Manager Commentary

Please read in conjunction with the Performance section above.

31 October 2019 Gervais Williams & Martin Turner

Returns on mainstream UK shares have been fluctuating in recent month. Interestingly, the returns on smaller quoted companies have followed a different trajectory with the FTSE Smaller Companies Index (excluding Investment Companies) falling in each of the four months to August, and then rising by 2.87% in September and a further 0.53% in October. The FTSE AIM All-Share Index had a particularly weak August (down 6.35%) but like other smaller companies this index has gently risen subsequently, rising 0.33% in September and 2.07% in October.

The NAV of the Trust rose by just 0.53% during October, which reflected the combination of a setback in the FTSE 100 Index, and the rise in the FTSE AIM All-Share Index.

The portfolio is fairly fully invested at present, as the trust continues to top up numerous stocks that we believe are particularly undervalued. We increased our holding in Insurance broker, Hastings where we believe the leadership of its CEO, who was appointed about 18 months ago, is transforming its prospects and scope to take market share. The company is paying a dividend yield of 7.0%, with room to grow from here.

Over October, the cash balance on the trust fell from 6.8% to 3.7%.

We believe that smaller companies are overdue a period of performance catch-up in the coming quarters.