £63,992,000 profit (2009: £31,231,000 loss).

Weighted average ordinary shares in issue

Both the revenue and capital returns per share are based on a weighted average of 41,319,218 ordinary shares in issue during the year (2009: 42,916,280).

2    Dividend

The Directors recommend a final dividend in respect of the year ended 30 April 2010 of 3.40p per share, payable on 6 August 2010 to all shareholders on the register at close of business on 25 June 2010. The recommended final dividend is subject to approval by shareholders at the annual general meeting.

3    Recoverable VAT

			2010			2009
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s
Recoverable in respect of management fees	-	-	-	171	58	229
Recoverable in respect of performance fees	-	-	-	-	-	-
	-	-	-	171	58	229

Management and performance fees are no longer subject to VAT. The Company has recovered £1,229,000 from HMRC, via its Manager, in relation to VAT paid on such fees in the periods 1990 to 1996 and 2001 to 2007. Of this amount, £1,000,000 was recognised in the Income Statement for the year ended 30 April 2008 and £229,000 was recognised for the year ended 30 April 2009. Interest of £422,000 received in connection with these recoveries was included within income in 2009.

A case has recently been brought against HMRC to seek to recover the amounts relating to the intervening period, 1997 to 2000, together with interest on a compound basis. No VAT or related interest recovery has been accrued or recognised as a contingent asset as the outcome of the case is expected to remain uncertain for several years.

4    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 United Kingdom (UK) as an investment trust under the provisions of section 842 of the Income and Corporation Taxes Act 1988. In so qualifying, the Company is exempted in the UK from corporation tax on capital gains on its portfolio of fixed asset investments.

The Company invests in smaller companies worldwide in order to secure a high total return. 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, 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) below.

The 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 in compliance with UK accounting standards and best practice, and include the valuation of financial assets and liabilities at fair value, except as noted in (d) below in respect of the debenture stock. The Company does not make use of hedge accounting rules.

(a) Market risks

The fair value of equity and other financial securities held in the Company's portfolio fluctuates with changes in market prices. Prices are themselves affected by movements in currencies and interest rates and by other financial issues, including the market perception of future risks. The Board sets policies for managing these risks within the Company's objective and 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.

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. The Company does not normally hold significant cash balances. 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 exchange rates. 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.

Income earned in foreign currencies is converted to sterling on receipt. The Board regularly monitors the effects on net revenue of interest earned on deposits and paid on gearing.

(b) Liquidity risk exposure

The Company is required to raise funds to meet commitments associated with financial instruments and share buybacks. These funds may be raised either 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 number of quoted investments held in the Company's portfolio (193 at 30 April 2010); the liquid nature of the portfolio of investments; and the industrial and geographical diversity of the portfolio. Cash balances are held with reputable banks, usually on overnight deposit. The Company does not normally invest in derivative products. The Manager reviews liquidity at the time of making each investment decision. The Board reviews liquidity exposure at each meeting.

The 11.5% debenture stock is governed by a trust deed and is redeemable in 2014 or at an earlier date or dates at the Company's behest. The Board does not therefore consider the repayment of the debenture stock as a likely short-term liquidity issue.

(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. Such transactions must be settled on the basis of delivery against payment (except where local market conditions do not permit).

Responsibility for the approval, limit setting and monitoring of counterparties is delegated to the Manager and a list of approved counterparties is periodically reviewed by the Board. 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. Cash and deposits are held with reputable banks.

The Company has an ongoing contract with its custodian for the provision of custody services. The contract is reviewed periodically. Details of securities held in custody on behalf of the Company are received and reconciled monthly. The custodian has a lien over the securities in the account, enabling it to sell or otherwise realise the securities in satisfaction of charges due under the agreement.

To the extent that F&C Management Limited ("F&C") 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 continuously through regular meetings with the management of F&C (including the Fund Manager) and with F&C's internal audit function. In reaching its conclusions, the Board also reviews F&C's parent group's annual audit and assurance faculty report.

The Company had no credit-rated bonds or similar securities or derivatives in its portfolio at the year end (2009: none) and does not normally invest in them. None of the Company's financial liabilities are past their due date or impaired.

(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 debenture which is carried at par value in accordance with FRS4. The fair value of the debenture, based on a comparable UK gilt, was £13,200,000 (2009: £13,846,000).

Unquoted investments, including partnership investments, are valued based on professional assumptions and advice that is not wholly supported by prices from current market transactions or by observable market data. The Directors make use of recognised valuation techniques and may take account of recent arm's length transactions in the same or similar investments. With respect specifically to investments in partnerships, the Directors rely on valuations of the underlying unlisted investments as supplied by the managers of those partnerships. The Directors regularly review the principles applied by the managers to those valuations to ensure they comply with the Company's accounting policies and with fair value principles.

(e) Capital risk management

The objective of the Company is stated as being to invest in smaller companies worldwide in order to secure a high total return. 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 the shareholders in general meeting; borrow monies in the short and long term; and pay dividends to shareholders out of current year revenue earnings as well as out of brought forward revenue reserves.

5    Annual general meeting

The annual general meeting will be held at the Chartered Accountants' Hall, One Moorgate Place, London EC2 on      21 July 2010 at 12 noon.

6    Report and accounts

The report and accounts for the year ended 30 April 2010 will be posted to shareholders and made available on the website www.fandcglobalsmallers.com. 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

15 June 2010

 

END

 

 

FR KKPDKDBKDKAD