Half Yearly Report

RNS Number : 0926B

F&C U.S. Smaller Companies PLC

27 February 2014

Date: 27 February 2014

Contact: Robert Siddles

Jupiter Asset Management Limited

020 7412 0703

F&C US Smaller Companies PLC

Unaudited statement of results

for the half-year ended 31 December 2013

Summary of Unaudited Results

Attributable to equity shareholders	31 December 2013	30 June 2013	% Change

Net assets	£160.94m	£147.69m	9.0

Net asset value per share	669.63p	618.35p	8.3

Russell 2000 Index (sterling adjusted)	702.58	644.48	9.0

Share price	669.00p	644.00p	3.9

Net cash*	4.0%	4.7%

Increase in net asset value per share since inception on 8 March 1993			593.9
Increase since 8 March 1993 in the Russell 2000 Index (sterling adjusted)			345.5

*Calculated as cash and investment debtors less overdrafts and investment creditors at balance sheet value as a percentage of net assets.

Chairman's Statement

I am pleased to be able to report another gain in net asset value ("NAV") per share in the six months to 31st December 2013.

The US stock market gained strongly in the period but weakness in the dollar reduced this significantly for sterling investors.

Performance

The NAV per share of your Company rose 8.3% in the six month period to 31 December 2013, compared with a gain of 9.0% in the Company's benchmark, the sterling-adjusted Russell 2000 Index.

Although it is disappointing that NAV perfor-mance slightly lagged that of the benchmark, the Company's conservative investment style means that this can happen when the market rises very rapidly, as was the case in the period. Over the long term, however, the approach has produced good returns.

Manager

With effect from 21 February 2014 the Directors terminated the management agreement with F&C Management Limited ("F&C") and appointed Jupiter Asset management Limited ("Jupiter"), thereby retaining the investment management services of Robert Siddles, who had recently transferred his employment from F&C to Jupiter. We will write to shareholders in April to convene a general meeting for the purpose of seeking approval to change the Company's name.

Savings Plan investors

Shareholders in F&C's savings plans have been sent letters informing them of their options and details of Jupiter's own Investment products are included in this half-year report. Jupiter have offered, to those shareholders who elect to switch their ISA or savings schemes to Jupiter, to meet the costs of doing so.

Market review

The Russell 2000 Index rose 19.1% in dollar terms. The dollar's fall against sterling meant that this was reduced to 9.0% in sterling terms, so investors suffered from the exchange rate movement because the Company's assets are valued in sterling.

The market welcomed encouraging develop-ments from several quarters: better US economic performance, a delay in the reduction of quantitative easing, reduced tension in the Middle East, and a political deal on the fiscal budget. In regard to the US economy, after a sluggish period since mid 2012, business activity picked up, as measured by the usually reliable Institute of Supply Managers' Manufacturing indicator. In addition employment conditions remained favourable according to Weekly Initial Jobless Claims reports.

Smaller companies led the market: in dollar terms the 19.1% gain in the Russell 2000 exceeded that of the Standard & Poors Composite Index, which rose 15.1%; the technology-oriented NASDAQ Composite Index, however, produced a stronger gain of 22.7%. This outperformance by smaller companies reflects a more optimistic assessment of the economy by investors who perceive smaller companies as being more geared to changes in economic growth.

In the six month period all sectors of the market advanced led by health care, materials and processing and producer durables. The laggards were utilities, financials and consumer discretionary.

Portfolio review

There was good performance from stocks in the consumer staples and utilities sectors. The specialised food distributor, The Chefs' Warehouse, produced the best contribution along with the diversifed corn-based agribusiness, The Andersons, and medical diagnostics supplier, Alere. There was poor performance in financial services although the largest negative contributions came from the satellite equipment and services supplier, ViaSat, conference calling provider, Premiere Global Services and gold miner Allied Nevada Gold. The fund's holding of cash reduced performance by 0.9%.

New purchases were made of Covanta Holding (waste to energy) and MSC Industrial Direct (industrial distributor) in producer durables, Resolute Energy (oil and gas exploration and production) in energy and Mercury Systems (defence electronics) in technology. There were several sales of stocks where it was believed that recovery had occurred, for example American Railcar (rail car manufacturing) and Gulfmark Offshore (offshore supply boats) in producer durables, Crawford & Co B (claims adjusting) in financials, and Flowers Foods (baked goods) in consumer staples. In addition, Allied Nevada Gold (gold miner) in materials and processing, which had been disappointing, was sold. A substantial reduction was made to the position in The Andersons, where the stock had done very well.

Share issuance and discount

The price of the shares increased 3.9% to 669.0p over the period. The discount to NAV per share was 0.1% at the end of the period compared to a premium of 4.1% at 30 June 2013. As at 24 February 2014, the discount was 4.5%.

The Company did not buy back any shares, reflecting a share price premium to the NAV for much of the period. Instead the Company used its authority to issue 150,000 new shares to meet demand from the market, bringing the total shares in issue to 24,034,135. This issuance raised £989,375 and the average premium to NAV of the shares issued was 1.2%: each issue of shares during the period was at a premium.

The Board will continue to apply its long standing policy of buying back shares at appropriate times with a view to limiting the discount in the longer term to around 10%.

Outlook

Whereas economic activity seems to be on an improving trend, the stock market will need to adjust to a reduction of quantitative easing in the coming year.

The Company takes a risk averse approach to investment which should benefit shareholders over time.

Gordon Grender

27 February 2014

Directors' Statement of Principal Risks and Uncertainties

The Company's assets consist mainly of listed equities and its principal risks are therefore market related.

Other key risks faced by the Company relate to investment strategy, currency, gearing, investment management resources, regulation, financial control and counterparties (including custodian default). These risks, and the way in which they are managed, are described in more detail under the heading "Principal risks and their management" within the Directors' Report and Business Review contained within the Company's annual report for the year ended 30 June 2013. The Company's principal risks and uncertainties have not changed materially since the date of that report and are not expected to change materially for the remainder of the Company's financial year.

Directors' Statement of 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 report and accounts for the half-year ended 31 December 2013 of which this statement is an extract, that to the best of their knowledge:

· the condensed set of financial statements has been prepared in accordance with applicable UK Accounting Standards on a going concern basis and gives a true and fair view of the assets, liabilities, financial position and return of the Company;

· the report includes a fair review of the important events that have occurred during the first six months of the financial year and their impact on the financial statements;

· the Directors' Statement of Principal Risks and Uncertainties shown above is a fair review of the principal risks and uncertainties for the remainder of the financial year;

· with effect from 21 February 2014, the Company has appointed Jupiter Asset Management (Jupiter) as its Manager. Details of the fee arrangements with Jupiter, and termination arrangements with the previous Manager, F&C Management Limited, are set out in the notes on the Accounts. Except for the above there has been no change in related party relationships and no significant changes to related party transactions since 30 June 2013; and

· in light of the controls and monitoring processes that are in place, the Company has adequate resources and arrangements to continue operating within its stated objective and policy for the foreseeable future. Accordingly, the accounts continue to be drawn up on the basis that the Company is a going concern.

Signed on behalf of the Board

Gordon Grender

Chairman

27 February 2014

Unaudited Condensed Income Statement

for the half-year ended 31 December	2013			2012
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000s	£'000s	£'000s	£'000s	£'000s	£'000s

Gains on investments	-	13,355	13,355	-	9,473	9,473
Foreign exchange losses	(1)	(677)	(678)	(1)	(166)	(167)
Income	404	-	404	548	-	548
Management fee	(621)	-	(621)	(431)	(58)	(489)
Other expenses	(135)	(2)	(137)	(171)	(2)	(173)
Net return on ordinary activities before taxation	(353)	12,676	12,323	(55)	9,247	9,192
Taxation on ordinary activities	(60)	-	(60)	(82)	-	(82)
Net return attributable to equity shareholders	(413)	12,676	12,263	(137)	9,247	9,110

Return per share - pence	(1.73)	53.01	51.28	(0.63)	42.68	42.05

The total column 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.

Unaudited Condensed Reconciliation of Movements in Shareholders' Funds

	Called-up	Share	Non-	Capital			Total
	share	premium	distributable	redemption	Capital	Revenue	shareholders'
Half-year ended	capital	account	reserve	reserve	reserves	reserve	funds
31 December 2013	£'000s	£'000s	£'000	£'000s	£'000s	£'000s	£'000s

Balance at 30 June 2013	5,971	18,598	841	8,175	116,793	(2,690)	147,688
Movements during the half-year ended 31 December 2013
Shares issued by the Company	38	951	-	-	-	-	989
Net return attributable to equity shareholders	-	-	-	-	12,676	(413)	12,263
Balance at 31 December 2013	6,009	19,549	841	8,175	129,469	(3,103)	160,940

Half-year ended 31 December 2012

Balance at 30 June 2012	5,298	4,660	841	8,175	82,418	(2,144)	99,248
Movements during the half-year ended 31 December 2012
Shares issued by the Company	261	4,917	-	-	-	-	5,178
Net return attributable to equity shareholders	-	-	-	-	9,247	(137)	9,110
Balance at 31 December 2012	5,559	9,577	841	8,175	91,665	(2,281)	113,536

Year ended 30 June 2013

Balance at 30 June 2012	5,298	4,660	841	8,175	82,418	(2,144)	99,248
Movements during the year ended 30 June 2013
Shares issued by the Company	673	13,938	-	-	-	-	14,611
Net return attributable to equity shareholders	-	-	-	-	34,375	(546)	33,829
Balance at 30 June 2013	5,971	18,598	841	8,175	116,793	(2,690)	147,688

Unaudited Condensed Balance Sheet

	31 Dec 2013	31 Dec 2012	30 June 2013
	£'000s	£'000s	£'000s
Fixed assets
Listed investments	154,719	111,786	141,061

Current assets
Debtors	113	47	793
Cash at bank and short-term deposits	6,463	2,068	6,773
	6,576	2,115	7,566
Creditors: amounts falling due within one year	(355)	(365)	(939)
Net current assets	6,221	1,750	6,627

Net assets	160,940	113,536	147,688

Capital and reserves
Called-up share capital	6,009	5,559	5,971
Share premium account	19,549	9,577	18,598
Non-distributable reserve	841	841	841
Capital redemption reserve	8,175	8,175	8,175
Capital reserves	129,469	91,665	116,793
Revenue reserve	(3,103)	(2,281)	(2,690)
Total shareholders' funds	160,940	113,536	147,688

Net asset value per share - pence	669.63	510.57	618.35

Unaudited Condensed Cash Flow Statement

	Half-year ended	Half-year ended
	31 Dec 2013	31 Dec 2012
	£'000s	£'000s
Net cash outflow from operating activities	(466)	(72)
Net cash outflow from financial investment	(154)	(8,546)
Net cash outflow before use of liquid resources and financing	(620)	(8,618)
Issue of ordinary shares	989	5,178
Increase/(decrease) in cash and short-term deposits	369	(3,440)

Reconciliation of net cash flow to movement in net funds
Increase/(decrease) in cash and short-term deposits	369	(3,440)
Foreign exchange movement	(679)	(167)
Movement in net funds	(310)	(3,607)
Net funds at the beginning of the period	6,773	5,675
Net funds at the end of the period	6,463	2,068

Represented by:
Cash at bank and short-term deposits	6,463	2,068

Notes

1 Accounting policies

These financial statements have been prepared on the basis of the accounting policies set out in the Company's financial statements at 30 June 2013. These accounting policies are expected to be followed throughout the year ending 30 June 2014.

2 Dividend

The Directors do not propose to pay an interim dividend.

3 Return per share

Return per share attributable to shareholders reflects the overall performance of the Company in the period. Net revenue recognised in the first six months is not indicative of the total likely to be received in the full accounting year.

	Half-year ended	Half-year ended
	31 Dec 2013 £'000s	31 Dec 2012 £'000s
Revenue return	(413)	(137)
Capital return	12,676	9,247
Total return	12,263	9,110

Weighted average number of shares in issue	23,914,162	21,665,695

4 Results

The results for the half-year ended 31 December 2013 and 31 December 2012, which have not been audited or reviewed by auditors pursuant to the Auditing Practices Board guidance on the review of interim financial information, constitute non-statutory accounts within the meaning of Section 434 of the Companies Act 2006. The latest published accounts which have been delivered to the Registrar of Companies are for the year ended 30 June 2013; the independent auditors' report thereon was unqualified and did not contain a statement under Section 498 of the Companies Act 2006. The abridged financial statements shown above for the year ended 30 June 2013 are an extract from those accounts.

5 Report and accounts

The report and accounts for the half-year ended 31 December 2013 will be posted to shareholders and made available on the website www.jupiteronline.com shortly. Copies may also be obtained from the Company's registered office, 1 Grosvenor Place, London, SW1X 7JJ.

By order of the Board

Jupiter Asset Management Limited, Secretary

1 Grosvenor Place, London, SW1X 7JJ

27 February 2014