Interim Management Statement

RNS Number : 9244L

Personal Assets Trust PLC

16 August 2013

 

Personal Assets Trust plc

Interim Management Statement

For the Three Month Period from 1 May 2013 to 31 July 2013

Investment Objective

Personal Assets is an investment trust run expressly for private investors. Its capital structure is the simplest possible for an investment trust, consisting only of ordinary shares. Its investment objective is to protect and increase (in that order) the value of shareholders' funds over the long term.

We aim to pay as high, secure and sustainable a dividend as is compatible with protecting and increasing the value our shareholders' funds and maintaining our investment flexibility.

The Board's policy is to ensure that the shares of Personal Assets always trade at close to NAV.

Performance Summary

	As at  31 July  2013	As at 30 April 2013	Movement
Market capitalisation	£596.1m	£601.9m	(1.0%)
Shareholders' funds	£590.1m	£593.2m	(0.5%)
Effective liquidity (1)	60.4%	56.5%	-
Share price	£344.00	£357.00	(3.6%)
Net asset value per share	£340.52	£351.89	(3.2%)
Premium to NAV	1.0%	1.5%	-
FTSE All-Share index	3,509.94	3,390.18	3.5%

⁽¹⁾ Includes holding in gold of 11.2% at 31 July 2013 (30 April 2013: 12.2%).

Period Review and Material Events

Economic growth remains fragile and the corporate earnings cycle appears to have peaked some time ago.  The move up in stock markets, over the past year, has been the result of a reduction in risk aversion rather than any meaningful rise in earnings, with a consequent increase in valuations.  Buoyed by greater confidence in the abilities of central bankers, momentum has fed on itself.  While good economic news is viewed positively, bad news is also good news because it is likely to lead to renewed market intervention.  This paradox cannot last forever.

The US stock market, on a cyclically adjusted price earnings multiple of 24x, is 50% overvalued compared to its long term average.  Deteriorating fundamentals coinciding with high markets at record profit margins are an unattractive and risky combination.  Rushing into rising stock markets, four years into a rally, is driven by the need for short term returns and is not a path we will take.  On the basis that profit margins and stock valuations revert to the mean, now does not seem to be an opportune time to be adding to equity allocations.

Short-term missed opportunities are the price we pay for dependable and sustainable wealth protection and growth over the long-term.  Complacency is an enemy of successful investing and so is panic.  Risks are now rising, notwithstanding the benefits of the printing press.  We wait patiently on the side-lines for the market to offer us better value.

The portfolio's inflation protection in gold and index linked bonds has hurt recent performance.  These will have crucial roles to play against the force that rarely preannounces itself.  While it is painful to be punished for prudence, we are confident that short term falls in the price of these assets will not lead to falls in their long term value.  The risk of higher inflation over the medium to long term remains and this makes the protection provided by these assets worth having.

Portfolio activity was minimal over the period.  We continued to take profits into the rally, reducing holdings in Microsoft and Becton Dickinson and sold out of the trust's longstanding holding in Johnson & Johnson.  Pharmaceutical and medical device companies have been some of the best performing stocks over the year-to date. Indeed Johnson & Johnson's share price has risen by a third. However, earnings expectations for this year and 2014 have not improved meaning the shares have rerated.  The company has made a number of expensive acquisitions and heavily invested in research in the hope of reinvigorating only tepid revenue growth.  The returns from these investments are uncertain and we believe the share price discounts only good news, hence our decision to sell.

During the three months ended 31 July 2013 the Company issued 47,011 Ordinary Shares for a total consideration of £16.4 million, representing 2.8% of the Ordinary Shares in issue at the beginning of the period. Since 31 July 2013 the Company has issued a further 5,504 Ordinary Shares for a total consideration of £1.9 million.

On 5 June the Company announced a first interim dividend of £1.40 per share. This was paid to shareholders on 19 July 2013. On 25 July the Company announced a second interim dividend of £1.40 per share. This will be paid to shareholders on 18 October 2013.

Top Ten Equity Holdings as at 31 July 2013

Company	Percentage of shareholders' funds	Percentage of equity exposure
British American Tobacco	4.2	10.6
Microsoft	4.1	10.4
Nestle	3.6	9.1
Imperial Oil	3.1	7.8
Coca Cola	2.9	7.3
Becton Dickinson	2.6	6.6
Philip Morris	2.4	6.1
Sage Group	2.4	6.1
GlaxoSmithKline	2.1	5.3
Altria	2.0	5.0
Other equities (8)	10.2	25.7
Total	39.6	100.0

Geographical Analysis as at 31 July 2013

Country	Percentage of shareholders' funds
US equities	19.5
UK equities	12.1
Canadian equities	3.7
European equities	3.6
Australian equities	0.7
Liquidity (including 11.2% gold)	60.4
Total	100.0

Sector Distribution as at 31 July 2013

Sector	Percentage of shareholders' funds
Oil & Gas	3.1
Basic Materials	3.0
Consumer Goods	19.7
Health Care	4.7
Consumer Services	0.7
Financials	1.9
Technology	6.5
Liquidity (including 11.2% gold)	60.4
Total	100.0

Additional Information

Further information regarding the Company, including Quarterly Reports and Investment Plan documents can be obtained from the Company's website www.patplc.co.uk or from Steven Budge, Personal Assets Trust plc, 10 St. Colme Street, Edinburgh EH3 6AA. Telephone: [phone].

Email: [e-mail]

 

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