Interim Management Statement

RNS Number : 6301Z

Personal Assets Trust PLC

08 March 2013

 

Personal Assets Trust plc

Interim Management Statement

For the Four Month Period from 1 November 2012 to 28 February 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  28 February  2013	As at 31 October 2012	Movement
Market capitalisation	£587.7m	£546.3m	7.6%
Shareholders' funds	£578.7m	£538.0m	7.6%
Effective liquidity (1)	55.5%	50.8%	-
Share price	£359.60	£350.00	2.7%
Net asset value per share	£354.12	£344.67	2.7%
Premium to NAV	1.5%	1.5%	-
FTSE All-Share index	3,349.39	3,024.40	10.7%

⁽¹⁾ Includes holding in physical gold bullion of 12.7% at 28 February 2013 (31 October 2012: 13.9%).

Period Review and Material Events

Unorthodox monetary stimuli have managed to prod the financial markets awake but have so far failed to revive Western economies.  The Eurozone, the United Kingdom and United States all saw their economies shrink or stagnate in the fourth quarter of 2012, while corporate profit growth also disappointed.  According to Citigroup, UK corporate earnings were, in late 2011, forecast to grow by +9.7% in 2012.  A year on, the outcome looks more like -7.1%, an implied downgrade of -15.3%, yet UK stocks have continued torise as investors accept higher levels of risk in a desperate gamble for returns ― any returns. This disconnect between corporate profits and share prices may continue, but it cannot do so indefinitely. Amid this environment we are finding it harder to unearth new investment opportunities with an adequate margin of safety.

We are almost four years into the current cyclical bull phase for stock markets. The rally began on the solid foundations of valuation and corporate earnings growth but those supports have long since been kicked away. More risk is being taken than investors acknowledge, and complacency is a major danger.  In recent months anecdotal evidence of investor capitulation has been building.  There is a whiff of panic to invest cash at any price.  Investor surveys point to the highest level of bullishness since 2007.  Stock market volatility, as defined by the VIX (or Fear) Index that reflects how much investors will pay to insure against volatile equity prices, is at its lowest since 2007.  Sceptics of the rally have thrown in the towel and started to join in.  Savers are now buying assets they would not otherwise buy, at prices they would not otherwise wish to pay.  Such are the characteristics of market highs, not market lows but that is not to say that overvaluation cannot stretch even further.

Some investors who are bullish on stock market prospects argue equities are cheap because cash trades at 200x earnings and ten year gilts at 50x (the inverse of the yields of 0.5% and 2% respectively).  Such frameworks of valuation have lost touch with reality.  While cash is no longer a nil risk asset, it remains low risk and we have decided that taking the certain real loss (after inflation) of holding cash is preferable to the uncertain risk of a material loss to capital through the purchase of overpriced equities and most bonds.

During the period under review portfolio turnover remained very low. We reduced equity exposure from 49.2% to 44.5%.  We sold holdings in Centrica and Vodafone and reduced the holding of Diageo. We acquired a new holding in UK Index-Linked gilts and added to existing holdings in Imperial Oil, Newcrest Mining and Altria.

Over the four months ended 28 February 2013 the Company issued 73,293 Ordinary shares for a total consideration of £25.6 million, representing 4.7% of the Ordinary shares in issue at the beginning of the period.

On 22 November 2012 the Company announced a third interim dividend of £1.40 per share. This was paid to shareholders on 18 January 2013. On 23 January 2013 the Company announced a fourth interim dividend of £1.40 per share. This will be paid to shareholders on 19 April 2013. 

On 28 November 2012 the Company published a circular in connection with proposals to change the Company's investment and dividend polices (the "Proposals").  These proposals were approved at a general meeting of the Company held on 21 December 2012.

Top Ten Equity Holdings as at 28 February 2013

Company	Percentage of shareholders' funds	Percentage of equity exposure
British American Tobacco	4.2	9.4
Microsoft	4.0	9.0
Nestle	3.7	8.3
Becton Dickinson	3.1	7.0
Imperial Oil	2.9	6.5
Coca Cola	2.8	6.3
Philip Morris	2.5	5.6
Sage	2.5	5.6
Newmont Mining	2.3	5.2
Diageo	2.0	4.5
Other equities (9)	14.5	32.6
Total	44.5	100.0

Geographical Analysis as at 28 February 2013

Country	Percentage of shareholders' funds
US equities	22.2
UK equity exposure	13.1
Canadian equities	3.8
European equities	3.7
Australian equities	1.7
Liquidity	55.5
Total	100.0

Sector Distribution as at 28 February 2013

Sector	Percentage of shareholders' funds
Oil & Gas	2.9
Basic Materials	4.8
Consumer Goods	20.9
Health Care	6.9
Consumer Services	0.8
Financials	1.7
Technology	6.5
Liquidity	55.5
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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