LOWLAND INV CO PLC

Quarterly Report • Dec 8, 2020

National Storage Mechanism | Additional information

RNS Number : 8342H

Lowland Investment Co PLC

08 December 2020

HENDERSON INVESTMENT FUNDS LIMITED

LOWLAND INVESTMENT COMPANY PLC

LEGAL ENTITY IDENTIFIER: 2138008RHG5363FEHV19

LOWLAND INVESTMENT COMPANY PLC

ANNUAL FINANCIAL RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2020

This announcement contains regulated information

INVESTMENT OBJECTIVE

The Company aims to give shareholders a higher than average return with growth of both capital and income over the medium to long-term, by investing in a broad spread of predominantly UK Companies. The Company measures its performance against the FTSE All-Share Index Total Return.

INVESTMENT POLICY

Asset Allocation

The Company will invest in a combination of large, medium and smaller companies listed in the UK.  We are not constrained by the weightings of any index; we focus instead on controlling absolute risk by diversifying on the basis of underlying company characteristics such as size, industry, economic sensitivity, clients and management.  In normal circumstances up to half the portfolio will be invested in FTSE 100 companies; the remainder will be divided between small and medium-sized companies.  On occasions the Manager will buy shares listed overseas. The Manager may also invest a maximum of 15% in other listed trusts.

Dividend

The Company aims to provide shareholders with better-than-average dividend growth.

Gearing

The Board believes that debt in a closed-end fund is a valuable source of long-term outperformance, therefore the Company will usually be geared.  At the point of drawing down debt, gearing will never exceed 29.99% of the portfolio valuation. Borrowing will be a mixture of short and long-dated debt, depending on relative attractiveness of rates.

Key Data as at 30 September 2020

·      Net Asset Value ('NAV') Total Return1 of -24.8%

·      Benchmark Total Return of -16.6%2

·      Dividend growth of 0.8%

·      Dividend for the Year3 of 60.0p

	Year ended 30 September 2020	Year ended 30 September 2019
NAV per share at year end	1,031p	1,428p
Share price at year end4	914p	1,280p
Market capitalisation	£247m	£346m
Dividend per share	[60.0p] 3	59.5p
Ongoing charge including performance fee	0.66%	0.63%
Ongoing charge excluding performance fee	0.66%	0.63%
Dividend yield5	6.60%	4.60%
Gearing at year end	15.00%	12.80%
Discount at year end6	9.15%	9.10%
AIC UK Equity Income sector average discount	5.70%	4.50%

1   NAV per share total return (including dividends reinvested)

2   The FTSE All-Share Index (including dividends reinvested)

3   Includes the final dividend of 15.0p per ordinary share for the year ended 30 September 2020 that will be put to shareholders for approval at the Annual General Meeting on Wednesday 27 January 2021

4   Mid-market closing price

5   Based on dividends paid in respect of the previous 12 months and the share price at the year-end

6   Calculated using year-end fair value NAVs including current year revenue

Sources: Morningstar for the AIC, Janus Henderson, Refinitiv Datastream

Historical Performance

Year ended 30 September	Dividend per ordinary share  (pence)	Total return/(loss) per ordinary share (pence)	Net revenue return per ordinary share (pence)	Total net assets (£'000)	Net asset value per ordinary share (pence)	Share price per ordinary share (pence)
2010	27.0	139.5	22.5	203,484	770.3	699.5
2011	28.0	68.3	28.8	214,251	811.0	762.5
2012	30.5	229.9	31.1	266,401	1,008.4	991.5
2013	34.0	330.1	36.7	347,202	1,306.9	1,325.0
2014	37.0	73.3	39.4	361,856	1,345.6	1,355.0
2015	41.0	11.8	46.4	354,563	1,318.4	1,287.0
2016	45.0	156.4	47.7	386,910	1,432.0	1,336.5
2017	49.0	243.2	49.1	439,896	1,628.1	1,504.0
2018	54.0	47.4	58.6	438,934	1,624.6	1,515.0
2019	59.5	(138.7)	68.0	385,904	1,428.3	1,280.0
2020	60.01	(336.9)	33.8	278,653	1,031.3	914.0

1 Includes the final dividend of 15.0p per ordinary share for the year ended 30 September 2020 that will be put to the shareholders for approval at the Annual General Meeting on Wednesday 27 January 2021

CHAIRMAN'S STATEMENT

Performance

Lowland's NAV declined by 24.8% during the year, and its share price by a similar amount. These declines compare with a fall in the Company's benchmark, the FTSE All-Share index, of 16.6%. The Company has always taken a long-term view, but it is disappointing that we need to look at the ten year period, as well as longer periods, to see outperformance over the index. It is particularly disappointing as the year started very well, and it looked as if our multi-cap focus, with a bias towards modestly valued UK stocks, was to be rewarded for patience. The unprecedented impact of the COVID-19-19 pandemic hit the portfolio in March. The NAV having been down 30.3% at the half year, saw modest recovery in the second half.

The Fund Managers provide a detailed analysis of performance in their report. Suffice it to observe here, that the underperformance in absolute and relative terms was due predominantly to the effect of the pandemic on the stocks held in our portfolio, exacerbated by the effects of gearing. There have obviously been companies which have benefitted from the consequences of the pandemic, technology-driven international companies for instance; but our portfolio consisted predominantly of companies which suffered from the effects of the pandemic and governments' response to it. The Fund Managers operate on a bottom-up stock selection basis, but the two sectors in which we were materially overweight - Industrials and Insurance - were disproportionately hit by the pandemic. In particular, our exposure to insurance companies, and those related to aerospace, was punished. While the Fund Managers have reassessed their exposure to companies in these sectors, they remain confident that the valuation of current holdings overly discounts their long term prospects.

Consideration of strategy is intensified in times of difficulty. Whereas some value-focused trusts have abandoned their historic approach, we are persuaded to stick to our last, and convinced that rewards will ensue.

Dividends

UK dividends are forecast to fall by about 40%, excluding special dividends, in the 2020 calendar year. Small and medium-sized companies have cut their dividends more aggressively than larger companies. In the second calendar quarter of the year, the worst period for dividend cuts, dividends paid by FTSE 100 companies fell 45% while dividends paid by small and medium-sized companies fell by three quarters.

As a result of lower dividend receipts, Lowland's revenue earnings per share fell from 68p in 2019, to 33.8p.

Lowland has pursued a progressive quarterly dividend policy since 2013.  At the half year stage, I said "Revenue reserves are there for a rainy day. At present, it feels more like a thunderstorm, and we will have to make a judgement on whether we can maintain the policy. We are cognisant of shareholders' desire for regular income and it is our firm intention to maintain the policy if possible". It would be rash to forecast a speedy return to clement weather conditions, although some companies have resumed dividends where they had been suspended.

We will draw on our Revenue Reserves to fund a little under half the proposed total dividend for this year. Revenue Reserves declined from £18.4m (68.0p per share) to £11.3m (41.8p per share) at the year end.

We will continue to monitor the dividend outlook very closely. Our latest review concluded that, under a reasonable domestic recovery scenario, we can return to almost covering the current level of dividend in our 2022 financial year. If prospects appear much worse than this, we may have to review our policy.

We propose to shareholders at the forthcoming AGM an unchanged final dividend of 15.0p. This brings the total for the year to 60.0p, marginally higher than last year.

Investment Review and Gearing

Although net debt went down, from £45.6m at the beginning of the year, to £42.6m at year end, as a percentage it increased from 12.8% to 15.0% over the period. This reflects the reduction in the value of the portfolio. Gearing amounted to £44.0 million, or 13.0%, on 4 December 2020.

The weighting of small, medium, and large companies has not changed materially from last year. In terms of sector weightings, Industrials and Financials remain the two largest positions.

Ongoing Charge and Fee Arrangements

The ongoing charge was 0.66% compared to the previous year's 0.63%.

As previously announced, from 1 October 2020 the performance fee has been removed. This brings us into line with competing trusts in our sector. The level at which the management fee drops from 0.5% to 0.4% of net chargeable assets has also been reduced from £375m to £325m.

We believe these fee arrangements, and the level of ongoing charges, to be competitive.

Share price discount

During a volatile year, the Company traded briefly at a premium, but on average at a discount of 7.0%, ending the year at a 9.2% discount. The policy on discount is set out in the annual report.

The Board

Karl Sternberg has indicated that he will step down between now and the 2022 AGM, once the Board has agreed on a suitable successor. Karl has been an outstanding Director, and is an example of one whose contribution has been enhanced both by the duration of his service and the experience gained from a wide range of other activities. It is unfashionable to say this but his tenure, which will amount to twelve years, has done nothing whatsoever to diminish his independence; neither have his other activities impinged remotely on his availability to fulfil his duties or his enthusiasm in so doing. Our approach with regard to tenure, and to ensure that our directors are not 'overboarded' in any meaningful sense, is set out in the annual report. The Lowland Board has never been fashion conscious; it is merely guided by shareholders' interests.

I would like to thank Karl, on behalf of shareholders, and fellow Directors, for his considerable contribution to the Company.

An announcement as to his successor will be made in due course.

Contact with Shareholders

We are always keen to hear shareholders' views and so I would invite anyone who wishes to contact me to do so at: itsecretariat@janushenderson.com.

Annual General Meeting

While we normally look forward to seeing shareholders at our AGM, the restrictions and limitations imposed by the pandemic mean that this is unlikely to be possible in 2021.  Instead, we will broadcast the AGM via Zoom https://jhi.zoom.us/webinar/register/WN_jO3n_WjSSDKtISvCXs3hNw on 27 January 2021.  Voting on the resolutions will be conducted via poll, and I strongly encourage you to vote using the proxy form provided with the copy of this report.  Please do sign up to register for the AGM, so you can log on to hear from the Fund Managers and ask any questions you may have of them or the Board.

Outlook

Hopefully it is safe to believe that the US presidential election has been resolved, and that the roll-out of vaccines will enable the COVID-19 virus to be brought substantially under control over the course of 2021. We shall know soon whether good sense from the EU and the UK will prevail in bringing about an orderly Brexit. The resolution of so much serious uncertainty should make us optimistic.  Reflecting a reversal of the pattern experienced during the financial year, the Company's NAV has increased by 23.3% compared with an increase of 13.3% in the benchmark since the year end (both on a total return basis).

Whilst asset prices generally are at elevated valuations, the exception is the UK equity market. Our approach to investment will remain bottom-up, but in looking at the prospects for individual companies, the prominence of macroeconomic challenges will be unusually apparent. It is impossible to foresee how governments will deal with the massive levels of debt incurred by their reactions to the pandemic, and there are many differences between this and the last severe recession. After the financial crisis, the British and many other governments chose financial orthodoxy by spending cuts to rebalance the books. This time around, governments seem more inclined to respond with expansionary policies. Money supply hardly grew after 2007, but is now growing at its fastest rate since the 1980s. We struggle to understand whether inflation can continue to lie fallow. We face the prospect of increasing unemployment and bankruptcies. We cannot yet know which of these contrary influences will prevail.

Assuming that the very immediate dangers which have preoccupied the last months are overcome, markets' initial relief may soon be displaced by a new focus on the more medium-term concerns of this sort.  Our Fund Managers do see considerable value in many parts of the UK market but a bumpy ride looks assured.

Robert Robertson

Chairman

7 December 2020

FUND MANAGER'S REPORT

Background

The UK economy has shrunk materially, and as investors closely linked to corporate UK, we have suffered. The underlying companies we hold have significantly more of their earnings derived from the UK than from overseas. This has helped the portfolio in periods when the UK has grown well relative to other developed economies, but not when the UK has substantially lagged. Contraction in economic activity has been more marked in the UK than in other major economies.

The virus came at a time of already large structural change in the economy, and it has further accelerated the process. The move in retailing from physical stores to online is a striking example.  It has meant older, established businesses with traditional infrastructures have suffered disproportionately more than the new businesses with less capital tied up in physical assets. A portfolio that has a bias towards dividend-paying companies will usually have more in the older cash generating stocks than in the cash-consuming younger companies.

The fallout from COVID-19 also hit some industries much harder than others, with aerospace and insurance being particularly affected. The Lowland portfolio has a large exposure to both. The UK has been a leader in both these industries with globally recognised successful companies. The aerospace sector had been growing faster than aggregate global economic growth for a number of years, but the pandemic grounded around 80% of global fleets. This has had a devastating effect on the industry; the fall-out will take several years to remedy. In the insurance sector, confusion over the level of business interruption risk that was being covered, meant the liability was not being properly recognised and the scale of the loss has been significantly bigger than anticipated.  

Good management teams are those which, when tested, can deal with the unexpected. It has been impressive watching how many of the companies held have dealt with the challenge of COVID-19. We have made further investments in companies already in the portfolio where management teams are tackling the problems they face and can emerge from the downturn with a strong product (or service) proposition. Many of these companies will also emerge to a more subdued competitive environment and with a leaner cost base.

Performance Attribution

It was a very difficult year for performance, both on an absolute basis and relative to the FTSE All-Share benchmark.

Before examining the reasons for underperformance at the stock and sector level, it is worth noting the impact on net asset value of gearing.  

At the start of the financial year, gearing was 12.8%. Valuation levels in the UK equity market were low relative to other developed equity markets, and the UK market was substantially 'out of favour' (prior to the UK General Election and clarity that Brexit was to happen). Therefore, at the start of the year, it was our view that the portfolio should be modestly geared to reflect a broad range of attractive investment opportunities. The NAV performance in the last quarter of the 2019 calendar year reflected our view of what could happen if confidence returned to the UK market, and it was a strong period for the portfolio (both on an absolute and relative basis). However, at a time of material market weakness in the Spring when the effects of the pandemic and the subsequent policy response became evident, this gearing level materially detracted from returns. We estimate gearing detracted 3.5% from net asset value total return during the year.

At the sector level, the biggest detractor from relative returns was the overweight position in the Industrials and Financials sectors. However, in both cases the driver of negative returns was predominantly stock selection, rather than sector allocation. Therefore in examining the reasons for underperformance we are focusing on stocks, rather than sectors. Trading conditions faced by companies even in the same industry were very disparate, which is a further reason for focusing on the stock-specific drivers of performance.

The largest five holdings contributing to relative return:

Company Name	Average weight in portfolio during the financial year (%)	Share price total return (%)	Contribution to relative return (%)
Avon Rubber	1.4	157.4	1.4
Ilika	0.6	303.0	0.8
XP Power	1.1	85.7	0.8
Phoenix Group	3.0	7.1	0.7
Somero Enterprises	1.0	45.9	0.5

Examining each in turn:

1.   Avon Rubber. A provider of defence equipment (such as gas masks and body armour). In recent years they have used selective acquisitions and disposals to re-shape the portfolio. The valuation rose to a materially higher level than where it had traded historically and relative to defence peers, therefore the position was reduced.

2.   Ilika. A designer and manufacturer of solid state batteries, with the potential for faster charging and longer battery life than traditional batteries. This year Ilika made further progress towards commercialisation, and the shares performed well as a result.

3.   XP Power. A designer and manufacturer of power converters for a range of end-markets. Healthcare and semiconductor end markets have proven resilient, offsetting weakness in industrial end markets and allowing group earnings to continue to grow during 2020.

4.   Phoenix Group. A closed book life insurer (life insurance policies and pension funds that are in gradual run-off). It continued to grow via selective acquisitions and benefitted from its ability to continue to pay an attractive dividend yield throughout the year, at a time when many companies reduced or suspended dividend payments.

5.   Somero Enterprises. A producer of concrete levelling equipment for the commercial building industry. After initial weakness in Spring, demand recovered strongly and recovered to historic levels in their key North American market.

The largest five holdings detracting from relative return: 

Company Name	Average weight in portfolio during the financial year (%)	Share price total return (%)	Contribution to relative return (%)
Senior	1.5	-76.0	-1.6
Hiscox	1.9	-46.1	-0.8
Hammerson	0.5	-96.1	-0.8
International Personal Finance	0.8	-58.1	-0.7
Rolls-Royce	1.0	-83.5	-0.6

Examining each in turn:

1.   Senior. An engineering firm that produces equipment such as structures for aeroplane wings and fluid transportation systems for aerospace, industrial and energy markets. Approximately half of group sales are exposed to the civil aerospace market, where production cuts from Boeing and Airbus have meant material earnings downgrades. With a large portion of the global aeroplane fleet currently grounded, overcapacity in the market is likely to extend for several years even as passenger demand recovers (which, in our view, it will). This means profitability for Senior is likely to be suppressed for several years. We reduced the position during the period but we have maintained a small holding on a recovery in earnings as the valuation is very low.

2.   Hiscox. A global insurer that writes predominantly small- and medium-sized business insurance. Among its coverage is business interruption and event cancellation insurance, an area that has seen highly contested claims as the insurance was not intended to cover prolonged forced closures as a result of a pandemic. There has recently been clarity on claims levels as a result of a test case in the UK High Court. We modestly added to the holding during the year in a placing by the company to ensure the balance sheet could fund COVID-19 claims.

3.   Hammerson. An owner and operator of prime retail assets in the UK and Continental Europe. At a time when there was already a structural shift in consumer spending to online, there was then a forced closure of a material portion of their retail estate, leading to low rental payments from tenants. Towards the end of the financial year Hammerson undertook a rights issue (in which the Company participated) and disposal of some properties in order to re-set the balance sheet. In our view, there is a future for prime retail assets in combination with online, allowing a coherent multichannel offering for brands. However, in the short term, with uncertainty as to the extent of enforced closures, the trading outlook for retailers, and therefore the outlook for rents, remains uncertain.

4.   International Personal Finance. A provider of door-to-door and digital lending. A wide range of regulatory changes (including debt moratoria) were imposed across a number of end markets at the beginning of the pandemic, leading to concerns of heightened bad debts. While this effect has (so far) been manageable, there were also concerns regarding the company's ability to refinance a sizeable corporate bond which expires early in 2021. This refinancing issue has, following the financial year end, been resolved. The valuation of the company has modestly recovered but remains low.

5.   Rolls-Royce. A designer and manufacturer of engines. As with Senior, approximately half of group sales are exposed to the civil aerospace market. Therefore both aftermarket sales and new engine sales have been materially impacted by reduced demand. Other markets to which the group is exposed, such as defence, have been more resilient and the management team have responded to the downturn with material cost savings across the business.

The largest sector weighting within the portfolio remains Financials. Within this, the portfolio has a substantial weighting in insurance (both life and non-life insurance) with a relatively low weighting in banks (4.3% of the portfolio as at the end of September).

The second largest sector weighting is the Industrials sector. Aerospace & defence, having been a large subsector weighting in the portfolio over many years, remains a small overweight position versus the benchmark, but at an aggregate level is now modest at 3.5% of the portfolio (versus 6.5% at the end of the previous financial year). This reduction in exposure to aerospace & defence is a combination of reducing positions held in companies such as Senior and Rolls-Royce, and underperformance of the subsector as a result of weakness in the civil aerospace market.

Historically the Company has held a material weighting in Insurance and Industrials on the view that the two sectors provide diversification benefits; the insurance industry follows the underwriting cycle, while industrial companies broadly follow the economic cycle. This year has been exceptionally unusual in that the same underlying event (COVID-19) has materially impacted the earnings of both sectors. In insurance, as described in the portfolio attribution sector, writers of business interruption insurance (such as Hiscox and RSA) faced an uncertain claims backdrop as a result of forced business closures. These claims costs have recently been clarified following a test case in the High Court. In industrials, what began as a supply shock (with industrial facilities forced to close early in calendar 2020 to prevent localised outbreaks), swiftly became a demand shock, with particularly acute demand weakness in end markets such as civil aerospace and energy. This demand weakness led to material earnings downgrades across much of the Industrials sector, although there remained some resilient areas such as healthcare and semiconductors.

The Company continues to hold a sizeable weighting in the Industrials and Financials sectors. Following the Financial Crisis the Industrials sector performed well, as sales recovered and the drop-through from sales to earnings surprised positively. We are expecting similar dynamics when sales recover from the current downturn. Industrial companies are currently focused on cost savings; several companies held have accelerated cost reduction plans that would have taken up to three years, to 12-18 months. In many cases these are permanent savings, such as closing manufacturing sites. Therefore when sales recover (it is a 'when' in our view, rather than an 'if'), the drop-through to earnings could again surprise positively, at a time when valuations (on a lower earnings level) are low. For the Insurance sector, following several years of high natural catastrophe losses and subsequently high claims as a result of COVID-19, this is driving a hardening of the market with material price rises across a number of lines. This hardening market comes at a time when valuations are low. Therefore we continue to hold the positions in both areas.

Portfolio Activity

The largest new positions purchased during the year fall broadly into two categories; companies which are well placed to continue growing their earnings (and dividends) irrespective of the progression of the pandemic, and companies where a return to 'normal' trading conditions is not, in our view, factored into the current valuation.

Among the largest purchases in the former category were Tesco and Hipgnosis Songs Fund. Tesco is guiding to 'at least' flat retail profits year on year, with higher costs as a result of COVID-19 being offset by higher like-for-like sales growth as food consumption shifts from restaurants to eating at home. Tesco continues to be the market leader in the UK and has substantially reduced the debt on its balance sheet. This leaves it well placed to return a material portion of its cash generation to shareholders. Hipgnosis Songs Fund is an investment trust which purchases back catalogues of songs from song writers. They have so far purchased catalogues from a variety of well known artists. The music industry, having been in decline for many years as a result of piracy and the decline of CD purchases, has recently returned to growth as a result of streaming services such as Spotify. This streaming growth, which in our view is a structural shift in the way music is consumed, should continue largely independent of the broader economic backdrop. Therefore the over 4% dividend yield currently paid by Hipgnosis should prove defensive with good scope to grow.

A number of new positions were also purchased in companies where earnings have been materially impacted by the pandemic, but where we can see a clear path to sales and earnings recovery as trading conditions normalise. These companies have often temporarily suspended their dividend, but we are purchasing positions at what we think will prove to be an attractive dividend yield when dividends resume. Among the largest purchases in this area were new positions in retailers Marks & Spencer and Halfords. Marks & Spencer is a company that we have historically avoided within the portfolio; it has ceded market share for many years in clothing and as a result group earnings have struggled to grow. However, there are two aspects of the investment case that have recently changed; a new management team (led by new Chairman Archie Norman) and a joint venture with Ocado. Under a new management team they have begun to address many of their legacy issues, including their store estate and an (at times) bewilderingly large number of similar items. The partnership with Ocado allows their food division to move online, potentially allowing material scale benefits in bringing their (historically successful) food division to a larger end-market. Halfords was a new purchase in February, that was subsequently increased once the effects of the pandemic became clearer.  Under a new management team it has improved both its consumer proposition (for example a materially improved website) and its focus on return on capital. On a short-term basis it has also benefitted from strong trading in its cycling division.

Among the sales during the period were pub operator Greene King, medical device manufacturer Consort Medical, clothing retailer Moss Bros and building materials company Low & Bonar, all of which were sold following takeover approaches. Other large reductions included defence equipment manufacturer Avon Rubber (where the remainder of the position was sold shortly after the year end) and Royal Dutch Shell. Avon Rubber had been in the portfolio for over fifteen years, progressing from a supplier of milking equipment to the dairy industry to a strategic supplier to the US Department of Defense (providing protective equipment such as gas masks). Fifteen years ago the share price was £2.14; the final sale just after the period end was at £43.99 and there have been many dividends received in addition. This achievement is a testament to both the current and previous management teams that have undertaken selective acquisitions at sensible valuations to grow the earnings materially while maintaining a strong balance sheet.

Royal Dutch Shell was reduced both prior to and following the two thirds dividend cut announced this year. The reason for the reduction was that it became clear the company had been historically over-distributing; cash spent on its dividend relative to its capital expenditure had been gradually rising over a number of years and it was also becoming increasingly indebted. Other material reductions included textile rental company Johnson Service Group and restaurant crockery designer and manufacturer Churchill China. In both cases they are market leaders in the UK, with well invested facilities, experienced management teams and a history of strong organic growth. However, both are materially exposed to the hospitality industry, which has been very badly impacted by a prolonged period of closure during 'lockdown' and a subsequent slow recovery in trading activity.

Dividends

At the peak of uncertainty in Spring this year, UK dividends were cut at an unprecedented rate. In the second quarter of 2020, UK dividend payments fell 50% (excluding special dividends), with steeper cuts among small and medium sized companies, where dividend payments fell by three quarters. Dividend cuts were most pronounced among cyclical sectors including Financials, while in more defensive sectors payments continued largely unaffected.

For Lowland specifically, earnings per share (including special dividends) fell 50% during the financial year. While the portfolio was less affected than the broader market by large company dividend cuts (such as Royal Dutch Shell, BP and HSBC, where we hold comparatively less than the FTSE All-Share benchmark), the portfolio holds more in small and medium sized companies, where companies (generally at an earlier stage in their life cycle and more exposed to the domestic economy) were quicker to suspend their dividend. A number of the non-life insurers held (such as Hiscox, RSA and Direct Line), also suspended their dividend because of an uncertain claims outlook, although some (such as Direct Line and Aviva), have subsequently resumed payments.

Since the peak period of dividend cuts in the second quarter, there has been an encouraging trend of companies returning to paying dividends across a broad range of sectors. Examples of this include paper and packaging company Mondi, defence equipment provider BAE Systems and industrial engineer IMI.

Our approach to the dividend trajectory for the Company has been to model investment income under a reasonable domestic recovery scenario out to FY22 (the financial year starting September 2021), in order to determine whether earnings per share can realistically recover to the point where it can cover the dividend payment. Based on what we view as reasonable (and in some cases conservative) assumptions regarding dividend payments, we think earnings per share can recover to near their historic trajectory.

Outlook

Since the majority of this statement was written, the US election has taken place and Pfizer, Moderna and AstraZeneca have released promising initial trial results from their COVID-19-19 vaccines. This has (at least to a degree) removed two key uncertainties, leaving our future trading relationship with the EU as the remaining overhang on the UK equity market. The Company's net asset value has responded positively to news of a vaccine. As at the close of business on Friday 4 December, the Company's NAV (on a total return basis) had risen 23.3% since the financial year end, while the FTSE All-Share rose 13.3% over the same period. In a reversal of the pattern described in the attribution section of this report, the best performing shares since year end have been those most positively exposed to a 're-opening' of the domestic and global economy. Despite the recent move upwards in equity prices we continue to see excellent value opportunities across the UK equity market as we look ahead into 2021.

The UK economy could see a strong recovery from 2021 onwards as the spending deferred during lockdown 'kicks in' on consumer and business confidence returning. The result could be a rapid improvement in corporate margins as sales recover. However, it is important to remain mindful that the debt taken in the pandemic by governments and companies needs to be paid back over time. The long-term implications of the pandemic on economic life will need to be worked through over an extended period.

James Henderson and Laura Foll

Fund Managers

7 December 2020

Twenty Largest Holdings as at 30 September 2020

The stocks in the portfolio are a diverse mix of businesses operating in a wide range of end markets.

Rank

2020 (2019)

Company

% of

portfolio

Approx. market cap

Valuation 2020

£'000

1 (2)

GlaxoSmithKline

A global pharmaceutical, vaccine and consumer healthcare company. The consumer healthcare and vaccine businesses should be steady growers over time while the pharmaceutical division under a new leadership team could turnaround what has been a mixed research and development track record.

4.1

£73bn

13,141

2 (3)

Phoenix
The company operates primarily in the UK and specialises in taking over and managing closed life insurance and pension funds.

3.6

£4.9bn

11,509

3 (8)

Severn Trent
A UK water utility with a well invested network and strong track record on operational performance. There is a good dividend yield with scope to grow.

2.9

£5.8bn

9,146

4 (14)

National Grid
A regulated utility (electricity and gas distribution) operating in the US and UK. The regulated asset base has good scope to grow in both the US and the UK. The shares pay an attractive dividend yield.

2.3

£31.2bn

7,267

5 (6)

Prudential
The company provides an assortment of insurance and investment products around the world. The business in the Far East has grown impressively in recent years. .

2.2

£28.9bn

7,209

6 (19)

Direct Line
A UK provider of car and home insurance. The company has well-known brands which will allow them to grow policies well, while maintaining underwriting discipline. A strong balance sheet allows them to pay an attractive dividend yield to shareholders.

2.2

£3.6bn

7,004

7 (10)

Relx
The company publishes information for the scientific, medical, legal and business sectors serving customers worldwide. The company is a consistent, high quality growth business.

2.1

£33.2bn

6,904

8 (1)

Royal Dutch Shell
The company explores, produces and refines oil; it produces fuels, chemicals and lubricants as well as operating filling stations worldwide. The company has reduced their cost base to adapt to a lower oil price. While the dividend has recently been re-based, the dividend yield remains attractive and the dividend has scope to grow.

2.1

£113bn

6,670

9 (4)

Hiscox
The international insurance company manages underwriting syndicates and underwrites a range of personal and commercial insurance. The company is a disciplined underwriter and has over the long-term achieved a high return on capital. On a shorter term basis shares have performed poorly due to an uncertain claims backdrop in business interruption insurance during the pandemic.

1.9

£3.1bn

6,178

10 (*)

Rio Tinto

A diversified mining company with exposure to commodities including iron ore, copper and aluminium. Their mines are well positioned on the global cost curve, allowing strong cash generation even in a volatile commodity price backdrop. The shares pay an attractive dividend yield.

1.8

£75.5bn

5,819

11 (*)

Morgan Advanced Materials

A designer and producer of specialist materials and components for a range of end markets including transportation, semiconductors, healthcare and general industry. Under a new management team the business has invested in research & development and the results are beginning to be evident in improved organic growth and margins.

1.8

£679m

5,653

12 (16)

Irish Continental1
The group provides passenger transport, roll-on and roll-off freight transport and container services between Ireland, the United Kingdom and Continental Europe. The shares have been impacted by an uncertain trading relationship between the UK and the EU. However, they continue to be a well managed business operating in a duopolistic industry.

1.6

£529m

5,298

13 (*)

Henderson Opportunities Trust

An investment Trust focused primarily on UK smaller companies, managed by James Henderson and Laura Foll. The portfolio has little cross-over with Lowland and brings diversification to the portfolio through its exposure to earlier stage, often lower yielding, smaller UK companies.

1.6

£68m

5,196

14 (*)

Pennon

A UK water utility with a well invested network. The shares have benefitted from the disposal of Viridor, Pennon's waste management business, to private equity at what was perceived to be a high valuation.

1.6

£4.3bn

5,155

15 (20)

Aviva
This company provides a wide range of insurance and financial services. Under a new CEO there is a heightened focus on simplifying the business and exiting peripheral geographies.

1.6

£11.2bn

5,000

16 (*)

Mondi

A vertically integrated producer of paper and packaging products. They are well positioned on the cost curve across the products they produce, allowing strong cash generation and attractive margins.

1.5

£8.0bn

4,919

17 (5)

HSBC
The global bank provides international banking and financial services. The diversity of the countries it operates in as well as its exposure to faster growing economies make it well placed.

1.5

£61.4bn

4,763

18 (9)

Standard Chartered
The international banking group operates principally in Asia, Africa and the Middle East. The management team has focused the bank on areas of relative strength in growing markets.

1.5

£11.2bn

4,732

19 (*)

Hill & Smith

An engineering firm operating in the US and UK that produces materials for infrastructure, along with galvanising services. Their products and services are positively exposed to the commitment of both the UK and US governments to grow infrastructure spending.

1.4

£948m

4,495

20 (*)

FBD1

An Irish insurer with a focus on the agricultural sector, as well as writing motor and business insurance. The shares have performed poorly in the short term because of business interruption claims as a result of the pandemic. On a longer term basis they are disciplined underwriters and the balance sheet is strong.

1.4

£276m

4,358

40.7

130,416

At 30 September 2020 these investments totalled £130,416,000 or 40.7% of portfolio.

* Not in the top twenty largest investments last year

1 Overseas listed stocks (Ireland)

PRINCIPAL RISKS AND UNCERTAINTIES

The Board, with the assistance of the Manager, has carried out a robust assessment of the principal risks and uncertainties, including emerging risks, facing the Company including those that would threaten its business model, future performance, solvency, liquidity and reputation. The Board regularly considers the principal risks facing the Company and has drawn up a matrix of risks. The Board has put in place a schedule of investment limits and restrictions, appropriate to the Company's investment objective and policy, in order to mitigate these risks as far as practicable. The principal risks which have been identified and the steps taken by the Board to mitigate these are set out in the table below. The principal financial risks are detailed in the annual report.

The Board has also considered the impact of the COVID-19 pandemic on the Company.  Originally identified as an emerging risk, the pandemic developed significantly and swiftly, triggering sharp falls in global stock markets and resulting in uncertainty about the ongoing impact on markets and companies, and around future dividend income.  The risks associated with the pandemic were therefore removed from emerging risks into one of the principal risks facing the Company.

Principal risks	Mitigating measure
Global pandemic The impact of the coronavirus pandemic on the Company's investments and its direct and indirect effects, including the effect on the global economy.	The Fund Managers maintain close oversight of the Company's portfolio, and in particular its gearing levels, and the performance of investee companies. Regular stress testing of the revenue account under different scenarios for dividends is carried out. The Board monitors the effects of the pandemic on the operations of the Company and its service providers to ensure that they continue to be appropriate, effective and properly resourced.
Investment activity and strategy risk An inappropriate investment strategy or poor execution, for example, in terms of asset allocation or level of gearing, may result in underperformance against the Company's benchmark index and the companies in its peer group, and also in the Company's shares trading on a wider discount to the net asset value per share.	The Board manages these risks by ensuring a diversification of investments and a regular review of the extent of borrowings. Janus Henderson operates in accordance with investment limits and restrictions and policy determined by the Board, which includes limits on the extent to which borrowings may be employed. The Board reviews the investment limits and restrictions on a regular basis and the Manager confirms adherence to them every month. Janus Henderson provides the Board with management information, including performance data and reports and shareholder analyses. The Board monitors the implementation and results of the investment process with the Fund Managers at each Board meeting and monitor risk factors in respect of the portfolio. Investment strategy is reviewed at each meeting.
Portfolio and market price Although the Company invests almost entirely in securities that are listed on recognised markets, share prices may move rapidly. The companies in which investments are made may operate unsuccessfully, or fail entirely. A fall in the market value of the Company's portfolio would have an adverse effect on equity shareholders' funds.	The Board reviews the portfolio at the five Board meetings held each year and receives regular reports from the Company's brokers. A detailed liquidity report is considered on a regular basis. The Fund Managers closely monitor the portfolio between meetings and mitigate this risk through diversification of investments. The Fund Managers periodically present the Company's investment strategy in respect of current market conditions. Performance relative to the FTSE All-Share Index, and other UK equity income trusts is also monitored.
Dividend income A reduction in dividend income could adversely affect the Company's dividend record.	The Board reviews income forecasts at each meeting. The Company has revenue reserves of £11.3 million (before payment of the third interim and final dividend) and distributable capital reserves of £265.6 million.
Financial risk The financial risks faced by the Company include market price risk, interest rate risk, liquidity risk, currency risk and credit and counterparty risk.	The Company minimises the risk of a counterparty failing to deliver securities or cash by dealing through organisations that have undergone rigorous due diligence by Janus Henderson. The Company holds its liquid funds almost entirely in interest bearing bank accounts in the UK or on short-term deposit. This, together with a diversified portfolio which comprises mainly investments in large and medium-sized listed companies mitigates the Company's exposure to liquidity risk. Currency risk is mitigated by the low exposure to overseas stocks. Please see note 14 in the annual report.
Gearing risk In the event of a significant or prolonged fall in equity markets gearing would exacerbate the effect of the falling market on the Company's NAV per share and, consequently, its share price.	At the point of drawing down debt, gearing will never exceed 29.99% of the portfolio valuation. The Company minimises the risk by the regular monitoring of the levels of the Company's borrowings in accordance with the agreed limits. The Company confirms adherence to the covenants of the loan facilities on a monthly basis.
Tax and regulatory Changes in the tax and regulatory environment could adversely affect the Company's financial performance, including the return on equity. A breach of s.1158/9 could lead to a loss of investment trust status, resulting in capital gains realised within the portfolio being subject to corporation tax. A breach of the Listing Rules could result in suspension of the Company's shares, while a breach of the Companies Act 2006 could lead to criminal proceedings, or financial or reputational damage.	The Manager provides its services, inter alia, through suitably qualified professionals and the Board receives internal control reports produced by the Manager on a quarterly basis, which confirm legal and regulatory compliance. The Fund Managers also consider tax and regulatory change in their monitoring of the Company's underlying investments.
Operational Disruption to, or failure of, the Manager's or its administrator's (BNP Paribas Securities Services) accounting, dealing or payment systems or the Depositary's records could prevent the accurate reporting and monitoring of the Company's financial position. Cyber crime could lead to loss of confidential data. The Company is also exposed to the operational risk that one or more of its suppliers may not provide the required level of service.	The Board monitors the services provided by the Manager and its other suppliers and receives reports on the key elements in place to provide effective internal control. Cyber security is closely monitored and the Audit Committee receives an annual presentation from Janus Henderson's Head of Information Security. Details of how the Board monitors the services provided by Janus Henderson and its other suppliers and the key elements designed to provide effective internal control are explained further in the Internal Controls section of the Corporate Governance Statement in the annual report.

Emerging risks

In addition to the principal risks facing the Company, the Board also regularly considers potential emerging risks, which are defined as potential trends, sudden events or changing risks which are characterised by a high degree of uncertainty in terms of the probability of them happening and the possible effects on the Company. Should an emerging risk become sufficiently clear, it may be moved to a significant risk, as described above in relation to the coronavirus pandemic.

VIABILITY STATEMENT

The Company is a long-term investor; the Board believes it is appropriate to assess the Company's viability over a five-year period in recognition of our long-term horizon and what we believe to be investors' horizons, taking account of the Company's current position and the potential impact of the principal risks and uncertainties as documented above in this Strategic Report.

The assessment has considered the impact of the likelihood of the principal and emerging risks and uncertainties facing the Company, in particular investment strategy and performance against benchmark, whether from asset allocation or the level of gearing, and market risk, in severe but plausible scenarios, and the effectiveness of any mitigating controls in place.

The Board has taken into account the liquidity of the portfolio and the gearing in place when considering the viability of the Company over the next five years and its ability to meet liabilities as they fall due. This included consideration of the duration of the Company's loan facilities and how a breach of the loan facility covenants could impact on the Company's liquidity, net asset value and share price.

The Board does not expect there to be any significant change in the current principal risks and adequacy of the mitigating controls in place. Also the Directors do not envisage any change in strategy or objectives or any events that would prevent the Company from continuing to operate over that period as the Company's assets are liquid, its commitments are limited and the Company intends to continue to operate as an investment trust. Only a substantial financial crisis affecting the global economy could have an impact on this assessment.

In coming to this conclusion, the Directors have considered the impact of the COVID-19 pandemic and the UK's ongoing negotiations having left the European Union, in particular the impact on income and the Company's ability to meet its investment objective. The Board does not believe that they will have a long-term impact on the viability of the Company and its ability to continue in operation, notwithstanding the short-term uncertainty they have caused in the markets.

Based on this assessment, the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over the next five-year period.

RELATED PARTY TRANSACTIONS

The Company's current related parties are its Directors and Janus Henderson. There have been no material transactions between the Company and its Directors during the year.  The fees and expenses paid to Directors are set in the Annual Report. There were no outstanding amounts payable at the year end.

In relation to the provision of services by Janus Henderson, other than fees payable by the Company in the ordinary course of business and the provision of sales and marketing services, there have been no material transactions with Janus Henderson affecting the financial position of the Company during the year under review. More details on transactions with Janus Henderson, including amounts outstanding at the year end, are given in the Annual Report.

STATEMENT OF DIRECTORS' RESPONSIBILITIES

In accordance with Disclosure Guidance and Transparency Rule 4.1.12, each of the Directors confirms that, to the best of his or her knowledge:

• the Company's financial statements, which have been prepared in accordance with UK Accounting Standards and applicable law give a true and fair view of the assets, liabilities, financial position and loss of the Company; and

• the Strategic Report, Report of the Directors and financial statements include a fair review of the development and performance of the business and the position of the Company, together with a description of the principal risks and uncertainties that it faces.

The directors consider that the Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

For and on behalf of the Board

Robert Robertson

Chairman

7 December 2020

INCOME STATEMENT

	Year ended 30 September 2020			Year ended 30 September 2019
	Revenue return £'000	Capital return £'000	Total £'000	Revenue return £'000	Capital return £'000	Total £'000
Losses on investments held at fair value through profit or loss (note 2)	-	(98,742)	(98,742)	-	(54,206)	(54,206)
Income from investments (note 3)	11,124	-	11,124	20,640	-	20,640
Other interest receivable and similar income (note 4)	128	-	128	121	-	121
Gross revenue and capital losses	11,252	(98,742)	(87,490)	20,761	(54,206)	(33,445)
Management fee	(835)	(836)	(1,671)	(983)	(983)	(1,966)
Administrative expenses	(547)	-	(547)	(539)	-	(539)
Net return/(loss) before finance costs and taxation	9,870	(99,578)	(89,708)	19,239	(55,189)	(35,950)
Finance costs	(594)	(593)	(1,187)	(669)	(670)	(1,339)
Net return/(loss) before taxation	9,276	(100,171)	(90,895)	18,570	(55,589)	(37,289)
Taxation on net return	(144)	-	(144)	(205)	-	(205)
Net return/(loss) after taxation	9,132	(100,171)	(91,039)	18,365	(55,859)	(37,494)
Return/(loss) per ordinary share  - basic and diluted (note 5)	33.8p	(370.7p)	(336.9p)	68.0p	(206.7p)	(138.7p)
	\=====	\=====	\=====	\=====	\=====	\=====

The total columns of this statement represent the Profit and Loss Account of the Company. The revenue return and capital return columns are supplementary to this and are prepared under guidance published by the Association of Investment Companies. All revenue and capital items in the above statement derive from continuing operations. The Company had no other comprehensive income other than those disclosed in the Income Statement. The net return is both the profit for the year and the total comprehensive income.

STATEMENT OF CHANGES IN EQUITY

Year ended 30 September 2020	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
At 1 October 2019	6,755	61,619	1,007	298,139	18,384	385,904
Net (loss)/return after taxation	-	-	-	(100,171)	9,132	(91,039)
Third interim dividend (15.0p) for the year ended 30 September 2019 paid 31 October 2019	-	-	-	-	(4,053)	(4,053)
Final dividend (15.0p) for the year ended 30 September 2019 paid 31 January 2020	-	-	-	-	(4,053)	(4,053)
First interim dividend (15.0p) for the year ended 30 September 2020 paid 30 April 2020	-	-	-	-	(4,053)	(4,053)
Second interim dividend (15.0p) for the year ended 30 September 2020 paid 31 July 2020	-	-	-	-	(4,053)	(4,053)
	---------	----------	----------	-----------	----------	----------
At 30 September 2020	6,755	61,619	1,007	197,968	11,304	278,653
	\=====	\=====	\=====	\======	\=====	\======

Year ended 30 September 2019	Called up share capital £'000	Share premium account £'000	Capital redemption reserve £'000	Other capital reserves £'000	Revenue reserve £'000	Total £'000
At 1 October 2018	6,755	61,619	1,007	353,998	15,555	438,934
Net (loss)/return after taxation	-	-	-	(55,859)	18,365	(37,494)
Third interim dividend (14.0p) for the year ended 30 September 2018 paid 31 October 2018	-	-	-	-	(3,783)	(3,783)
Final dividend (14.0p) for the year ended 30 September 2018 paid 31 January 2019	-	-	-	-	(3,782)	(3,782)
First interim dividend (14.5p) for the year ended 30 September 2019 paid 30 April 2019	-	-	-	-	(3,918)	(3,918)
Second interim dividend (15.0p) for the year ended 30 September 2019 paid 31 July 2019	-	-	-	-	(4,053)	(4,053)
	---------	----------	----------	-----------	----------	-----------
At 30 September 2019	6,755	61,619	1,007	298,139	18,384	385,904
	\=====	\=====	\=====	\======	\=====	\======

STATEMENT OF FINANCIAL POSITION

	As at 30 September 2020 £'000	As at 30 September 2019 £'000
Fixed assets
Investments held at fair value through profit or loss:
Listed at market value in the United Kingdom (main market)	256,935	351,431
Listed at market value on AIM	48,425	65,428
Listed at market value overseas	12,695	15,906
Unlisted	2,495	2,422
	-----------	-----------
	320,550	435,187
	-----------	-----------
Current assets
Debtors	2,424	1,710
Cash at bank	3,232	2,008
	-----------	-----------
	5,656	3,718
	-----------	-----------
Creditors: amounts falling due within one year	(17,772)	(23,222)
	-----------	-----------
Net current liabilities	(12,116)	(19,504)
	-----------	-----------
Total assets less current liabilities	308,434	415,683
Creditors: amounts falling due after one year	(29,781)	(29,779)
	-----------	-----------
Net assets	278,653	385,904
	\=======	\=======
Capital and reserves
Called up share capital	6,755	6,755
Share premium account	61,619	61,619
Capital redemption reserve	1,007	1,007
Other capital reserves	197,968	298,139
Revenue reserve	11,304	18,384
	-----------	-----------
Total shareholders' funds	278,653	385,904
	\=======	\=======
Net asset value per ordinary share - basic and diluted	1,031.3p	1,428.3p
	\=======	\=======

STATEMENT OF CASH FLOWS

	Year ended 30 September 2020 £'000	Year ended 30 September 2019 £'000
Cash flows from operating activities
Net loss before taxation	(90,895)	(37,289)
Add back: finance costs	1,187	1,339
Add: losses on investments held at fair value through profit or loss	98,742	54,206
Withholding tax on dividends deducted at source	(177)	(282)
Decrease in other debtors	814	386
(Decrease)/increase in other creditors	(784)	1,159
	-----------	-----------
Net cash inflow from operating activities	8,887	19,519
Cash flows from investing activities
Purchase of investments	(53,045)	(51,677)
Sale of investments	67,917	54,923
	-----------	-----------
Net cash inflow from investing activities	14,872	3,246
Cash flows from financing activities
Equity dividends paid (net of refund of unclaimed distributions and reclaimed distributions)	(16,212)	(15,536)
Net loans repaid	(5,109)	(5,342)
Interest paid	(1,207)	(1,344)
	-----------	-----------
Net cash outflow from financing activities	(22,528)	(22,222)
	-----------	-----------
Net increase in cash and cash equivalents	1,231	543
Cash and cash equivalents at start of year	2,008	1,445
Effect of foreign exchange rates	(7)	20
	-----------	-----------
Cash and cash equivalents at end of year	3,232	2,008
	\=======	\=======
Comprising:
Cash at bank	3,232	2,008
	-----------	-----------
	3,232	2,008
	\=======	\=======
Cash inflow from dividends net of taxation was £11,713,000 (2019: £20,564,000).

NOTES TO THE FINANCIAL STATEMENTS

1.	Accounting Policies
	a) Basis of Preparation The Company is a registered investment company as defined in section 833 of the Companies Act 2006 and is incorporated in the United Kingdom. It operates in the United Kingdom and is registered at 201 Bishopsgate, London, EC2M 3AE. The financial statements have been prepared in accordance with the Companies Act 2006, FRS 102 - The Financial Reporting Standard applicable in the UK and Republic of Ireland and with the Statement of Recommended Practice: Financial Statements of Investment Trust Companies and Venture Capital Trusts (the 'SORP') issued in October 2019. The principal accounting policies applied in the presentation of these financial statements are set out below. These policies have been consistently applied to all the years presented. The financial statements have been prepared under the historical cost basis except for the measurement of fair value of investments. In applying FRS102, financial instruments have been accounted for in accordance with Section 11 and 12 of the standard. All of the Company's operations are of a continuing nature. The preparation of the Company's financial statements on occasion requires the Directors to make judgements, estimates and assumptions that affect the reported amounts in the primary financial statements and the accompanying disclosures. These assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in the current and future periods, depending on circumstance. The Directors do not believe that any accounting judgements or estimates have been applied to this set of financial statements that have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities within the next financial year. b) Going Concern The assets of the Company consist of securities that are readily realisable and, accordingly, the Directors believe that the Company has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements. The Directors have also considered the impact of COVID-19, including cash flow forecasting, a review of covenant compliance including the headroom above the most restrictive covenants and an assessment of the liquidity of the portfolio. They have concluded that they are able to meet their financial obligations as they fall due for at least twelve months from the date of issuance. Having assessed these factors, the principal risks and other matters discussed in connection with the viability statement, the Directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements. .
2.	Losses on Investments held at fair value through profit or loss	2020 £'000	2019 £'000
	(Losses)/gains on the sale of investments based on historical cost	(2,753)	13,452
	Less: revaluation gains recognised in previous years	(4,313)	(11,057)
		-----------	-----------
	(Losses)/gains on investments sold in the year based on carrying value at previous Statement of Financial Position date	(7,066)	2,395
	Revaluation losses on investments held at 30 September	(91,669)	(56,621)
	Exchange (losses)/gains	(7)	20
		----------	----------
		(98,742)	(54,206)
		\======	\======

3.	Income from Investments	2020 £'000	2019 £'000
	UK dividends:
	Listed investments	9,493	16,682
	Unlisted	49	69
	Property income dividends	169	442
		---------	---------
		9,711	17,193
		---------	---------
	Non UK dividends:
	Overseas dividend income	1,413	3,447
		---------	---------
		1,413	3,447
		---------	---------
		11,124	20,640
		\=====	\=====

4.	Other Interest Receivable and Similar Income	2020 £'000	2019 £'000
	Stock lending commission	121	112
	Income from underwriting	5	5
	Bank interest	2	4
		---------	---------
		128	121
		\=====	\=====
	At 30 September 2020 the total value of securities on loan by the Company for stock lending purposes was £21,774,000 (2019: £74,715,000). The maximum aggregate value of securities on loan at any time during the year ended 30 September 2020 was £74,214,000 (2019: £118,213,000). The Company's agent holds collateral comprising FTSE 100 stocks, gilts, overseas equities and overseas government bonds with a collateral value of £22,937,000 (2019 £78,772,000) amounting to a minimum of 105% (2019: minimum 105%) of the market value of any securities on loan. Stock lending commission has been shown net of brokerage fees of £30,000 (2019: £28,000).

5.	Return per Ordinary Share - Basic and Diluted
	The loss per ordinary share is based on the net loss attributable to the ordinary shares of £91,039,000 (2019: £37,494,000) and on 27,018,565 ordinary shares (2019: 27,018,565) being the weighted average number of ordinary shares in issue during the year. The loss per ordinary share can be further analysed between revenue and capital, as below.
				2020 £'000	2019 £'000
	Net revenue return			9,132	18,365
	Net capital loss			(100,171)	(55,859)
				---------	---------
	Net total loss			(91,039)	(37,494)
				\=====	\=====
	Weighted average number of ordinary shares in issue during the year			27,018,565	27,018,565
				2020 Pence	2019 Pence
	Revenue return per ordinary share			33.8	68.0
	Capital loss per ordinary share			(370.7)	(206.7)
				----------	----------
	Total loss per ordinary share			(336.9)	(138.7)
				\======	\======
	The Company does not have any dilutive securities, therefore the basic and diluted returns per share are the same.
6.	Dividends Paid and Payable on the Ordinary Shares
	Dividends on ordinary shares	Record date	Payment date		2020 £'000	2019 £'000
	Third interim dividend (14.0p) for the year ended 30 September 2018	4 October 2018	31 October 2018		-	3,783
	Final dividend (14.0p) for the year ended 30 September 2018	4 January 2019	31 January 2019		-	3,782
	First interim dividend (14.5p) for the year ended 30 September 2019	5 April 2019	30 April 2019		-	3,918
	Second interim dividend (15.0p) for the year ended 30 September 2019	5 July 2019	31 July 2019		-	4,053
	Third interim dividend (15.0p) for the year ended 30 September 2019	4 October 2019	31 October 2019		4,053	-
	Final dividend (15.0p) for the year ended 30 September 2019	3 January 2020	31 January 2020		4,053	-
	First interim dividend (15.0p) for the year ended 30 September 2020	3 April 2020	30 April 2020		4,053	-
	Second interim dividend (15.0p) for the year ended 30 September 2020	3 July 2020	31 July 2020		4,053	-
					---------	---------
					16,212 \=====	15,536 \=====

The third interim dividend and the final dividend for the year ended 30 September 2020 have not been included as a liability in these financial statements. The total dividends payable in respect of the financial year, which form the basis of the retention test under Section 1158 of the Corporation Tax Act 2010, are set out below.
		2020 £'000
	Revenue available for distribution by way of dividend for the year	9,132
	First interim dividend (15.0p) for the year ended 30 September 2020	(4,053)
	Second interim dividend (15.0p) for the year ended 30 September 2020	(4,053)
	Third interim dividend (15.0p) for the year ended 30 September 2020	(4,053)
	Final dividend (15.0p) for the year ended 30 September 2020 (based on 27,018,565 ordinary shares in issue at 7 December 2020)	(4,053)
		---------
	Revenue surplus	(7,080)
		\=====

7.	Called up Share Capital
			Number of shares entitled  to dividend	Total number          of shares	Nominal value of shares £'000
	At 30 September 2019		27,018,565	27,018,565	6,755
			-----------	-----------	-----------
	At 30 September 2020		27,018,565	27,018,565	6,755
The Company issued no ordinary shares during the year (2019: nil).

8.	Net Asset Value per Ordinary Share
	The net asset value per ordinary share of 1,031.3p (2019: 1,428.3p) is based on the net assets attributable to the ordinary shares of £278,653,000 (2019: £385,904,000) and on 27,018,565 (2019: 27,018,565) shares in issue on 30 September 2020. The movements during the year of the assets attributable to the ordinary shares were as follows:
		2020 £'000	2019 £'000
	Total net assets at start of year	385,904	438,934
	Total net loss after taxation	(91,039)	(37,494)
	Net dividends paid in the year:	(16,212)	(15,536)
		-----------	-----------
	Net assets attributable to the ordinary shares at 30 September	278,653	385,904
		\======	\======

9.	2020 Financial Information
	The figures and financial information for the year ended 30 September 2020 are extracted from the Company's annual financial statements for that period and do not constitute statutory accounts. The Company's annual financial statements for the year to 30 September 2020 have been audited but have not yet been delivered to the Registrar of Companies. The Independent Auditor's Report on the 2020 annual financial statements was unqualified, did not include reference to any matter to which the Auditor drew attention without qualifying the report, and did not contain any statements under sections 498(2) or 498(3) of the Companies Act 2006.
10.	2019 Financial Information
	The figures and financial information for the year ended 30 September 2019 are compiled from an extract of the published financial statements for that year and do not constitute statutory accounts. Those financial statements have been delivered to the Registrar of Companies and included the Independent Auditor's Report, which was unqualified, did not include reference to any matter to which the Auditor drew attention without qualifying the report, and did not contain any statements under sections 498(2) or 498(3) of the Companies Act 2006.
11.	Dividend
	The final dividend, if approved by the shareholders at the Annual General Meeting, of 15.0p per ordinary share will be paid on 29 January 2021 to shareholders on the register of members at the close of business on 29 December 2020. This will take the total dividends for the year to 60.0p (2019: 59.5p). The Company's shares will be traded ex-dividend on 24 December 2020.

12.	Annual Report
	The Annual Report will be posted to shareholders in December 2020 and will be available on the Company's website (www.lowlandinvestment.com).

13.	Annual General Meeting
	The Annual General Meeting will be broadcast on 27 January 2021 at 3.30 p.m. by zoom webinar. The Notice of Meeting will be sent to shareholders with the Annual Report.

For further information please contact:
James Henderson	Laura Foll
Fund Manager	Fund Manager
Lowland Investment Company plc	Lowland Investment Company plc
Telephone: 020 7818 4370	Telephone: 020 7818 6364
Laura Thomas	James de Sausmarez
Investment Trust PR Manager	Head of Investment Trusts
Janus Henderson Investors	Janus Henderson Investors
Telephone: 020 7818 2636	Telephone: 020 7818 3349

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