Date: 12 August 2010
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 2010
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 2010 |
30 April 2010 |
% Change |
|
|
|
|
Share price |
453.50p |
461.00p |
-1.6 |
|
|
|
|
Net asset value per share (debenture at nominal value) |
472.04p |
518.10p |
-8.9 |
|
|
|
|
Net asset value per share (debenture at market value) |
463.79p |
510.14p |
-9.1 |
|
|
|
|
Manager's review
Stock markets fell during the three months under review. This, at least in part, was a consequence of lower investor confidence in the underlying world economic outlook with growth in the US in particular showing signs of moderation. Despite this, corporate earnings' news continued to generally surprise on the upside, providing some support to share prices. On a global basis, smaller company performance was not markedly different to the broader market indices during the period, though larger stocks held up better in the US and Europe.
With effect from 1 May 2010, the Company's Benchmark 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. With markets falling back, this delivered a total return in sterling terms of -7.5% over the three months under review, a little better than the Company's net asset value ("NAV") per share total return of -8.2%. The share price fell by just 1.6%, considerably less than the NAV and Benchmark. Taking the debenture at market value and excluding current period income, the discount ended the period at 1.9% down from 9.0% at the end of April. A total of 120,000 of the Company's shares (0.3% of share capital) were bought and cancelled during the period at a cost of £525,000.
At the stock selection level, the local portfolios in the UK, Europe and Asia outside of Japan all outperformed their local small cap indices, but we were behind the relevant comparator indices in Japan and the US. Weakness in the US over the period was the main reason for the overall underperformance of the NAV against the Benchmark, but this followed on from two strong years of relative performance in this market.
The new UK government's plans to address the fiscal deficit at an early stage were positively received in the financial markets and this contributed to a period of strength for sterling. Helped by this sterling effect, UK smaller company shares performed better than most international markets over the period. On an asset allocation basis, there was a further modest increase in the exposure to emerging markets, with economic growth in Asia and Latin America likely to remain significantly better than that of the developed world. Late in the period more money was invested in the US market to take advantage of lower valuations, though the end period weighting here fell as a result of the underperformance of this segment versus other parts of the world.
At the start of the period we had a cautious view on the overall near-term market prospects following their earlier strong performance and given worrisome developments in sovereign debt markets. Indications that growth in the US is weakening is an additional concern given the importance of the US in a global context. However, for now the markets appear a little more relaxed about the euro-zone fiscal outlook. The pull-back in equity markets is presenting more opportunities at the individual stock level and some of the Company's net cash balance has been invested in the three months under review. At the end of July the Company still had a net cash position of 1.1%, down from 3.3% at the end of April, providing scope to take advantage of other investment opportunities around the world as they arise.
Ten largest holdings at 31 July 2010
31 July 2010 |
30 April 2010 |
Company Country |
% of total investments |
1 |
1 |
iShares MSCI Japanese Small Cap Exchange Traded Fund Japan |
4.0 |
2 |
2 |
Aberdeen Global-Asian Smaller Companies Fund Asia Pacific ex Japan |
2.3 |
3 |
3 |
The Scottish Oriental Smaller Companies Trust Asia Pacific ex Japan |
2.1 |
4 |
6 |
Axa Framlington Japan Smaller Companies Fund Japan |
1.6 |
5 |
4 |
Allianz GIS RCM Little Dragons Fund Asia Pacific ex Japan |
1.6 |
6 |
8 |
Utilico Emerging Markets Asia Pacific ex Japan |
1.2 |
7 |
5 |
Australian New Horizons Fund Australia |
1.2 |
8 |
27 |
SDL United Kingdom |
1.0 |
9 |
28 |
Senior United Kingdom |
0.9 |
10 |
7 |
Brush Engineered Materials United States |
0.9 |
The portfolio obtains exposure to Japanese and Asian markets via a number of collective funds as opposed to individual holdings. These funds are mainly managed by third party fund managers based in the Far East with significant local market expertise. F&C is responsible for selecting the appropriate funds to use for these markets.
Ten largest holdings (excluding collective funds) at 31 July 2010
31 July 2010 |
Company Country |
% of total investments |
1 |
SDL United Kingdom |
1.0 |
2 |
Senior United Kingdom |
0.9 |
3 |
Brush Engineered Materials United States |
0.9 |
4 |
CLS Holdings United Kingdom |
0.9 |
5 |
The Andersons United States |
0.8 |
6 |
HCC Insurance United States |
0.8 |
7 |
Quanta Services United States |
0.8 |
8 |
Horizon Lines United States |
0.8 |
9 |
CapitalSource United States |
0.8 |
10 |
Genesee & Wyoming United States |
0.8 |
Geographical distribution of the investment portfolio at 31 July 2010
|
31 July 2010 % of total investments |
30 April 2010 % of total investments |
North America |
41.4 |
43.3 |
United Kingdom |
33.7 |
33.5 |
Rest of World |
9.8 |
8.7 |
Continental Europe |
9.2 |
9.1 |
Japan |
5.9 |
5.4 |
Further information
Further information, including monthly factsheets and NAVs published since the end of the quarter, can be found on the www.fandcglobalsmallers.com website.
The Board is not aware of any significant events or transactions that have occurred between 31 July 2010 and the date of publication of this statement which would have a material impact on the financial position of the Company.
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
12 August 2010