Interim Management Statement

RNS Number : 5404V

Aurora Investment Trust PLC

13 January 2012

 



AURORA INVESTMENT TRUST Plc

Interim Management Statement 31 December 2011

Directors:

Lord Flight (Chairman)

James Barstow FCA

Richard Martin

Hon James Nelson

Fund Manager:

James Barstow of Mars Asset Management Ltd

Year End:    28 February

Dividend:     Final only. Latest dividend 3.5p.    Paid 25 July 2011

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 larger and mid-cap 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 2011

		£'000		%
BTG		2,823		11.0
ROYAL DUTCH		1,717		6.7
PROSPERITY MINERALS		1,589		6.2
ANTOFAGASTA		1,519		5.9
ASIAN CITRUS		1,353		5.3
WEST CHINA CEMENT		1,232		4.8
EMBLAZE		1,040		4.1
GCM RESOURCES		1,035		4.0
BG		1,032		4.0
PRUDENTIAL		956		3.7
		14,296		55.7

Sector Analysis

		Aurora %
Oil and Gas		17.0
Industrials		13.8
Consumer goods		6.3
Health Care		11.6
Consumer Services		0.0
Telecommunications		0.0
Information Technology		6.6
Financials		10.4
Resources (Mining)		27.0
Utilities		0.0
Fixed Interest		7.3
		100.0

Performance    

		NAV (ex-income)		FTSE All-Share
		%		%
Since Launch to 31/12/11		+89.7		+32.5
5 years to 31/12/11		-25.8		-11.3
3 years to 31/12/11		+53.6		+29.3
1 year to   31/12/11		-34.3		-6.7
4 months to 31/12/11		-15.0		+2.0
		31/12/2011
Share price		152.5p
Net Asset Value per share		185.5p
Discount		17.8%

Review

The four month period under review witnessed a continuation in the London, and indeed most other major stock-markets around the world, of the highly volatile trading conditions prevalent in the summer months.

Investor sentiment remained fragile on account of worries about many features, ranging from the slow pace of recovery in the US economy, to the possibility of a hard landing in China and the sharp and unexpected rapid slow-down in Brazil.  Most importantly of all, the sovereign debt worries in the eurozone were never far from centre stage as the yields on bonds continued to rise throughout the eurozone.  This was particularly the situation in Italy, where yields breached the level of 7%, deemed critical by the experts.

Despite several conferences and summits between the main European leaders, few important decisions were reached, except for the need for further austerity programmes to shrink the budget deficits in the southern based and weaker eurozone economies. One positive and overdue measure taken by the new Governor of the ECB was to make quarter point reductions in interest rates in successive months following his appointment to that office, thus reversing the unwise interest rate increases made earlier in the year.

In mid-December a further move to create extra liquidity to the banking sector was the provision of 500bn euros of three year loans, an offer which was snapped up in a single day -clear evidence of the severity of the crisis.

Alone amongst EU members, the UK remains unwilling to prop up the eurozone with direct financial contributions, as evidenced by the British Prime Minister's recent refusal to accept the imposition of a financial transaction tax.  The dire recessionary outlook in Europe has certainly had a chilling effect on both UK consumer and investor confidence alike. Not surprisingly, sentiment in the stock-market turned extremely defensive.  Growth/cyclical oriented companies as well as mid and smaller capitalised stocks, the core of this portfolio, accordingly performed badly, despite their superior long term prospects.  Thus the company's share price ended the period at the much lower level of 152 pence.

Portfolio

During the period, various holdings were trimmed and the proceeds reinvested in fixed interest securities.

Outlook

The inability of politicians on both sides of the Atlantic to solve their nations' long term economic problems in a decisive manner continues to weigh heavily on stock-markets.

In the US the recovery is slow and patchy, but appearing nevertheless, although, as in previous cycles, employment numbers are making snail-paced progress.  Growth in Asia looks set to continue, albeit at a modest pace, perhaps soon to be aided by some monetary easing as a result of the recent reductions in the rate of inflation.

The future of the eurozone in its current form is the subject of increasing speculation and not only by hardened eurosceptics.  The likelihood of Greece's ongoing membership in particular is being put under the spotlight, in view of the magnitude of the debt to be refinanced and the degree of civil unrest already manifest from the 'austerity fatigued' population.

Meanwhile, the eurocrats remain determined to preserve the eurozone in its current form, with little regard to the social cost in the Southern based economies. In all probability they will be forced to react with further monetary loosening measures as each major round of debt refinancing occurs.  Inevitably the printing presses at the ECB will, before too long, be set in motion with dire long term consequences.

Shorter term, however, the Manager considers that predicting the level of the UK stock-market is a near impossible task but remains confident that despite its recent severe under-performance of the benchmark the portfolio is well positioned to demonstrate its superior long-term growth prospects.

 

END

 

 

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