Thomas Moore

By contrast, the reference index for the company, the FTSE All-Share Index, delivered a total return of 27.9% placing the company among the top quartile of investment trusts in the UK Equity Income peer group for the financial year

The firm’s share price total return also rose by 47.1%.

The board also determined that the company should announce a fourth interim dividend of 5.6 pence per share which will be paid on 21 January 2022 to shareholders on the Register on 24 December 2021, with an associated ex-dividend date of 23 December 2021.

This takes the total dividend for the year to 21.2 pence per share, which is a 2.9% increase on the dividend declared for the 2020 financial year and the 21st consecutive annual dividend increase paid by the company.

Mark White, chairman, said: “The performance numbers are impressive both in absolute terms and relative to the index. Thomas Moore took over responsibility for managing the portfolio 10 years ago, in November 2011, adopting the Focus on Change investment approach applied in an index-agnostic manner.

“In absolute terms, this year’s NAV total return is the largest that the Company has generated in those 10 years and it has only been bettered once in relative terms. The absolute return has been driven by the powerful market recovery following the unprecedented intervention of Central Banks with unorthodox monetary policies and Governments with fiscal stimuli. It is also pleasing to note that the portfolio significantly outperformed relative to the market and most of its peers.

“The Focus on Change investment approach looks to identify those companies which the Manager believes are not correctly priced by the market. There is no requirement or expectation that the portfolio will mirror the weightings of the reference index and consequently the performance of the portfolio can diverge significantly from it. Last year the Board reviewed a wide range of options available to the Company including the investment approach in light of the impact of Covid-19 on equity markets in 2020. “

He continued: “We concluded that we should continue with the existing policy as we believed that the investment approach remained sound and the underperformance in 2020 was due to extraordinary market conditions which would pass. I am happy to conclude that the performance this year has vindicated that decision.”

Commenting on the outlook, Thomas Moore, portfolio manager, added: “The past 12 months have strengthened my conviction in our ability to achieve our income and capital objectives while staying true to our Focus on Change investment process. A surge in portfolio income in the second half of the 12 month period has driven a sharp recovery in the revenue account, allowing shareholders to feel confident in our ability to return to above 1x dividend cover sooner rather than later. At the same time, the portfolio has enjoyed strong capital growth, well in excess of our peer group and Reference Index. The income and capital objectives go hand in hand in this market environment, given the number of higher-yielding stocks experiencing positive change in their underlying corporate fundamentals.

“Looking ahead, I feel there are three main reason for confidence in the outlook: Firstly, The abundance of stocks with a combination of positive operating revisions and low valuation, secondly, the prospect of further incoming M&A, if valuations remain this low and finally the potential for an inflection in macro conditions, such as a spike in inflation, to drive a market rotation in favour of our portfolio.

“By remaining committed to the investment process, scouring the UK market for attractively valued stocks with positive change, I am confident that the portfolio can continue to deliver for shareholders in the financial year ahead and beyond.”