September was a better month for the Trust and for the broader UK market, as Sterling recovered marginally after touching $1.20. Lowland’s net asset value rose 5% (on a total return basis with debt at fair value) versus the FTSE All-Share benchmark which rose 3.0%, and the AIC UK Equity Income Sector which rose 3.4%. Global economic data remains mixed; however it is Brexit that is dominating UK investor sentiment. Company earnings and dividend progression through all the noise are coming through satisfactorily.

At the sector level, the significant position in the financial sector was the largest positive contributor to performance. Following a sharp fall in bond yields during August, in September bond yields rose modestly and this led to a recovery in the sector. At the stock level this meant that companies held including International Personal Finance, Phoenix Group and Hiscox all performed well.

The largest individual detractor from performance was Somero Enterprises, which makes concrete levelling equipment sold to contractors. This reported disappointing interim results in which sales have slowed in Europe and the Middle East, having slowed in the US earlier on in the year. We reduced the position earlier this year (at a substantially higher share price), but where the valuation is now we think the shares are attractively valued and the balance sheet remains in a strong net cash position. The business continues to make good margins even in the current difficult backdrop.

During the month existing holdings were added to including IP Group, Hammerson and STV. In all cases (in our view) the shares are trading at attractive valuation levels, and in the case of Hammerson and STV are paying a good dividend yield to shareholders.  These purchases were financed by reducing positions including Johnson Service Group, Avon Rubber and Flowtech Fluidpower. Gearing fell marginally during the month and was 12% net assets as at the end of September.