Interim Management Statement

RNS Number : 4818A

British Empire Sec & Gen Tst PLC

02 February 2011

 



BRITISH EMPIRE SECURITIES AND GENERAL TRUST PLC

Interim Management Statement - 3 months ended 31 December 2010

This investment management report relates to performance figures to 31 December 2010.

	Qtr	Financial Yr*	Calendar Yr
BTEM	5.9%	5.9%	20.8%
Benchmark2	8.2%	8.2%	18.2%
MSCI World1	9.2%	9.2%	15.9%

Quarterly Investment Manager's Review

Since the US Federal Reserve's announcement of a further round of bond purchases (also known as Quantitative Easing II or QEII), animal spirits have re-awakened, stocks have rallied, and government bonds fallen.  Federal Reserve Chairman Ben Bernanke has said he is satisfied with this outcome despite the fact the original rationale for the programme was to lower bond yields.  There is a suspicion that Bernanke, like Greenspan before him, is targeting a rising stock market to generate the wealth to offset a bursting bubble.  The problem is that such manipulation may lead to further bubbles and uncertainty over the value of price signals we are getting from the market.

British Empire has participated in the rally even if we have not fully embraced it.  Valuations seem to us to be getting stretched in certain cases and investor optimism is riding high.    Our portfolio contains companies that on the whole have strong balance sheets, many of which have net cash.  Many companies we own pay relatively high dividends and have been able to continue to increase them.  In terms of discount to NAV, our portfolio remains at the higher end of its discount range.  We are, as ever, on the lookout for opportunities in undervalued stocks offering good risk-adjusted returns.  We also have liquidity to invest when compelling situations arise.

Performance

During the Quarter, British Empire's NAV rose by 5.9%, compared to an increase of 8.2%² for the benchmark and 9.2%¹ for the MSCI World index.

British Empire has lagged the market recently partly as a result of our higher cash weighting which gives us some flexibility and downside protection.

Activity

During the period, we reduced our stakes in Asian investment holding companies Jardine Matheson, Jardine Strategic and Swire Pacific 'B' as equity markets in Asia have been particularly strong.  We also sold shares in Turkish Sabanci Holdings and Italian Exor.

We increased our position in Orkla substantially taking the overall weight to above 5% and also boosted our holdings in Investor and Vivendi, all on wide discounts.

Discounts³

At the end of December the weighted average discount (excluding liquidity) stood at 27.5% compared to 27.7% at the end of September.  The discount calculation is a measure of how much the stock market capitalization is below the estimated net asset value for all stocks owned by British Empire.  The trend in the weighted average discount can be seen in the chart below:

Financial Performance to 31 December 2010

Statistics

	Value	% 1 qtr	% 1 yr	% 3 yr	% 5 yr
Price (£)1	486.0	4.4	18.5	17.9	14.9
Net Asset Value1	537.0	4.8	19.1	10.3	26.2
Net Asset Value Total Return1		5.9	20.8	16.0	35.8
Benchmark1 (£)		8.2	18.2	7.5	35.3
Annual Returns (%)	2010	2009	2008	2007	2006
Price1	18.5	27.9	-22.3	-2.8	0.3
MSCI World1	15.9	16.5	-17.4	7.7	5.8

1 Source: Morningstar. Share price total return is on a mid-to-mid basis, with net income re-invested.
2 Morningstar Global Growth Index official Benchmark from 1^st October 2008
3 Discounts are AVI estimates

Top Ten Equity Holdings                                                %

Vivendi	7.77
Jardine Strategic	6.18
GBL	5.37
Orkla	5.21
Investor AB	5.07
Deutsche Wohnen	4.24
Sofina	4.09
Jardine Matheson	3.77
Exor SpA Pref	2.99
Aker	2.59

Geographic Breakdown (% of total assets)
               

	30/09/10	31/12/10
Continental Europe	40.8%	45.8%
UK	5.9%	4.4%
Japan	4.4%	4.7%
Asia Pacific	18.2%	15.6%
EMEA	4.4%	4.2%
Canada	5.8%	5.9%
Liquidity~	20.8%	19.5%

~ Liquidity is held primarily in UK and US Government Securities

Sector Breakdown (% of invested assets)

	30/09/10	31/12/10
Closed-End Funds	5.6%	4.3%
Investment Holding Companies	58.9%	60.3%
Open-End Funds	1.0%	1.1%
Property	8.4%	8.8%
Resources & Mining	14.0%	13.0%
Other	12.1%	12.6%

Major Movers

Largest Risers	Percent change	Percent of Assets
Amerisur Resources	39.62%	0.54%
Treasury China Trust Unit	28.48%	0.73%

Largest Fallers	Percent change	Percent of Assets
Soco International	-14.05%	1.35%
CIR SpA	-8.16%	1.46%

Further Information Investment Manager - John Pennink, 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. *British Empire Securities and General Trust financial year commences on the 1st of October. ** Last audited figure updated annually # Book Values Information may be found on the following websites. http://www.british-empire-stocks-and-shares-isa.co.uk/index.html 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 ("FSA").  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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