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The Company’s net asset value increased 1.7% in total return terms during the month. This compares with the 2.0% increase in the FTSE All Share 5% Capped Index over the same period.
The holding in Berendsen was reduced during the month. Berendsen is a textile cleaning and supply business which has leading positions in most of the markets in which it operates. The company’s shares have performed exceptionally well in recent years benefiting from a combination of strong earnings growth and a share price re-rating. As a consequence the shares now appear more fully valued.
The holdings in Dunelm and Phoenix Group were further increased during the month. Dunelm is one of the UK’s leading home furnishings retailers. The company has a strong brand, offers an unrivalled range of products and has a cost advantage in that its rents are amongst the lowest in the industry. We expect the company to continue to grow market share through expansion of its store portfolio, predominantly around London, and by expanding its online offering. The company is highly cash generative and has a strong track record of returning excess cash to shareholders. Phoenix is a UK based closed life and pension fund consolidator. It is the largest consolidator of closed life funds, with a scalable operating model and strong management team. The company recently announced the acquisition of AXA Wealth’s pension and protection business on attractive terms. The shares offer a yield in excess of 6% with the scope for dividend growth.
Melrose announced a fully-underwritten £1.6 billion, 12 for 1 rights issue to fund the acquisition of Nortek, a US based industrial manufacturing group which Melrose’s management believes has been poorly managed, is under-invested and underperforming its potential. Melrose’s management have an excellent track record of turning around fundamentally sound but poorly-performing businesses. The Melrose rights issues were taken up.
The UK’s decision to leave the European Union in late June sent UK equities and sterling sharply lower. In contrast, gilt yields rallied as investors sought-out safe haven assets. However, the equity market weakness proved to be short lived as investors began to anticipate the significant benefit of a weak currency on the predominantly international earnings base of the UK equity market. UK equities have continued to register gains through both July and August. The UK market is one of the most diversified of the developed stock market markets with over two thirds of revenues coming from overseas. The market has also been supported by comments from the Bank of England governor Mark Carney that the central bank would act to mitigate the near-term impact of any slowdown in the domestic UK economy.
As at 31 August 2016
The Company is an investment trust and therefore its shares are not subject to the Financial Conduct Authority's rules relating to the restrictions on the retail distribution of unregulated collective investment schemes and close substitutes which came into effect on 1 January 2014. The Company conducts its affairs so that its shares can be recommended by Financial Advisers to ordinary retail investors in accordance with the Financial Conduct Authority's rules relating to non-mainstream investment products and intends to continue to do so.
Share price (A Shares)
Share price (B Shares)
Share price (Units)
Past performance is not a guide to future results. The value of investments can go down as well as up.
The shares of the Company are listed on the London Stock Exchange.
Information in this section of the website concerning the Company is
directed solely at persons who are located in the UK. Nothing on this
website is, or is intended to be, an offer, advice, or an invitation, to
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