Manager Commentary

Please read in conjunction with the Performance section above.

31 May 2020Gervais Williams & Martin Turner

The major scale up of US dollar issuance by the US government has led to an accelerated rise in the price of gold. With their strong balance sheets and generous dividend yields, some of the trust’s largest holdings are gold mining companies, and they were one of the strongest contributors to return in May. The NAV of the trust rose by 3.55%.

One advantage the trust has, is the additional 5.3% of cash that was realised from the sale of the FTSE 100 Put option in March, that can now be invested in additional dividend income generating holdings.

We believe one of the sectors that could recover following the end of the lockdown are energy stocks. Since some of the oil majors are cutting their dividends at present the trust has invested in an oil infrastructure company, Enbridge, that pumps oil from the oilfield to the users because we consider the dividend will be more sustainable. The trust has also bought into some other potential market leaders for recovery including AO World, Dart Group, Easyjet, and Great Portland Estates. These quoted companies tend to have strong balance sheets, however, since most of these are not paying dividends at present, the weightings in each are between 0.25% or 0.60% of the trust.

May marks the end of the trust’s financial year. With the scale of dividend cuts recently, the trust’s board has stated that it intends to use past revenue reserves so the trust’s dividend to shareholders for the financial year is at least maintained.