Annual Financial Report

RNS Number : 6333I

F&C Managed Portfolio Trust PLC.

26 July 2012

 



To:      RNS

Date:  26 July 2012

From: F&C Managed Portfolio Trust plc

Results for the year ended 31 May 2012

The Board of F&C Managed Portfolio Trust plc announces the audited results of the Company for the year to 31 May 2012.

Chairman's Statement

Highlights

·      £12.9 million raised in March 2012 under an offer for subscription, increasing the size of the Company by approximately 30%

·      Annual dividend increased to 4.5p per Income share for the year

·      Both shares traded at a small premium to NAV on average during the year

Introduction

It is always disappointing to report a fall in the value of our shares, but, as the Manager's Report makes clear, this was a difficult year for all equity markets. On the positive side, the Income shares out-performed the FTSE All-Share index, the fourth consecutive year they have done so.

In recent years the Growth portfolio has been out-stripping its sister portfolio but in this period it suffered from a rush to safety as global growth slowed and the Euro crisis boiled up again.

We have succeeded in expanding the Company by nearly a third, largely through demand from various F&C share plans. This has brought assets up to the £50 million mark and should increase liquidity in the shares and reduce running costs per share.

Performance

For the Company's financial year to 31 May 2012, the total return (i.e. adding dividends paid to capital performance) of the FTSE All-Share Index was -- 8.0%. This index is the performance benchmark for both Portfolios. The total return for the Investment Company sector, as measured by the FTSE Equity Investment Instruments Index, was -10.2%.

The net asset value ('NAV') or capital value per share of the Income shares fell by 10.9% to 91.86p. However, with the four dividends paid out during the year included, the total return of -6.6% was ahead of the benchmark.

The NAV per share of the Growth shares fell by 12.6% to 93.97p per share and was behind the benchmark.

Since launch in April 2008, the NAV per share total return of the Income shares is 14.0%; and -4.1% for the Growth shares; which compares to a total return of 4.6% from the benchmark index.

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 2012 totalled £227,000, which is equivalent to 0.96p per Income share. Including this transfer, the Company's net revenue return was £1,188,000 which is equivalent to 5.04p per Income share.

Four interim dividends together with the special interim dividend (which was paid as a consequence of the fund raising) with respect to the year to 31  May 2012 have now been paid, totalling 4.5p per Income share. This represents a small increase of 0.1p or 2.3% from the prior year to 31 May 2011 and was made possible by increased income from investee companies and the successful fund raising in March 2012. The fourth interim and the special interim dividend were paid after the year end on 6 July 2012. After recognising all dividends for the year, we were able to add £123,000 to the revenue reserve, which now totals £201,000 or 0.75p per Income share.

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 2012, January 2013 and April 2013. It is intended that a fourth interim dividend will be paid to Income shareholders in July 2013 but the directors will determine the amount of the fourth interim dividend when a clearer view emerges of income for the year.

In real terms, dividends paid by companies in the FTSE All-Share index are continuing to grow. In time this should feed through to an increase in payments from investment companies in the portfolio.

Borrowing

At the time of writing, borrowings in the Income Portfolio total £0.8 million but we are unlikely to increase this significantly unless the market outlook improves. The borrowing; having been invested, produces a net contribution to income after deducting interest payments.

Offer for subscription

In January 2012, the Board announced proposals to offer new Income shares and Growth shares to both existing and potential new shareholders. The Board was very pleased to announce in March, that gross proceeds of approximately £12.9 million had been raised which increased the size of the company by some 30%. We believe that this fund raising will benefit all shareholders by increasing liquidity and spreading management costs over a larger base. I would like to welcome new shareholders who participated in the offer.

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. In normal circumstances we aim to maintain our discount at not more than 5% by buying back shares from time to time. During the year to 31 May 2012 we have been able to maintain average premiums of 0.8% for the Income shares and 0.9% for the Growth shares. At the year end, the ratings were a discount of 0.4% for the Income shares and a discount of 1.0% for the Growth shares.

By maintaining these ratings we were able to issue new shares under the offer for subscription referred to previously to meet demand, primarily from investors through the F&C savings plans. On 7 March 2012 the Company issued 4,807,744 Income shares and 7,844,276 Growth shares. As this would have exceeded the authority granted by shareholders at the last AGM, authority for this larger share issuance was granted by shareholders at the General Meeting held in November 2011.

In addition, during the year, 485,000 Income shares and 1,120,000 Growth shares were bought back to be held in treasury and are available to re-sell.

We will be seeking shareholders' approval to renew the powers to allot shares, buy back shares and sell shares from treasury at the Annual General Meeting.

Share plans and conversion facility

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 25 October 2012. 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 30 July 2012. Since launch no conversion has yet taken place as the number of shares offered for conversion has been well below the minimum threshold.

AGM

The annual general meeting ("AGM") will be held at 12.30pm on Wednesday 26 September 2012 and I hope you will attend. The meeting will be held in the offices of F&C Asset Management plc at Exchange House, Primrose Street, London.

Outlook

The outlook is more uncertain than probably any time since the Second World War. The Eurozone, comprising so many countries with widely different economic strengths and cultures, is fundamentally flawed. The determination of politicians to hold it together, without addressing fundamental issues, means that we seem condemned to a series of crises and concerns.

However growth continues in Asian and developing economies, even if at more moderate rates than in recent years. Despite the uncertainties, many companies across the world continue to flourish. Equity markets offer sound value and our portfolios of investment companies investing across the world and in many sectors should prove resilient.

Richard M. Martin

Chairman

26 July 2012

Manager's Review as follows:

Stockmarket background

Last year's manager's review included comments which highlighted "the unprecedented level of uncertainty surrounding the direction of economies and financial markets" and then made reference to bail outs and severe austerity measures (for Greece, Ireland, Portugal and Spain) and concluded "it is not clear what the eventual outcome may be".

One year on, plus ca' change.

The past twelve months has witnessed very pronounced swings in equity markets, in both directions, although over the period there were more falls than rises. The Euro zone crisis has appeared similar to a slow motion train wreck with the focus moving from one country to another. First Greece, then Ireland and Portugal, all requiring bail outs of larger magnitude. Then concerns over Italy's finances before the spotlight moved back to Greece with its seemingly intractable difficulties and now the focus has moved to Spain. Politicians have been unable to come up with a solution and so the Euro remains in crisis. Confidence is low and most of Europe with the notable exception of Germany has lapsed into a double dip recession. The impact on financial markets has been remarkable. As illustrated by the UK where 10 year UK Government gilt yields have declined from 3.4% (already a historically low level) a year ago to around 1.6% currently. This is a level not seen in most working lifetimes and reflects not just lack of growth, but extreme fear amongst investors regarding the direction of the economy and what the implications of a Euro break up could mean.

Commodity prices which had risen very strongly for a number of years began, in recent months, to sell off sharply as fears of a slowdown in the Chinese economy surfaced.

All of the above resulted in a generally poor year for most equity markets.

The area which unsurprisingly experienced the worst returns was Europe where all equity markets were affected directly by the Euro zone crisis. At the other end of the spectrum was the US where the S&P Composite Index gained 6.5% (sterling adjusted total return). The US economy has shown signs of recovery, albeit modest in the context of previous recoveries, which has allowed the US corporate sector to achieve good levels of profit growth. When combined with generally benign levels of inflation and an accommodative policy from the Federal Reserve this proved enough for US equity markets to withstand the worst of the declines (S&P Composite was actually down 0.4% in dollar total returns). Also because the US market is the largest component in the FTSE World Index by some way this more than offset poor performances from Asian and Emerging Markets.

Performance

For the year to 31 May 2012 the FTSE All-Share Index declined by 8.0% (in total return terms). Over the same period the Net Asset Value for the Income Portfolio fell by 6.6% whilst that of the Growth Portfolio was down by 12.6% (again both in total return terms). This is the fourth consecutive financial year that the Income portfolio has generated returns ahead of that of the principal benchmark. Whilst after two years of outperformance the Growth Portfolio lagged the FTSE All-Share Index in the year under review. For comparative purposes the FTSE Equity Investment Instruments Index which measures the performance of Investment Companies fell by 10.2% (also in total return terms).

What were the key factors and trends that influenced performance?

Small/Mid Cap Effect

As outlined in the Interim Report the first six months were not kind to Investment Companies generally or F&C Managed Portfolio Trust in particular. Equity markets fell sharply as the difficulties caused by the crisis in the Euro zone intensified. Within the UK equity market a narrow group of large global companies and sectors with defensive characteristics such as pharmaceuticals, tobacco, mobile telecoms and food and beverages performed strongly. These companies comprised a substantial portion of the FTSE 100 Index and helped keep its fall to 6.3% whilst most of the rest of the UK equity market experienced a material setback as illustrated by the performance of the FTSE Mid 250 Index which declined by 13.2% and the FTSE Small Cap Index (ex Investment companies) which was down 17.9%. This trend was not helpful for active fund managers who have difficulty being overweight in the very largest companies in the Index and so have a much greater exposure in portfolios to medium and smaller sized companies. The headwinds experienced by the sector were best illustrated by the performance of the FTSE Equity Investment Instruments Index which fell 10.5% over the first half of the financial year. Circumstances changed early in the second half as bail outs were made to certain of the most hard pressed of the Euro zone countries. With generally good year end figures from the corporate sector in the US and UK being announced in the first calendar quarter and with valuations of equities at attractive levels, equity markets mounted a sharp recovery. By April however it became apparent that problems in the Euro zone were far from being solved and equities gave up most of the gains from the December to March period. Despite this, the second half of the financial year was a more favourable period for Investment Companies as the FTSE Mid 250 Index and the FTSE Small Cap (ex Investment Companies) gained 4.0% and 10.4% respectively whilst that of the FTSE 100 Index fell by 1.5%. Over the same period the FTSE Equity Investment Instruments Index rose by 0.4%.

Average Sector Discounts

Over the period under review average discounts in the Investment Company sector widened from 7.8% to  10.2% which helps explain the sector's underperformance relative to the main UK equity index. However most of the widening happened during the first half of the financial year when the average discount moved out to 9.7% as at 30 November 2011. The second half of the financial year witnessed a stabilisation. Typically, it was the equity income sectors which benefited from high ratings which were accorded to trusts with above average yields where the dividends were viewed as being sustainable. The Income Portfolio was the principal beneficiary of this trend.

Gearing

One of the main advantages that investment companies have over their open ended counterparts is the ability to borrow and invest in the markets. This can work against performance should equity price levels decline and was a factor in the underperformance of investment companies during the first half of the year.

Outperformance of the FTSE World (ex UK) Index

The FTSE World (ex UK) Index adjusted back into sterling fell only 5.2% over the year under review. This would normally assist Investment Companies who typically have a significant exposure to overseas assets and should be a factor helping them to outperform. Unfortunately this relationship broke down over the past year due to the nature of what performed within the World Index. As the table illustrated earlier in the report showed the FTSE Europe (ex UK) Index fell 24.2% whilst the FTSE Pacific (ex Japan) Index declined 11.0% and the MSCI Emerging Markets Index was down 14.5%. All markedly worse than the UK. However the S&P Composite Index representing the five hundred largest companies in the US gained 6.5%. This is a notable performance from the US which itself comprises around 50% of the World by market value. Unfortunately there is only one US specialist large cap actively managed trust, JPMorgan American which has been a long term holding in the Growth Portfolio. Although most of the Global trusts do have exposure to the US market, most are underweight and so inherently the Investment Company sector has been underexposed to the best performing major market of the past year.

Leading Contributors - Income Portfolio (all figures total return)

The leading performer in the Income Portfolio was Aberdeen Asian Income Fund which appreciated by 8.4%. This trust along with Schroder Oriental Income which gained 4.0% and Utilico Emerging Markets, up 1.4%, which were the portfolio's third and fifth best performers, are invested in rapidly growing parts of the world well away from the difficulties faced in Europe. Against a backdrop of faster growth these trusts tend to be invested in larger more mature companies which are not heavily indebted and have plenty of scope to use their growing cash flows to pay dividends. In particular in the Pacific region the culture of rewarding shareholders with steady dividends has taken hold. Over the long run returns from the Income Portfolio should benefit from exposure to exciting areas of growth both in terms of capital and income. 3i Infrastructure returned 5.7% over the past year and was the second best performer. Unlike other infrastructure trusts which are very much focused on lower return PFI type projects in the UK, 3i Infrastructure is invested in a number of low volatility businesses which generate strong cash flow with some capital growth prospects e.g. Anglian Water, Eversholt a leading train leasing business in the UK, Finnish electricity generation and Oystercatcher which is involved in oil storage throughout Europe. The dividend grew 5% last year with a near 5% yield. For the second consecutive year Lowland Investment Company appears as a leading contributor with a 2.2% return. This trust is in the UK Growth & Income sector but differs from others in that around two thirds of its portfolio is invested in medium and small companies with a bias towards the industrial sector. It contributed very strongly in the second half of the financial year as these types of companies experienced a sharp recovery in the stockmarket.

Leading Contributors - Growth Portfolio (all figures total return)

The leading contributor by some considerable way was the Biotech Growth Trust with a gain of 36.5%. The trust is managed by Orbimed, a specialist in this field, based in New York. The US has by far the most developed market for biotech companies and also is where the majority are quoted. The strong performance was due to a number of factors: large pharmaceutical groups deciding that acquiring biotech companies with products close to market is a more efficient way of replacing drug pipelines than their own research and development. A number of biotech companies with major new products that have had successful clinical trials and finally quoted biotech companies are attractively valued relative to their prospects. All of these factors should continue into next year. The meagre nature of returns is highlighted by the next best contributor in the portfolio being Lowland Investment Company (see comments above) with only a 2.2% rise. Graphite Enterprise, a private equity fund of funds investment company came next with a 1.9% return. Other funds in this sector have had very wide discounts accorded to them by the market reflecting investor doubts over prospects and yet Graphite managed a modest rise in asset value over the year. It is a well managed fund with a strong balance sheet and has the likelihood of a number of profitable realisations from its portfolio over the next year. As has been mentioned earlier in the review the US stockmarket was the best performer of major markets last year and so JPMorgan American Investment Trust, which invests in large cap US companies, was a beneficiary with a 1.2% gain. Lastly, Polar Capital Technology Trust achieved a small 0.3% rise over the period. It is a specialist investor in the technology sector and has sizeable holdings in Apple, Amazon and Google as well as a number of smaller companies with exciting potential. As with Biotech Growth Trust the technology sector has done well, due less to overall economic conditions or a strong recovery but more as a result of new products or services. Both sectors appear to be on a secular growth trend.

Investment Strategy and Outlook

The past year has not been good for most economies or equity markets. Indeed only those bond markets deemed to be safe havens by global investors have  appreciated significantly (the FTSE Government All Stocks Index gave investors a total return of 16.3% over the period under review). China's rate of growth began to slow appreciably which affected the rest of Asia and also commodity prices. Europe moved into recession; severely in Southern Europe; and even in Germany growth began to moderate. The US economy kept growing albeit at a below trend level as the Federal Reserve continued to pursue a highly accommodative monetary policy. Against this background equity markets fell, with some in the Euro zone suffering quite considerable declines. In sterling terms only the US rose although that was due to the dollar rising in relation to sterling. In dollar terms even Wall Street moved slightly lower.

What lies ahead for the next year?

Much depends on what transpires in the Euro zone and whether politicians find a solution. Even if they do, recession will continue in the south due to the requirement of severe austerity measures and even in northern Europe, a return to average levels of growth seems some way off. China has been slowing, although recent policy actions may avoid a hard landing and growth rates could stabilise. Over the balance of 2012, the pace of US growth is not expected to increase and much depends on the Presidential election in November. Some form of tax increases and spending cuts look inevitable given the size of the US deficit.

Equity markets remain in a state of extreme uncertainty. The risk of countries being forced out of the Euro and the impact this would have on overall activity levels remains high. Investor sentiment is very risk averse as illustrated by those government bond markets viewed as safe havens (e.g. US, UK and Germany) being very highly priced. In the coming months the direction of equity markets will be determined as much by politicians as by fundamentals, however, it can be argued that a great deal of these uncertainties are priced into equity markets. Should next year prove to be a year of stabilisation in Europe, with even modest growth appearing in certain economies, then equities will respond positively.

On a longer view equities are, in a historical context, attractively valued. The UK market is rated on a prospective p/e of less than 10x and a dividend yield of 4.5%. They are also attractively valued when compared to either the returns on bank deposits or UK gilts where the yield on 10 year gilts is just 1.6%. This highlights a key positive feature which is the performance of the corporate sector particularly in the US and UK. Balance sheets have been de-leveraged and cash levels are improving whilst both profits and dividend growth has been reasonable. The direction of markets have been dominated by macro uncertainties; however, should these begin to recede, it would pave the way for equity markets, with attractive fundamentals and valuations to move ahead.

There is no change to the key element of the long term investment strategy which remains to capture the superior growth inherent in certain overseas markets or sectors with a strong overseas bias. This has generally served both portfolios well where access to high quality managers who specialise in these areas e.g. Pacific, Emerging Markets and Technology can add value.

However given the extreme uncertainty pervading global financial markets it has been decided to devote a portion of the Growth Portfolio to more defensive, low volatility holdings with the intention they would offset the effect of a sharp market correction on the portfolio. Around 10% of the portfolio has been invested in the Ruffer Investment Company, Personal Assets Trust, BH Macro and Finsbury Growth & Income all of which have demonstrated the ability to preserve value and are less sensitive to the direction of equity markets. The underlying characteristics of long term capital growth of the rest of the Growth Portfolio remain unchanged.

In conclusion, although there are many reasons to be concerned over near term prospects for global financial markets, the valuations of equities have become attractive on both an absolute and relative basis. Both portfolios are exposed to high quality investment companies focussed on growth and income respectively with an international bias. The Manager believes that when current macro uncertainties eventually do subside and markets begin to recover, they will benefit strongly.

Peter Hewitt

Investment Manager

F&C Investment Business Limited

Income Statement (audited)

Year to 31 May 2012

	Notes	Revenue	Capital	Total
		£'000	£'000	£'000
Losses on investments		-	(6,039)	(6,039)
Foreign exchange gains		-	4	4
Income		1,669	-	1,669
Investment management and performance fees		(82)	(218)	(300)
Other expenses		(381)	-	(381)
Return/(loss) on ordinary activities before finance costs and tax		1,206	(6,253)	(5,047)
Finance costs		(11)	(17)	(28)
Return/(loss) on ordinary activities before tax		1,195	(6,270)	(5,075)
Tax on ordinary activities	5	(7)	-	(7)
Return/(loss) attributable to shareholders	2	1,188	(6,270)	(5,082)
Return/(loss) per Income share	3	5.04p	(12.84)p	(7.80)p
Return/(loss) per Growth share	3	-	(15.57)p	(15.57)p

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)

Year to 31 May 2011

	Notes	Revenue	Capital	Total
		£'000	£'000	£'000
Gains on investments		-	7,798	7,798
Income		1,353	-	1,353
Investment management and performance fees		(76)	(244)	(320)
Other expenses		(345)	-	(345)
Return on ordinary activities before finance costs and tax		932	7,554	8,486
Finance costs		(5)	(7)	(12)
Return on ordinary activities before tax		927	7,547	8,474
Tax on ordinary activities		-	-	-
Return attributable to shareholders	2	927	7,547	8,474
Return per Income share	3	4.20p	16.41p	20.61p
Return per Growth share	3	-	20.74p	20.74p

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.

Balance Sheet (audited)

As at 31 May 2012

		Income Shares	Growth Shares	Total
	Notes	£'000	£'000	£'000
Fixed assets
Investments at fair value		25,196	24,154	49,350
Current assets
Debtors		58	54	112
Cash at bank and on deposit		-	271	271
		58	325	383
Creditors
Amount falling due within one year		(562)	(94)	(656)
Net current (liabilities)/assets		(504)	231	(273)
Net assets		24,692	24,385	49,077
Capital and reserves
Called-up share capital		2,736	2,740	5,476
Share premium		4,967	7,876	12,843
Capital redemption reserve		-	182	182
Special reserve		18,927	15,824	34,751
Capital reserves		(2,529)	(2,237)	(4,766)
Revenue reserve		591	-	591
Shareholders' Funds		24,692	24,385	49,077
Net asset value per share (pence)	6	91.86p	93.97p

Balance Sheet (audited)

As at 31 May 2011

		Income Shares	Growth Shares	Total
	Notes	£'000	£'000	£'000
Fixed assets
Investments at fair value		24,421	20,398	44,819
Current assets
Debtors		30	22	52
Cash at bank and on deposit		-	333	333
		30	355	385
Creditors
Amount falling due within one year		(1,197)	(82)	(1,279)
Net current (liabilities)/assets		(1,167)	273	(894)
Net assets		23,254	20,671	43,925
Capital and reserves
Called-up share capital		2,256	1,956	4,212
Share premium		729	654	1,383
Capital redemption reserve		-	182	182
Special reserve		19,380	16,870	36,250
Capital reserves		495	1,009	1,504
Revenue reserve		394	-	394
Shareholders' Funds		23,254	20,671	43,925
Net asset value per share (pence)	6	103.09p	107.52p

Cash Flow Statement (audited)

Year to 31 May 2012

		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Operating activities
Investment income received, net of withholding tax suffered		1,179	418	1,597
Deposit interest received		-	3	3
Investment management and performance fees paid		(260)	(120)	(380)
Other cash payments		(182)	(206)	(388)
Net cash inflow from operating activities		737	95	832
Servicing of finance
Interest paid on bank borrowings		(29)	-	(29)
Net cash outflow from servicing of finance		(29)	-	(29)
Capital expenditure and financial investment
Purchases of investments		(4,534)	(8,995)	(13,529)
Disposals of investments		1,077	1,865	2,942
Net cash outflow from capital expenditure and financial investment		(3,457)	(7,130)	(10,587)
Equity dividends paid		(991)	-	(991)
Net cash outflow before financing		(3,740)	(7,035)	(10,775)
Financing
Issue of new shares		4,801	8,145	12,946
Expenses of offer for subscription		(76)	(126)	(202)
Shares purchased to be held in treasury		(453)	(1,046)	(1,499)
Sale of shares from treasury		-	-	-
Net cash inflow from financing		4,272	6,973	11,245
Increase/(decrease) in cash		532	(62)	470
Reconciliation of net cash flow to movement in net (debt)/cash
Increase/(decrease) in cash in the year		532	(62)	470
Opening net (debt)/cash		(972)	333	(639)
Closing net (debt)/cash		(440)	271	(169)

Cash Flow Statement (audited)

Year to 31 May 2011

		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Operating activities
Investment income received, net of withholding tax suffered		1,075	283	1,358
Deposit interest received		1	2	3
Investment management and performance fees paid		(124)	(108)	(232)
Other cash payments		(172)	(168)	(340)
Net cash inflow from operating activities		780	9	789
Servicing of finance
Interest paid on bank borrowings		(10)	-	(10)
Net cash outflow from servicing of finance		(10)	-	(10)
Capital expenditure and financial investment
Purchases of investments		(3,518)	(3,888)	(7,406)
Disposals of investments		1,003	2,159	3,162
Net cash outflow from capital expenditure and financial investment		(2,515)	(1,729)	(4,244)
Equity dividends paid		(964)	-	(964)
Net cash outflow before financing		(2,709)	(1,720)	(4,429)
Financing
Issue of new shares		646	419	1,065
Expenses of offer for subscription		-	-	-
Shares purchased to be held in treasury		-	(493)	(493)
Sale of shares from treasury		374	1,771	2,145
Net cash inflow from financing		1,020	1,697	2,717
Decrease in cash		(1,689)	(23)	(1,712)
Reconciliation of net cash flow to movement in net (debt)/cash
Decrease in cash in the year		(1,689)	(23)	(1,712)
Opening net cash		717	356	1,073
Closing net (debt)/cash		(972)	333	(639)

Reconciliation of Movements in Shareholders' Funds (audited)

Year to 31 May 2012

		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Opening shareholders' funds		23,254	20,671	43,925
Increase in share capital in issue		4,801	8,145	12,946
Expenses of offer for subscription		(83)	(139)	(222)
Shares purchased for treasury		(453)	(1,046)	(1,499)
Transfer of net income to Income shares from Growth shares		227	(227)	-
Transfer of capital from Income shares to Growth shares		(227)	227	-
Dividends paid		(991)	-	(991)
Loss attributable to shareholders		(1,836)	(3,246)	(5,082)
Closing shareholders' funds		24,692	24,385	49,077

Reconciliation of Movements in Shareholders' Funds (audited)

Year to 31 May 2011

		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Opening shareholders' funds		18,646	15,052	33,698
Increase in share capital in issue		646	419	1,065
Sale of shares from treasury		374	1,771	2,145
Shares purchased for treasury		-	(493)	(493)
Transfer of net income to Income shares from Growth shares		89	(89)	-
Transfer of capital from Income shares to Growth shares		(89)	89	-
Dividends paid		(964)	-	(964)
Return attributable to shareholders		4,552	3,922	8,474
Closing shareholders' funds		23,254	20,671	43,925

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 had 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 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 to the Company, leading to a loss of shareholders' confidence.

·      Financial - inadequate controls by the Manager or third party service providers could lead to misappropriation of assets of the Company.  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 2012, 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

26 July 2012

Notes (audited)

1.   The financial statements of the Company, which are the responsibility of, and were approved by, the Board on 26 July 2012, 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. This has been disclosed to assist shareholders' understanding, but this analysis is additional to that required by UK GAAP:

Year ended 31 May 2012

	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	-	(2,665)	(2,665)	-	(3,374)	(3,374)	-	(6,039)	(6,039)
Foreign exchange gains	-	4	4	-	-	-	-	4	4
Income	1,213	-	1,213	456	-	456	1,669	-	1,669
Investment management and          performance fees	(57)	(119)	(176)	(25)	(99)	(124)	(82)	(218)	(300)
Other expenses	(179)	-	(179)	(202)	-	(202)	(381)	-	(381)
Return/(loss) on ordinary activities before finance costs and tax	977	(2,780)	(1,803)	229	(3,473)	(3,244)	1,206	(6,253)	(5,047)
Finance costs	(11)	(17)	(28)	-	-	-	(11)	(17)	(28)
Return/(loss) on ordinary activities before tax	966	(2,797)	(1,831)	229	(3,473)	(3,244)	1,195	(6,270)	(5,075)
Tax on ordinary activities	(5)	-	(5)	(2)	-	(2)	(7)	-	(7)
Return/(loss)  #	961	(2,797)	(1,836)	227	(3,473)	(3,246)	1,188	(6,270)	(5,082)

Year ended 31 May 2011

	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	-	3,872	3,872	-	3,926	3,926	-	7,798	7,798
Income	1,066	-	1,066	287	-	287	1,353	-	1,353
Investment management and performance fees	(53)	(151)	(204)	(23)	(93)	(116)	(76)	(244)	(320)
Other expenses	(170)	-	(170)	(175)	-	(175)	(345)	-	(345)
Return on ordinary activities before finance costs and tax	843	3,721	4,564	89	3,833	3,922	932	7,554	8,486
Finance costs	(5)	(7)	(12)	-	-	-	(5)	(7)	(12)
Return on ordinary activities before tax	838	3,714	4,552	89	3,833	3,922	927	7,547	8,474
Tax on ordinary activities	-	-	-	-	-	-	-	-	-
Return  #	838	3,714	4,552	89	3,833	3,922	927	7,547	8,474

# 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 2012	Income Shares			Growth Shares
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Return/(loss) attributable to Portfolios	961	(2,797)	(1,836)	227	(3,473)	(3,246)
Transfer of net income from Growth to Income Portfolio	227	-	227	(227)	-	(227)
Transfer of capital from Income to Growth Portfolio	-	(227)	(227)	-	227	227
Return/(loss) attributable to shareholders	1,188	(3,024)	(1,836)	-	(3,246)	(3,246)
Return/(loss) per share	5.04p	(12.84)p	(7.80)p	-	(15.57)p	(15.57)p
Weighted average number of shares in issue during the year (excluding shares held in treasury)		23,555,829			20,845,902

Year ended 31 May 2011	Income Shares			Growth Shares
	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Return attributable to Portfolios	838	3,714	4,552	89	3,833	3,922
Transfer of net income from Growth to Income Portfolio	89	-	89	(89)	-	(89)
Transfer of capital from Income to Growth Portfolio	-	(89)	(89)	-	89	89
Return attributable to shareholders	927	3,625	4,552	-	3,922	3,922
Return per share	4.20p	16.41p	20.61p	-	20.74p	20.74p
Weighted average number of shares in issue during the year (excluding shares held in treasury)		22,081,107			18,907,225

4.       Dividends

		2012
		Income shares Total
Dividends on Income shares		£'000
Amounts recognised as distributions to shareholders during the year:
For the year ended 31 May 2011
- fourth interim dividend of 1.4p per Income share		316
For the year ended 31 May 2012
- first interim dividend of 1p per Income share		225
- second interim dividend of 1p per Income share		226
- third interim dividend of 1p per Income share		224
		991
Amounts relating to the year but not paid at the year end:
- special interim dividend of 0.3p per Income share *		67
- fourth interim dividend of 1.2p per share**		323
		390

*  Based on 22,397,192 Income Shares in issue at the record date of 24 February 2012.

** Based on 26,879,936 Income Shares in issue at the record date of 22 June 2012.

The special interim dividend of 0.3p per Income share, was paid on 6 July 2012 to shareholders on the register on 24 February 2012, with an ex-dividend date of 22 February 2012.

The fourth interim dividend of 1.2p per Income share, was paid on 6 July 2012 to shareholders on the register on 22 June 2012, with an ex-dividend date of 20 June 2012.

The Growth shares do not carry an entitlement to receive dividends.

5.       (a) Tax on ordinary activities

    Year ended 31 May 2012

	Income Portfolio			Growth Portfolio			Total
	Revenue	Capital	Total	Revenue	Capital	Total	Revenue	Capital	Total
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
Current tax charge for the year (all irrecoverable overseas tax) being Taxation on ordinary activities	5	-	5	2	-	2	7	-	7

 (b) Reconciliation of tax charge

		2012
		Income Shares	Growth Shares	Total
		£'000	£'000	£'000
Loss on ordinary activities before tax:		(1,831)	(3,244)	(5,075)
Corporation tax at standard rate of 25.7 per cent		(471)	(834)	(1,305)
Effects of:
Losses on investments not relievable		685	867	1,552
Overseas tax suffered		5	2	7
Non taxable UK dividend income		(209)	(107)	(316)
Non taxable overseas dividend income		(99)	(9)	(108)
Expenses not utilised		94	83	177
Current year tax charge (note 5 (a))		5	2	7

6.       The net asset value per Income share is calculated on net assets of 24,692,000 (2011: £23,254,000), divided by 26,879,936 (2011: 22,557,192) 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 24,385,000 (2011: £20,671,000), divided by 25,949,843 (2011: 19,225,567) Growth shares, being the number of Growth shares in issue at the year end (excluding shares held in treasury). 

7.       During the year the Company bought back 485,000 (2011: nil) Income shares at a cost of £453,000 (2011: £nil) to be held in treasury and resold out of treasury nil (2011: 427,000) Income shares, receiving net proceeds of £nil (2011: £374,000). At 31 May 2012 the Company held 485,000 (2011: nil) Income shares in treasury.  A further 4,807,744 (2011: 650,000) Income shares were issued for net proceeds of £4,718,000 (2011: £646,000).

          During the year the Company bought back 1,120,000 (2011: 485,000) Growth shares at a cost of £1,046,000 (2011: £493,000) to be held in treasury and resold out of treasury nil (2011: 1,910,000) Growth shares receiving net proceeds of £nil (2011: £1,771,000).  At 31 May 2012 the Company held 1,455,000 (2011: 335,000) Growth shares in treasury.  A further 7,844,276 (2011: 440,000) Growth shares were issued for net proceeds of £8,006,000 (2011: £419,000).

8.   Financial Instruments

The Company's financial instruments comprise its investment portfolio, cash balances, bank borrowings 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 2012 and 31 May 2011 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 or the fair value of the listed debt 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 and debt 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 2012 (2011: 0.5 per cent). There are no other assets which are directly exposed to floating interest rate risk. The cost of the Company's borrowing facility from its custodian JPMorgan Chase Bank is liked to the Sterling Overnight Interbank Average Rate (SONIA) which was 0.49 per cent at 31 May 2012 (2011: 0.54 per cent).

Fixed rate

The Income Portfolio holds fixed interest investments.  Movements in market interest rates will affect the market value of fixed interest investments. 

              The Growth Portfolio does not hold any fixed interest investments.

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

Foreign currency risk

The Company may invest in overseas securities which give rise to currency risks.  At 31 May 2012 the Income Portfolio had a US dollar denominated investment valued at £540,000.

As the remainder of the Company's investments and all other assets and liabilities are denominated in sterling there is no other direct foreign currency risk.  However, although the Company's performance is measured in sterling and the Company's investments (other than the above) 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 market price of 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 A 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

Liquidity risk is the risk that the Company will encounter difficulty in realising assets or otherwise raising funds to meet financial commitments.  The risk of the Company not having sufficient liquidity at any time is not considered by the Board to be significant, given that 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, the Company had a borrowing facility with its custodian JPMorgan Chase Bank which is repayable on demand.  All liabilities are considered to be repayable on demand for a consideration equal to the carrying value of the liabilities.

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 25 October 2012 and then annually or close to annually thereafter (subject to the articles of association of the Company). The Conversion notice period will commence on 30 July 2012 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 2012 will be sent to shareholders shortly, 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 2012 will be lodged with the Registrar of Companies following the Annual General Meeting to be held on 26 September 2012.

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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