Monthly Report
March 13 2003 - 5:33AM
UK Regulatory
RNS Number:6798I
Anglo & Overseas Trust PLC
13 March 2003
Anglo & Overseas Trust
REPORT FOR THE MONTH OF FEBRUARY 2003
REVIEW
Anglo's net asset value rose 3.5% during February; stock selection was good in
all regions. The share price, though, was virtually unchanged as the discount
widened.
UK
The UK equity market as measured by the FTSE All-Share Index rose by 2.1% in
capital terms over the month. Large companies outperformed, with the FTSE 100
Index rising by 2.5%, the FTSE Mid 250 Index rising by 0.5% and the FTSE Small
Cap Index falling by 1.0%.
The best performing sectors over the month were Forestry & Paper, Mining and
Household Goods & Textiles (helped by the bid for Coats), although it should be
noted that Tobacco, Banks and Construction & Building Materials also
outperformed. The worst performing sectors were Steel & Other Metals (concerns
about a delay to the sale of Corus's aluminium subsidiary) and Electronic &
Electrical Equipment (another profits warning at Invensys).
Major purchases during the period included closing the underweight position in
Lloyds TSB, topping up in AstraZeneca and establishing a new holding in United
Utilities. Holdings were sold in Next, Centrica and Rio Tinto.
USA
Corporate earnings news and some better-than-expected economic data took a
backseat to geopolitical concerns once again in February as a potential war with
Iraq, nuclear tensions with North Korea, and terrorist threats dominated
headlines. The price of oil hit a 28 month high.
Equity markets were unusually volatile during the month as some investors seemed
to be trading based on geopolitical news flow. Positive economic news such as
the unexpected drop in the unemployment rate helped spark gains, but all
attempts at a rally were shortly eroded by news flow such as the heightening of
the national terror alert. The current environment has some investors so anxious
that news of a fire in Staten Island caused the broad market to trade lower, as
some prematurely concluded that the accidental fire was caused by terrorism.
Bond prices continued to rise on the back of geopolitical tension, while yields
hit multi-year lows as investors continued to pour money into what they believed
to be a safe-haven.
February ended with news that the U.S. economy grew in the fourth quarter of
2002 at twice the annual rate previously estimated. This was still not enough to
put the broad market S&P 500 in positive territory for the month as the index
declined 1.7% in USD terms. However, due to the weakness of sterling the S&P 500
rose 2.6% in sterling capital terms.
We added Honeywell as a turnaround story with leverage to the industrial
economy. It has world leading assets in industrial processing, safety &
security, commercial & military aerospace, and assets that benefit from
increased environmental regulations. It is ranked highly by our research team
which sees 15-20% upside in the stock price. New management recently restored
some credibility in their first investor presentation day. It set out a strategy
of moving beyond just productivity enhancement to include a focus on return on
capital and growth opportunities. Our thesis is that Honeywell's undervalued
assets combined with new management can leverage strongly from an economic
recovery to generate cash flow and cash return on investment that will be above
its peer group. It also has an attractive 3.3% dividend yield. The risks are:
asbestos liability but there are significant insurance and accumulated reserves;
further problems in the commercial aerospace industry; and general economic
weakness.
We added Dupont to the portfolio to diversify our materials holdings, which are
currently dominated by International Paper. We have lost confidence in Dow, our
other chemical holding. Our thesis is that the company has less financial risk
than Dow with similar cyclical upside, with the added kicker of a portfolio
restructuring. Wall Street is rightfully skeptical of management's ability to
create shareholder value. The stock has underperformed since 1998, as
fundamentals weakened and the PE eroded. Today, earnings are below normal, the
dividend is safe, and the company generates free cash flow. In addition, there
is an R&D program which could yield new products. Risks include near term
earnings, which are suffering from higher feed stock costs, exposure to the
housing and auto industries, the structural problems of the chemical industry,
the credibility of management and reinvestment risk.
JAPAN
TOPIX rose in early February on expectations of positive policy changes but gave
up most of these early gains towards the end of the month, nearing its
post-bubble low. The nomination of Toshihiko Fukui as Bank of Japan Governor was
probably the most cautious choice the government could have made. This together
with large issues of highly dilutive convertible preference shares by two of the
city banks at terms highly unfavourable to ordinary shareholders combined to
dampen investors' sentiment. Geopolitical risks continued to weigh on the
market. Supply-demand conditions continued to have a negative impact. During the
month we added to the holdings in Honda Motor, KDDI, Ricoh and Ito-Yokado. We
sold most of the holding in Fuji Soft ABC on the suspicion that they would
struggle to meet their forecast following order delays. We switched the holding
in Fujisawa Pharmaceutical into Yamanouchi Pharmaceutical, which is benefiting
from recent successful drug launches.
EUROPE
Markets remained unsettled in February. In addition to the global malaise Europe
suffered from the specific issues of Ahold's accounting problems, and growing
concerns about capital adequacy in the insurance sector. Activity was limited
over the month, although we were net sellers of the region. We sold our
positions in Infineon (semiconductors), Assa Abloy (locks), Group4 (security)
and Generali (insurance). New purchases included SEB (banking), OPAP (gaming)
and Ericsson (technology).
NET ASSET VALUE 28/02/03 31/01/03
prior charges at nominal value 180.50p 174.36p
prior charges at market value 162.39p 155.97p
MID-MARKET SHARE PRICE
Ordinary Share 140.75p 141.00p
Dividend Yield (%) 2.8 2.8
DISTRIBUTION OF ASSETS at market value 28/02/03 31/01/03
Market exposure
% %
EQUITIES
United Kingdom 48.0 48.7
U.S.A. 30.0 29.4
Latin America 0.6 0.6
Japan 4.0 3.8
Belgium 0.2 0.3
Denmark 0.4 0.6
Eire 0.1 0.1
Finland 0.8 0.9
France 1.5 1.6
Germany 1.8 2.1
Greece 0.1 -
Italy 1.5 1.8
Netherlands 0.9 0.9
Norway 0.1 0.1
Portugal 0.4 0.4
Spain 0.8 0.8
Sweden 0.8 0.8
Switzerland 2.5 2.9
TOTAL PORTFOLIO 94.5 95.8
Net Current Assets/(Liabilities) 5.5 4.2
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TOTAL 100.00 100.00
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Based on total assets less current liabilities of #257.2 million (#250.7 million).
GEARING
Borrowings and Gearing at 28/02/03 31/01/03
#000's #000's
Debenture Stock 2020 34,396 34,394
Debenture Stock 2012 33,672 33,661
----------- -----------
68,068 68,055
===== =====
36.0% 37.3%
===== =====
Based on net asset value of #189.1 million (#182.7 million).
LARGEST HOLDINGS (market value #98.4 million equal to 40.5% of total portfolio)
#'000's % of
portfolio
GlaxoSmithKline 9,269 3.8
HSBC Holdings 8,708 3.6
BP 8,540 3.5
Vodafone Group 7,804 3.2
Royal Bank of Scotland 6,438 2.6
Shell Transport & Trading 5,357 2.2
AstraZeneca 4,768 2.0
Imperial Tobacco 3,684 1.5
Scottish and Southern Energy 3,396 1.4
Microsoft 3,057 1.3
Bank of America 3,038 1.3
Exxon Mobil 2,946 1.2
BT Group 2,796 1.1
Johnson & Johnson 2,661 1.1
Citigroup 2,574 1.1
Unilever 2,564 1.1
HBOS 2,563 1.1
Tate & Lyle 2,513 1.0
General Electric Co. of America 2,403 1.0
Pfizer 2,389 1.0
Lloyds TSB 2,347 0.9
3M Company 2,253 0.9
Barclays 2,194 0.9
United Technologies 2,161 0.9
Cisco Systems 2,010 0.8
FINANCIAL CALENDAR
Annual General Meeting 23 April 2003
Final Dividend Paid 29 April 2003
For further information, contact James Fox at Deutsche Investment Trust Managers
Limited on 020-7545-6000.
For additional copies, changes of address or details of our Private Investors'
Plan, low cost ISA, PEP Transfer and Dividend Reinvestment Plan (a plan through
which shareholders, who hold their shares on the Company's main register, can
use their dividends to purchase further shares) contact Mark Pope on
020-7545-0520, e-mail address: mark.pope@db.com. Further details of Anglo &
Overseas Trust including the latest annual, interim and monthly reports can be
found on the Deutsche Investment Trust Managers website located at
www.deutsche-its.co.uk.
Issued by Anglo & Overseas Trust PLC and approved by Deutsche Investment Trust
Managers Limited, regulated by the Financial Services Authority and manager of
Anglo & Overseas Trust PLC. Investors should be aware that past performance is
not necessarily a guide to future returns, the price of shares and the income
from them can fall as well as rise and investors may not get back the amount
they invested. Fluctuations in exchange rates may also affect the value of your
investment. Anglo & Overseas Trust PLC may invest in shares traded in emerging
markets which may at times be illiquid and/or volatile.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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