Interim Management Statement

RNS Number : 4309P

Aurora Investment Trust PLC

15 July 2010

 



AURORA INVESTMENT TRUST Plc

Interim Management Statement 30 June  2010

Directors:

Alex Hammond-Chambers (Chairman)

James Barstow FCA

Richard Robinson

Fund Manager:

James Barstow of Mars Asset Management Ltd

Year End:    28 February

Dividend:     Final only. Latest dividend 3.45p.    Payment 6 August 2010

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 the larger rather than smaller capitalised 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 2010

	£ 000's	%
GCM	3,075	11.6
WEST CHINA CEMENT	2,619	9.9
BTG	2,271	8.6
ASIAN CITRUS	1,896	7.1
STANDARDCHARTERED	1,231	4.6
ANTOFAGASTA	1,100	4.1
KAZAKHMYS	1,093	4.1
RIO TINTO	979	3.7
XSTRATA	887	3.3
PRUDENTIAL	864	3.3
	Total	60.3%

Sector Analysis

	Aurora %
Oil & Gas	12.1
Industrials	11.5
Consumer Goods	8.3
Health Care	8.8
Consumer Services	0.1
Telecommunications	2.9
Information Technology	1.9
Financials	15.9
Resources (mining)	32.6
Utilities	-
Fixed Interest	5.9
	100

Performance  

                                                         NAV (ex-income)                     FTSE All-Share

                                                                          %                                                 %

Since Launch to 30/06/10                            +86.0                                             +18.0

          5 years to 30/06/10                             -10.9                                                -0.7

          3 years to 30/06/10                             -25.7                                              -25.3

          1 year to   30/06/10                            +35.1                                             +17.1

       4 months to 30/06/10                               -2.8                                                -7.1

                                                        30/06/10                                           

Share price                                       172.75p                                             

Discount                                               5.0 %                                              

Review

The strong rebound in the UK stock-market, which had commenced in early March 2009 against a background of strong monetary stimulation and evidence of economic recovery, continued for the first six weeks of the period under review. Thereafter the UK stock-market, along with many others around the globe, went into a sharp decline for the rest of the period. Worries over Sovereign debt issues, particularly those of Greece, as well as over the highly indebted nature of many individual banks within the peripheral economies of the Eurozone, came to the fore. The response by the German leader, Mrs Merkel, of introducing a ban on short selling by hedge funds, smacked of an element of panic and upset investor sentiment further.

Other features which impacted negatively on investor confidence during the period include the sudden sharp decline in US consumer confidence levels, together with a deterioration in both the housing market and in the level of new employment. Furthermore, if the enormous size of the potential rights issue by Prudential in its attempt to purchase the Asian businesses from AIG had only a temporary negative effect, then the massive oil spillage by BP and Anadarko had a more long-lasting effect.

Good news was certainly hard to find during the later stages of the period which was marked by the announcement of several austerity programmes, most notably in the UK. The decision, however by the Chinese Government just prior to the G20 economic Summit, to remove the peg from the US Dollar, was one of major significance, particularly for the portfolio, on account of its heavy exposure to China and China-related stocks.

When compared to the FTA All-Share index, the company's benchmark, the Net Asset Value rose strongly at the start of the period but gave up its gains as the stock-market declined. Overall, the portfolio produced an out-performance of 4% during the period.

Outlook

Macro-economic problems still abound in profusion in the Western world. In Europe neither have the sovereign debt issues been resolved nor have the banks fully addressed the issues of bad debts and overstretched balance sheets. In the USA there are similar problems, particularly related to the perilous nature of the finances of certain states such as California. Furthermore, there are few signs of any much needed revival in the housing market and little evidence of new jobs being created.

Although the UK Government in its recent Budget has taken bold and rigorous measures to improve the parlous state of its finances, the intention being to cut back the bloated public sector to free up resources for the private sector to expand, yet the degree of success it will enjoy in future years is far from certain. At a time when most British banks have to continue to shrink their balance sheets, economic growth will be difficult to achieve especially against a background of lacklustre growth elsewhere, with the notable exception of Asia and Emerging markets. Fortunately, these areas of the world are not only extremely well populated but have grown strongly in recent years, indeed to such an extent that the IMF has recently upgraded its forecast for global growth to 4.5% for 2010.

The portfolio has been carefully oriented away from exposure to domestic UK and European companies; instead it has a high exposure to Asia and Emerging economies where the growth is far superior. Relative lack of regulation, plentiful savings, a more dynamic demographic profile, lower labour and overhead costs and, most importantly, a greater work ethic, are some of the features which will help to achieve that superior growth. In addition, the prospects for appreciation by those local currencies are extremely favourable.

The only feature which can be predicted with any degree of certainty, at a time when much of the financial structures of the world are in such a perilous state, is that a high degree of volatility will prevail in all stock-markets for the foreseeable future. The manager, however, remains confident that the portfolio is well positioned to out-perform.

 

END

 

 

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