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Dunedin Smaller Companies Investment Trust PLC

 

Objective

The objective of Dunedin Smaller Companies Investment Trust PLC is to achieve long term growth from a portfolio of smaller companies in the United Kingdom.

Manager's Monthly Report

August 2008


Performance

The Trust outperformed over the month with the net asset value per share declining by 3.7% compared to the FTSE Small Cap (exIC) which declined by 4.5%. Equity markets declined further in July. Investor risk aversion remains at high levels and in such an environment smaller company shares continued to underperform their larger counterparts. The Trust benefited from good performances from Detica which announced it had received an approach from British Aerospace. McBride, which bounced following weakness in May and June and Ultra Electronics who continued their track record of announcing successful contract wins. Detractors from performance included Morgan Sindall which announced that they were having to write down certain contracts they had acquired from Amec. Laird announced interim results that were weaker than the market was expecting, and Ennstone issued a profits warning as a result of weakening demand in both the UK and US.


Activity

Having held up well the holdings in: Dechra Pharmaceuticals, Chloride Group and Aveva were all top sliced. The proceeds were re invested into: Numis, Mothercare, Morgan Sindall, CareUK and John Menzies.

Outlook

Macroeconomic data remains volatile with large swings from month to month as characterised by the latest retail sales data. However the underlying trend is worsening with inflation rising and showing no signs of abating; increasing pressure is being placed on both consumer and corporate profitability. July has witnessed declines in the oil and some other commodity prices and if this continues it should ultimately feed through to lower inflation. However the Monetary Policy Committee remains unwilling to reduce interest rates in the meantime. House prices are declining and arguably the rate of decline is accelerating. The September reporting season will be crucial to setting the level of market expectations for the coming months. We will retain our focus on good quality companies with sound balance sheets and sustainable cash flows.


Source: Monthly Factsheet Aberdeen Asset Managers Limited