Aberdeen UK Smaller Companies (AUSC) is “engaging closely” with fund managers Abby Glennie and Amanda Yeaman after the investment trust endured a “disappointing” half year of underperformance that saw its market value fall by 20%, mostly due to the high level of share buybacks authorised by the board to support the weak share price.

For the six months to 31 December, the portfolio of small-cap quality growth stocks fell 3.5%, trailing the 4.6% total return from the Deutsche Numis Smaller Companies plus AIM index. 

Chair Liz Airey said the underperformance was mainly driven by style factors and sector exposures, with value stocks, miners, financials and big blue-chip stocks benefiting most from the second half rally in markets. 

She assured shareholders “every effort” was being taken to improve the situation with the trust’s underperformance currently stretching to three and five years. Over three years net asset value (NAV) has risen a total 15% with shareholder returns up 20%, but over five years the portfolio is down 3% with shareholders sitting on a 6% loss including dividends. The Numis index has returned 27% and 26% over those periods. Former fund manager Harry Nimmo retired at the end of 2022 having run the trust since 2003. 

Airey reserved her sharpest comments on the 10.1m shares the board had to buy back to defend an 8% share price discount as investors sold out. This reduced the number of shares by 16.3%, which combined with the investment loss saw the trust’s market capitalisation fall 20.3% to £285.2m from £326.8m.

While selling holdings to buy back its cheap shares added 1.6% to AUSC’s NAV, it reduced net revenues by 10.3% to £3.9m. Nevertheless, the board was able to declare an interim dividend of 4.5p per share, up from 3.7p a year ago.

Airey said: “The board is acutely aware that the high level of share buy-backs has resulted in a reduction in the size of the company, but the general feedback from shareholders is they appreciate the effort that the board is making to protect the discount level.”

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