Establishment Investment Investors - ET.

Establishment Investment Investors - ET.

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Stock Name Stock Symbol Market Stock Type
Establishment Investment Trust Plc ET. London Ordinary Share
  Price Change Price Change % Stock Price Last Trade
0.00 0.0% 217.00 01:00:00
Open Price Low Price High Price Close Price Previous Close
217.00 217.00
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davebowler: Chairman's Statement During the first half of the financial year the share price rose by 3.4% while the net asset value increased by 3.7%. In addition a final dividend of 2.6p was paid to shareholders during the period thus lifting the total return on the share price and net asset value to 4.8% and 4.9% respectively. This compares to the 2.1% increase in the FTSE APCIMS Stock Market Balanced Portfolio Index and 0.3% gain in the MSCI World Index in sterling terms. I am pleased to note that your investment manager increased exposure to gold bullion during the period under review, reversing the partial disposal in the third quarter of 2011. Gold Bullion Securities again account for approximately one eighth of the net assets of the Company. The recent open ended commitment by both the European Central Bank and the Federal Reserve to continue printing money is a course of action that should be of great concern to investors for two important reasons. First, it is a course of action that, simply put, is impossible to reconcile with sound long term monetary policy. Second, this policy occurs at a time when regulators continue to apply rigid formulaic assessments and measures of risk where the most basic building block of the calculation rests upon the ludicrous assumption that cash is both risk free and, by implication, a store of value. This is patently not the case. Since the United States abandoned the Gold Standard in 1971, consumer prices in that country have increased by well over five times. In other words, cash today buys substantially less than one fifth of the goods today that it did 40 years ago. The Company holds exposure to physical gold because it is a proven store of value and central banks can't print it. Elsewhere, the Company retains substantial exposure to domestically orientated businesses across the Asia Pacific region, both directly and via the investment manager's open ended funds. The subdued outlook for growth in the global economy obviously impacts the short term outlook of many countries in this open, trade orientated region but your Board continues to believe that the Asian equity markets offer great long term potential. The Board has declared an interim dividend of 1.8p per Ordinary Share, a 5.9% increase on last year's interim dividend. Sir David Cooksey GBE Chairman 23 November 2012 Investment Manager's Report The Chairman's statement notes the modest upward movement in the share price and net asset value of the Company during the six month period. The discount has remained stable over the period and stood at 14.7% on 30 September 2012. For comparative purposes, over the period, the MSCI UK Equity Index rose 1.8%, the MSCI World Equity Index rose 0.3%, the MSCI Asia ex Japan Equity Index gained 0.8% while the MSCI Japan Index declined 9.0%. The sharp deceleration in the Chinese economy in 2012 appears to have come as a surprise to many. We discussed the implications of the post global financial crisis Chinese credit and investment boom in the annual report. Rudimentary macroeconomic analysis was more than sufficient to suggest that recent growth rates, generated almost exclusively by investment in the property and infrastructure sectors, were unsustainable. Some superb work on balance sheets and cash flow generation from Forensic Asia, an Hong Kong based independent research firm, has shed light on the current slowdown in China from a corporate perspective. In brief, data from 2011 published accounts suggests that following the recent credit boom Chinese companies are left with highly leveraged balance sheets and exceptionally weak cashflow. The normal reaction of management to this state of affairs is to improve cashflow, reduce liabilities and reduce or defer capital expenditure (voluntarily or involuntarily if creditors have stepped in). This has clear implications for an economy where gross fixed capital formation accounts for roughly half gross domestic product. Much slower economic growth in China and a collapse in the growth in demand for commodities - if not an outright decline - remains the base case of your investment manager. We remain fairly optimistic on the outlook for Chinese consumption and, indeed, consumption trends elsewhere in the region. The Company retains significant exposure to consumer businesses. It is important to note that the stretched balance sheets and weak cashflows of corporate China is the exception, and not the rule, in Asia. The lessons of the Asian crisis of 1997-1998 have been learnt in countries such as the Philippines and Thailand and a long overdue investment cycle, especially in infrastructure, is underway across the Association of Southeast Asian Nations (ASEAN). The Company has significant investments in this area. Your investment manager hopes to build on recent progress in the second half of the company's financial year. BDT Invest LLP
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