Interim Management Statement

RNS Number : 0449W

British Empire Sec & Gen Tst PLC

22 January 2013

 



BRITISH EMPIRE SECURITIES AND GENERAL TRUST PLC

Interim Management Statement - 3 months ended 31 December 2012

This investment management report relates to performance figures to 31 December 2012.

Summary NAV Performance (total return basis)

	Qtr	Financial Year#	Calendar Year
BTEM	7.9%	7.9%	18.8%
Benchmark2	2.8%	2.8%	12.5%
MSCI World1	2.0%	2.0%	11.4%

Quarterly Investment Manager's Review

During the period, we have continued to outperform the benchmark and the weighted average discount on the portfolio narrowed from 30.2% at the end of September 2012 to 25.9% at calendar year end.  The discount calculation is a measure of how much the share price of each stock in the portfolio is below our estimate of its net asset value. The narrowing has been driven by a combination of factors including greater investor confidence and an increase in the level of corporate activity amongst portfolio companies.

Specific examples of corporate activity that have helped discounts narrow included the takeover of Nexen by CNOOC, the disposal of minority interests in assets by Ferrovial enabling an extraordinary special dividend, a bid received by Investor AB for Gambro, a medical devices business it owns, and the continued transformation of Orkla into a pure-play brands business.

Performance
During the Quarter, NAV rose by 7.9%, compared to an increase of 2.8%² for the Benchmark² index, resulting in an outperformance of 5.1%.

Vivendi, the largest position in the portfolio, was a significant contributor to the outperformance over the period.  It is likely that one or more businesses will be sold and this should lead to a reduction in the discount.  Orkla was another important contributor to returns.  As mentioned earlier, the company continued to restructure its businesses and formed a JV with Norsk Hydro with its aluminium business. In Asia, Shun Tak, the Macau focussed gaming and property developer began to re-rate as the prospect of permission being granted for its Cotai development property came closer to reality.  We believe there is still significant potential upside in the share price as the company continues to trade on a 62% discount.

Activity
During the quarter notable new investments include: ASM, Symphony International, Kinnevik and Dundee Corp.  ASM is a European technology holding company which could potentially be restructured.  We purchased Symphony International, a UK listed investment trust with Asian focussed consumer assets, during a deeply discounted placing.  Despite the subsequent rise in its share price, it is currently trading on a 43% discount.  Kinnevik, a Swedish listed holding company with interests in listed telecom companies and unlisted e-commerce businesses is trading on a 35% discount.  Dundee Corp is a Canadian listed holding company with significant investments in real estate, resources, financial assets and agriculture.  Dundee is trading on a 26% discount and the management has a proven record of restructuring assets.    

We reduced our commodity exposure by selling our holding in Sherritt and by taking part of our profits in Amerisur after the stock had performed strongly on the back of an encouraging oil production update.  We have also finally sold out of our Japanese holdings in Showa Aircraft and Daidoh.  Whilst we continue to believe these holdings are undervalued, the management have shown little willingness to create catalysts to capture that value.  

Share Buyback

We bought back 471,043 shares in British Empire during the period at an average price of 450p.  The shares were purchased at discounts between 12% and 14%.

Financial Performance to 31 December 2012

Statistics

	Value (GB pence)	1 qtr %	1 yr %	3 yr %	5 yr %
Price1	474.0	10.8	17.8	21.7	21.0
Net Asset Value1	516.0	5.4	14.7	14.4	6.0
Net Asset Value Total Return1		7.9	18.8	24.8	16.9
Benchmark1		2.8	12.5	21.4	10.5

Annual Returns (%)	2012	2011	2010	2009	2008
Price1	17.8	-12.8	18.5	27.9	-22.3
MSCI World1	11.4	-4.3	15.9	16.5	-17.4

1 Source: Morningstar. Share price total return is on a mid-to-mid basis, with net income re-invested.  All NAV TR figures for periods less than 5 years are on a Cum Fair value return basis in line with AIC guidelines.
2 Morningstar Global Growth Index: official Benchmark from 1 October 2008
3 Discounts are AVI estimates

Top Ten Equity Holdings	%
Vivendi	10.32
Orkla	5.48
Jardine Matheson	5.37
Aker	4.98
Investor AB	4.20
Jardine Strategic	4.20
Groupe Bruxelles Lambert	3.48
Sofina	3.16
Kinnevik-B	2.87
Macquarie Intl	2.72

Geographic Breakdown (% of total assets)

	30/09/12	31/12/12
EMEA	3.7	2.9
Continental Europe	37.8	43.3
Japan	0.4	0.0
Canada	15.2	15.7
Asia Pacific	21.7	23.8
UK	1.4	1.4
Liquidity ~	19.9	12.8

~ Liquidity is held primarily in UK and US Government Securities

Sector Breakdown

	30/09/12	31/12/12
Closed-End Funds	9.4	11.8
European Holding Companies	26.7	30.5
Asian Holding Companies	15.7	14.6
N. American Holding Companies	0.0	2.1
Property	5.3	7.0
Resources & Mining	10.4	7.1
Other	12.7	14.0
Liquidity	19.9	12.8

Major Movers

Largest Risers	Percent change	Percent of Assets
Treasury China Trust	41.35%	0.57%
Shun Tak Holdings Ltd	39.67%	2.25%

Largest Fallers	Percent change	Percent of Assets
St Barbara Ltd	-33.10%	0.65%
Talisman Energy Inc	-14.38%	1.51%

Further Information Investment Manager - John Pennink and Joe Bauernfreund, AVI Ltd. [phone]       [e-mail] The share price can be found under 'INVESTMENT COMPANIES' in The Financial Times, The Times, The Daily Telegraph, The Scotsman and The Evening Standard. Information may be found on the following websites. www.british-empire.co.uk or www.assetvalueinvestors.com Risk Factors you should consider before investing Investment in the British Empire Securities and General Trust plc (the "Trust") carries risks, which are more fully described in the Key Features Document.  Listed below are some of the key risks: Investors are reminded that past performance is not a guide to future performance and that their capital will be at risk and they may therefore lose some or all of the amounts that they choose to invest in the Trust. The Trust utilises gearing techniques (leverage) which exaggerate market movements both down and up and which could mean sudden and large falls in market value. Movements in exchange rates can impact both the level of income received and the capital value of your investment.  If the currency of your residence strengthens against the currency in which the underlying investments of the fund are made, the value of your investment will reduce and vice versa. As with all stock exchange investments the value of investment trust shares will immediately fall by the difference between the buying and selling prices. Where investments are made in emerging market, unquoted securities or smaller companies, their potential volatility may increase the risk to the value of, and the income from the investment. British Empire Securities and General Trust plc, Springfield Lodge, Colchester Road, Chelmsford, Essex CM2 5PW.  Registered in England & Wales No: 28203 All figures as at the period under review unless otherwise stated.  All sources Asset Value Investors Ltd unless otherwise stated.  Asset Value Investors Limited ("AVI") is authorised and regulated by the Financial Services Authority of the United Kingdom (the "FSA") and is a registered investment adviser with the Securities and Exchange Commission of the United States.  While the Investment Manager is registered with the SEC as an investment adviser, it does not comply with the Advisers Act with regard to its non-U.S. clients.  This document does not constitute an offer to buy or sell shares in the British Empire Securities and General Trust plc (the "Trust").  The contents of this message are not intended to constitute, and should not be construed as, investment advice. Potential investors in the Trust should seek their own independent financial advice.  AVI neither provides investment advice to, nor receives and transmits orders from, investors in the Trust nor does it carry on any other activities with or for such investors that constitute "MiFID or equivalent third country business" for the purposes of the FSA's rules.

 

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