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Shires Smaller Companies plc

 

Objective

The objective of the Company is to provide a high and growing dividend and capital growth from an investment in a portfolio invested principally in the ordinary shares of smaller UK companies and UK fixed income securities.

Manager's Monthly Report

August 2008


Equity markets fell during July as the economic outlook deteriorated and concerns over rising inflation weighed on the consumer. Similar market themes to those seen in June were evident as markets slid towards the middle of the month, however, they did recover in the second half as commodity and oil prices fell from recent highs. There was weakness across the market cap range with small caps underperforming the wider FTSE All-Share Index. Domestic economic news continued to weaken and with inflation still breaching the 2% limit The Bank of England's MPC voted to hold interest rates at 5%. Inflation remains a key concern for the MPC but figures may get a welcome respite from oil and commodity prices declining sharply from there recent highs. Retail sales came under pressure falling 3.9% in June with sizeable volume declines across most sectors and expectations that the second half will remain tough. The Trust benefited from a positive interim management statement from Mothercare and a bounce in McBribe who will benefit from any further weakening in the oil price. On a more negative note, the consumer facing stocks Western & Oriental, Lookers and Holidaybreak were all weak over the period. The other main detractor from performance was F&C Asset Management after one of their major shareholders liquidated their position. In terms of portfolio activity, we exited Abbey, a UK and Irish housebuilder, Powerleague, and Luminar. We also reduced Healthcare Locums, Midas Income & Growth and Hill & Smith following strong relative performance. The small cap market remains volatile but where opportunities present themselves we will continue to add to our holdings which we believe are attractively valued.

10 April 2008, UK Equities Update

James Laing, Head of Pan-European Equities


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James Laing