Annual Financial Report

RNS Number : 2135P

F&C Managed Portfolio Trust PLC.

12 July 2010

 



To:      RNS

Date:  12 July 2010

From: F&C Managed Portfolio Trust plc

Results for the year ended 31 May 2010

Chairman's Statement as follows:

Highlights

·                    Strong NAV total returns for both the Income shares (+23.9 per cent) and Growth shares (+24.2 per cent)

·                    Both share classes beat their benchmark, the FTSE All-Share Index

·                    Share prices generally maintained close to net asset value throughout the year

·                    Annualised dividend maintained at 4.4p per Income share for the year

Introduction

In many respects this was a satisfactory year, for all the reasons outlined above. Only a sharp fall in equity markets in the final month removed some of the gloss.

We believe that the Company is demonstrating the benefits of a managed and diversified portfolio of investment trusts, as set out at its launch in April 2008. Investors are offered the choice of capital growth or of total return with a strong income component. At the share price of 89.5p at the year end the Income shares offered an attractive historic yield of 4.9 per cent.

Performance

For the Company's financial year to 31 May 2010, the total return (i.e. adding dividends paid to capital performance) of the FTSE All-Share Index was 22.9 per cent. This index is the performance benchmark for both Portfolios.

The net asset value ('NAV') per share of the Income shares rose by 17.5 per cent to 86.81p per share. With the four dividends paid out during the year included, the total return of 23.9 per cent was ahead of the benchmark.

The NAV per share of the Growth shares rose by 24.2 per cent to 86.70p per share and was also ahead of the benchmark.

Dividends

Under the Company's capital structure any net revenue arising on the Growth Portfolio is transferred to the Income Portfolio in exchange for a capital contribution of an identical amount. The net revenue return for the Growth shares for the year to 31 May 2010 totalled £189,000, which is equivalent to 0.9p per Income share. Including this transfer, the Company's net revenue return was £956,000 which is equivalent to 4.58p per Income share. Of this total, approximately £90,000 (0.43p per Income share) was due to the accelerated payment of dividends by investee companies prior to the end of the tax year on 5 April 2010. Four interim dividends with respect to the year to 31 May 2010 have now been paid, totalling 4.4p per Income share. This is at the same annualised rate as in the previous 13¹/₂ month financial period to 31 May 2009.

The fourth interim dividend was paid after the year end on 9 July 2010. After recognising all dividends for the year, there was a small addition to the revenue reserves, which now total £130,000.

As before, in the absence of unforeseen circumstances, your Board intends to declare three interim dividends, each of 1p per Income share payable in October 2010, January 2011 and April 2011. It is intended that a fourth interim dividend will be paid to Income shareholders in July 2011 but, in view of the current uncertain outlook, your Board will determine the amount of the fourth interim dividend when a clearer view emerges of income for the year to 31 May 2011.

Discounts and share buy-backs

The share price of investment trusts does not always reflect closely their underlying NAV and many trusts trade at a substantial discount. By buying back shares from time to time, we have been able to maintain an average discount of 0.8 per cent for the Income shares and 2.2 per cent for the Growth shares. At the year end, the ratings were a premium of 3.1 per cent for the Income shares and a premium of 0.3 per cent for the Growth shares.

During the year the Company bought back 320,000 Income shares to be held in treasury. In addition 1,555,000 Growth shares were bought back for cancellation, as the Company did not have the power to hold further Growth shares in Treasury. We have been able to re--sell some of the shares held in treasury as demand arose. During the year 1,450,000 Income shares and 250,000 Growth shares were resold out of treasury. These were sold at a small premium or discount to NAV, but at smaller discounts than the average discounts at which the shares had been purchased, thereby enhancing the net asset value.

In addition, since the year end, a further 250,000 Income shares and 150,000 Growth shares have been re--sold out of Treasury at a small premium to NAV. We will be seeking shareholders' approval to renew the powers to buy back shares and sell shares from treasury at the Annual General Meeting.

Share plans and conversion facility

F&C operates various share plans which enable shareholders to invest in the Company's shares in a cost effective way. One of these, the F&C Managed Portfolio Trust Share Plan and ISA, provides investment protection, which repays the gross amount invested, in the event of death. We consider this to be a valuable benefit which may be of interest to many, including trustees. Further details are shown in the Annual Report.

Subject to minimum thresholds, shareholders have the opportunity to convert their Income shares into Growth shares or their Growth shares into Income shares upon certain dates every year, the next of which will be 29 October 2010. Information is provided in the Company's Annual Report and Accounts and full details will be provided on the Company's website (www.fcmanagedportfolio.co.uk) from 26 July 2010. Last year no conversion took place as the number of shares offered for conversion was well below the minimum threshold.

AGM

Over 90 per cent of the Income shares and Growth shares are held by investors through F&C retail plans. Under F&C's current arrangements, the nominee company, which holds these shares on behalf of the plan holders, will vote the shares held on behalf of plan holders who have not returned their voting directions in the same proportion, for, against and withheld, to those that have voted. This proportional voting arrangement will apply, subject to certain limits, at the forthcoming Annual General Meeting. Any investor wishing to exclude their shares from the arrangement may do so, by marking their form of direction accordingly.

Outlook

A robust recovery in company profits seems well established around the world. However, attention has now turned to the parlous state of government finances, especially in the developed world. The impact on corporate profitability of the proposed budget cuts which are clearly necessary will be critical - and is currently unclear.

While Asian and Emerging Markets have their problems - notably rising inflation - economic growth is more visible and increasingly based on domestic consumption as well as exports. We have a significant exposure to these markets and our Manager continues to seek out interesting opportunities in different sectors and markets.

We believe that the benefits of a diversified portfolio and the strength of the investment sector will continue to demonstrate their merits over the coming year.

Richard M. Martin

Chairman

12 July 2010

Manager's Review as follows:

Stockmarket background

A return of 22.9 per cent from the UK stockmarket has been very welcome for investors, particularly after the experience of last year. However, this positive headline return recorded by UK equities masks a period of extreme volatility and swings in sentiment. To put this into perspective: the FTSE 100 Index of the largest companies in the UK began the financial year under review at a level of 4417 and concluded the period at 5188. Along the way it visited 4127 last July and from there rose to 5825 in April of this year before its recent sharp retreat.

Part of the reason for this is that the UK economy, along with those of the US and Europe, reached a turning point and began moving out of recession into recovery, albeit in the case of the UK in a very muted fashion. At this stage of an economic cycle, indicators typically give out conflicting signals. More so this time due to the extent of financial support for both the economy and the banking system through "quantitative easing". This has meant it has not been clear how genuine the recovery is, or how sustainable it may be, once the stimulus is withdrawn. Then there is the all-pervading issue of sovereign debt across Europe and the US and what measures should be taken to tackle deficits, how rapidly these measures should be enacted and whether the inevitable reduction in demand which follows from lower government spending and higher taxes will cause the economy to fall back into a double dip recession.

So, although the equity market returns are generally good for the year to 31 May 2010, and mark a decent recovery from the lows experienced in 2008/09, there remains a particularly high level of uncertainty as a result of a combination of factors outlined above.

Nonetheless, despite the volatility and uncertainty, returns from equities over the year have generally been good.  An environment of sustained low interest rates throughout the year in most developed markets, and much better than expected results from companies were the key factors which underpinned the gains.  

Performance

As commented upon, despite unusually high levels of volatility, overall returns for the year to 31 May 2010 were good. The FTSE All-Share Index (in total return terms) gained 22.9 per cent whilst the Net Asset Value for the Income Portfolio appreciated by 23.9 per cent, and the Net Asset Value for the Growth Portfolio gained by 24.2 per cent (both in total return terms). The sporting term "a game of two halves" aptly describes investment performance over the past twelve months. At the Company's Interim stage both the Income and Growth Portfolios were lagging the FTSE All-Share Index, by 1.8  per cent and 4 per cent respectively, only to mount a notable recovery during the second half of the year, such that both Portfolios ended the year ahead of their benchmark. This was further reflected in the performance of the FTSE Equity Investment Instrument Sector (which measures the total return for the Investment Company sector) and which recorded a 24.0 per cent rise for the year, with a similar bias of stronger relative performance to the second half of the year to 31 May 2010.

A couple of more general factors help to explain the better relative performance during the second half of the Company's financial year. First is currency, in particular the US dollar/sterling rate. This showed little change in the first six months; however sterling fell against the US dollar by 12 per cent ($1.64 to $1.45) over the six months to 31 May 2010. This is a significant move and important from an investment standpoint as it benefited, in sterling terms, not only directly held dollar investments but also Pacific and Emerging Markets which are sensitive to movements in the dollar. Both Portfolios have substantial investments in these areas. The second factor, is the trend of average discounts across the Investment Company sector in the year to 31 May 2010.

At the Company's Interim stage it was reported that the average discount (excluding private equity, hedge funds and direct property funds) had widened from 7 per cent to 10 per cent; during the second half this stabilised and then tightened slightly to 9.5 per cent. A small but useful assist for Investment Company share prices.

Leading Contributors - Income Portfolio

Invesco Leveraged High Yield Fund and City Merchants High Yield Trust are both invested principally in corporate bonds and enjoyed very strong share price gains over the year of 49 per cent and 43 per cent respectively. These gains occurred mainly in the first half of the financial year and were due to a tightening of spreads as many bonds had been priced to default at the beginning of the period but, as economies began to recover, so this risk lessened and share prices of many corporate bonds recovered. Both investments have attractive dividend yields: 9.6 per cent for Invesco Leveraged High Yield Fund and 7.8 per cent for City Merchants High Yield Trust. Another strong contribution came from Schroder Oriental Income Fund, which recorded a gain of 41 per cent for the year. Good stock selection in a part of the world with much better growth characteristics than developed markets produced a substantial rise in share price. This investment had a dividend yield of 4.4 per cent at the year end. Murray International Trust is one of the Portfolio's largest positions and achieved a gain of 29 per cent. This trust is very international in its strategy and has 23 per cent in the Pacific region and 16 per cent in Latin America, which helped performance over the past twelve months.

Leading Contributors - Growth Portfolio

The largest gain came from Polar Capital Technology Trust which rose by 65 per cent. This company invests in technology companies globally but is mainly exposed to North America and Asia and is benefiting from the wave of new products from leading companies such as Apple. Baring Emerging Europe showed the next biggest move with a 45 per cent rise. This was driven by a substantial recovery in the Russian market, helped by higher oil and commodity prices. Templeton Emerging Markets Investment Trust gained 43 per cent. This trust, which has a market value of £1.7 billion, has been investing in emerging markets for over twenty years and, under the leadership of Dr Mark Mobius, has built up a network of offices across the globe with the primary goal of identifying new markets and new opportunities for the trust. Their portfolio is diversified through Latin America, Eastern Europe, the Pacific region and certain frontier emerging markets. It is an excellent way to gain exposure to these exciting markets. Last, special note of the contribution of Jupiter European Opportunities Trust which rose by 40 per cent despite being exposed to markets which did not do as well as some others over the past year. Performance was achieved by outstanding long term stock selection and underlines the importance of picking the right manager with a clear and definable investment strategy.

Investment Approach

For investment companies, whilst the discount between the share price and the net asset value is an important element in the decision to invest, and close attention is paid to it, it is not the dominant factor behind the investment selections of F&C Managed Portfolio Trust. The policy which we believe will serve shareholders best is to employ a long-term approach to investment and, as such, the key driver to performance is asset growth over the long-run. Integral to this approach is endeavouring to identify fund managers, within the investment company universe, who can demonstrate good performance records over the long-term either relative to a benchmark index or against a relevant peer group.

Once a potential investment has been identified an analysis of the fundamentals is then undertaken. Examples of factors to focus on include:

-          what the prospects are for the relevant market or sector in which the company specialises;

-          the need to understand the capital structure, the attitude to and use of gearing, as well as the cost and flexibility of the borrowings;

-          meeting with the fund manager regularly to gain an understanding and appreciation of their views and approach and also to ensure that they are properly resourced and not managing too many other funds or different mandates;

-          what is the investment style; for example, value or growth and how does this translate into portfolio selections.

Investment Strategy and Outlook

Rarely have views been so divided or prospects appeared so uncertain than is the case currently. On balance, a double dip recession for the UK economy appears less likely with a continued slow, muted and below trend recovery being the more probable trajectory for growth in the UK. Fiscal tightening, whilst necessary from a budget deficit perspective, is the main risk to growth over the next twelve months. Globally, the prospects for Europe are not significantly different, in terms of growth, to that of the UK, whilst those for the US appear brighter with increasing momentum anticipated to become evident as the year unfolds. Meanwhile, the growth characteristics of the Pacific region (ex Japan) and Emerging Markets remain robust and are on an altogether higher plane than those of the  developed world where, importantly for financial markets, monetary tightening still seems some way off.

After recent sharp declines, equity markets appear to be discounting renewed economic weakness and this has resulted in valuations becoming more attractive. Encouragingly, corporate earnings from the US and UK are recovering strongly and this trend is anticipated to continue into 2011. Consensus earnings and dividend expectations to December 2010 put the UK equity market on a prospective price earnings ratio of 11 times with a dividend yield of 4 per cent. Whilst not at the distressed levels of early 2009, this is much cheaper than long term averages and would indicate positive returns from equities. Also, at 4 per cent (with dividend growth of around 10 per cent) the yield is materially higher than that accorded to UK 10 year gilts of 3.5 per cent.

Optimism is moderated because near-term risks remain high. Sovereign debt concerns are more widespread than just peripheral Europe, where measures to seek a resolution appear to have deferred rather than addressed the underlying problems. In the UK, public spending will be under severe pressure for years and higher taxes will constrain consumer spending however much of this appears to be discounted in valuations.

In terms of strategy, the key long-term theme for both Portfolios, to have considerable exposure to overseas markets, remains unchanged. Growth prospects, particularly in the Pacific Rim region and certain Emerging Markets, are superior to those of the UK. In addition, returns are boosted from holdings invested in these areas should sterling continue to be a weak currency which, in the long-term, appears likely.

Both Portfolios completed their second year with satisfactory returns and, although volatility, uncertainty and risk remain high, the Manager approaches the year ahead with cautious optimism.

Peter Hewitt

Investment Manager

Income Statement (audited)

Year to 31 May 2010

	Notes	Revenue	Capital	Total
		£'000	£'000	£'000
Gains on investments		-	5,746	5,746
Income		1,314	-	1,314
Investment management fee		(61)	(142)	(203)
Other expenses		(285)	-	(285)
Return on ordinary activities before tax		968	5,604	6,572
Tax on ordinary activities	5	(12)	-	(12)
Return attributable to shareholders	2	956	5,604	6,560
Return per Income share	3	4.58p	12.54p	17.12p
Return per Growth share	3	-p	16.82p	16.82p

The total column of this statement is the Profit and Loss Account of the Company.  The supplementary revenue and capital columns are prepared under guidance published by The Association of Investment Companies.

Segmental analysis, illustrating the two separate Portfolios of assets, the Income Portfolio and the Growth Portfolio, is provided in note 2.

All revenue and capital items in the Income 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.

Income Statement (audited)

Period from 20 February 2008 (date of incorporation) to 31 May 2009*

		Revenue	Capital	Total
	Notes	£'000	£'000	£'000
Losses on investments		-	(11,462)	(11,462)
Income		1,527	-	1,527
Investment management fee		(62)	(180)	(242)
Other expenses		(319)	-	(319)
Return on ordinary activities before tax		1,146	(11,642)	(10,496)
Tax on ordinary activities		(32)	24	(8)
Return attributable to shareholders		1,114	(11,618)	(10,504)
Return per Income share (pence)	3	5.33p	(27.39)p	(22.06)p
Return per Growth share (pence)	3	-p	(30.00)p	(30.00)p

* The Company was incorporated on 20 February 2008 and commenced operations on 16 April 2008.

Balance Sheet (audited)

As at 31 May 2010

		Income Shares	Growth Shares	Total
	Notes	£'000	£'000	£'000
Non-current assets
Investments at fair value		18,013	14,743	32,756
Current assets
Debtors		41	19	60
Cash at bank and on deposit		717	356	1,073
		758	375	1,133
Creditors
Amount falling due within one year		(125)	(66)	(191)
Net current assets		633	309	942
Net assets		18,646	15,052	33,698
Capital and reserves
Called-up share capital		2,191	1,912	4,103
Share premium		99	5	104
Capital redemption reserve		-	182	182
Special reserve		19,055	15,866	34,921
Capital reserves		(3,130)	(2,913)	(6,043)
Revenue reserve		431	-	431
Shareholders' Funds		18,646	15,052	33,698
Net asset value per share (pence)	6	86.81p	86.70p

Balance Sheet (audited)

As at 31 May 2009

		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Non-current assets
Investments at fair value		14,137	12,463	26,600
Current assets
Debtors		30	22	52
Cash at bank and on deposit		981	609	1,590
		1,011	631	1,642
Creditors
Amount falling due within one year		(117)	(68)	(185)
Net current assets		894	563	1,457
Net assets		15,031	13,026	28,057
Capital and reserves
Called-up share capital		2,191	2,068	4,259
Capital redemption reserve		-	26	26
Special reserve		18,194	16,831	35,025
Capital reserves		(5,748)	(5,899)	(11,647)
Revenue reserve		394	-	394
Shareholders' Funds		15,031	13,026	28,057
Net asset value per share (pence)		73.86p	69.79p

Cash Flow Statement (audited)

Year to 31 May 2010

		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Operating activities
Investment income received, net of withholding tax suffered		954	344	1,298
Deposit interest received		3	1	4
Investment management fees paid		(102)	(85)	(187)
Other cash payments		(162)	(141)	(303)
Net cash inflow from operating activities		693	119	812
Capital expenditure and financial investment
Purchases of investments		(2,054)	(1,496)	(3,550)
Disposals of investments		1,056	2,084	3,140
Net cash (outflow)/inflow from capital expenditure and financial investment		(998)	588	(410)
Equity dividends paid		(919)	-	(919)
Net cash (outflow)/inflow before financing		(1,224)	707	(517)
Financing
Shares purchased for cancellation		-	(1,156)	(1,156)
Shares purchased to be held in treasury		(243)	-	(243)
Sale of shares from treasury		1,203	196	1,399
Net cash inflow/(outflow) from financing		960	(960)	-
Decrease in cash		(264)	(253)	(517)
Reconciliation of net cash flow to movement in net cash
Decrease in cash in the year		(264)	(253)	(517)
Opening net cash		981	609	1,590
Closing net cash		717	356	1,073

Cash Flow Statement (audited)

Period from 20 February 2008 (date of incorporation) to 31 May 2009*

		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Operating activities
Investment income received, net of withholding tax suffered		914	377	1,291
Deposit interest received		99	93	192
Investment management fees paid		(84)	(76)	(160)
Other cash payments		(125)	(106)	(231)
Net cash inflow from operating activities		804	288	1,092
Capital expenditure and financial investment
Purchases of investments		(9,675)	(13,139)	(22,814)
Disposals of investments		11,413	15,304	26,717
Net cash inflow from capital expenditure and financial investment		1,738	2,165	3,903
Equity dividends paid		(720)	-	(720)
Net cash inflow before financing		1,822	2,453	4,275
Financing
Issue of new shares		30	30	60
Expenses of share issue and launch costs		(328)	(314)	(642)
Shares purchased for cancellation		-	(153)	(153)
Shares purchased to be held in treasury		(1,401)	(1,564)	(2,965)
Sale of shares from treasury		182	16	198
Net cash outflow from financing		(1,517)	(1,985)	(3,502)
Increase in cash		305	468	773
Reconciliation of net cash flow to movement in net cash
Increase in cash in the period		305	468	773
Cash inflow from transfer of cash at launch†		676	141	817
Movement in net cash resulting from cash flows		981	609	1,590
Opening net cash		-	-	-
Closing net cash		981	609	1,590

†On 16 April 2008, investments with a market value of £21,201,000 (Income) and £20,764,000 (Growth) together with cash of £676,000 (Income) and £141,000 (Growth) (all of which had previously been held in F&C's investment trust managed portfolio service) were received by the Company in exchange for the issue of Income and Growth Shares.

* The Company was incorporated on 20 February 2008 and commenced operations on 16 April 2008.

Reconciliation of Movements in Shareholders' Funds (audited)

Year to 31 May 2010

		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Opening shareholders' funds		15,031	13,026	28,057
Sale of shares from treasury		1,203	196	1,399
Shares purchased for treasury		(243)	-	(243)
Shares purchased for cancellation		-	(1,156)	(1,156)
Transfer of net income to Income Shares from Growth shares		189	(189)	-
Transfer of capital from Income shares to Growth shares		(189)	189	-
Dividends paid		(919)	-	(919)
Return attributable to shareholders		3,574	2,986	6,560
Closing shareholders' funds		18,646	15,052	33,698

Reconciliation of Movements in Shareholders' Funds (audited)

Period from 20 February 2008 (date of incorporation) to 31 May 2009*

		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Opening shareholders' funds		-	-	-
Increase in share capital in issue		21,907	20,936	42,843
Launch costs		(328)	(314)	(642)
Sale of shares from treasury		182	16	198
Shares purchased for treasury		(1,401)	(1,564)	(2,965)
Shares purchased for cancellation		-	(153)	(153)
Transfer of net income to Income Shares from Growth shares		318	(318)	-
Transfer of capital from Income shares to Growth shares		(318)	318	-
Dividends paid		(720)	-	(720)
Return attributable to shareholders		(4,609)	(5,895)	(10,504)
Closing shareholders' funds		15,031	13,026	28,057

* The Company was incorporated on 20 February 2008 and commenced operations on 16 April 2008.

Principal Risks and Uncertainties

The Company's assets consist mainly of listed equity securities and its principal risks are therefore   market-related.  More detailed explanations of these risks and the way in which they are managed are contained in the notes to the accounts.

Other risks faced by the Company include the following:

·      External - events such as terrorism, protectionism, inflation or deflation, economic recessions and movements in interest rates and exchange rates could affect share prices in particular markets.

·      Investment and strategic - incorrect strategy, asset allocation, stock selection and the use of gearing could all lead to poor returns for shareholders.

·      Credit risk - is the risk that a counterparty will fail to discharge an obligation or commitment that it has entered into with the Company.  All the assets of the Company which are traded on a recognised exchange are held by JPMorgan Chase Bank, the Company's custodian.  Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to the securities held by the custodian to be delayed or limited.

·      Regulatory - breach of regulatory rules could lead to suspension of the Company's Stock Exchange listing, financial penalties or a qualified audit report.  Breach of Chapter 4, Part 24 of the Corporation Tax Act 2010 (previously section 842 of the Income and Corporation Taxes Act 1988) could lead to the Company being subject to tax on capital gains.

·      Operational - failure of the Manager's accounting systems or disruption to the Manager's business, or that of the third party service providers, could lead to an inability to provide accurate reporting and monitoring, leading to a loss of shareholders' confidence.

·      Financial - inadequate controls by the Manager or third party service providers could lead to misappropriation of assets.  Inappropriate accounting policies or failure to comply with accounting standards could lead to misreporting or breaches of regulations.

The Board seeks to mitigate and manage these risks through continual review, policy-setting and reliance upon contractual obligations.  It also regularly monitors the investment environment and the management of the Company's investment portfolio, and applies the principles detailed in the internal control guidance issued by the Financial Reporting Council.

Statement of Directors' Responsibilities in Respect of the Annual Financial Report

In accordance with Chapter 4 of the Disclosure and Transparency Rules, we confirm that to the best of our knowledge:

·      The financial statements contained within the Annual Report for the year to 31 May 2010, of which this statement of results is an extract, have been prepared in accordance with applicable UK Generally Accepted Accounting Practice, on a going concern basis, and give a true and fair view of the assets, liabilities, financial position and return of the Company;

·      The Chairman's Statement and Manager's Review include a fair review of the important events that have occurred during the financial year and their impact on the financial statements;

·      'Principal Risks and Risk Management' includes a description of the Company's principal risks and uncertainties; and

·      The Annual Report includes details of related party transactions that have taken place during the financial year.

On behalf of the Board

Richard M. Martin

Chairman

12 July 2010

Notes (audited)

1.   The financial statements of the Company, which are the responsibility of, and were approved by, the Board on 12 July 2010, have been prepared in accordance with UK Generally Accepted Accounting Practice ("UK GAAP") and in accordance with guidelines set out in the Statement of Recommended Practice (''SORP''), for Investment Trust Companies and Venture Capital Trusts issued by the Association of Investment Companies (''AIC'') in January 2009.

2.   Segmental analysis

            The Company carries on business as an investment trust and manages two separate portfolios of assets: the Income Portfolio and the Growth Portfolio.

            The Company's Income Statementcan be analysed as follows:

            Year ended 31 May 2010

	Income Portfolio			Growth Portfolio			Total
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Gains on investments	-	2,878	2,878	-	2,868	2,868	-	5,746	5,746
Income	972	-	972	342	-	342	1,314	-	1,314
Investment management fee	(43)	(71)	(114)	(18)	(71)	(89)	(61)	(142)	(203)
Other expenses	(153)	-	(153)	(132)	-	(132)	(285)	-	(285)
Return on ordinary activities before tax	776	2,807	3,583	192	2,797	2,989	968	5,604	6,572
Tax on ordinary activities	(9)	-	(9)	(3)	-	(3)	(12)	-	(12)
Return  #	767	2,807	3,574	189	2,797	2,986	956	5,604	6,560

                Period from 20 February 2008 (date of incorporation) to 31 May 2009

	Income Portfolio			Growth Portfolio			Total
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Losses on investments	-	(5,326)	(5,326)	-	(6,136)	(6,136)	-	(11,462)	(11,462)
Income	1,039	-	1,039	488	-	488	1,527	-	1,527
Investment management fee	(43)	(103)	(146)	(19)	(77)	(96)	(62)	(180)	(242)
Other expenses	(170)	-	(170)	(149)	-	(149)	(319)	-	(319)
Return on ordinary activities before tax	826	(5,429)	(4,603)	320	(6,213)	(5,893)	1,146	(11,642)	(10,496)
Tax on ordinary activities	(30)	24	(6)	(2)	-	(2)	(32)	24	(8)
Return  #	796	(5,405)	(4,609)	318	(6,213)	(5,895)	1,114	(11,618)	(10,504)

# Any net revenue return attributable to the Growth Portfolio is transferred to the Income Portfolio and a corresponding transfer of an identical amount of capital is made from the Income Portfolio to the Growth Portfolio and accordingly the whole return in the Growth Portfolio is capital.  Refer to the Reconciliation of Movements in Shareholders' Funds.

.

3.   Return per share

      The return per share is as follows:

Year ended 31 May 2010	Income Shares			Growth Shares
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Return attributable to Portfolios	767	2,807	3,574	189	2,797	2,986
Transfer of net income from Growth to Income Portfolio	189	-	189	(189)	-	(189)
Transfer of capital from Income to Growth Portfolio	-	(189)	(189)	-	189	189
Return attributable to shareholders	956	2,618	3,574	-	2,986	2,986
Return per share	4.58p	12.54p	17.12p	-	16.82p	16.82p

              Both the Revenue and Capital returns per share have been calculated using the weighted average number of shares in issue (excluding shares held in treasury) during the year as the denominator, being 20,880,041 Income Shares and 17,752,074 Growth Shares.

              The returns per Income share for the comparative period are based on a net revenue return of £1,114,000 and a net capital return of £(5,723,000) and 20,897,345 Income shares being the weighted average number of Income shares in issue during the period.

              The returns per Growth share for the comparative period are based on a net capital return of £(5,895,000) and 19,647,465 Growth shares being the weighted average number of Growth shares in issue during the period.

4.       Dividends

		2010
		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Amounts recognised as distributions to shareholders during the year:
For the period ended 31 May 2009
- fourth interim dividend of 1.4p per share		292	-	292
For the year ended 31 May 2010
-first interim dividend of 1p per share		206	-	206
-second interim dividend of 1p per share		208	-	208
-third interim dividend of 1p per share		213	-	213
		919	-	919
Amounts relating to the year but not paid at the year end: -fourth interim dividend of 1.4p per share*		301	-	301
		301	-	301

* Based on 21,480,192 Income Shares (excluding 427,000 shares held in treasury) at the record date of 25 June 2010.

The fourth interim dividend of 1.4p per Income share, was paid on 9 July 2010 to shareholders on the register on 25 June 2010, with an ex-dividend date of 23 June 2010.

5.       (a) Tax on ordinary activities

	Income Portfolio			Growth Portfolio			Total
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Overseas taxation	9	-	9	3	-	3	12	-	12
Current tax charge for the year being Taxation on ordinary activities	9	-	9	3	-	3	12	-	12

 (b) Reconciliation of tax charge

		2010
		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Return on ordinary activities before tax:		3,583	2,989	6,572
Corporation tax at standard rate of 28 per cent		1,003	837	1,840
Effects of:
Gains on investments not taxable/relievable		(806)	(803)	(1,609)
Overseas tax suffered		9	3	12
Non taxable overseas dividend income		(63)	(5)	(68)
Non taxable UK dividend income		(203)	(90)	(293)
Expenses not utilised		69	61	130
Current year tax charge (note 5 (a))		9	3	12

6.       The net asset value per Income share is calculated on net assets of £18,646,000 (2009: £15,031,000), divided by 21,480,192 (2009: 20,350,192) Income shares, being the number of Income shares in issue at the year end (excluding shares held in treasury).

The net asset value per Growth share is calculated on net assets of £15,052,000 (2009: £13,026,000), divided by 17,360,567 (2009: 18,665,567) Growth shares, being the number of Growth shares in issue at the year end (excluding shares held in treasury). 

7.       During the year to 31 May 2010 the Company bought back 320,000 (2009: 1,825,000) Income shares at a cost of £243,000 (2009: £1,401,000) to be held in treasury and resold out of treasury 1,450,000 (2009: 268,000) Income shares receiving net proceeds of £1,203,000 (2009: £182,000).

          During the year to 31 May 2010 the Company bought back nil (2009: 2,035,000) Growth shares at a cost of £nil (2009: £1,564,000) to be held in treasury and resold out of treasury 250,000 (2009: 25,000) Growth shares receiving net proceeds of £196,000 (2009: £16,000).   During the year to 31 May 2010 the Company bought back 1,555,000 (2009: 260,000) Growth shares at a cost of £1,156,000 (2009: £153,000) for cancellation. 

          At 31 May 2010 the Company held 427,000 (2009: 1,557,000) Income shares and 1,760,000 (2009: 2,010,000) Growth shares in treasury.

8.   Financial Instruments

The Company's financial instruments comprise its investment portfolio, cash balances and debtors and creditors that arise directly from its operations. As an investment trust the Company holds a portfolio of financial assets in pursuit of its investment objective.

Listed and quoted fixed asset investments held are valued at fair value. The fair value of all other financial assets and liabilities is represented by their carrying value in the Balance Sheet.

The fair value of the financial assets and liabilities of the Company at 31 May 2010 is not materially different from their carrying value in the financial statements.

The main risks that the Company faces arising from its financial instruments are:

(i)       market price risk, being the risk that the value of investment holdings will fluctuate as a result of changes in market prices caused by factors other than interest rate or currency rate movements;

(ii)      interest rate risk, being the risk that the future cash flows of a financial instrument will fluctuate because of changes in market interest rates;

(iii)      foreign currency risk, being the risk that the value of investment holdings, investment purchases, investment sales and income will fluctuate because of movements in currency rates;

(iv)      credit risk, being the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company; and

(v)       liquidity risk, being the risk that the Company may not be able to liquidate its investments quickly or otherwise raise funds to meet financial commitments.

Market price risk

The management of market price risk is part of the fund management process and is typical of equity investment. The portfolio is managed with an awareness of the effects of adverse price movements through detailed and continuing analysis with an objective of maximising overall returns to shareholders.

Interest rate risk

Floating rate

When the Company retains cash balances the majority of the cash is held in variable rate bank accounts yielding rates of interest linked to the UK base rate which was 0.5 per cent at 31 May 2010 (2009: 0.5 per cent). There are no other assets which are directly exposed to floating interest rate risk.

Fixed rate

The Company does not hold any fixed interest investments.

The Company does not have any liabilities which are exposed to interest rate risk.

Foreign currency risk

As the Company's investments and all assets and liabilities are denominated in sterling there is no direct foreign currency risk. However, although the Company's performance is measured in sterling and the Company's investments are denominated in sterling a proportion of their underlying assets are quoted in currencies other than sterling. Therefore movements in the rates of exchange between sterling and other currencies may affect the Company's investment portfolios and therefore they have currency exposure.

                  Credit risk

Credit risk is the risk that a counterparty to a financial instrument will fail to discharge an obligation or commitment that it has entered into with the Company. The investment manager has in place a monitoring procedure in respect of counterparty risk which is reviewed on an ongoing basis. The carrying amounts of financial assets best represents the maximum credit risk exposure at the balance sheet date.

Credit risk arising on transactions with brokers relates to transactions awaiting settlement. Risk relating to unsettled transactions is considered to be small due to the short settlement period involved and the acceptable credit quality of the brokers used. The Manager monitors the quality of service provided by the brokers used to further mitigate this risk.

All the assets of the Company which are traded on a recognised exchange are held by JPMorgan Chase Bank, the Company's custodian. Bankruptcy or insolvency of the custodian may cause the Company's rights with respect to securities held by the custodian to be delayed or limited. The Board monitors the Company's risk by reviewing the custodian's internal control reports.

The credit risk on liquid funds is controlled because the counterparties are banks with acceptable credit ratings, normally rated AA or higher, assigned by international credit rating agencies. Bankruptcy or insolvency of such financial institutions may cause the Company's ability to access cash placed on deposit to be delayed, limited or lost.

Liquidity risk

The Company's listed and quoted securities are considered to be readily realisable.

The Company's liquidity risk is managed on an ongoing basis by the investment manager in accordance with policies and procedures in place. The Company's overall liquidity risks are monitored on a quarterly basis by the Board.

The Company maintains sufficient investments in cash and readily realisable securities to pay accounts payable and accrued expenses which are settled in accordance with suppliers stated terms. During the year and at the year end, overdraft facilities were not utilised however short-term flexibility could be achieved, where necessary, through the use of overdraft facilities.

9.       Subject to certain minimum and maximum thresholds which may be set by the Board of F&C Managed Portfolio Trust plc ("the Board") from time to time, shareholders have the opportunity to convert their Income shares into Growth shares and/or their Growth shares into Income shares upon certain dates, the next of which will be 29 October 2010 and then annually or close to annually thereafter (subject to the articles of association of the Company). The Conversion notice period will commence on 26 July 2010 and full details will be provided on the Company's website from this date and in the Company's Annual Report and Accounts.

10.     These are not full statutory accounts in terms of Section 434 of the Companies Act 2006. The full audited Annual Report and Accounts for the year ended 31 May 2010 will be sent to shareholders in July 2010 and will be available for inspection at 80 George Street, Edinburgh, the registered office of the Company.  The full Annual Report and Accounts will be available on the Company's website www.fcmanagedportfolio.co.uk.

The audited accounts for the year to 31 May 2010 will be lodged with the Registrar of Companies following the Annual General Meeting to be held on 21 September 2010.

For further information, please contact:

Peter Hewitt, F&C Investment Business Limited   0131 718 1244

Ian Ridge, F&C Investment Business Limited        0131 718 1010

 

END

 

 

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