Manager's Monthly Report

The Trust produced a Net Asset Value total return of -1.9% during the month and a price total return of -0.3%, compared to a return of -1.7% for the FTSE All-Share Index (TR).

The UK Bank Rate was raised for the first time in a decade in November. While the increase to 0.5% has little direct impact, it is symbolic that a period of extremely loose monetary policy is slowly ending. Every day brings a new example of credit market excess facilitated by this period of low rates. This month included a European company at the edge of investment grade issuing a bond with a negative yield and Oxford University selling a 100-year bond with an annual coupon of just 2.5%. Such examples may illustrate plentiful liquidity, but they also demonstrate how risks have been mispriced in recent years and the importance of a defensive equity approach investing in quality companies that have stood the test of time.

In this light we bought Procter & Gamble during the month. While the company has a strong long-term record, recent performance has been impacted by the necessary streamlining of the global brand portfolio from 170 brands to 65. We have seen from previous investments how valuable the decision to focus on core strengths can be for shareholders. An international business such as P&G with strong market positions, a prospective free cash flow yield of c.5% and a growing dividend yield above 3% (61 consecutive years of dividend growth) is an attractive proposition in a market where valuations elsewhere have become so distorted.

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