Interim Management Statement

RNS Number : 9867H

Aurora Investment Trust PLC

18 July 2012

 



AURORA INVESTMENT TRUST Plc

Interim Management Statement 30 June 2012

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 3.55p.  Paid 20 July 2012

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    30 June 2012

		£'000		%
BTG		2,732		11.1
ASIAN CITRUS		2,259		9.2
ROYAL DUTCH		1,558		6.3
WEST CHINA CEMENT		1,408		5.7
ANTOFAGASTA		1,360		5.5
PROSPERITY MINERALS		1,340		5.4
PRUDENTIAL		1,106		4.5
EMBLAZE		1,040		4.2
BG		975		4.0
RIO TINTO		906		3.7
TOTAL		14,684		59.6

Sector Analysis

		Aurora %
Resources (mining)		22.0
Oil & Gas		15.9
Industrials		13.8
Health Care		11.7
Financials		10.5
Consumer Goods		10.5
Fixed Interest		8.4
Information Technology		7.2
Total		100

Performance  

Period		NAV (ex-income)		FTSE All-Share
(to 30/6/12 in each case)		%		%
Since launch		+83.9		+34.1
5 years		+150.4		+57.9
3 years		+33.5		+33.1
1 year		-31.6		-6.6
4 months		-14.8		-5.0

		30/6/12
Share price		145.5p
Net Asset Value (ex-income)		179.8p
Discount		18.5%

Review

The four month period under review produced negative equity returns against a background of continuing economic woes almost universally around the globe. The positive effect earlier in the year on stock-markets of Quantitative Easing in its various forms, whether in the US, UK or Euro-zone finally wore off giving way to deteriorating sentiment in view of renewed Sovereign debt worries, particularly in Greece, Spain and to a lesser extent Italy.

Such worries peaked immediately prior to the Greek general election; this produced victory for those willing to stay in the Euro and thus a brief rally in markets.  In turn it was followed, a few weeks later, by yet another EU summit during which, at the eleventh hour, Italy and France persuaded Germany to become slightly less austerity oriented and to agree to help refinance the banking system directly rather than via national governments.  The main condition stipulated by Germany was the introduction of a new universal banking regulator throughout the Euro-zone - a feature which cannot be created instantaneously.

Meanwhile, the US economy continued to grow at the modest pace of some 2% without showing much employment growth. China's restrictive monetary policies were proving effective, as manifested through the rapid decline in the rate of inflation and the overall slowdown in the economy from its previous frenetic pace.

Overall, the portfolio underperformed its benchmark during the period.  The principal reason being that defensive large capitalisations - not the remit of the company- performed far better than companies with superior long term growth prospects to which the portfolio is well exposed.  Worthy of mention, however, is BTG, by far the portfolio's largest holding (11%) despite severe pruning in size, which continued to perform outstandingly well.

Outlook

In the US the recovery continues for the time being at a modest pace but by the end of the year the politicians are facing the "Fiscal Cliff" when some harsh decisions will have to be made.  To date their record is not good in this respect; hence a period of great doubt and uncertainty overhanging stock-markets is probably inevitable.

In the Eurozone huge amounts of Greek, Spanish and Italian debt will have to be refinanced by the year end from sources currently unknown.  Meanwhile, huge amounts of deposits are leaving the shores of those countries for safe havens, whether Swiss banks, London property or German bonds, which currently have a negative yield.  Pessimism in this region appears set to mount and last for a prolonged period.

The Far East Economies, by contrast, which now account for the largest of the three main blocs, continue to thrive. By comparison with their Western counterparts, they are more-over relatively well financed. Amongst them China, where the most recent inflation data shows a fall in the RPI down to as low as 2.2% per year - well below the official target -appears on the verge of yet further monetary loosening. Many commentators are also predicting the announcement of a new stimulatory package, albeit not on the scale of three years ago.  This will probably occur in October when the new Administration assumes authority.

Should these predictions come to pass the portfolio which is heavily oriented to this region of the globe should be a major beneficiary of a rerating of Asian and particularly China centric stocks.

 

END

 

 

IMSEVLFFLDFBBBE