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Glasgow Income Trust plc

 

Objective

The principal objective of the Company is to provide shareholders with a high level of income and to obtain growth in both income and capital over the longer term.

Manager's Monthly Report

June 2009


A slew of positive economic data has encouraged bulls into the open to declare the beginning of the end of the global recession and equity markets have responded positively. The FTSE All-Share Index built on April’s robust performance to post a total return of 4.2% with large cap companies outperforming their smaller peers. The positive economic news included a lower than expected rise in the unemployment claimant count, April retail sales increasing by 0.9% and the PMI rising from 39.1 to 42.9 which whilst still indicating contraction, shows a slowing rate. Commodities also responded to the positive news with oil rising above $60 a barrel in May and base metals rose similarly. These rises come too soon to have any impact on inflation which is still falling, albeit at 2.3%, CPI is still ahead of the Bank of England’s target. RPI on the other hand pointed to -1.2%, the lowest level since the measure was first collected in 1948. However, there is still good reason for caution. The Bank of England’s inflation report read cautiously and the MPC spend more time debating whether to increase quantitative easing by £50bn or £75bn rather than whether to increase it at all. In the end they plumped for £50bn which extends the programme at the same rate as they have already been going. S&P put the UK public finances on negative watch which, whilst not a downgrade, suggests that the possibility is ever more distinct. Globally, the car industry remains in trouble with Chrysler filing for Chapter 11 bankruptcy and GM’s future looking equally bleak. Likewise, Japan is suffering as demand for exports declines. Their GDP fell by 4% in Q109. With commodities performing strongly it is no surprise that Mining and Industrial Metals were top performers in the FTSE, alongside Financials who also benefited from better economic expectations. Capital was reallocated from Telecoms, which are traditionally perceived as defensive and also Retailers who had held up well in the past few months. With the uncertainty surrounding the economy and stock market and the managers’ belief that the portfolio is well positioned, it was a quiet month for trading. We took some profits from Marks & Spencer, recycling the capital into Vodafone and we also initiated a position in Weir, taking profits from AMEC to fund this.