Source - PRN
All information is at 30 September 2017 and unaudited.
Performance at month end with net income reinvested


1 April
Share price 0.6% 1.3% 9.6% 29.2% 71.9% 82.9%
Net asset value 0.6% 1.5% 10.8% 33.7% 67.5% 72.5%
FTSE All-Share Total Return -0.4% 2.1% 11.9% 27.8% 61.2% 64.3%
Source: BlackRock


BlackRock took over the investment management of the Company with effect from 1 April 2012.


At month end
Net asset value - capital only: 202.41p
Net asset value - cum income*: 206.27p
Share price: 199.50p
Total assets (including income): £51.0m
Discount to cum-income NAV: 3.3%
Gearing: 2.4%
Net yield**: 3.2%
Ordinary shares in issue***: 24,704,268
Gearing range (as a % of net assets) 0-20%
Ongoing charges****: 1.0%


* includes net revenue of 3.86 pence per share
** The Company’s yield based on dividends announced in the last 12 months as at the date of the release of this announcement is 3.2% and includes the 2016 final dividend of 3.90p per share declared on 21 December 2016 and paid to shareholders on 10 March 2017 and the 2017 interim dividend of 2.50p per share announced on 26 June 2017 to be paid to shareholders on 1 September 2017.
*** excludes 8,229,664 shares held in treasury
**** Calculated as a percentage of average net assets and using expenses, excluding performance fees and interest costs for the year ended 31 October 2016.


Sector Analysis Total assets (%)
Support Services 9.0
Banks 7.9
Pharmaceuticals & Biotechnology 7.7
Tobacco 7.0
Oil & Gas Producers 6.6
Media 6.0
Travel & Leisure 5.9
Non-Life Insurance 5.6
Financial Services 5.5
General Retailers 4.9
Food Producers 4.6
Construction & Materials 4.4
General Industrials 4.1
Industrial Engineering 3.1
Fixed Line Telecommunications 2.9
Food & Drug Retailers 2.4
Mobile Telecommunications 1.8
Aerospace & Defence 1.8
Real Estate Investment & Services 1.7
Household Goods & Home Construction 1.5
Chemicals 1.4
Beverages 1.0
Real Estate Investment Trusts
Software & Computer Services
Net Current Assets 1.5
Total 100.0


Ten Largest Equity Investments
Company Total assets (%)
British American Tobacco 6.1
Lloyds Banking Group 4.9
Unilever 4.6
RELX 4.1
Royal Dutch Shell ‘B’ 4.0
Rentokil Initial 3.8
Ferguson 3.1
John Laing Group 3.1
HSBC Holdings 3.0
BT Group 2.9


Commenting on the markets, Adam Avigdori and David Goldman representing the Investment Manager noted:
UK equities made further progress in the third quarter and kept pace with global equities as the domestic economy continued to shrug off fears of a slowdown. Falling unemployment and other positive data were sufficient for the Monetary Policy Committee and Mark Carney to hint that an interest rate rise may be seen in 2017, ahead of expectations.  Sterling strengthened against this backdrop despite the seeming lack of progress in Brexit negotiations. Political concerns around Europe continued to abate as Merkel's Christian Democratic Union party won the largest share of the vote in Germany, but geopolitical tensions were ratcheted upwards around the Korean peninsula as North Korean missile launches were met by hard words from President Trump.

The surprising robustness of the UK economy led to further outperformance by mid- and small-cap indices. Overseas earners, such as Tobacco, Pharmaceuticals and Media underperformed, although the first of these was also affected by an announcement from the FDA around sector regulation. Strength in commodity prices drove mining and oil shares to the top of the list of positive contributors with General Retail also recovering strongly as trading improved.

Over the quarter the Trust delivered a positive return of 1.5%, underperforming the FTSE All-Share which returned 2.1%.

Provident Financial was the largest detractor from performance after a profit warning from the sub-prime lender indicated a fall in debt collection rates from 90% to 57%, leading to a significant drop in profits. CEO, Peter Crook, stepped down with immediate effect and the group has said it is facing an investigation from the FCA. We held a 0.3% position in the Trust over the quarter and have since sold the shares. An underweight position in Royal Dutch Shell created a performance drag over the quarter as the company posted a better than expected earnings and broadly resilient cash generation.

Next rallied strongly after a prolonged period of underperformance.  Better weather played its part in sales beating expectations but the company is also benefiting from the modernisation of its online offering and from the improvements made to its clothing ranges.  The extent of the increase in the share price, which gained over 40%, seems extraordinary in the context of an upgrade to earnings of just 2-3% but this reflects the extent to which the shares had been heavily oversold on – misplaced – concerns of structural decline.

A trading statement from RPC reassuringly demonstrated organic growth, contribution from Merger and Acquisition synergies and strong profitability. The company has also announced a £100 million share buyback programme to return cash to shareholders. Bodycote shares have performed very strongly over the quarter, both in absolute terms and relative to the industrials sector. Bodycote is demonstrating strength in its automotive and general industrial divisions with the move towards hybrid vehicles a positive for them. The shares have received an additional boost due to market anticipation of a deal with Praxair Surface Technologies which, if it materialises, would provide a significant revenue opportunity for the business.

We continue to run a flexible and concentrated portfolio with competition for capital ensuring we only hold the highest conviction positions. In this regard, we added new positions in Diageo, where we see a pick-up in growth and margins and in Accesso Technology, a queuing and ticketing technology company. We added to Ferguson, Shire and Admiral, sold out of our positions in Sky, Aggreko and Provident Financial and have reduced holdings in Unilever, AstraZeneca and RPC.

We see increasing pressure in the UK consumer space as rock bottom household savings are coupled with rising household debt levels. Whilst we remain cautious in this area, we certainly don’t treat all companies equally. By focusing on those companies that can generate cashflow from strong business models, have strong balance sheets or scope for management driven self-help, we are able to access some of the fantastic domestic opportunities starting to emerge.

As ever, we remain believers that over the longer-term earnings and cashflow growth tend to be the dominant driver of share prices and where equity markets fail to recognise that, corporates buyers have the potential to exploit the opportunity. With a combination of continued sterling weakness and a low rate environment fuelling cheap debt, we believe that M&A activity will remain a theme throughout the remainder of the year.
13 October 2017