Manager Commentary

Please read in conjunction with the Performance section above.

31 October 2019 Gervais Williams & Martin Turner

The NAV of the Trust drifted by 1.25% during October, which reflected the absence of positive momentum in micro companies at a time when some of the larger small companies are starting to stage a recovery.

Whilst the share prices of many micro companies have fallen back this year, there have been others that have held up, so their valuations are now somewhat above most in the portfolio. Naturally, we are happy to trim these holdings to fund re-investment in those that we consider are grossly oversold. This ensures that the trust is in a position to buy shares in some of the holdings that are undergoing major surgery and hence being sold. Since the share prices of some of these companies tend to fall back to reflect the overhang prior to their sale, these can offer very attractive entry valuations to these positions.

The Trust didn’t bring in any new holdings during October, since we didn’t identify any individual cases on offer that were standing at lower valuations than most of the current portfolio. However, the Trust does have a cash balance of 5.5% so we are ready to transact if ultra-low valuations come available. In the meantime, we await the result of the UK General Election, and the conclusion to Brexit. Once we see the renewed interest in mid size companies waterfalling into small companies and micro companies this cash can be quickly allocated to the Trust’s existing holdings, so it fully participates in the micro companies’ recovery when it comes.