Interim Management Statement

RNS Number : 6217M

F&C Global Smaller Companies PLC

18 August 2011

 



Date:        18 August 2011

Contact:    Peter Ewins                                                          

                 F&C Management Limited                                      

                 020 7628 8000                                                      

F&C Global Smaller Companies PLC

Interim Management Statement

for the quarter ended 31 July 2011

Objective

F&C Global Smaller Companies PLC invests in smaller companies worldwide in order to secure a high total return.

Summary of results

Capital return

Attributable to equity shareholders	31 July 2011	30 April 2011	% Change
Share price	576.25p	583.50p	-1.2
Net asset value per share (debenture at nominal value)	587.43p	602.49p	-2.5
Net asset value per share (debenture at market value)	580.48p	595.82p	-2.6

Manager's review

The three months under review was generally a period of consolidation in equity markets, albeit not one lacking in volatility, with investors becoming more concerned over the sustainability of the pace of global economic growth. After serious weakness in the immediate aftermath of the March earthquake, Japanese equities nevertheless delivered a strong performance over the period. European stocks on the other hand were out of favour against the background of more government bond market turmoil and sluggish economic growth.

Following strong relative performance from smaller company shares during the last financial year, their performance against the broad market indices was more mixed in the quarter. In Japan, Asia and the UK they did better than large caps, but in Europe, the US and Latin America they underperformed as confidence in the outlook for corporate profit growth came under more scrutiny.

The Company's benchmark, which is a blended index of the returns of 30% Hoare Govett UK Smaller Companies (excluding investment companies) Index and 70% MSCI All Country World ex UK Small Cap Index, recorded a total return in sterling terms of -3.8% in the three months. The Company's net asset value ("NAV") per share total return of

-1.9% was ahead of the benchmark. The share price fell by 1.2%. It is pleasing to add that in June the Company was named Global Investment Trust of the year for 2011 by Money Observer magazine, in recognition of strong performance over the previous three years.

Taking the debenture at market value and excluding current period income, the discount ended the period at 0.4%, compared to 1.5% at the end of April 2011. With the share price on occasions trading at a premium to NAV, 95,000 new shares ( 0.2% of share capital ) were issued during the period to satisfy demand in the market.

In terms of investment performance, notably all regional portfolios beat their relevant local small cap indices over the quarter. The strongest performance by some way came from the Japanese portfolio which delivered a sterling total return of 9.6%. We continue to believe that there could be a further catch-up in Japan's relative showing after the excessive weakness over the last year, though the strength of the yen and the effects of the earthquake will be evident in many company results in the near term. At the other end of the scale, the sterling total return from the European portfolio was - 6.2%, although this was comfortably ahead of the local small cap benchmark return of -10.8%.

On the asset allocation front, we decided to trim our US exposure, partly on the basis that there could be further pressure on the dollar. The relatively disappointing recent pace of growth in the US economy, and the looming necessity for a tightening in fiscal policy given the growing debt burden could lead to additional quantitative easing at some point. Cash taken out of the US was used to fund additional exposure to the Rest of the World where growth prospects continue to look superior, and we added a new position in a fund targeting growth companies in Brazil. We also increased our Japanese weighting to take advantage of the potential for recovery in small cap performance in this market. The Company's gearing of 2.8% at the end of July, was just above the level at the end of April 2011 (2.7%).

Since the end of the period there have been heavy falls in equity markets globally, following on from the protracted US debt ceiling negotiations, the downgrading of US government debt, and the ongoing crisis of confidence in European sovereign debt markets. Markets have begun to factor in lower economic growth prospects for much of the Western developed world, and we are now starting to see this reflected in more widespread corporate earnings downgrades by brokers. The resulting pull-back in share prices is already providing some interesting opportunities, but until there is greater clarity on the outlook, particularly over developments in the European bond markets, volatility is likely to remain high.

The portfolio obtains exposure to Japanese, Asian and Latin American markets via a number of collective funds as opposed to individual holdings. F&C is responsible for selecting the appropriate funds to use for these markets.

Ten largest holdings at 31 July 2011

31 July 2011	30 April 2011	Company Country	% of total investments
1	1	iShares MSCI Japanese Small Cap Exchange Traded Fund Japan	3.6
2	3	Aberdeen Global-Asian Smaller Companies Fund Rest of World	2.4
3	2	Utilico Emerging Markets Rest of World	2.3
4	5	The Scottish Oriental Smaller Companies Trust Rest of World	2.2
5	4	Allianz GIS RCM Little Dragons Fund Rest of World	2.1
6	7	Axa Framlington Japan Smaller Companies Fund Japan	1.6
7	6	Australian New Horizons Fund Australia	1.4
8	17	M&G Japan Smaller Companies Fund Japan	1.4
9	32	DeVry United States	1.0
10	8	Sanderson Farms United States	1.0

Ten largest equity holdings (excluding collective funds) at 31 July 2011

31 July 2011	Company Country	% of total investments
1	DeVry United States	1.0
2	Sanderson Farms United States	1.0
3	Airgas United States	1.0
4	America's Car-Mart    United States	0.9
5	Career Education United States	0.9
6	Rex Energy United States	0.9
7	Conn's United States	0.9
8	ACI Worldwide United States	0.9
9	Teledyne Technologies United States	0.9
10	Viasat United States	0.8

Geographical distribution of the investment portfolio at 31 July 2011

	31 July 2011 % of total investments	30 April 2011 % of total investments
North America	40.4	42.3
United Kingdom	31.1	31.3
Rest of World	11.8	10.5
Continental Europe	10.0	10.3
Japan	6.7	5.6

Further information

Further information, including monthly factsheets and NAV's published since the end of the quarter, can be found on the www.fandcglobalsmallers.com website.

Due mainly to volatile market movements, the NAV per share (debenture at par) at the close of business on 17 August 2011 had fallen to 519.63p. The Board is not aware of any other significant events or transactions that have occurred between 31 July 2011 and the date of publication of this statement which would have a material impact on the financial position of the Company.   The Company has issued a further 280,000 shares since the end of the period and the number of shares in issue at 17 August 2011 was 40,475,990.

This interim management statement has been prepared solely to provide information to meet the requirements of the UK Listing Authority's Disclosure and Transparency Rules.

By order of the Board

F&C Management Limited, Secretary

Exchange House, Primrose Street, London EC2A 2NY

18 August 2011

 

END

 

 

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