• The Trust seeks to generate attractive long-term capital growth through investment in quoted small and medium-sized companies in Europe, excluding the UK. As well as capital growth the company aims to offer an attractive dividend, with payments made in January, May and August of each year.
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    • A high-conviction trust that taps into the huge potential of small and medium-sized companies in Europe
    • Attractive combination of capital growth and income; 6% of the year end NAV paid to shareholders as dividends*
    • Under researched asset class which offers the potential for significant performance from stock picking
    • The strategy has delivered strong investment performance

    Past performance is no indication of future returns.

    Fund facts
    Investment manager F&C Investment Business Limited
    Benchmark HSBC Europe (ex-UK) Smaller Companies Index
    AIC sector European Smaller Companies
    Launch date 1972
    Total assets £204.1 million (as at 28.02.14)
    ISIN NL0000226090
    SEDOL 322566
    Currency Euros
    Key dates
    Annual general meeting 25 April 2013
    Shareholders' and Investors' Briefing 7 May 2013
    Year end 31 December
    Dividend payment date(s) January, May and August
    Ex-dividend date(s) January, May and August

    Fund manager commentary

    February was a very strong month for European small caps, with our index returning +6.7% in Sterling terms. This was again well ahead of their large cap counterparts and the majority of global indices. Our NAV return was marginally behind this, however, we are pleased to capture the majority of this increase. The strong returns can in part be explained by a refocusing of the investment community away from the theme of global growth which has come under pressure as emerging markets have struggled, towards domestic recovery in Europe of which the principal beneficiaries are smaller companies. While valuations are not as obviously cheap as they have been, we think they remain supportive particularly when considering a potential recovery in profits which remain well below previous levels.

    February was dominated by full year results announcements, which have been mixed for the portfolio. On the positive side one of our largest positions Aareal Bank had strong results showing improving returns, strong capital ratios and an improving dividend. This is inline with our investment thesis. However we have since reduced the position as the strong performance has closed its valuation discount, although it remains a core holding in the portfolio. Plastic Omnium, the auto supplier, also had strong results and rose +30.7% during the month. We continue to believe that the valuation is very attractive.

    However, on a more negative note we had some poor results which impacted some of our holdings. SHW one of our recent purchases fell -8.2% following full year results as they announced a more subdued outlook then expected. Since purchase in November last year, we have made some good money on this position, however expectation had moved ahead of reality and a conservative outlook has now brought the two back in line. EFG the Swiss private bank, also performed poorly following their results. Again the outlook was below market expectations with client risk appetite remaining subdued despite more buoyant financial markets. For both companies we think that these are temporary setbacks and continue to believe in their prospects.

    As at 28 February 2014

    The value of shares and the income from them is not guaranteed and can fall as well as rise due to stock market movements. Past performance is not a guide to future performance. When you sell your shares, you might get back less than you originally invested. If markets fall, gearing can magnify the negative impact on performance. Changes in rates of exchange may have an adverse effect on the value, price or income of investments. Emerging Markets, Unquoted Companies and Smaller companies carry a higher degree of risk and their value can be more sensitive to market movement; their shares may be less liquid and performance may be more volatile. The fund may invest in hedge funds or private equity funds which are not normally available to individual investors, exposing the fund to the performance, liquidity and valuation issues of these funds. Such funds typically have high minimum investment levels and may restrict or suspend redemptions or repayment to investors. The asset value of these shares and its prospects may be more difficult to assess.

    * The Board has stated that barring unforeseen circumstances it will pay an annual dividend equivalent to 6% of the NAV. The dividend is funded from a combination of accumulate capital gains and income but the dividend may fluctuate. Dividend payments may constitute a return of capital in whole or in part and may be achieved by foregoing future capital growth.

  • Sam Cosh

    Sam Cosh

    Fund manager

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