Interim Management Statement

RNS Number : 4831Z

Aurora Investment Trust PLC

14 January 2011

 



AURORA INVESTMENT TRUST Plc

Interim Management Statement 31 December  2010

Directors:

Alex Hammond-Chambers (Chairman)

James Barstow FCA

Richard Martin

Richard Robinson

Fund Manager:

James Barstow of Mars Asset Management Ltd

Year End:    28 February

Dividend:     Final only. Latest dividend 3.45p.    Paid 6th August 2010

Benchmark:   All-Share Index

Objective:

Capital Appreciation through investments listed mainly on the London Stock Exchange.

Policy (Summary)

To invest primarily in equities, but with some exposure also to Fixed Interest.  In general the portfolio will be weighted towards the larger rather than smaller capitalised stocks.  A distinctive feature is an emphasis on investments in companies with exposure to economies growing at a faster rate than the UK.

Largest Holdings    31 December 2010

		£'000		%
GCM		4,261		11.1
West China Cement		3,276		8.5
Asian Citrus		3,160		8.2
BTG		2,638		6.8
Antofagasta		2,257		5.9
Kazakhmys		1,775		4.6
Xstrata		1,505		3.9
Royal Dutch		1,481		3.8
Rio Tinto		1,480		3.8
Standard Chartered		1,455		3.8
Total		23,288		60.4

Sector Analysis

	Aurora %
Oil & Gas	15.7
Industrials	9.9
Consumer Goods	8.7
Health Care	7.2
Consumer Services	0.1
Telecommunications	3.5
Information Technology	2.1
Financials	13.5
Resources (mining)	35.2
Utilities	-
Fixed Interest	4.1
Total	100.0

Performance  

Period (up to 31/12/10)		NAV (ex-income)		FTSE All-Share
		%		%
From Launch		+ 188.8		+ 44.1
7 years		+ 61.6		+ 40.8
5 years		+ 26.6		+ 9.2
3 years		+ 31.4		(5.5)
1 year		+ 53.3		+ 13.0
4 months		+ 26.6		+15.2

		At 31/12/10
Share price		252.0p
Net Asset Value		282.4p
Discount		10.8%

REVIEW

Although the UK stock-market went into a slight retreat during most of November, on account of eurozone in general, but particularly Irish, sovereign debt worries, this was a short term aberration during the four months under review. Throughout the rest of this period the FTSE 100 and other European markets followed the lead from Wall Street and rose strongly against a background of encouraging economic statistics. The announcement that there would be a continuation of the package of US Quantitative Easing, combined with an environment of low interest rates for the foreseeable future, acted as an additional powerful catalyst.

The US economy has continued to accelerate its pace of recovery, yet is struggling to provide new employment at the desired rate. As a consequence, consumer confidence remains low as house prices stay weak while debt is repaid and the savings ratio continues to rise. Meanwhile, the forward indicators for both the manufacturing and service industries are performing strongly.

There has been a marked divergence in Europe between the 'core' countries which lie generally to the North and the peripheral countries of the South. Growth in the former is far outstripping the latter. Above all, the outstanding performer is Germany, whose manufacturing base continues to benefit from strong growth in its export trade mainly to Asia, but also to Russia.

Meanwhile, the UK economy has fared surprisingly well. Until the cold weather arrived in mid-November retail sales were rising and the construction industry remained buoyant as old contracts issued by the previous government were in course of completion. It was the manufacturing sector, however, which performed best of all, indeed even more so than the service sector.

The major economies in Asia continue to boom, notably India and China which have been growing at a near double digit rate, a fact which has caused a certain degree of consternation over the rising rate of inflation. Not surprisingly this has led to interest rate increases and monetary tightening in both countries.

During the period the benchmark (FTSE All-Share index) rose by 15.2% whereas the portfolio performed much more strongly, having produced a rise of 26.6%. The main contributors to the relative out-performance were the high exposure to mining and natural resource stocks as well as certain individual stocks e.g. Asian Citrus and West China Cement, benefiting from their exposure to the Chinese economy. At the same time the avoidance of exposure to mainstream UK consumer stocks also proved an excellent decision.

The company's share price ended the period at an all-time record level of 252 pence.

Outlook

There are now few who still doubt that economic recovery, following the financial crisis of 2007/8, is firmly underway among western economies, even though the rate of job creation remains slower than most commentators would desire. Corporate profitability appears set to grow on account of higher productivity and reductions in labour costs, whilst at the same time interest charges, particularly in the US where there is no social security safety net, are set to remain at close to current low levels for the foreseeable future.

Stock-markets are in general driven by corporate profitability, which in turn determines the level of dividends. Against the current economic background, political shocks apart, and in view of the relatively low valuations and high levels of institutional liquidity prevailing, it is not difficult to forecast with a good degree of probability that 2011 will witness a continuation of the rise in stock-markets around the globe, albeit, as ever, with some short term setbacks on the way. Increased levels of corporate M & A activity are set to be an important feature, not least in the resources sector, as evidenced by the current actions of BHP, Rio Tinto, Xstrata and others.

The manager remains optimistic for the prospects for the current portfolio and feels content that the current investment themes remain apposite and are set to fructify.

 

END

 

 

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