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The website is directed only at Professional Clients in the UK. The website is issued by Asset Value Investors Limited (“AVI”), in respect of British Empire Trust plc (“British Empire”). AVI is authorised and regulated by the UK Financial Conduct Authority (“FCA”). British Empire is a public company listed and traded on the London Stock Exchange.

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October

October was a volatile month which at one point saw European stockmarkets down more than 10% from their 2014 peaks. The heightened risk aversion that comes with sharply falling markets tends to push discounts out to wider levels, and this was a feature of some of the stocks in our portfolio during the month. Most outperformed markets in NAV terms which is encouraging as it allows for some catch up in performance when discounts narrow again. One particularly painful investment over the month was Aker ASA, which fell by 22% as its NAV was hit by the rapidly falling oil price. With investments in oil exploration company Det Norske and in oil services company Aker Solutions, its value has been hit hard. The company’s policy of paying out a relatively high dividend and of actively managing its investments in order to maximise value, is a source of confidence in the long term potential of Aker. On a discount of almost 40% and with such a swift fall in value over the month, we believe there will be a bounce in the share price. However, in the very near term sentiment will continue to be driven by moves in the oil price.

Whilst we don’t hedge our foreign exchange exposure as a matter of course, there are times when we do wish to hedge particular exposures. During the month we decided to hedge most of our Japanese Yen exposure, as we were mindful of the potential for further QE in Japan which would weaken the currency. The timing proved fortuitous, as the BOJ announced aggressive additional monetary stimulus plans at the end of the month. This not only weakened the currency sharply, but also sent the stock market up strongly. Our two stocks in Japan, Hitachi and Mitsui Fudosan were beneficiaries of this move as their share prices jumped by 5% and 9% respectively.

We raised some cash early in the month by taking profits out of Asia Pacific in order to take advantage of more compelling opportunities in Europe where markets had been far weaker. Within our universe of European companies, several which we didn’t own on valuation grounds had fallen by more than 25%. We wanted to take advantage of more compelling valuations here and therefore raised some cash from a part of the portfolio that had not suffered material declines in recent weeks, and where valuations and discounts were less interesting. Money was raised from KT Corp in Korea, Westfield in Australia and Jardine Matheson in Singapore. We made a few small new investments in European holding companies during the month, as well as some additional investments into existing holdings.

 

British Empire Securities and General Trust p.l.c is referred to as ‘British Empire’ throughout the website. British Empire’s investment managers, Asset Value Investors are referred to as ‘AVI’

British Empire currently conducts its affairs so that its shares can be recommended by Independent Financial Advisers (“IFAs”) in the UK to ordinary retail investors in accordance with the Financial Conduct Authority (“FCA”) rules in relation to non-mainstream investment products and intends to continue to do so. The shares are excluded from the FCA’s restrictions which apply to non-mainstream investment products because they are shares in an authorised investment trust. © British Empire Trust plc. 2014 Registered in England No: 00028203. An investment company under Section 833 of the Companies Act 2006. Registered Office: Beaufort House, 51 New North Road, Exeter, EX4 4EP. Managed by Asset Value Investors Ltd. which is authorised and regulated by the Financial Conduct Authority. Past performance should not be seen as an indication of future performance. The price of investments and the income may fall as well as rise and investors may not get back the full amount invested. British Empire uses gearing techniques (leverage) which will exaggerate market movements both down and up which could mean sudden and large falls in market value. Please refer to the Key Features Document for further details of the risks affecting your investment. Performance figures are cumulative and based on Price total return and do not include Plan charges. For more information, please call 03458 500181. Tax treatment depends on the individual circumstances and may be subject to change in the future. Asset Value Investors Ltd do not offer Innovative Finance ISAs.