Fund manager commentary
The Company's net asset value increased 4.7% on a total return basis during the month. This compares with a 4.4% increase in the FTSE All Share 5% Capped Index over the same period.
The holding in AstraZeneca, the global pharmaceutical group, was further reduced. The company's senior management team have set out a strategy which they believe will reverse the sales and profit decline of recent years and enable AstraZeneca to return to a growth trajectory over the medium term. A significant strand of that strategy is to use surplus cash generated by the business to fund bolt-on acquisitions and in-license new drugs to better leverage the company's scale in sales and distribution. During the month the company reported quarterly results which once again confirmed the extent of the ongoing challenges facing the group. Near term profitability remains under pressure as a result of the combination of higher costs together with weaker than expect revenue growth.
The Company's position in Associated British Foods, the retail, food ingredients and manufacturing business, was also further reduced. AB Foods owns the Primark discount retail chain which we believe is well positioned to continue to take market share from its competition, both the UK and Continental Europe. While we remain fundamentally positive on the future prospects for that part of the business the outlook for AB Food's sugar business, another key division appears less clear. The shares have re-rated substantially over the past year.
The Company participated in the Royal Mail Initial Public Offering. The Royal Mail is undergoing a major transformation program which will enable the company to deliver letters and parcels more efficiently. At the same time a new regulatory framework will give the group greater commercial freedom to set prices for it services. The IPO was priced at a particularly attractive level resulting in a sharp rise in the Royal Mail share price following the company's listing. Unfortunately institutional share allocations were small due to high levels of demand and the holding has subsequently been sold.
As at 31 October 2013
Percentage growth, total return, bid to bid price with net income reinvested in sterling. Basis in accordance with the regulations of the FSA. Past performance is not a guide to future performance. Stock market movements may cause the value of investments and the income from them to fall as well as rise and investors may not get back the amount originally invested. A fund investing in a specific country carries a greater risk than a fund diversified across a range of countries. Changes in rates of exchange may have an adverse effect on the value, price or income of investments. If markets fall, gearing can magnify the negative impact on performance. The discrete annual performance table refers to 12 month periods, ending at the date shown.