Manager's Monthly Report

The Trust produced a Net Asset Value total return of +3.5% during the month and a price total return of +3.0%, compared to a return of +4.2% for the FTSE All-Share Index (TR).

The Trust captured about three quarters of the rally from the December lows, helped by stocks such as Next and Dairy Crest whose positive trading statements pushed up share prices by more than 20% and 15% respectively. The market was effectively discounting a further deterioration in trading over Christmas, but the sharp rebound reflects the degree to which many stocks in the UK have been de-rated. It appears that the UK equity market is almost friendless in professional asset allocation circles. The combination of Brexit uncertainty, the growing possibility of a radical Labour government and an index virtually devoid of technology stocks has resulted in the market yield approaching 4.5% - higher than it has been since the Global Financial Crisis of 2008-9.

At the same time, dividend cover in the market as a whole has been improving in recent years from a low point of 1.3x in 2015 to just under 2x today. So the yield is higher and the sustainability of the underlying dividends has increased. This is not to say that there are no examples of unsustainable dividends and there will no doubt be some further individual adjustments, but in aggregate we believe that the income prospects for the market are better than they were three years ago.



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