Interim Management Statement

RNS Number : 5689X

F&C Global Smaller Companies PLC

16 February 2012

 



Date:        16 February 2012

Contact:    Peter Ewins                                                          

                 F&C Management Limited                                      

                 020 7628 8000                                                      

F&C Global Smaller Companies PLC

Interim Management Statement

for the quarter ended 31 January 2012

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 January 2012	31 October 2011	% Change
Share price	567.00p	524.00p	+8.2
Net asset value per share (debenture at nominal value)	571.87p	543.98p	+5.1
Net asset value per share (debenture at market value)	565.52p	537.35p	+5.2

Manager's review

Stock markets posted gains over the three months under review as 2012 started in a more positive fashion for share prices. These gains came despite ongoing uncertainty about the chances of Greece avoiding a formal default, and increasing concern over the prospects for other Eurozone countries, notably Italy. Moves by the European Central Bank ("ECB") to boost liquidity for European banks and to avert a credit crunch dramatically improved sentiment towards "risk assets" later in the period and boosted hopes that upcoming bond issuance from indebted countries could be absorbed. Data from the US, particularly in relation to employment and consumer spending, also surprised on the upside, lifting confidence about the prospects for 2012.

Smaller company shares benefited from the better market backdrop and the Benchmark recorded a 5.9% total return in sterling terms for the three months. The net asset value ("NAV") per share total return was 5.4%, with outperformance through to the end of December 2011 erased as our more defensively positioned investment portfolio failed to keep up with the strong lift in markets during January. The Company's share price rose by 8.2% as the shares moved to a small premium against NAV, taking the debenture at fair value and excluding current period income. A total of 175,000 new shares (0.4% of share capital at the start of the period) were issued by the Company to help to meet demand in the market. For the nine months ended 31 January, the NAV return on a total return basis was -4.2% compared to -7.0% for the Benchmark, while the share price was down by 2.8%.

Over the three months the US small cap market was strong as the economy showed signs of improvement, while at the other end of the spectrum smaller stocks in Europe delivered a modest negative return in sterling terms. Our portfolios in the UK and Europe beat the local small cap indices, but we were behind in the US and Japan over the quarter. The Rest of the World portfolio, which is predominantly focused on Asian markets, was ahead of our Asian small cap benchmark but behind the targeted Latin American small cap index. Latin American markets bounced strongly in January, helped by the move to lower interest rates in Brazil.

In terms of asset allocation, there were no major shifts in the portfolio's geographic dispersion.  We did however, decide to lift exposure to the Rest of the World with these markets having underperformed the main developed markets in 2011. We funded extra exposure here by taking cash out of the UK, while the European weighting fell as a consequence of the weakness of these markets in relative terms. The portfolio's effective gearing ended the period marginally up at 2.3% (2.2% at 31 October 2011).

With growth in the world economy in 2012 likely to be lower than in 2010 or 2011, it is unlikely to be a vintage year for company profit growth. Having said this, equity valuation metrics do not look too stretched providing the current expected growth trajectory is maintained. Overall corporate balance sheets, unlike many governments, remain in solid shape and we are seeing some evidence of more M&A activity which should also help stock markets. Further gyrations in markets, however, are certainly conceivable given the need for many countries to access more funding.

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 (excluding collective funds) at 31 January 2012

31 January 2012	Company Country	% of total assets
1	Airgas United States	1.1
2	Conn's United States	1.1
3	America's Car-Mart United States	1.1
4	SBA Communications United States	1.1
5	Pool United States	1.0
6	Granite Construction United States	1.0
7	Sanderson Farms  United States	1.0
8	Microsemi United States	1.0
9	Mohawk Industries United States	1.0
10	ICF International United States	1.0

Ten largest holdings at 31 January 2012

31 January 2012	Company Country	% of total assets
1	iShares MSCI Japanese Small Cap Exchange Traded Fund Japan	3.5
2	Aberdeen Global-Asian Smaller Companies Fund Rest of World	2.5
3	Allianz GIS RCM Little Dragons Fund Rest of World	2.4
4	The Scottish Oriental Smaller Companies Trust Rest of World	2.3
5	Utilico Emerging Markets Rest of World	2.1
6	M&G Japan Smaller Companies Fund Japan	1.8
7	Axa Framlington Japan Smaller Companies Fund Japan	1.7
8	Australian New Horizons Fund Australia	1.2
9	Airgas United States	1.1
10	Conn's United States	1.1

Geographical distribution of the investment portfolio at 31 January 2012

	31 January 2012 % of total investments	31 October 2011 % of total investments
North America	41.4	41.3
United Kingdom	28.9	29.3
Rest of World	12.3	11.8
Continental Europe	10.2	10.8
Japan	7.2	6.8

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 January 2012 and the date of publication of this statement which would have a material impact on the financial position of the Company. A further 25,000 shares were issued on 8 February 2012.   

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

16 February 2012

 

END

 

 

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